Document ID: SEC-2020-0778-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2020-05-14T04:00Z

[Federal Register Volume 85, Number 94 (Thursday, May 14, 2020)]
[Notices]
[Pages 28996-29000]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10287]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88843; File No. SR-CboeEDGX-2020-021]

Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Adopting Rule 14.12 Governing the Trading, Pursuant to Unlisted Trading 
Privileges, of Exchange-Traded Fund Shares

May 8, 2020.
    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 May 7, 2020, Cboe EDGX Exchange, Inc. (``Exchange'' or ``EDGX'') 
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 Exchange filed the proposal as 
a ``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to adopt Rule 14.12 to permit the trading, pursuant to 
unlisted trading privileges, of Exchange-Traded Fund Shares. 
Additionally, the Exchange proposes to make corresponding changes to 
Rule 14.1(a). The text of the proposed rule change is provided in 
Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, 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 aspects 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 adopt Rule 14.12 to permit the trading, 
pursuant to unlisted trading privileges (``UTP''), of Exchange-Traded 
Fund (also referred to as ``ETF'') Shares,\5\ which substantially 
conforms to Cboe BZX Exchange, Inc. (``BZX'') Rule 14.11(l).\6\ 
Additionally, the Exchange proposes to make corresponding changes to 
Rule 14.1(a) to reference Exchange-Traded Fund Shares and proposed Rule 
14.12, where applicable.
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    \5\ ETF Shares means shares of stock issued by an Exchange-
Traded Fund. See proposed Rule 14.12(c)(1).
    \6\ See Securities and Exchange Act Release No. 88566 (April 6, 
2020) 85 FR 20312 (April 10, 2020) (SR-CboeBZX-2019-097) (the ``BZX 
Approval Order'').
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    The Exchange does not currently list any securities as a primary 
listing market. Consistent with this fact, Exchange Rule 14.1(a) 
currently states that all securities traded on the Exchange are traded 
pursuant to UTP and that the Exchange will not list any securities 
before first filing and obtaining Commission approval of rules that 
incorporate qualitative listing criteria and comply with Rules 10A-3 
\7\ (``Rule 10A-3'') and 10C-1 \8\ (``Rule 10C-1'') under the Act. 
Therefore, the provisions of existing Rules 14.2 through 14.9, 14.11, 
and proposed Rule 14.12 that permit the listing of certain Equity 
Securities \9\ will not be effective

[[Page 28997]]

until the Exchange files a proposed rule change under Section 19(b)(2) 
under the Exchange Act to amend its rules to comply with Rule 10A-3 and 
10C-1 under the Exchange Act and to incorporate qualitative listing 
criteria, and such proposed rule change is approved by the Commission. 
Considering the foregoing, the Exchange proposes to adopt Rule 14.12 as 
set forth below.
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    \7\ Rule 10A-3 obligates the Exchange to prohibit the initial or 
continued listing of any security of an issuer that is not in 
compliance with certain required standards. See 17 CFR 240.10A-3.
    \8\ Rule 10C-1 obligates the Exchange to establish listing 
standards that require each member of a listed issuer's compensation 
committee to be a member of the issuer's board and to be 
independent, as well as establish certain factors that an issuer 
must consider when evaluating the independence of a director. See 17 
CFR 240.10C-1.
    \9\ As provided in Rule 14.1(a), the term ``Equity Security'' 
means, but is not limited to, common stock, secondary classes of 
common stock, preferred stock and similar issues, shares or 
certificates of beneficial interest of trusts, notes, limited 
partnership interests, warrants, certificates of deposit for common 
stock, convertible debt securities, ADRs, CVRs, Investment Company 
Units, Trust Issued Receipts (including those based on Investment 
Shares), Commodity-Based Trust Shares, Currency Trust Shares, 
Partnership Units, Equity-Linked Securities, Commodity-Linked 
Securities, Currency-Linked Securities, Portfolio Depositary 
Receipts, Equity-Linked Debt Securities, and Managed Portfolio 
Shares. Further, the Exchange now proposes to include the term 
``Exchange-Traded Fund Shares'' to the definition of Equity 
Security.
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Proposed Listing Rules
    Proposed Rule 14.12(a) provides that the Exchange will consider for 
trading, whether by listing or pursuant to UTP, ETF Shares that meet 
the criteria of Rule 14.12.
    Proposed Rule 14.12(b) provides that Rule 14.12 is applicable only 
to ETF Shares and that, except to the extent inconsistent with Rule 
14.12, or unless the context otherwise requires, the rules and 
procedures of the Exchange's Board of Directors shall be applicable to 
the trading on the Exchange of such securities. Proposed Rule 14.12(b) 
provides further that ETF Shares are included within the definition of 
``security'' or ``securities'' as such terms are used in the Rules of 
the Exchange.
    Proposed Rule 14.12(b)(1) provides that transactions in ETF Shares 
will occur throughout the Exchange's trading hours.
    Proposed Rule 14.12(b)(2) provides that the minimum price variation 
for quoting and entry of orders in ETF Shares will be $0.01.
    Proposed Rule 14.12(b)(3) provides that the Exchange will implement 
and maintain written surveillance procedures for ETF Shares.
    Proposed Rule 14.12(c)(1) defines the term ``ETF Shares'' as shares 
of stock issued by an Exchange-Traded Fund.\10\
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    \10\ For purposes of this filing, references to a series of 
Exchange-Traded Fund Shares are referred to interchangeably as a 
series of Exchange-Traded Fund Shares or as a ``Fund'' and shares of 
a series of Exchange-Traded Fund Shares are generally referred to as 
the ``Shares''.
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    Proposed Rule 14.12(c)(2) defines the term ``Exchange-Traded Fund'' 
as having the same meaning as the term ``exchange-traded fund'' as 
defined in Rule 6c-11 under the Investment Company Act of 1940.\11\
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    \11\ Per Rule 6c-11, an exchange-traded fund means a registered 
open-end management company: (A) That issues (and redeems) creation 
units to (and from) authorized participants in exchange for a basket 
and a cash balancing amount if any; and (B) Whose shares are listed 
on a national securities exchange and traded at market-determined 
prices.
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    Proposed Rule 14.12(c)(3) defines the term ``Reporting Authority'' 
in respect of a particular series of ETF Shares means the Exchange, an 
institution, or a reporting service designated by the Exchange or by 
the exchange that lists a particular series of ETF Shares (if the 
Exchange is trading such series pursuant to UTP) as the official source 
for calculating and reporting information relating to such series, 
including, but not limited to, the amount of any dividend equivalent 
payment or cash distribution to holders of ETF Shares, the net asset 
value (the ``NAV''), index or portfolio value, the current value of the 
portfolio of securities required to be deposited in connection with 
issuance of ETF Shares, or other information relating to the issuance, 
redemption or trading of ETF Shares. A series of ETF Shares may have 
more than one Reporting Authority, each having different functions.
    Proposed Rule 14.12(d) provides for the initial and continued 
listing and/or trading of ETF Shares, including trading pursuant to 
UTP, pursuant to Rule 19b-4(e) under the Act. Proposed Rule 14.12(d)(1) 
sets forth initial listing criteria applicable to ETF Shares. 
Specifically, proposed Rule 14.12(d)(1) provides that the requirements 
of Rule 6c-11 must be satisfied by a series of ETF Shares on an initial 
and continued listing basis. Such securities must also satisfy the 
criteria on an initial and, with the exception of proposed subparagraph 
(d)(1)(A), a continued listing basis. Proposed Rule 14.12(d)(1)(A) 
provides that for each series, the Exchange will establish a minimum 
number of ETF Shares required to be outstanding at the time of 
commencement of trading on the Exchange. However, as noted above, such 
criteria is not applicable on a continued listing basis. Proposed rule 
14.12(d)(1)(B) provides that if an index underlying a series of ETF 
Shares is maintained by a broker-dealer or fund adviser, the broker-
dealer or fund adviser shall erect and maintain a ``fire wall'' around 
the personnel who have access to information concerning changes and 
adjustments to the index and the index shall be calculated by a third 
party who is not a broker-dealer or fund adviser. If the investment 
adviser to the investment company issuing an actively managed series of 
ETF Shares is affiliated with a broker-dealer, such investment adviser 
shall erect and maintain a ``fire wall'' between the investment adviser 
and the broker-dealer with respect to access to information concerning 
the composition and/or changes to such Exchange-Traded Fund's 
portfolio. Additionally proposed rule 14.12(d)(1)(C) provides that any 
advisory committee, supervisory board, or similar entity that advises a 
Reporting Authority or that makes decisions on the composition, 
methodology, and related matters of an index underlying a series of ETF 
Shares, must implement and maintain, or be subject to, procedures 
designed to prevent the use and dissemination of material non-public 
information regarding the applicable index. For actively managed 
Exchange-Traded Funds, personnel who make decisions on the portfolio 
composition must be subject to procedures designed to prevent the use 
and dissemination of material nonpublic information regarding the 
applicable portfolio.
    Proposed Rule 14.12(d)(2) provides that each series of ETF Shares 
will be listed and traded subject to application of the following 
continued listing criteria. Proposed Rule 14.12(d)(2)(A) provides that 
the Exchange will consider the suspension of trading in or removal from 
listing of or termination of unlisted trading privileges for a series 
of ETF Shares under any of the following circumstances: (i) If the 
Exchange becomes aware that the issuer of the ETF Shares is no longer 
eligible to operate in reliance on Rule 6c-11 under the Investment 
Company Act of 1940; (ii) if any of the other listing requirements set 
forth in this Rule 14.12 are not continuously maintained; (iii) if, 
following the initial twelve month period after commencement of trading 
on the Exchange of a series of ETF Shares, there are fewer than 50 
beneficial holders of the series of ETF Shares for 30 or more 
consecutive trading days; or (iv) if such other event shall occur or 
condition exists which, in the opinion of the Exchange, makes further 
dealings on the Exchange inadvisable. Proposed Rule 14.12(d)(2)(B) 
provides that upon termination of an investment company, the Exchange 
will require that ETF Shares issued in connection with such entity be 
removed from Exchange listing.
    Proposed Rule 14.12(e), which relates to limitation of Exchange 
liability, provides that neither the Exchange, the Reporting Authority, 
nor any agent of the Exchange shall have any liability for damages, 
claims, losses or expenses caused by any errors, omissions, or delays 
in calculating or disseminating any current index or portfolio value; 
the current value of the portfolio of securities required to be 
deposited to the open-end management investment company in connection 
with issuance of ETF Shares; the amount of any dividend

[[Page 28998]]

equivalent payment or cash distribution to holders of ETF Shares; net 
asset value; or other information relating to the purchase, redemption, 
or trading of ETF Shares, resulting from any negligent act or omission 
by the Exchange, the Reporting Authority, or any agent of the Exchange, 
or any act, condition, or cause beyond the reasonable control of the 
Exchange, its agent, or the Reporting Authority, including, but not 
limited to, an act of God; fire; flood; extraordinary weather 
conditions; war; insurrection; riot; strike; accident; action of 
government; communications or power failure; equipment or software 
malfunction; or any error, omission, or delay in the reports of 
transactions in one or more underlying securities.
    The Exchange does not propose to adopt BZX Rule 14.11(l)(6) because 
it is not applicable as the Exchange does not currently have any listed 
products.
Quantitative Standards
    The Exchange believes that the proposal is designed to prevent 
fraudulent and manipulative acts and practices because the Exchange 
will perform ongoing surveillance of ETF Shares listed on the Exchange 
in order to ensure compliance with Rule 6c-11 and the 1940 Act on an 
ongoing basis. While proposed Rule 14.12 does not include the 
quantitative requirements applicable to an ETF or an ETF's holdings or 
underlying index that are included in Rule 14.2, the Exchange believes 
that the manipulation concerns that such standards are intended to 
address are otherwise mitigated by a combination of the Exchange's 
surveillance procedures and the Exchange's ability to suspend trading 
or terminate unlisted trading privileges under the proposed Rule 
14.12(d)(2)(A). The Exchange will also halt trading in ETF Shares under 
the conditions specified in Rule 11.16, ``Trading Halts Due to 
Extraordinary Market Volatility.'' The Exchange believes that such 
concerns are further mitigated by enhancements to the arbitrage 
mechanism that will come from Rule 6c-11, specifically the additional 
flexibility provided to issuers of ETF Shares through the use of custom 
baskets for creations and redemptions and the additional information 
made available to the public through the additional daily website 
disclosure obligations applicable under Rule 6c-11.\12\ The Exchange 
believes that the combination of these factors will act to keep ETF 
Shares trading near the value of their underlying holdings and further 
mitigate concerns around manipulation of ETF Shares on the Exchange 
without the inclusion of quantitative standards.\13\
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    \12\ The Exchange notes that the Commission came to a similar 
conclusion in several places in the Rule 6c-11 Release. See Release 
Nos. 33-10695; IC-33646; File No. S7-15-18 (Exchange-Traded Funds) 
(September 25, 2019), 84 FR 57162 (October 24, 2019) (the ``Rule 6c-
11 Release'') at 15-18; 60-61; 69-70; 78-79; 82-84; and 95-96.
    \13\ The Exchange believes that this applies to all quantitative 
standards, whether applicable to the portfolio holdings of a series 
of ETF Shares or the distribution of the ETF Shares.
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Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of ETF Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. Trading of ETF Shares 
through the Exchange will be subject to the Exchange's surveillance 
procedures for derivative products. The Exchange will require the 
issuer of each series of ETF Shares listed on the Exchange to represent 
to the Exchange that it will advise the Exchange of any failure by a 
Fund to comply with the continued listing requirements, and, pursuant 
to its obligations under Section 19(g)(1) of the Exchange Act, the 
Exchange will surveil for compliance with the continued listing 
requirements.
    Specifically, the Exchange intends to utilize its existing 
surveillance procedures applicable to derivative products, which are 
currently applicable to Investment Company Units, among other product 
types, to monitor trading in ETF Shares. The Exchange or the Financial 
Industry Regulatory Authority, Inc. (``FINRA''), on behalf of the 
Exchange, will communicate as needed regarding trading in ETF Shares 
and certain of their applicable underlying components with other 
markets that are members of the Intermarket Surveillance Group 
(``ISG'') or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. In addition, the Exchange may obtain 
information regarding trading in ETF Shares and certain of their 
applicable underlying components from markets and other entities that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. Additionally, FINRA, on 
behalf of the Exchange, is able to access, as needed, trade information 
for certain fixed income securities that may be held by a series of ETF 
Shares reported to FINRA's Trade Reporting and Compliance Engine 
(``TRACE''). FINRA also can access data obtained from the Municipal 
Securities Rulemaking Board's (``MSRB'') Electronic Municipal Market 
Access (``EMMA'') system relating to municipal bond trading activity 
for surveillance purposes in connection with trading in a series of ETF 
Shares, to the extent that a series of ETF Shares holds municipal 
securities.
Trading Halts
    As proposed above, the Exchange may consider all relevant factors 
in exercising its discretion to halt trading in a series of Managed 
Portfolio Shares. Trading may be halted because of market conditions or 
for reasons that, in the view of the Exchange, make trading in the 
series of ETF Shares inadvisable. These may include: (i) The extent to 
which trading is not occurring in the securities and/or the financial 
instruments composing the portfolio; or (ii) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. Additionally, the Exchange would halt 
trading as soon as practicable where the Exchange becomes aware that: 
(i) If the Exchange becomes aware that the issuer of the ETF Shares is 
no longer eligible to operate in reliance on Rule 6c-11 under the 
Investment Company Act of 1940; (ii) if any of the other listing 
requirements set forth in this Rule 14.12 are not continuously 
maintained; (iii) if, following the initial twelve month period after 
commencement of trading on the Exchange of a series of ETF Shares, 
there are fewer than 50 beneficial holders of the series of ETF Shares 
for 30 or more consecutive trading days; or (iv) if such other event 
shall occur or condition exists which, in the opinion of the Exchange, 
makes further dealings on the Exchange inadvisable.
Trading Rules
    The Exchange deems ETF Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. ETF Shares will trade 
on the Exchange throughout the Exchange's trading hours. As provided in 
proposed Rule 14.12(b)(2), the minimum price variation for quoting and 
entry of orders in ETF Shares traded on the Exchange is $0.01.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \14\ in general and Section

[[Page 28999]]

6(b)(5) of the Act \15\ in particular in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that proposed Rule 14.12 will remove 
impediments to and perfect the mechanism of a free and open market and 
national market system. Specifically, the proposed amendment raises no 
substantive issues that have not otherwise been considered by the 
Commission in either the BZX Approval Order or in the context of other 
similar Exchange Rules. This proposal is substantively similar to the 
BZX Approval Order, with the exception that the Exchange is only 
proposing to trade series of ETF Shares pursuant to unlisted trading 
privileges, while BZX will both list and trade series of ETF Shares. 
Further, while proposed Rule 14.12(d)(2)(A) provides that the Exchange 
may terminate unlisted trading privileges and BZX Rule 14.11(l) does 
not, the proposed rule text is substantially similar to existing 
Exchange Rules 14.3(g)(2) and 14.11(d)(2)(B) and therefore raises no 
novel issues.
    The Exchange believes that proposed Rule 14.12 is designed to 
prevent fraudulent and manipulative acts and practices in that the 
proposed rules relating to listing and trading ETF Shares on the 
Exchange provide specific initial and continued listing criteria 
required to be met by such securities. Proposed Rule 14.12(d) sets 
forth initial and continued listing criteria applicable to ETF Shares, 
specifically providing that the Exchange may approve a series of ETF 
Shares for listing and/or trading (including pursuant to unlisted 
trading privileges) on the Exchange pursuant to Rule 19b-4(e) under the 
Act, provided such series of ETF Shares is eligible to operate in 
reliance on Rule 6c-11 under the Investment Company Act of 1940 and 
must satisfy the requirements of this Rule 14.12 on an initial and 
continued listing basis.
    Proposed Rule 14.12(d)(1) provides that initial listing criteria 
which includes (A) for each series, the Exchange will establish a 
minimum number of ETF Shares required to be outstanding at the time of 
commencement of trading on the Exchange; (B) if an index underlying a 
series of ETF Shares is maintained by a broker-dealer or fund adviser, 
the broker-dealer or fund adviser shall erect and maintain a ``fire 
wall'' around the personnel who have access to information concerning 
changes and adjustments to the index and the index shall be calculated 
by a third party who is not a broker-dealer or fund adviser. If the 
investment adviser to the investment company issuing an actively 
managed series of ETF Shares is affiliated with a broker-dealer, such 
investment adviser shall erect and maintain a ``fire wall'' between the 
investment adviser and the broker-dealer with respect to access to 
information concerning the composition and/or changes to such Exchange-
Traded Fund's portfolio; and (C) any advisory committee, supervisory 
board, or similar entity that advises a Reporting Authority or that 
makes decisions on the composition, methodology, and related matters of 
an index underlying a series of ETF Shares, must implement and 
maintain, or be subject to, procedures designed to prevent the use and 
dissemination of material non-public information regarding the 
applicable index. For actively managed Exchange-Traded Funds, personnel 
who make decisions on the portfolio composition must be subject to 
procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the applicable portfolio.
    Proposed Rule 14.12(d)(2) provides that each series of ETF Shares 
will be listed and traded on the Exchange subject to application of 
Proposed Rule 14.12(d)(2)(A) and (B). Proposed Rule 14.12(d)(2)(A) 
provides that the Exchange will consider the suspension of trading in 
or removal from listing of or termination of UTP for a series of ETF 
Shares under any of the following circumstances: (i) If the Exchange 
becomes aware that the issuer of the ETF Shares is no longer eligible 
to operate in reliance on Rule 6c-11 under the Investment Company Act 
of 1940; (ii) if any of the other listing requirements set forth in 
this Rule 14.12 are not continuously maintained; (iii) if, following 
the initial twelve month period after commencement of trading on the 
Exchange of a series of ETF Shares, there are fewer than 50 beneficial 
holders of the series of ETF Shares for 30 or more consecutive trading 
days; or (iv) if such other event shall occur or condition exists 
which, in the opinion of the Exchange, makes further dealings on the 
Exchange inadvisable. Proposed Rule 14.12(d)(2)(B) provides that upon 
termination of an investment company, the Exchange requires that ETF 
Shares issued in connection with such entity be removed from Exchange 
listing.
    The Exchange further believes that proposed Rule 14.12 is designed 
to prevent fraudulent and manipulative acts and practices because of 
the robust surveillances in place on the Exchange as required under 
proposed Rule 14.12(b)(3) along with the similarities of proposed Rule 
14.12 to the rules related to other securities that are already traded 
on the Exchange pursuant to UTP and which would qualify as ETF Shares. 
Proposed Rule 14.12 is based in large part on Rule 14.2 related to the 
listing and trading of Investment Company Units on the Exchange, which 
are issued under the 1940 Act and would qualify as ETF Shares after 
Rule 6c-11 is effective. As such, the Exchange believes that using Rule 
14.2 (the ``Current ETF Standards'') as the basis for proposed Rule 
14.12 is appropriate because they are generally designed to address the 
issues associated with ETF Shares. The only substantial differences 
between proposed Rule 14.12 and the Current ETF Standards that are not 
otherwise required under Rule 6c-11 are as follows: (i) Proposed Rule 
14.12 does not include the quantitative standards applicable to a fund 
or an index that are included in the Current ETF Standards; and (ii) 
Proposed Rule 14.12 does not include any requirements related to the 
dissemination of a fund's intraday indicative value.\16\
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    \16\ For purposes of this filing, the term ``intraday indicative 
value'' or ``IIV'' shall mean an intraday estimate of the value of a 
share of each series Investment Company Units.
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    Further, the Exchange also represents that its surveillance 
procedures are adequate to properly monitor the trading of the ETF 
Shares in all trading sessions and to deter and detect violations of 
Exchange rules and applicable federal securities laws. Specifically, 
the Exchange intends to utilize its existing surveillance procedures 
applicable to derivative products, which are currently applicable to 
Investment Company Units, among other product types, to monitor trading 
in ETF Shares. The Exchange or the FINRA, on behalf of the Exchange, 
will communicate as needed regarding trading in ETF Shares and certain 
of their applicable underlying components with other markets that are 
members of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. In addition, the Exchange 
may obtain information regarding trading in ETF Shares and certain of 
their applicable underlying components from markets

[[Page 29000]]

and other entities that are members of ISG or with which the Exchange 
has in place a comprehensive surveillance sharing agreement. 
Additionally, FINRA, on behalf of the Exchange, is able to access, as 
needed, trade information for certain fixed income securities that may 
be held by a series of ETF Shares reported to FINRA's TRACE. FINRA also 
can access data obtained from the MSRB EMMA system relating to 
municipal bond trading activity for surveillance purposes in connection 
with trading in a series of ETF Shares, to the extent that a series of 
ETF Shares holds municipal securities.
    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 that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change, rather will facilitate the trading, pursuant to 
UTP, of ETF Shares that will enhance competition among both market 
participants and listing venues, to the benefit of investors and the 
marketplace.

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

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

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay to immediately allow 
ETF Shares to be traded on another venue. The Commission believes that 
waiver of the 30-day operative delay for this purpose is consistent 
with the protection of investors and the public interest and hereby 
waives the 30-day operative delay and designates the proposed rule 
change operative upon filing.\21\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ For purposes only of waiving the operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
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 rule-comments@sec.gov. Please include 
File Number SR-CboeEDGX-2020-021 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-CboeEDGX-2020-021. 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 also will 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-CboeEDGX-2020-021 and should be 
submitted on or before June 4, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10287 Filed 5-13-20; 8:45 am]
BILLING CODE 8011-01-P