Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment Nos. 1, 3, and 4 Thereto, To List and Trade Shares of the ProShares UltraPro 3x Crude Oil ETF and ProShares UltraPro 3x Short Crude Oil ETF Under NYSE Arca Equities Rule 8.200, 15400-15404 [2017-06053]

Download as PDF 15400 Federal Register / Vol. 82, No. 58 / Tuesday, March 28, 2017 / Notices IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– C2–2017–011 on the subject line. Paper Comments sradovich on DSK3GMQ082PROD with NOTICES • 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–C2–2017–011. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for 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–C2– 2017–011, and should be submitted on or before April 18, 2017. VerDate Sep<11>2014 17:14 Mar 27, 2017 Jkt 241001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.36 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–06055 Filed 3–27–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80296; File No. SR– NYSEArca–2017–07] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment Nos. 1, 3, and 4 Thereto, To List and Trade Shares of the ProShares UltraPro 3x Crude Oil ETF and ProShares UltraPro 3x Short Crude Oil ETF Under NYSE Arca Equities Rule 8.200 March 22, 2017. I. Introduction On January 26, 2017, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 2 and Rule 19b–4 thereunder,3 a proposed rule change to list and trade shares (‘‘Shares’’) of the ProShares UltraPro 3x Crude Oil ETF and ProShares UltraPro 3x Short Crude Oil ETF (each a ‘‘Fund,’’ and collectively the ‘‘Funds’’) under NYSE Arca Equities Rule 8.200. The proposed rule change was published for comment in the Federal Register on February 7, 2017.4 On March 9, 2017, the Exchange filed Amendment No. 1 to the proposed rule change.5 On March 10, 2017, the 36 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 4 See Securities Exchange Act Release No. 79917 (February 1, 2017), 82 FR 9620. 5 In Amendment No. 1, which amended and replaced the proposed rule change in its entirety, the Exchange: (1) Supplemented its description of the Funds’ investments in over-the-counter (‘‘OTC’’) transactions; (2) provided clarification and additional specificity regarding the holding and settlement of futures contracts and options on such futures; (3) provided additional details regarding the calculation of the Bloomberg WTI Crude Oil SubindexSM; (4) provided information regarding the calculation and dissemination of the Indicative Fund Value of the Funds; (5) provided additional clarification regarding the difference between the net asset value calculation time and the creation and redemption cut-off time for the Funds; (6) clarified the information that will be made available on the Funds’ Web site regarding the Funds and their portfolio holdings; (7) supplemented its description of the Exchange’s surveillance procedures; (8) represented that the applicability of Exchange listing rules specified in the proposed 1 15 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 Exchange filed and withdrew Amendment No. 2 to the proposed rule change,6 and filed Amendment No. 3 to the proposed rule change.7 On March 20, 2017, the Exchange filed Amendment No. 4 to the proposed rule change.8 The Commission received no comments on the proposed rule change. This order approves the proposed rule change, as modified by Amendment Nos. 1, 3, and 4 thereto. II. Exchange’s Description of the Proposal 9 The Exchange proposes to list and trade the Shares under NYSE Arca Equities Rule 8.200, Commentary .02, which governs the listing and trading of Trust Issued Receipts.10 Each Fund is a rule change shall constitute continued listing requirements for listing the Shares on the Exchange; (9) clarified the type of information that will be available in the Information Bulletin regarding the Funds’ portfolio holdings; and (10) made other technical amendments. Amendment No. 1 to the proposed rule change is available at: https:// www.sec.gov/comments/sr-nysearca-2017-07/ nysearca201707-1630210-137426.pdf. Amendment No. 1 is not subject to notice and comment because it is a technical amendment that does not materially alter the substance of the proposed rule change or raise any novel regulatory issues. 6 Notice of the Exchange’s withdrawal of Amendment No. 2 is available at: https:// www.sec.gov/comments/sr-nysearca-2017-07/ nysearca201707-1644096-147899.pdf. 7 In Amendment No. 3, which partially amended the proposed rule change, as modified by Amendment No. 1 thereto, the Exchange added a representation regarding the dissemination of the value of the Bloomberg WTI Crude Oil SubindexSM. Amendment No. 3 to the proposed rule change is available at: https://www.sec.gov/comments/sr-nyse arca-2017-07/nysearca201707-1644096-147899.pdf. Amendment No. 3 is not subject to notice and comment because it is a technical amendment that does not materially alter the substance of the proposed rule change or raise any novel regulatory issues. 8 In Amendment No. 4, which partially amended the proposed rule change, as modified by Amendment Nos. 1 and 3 thereto, the Exchange: (1) Clarified its use of the term ‘‘Futures Contracts’’ and (2) provided additional clarification regarding the calculation of the Indicative Fund Value. Amendment No. 4 to the proposed rule change is available at: https://www.sec.gov/comments/sr-nyse arca-2017-07/nysearca201707-1657390-148729.pdf. Amendment No. 4 is not subject to notice and comment because it is a technical amendment that does not materially alter the substance of the proposed rule change or raise any novel regulatory issues. 9 A more detailed description of the Funds, the Shares, and the Benchmark, as well as investment risks, creation and redemption procedures, net asset value (‘‘NAV’’) calculation, availability of values and other information regarding the Funds’ portfolio holdings, and fees, among other things, is included in the Registration Statement, as well as Amendment Nos. 1, 3, and 4, as applicable. See infra note 11, and supra notes 5, 7, and 8, respectively. 10 Commentary .02 to NYSE Arca Equities Rule 8.200 applies to Trust Issued Receipts that invest in ‘‘Financial Instruments.’’ The term ‘‘Financial Instruments,’’ as defined in Commentary .02(b)(4) to NYSE Arca Equities Rule 8.200, means any combination of investments, including cash; E:\FR\FM\28MRN1.SGM 28MRN1 Federal Register / Vol. 82, No. 58 / Tuesday, March 28, 2017 / Notices series of the ProShares Trust II (‘‘Trust’’), a Delaware statutory trust.11 The Trust and the Funds are managed and controlled by ProShare Capital Management LLC (‘‘ProShare Capital’’). ProShare Capital is registered as a commodity pool operator with the Commodity Futures Trading Commission and is a member of the National Futures Association. Brown Brothers Harriman & Co. will be the custodian, registrar, and transfer agent, and administrator for the Funds. SEI Investments Distribution Co. serves as distributor for the Funds. sradovich on DSK3GMQ082PROD with NOTICES Overview of the Funds The investment objective of the ProShares UltraPro 3x Crude Oil ETF is to seek, on a daily basis,12 investment results that correspond (before fees and expenses) to three times (3×) the performance of the Bloomberg WTI Crude Oil SubindexSM (‘‘Benchmark’’).13 The investment objective of the ProShares UltraPro 3x Short Crude Oil ETF is to seek, on a daily basis, investment results that correspond (before fees and expenses) to three times (3×) the inverse of the performance of the Benchmark. The Benchmark is intended to reflect the performance of crude oil as measured by the price of futures contracts of West Texas Intermediate sweet, light crude oil listed on the New York Mercantile Exchange (‘‘NYMEX’’), including the impact of rolling, without regard to income earned on cash positions. In seeking to achieve the Funds’ investment objectives, ProShare Capital will utilize a mathematical approach to determine the type, quantity and mix of securities; options on securities and indices; futures contracts; options on futures contracts; forward contracts; equity caps, collars, and floors; and swap agreements. 11 The Trust is registered under the Securities Act of 1933 (15 U.S.C. 77a) (‘‘Securities Act’’). On December 9, 2016, the Trust filed with the Commission a registration statement on Form S–1 under the Securities Act relating to the Funds (File No. 333–214904) (‘‘Registration Statement’’). The description of the operation of the Trust and the Funds herein is based, in part, on the Registration Statement. 12 The Fund does not seek to achieve its investment objective over a period greater than a single trading day. The Exchange states that the return of a Fund for a period longer than a single trading day is the result of its return for each day compounded over the period and thus will usually differ from a Fund’s multiple times the return of the Benchmark for the same period. See Amendment No. 1, supra note 5, at 5. 13 According to the Exchange, the Bloomberg WTI Crude Oil SubindexSM is a ‘‘rolling index,’’ which means that the Index performance includes the impact of closing out futures contracts that are nearing expiration and replacing them with futures contracts with later expirations. The Exchange states that this process is commonly referred to as ‘‘rolling.’’ See id. at 5 n.6. VerDate Sep<11>2014 17:14 Mar 27, 2017 Jkt 241001 investment positions that ProShare Capital believes, in combination, should produce daily returns consistent with the Funds’ respective objectives. ProShare Capital will rely on a predetermined model to generate orders that result in repositioning the Funds’ investments in accordance with their respective investment objectives. Investments of the Funds Each Fund will seek to achieve its respective investment objective by investing, under normal market conditions,14 substantially all of its assets in futures contracts for West Texas Intermediate sweet, light crude oil listed on the NYMEX, ICE Futures U.S. or other U.S. exchanges (‘‘Futures’’) and listed options on such contracts (‘‘Options’’ and, together with Futures, ‘‘Futures Contracts’’). The Funds will not invest directly in oil. A Fund’s investments in Futures Contracts will be used to produce economically ‘‘leveraged’’ or ‘‘inverse leveraged’’ investment in a manner consistent with the respective Fund’s investment objective. In the event position, price or accountability limits are reached with respect to Futures Contracts,15 each Fund may obtain exposure to the Benchmark through investments in swap agreements and forward contracts referencing such Benchmark (‘‘Financial Instruments’’). To the extent that a Fund invests in Financial Instruments, it would first make use of exchange-traded Financial Instruments, if available. If an investment in exchange-traded Financial Instruments is unavailable, then a Fund would invest in Financial Instruments that clear through derivatives clearing organizations that satisfy the Trust’s criteria, if available. If 14 The term ‘‘normal market conditions’’ includes, but is not limited to, the absence of trading halts in the applicable financial markets generally; operational issues (e.g., systems failure) causing dissemination of inaccurate market information; or force majeure type events such as natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. See id. at 6 n.9. 15 Designated contract markets, such as the NYMEX and ICE Futures U.S., have established accountability levels and position limits on the maximum net long or net short Futures Contracts in commodity interests that any person or group of persons under common trading control (other than as a hedge, which an investment by a Fund is not) may hold, own or control. These levels and position limits apply to the Futures Contracts that each Fund would invest in to meet its investment objective. In addition to accountability levels and position limits, NYMEX and ICE Futures U.S. also set price fluctuation limits on Futures Contracts. The price fluctuation limit establishes the amount that the price of Futures may vary either up or down from the previous day’s settlement price. Options do not have individual price limits but rather are linked to the price limit of Futures. See id. at 6 n.10. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 15401 an investment in cleared Financial Instruments is unavailable, then a Fund would invest in other Financial Instruments, including uncleared Financial Instruments in the OTC market. The Funds may also invest in Financial Instruments if the market for a specific Futures Contract experiences emergencies (e.g., natural disaster, terrorist attack or an act of God) or disruptions (e.g., a trading halt) that prevent or make it impractical for a Fund to obtain the appropriate amount of investment exposure using Futures Contracts. Although each Fund, under normal market conditions, will invest substantially all of its assets in Futures Contracts, each Fund will also hold cash or cash equivalents, such as U.S. Treasury securities or other high credit quality, short-term fixed-income or similar securities (such as shares of money market funds and collateralized repurchase agreements) pending investment in Futures Contracts or Financial Instruments or as collateral for the Funds’ investments. The Exchange represents that, to the extent a Fund enters into swap agreements and other OTC transactions, it will do so only with large, established and well capitalized financial institutions that meet the Sponsor’s credit quality standards and monitoring policies. The Exchange states that each Fund will use various techniques to minimize credit risk including early termination or reset and payment, using different counterparties and limiting the net amount due from any individual counterparty.16 The Funds do not intend to hold Futures 17 through expiration, but instead intend to ‘‘roll’’ or close their respective positions before expiration. When the market for these contracts is such that the prices are higher in the more distant delivery months than in the nearer delivery months, the sale during the course of the ‘‘rolling process’’ of the more nearby contract would take place at a price that is lower 16 See id. at 7. Exchange states that out-of-the-money Options will be held to expiration and will expire worthless. According to the Exchange, Funds intend to hold in-the-money options to expiration, which would occur before the expiration of Futures. In-the-money Options are settled through receipt or delivery of Futures. With respect to Futures positions established through the Options settlement procedure, the Funds intend to close such positions by entering into simultaneous offsetting Futures positions. The effects of contango and backwardation on the price of Futures will impact the price of Options to the same degree of any change in the price of the underlying Futures. See id. at 7 n.11. 17 The E:\FR\FM\28MRN1.SGM 28MRN1 15402 Federal Register / Vol. 82, No. 58 / Tuesday, March 28, 2017 / Notices than the price of the more distant contract.18 The Exchange states that the Funds do not expect to have exposure to Futures Contracts and Financial Instruments greater than three times (3x) the Funds’ net assets. Thus, the maximum margin held at a future commission merchant would not exceed three times the margin requirement for either Fund.19 The Exchange represents that not more than 10% of the net assets of a Fund in the aggregate invested in Futures Contracts shall consist of Futures Contracts whose principal market is not a member of the Intermarket Surveillance Group (‘‘ISG’’) or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement (‘‘CSSA’’).20 sradovich on DSK3GMQ082PROD with NOTICES III. Discussion and Commission Findings After careful review, the Commission finds that the Exchange’s proposal to list and trade the Shares is consistent with the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange.21 In particular, the Commission finds that the proposed rule change, as modified by Amendment Nos. 1, 3, and 4 thereto, is consistent with Section 6(b)(5) of the Exchange Act,22 which requires, among other things, that the Exchange’s rules be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Exchange Act,23 18 The Exchange states that this pattern of higher futures prices for longer expiration Futures is referred to as ‘‘contango.’’ Alternatively, when the market for these contracts is such that the prices are higher in the nearer months than in the more distant months, the sale during the course of the ‘‘rolling process’’ of the more nearby contract would take place at a price that is higher than the price of the more distant contract. This pattern of higher futures prices for shorter expiration Futures is referred to as ‘‘backwardation.’’ According to the Exchange, the presence of contango in certain Futures at the time of rolling could adversely affect a Fund with long positions, and positively affect a Fund with short positions. Similarly, the presence of backwardation in certain Futures at the time of rolling such contracts could adversely affect a Fund with short positions and positively affect a Fund with long positions. See id. at 7. 19 See id. 20 See id. at 14. 21 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 22 15 U.S.C. 78f(b)(5). 23 15 U.S.C. 78k–1(a)(1)(C)(iii). VerDate Sep<11>2014 17:14 Mar 27, 2017 Jkt 241001 which sets forth Congress’ finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers and investors of information with respect to quotations for and transactions in securities. According to the Exchange, quotation and last-sale information regarding the Shares will be disseminated through the facilities of the Consolidated Tape Association (‘‘CTA’’). Quotation information for cash equivalents, OTC swaps and forward contracts may be obtained from brokers and dealers who make markets in such instruments. Quotation information for exchange-traded swaps will be available from the applicable exchange and major market vendors. The intraday, closing prices, and settlement prices of the Futures Contracts will be readily available from the applicable futures exchange Web sites, automated quotation systems, published or other public sources, or major market data vendors. Complete real-time data for the Futures Contracts is available by subscription through on-line information services. ICE Futures U.S. and NYMEX also provide delayed futures and options on futures information on current and past trading sessions and market news free of charge on their respective Web sites. The specific contract specifications for Futures Contracts are also available on such Web sites, as well as other financial informational sources. Intraday price and closing price level information for the Benchmark will be available from major market data vendors. The Funds’ Web site, www.ProShares.com, will display the applicable end of day closing NAV. Each Fund’s total portfolio composition will be disclosed each business day that the NYSE Arca is open for trading, on the Funds’ Web site. The Funds’ Web site will also include a form of the prospectus for the Funds that may be downloaded. The Web site will include the Shares’ ticker and CUSIP information, along with additional quantitative information updated on a daily basis for each Fund.24 The Web site disclosure of portfolio holdings will 24 The Funds’ Web site will include (1) daily trading volume, the prior business day’s reported NAV and closing price, and a calculation of the premium and discount of the closing price or midpoint of the bid/ask spread at the time of NAV calculation (‘‘Bid/Ask Price’’) against the NAV; and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily closing price or Bid/Ask Price against the NAV, within appropriate ranges, for at least each of the four previous calendar quarters. PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 be made daily and will include, as applicable, (i) the name, quantity, value, expiration and strike price of Futures and Options, (ii) the counterparty to and value of swap agreements and forward contracts, and (ii) the aggregate net value of other assets (i.e., Treasury securities, cash equivalents and cash) held in each Fund’s portfolio, if applicable. The Benchmark will be disseminated by one or more major market data vendors every 15 seconds during the NYSE Arca Core Trading Session of 9:30 a.m. to 4:00 p.m. Eastern Time (‘‘E.T.’’). The Indicative Fund Value (‘‘IFV’’) 25 per Share will be widely disseminated by one or more major market data vendors every 15 seconds during the Exchange’s Core Trading Session.26 The Funds will compute their NAVs at 2:30 p.m. E.T., which is the designated closing time of the crude oil futures listed on NYMEX,27 or an earlier time as set forth on www.ProShares.com, if necessitated by the New York Stock Exchange LLC, the Exchange, or other exchange material to the valuation or operation of such Fund closing early. The NAV for the Shares will be disseminated daily to all market participants at the same time. The Commission further believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. If the Exchange becomes aware that the NAV with respect to the Shares is not 25 The IFV will be calculated by using the prior day’s closing NAV per Share of a Fund as a base and will be updating throughout the Exchange’s Core Trading Session to reflect changes in the approximate aggregate per Share value of the investments held by a Fund based on the most recently available prices for the Fund’s investments. According to the Exchange, there may be times when trading in the Shares is occurring during the NYSE Arca Core Trading Session, but trading in Futures is not occurring. This may occur when, for example, a futures exchange and NYSE Arca have different holiday schedules, a futures exchange closes prior to the close of the NYSE Arca Core Trading Session, price fluctuation limits are reached in Futures, or a futures exchange imposes any other suspension or limitation on trading in Futures. In such instances, the IFV would be static or priced at the applicable early cut-off time of the exchange trading the applicable Futures. See Amendment No. 1, supra note 5, at 9; Amendment No. 4, supra note 8. 26 The Exchange notes that several major market data vendors display and/or make widely available IFVs taken from the CTA or other data feeds. See Amendment No. 1, supra note 5, at 9 n.13. 27 The Exchange states that the daily value of the Benchmark is calculated as of 2:30 p.m. E.T. to coincide with the designated closing time. Futures Contracts, however, continue to trade past 2:30 p.m. E.T. and through the end of the NYSE Arca Core Trading Session at 4:00 p.m. E.T. See id. at 8 n.12. E:\FR\FM\28MRN1.SGM 28MRN1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 82, No. 58 / Tuesday, March 28, 2017 / Notices disseminated to all market participants at the same time, it will halt trading in the Shares until such time as the NAV is available to all market participants. Further, the Exchange may halt trading during the day in which an interruption to the dissemination of the IFV or the value of the Benchmark occurs. If the interruption to the dissemination of the IFV or the value of the Benchmark persists past the trading day in which it occurred, the Exchange will halt trading no later than the beginning of the trading day following the interruption. Trading in Shares of a Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. The Exchange states that it has a general policy prohibiting the distribution of material, non-public information by its employees.28 Moreover, trading of the Shares will be subject to NYSE Arca Equities Rule 8.200, Commentary .02(e), which sets forth certain restrictions on Equity Trading Permit (‘‘ETP’’) Holders acting as registered Market Makers in Trust Issued Receipts to facilitate surveillance. The Commission notes that the Exchange or the Financial Industry Regulatory Authority (‘‘FINRA’’), on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and certain Futures Contracts with other markets and other entities that are members of the ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading in the Shares and certain Futures Contracts from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares and certain Futures Contracts from markets and other entities that are members of ISG or with which the Exchange has in place a CSSA.29 The Exchange is also able to obtain information regarding trading in the Shares, the physical commodities underlying Futures Contracts through ETP Holders, in connection with such ETP Holders’ proprietary or customer trades which they effect through ETP Holders on any relevant market. The Exchange can obtain market surveillance information, including customer identity 28 See id. at 14. a list of the current members of ISG, see www.isgportal.org. According to the Exchange, not all components of a Fund may trade on markets that are members of ISG or with which the Exchange has in place a CSSA. See id. at 13 n.18. 29 For VerDate Sep<11>2014 17:14 Mar 27, 2017 Jkt 241001 information, with respect to transactions (including transactions in Futures Contracts) occurring on US futures exchanges, which are members of the ISG. The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. In support of this proposal, the Exchange represented that: (1) The Shares will conform to the initial and continued listing criteria under NYSE Arca Equities Rule 8.200. (2) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. (3) Trading in the Shares will be subject to the existing trading surveillances administered by the Exchange, as well as cross-market surveillances administered by FINRA on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws, and these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. (4) Prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Specifically, the Information Bulletin will discuss the following: (a) The risks involved in trading the Shares during the Early and Late Trading Sessions when an updated IFV will not be calculated or publicly disseminated; (b) the procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (c) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (d) how information regarding the IFV is disseminated; (e) how information regarding portfolio holdings is disseminated; (f) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (g) trading information. (5) For initial and continued listing, each Fund will be in compliance with Rule 10A–3 under the Act,30 as provided by NYSE Arca Equities Rule 5.3. (6) Each Fund will seek to achieve its respective investment objective by 30 17 PO 00000 CFR 240.10A–3. Frm 00090 Fmt 4703 Sfmt 4703 15403 investing, under normal market conditions, substantially all of its assets in Futures Contracts.’’ In the event position, price or accountability limits are reached with respect to Futures Contracts, each Fund may obtain exposure to the Benchmark through investments in Financial Instruments. To the extent that a Fund invests in Financial Instruments, it would first make use of exchange-traded Financial Instruments, if available. If an investment in exchange-traded Financial Instruments is unavailable, then a Fund would invest in Financial Instruments that clear through derivatives clearing organizations that satisfy the Trust’s criteria, if available. If an investment in cleared Financial Instruments is unavailable, then a Fund would invest in other Financial Instruments, including uncleared Financial Instruments in the OTC market. (7) Not more than 10% of the net assets of a Fund in the aggregate invested in Futures Contracts shall consist of Futures Contracts whose principal market is not a member of the ISG or is a market with which the Exchange does not have a CSSA. (8) To the extent a Fund enters into swap agreements and other OTC transactions, it will do so only with large, established and well capitalized financial institutions that meet the Sponsor’s credit quality standards and monitoring policies. Each Fund will use various techniques to minimize credit risk including early termination or reset and payment, using different counterparties and limiting the net amount due from any individual counterparty. (9) A minimum of 100,000 Shares of each Fund will be outstanding at the commencement of trading on the Exchange. The Exchange represents that all statements and representations made in this filing regarding (a) the description of the portfolios of the Funds or Benchmark, (b) limitations on portfolio holdings or the Benchmark, or (c) the applicability of Exchange listing rules specified in this rule filing shall constitute continued listing requirements for listing the Shares on the Exchange. The issuer has represented to the Exchange that it will advise the Exchange of any failure by the Funds to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing E:\FR\FM\28MRN1.SGM 28MRN1 15404 Federal Register / Vol. 82, No. 58 / Tuesday, March 28, 2017 / Notices requirements.31 If a Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Equities Rule 5.5(m). This approval order is based on all of the Exchange’s representations and description of the Funds, including those set forth above and in Amendment Nos. 1, 3, and 4. The Commission notes that the Shares must comply with the requirements of NYSE Arca Equities Rule 8.200 and Commentary .02 thereto to be listed and traded on the Exchange on an initial and continuing basis. For the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendment Nos. 1, 3, and 4 thereto, is consistent with Section 6(b)(5) of the Act 32 and the rules and regulations thereunder applicable to a national securities exchange. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,33 that the proposed rule change (SR– NYSEArca–2017–07), as modified by Amendment Nos. 1, 3, and 4 thereto, be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–06053 Filed 3–27–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80300; File No. SR–CTA/ CQ–2017–02] Consolidated Tape Association; Notice of Filing and Immediate Effectiveness of the Twenty-Second Charges Amendment to the Second Restatement of the CTA Plan and the Thirteenth Charges Amendment to the Restated CQ Plan March 23, 2017. Pursuant to Section 11A of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 608 thereunder,2 notice is hereby given that on March 2, 2017, the Consolidated Tape Association (‘‘CTA’’) Plan participants (‘‘Participants’’) 3 filed with the Securities and Exchange Commission (‘‘Commission’’) a proposal to amend the Second Restatement of the CTA Plan and the Restated Consolidated Quotation (‘‘CQ’’) Plan (‘‘Plans’’).4 These amendments represent the twenty-second Charges Amendment to the CTA Plan and the thirteenth Charges Amendment to the CQ Plan (‘‘Amendments’’). The Amendments seek to amend the Plans’ fee schedule as well as the non-display use policy to clarify the applicability on the nondisplay fee, the device fee, and the access fee. The Commission is publishing this notice to solicit comments from interested persons on the proposed Amendments. 1 15 U.S.C. 78k–1. CFR 242.608. 3 The Participants are: BATS Exchange, Inc., BATS–Y Exchange, Inc., Chicago Board Options Exchange, Inc., Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors’ Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX, Inc., Nasdaq Stock Market LLC, National Stock Exchange, New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. 4 See Securities Exchange Act Release Nos. 10787 (May 10, 1974), 39 FR 17799 (May 20, 1974) (declaring the CTA Plan effective); 15009 (July 28, 1978), 43 FR 34851 (August 7, 1978) (temporarily authorizing the CQ Plan); and 16518 (January 22, 1980), 45 FR 6521 (January 28, 1980) (permanently authorizing the CQ Plan). The most recent restatement of both Plans was in 1995. The CTA Plan, pursuant to which markets collect and disseminate last sale price information for nonNASDAQ listed securities, is a ‘‘transaction reporting plan’’ under Rule 601 under the Act, 17 CFR 242.601, and a ‘‘national market system plan’’ under Rule 608 under the Act, 17 CFR 242.608. The CQ Plan, pursuant to which markets collect and disseminate bid/ask quotation information for listed securities, is a ‘‘national market system plan’’ under Rule 608 under the Act, 17 CFR 242.608. sradovich on DSK3GMQ082PROD with NOTICES 2 17 31 The Commission notes that certain other proposals for the listing and trading of Managed Fund Shares include a representation that the exchange will ‘‘surveil’’ for compliance with the continued listing requirements. See, e.g., Securities Exchange Act Release No. 77499 (April 1, 2016), 81 FR 20428 (April 7, 2016) (Notice of Filing of Amendment No. 2, and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, to List and Trade Shares of the SPDR DoubleLine Short Duration Total Return Tactical ETF of the SSgA Active Trust), available at: http://www.sec.gov/rules/sro/bats/2016/3477499.pdf. In the context of this representation, it is the Commission’s view that ‘‘monitor’’ and ‘‘surveil’’ both mean ongoing oversight of the Fund’s compliance with the continued listing requirements. Therefore, the Commission does not view ‘‘monitor’’ as a more or less stringent obligation than ‘‘surveil’’ with respect to the continued listing requirements. 32 15 U.S.C. 78f(b)(5). 33 15 U.S.C. 78s(b)(2). 34 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:14 Mar 27, 2017 Jkt 241001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 I. Rule 608(a) A. Purpose of the Amendments 1. Background In October 2014, the Participants amended the Plans’ fee schedules to establish fees for non-display uses of data and to reduce the device fees assessed on professional subscribers.5 In so doing, the Participants determined that such a change provided an equitable allocation of fees to the industry that would reflect the value of non-display data usage (subject to the non-display fees) versus display data usage (subject to the lower device fees). At that time, non-display use was defined as consisting of accessing, processing, or consuming real-time Network A or Network B quotation information or last sale price information, whether delivered via direct and/or redistributor data feeds, for a purpose other than in support of a data recipient’s display or further internal or external distribution. The Participants established three categories of non-display uses of market data: • Category 1 applies when a data recipient makes non-display uses of real-time market data on its own behalf. • Category 2 applies when a data recipient makes non-display uses of real-time market data on behalf of its clients. • Category 3 applies when a data recipient makes non-display uses of real-time market data for the purpose of internally matching buy and sell orders within an organization. Data recipients can be charged for each of the three categories of nondisplay uses. Category 3 is the only nondisplay fee that can be charged multiple times; a data recipient would be charged for each ATS, exchange, or ECN operated by the data recipient. In the October 2014 Non-Display Filing, the Participants also provided the following non-exhaustive list of examples of nondisplay use: • Any trading in any asset class; • Automated order or quote generation and/or order pegging; • Price referencing for algorithmic trading; • Price referencing for smart order routing; • Operations control programs; • Investment analysis; • Order verification; • Surveillance programs; • Risk management; • Compliance; and • Portfolio valuation. 5 See Securities Exchange Act Release No. 73278 (October 1, 2014), 79 FR 60536 (October 7, 2014) (‘‘October 2014 Non-Display Filing’’). E:\FR\FM\28MRN1.SGM 28MRN1

Agencies

[Federal Register Volume 82, Number 58 (Tuesday, March 28, 2017)]
[Notices]
[Pages 15400-15404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06053]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80296; File No. SR-NYSEArca-2017-07]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendment Nos. 1, 3, and 4 
Thereto, To List and Trade Shares of the ProShares UltraPro 3x Crude 
Oil ETF and ProShares UltraPro 3x Short Crude Oil ETF Under NYSE Arca 
Equities Rule 8.200

March 22, 2017.

I. Introduction

    On January 26, 2017, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \2\ and Rule 19b-4 
thereunder,\3\ a proposed rule change to list and trade shares 
(``Shares'') of the ProShares UltraPro 3x Crude Oil ETF and ProShares 
UltraPro 3x Short Crude Oil ETF (each a ``Fund,'' and collectively the 
``Funds'') under NYSE Arca Equities Rule 8.200. The proposed rule 
change was published for comment in the Federal Register on February 7, 
2017.\4\ On March 9, 2017, the Exchange filed Amendment No. 1 to the 
proposed rule change.\5\ On March 10, 2017, the Exchange filed and 
withdrew Amendment No. 2 to the proposed rule change,\6\ and filed 
Amendment No. 3 to the proposed rule change.\7\ On March 20, 2017, the 
Exchange filed Amendment No. 4 to the proposed rule change.\8\ The 
Commission received no comments on the proposed rule change. This order 
approves the proposed rule change, as modified by Amendment Nos. 1, 3, 
and 4 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 79917 (February 1, 
2017), 82 FR 9620.
    \5\ In Amendment No. 1, which amended and replaced the proposed 
rule change in its entirety, the Exchange: (1) Supplemented its 
description of the Funds' investments in over-the-counter (``OTC'') 
transactions; (2) provided clarification and additional specificity 
regarding the holding and settlement of futures contracts and 
options on such futures; (3) provided additional details regarding 
the calculation of the Bloomberg WTI Crude Oil Subindex\SM\; (4) 
provided information regarding the calculation and dissemination of 
the Indicative Fund Value of the Funds; (5) provided additional 
clarification regarding the difference between the net asset value 
calculation time and the creation and redemption cut-off time for 
the Funds; (6) clarified the information that will be made available 
on the Funds' Web site regarding the Funds and their portfolio 
holdings; (7) supplemented its description of the Exchange's 
surveillance procedures; (8) represented that the applicability of 
Exchange listing rules specified in the proposed rule change shall 
constitute continued listing requirements for listing the Shares on 
the Exchange; (9) clarified the type of information that will be 
available in the Information Bulletin regarding the Funds' portfolio 
holdings; and (10) made other technical amendments. Amendment No. 1 
to the proposed rule change is available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1630210-137426.pdf. 
Amendment No. 1 is not subject to notice and comment because it is a 
technical amendment that does not materially alter the substance of 
the proposed rule change or raise any novel regulatory issues.
    \6\ Notice of the Exchange's withdrawal of Amendment No. 2 is 
available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1644096-147899.pdf.
    \7\ In Amendment No. 3, which partially amended the proposed 
rule change, as modified by Amendment No. 1 thereto, the Exchange 
added a representation regarding the dissemination of the value of 
the Bloomberg WTI Crude Oil Subindex\SM\. Amendment No. 3 to the 
proposed rule change is available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1644096-147899.pdf. Amendment No. 
3 is not subject to notice and comment because it is a technical 
amendment that does not materially alter the substance of the 
proposed rule change or raise any novel regulatory issues.
    \8\ In Amendment No. 4, which partially amended the proposed 
rule change, as modified by Amendment Nos. 1 and 3 thereto, the 
Exchange: (1) Clarified its use of the term ``Futures Contracts'' 
and (2) provided additional clarification regarding the calculation 
of the Indicative Fund Value. Amendment No. 4 to the proposed rule 
change is available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1657390-148729.pdf. Amendment No. 4 is not 
subject to notice and comment because it is a technical amendment 
that does not materially alter the substance of the proposed rule 
change or raise any novel regulatory issues.
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II. Exchange's Description of the Proposal \9\
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    \9\ A more detailed description of the Funds, the Shares, and 
the Benchmark, as well as investment risks, creation and redemption 
procedures, net asset value (``NAV'') calculation, availability of 
values and other information regarding the Funds' portfolio 
holdings, and fees, among other things, is included in the 
Registration Statement, as well as Amendment Nos. 1, 3, and 4, as 
applicable. See infra note 11, and supra notes 5, 7, and 8, 
respectively.
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    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.200, Commentary .02, which governs the listing and 
trading of Trust Issued Receipts.\10\ Each Fund is a

[[Page 15401]]

series of the ProShares Trust II (``Trust''), a Delaware statutory 
trust.\11\ The Trust and the Funds are managed and controlled by 
ProShare Capital Management LLC (``ProShare Capital''). ProShare 
Capital is registered as a commodity pool operator with the Commodity 
Futures Trading Commission and is a member of the National Futures 
Association. Brown Brothers Harriman & Co. will be the custodian, 
registrar, and transfer agent, and administrator for the Funds. SEI 
Investments Distribution Co. serves as distributor for the Funds.
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    \10\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
Trust Issued Receipts that invest in ``Financial Instruments.'' The 
term ``Financial Instruments,'' as defined in Commentary .02(b)(4) 
to NYSE Arca Equities Rule 8.200, means any combination of 
investments, including cash; securities; options on securities and 
indices; futures contracts; options on futures contracts; forward 
contracts; equity caps, collars, and floors; and swap agreements.
    \11\ The Trust is registered under the Securities Act of 1933 
(15 U.S.C. 77a) (``Securities Act''). On December 9, 2016, the Trust 
filed with the Commission a registration statement on Form S-1 under 
the Securities Act relating to the Funds (File No. 333-214904) 
(``Registration Statement''). The description of the operation of 
the Trust and the Funds herein is based, in part, on the 
Registration Statement.
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Overview of the Funds

    The investment objective of the ProShares UltraPro 3x Crude Oil ETF 
is to seek, on a daily basis,\12\ investment results that correspond 
(before fees and expenses) to three times (3x) the performance of the 
Bloomberg WTI Crude Oil Subindex\SM\ (``Benchmark'').\13\ The 
investment objective of the ProShares UltraPro 3x Short Crude Oil ETF 
is to seek, on a daily basis, investment results that correspond 
(before fees and expenses) to three times (3x) the inverse of the 
performance of the Benchmark. The Benchmark is intended to reflect the 
performance of crude oil as measured by the price of futures contracts 
of West Texas Intermediate sweet, light crude oil listed on the New 
York Mercantile Exchange (``NYMEX''), including the impact of rolling, 
without regard to income earned on cash positions.
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    \12\ The Fund does not seek to achieve its investment objective 
over a period greater than a single trading day. The Exchange states 
that the return of a Fund for a period longer than a single trading 
day is the result of its return for each day compounded over the 
period and thus will usually differ from a Fund's multiple times the 
return of the Benchmark for the same period. See Amendment No. 1, 
supra note 5, at 5.
    \13\ According to the Exchange, the Bloomberg WTI Crude Oil 
Subindex\SM\ is a ``rolling index,'' which means that the Index 
performance includes the impact of closing out futures contracts 
that are nearing expiration and replacing them with futures 
contracts with later expirations. The Exchange states that this 
process is commonly referred to as ``rolling.'' See id. at 5 n.6.
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    In seeking to achieve the Funds' investment objectives, ProShare 
Capital will utilize a mathematical approach to determine the type, 
quantity and mix of investment positions that ProShare Capital 
believes, in combination, should produce daily returns consistent with 
the Funds' respective objectives. ProShare Capital will rely on a pre-
determined model to generate orders that result in repositioning the 
Funds' investments in accordance with their respective investment 
objectives.

Investments of the Funds

    Each Fund will seek to achieve its respective investment objective 
by investing, under normal market conditions,\14\ substantially all of 
its assets in futures contracts for West Texas Intermediate sweet, 
light crude oil listed on the NYMEX, ICE Futures U.S. or other U.S. 
exchanges (``Futures'') and listed options on such contracts 
(``Options'' and, together with Futures, ``Futures Contracts''). The 
Funds will not invest directly in oil. A Fund's investments in Futures 
Contracts will be used to produce economically ``leveraged'' or 
``inverse leveraged'' investment in a manner consistent with the 
respective Fund's investment objective.
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    \14\ The term ``normal market conditions'' includes, but is not 
limited to, the absence of trading halts in the applicable financial 
markets generally; operational issues (e.g., systems failure) 
causing dissemination of inaccurate market information; or force 
majeure type events such as natural or manmade disaster, act of God, 
armed conflict, act of terrorism, riot or labor disruption or any 
similar intervening circumstance. See id. at 6 n.9.
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    In the event position, price or accountability limits are reached 
with respect to Futures Contracts,\15\ each Fund may obtain exposure to 
the Benchmark through investments in swap agreements and forward 
contracts referencing such Benchmark (``Financial Instruments''). To 
the extent that a Fund invests in Financial Instruments, it would first 
make use of exchange-traded Financial Instruments, if available. If an 
investment in exchange-traded Financial Instruments is unavailable, 
then a Fund would invest in Financial Instruments that clear through 
derivatives clearing organizations that satisfy the Trust's criteria, 
if available. If an investment in cleared Financial Instruments is 
unavailable, then a Fund would invest in other Financial Instruments, 
including uncleared Financial Instruments in the OTC market. The Funds 
may also invest in Financial Instruments if the market for a specific 
Futures Contract experiences emergencies (e.g., natural disaster, 
terrorist attack or an act of God) or disruptions (e.g., a trading 
halt) that prevent or make it impractical for a Fund to obtain the 
appropriate amount of investment exposure using Futures Contracts.
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    \15\ Designated contract markets, such as the NYMEX and ICE 
Futures U.S., have established accountability levels and position 
limits on the maximum net long or net short Futures Contracts in 
commodity interests that any person or group of persons under common 
trading control (other than as a hedge, which an investment by a 
Fund is not) may hold, own or control. These levels and position 
limits apply to the Futures Contracts that each Fund would invest in 
to meet its investment objective. In addition to accountability 
levels and position limits, NYMEX and ICE Futures U.S. also set 
price fluctuation limits on Futures Contracts. The price fluctuation 
limit establishes the amount that the price of Futures may vary 
either up or down from the previous day's settlement price. Options 
do not have individual price limits but rather are linked to the 
price limit of Futures. See id. at 6 n.10.
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    Although each Fund, under normal market conditions, will invest 
substantially all of its assets in Futures Contracts, each Fund will 
also hold cash or cash equivalents, such as U.S. Treasury securities or 
other high credit quality, short-term fixed-income or similar 
securities (such as shares of money market funds and collateralized 
repurchase agreements) pending investment in Futures Contracts or 
Financial Instruments or as collateral for the Funds' investments.
    The Exchange represents that, to the extent a Fund enters into swap 
agreements and other OTC transactions, it will do so only with large, 
established and well capitalized financial institutions that meet the 
Sponsor's credit quality standards and monitoring policies. The 
Exchange states that each Fund will use various techniques to minimize 
credit risk including early termination or reset and payment, using 
different counterparties and limiting the net amount due from any 
individual counterparty.\16\
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    \16\ See id. at 7.
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    The Funds do not intend to hold Futures \17\ through expiration, 
but instead intend to ``roll'' or close their respective positions 
before expiration. When the market for these contracts is such that the 
prices are higher in the more distant delivery months than in the 
nearer delivery months, the sale during the course of the ``rolling 
process'' of the more nearby contract would take place at a price that 
is lower

[[Page 15402]]

than the price of the more distant contract.\18\
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    \17\ The Exchange states that out-of-the-money Options will be 
held to expiration and will expire worthless. According to the 
Exchange, Funds intend to hold in-the-money options to expiration, 
which would occur before the expiration of Futures. In-the-money 
Options are settled through receipt or delivery of Futures. With 
respect to Futures positions established through the Options 
settlement procedure, the Funds intend to close such positions by 
entering into simultaneous offsetting Futures positions. The effects 
of contango and backwardation on the price of Futures will impact 
the price of Options to the same degree of any change in the price 
of the underlying Futures. See id. at 7 n.11.
    \18\ The Exchange states that this pattern of higher futures 
prices for longer expiration Futures is referred to as ``contango.'' 
Alternatively, when the market for these contracts is such that the 
prices are higher in the nearer months than in the more distant 
months, the sale during the course of the ``rolling process'' of the 
more nearby contract would take place at a price that is higher than 
the price of the more distant contract. This pattern of higher 
futures prices for shorter expiration Futures is referred to as 
``backwardation.'' According to the Exchange, the presence of 
contango in certain Futures at the time of rolling could adversely 
affect a Fund with long positions, and positively affect a Fund with 
short positions. Similarly, the presence of backwardation in certain 
Futures at the time of rolling such contracts could adversely affect 
a Fund with short positions and positively affect a Fund with long 
positions. See id. at 7.
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    The Exchange states that the Funds do not expect to have exposure 
to Futures Contracts and Financial Instruments greater than three times 
(3x) the Funds' net assets. Thus, the maximum margin held at a future 
commission merchant would not exceed three times the margin requirement 
for either Fund.\19\ The Exchange represents that not more than 10% of 
the net assets of a Fund in the aggregate invested in Futures Contracts 
shall consist of Futures Contracts whose principal market is not a 
member of the Intermarket Surveillance Group (``ISG'') or is a market 
with which the Exchange does not have a comprehensive surveillance 
sharing agreement (``CSSA'').\20\
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    \19\ See id.
    \20\ See id. at 14.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\21\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment Nos. 1, 3, and 4 
thereto, is consistent with Section 6(b)(5) of the Exchange Act,\22\ 
which requires, among other things, that the Exchange's rules be 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest.
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    \21\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \22\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Exchange Act,\23\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers and investors of information with respect to 
quotations for and transactions in securities. According to the 
Exchange, quotation and last-sale information regarding the Shares will 
be disseminated through the facilities of the Consolidated Tape 
Association (``CTA''). Quotation information for cash equivalents, OTC 
swaps and forward contracts may be obtained from brokers and dealers 
who make markets in such instruments. Quotation information for 
exchange-traded swaps will be available from the applicable exchange 
and major market vendors. The intraday, closing prices, and settlement 
prices of the Futures Contracts will be readily available from the 
applicable futures exchange Web sites, automated quotation systems, 
published or other public sources, or major market data vendors. 
Complete real-time data for the Futures Contracts is available by 
subscription through on-line information services. ICE Futures U.S. and 
NYMEX also provide delayed futures and options on futures information 
on current and past trading sessions and market news free of charge on 
their respective Web sites. The specific contract specifications for 
Futures Contracts are also available on such Web sites, as well as 
other financial informational sources. Intra-day price and closing 
price level information for the Benchmark will be available from major 
market data vendors.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    The Funds' Web site, www.ProShares.com, will display the applicable 
end of day closing NAV. Each Fund's total portfolio composition will be 
disclosed each business day that the NYSE Arca is open for trading, on 
the Funds' Web site. The Funds' Web site will also include a form of 
the prospectus for the Funds that may be downloaded. The Web site will 
include the Shares' ticker and CUSIP information, along with additional 
quantitative information updated on a daily basis for each Fund.\24\ 
The Web site disclosure of portfolio holdings will be made daily and 
will include, as applicable, (i) the name, quantity, value, expiration 
and strike price of Futures and Options, (ii) the counterparty to and 
value of swap agreements and forward contracts, and (ii) the aggregate 
net value of other assets (i.e., Treasury securities, cash equivalents 
and cash) held in each Fund's portfolio, if applicable.
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    \24\ The Funds' Web site will include (1) daily trading volume, 
the prior business day's reported NAV and closing price, and a 
calculation of the premium and discount of the closing price or mid-
point of the bid/ask spread at the time of NAV calculation (``Bid/
Ask Price'') against the NAV; and (2) data in chart format 
displaying the frequency distribution of discounts and premiums of 
the daily closing price or Bid/Ask Price against the NAV, within 
appropriate ranges, for at least each of the four previous calendar 
quarters.
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    The Benchmark will be disseminated by one or more major market data 
vendors every 15 seconds during the NYSE Arca Core Trading Session of 
9:30 a.m. to 4:00 p.m. Eastern Time (``E.T.''). The Indicative Fund 
Value (``IFV'') \25\ per Share will be widely disseminated by one or 
more major market data vendors every 15 seconds during the Exchange's 
Core Trading Session.\26\ The Funds will compute their NAVs at 2:30 
p.m. E.T., which is the designated closing time of the crude oil 
futures listed on NYMEX,\27\ or an earlier time as set forth on 
www.ProShares.com, if necessitated by the New York Stock Exchange LLC, 
the Exchange, or other exchange material to the valuation or operation 
of such Fund closing early. The NAV for the Shares will be disseminated 
daily to all market participants at the same time.
---------------------------------------------------------------------------

    \25\ The IFV will be calculated by using the prior day's closing 
NAV per Share of a Fund as a base and will be updating throughout 
the Exchange's Core Trading Session to reflect changes in the 
approximate aggregate per Share value of the investments held by a 
Fund based on the most recently available prices for the Fund's 
investments. According to the Exchange, there may be times when 
trading in the Shares is occurring during the NYSE Arca Core Trading 
Session, but trading in Futures is not occurring. This may occur 
when, for example, a futures exchange and NYSE Arca have different 
holiday schedules, a futures exchange closes prior to the close of 
the NYSE Arca Core Trading Session, price fluctuation limits are 
reached in Futures, or a futures exchange imposes any other 
suspension or limitation on trading in Futures. In such instances, 
the IFV would be static or priced at the applicable early cut-off 
time of the exchange trading the applicable Futures. See Amendment 
No. 1, supra note 5, at 9; Amendment No. 4, supra note 8.
    \26\ The Exchange notes that several major market data vendors 
display and/or make widely available IFVs taken from the CTA or 
other data feeds. See Amendment No. 1, supra note 5, at 9 n.13.
    \27\ The Exchange states that the daily value of the Benchmark 
is calculated as of 2:30 p.m. E.T. to coincide with the designated 
closing time. Futures Contracts, however, continue to trade past 
2:30 p.m. E.T. and through the end of the NYSE Arca Core Trading 
Session at 4:00 p.m. E.T. See id. at 8 n.12.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. If the Exchange becomes aware that the NAV with respect to the 
Shares is not

[[Page 15403]]

disseminated to all market participants at the same time, it will halt 
trading in the Shares until such time as the NAV is available to all 
market participants. Further, the Exchange may halt trading during the 
day in which an interruption to the dissemination of the IFV or the 
value of the Benchmark occurs. If the interruption to the dissemination 
of the IFV or the value of the Benchmark persists past the trading day 
in which it occurred, the Exchange will halt trading no later than the 
beginning of the trading day following the interruption. Trading in 
Shares of a Fund will be halted if the circuit breaker parameters in 
NYSE Arca Equities Rule 7.12 have been reached. Trading also may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. The Exchange 
states that it has a general policy prohibiting the distribution of 
material, non-public information by its employees.\28\ Moreover, 
trading of the Shares will be subject to NYSE Arca Equities Rule 8.200, 
Commentary .02(e), which sets forth certain restrictions on Equity 
Trading Permit (``ETP'') Holders acting as registered Market Makers in 
Trust Issued Receipts to facilitate surveillance.
---------------------------------------------------------------------------

    \28\ See id. at 14.
---------------------------------------------------------------------------

    The Commission notes that the Exchange or the Financial Industry 
Regulatory Authority (``FINRA''), on behalf of the Exchange, or both, 
will communicate as needed regarding trading in the Shares and certain 
Futures Contracts with other markets and other entities that are 
members of the ISG, and the Exchange or FINRA, on behalf of the 
Exchange, or both, may obtain trading information regarding trading in 
the Shares and certain Futures Contracts from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and certain Futures Contracts from markets and 
other entities that are members of ISG or with which the Exchange has 
in place a CSSA.\29\ The Exchange is also able to obtain information 
regarding trading in the Shares, the physical commodities underlying 
Futures Contracts through ETP Holders, in connection with such ETP 
Holders' proprietary or customer trades which they effect through ETP 
Holders on any relevant market. The Exchange can obtain market 
surveillance information, including customer identity information, with 
respect to transactions (including transactions in Futures Contracts) 
occurring on US futures exchanges, which are members of the ISG.
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    \29\ For a list of the current members of ISG, see 
www.isgportal.org. According to the Exchange, not all components of 
a Fund may trade on markets that are members of ISG or with which 
the Exchange has in place a CSSA. See id. at 13 n.18.
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    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. In support of this 
proposal, the Exchange represented that:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.200.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances administered by the Exchange, as well as cross-market 
surveillances administered by FINRA on behalf of the Exchange, which 
are designed to detect violations of Exchange rules and applicable 
federal securities laws, and these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange.
    (4) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The risks involved in trading the Shares during the Early and Late 
Trading Sessions when an updated IFV will not be calculated or publicly 
disseminated; (b) the procedures for purchases and redemptions of 
Shares in Creation Units (and that Shares are not individually 
redeemable); (c) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (d) how 
information regarding the IFV is disseminated; (e) how information 
regarding portfolio holdings is disseminated; (f) the requirement that 
ETP Holders deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
and (g) trading information.
    (5) For initial and continued listing, each Fund will be in 
compliance with Rule 10A-3 under the Act,\30\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \30\ 17 CFR 240.10A-3.
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    (6) Each Fund will seek to achieve its respective investment 
objective by investing, under normal market conditions, substantially 
all of its assets in Futures Contracts.'' In the event position, price 
or accountability limits are reached with respect to Futures Contracts, 
each Fund may obtain exposure to the Benchmark through investments in 
Financial Instruments. To the extent that a Fund invests in Financial 
Instruments, it would first make use of exchange-traded Financial 
Instruments, if available. If an investment in exchange-traded 
Financial Instruments is unavailable, then a Fund would invest in 
Financial Instruments that clear through derivatives clearing 
organizations that satisfy the Trust's criteria, if available. If an 
investment in cleared Financial Instruments is unavailable, then a Fund 
would invest in other Financial Instruments, including uncleared 
Financial Instruments in the OTC market.
    (7) Not more than 10% of the net assets of a Fund in the aggregate 
invested in Futures Contracts shall consist of Futures Contracts whose 
principal market is not a member of the ISG or is a market with which 
the Exchange does not have a CSSA.
    (8) To the extent a Fund enters into swap agreements and other OTC 
transactions, it will do so only with large, established and well 
capitalized financial institutions that meet the Sponsor's credit 
quality standards and monitoring policies. Each Fund will use various 
techniques to minimize credit risk including early termination or reset 
and payment, using different counterparties and limiting the net amount 
due from any individual counterparty.
    (9) A minimum of 100,000 Shares of each Fund will be outstanding at 
the commencement of trading on the Exchange.
    The Exchange represents that all statements and representations 
made in this filing regarding (a) the description of the portfolios of 
the Funds or Benchmark, (b) limitations on portfolio holdings or the 
Benchmark, or (c) the applicability of Exchange listing rules specified 
in this rule filing shall constitute continued listing requirements for 
listing the Shares on the Exchange. The issuer has represented to the 
Exchange that it will advise the Exchange of any failure by the Funds 
to comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Act, the Exchange will 
monitor for compliance with the continued listing

[[Page 15404]]

requirements.\31\ If a Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
under NYSE Arca Equities Rule 5.5(m).
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    \31\ The Commission notes that certain other proposals for the 
listing and trading of Managed Fund Shares include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
77499 (April 1, 2016), 81 FR 20428 (April 7, 2016) (Notice of Filing 
of Amendment No. 2, and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 2, to List and 
Trade Shares of the SPDR DoubleLine Short Duration Total Return 
Tactical ETF of the SSgA Active Trust), available at: http://www.sec.gov/rules/sro/bats/2016/34-77499.pdf. In the context of this 
representation, it is the Commission's view that ``monitor'' and 
``surveil'' both mean ongoing oversight of the Fund's compliance 
with the continued listing requirements. Therefore, the Commission 
does not view ``monitor'' as a more or less stringent obligation 
than ``surveil'' with respect to the continued listing requirements.
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    This approval order is based on all of the Exchange's 
representations and description of the Funds, including those set forth 
above and in Amendment Nos. 1, 3, and 4. The Commission notes that the 
Shares must comply with the requirements of NYSE Arca Equities Rule 
8.200 and Commentary .02 thereto to be listed and traded on the 
Exchange on an initial and continuing basis.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 1, 3, and 4 thereto, is 
consistent with Section 6(b)(5) of the Act \32\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \32\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\33\ that the proposed rule change (SR-NYSEArca-2017-07), 
as modified by Amendment Nos. 1, 3, and 4 thereto, be, and it hereby 
is, approved.
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    \33\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06053 Filed 3-27-17; 8:45 am]
BILLING CODE 8011-01-P