Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the ProShares Short VIX Short-Term Futures ETF and ProShares Ultra VIX Short-Term Futures ETF, 15659-15662 [2018-07406]
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Federal Register / Vol. 83, No. 70 / Wednesday, April 11, 2018 / Notices
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support fee for calendar year 2018.2 In
connection with its review, the
Commission also reviewed the budget
for the FAF and the FASB for calendar
year 2018.
Section 109 of the Act also provides
that the standard setting body can have
additional sources of revenue for its
activities, such as earnings from sales of
publications, provided that each
additional source of revenue shall not
jeopardize, in the judgment of the
Commission, the actual or perceived
independence of the standard setter. In
this regard, the Commission also
considered the interrelation of the
operating budgets of the FAF, the FASB,
and the Governmental Accounting
Standards Board (‘‘GASB’’), the FASB’s
sister organization, which sets
accounting standards used by state and
local government entities. The
Commission has been advised by the
FAF that neither the FAF, the FASB, nor
the GASB accept contributions from the
accounting profession.
The Commission understands that the
Office of Management and Budget
(‘‘OMB’’) has determined the FASB’s
spending of the 2018 accounting
support fee is sequestrable under the
Budget Control Act of 2011.3 So long as
sequestration is applicable, we
anticipate that the FAF will work with
the Commission and Commission staff
as appropriate regarding its
implementation of sequestration.
The Commission requests that the
FAF and the FASB continue to provide
the Commission with quarterly updates
of their activities, including but not
limited to their efforts to include a
wide-range of views from investors,
preparers, auditors, academics, and
other constituent groups, and their
efforts to improve the selection process
for FASB and FAF members.
After its review, the Commission
determined that the 2018 annual
accounting support fee for the FASB is
consistent with Section 109 of the Act.
Accordingly,
It is ordered, pursuant to Section 109
of the Act, that the FASB may act in
accordance with this determination of
the Commission.
2 The Financial Accounting Foundation’s Board
of Trustees approved the FASB’s budget on
November 14, 2017. The FAF submitted the
approved budget to the Commission on November
17, 2017.
3 See ‘‘OMB Report Pursuant to the Sequestration
Transparency Act of 2012’’ (P.L. 112–155), page 222
of 224 at: https://www.whitehouse.gov/sites/default/
files/omb/assets/legislative_reports/stareport.pdf.
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By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2018–07363 Filed 4–10–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83000; File No. SR–
NYSEArca–2018–17]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to the ProShares
Short VIX Short-Term Futures ETF and
ProShares Ultra VIX Short-Term
Futures ETF
April 5, 2018.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on March 23,
2018, NYSE Arca, Inc. (‘‘Exchange’’ or
‘‘NYSE Arca’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to make
changes to certain representations made
in the proposed rule change previously
filed with the Commission pursuant to
Rule 19b–4 relating to ProShares Short
VIX Short-Term Futures ETF and
ProShares Ultra VIX Short-Term Futures
ETF, shares of which currently are listed
and traded under NYSE Arca Rule
8.200–E, Commentary .02. The proposed
rule change is available on the
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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15659
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Commission has approved the
listing and trading on the Exchange of
shares (‘‘Shares’’) of the ProShares Short
VIX Short-Term Futures ETF (the ‘‘Short
Fund’’) and ProShares Ultra VIX ShortTerm Futures ETF (the ‘‘Ultra Fund’’
and, together with the Short Fund, the
‘‘Funds’’) under NYSE Arca Rule 8.200–
E, Commentary .02 (formerly NYSE
Arca Equities Rule 8.200, Commentary
.02), which governs the listing and
trading of Trust Issued Receipts.4 Shares
of the Funds are currently listed and
traded on the Exchange under NYSE
Arca Rule 8.200–E, Commentary .02.5
Other than Shares of the Short Fund and
the Ultra Fund, shares of the ProShares
ETFs approved for listing and trading in
the Prior Order are not listed and traded
on the Exchange.6
The Shares are issued by ProShares
Trust II (the ‘‘Trust’’). ProShare Capital
Management LLC (‘‘Sponsor’’) serves as
the Trust’s Sponsor.
In this proposed rule change, the
Exchange proposes to amend certain
representations made in the Prior Notice
relating to each Fund’s investment
4 Commentary .02 to NYSE Arca Rule 8.200–E
applies to TIRs that invest in ‘‘Financial
Instruments’’. The term ‘‘Financial Instruments’’, as
defined in Commentary .02(b)(4) to NYSE Arca Rule
8.200–E, 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.
5 The Commission previously approved the
listing and trading of the Shares of the Funds on
the Exchange. See Securities Exchange Act Release
Nos. 65134 (August 15, 2011), 76 FR 52034 (August
19, 2011) (SR–NYSEArca–2011–23) (Order Granting
Approval of Proposed Rule Change To List and
Trade Shares of ProShares Short VIX Short-Term
Futures ETF, ProShares Short VIX Mid-Term
Futures ETF, ProShares Ultra VIX Short-Term
Futures ETF, ProShares Ultra VIX Mid-Term
Futures ETF, ProShares UltraShort VIX Short-Term
Futures ETF, and ProShares UltraShort VIX MidTerm Futures ETF Under NYSE Arca Equities Rule
8.200, Commentary .02) (the ‘‘Prior Order’’); 64470
(May 11, 2011), 76 FR 28493 (May 17, 2011) (SR–
NYSEArca-2011–23) (Notice of Filing of Proposed
Rule Change To List and Trade Shares of the Funds
Under NYSE Arca Equities Rule 8.200, Commentary
.02.) (the ‘‘Prior Notice’’).
6 On February 28, 2018, the Exchange appended
a ‘‘.BC’’ (below compliance) indicator to the trading
symbols for the Funds (SVXY for the Short Fund
and UVXY for the Ultra Fund), signifying noncompliance with certain representations in the Prior
Notice and Prior Order.
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objective, in order to reflect recent
changes to the investment objective of
each Fund, as described below.7
The Sponsor believes the change to
each Fund’s investment objective (as
described herein) is appropriate and
consistent with the best interest of each
Fund and Fund shareholders in light of
recent extreme changes in the value of
the S&P 500 ® VIX Short-Term Futures
Index (the ‘‘Index’’). As a result of the
change to each Fund’s investment
objective, the Sponsor expects the risk
profile and volatility of each Fund to be
significantly reduced.
As stated in the Prior Notice, each
Fund seeks, on a daily basis, to provide
investment results (before fees and
expenses) that correspond to the inverse
of the daily performance or a multiple
of the daily performance of a benchmark
(i.e., the Index) that seeks to offer
exposure to market volatility through
publicly traded futures markets.
Specifically, the prior investment
objective of the Short Fund was to seek
results (before fees and expenses) that
correspond to the inverse (¥1x) of the
performance of the Index for a single
day. The prior investment objective of
the Ultra Fund was to seek results
(before fees and expenses) that
correspond to two times (2x) the
performance of the Index for a single
day.8 Each Fund seeks to achieve its
investment objective by investing under
normal market conditions in VIX
Futures Contracts.9
If the Short Fund is successful in
meeting its objective, its value (before
fees and expenses) should gain
approximately as much on a percentage
7 The Funds have a filed registration statement on
Form S–3 under the Securities Act of 1933 (File No.
333–220688). The Funds’ prospectus containing the
previous investment objectives for the Funds was
filed pursuant to Rule 424(b)(3) on February 15,
2018. A prospectus containing the new objectives,
as described herein, was filed pursuant to Rule
424(b)(3) on February 28, 2018 (‘‘Registration
Statement’’). The description of the Funds and the
Shares contained herein are based on the
Registration Statement. The change to each Fund’s
investment objective as described herein was
implemented effective as of the close of business on
February 27, 2018. The Sponsor issued a press
release dated February 26, 2018 regarding the
Sponsor’s plans to reduce the target exposure for
the Funds. See https://www.proshares.com/news/
proshare_capital_management_llc_plans_to_
reduce_target_exposure_on_two_etfs.html.
8 According to the Registration Statement, for
these purposes, a ‘‘single day’’ is measured from the
time a Fund calculates its net asset value (‘‘NAV’’)
to the time of the Fund’s next NAV calculation.
9 The term ‘‘under normal conditions’’ includes,
but is not limited to, the absence of extreme
volatility or trading halts in the futures markets or
the financial markets generally; operational issues
causing dissemination of inaccurate market
information; or force majeure type events such as
systems failure, natural or man-made disaster, act
of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance.
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basis as its Index when the Index
declines on a given day. Conversely, its
value (before fees and expenses) should
lose approximately as much on a
percentage basis as its Index when the
Index rises on a given day.
If the Ultra Fund is successful in
meeting its objective, its value (before
fees and expenses) should gain
approximately twice as much on a
percentage basis as its Index when the
Index rises on a given day. Conversely,
its value (before fees and expenses)
should lose approximately twice as
much on a percentage basis as its Index
when the Index declines on a given day.
As of the close of business on
February 27, 2018, the Short Fund
changed its investment objective to seek
results (before fees and expenses) that
correspond to one-half the inverse
(¥0.5x) of the performance of the Index
for a single day. The Ultra Fund
changed its investment objective to seek
results (before fees and expenses) that
correspond to one and one-half times
(1.5x) of the performance of the Index
for a single day.
As a result of the change to each
Fund’s investment objective, the
Exchange proposes to amend the
representations in the Prior Notice
described in the preceding two
paragraphs as follows.
If the Short Fund is successful in
meeting its objective, its value (before
fees and expenses) should gain
approximately half as much on a
percentage basis as its Index when the
Index declines on a given day.
Conversely, its value (before fees and
expenses) should lose approximately
half as much on a percentage basis as
the Index when the Index rises on a
given day.
If the Ultra Fund is successful in
meeting its objective, its value (before
fees and expenses) should gain
approximately 1.5 times as much on a
percentage basis as its Index when the
Index rises on a given day. Conversely,
its value (before fees and expenses)
should lose approximately 1.5 times as
much on a percentage basis as its Index
when the Index declines on a given day.
The Prior Notice stated that the Funds
do not seek to achieve their stated
investment objective over a period of
time greater than one day because
mathematical compounding prevents
the Funds from perfectly achieving such
results. Accordingly, as noted in the
Prior Notice, results over periods of time
greater than one day typically will not
be a simple inverse correlation
(¥100%) or multiple correlation
(+200%) of the period return of the
Index and may differ significantly.
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Fmt 4703
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As a result of the change to each
Fund’s investment objective, the
Exchange proposes to amend the
representations in the preceding
paragraph with respect to the Short
Fund and the Ultra Fund as described
below.
The Funds do not seek to achieve
their stated investment objective over a
period of time greater than one day
because mathematical compounding
prevents the Funds from perfectly
achieving such results. Accordingly,
results over periods of time greater than
one day typically will not be a simple
one-half of the inverse correlation
(¥50%) or multiple correlation
(+150%) of the period return of the
Index and may differ significantly.
The Prior Notice stated that NYSE
Arca will calculate and disseminate
every 15 seconds throughout the NYSE
Arca Core Trading Session (9:30 a.m. to
4:00 p.m. E.T.) an updated Intraday
Optimized Portfolio Value (‘‘IOPV’’).
The Prior Notice also stated that the
IOPV will be calculated by the NYSE
Arca using the prior day’s closing net
assets of a Fund as a base and updating
throughout the trading day changes in
the value of such Fund’s holdings. The
Exchange proposes to amend these
representations to state that the IOPV
will be calculated and widely
disseminated by one or more major
market data vendors every 15 seconds
throughout the NYSE Arca Core Trading
Session, and that the IOPV will be
calculated using the prior day’s closing
net assets of a Fund as a base and
updating throughout the trading day
changes in the value of such Fund’s
holdings, consistent with the
Exchange’s previous proposed rule
change regarding calculation of the
Intraday Indicative Value for specified
Exchange-Traded Products.10
Except for the changes noted above,
all other statements and representations
made in the Prior Notice remain
unchanged.11 The Funds will comply
with all continued listing requirements
under NYSE Arca Rule 8.200–E,
Commentary .02.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 12 that an
exchange have rules that are designed to
prevent fraudulent and manipulative
10 See Securities Exchange Act Release No. 81985
(October 31, 2017) (SR–NYSEArca–2017–127)
(Notice of Filing and Immediate Effectiveness of
Proposed Rule Change Regarding Exchange
Calculation of the Intraday Indicative Value for
Specified Exchange-Traded Products).
11 See note 5, supra.
12 15 U.S.C. 78f(b)(5).
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acts and practices, to promote just and
equitable principles of trade, to remove
impediments to, and perfect the
mechanism of a free and open market
and, in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices, and is designed to
promote just and equitable principles of
trade and to protect investors and the
public interest.
Consistent with the representations in
the Prior Notice, each Fund will
continue to seek to achieve its
investment objective by investing under
normal market conditions in VIX
Futures Contracts.
As a result of the change to each
Fund’s investment objective, the
Exchange is proposing to amend
representations in the Prior Notice
regarding the correlation of the value of
the Shares of the Short Fund and the
Ultra Fund with the Index.
The Short Fund previously had an
investment objective to seek results
(before fees and expenses) that
correspond to the inverse (¥1x) of the
performance of the Index for a single
day. As of February 27, 2018, the Fund’s
objective was changed to seek results
(before fees and expenses) that
correspond to one-half of the inverse
(¥0.5x) of the performance of the Index
for a single day.
The Ultra Fund previously had an
investment objective to seek results
(before fees and expenses) that
correspond to two times (2x) the
performance of the Index for a single
day. As of the close of business on
February 27, 2018, the Fund’s objective
was changed to seek results (before fees
and expenses) that correspond to one
and one-half times (1.5x) of the
performance of the Index for a single
day.
The Sponsor believes the change to
each Fund’s investment objective is
appropriate and consistent with the best
interest of each Fund and Fund
shareholders in light of recent extreme
changes in the value of the Index. As a
result of the change to each Fund’s
investment objective, the Sponsor
expects the risk profile and volatility of
each Fund to be significantly reduced.
The Exchange’s proposal to amend
the representations in the Prior Notice
regarding the IOPV calculation and
dissemination as described above
reflects changes that are consistent with
the Exchange’s previous proposed rule
change regarding calculation of the
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Intraday Indicative Value for specified
Exchange-Traded Products.13
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes the proposed rule
change will enhance competition and
benefit investors and the marketplace by
permitting continued listing and trading
of Shares of the Funds with their
revised investment objectives, as
described above.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 14 and Rule 19b–
4(f)(6) thereunder.15
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 16 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 17
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay so that the
proposed rule change may become
operative upon filing. The Commission
notes that, as a result of the change to
each Fund’s investment objective,18 the
13 See
note 10, supra.
U.S.C. 78s(b)(3)(A).
15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
16 17 CFR 240.19b–4(f)(6).
17 17 CFR 240.19b–4(f)(6)(iii).
18 As noted above, the change to each Fund’s
investment objective was implemented effective as
14 15
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15661
risk profile and volatility of each Fund
is expected to be reduced. Moreover, the
proposed changes to the representations
in the Prior Notice regarding IOPV
calculation and dissemination are
consistent with the Exchange’s previous
proposed rule change regarding
calculation of the Intraday Indicative
Value for specified Exchange-Traded
Products. The Commission notes that,
except for the changes in this proposed
rule change, all other statements and
representations made in the Prior Notice
remain unchanged, and the Funds will
comply with all continued listing
requirements under NYSE Arca Rule
8.200–E, Commentary .02. The
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.19
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2018–17 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
of the close of business on February 27, 2018. On
February 28, 2018, the Exchange appended a ‘‘.BC’’
indicator to the trading symbols for the Funds,
signifying non-compliance with certain
representations in the Prior Notice and Prior Order.
19 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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Commission, 100 F Street NE,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–NYSEArca–2018–17. 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–2018–17 and
should be submitted on or before May
2, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–07406 Filed 4–10–18; 8:45 am]
[Release No. 34–82999; File No. SR–ISE–
2018–28]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Schedule of Fees To
Clarify the Fees and Rebates for the
Complex Order Exposure Auction
Pursuant to Rule 722(b)(3)(iii)
April 5, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 23,
2018, Nasdaq ISE, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s Schedule of Fees to provide
greater clarity as to how the Exchange
currently charges complex orders
executed during an exposure auction
pursuant to Rule 722(b)(3)(iii)
(‘‘Exposure Auction’’).
The text of the proposed rule change
is available on the Exchange’s website at
https://ise.cchwallstreet.com/, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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BILLING CODE 8011–01–P
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
20 17
CFR 200.30–3(a)(12).
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00113
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
Schedule of Fees to provide greater
clarity as to how the Exchange currently
charges complex orders executed during
an Exposure Auction pursuant to Rule
722(b)(3)(iii). An Exposure Auction is
automatically initiated when a member
submits an eligible complex order that
is marked for price improvement.3
Because Exposure Auctions are initiated
by complex orders entered on the
complex order book, they are charged
based on the same maker/taker scheme
as is applicable to other complex orders
that are executed on the complex order
book rather than the separate pricing
defined for Crossing Orders.4
Specifically, the Exchange treats the
originating side of Exposure Auction
orders as adding liquidity, and the
contra side as taking liquidity, for the
purpose of determining applicable fees
and rebates. Since the Schedule of Fees
does not currently indicate the manner
in which the Exchange treats the
originating or contra side of Exposure
Auction orders, the Exchange proposes
to add the following language in Section
II: ‘‘During an ‘‘exposure’’ auction
pursuant to Rule 722(b)(3)(iii), the
originating side of the auction order will
be assessed the applicable maker fee or
rebate, and the contra side will be
assessed the applicable taker fee or
rebate.’’
Thus, based on current rates, the
Exchange charges the originating side of
Non-Priority Customer 5 Exposure
Auction orders that trade against other
Non-Priority Customer orders a maker
fee of $0.10 per contract in Select
3 Pursuant to Rule 722(b)(3)(iii), the marked
complex order is exposed for a period of up to onesecond. When the Exchange first adopted Rule
722(b)(3)(iii), it indicated that this exposure period,
which provided members an opportunity for price
improvement, was not considered an ‘‘auction.’’ See
Securities Exchange Act Release No. 57706 (April
24, 2008), 73 FR 23517 (April 30, 2008) (SR–ISE–
2007–77) (‘‘2007 Filing’’). Notwithstanding the 2007
Filing, this feature would be considered an auction
today.
4 A ‘‘Crossing Order’’ is an order executed in the
Exchange’s Facilitation Mechanism, Solicited Order
Mechanism, Price Improvement Mechanism (PIM)
or submitted as a Qualified Contingent Cross order.
For purposes of the Fee Schedule, orders executed
in the Block Order Mechanism are also considered
Crossing Orders.
5 Non-Priority Customer includes Market Maker,
Non-Nasdaq ISE Market Maker, Firm Proprietary,
Broker-Dealer, and Professional Customer.
E:\FR\FM\11APN1.SGM
11APN1
]]>Agencies
[Federal Register Volume 83, Number 70 (Wednesday, April 11, 2018)]
[Notices]
[Pages 15659-15662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07406]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83000; File No. SR-NYSEArca-2018-17]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Relating to the
ProShares Short VIX Short-Term Futures ETF and ProShares Ultra VIX
Short-Term Futures ETF
April 5, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on March 23, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the self-regulatory organization. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to make changes to certain representations
made in the proposed rule change previously filed with the Commission
pursuant to Rule 19b-4 relating to ProShares Short VIX Short-Term
Futures ETF and ProShares Ultra VIX Short-Term Futures ETF, shares of
which currently are listed and traded under NYSE Arca Rule 8.200-E,
Commentary .02. The proposed rule change is available on the Exchange's
website at www.nyse.com, at the principal office of the Exchange, and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Commission has approved the listing and trading on the Exchange
of shares (``Shares'') of the ProShares Short VIX Short-Term Futures
ETF (the ``Short Fund'') and ProShares Ultra VIX Short-Term Futures ETF
(the ``Ultra Fund'' and, together with the Short Fund, the ``Funds'')
under NYSE Arca Rule 8.200-E, Commentary .02 (formerly NYSE Arca
Equities Rule 8.200, Commentary .02), which governs the listing and
trading of Trust Issued Receipts.\4\ Shares of the Funds are currently
listed and traded on the Exchange under NYSE Arca Rule 8.200-E,
Commentary .02.\5\ Other than Shares of the Short Fund and the Ultra
Fund, shares of the ProShares ETFs approved for listing and trading in
the Prior Order are not listed and traded on the Exchange.\6\
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\4\ Commentary .02 to NYSE Arca Rule 8.200-E applies to TIRs
that invest in ``Financial Instruments''. The term ``Financial
Instruments'', as defined in Commentary .02(b)(4) to NYSE Arca Rule
8.200-E, 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.
\5\ The Commission previously approved the listing and trading
of the Shares of the Funds on the Exchange. See Securities Exchange
Act Release Nos. 65134 (August 15, 2011), 76 FR 52034 (August 19,
2011) (SR-NYSEArca-2011-23) (Order Granting Approval of Proposed
Rule Change To List and Trade Shares of ProShares Short VIX Short-
Term Futures ETF, ProShares Short VIX Mid-Term Futures ETF,
ProShares Ultra VIX Short-Term Futures ETF, ProShares Ultra VIX Mid-
Term Futures ETF, ProShares UltraShort VIX Short-Term Futures ETF,
and ProShares UltraShort VIX Mid-Term Futures ETF Under NYSE Arca
Equities Rule 8.200, Commentary .02) (the ``Prior Order''); 64470
(May 11, 2011), 76 FR 28493 (May 17, 2011) (SR-NYSEArca-2011-23)
(Notice of Filing of Proposed Rule Change To List and Trade Shares
of the Funds Under NYSE Arca Equities Rule 8.200, Commentary .02.)
(the ``Prior Notice'').
\6\ On February 28, 2018, the Exchange appended a ``.BC'' (below
compliance) indicator to the trading symbols for the Funds (SVXY for
the Short Fund and UVXY for the Ultra Fund), signifying non-
compliance with certain representations in the Prior Notice and
Prior Order.
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The Shares are issued by ProShares Trust II (the ``Trust'').
ProShare Capital Management LLC (``Sponsor'') serves as the Trust's
Sponsor.
In this proposed rule change, the Exchange proposes to amend
certain representations made in the Prior Notice relating to each
Fund's investment
[[Page 15660]]
objective, in order to reflect recent changes to the investment
objective of each Fund, as described below.\7\
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\7\ The Funds have a filed registration statement on Form S-3
under the Securities Act of 1933 (File No. 333-220688). The Funds'
prospectus containing the previous investment objectives for the
Funds was filed pursuant to Rule 424(b)(3) on February 15, 2018. A
prospectus containing the new objectives, as described herein, was
filed pursuant to Rule 424(b)(3) on February 28, 2018
(``Registration Statement''). The description of the Funds and the
Shares contained herein are based on the Registration Statement. The
change to each Fund's investment objective as described herein was
implemented effective as of the close of business on February 27,
2018. The Sponsor issued a press release dated February 26, 2018
regarding the Sponsor's plans to reduce the target exposure for the
Funds. See https://www.proshares.com/news/proshare_capital_management_llc_plans_to_reduce_target_exposure_on_two_etfs.html.
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The Sponsor believes the change to each Fund's investment objective
(as described herein) is appropriate and consistent with the best
interest of each Fund and Fund shareholders in light of recent extreme
changes in the value of the S&P 500 [supreg] VIX Short-Term Futures
Index (the ``Index''). As a result of the change to each Fund's
investment objective, the Sponsor expects the risk profile and
volatility of each Fund to be significantly reduced.
As stated in the Prior Notice, each Fund seeks, on a daily basis,
to provide investment results (before fees and expenses) that
correspond to the inverse of the daily performance or a multiple of the
daily performance of a benchmark (i.e., the Index) that seeks to offer
exposure to market volatility through publicly traded futures markets.
Specifically, the prior investment objective of the Short Fund was to
seek results (before fees and expenses) that correspond to the inverse
(-1x) of the performance of the Index for a single day. The prior
investment objective of the Ultra Fund was to seek results (before fees
and expenses) that correspond to two times (2x) the performance of the
Index for a single day.\8\ Each Fund seeks to achieve its investment
objective by investing under normal market conditions in VIX Futures
Contracts.\9\
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\8\ According to the Registration Statement, for these purposes,
a ``single day'' is measured from the time a Fund calculates its net
asset value (``NAV'') to the time of the Fund's next NAV
calculation.
\9\ The term ``under normal conditions'' includes, but is not
limited to, the absence of extreme volatility or trading halts in
the futures markets or the financial markets generally; operational
issues causing dissemination of inaccurate market information; or
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption or any similar intervening circumstance.
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If the Short Fund is successful in meeting its objective, its value
(before fees and expenses) should gain approximately as much on a
percentage basis as its Index when the Index declines on a given day.
Conversely, its value (before fees and expenses) should lose
approximately as much on a percentage basis as its Index when the Index
rises on a given day.
If the Ultra Fund is successful in meeting its objective, its value
(before fees and expenses) should gain approximately twice as much on a
percentage basis as its Index when the Index rises on a given day.
Conversely, its value (before fees and expenses) should lose
approximately twice as much on a percentage basis as its Index when the
Index declines on a given day.
As of the close of business on February 27, 2018, the Short Fund
changed its investment objective to seek results (before fees and
expenses) that correspond to one-half the inverse (-0.5x) of the
performance of the Index for a single day. The Ultra Fund changed its
investment objective to seek results (before fees and expenses) that
correspond to one and one-half times (1.5x) of the performance of the
Index for a single day.
As a result of the change to each Fund's investment objective, the
Exchange proposes to amend the representations in the Prior Notice
described in the preceding two paragraphs as follows.
If the Short Fund is successful in meeting its objective, its value
(before fees and expenses) should gain approximately half as much on a
percentage basis as its Index when the Index declines on a given day.
Conversely, its value (before fees and expenses) should lose
approximately half as much on a percentage basis as the Index when the
Index rises on a given day.
If the Ultra Fund is successful in meeting its objective, its value
(before fees and expenses) should gain approximately 1.5 times as much
on a percentage basis as its Index when the Index rises on a given day.
Conversely, its value (before fees and expenses) should lose
approximately 1.5 times as much on a percentage basis as its Index when
the Index declines on a given day.
The Prior Notice stated that the Funds do not seek to achieve their
stated investment objective over a period of time greater than one day
because mathematical compounding prevents the Funds from perfectly
achieving such results. Accordingly, as noted in the Prior Notice,
results over periods of time greater than one day typically will not be
a simple inverse correlation (-100%) or multiple correlation (+200%) of
the period return of the Index and may differ significantly.
As a result of the change to each Fund's investment objective, the
Exchange proposes to amend the representations in the preceding
paragraph with respect to the Short Fund and the Ultra Fund as
described below.
The Funds do not seek to achieve their stated investment objective
over a period of time greater than one day because mathematical
compounding prevents the Funds from perfectly achieving such results.
Accordingly, results over periods of time greater than one day
typically will not be a simple one-half of the inverse correlation (-
50%) or multiple correlation (+150%) of the period return of the Index
and may differ significantly.
The Prior Notice stated that NYSE Arca will calculate and
disseminate every 15 seconds throughout the NYSE Arca Core Trading
Session (9:30 a.m. to 4:00 p.m. E.T.) an updated Intraday Optimized
Portfolio Value (``IOPV''). The Prior Notice also stated that the IOPV
will be calculated by the NYSE Arca using the prior day's closing net
assets of a Fund as a base and updating throughout the trading day
changes in the value of such Fund's holdings. The Exchange proposes to
amend these representations to state that the IOPV will be calculated
and widely disseminated by one or more major market data vendors every
15 seconds throughout the NYSE Arca Core Trading Session, and that the
IOPV will be calculated using the prior day's closing net assets of a
Fund as a base and updating throughout the trading day changes in the
value of such Fund's holdings, consistent with the Exchange's previous
proposed rule change regarding calculation of the Intraday Indicative
Value for specified Exchange-Traded Products.\10\
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\10\ See Securities Exchange Act Release No. 81985 (October 31,
2017) (SR-NYSEArca-2017-127) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change Regarding Exchange Calculation
of the Intraday Indicative Value for Specified Exchange-Traded
Products).
---------------------------------------------------------------------------
Except for the changes noted above, all other statements and
representations made in the Prior Notice remain unchanged.\11\ The
Funds will comply with all continued listing requirements under NYSE
Arca Rule 8.200-E, Commentary .02.
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\11\ See note 5, supra.
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2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \12\ that an exchange have rules that
are designed to prevent fraudulent and manipulative
[[Page 15661]]
acts and practices, to promote just and equitable principles of trade,
to remove impediments to, and perfect the mechanism of a free and open
market and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices, and is designed
to promote just and equitable principles of trade and to protect
investors and the public interest.
Consistent with the representations in the Prior Notice, each Fund
will continue to seek to achieve its investment objective by investing
under normal market conditions in VIX Futures Contracts.
As a result of the change to each Fund's investment objective, the
Exchange is proposing to amend representations in the Prior Notice
regarding the correlation of the value of the Shares of the Short Fund
and the Ultra Fund with the Index.
The Short Fund previously had an investment objective to seek
results (before fees and expenses) that correspond to the inverse (-1x)
of the performance of the Index for a single day. As of February 27,
2018, the Fund's objective was changed to seek results (before fees and
expenses) that correspond to one-half of the inverse (-0.5x) of the
performance of the Index for a single day.
The Ultra Fund previously had an investment objective to seek
results (before fees and expenses) that correspond to two times (2x)
the performance of the Index for a single day. As of the close of
business on February 27, 2018, the Fund's objective was changed to seek
results (before fees and expenses) that correspond to one and one-half
times (1.5x) of the performance of the Index for a single day.
The Sponsor believes the change to each Fund's investment objective
is appropriate and consistent with the best interest of each Fund and
Fund shareholders in light of recent extreme changes in the value of
the Index. As a result of the change to each Fund's investment
objective, the Sponsor expects the risk profile and volatility of each
Fund to be significantly reduced.
The Exchange's proposal to amend the representations in the Prior
Notice regarding the IOPV calculation and dissemination as described
above reflects changes that are consistent with the Exchange's previous
proposed rule change regarding calculation of the Intraday Indicative
Value for specified Exchange-Traded Products.\13\
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\13\ See note 10, supra.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes the
proposed rule change will enhance competition and benefit investors and
the marketplace by permitting continued listing and trading of Shares
of the Funds with their revised investment objectives, as described
above.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \16\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposed rule change may become operative upon filing. The
Commission notes that, as a result of the change to each Fund's
investment objective,\18\ the risk profile and volatility of each Fund
is expected to be reduced. Moreover, the proposed changes to the
representations in the Prior Notice regarding IOPV calculation and
dissemination are consistent with the Exchange's previous proposed rule
change regarding calculation of the Intraday Indicative Value for
specified Exchange-Traded Products. The Commission notes that, except
for the changes in this proposed rule change, all other statements and
representations made in the Prior Notice remain unchanged, and the
Funds will comply with all continued listing requirements under NYSE
Arca Rule 8.200-E, Commentary .02. The Commission believes that waiver
of the 30-day operative delay is consistent with the protection of
investors and the public interest. Accordingly, the Commission hereby
waives the operative delay and designates the proposed rule change
operative upon filing.\19\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ As noted above, the change to each Fund's investment
objective was implemented effective as of the close of business on
February 27, 2018. On February 28, 2018, the Exchange appended a
``.BC'' indicator to the trading symbols for the Funds, signifying
non-compliance with certain representations in the Prior Notice and
Prior Order.
\19\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2018-17 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 15662]]
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2018-17. 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-2018-17 and should be submitted
on or before May 2, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07406 Filed 4-10-18; 8:45 am]
BILLING CODE 8011-01-P
