Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change Regarding Monthly Distributions, Excess Returns, and Share Index Factors of Certain AccuShares® Trust I Funds, 14489-14495 [2016-05977]

Download as PDF Federal Register / Vol. 81, No. 52 / Thursday, March 17, 2016 / Notices invites public comment, and takes other administrative steps. DATES: Comments are due: March 21, 2016. Submit comments electronically via the Commission’s Filing Online system at https:// www.prc.gov. Those who cannot submit comments electronically should contact the person identified in the FOR FURTHER INFORMATION CONTACT section by telephone for advice on filing alternatives. ADDRESSES: FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 202–789–6820. SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction II. Notice of Commission Action III. Ordering Paragraphs I. Introduction In accordance with 39 U.S.C. 3642 and 39 CFR 3020.30 through 3020.35, the Postal Service filed a formal request and associated supporting information to add Priority Mail Contract 196 to the competitive product list.1 The Postal Service contemporaneously filed a redacted contract related to the proposed new product under 39 U.S.C. 3632(b)(3) and 39 CFR 3015.5. Request, Attachment B. To support its Request, the Postal Service filed a copy of the contract, a copy of the Governors’ Decision authorizing the product, proposed changes to the Mail Classification Schedule, a Statement of Supporting Justification, a certification of compliance with 39 U.S.C. 3633(a), and an application for non-public treatment of certain materials. It also filed supporting financial workpapers. asabaliauskas on DSK3SPTVN1PROD with NOTICES II. Notice of Commission Action The Commission establishes Docket Nos. MC2016–95 and CP2016–120 to consider the Request pertaining to the proposed Priority Mail Contract 196 product and the related contract, respectively. The Commission invites comments on whether the Postal Service’s filings in the captioned dockets are consistent with the policies of 39 U.S.C. 3632, 3633, or 3642, 39 CFR part 3015, and 39 CFR part 3020, subpart B. Comments are due no later than March 21, 2016. The public portions of these filings can be 1 Request of the United States Postal Service to Add Priority Mail Contract 196 to Competitive Product List and Notice of Filing (Under Seal) of Unredacted Governors’ Decision, Contract, and Supporting Data, March 11, 2016 (Request). VerDate Sep<11>2014 17:03 Mar 16, 2016 Jkt 238001 accessed via the Commission’s Web site (https://www.prc.gov). The Commission appoints Kenneth R. Moeller to serve as Public Representative in these dockets. III. Ordering Paragraphs It is ordered: 1. The Commission establishes Docket Nos. MC2016–95 and CP2016–120 to consider the matters raised in each docket. 2. Pursuant to 39 U.S.C. 505, Kenneth R. Moeller is appointed to serve as an officer of the Commission to represent the interests of the general public in these proceedings (Public Representative). 3. Comments are due no later than March 21, 2016. 4. The Secretary shall arrange for publication of this order in the Federal Register. By the Commission. Stacy L. Ruble, Secretary. [FR Doc. 2016–06037 Filed 3–16–16; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77353; File No. SR– NASDAQ–2016–034] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change Regarding Monthly Distributions, Excess Returns, and Share Index Factors of Certain AccuShares® Trust I Funds March 11, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 2, 2016, The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change NASDAQ proposes to indicate the following: (1) That regular distributions (‘‘Regular Distributions’’) of the 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00080 Fmt 4703 Sfmt 4703 14489 following Paired Class Shares issued by AccuShares® Trust I (formerly known as AccuShares Commodities Trust I) (the ‘‘AccuShares Trust’’ or ‘‘Trust’’) 3 will be made on a monthly basis on behalf of each of the following segregated series AccuShares S&P® GSCI® Industrial Metals Spot Fund, AccuShares S&P GSCI Crude Oil Spot Fund, and AccuShares S&P GSCI Brent Oil Spot Fund (each a ‘‘Distribution Fund’’, and collectively the ‘‘Distribution Funds’’); 4 (2) That the following Paired Class Shares issued by the Trust will have their indexes changed from the spot variant to the excess return variant of such indexes and the funds will be renamed to accurately reflect the changes to the indexes—the AccuShares S&P GSCI Crude Oil Spot Fund will have its index changed from the S&P GSCI Crude Oil Spot Index to the S&P GSCI Crude Oil Excess Return Index and the fund will be renamed AccuShares S&P GSCI Crude Oil Excess Return Fund, and the AccuShares S&P GSCI Natural Gas Spot Fund will have its index changed from S&P GSCI Natural Gas Spot Index to S&P GSCI Natural Gas Excess Return Index and the fund will be renamed AccuShares S&P GSCI Natural Gas Excess Return Fund; and (3) That the Share Index Factors 5 for the AccuShares Spot CBOE VIX Fund would be reset on a weekly basis on each Tuesday (after certain distribution dates), and the regular distributions for the AccuShares Spot CBOE VIX Fund would be made monthly on the third Tuesday rather than monthly on the 3 AccuShares® is a registered trademark of AccuShares Holdings LLC. S&P®, S&P GSCI®, S&P 500® and Standard & Poor’s® are registered trademarks of Standard & Poor’s® Financial Services LLC. CBOE®, Chicago Board Options Exchange®, CBOE Volatility Index® and VIX® are registered trademarks of Chicago Board Options Exchange®, Incorporated (‘‘CBOE’’). Dow Jones® is a registered trademark of Dow Jones® Trademark Holdings LLC. 4 The Paired Class Shares funds discussed in this proposal—the three Distribution Funds and the AccuShares S&P GSCI Natural Gas Spot Fund—and in addition the AccuShares S&P GSCI Spot Fund, the AccuShares S&P GSCI Agriculture and Livestock Spot Fund, and the AccuShares Spot CBOE® VIX® Fund, are approved for listing. See Securities Exchange Act Release No. 74299 (February 18, 2015), 80 FR 9778 (February 24, 2015) (SR–NASDAQ–2014–065) (order approving new Rule 5713 and listing seven AccuShares funds) (the ‘‘AccuShares Order’’). The first, and only, AccuShares fund that is currently listed and trading on the Exchange is the AccuShares Spot CBOE® VIX® Fund. See also Securities Exchange Act Release No. 72412 (June 17, 2014), 79 FR 35610 (June 23, 2014) (SR–NASDAQ–2014–065) (notice of filing regarding new Rule 5713 and listing seven AccuShares funds) (the ‘‘AccuShares Proposal’’). The funds approved for listing in the AccuShares Order are together called the ‘‘Funds’’. 5 Share Index Factors are discussed below. E:\FR\FM\17MRN1.SGM 17MRN1 14490 Federal Register / Vol. 81, No. 52 / Thursday, March 17, 2016 / Notices 15th so that each monthly distribution date (and the end of each monthly measuring period) coincides with a Share Index Factor reset. The text of the proposed rule change is available at https:// nasdaq.cchwallstreet.com/, at NASDAQ’s principal office, 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 self-regulatory organization 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 those 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. asabaliauskas on DSK3SPTVN1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposed rule change is to indicate the following: (1) That Regular Distributions will be made on a monthly basis on behalf of each of the Distribution Funds; (2) That the following Paired Class Shares issued by the Trust will have their indexes changed from the spot variant to the excess return variant of such indexes and the funds will be renamed to accurately reflect the changes to the indexes—the AccuShares S&P GSCI Crude Oil Spot Fund (‘‘Crude Oil Fund’’) will have its index changed from the S&P GSCI Crude Oil Spot Index to the S&P GSCI Crude Oil Excess Return Index and the fund will be renamed AccuShares S&P GSCI Crude Oil Excess Return Fund (‘‘Excess Crude Oil Fund’’), and the AccuShares S&P GSCI Natural Gas Spot Fund (‘‘Natural Gas Fund’’) will have its index changed from S&P GSCI Natural Gas Spot Index to S&P GSCI Natural Gas Excess Return Index and the fund will be renamed AccuShares S&P GSCI Natural Gas Excess Return Fund (‘‘Excess Natural Gas Fund’’); 6 and 6 Excess returns, which are discussed below, are generally investment returns from a security or portfolio that exceed a benchmark or index with a similar level of risk. For the Excess Return Crude Oil Fund and the Excess Return Natural Gas Fund, the excess return index is calculated from holding a nearest-to-expiration futures contract, and exchanging such nearest-to-expiration contract for the contract expiring in the next following month VerDate Sep<11>2014 17:03 Mar 16, 2016 Jkt 238001 (3) That the Share Index Factors for the AccuShares Spot CBOE VIX Fund (‘‘VIX Fund’’) 7 would be reset on a weekly basis on each Tuesday (after certain distribution dates), and the regular distributions for the VIX Fund would be made monthly on the third Tuesday rather than monthly on the 15th so that each monthly distribution date (and the end of each monthly measuring period) coincides with a Share Index Factor reset.8 Paired Class Shares—A Short Background 9 The structure of Paired Class Shares is designed to be a passive unmanaged investment vehicle with the objective to provide investors with exposure to changes in an Underlying Benchmark as defined below. Paired Class Shares are expected to provide retail as well as institutional investors with a simple, liquid and cost effective means of in accordance with the monthly S&P GSCI roll schedule. The S&P GSCI roll schedule holds the nearest-to-expiration futures contract until the fifth trading day of each month, and over the fifth to ninth trading day of each month sells the nearestto-expiration contract and purchases the contract expiring in the next following month (i.e. rolls the futures contracts) in five equal installments of twenty percent each. The excess return is inclusive of two things: The gain or loss associated with holding a futures contract and the gain or loss associated with the rolling of a futures contract to the next following expiration. In contrast, the spot variant does not include the gain or loss associated with rolling from the nearest-to-expiration contract to the next following contract (i.e. the spot variant only captures the return related to holding a contract). The excess return is replicated by holding and trading futures contracts underlying the index in accordance with the S&P GSCI roll schedule. The spot variant, on the other hand, cannot be directly hedged with rolling futures contracts, and its hedging requires active anticipatory hedging and rolling based on the price differentials between forward expiry futures contracts. The spot variant has not been used for any index in exchange traded products, whereas the excess variant routinely continues to be used for these purposes. In the case of the excess return indexes for the Excess Return Crude Oil Fund and the Excess Return Natural Gas Fund, the changes in the excess return variant may be larger or smaller than the changes in the benchmark spot return variant. See also https:// www.investopedia.com/terms/e/excessreturn.asp. 7 The VIX is a key measure of market expectations of near-term volatility conveyed by S&P 500® stock index option prices. 8 Share Index Factors would continue to reset after any Regular Distribution or special distribution. In addition to Regular Distributions and special distributions, discussed below, Funds may also have corrective distributions and net income distributions. Since this filing does not implicate or change any of these other types of distributions, they are not discussed herein. 9 The Exchange will not engage in a detailed discussion of the Funds or all aspects of Paired Class Shares. This is done for purposes of brevity. This short background description is intended only to provide context for discussion of the proposed rule change. For additional detail, see the AccuShares Order or AccuShares Proposal. See also Rule 5713. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 simulating an investment in an Underlying Benchmark. As noted in Rule 5713, Paired Class Shares will be issued by a trust on behalf of a segregated series of the Trust,10 each of which is known as a Fund. Paired Class Shares will have values that are based on an index or other numerical variable (‘‘Underlying Benchmark’’) whose value reflects the value of assets, prices, price volatility or other economic interests (‘‘Reference Asset’’).11 The Trust will always issue Paired Class Shares in pairs of shares of opposing classes of each Fund. The values of the opposing classes will move in opposite directions as the value of the Fund’s Underlying Benchmark, such as VIX for the VIX Fund, varies from its starting level, where one constituent of the pair is positively linked to the Fund’s Underlying Benchmark (‘‘Up Shares’’) and the other constituent is negatively linked to the Fund’s Underlying Benchmark (‘‘Down Shares’’). The rate of linkage or leverage of a Fund’s Up Shares and Down Shares performance to the performance of the Fund’s referenced Underlying Benchmark will be one-to-one. The calculation of the liquidation value of a Fund attributable to each of its classes of Paired Class Shares (‘‘Class Value’’), and each Share of such class’ pro rata portion of Class Value (‘‘Class Value per Share’’), will be determined according to a mathematical formula.12 Each Fund will engage in: (1) Scheduled Regular Distributions, (2) special distributions that are 10 The Trust in the case of AccuShares is a Delaware statutory trust that was established into separate AccuShares Funds pursuant to the Second Amended and Restated Trust Agreement of the AccuShares Trust, by AccuShares Investment Management, LLC, a Delaware limited liability company, as sponsor (the ‘‘Sponsor’’), and Wilmington Trust, N.A., a national banking association, as trustee (the ‘‘Trustee’’), as it may be amended and restated from time to time (the ‘‘Trust Agreement’’). Under the Trust Agreement, the Sponsor has exclusive management and control of all aspects of the business of each Fund. Specifically, the Sponsor selects the Funds’ service providers, negotiates various fees and agreements and performs such other services as the Sponsor believes that the AccuShares Trust may require from time to time. See 79 FR 35610 at 35615 (AccuShares Proposal). 11 Other economic interests would include, for example, currencies, interest rates, non-investable economic indices and other measures of financial instrument value. 12 The mathematical formula is based on the following factors: (1) The value of Fund assets, (2) the allocation of such value based on changes in the level of the Fund’s Underlying Benchmark which may be limited, reduced, capped or otherwise modified according to formula or pre-set parameters, and (3) the daily accrual of gain and income or loss on the assets of the Fund, less the liabilities of the Fund, as such gains, income losses and liabilities are allocated to each class of the Fund. E:\FR\FM\17MRN1.SGM 17MRN1 Federal Register / Vol. 81, No. 52 / Thursday, March 17, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES automatically triggered upon the Underlying Benchmark exceeding a fixed rate of change since the Fund’s prior regular or special distribution date or inception date in the case of the first distribution (each a ‘‘prior distribution date’’), and (3) corrective distributions that are automatically triggered when the trading price of a Paired Class Share deviates by a specified amount from its Class Value per Share for a specified period of time. Immediately after each Regular, special and corrective distribution, the Fund’s Underlying Benchmark participation or exposure will be reset and the Fund’s Class Value per Share for each of its classes will be set to equal the lowest Class Value per Share of the two classes of Paired Class Shares. To the extent any class of Paired Class Shares of a Fund has a positive net income from income or gain on class assets, after deduction of class liabilities, on a Regular or special distribution date as measured from the prior distribution date, such class of Paired Class Shares will receive a distribution in cash equal to such positive net income regardless of whether such class is entitled to a Regular or special distribution on such date. Share Index Factors are used for the determination of Class Value and Class Value Per Share of a Fund. On a daily basis the custodian of a Fund (‘‘Custodian’’) 13 will determine the Class Value of each class of a Fund, which is based on the value of the Fund’s Eligible Assets (‘‘Eligible Assets’’) 14 attributable to such class, (a) plus any accrued income or gains or losses on such assets attributable to such class (‘‘Investment Income’’), (b) less all fees, expenses and taxes attributable to such class not otherwise assumed by the Sponsor,15 where such income and gains after deduction of such fees, expenses and taxes is referred to as the class ‘‘Net Investment Income.’’ 16 The Class Value per Share 13 Each Fund will have a Custodian pursuant to appointment by the AccuShares Trust and the terms of a domestic custodian agreement. The Custodian will hold each Fund’s securities and cash, and will perform each Fund’s Class Value and Class Value per Share calculations. 14 Regarding Eligible Assets, the Funds are designed so that the cash proceeds from the creation of Paired Class Shares may be held by a Fund only in Eligible Assets designed to preserve capital while earning an investment return that is consistent with the preservation of capital. See 80 FR 9778 at 9780 (AccuShares Order). 15 The Sponsor has exclusive management and control of all aspects of the business of each of the Funds. 16 Such accrued income, gains, losses, fees, expenses and taxes will be allocated to each Share class on a daily basis, where such allocation is equal to the amount of such accrued income, gains, VerDate Sep<11>2014 17:03 Mar 16, 2016 Jkt 238001 of each Fund’s Up Shares will have a fixed one-to-one positive linear relationship with such Fund’s Underlying Benchmark (the ‘‘Up Share Index Factor’’) and the Class Value per Share of each Fund’s Down Shares will have a fixed one-to-one inverse linear relationship with such Fund’s Underlying Benchmark (the ‘‘Down Share Index Factor’’ and together with the Up Share Index Factor, the ‘‘Share Index Factors’’). The Down Share Index Factor will equal negative one times the Up Share Index Factor. At the inception of operations of each Fund, the Sponsor will establish such Fund’s Share Index Factors. After any regular or special distribution by a Fund, the Fund will reset its Share Index Factors—the VIX Fund would have additional resets to the Share Index Factors as described below. The payment of cash distributions causes Class Values per Share to be equal following each such distribution, where the Class Values per Share will be equal to the lowest Class Value per Share of either class calculated in determining the distribution. This filing is being made to reflect the change in the Regular Distribution interval for the Distribution Funds from quarterly to monthly, to reflect the index changes and name changes of two funds, and to reflect that the Share Index Factors for the VIX Fund would be reset on a weekly basis on each Tuesday and the regular distribution dates would be monthly on each third Tuesday to coincide with a Share Index Factor reset. Upon operational effectiveness of this proposal, each such Distribution Fund would, like the VIX Fund currently, engage in monthly Regular Distributions, the two excess return Funds (Excess Crude Oil Fund and Excess Natural Gas Fund) would reflect excess return, and Share Index Factors for the VIX Fund will be reset on a weekly basis on Tuesday with related changes to the regular monthly distribution date to the third Tuesday of each month such that distribution dates coincide with a Share Index Factor reset all as described in more detail below. The Exchange believes that these changes will be beneficial to market participants that choose to trade the Funds. Monthly Distribution Rule 5713 does not specify the interval for Regular Distributions. Rather, Rule 5713 states only that a losses, fees, expenses and taxes multiplied by a fraction the numerator of which is the closing Class Value per Share of the referenced class and the denominator of which is the sum of the closing Class Values per Share of both classes of the Fund. PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 14491 Fund may engage in ‘‘scheduled regular distributions’’.17 The only mention of an interval for Regular Distributions is in footnote 40 in the AccuShares Proposal, which states that other than monthly Regular Distributions for VIX Fund and the Natural Gas Fund, AccuShares ‘‘will engage in quarterly regular distributions.’’ 18 In this proposal the Exchange proposes to indicate that the Distribution Funds will have Regular Distributions on a monthly basis. Thus, the Exchange proposes that each of the Distribution Funds will, like the VIX Fund and the Natural Gas Fund, engage in Regular Distributions each calendar month. The Exchange believes that this proposed change will serve to add an additional measure of consistency to investors and traders that may want to trade one or more of the Distribution Funds by themselves or in addition to the currently-traded VIX Fund, which has monthly Regular Distributions.19 The Exchange believes that consistency across all Funds (except AccuShares S&P GSCI Spot Fund and AccuShares S&P GSCI Agriculture and Livestock Spot Fund) vis-a-vis monthly Regular Distributions will be helpful to investors and traders. While some may have become aware of AccuShares and Paired Class Shares when the Exchange filed the AccuShares Proposal, many more have become aware of AccuShares and its product offerings with the listing and trading of the first of the Paired Class Shares products, namely the VIX Fund.20 The VIX Fund (as also the Natural Gas Fund, which is not yet listed and traded) is currently structured with monthly Regular Distributions. The Exchange believes that consistency across all Funds (except AccuShares S&P GSCI Spot Fund and AccuShares S&P GSCI Agriculture and Livestock Spot Fund) in terms of monthly Regular Distributions would avoid potential investor confusion, and, as discussed 17 See Rule 5713(d). 79 FR 35610 at 35619 (AccuShares Proposal). 19 The AccuShares S&P GSCI Spot Fund and the AccuShares S&P GSCI Agriculture and Livestock Spot Fund would continue to have Regular Distributions on a quarterly basis. In addition, the Exchange proposes to change the name of the Crude Oil Fund and the Natural Gas Fund so that the new names, namely AccuShares S&P GSCI Crude Oil Excess Return Fund and AccuShares S&P GSCI Natural Gas Spot Excess Return Fund, more accurately reflect how these funds will function. The Exchange also proposes to indicate that the Share Index Factors for the VIX Fund would be reset on a weekly basis on each Tuesday, and the regular distributions for the VIX Fund would be made monthly on the third Tuesday rather than monthly on the 15th so that each monthly distribution date (and each end of a monthly measuring period) coincides with a Share Index Factor reset. These changes are described below. 20 The VIX Fund began trading on May 19, 2015. 18 See E:\FR\FM\17MRN1.SGM 17MRN1 14492 Federal Register / Vol. 81, No. 52 / Thursday, March 17, 2016 / Notices below, could be advantageous to market participants. For example, the proposed monthly distributions could allow investors to redeploy gains from Up Shares or Down Shares to alternative, non-Fund investments in a tax efficient manner more frequently than investors could do with quarterly distributions. In addition, monthly distributions would better align the changes in the Class Values per Share of both the Up Shares and the Down Shares with a more current valuation of the underlying index. Moreover, with the commencement of trading of the VIX Fund on the Exchange, the Sponsor has received feedback from both current and potential investors about preferred distribution frequency. In particular, the majority of these market participants have indicated to the Sponsor that monthly Regular Distributions would be preferable to a longer period and would improve both trading and hedging. Monthly distributions can be more frequently redeployed in a tax efficient manner into the opposing share class or other positions. Additionally, for traders or market makers hedging or arbitraging the fund’s shares, monthly distributions and concurrent monthly Share Index Factor settings will more closely align the funds with the most liquid monthly futures contracts and other exchange traded products which also employ a monthly index roll similar to the S&P GSCI commodity indexes. Finally, in each instance of a distribution the Sponsor will continue to post a notice of such event and its details on the Sponsor’s Web site (www.AccuShares.com). The Sponsor has also represented to the Exchange that each Fund engaging in a Regular Distribution (or, for that matter, a special distribution, corrective distribution, or net income distribution) will provide at least three business days’ advance notice (or longer advance notice as may be required by the Exchange) 21 of such an event. asabaliauskas on DSK3SPTVN1PROD with NOTICES Excess Crude Oil Fund and Excess Natural Gas Fund The Exchange proposes to change the underlying indexes from their spot variant to their excess return variant and to rename the AccuShares S&P GSCI Crude Oil Spot Fund to AccuShares S&P GSCI Crude Oil Excess Return Fund and the AccuShares S&P GSCI Natural Gas Spot Fund to AccuShares S&P GSCI Natural Gas Excess Return Fund. Market participants, in particular Authorized 21 The Exchange may determine that longer notice is advisable in some circumstances (e.g., an extended market break). VerDate Sep<11>2014 17:03 Mar 16, 2016 Jkt 238001 Participants 22 of the AccuShares Trust and market participants who are expected to act as liquidity providers for excess return Funds (‘‘liquidity providers’’), have recommended the index change and the related name revision. The Authorized Participants and liquidity providers have indicated that market making in the spot variant of the indexes (the current indexes variant) would require wider bid/offer spreads in comparison to using the excess return variant of the indexes.23 That is, the current spot variant would require anticipatory hedging, rolls, and the management of forward contango and backwardation 24 risk (together ‘‘spot requirements’’), while in contrast these spot requirements are not important with excess return because they are naturally embedded in the excess return variant. The excess return variant is an index variant that is not novel, but rather is one that has been in use and is thus familiar to market makers and other market participants.25 Moreover, the excess return variant is expected to benefit market participants through both narrower bid/offer spreads 22 Per note 13 of the AccuShares Order, an Authorized Participant may place orders to create or redeem one or more Creation Units, and must be (1) a registered broker-dealer or other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions, (2) a direct participant in The Depository Trust Company, and (3) a party to an Authorized Participant Agreement with the Sponsor setting forth the procedures for the creation and redemption of Creation Units in a Fund. 23 Market participants have indicated that their expected average holding and reassessment periods would be in the area of two to eight weeks, and that funds that offer excess return would be less costly because they would offer narrower bid/offer spreads and less risk. This would have several positive effects. First, investors are expected to buy or sell Fund shares concurrent with each reassessment. Second, such buying or selling is expected to be cheaper. Third, the narrower bid/offer spreads are expected to increase liquidity in the Fund shares, thus reducing the risk of buying or selling across a range of market conditions. 24 Contango is normally when a futures price is above the expected future spot price. Because the futures price must converge on the expected future spot price, contango implies that futures prices are falling over time as new information brings them into line with the expected future spot price. Backwardation is normally when a futures price is below the expected future spot price and increases with time. For additional information, see https:// www.investopedia.com/articles/07/contango_ backwardation.asp. 25 Products that use the excess return variant include DBO, OIL, UCO, UGAZ, and DGAZ. The crude oil products (DBO, OIL, and UCO) have current assets ranging from $400 to 800 million, and daily trading volumes ranging from 1 million to 11 million shares. The natural gas products (UGAZ and DGAZ) have current assets ranging from $80 million to $300 million, and daily trading volumes ranging from 4 million to 11 million shares. Other funds seek to track an excess return variant by transacting directly in the related futures contracts and some of those funds are larger than those listed. PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 and an increased ability and proclivity for providing liquidity in all market conditions.26 As such, market participants that choose to trade Pair Class Shares and benefit from the efficiency and transparency inherent in the product will also be able to benefit from the more easily traded and hedged excess return variant. Both the spot variant and the excess return variant are computed from the same underlying futures contracts at the same point in time. The difference between the two variants occurs only on 5 trading days: The 5th through the 9th trading days of each month (the ‘‘five day period’’). During the five day period, each S&P GSCI commodity index underlying a Fund, whether monthly return or excess return, moves its reference from the front-month expiry contract to the next following contract (that is, the futures contract for the next consecutive expiry month) in five equal installments of twenty percent per day in order to capture the cost or the benefit from rolling the nearby front-month expiry contract into the next following expiry contract. In the excess return variant, the cost or benefit of transacting out of the current or front-month expiry contract and into the next or following futures contract is added to (or subtracted from) the index value. In contrast, in the spot variant this cost or benefit is not added to (or subtracted from) the index value,27 and 26 Because the excess return variant can be found in standard indexes used in exchange traded products, market makers are already accustomed to trading and hedging fund shares based on this variant. In addition to promoting narrower spreads and added liquidity, the excess return variant is directly hedgeable with conventional futures contracts, which contain the cost or benefit of the roll forward. Because the excess return variant precisely tracks the prices of the futures that a market maker is expected to use to both arbitrage and hedge the Fund shares, many more market makers are expected to engage in trading and arbitrage activities. With the excess return variant, the rolling effect of the index will be identical to the rolling performance of a futures hedge; and because the excess return variant precisely tracks an actual futures holding, a hedge can essentially remain static throughout a month and may require rebalancing only on those five days on which the excess return variant rolls its hypothetical positions. In contrast, the spot variant would require a more complex daily rebalancing of the futures hedge. Hedging and arbitraging the spot variant requires holding a next following futures contract (rather than the current futures contract) and manually rebalancing the next following futures contract amount on a daily basis to account for contango or backwardation between the futures hedge and the spot variant index. 27 The Sponsor expects more market makers to participate in the excess return variant because of the reduced market making complexity. The potential benefits of additional market maker participation include: (i) The ability of market participants to transact higher share quantities at tighter bid/offer spreads, and (ii) more robust and predictable trading prices in fast moving or volatile markets. E:\FR\FM\17MRN1.SGM 17MRN1 Federal Register / Vol. 81, No. 52 / Thursday, March 17, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES as such, gives rise to needed anticipatory hedging which, based on feedback from Authorized Participants and market makers, is expected to result in increased bid/offer spreads. VIX Fund Share Index Factor and Distribution Date The Exchange is proposing a periodic resetting of the Share Index Factors for the VIX Fund where the Share Index Factors reset weekly on each Tuesday and where the regular distributions for the VIX Fund would be made monthly on the third Tuesday of the month so that each monthly distribution date (and each end of a monthly measuring period) coincides with a Share Index Factor reset. Currently, after any Regular Distribution or special distribution by a Fund, a Fund will reset its Share Index Factors. Cash distributions cause Class Values per Share to be equal following each such distribution. The lowest Class Value per Share of either class calculated is used for the Share Index Factor.28 The Exchange is proposing that the resetting of the Share Index Factors for the VIX Fund not wait for a distribution but rather that [sic] be done on a more frequent, weekly basis on each Tuesday. In a related change, the regular distributions for the VIX Fund would be made monthly on the third Tuesday rather than monthly on the 15th so that each monthly distribution date and end of each monthly measuring period coincides with a Share Index Factor reset. The Exchange believes that more frequent resets of the Share Index Factors for the VIX Fund will be beneficial to market participants that trade the fund because it will improve the arbitrage function of the fund’s shares by aligning the setting of the Share Index Factors with the expiry of each weekly VIX futures contract, and because the Share Index Factor will reset with a frequency closer to the daily measurements of spot VIX. The weekly VIX futures began trading in July 2015— approximately two months after the launch of the VIX Fund. The weekly VIX futures are the preferred hedging futures contract for spot VIX with both higher correlations to spot VIX than the monthly contracts, and more timely responsiveness to changes in spot VIX. Changing the Share Index Factors to a weekly determination is expected to have two benefits, both of which are expected to narrow bid/offer spreads 28 Immediately after each distribution, the fund’s exposure will be reset, and the fund’s Class Value per Share for each of its classes will be set to equal the lowest Class Value per Share of the two classes of Paired Class Shares. See 80 FR 9778 at 9779 (AccuShares Order). VerDate Sep<11>2014 17:03 Mar 16, 2016 Jkt 238001 and increase trading volumes. First, the fund shares are expected to be more easily hedged with shorter duration VIX futures. Aligning the Share Index Factor resets to the shorter VIX futures would make the fund shares’ responsiveness to VIX better aligned with the preferred hedging instrument. The arbitrage and hedging of fund shares would be simplified because the settlement of the shorter VIX futures will be coincidental with each Share Index Factor reset. That is, the preferred hedge is expected to be rolled on its expiry cycle by an arbitrageur or hedger, and the expiry cycle will coincide with each Share Index Factor reset. Second, the improved hedgeability is expected to bring the trading prices in closer alignment with fund share class values which are algorithmic and tied directly to changes in spot VIX. As a result of this proposed change, Share Index Factor resetting will be taking place more frequently to the benefit of market participants.29 The Exchange believes that all three of the proposed changes will be beneficial to traders and investors, and that they meet the requirements of the Act. The Exchange notes that this proposal makes three changes, as discussed, to the original AccuShares Order and AccuShares Proposal, see 80 FR 9778 and 79 FR 35610, and that the representations made in the original AccuShares Order and AccuShares Proposal remain unchanged. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder, including the requirements of Section 6(b) of the Act.30 In particular, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 31 requirements that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and practices, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange proposes to indicate that Regular Distributions of the Distribution Funds will be done on 29 Share Index Factors would, as now, continue to reset after any Regular Distribution and special distribution. 30 15 U.S.C. 78f(b). 31 15 U.S.C. 78f(b)(5). PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 14493 a monthly rather than on a quarterly basis, to rename two Funds to reflect excess return rather than spot, and to indicate that Share Index Factors for the VIX Fund would be reset on a weekly basis on Tuesday and the regular distributions will occur monthly on the third Tuesday of each month rather than on the 15th, as discussed. Thus, each such monthly distribution Fund (and in fact all of the Funds with the exception of AccuShares S&P GSCI Spot Fund and AccuShares S&P GSCI Agriculture and Livestock Spot Fund) would engage in monthly Regular Distributions, and the excess return Funds would be indexed to their excess return variant and renamed AccuShares S&P GSCI Crude Oil Excess Return Fund and AccuShares S&P GSCI Natural Gas Excess Return Fund. The Exchange believes that these proposed changes will be beneficial to market participants that choose to trade the Funds. The Exchange believes that consistency across all Funds (except AccuShares S&P GSCI Spot Fund and AccuShares S&P GSCI Agriculture and ` Livestock Spot Fund) vis-a-vis monthly Regular Distributions will be helpful to investors and traders. While some may have become aware of AccuShares and Paired Class Shares when the Exchange filed the AccuShares proposal, many more have become aware of AccuShares and its product offerings with the listing and trading of the first of the Paired Class Shares products, namely the VIX Fund that began trading on May 19, 2015. The Exchange believes that consistency across Funds as discussed in terms of monthly Regular Distributions would avoid potential investor confusion, and, as discussed above, could be advantageous to market participants. In addition, the Sponsor has heard from current and potential investors about distribution. In particular, the majority of these market participants indicated to the Sponsor that monthly Regular Distributions would be preferable to a longer period because this would tend to have a positive impact on trading activity because better alignment with both futures hedges and better alignment with other exchange traded products would reduce intraday spreads by being more easily hedged and arbitraged, and more widely traded. This would help trading price stability and tracking in terms of premiums and discounts by both overall increasing trading volumes and making intraday and inter-day trading volumes more consistent, all of which is expected to contribute to narrower bid/offer spreads and more predictable fund performance. E:\FR\FM\17MRN1.SGM 17MRN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES 14494 Federal Register / Vol. 81, No. 52 / Thursday, March 17, 2016 / Notices The Exchange believes that, as discussed, re-indexing and renaming the excess return Funds will be helpful to market participants. The excess return change is recommended by market participants. The Authorized Participants and liquidity providers have indicated that market making in the excess return Funds, as currently reflecting the spot variant of the index, would require wider bid/offer spreads in comparison to using the excess return variant of the index.32 That is, the current spot variant would require anticipatory hedging, rolls, and the management of the spot requirements (e.g., contango and backwardation risk), while in contrast these spot requirements are not important with excess return because they are naturally embedded in the excess return variant. The Exchange notes that in each instance of a distribution the Sponsor will post a notice of such event and its details on the Sponsor’s Web site (www.AccuShares.com). The Sponsor has also represented to the Exchange that each Fund engaging in a Regular Distribution (or, for that matter, a special distribution, corrective distribution, or net income distribution) will provide at least three business days’ advance notice (or longer advance notice as may be required by the Exchange) 33 of such an event. The Exchange believes that, as discussed, more frequent resetting of the Share Index Factors will likewise be beneficial to market participants. The Exchange is proposing that the resetting of the Share Index Factors for the VIX Fund not have to wait for a Regular or special distribution but rather be done on a more frequent, weekly basis on each Tuesday. More frequent resets of the Share Index Factors for the VIX Fund will be beneficial to market participants that trade the fund because it will improve the arbitrage function of the fund’s shares by aligning the setting of the Share Index Factors with the expiry of each weekly VIX futures contract, and because the Share Index Factor will reset with a frequency closer to the daily measurements of spot VIX. The weekly VIX futures are the preferred hedging futures with both higher correlations to spot VIX than the monthly contracts, and more timely responsiveness to changes in spot VIX. 32 Market participants have indicated that their expected average holding and reassessment periods would be in the area of two to eight weeks, and that excess return Funds, with narrower bid/offer spreads—which are advantageous to market participants—would be preferred. 33 The Exchange may determine that longer notice is advisable in some circumstances (e.g., an extended market break). VerDate Sep<11>2014 17:03 Mar 16, 2016 Jkt 238001 Changing the Share Index Factors to a weekly determination is expected to have several advantages for market participants: Narrower bid/offer spreads and increased trading volumes; fund shares more easily hedged with shorter VIX futures; and improved hedgeability that should bring the trading prices in closer alignment with fund share class values which are algorithmic and tied directly to changes in spot VIX. 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 purposes of the Act. The Exchange does not believe that the proposed rule change will have any impact on competition. The proposed rule change will achieve better consistency for the Funds of the Trust as discussed regarding the timing of Regular Distributions. The proposed rule change will have certain indexes changed from the spot variant to the excess return variant of such indexes, and will rename two of the Funds to reflect that these excess return Funds will use the excess return variant of the index underlying the Funds rather the current index variant that is based on spot. The proposed rule change will increase the frequency of Share Index Factor resets for the VIX Fund to occur weekly on each Tuesday, and will make a corresponding change to monthly distribution dates to the third Tuesday of each month such that a monthly distribution coincides with a weekly Share Index Factor reset. The Exchange believes that while these changes may not directly impact competition, they will be helpful for market participants. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. 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 shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 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 Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2016–034 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–NASDAQ–2016–034. 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 Web site (https://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 Web site 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; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NASDAQ–2016–034 and should be submitted on or before April 7, 2016. E:\FR\FM\17MRN1.SGM 17MRN1 Federal Register / Vol. 81, No. 52 / Thursday, March 17, 2016 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Lynn M. Powalski, Deputy Secretary. Dated: March 14, 2016. Lynn M. Powalski, Deputy Secretary. forth in sections A, B, and C below, of the most significant aspects of such statements. [FR Doc. 2016–06130 Filed 3–15–16; 11:15 am] A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P [FR Doc. 2016–05977 Filed 3–16–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77350; File No. SR–BX– 2016–014] asabaliauskas on DSK3SPTVN1PROD with NOTICES Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission (‘‘Commission’’) will hold an Open Meeting on Monday, March 21, 2016, at 11:00 a.m., in the Auditorium (L–002) at the Commission’s headquarters building, to hear oral argument in an appeal from an initial decision of an administrative law judge by respondents Edgar Page (‘‘Page’’) and PageOne Financial, Inc. (‘‘PageOne’’). On March 10, 2015, after the Commission instituted proceedings, Page and PageOne submitted an offer of settlement, accepted by the Commission, pursuant to which they consented to entry of an order: finding that they violated the Investment Advisers Act of 1940 by failing to disclose a conflict of interest; imposing a censure and a cease-and-desist order; and ordering additional proceedings to determine what, if any, disgorgement, prejudgment interest, civil penalties, and other remedial action is in the public interest. In an initial decision issued June 25, 2015, the law judge barred Page from the securities industry, revoked PageOne’s investment adviser registration, ordered Page and PageOne to disgorge $2,184,850.30, with prejudgment interest, jointly and severally, and declined to impose a civil penalty. Page and PageOne appealed the sanctions imposed in the initial decision. The Commission’s Division of Enforcement cross-appealed the initial decision’s imposition of a time-limited industry bar, as opposed to a permanent industry bar with a right to reapply. The oral argument is likely to address what penalties, if any, are appropriate in the public interest. Also likely to be considered at oral argument is whether these administrative proceedings violate the U.S. Constitution. For further information, please contact the Office of the Secretary at (202) 551–5400. Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 7018 March 11, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 29, 2016, NASDAQ BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the fee schedule under Exchange Rule 7018(a) with respect to execution and routing of orders in securities priced at $1 or more per share. This filing is being made for immediate effectiveness and will become operative March 1, 2016. The text of the proposed rule change is also available on the Exchange’s Web site at https:// nasdaqomxbx.cchwallstreet.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 1 15 34 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:03 Mar 16, 2016 2 17 Jkt 238001 14495 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00086 Fmt 4703 Sfmt 4703 1. Purpose The Exchange is proposing to amend the fee schedule under BX Rule 7018(a), relating to fees and credits provided for orders in securities priced and $1 or more per share that execute on BX. Under BX Rule 7018(a), the Exchange provides credits to member firms that access liquidity on BX. The Exchange is proposing to eliminate two credit tiers, as well as to amend the criteria of two other credit tiers, each for orders that access liquidity (excluding orders with midpoint pegging and excluding orders that receive price improvement and execute against an order with midpoint pegging). Specifically, the first eliminated credit tier is for a member that adds and accesses liquidity equal to or exceeding 0.50% of total consolidated volume (‘‘TCV’’) during a month to receive a credit of $0.0017 per share executed. The second eliminated credit tier is for a member that accesses liquidity equal to or exceeding 0.05% of TCV during a month to receive a credit of $0.0008 per share executed. Members that previously would have qualified under the eliminated tiers may continue to qualify for and receive either an equal or higher credit. Specifically, members that previously qualified for the credit of $0.0017 per share executed for adding and accessing liquidity equal to or exceeding 0.50% of TCV during a month may still receive the same credit, but for meeting the lower TCV threshold and through solely accessing liquidity (no longer includes adding liquidity) equal to or exceeding 0.20% of TCV during a month. Otherwise, members may receive a lower credit. For [sic] members that previously qualified for the credit of $0.0008 per share executed for accessing liquidity equal to or exceeding 0.05% of TCV during a month will receive a higher credit of $0.0015 per share executed for meeting the same monthly threshold. The first amended credit tier reduces the threshold to qualify for a credit of $0.0016 per share executed. The current threshold requires a member to access liquidity equal to or exceeding 0.15% of TCV during a month. The proposed rule change lowers this threshold for a member to access liquidity equal to or E:\FR\FM\17MRN1.SGM 17MRN1

Agencies

[Federal Register Volume 81, Number 52 (Thursday, March 17, 2016)]
[Notices]
[Pages 14489-14495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-05977]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77353; File No. SR-NASDAQ-2016-034]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change Regarding Monthly 
Distributions, Excess Returns, and Share Index Factors of Certain 
AccuShares[supreg] Trust I Funds

March 11, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 2, 2016, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in in Items I 
and II below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to indicate the following:
    (1) That regular distributions (``Regular Distributions'') of the 
following Paired Class Shares issued by AccuShares[supreg] Trust I 
(formerly known as AccuShares Commodities Trust I) (the ``AccuShares 
Trust'' or ``Trust'') \3\ will be made on a monthly basis on behalf of 
each of the following segregated series AccuShares S&P[supreg] 
GSCI[supreg] Industrial Metals Spot Fund, AccuShares S&P GSCI Crude Oil 
Spot Fund, and AccuShares S&P GSCI Brent Oil Spot Fund (each a 
``Distribution Fund'', and collectively the ``Distribution Funds''); 
\4\
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    \3\ AccuShares[supreg] is a registered trademark of AccuShares 
Holdings LLC. S&P[supreg], S&P GSCI[supreg], S&P 500[supreg] and 
Standard & Poor's[supreg] are registered trademarks of Standard & 
Poor's[supreg] Financial Services LLC. CBOE[supreg], Chicago Board 
Options Exchange[supreg], CBOE Volatility Index[supreg] and 
VIX[supreg] are registered trademarks of Chicago Board Options 
Exchange[supreg], Incorporated (``CBOE''). Dow Jones[supreg] is a 
registered trademark of Dow Jones[supreg] Trademark Holdings LLC.
    \4\ The Paired Class Shares funds discussed in this proposal--
the three Distribution Funds and the AccuShares S&P GSCI Natural Gas 
Spot Fund--and in addition the AccuShares S&P GSCI Spot Fund, the 
AccuShares S&P GSCI Agriculture and Livestock Spot Fund, and the 
AccuShares Spot CBOE[supreg] VIX[supreg] Fund, are approved for 
listing. See Securities Exchange Act Release No. 74299 (February 18, 
2015), 80 FR 9778 (February 24, 2015) (SR-NASDAQ-2014-065) (order 
approving new Rule 5713 and listing seven AccuShares funds) (the 
``AccuShares Order''). The first, and only, AccuShares fund that is 
currently listed and trading on the Exchange is the AccuShares Spot 
CBOE[supreg] VIX[supreg] Fund. See also Securities Exchange Act 
Release No. 72412 (June 17, 2014), 79 FR 35610 (June 23, 2014) (SR-
NASDAQ-2014-065) (notice of filing regarding new Rule 5713 and 
listing seven AccuShares funds) (the ``AccuShares Proposal''). The 
funds approved for listing in the AccuShares Order are together 
called the ``Funds''.
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    (2) That the following Paired Class Shares issued by the Trust will 
have their indexes changed from the spot variant to the excess return 
variant of such indexes and the funds will be renamed to accurately 
reflect the changes to the indexes--the AccuShares S&P GSCI Crude Oil 
Spot Fund will have its index changed from the S&P GSCI Crude Oil Spot 
Index to the S&P GSCI Crude Oil Excess Return Index and the fund will 
be renamed AccuShares S&P GSCI Crude Oil Excess Return Fund, and the 
AccuShares S&P GSCI Natural Gas Spot Fund will have its index changed 
from S&P GSCI Natural Gas Spot Index to S&P GSCI Natural Gas Excess 
Return Index and the fund will be renamed AccuShares S&P GSCI Natural 
Gas Excess Return Fund; and
    (3) That the Share Index Factors \5\ for the AccuShares Spot CBOE 
VIX Fund would be reset on a weekly basis on each Tuesday (after 
certain distribution dates), and the regular distributions for the 
AccuShares Spot CBOE VIX Fund would be made monthly on the third 
Tuesday rather than monthly on the

[[Page 14490]]

15th so that each monthly distribution date (and the end of each 
monthly measuring period) coincides with a Share Index Factor reset.
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    \5\ Share Index Factors are discussed below.

The text of the proposed rule change is available at https://nasdaq.cchwallstreet.com/, at NASDAQ's principal office, 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 self-regulatory organization 
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 those 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 purpose of this proposed rule change is to indicate the 
following:
    (1) That Regular Distributions will be made on a monthly basis on 
behalf of each of the Distribution Funds;
    (2) That the following Paired Class Shares issued by the Trust will 
have their indexes changed from the spot variant to the excess return 
variant of such indexes and the funds will be renamed to accurately 
reflect the changes to the indexes--the AccuShares S&P GSCI Crude Oil 
Spot Fund (``Crude Oil Fund'') will have its index changed from the S&P 
GSCI Crude Oil Spot Index to the S&P GSCI Crude Oil Excess Return Index 
and the fund will be renamed AccuShares S&P GSCI Crude Oil Excess 
Return Fund (``Excess Crude Oil Fund''), and the AccuShares S&P GSCI 
Natural Gas Spot Fund (``Natural Gas Fund'') will have its index 
changed from S&P GSCI Natural Gas Spot Index to S&P GSCI Natural Gas 
Excess Return Index and the fund will be renamed AccuShares S&P GSCI 
Natural Gas Excess Return Fund (``Excess Natural Gas Fund''); \6\ and
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    \6\ Excess returns, which are discussed below, are generally 
investment returns from a security or portfolio that exceed a 
benchmark or index with a similar level of risk. For the Excess 
Return Crude Oil Fund and the Excess Return Natural Gas Fund, the 
excess return index is calculated from holding a nearest-to-
expiration futures contract, and exchanging such nearest-to-
expiration contract for the contract expiring in the next following 
month in accordance with the monthly S&P GSCI roll schedule. The S&P 
GSCI roll schedule holds the nearest-to-expiration futures contract 
until the fifth trading day of each month, and over the fifth to 
ninth trading day of each month sells the nearest-to-expiration 
contract and purchases the contract expiring in the next following 
month (i.e. rolls the futures contracts) in five equal installments 
of twenty percent each. The excess return is inclusive of two 
things: The gain or loss associated with holding a futures contract 
and the gain or loss associated with the rolling of a futures 
contract to the next following expiration. In contrast, the spot 
variant does not include the gain or loss associated with rolling 
from the nearest-to-expiration contract to the next following 
contract (i.e. the spot variant only captures the return related to 
holding a contract). The excess return is replicated by holding and 
trading futures contracts underlying the index in accordance with 
the S&P GSCI roll schedule. The spot variant, on the other hand, 
cannot be directly hedged with rolling futures contracts, and its 
hedging requires active anticipatory hedging and rolling based on 
the price differentials between forward expiry futures contracts. 
The spot variant has not been used for any index in exchange traded 
products, whereas the excess variant routinely continues to be used 
for these purposes. In the case of the excess return indexes for the 
Excess Return Crude Oil Fund and the Excess Return Natural Gas Fund, 
the changes in the excess return variant may be larger or smaller 
than the changes in the benchmark spot return variant. See also 
https://www.investopedia.com/terms/e/excessreturn.asp.
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    (3) That the Share Index Factors for the AccuShares Spot CBOE VIX 
Fund (``VIX Fund'') \7\ would be reset on a weekly basis on each 
Tuesday (after certain distribution dates), and the regular 
distributions for the VIX Fund would be made monthly on the third 
Tuesday rather than monthly on the 15th so that each monthly 
distribution date (and the end of each monthly measuring period) 
coincides with a Share Index Factor reset.\8\
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    \7\ The VIX is a key measure of market expectations of near-term 
volatility conveyed by S&P 500[supreg] stock index option prices.
    \8\ Share Index Factors would continue to reset after any 
Regular Distribution or special distribution. In addition to Regular 
Distributions and special distributions, discussed below, Funds may 
also have corrective distributions and net income distributions. 
Since this filing does not implicate or change any of these other 
types of distributions, they are not discussed herein.
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Paired Class Shares--A Short Background \9\
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    \9\ The Exchange will not engage in a detailed discussion of the 
Funds or all aspects of Paired Class Shares. This is done for 
purposes of brevity. This short background description is intended 
only to provide context for discussion of the proposed rule change. 
For additional detail, see the AccuShares Order or AccuShares 
Proposal. See also Rule 5713.
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    The structure of Paired Class Shares is designed to be a passive 
unmanaged investment vehicle with the objective to provide investors 
with exposure to changes in an Underlying Benchmark as defined below. 
Paired Class Shares are expected to provide retail as well as 
institutional investors with a simple, liquid and cost effective means 
of simulating an investment in an Underlying Benchmark.
    As noted in Rule 5713, Paired Class Shares will be issued by a 
trust on behalf of a segregated series of the Trust,\10\ each of which 
is known as a Fund. Paired Class Shares will have values that are based 
on an index or other numerical variable (``Underlying Benchmark'') 
whose value reflects the value of assets, prices, price volatility or 
other economic interests (``Reference Asset'').\11\ The Trust will 
always issue Paired Class Shares in pairs of shares of opposing classes 
of each Fund. The values of the opposing classes will move in opposite 
directions as the value of the Fund's Underlying Benchmark, such as VIX 
for the VIX Fund, varies from its starting level, where one constituent 
of the pair is positively linked to the Fund's Underlying Benchmark 
(``Up Shares'') and the other constituent is negatively linked to the 
Fund's Underlying Benchmark (``Down Shares''). The rate of linkage or 
leverage of a Fund's Up Shares and Down Shares performance to the 
performance of the Fund's referenced Underlying Benchmark will be one-
to-one. The calculation of the liquidation value of a Fund attributable 
to each of its classes of Paired Class Shares (``Class Value''), and 
each Share of such class' pro rata portion of Class Value (``Class 
Value per Share''), will be determined according to a mathematical 
formula.\12\
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    \10\ The Trust in the case of AccuShares is a Delaware statutory 
trust that was established into separate AccuShares Funds pursuant 
to the Second Amended and Restated Trust Agreement of the AccuShares 
Trust, by AccuShares Investment Management, LLC, a Delaware limited 
liability company, as sponsor (the ``Sponsor''), and Wilmington 
Trust, N.A., a national banking association, as trustee (the 
``Trustee''), as it may be amended and restated from time to time 
(the ``Trust Agreement''). Under the Trust Agreement, the Sponsor 
has exclusive management and control of all aspects of the business 
of each Fund. Specifically, the Sponsor selects the Funds' service 
providers, negotiates various fees and agreements and performs such 
other services as the Sponsor believes that the AccuShares Trust may 
require from time to time. See 79 FR 35610 at 35615 (AccuShares 
Proposal).
    \11\ Other economic interests would include, for example, 
currencies, interest rates, non-investable economic indices and 
other measures of financial instrument value.
    \12\ The mathematical formula is based on the following factors: 
(1) The value of Fund assets, (2) the allocation of such value based 
on changes in the level of the Fund's Underlying Benchmark which may 
be limited, reduced, capped or otherwise modified according to 
formula or pre-set parameters, and (3) the daily accrual of gain and 
income or loss on the assets of the Fund, less the liabilities of 
the Fund, as such gains, income losses and liabilities are allocated 
to each class of the Fund.
---------------------------------------------------------------------------

    Each Fund will engage in: (1) Scheduled Regular Distributions, (2) 
special distributions that are

[[Page 14491]]

automatically triggered upon the Underlying Benchmark exceeding a fixed 
rate of change since the Fund's prior regular or special distribution 
date or inception date in the case of the first distribution (each a 
``prior distribution date''), and (3) corrective distributions that are 
automatically triggered when the trading price of a Paired Class Share 
deviates by a specified amount from its Class Value per Share for a 
specified period of time. Immediately after each Regular, special and 
corrective distribution, the Fund's Underlying Benchmark participation 
or exposure will be reset and the Fund's Class Value per Share for each 
of its classes will be set to equal the lowest Class Value per Share of 
the two classes of Paired Class Shares. To the extent any class of 
Paired Class Shares of a Fund has a positive net income from income or 
gain on class assets, after deduction of class liabilities, on a 
Regular or special distribution date as measured from the prior 
distribution date, such class of Paired Class Shares will receive a 
distribution in cash equal to such positive net income regardless of 
whether such class is entitled to a Regular or special distribution on 
such date.
    Share Index Factors are used for the determination of Class Value 
and Class Value Per Share of a Fund. On a daily basis the custodian of 
a Fund (``Custodian'') \13\ will determine the Class Value of each 
class of a Fund, which is based on the value of the Fund's Eligible 
Assets (``Eligible Assets'') \14\ attributable to such class, (a) plus 
any accrued income or gains or losses on such assets attributable to 
such class (``Investment Income''), (b) less all fees, expenses and 
taxes attributable to such class not otherwise assumed by the 
Sponsor,\15\ where such income and gains after deduction of such fees, 
expenses and taxes is referred to as the class ``Net Investment 
Income.'' \16\ The Class Value per Share of each Fund's Up Shares will 
have a fixed one-to-one positive linear relationship with such Fund's 
Underlying Benchmark (the ``Up Share Index Factor'') and the Class 
Value per Share of each Fund's Down Shares will have a fixed one-to-one 
inverse linear relationship with such Fund's Underlying Benchmark (the 
``Down Share Index Factor'' and together with the Up Share Index 
Factor, the ``Share Index Factors''). The Down Share Index Factor will 
equal negative one times the Up Share Index Factor. At the inception of 
operations of each Fund, the Sponsor will establish such Fund's Share 
Index Factors. After any regular or special distribution by a Fund, the 
Fund will reset its Share Index Factors--the VIX Fund would have 
additional resets to the Share Index Factors as described below. The 
payment of cash distributions causes Class Values per Share to be equal 
following each such distribution, where the Class Values per Share will 
be equal to the lowest Class Value per Share of either class calculated 
in determining the distribution.
---------------------------------------------------------------------------

    \13\ Each Fund will have a Custodian pursuant to appointment by 
the AccuShares Trust and the terms of a domestic custodian 
agreement. The Custodian will hold each Fund's securities and cash, 
and will perform each Fund's Class Value and Class Value per Share 
calculations.
    \14\ Regarding Eligible Assets, the Funds are designed so that 
the cash proceeds from the creation of Paired Class Shares may be 
held by a Fund only in Eligible Assets designed to preserve capital 
while earning an investment return that is consistent with the 
preservation of capital. See 80 FR 9778 at 9780 (AccuShares Order).
    \15\ The Sponsor has exclusive management and control of all 
aspects of the business of each of the Funds.
    \16\ Such accrued income, gains, losses, fees, expenses and 
taxes will be allocated to each Share class on a daily basis, where 
such allocation is equal to the amount of such accrued income, 
gains, losses, fees, expenses and taxes multiplied by a fraction the 
numerator of which is the closing Class Value per Share of the 
referenced class and the denominator of which is the sum of the 
closing Class Values per Share of both classes of the Fund.
---------------------------------------------------------------------------

    This filing is being made to reflect the change in the Regular 
Distribution interval for the Distribution Funds from quarterly to 
monthly, to reflect the index changes and name changes of two funds, 
and to reflect that the Share Index Factors for the VIX Fund would be 
reset on a weekly basis on each Tuesday and the regular distribution 
dates would be monthly on each third Tuesday to coincide with a Share 
Index Factor reset. Upon operational effectiveness of this proposal, 
each such Distribution Fund would, like the VIX Fund currently, engage 
in monthly Regular Distributions, the two excess return Funds (Excess 
Crude Oil Fund and Excess Natural Gas Fund) would reflect excess 
return, and Share Index Factors for the VIX Fund will be reset on a 
weekly basis on Tuesday with related changes to the regular monthly 
distribution date to the third Tuesday of each month such that 
distribution dates coincide with a Share Index Factor reset all as 
described in more detail below. The Exchange believes that these 
changes will be beneficial to market participants that choose to trade 
the Funds.
Monthly Distribution
    Rule 5713 does not specify the interval for Regular Distributions. 
Rather, Rule 5713 states only that a Fund may engage in ``scheduled 
regular distributions''.\17\ The only mention of an interval for 
Regular Distributions is in footnote 40 in the AccuShares Proposal, 
which states that other than monthly Regular Distributions for VIX Fund 
and the Natural Gas Fund, AccuShares ``will engage in quarterly regular 
distributions.'' \18\ In this proposal the Exchange proposes to 
indicate that the Distribution Funds will have Regular Distributions on 
a monthly basis. Thus, the Exchange proposes that each of the 
Distribution Funds will, like the VIX Fund and the Natural Gas Fund, 
engage in Regular Distributions each calendar month. The Exchange 
believes that this proposed change will serve to add an additional 
measure of consistency to investors and traders that may want to trade 
one or more of the Distribution Funds by themselves or in addition to 
the currently-traded VIX Fund, which has monthly Regular 
Distributions.\19\
---------------------------------------------------------------------------

    \17\ See Rule 5713(d).
    \18\ See 79 FR 35610 at 35619 (AccuShares Proposal).
    \19\ The AccuShares S&P GSCI Spot Fund and the AccuShares S&P 
GSCI Agriculture and Livestock Spot Fund would continue to have 
Regular Distributions on a quarterly basis. In addition, the 
Exchange proposes to change the name of the Crude Oil Fund and the 
Natural Gas Fund so that the new names, namely AccuShares S&P GSCI 
Crude Oil Excess Return Fund and AccuShares S&P GSCI Natural Gas 
Spot Excess Return Fund, more accurately reflect how these funds 
will function. The Exchange also proposes to indicate that the Share 
Index Factors for the VIX Fund would be reset on a weekly basis on 
each Tuesday, and the regular distributions for the VIX Fund would 
be made monthly on the third Tuesday rather than monthly on the 15th 
so that each monthly distribution date (and each end of a monthly 
measuring period) coincides with a Share Index Factor reset. These 
changes are described below.
---------------------------------------------------------------------------

    The Exchange believes that consistency across all Funds (except 
AccuShares S&P GSCI Spot Fund and AccuShares S&P GSCI Agriculture and 
Livestock Spot Fund) vis-a-vis monthly Regular Distributions will be 
helpful to investors and traders. While some may have become aware of 
AccuShares and Paired Class Shares when the Exchange filed the 
AccuShares Proposal, many more have become aware of AccuShares and its 
product offerings with the listing and trading of the first of the 
Paired Class Shares products, namely the VIX Fund.\20\ The VIX Fund (as 
also the Natural Gas Fund, which is not yet listed and traded) is 
currently structured with monthly Regular Distributions. The Exchange 
believes that consistency across all Funds (except AccuShares S&P GSCI 
Spot Fund and AccuShares S&P GSCI Agriculture and Livestock Spot Fund) 
in terms of monthly Regular Distributions would avoid potential 
investor confusion, and, as discussed

[[Page 14492]]

below, could be advantageous to market participants. For example, the 
proposed monthly distributions could allow investors to redeploy gains 
from Up Shares or Down Shares to alternative, non-Fund investments in a 
tax efficient manner more frequently than investors could do with 
quarterly distributions. In addition, monthly distributions would 
better align the changes in the Class Values per Share of both the Up 
Shares and the Down Shares with a more current valuation of the 
underlying index. Moreover, with the commencement of trading of the VIX 
Fund on the Exchange, the Sponsor has received feedback from both 
current and potential investors about preferred distribution frequency. 
In particular, the majority of these market participants have indicated 
to the Sponsor that monthly Regular Distributions would be preferable 
to a longer period and would improve both trading and hedging. Monthly 
distributions can be more frequently redeployed in a tax efficient 
manner into the opposing share class or other positions. Additionally, 
for traders or market makers hedging or arbitraging the fund's shares, 
monthly distributions and concurrent monthly Share Index Factor 
settings will more closely align the funds with the most liquid monthly 
futures contracts and other exchange traded products which also employ 
a monthly index roll similar to the S&P GSCI commodity indexes.
---------------------------------------------------------------------------

    \20\ The VIX Fund began trading on May 19, 2015.
---------------------------------------------------------------------------

    Finally, in each instance of a distribution the Sponsor will 
continue to post a notice of such event and its details on the 
Sponsor's Web site (www.AccuShares.com). The Sponsor has also 
represented to the Exchange that each Fund engaging in a Regular 
Distribution (or, for that matter, a special distribution, corrective 
distribution, or net income distribution) will provide at least three 
business days' advance notice (or longer advance notice as may be 
required by the Exchange) \21\ of such an event.
---------------------------------------------------------------------------

    \21\ The Exchange may determine that longer notice is advisable 
in some circumstances (e.g., an extended market break).
---------------------------------------------------------------------------

Excess Crude Oil Fund and Excess Natural Gas Fund
    The Exchange proposes to change the underlying indexes from their 
spot variant to their excess return variant and to rename the 
AccuShares S&P GSCI Crude Oil Spot Fund to AccuShares S&P GSCI Crude 
Oil Excess Return Fund and the AccuShares S&P GSCI Natural Gas Spot 
Fund to AccuShares S&P GSCI Natural Gas Excess Return Fund. Market 
participants, in particular Authorized Participants \22\ of the 
AccuShares Trust and market participants who are expected to act as 
liquidity providers for excess return Funds (``liquidity providers''), 
have recommended the index change and the related name revision. The 
Authorized Participants and liquidity providers have indicated that 
market making in the spot variant of the indexes (the current indexes 
variant) would require wider bid/offer spreads in comparison to using 
the excess return variant of the indexes.\23\ That is, the current spot 
variant would require anticipatory hedging, rolls, and the management 
of forward contango and backwardation \24\ risk (together ``spot 
requirements''), while in contrast these spot requirements are not 
important with excess return because they are naturally embedded in the 
excess return variant. The excess return variant is an index variant 
that is not novel, but rather is one that has been in use and is thus 
familiar to market makers and other market participants.\25\ Moreover, 
the excess return variant is expected to benefit market participants 
through both narrower bid/offer spreads and an increased ability and 
proclivity for providing liquidity in all market conditions.\26\ As 
such, market participants that choose to trade Pair Class Shares and 
benefit from the efficiency and transparency inherent in the product 
will also be able to benefit from the more easily traded and hedged 
excess return variant.
---------------------------------------------------------------------------

    \22\ Per note 13 of the AccuShares Order, an Authorized 
Participant may place orders to create or redeem one or more 
Creation Units, and must be (1) a registered broker-dealer or other 
securities market participant such as a bank or other financial 
institution which is not required to register as a broker-dealer to 
engage in securities transactions, (2) a direct participant in The 
Depository Trust Company, and (3) a party to an Authorized 
Participant Agreement with the Sponsor setting forth the procedures 
for the creation and redemption of Creation Units in a Fund.
    \23\ Market participants have indicated that their expected 
average holding and reassessment periods would be in the area of two 
to eight weeks, and that funds that offer excess return would be 
less costly because they would offer narrower bid/offer spreads and 
less risk. This would have several positive effects. First, 
investors are expected to buy or sell Fund shares concurrent with 
each reassessment. Second, such buying or selling is expected to be 
cheaper. Third, the narrower bid/offer spreads are expected to 
increase liquidity in the Fund shares, thus reducing the risk of 
buying or selling across a range of market conditions.
    \24\ Contango is normally when a futures price is above the 
expected future spot price. Because the futures price must converge 
on the expected future spot price, contango implies that futures 
prices are falling over time as new information brings them into 
line with the expected future spot price. Backwardation is normally 
when a futures price is below the expected future spot price and 
increases with time. For additional information, see https://www.investopedia.com/articles/07/contango_backwardation.asp.
    \25\ Products that use the excess return variant include DBO, 
OIL, UCO, UGAZ, and DGAZ. The crude oil products (DBO, OIL, and UCO) 
have current assets ranging from $400 to 800 million, and daily 
trading volumes ranging from 1 million to 11 million shares. The 
natural gas products (UGAZ and DGAZ) have current assets ranging 
from $80 million to $300 million, and daily trading volumes ranging 
from 4 million to 11 million shares. Other funds seek to track an 
excess return variant by transacting directly in the related futures 
contracts and some of those funds are larger than those listed.
    \26\ Because the excess return variant can be found in standard 
indexes used in exchange traded products, market makers are already 
accustomed to trading and hedging fund shares based on this variant. 
In addition to promoting narrower spreads and added liquidity, the 
excess return variant is directly hedgeable with conventional 
futures contracts, which contain the cost or benefit of the roll 
forward. Because the excess return variant precisely tracks the 
prices of the futures that a market maker is expected to use to both 
arbitrage and hedge the Fund shares, many more market makers are 
expected to engage in trading and arbitrage activities. With the 
excess return variant, the rolling effect of the index will be 
identical to the rolling performance of a futures hedge; and because 
the excess return variant precisely tracks an actual futures 
holding, a hedge can essentially remain static throughout a month 
and may require rebalancing only on those five days on which the 
excess return variant rolls its hypothetical positions. In contrast, 
the spot variant would require a more complex daily rebalancing of 
the futures hedge. Hedging and arbitraging the spot variant requires 
holding a next following futures contract (rather than the current 
futures contract) and manually rebalancing the next following 
futures contract amount on a daily basis to account for contango or 
backwardation between the futures hedge and the spot variant index.
---------------------------------------------------------------------------

    Both the spot variant and the excess return variant are computed 
from the same underlying futures contracts at the same point in time. 
The difference between the two variants occurs only on 5 trading days: 
The 5th through the 9th trading days of each month (the ``five day 
period''). During the five day period, each S&P GSCI commodity index 
underlying a Fund, whether monthly return or excess return, moves its 
reference from the front-month expiry contract to the next following 
contract (that is, the futures contract for the next consecutive expiry 
month) in five equal installments of twenty percent per day in order to 
capture the cost or the benefit from rolling the nearby front-month 
expiry contract into the next following expiry contract. In the excess 
return variant, the cost or benefit of transacting out of the current 
or front-month expiry contract and into the next or following futures 
contract is added to (or subtracted from) the index value. In contrast, 
in the spot variant this cost or benefit is not added to (or subtracted 
from) the index value,\27\ and

[[Page 14493]]

as such, gives rise to needed anticipatory hedging which, based on 
feedback from Authorized Participants and market makers, is expected to 
result in increased bid/offer spreads.
---------------------------------------------------------------------------

    \27\ The Sponsor expects more market makers to participate in 
the excess return variant because of the reduced market making 
complexity. The potential benefits of additional market maker 
participation include: (i) The ability of market participants to 
transact higher share quantities at tighter bid/offer spreads, and 
(ii) more robust and predictable trading prices in fast moving or 
volatile markets.
---------------------------------------------------------------------------

VIX Fund Share Index Factor and Distribution Date
    The Exchange is proposing a periodic resetting of the Share Index 
Factors for the VIX Fund where the Share Index Factors reset weekly on 
each Tuesday and where the regular distributions for the VIX Fund would 
be made monthly on the third Tuesday of the month so that each monthly 
distribution date (and each end of a monthly measuring period) 
coincides with a Share Index Factor reset.
    Currently, after any Regular Distribution or special distribution 
by a Fund, a Fund will reset its Share Index Factors. Cash 
distributions cause Class Values per Share to be equal following each 
such distribution. The lowest Class Value per Share of either class 
calculated is used for the Share Index Factor.\28\ The Exchange is 
proposing that the resetting of the Share Index Factors for the VIX 
Fund not wait for a distribution but rather that [sic] be done on a 
more frequent, weekly basis on each Tuesday. In a related change, the 
regular distributions for the VIX Fund would be made monthly on the 
third Tuesday rather than monthly on the 15th so that each monthly 
distribution date and end of each monthly measuring period coincides 
with a Share Index Factor reset. The Exchange believes that more 
frequent resets of the Share Index Factors for the VIX Fund will be 
beneficial to market participants that trade the fund because it will 
improve the arbitrage function of the fund's shares by aligning the 
setting of the Share Index Factors with the expiry of each weekly VIX 
futures contract, and because the Share Index Factor will reset with a 
frequency closer to the daily measurements of spot VIX. The weekly VIX 
futures began trading in July 2015--approximately two months after the 
launch of the VIX Fund. The weekly VIX futures are the preferred 
hedging futures contract for spot VIX with both higher correlations to 
spot VIX than the monthly contracts, and more timely responsiveness to 
changes in spot VIX. Changing the Share Index Factors to a weekly 
determination is expected to have two benefits, both of which are 
expected to narrow bid/offer spreads and increase trading volumes. 
First, the fund shares are expected to be more easily hedged with 
shorter duration VIX futures. Aligning the Share Index Factor resets to 
the shorter VIX futures would make the fund shares' responsiveness to 
VIX better aligned with the preferred hedging instrument. The arbitrage 
and hedging of fund shares would be simplified because the settlement 
of the shorter VIX futures will be coincidental with each Share Index 
Factor reset. That is, the preferred hedge is expected to be rolled on 
its expiry cycle by an arbitrageur or hedger, and the expiry cycle will 
coincide with each Share Index Factor reset. Second, the improved 
hedgeability is expected to bring the trading prices in closer 
alignment with fund share class values which are algorithmic and tied 
directly to changes in spot VIX.
---------------------------------------------------------------------------

    \28\ Immediately after each distribution, the fund's exposure 
will be reset, and the fund's Class Value per Share for each of its 
classes will be set to equal the lowest Class Value per Share of the 
two classes of Paired Class Shares. See 80 FR 9778 at 9779 
(AccuShares Order).
---------------------------------------------------------------------------

    As a result of this proposed change, Share Index Factor resetting 
will be taking place more frequently to the benefit of market 
participants.\29\
---------------------------------------------------------------------------

    \29\ Share Index Factors would, as now, continue to reset after 
any Regular Distribution and special distribution.
---------------------------------------------------------------------------

    The Exchange believes that all three of the proposed changes will 
be beneficial to traders and investors, and that they meet the 
requirements of the Act.
    The Exchange notes that this proposal makes three changes, as 
discussed, to the original AccuShares Order and AccuShares Proposal, 
see 80 FR 9778 and 79 FR 35610, and that the representations made in 
the original AccuShares Order and AccuShares Proposal remain unchanged.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder, including the 
requirements of Section 6(b) of the Act.\30\ In particular, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \31\ requirements that the rules of an exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts and practices, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and to perfect the mechanism for a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The Exchange proposes to 
indicate that Regular Distributions of the Distribution Funds will be 
done on a monthly rather than on a quarterly basis, to rename two Funds 
to reflect excess return rather than spot, and to indicate that Share 
Index Factors for the VIX Fund would be reset on a weekly basis on 
Tuesday and the regular distributions will occur monthly on the third 
Tuesday of each month rather than on the 15th, as discussed. Thus, each 
such monthly distribution Fund (and in fact all of the Funds with the 
exception of AccuShares S&P GSCI Spot Fund and AccuShares S&P GSCI 
Agriculture and Livestock Spot Fund) would engage in monthly Regular 
Distributions, and the excess return Funds would be indexed to their 
excess return variant and re-named AccuShares S&P GSCI Crude Oil Excess 
Return Fund and AccuShares S&P GSCI Natural Gas Excess Return Fund. The 
Exchange believes that these proposed changes will be beneficial to 
market participants that choose to trade the Funds.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that consistency across all Funds (except 
AccuShares S&P GSCI Spot Fund and AccuShares S&P GSCI Agriculture and 
Livestock Spot Fund) vis-[agrave]-vis monthly Regular Distributions 
will be helpful to investors and traders. While some may have become 
aware of AccuShares and Paired Class Shares when the Exchange filed the 
AccuShares proposal, many more have become aware of AccuShares and its 
product offerings with the listing and trading of the first of the 
Paired Class Shares products, namely the VIX Fund that began trading on 
May 19, 2015. The Exchange believes that consistency across Funds as 
discussed in terms of monthly Regular Distributions would avoid 
potential investor confusion, and, as discussed above, could be 
advantageous to market participants. In addition, the Sponsor has heard 
from current and potential investors about distribution. In particular, 
the majority of these market participants indicated to the Sponsor that 
monthly Regular Distributions would be preferable to a longer period 
because this would tend to have a positive impact on trading activity 
because better alignment with both futures hedges and better alignment 
with other exchange traded products would reduce intraday spreads by 
being more easily hedged and arbitraged, and more widely traded. This 
would help trading price stability and tracking in terms of premiums 
and discounts by both overall increasing trading volumes and making 
intraday and inter-day trading volumes more consistent, all of which is 
expected to contribute to narrower bid/offer spreads and more 
predictable fund performance.

[[Page 14494]]

    The Exchange believes that, as discussed, re-indexing and renaming 
the excess return Funds will be helpful to market participants. The 
excess return change is recommended by market participants. The 
Authorized Participants and liquidity providers have indicated that 
market making in the excess return Funds, as currently reflecting the 
spot variant of the index, would require wider bid/offer spreads in 
comparison to using the excess return variant of the index.\32\ That 
is, the current spot variant would require anticipatory hedging, rolls, 
and the management of the spot requirements (e.g., contango and 
backwardation risk), while in contrast these spot requirements are not 
important with excess return because they are naturally embedded in the 
excess return variant.
---------------------------------------------------------------------------

    \32\ Market participants have indicated that their expected 
average holding and reassessment periods would be in the area of two 
to eight weeks, and that excess return Funds, with narrower bid/
offer spreads--which are advantageous to market participants--would 
be preferred.
---------------------------------------------------------------------------

    The Exchange notes that in each instance of a distribution the 
Sponsor will post a notice of such event and its details on the 
Sponsor's Web site (www.AccuShares.com). The Sponsor has also 
represented to the Exchange that each Fund engaging in a Regular 
Distribution (or, for that matter, a special distribution, corrective 
distribution, or net income distribution) will provide at least three 
business days' advance notice (or longer advance notice as may be 
required by the Exchange) \33\ of such an event.
---------------------------------------------------------------------------

    \33\ The Exchange may determine that longer notice is advisable 
in some circumstances (e.g., an extended market break).
---------------------------------------------------------------------------

    The Exchange believes that, as discussed, more frequent resetting 
of the Share Index Factors will likewise be beneficial to market 
participants. The Exchange is proposing that the resetting of the Share 
Index Factors for the VIX Fund not have to wait for a Regular or 
special distribution but rather be done on a more frequent, weekly 
basis on each Tuesday. More frequent resets of the Share Index Factors 
for the VIX Fund will be beneficial to market participants that trade 
the fund because it will improve the arbitrage function of the fund's 
shares by aligning the setting of the Share Index Factors with the 
expiry of each weekly VIX futures contract, and because the Share Index 
Factor will reset with a frequency closer to the daily measurements of 
spot VIX. The weekly VIX futures are the preferred hedging futures with 
both higher correlations to spot VIX than the monthly contracts, and 
more timely responsiveness to changes in spot VIX. Changing the Share 
Index Factors to a weekly determination is expected to have several 
advantages for market participants: Narrower bid/offer spreads and 
increased trading volumes; fund shares more easily hedged with shorter 
VIX futures; and improved hedgeability that should bring the trading 
prices in closer alignment with fund share class values which are 
algorithmic and tied directly to changes in spot VIX.

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 purposes of the Act. The Exchange does not 
believe that the proposed rule change will have any impact on 
competition. The proposed rule change will achieve better consistency 
for the Funds of the Trust as discussed regarding the timing of Regular 
Distributions. The proposed rule change will have certain indexes 
changed from the spot variant to the excess return variant of such 
indexes, and will rename two of the Funds to reflect that these excess 
return Funds will use the excess return variant of the index underlying 
the Funds rather the current index variant that is based on spot. The 
proposed rule change will increase the frequency of Share Index Factor 
resets for the VIX Fund to occur weekly on each Tuesday, and will make 
a corresponding change to monthly distribution dates to the third 
Tuesday of each month such that a monthly distribution coincides with a 
weekly Share Index Factor reset. The Exchange believes that while these 
changes may not directly impact competition, they will be helpful for 
market participants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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 shall: (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 Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2016-034 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-NASDAQ-2016-034. 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 Web site (https://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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2016-034 and should 
be submitted on or before April 7, 2016.


[[Page 14495]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
---------------------------------------------------------------------------

    \34\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Lynn M. Powalski,
Deputy Secretary.
[FR Doc. 2016-05977 Filed 3-16-16; 8:45 am]
 BILLING CODE 8011-01-P
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