Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade the Shares of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF Under NYSE Arca Rule 8.200-E, Commentary .02, 13537-13539 [2018-06297]

Download as PDF Federal Register / Vol. 83, No. 61 / Thursday, March 29, 2018 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Brent J. Fields, Secretary. [FR Doc. 2018–06299 Filed 3–28–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82939; File No. SR– NYSEArca–2017–139] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade the Shares of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF Under NYSE Arca Rule 8.200–E, Commentary .02 March 23, 2018. On December 4, 2017, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade the shares (‘‘Shares’’) of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF (each a ‘‘Fund’’ and, collectively, ‘‘Funds’’) issued by the ProShares Trust II (‘‘Trust’’) under NYSE Arca Rule 8.200–E, Commentary .02. The proposed rule change was published for comment in the Federal Register on December 26, 2017.3 The Commission has received one comment letter on the proposed rule change.4 On January 30, 2018, pursuant to Section 19(b)(2) of the Act,5 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.6 This order 24 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 82350 (Dec. 19, 2017), 82 FR 61100 (Dec. 26, 2017) (‘‘Notice’’). 4 See Letter from Abe Kohen, AK Financial Engineering Consultants, LLC (Dec. 27, 2017) (‘‘Kohen Letter’’). All comments on the proposed rule change are available on the Commission’s website at: https://www.sec.gov/comments/srnysearca-2017-139/nysearca2017139.htm. 5 15 U.S.C. 78s(b)(2). 6 See Securities Exchange Act Release No. 82602 (Jan. 30, 2018), 83 FR 4941 (Feb. 2, 2018). The Commission designated March 26, 2018, as the date by which it should approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change. sradovich on DSK3GMQ082PROD with NOTICES 1 15 VerDate Sep<11>2014 19:09 Mar 28, 2018 Jkt 244001 institutes proceedings under Section 19(b)(2)(B) of the Act 7 to determine whether to approve or disapprove the proposed rule change. I. Summary of the Proposal 8 and Comments Received The Exchange proposes to list and trade the Shares under NYSE Arca Rule 8.200–E, Commentary .02, which governs the listing and trading of Trust Issued Receipts on the Exchange.9 Each Fund will be a series of the Trust, and the Trust and the Funds will be managed and controlled by ProShare Capital Management LLC (‘‘Sponsor’’). Brown Brothers Harriman & Co. will be the custodian and administrator for the Trust. SEI Investments Distribution Co. will serve as the distributor of the Shares (‘‘Distributor’’). The Trust will offer Shares of the Funds for sale through the Distributor in ‘‘Creation Units.’’ 10 According to the Exchange, the ProShares Bitcoin ETF’s investment objective will be to seek results (before fees and expenses) that, both for a single day and over time, correspond to the performance of lead month bitcoin futures contracts 11 listed and traded on either the Cboe Futures Exchange (‘‘CFE’’) or the Chicago Mercantile Exchange (‘‘CME’’) (‘‘Benchmark Futures Contract’’). This Fund generally intends to invest substantially all of its assets in the Benchmark Futures Contracts, but may invest in other U.S. 7 15 U.S.C. 78s(b)(2)(B). Commission notes that additional information regarding the Trust, the Shares, and the Funds, including investment strategies, calculation of net asset value (‘‘NAV’’) and indicative fund value, creation and redemption procedures, and additional background information about bitcoins, the bitcoin network, and bitcoin futures contracts, among other things, can be found in the Notice (see supra note 3) and the registration statement filed with the Commission on Form S–1 (File No. 333– 220680) under the Securities Act of 1933 (‘‘Registration Statement’’), as applicable. 9 See NYSE Arca Rule 8.200–E, Commentary .02. NYSE Arca Rule 8.200–E permits the listing and trading of ‘‘Trust Issued Receipts,’’ defined as a security (1) that is used by the trust which holds specific securities deposited with the trust; (2) that, when aggregated in some specified minimum number, may be surrendered to the trust by the beneficial owner to receive the securities; and (3) that pay beneficial owners dividends and other distributions on the deposited securities, if any are declared and paid to the trustee by an issuer of the deposited securities. Commentary .02 applies to Trust Issued Receipts that invest in 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. 10 See Notice, supra note 3, at 61101. 11 According to the Exchange, lead month futures contracts are the monthly contracts with the earliest expiration date. See Notice, supra note 3, at 61101, n.6. See also Notice and Registration Statement, supra notes 3 and 8. 8 The PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 13537 exchange listed bitcoin futures contracts, if available (together with Benchmark Futures Contracts, collectively, ‘‘Bitcoin Futures Contracts’’).12 In addition, the Exchange states that the ProShares Short Bitcoin ETF’s investment objective will be to seek results, for a single day, that correspond (before fees and expenses) to the inverse of the daily performance of the Benchmark Futures Contract. This Fund generally intends to invest substantially all of its assets through short positions in Benchmark Futures Contracts, but may invest through short positions in Bitcoin Futures Contracts, if available.13 Further, the Exchange states that, in the event position, price, or accountability limits are reached with respect to Bitcoin Futures Contracts, each Fund may invest in listed options on Bitcoin Futures Contracts (should such listed options become available) and OTC swap agreements referencing Bitcoin Futures Contracts (collectively, ‘‘Financial Instruments’’).14 The Commission has received one comment letter, which expresses concerns about the proposed rule change.15 The commenter refers to the proposal as a ‘‘house of cards’’ and expresses concern that the Funds’ attempt to replicate the bitcoin futures markets, which are related to underlying cryptocurrencies that trade on unregulated exchanges, will lead to losses for retail investors, and that the inclusion of an inverse Fund will add to the risk.16 II. Proceedings To Determine Whether to Approve or Disapprove SR– NYSEArca–2017–139 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 17 to determine whether the proposed rule change should be approved or disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to 12 See Notice, supra note 3, at 61101. id. 14 See id. at 61102. 15 See supra note 4 and accompanying text. 16 See Kohen Letter, supra note 4. 17 15 U.S.C. 78s(b)(2)(B). 13 See E:\FR\FM\29MRN1.SGM 29MRN1 13538 Federal Register / Vol. 83, No. 61 / Thursday, March 29, 2018 / Notices provide comments on the proposed rule change. Pursuant to Section 19(b)(2)(B) of the Act,18 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be ‘‘designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade,’’ and ‘‘to protect investors and the public interest.’’ 19 III. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposal is consistent with Section 6(b)(5) or any other provision of the Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any request for an opportunity to make an oral presentation.20 Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by April 19, 2018. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by May 3, 2018. The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of the proposal, which are set forth in the Notice,21 in addition to any other comments they may wish to submit about the proposed rule change. In 18 Id. 19 15 U.S.C. 78f(b)(5). 19(b)(2) of the Act, as amended by the Securities Act Amendments of 1975, Pub. L. 94–29 (June 4, 1975), grants the Commission flexibility to determine what type of proceeding—either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 21 See supra note 3. sradovich on DSK3GMQ082PROD with NOTICES 20 Section VerDate Sep<11>2014 19:09 Mar 28, 2018 Jkt 244001 particular, the Commission seeks comment on the following: 1. What are commenters’ views on whether the Exchange has sufficiently described how the Sponsor will select the applicable Benchmark Futures Contracts, given that the contracts trading on these two bitcoin futures exchanges have different terms (including different reference prices) and trade at different prices? 2. In its proposal, the Exchange states that each Fund may, in the event that position, price, or accountability limits are reached with respect to Bitcoin Futures Contracts—or if the market for a specific Bitcoin Futures Contract experiences an emergency or disruption—also invest in Financial Instruments, which include listed options on Bitcoin Futures Contracts (should such listed options become available) and OTC swap agreements referencing Bitcoin Futures Contracts. What are commenters’ views on the current availability of Financial Instruments for trading? What are commenters’ views on the ability of the Funds to invest in Financial Instruments in the event that position, price, or accountability limits are reached with respect to Bitcoin Futures Contracts? What are commenters’ views on the ability of the Funds to invest in Financial Instruments if the market for a specific Bitcoin Futures Contract experiences emergencies or disruptions? 3. What are commenters’ views on whether the Funds would have the information necessary to adequately value, including fair value, the Bitcoin Futures Contracts and related Financial Instruments when determining an appropriate end-of-day NAV for the Funds, taking into account any volatility, fragmentation, or general lack of regulation of the underlying bitcoin markets? 4. What are commenters’ views on the potential impact of manipulation in the underlying bitcoin markets on the Funds’ NAV? What are commenters views on the potential effect of such manipulation on the valuation of a Fund’s Bitcoin Futures Contracts, which is determined using the last traded price on the primary listing futures exchange (as opposed to the settlement price, closing price, midpoint, or volume weighted average price)? What are commenters’ views on the potential effect of such manipulation on the pricing of a Fund’s Financial Instruments? 5. What are commenters’ views on how the Funds’ valuation policies would address the potential for the bitcoin blockchain to diverge into different paths (i.e., a ‘‘fork’’)? PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 6. What are commenters’ views on the price differentials and trading volumes across bitcoin trading platforms (including during periods of market stress) and on the extent to which these differing prices may affect the trading of the Bitcoin Futures Contracts and, accordingly, trading in the Shares of the Funds? 7. What are commenters’ views on how the substantial margin requirements for Bitcoin Futures Contracts, and the nature of liquidity and volatility in the market for Bitcoin Futures Contracts, might affect the Trust’s ability to meet redemption orders? What are commenters’ views on whether and how the margin requirements for Bitcoin Futures Contracts, and the nature of liquidity and volatility in the market for Bitcoin Futures Contracts, might affect a Fund’s use of available cash to achieve its investment strategy? 8. What are commenters’ views on the possibility that the Funds—along with other exchange-traded products with similar investment objectives—could acquire a substantial portion of the market for Bitcoin Futures Contracts or the Financial Instruments? What are commenters’ views on whether such a concentration of holdings could affect the Funds’ portfolio management, the liquidity of the Funds’ respective portfolios, or the pricing of the Bitcoin Futures Contracts or the Financial Instruments? 9. What are commenters’ views on possible factors that might impair the ability of the arbitrage mechanism to keep the trading price of the Shares tied to the NAV of each Fund? With respect to the market for Bitcoin Futures Contracts, what are commenters’ views on the potential impact on the arbitrage mechanism of the price volatility and the potential for trading halts? What are commenters’ views on whether or how these potential impairments of the arbitrage mechanism may affect the Funds’ ability to ensure adequate participation by Authorized Participants? What are commenters’ views on the potential effects on investors if the arbitrage mechanism is impaired? 10. What are commenters’ views on the risks of price manipulation and fraud in the underlying bitcoin trading platforms and how these risks might affect the Bitcoin Futures Contracts market or the Financial Instruments? What are commenters’ views on how these risks might affect trading in the Shares of the Funds? 11. What are commenters’ views on how an investor may evaluate the price of the Shares in light of the risk of E:\FR\FM\29MRN1.SGM 29MRN1 Federal Register / Vol. 83, No. 61 / Thursday, March 29, 2018 / Notices potential price manipulation and fraud in the underlying bitcoin trading platforms and in light of the potentially significant spread between the price of the Bitcoin Futures Contracts and the spot price of bitcoin? 12. What are commenters’ views on whether the two bitcoin futures exchanges represent a significant market, i.e., a market of significant size? 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– NYSEArca–2017–139 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–NYSEArca-2017–139. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (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 website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEArca-2017–139 and should be submitted on or before April VerDate Sep<11>2014 19:09 Mar 28, 2018 Jkt 244001 19, 2018. Rebuttal comments should be submitted by May 3, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Brent J. Fields, Secretary. [FR Doc. 2018–06297 Filed 3–28–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82937; File No. SR–CTA/ CQ–2018–01] Consolidated Tape Association; Notice of Filing and Immediate Effectiveness of the Twenty-Third Charges Amendment to the Second Restatement of the CTA Plan and the Fourteenth Charges Amendment to the Restated CQ Plan March 23, 2018. 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 5, 2018,3 the Consolidated Tape Association (‘‘CTA’’) Plan participants (‘‘Participants’’) 4 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’’).5 The amendment represents the twenty-third Charges Amendment to the CTA Plan and the fourteenth Charges Amendment 22 17 CFR 200.30–3(a)(57). U.S.C. 78k–1. 2 17 CFR 242.608. 3 See Letter from Emily Kasparov to Brent J. Fields, Secretary, Securities and Exchange Commission, dated March 1, 2018. 4 The Participants are: Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Cboe Exchange, Inc.; Chicago Stock Exchange, Inc.; Financial Industry Regulatory Authority, Inc.; Investors Exchange LLC; Nasdaq BX, Inc.; Nasdaq ISE, LLC; Nasdaq PHLX LLC; The Nasdaq Stock Market LLC; New York Stock Exchange LLC; NYSE Arca, Inc.; NYSE American LLC; and NYSE National, Inc. (collectively, the ‘‘Participants’’). 5 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. 1 15 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 13539 to the CQ Plan (‘‘Amendments’’). The Amendments seek to amend the text of the Plans’ fee schedule to adopt changes to the Broker-Dealer Enterprise Maximum Monthly Charge (‘‘Enterprise Cap’’) and Per-Quote-Packet Charges. The Participants are proposing to increase the Enterprise Cap from $686,400 to $1,260,000 for Network A and from $520,000 to $680,000 for Network B. The Participants state that the Enterprise Cap was established to provide incentives to entities to make market data available to large Nonprofessional Subscriber bases. Due to what they describe as ongoing industry consolidation, however, the Participants are proposing to increase the Enterprise Cap in order to account for the sudden and substantial increase of Nonprofessional Subscribers at entities using the Enterprise Cap. To make the increase of the Enterprise Cap revenue neutral (from an overall Plan perspective) and fee neutral (from an individual entity 6 perspective), the Participants are proposing to decrease the Per-Quote-Packet Charges for those broker-dealers with 500,000 or more Nonprofessional Subscribers. According to the Participants, the increase in fees as a result of the increase of the Enterprise Cap will be offset by a decrease in Per-Quote-Packet Charges for those entities that would be most likely affected by the raising of the cap, i.e., those with a large Nonprofessional Subscriber base. Pursuant to Rule 608(b)(3) under Regulation NMS,7 the Participants designate the amendment as establishing or changing a fee or other charge collected on their behalf in connection with access to, or use of, the facilities contemplated by the Plans. As a result, the amendment is effective upon filing with the Commission. The Commission is publishing this notice to solicit comments from interested persons on the proposed Amendments. Set forth in Sections I and II is the statement of the purpose and summary of the Amendments, along with the information required by Rules 608(a) and 601(a) under the Act, prepared and submitted by the Participants to the Commission. 6 As described below, the Plan does not require an entity that is registered as a broker-dealer under the Act to pay more than the Enterprise Cap for any month for the aggregate amount of (a) a network’s Device charges for devices used for its Internal Distribution plus (b) that network’s Device and PerQuote-Packet charges payable in respect of services that it provides to Nonprofessional Subscribers that are brokerage account customers of the brokerdealer. 7 17 CFR 242.608(b)(3)(i). E:\FR\FM\29MRN1.SGM 29MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 83, Number 61 (Thursday, March 29, 2018)]
[Notices]
[Pages 13537-13539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06297]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82939; File No. SR-NYSEArca-2017-139]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove a Proposed 
Rule Change To List and Trade the Shares of the ProShares Bitcoin ETF 
and the ProShares Short Bitcoin ETF Under NYSE Arca Rule 8.200-E, 
Commentary .02

March 23, 2018.
    On December 4, 2017, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade the shares (``Shares'') of the 
ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF (each a 
``Fund'' and, collectively, ``Funds'') issued by the ProShares Trust II 
(``Trust'') under NYSE Arca Rule 8.200-E, Commentary .02. The proposed 
rule change was published for comment in the Federal Register on 
December 26, 2017.\3\
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 82350 (Dec. 19, 
2017), 82 FR 61100 (Dec. 26, 2017) (``Notice'').
---------------------------------------------------------------------------

    The Commission has received one comment letter on the proposed rule 
change.\4\ On January 30, 2018, pursuant to Section 19(b)(2) of the 
Act,\5\ the Commission designated a longer period within which to 
approve the proposed rule change, disapprove the proposed rule change, 
or institute proceedings to determine whether to disapprove the 
proposed rule change.\6\ This order institutes proceedings under 
Section 19(b)(2)(B) of the Act \7\ to determine whether to approve or 
disapprove the proposed rule change.
---------------------------------------------------------------------------

    \4\ See Letter from Abe Kohen, AK Financial Engineering 
Consultants, LLC (Dec. 27, 2017) (``Kohen Letter''). All comments on 
the proposed rule change are available on the Commission's website 
at: https://www.sec.gov/comments/sr-nysearca-2017-139/nysearca2017139.htm.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 82602 (Jan. 30, 
2018), 83 FR 4941 (Feb. 2, 2018). The Commission designated March 
26, 2018, as the date by which it should approve, disapprove, or 
institute proceedings to determine whether to disapprove the 
proposed rule change.
    \7\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

I. Summary of the Proposal \8\ and Comments Received
---------------------------------------------------------------------------

    \8\ The Commission notes that additional information regarding 
the Trust, the Shares, and the Funds, including investment 
strategies, calculation of net asset value (``NAV'') and indicative 
fund value, creation and redemption procedures, and additional 
background information about bitcoins, the bitcoin network, and 
bitcoin futures contracts, among other things, can be found in the 
Notice (see supra note 3) and the registration statement filed with 
the Commission on Form S-1 (File No. 333-220680) under the 
Securities Act of 1933 (``Registration Statement''), as applicable.
---------------------------------------------------------------------------

    The Exchange proposes to list and trade the Shares under NYSE Arca 
Rule 8.200-E, Commentary .02, which governs the listing and trading of 
Trust Issued Receipts on the Exchange.\9\ Each Fund will be a series of 
the Trust, and the Trust and the Funds will be managed and controlled 
by ProShare Capital Management LLC (``Sponsor''). Brown Brothers 
Harriman & Co. will be the custodian and administrator for the Trust. 
SEI Investments Distribution Co. will serve as the distributor of the 
Shares (``Distributor''). The Trust will offer Shares of the Funds for 
sale through the Distributor in ``Creation Units.'' \10\
---------------------------------------------------------------------------

    \9\ See NYSE Arca Rule 8.200-E, Commentary .02. NYSE Arca Rule 
8.200-E permits the listing and trading of ``Trust Issued 
Receipts,'' defined as a security (1) that is used by the trust 
which holds specific securities deposited with the trust; (2) that, 
when aggregated in some specified minimum number, may be surrendered 
to the trust by the beneficial owner to receive the securities; and 
(3) that pay beneficial owners dividends and other distributions on 
the deposited securities, if any are declared and paid to the 
trustee by an issuer of the deposited securities. Commentary .02 
applies to Trust Issued Receipts that invest in 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.
    \10\ See Notice, supra note 3, at 61101.
---------------------------------------------------------------------------

    According to the Exchange, the ProShares Bitcoin ETF's investment 
objective will be to seek results (before fees and expenses) that, both 
for a single day and over time, correspond to the performance of lead 
month bitcoin futures contracts \11\ listed and traded on either the 
Cboe Futures Exchange (``CFE'') or the Chicago Mercantile Exchange 
(``CME'') (``Benchmark Futures Contract''). This Fund generally intends 
to invest substantially all of its assets in the Benchmark Futures 
Contracts, but may invest in other U.S. exchange listed bitcoin futures 
contracts, if available (together with Benchmark Futures Contracts, 
collectively, ``Bitcoin Futures Contracts'').\12\
---------------------------------------------------------------------------

    \11\ According to the Exchange, lead month futures contracts are 
the monthly contracts with the earliest expiration date. See Notice, 
supra note 3, at 61101, n.6. See also Notice and Registration 
Statement, supra notes 3 and 8.
    \12\ See Notice, supra note 3, at 61101.
---------------------------------------------------------------------------

    In addition, the Exchange states that the ProShares Short Bitcoin 
ETF's investment objective will be to seek results, for a single day, 
that correspond (before fees and expenses) to the inverse of the daily 
performance of the Benchmark Futures Contract. This Fund generally 
intends to invest substantially all of its assets through short 
positions in Benchmark Futures Contracts, but may invest through short 
positions in Bitcoin Futures Contracts, if available.\13\
---------------------------------------------------------------------------

    \13\ See id.
---------------------------------------------------------------------------

    Further, the Exchange states that, in the event position, price, or 
accountability limits are reached with respect to Bitcoin Futures 
Contracts, each Fund may invest in listed options on Bitcoin Futures 
Contracts (should such listed options become available) and OTC swap 
agreements referencing Bitcoin Futures Contracts (collectively, 
``Financial Instruments'').\14\
---------------------------------------------------------------------------

    \14\ See id. at 61102.
---------------------------------------------------------------------------

    The Commission has received one comment letter, which expresses 
concerns about the proposed rule change.\15\ The commenter refers to 
the proposal as a ``house of cards'' and expresses concern that the 
Funds' attempt to replicate the bitcoin futures markets, which are 
related to underlying cryptocurrencies that trade on unregulated 
exchanges, will lead to losses for retail investors, and that the 
inclusion of an inverse Fund will add to the risk.\16\
---------------------------------------------------------------------------

    \15\ See supra note 4 and accompanying text.
    \16\ See Kohen Letter, supra note 4.
---------------------------------------------------------------------------

II. Proceedings To Determine Whether to Approve or Disapprove SR-
NYSEArca-2017-139 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \17\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change. Institution of proceedings 
does not indicate that the Commission has reached any conclusions with 
respect to any of the issues involved. Rather, as described below, the 
Commission seeks and encourages interested persons to

[[Page 13538]]

provide comments on the proposed rule change.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\18\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposed rule change's consistency with Section 6(b)(5) 
of the Act, which requires, among other things, that the rules of a 
national securities exchange be ``designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade,'' and ``to protect investors and the public 
interest.'' \19\
---------------------------------------------------------------------------

    \18\ Id.
    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

III. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) or any other provision of the Act, or 
the rules and regulations thereunder. Although there do not appear to 
be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\20\
---------------------------------------------------------------------------

    \20\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Pub. L. 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by April 19, 2018. Any person who wishes to file a rebuttal 
to any other person's submission must file that rebuttal by May 3, 
2018. The Commission asks that commenters address the sufficiency of 
the Exchange's statements in support of the proposal, which are set 
forth in the Notice,\21\ in addition to any other comments they may 
wish to submit about the proposed rule change. In particular, the 
Commission seeks comment on the following:
---------------------------------------------------------------------------

    \21\ See supra note 3.
---------------------------------------------------------------------------

    1. What are commenters' views on whether the Exchange has 
sufficiently described how the Sponsor will select the applicable 
Benchmark Futures Contracts, given that the contracts trading on these 
two bitcoin futures exchanges have different terms (including different 
reference prices) and trade at different prices?
    2. In its proposal, the Exchange states that each Fund may, in the 
event that position, price, or accountability limits are reached with 
respect to Bitcoin Futures Contracts--or if the market for a specific 
Bitcoin Futures Contract experiences an emergency or disruption--also 
invest in Financial Instruments, which include listed options on 
Bitcoin Futures Contracts (should such listed options become available) 
and OTC swap agreements referencing Bitcoin Futures Contracts. What are 
commenters' views on the current availability of Financial Instruments 
for trading? What are commenters' views on the ability of the Funds to 
invest in Financial Instruments in the event that position, price, or 
accountability limits are reached with respect to Bitcoin Futures 
Contracts? What are commenters' views on the ability of the Funds to 
invest in Financial Instruments if the market for a specific Bitcoin 
Futures Contract experiences emergencies or disruptions?
    3. What are commenters' views on whether the Funds would have the 
information necessary to adequately value, including fair value, the 
Bitcoin Futures Contracts and related Financial Instruments when 
determining an appropriate end-of-day NAV for the Funds, taking into 
account any volatility, fragmentation, or general lack of regulation of 
the underlying bitcoin markets?
    4. What are commenters' views on the potential impact of 
manipulation in the underlying bitcoin markets on the Funds' NAV? What 
are commenters views on the potential effect of such manipulation on 
the valuation of a Fund's Bitcoin Futures Contracts, which is 
determined using the last traded price on the primary listing futures 
exchange (as opposed to the settlement price, closing price, midpoint, 
or volume weighted average price)? What are commenters' views on the 
potential effect of such manipulation on the pricing of a Fund's 
Financial Instruments?
    5. What are commenters' views on how the Funds' valuation policies 
would address the potential for the bitcoin blockchain to diverge into 
different paths (i.e., a ``fork'')?
    6. What are commenters' views on the price differentials and 
trading volumes across bitcoin trading platforms (including during 
periods of market stress) and on the extent to which these differing 
prices may affect the trading of the Bitcoin Futures Contracts and, 
accordingly, trading in the Shares of the Funds?
    7. What are commenters' views on how the substantial margin 
requirements for Bitcoin Futures Contracts, and the nature of liquidity 
and volatility in the market for Bitcoin Futures Contracts, might 
affect the Trust's ability to meet redemption orders? What are 
commenters' views on whether and how the margin requirements for 
Bitcoin Futures Contracts, and the nature of liquidity and volatility 
in the market for Bitcoin Futures Contracts, might affect a Fund's use 
of available cash to achieve its investment strategy?
    8. What are commenters' views on the possibility that the Funds--
along with other exchange-traded products with similar investment 
objectives--could acquire a substantial portion of the market for 
Bitcoin Futures Contracts or the Financial Instruments? What are 
commenters' views on whether such a concentration of holdings could 
affect the Funds' portfolio management, the liquidity of the Funds' 
respective portfolios, or the pricing of the Bitcoin Futures Contracts 
or the Financial Instruments?
    9. What are commenters' views on possible factors that might impair 
the ability of the arbitrage mechanism to keep the trading price of the 
Shares tied to the NAV of each Fund? With respect to the market for 
Bitcoin Futures Contracts, what are commenters' views on the potential 
impact on the arbitrage mechanism of the price volatility and the 
potential for trading halts? What are commenters' views on whether or 
how these potential impairments of the arbitrage mechanism may affect 
the Funds' ability to ensure adequate participation by Authorized 
Participants? What are commenters' views on the potential effects on 
investors if the arbitrage mechanism is impaired?
    10. What are commenters' views on the risks of price manipulation 
and fraud in the underlying bitcoin trading platforms and how these 
risks might affect the Bitcoin Futures Contracts market or the 
Financial Instruments? What are commenters' views on how these risks 
might affect trading in the Shares of the Funds?
    11. What are commenters' views on how an investor may evaluate the 
price of the Shares in light of the risk of

[[Page 13539]]

potential price manipulation and fraud in the underlying bitcoin 
trading platforms and in light of the potentially significant spread 
between the price of the Bitcoin Futures Contracts and the spot price 
of bitcoin?
    12. What are commenters' views on whether the two bitcoin futures 
exchanges represent a significant market, i.e., a market of significant 
size?
    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 [email protected]. Please include 
File Number SR-NYSEArca-2017-139 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-NYSEArca-2017-139. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2017-139 and should be 
submitted on or before April 19, 2018. Rebuttal comments should be 
submitted by May 3, 2018.
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(57).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Brent J. Fields,
Secretary.
[FR Doc. 2018-06297 Filed 3-28-18; 8:45 am]
 BILLING CODE 8011-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.