[Federal Register Volume 83, Number 85 (Wednesday, May 2, 2018)]
[Notices]
[Pages 19387-19393]
[FR Doc No: 2018-09259]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83114; File No. SR-CboeBZX-2018-005]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To List
and Trade Shares of the Cboe Vest S&P 500[reg] Premium Income ETF Under
Rule 14.11(c)(4)

April 26, 2018.

I. Introduction

    On January 10, 2018, Cboe BZX Exchange, Inc. (``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ a
proposed rule change to list and trade shares of the Cboe Vest S&P
500[reg] Premium Income ETF, a series of ETF Series Solutions (the
``Trust''). The proposed rule change was published for comment in the
Federal Register on January 26, 2018.\4\ On March 8, 2018, the
Commission extended the time period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to approve or disapprove the proposed
rule change.\5\ On April 18, 2018, the Exchange filed Amendment No. 1
to the proposed rule change, which replaced and superseded the proposed
rule change as originally filed.\6\ The Commission received no comments
on the proposed rule change. The Commission is publishing this notice
to solicit comments on Amendment No. 1 from interested persons and is
approving the proposed rule change, as modified by Amendment No. 1, on
an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 82538 (January 19,
2018), 83 FR 3807.
    \5\ See Securities Exchange Act Release No. 82832, 82 FR 11269
(March 14, 2018) (extending the time period to April 26, 2018).
    \6\ Amendment No. 1 to the proposed rule change is available at:
https://www.sec.gov/comments/sr-cboebzx-2017-005/cboebzx2017005-3458514-162203.pdf.
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II. The Exchange's Description of the Proposed Rule Change, as Modified
by Amendment No. 1

    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 parts of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of Cboe
Vest S&P 500[reg] Premium Income ETF (the ``Fund'') under Rule
14.11(c)(4), which governs the listing and trading of Index Fund Shares
based on fixed income

securities indexes on the Exchange. The Fund will be an index-based
exchange traded fund (``ETF''). The Fund will track the Cboe S&P
500[reg] Volatility Risk Premia Index (the ``Index'').\7\
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    \7\ This filing was originally submitted on January 10, 2018 as
SR-CboeBZX-2018-004. SR-CboeBZX-2018-004 was subsequently withdrawn
on January 10, 2018 and replaced by this filing.
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    The Shares will be offered by the Trust, which was established as a
Delaware statutory trust on February 9, 2012. 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.\8\ The Fund's
adviser, Cboe Vest Financial, LLC (the ``Adviser''), and index
provider, Cboe Exchange, Inc. (``Cboe Options'' or the ``Index
Provider''), are affiliates and have implemented and will maintain a
``fire wall'' with respect to their respective personnel regarding
access to information concerning the composition and/or changes to the
underlying index or portfolio, as applicable. The Adviser and the Index
Provider are not registered as broker-dealers, but are affiliated with
a broker-dealer. The Index Provider has implemented and will maintain a
``fire wall'' with respect to such broker-dealer and its personnel
regarding access to information concerning the composition and/or
changes to the Index. In addition, Index Provider personnel who make
decisions regarding the Index composition or methodology are subject to
procedures designed to prevent the use and dissemination of material
nonpublic information regarding the Index, pursuant to Rule
14.11(c)(4)(C)(iii). The Adviser has also implemented and will maintain
a ``fire wall'' with respect to such broker-dealer and its personnel
regarding access to information concerning the composition and/or
changes to the portfolio. 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
another 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. Similarly, in the event that the Index Provider becomes
registered as a broker-dealer or newly affiliated with another 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. The Exchange also notes that the Adviser is a
BZX Affiliate as defined in Rule 14.3(e)(1)(A),\9\ but the Fund is not
an Affiliate Security, as defined in Rule 14.11(e)(1)(B),\10\ and is
therefore not subject to the additional requirements applicable to
Affiliate Securities because such definition explicitly excludes Index
Fund Shares. The Fund intends to qualify each year as a regulated
investment company under Subchapter M of the Internal Revenue Code of
1986, as amended.
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    \8\ See Registration Statement on Form N-1A for the Trust, dated
September 28, 2017 (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. The
Commission has not yet issued an order granting exemptive relief to
the Trust under the Investment Company Act of 1940 (15 U.S.C. 80a-1)
applicable to the activities of the Fund, but the Fund will not be
listed on the Exchange until such an order is issued and any
conditions contained therein are satisfied.
    \9\ As defined in Rule 14.3(e)(1)(A), the term ``BZX Affiliate''
means the Exchange and any entity that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or
is under common control with the Exchange, where ``control'' means
that one entity possesses, directly or indirectly, voting control of
the other entity either through ownership of capital stock or other
equity securities or through majority representation on the board of
directors or other management body of such entity.
    \10\ As defined in Rule 14.3(e)(1)(B), the term ``Affiliate
Security'' means any security issued by a BZX Affiliate or any
Exchange-listed option on any such security, with the exception of
Portfolio Depository Receipts as defined in Rule 14.11(b) and Index
Fund Shares as defined in Rule 14.11(c).
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    The Exchange is submitting this proposed rule change because the
Index for the Fund does not meet the listing requirements of Rule
14.11(c)(4) applicable to an index that consists of Fixed Income
Securities,\11\ which requires that the fixed income component
securities in an index or portfolio meet the criteria set forth in Rule
14.11(c)(4). As further described below, the Index consists of options
on an index that consists of ``U.S. Component Stocks'' as defined in
Rule 14.11(c)(1)(D),\12\ and Fixed Income Securities. The Fixed Income
Security portion of the Index, which consists of only Treasury bills,
meets the ``generic'' listing requirements of Rule 14.11(c)(4).
However, because the Index consists partially of options and Rule
14.11(c)(4) does not provide generic listing criteria for an index or
portfolio that includes options, the Index does not meet the criteria
set forth in Rule 14.11(c)(4).
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    \11\ As defined in Rule 14.11(c)(4), the term ``Fixed Income
Security'' shall mean debt securities that are notes, bonds,
debentures or evidence of indebtedness that include, but are not
limited to, Treasury bills, government-sponsored entity securities
(``GSE Securities''), municipal securities, trust preferred
securities, supranational debt and debt of a foreign country or
subdivision thereof.
    \12\ As defined in Rule 14.11(c)(1)(D), the term ``U.S.
Component Stock'' shall mean an equity security that is registered
under Sections 12(b) or 12(g) of the Act, or an American Depositary
receipt, the underlying equity security of which is registered under
Sections 12(b) or 12(g) of the Act.
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Cboe S&P 500[reg] Volatility Risk Premia Index
    The Index is a rules-based options index created by the Index
Provider, an affiliate of the Adviser, and designed to capture the
``volatility risk premium'' in standardized options on the S&P 500
Index (``SPX Options''). The ``volatility risk premium'' in SPX Options
is based on the premise that the expected level of volatility of the
S&P 500 Index priced into such options (the options' ``implied
volatility'') is, on average, higher than the volatility actually
experienced by the S&P 500 Index (the ``realized volatility'').
    On the last trading day of each month, the Index (i) writes (sells)
\13\ call and put SPX Options (``Sold SPX Options'') with a delta \14\
of approximately 0.10 and an expiration date of the last
trading day of the following month, (ii) buys call and put SPX Options
(``Bought SPX Options'') with an expiration date of the last trading
day of the following month and strike prices such that the maximum one-
month loss to the Index is equal to the value of the Index, and (iii)
buys one- and three-month U.S. Treasury securities equal in value to
the net premiums earned from writing the Sold SPX Options, less the
premiums

incurred of the Bought SPX Options, and sufficient to cover the maximum
potential one-month loss of the Index.
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    \13\ For purposes of this filing, when describing the Index, the
terms ``buy,'' ``sell,'' ``write,'' ``hold,'' or any other term
related to the acquisition, disposition, or issuance of an asset are
intended to describe a theoretical transaction conducted by the
Index that will be reflected in the Index constituents, rather than
to imply that the Index is actually transacting.
    \14\ ``Delta'' is a measure of an option's sensitivity to
changes in the price of the underlying asset (e.g., a call option
with a delta of 0.10 is expected to increase $0.10 for each $1.00
increase in the price of the underlying asset) and reflects the
volatility expected by the market. The strike price of a call option
with a delta of 0.10 will be higher when the market expects
significant volatility and lower when the market expects relatively
stable prices.
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    If the S&P 500 Index at the end of the following month is within
the range of the strike prices of the Sold SPX Options, the Sold SPX
Options expire worthless and the Index's value will have increased for
the month by the amount of the premiums from writing such options. If
the S&P 500 Index at the end of the month is outside the range of the
strike prices of the Sold SPX Options, positively or negatively, the
Index will incur a loss proportional to the magnitude by which the S&P
500 Index is outside such range, less the premiums from writing such
options. In other words, the Index incurs losses when increases or
decreases in the level of the S&P 500 Index during a month exceed those
implicitly anticipated by the options market.
    The Index will only include SPX Options and Treasury bills. The
strike prices for the Sold SPX Options will be ``out-of-the-money''
(i.e., the strike price of the sold put options will be less than the
level of S&P 500 Index and the strike price of the sold call options
will be more than the level of the S&P 500 Index). The strike prices
for the Bought SPX Options will be higher and lower, respectively, than
the strike prices for the Sold SPX Options, which offsets some of the
Index's risk from the Sold SPX Options. The difference between the
strike prices of the Sold SPX Options and the Bought SPX Options
represents the net liability for the Index, and the Index maintains an
allocation to one- and three-month Treasury bills at least equal to
such net liability. The Index receives premiums from the sale of the
Sold SPX Options and pays premiums to buy the Bought SPX Options. The
Index invests the net premium difference between the Sold SPX Options
and the Bought SPX Options in one- and three-month Treasury bills. The
Index holds each option until its expiration.
    If the value of the S&P 500 Index rises above the strike price of
the put S&P 500 Index Options (the ``SPX Puts'') or falls below the
strike price of the call S&P 500 Index Options (the ``SPX Calls'') sold
by the Index, the Sold SPX Options will not be exercised and will
expire worthless, resulting in a gain to the Index equal to the
premiums received from the Sold SPX Options. If the value of the S&P
500 Index falls below the strike price of the SPX Puts or rises above
the strike price of the SPX Calls sold by the Index, the Sold SPX
Options will finish ``in-the-money'' and the Index incurs a loss equal
to the difference between the Sold SPX Options' strike price and the
value of the S&P 500 Index, less the value of the premiums received
from the Sold SPX Options.
    If the value of the S&P 500 Index rises above the strike price of
the SPX Puts or falls below the strike price of the SPX Calls bought by
the Index, the Bought SPX Options will not be exercised and will expire
worthless, resulting in a loss to the Index equal to the premiums paid
for the Bought SPX Options. If the value of the S&P 500 Index falls
below the strike price of the SPX Puts or rises above the strike price
of the SPX Calls sold by the Index, the Bought SPX Options will finish
``in-the-money'' and the Index receives a gain equal to the difference
between the Bought SPX Options' strike price and the value of the S&P
500 Index, less the value of the premiums paid for the Bought SPX
Options.
    The strike prices of the SPX Puts and SPX Calls are calculated such
that the Index is equity-market-neutral, meaning that it seeks to earn
a total return in most equity market conditions regardless of general
market direction as measured by the move in value of the S&P 500 Index.
The cash and net option premium proceeds will be invested in short-term
Treasury bills which will be rolled at maturity. This makes the Index
bond-market-neutral, meaning that as interest rates and the yield for
Treasury bills go up or down, the short duration of the Treasury bills
will result in minimal effect on the Index.
Fund Holdings
    Under Normal Market Conditions,\15\ the Fund will invest all, or
substantially all, of its assets in the SPX Options that make up the
Index, as well as the Treasury bills included in the Index. Under
Normal Market Conditions, at least 80% of the Fund's total assets
(exclusive of any collateral held from securities lending) will be
invested in the SPX Options or Treasury bills that make up the Index.
In addition to the SPX Options and Treasury bills that make up the
Index, the Fund may invest up to 20% of its total assets in U.S.
exchange-listed options based on one or more ETFs that track the
performance of the S&P 500 Index (``Comparable ETF Options''). The Fund
will hold only SPX Options, Comparable ETF Options, Treasury bills
included in the Index, and other cash and cash equivalents.\16\
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    \15\ The term ``Normal Market Conditions'' includes, but is not
limited to, the absence of trading halts in the applicable financial
markets generally; operational issues causing dissemination of
inaccurate market information or system failures; or force majeure
type events such as natural or man-made disaster, act of God, armed
conflict, act of terrorism, riot or labor disruption, or any similar
intervening circumstance.
    \16\ For purposes of this filing, cash equivalents are short-
term instruments with maturities of less than three months,
including: (i) U.S. Government securities, including bills, notes,
and bonds differing as to maturity and rates of interest, which are
either issued or guaranteed by the U.S. Treasury or by U.S.
Government agencies or instrumentalities; (ii) certificates of
deposit issued against funds deposited in a bank or savings and loan
association; (iii) bankers acceptances, which are short-term credit
instruments used to finance commercial transactions; (iv) repurchase
agreements and reverse repurchase agreements; (v) bank time
deposits, which are monies kept on deposit with banks or savings and
loan associations for a stated period of time at a fixed rate of
interest; (vi) commercial paper, which are short-term unsecured
promissory notes; and (vii) money market funds.
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Additional Discussion
    The Exchange believes that sufficient protections are in place to
protect against market manipulation of the Fund's Shares and SPX
Options and Comparable ETF Options for the following reasons: (i) The
diversity, liquidity, and market cap of the securities underlying the
S&P 500 Index; \17\ (ii) the liquidity of the SPX Options; \18\ and
(iii) surveillance by the Exchange, Cboe Options and the Financial
Industry Regulatory Authority (``FINRA'') designed to detect violations
of the federal securities laws and self-regulatory organization
(``SRO'') rules.
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    \17\ The Exchange notes that the diversity, liquidity, and
market cap of the components of the S&P 500 Index are such that the
S&P 500 Index would meet the generic listing standards applicable to
an index composed of U.S. Component Stocks in Rule
14.11(c)(3)(A)(i).
    \18\ The market for SPX Options traded on Cboe Options is among
the most liquid markets in the world. In 2017, approximately 1.2
million options contracts on the S&P 500 Index were traded per day
on Cboe Options, which is more than $300 billion in notional volume
traded on a daily basis.
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    Trading in the Shares and the underlying investments will be
subject to the federal securities laws and Exchange, Cboe Options,
FINRA, and, with respect to the Comparable ETF Options, other U.S.
options exchanges' rules and surveillance programs.\19\
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    \19\ The Exchange notes that Cboe Options is a member of the
Option Price Regulatory Surveillance Authority, which was
established in 2006, to provide efficiencies in looking for insider
trading and serves as a central organization to facilitate
collaboration in insider trading and investigations for the U.S.
options exchanges. For more information, see http://www.cboe.com/aboutcboe/legal/departments/orsareg.aspx.
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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
Index Fund Shares. 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.
    All statements and representations made in this filing regarding
the index composition, 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 (as applicable), or the applicability of Exchange
listing rules shall constitute continued listing requirements for
listing the Shares on the Exchange. The Trust has represented to the
Exchange that it will advise the Exchange of any failure by the Fund or
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 Shares are not in compliance with the applicable listing
requirements, then, with respect to such Fund or Shares, the Exchange
will commence delisting procedures 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
Intermarket Surveillance Group (``ISG'') \20\ and may obtain trading
information regarding trading in the Shares and exchange-traded options
contracts from such markets and other entities. The Exchange is also
able to access, as needed, trade information for certain fixed income
instruments, including treasuries, reported to FINRA's Trade Reporting
and Compliance Engine (``TRACE''). 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.
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    \20\ All exchange-listed securities that the Fund may hold will
trade on a market that is a member of the ISG and the Fund will not
hold any non-exchange-listed 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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    As noted above, SPX 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 are cash-settled with no delivery of stocks
or ETFs, and 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, price and quote transparency, and
arbitrage opportunities.
    The Exchange believes that the liquidity of the markets for S&P 500
Index securities, SPX 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 are sufficient to support the creation and redemption
mechanism. Coupled with the surveillance programs of the SROs described
above, the Exchange does not believe that trading in the Fund's Shares
would present manipulation concerns. The Fund's investments will be
consistent with the Fund's investment objective and will not be used to
enhance leverage (although certain derivatives and other investments
may result in leverage).\21\ The Fund's investments will not be used to
seek performance that is the multiple or inverse multiple (i.e., 2 x or
-2 x) of the Index. The Fund's use of derivative instruments will be
collateralized.
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    \21\ The Fund will include appropriate risk disclosure in its
offering documents, including leveraging risk. Leveraging risk is
the risk that certain transactions of a fund, including a fund's use
of derivatives, may give rise to leverage, causing a fund to be more
volatile than if it had not been leveraged. To mitigate leveraging
risk, the Adviser will segregate or earmark liquid assets or
otherwise cover the transactions that give rise to such risk. See 15
U.S.C. 80a-18; Investment Company Act Release No. 10666 (April 18,
1979), 44 FR 25128 (April 27, 1979); Dreyfus Strategic Investing,
Commission No-Action Letter (June 22, 1987); Merrill Lynch Asset
Management, L.P., Commission No-Action Letter (July 2, 1996).
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    The Exchange represents that, except as described above, the Fund
will meet each of the initial and continued listing criteria in BZX
Rule 14.11(c)(4) except as it relates to the portion of the Index that
consists of SPX Options because Rule 14.11(c)(4) does not provide
generic listing criteria for an index or portfolio that includes
options. Further to this point, the three-month Treasury bills that
compose the entirety of the fixed income portion of the Index will
satisfy all requirements of Rule 14.11(c)(4). 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. A minimum of 100,000 Shares will be
outstanding at the commencement of trading on the Exchange. In
addition, the Exchange represents that the Shares of the Fund will
comply with all other requirements applicable to Index Fund Shares,
which includes requirements relating to the dissemination of key
information such as the Net Asset Value, Index value, and the Intraday
Indicative Value, rules governing the trading of equity securities,
trading hours, trading halts, firewalls for the Index Provider and
Adviser, surveillance, and the information circular, as set forth in
Exchange rules applicable to Index Fund Shares and the orders approving
such rules.
    Quotation and last sale information for SPX Options and Comparable
ETF Options 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 Treasury bills and other 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.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section
6(b) of the Act \22\ in general and Section 6(b)(5) of the Act \23\ 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.
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    \22\ 15 U.S.C. 78f.
    \23\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices, to 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 the Fund will meet each of the initial and continued listing
criteria required by BZX Rule 14.11(c)(4), which includes the listing
requirements for an index of Fixed Income Securities, except as it
relates to the portion of the Index that consists of SPX Options
because Rule 14.11(c)(4) does not provide generic listing criteria for
an index or portfolio that includes options. Specifically, because the
Index consists partially of options and Rule 14.11(c)(4) does not
provide generic listing criteria for an index or portfolio that
includes options, the Index does not meet the criteria set forth in
Rule 14.11(c)(4). Nevertheless, the Exchange believes that the concerns
that sufficient protections are in place to protect against market
manipulation of the Fund's Shares and S&P 500 Index Options and
Comparable ETF Options for the following reasons: (i) The diversity,
liquidity, and market cap of the securities underlying the S&P 500
Index; \24\ (ii) the liquidity of the S&P 500 Index Options; \25\ and
(iii) surveillance by the Exchange, Cboe Options and FINRA designed to
detect violations of the federal securities laws and self-regulatory
organization (``SRO'') rules.
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    \24\ The Exchange notes that the diversity, liquidity, and
market cap of the components of the S&P 500 Index are such that the
S&P 500 Index would meet the generic listing standards applicable to
an index composed of U.S. Component Stocks in Rule
14.11(c)(3)(A)(i).
    \25\ The market for SPX Options traded on Cboe Options is among
the most liquid markets in the world. In 2017, approximately 1.2
million options contracts on the S&P 500 Index were traded per day
on Cboe Options, which is more than $300 billion in notional volume
traded on a daily basis. See supra note 18.
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    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 Index 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 Index Fund Shares. All
statements and representations made in this filing regarding the index
composition, 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 (as applicable), or the applicability of Exchange listing rules
shall constitute continued listing requirements for listing the Shares
on the Exchange. The Trust has represented to the Exchange that it will
advise the Exchange of any failure by the Fund or 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
Shares are not in compliance with the applicable listing requirements,
then, with respect to such Fund or Shares, 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 with respect to such 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. The Exchange is also able to access, as needed, trade
information for certain fixed income instruments reported to TRACE. 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 are among the most liquid options in
the world and derive their value from the actively traded S&P 500 Index
components. The contracts are cash-settled with no delivery of stocks
or ETFs, and 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, price and quote transparency, and
arbitrage opportunities.
    The Exchange believes that the liquidity of the markets for S&P 500
Index securities, SPX 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
efficiency and liquidity are 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 it relates to the options
portion of the Index described above, the Fund will meet and be subject
to all other requirements of Rule 14.11(c)(4) related to generic
listing standards of the Index and other applicable requirements for
such a series of Index Fund Shares under Rule 14.11(c) on an initial
and continued listing basis, including those requirements regarding the
dissemination of key information such as the Net Asset Value, the
Index, and the Intraday Indicative Value, rules governing the trading
of equity securities, trading hours, trading halts, surveillance, and
the information circular, as set forth in Exchange rules applicable to
Index Fund Shares and the orders approving such rules. 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.
    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 facilitate the listing and trading of an additional type of
Index Fund Shares that 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. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\26\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment No. 1, is consistent
with Section 6(b)(5) of the Act,\27\ which requires, among other
things, that the Exchange's rules be designed to promote just and
equitable principles of trade, 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. The
Commission also finds that the proposal to list and trade the Shares on
the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\28\ which sets forth Congress' finding that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers and investors of information with respect to
quotations for and transactions in securities.
---------------------------------------------------------------------------

    \26\ 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).
    \27\ 15 U.S.C. 78f(b)(5).
    \28\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    According to the Exchange, quotation and last-sale information for
SPX Options and Comparable ETF Options will be available via the
Options Price Reporting Authority.\29\ 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.\30\ In addition,
price information on Treasury bills and other cash equivalents will be
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.\31\
---------------------------------------------------------------------------

    \29\ See Amendment No. 1, supra note 6, at 15.
    \30\ See id.
    \31\ See id.
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    The Commission also believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. Under BZX Rule 14.11(c)(1)(B)(iv), if the Exchange becomes
aware that the NAV or the Disclosed Portfolio is not disseminated to
all market participants at the same time, the Exchange is required to
halt trading in such series of Index Fund Shares. In addition, the
Exchange represents that if the Fund or the related Shares are not in
compliance with the applicable listing requirements for Index Fund
Shares under BZX Rule 14.11(c)(4), the Exchange will commence delisting
procedures under BZX Rule 14.12 (Failure to Meet Listing
Standards).\32\ The Exchange also states that it has a general policy
prohibiting the distribution of material, non-public information by its
employees.\33\
---------------------------------------------------------------------------

    \32\ See id. at 12. See also BZX Rule 14.11(c)(4).
    \33\ See Amendment No. 1, supra note 6, at 13.
---------------------------------------------------------------------------

    The Shares do not qualify for generic listing because the Index
includes SPX Options. The Commission has previously approved listing
rules for issues of Index Fund Shares that tracked indexes that
included listed options.\34\ The Commission believes that the price of
the Shares will not be susceptible to manipulation. Options on the S&P
500 Index are among the most liquid options in the world,\35\ and
derive their value from the actively traded index components.
Additionally, all of the options 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.
---------------------------------------------------------------------------

    \34\ See, e.g., Securities Exchange Act Release No. 79402
(November 25, 2016), 81 FR 86760 (December 1, 2016) (SR-NYSEArca-
2016-131) (approving the listing and trading of shares of the Virtus
Enhanced U.S. Equity ETF); No. 74675 (April 8, 2015), 80 FR 20038
(April 14, 2015) (SR-NYSEArca-2015-05) (approving the listing and
trading of shares of the WisdomTree Put Write Strategy Fund).
    \35\ See supra note 18.
---------------------------------------------------------------------------

    In support of this proposal, the Exchange represents that:
    (1) The Fund will satisfy, on an initial and continued listing
basis, all of the generic listing standards under BZX Rule 14.11(c),
except as described above.
    (2) The Shares will comply with all requirements applicable to
Index Fund Shares under BZX Rule 14.11(c) including, but not limited to
the requirements relating to the dissemination of key information such
as the NAV, the Index, and the Intraday Indicative Value, rules
governing the trading of equities securities, trading hours, trading
halts, surveillance, and the information circular, as set forth in
Exchange rules applicable to Index Fund Shares and the orders approving
such rules.
    (3) Trading in the Shares will be subject to the existing trading
surveillances administered by the Exchange, as well as cross-market
surveillances administered by Cboe Options and FINRA, on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
applicable federal securities laws.
    (4) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act.\36\
---------------------------------------------------------------------------

    \36\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (5) A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange.\37\
---------------------------------------------------------------------------

    \37\ See Amendment No. 1, supra note 6, at 15.
---------------------------------------------------------------------------

    This approval order is based on all of the Exchange's statements
and representations, including those set forth above and in Amendment
No. 1.
    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1 thereto, is consistent with
Section 6(b)(5) of the Act \38\ and the rules and regulations
thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change

    Interested persons are invited to submit written views, data, and
arguments concerning whether Amendment No. 1 is consistent with the
Act. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-CboeBZX-2018-005 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-2018-005. 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-2018-005 and should be submitted
on or before May 23, 2018.

V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1

    The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. Amendment No. 1 supplements the proposal by,
among other things: (1) Providing additional information regarding the
Index; and (2) making additional representations regarding the Adviser
and Index Provider implementing and maintaining a fire wall. The
changes assisted the Commission in evaluating the Exchange's proposal
and in determining that the listing and trading of the Shares is
consistent with the Act. Accordingly, the Commission finds good cause,
pursuant to Section 19(b)(2) of the Act,\39\ to approve the proposed
rule change, as modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\40\ that the proposed rule change (SR-CboeBZX-2018-005), as
modified by Amendment No. 1 thereto, be, and it hereby is, approved on
an accelerated basis.
---------------------------------------------------------------------------

    \40\ Id.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
---------------------------------------------------------------------------

    \41\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-09259 Filed 5-1-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 86, Number 211 (Thursday, November 4, 2021)]
[Notices]
[Pages 60964-60965]
[FR Doc No: 2021-23997]

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DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

[Docket No. FRA-2010-0049]

North County Transit District's Request for Positive Train
Control Safety Plan Approval and System Certification

AGENCY: Federal Railroad Administration (FRA), U.S. Department of
Transportation (DOT).

ACTION: Notice of availability and request for comments.

-----------------------------------------------------------------------

SUMMARY: This document provides the public with notice that the North
County Transit District (SDNX) submitted its Positive Train Control
Safety Plan (PTCSP), Version 3.0, dated September 30, 2021, to FRA's
Secure Information Repository. SDNX asks FRA to approve its amendment
to its PTCSP and issue a Positive Train Control System Certification as
a Mixed System for SDNX's Interoperable Electronic Train Management
System (I-ETMS).

DATES: FRA will consider comments received by January 3, 2022 before
taking final action on the PTCSP. FRA may consider comments received
after that date to the extent practicable and without delaying
implementation of valuable or necessary modifications to a PTC system.

ADDRESSES:
    Comments: Comments may be submitted by going to https://www.regulations.gov and following the online instructions for
submitting comments.
    Instructions: All submissions must include the agency name and the
applicable docket number. The relevant PTC docket number for this host
railroad is Docket No. FRA-2010-0049. For convenience, all active PTC
dockets are hyperlinked on FRA's website at https://railroads.dot.gov/train-control/ptc/ptc-annual-and-quarterly-reports. All comments
received will be posted without change to https://www.regulations.gov;
this includes any personal information.

FOR FURTHER INFORMATION CONTACT: Mr. Gabe Neal, Staff Director, Signal,
Train Control, and Crossings Division, telephone:<PHONE_NUMBER>, email:
[email protected].

SUPPLEMENTARY INFORMATION: In its PTCSP, SDNX asserts that the I-ETMS
it is implementing is designed as a mixed PTC system as defined in
Title 49 Code of Federal Regulations (CFR) 236.1015(e). The PTCSP
describes SDNX's I-ETMS implementation and the associated I-ETMS safety
processes, safety analyses, and test, validation, and verification
processes used during the development of I-ETMS. The PTCSP also
contains SDNX's operational and support requirements and procedures.
    SDNX's PTCSP and the accompanying request for approval and system
certification are available for review online at www.regulations.gov
(Docket Number FRA-2010-0049) and in person at DOT's Docket Operations
Facility, 1200 New Jersey Avenue SE, W12-140, Washington, DC 20590. The
Docket Operations Facility is open from 9 a.m. to 5 p.m., Monday
through Friday, except Federal holidays.

    Interested parties are invited to comment on the PTCSP by
submitting written comments or data. During its review of the PTCSP,
FRA will consider any comments or data submitted. See 49 CFR
236.1011(e). However, FRA may elect not to respond to any particular
comment and, under 49 CFR 236.1009(d)(3), FRA maintains the authority
to approve or disapprove the PTCSP at its sole discretion. FRA does not
anticipate scheduling a public hearing regarding SDNX's PTCSP because
the circumstances do not appear to warrant a hearing. If any interested
party desires an opportunity for oral comment, the party should notify
FRA in writing before the end of the comment period and specify the
basis for their request.

Privacy Act Notice

    Anyone can search the electronic form of any written communications
and comments received into any of our dockets by the name of the
individual submitting the comment (or signing the document, if
submitted on behalf of an association, business, labor union, etc.). In
accordance with 49 CFR 211.3, FRA solicits comments from the public to
better inform its decisions. DOT posts these comments, without edit,
including any personal information the commenter provides, to https://www.regulations.gov, as described in the system of records notice (DOT/
ALL-14 FDMS), which can be reviewed at https://www.transportation.gov/privacy. See https://www.regulations.gov/privacy-notice for the privacy
notice of regulations.gov. To facilitate comment tracking, we encourage
commenters to provide their name, or the name of their organization;
however, submission of names is completely optional. If you wish to
provide comments containing proprietary or confidential information,
please contact FRA for alternate submission instructions.

    Issued in Washington, DC.
Carolyn R. Hayward-Williams,
Director, Office of Railroad Systems and Technology.
[FR Doc. 2021-23997 Filed 11-3-21; 8:45 am]
BILLING CODE 4910-06-P