Document ID: SEC-2021-1254-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.;
Posted Date: 2021-09-17T04:00Z

[Federal Register Volume 86, Number 178 (Friday, September 17, 2021)]
[Notices]
[Pages 51941-51943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20079]

[[Page 51941]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92946; File No. SR-CboeBZX-2021-060]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Reflect 
an Amendment to the Application and Exemptive Order Governing the 
Following Funds, Shares of Which Are Listed and Traded on the Exchange 
Under BZX Rule 14.11(m): Fidelity Growth Opportunities ETF, Fidelity 
Magellan ETF, Fidelity Real Estate Investment ETF, Fidelity Small-Mid 
Cap Opportunities ETF, Fidelity Blue Chip Value ETF, Fidelity Blue Chip 
Growth ETF, and Fidelity New Millennium ETF

September 13, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on August 31, 2021, Cboe BZX Exchange, Inc. (the ``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\ 15 U.S.C. 78a.
    \3\ 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'') proposes to 
reflect an amendment to the Application and Exemptive Order governing 
the following funds, shares of which are listed and traded on the 
Exchange under BZX Rule 14.11(m): Fidelity Growth Opportunities ETF, 
Fidelity Magellan ETF, Fidelity Real Estate Investment ETF, Fidelity 
Small-Mid Cap Opportunities ETF, Fidelity Blue Chip Value ETF, Fidelity 
Blue Chip Growth ETF, and Fidelity New Millennium ETF.
    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 adopted BZX Rule 14.11(m) for the purpose of 
permitting the listing and trading, or pursuant to unlisted trading 
privileges (``UTP''), of Tracking Fund Shares, which are securities 
issued by an actively managed open-end management investment 
company.\4\ Exchange Rule 14.11(m)(2)(A) requires the Exchange to file 
separate proposals under Section 19(b) of the Act before listing and 
trading any series of Tracking Fund Shares on the Exchange. Pursuant to 
this provision, the Exchange submitted proposals to list and trade 
shares (``Shares'') of Tracking Funds Shares of the following funds 
listed and traded on the Exchange under BZX Rule 14.11(m): Fidelity 
Growth Opportunities ETF, Fidelity Magellan ETF, Fidelity Real Estate 
Investment ETF, Fidelity Small-Mid Cap Opportunities ETF, Fidelity Blue 
Chip Value ETF, Fidelity Blue Chip Growth ETF, and Fidelity New 
Millennium ETF (each, a ``Fund'' and, together the ``Funds'').\5\ The 
Exchange proposes to reflect an amendment to the Prior Exemptive Order 
(as defined below) related to the listing and trading of these Funds 
filed by, among others, Fidelity Beach Street Trust (the ``Issuer'') as 
follows.
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    \4\ See Securities Exchange Act Release No. 88887 (May 15, 
2020), 85 FR 30990 (May 21, 2020) (SR-CboeBZX-2019-107) (Notice of 
Filing of Amendment No. 5 and Order Granting Accelerated Approval of 
a Proposed Rule Change, as Modified by Amendment No. 5, to Adopt 
Rule 14.11(m), Tracking Fund Shares, and to List and Trade Shares of 
the Fidelity Blue Chip Value ETF, Fidelity Blue Chip Growth ETF, and 
Fidelity New Millennium ETF (``Approval Order'')). Rule 
14.11(m)(3)(A) provides that ``[t]he term ``Tracking Fund Share'' 
means a security that (i) represents an interest in an investment 
company registered under the Investment Company Act of 1940 
(``Investment Company'') organized as an open-end management 
investment company, that invests in a portfolio of securities 
selected by the Investment Company's investment adviser consistent 
with the Investment Company's investment objectives and policies; 
(ii) is issued in a specified aggregate minimum number in return for 
a deposit of a specified Tracking Basket and/or a cash amount with a 
value equal to the next determined net asset value; (iii) when 
aggregated in the same specified minimum number, may be redeemed at 
a holder's request, which holder will be paid a specified Tracking 
Basket and/or a cash amount with a value equal to the next 
determined net asset value; and (iv) the portfolio holdings for 
which are disclosed within at least 60 days following the end of 
every fiscal quarter. Rule 14.11(m)(3)(E) provides that ``[t]he 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.''
    \5\ On May 15, 2020, in conjunction with its approval of Rule 
14.11(m), the Commission approved the proposed rule change relating 
to the listing and trading of shares of Fidelity Blue Chip Value 
ETF, Fidelity Blue Chip Growth ETF, and Fidelity New Millennium ETF. 
Id. The Commission published the notice of filing and immediate 
effectiveness relating to the rule change to list and trade shares 
of the Fidelity Growth Opportunities ETF, Fidelity Magellan ETF, 
Fidelity Real Estate Investment ETF, and Fidelity Small-Mid Cap 
Opportunities ETF on November 30, 2020. See Securities Exchange 
Release No. 90530 (November 30, 2020), 85 FR 78366 (December 4, 
2020) (SR-CboeBZX-2020-085) (``Notice'').
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    The Issuer filed a ninth amended application for an order under 
Section 6(c) of the 1940 Act for exemptions from various provisions of 
the 1940 Act and rules thereunder (the ``Prior Application'').\6\ On 
December 10, 2019, the Commission issued an order (the ``Prior 
Exemptive Order'') under the 1940 Act granting the exemptions requested 
in the Application.\7\
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    \6\ See File No. 812-14364, dated November 8, 2019.
    \7\ See Investment Company Act Release No. 33712, December 10, 
2019.
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    Under the Prior Exemptive Order, the Funds are required to publish 
a basket of securities and cash that, while different from the Fund's 
portfolio, is designed to closely track its daily performance (i.e., 
the Tracking Basket). The Prior Application stated that the Tracking 
Basket will solely consist of a combination of (i) select recently 
disclosed portfolio holdings (``Strategy Components''); (ii) liquid 
U.S. exchange-traded funds (``ETFs'') that convey information about the 
types of instruments (that are not otherwise fully represented by the 
Strategy Components) in which a Fund invests (``Representative ETFs''); 
and (iii) cash and cash equivalents. As set forth in the Approval Order 
and in the Notice, investments made by the Funds will comply with the 
conditions set forth in the Prior Application and the Prior Exemptive 
Order.
    On October 30, 2020, as amended June 30, 2021, the Issuer sought to

[[Page 51942]]

amend the Prior Exemptive Order to permit the Issuer to also select 
securities from the universe from which a Fund's investments are 
selected such as a broad-based market index (``Investment Universe'') 
in the Fund's Tracking Basket.\8\ On August 5, 2021, the Commission 
issued an amended order that, among other things, permits the Issuer to 
include select securities from the Fund's Investment Universe in the 
Fund's Tracking Basket (the ``Updated Exemptive Order'').\9\ 
Accordingly, the Funds will comply with this condition of the Updated 
Application and the Updated Exemptive Order. Except for the change 
noted above, all other representations made in the respective rule 
filings remain unchanged and will continue to constitute continuing 
listing requirements for the Funds. The Funds will also continue to 
comply with the requirements of Rule 14.11(m).
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    \8\ See File No. 812-15175, dated June 30, 2021. The amendment 
also sought to provide for the use of creation baskets that include 
instruments that are not included, or that are included with 
different weightings, in the Fund's Tracking Basket. Accordingly, 
the Exchange has filed a separate proposed rule change to amend Rule 
14.11 to provide for the use of creation baskets that include 
instruments that are not included, or that are included with 
different weightings, in the Fund's Tracking Basket. See Securities 
Exchange Act No. 92626 (August 10, 2021) 86 FR 45792 (August 16, 
2021) (SR-CboeBZX-2021-053) (Notice of Filing of a Proposed Rule 
Change To Amend Rule 14.11(m) (Tracking Fund Shares) To Provide for 
the Use of Custom Baskets Consistent With the Exemptive Relief 
Issued Pursuant to the Investment Company Act of 1940 Applicable to 
a Series of Tracking Fund Shares).
    \9\ See Investment Company Act Release No. 34350, August 5, 
2021.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\10\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \11\ requirements that the rules of an exchange be 
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 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. The proposed revision is intended to reflect the 
change in the Updated Application and the Updated Exemptive Order that 
permits the Issuer to include select securities from the Fund's 
Investment Universe in the Fund's Tracking Basket. The proposed rule 
change would permit the Funds to operate consistent with this updated 
condition in the Updated Application and the Updated Exemptive Order. 
Furthermore, Exchange Rule 14.11(m)(4)(B)(iii) provides that the 
Exchange will consider the suspension of trading in and will commence 
delisting proceedings for a series of Tracking Fund Shares pursuant to 
Rule 14.12 if, among other things, the Exchange is aware that the 
Investment Company is not in compliance with the conditions of any 
exemptive order or no-action relief granted by the Commission of the 
Commission Staff under the 1940 Act to the Investment Company with 
respect to the series of Tracking Funds Shares. Therefore, the proposed 
rule change would allow the Exchange to enforce compliance by its 
members and persons associated with its members, as provided in Section 
6(b)(1) of the Act.\12\ Except for the changes noted above, all other 
representations made in the respective rule filings remain unchanged 
and, as noted, will continue to constitute continuing listing 
requirements for the Funds.
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    \12\ 15 U.S.C. 78f(b)(1).
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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. As noted, the purpose of the 
filing is to reflect an amendment to the Prior Exemptive Order 
governing the listing and trading of these Funds. To the extent that 
the proposed rule change would continue to permit listing and trading 
of another type of actively-managed ETF that has characteristics 
different from existing actively-managed and index ETFs, the Exchange 
believes that the proposal would benefit investors by continuing to 
promote competition among various ETF products.

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 \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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 pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
states that the Funds will continue to comply with the requirements of 
BZX Rule 14.11(m) and that waiver of the operative delay would allow 
the Funds to operate in a manner consistent with the Updated 
Application and Updated Exemptive Order. For these reasons, the 
Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposed rule change operative upon filing.\16\
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    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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

[[Page 51943]]

action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.

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-2021-060 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-2021-060. 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-2021-060 and should be submitted 
on or before October 8, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-20079 Filed 9-16-21; 8:45 am]
BILLING CODE 8011-01-P