Document ID: SEC-2021-0201-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2021-02-10T05:00Z

[Federal Register Volume 86, Number 26 (Wednesday, February 10, 2021)]
[Notices]
[Pages 8935-8937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02713]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91064; File No. SR-CboeBZX-2021-014]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Amendment To Allow the Invesco Focused 
Discovery Growth ETF and Invesco Select Growth ETF (Each a ``Fund'' 
and, Collectively, the ``Funds''), Each a Series of the Invesco 
Actively Managed Exchange-Traded Fund Trust (the ``Trust''), To Strike 
and Publish Multiple Intra-Day Net Asset Values (``NAVs'') and an End-
of-Day NAV

February 4, 2021.
    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 January 22, 2021, 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 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

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule amendment to allow the Invesco Focused Discovery Growth ETF and 
Invesco Select Growth ETF (each a ``Fund'' and, collectively, the 
``Funds''), each a series of the Invesco Actively Managed Exchange-
Traded Fund Trust (the ``Trust''), to strike and publish multiple 
intra-day net asset values (``NAVs'') and an end-of-day NAV. The shares 
of each Fund (the ``Shares'') would continue to comply with all of the 
listing standards set forth under Rule 14.11(m).
    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 proposed and the Commission approved a rule to permit 
the listing and trading of the Shares of each Fund.\3\ On December 22, 
2020, the Exchange commenced trading in the Shares of each Fund. The 
Exchange now proposes to continue listing and trading the Shares of 
each Fund pursuant to Rule 14.11(m) and to permit the Funds to strike 
and publish multiple intra-day NAVs and an end-of-day NAV. This 
proposal is designed to provide the marketplace with additional 
information about the Funds and their respective holdings and the 
Exchange believes it will allow market participants to better estimate 
the value each Fund's underlying holdings, assess their risk, and 
provide additional certainty around intra-day price and hedging for the 
Funds' shares.
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    \3\ See Securities Exchange Act Release No. 90684 (December 16, 
2020) 85 FR 83637 (December 22, 2020) (SR-CboeBZX-2020-091) (the 
``Initial Filing'').
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    The NAV represents the value of a fund's assets minus its 
liabilities divided by the number of shares outstanding and is used in 
valuing exchange-traded products (``ETPs''), including Tracking Fund 
Shares. By way of background, an ETP issues shares that can be bought 
or sold throughout the day in the secondary market at a market-
determined price. Authorized participants that have contractual 
arrangements with the ETP (or its distributor) purchase and redeem ETP 
shares directly from the ETP in blocks called creation units at a price 
equal to the next NAV, and may then purchase or sell individual ETP 
shares in the secondary market at market-determined prices. ETPs trade 
at market prices, but the market price typically will be more or less 
than the fund's

[[Page 8936]]

NAV per share due to a variety of factors, including the underlying 
prices of the ETP's assets and the demand for the ETP. Nonetheless, an 
ETP's market price is generally kept close to the ETP's end-of-day NAV 
because of the arbitrage function inherent to the structure of the ETP. 
An arbitrage opportunity is inherent in the ETP structure because the 
ETP's intra-day market price fluctuates during the trading day. Due to 
this fluctuation, the ETP's intra-day market price may not equal the 
ETP's end-of-day NAV. Authorized participants can arbitrage this 
difference (and make a profit) because they can trade directly with the 
ETP at NAV \4\ as well as on the market at market-determined prices. 
The expected result of the arbitrage activity is that the market value 
of the ETP moves back in line with the ETP's NAV per share and 
investors are able to buy ETP shares on an exchange that is close to 
the ETP's NAV per share. The arbitrage mechanism is important because 
it provides a means to maintain a close tie between market price and 
NAV per share of the ETP, thereby helping to ensure that ETP investors 
are treated equitably when buying and selling fund shares.
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    \4\ An open-end fund is required by law to redeem its securities 
on demand from shareholders at a price approximately the 
proportionate share of the fund's NAV at the time of redemption. See 
15 U.S.C. 80a-22(d).
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    In order for the arbitrage mechanism described above to operated 
efficiently, market participants need to be able to estimate, with high 
accuracy, the value of the ETP's holdings, such that it can then 
observe instances when the value of such holdings, on a per-share 
basis, is higher or lower than the current trading price of the shares 
on an exchange. In the case of Tracking Fund Shares, the applicable ETP 
disseminates various information to achieve that goal, while not 
publishing a full list of fund holdings daily.\5\ In general, the more 
information that is available to assist the market participants in 
estimating the value of the fund's holdings, the better the arbitrage 
mechanism will operate with respect to the Tracking Fund Shares.
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    \5\ As noted in the Initial Filing, each Fund will disclose the 
Tracking Basket, which is designed to closely track the daily 
performance of the Fund Portfolio, on a daily basis. Each Fund will 
at a minimum publicly disclose the entirety of its portfolio 
holdings, including the name, identifier, market value and weight of 
each security and instrument in the portfolio within at least 60 
days following the end of every fiscal quarter in a manner 
consistent with normal disclosure requirements otherwise applicable 
to open-end investment companies registered under the 1940 Act.
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    Generally, ETPs must calculate the NAV at least once every business 
day, which is typically done at market close (i.e., 4 p.m. ET).\6\ 
Indeed, Exchange Rules reference the fact that NAV of a series of 
Tracking Fund Shares is calculated at the end of the business day.\7\ 
Now, the Exchange is proposing to allow the Funds to strike and publish 
the NAV per Share for each of the Funds more than once daily.\8\
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    \6\ See 17 CFR 270.22c-1.
    \7\ See Exchange Rule 14.11(m)(3)(B).
    \8\ The Exchange's proposal is similar to functionality offered 
for other ETPs. For example, the prospectus for the Invesco Treasury 
Collateral ETF provides that the Fund is calculated at 12 p.m. and 4 
p.m. ET every day the New York Stock Exchange (``NYSE'') is open. 
See http://hosted.rightprospectus.com/Invesco/Fund.aspx?cu=46138G888&dt=P&ss=ETF.
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    As noted in the Initial Filing, Shares of each of the Funds are 
offered by the Trust, which is registered with the Commission as an 
open-end investment company and has filed a registration statement on 
behalf of the Funds on Form N-1A with the Commission.\9\ The Exemptive 
Relief and Registration Statement provide that the Funds may calculate 
the NAV per Share more than once daily (e.g., at 12 p.m. ET and 4:00 
p.m. ET), however, the Initial Filing did not seek to allow the Funds 
to calculate more than one NAV per day. Now, the Exchange is seeking 
approval to explicitly allow the Funds to strike and publish the NAV 
per Share more than once daily.
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    \9\ The Trust is registered under the 1940 Act. On September 25, 
2020, the Trust filed post-effective amendments to its registration 
statement on Form N-1A relating to each Fund (File No. 811-22148) 
(the ``Registration Statement''). The descriptions of the Funds and 
the Shares contained herein are based, in part, on information 
included in the Registration Statement. The Commission has issued an 
order granting certain exemptive relief to the Trust (the 
``Exemptive Relief'') under the 1940 Act. See Investment Company Act 
of 1940 Release No. 34127 (December 2, 2020).
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    As explained above, the calculation of NAV provides the basis for 
arbitrage, which is an instrumental mechanism in ensuring ETP investors 
are treated equitably when buying and selling fund shares. The Funds 
seek to further reduce market participants' risk and to provide intra-
day price certainty by striking and publishing its NAV more than once 
during each Business Day.\10\ Currently, and by way of example, the 
Fund anticipates it will strike a NAV once during normal trading at 
12:00 p.m. ET (an ``Intra-Day NAV'') and again at the close of trading 
at 4:00 p.m. ET (the ``End-of-Day NAV'' and collectively, the 
``Published NAVs''); however, the Fund may strike and publish multiple 
Intra-Day NAVs. If a Fund strikes an Intra-Day NAV, market participants 
will have the choice of purchasing or redeeming Shares at either of the 
Published NAVs pursuant to the applicable purchase and redemption order 
processes and requirements, understanding that the Fund will always 
process purchase and sales consistent with the next NAV struck 
following the purchase or sale request. The Exchange believes that 
providing market participants with the ability to create and redeem 
during the trading day, coupled with the information available to 
market participants, will reduce the risk that market participants face 
intra-day related to the possible divergence between the Tracking 
Basket \11\ and the value of the Fund's underlying holdings, which 
should enable them to reduce spreads on Shares. Market participants 
will be able to ``lock in'' their creation and redemption transactions 
during the trading day at an Intra-Day NAV, and at the end of the 
trading day at the End-of-Day NAV. As proposed, the Funds will continue 
to meet all listings standards provided in Rule 14.11(m). The only 
change to the Funds that the Exchange is proposing is to allow the 
Funds to strike multiple Intra-Day NAVs. All other material 
representations contained within the Initial Filing remain true and 
will continue to constitute continued listing requirements for the 
Funds.
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    \10\ See the Exemptive Relief.
    \11\ As defined in Rule 14.11(m)(3)(E), the term ``Tracking 
Basket'' means the identities and quantities of the securities and 
other assets included in a basket that is designed to closely track 
the daily performance of the Fund Portfolio, as provided in the 
exemptive relief under the Investment Company Act of 1940 applicable 
to a series of Tracking Fund Shares.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \12\ in general and Section 6(b)(5) of the Act \13\ 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, 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 in that the Shares of each Fund will meet each of the 
continued listing criteria in BZX Rule 14.11(m), as provided in the 
Initial Filing.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The proposal to allow the Funds to strike and publish multiple 
intra-day NAVs will provide the marketplace with additional information 
related to each

[[Page 8937]]

Fund's underlying holdings on an intraday basis, which the Exchange 
believes will allow market participants to better assess their risk and 
provide additional certainty around intra-day price and hedging. The 
Exchange believes that this additional information will reduce the risk 
that market participants face intra-day, which will encourage tighter 
spreads and deeper liquidity in Shares of the Funds, to the benefit of 
investors. The only change to the Funds that the Exchange is proposing 
is to allow the Funds to strike multiple Intra-Day NAVs. All other 
material representations contained within the Initial Filing remain 
true and will continue to constitute continued listing requirements for 
the Funds.
    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 provide additional information to 
market participants thereby reducing market participants risk and 
intra-day price uncertainty which will allow the Fund to better compete 
in the marketplace, thus enhancing 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

    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 the 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 rule-comments@sec.gov. Please include 
File Number SR-CboeBZX-2021-014 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-2021-014. 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-CboeBZX-2021-014 and should be submitted 
on or before March 3, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02713 Filed 2-9-21; 8:45 am]
BILLING CODE 8011-01-P