Document ID: SEC-2018-1586-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2018-10-12T04:00Z

[Federal Register Volume 83, Number 198 (Friday, October 12, 2018)]
[Notices]
[Pages 51747-51749]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22206]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84377; File No. SR-CboeBZX-2018-047]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of Amendment Nos. 2 and 4 and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 2 and 
4, To Amend BZX Rule 14.8, General Listings Requirements--Tier I, To 
Adopt Listing Standards for Closed-End Funds

October 5, 2018.

I. Introduction

    On June 21, 2018, Cboe BZX Exchange, Inc. (``BZX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend BZX Rule 14.8, General Listings Requirements--Tier I, to adopt 
listing standards for Closed-End Funds. The proposed rule change was 
published for comment in the Federal Register on July 11, 2018.\3\ On 
August 24, 2018, pursuant to Section 19(b)(2) of the Act,\4\ the 
Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\5\ On August 28, 2018, the Exchange filed Amendment No. 1 to 
the proposed rule change, which amended and replaced the proposed rule 
change as originally filed. On September 24, 2018, the Exchange filed 
Amendment No. 2 to the proposed rule change, which amended and replaced 
the proposed rule change, as modified by Amendment No. 1.\6\ On October 
3, 2018, the Exchange filed and withdrew Amendment No. 3 to the 
proposed rule change and filed Amendment No. 4 to the proposed rule 
change.\7\ The Commission has received no comments on the proposed rule 
change. The Commission is publishing this notice to solicit comments on 
Amendment Nos. 2 and 4 from interested persons, and is approving the 
proposed rule change, as modified by Amendment Nos. 2 and 4, on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 83596 (July 5, 
2018), 83 FR 32162.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 83938, 83 FR 44403 
(August 30, 2018). The Commission designated October 9, 2018 as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \6\ In Amendment No. 2, the Exchange: (i) Noted that the 
proposed quantitative listing standards differ from the listing 
standards for closed-end funds on NYSE American LLC (``NYSE 
American'') in two ways and described those differences; (ii) 
reorganized the proposed definitions of ``Public Distribution'' and 
``Public Shareholders;'' (iii) specified the meaning of ``market 
value'' for purposes of Closed-End Funds (as defined herein); (iv) 
amended the proposed Market Maker requirement; (v) proposed 
additional continued listing standards; (vi) modified the proposed 
trading hours for Closed-End Funds; (vii) noted that BZX Rule 14.6 
also provides certain conditions under which the Exchange will halt 
trading in a Closed-End Fund; (viii) represented that Closed-End 
Funds will be subject to the Exchange's surveillance procedures for 
ETPs and other equity securities traded on the Exchange; (ix) 
represented that the governance requirements for Closed-End Funds 
would be substantially similar to those applicable to closed-end 
funds on the Nasdaq Stock Market LLC (``Nasdaq''); and (x) made 
technical and conforming changes. Amendment No. 2 is available at: 
https://www.sec.gov/comments/sr-cboebzx-2018-047/srcboebzx2018047-4447313-175711.pdf.
    \7\ In Amendment No. 4, the Exchange corrected two typographical 
errors from Amendment No. 2. Amendment No. 4 is available at: 
https://www.sec.gov/comments/sr-cboebzx-2018-047/srcboebzx2018047-4474562-175863.pdf.
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II. Description of the Proposal, as Modified by Amendment Nos. 2 and 4 
8
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    \8\ For a full description of the proposal, see Amendment No. 2, 
supra note 6 and Amendment No. 4, supra note 7.
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    The Exchange proposes to amend BZX Rule 14.8 \9\ to adopt listing

[[Page 51748]]

standards for Closed-End Funds,\10\ which are based on existing listing 
standards applicable to closed-end funds listed on NYSE American.\11\
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    \9\ Specifically, the Exchange proposes to add new paragraphs 
(e) and (i) under BZX Rule 14.8 related to the initial and continued 
listing standards, respectively, for Closed-End Funds. The Exchange 
also proposes to renumber certain existing paragraphs in BZX Rule 
14.8 in order to accommodate these new paragraphs.
    \10\ As proposed in BZX Rule 14.8(a), the term ``Closed-End 
Funds'' means closed-end management investment companies registered 
under the Investment Company Act of 1940.
    \11\ The Exchange notes that the proposed quantitative listing 
standards are substantively identical to the listing standards 
applicable to closed-end funds on NYSE American (``NYSE American CEF 
Rules''), with two exceptions. Specifically, the proposed 
quantitative listing standards are substantively identical to 
Sections 101(g), 102(a), and 1003(b)(i) and (v) in the NYSE American 
Company Guide. In addition, the Exchange proposes to require that a 
Closed-End Fund has a minimum of four registered and active Market 
Makers, and that a Closed-End Fund has a minimum bid price of at 
least $4 per share initially and at least $1 per share on an ongoing 
basis. These additional requirements are consistent with the 
Exchange's listing standards for corporate securities under current 
BZX Rules 14.8(b)(1)(A), 14.8(e)(1)(A), 14.8(b)(2)(C)(iii), and 
14.8(e)(2)(B)(iv).
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    For initial listing, a Closed-End Fund must meet the requirements 
for either an individual Closed-End Fund (``Individual CEF Standard'') 
or a Group \12\ of Closed-End Funds (``Group CEF Standard''). The 
Individual CEF Standard requires:
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    \12\ As defined in proposed BZX Rule 14.8(e)(2)(B), 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.
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    (i) A Public Distribution \13\ of: (a) At least 500,000 shares 
where there are at least 800 Public Shareholders,\14\ 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; \15\ or (b) at least 1,000,000 shares where there are at least 
400 Public Shareholders;
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    \13\ As defined in proposed BZX Rule 14.8(e)(1)(B), the term 
``Public Distribution'' means the public distribution including only 
Public Shareholders.
    \14\ As defined in proposed BZX Rule 14.8(e)(1)(A), the term 
``Public Shareholders'' includes both shareholders of record and 
beneficial holders, but is exclusive of the holdings of officers, 
directors, controlling shareholders, and other concentrated (i.e., 
10% or greater), affiliated or family holdings.
    \15\ As proposed, 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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    (ii) A Public Distribution with a market value \16\ or net assets 
of at least $20 million;
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    \16\ For purposes of Closed-End Funds, the term ``market value'' 
means the official closing price multiplied by the unit of count.
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    (iii) Minimum bid price of at least $4 per share; and
    (iv) At least four registered and active Market Makers.\17\
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    \17\ See proposed BZX Rule 14.8(e)(2)(A).
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    The Group CEF Standard requires:
    (i) The Group has a Public Distribution with a market value or net 
assets of at least $75 million;
    (ii) 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;
    (iii) Each Closed-End Fund in the Group has a Public Distribution 
with a market value or net assets of at least $10 million; and
    (iv) Each Closed-End Fund in the Group has:
    (a) A Public Distribution of: (1) 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; \18\ or (2) at least 1,000,000 shares where there are at least 
400 Public Shareholders;
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    \18\ See supra note 15.
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    (b) Minimum bid price of at least $4 per share; and
    (c) At least four registered and active Market Makers.\19\
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    \19\ See proposed BZX Rule 14.8(e)(2)(B).
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    The Exchange will consider the suspension of trading in and will 
initiate delisting proceedings (and such Closed-End Fund will not be 
eligible to follow the cure procedures outlined in BZX Rule 14.12) for 
a Closed-End Fund where:
    (i) The market value of the Public Distribution and net assets each 
are less than $5 million for more than 60 consecutive days;
    (ii) 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);
    (iii) The Public Distribution is less than 200,000;
    (iv) The total number of Public Shareholders is less than 300;
    (v) The Public Distribution has a market value of less than $1 
million for more than 90 consecutive days;
    (vi) The bid price is less than $1 per share; or
    (vii) There are fewer than four registered and active Market 
Makers.\20\
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    \20\ See proposed BZX Rule 14.8(i).
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    Closed-End Funds listed on the Exchange will be subject to the 
governance requirements in BZX Rule 14.10 applicable to all management 
investment companies listed on the Exchange, except as provided in the 
exceptions to certain governance requirements for management investment 
companies under BZX Rule 14.10(e)(1)(E) and Interpretation and Policy 
.13 of BZX Rule 14.10. The Exchange notes that the governance 
requirements for Closed-End Funds are substantially similar to those 
applicable to closed-end funds listed on Nasdaq.\21\
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    \21\ See Nasdaq Rule 5600 series.
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    Closed-End Funds will be 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 8:00 p.m. Eastern Time 
\22\ and the Exchange represents that it has appropriate rules to 
facilitate such transactions during all trading sessions. 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 BZX Rule 11.18 
(Trading Halts Due to Extraordinary Market Volatility). BZX Rule 14.6 
(Obligations for Companies Listed on the Exchange) also provides 
certain conditions under which the Exchange will halt trading in a 
Closed-End Fund. Trading may also 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.
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    \22\ The Exchange notes that this includes three trading 
sessions on the Exchange: The Pre-Opening Session from 8:00 a.m. to 
9:30 a.m. Eastern Time; Regular Trading Hours from 9:30 a.m. to 4:00 
p.m. Eastern Time; and the After Hours Trading Session from 4:00 
p.m. to 8:00 p.m. Eastern Time.
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    Trading of Closed-End Funds on the Exchange will be subject to the 
Exchange's surveillance procedures for ETPs and other equity securities 
traded on the Exchange. 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.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment Nos. 2 and 4, is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national

[[Page 51749]]

securities exchange.\23\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\24\ 
which requires, among other things, that the rules of a national 
securities 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, and that the rules are not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \23\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \24\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the proposed initial and continued 
listing standards for Closed-End Funds under BZX Rule 14.8 are 
substantively identical to the listing standards for closed-end funds 
currently utilized by NYSE American, with the exceptions of two 
additional requirements proposed by the Exchange.\25\ The Commission 
also notes that the Exchange's governance requirements that will be 
applicable to Closed-End Funds are substantially similar to those 
applicable to closed-end funds listed on Nasdaq.\26\ As discussed 
above, Closed-End Funds will be subject to the Exchange's existing 
rules governing the trading of equity securities, and 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 applicable federal securities laws.
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    \25\ As discussed above, in addition to the listing standards 
for closed-end funds currently utilized by NYSE American, the 
Exchange would require that a Closed-End Fund has a minimum of four 
registered and active Market Makers, and that a Closed-End Fund has 
a minimum bid price of at least $4 per share initially and at least 
$1 per share on an ongoing basis. These two additional requirements 
are consistent with the Exchange's listing standards for corporate 
securities. See supra note 11.
    \26\ See supra note 21.
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    Based on the foregoing, the Commission believes that the proposal 
presents no novel regulatory issues and finds the proposal to be 
consistent with the Act.

IV. Solicitation of Comments on Amendment Nos. 2 and 4 to the Proposed 
Rule Change

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment Nos. 2 and 4 are 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 such 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 November 2, 2018.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment Nos. 2 and 4

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment Nos. 2 and 4, prior to the thirtieth 
day after the date of publication of notice of the filing of Amendment 
Nos. 2 and 4 in the Federal Register. The Commission notes that 
Amendment No. 2 enhanced consistency between the Exchange's proposed 
listing standards and the existing listing standards for closed-end 
funds on other exchanges, as well as the existing listing standards for 
corporate securities on the Exchange. Amendment No. 2 also provided 
additional description of the proposed listing standards, trading 
rules, and surveillance procedures, and made technical and conforming 
changes. The changes in Amendment No. 2 assisted the Commission in 
finding that the proposal is consistent with the Act. The Commission 
notes that Amendment No. 4 only corrected two typographical errors. 
Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Act,\27\ to approve the proposed rule change, as 
modified by Amendment Nos. 2 and 4, on an accelerated basis.
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    \27\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\28\ that the proposed rule change (SR-CboeBZX-2018-047), as 
modified by Amendment Nos. 2 and 4, be, and hereby is, approved on an 
accelerated basis.
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    \28\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22206 Filed 10-11-18; 8:45 am]
 BILLING CODE 8011-01-P