Document ID: SEC-2018-1089-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2018-07-11T04:00Z

[Federal Register Volume 83, Number 133 (Wednesday, July 11, 2018)]
[Notices]
[Pages 32162-32164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14788]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83596; File No. SR-CboeBZX-2018-047]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To Amend BZX Rule 14.8, General 
Listings Requirements--Tier I

July 5, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 21, 2018, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the listing rules under Rule 
14.8, titled ``General Listing Requirements--Tier I,'' in order to 
adopt listing standards for closed-end funds.
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its listing rules in Rule 14.8 in 
order to add listing standards applicable to Closed-End Funds \3\ based 
on existing criteria applicable to Closed-End Funds listed on NYSE 
American LLC (``NYSE American'').\4\ Specifically, the Exchange is 
proposing to add new paragraphs (e) and (i) under Rule 14.8 related to 
the initial and continued listing requirements for Closed-End Funds, 
respectively, as well as to make certain corresponding changes.
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    \3\ As defined in proposed Rule 14.8(a), the term Closed-End 
Fund means a Closed-End Management Investment Company registered 
under the Investment Company Act of 1940.
    \4\ The Exchange notes that the proposed quantitative rules are 
substantively identical to the listing standards applicable to 
Closed-End Funds on NYSE American. Specifically, the proposed 
quantitative rules are substantively identical to the following 
sections in the NYSE American Company Guide: 101(g), 102(a), and 
1003(b)(v).
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Initial Listing
    As proposed, a Closed-End Fund must meet the initial listing 
requirements for either an individual Closed-End Fund (the ``Individual 
CEF Standard'') or a Group \5\ of Closed-End Funds (the ``Group CEF 
Standard''), as provided below, before being listed on the Exchange. 
The Individual CEF Standard requires: (a) A public distribution (which 
includes both shareholders of record and beneficial holders, but 
excludes the holdings of officers, directors, controlling shareholders, 
and other concentrated (i.e. 10% or greater), affiliated or family 
holdings (``Public Shareholders'')) (a ``Public Distribution'') of (i) 
at least 500,000 shares where there are at least 800 Public 
Shareholders, except that companies that are not banks whose securities 
are concentrated in a limited geographical area, or whose securities 
are largely held in block by institutional investors, are normally not 
considered eligible for listing unless the Public Distribution 
appreciably exceeds 500,000 shares; \6\ or (ii) at least 1,000,000 
shares where there are at least 400 Public Shareholders; (b) a Public 
Distribution with a Market Value or net assets of at least $20 million; 
(c) a minimum bid price of at least $4 per share; and (d) at least 
three registered and active Market Makers. The Group CEF Standard 
requires that a Closed-End Fund which is part of a Group be subject to 
the following criteria: (a) The Group has a Public Distribution with a 
Market Value or net assets of at least $75 million; (b) the Closed-End 
Funds in the Group have a Public Distribution with an average Market 
Value or average net assets of at least $15 million; (c) each Closed-
End Fund in the Group has a Public Distribution with a Market Value or 
net assets of at least $10 million; and (d) each Closed-End Fund in the 
Group has: (i) A Public Distribution of: (a) At least 500,000 shares 
where there are at least 800 Public Shareholders, except that companies 
that are not banks whose securities are concentrated in a limited 
geographical area, or whose securities are largely held in block by 
institutional investors, are normally not considered eligible for 
listing unless the Public Distribution appreciably exceeds 500,000 
shares; or (b) at least 1,000,000 shares where there are at least 400 
Public Shareholders; (ii) a minimum bid price of at least $4 per share; 
and (iii) at least three registered and active Market Makers.
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    \5\ As defined in proposed Rule 14.8(e)(2), a ``Group'' is a 
group of Closed-End Funds which are or will be listed on the 
Exchange, and which are managed by a common investment adviser or 
investment advisers who are ``affiliated persons'' as defined in 
Section 2(a)(3) of the Investment Company Act of 1940 as amended. 
Section 2(a)(3) of the Investment Company Act of 1940 defines 
affiliated person of another person as ``(A) any person directly or 
indirectly owning, controlling, or holding with power to vote, 5 per 
centum or more of the outstanding voting securities of such other 
person; (B) any person 5 per centum or more of whose outstanding 
voting securities are directly or indirectly owned, controlled, or 
held with power to vote, by such other person; (C) any person 
directly or indirectly controlling, controlled by, or under common 
control with, such other person; (D) any officer, director, partner, 
copartner, or employee of such other person; (E) if such other 
person is an investment company, any investment adviser thereof or 
any member of an advisory board thereof; and (F) if such other 
person is an unincorporated investment company not having a board of 
directors, the depositor thereof.''
    \6\ The Exchange notes that where the Public Distribution 
appreciably exceeds 500,000 shares for companies that are not banks 
whose securities are concentrated in a limited geographical area, or 
whose securities are largely held in block by institutional 
investors, the 800 Public Shareholders requirement would also apply.
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Continued Listing
    As proposed, The Exchange will consider the suspension of trading 
in and will initiate delisting proceedings (and are not eligible to 
follow the cure procedures outlined in Rule 14.12) for a Closed-End 
Fund where: (a) The Market Value of the Public Distribution and net 
assets each are less than $5,000,000 for

[[Page 32163]]

more than 60 consecutive days; (b) the Closed-End Fund no longer 
qualifies as a closed-end fund under the Investment Company Act of 1940 
(unless the resultant entity otherwise qualifies for listing); or (c) 
it appears that the extent of Public Distribution, the Market Value of 
such Public Distribution, or net assets of such Public Distribution has 
become so reduced as to make further dealings on the Exchange 
inadvisable. Any failure to meet any of the continued listing 
requirements will subject the applicable Closed-End Fund to delisting 
proceedings in accordance with the provisions set forth in Rule 14.12.
Trading Rules
    Closed-End Funds are equity securities, thus rendering trading in 
Closed-End Funds subject to the Exchange's existing rules governing the 
trading of equity securities. The Exchange will allow trading in 
Closed-End Funds from 8:00 a.m. until 5:00 p.m. Eastern Time and the 
Exchange has appropriate rules to facilitate such transactions during 
all trading sessions. As provided in Rule 11.11(a), the minimum price 
variation for quoting and entry of orders in Closed-End Funds traded on 
the Exchange will be $0.01, with the exception of securities that are 
priced less than $1.00, for which the minimum price variation for 
quoting and order entry will be $0.0001.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in a Closed-End Fund. The Exchange will halt trading in a 
Closed-End Fund under the conditions specified in Rule 11.18. Trading 
may be halted because of market conditions or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable. These 
include whether unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.
Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of Closed-End Funds on the Exchange 
during all trading sessions and to deter and detect violations of 
Exchange rules and the applicable federal securities laws. Trading of 
Closed-End Funds through the Exchange will be subject to the Exchange's 
surveillance procedures for ETPs.
Governance
    Any Closed-End Funds listed on the Exchange will be subject to the 
governance requirements in Rule 14.10 applicable to all management 
investment companies listed on the Exchange, including Closed-End 
Funds, except as provided in the exceptions to certain governance 
requirements for management investment companies as provided under Rule 
14.10(e)(1)(E) and Interpretation and Policy .13 of Rule 14.10(e). The 
Exchange notes that its governance requirements for Closed-End Funds 
are substantially similar to those applicable to Closed-End Funds 
listed on NYSE American.
Other Changes
    The Exchange is also proposing to make certain renumbering changes 
to Rule 14.8 in order to accommodate the other proposed rule changes 
described herein.
Listing Fees
    The Exchange plans to separately submit a proposal to amend Rule 
14.13 related to listing fees in order to implement fees applicable to 
Closed-End Funds prior to this proposal becoming operational.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \7\ in general and Section 6(b)(5) of the Act \8\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. The Exchange believes that the 
proposed rules will facilitate the listing and trading of additional 
types of exchange-traded products on the Exchange that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. In addition, the listing and trading criteria set 
forth in the proposed rules are intended to protect investors and the 
public interest.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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    As noted above, the Exchange's proposed quantitative and 
qualitative listing requirements related to Closed-End Funds are 
substantively identical to those of NYSE American and, as such, the 
proposed rule change is consistent with the protection of investors and 
the public interest. Additionally, the proposal is designed to prevent 
fraudulent and manipulative acts and practices, as any Closed-End Funds 
listed on the Exchange will be required to meet these proposed new 
rules related to initial and continued listing and will be subject to 
existing Exchange trading rules, trading halts, governance, and 
surveillance procedures, as set forth above.
    The proposal is also designed to promote just and equitable 
principles of trade by way of the proposed initial and continued 
listing standards, which is further bolstered by the requirement that 
any failure to meet any of the continued listing requirements will 
subject the applicable Closed-End Fund to delisting proceedings in 
accordance with the provisions set forth in Rule 14.12. These 
requirements, together with the applicable Exchange equity trading 
rules (which will apply to Closed-End Funds listed under the proposed 
criteria), ensure that no investor would have an unfair advantage over 
another respecting the trading of Closed-End Funds. On the contrary, 
all investors will have the same access to trading in Closed-End Funds 
listed on the Exchange, as is the case for all other products listed 
and/or traded on the Exchange, all to the benefit of public customers 
and the marketplace as a whole.
    On the whole, the proposed rule change is designed to perfect the 
mechanism of a free and open market and, in general, to protect 
investors and the public interest in that it will facilitate the 
listing and trading of an additional product type on the Exchange that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace.
    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. Instead, the 
proposal is a competitive one which would facilitate the listing and 
trading of Closed-End Funds on the Exchange, which the Exchange 
believes will enhance competition among exchanges that list Closed-End 
Funds, to the benefit of investors, issuers, and the marketplace 
generally.

[[Page 32164]]

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBZX-2018-047 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeBZX-2018-047. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing will also be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CboeBZX-2018-047 and should be submitted 
on or before August 1, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14788 Filed 7-10-18; 8:45 am]
 BILLING CODE 8011-01-P