Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Amend NYSE Arca Rule 8.700-E and To List and Trade Shares of the Dynamic Short Short-Term Volatility Futures ETF, 44642-44649 [2019-18270]
Download as PDF
<![CDATA[
44642
Federal Register / Vol. 84, No. 165 / Monday, August 26, 2019 / Notices
(MP), Room 4100; National Archives
and Records Administration; 8601
Adelphi Road; College Park, MD 20740–
6001, fax them to 301–837–7409, or
email them to tamee.fechhelm@
nara.gov.
FOR FURTHER INFORMATION CONTACT:
Contact Tamee Fechhelm by telephone
at 301–837–1694 or fax at 301–837–
7409 with requests for additional
information or copies of the proposed
information collection and supporting
statement.
Pursuant
to the Paperwork Reduction Act of 1995
(Pub. L. 104–13), we invite the public
and other Federal agencies to comment
on proposed information collections.
The comments and suggestions should
address one or more of the following
points: (a) Whether we need the
proposed information collection to
properly perform our agency functions;
(b) our estimate of the burden of the
proposed information collection and its
accuracy; (c) ways we could enhance
the quality, utility, and clarity of the
information we collect; (d) ways we
could minimize the burden on
respondents of collecting the
information, including through
information technology; and (e) whether
this collection affects small businesses.
We will summarize any comments you
submit and include the summary in our
request for OMB approval. All
comments will become a matter of
public record. In this notice, we solicit
comments concerning the following
information collection:
Title: Freedom of Information Act
(FOIA) Request for Assistance and
Consent.
OMB number: 3095–0068.
Agency form number: NA Form
10003.
Type of review: Regular.
Affected public: Individuals or
households, business or other for-profit,
not-for-profit institutions, and Federal
Government.
Estimated number of respondents:
3,646.
Estimated time per response: Ten
minutes.
Frequency of response: On occasion.
Estimated total annual burden hours:
608 hours (3,646 responses × 10
minutes/by 60).
Abstract: In order to fulfill its
Government-wide statutory mission to
mediate FOIA disputes between
requesters and agencies, OGIS must
communicate with Government
departments and agencies regarding the
customer’s Freedom of Information Act
(FOIA)/Privacy Act of 1974 request or
appeal. As a result, OGIS collects intake
khammond on DSKBBV9HB2PROD with NOTICES
SUPPLEMENTARY INFORMATION:
VerDate Sep<11>2014
16:09 Aug 23, 2019
Jkt 247001
information from customers who
request OGIS’s mediation services. This
information includes the customer’s
name, contact information, FOIA case
number, information on the customer’s
concern areas/resolution goals, and
documents relating to the underlying
Freedom of Information Act/Privacy Act
request or appeal. Customers provide
this information by phone, fax, email, or
mail.
OGIS and other agencies must handle
FOIA and Privacy Act-protected case
information in conformity with the
requirements of the FOIA and Privacy
Act, including 5 U.S.C. 552a(b), which
prohibits agencies from releasing
Privacy-Act protected information
without an already-established routine
use or consent of the person to whom
the information pertains. In accord with
this requirement, a subset of customers
also must fill out a privacy consent
form, NA Form 10003, if dealing with
an agency that has not published a
system of records notice with a routine
use for release of information to OGIS.
OGIS uses the information customers
provide in this information collection to
contact customers, request information
on the customer’s case from other
Federal agencies, and provide the
requested assistance. Without the
information submitted in the intake
process and the consent form, OGIS
would be unable to get the information
from other agencies or fulfill its
mediation mission.
Swarnali Haldar,
Executive for Information Services/CIO.
[FR Doc. 2019–18293 Filed 8–23–19; 8:45 am]
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matters of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: August 21, 2019.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2019–18367 Filed 8–22–19; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
BILLING CODE 7515–01–P
[Release No. 34–86714; File No. SR–
NYSEArca–2019–55]
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To Amend NYSE Arca
Rule 8.700–E and To List and Trade
Shares of the Dynamic Short ShortTerm Volatility Futures ETF
Sunshine Act Meetings
2:00 p.m. on Wednesday,
August 28, 2019.
PLACE: The meeting will be held at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
TIME AND DATE:
PO 00000
Frm 00045
Fmt 4703
Sfmt 4703
August 20, 2019.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’ or the ‘‘Exchange Act’’) 2 and Rule
19b–4 thereunder,3 notice is hereby
given that, on August 7, 2019, NYSE
Arca, Inc. (‘‘NYSE Arca’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
E:\FR\FM\26AUN1.SGM
26AUN1
Federal Register / Vol. 84, No. 165 / Monday, August 26, 2019 / Notices
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 (1) to amend
NYSE Arca Rule 8.700–E to add futures
contracts and swaps on the Cboe
Volatility Index (‘‘VIX’’) to the financial
instruments that an issue of Managed
Trust Securities may hold; and (2) to list
and trade shares of the Dynamic Short
Short-Term Volatility Futures ETF
under proposed amended NYSE Arca
Rule 8.700–E. The proposed 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
khammond on DSKBBV9HB2PROD with NOTICES
1. Purpose
NYSE Arca Rule 8.700–E permits the
trading of Managed Trust Securities
either by listing or pursuant to unlisted
trading privileges (‘‘UTP’’).3 The
3 Managed Trust Security means a security that is
registered under the Securities Act of 1933 (15
U.S.C. 77a), as amended (the ‘‘Securities Act’’), and
(i) is issued by a trust (‘‘Trust’’), or any series
thereof, that (1) is a commodity pool as defined in
the Commodity Exchange Act and regulations
thereunder, is not registered or required to be
registered as an investment company under the
Investment Company Act of 1940, as amended, and
is managed by a commodity pool operator
registered with the Commodity Futures Trading
Commission, and (2) holds long and/or short
positions in exchange-traded futures contracts and/
or certain currency forward contracts and/or swaps
selected by the Trust’s advisor consistent with the
Trust’s investment objectives, which will only
include exchange-traded futures contracts involving
commodities, commodity indices, currencies,
currency indices, stock indices, the EURO STOXX
50 Volatility Index (VSTOXX), fixed income
indices, interest rates and sovereign, private and
mortgage or asset backed debt instruments, and/or
forward contracts on specified currencies, and/or
VerDate Sep<11>2014
16:09 Aug 23, 2019
Jkt 247001
Exchange proposes to amend NYSE
Arca Rule 8.700–E (c)(1) to add futures
contracts and/or swaps on the Cboe
Volatility Index (‘‘VIX Index’’ or ‘‘VIX’’)
to the financial instruments that an
issue of Managed Trust Securities may
hold long and/or short positions.
(Futures on the VIX Index are referred
to herein as ‘‘VIX Futures’’ or ‘‘VIX
Futures Contracts’’). In addition, the
Exchange proposes to list and trade the
shares (the ‘‘Shares’’) of the Dynamic
Short Short-Term Volatility Futures ETF
(the ‘‘Fund’’) a series of Dynamic Shares
Trust (‘‘Trust’’) under proposed
amended NYSE Arca Rule 8.700–E.4
The Commission has previously
approved the listing and trading of
options on the VIX.5 In addition, the
Commission has previously approved
an amendment to NYSE Arca Rule 5.2–
E(j)(6) (‘‘Index-Linked Securities’’) to
add VIX Futures to the definition of
Futures Reference Assets applicable to
‘‘Futures-Linked Securities,’’ 6 and has
swaps on stock indices, fixed income indices,
commodity indices, VSTOXX, commodities,
currencies, currency indices, or interest rates, each
as disclosed in the Trust’s prospectus as such may
be amended from time to time, and cash and cash
equivalents; and (ii) is issued and redeemed
continuously in specified aggregate amounts at the
next applicable net asset value. See NYSE Arca
Rule 8.700–E (c)(1).
4 On June 5, 2019, the Trust submitted to the
Commission its draft registration statement on Form
S–1 under the Securities Act of 1933 (15 U.S.C. 77a)
(‘‘Securities Act’’). The Jumpstart Our Business
Startups Act, enacted on April 5, 2012, added
Section 6(e) to the Securities Act. Section 6(e) of the
Securities Act provides that an ‘‘emerging growth
company’’ may confidentially submit to the
Commission a draft registration statement for
confidential, non-public review by the Commission
staff prior to public filing, provided that the initial
confidential submission and all amendments
thereto shall be publicly filed not later than 21 days
before the date on which the issuer conducts a road
show, as such term is defined in Securities Act Rule
433(h)(4). An emerging growth company is defined
in Section 2(a)(19) of the Securities Act as an issuer
with less than $1,000,000,000 total annual gross
revenues during its most recently completed fiscal
year. The Trust meets the definition of an emerging
growth company and consequently has submitted
its Form S–1 registration statement (‘‘Registration
Statement’’) on a confidential basis with the
Commission. The description of the operation of the
Trust and the Fund herein is based, in part, on the
Registration Statement.
5 See Securities Exchange Release No. 48807
(November 19, 2003), 68 FR 66516 (November 26,
2003) (SR–CBOE–2003–40).
6 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). See also, Securities Exchange Act
Release No. 58968 (November 17, 2008), 73 FR
71082 (November 24, 2008) (SR–NYSEArca–2008–
111) (Order Granting Accelerated Approval of
PO 00000
Frm 00046
Fmt 4703
Sfmt 4703
44643
approved listing and trading on the
Exchange of series of Trust Issued
Receipts that invest in VIX Futures.7
The Exchange notes that the
Commission has issued a notice of
effectiveness regarding amendments to
NYSE Arca Rule 5.2–E(j)(6)(v) to add
futures on another index referencing
market volatility—the EURO STOXX 50
Volatility Index (‘‘VSTOXX’’)—as a
‘‘Futures Reference Asset’’ underlying
an issue of ‘‘Futures-Linked
Securities.’’ 8 In addition, the
Commission has approved an
amendment to NYSE Arca Rule 8.700–
E to add the VSTOXX as a reference
asset to the futures contracts and swaps
that may be held by trusts that issue
Managed Trust Securities.9
The Exchange believes that the
proposed amendment to add VIX
Futures and/or swaps on VIX to the
financial instruments in which an issue
of Managed Trust Securities may hold
long and/or short positions will provide
investors with the ability to better
diversify and hedge their portfolios
using an exchange traded security
without having to trade directly in the
underlying VIX Futures, and will
facilitate the listing and trading on the
Exchange of additional Managed Trust
Securities that will enhance competition
among market participants, to the
benefit of investors and the marketplace.
The Exchange believes that its
surveillance procedures are adequate to
continue to properly monitor the trading
of Managed Trust Securities that hold
Proposed Rule Change to Amend NYSE Arca
Equities Rule 5.2(j)(6)(v) in Order to Add the CBOE
Volatility Index Futures to the Definition of Futures
Reference Asset).
7 See, e.g., Securities Exchange Act Release Nos.
58457 (September 3, 2008), 73 FR 52711 (September
10, 2008) (SR–NYSEArca–2008–91) (order granting
accelerated approval to list on NYSE Arca of 14
ProShares funds); 63610 (December 27, 2010), 76
FR 199 (January 3, 2011) (SR–NYSEArca–2010–101)
(order approving listing and trading of the
ProShares VIX Short-Term Futures ETF and the
ProShares VIX Mid-Term Futures ETF). See also
Securities Exchange Act Release No. 58968
(November 17, 2008), 73 FR 71082 (November 24,
2008) (SR–NYSEArca–2008–111) (order granting
accelerated approval of proposed rule change to
amend NYSE Arca Equities Rule 5.2(j)(6)(v) to add
VIX Futures to the definition of Futures Reference
Asset.
8 See Securities Exchange Act Release No. 79975
(February 6, 2017), 82 FR 10418 (February 10, 2017)
(SR–NYSEArca–2017–08) (Notice of Filing and
Immediate Effectiveness to Amend NYSE Arca
Equities Rule 5.2(j)(6)(v) to Add EURO STOXX 50
Volatility Futures to the Definition of Futures
Reference Asset in Rule 5.2(j)(6)).
9 See Securities Exchange Act Release No. 82066
(November 13, 2017), 82 FR 54434 (November 17,
2017) (SR–NYSEArca–2017–85) (Notice of Filing of
Amendment No. 3, and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified
by Amendment No. 3, to Amend NYSE Arca Rule
8.700–E and to List and Trade Shares of the
ProShares European Volatility Futures ETF).
E:\FR\FM\26AUN1.SGM
26AUN1
44644
Federal Register / Vol. 84, No. 165 / Monday, August 26, 2019 / Notices
VIX Futures and/or swaps on VIX in all
trading sessions and to deter and detect
violations of Exchange rules.
The VIX Index
The information in this filing relating
to the VIX Index was taken from the
website of the Cboe Futures Exchange
(the ‘‘CFE’’) and from the Registration
Statement.
The VIX Index is an up-to-the-minute
market estimate of expected volatility
that is calculated by using real-time
prices of options on the S&P 500® Index
listed on Cboe Exchange, Inc. (‘‘Cboe’’)
(‘‘Cboe Options’’) (Symbol: SPX). The
VIX Index is designed to reflect
investors’ consensus view of future (30day) expected stock market volatility.
Only SPX options with Friday
expirations are used to calculate the VIX
Index. The VIX Index is calculated
between 2:15 a.m. Central Time (‘‘C.T.’’)
and 8:15 a.m. C.T. and between 8:30
a.m. C.T. and 3:15 p.m. C.T. The VIX
Index is calculated by using the
midpoints of real-time SPX option bid/
ask quotes. Only SPX options with more
than 23 days and less than 37 days to
the Friday SPX expiration are used to
calculate the VIX Index. These SPX
options are then weighted to yield a
constant, 30-day measure of the
expected volatility of the S&P 500
Index.
VIX levels are calculated by Cboe and
disseminated at 15-second intervals to
market information vendors via the
Options Price Reporting Authority
(‘‘OPRA’’).
khammond on DSKBBV9HB2PROD with NOTICES
VIX Futures
The information in this filing relating
to VIX Futures was taken from the CFE
website and from the Registration
Statement.
The CFE began listing and trading VIX
Futures on March 26, 2004 under the
ticker symbol VX. VIX Futures reflect
the market’s estimate of the value of the
VIX Index on various expiration dates in
the future. According to the Registration
Statement, the value of a VIX Futures
Contract is based on the expected
reading of the VIX Index at the
expiration of such VIX Futures, and
therefore represents forward implied
volatility of the S&P 500 over the 30-day
period following the expiration of the
VIX Futures. As a result, a movement in
the VIX Index today will not necessarily
result in a corresponding movement in
the price of VIX Futures.
VIX Futures, which trade only on
CFE, trade between the hours of 8:30
a.m.–3:15 p.m. C.T. The CFE is a
member of the Intermarket Surveillance
Group (‘‘ISG’’).
VerDate Sep<11>2014
16:09 Aug 23, 2019
Jkt 247001
Monthly and weekly expirations in
VIX Futures are available and trade
nearly 24 hours a day, five days a week.
VIX Weekly futures began trading on
CFE in 2015.
The monthly volume and open
interest (number of contracts) as of the
last day of each month (November 2018
through April 2019) for VIX Futures was
as follows:
Nov–18
Dec–18
Jan–19
Feb–19
Mar–19
Apr–19
.............
.............
..............
..............
..............
..............
Monthly
volume
Open
interest
5,602,563
6,127,137
4,896,371
3,793,922
5,294,713
4,524,300
9,704,691
8,120,281
7,605,976
6,880,121
7,419,836
8,875,583
Dynamic Short Short-Term Volatility
Futures ETF
The Exchange proposes to list and
trade the Shares of the Fund under
proposed amended NYSE Arca Rule
8.700–E. Dynamic Shares LLC will serve
as the Trust’s sponsor (‘‘Sponsor’’), and
will serve as its commodity pool
operator upon its registration with the
Commodity Futures Trading
Commission (‘‘CFTC’’), which will be
prior to the effectiveness of the
Registration Statement. Wilmington
Trust Company is the sole ‘‘Trustee’’ of
the Trust. The Nottingham Company
will be the ‘‘Administrator’’ for the
Fund. Nottingham Shareholder
Services, LLC will serve as the ‘‘Transfer
Agent’’ for the Fund for ‘‘Authorized
Participants.’’ Capital Investment
Group, Inc. will serve as the
‘‘Distributor’’ for the Fund.
The Sponsor will be registered as a
commodity pool operator and is not
registered or affiliated with a brokerdealer. In the event (a) the Sponsor
becomes registered as a broker-dealer or
newly affiliated with a broker-dealer, or
(b) any new sponsor is a registered
broker-dealer or becomes affiliated with
a broker-dealer, it will implement and
maintain a fire wall with respect to its
relevant personnel or its broker-dealer
affiliate regarding access to information
concerning the composition and/or
changes to the Disclosed Portfolio (as
defined in NYSE Arca Rule 8.700–
E(c)(2)), and will be subject to
procedures designed to prevent the use
and dissemination of material nonpublic information regarding such
portfolio.
According to the Registration
Statement, the Fund will seek to
provide investors with inverse exposure
to the implied volatility of the broadbased, large-cap U.S. equity market.
Such exposure will be for one full
PO 00000
Frm 00047
Fmt 4703
Sfmt 4703
trading day. The Fund will seek to
achieve its investment objective, under
normal market conditions,10 by
obtaining investment exposure to an
actively managed portfolio of short
positions in VIX Futures Contracts with
monthly expirations.
The Fund expects to primarily take
short positions in VIX Futures by
shorting the next two near term VIX
Futures and rolling the nearest month
VIX Futures Contract to the next month
on a daily basis. As such, the Fund
expects to have a constant one-month
rolling short position in first and second
month VIX Futures.
The Fund also may hold cash and
cash equivalents, including U.S.
Treasury securities.11
The Fund will seek to dynamically
manage its notional exposure to VIX
Futures. For instance, when the VIX
Index is below its historical average, the
Fund’s notional exposure will be lower
than a traditional short VIX short term
futures ETF, which may maintain a
fixed notional exposure every day.
When the VIX Index is going up, the
Fund will gradually increase its
notional exposure, up to a ceiling of
¥0.5 times its net asset value (‘‘NAV’’).
The Fund expects that its notional
exposure will not exceed ¥0.5 times its
NAV, but that its notional exposure may
exceed ¥0.5 times its NAV during
intraday trading before recalibration (as
described further below).
The Fund will be actively managed
and is not benchmarked to the VIX
Index. As such, according to the
Registration Statement, the Fund can be
expected to perform very differently
from the inverse of the VIX Index. The
Fund does not seek to track the
performance of the VIX Index or the
S&P 500® and can be expected to
perform very differently from the VIX
Index over all periods of time.
According to the Registration
Statement, the Fund will experience
positive or negative performance based
10 The term ‘‘normal market conditions’’ is
defined in NYSE Arca Rule 8.600–E(c)(5).
11 For purposes of this filing, cash equivalents are
the following short-term instruments: (i) U.S.
Government securities, including bills, notes and
bonds differing as to maturity and rates of interest,
which are either issued or guaranteed by the U.S.
Treasury or by U.S. Government agencies or
instrumentalities; (ii) certificates of deposit issued
against funds deposited in a bank or savings and
loan association; (iii) bankers’ acceptances, which
are short-term credit instruments used to finance
commercial transactions; (iv) repurchase
agreements and reverse repurchase agreements; (v)
bank time deposits, which are monies kept on
deposit with banks or savings and loan associations
for a stated period of time at a fixed rate of interest;
(vi) commercial paper, which are short-term
unsecured promissory notes; and (vii) money
market funds.
E:\FR\FM\26AUN1.SGM
26AUN1
Federal Register / Vol. 84, No. 165 / Monday, August 26, 2019 / Notices
on changes in the implied level of future
market volatility to the extent these
changes are reflected in the price of VIX
Futures Contracts. The Fund generally
will experience positive performance,
before accounting for fees and expenses,
to the extent that the implied level of
future volatility, as reflected by the
value of the Fund’s short position in
VIX Futures Contracts, decreases.
Similarly, the Fund generally will
experience negative performance, before
accounting for fees and expenses, to the
extent that the implied level of future
volatility increases.
According to the Registration
Statement, at the close of each trading
day, the Fund expects to recalibrate its
notional exposure value upon the
change of the VIX Index and contango
on that day.12 The Fund expects its
notional exposure to range from ¥0.1 to
¥0.5 after each calibration. Movements
of the VIX Futures during the day will
affect whether the Fund’s portfolio
needs to be repositioned. For example,
if the levels of the VIX Futures have
risen on a given day, net assets of the
Fund should fall. As a result of the
calibration, the Fund’s inverse exposure
will generally increase to a level not
beyond ¥0.5. Conversely, if the levels
of the VIX Futures have fallen on a
given day, net assets of the Fund should
rise. As a result of the calibration, the
Fund’s inverse exposure will generally
decrease to as low as ¥0.1.
In seeking to achieve the Fund’s
investment objective, the Sponsor uses
a proprietary algorithm, which learns
from VIX Futures historical prices and
contango trend, to optimize VIX Futures
khammond on DSKBBV9HB2PROD with NOTICES
12 According
to the Registration Statement, the
contractual obligations of a buyer or seller holding
a futures contract to expiration may generally be
satisfied by taking or making physical delivery of
the underlying reference asset or settling in cash as
designated in the contract specifications.
Alternatively, futures contracts may be closed out
prior to expiration by making an offsetting sale or
purchase of an identical futures contract on the
same or linked exchange before the designated date
of delivery. Once this date is reached, the futures
contract ‘‘expires.’’ As the futures contracts held by
the Fund near expiration, they are generally closed
out and replaced by contracts with a later
expiration. This process is referred to as ‘‘rolling.’’
When the market for these contracts is such that the
prices are higher in the more distant delivery
months than in the nearer delivery months, the sale
during the course of the ‘‘rolling process’’ of the
more nearby contract would take place at a price
that is lower than the price of the more distant
contract. This pattern of higher future prices for
longer expiration futures contracts is often referred
to as ‘‘contango.’’ Alternatively, when the market
for these contracts is such that the prices are higher
in the nearer months than in the more distant
months, the sale during the course of the ‘‘rolling
process’’ of the more nearby contract would take
place at a price that is higher than the price of the
more distant contract. This pattern of higher future
prices of shorter expiration futures contracts is
referred to as ‘‘backwardation.’’
VerDate Sep<11>2014
16:09 Aug 23, 2019
Jkt 247001
trading risks and returns. The algorithm
starts with a relatively low notional
exposure (¥0.1 to ¥0.15) and
recalibrates its notional exposure upon
the change of price and contango of VIX
Futures. The Sponsor expects the
algorithm to slightly increase the Fund’s
notional exposure when the price of VIX
Futures go up to a level not beyond
¥0.5, and, when the price of VIX
Futures goes down, the Sponsor expects
the algorithm to decrease the Fund’s
notional exposure to lower levels to
prepare for potential upcoming spikes
in the price of VIX Futures. In the event
that the Fund’s notional exposure has
already reached ¥0.5 and the price of
VIX Futures increases, the Fund expects
to maintain its notional exposure at
¥0.5 at the close of each trading day.
Conversely, if the price of VIX Futures
decreases when the Fund’s notional
exposure is below ¥0.1, the Fund
expects to maintain its notional
exposure at ¥0.1 when calibrating its
notional exposure.
According to the Registration
Statement, the pursuit of the Fund’s
daily investment objective means that
the Fund’s return for a period longer
than a full trading day will be the
product of the series of daily returns,
with daily repositioned exposure, for
each trading day during the relevant
period. As a consequence, the return for
investors that invest for periods less
than a full trading day or for a period
different than a trading day will not be
the product of the return of the Fund’s
stated daily inverse investment
objective.
Creation and Redemption Transactions
According to the Registration
Statement, ‘‘Authorized Participants’’
may purchase (i.e., create) or redeem
Shares only in blocks of 50,000 Shares
(each such block, a ‘‘Creation Unit’’) in
the Fund. An Authorized Participant is
an entity that has entered into an
Authorized Participant Agreement with
the Trust and the Sponsor. Creation
Units are offered to Authorized
Participants at the Fund’s NAV. The
size of a Creation Unit is subject to
change.
A creation transaction generally takes
place when an Authorized Participant
deposits a specified amount of cash in
exchange for a specified number of
Creation Units. Similarly, Shares
generally can be redeemed only in
Creation Units, generally for cash. The
prices at which creations and
redemptions occur are based on the next
calculation of NAV after an order is
received in proper form. By placing a
purchase order, an Authorized
Participant agrees to deposit cash
PO 00000
Frm 00048
Fmt 4703
Sfmt 4703
44645
(unless as provided otherwise in the
Registration Statement) with the
‘‘Custodian.’’ Creation and redemption
transactions must be placed each day
with the Distributor by the create/
redeem cutoff time (generally 2:00 p.m.,
E.T.) to receive that day’s NAV.
On any Business Day, an Authorized
Participant may place an order with the
Distributor to create one or more
Creation Units. For purposes of
processing both purchase and
redemption orders, a ‘‘Business Day’’
means any day on which the NAV of the
Fund is determined.
Purchase orders must be placed by the
cutoff time of 2:00 p.m., E.T. The cutoff time may be earlier if, for example,
the Exchange or other exchange material
to the valuation or operation of the
Fund closes before the cut-off time.
The total payment required to create
each Creation Unit is the NAV of the
Shares required for such Creation Unit
on the purchase order date plus the
applicable transaction fee.
Delivery of Cash
Cash required for settlement will
typically be transferred to the Custodian
through: (1) The Continuous Net
Settlement (‘‘CNS’’) clearing process of
the National Securities Clearing
Corporation (‘‘NSCC’’), as such
processes have been enhanced to effect
creations and redemptions of Creation
Units; or (2) the facilities of the
Depository Trust Company (‘‘DTC’’) on
a Delivery Versus Payment (‘‘DVP’’)
basis, which is the procedure in which
the buyer’s payment for securities is due
at the time of delivery. The Sponsor
reserves the right to extend the deadline
for the Custodian to receive the cash
required for settlement up to the second
Business Day following the purchase
order date (T+2). The Creation Units
will be delivered to the Authorized
Participant upon the Custodian’s receipt
of the purchase amount.
Delivery of Exchange of Futures
Contract for Related Position (‘‘EFCRP’’)
Futures
Contracts or Block Trades
If the Sponsor shall have determined
to permit the Authorized Participant to
transfer VIX Futures pursuant to an
EFCRP or to engage in a block trade
purchase of futures contracts from the
Authorized Participant with respect to
the Fund, as well as to deliver cash, in
the creation process, VIX Futures
required for settlement must be
transferred directly to the Fund’s
account at its futures commission
merchant. The Creation Units will be
delivered to the Authorized Participant
E:\FR\FM\26AUN1.SGM
26AUN1
44646
Federal Register / Vol. 84, No. 165 / Monday, August 26, 2019 / Notices
upon the Custodian’s receipt of the cash
purchase amount and the VIX Futures.
khammond on DSKBBV9HB2PROD with NOTICES
Redemption Procedures
According to the Registration
Statement, the procedures by which an
Authorized Participant can redeem one
or more Creation Units mirror the
procedures for the creation of Creation
Units. On any Business Day, an
Authorized Participant may place an
order with the Distributor to redeem one
or more Creation Units. A redemption
order must be received prior to
applicable cutoff time (generally 2:00
p.m., E.T.).
By placing a redemption order, an
Authorized Participant agrees to deliver
the Creation Units to be redeemed
through DTC’s book-entry system to the
Fund not later than noon E.T. on the
first Business Day immediately
following the redemption order date
(T+1). The Sponsor reserves the right to
extend the deadline for the Fund to
receive the Creation Units required for
settlement up to the second Business
Day following the redemption order
date (T+2).
The redemption proceeds from the
Fund will consist of the cash
redemption amount and, if permitted by
the Sponsor in its sole discretion with
respect to the Fund, an EFCRP or block
trade with the Fund. The cash
redemption amount is equal to the NAV
of the number of Creation Unit(s) of the
Fund requested in the Authorized
Participant’s redemption order as of the
time of the calculation of the Fund’s
NAV on the redemption order date, less
transaction fees and any amounts
attributable to any applicable EFCRP or
block trade.
The redemption proceeds due from
the Fund will be delivered to the
Authorized Participant at noon E.T. on
the third Business Day immediately
following the redemption order date if,
by such time on such Business Day
immediately following the redemption
order date, the Fund’s DTC account has
been credited with the Creation Units to
be redeemed.
Net Asset Value
The NAV per Share of the Fund will
be computed by dividing the value of
the net assets of the Fund by its total
number of Shares outstanding. Expenses
and fees are accrued daily and taken
into account for purposes of
determining NAV. The Fund’s NAV is
calculated on each day other than a day
when the Exchange is closed for regular
trading. The Fund will compute its NAV
once each trading day (the ‘‘NAV
Calculation Time’’), or an earlier time
set forth on the Trust’s website
VerDate Sep<11>2014
16:09 Aug 23, 2019
Jkt 247001
(www.dynamicsharesetf.com). The
Fund’s website will be operable prior to
commencement of Exchange trading of
the Shares. The NAV Calculation Time
is 4:15 p.m., E.T.
VIX Futures prices are calculated at
their then current market value, which
typically is based upon the settlement
price or the last traded price before the
NAV time for that particular futures
contract.
In certain circumstances (e.g., if the
Sponsor believes market quotations do
not accurately reflect the fair value of a
Fund investment, or a trading halt
closes an exchange or market early), the
Sponsor may, in its sole discretion,
choose to determine a fair value price as
the basis for determining the market
value of such position for such day.
Such fair value prices would generally
be determined based on available inputs
about the current underlying reference
assets and would be based on principles
that the Sponsor deems fair and
equitable.
Indicative Optimized Portfolio Value
(‘‘IOPV’’)
According to the Registration
Statement, the IOPV is an indicator of
the value of the Fund’s net assets at the
time the IOPV is disseminated. The
IOPV is calculated and disseminated
every 15 seconds throughout the trading
day. The IOPV is generally calculated
using the prior day’s closing net assets
of the Fund as a base and updating
throughout the trading day changes in
the value of the financial instruments
held by the Fund.
The IOPV will be disseminated by the
Exchange or a major market data
vendor. In addition, the IOPV is
published on the NYSE Arca’s website
and is available through on-line
information services such as Bloomberg
Finance L.P. and Reuters.
Availability of Information
The Trust’s website,
www.dynamicsharesetf.com, which will
be publicly accessible at no charge, will
contain the following information: (a)
The daily NAV of the Trust, the daily
NAV per Share, the prior Business Day’s
NAV per Share, the reported daily
closing price and the reported daily
trading volume; (b) the daily
composition of the Disclosed Portfolio,
as defined in NYSE Arca Rule 8.700–E
(c)(2) 13; (c) the midpoint of the bid-ask
price as of the time the NAV per Share
13 NYSE Arca Rule 8.700–E(c)(2) provides that the
term ‘‘Disclosed Portfolio’’ means ‘‘the identities
and quantities of the securities and other assets
held by the Trust that will form the basis for the
Trust’s calculation of net asset value at the end of
the business day’’.
PO 00000
Frm 00049
Fmt 4703
Sfmt 4703
is calculated (the ‘‘Bid-Ask Price’’); (d)
the calculation of the premium or
discount of such price against such
NAV per Share; (e) data in chart form
displaying the frequency distribution of
discounts or premiums of the bid-ask
price against the NAV per Share, within
appropriate ranges for each of the four
previous calendar quarters; and (f) the
current prospectus of the Trust,
included in the Registration Statement.
On a daily basis, the Trust will
disclose on its website for all of the
assets held by the Fund the following
information: Name; ticker symbol (if
applicable); CUSIP or other identifier (if
applicable); description of the holding;
with respect to derivatives, the identity
of the security, commodity, index or
other underlying asset; the quantity or
aggregate amount of the holding as
measured by par value, notional value
or amount, number of contracts or
number of units (if applicable); maturity
date; coupon rate (if applicable);
effective date or issue date (if
applicable); market value; percentage
weighting in the Disclosed Portfolio;
and expiration date (if applicable). The
website information will be publicly
available at no charge.
As noted above, the Trust’s NAV and
the NAV per Share will be calculated
and disseminated daily after the close of
the New York Stock Exchange (normally
4:00 p.m., E.T.).14 The Exchange will
disseminate for the Trust on a daily
basis by means of the Consolidated Tape
Association (the ‘‘CTA’’) high-speed line
information with respect to the most
recent NAV per Share, and the number
of Shares outstanding. The Exchange
also will make available on its website
daily trading volume, closing prices and
the NAV per Share.
Pricing for VIX is available from major
market data vendors. Pricing for VIX
Futures is available from CFE and from
major market data vendors. Pricing for
Cboe Options is available from Cboe and
from major market data vendors. Price
information for cash equivalents is
available from major market data
vendors.
The IOPV will be widely
disseminated by one or more major
market data vendors at least every 15
seconds during the Exchange’s Core
Trading Session (as defined in NYSE
Arca Rule 7.34–E).15
14 The Exchange will obtain a representation from
the Trust that the NAV and the NAV per Share will
be calculated daily and that the NAV, the NAV per
Share and the composition of the Disclosed
Portfolio will be made available to all market
participants at the same time.
15 Currently, it is the Exchange’s understanding
that several major market data vendors widely
disseminate IOPVs taken from the CTA high-speed
line or other data feeds.
E:\FR\FM\26AUN1.SGM
26AUN1
Federal Register / Vol. 84, No. 165 / Monday, August 26, 2019 / Notices
Information regarding market price
and trading volume of the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services. The previous day’s closing
price and trading volume information
for the Shares will be published daily in
the financial section of newspapers.
Quotation and last sale information for
the Shares will be available via the CTA
high-speed line.
Impact on Arbitrage Mechanism
The Sponsor believes there will be
minimal, if any, impact to the arbitrage
mechanism as a result of the use of
derivatives. Market makers and
participants should be able to value
derivatives as long as the positions are
disclosed with relevant information.
The Sponsor believes that the price at
which Shares trade will continue to be
disciplined by arbitrage opportunities
created by the ability to purchase or
redeem Shares at their NAV, which
should help ensure that Shares will not
trade at a material discount or premium
in relation to their NAV.
The Sponsor does not believe there
will be any significant impacts to the
settlement or operational aspects of the
Fund’s arbitrage mechanism due to the
use of derivatives.
khammond on DSKBBV9HB2PROD with NOTICES
Criteria for Initial and Continued Listing
The Trust will be subject to the
criteria in NYSE Arca Rule 8.700–E for
initial and continued listing of the
Shares.
The minimum number of Shares to be
outstanding at the start of trading will
be 100,000 Shares. The Exchange
believes that this minimum number of
Shares to be outstanding at the start of
trading is sufficient to provide adequate
market liquidity. The Exchange
represents that, for the initial and
continued listing of the Shares, the
Trust must be in compliance with NYSE
Arca Rule 5.3–E and Rule 10A–3 under
the Exchange Act.16
Trading Rules
Under NYSE Arca Rule 8.700–E(b),
Managed Trust Securities are included
within the Exchange’s definition of
‘‘securities.’’ The Exchange deems the
Shares to be equity securities, thus
rendering trading in the Shares subject
to the Exchange’s existing rules
governing the trading of equity
securities. Commentary .02 to NYSE
Arca Rule 8.700–E provides that
transactions in Managed Trust
Securities will occur during the trading
hours specified in NYSE Arca Rule
16 17
CFR 240.10A–3.
VerDate Sep<11>2014
16:09 Aug 23, 2019
Jkt 247001
7.34–E. Therefore, in accordance with
NYSE Arca Rule 7.34–E, the Shares will
trade on the NYSE Arca Marketplace
from 4:00 a.m. to 8:00 p.m. E.T. The
Exchange has appropriate rules to
facilitate transactions in the Shares
during all trading sessions. As provided
in NYSE Arca Rule 7.6–E, the minimum
price variation (‘‘MPV’’) for quoting and
entry of orders in equity securities
traded on the NYSE Arca Marketplace is
$0.01, with the exception of securities
that are priced less than $1.00 for which
the MPV for order entry is $0.0001.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares.
Trading in the Shares will be halted if
the circuit breaker parameters under
NYSE Arca Rule 7.12–E are reached.
Trading may also be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable.
In addition, if the Exchange becomes
aware that the NAV, the NAV per Share
and/or the Disclosed Portfolio with
respect to a series of Managed Trust
Securities is not disseminated to all
market participants at the same time, it
will halt trading in such series until
such time as the NAV, the NAV per
Share and the Disclosed Portfolio is
available to all market participants.
Surveillance
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances
administered by the Exchange, as well
as cross-market surveillances
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.17 The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
17 FINRA conducts cross-market surveillances on
behalf of the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
PO 00000
Frm 00050
Fmt 4703
Sfmt 4703
44647
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange or FINRA, on behalf of
the Exchange, or both, will
communicate as needed regarding
trading in the Shares and VIX Futures
with other markets or other entities that
are members of the ISG, and the
Exchange or FINRA, on behalf of the
Exchange, or both, may obtain trading
information regarding trading in the
Shares and VIX Futures from such
markets or entities. In addition, the
Exchange may obtain information
regarding trading in the Shares and VIX
Futures from markets or other entities
that are members of ISG or with which
the Exchange has in place a
comprehensive surveillance sharing
agreement (‘‘CSSA’’).18 FINRA, on
behalf of the Exchange, is able to access,
as needed, trade information for certain
cash equivalents held by the Fund
reported to FINRA’s Trade Reporting
and Compliance Engine (‘‘TRACE’’).
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
All statements and representations
made in this filing regarding (a) the
description of the portfolio of the Fund,
(b) limitations on portfolio of the Fund,
or (c) the applicability of Exchange
listing rules specified in this rule filing
shall constitute continued listing
requirements for listing the Shares on
the Exchange.
The issuer has represented to the
Exchange that it will advise the
Exchange of any failure by the Fund to
comply with the continued listing
requirements, and, pursuant to its
obligations under Section 19(g)(1) of the
Act, the Exchange will monitor for
compliance with the continued listing
requirements. If the Fund is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
NYSE Arca Rule 5.5–E (m).
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an Information Bulletin
(‘‘Bulletin’’) of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Bulletin will discuss the following: (1)
The procedures for purchases and
redemptions of Shares (and that Shares
are not individually redeemable); (2)
18 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
components of the Disclosed Portfolio for the Fund
may trade on markets that are members of ISG or
with which the Exchange has in place a CSSA.
E:\FR\FM\26AUN1.SGM
26AUN1
44648
Federal Register / Vol. 84, No. 165 / Monday, August 26, 2019 / Notices
khammond on DSKBBV9HB2PROD with NOTICES
NYSE Arca Rule 9.2–E (a), which
imposes a duty of due diligence on its
ETP Holders to learn the essential facts
relating to every customer prior to
trading the Shares; (3) the requirement
that ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; (4) how
information regarding the IOPV and the
Disclosed Portfolio is disseminated; (5)
the risks involved in trading the Shares
during the opening and late trading
sessions when an updated IOPV will not
be calculated or publicly disseminated;
and (6) trading information.
In addition, the Bulletin will
reference that the Trust is subject to
various fees and expenses described in
the Registration Statement.
The Bulletin also will reference the
fact that there is no regulated source of
last sale information regarding certain of
the asset classes that the Trust may hold
and that the Commission has no
jurisdiction over the trading of VIX
Futures.
The Bulletin also will discuss any
exemptive, no-action and interpretive
relief granted by the Commission from
any rules under the Act.
2. Statutory Basis
The basis under the Exchange Act for
this proposed rule change is the
requirement under Section 6(b)(5) 19
that an exchange have rules that are
designed to prevent fraudulent and
manipulative 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 amendment to Rule 8.700–
E(c)(1) to add VIX Futures Contracts
and/or swaps on VIX to the financial
instruments in which an issue of
Managed Trust Securities may hold long
and/or short positions will provide
investors with the ability to better
diversify and hedge their portfolios
using an exchange traded security
without having to trade directly in the
underlying VIX Futures Contracts, and
will facilitate the listing and trading on
the Exchange of additional Managed
Trust Securities that will enhance
competition among market participants,
to the benefit of investors and the
marketplace.
As noted above, the Commission
previously has (1) approved the listing
and trading of options on the VIX,20 (2)
approved an amendment to NYSE Arca
Rule 5.2–E(j)(6) to add VIX Futures to
the definition of Futures Reference
Assets applicable to ‘‘Futures-Linked
Securities,’’ 21 (3) approved listing and
trading on the Exchange of series of
Trust Issued Receipts that invest in VIX
Futures,22 (4) issued a notice of
effectiveness regarding amendments to
NYSE Arca Rule 5.2–E(j)(6)(v) to add
futures on VSTOXX (another index
referencing market volatility) as a
‘‘Futures Reference Asset’’ underlying
an issue of ‘‘Futures-Linked
Securities’’ 23, and (5) approved an
amendment to NYSE Arca Rule 8.700–
E to add the VSTOXX as a reference
asset to the futures contracts and swaps
that may be held by trusts that issue
Managed Trust Securities.24
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices because the Shares
will be listed and traded on the
Exchange pursuant to the initial and
continued listing criteria in NYSE Arca
Rule 8.700–E. The Exchange has in
place surveillance procedures that are
adequate to properly monitor trading in
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and applicable federal securities
laws. The NAV of the Trust, the NAV
per Share and the Disclosed Portfolio
will be disseminated to all market
participants at the same time. The Trust
will provide website disclosure of
portfolio holdings daily. The IOPV per
Share (quoted in U.S. dollars) will be
widely disseminated at least every 15
seconds during the Exchange’s Core
Trading Session by major market data
vendors. Pricing for the Index and VIX
are available from major market data
vendors. Pricing for VIX Futures and
VIX Options will be available from the
CFE and Cboe, respectively. Price
information for cash equivalents will be
available from major market data
vendors. Quotation and last-sale
information regarding the Shares will be
disseminated through the CTA highspeed line.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest given that a large amount
of information will be publicly available
regarding the Trust and the Shares,
thereby promoting market transparency.
The Exchange may halt trading during
the day in which an interruption to the
dissemination of the IOPV occurs, or the
value of the underlying VIX Futures
21 See
note 6, supra.
note 7, supra.
23 See note 8, supra.
24 See note 9, supra.
22 See
19 15
U.S.C. 78f(b)(5).
note 5, supra.
20 See
VerDate Sep<11>2014
16:09 Aug 23, 2019
Jkt 247001
PO 00000
Frm 00051
Fmt 4703
Sfmt 4703
occurs. If the interruption to the
dissemination of the IOPV or the value
of the underlying VIX Futures persists
past the trading day in which it
occurred, the Exchange will halt trading
no later than the beginning of the
trading day following the interruption.
If the Exchange becomes aware that the
NAV, the NAV per Share and the
Disclosed Portfolio with respect to a
series of Managed Trust Securities are
not disseminated to all market
participants at the same time, it will halt
trading in such series until such time as
the NAV, the NAV per Share and the
Disclosed Portfolio are available to all
market participants. Trading in Shares
of the Trust will be halted if the circuit
breaker parameters under NYSE Arca
Rule 7.12–E have been reached or
because of market conditions or for
reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable. Moreover, prior to the
commencement of trading, the Exchange
will inform its ETP Holders in the
Bulletin of the special characteristics
and risks associated with trading the
Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest given
that it will facilitate the listing and
trading of an additional type of
exchange-traded product that will
principally hold futures contracts and
that will enhance competition among
market participants, to the benefit of
investors and the marketplace. As noted
above, the Exchange has in place
surveillance procedures relating to
trading in the Shares and may obtain
information relating to trading in the
Shares and VIX Futures from other
exchanges that are members of the ISG
or with which the Exchange has entered
into a CSSA. In addition, as noted
above, investors will have ready access
to information regarding the IOPV and
quotation and last sale information for
the Shares.
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 Exchange Act.
The Exchange notes that the proposed
rule change will facilitate the listing and
trading of an additional type of activelymanaged exchange-traded product that
will principally hold VIX Futures, and
that will enhance competition among
market participants, to the benefit of
investors and the marketplace.
E:\FR\FM\26AUN1.SGM
26AUN1
Federal Register / Vol. 84, No. 165 / Monday, August 26, 2019 / Notices
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
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
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–2019–55 on the subject line.
khammond on DSKBBV9HB2PROD with NOTICES
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–2019–55. 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
16:09 Aug 23, 2019
Jkt 247001
on July 31, 2019,5 and the Commission
has received no comments regarding the
changes proposed in the Advance
Notice.6 This publication serves as
notice of no objection to the Advance
Notice.
BILLING CODE 8011–01–P
II. Background
The System for Theoretical Analysis
and Numerical Simulations (‘‘STANS’’)
is OCC’s methodology for calculating
margin requirements. STANS margin
requirements are driven by several
components, each reflecting a different
aspect of risk. Two primary components
of STANS are the models that OCC uses
to (1) generate theoretical values,
implied volatilities, and certain risk
sensitivities for plain vanilla listed
options (the ‘‘Vanilla Option Model’’); 7
and (2) estimate fair prices of listed
option contracts based on their bid and
ask price quotes (the ‘‘Smoothing
Algorithm’’).8 The changes proposed in
the Advance Notice are designed to
address five limitations of the current
Vanilla Option Model and five
limitations of the current Smoothing
Algorithm.
SECURITIES AND EXCHANGE
COMMISSION
A. Vanilla Option Model
OCC relies on the Vanilla Option
Model to generate theoretical values,
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–18270 Filed 8–23–19; 8:45 am]
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:
VerDate Sep<11>2014
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–2019–55 and
should be submitted on or before
September16, 2019.
44649
[Release No. 34–86713; File No. SR–OCC–
2019–804]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of No Objection To Advance Notice
Related to The Options Clearing
Corporation’s Vanilla Option Model
and Smoothing Algorithm
August 20, 2019.
I. Introduction
On June 28, 2019, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) advance
notice SR–OCC–2019–804 (‘‘Advance
Notice’’) pursuant to Section 806(e)(1) of
Title VIII of the Dodd-Frank Wall Street
Reform and Consumer Protection Act,
entitled Payment, Clearing and
Settlement Supervision Act of 2010
(‘‘Clearing Supervision Act’’) 1 and Rule
19b–4(n)(1)(i) 2 under the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 3 to propose changes to its margin
methodology regarding the estimation of
prices for listed options contracts.4 The
Advance Notice was published for
public comment in the Federal Register
25 17
CFR 200.30–3(a)(12).
U.S.C. 5465(e)(1).
2 17 CFR 240.19b–4(n)(1)(i).
3 15 U.S.C. 78a et seq.
4 See Notice of Filing infra note 5, at 84 FR 37373.
1 12
PO 00000
Frm 00052
Fmt 4703
Sfmt 4703
5 Securities Exchange Act Release No. 86488 (Jul.
26, 2019), 84 FR 37373 (Jul. 31, 2019) (SR–OCC–
2019–804) (‘‘Notice of Filing’’). On June 28, 2019,
OCC also filed a related proposed rule change (SR–
OCC–2019–005) with the Commission pursuant to
Section 19(b)(1) of the Exchange Act and Rule 19b–
4 thereunder (‘‘Proposed Rule Change’’). 15 U.S.C.
78s(b)(1) and 17 CFR 240.19b–4, respectively. In the
Proposed Rule Change, which was published in the
Federal Register on July 9, 2019, OCC seeks
approval of proposed changes to its rules necessary
to implement the Advance Notice. Securities
Exchange Act Release No. 86296 (July 3, 2019), 84
FR 32821 (July 9, 2019). The comment period for
the related Proposed Rule Change filing closed on
July 30, 2019.
6 Since the proposal contained in the Advance
Notice was also filed as a proposed rule change, all
public comments received on the proposal are
considered regardless of whether the comments are
submitted on the proposed rule change or the
Advance Notice.
7 Plain vanilla listed options are commonly
understood to encompass options with
standardized terms (e.g., a predetermined strike
price, classification as a call vs. put) and settlement
structures (e.g., American-style, European-style). As
described in the Notice of Filing, the Vanilla Option
Model is designed to address such options,
including (1) all listed vanilla European and
American options on exchange traded funds and
exchange traded notes (collectively, ‘‘ETPs’’),
equities, equity indices, futures on equity indices,
currencies or commodities, and (2) vanilla flexible
exchange options (‘‘vanilla FLEX options’’). See
Notice of Filing, 84 FR at 37373, n. 8. As of the time
of filing, plain vanilla options accounted for
approximately 95 percent of the total contracts
cleared by OCC. See id.
8 OCC uses the Smoothing Algorithm to estimate
prices on all plain vanilla listed options included
in the Vanilla Option Model, as well as options on
non-equity securities (e.g., the Cboe Volatility
Index). See Notice of Filing, 84 FR at 37374.
E:\FR\FM\26AUN1.SGM
26AUN1
]]>Agencies
[Federal Register Volume 84, Number 165 (Monday, August 26, 2019)]
[Notices]
[Pages 44642-44649]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18270]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86714; File No. SR-NYSEArca-2019-55]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Amend NYSE Arca Rule 8.700-E and To List and
Trade Shares of the Dynamic Short Short-Term Volatility Futures ETF
August 20, 2019.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'' or the ``Exchange Act'') \2\ and Rule 19b-4
thereunder,\3\ notice is hereby given that, on August 7, 2019, NYSE
Arca, Inc. (``NYSE Arca'' or the ``Exchange'') filed with the
Securities and Exchange Commission (the ``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by the self-regulatory
[[Page 44643]]
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes (1) to amend NYSE Arca Rule 8.700-E to add
futures contracts and swaps on the Cboe Volatility Index (``VIX'') to
the financial instruments that an issue of Managed Trust Securities may
hold; and (2) to list and trade shares of the Dynamic Short Short-Term
Volatility Futures ETF under proposed amended NYSE Arca Rule 8.700-E.
The proposed 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
NYSE Arca Rule 8.700-E permits the trading of Managed Trust
Securities either by listing or pursuant to unlisted trading privileges
(``UTP'').\3\ The Exchange proposes to amend NYSE Arca Rule 8.700-E
(c)(1) to add futures contracts and/or swaps on the Cboe Volatility
Index (``VIX Index'' or ``VIX'') to the financial instruments that an
issue of Managed Trust Securities may hold long and/or short positions.
(Futures on the VIX Index are referred to herein as ``VIX Futures'' or
``VIX Futures Contracts''). In addition, the Exchange proposes to list
and trade the shares (the ``Shares'') of the Dynamic Short Short-Term
Volatility Futures ETF (the ``Fund'') a series of Dynamic Shares Trust
(``Trust'') under proposed amended NYSE Arca Rule 8.700-E.\4\
---------------------------------------------------------------------------
\3\ Managed Trust Security means a security that is registered
under the Securities Act of 1933 (15 U.S.C. 77a), as amended (the
``Securities Act''), and (i) is issued by a trust (``Trust''), or
any series thereof, that (1) is a commodity pool as defined in the
Commodity Exchange Act and regulations thereunder, is not registered
or required to be registered as an investment company under the
Investment Company Act of 1940, as amended, and is managed by a
commodity pool operator registered with the Commodity Futures
Trading Commission, and (2) holds long and/or short positions in
exchange-traded futures contracts and/or certain currency forward
contracts and/or swaps selected by the Trust's advisor consistent
with the Trust's investment objectives, which will only include
exchange-traded futures contracts involving commodities, commodity
indices, currencies, currency indices, stock indices, the EURO STOXX
50 Volatility Index (VSTOXX), fixed income indices, interest rates
and sovereign, private and mortgage or asset backed debt
instruments, and/or forward contracts on specified currencies, and/
or swaps on stock indices, fixed income indices, commodity indices,
VSTOXX, commodities, currencies, currency indices, or interest
rates, each as disclosed in the Trust's prospectus as such may be
amended from time to time, and cash and cash equivalents; and (ii)
is issued and redeemed continuously in specified aggregate amounts
at the next applicable net asset value. See NYSE Arca Rule 8.700-E
(c)(1).
\4\ On June 5, 2019, the Trust submitted to the Commission its
draft registration statement on Form S-1 under the Securities Act of
1933 (15 U.S.C. 77a) (``Securities Act''). The Jumpstart Our
Business Startups Act, enacted on April 5, 2012, added Section 6(e)
to the Securities Act. Section 6(e) of the Securities Act provides
that an ``emerging growth company'' may confidentially submit to the
Commission a draft registration statement for confidential, non-
public review by the Commission staff prior to public filing,
provided that the initial confidential submission and all amendments
thereto shall be publicly filed not later than 21 days before the
date on which the issuer conducts a road show, as such term is
defined in Securities Act Rule 433(h)(4). An emerging growth company
is defined in Section 2(a)(19) of the Securities Act as an issuer
with less than $1,000,000,000 total annual gross revenues during its
most recently completed fiscal year. The Trust meets the definition
of an emerging growth company and consequently has submitted its
Form S-1 registration statement (``Registration Statement'') on a
confidential basis with the Commission. The description of the
operation of the Trust and the Fund herein is based, in part, on the
Registration Statement.
---------------------------------------------------------------------------
The Commission has previously approved the listing and trading of
options on the VIX.\5\ In addition, the Commission has previously
approved an amendment to NYSE Arca Rule 5.2-E(j)(6) (``Index-Linked
Securities'') to add VIX Futures to the definition of Futures Reference
Assets applicable to ``Futures-Linked Securities,'' \6\ and has
approved listing and trading on the Exchange of series of Trust Issued
Receipts that invest in VIX Futures.\7\
---------------------------------------------------------------------------
\5\ See Securities Exchange Release No. 48807 (November 19,
2003), 68 FR 66516 (November 26, 2003) (SR-CBOE-2003-40).
\6\ 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).
See also, Securities Exchange Act Release No. 58968 (November 17,
2008), 73 FR 71082 (November 24, 2008) (SR-NYSEArca-2008-111) (Order
Granting Accelerated Approval of Proposed Rule Change to Amend NYSE
Arca Equities Rule 5.2(j)(6)(v) in Order to Add the CBOE Volatility
Index Futures to the Definition of Futures Reference Asset).
\7\ See, e.g., Securities Exchange Act Release Nos. 58457
(September 3, 2008), 73 FR 52711 (September 10, 2008) (SR-NYSEArca-
2008-91) (order granting accelerated approval to list on NYSE Arca
of 14 ProShares funds); 63610 (December 27, 2010), 76 FR 199
(January 3, 2011) (SR-NYSEArca-2010-101) (order approving listing
and trading of the ProShares VIX Short-Term Futures ETF and the
ProShares VIX Mid-Term Futures ETF). See also Securities Exchange
Act Release No. 58968 (November 17, 2008), 73 FR 71082 (November 24,
2008) (SR-NYSEArca-2008-111) (order granting accelerated approval of
proposed rule change to amend NYSE Arca Equities Rule 5.2(j)(6)(v)
to add VIX Futures to the definition of Futures Reference Asset.
---------------------------------------------------------------------------
The Exchange notes that the Commission has issued a notice of
effectiveness regarding amendments to NYSE Arca Rule 5.2-E(j)(6)(v) to
add futures on another index referencing market volatility--the EURO
STOXX 50 Volatility Index (``VSTOXX'')--as a ``Futures Reference
Asset'' underlying an issue of ``Futures-Linked Securities.'' \8\ In
addition, the Commission has approved an amendment to NYSE Arca Rule
8.700-E to add the VSTOXX as a reference asset to the futures contracts
and swaps that may be held by trusts that issue Managed Trust
Securities.\9\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 79975 (February 6,
2017), 82 FR 10418 (February 10, 2017) (SR-NYSEArca-2017-08) (Notice
of Filing and Immediate Effectiveness to Amend NYSE Arca Equities
Rule 5.2(j)(6)(v) to Add EURO STOXX 50 Volatility Futures to the
Definition of Futures Reference Asset in Rule 5.2(j)(6)).
\9\ See Securities Exchange Act Release No. 82066 (November 13,
2017), 82 FR 54434 (November 17, 2017) (SR-NYSEArca-2017-85) (Notice
of Filing of Amendment No. 3, and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 3,
to Amend NYSE Arca Rule 8.700-E and to List and Trade Shares of the
ProShares European Volatility Futures ETF).
---------------------------------------------------------------------------
The Exchange believes that the proposed amendment to add VIX
Futures and/or swaps on VIX to the financial instruments in which an
issue of Managed Trust Securities may hold long and/or short positions
will provide investors with the ability to better diversify and hedge
their portfolios using an exchange traded security without having to
trade directly in the underlying VIX Futures, and will facilitate the
listing and trading on the Exchange of additional Managed Trust
Securities that will enhance competition among market participants, to
the benefit of investors and the marketplace.
The Exchange believes that its surveillance procedures are adequate
to continue to properly monitor the trading of Managed Trust Securities
that hold
[[Page 44644]]
VIX Futures and/or swaps on VIX in all trading sessions and to deter
and detect violations of Exchange rules.
The VIX Index
The information in this filing relating to the VIX Index was taken
from the website of the Cboe Futures Exchange (the ``CFE'') and from
the Registration Statement.
The VIX Index is an up-to-the-minute market estimate of expected
volatility that is calculated by using real-time prices of options on
the S&P 500[supreg] Index listed on Cboe Exchange, Inc. (``Cboe'')
(``Cboe Options'') (Symbol: SPX). The VIX Index is designed to reflect
investors' consensus view of future (30-day) expected stock market
volatility. Only SPX options with Friday expirations are used to
calculate the VIX Index. The VIX Index is calculated between 2:15 a.m.
Central Time (``C.T.'') and 8:15 a.m. C.T. and between 8:30 a.m. C.T.
and 3:15 p.m. C.T. The VIX Index is calculated by using the midpoints
of real-time SPX option bid/ask quotes. Only SPX options with more than
23 days and less than 37 days to the Friday SPX expiration are used to
calculate the VIX Index. These SPX options are then weighted to yield a
constant, 30-day measure of the expected volatility of the S&P 500
Index.
VIX levels are calculated by Cboe and disseminated at 15-second
intervals to market information vendors via the Options Price Reporting
Authority (``OPRA'').
VIX Futures
The information in this filing relating to VIX Futures was taken
from the CFE website and from the Registration Statement.
The CFE began listing and trading VIX Futures on March 26, 2004
under the ticker symbol VX. VIX Futures reflect the market's estimate
of the value of the VIX Index on various expiration dates in the
future. According to the Registration Statement, the value of a VIX
Futures Contract is based on the expected reading of the VIX Index at
the expiration of such VIX Futures, and therefore represents forward
implied volatility of the S&P 500 over the 30-day period following the
expiration of the VIX Futures. As a result, a movement in the VIX Index
today will not necessarily result in a corresponding movement in the
price of VIX Futures.
VIX Futures, which trade only on CFE, trade between the hours of
8:30 a.m.-3:15 p.m. C.T. The CFE is a member of the Intermarket
Surveillance Group (``ISG'').
Monthly and weekly expirations in VIX Futures are available and
trade nearly 24 hours a day, five days a week. VIX Weekly futures began
trading on CFE in 2015.
The monthly volume and open interest (number of contracts) as of
the last day of each month (November 2018 through April 2019) for VIX
Futures was as follows:
------------------------------------------------------------------------
Monthly Open
volume interest
------------------------------------------------------------------------
Nov-18........................................ 5,602,563 9,704,691
Dec-18........................................ 6,127,137 8,120,281
Jan-19........................................ 4,896,371 7,605,976
Feb-19........................................ 3,793,922 6,880,121
Mar-19........................................ 5,294,713 7,419,836
Apr-19........................................ 4,524,300 8,875,583
------------------------------------------------------------------------
Dynamic Short Short-Term Volatility Futures ETF
The Exchange proposes to list and trade the Shares of the Fund
under proposed amended NYSE Arca Rule 8.700-E. Dynamic Shares LLC will
serve as the Trust's sponsor (``Sponsor''), and will serve as its
commodity pool operator upon its registration with the Commodity
Futures Trading Commission (``CFTC''), which will be prior to the
effectiveness of the Registration Statement. Wilmington Trust Company
is the sole ``Trustee'' of the Trust. The Nottingham Company will be
the ``Administrator'' for the Fund. Nottingham Shareholder Services,
LLC will serve as the ``Transfer Agent'' for the Fund for ``Authorized
Participants.'' Capital Investment Group, Inc. will serve as the
``Distributor'' for the Fund.
The Sponsor will be registered as a commodity pool operator and is
not registered or affiliated with a broker-dealer. In the event (a) the
Sponsor becomes registered as a broker-dealer or newly affiliated with
a broker-dealer, or (b) any new sponsor is a registered broker-dealer
or becomes affiliated with a broker-dealer, it will implement and
maintain a fire wall with respect to its relevant personnel or its
broker-dealer affiliate regarding access to information concerning the
composition and/or changes to the Disclosed Portfolio (as defined in
NYSE Arca Rule 8.700-E(c)(2)), and will be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding such portfolio.
According to the Registration Statement, the Fund will seek to
provide investors with inverse exposure to the implied volatility of
the broad-based, large-cap U.S. equity market. Such exposure will be
for one full trading day. The Fund will seek to achieve its investment
objective, under normal market conditions,\10\ by obtaining investment
exposure to an actively managed portfolio of short positions in VIX
Futures Contracts with monthly expirations.
---------------------------------------------------------------------------
\10\ The term ``normal market conditions'' is defined in NYSE
Arca Rule 8.600-E(c)(5).
---------------------------------------------------------------------------
The Fund expects to primarily take short positions in VIX Futures
by shorting the next two near term VIX Futures and rolling the nearest
month VIX Futures Contract to the next month on a daily basis. As such,
the Fund expects to have a constant one-month rolling short position in
first and second month VIX Futures.
The Fund also may hold cash and cash equivalents, including U.S.
Treasury securities.\11\
---------------------------------------------------------------------------
\11\ For purposes of this filing, cash equivalents are the
following short-term instruments: (i) U.S. Government securities,
including bills, notes and bonds differing as to maturity and rates
of interest, which are either issued or guaranteed by the U.S.
Treasury or by U.S. Government agencies or instrumentalities; (ii)
certificates of deposit issued against funds deposited in a bank or
savings and loan association; (iii) bankers' acceptances, which are
short-term credit instruments used to finance commercial
transactions; (iv) repurchase agreements and reverse repurchase
agreements; (v) bank time deposits, which are monies kept on deposit
with banks or savings and loan associations for a stated period of
time at a fixed rate of interest; (vi) commercial paper, which are
short-term unsecured promissory notes; and (vii) money market funds.
---------------------------------------------------------------------------
The Fund will seek to dynamically manage its notional exposure to
VIX Futures. For instance, when the VIX Index is below its historical
average, the Fund's notional exposure will be lower than a traditional
short VIX short term futures ETF, which may maintain a fixed notional
exposure every day.
When the VIX Index is going up, the Fund will gradually increase
its notional exposure, up to a ceiling of -0.5 times its net asset
value (``NAV''). The Fund expects that its notional exposure will not
exceed -0.5 times its NAV, but that its notional exposure may exceed -
0.5 times its NAV during intraday trading before recalibration (as
described further below).
The Fund will be actively managed and is not benchmarked to the VIX
Index. As such, according to the Registration Statement, the Fund can
be expected to perform very differently from the inverse of the VIX
Index. The Fund does not seek to track the performance of the VIX Index
or the S&P 500[supreg] and can be expected to perform very differently
from the VIX Index over all periods of time.
According to the Registration Statement, the Fund will experience
positive or negative performance based
[[Page 44645]]
on changes in the implied level of future market volatility to the
extent these changes are reflected in the price of VIX Futures
Contracts. The Fund generally will experience positive performance,
before accounting for fees and expenses, to the extent that the implied
level of future volatility, as reflected by the value of the Fund's
short position in VIX Futures Contracts, decreases. Similarly, the Fund
generally will experience negative performance, before accounting for
fees and expenses, to the extent that the implied level of future
volatility increases.
According to the Registration Statement, at the close of each
trading day, the Fund expects to recalibrate its notional exposure
value upon the change of the VIX Index and contango on that day.\12\
The Fund expects its notional exposure to range from -0.1 to -0.5 after
each calibration. Movements of the VIX Futures during the day will
affect whether the Fund's portfolio needs to be repositioned. For
example, if the levels of the VIX Futures have risen on a given day,
net assets of the Fund should fall. As a result of the calibration, the
Fund's inverse exposure will generally increase to a level not beyond -
0.5. Conversely, if the levels of the VIX Futures have fallen on a
given day, net assets of the Fund should rise. As a result of the
calibration, the Fund's inverse exposure will generally decrease to as
low as -0.1.
---------------------------------------------------------------------------
\12\ According to the Registration Statement, the contractual
obligations of a buyer or seller holding a futures contract to
expiration may generally be satisfied by taking or making physical
delivery of the underlying reference asset or settling in cash as
designated in the contract specifications. Alternatively, futures
contracts may be closed out prior to expiration by making an
offsetting sale or purchase of an identical futures contract on the
same or linked exchange before the designated date of delivery. Once
this date is reached, the futures contract ``expires.'' As the
futures contracts held by the Fund near expiration, they are
generally closed out and replaced by contracts with a later
expiration. This process is referred to as ``rolling.'' When the
market for these contracts is such that the prices are higher in the
more distant delivery months than in the nearer delivery months, the
sale during the course of the ``rolling process'' of the more nearby
contract would take place at a price that is lower than the price of
the more distant contract. This pattern of higher future prices for
longer expiration futures contracts is often referred to as
``contango.'' Alternatively, when the market for these contracts is
such that the prices are higher in the nearer months than in the
more distant months, the sale during the course of the ``rolling
process'' of the more nearby contract would take place at a price
that is higher than the price of the more distant contract. This
pattern of higher future prices of shorter expiration futures
contracts is referred to as ``backwardation.''
---------------------------------------------------------------------------
In seeking to achieve the Fund's investment objective, the Sponsor
uses a proprietary algorithm, which learns from VIX Futures historical
prices and contango trend, to optimize VIX Futures trading risks and
returns. The algorithm starts with a relatively low notional exposure
(-0.1 to -0.15) and recalibrates its notional exposure upon the change
of price and contango of VIX Futures. The Sponsor expects the algorithm
to slightly increase the Fund's notional exposure when the price of VIX
Futures go up to a level not beyond -0.5, and, when the price of VIX
Futures goes down, the Sponsor expects the algorithm to decrease the
Fund's notional exposure to lower levels to prepare for potential
upcoming spikes in the price of VIX Futures. In the event that the
Fund's notional exposure has already reached -0.5 and the price of VIX
Futures increases, the Fund expects to maintain its notional exposure
at -0.5 at the close of each trading day. Conversely, if the price of
VIX Futures decreases when the Fund's notional exposure is below -0.1,
the Fund expects to maintain its notional exposure at -0.1 when
calibrating its notional exposure.
According to the Registration Statement, the pursuit of the Fund's
daily investment objective means that the Fund's return for a period
longer than a full trading day will be the product of the series of
daily returns, with daily repositioned exposure, for each trading day
during the relevant period. As a consequence, the return for investors
that invest for periods less than a full trading day or for a period
different than a trading day will not be the product of the return of
the Fund's stated daily inverse investment objective.
Creation and Redemption Transactions
According to the Registration Statement, ``Authorized
Participants'' may purchase (i.e., create) or redeem Shares only in
blocks of 50,000 Shares (each such block, a ``Creation Unit'') in the
Fund. An Authorized Participant is an entity that has entered into an
Authorized Participant Agreement with the Trust and the Sponsor.
Creation Units are offered to Authorized Participants at the Fund's
NAV. The size of a Creation Unit is subject to change.
A creation transaction generally takes place when an Authorized
Participant deposits a specified amount of cash in exchange for a
specified number of Creation Units. Similarly, Shares generally can be
redeemed only in Creation Units, generally for cash. The prices at
which creations and redemptions occur are based on the next calculation
of NAV after an order is received in proper form. By placing a purchase
order, an Authorized Participant agrees to deposit cash (unless as
provided otherwise in the Registration Statement) with the
``Custodian.'' Creation and redemption transactions must be placed each
day with the Distributor by the create/redeem cutoff time (generally
2:00 p.m., E.T.) to receive that day's NAV.
On any Business Day, an Authorized Participant may place an order
with the Distributor to create one or more Creation Units. For purposes
of processing both purchase and redemption orders, a ``Business Day''
means any day on which the NAV of the Fund is determined.
Purchase orders must be placed by the cutoff time of 2:00 p.m.,
E.T. The cut-off time may be earlier if, for example, the Exchange or
other exchange material to the valuation or operation of the Fund
closes before the cut-off time.
The total payment required to create each Creation Unit is the NAV
of the Shares required for such Creation Unit on the purchase order
date plus the applicable transaction fee.
Delivery of Cash
Cash required for settlement will typically be transferred to the
Custodian through: (1) The Continuous Net Settlement (``CNS'') clearing
process of the National Securities Clearing Corporation (``NSCC''), as
such processes have been enhanced to effect creations and redemptions
of Creation Units; or (2) the facilities of the Depository Trust
Company (``DTC'') on a Delivery Versus Payment (``DVP'') basis, which
is the procedure in which the buyer's payment for securities is due at
the time of delivery. The Sponsor reserves the right to extend the
deadline for the Custodian to receive the cash required for settlement
up to the second Business Day following the purchase order date (T+2).
The Creation Units will be delivered to the Authorized Participant upon
the Custodian's receipt of the purchase amount.
Delivery of Exchange of Futures Contract for Related Position
(``EFCRP'') Futures
Contracts or Block Trades
If the Sponsor shall have determined to permit the Authorized
Participant to transfer VIX Futures pursuant to an EFCRP or to engage
in a block trade purchase of futures contracts from the Authorized
Participant with respect to the Fund, as well as to deliver cash, in
the creation process, VIX Futures required for settlement must be
transferred directly to the Fund's account at its futures commission
merchant. The Creation Units will be delivered to the Authorized
Participant
[[Page 44646]]
upon the Custodian's receipt of the cash purchase amount and the VIX
Futures.
Redemption Procedures
According to the Registration Statement, the procedures by which an
Authorized Participant can redeem one or more Creation Units mirror the
procedures for the creation of Creation Units. On any Business Day, an
Authorized Participant may place an order with the Distributor to
redeem one or more Creation Units. A redemption order must be received
prior to applicable cutoff time (generally 2:00 p.m., E.T.).
By placing a redemption order, an Authorized Participant agrees to
deliver the Creation Units to be redeemed through DTC's book-entry
system to the Fund not later than noon E.T. on the first Business Day
immediately following the redemption order date (T+1). The Sponsor
reserves the right to extend the deadline for the Fund to receive the
Creation Units required for settlement up to the second Business Day
following the redemption order date (T+2).
The redemption proceeds from the Fund will consist of the cash
redemption amount and, if permitted by the Sponsor in its sole
discretion with respect to the Fund, an EFCRP or block trade with the
Fund. The cash redemption amount is equal to the NAV of the number of
Creation Unit(s) of the Fund requested in the Authorized Participant's
redemption order as of the time of the calculation of the Fund's NAV on
the redemption order date, less transaction fees and any amounts
attributable to any applicable EFCRP or block trade.
The redemption proceeds due from the Fund will be delivered to the
Authorized Participant at noon E.T. on the third Business Day
immediately following the redemption order date if, by such time on
such Business Day immediately following the redemption order date, the
Fund's DTC account has been credited with the Creation Units to be
redeemed.
Net Asset Value
The NAV per Share of the Fund will be computed by dividing the
value of the net assets of the Fund by its total number of Shares
outstanding. Expenses and fees are accrued daily and taken into account
for purposes of determining NAV. The Fund's NAV is calculated on each
day other than a day when the Exchange is closed for regular trading.
The Fund will compute its NAV once each trading day (the ``NAV
Calculation Time''), or an earlier time set forth on the Trust's
website (www.dynamicsharesetf.com). The Fund's website will be operable
prior to commencement of Exchange trading of the Shares. The NAV
Calculation Time is 4:15 p.m., E.T.
VIX Futures prices are calculated at their then current market
value, which typically is based upon the settlement price or the last
traded price before the NAV time for that particular futures contract.
In certain circumstances (e.g., if the Sponsor believes market
quotations do not accurately reflect the fair value of a Fund
investment, or a trading halt closes an exchange or market early), the
Sponsor may, in its sole discretion, choose to determine a fair value
price as the basis for determining the market value of such position
for such day. Such fair value prices would generally be determined
based on available inputs about the current underlying reference assets
and would be based on principles that the Sponsor deems fair and
equitable.
Indicative Optimized Portfolio Value (``IOPV'')
According to the Registration Statement, the IOPV is an indicator
of the value of the Fund's net assets at the time the IOPV is
disseminated. The IOPV is calculated and disseminated every 15 seconds
throughout the trading day. The IOPV is generally calculated using the
prior day's closing net assets of the Fund as a base and updating
throughout the trading day changes in the value of the financial
instruments held by the Fund.
The IOPV will be disseminated by the Exchange or a major market
data vendor. In addition, the IOPV is published on the NYSE Arca's
website and is available through on-line information services such as
Bloomberg Finance L.P. and Reuters.
Availability of Information
The Trust's website, www.dynamicsharesetf.com, which will be
publicly accessible at no charge, will contain the following
information: (a) The daily NAV of the Trust, the daily NAV per Share,
the prior Business Day's NAV per Share, the reported daily closing
price and the reported daily trading volume; (b) the daily composition
of the Disclosed Portfolio, as defined in NYSE Arca Rule 8.700-E (c)(2)
\13\; (c) the midpoint of the bid-ask price as of the time the NAV per
Share is calculated (the ``Bid-Ask Price''); (d) the calculation of the
premium or discount of such price against such NAV per Share; (e) data
in chart form displaying the frequency distribution of discounts or
premiums of the bid-ask price against the NAV per Share, within
appropriate ranges for each of the four previous calendar quarters; and
(f) the current prospectus of the Trust, included in the Registration
Statement.
---------------------------------------------------------------------------
\13\ NYSE Arca Rule 8.700-E(c)(2) provides that the term
``Disclosed Portfolio'' means ``the identities and quantities of the
securities and other assets held by the Trust that will form the
basis for the Trust's calculation of net asset value at the end of
the business day''.
---------------------------------------------------------------------------
On a daily basis, the Trust will disclose on its website for all of
the assets held by the Fund the following information: Name; ticker
symbol (if applicable); CUSIP or other identifier (if applicable);
description of the holding; with respect to derivatives, the identity
of the security, commodity, index or other underlying asset; the
quantity or aggregate amount of the holding as measured by par value,
notional value or amount, number of contracts or number of units (if
applicable); maturity date; coupon rate (if applicable); effective date
or issue date (if applicable); market value; percentage weighting in
the Disclosed Portfolio; and expiration date (if applicable). The
website information will be publicly available at no charge.
As noted above, the Trust's NAV and the NAV per Share will be
calculated and disseminated daily after the close of the New York Stock
Exchange (normally 4:00 p.m., E.T.).\14\ The Exchange will disseminate
for the Trust on a daily basis by means of the Consolidated Tape
Association (the ``CTA'') high-speed line information with respect to
the most recent NAV per Share, and the number of Shares outstanding.
The Exchange also will make available on its website daily trading
volume, closing prices and the NAV per Share.
---------------------------------------------------------------------------
\14\ The Exchange will obtain a representation from the Trust
that the NAV and the NAV per Share will be calculated daily and that
the NAV, the NAV per Share and the composition of the Disclosed
Portfolio will be made available to all market participants at the
same time.
---------------------------------------------------------------------------
Pricing for VIX is available from major market data vendors.
Pricing for VIX Futures is available from CFE and from major market
data vendors. Pricing for Cboe Options is available from Cboe and from
major market data vendors. Price information for cash equivalents is
available from major market data vendors.
The IOPV will be widely disseminated by one or more major market
data vendors at least every 15 seconds during the Exchange's Core
Trading Session (as defined in NYSE Arca Rule 7.34-E).\15\
---------------------------------------------------------------------------
\15\ Currently, it is the Exchange's understanding that several
major market data vendors widely disseminate IOPVs taken from the
CTA high-speed line or other data feeds.
---------------------------------------------------------------------------
[[Page 44647]]
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. The
previous day's closing price and trading volume information for the
Shares will be published daily in the financial section of newspapers.
Quotation and last sale information for the Shares will be available
via the CTA high-speed line.
Impact on Arbitrage Mechanism
The Sponsor believes there will be minimal, if any, impact to the
arbitrage mechanism as a result of the use of derivatives. Market
makers and participants should be able to value derivatives as long as
the positions are disclosed with relevant information. The Sponsor
believes that the price at which Shares trade will continue to be
disciplined by arbitrage opportunities created by the ability to
purchase or redeem Shares at their NAV, which should help ensure that
Shares will not trade at a material discount or premium in relation to
their NAV.
The Sponsor does not believe there will be any significant impacts
to the settlement or operational aspects of the Fund's arbitrage
mechanism due to the use of derivatives.
Criteria for Initial and Continued Listing
The Trust will be subject to the criteria in NYSE Arca Rule 8.700-E
for initial and continued listing of the Shares.
The minimum number of Shares to be outstanding at the start of
trading will be 100,000 Shares. The Exchange believes that this minimum
number of Shares to be outstanding at the start of trading is
sufficient to provide adequate market liquidity. The Exchange
represents that, for the initial and continued listing of the Shares,
the Trust must be in compliance with NYSE Arca Rule 5.3-E and Rule 10A-
3 under the Exchange Act.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
Trading Rules
Under NYSE Arca Rule 8.700-E(b), Managed Trust Securities are
included within the Exchange's definition of ``securities.'' The
Exchange deems the Shares to be equity securities, thus rendering
trading in the Shares subject to the Exchange's existing rules
governing the trading of equity securities. Commentary .02 to NYSE Arca
Rule 8.700-E provides that transactions in Managed Trust Securities
will occur during the trading hours specified in NYSE Arca Rule 7.34-E.
Therefore, in accordance with NYSE Arca Rule 7.34-E, the Shares will
trade on the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. The
Exchange has appropriate rules to facilitate transactions in the Shares
during all trading sessions. As provided in NYSE Arca Rule 7.6-E, the
minimum price variation (``MPV'') for quoting and entry of orders in
equity securities traded on the NYSE Arca Marketplace is $0.01, with
the exception of securities that are priced less than $1.00 for which
the MPV for order entry is $0.0001.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading in the Shares will be halted if the
circuit breaker parameters under NYSE Arca Rule 7.12-E are reached.
Trading may also be halted because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable.
In addition, if the Exchange becomes aware that the NAV, the NAV
per Share and/or the Disclosed Portfolio with respect to a series of
Managed Trust Securities is not disseminated to all market participants
at the same time, it will halt trading in such series until such time
as the NAV, the NAV per Share and the Disclosed Portfolio is available
to all market participants.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances administered by the Exchange, as
well as cross-market surveillances administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\17\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and applicable federal securities laws.
---------------------------------------------------------------------------
\17\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------
The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares and VIX Futures
with other markets or other entities that are members of the ISG, and
the Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares and VIX Futures
from such markets or entities. In addition, the Exchange may obtain
information regarding trading in the Shares and VIX Futures from
markets or other entities that are members of ISG or with which the
Exchange has in place a comprehensive surveillance sharing agreement
(``CSSA'').\18\ FINRA, on behalf of the Exchange, is able to access, as
needed, trade information for certain cash equivalents held by the Fund
reported to FINRA's Trade Reporting and Compliance Engine (``TRACE'').
---------------------------------------------------------------------------
\18\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a CSSA.
---------------------------------------------------------------------------
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
All statements and representations made in this filing regarding
(a) the description of the portfolio of the Fund, (b) limitations on
portfolio of the Fund, or (c) the applicability of Exchange listing
rules specified in this rule filing shall constitute continued listing
requirements for listing the Shares on the Exchange.
The issuer has represented to the Exchange that it will advise the
Exchange of any failure by the Fund to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Fund is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E (m).
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin (``Bulletin'') of the special
characteristics and risks associated with trading the Shares.
Specifically, the Bulletin will discuss the following: (1) The
procedures for purchases and redemptions of Shares (and that Shares are
not individually redeemable); (2)
[[Page 44648]]
NYSE Arca Rule 9.2-E (a), which imposes a duty of due diligence on its
ETP Holders to learn the essential facts relating to every customer
prior to trading the Shares; (3) the requirement that ETP Holders
deliver a prospectus to investors purchasing newly issued Shares prior
to or concurrently with the confirmation of a transaction; (4) how
information regarding the IOPV and the Disclosed Portfolio is
disseminated; (5) the risks involved in trading the Shares during the
opening and late trading sessions when an updated IOPV will not be
calculated or publicly disseminated; and (6) trading information.
In addition, the Bulletin will reference that the Trust is subject
to various fees and expenses described in the Registration Statement.
The Bulletin also will reference the fact that there is no
regulated source of last sale information regarding certain of the
asset classes that the Trust may hold and that the Commission has no
jurisdiction over the trading of VIX Futures.
The Bulletin also will discuss any exemptive, no-action and
interpretive relief granted by the Commission from any rules under the
Act.
2. Statutory Basis
The basis under the Exchange Act for this proposed rule change is
the requirement under Section 6(b)(5) \19\ that an exchange have rules
that are designed to prevent fraudulent and manipulative 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.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed amendment to Rule 8.700-
E(c)(1) to add VIX Futures Contracts and/or swaps on VIX to the
financial instruments in which an issue of Managed Trust Securities may
hold long and/or short positions will provide investors with the
ability to better diversify and hedge their portfolios using an
exchange traded security without having to trade directly in the
underlying VIX Futures Contracts, and will facilitate the listing and
trading on the Exchange of additional Managed Trust Securities that
will enhance competition among market participants, to the benefit of
investors and the marketplace.
As noted above, the Commission previously has (1) approved the
listing and trading of options on the VIX,\20\ (2) approved an
amendment to NYSE Arca Rule 5.2-E(j)(6) to add VIX Futures to the
definition of Futures Reference Assets applicable to ``Futures-Linked
Securities,'' \21\ (3) approved listing and trading on the Exchange of
series of Trust Issued Receipts that invest in VIX Futures,\22\ (4)
issued a notice of effectiveness regarding amendments to NYSE Arca Rule
5.2-E(j)(6)(v) to add futures on VSTOXX (another index referencing
market volatility) as a ``Futures Reference Asset'' underlying an issue
of ``Futures-Linked Securities'' \23\, and (5) approved an amendment to
NYSE Arca Rule 8.700-E to add the VSTOXX as a reference asset to the
futures contracts and swaps that may be held by trusts that issue
Managed Trust Securities.\24\
---------------------------------------------------------------------------
\20\ See note 5, supra.
\21\ See note 6, supra.
\22\ See note 7, supra.
\23\ See note 8, supra.
\24\ See note 9, supra.
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices because the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Rule 8.700-E. The
Exchange has in place surveillance procedures that are adequate to
properly monitor trading in the Shares in all trading sessions and to
deter and detect violations of Exchange rules and applicable federal
securities laws. The NAV of the Trust, the NAV per Share and the
Disclosed Portfolio will be disseminated to all market participants at
the same time. The Trust will provide website disclosure of portfolio
holdings daily. The IOPV per Share (quoted in U.S. dollars) will be
widely disseminated at least every 15 seconds during the Exchange's
Core Trading Session by major market data vendors. Pricing for the
Index and VIX are available from major market data vendors. Pricing for
VIX Futures and VIX Options will be available from the CFE and Cboe,
respectively. Price information for cash equivalents will be available
from major market data vendors. Quotation and last-sale information
regarding the Shares will be disseminated through the CTA high-speed
line.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest
given that a large amount of information will be publicly available
regarding the Trust and the Shares, thereby promoting market
transparency. The Exchange may halt trading during the day in which an
interruption to the dissemination of the IOPV occurs, or the value of
the underlying VIX Futures occurs. If the interruption to the
dissemination of the IOPV or the value of the underlying VIX Futures
persists past the trading day in which it occurred, the Exchange will
halt trading no later than the beginning of the trading day following
the interruption. If the Exchange becomes aware that the NAV, the NAV
per Share and the Disclosed Portfolio with respect to a series of
Managed Trust Securities are not disseminated to all market
participants at the same time, it will halt trading in such series
until such time as the NAV, the NAV per Share and the Disclosed
Portfolio are available to all market participants. Trading in Shares
of the Trust will be halted if the circuit breaker parameters under
NYSE Arca Rule 7.12-E have been reached or because of market conditions
or for reasons that, in the view of the Exchange, make trading in the
Shares inadvisable. Moreover, prior to the commencement of trading, the
Exchange will inform its ETP Holders in the Bulletin of the special
characteristics and risks associated with trading the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest given that it will facilitate the listing and trading
of an additional type of exchange-traded product that will principally
hold futures contracts and that will enhance competition among market
participants, to the benefit of investors and the marketplace. As noted
above, the Exchange has in place surveillance procedures relating to
trading in the Shares and may obtain information relating to trading in
the Shares and VIX Futures from other exchanges that are members of the
ISG or with which the Exchange has entered into a CSSA. In addition, as
noted above, investors will have ready access to information regarding
the IOPV and quotation and last sale information for the Shares.
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 Exchange Act. The Exchange notes
that the proposed rule change will facilitate the listing and trading
of an additional type of actively-managed exchange-traded product that
will principally hold VIX Futures, and that will enhance competition
among market participants, to the benefit of investors and the
marketplace.
[[Page 44649]]
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
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2019-55 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-2019-55. 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-2019-55 and should be submitted
on or before September 16, 2019.
---------------------------------------------------------------------------
\25\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-18270 Filed 8-23-19; 8:45 am]
BILLING CODE 8011-01-P
