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Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Notices
in that it will permit use of Custom Baskets, consistent with the applicable exemptive relief, in a manner that will benefit investors by increasing efficiencies in the creation and redemption process. More specifically, Custom Baskets provide an issuer with flexibility in portfolio construction that may assist in reducing taxable capital gains distributions for investors and may generally improve tax efficiencies.
Further, the use of Custom Baskets, to the extent permitted by a funds exemptive relief, may also result in narrower bid/ask spreads and smaller premiums and discounts to the net asset value for Tracking Fund Shares to the extent that the Investment Company utilizes Custom Baskets with fewer securities which may, in turn, allow Authorized Participants to more efficiently hedge and participate generally in the Tracking Fund Shares.
In addition to this, the flexibility provided in the creation of Custom Baskets may serve to increase competition between issuers. The Exchange believes the proposed rule change will enhance competition among market participants overall, to the benefit of investors and the marketplace.
The Exchange also believes that amending Rule 14.11m to incorporate specific initial listing criteria required to be met by Tracking Fund Shares that utilize Custom Baskets is designed to prevent fraudulent and manipulative acts and practices. The Exchange believes that the daily dissemination of the composition of any Custom Basket transacted on the previous day, except a Custom Basket that differs from the applicable Tracking Basket only with respect to cash, together with the right of Authorized Participants to create and redeem each day at the net asset value, will enable market participants to value and trade shares in a manner that will not lead to significant deviations between the bid/ask price and net asset value of shares of a series of Tracking Fund Shares. Further, including Custom Baskets in the requirements of Rules 14.11m2E and F would act as a safeguard against any misuse and improper dissemination of nonpublic information related to a funds Custom Basket or changes thereto. The requirement that any person or entity implement procedures reasonably designed to prevent the use and dissemination of material non-public information regarding a Custom Basket will act to prevent any individual or entity from sharing such information externally and the internal fire wall requirements applicable where an entity is a registered broker-dealer or affiliated
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with a broker-dealer will act to make sure that no entity will be able to misuse the data for their own purposes. As such, the Exchange believes that the proposed rule change to Rule 14.11m is designed to prevent fraudulent and manipulative acts and practices.
The Exchange also believes that the proposed initial and continued listing standards are designed to promote disclosure and transparency with respect to the use of Custom Baskets consistent with the applicable exemptive relief. Specifically, the Exchange believes that requiring as an initial listing condition that an issuer and any person acting on behalf of the series of Tracking Fund Shares comply with Regulation Fair Disclosure under the Exchange Act, including with respect to any Custom Basket, would further the full and fair disclosure objectives of Regulation Fair Disclosure to the benefit of the investing public and all market participants. Further, with respect to each Custom Basket utilized by a series of Tracking Fund Shares, the Exchange believes that requiring, as a continued listing condition, that each business day, before the opening of trading in Regular Trading Hours as defined in Rule 1.5w, an investment company make publicly available on its website the composition of any Custom Basket transacted on the previous business day, except a Custom Basket that differs from the applicable Tracking Basket only with respect to cash, also furthers the goals of transparency and full and fair disclosure, to the benefit of investors and the public interest.
B. Self-Regulatory Organizations 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 purposes of the Exchange Act.
The Exchange believes the proposed rule change, by permitting the use of Custom Baskets, consistent with a funds exemptive relief, would introduce additional competition among various ETF products to the benefit of investors.
C. Self-Regulatory Organizations Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change.

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III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days i as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or ii as to which the Exchange consents, the Commission will:
A. By order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be 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 Exchange Act. Comments may be submitted by any of the following methods:
Electronic Comments Use the Commissions internet comment form http www.sec.gov/
rules/sro.shtml; or Send an email to rule-comments@
sec.gov. Please include File Number SR
CboeBZX2021053 on the subject line.
Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 205491090.
All submissions should refer to File Number SRCboeBZX2021053. 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 Commissions 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 Commissions 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
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