[Federal Register Volume 83, Number 35 (Wednesday, February 21, 2018)]
[Notices]
[Pages 7524-7526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03453]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82715; File No. SR-CboeBZX-2018-011]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Temporarily Amend Rule 11.23(d)(2)(E) Relating to the Halt Auction
Collar for a Halt Auction for REX VolMAXX Short Weekly Futures Strategy
ETF
February 14, 2018.
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 February 7, 2018, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
has designated this proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with
the Commission. 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).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to temporarily amend Rule
11.23(d)(2)(E) relating to the Halt Auction Collar for a Halt Auction
for REX VolMAXX Short Weekly Futures Strategy ETF (VMIN), which would
be operative for February 6, 2018 only.
The text of the proposed rule change is available at the Exchange's
website at www.markets.cboe.com, at the principal office of the
Exchange, 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 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 temporarily amend Rule 11.23(d)(2)(E)
relating to the Halt Auction Collar for a Halt Auction for REX VolMAXX
Short Weekly Futures Strategy ETF (VMIN), which would be operative for
February 6, 2018 only.
On February 5, 2018, both the U.S. and global markets experienced
increased selling pressure and the Dow Jones Industrial Average
(``DJIA'') closed 4.6% down over the prior closing day. In addition, on
February 5, 2018, volatility was significantly higher across all
measures of U.S. markets and continued to fluctuate significantly
through the morning of February 6, 2018.
VMIN, which is listed on the Exchange, seeks to provide investors
with inverse exposure to the implied volatility of the broad-based,
large-cap U.S. equity market by obtaining investment exposure to an
actively managed portfolio of exchange-traded Cboe Volatility Index
(``VIX'') Futures Contracts with weekly and monthly expirations. On
February 5, 2018, the Official Closing Price for VMIN was $16.57. The
price of VMIN declined in after-market trading on February 5, 2018, and
the last reported extended-hours trade price on that day was $7.50. The
reported NAV for February 5, 2018 was $3.37. Because of the volatility
in the pricing for VMIN and based on information from the issuer that
there was a news event forthcoming, the Exchange halted trading in VMIN
during the Pre-Opening Session. While the security was halted, an
Intraday Indicative Value (``IIV'') was published under the ticker
VMIN.IV, and as of 3:00 p.m. Eastern Time on February 6, 2018, the IIV
was $3.19. As such, the Halt Auction Reference Price for a Halt Auction
would be the prior day's Official Closing Price, $16.57, and the Halt
Auction Collar would be $14.91 and $18.23.
However, because of market events unique to the circumstances of
February 5, 2018 and February 6, 2018, and the impact on pricing of
VMIN, the Exchange does not believe that VMIN's Official Closing Price
would be an appropriate Halt Auction Reference Price and the basis for
calculating the
[[Page 7525]]
Halt Auction Collar for the Halt Auction for that security. The
Exchange believes that the significant difference between the Official
Closing Price on the one hand, and the last reported extended-hours
sale price, the NAV, and the IIV on the other hand indicates that the
Official Closing Price does not reflect the value of the security and
would not be an appropriate Halt Auction Reference Price.
The Exchange believes that it would be consistent with fair and
orderly markets and the protection of investors and the public to
temporarily amend 11.23(d)(2)(E) and set a different Halt Auction
Collar for VMIN based on a different Halt Auction Reference Price. The
Exchange believes that given the unique circumstances for VMIN,
including the selling pressure on February 5, 2018 and the fluctuating
prices relating to VMIN overnight, an IIV identified shortly before the
Trading Halt Auction would more closely correlate to the value of VMIN
as of the time of the Trading Halt Auction. More specifically, the
Exchange believes that using a Halt Auction Reference Price based on an
IIV for VMIN as the basis for forming the Halt Auction Collars that is
identified prior to the Halt Auction would reduce the potential for
volatility in trading after the security resumes trading.
Accordingly, the Exchange proposes to temporarily amend Rule
11.23(d)(2)(E) so that the Halt Auction Reference Price for VMIN used
to calculate the Halt Auction Collars would be $3.19. Because this
proposed amendment would be operative for only one trading day and for
only one symbol, the Exchange does not believe it is necessary to amend
the rule text to effect this change. The Exchange proposes to provide
notice of the amended Halt Auction Reference Price via a Trade Desk
Notice, to be published before the Trading Halt Auction in VMIN.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act \5\ in general and Section 6(b)(5) of the Act \6\ 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, and 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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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that it would promote the protection of
investors and the public interest to temporarily amend Rule
11.23(d)(2)(E) to set a different Halt Auction Reference Price for VMIN
for the Halt Auction that would resume trading in that security on
February 6, 2018. In particular, the Exchange believes that the unique
circumstances of the market-wide trading volatility on February 5 and
6, 2018, and related impact on the various prices relating to VMIN,
using the Official Closing Price as the Halt Auction Reference Price
could result in extreme market volatility for that security after the
security resumes trading on February 6, 2018. Specifically, the
difference between the Official Closing Price on the one hand, and the
NAV, last reported extended-hours sale price, and IIV on the morning of
February 6, 2018 on the other hand, indicate that the Official Closing
Price no longer reflects the value of VMIN.
By contrast, the Exchange believes that for this unique
circumstance, using an IIV identified shortly before the Halt Auction
would more closely reflect the value of VMIN and would reduce the
potential for volatile trading after the security resumes trading.
Accordingly, the Exchange believes that it would remove impediments 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,
to temporarily amend Rule 11.23(d)(2)(E) to provide that the Halt
Auction Reference Price that is used for the basis of calculating the
Halt Auction Collars on February 6, 2018 only would be based on an IIV
as of 3:00 p.m. Eastern Time.
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 proposed rule change is
not designed to address any competitive issues but rather is designed
to ensure a fair and orderly market by temporarily amending the Auction
Reference Price that would be used for the Trading Halt Auction to
resume trading in VMIN on February 6, 2018 only.
(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 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 \7\ and Rule 19b-4(f)(6) thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) requires the
Exchange to provide the Commission with written notice of its intent
to file the proposed rule change, along with a brief description and
the 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
requested that the Commission waive this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \9\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \10\ 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 asked the Commission to waive the five-day prefiling requirement,
as well the 30-day operative delay, so that the proposal may become
operative immediately. The Commission waives the prefiling requirement
and finds that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest because the
proposed rule change is designed to facilitate the orderly reopening of
trading in VMIN, and raises no new or novel issues. Therefore, the
Commission hereby waives the operative delay and designates the
proposal operative upon filing.\11\
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\9\ 17 CFR 240.19b-4(f)(6).
\10\ 17 CFR 240.19b-4(f)(6)(iii).
\11\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such
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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 under Section 19(b)(2)(B) \12\ of the Act to
determine whether the proposed rule change should be approved or
disapproved.
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\12\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal 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 No. SR-CboeBZX-2018-011 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.
(a) All submissions should refer to File No. SR-CboeBZX-2018-011.
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 No. SR-CboeBZX-2018-011 and should be
submitted on or before March 14, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03453 Filed 2-20-18; 8:45 am]
BILLING CODE 8011-01-P