Document ID: SEC-2019-1397-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2019-09-30T04:00Z

[Federal Register Volume 84, Number 189 (Monday, September 30, 2019)]
[Notices]
[Pages 51649-51654]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21094]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87095; File No. SR-CboeBZX-2019-083]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change Regarding Certain Changes to 
Investments of the Aptus Collared Income Opportunity ETF, a Series of 
ETF Series Solutions

September 24, 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 September 16, 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 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

    The Exchange proposes a rule change to allow the Aptus Collared 
Income Opportunity ETF (the ``Fund''), a series of ETF Series Solutions 
(the ``Trust''), to hold certain instruments in a manner that does not 
necessarily comply with Rule 14.11(i) (``Managed Fund Shares''). The 
shares of the Fund are referred to herein as the ``Shares.''
    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 Shares are currently listed on the Exchange pursuant to the 
generic listing standards applicable to Managed Fund Shares under Rule 
14.11(i) \5\ (the ``Generic Listing Standards'') and began trading on 
July 10, 2019. While the Fund currently meets all of the Generic 
Listing Standards, the Adviser would like to increase the flexibility 
of the Fund's holdings in a way that might not meet such requirements. 
As such, the Exchange submits this proposal in order

[[Page 51650]]

to allow the Shares to continue listing and trading on the Exchange 
while holding certain listed derivatives in a manner that may not 
comply with Rule 14.11(i)(4)(C)(iv)(b).\6\ Specifically, the Exchange 
is proposing to allow the Fund to hold options on the S&P 500 Index 
(``SPX Options'') and/or options on the SPDR S&P 500 ETF Trust 
(``SPY'') (``SPY Options'' and, collectively with SPX Options, ``S&P 
500 Options'') in a manner that exceeds both the 30% Limit and the 65% 
Limit. Otherwise, the Fund will continue to comply with all other 
listing standards on an initial and continued listing basis under Rule 
14.11(i). As noted above, the Fund currently meets the Generic Listing 
Standards and will continue to meet the Generic Listing Standards until 
and unless this proposal becomes operative.
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    \5\ The Commission approved Rule 14.11(i) in Securities Exchange 
Act Release No. 65225 (August 30, 2011), 76 FR 55148 (September 6, 
2011) (SR-BATS-2011-018).
    \6\ Rule 14.11(i)(4)(C)(iv)(b) provides that ``the aggregate 
gross notional value of listed derivatives based on any five or 
fewer underlying reference assets shall not exceed 65% of the weight 
of the portfolio (including gross notional exposures) (the ``65% 
Limit''), and the aggregate gross notional value of listed 
derivatives based on any single underlying reference asset shall not 
exceed 30% of the weight of the portfolio (including gross notional 
exposures) (the ``30% Limit'').''
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    The Exchange notes that the proposed exceptions to the Generic 
Listing Standards included in this proposal are substantively identical 
to exceptions previously approved by the Commission and do not raise 
any new issues that the Commission has not previously contemplated.\7\
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    \7\ The Exchange notes that this proposal is very similar to 
several previously submitted proposals to list and trade a series of 
Index Fund Shares (which are referred to as Investment Company Units 
under the rules of NYSE Arca, Inc.) and Managed Fund Shares with 
exposures to a single underlying reference asset that were either 
approved by the Commission or effective upon filing. See Securities 
Exchange Act Release Nos. 83146 (May 1, 2018), 83 FR 20103 (May 7, 
2018) (SR-CboeBZX-2018-029); 83679 (July 20, 2018), 83 FR 35505 
(July 26, 2018); 77045 (February 3, 2016), 81 FR 6916 (February 9, 
2016) (SR-NYSEArca-2015-113) (the ``Amendment''); and 74675 (April 
8, 2015), 80 FR 20038 (April 14, 2015) (SR-NYSEArca-2015-05) 
(collectively, with the Amendment, the ``Arca Filing'').
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    The Shares are offered by the Trust, which was established as a 
Delaware statutory trust on February 9, 2012.\8\ The Trust is 
registered with the Commission as an open-end investment company and 
has filed a registration statement on behalf of the Fund on Form N-1A 
(``Registration Statement'') with the Commission.\9\ Aptus Capital 
Advisors, LLC (the ``Adviser'') serves as investment adviser to the 
Fund. Rule 14.11(i)(7) provides that, if the investment adviser to the 
investment company issuing Managed Fund Shares is affiliated with a 
broker-dealer, such investment adviser shall erect 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 
investment company portfolio.\10\ In addition, Rule 14.11(i)(7) further 
requires that personnel who make decisions on the investment company's 
portfolio composition must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable investment company portfolio. The Adviser is not a 
broker-dealer and is not affiliated with a broker-dealer. In addition, 
Adviser personnel who make decisions regarding the Fund's portfolio are 
subject to procedures designed to prevent the use and dissemination of 
material nonpublic information regarding the Fund's portfolio. In the 
event that (a) the Adviser becomes registered as a broker-dealer or 
newly affiliated with a broker-dealer, or (b) any new adviser or sub-
adviser is a registered broker-dealer or becomes affiliated with a 
broker-dealer, it will implement and maintain a fire wall with respect 
to its relevant personnel or such broker-dealer affiliate, as 
applicable, regarding access to information concerning the composition 
and/or changes to the portfolio, and will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding such portfolio.
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    \8\ The Commission has issued an order, upon which the Trust may 
rely, granting certain exemptive relief under the 1940 Act. See 
Investment Company Act Release No. 32110 (May 10, 2016) (File No. 
812-14604).
    \9\ See Registration Statement on Form N-1A for the Trust, dated 
April 26, 2019 (File Nos. 333-179562 and 811-22668). The 
descriptions of the Fund and the Shares contained herein are based, 
in part, on information in the Registration Statement.
    \10\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and its related personnel are 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This Rule requires investment advisers 
to adopt a code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
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Aptus Collared Income Opportunity ETF
    According to the Registration Statement, the Fund seeks current 
income and capital appreciation. The Fund is an actively-managed 
exchange-traded fund (``ETF'') that seeks to achieve its investment 
objective principally by investing in a portfolio of large 
capitalization U.S.-listed equity securities and an options collar 
(i.e., a mix of written (sold) call options and long (bought) put 
options) on the same underlying equity securities. The equity 
securities and options held by the Fund must be listed on a U.S.-
exchange.
    The Adviser selects the Fund's equity securities based on the 
Adviser's assessment of the likelihood that the dividends paid by the 
issuer will increase or remain stable and based on the liquidity of the 
options available for such security. The Adviser considers factors 
primarily related to yield, earnings growth, revenue growth, and 
distribution history in assessing the likelihood that the dividends 
paid by an issuer will increase or remain stable. The Fund's portfolio 
will typically consist of approximately 30 equity securities across a 
variety of industries, with generally no more than 30% of the Fund's 
net assets invested in companies in a single sector. The Fund's options 
collar strategy typically consists of two components: (i) Selling 
covered call options on up to 100% of the equity securities held by the 
Fund to generate premium from such options, while (ii) simultaneously 
reinvesting a portion of such premium to buy put options on all or a 
significant portion of an equity position held by the Fund to ``hedge'' 
or mitigate the downside risk associated with owning equity securities. 
The Fund seeks to generate income from the combination of dividends 
received from the equity securities held by the Fund and premiums 
received from the sale of options.
    The equity securities held by the Fund will meet the requirements 
of Rule 14.11(i)(4)(C)(i)(a) and the single equity options contracts 
will meet the requirements of Rule 14.11(i)(4)(C)(iv)(a) and (b).
    In addition to the above described principal investment strategy, 
the Fund may also invest in a ``bull call spread'' options strategy as 
a non-principal investment strategy. The Fund's bull call spread 
strategy entails (i) the purchase of at-the-money call S&P 500 Options 
(i.e., call options with a strike price roughly equal to the current 
price

[[Page 51651]]

of the underlying asset); and (ii) writing (selling) out-of-the-money 
call S&P 500 Options (i.e., call options with a strike price higher 
than the current price of the underlying asset). The Adviser expects to 
generally invest less than 5% of the Fund's net assets in the bull call 
spread options strategy, however, the gross notional value of such 
positions may exceed the 30% Limit and the 65% Limit.
S&P 500 Options
    The market for options contracts on the S&P 500 Index traded on 
Cboe Exchange, Inc. (``Cboe Options'') is among the most liquid markets 
in the world. In August 2019, approximately 1.488 million options 
contracts on the S&P 500 Index were traded per day, which is more than 
$430 billion in notional volume traded on a daily basis. Similarly, 
more than 75 million options contracts referencing SPY were traded in 
August 2019, representing more than $105 billion in notional volume on 
a daily basis. The Exchange believes that sufficient protections are in 
place to protect against market manipulation of the Fund's Shares and 
S&P 500 Options for several reasons: (i) The diversity, liquidity, and 
market cap of the securities underlying the S&P 500 Index; (ii) the 
significant liquidity in the market for SPX Options and SPY Options; 
and (iii) surveillance by the Exchange, Cboe Options, other U.S. 
options exchanges, and the Financial Industry Regulatory Authority 
(``FINRA'') designed to detect violations of the federal securities 
laws and self-regulatory organization (``SRO'') rules. The Exchange has 
in place a surveillance program for transactions in ETFs to ensure the 
availability of information necessary to detect and deter potential 
manipulations and other trading abuses, thereby making the Shares less 
readily susceptible to manipulation. Further, the Exchange believes 
that because the S&P 500 Options in the Fund's portfolio will be 
acquired in extremely liquid and highly regulated markets,\11\ the 
Shares are less readily susceptible to manipulation.
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    \11\ All exchange-listed securities that the Fund may hold will 
trade on a market that is a member of the Intermarket Surveillance 
Group (``ISG'') and the Fund will not hold any non-exchange-listed 
equities or options, however, not all of the components of the 
portfolio for the Fund may trade on exchanges that are members of 
the ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. For a list of the current members of 
ISG, see www.isgportal.org.
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    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the 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 the Shares 
through the Exchange will be subject to the Exchange's surveillance 
procedures for derivative products, including Managed Fund Shares. All 
statements and representations made in this filing regarding (a) the 
description of the portfolio and reference assets, (b) limitations on 
portfolio holdings or reference assets, or (c) the applicability of 
Exchange rules shall constitute continued listing requirements for 
listing the Shares on the Exchange. The issuer has represented to the 
Exchange that it will advise the Exchange of any failure by the Fund or 
the Shares to comply with the continued listing requirements, and, 
pursuant to its obligations under Section 19(g)(1) of the Act, the 
Exchange will surveil for compliance with the continued listing 
requirements. If the Fund or the Shares are not in compliance with the 
applicable listing requirements, then the Exchange will commence 
delisting procedures under Exchange Rule 14.12. FINRA conducts certain 
cross-market surveillances on behalf of the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for FINRA's 
performance under this regulatory services agreement. If the Fund is 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures for the Fund under Exchange 
Rule 14.12.
    The Exchange or FINRA, on behalf of the Exchange, will communicate 
as needed regarding trading in the Shares and exchange-traded options 
contracts with other markets and other entities that are members of the 
ISG and may obtain trading information regarding trading in the Shares 
as well as the equities and exchange-traded options contracts held by 
the Fund from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares, 
equities, and exchange-traded options contracts from markets and other 
entities that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement. In addition, the 
Exchange also has a general policy prohibiting the distribution of 
material, non-public information by its employees.
    As noted above, SPX Options and SPY Options are among the most 
liquid options in the world and derive their value from the actively 
traded S&P 500 Index components. The contracts trade in competitive 
auction markets with price and quote transparency. The Exchange 
believes the highly regulated options markets and the broad base and 
scope of the S&P 500 Index make securities that derive their value from 
that index less susceptible to market manipulation in view of market 
capitalization and liquidity of the S&P 500 Index components, the 
market cap and liquidity of SPY, price and quote transparency, and 
arbitrage opportunities.
    The Exchange believes that the liquidity of the markets for SPY, 
S&P 500 Index securities, SPX Options, and SPY Options, and other 
related derivatives is sufficiently great to deter fraudulent or 
manipulative acts associated with the price of the Shares. The Exchange 
also believes that such liquidity is sufficient to support the creation 
and redemption mechanism. Coupled with the extensive surveillance 
programs of the SROs described above, the Exchange does not believe 
that trading in the Shares would present manipulation concerns.
    The Exchange represents that, except for the limitations on listed 
derivatives in BZX Rule 14.11(i)(4)(C)(iv)(b), the Fund's proposed 
investments will satisfy, on an initial and continued listing basis, 
all of the generic listing standards under BZX Rule 14.11(i)(4)(C) and 
all other applicable requirements for Managed Fund Shares under Rule 
14.11(i). The Trust is required to comply with Rule 10A-3 under the Act 
for the initial and continued listing of the Shares of the Fund. In 
addition, the Exchange represents that the Shares of the Fund will 
continue to comply with all other requirements applicable to Managed 
Fund Shares, which includes the dissemination of key information such 
as the Disclosed Portfolio,\12\ Net Asset Value,\13\ and the Intraday 
Indicative Value,\14\ suspension of trading or removal,\15\ trading 
halts,\16\ surveillance,\17\ minimum price variation for quoting and 
order entry,\18\ and the information circular,\19\ as set forth in 
Exchange rules applicable to Managed Fund Shares. Further, all 
statements or representations regarding the description of the 
portfolio or reference assets, limitations on portfolio holdings or 
reference assets, dissemination and availability of index, reference 
asset, and intraday indicative values, or the applicability of Exchange 
listing rules shall constitute continued listing

[[Page 51652]]

requirements for the Fund. Moreover, all of the options contracts held 
by the Fund will trade on markets that are a member of ISG or 
affiliated with a member of ISG or with which the Exchange has in place 
a comprehensive surveillance sharing agreement. Quotation and last sale 
information for U.S. exchange-listed options contracts cleared by The 
Options Clearing Corporation will be available via the Options Price 
Reporting Authority. The intra-day, closing and settlement prices of 
exchange-traded options will be readily available from the options 
exchanges, automated quotation systems, published or other public 
sources, or online information services such as Bloomberg or Reuters. 
Price information on cash equivalents is available from major broker-
dealer firms or market data vendors, as well as from automated 
quotation systems, published or other public sources, or online 
information services.
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    \12\ See Rule 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii).
    \13\ See Rule 14.11(i)(4)(A)(ii).
    \14\ See Rule 14.11(i)(4)(B)(i).
    \15\ See Rule 14.11(i)(4)(B)(iii).
    \16\ See Rule 14.11(i)(4)(B)(iv).
    \17\ See Rule 14.11(i)(2)(C).
    \18\ See Rule 14.11(i)(2)(B).
    \19\ See Rule 14.11(i)(6).
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \20\ in general and Section 6(b)(5) of the Act \21\ 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, because, as noted above, the Shares will meet each of 
the initial and continued listing criteria in BZX Rule 14.11(i) with 
the exception of Rule 14.11(i)(4)(C)(iv)(b), which requires that the 
aggregate gross notional value of listed derivatives based on any five 
or fewer underlying reference assets shall not exceed 65% of the weight 
of the portfolio (including gross notional exposures), and the 
aggregate gross notional value of listed derivatives based on any 
single underlying reference asset shall not exceed 30% of the weight of 
the portfolio (including gross notional exposures).\22\ Rule 
14.11(i)(4)(C)(iv)(b) is intended to ensure that the Fund is not 
subject to manipulation by virtue of significant exposure to a 
manipulable underlying reference asset by establishing concentration 
limits among the underlying reference assets for listed derivatives 
held by a particular fund.
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    \20\ 15 U.S.C. 78f.
    \21\ 15 U.S.C. 78f(b)(5).
    \22\ As noted above, the Exchange is submitting this proposal 
because the Fund would not meet the requirements of Rule 
14.11(i)(4)(C)(iv)(b) which prevents the aggregate gross notional 
value of listed derivatives based on any single underlying reference 
asset from exceeding 30% of the weight of the portfolio (including 
gross notional exposures) and the aggregate gross notional value of 
listed derivatives based on any five or fewer underlying reference 
assets from exceeding 65% of the weight of the portfolio (including 
gross notional exposures).
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    The Exchange believes that sufficient protections are in place to 
protect against market manipulation of the Fund's Shares and S&P 500 
Options for several reasons: (i) The diversity, liquidity, and market 
cap of the securities underlying the S&P 500 Index; (ii) the 
significant liquidity in the market for SPX Options and SPY Options; 
and (iii) surveillance by the Exchange, Cboe Options, other U.S. 
options exchanges, and FINRA designed to detect violations of the 
federal securities laws and SRO rules. The Exchange has in place a 
surveillance program for transactions in ETFs to ensure the 
availability of information necessary to detect and deter potential 
manipulations and other trading abuses, thereby making the Shares less 
readily susceptible to manipulation. Further, the Exchange believes 
that because the assets in the Fund's portfolio, which are comprised 
primarily of S&P 500 Options, will be acquired in extremely liquid and 
highly regulated markets, the Shares are less readily susceptible to 
manipulation.
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the 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 the Shares 
through the Exchange will be subject to the Exchange's surveillance 
procedures for derivative products, including Managed Fund Shares. All 
statements and representations made in this filing regarding (a) the 
description of the portfolio and reference assets, (b) limitations on 
portfolio holdings or reference assets, or (c) the applicability of 
Exchange rules shall constitute continued listing requirements for 
listing the Shares on the Exchange. The issuer has represented to the 
Exchange that it will advise the Exchange of any failure by the Fund or 
the Shares to comply with the continued listing requirements, and, 
pursuant to its obligations under Section 19(g)(1) of the Act, the 
Exchange will surveil for compliance with the continued listing 
requirements. If the Fund or the Shares are not in compliance with the 
applicable listing requirements, then the Exchange will commence 
delisting procedures under Exchange Rule 14.12. FINRA conducts certain 
cross-market surveillances on behalf of the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for FINRA's 
performance under this regulatory services agreement. If the Fund is 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures for the Fund under Exchange 
Rule 14.12.
    The Exchange or FINRA, on behalf of the Exchange, will communicate 
as needed regarding trading in the Shares and exchange-traded options 
contracts with other markets and other entities that are members of the 
ISG and may obtain trading information regarding trading in the Shares 
and exchange-traded options contracts from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and exchange-traded options contracts from 
markets and other entities that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees. As 
noted above, SPX Options and SPY Options are among the most liquid 
options in the world and derive their value from the actively traded 
S&P 500 Index components. The Exchange believes the highly regulated 
options markets and the broad base and scope of the S&P 500 Index make 
securities that derive their value from that index less susceptible to 
market manipulation in view of market capitalization and liquidity of 
the S&P 500 Index components, the market cap and liquidity of SPY, 
price and quote transparency, and arbitrage opportunities.
    The Exchange believes that the liquidity of the markets for S&P 500 
Index securities, SPY, SPX Options and SPY Options, and other related 
derivatives is sufficiently great to deter fraudulent or manipulative 
acts associated with the Fund's Shares price. The Exchange also 
believes that such liquidity is sufficient to support the creation and 
redemption mechanism. Coupled with the extensive surveillance programs 
of the SROs described above, the Exchange does not believe that trading 
in the Fund's Shares would present manipulation concerns.
    The Exchange represents that, except as described above, the Fund 
will meet and be subject to all other requirements of the Generic 
Listing Standards and

[[Page 51653]]

other applicable continued listing requirements for Managed Fund Shares 
under Rule 14.11(i), including those requirements regarding the 
Disclosed Portfolio,\23\ Intraday Indicative Value,\24\ suspension of 
trading or removal,\25\ trading halts,\26\ disclosure,\27\ and 
firewalls.\28\ The Trust is required to comply with Rule 10A-3 under 
the Act for the initial and continued listing of the Shares of the 
Fund. Moreover, all of the options contracts held by the Fund will 
trade on markets that are a member of ISG or affiliated with a member 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
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    \23\ See Rule 14.11(i)(4)(B)(ii).
    \24\ See Rule 14.11(i)(4)(B)(i).
    \25\ See Rule 14.11(i)(4)(B)(iii).
    \26\ See Rule 14.11(i)(4)(B)(iv).
    \27\ See Rule 14.11(i)(6).
    \28\ See Rule 14.11(i)(7).
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    Finally, this proposal would allow the Fund to hold S&P 500 Options 
in a manner that is generally consistent with other series of Index 
Fund Shares and Managed Fund Shares based on filings that were either 
effective upon filing or that the Commission has approved for listing 
and trading that also did not satisfy the applicable generic listing 
standards. Specifically, the proposal is seeking similar exposure as 
was approved by the Commission in the Arca Filing, which allowed the 
listing of a fund based on an index with significant exposure to SPX 
Options. As such, the Exchange believes the proposed rule change will 
not significantly affect the protection of investors or the public 
interest because the proposal contains no new issues that the 
Commission has not previously contemplated.
    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 will allow the Fund to fully implement its options 
strategy, which will enhance competition among market participants, 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 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: (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 \29\ and Rule 19b-
4(f)(6) thereunder.\30\
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    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 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 pursuant to Rule 19b-4(f)(6) under the 
Act \31\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \32\ 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 proposed rule change may become operative upon filing. The 
Exchange believes that the proposal will enhance competition among both 
market participants and listing venues to the benefit of investors and 
the marketplace by providing additional flexibility for the options 
strategy of the Fund. Further, the Exchange believes that the proposed 
rule change will not significantly affect the protection of investors 
or the public interest because the proposal does not raise any new 
issues that the Commission has not previously contemplated. 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 operative delay and 
designates the proposed rule change operative upon filing.\33\
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    \31\ 17 CFR 240.19b-4(f)(6).
    \32\ 17 CFR 240.19b-4(f)(6)(iii).
    \33\ For purposes only of waiving the 30-day operative delay, 
the Commission also 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 shall 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-CboeBZX-2019-083 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-2019-083. 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

[[Page 51654]]

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-2019-083, and should 
be submitted on or before October 21, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-21094 Filed 9-27-19; 8:45 am]
BILLING CODE 8011-01-P