Document ID: SEC-2019-1170-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2019-08-15T04:00Z

[Federal Register Volume 84, Number 158 (Thursday, August 15, 2019)]
[Notices]
[Pages 41771-41774]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17486]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86623; File No. SR-CboeBZX-2019-073]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to Rule 14.3(e), Additional Requirements for Securities Issued by the 
Exchange or Its Affiliates

August 9, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 6, 2019, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III 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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[[Page 41772]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to make three changes to Rule 14.3(e), 
Additional Requirements for Securities Issued by the Exchange or its 
Affiliates.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), 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 amend Rule 14.3(e) (Additional 
Requirements for Securities Issued by the Exchange or its Affiliates) 
regarding the requirements for the listing of securities that are 
issued by the Exchange or any of its affiliates.
    Rule 14.3(e) sets forth certain monitoring requirements that must 
be met throughout the continued listing and trading of securities 
issued by the Exchange or its affiliates. More specifically, Rule 
14.3(e)(2) and (3) provide that:
     Throughout the continued listing and trading of an 
Affiliate Security \5\ on the Exchange, the Exchange shall prepare a 
quarterly report on the Affiliate Security for the Regulatory Oversight 
Committee (``ROC'') of the Exchange's Board of Directors that describes 
the Exchange's monitoring of the Affiliate Security's compliance with 
the Exchange's listing standards (the ``Quarterly Listing Report'');
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    \5\ As defined in Rule 14.3(e)(1)(B), the term ``Affiliate 
Security'' means any security issued by a BZX Affiliate or any 
Exchange-listed option on any such security, with the exception of 
Portfolio Depository Receipts as defined in Rule 14.11(b) and Index 
Fund Shares as defined in Rule 14.11(c).
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     once a year, an independent accounting firm shall review 
the listing standards for the Affiliate Security to ensure that the 
issuer is in compliance with the listing requirements (``Annual 
Report''), and a copy of the Annual Report shall be forwarded promptly 
to the ROC; and
     throughout the trading of an Affiliate Security on the 
Exchange, the Exchange shall prepare a quarterly report on the 
Affiliate Security for the Regulatory Oversight Committee of the 
Exchange's Board of Directors that describes the Exchange's monitoring 
of the trading of the Affiliate Security, including summaries of all 
related surveillance alerts, complaints, regulatory referrals, trades 
cancelled or adjusted pursuant to Exchange Rules, investigations, 
examinations, formal and informal disciplinary actions, exception 
reports and trading data used to ensure the Affiliate Security's 
compliance with the Exchange's listing and trading rules (the 
``Quarterly Trading Report'' and, collectively with the Quarterly 
Listing Report, the ``Quarterly Reports'').

Rule 14.3(e)(4) requires that a copy of all Quarterly Reports and 
Annual Reports will be forwarded promptly to the Commission.
    The Exchange proposes to amend Rule 14.3(e)(4) to remove the 
requirement that copies of the Quarterly Reports and Annual Reports be 
forwarded to the Commission and instead providing that the Exchange 
will forward a copy of the Quarterly Reports and/or Annual Reports to 
the Commission upon request.
    Finally, the Exchange is proposing to make clear that the 
requirements under Rule 14.3(e)(2)(A),\6\ (B),\7\ (C),\8\ and (D) \9\ 
do not apply to Affiliate Securities that are Exchange-listed options. 
The Exchange is proposing this change because there is no issuer for 
options as the term is used in Rule 14.3(e)(2) and each of the 
requirements under Rule 14.3(e)(2) are implicitly related to equity 
securities and not to options on such equity securities. The Exchange 
is not proposing to make any changes to the requirement for all 
Affiliate Securities (including options) under Rule 14.3(e)(3) that 
``throughout the trading of an Affiliate Security on the Exchange, the 
Exchange shall prepare a quarterly report on the Affiliate Security for 
the Regulatory Oversight Committee of the Exchange's Board of Directors 
that describes the Exchange's monitoring of the trading of the 
Affiliate Security, including summaries of all related surveillance 
alerts, complaints, regulatory referrals, trades cancelled or adjusted 
pursuant to Exchange Rules, investigations, examinations, formal and 
informal disciplinary actions, exception reports and trading data used 
to ensure the Affiliate Security's compliance with the Exchange's 
listing and trading

[[Page 41773]]

rules.'' As such, the Exchange will continue to prepare reports on all 
Affiliate Securities (including those that are Exchange-listed options) 
as required under Rule 14.3(e)(3).
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    \6\ Rule 14.3(e)(2)(A) requires that prior to the initial 
listing of an Affiliate Security on the Exchange, Exchange personnel 
shall determine that such security satisfies the Exchange's rules 
for listing, and such finding must be approved by the Regulatory 
Oversight Committee of the Exchange's Board of Directors.
    \7\ Rule 14.3(e)(2)(B) requires that throughout the continued 
listing of an Affiliate Security on the Exchange, the Exchange shall 
prepare a quarterly report on the Affiliate Security for the 
Regulatory Oversight Committee of the Exchange's Board of Directors 
that describes the Exchange's monitoring of the Affiliate Security's 
compliance with the Exchange's listing standards, including: the 
Affiliate Security's compliance with the Exchange's minimum share 
price requirement; and the Affiliate Security's compliance with each 
of the quantitative continued listing requirements.
    \8\ Rule 14.3(e)(2)(C) requires that once a year, an independent 
accounting firm shall review the listing standards for the Affiliate 
Security to ensure that the issuer is in compliance with the listing 
requirements and a copy of the report shall be forwarded promptly to 
the Regulatory Oversight Committee of the Exchange's Board of 
Directors.
    \9\ Rule 14.3(e)(2)(D) requires that in the event that the 
Exchange determines that the BZX Affiliate is not in compliance with 
any of the Exchange's listing standards, the Exchange shall notify 
the issuer of such non-compliance promptly and request a plan of 
compliance. The Exchange shall file a report with the Commission 
within five business days of providing such notice to the issuer of 
its non-compliance. The report shall identify the date of the non-
compliance, type of non-compliance, and any other material 
information conveyed to the issuer in the notice of non-compliance. 
Within five business days of receipt of a plan of compliance from 
the issuer, the Exchange shall notify the Commission of such 
receipt, whether the plan of compliance was accepted by the Exchange 
or what other action was taken with respect to the plan and the time 
period provided to regain compliance with the Exchange's listing 
standards, if any.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \10\ in general and Section 6(b)(5) of the Act \11\ 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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, 
because the proposed changes would reduce the paperwork received by the 
Commission and ease the burden of submitting the Quarterly Reports and 
Annual Reports, without changing the information available to the 
Commission. In discussions with the Commission Staff regarding Rule 
14.3(e), it was determined that the Exchange no longer needed to 
provide copies of the Quarterly Reports and Annual Reports to the 
Commission. The Quarterly Reports and Annual Reports would continue to 
be available to the Commission, as they are subject to Section 17A of 
the Act \12\ and Rule 17a-1 thereunder,\13\ pursuant to which the 
Exchange is required to keep and preserve copies of the Quarterly 
Reports and Annual Reports, and to promptly furnish to the Commission 
copies of such Reports upon request of any representative of the 
Commission.
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    \12\ 15 U.S.C. 78q.
    \13\ 17 CFR 240.17a-1.
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    Finally, the Exchange believes that the clarifying change to 
exclude options on Affiliate Securities from the requirements of Rule 
14.3(e)(2) would promote just and equitable principles of trade and 
remove impediments to a free and open market by making clear that 
certain obligations that implicitly did not apply to options on 
Affiliate Securities do not, in fact, apply. As noted above, the 
Exchange will continue to prepare reports on all Affiliate Securities 
that include summaries of all related surveillance alerts, complaints, 
regulatory referrals, trades cancelled or adjusted pursuant to Exchange 
Rules, investigations, examinations, formal and informal disciplinary 
actions, exception reports and trading data used to ensure the 
Affiliate Security's compliance with the Exchange's listing and trading 
rules (including those that are Exchange-listed options) as required 
under Rule 14.3(e)(3).

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 purposes of the Act. The Exchange believes that 
the proposed changes to eliminate the requirement that the Exchange 
submit copies of the Quarterly Reports and Annual Reports to the 
Commission and excluding options on Affiliate Securities from the 
requirements of Rule 14.3(e)(2) will have no impact on competition.

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

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. 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 \14\ and 
Rule 19b-4(f)(6) \15\ thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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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 [email protected]. Please include 
File Number SR-CboeBZX-2019-073 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-2019-073. 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

[[Page 41774]]

submissions should refer to File Number SR-CboeBZX-2019-073 and should 
be submitted on or before September 5, 2019.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-17486 Filed 8-14-19; 8:45 am]
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