Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Shares of ConvexityShares Daily 1.5x SPIKES Futures ETF Under NYSE Arca Rule 8.200-E (Trust Issued Receipts), 4308-4311 [2022-01564]
Download as PDF
<![CDATA[
4308
Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Notices
Dated: January 24, 2022.
J. Matthew DeLesDernier,
Assistant Secretary.
rule change.8 On November 15, 2021,
pursuant to Section 19(b)(2) of the Act,9
the Commission designated a longer
period within which to issue an order
approving or disapproving the proposed
rule change.10 The Commission has
received no comment letters on the
proposed rule change. The Commission
is approving the proposed rule change,
as modified by Amendment No. 1.
[FR Doc. 2022–01639 Filed 1–26–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94024; File No. SR–
NYSEArca–2021–28]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
a Proposed Rule Change, as Modified
by Amendment No. 1, To List and
Trade Shares of ConvexityShares Daily
1.5x SPIKES Futures ETF Under NYSE
Arca Rule 8.200–E (Trust Issued
Receipts)
January 21, 2022.
I. Introduction
On May 13, 2021, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the ConvexityShares Daily
1.5x SPIKES Futures ETF (‘‘Fund’’), a
series of the ConvexityShares Trust
(‘‘Trust’’), under NYSE Arca Rule 8.200–
E, Commentary .02 (‘‘Trust Issued
Receipts’’). The proposed rule change
was published for comment in the
Federal Register on May 26, 2021.3 On
July 2, 2021, pursuant to Section
19(b)(2) of the Act,4 the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to approve or disapprove the
proposed rule change.5 On July 26,
2021, the Exchange filed Amendment
No. 1 to the proposed rule change,
which replaced and superseded the
proposed rule change as originally
filed.6 On August 12, 2021, the
Commission published notice of
Amendment No. 1 and instituted
proceedings under Section 19(b)(2)(B) of
the Act 7 to determine whether to
approve or disapprove the proposed
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 91949
(May 20, 2021), 86 FR 28420.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 92320,
86 FR 36309 (July 9, 2021).
6 Amendment No. 1 is available at: https://
www.sec.gov/comments/sr-nysearca-2021-28/
srnysearca202128-9090695-246773.pdf.
7 15 U.S.C. 78s(b)(2)(B).
lotter on DSK11XQN23PROD with NOTICES1
2 17
VerDate Sep<11>2014
17:53 Jan 26, 2022
Jkt 256001
II. Description of the Proposed Rule
Change, as Modified by Amendment
No. 1 11
The Exchange proposes to list and
trade Shares of the Fund 12 under NYSE
Arca Rule 8.200–E, Commentary .02
which governs the listing and trading of
Trust Issued Receipts 13 on the
Exchange. The Fund will be managed
and controlled by ConvexityShares, LLC
(‘‘Sponsor’’), a commodity pool
operator.14 Teucrium Trading, LLC, a
commodity trading adviser registered
with the Commodity Futures Trading
Commission, will be the Sub-Adviser
for the Fund (‘‘Sub-Adviser’’) and will
manage the Fund’s commodity futures
investment strategy.15 U.S. Bank will
8 See Securities Exchange Act Release No. 92651,
86 FR 46292 (August 18, 2021).
9 15 U.S.C. 78s(b)(2).
10 See Securities Exchange Act Release No. 93575,
86 FR 64978 (November 19, 2021). The Commission
designated January 21, 2022, as the date by which
the Commission shall either approve or disapprove
the proposed rule change.
11 Additional information regarding the Fund, the
Trust, and the Shares, including investment
strategies, creation and redemption procedures, and
portfolio holdings can be found in Amendment No.
1, supra note 6.
12 The Fund has filed a registration statement on
Form S–1 under the Securities Act of 1933, dated
May 25, 2021 (‘‘Registration Statement’’). The
Registration Statement for the Fund is not yet
effective and the Exchange will not commence
trading in Shares of the Fund until the Registration
Statement becomes effective.
13 Commentary .02 to NYSE Arca Rule 8.200–E
applies to Trust Issued Receipts that invest in
‘‘Financial Instruments.’’ The term ‘‘Financial
Instruments,’’ as defined in Commentary .02(b)(4) to
NYSE Arca Rule 8.200–E, means any combination
of investments, including cash; securities; options
on securities and indices; futures contracts; options
on futures contracts; forward contracts; equity caps,
collars, and floors; and swap agreements.
14 The Sponsor is not registered as a broker-dealer
or affiliated with a broker-dealer. In the event (a)
the Sponsor becomes registered as a broker-dealer
or becomes newly affiliated with a broker-dealer, or
(b) any new sponsor becomes registered as a brokerdealer or becomes newly affiliated with a brokerdealer, it will implement and maintain a fire wall
with respect to its relevant personnel of the brokerdealer or broker-dealer affiliate, as applicable,
regarding access to information concerning the
composition and/or changes to the portfolio, and
will be subject to procedures designed to prevent
the use and dissemination of material non-public
information regarding the portfolio.
15 The Sub-Adviser is not registered as a brokerdealer or affiliated with a broker-dealer. In the event
(a) the Sub-Adviser becomes registered as a brokerdealer or becomes newly affiliated with a broker-
PO 00000
Frm 00118
Fmt 4703
Sfmt 4703
provide custody and fund accounting to
the Trust and the Fund; U.S. Bancorp
Fund Services will be the transfer agent
for the Shares and administrator for the
Fund; and Foreside will serve as the
distributor for the Fund.
The Fund will seek daily investment
results, before fees and expenses, that
correspond to one-and-a-half times
(1.5x) the performance of its benchmark
index for a single day. The Fund is
benchmarked to the T3 SPIKE Front 2
Futures Index (‘‘Index’’), an investable
index of SPIKES futures contracts.16 The
Index is intended to reflect the returns
that are potentially available through an
unleveraged investment in a theoretical
portfolio of first- and second-month
futures contracts on the SPIKES
Volatility Index (‘‘SPIKES Index’’).17
The Index is comprised solely of
SPIKES futures contracts.18 The Index
dealer, or (b) any new Sub-Adviser becomes
registered as a broker-dealer or becomes newly
affiliated with a broker-dealer, it will implement
and maintain a fire wall with respect to its relevant
personnel of the broker-dealer or broker-dealer
affiliate, as applicable, regarding access to
information concerning the composition and/or
changes to the portfolio, and will be subject to
procedures designed to prevent the use and
dissemination of material non-public information
regarding the portfolio.
16 The Index is sponsored by Triple Three
Partners Pty Ltd, which licenses the use of the
Index to its affiliated company, T3i Pty Ltd (Triple
Three Partners Pty Ltd and T3i Pty Ltd. are
collectively referred to herein as ‘‘T3 Index’’ or
‘‘Index Sponsor’’). The Index Sponsor is affiliated
with the Sponsor. The Index Sponsor has
implemented and will maintain a fire wall
regarding access to information concerning the
composition of and/or changes to the Index. In
addition, the Index Sponsor has implemented and
will maintain procedures that are designed to
prevent the use and dissemination of material, nonpublic information regarding the Index. The Index
Sponsor is not registered as an investment adviser
or broker-dealer and is not affiliated with any
broker-dealers. The Index is calculated and
published by Solactive AG, which is not affiliated
with T3 Index.
17 The Exchange states that the SPIKES Index is
a non-investable index that measures the implied
volatility of the SPDR S&P 500 ETF Trust (‘‘SPY’’)
over 30 days in the future. SPY is a unit investment
trust that holds a portfolio of common stocks that
closely tracks the price performance and dividend
yield of the S&P 500 Composite Price Index (‘‘S&P
500’’). The SPIKES Index does not represent the
actual or the realized volatility of SPY. The SPIKES
Index is calculated based on the prices of a
constantly changing portfolio of SPY put and call
options. The SPIKES Index is reflective of the
premium paid by investors for certain options
linked to the level of the S&P 500. The SPIKES
Index is a theoretical calculation and cannot be
traded on a spot basis. T3 Index is the owner,
creator and licensor of the SPIKES Index. The
SPIKES Index is calculated, maintained and
published by Miami International Securities
Exchange, LLC via the Options Price Reporting
Authority.
18 According to the Exchange, SPIKES futures
contracts were launched for trading by the
Minneapolis Grain Exchange, LLC (‘‘MGEX’’) on
December 14, 2020. While the SPIKES Index
represents a measure of the expected 30-day
E:\FR\FM\27JAN1.SGM
27JAN1
Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Notices
lotter on DSK11XQN23PROD with NOTICES1
employs rules for selecting the SPIKES
futures contracts comprising the Index
and a formula to calculate a level for the
Index from the prices of these SPIKES
futures contracts. Currently, the SPIKES
futures contracts comprising the Index
represent the prices of two near-term
SPIKES futures contracts, replicating a
position that rolls the nearest month
SPIKES futures contracts to the next
month SPIKES futures contracts at or
close to the daily settlement price via a
Trade-At-Settlement 19 program towards
the end of each business day in equal
fractional amounts. This results in a
constant weighted average maturity of
one month.
The Fund will invest primarily in
SPIKES futures contracts to gain the
appropriate exposure to the Index.
Under certain circumstances (described
below), the Fund may also invest in
futures contracts and swap contracts
(‘‘VIX Related Positions’’) on the Cboe
Volatility Index (‘‘VIX’’).20 The
Exchange states that the VIX is an index
that tracks volatility and would be
expected to perform in a substantially
similar manner as the SPIKES Index.
The Fund seeks to achieve its
investment objective through the
appropriate amount of exposure to the
SPIKES futures contracts included in
the Index. The Sponsor or Sub-Adviser
determines the type, quantity and mix
of investments that the Sponsor or SubAdviser believes, in combination,
should provide daily leveraged
exposure to the Index to seek
investment results equal to one-and-ahalf times the performance of the Index.
In the event accountability rules, price
limits, position limits, margin limits or
other exposure limits are reached with
respect to SPIKES futures contracts, or
if the market for a specific futures
contract experiences emergencies (e.g.,
natural disaster, terrorist attack or an act
volatility of SPY, the prices of SPIKES futures
contracts are based on the current expectation of the
expected 30-day volatility of SPY on the expiration
date of the futures contract.
19 According to the Exchange, a Trade at
Settlement (‘‘TAS’’) transaction is a transaction at
a price equal to the daily settlement price, or at a
specified differential above or below the daily
settlement price. The TAS transaction price will be
determined following execution and based upon the
daily settlement price of the respective SPIKES
futures contracts month. The permissible price
range for permitted TAS transactions is from 0.50
index points below the daily settlement price to
0.50 index points above the daily settlement price.
The permissible minimum increment for a TAS
transaction is 0.01 index points. See MGEX Rule
83.15 at https://www.mgex.com/documents/
20210318-Rulebook.pdf.
20 According to the Exchange, the VIX is a
measure of estimated near-term future volatility
based upon the weighted average of the implied
volatilities of near-term put and call options on the
S&P 500.
VerDate Sep<11>2014
17:53 Jan 26, 2022
Jkt 256001
of God) or disruptions (e.g., a trading
halt or a flash crash), or in situations
where the Sponsor or Sub-Adviser
deems it impractical or inadvisable to
buy or sell SPIKES futures contracts
(such as during periods of market
volatility or illiquidity, or when trading
in SPY is halted), the Sponsor or SubAdviser may cause the Fund to invest in
VIX Related Positions. The Sponsor
expects the Fund’s positions in VIX
Related Positions to consist primarily of
VIX futures contracts, which are traded
on the Cboe Futures Exchange.
However, in the event accountability
rules, price limits, position limits,
margin limits or other exposure limits
are reached with respect to VIX futures
contracts, or if the market for a specific
VIX futures contract experiences
emergencies or disruptions or in
situations where the Sponsor or SubAdviser deems it impractical or
inadvisable to buy or sell VIX futures
contracts, the Fund would hold VIX
swap agreements.21 The Fund will also
hold cash or cash equivalents such as
U.S. Treasury securities or other high
credit quality, short-term fixed-income
or similar securities (such as shares of
money market funds) as collateral for
investments and pending investments.
III. Discussion and Commission
Findings
After careful review of the proposed
rule change, as modified by Amendment
No. 1, the Commission finds that the
proposed rule change, as modified by
Amendment No. 1, is consistent with
the Act and the rules and regulations
thereunder applicable to a national
securities exchange.22 In particular, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section 6(b)(5)
of the Act,23 which requires, among
other things, that the Exchange’s rules
be 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 a national market
21 The Fund will attempt to limit counterparty
risk in uncleared swap agreements by entering into
such agreements only with counterparties the
Sponsor and Sub-Adviser believe are creditworthy
and by limiting the Fund’s exposure to each
counterparty. The Exchange represents that the
Sponsor and Sub-Adviser will monitor the
creditworthiness of each counterparty and the
Fund’s exposure to each counterparty on an
ongoing basis.
22 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
23 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00119
Fmt 4703
Sfmt 4703
4309
system, and, in general, to protect
investors and the public interest.
The proposal is reasonably designed
to promote fair disclosure of
information that may be necessary to
price the Shares appropriately and to
prevent trading in the Shares when a
reasonable degree of certain pricing
transparency cannot be assured.
Specifically, the Exchange will obtain a
representation from the issuer of the
Shares that the net asset value (‘‘NAV’’)
per Share will be calculated and
disseminated daily and will be made
available to all market participants at
the same time. Each day before 9:30
a.m., E.T., the daily holdings of the
Fund will be available on the Fund’s
website, www.convexityshares.com,
which will be publicly accessible at no
charge.24 This website disclosure of the
Fund’s daily holdings will occur at
approximately the same time as the
disclosure by the Trust of the daily
holdings to authorized participants, so
that all market participants will be
provided daily holdings information at
approximately the same time, and the
same holdings information will be
provided on the public website as in
electronic files provided to authorized
participants. Quotation and last-sale
information regarding the Shares will be
disseminated through the facilities of
the Consolidated Tape Association. As
required by NYSE Arca Rule 8.200–E,
Commentary .02, an updated Intraday
Fund Value (‘‘IFV’’) will be calculated
and widely disseminated by one or
more major market data vendors every
15 seconds during the Exchange’s Core
Trading Session (9:30 a.m., E.T., to 4:00
p.m., E.T.). The IFV will be readily
available from the Fund’s website,
automated quotation systems, published
or other public sources, or major market
data vendors’ website or on-line
information services. 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
Fund’s website will include a form of
the prospectus for the Fund and
additional data relating to NAV and
24 The daily website disclosure of portfolio
holdings will include, as applicable, (i) the
composite value of the total portfolio, (ii) the
quantity and type of each holding (including the
ticker symbol, maturity date or other identifier, if
any) and other descriptive information including, in
the case of a swap, the type of swap, its notional
value and the underlying instrument, index or asset
on which the swap is based, (iii) the market value
of each investment held by the Fund, (iv) the type
(including maturity, ticker symbol, or other
identifier) and value of each Treasury security and
cash equivalent, and (v) the amount of cash held in
the Fund’s portfolio.
E:\FR\FM\27JAN1.SGM
27JAN1
lotter on DSK11XQN23PROD with NOTICES1
4310
Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Notices
other applicable quantitative
information. The level of the Index will
be published at least every 15 seconds,
both in real time from 9:30 a.m. to 4
p.m., E.T., and at the close of trading on
each business day by Bloomberg and
Reuters. The Fund’s website will also
provide information regarding the
SPIKES futures contracts constituting
the Index and the Index methodology.
In addition, the level of the SPIKES
Index and the VIX is available from
Bloomberg and Reuters.
Complete real-time data for SPIKES
futures contracts, which trade on
MGEX, is available by subscription
through on-line information services.
MGEX also provides delayed futures
information on current and past trading
sessions and market news free of charge
on its website. Price information
regarding cleared VIX swap contracts is
available from major market data
vendors and price information for nonexchange-traded VIX swap contracts
may be obtained from brokers and
dealers who make markets in such
instruments. Price information
regarding VIX futures is available from
the Cboe Futures Exchange and from
major market data vendors. Price
information for cash equivalents is
available from major market data
vendors.
The Exchange’s rules regarding
trading halts further help to ensure the
maintenance of fair and orderly markets
for the Shares, which is consistent with
the protection of investors and the
public interest. Trading in the Shares
may be halted because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the securities and/or
the financial instruments composing the
daily disclosed portfolio of the Fund; or
(2) whether other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present. Trading in Shares of
the Fund will be halted if the circuit
breaker parameters in NYSE Arca Rule
7.12–E (Trading Halts Due to
Extraordinary Market Volatility) have
been reached. The Exchange may halt
trading during the day in which an
interruption to the dissemination of the
IFV or the value of the Index occurs. If
the interruption to the dissemination of
the IFV or the value of the Index 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.
In addition, if the Exchange becomes
aware that the NAV with respect to the
Shares or disclosure of the Fund’s daily
VerDate Sep<11>2014
17:53 Jan 26, 2022
Jkt 256001
holdings is not disseminated to all
market participants at the same time, it
will halt trading in the Shares until such
time as the NAV and the Fund’s daily
holdings is available to all market
participants. NYSEArca Rule 8.200–E,
Commentary .02, enumerates additional
circumstances under which the
Exchange will consider the suspension
of trading in and will commence
delisting proceedings for the Shares.
The Exchange’s proposal is designed
to safeguard material non-public
information relating to the Fund’s
portfolio. Specifically, as the Exchange
states, neither the Sponsor nor the SubAdviser is registered as a broker-dealer
or affiliated with a broker-dealer. In the
event that (a) either the Sponsor or the
Sub-Adviser becomes registered as a
broker-dealer or newly affiliated with a
broker-dealer, or (b) any new sponsor or
sub-adviser is registered as a brokerdealer or becomes affiliated with a
broker-dealer, it will implement and
maintain a fire wall with respect to its
relevant personnel or personnel of the
broker-dealer affiliate, as applicable,
regarding access to information
concerning the composition of and/or
changes to the portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding the portfolio. Moreover,
trading of the Shares will be subject to
NYSE Arca Rule 8.200–E, Commentary
.02(e), which sets forth certain
restrictions on Equity Trading Permit
Holders (‘‘ETP Holders’’) acting as
registered Market Makers 25 in Trust
Issued Receipts to facilitate
surveillance. In addition, the Exchange
has a general policy prohibiting the
distribution of material, non-public
information by its employees.
Furthermore, the Exchange or the
Financial Industry Regulatory Authority
(‘‘FINRA’’), on behalf of the Exchange,
or both, will communicate as needed,
and may obtain information, regarding
trading in the Shares, SPIKES futures,
VIX futures and other underlying
exchange-listed instruments with other
markets and entities that are members of
the Intermarket Surveillance Group
(‘‘ISG’’). In addition, the Exchange may
obtain information regarding trading in
the Shares, SPIKES futures, VIX futures
and other underlying exchange-listed
instruments from markets and other
entities with which the Exchange has in
place a comprehensive surveillance
sharing agreement (‘‘CSSA’’). All futures
contracts in which the Fund invests
25 As defined in NYSE Arca Rule 1.1(z) the term
‘‘Market Maker’’ means an ETP Holder that acts as
a Market Maker pursuant to NYSEArca Rule 7–E.
PO 00000
Frm 00120
Fmt 4703
Sfmt 4703
shall consist of futures contracts whose
principal market is a member of the ISG
or is a market with which the Exchange
has a CSSA. The Exchange states that
trading in the Shares will be subject to
existing trading surveillances
administered by the Exchange, as well
as cross-market surveillances
administered by FINRA on behalf of the
Exchange, and these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange.
The Exchange has demonstrated there
is an appropriate regulatory framework
to support listing and trading of the
Shares, including trading rules,
surveillance, and listing standards.
Moreover, the trading of the Shares on
the Exchange will be subject to the
Exchange’s and other rules listed below.
Specifically:
(1) 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;
(2) The Shares will conform to the
initial and continued listing criteria
under NYSE Arca Rule 8.200–E;
(3) Pursuant to NYSEArca Rule 8.200–
E(a), all statements and representations
made in the filing regarding (a) the
description of the Index, portfolio, or
reference asset, (b) limitations on Index
or portfolio holdings or reference assets,
or (c) the applicability of Exchange
listing rules specified in the filing will
constitute continued listing
requirements for the Shares. The issuer
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 26 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).
26 Certain proposals for the listing and trading of
exchange-traded products include a representation
that the exchange will ‘‘surveil’’ for compliance
with the continued listing requirements. See, e.g.,
Securities Exchange Act Release No. 77499 (April
1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR–
BATS–2016–04). In the context of this
representation, it is the Commission’s view that
‘‘monitor’’ and ‘‘surveil’’ both mean ongoing
oversight of compliance with the continued listing
requirements. Therefore, the Commission does not
view ‘‘monitor’’ as a more or less stringent
obligation than ‘‘surveil’’ with respect to the
continued listing requirements.
E:\FR\FM\27JAN1.SGM
27JAN1
Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Notices
(4) The Exchange has the appropriate
rules to facilitate transactions in the
Shares during all trading sessions;
(5) Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an Information Bulletin
of the special characteristics and risks
associated with trading the Shares; 27
(6) FINRA has implemented increased
sales practice and customer margin
requirements for FINRA members
applicable to inverse, leveraged and
inverse leveraged securities (which
include the Shares) and options on such
securities, as described in FINRA
Regulatory Notices 09–31 (June 2009),
09–53 (August 2009), and 09–65
(November 2009). ETP Holders that
carry customer accounts will be
required to follow the FINRA guidance
set forth in these notices;
(7) For initial and continued listing,
the Fund will be in compliance with
Rule 10A–3 under the Act; 28 and
(8) A minimum of 100,000 Shares of
the Fund will be outstanding at the
commencement of trading on the
Exchange.
Accordingly, the Commission finds
that the proposed rule change, as
modified by Amendment No. 1, is
consistent with Section 6(b)(5) of the
Act 29 and the rules and regulations
thereunder applicable to a national
securities exchange.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,30 that the
proposed rule change (SR–NYSEArca–
2021–28), as modified by Amendment
No. 1, be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–01564 Filed 1–26–22; 8:45 am]
lotter on DSK11XQN23PROD with NOTICES1
BILLING CODE 8011–01–P
27 The Exchange states that the Information
Bulletin will discuss the following: (1) The risks
involved in trading the Shares during the Opening
and Late Trading Sessions when an updated IFV
will not be calculated or publicly disseminated; (2)
the procedures for purchases and redemptions of
Shares in Creation Units and Redemption Units
(and that Shares are not individually redeemable);
(3) 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; (4) how information regarding
the IFV is disseminated; (5) how information
regarding portfolio holdings is disseminated; (6) the
requirement that ETP Holders deliver a prospectus
to investors purchasing newly issued Shares prior
to or concurrently with the confirmation of a
transaction; and (7) trading information.
28 17 CFR 240.10A–3.
29 15 U.S.C. 78f(b)(5).
30 Id.
31 17 CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:53 Jan 26, 2022
Jkt 256001
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–401, OMB Control No.
3235–0459]
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Rule 3a–4
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 350l-3520), the Securities and
Exchange Commission (the
‘‘Commission’’) has submitted to the
Office of Management and Budget a
request for extension of the previously
approved collection of information
discussed below.
Rule 3a–4 (17 CFR 270.3a–4) under
the Investment Company Act of 1940
(15 U.S.C. 80a) (‘‘Investment Company
Act’’ or ‘‘Act’’) provides a nonexclusive
safe harbor from the definition of
investment company under the Act for
certain investment advisory programs.
These programs, which include ‘‘wrap
fee’’ programs, generally are designed to
provide professional portfolio
management services on a discretionary
basis to clients who are investing less
than the minimum investments for
individual accounts usually required by
the investment adviser but more than
the minimum account size of most
mutual funds. Under wrap fee and
similar programs, a client’s account is
typically managed on a discretionary
basis according to pre-selected
investment objectives. Clients with
similar investment objectives often
receive the same investment advice and
may hold the same or substantially
similar securities in their accounts.
Because of this similarity of
management, some of these investment
advisory programs may meet the
definition of investment company under
the Act.
In 1997, the Commission adopted rule
3a–4, which clarifies that programs
organized and operated in accordance
with the rule are not required to register
under the Investment Company Act or
comply with the Act’s requirements.1
These programs differ from investment
1 Status of Investment Advisory Programs Under
the Investment Company Act of 1940, Investment
Company Act Rel. No. 22579 (Mar. 24, 1997) [62 FR
15098 (Mar. 31, 1997)] (‘‘Adopting Release’’). In
addition, there are no registration requirements
under section 5 of the Securities Act of 1933 for
programs that meet the requirements of rule 3a–4.
See 17 CFR 270.3a–4, introductory note.
PO 00000
Frm 00121
Fmt 4703
Sfmt 4703
4311
companies because, among other things,
they provide individualized investment
advice to the client. The rule’s
provisions have the effect of ensuring
that clients in a program relying on the
rule receive advice tailored to the
client’s needs.
For a program to be eligible for the
rule’s safe harbor, each client’s account
must be managed on the basis of the
client’s financial situation and
investment objectives and in accordance
with any reasonable restrictions the
client imposes on managing the
account. When an account is opened,
the sponsor 2 (or its designee) must
obtain information from each client
regarding the client’s financial situation
and investment objectives, and must
allow the client an opportunity to
impose reasonable restrictions on
managing the account.3 In addition, the
sponsor (or its designee) must contact
the client annually to determine
whether the client’s financial situation
or investment objectives have changed
and whether the client wishes to impose
any reasonable restrictions on the
management of the account or
reasonably modify existing restrictions.
The sponsor (or its designee) must also
notify the client quarterly, in writing, to
contact the sponsor (or its designee)
regarding changes to the client’s
financial situation, investment
objectives, or restrictions on the
account’s management.
Additionally, the sponsor (or its
designee) must provide each client with
a quarterly statement describing all
activity in the client’s account during
the previous quarter. The sponsor and
personnel of the client’s account
manager who know about the client’s
account and its management must be
reasonably available to consult with the
client. Each client also must retain
certain indicia of ownership of all
securities and funds in the account.
The Commission staff estimates that
27,979,460 clients participate each year
in investment advisory programs relying
on rule 3a–4.4 Of that number, the staff
2 For purposes of rule 3a–4, the term ‘‘sponsor’’
refers to any person who receives compensation for
sponsoring, organizing or administering the
program, or for selecting, or providing advice to
clients regarding the selection of, persons
responsible for managing the client’s account in the
program.
3 Clients specifically must be allowed to designate
securities that should not be purchased for the
account or that should be sold if held in the
account. The rule does not require that a client be
able to require particular securities be purchased for
the account.
4 These estimates are based on an analysis of the
number of individual clients from Form ADV Item
5D(a)(1) and (b)(1) of advisers that report they
provide portfolio management to wrap programs as
E:\FR\FM\27JAN1.SGM
Continued
27JAN1
]]>Agencies
[Federal Register Volume 87, Number 18 (Thursday, January 27, 2022)]
[Notices]
[Pages 4308-4311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01564]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94024; File No. SR-NYSEArca-2021-28]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To
List and Trade Shares of ConvexityShares Daily 1.5x SPIKES Futures ETF
Under NYSE Arca Rule 8.200-E (Trust Issued Receipts)
January 21, 2022.
I. Introduction
On May 13, 2021, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
list and trade shares (``Shares'') of the ConvexityShares Daily 1.5x
SPIKES Futures ETF (``Fund''), a series of the ConvexityShares Trust
(``Trust''), under NYSE Arca Rule 8.200-E, Commentary .02 (``Trust
Issued Receipts''). The proposed rule change was published for comment
in the Federal Register on May 26, 2021.\3\ On July 2, 2021, pursuant
to Section 19(b)(2) of the Act,\4\ the Commission designated a longer
period within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
approve or disapprove the proposed rule change.\5\ On July 26, 2021,
the Exchange filed Amendment No. 1 to the proposed rule change, which
replaced and superseded the proposed rule change as originally
filed.\6\ On August 12, 2021, the Commission published notice of
Amendment No. 1 and instituted proceedings under Section 19(b)(2)(B) of
the Act \7\ to determine whether to approve or disapprove the proposed
rule change.\8\ On November 15, 2021, pursuant to Section 19(b)(2) of
the Act,\9\ the Commission designated a longer period within which to
issue an order approving or disapproving the proposed rule change.\10\
The Commission has received no comment letters on the proposed rule
change. The Commission is approving the proposed rule change, as
modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 91949 (May 20,
2021), 86 FR 28420.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 92320, 86 FR 36309
(July 9, 2021).
\6\ Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysearca-2021-28/srnysearca202128-9090695-246773.pdf.
\7\ 15 U.S.C. 78s(b)(2)(B).
\8\ See Securities Exchange Act Release No. 92651, 86 FR 46292
(August 18, 2021).
\9\ 15 U.S.C. 78s(b)(2).
\10\ See Securities Exchange Act Release No. 93575, 86 FR 64978
(November 19, 2021). The Commission designated January 21, 2022, as
the date by which the Commission shall either approve or disapprove
the proposed rule change.
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1 \11\
---------------------------------------------------------------------------
\11\ Additional information regarding the Fund, the Trust, and
the Shares, including investment strategies, creation and redemption
procedures, and portfolio holdings can be found in Amendment No. 1,
supra note 6.
---------------------------------------------------------------------------
The Exchange proposes to list and trade Shares of the Fund \12\
under NYSE Arca Rule 8.200-E, Commentary .02 which governs the listing
and trading of Trust Issued Receipts \13\ on the Exchange. The Fund
will be managed and controlled by ConvexityShares, LLC (``Sponsor''), a
commodity pool operator.\14\ Teucrium Trading, LLC, a commodity trading
adviser registered with the Commodity Futures Trading Commission, will
be the Sub-Adviser for the Fund (``Sub-Adviser'') and will manage the
Fund's commodity futures investment strategy.\15\ U.S. Bank will
provide custody and fund accounting to the Trust and the Fund; U.S.
Bancorp Fund Services will be the transfer agent for the Shares and
administrator for the Fund; and Foreside will serve as the distributor
for the Fund.
---------------------------------------------------------------------------
\12\ The Fund has filed a registration statement on Form S-1
under the Securities Act of 1933, dated May 25, 2021 (``Registration
Statement''). The Registration Statement for the Fund is not yet
effective and the Exchange will not commence trading in Shares of
the Fund until the Registration Statement becomes effective.
\13\ Commentary .02 to NYSE Arca Rule 8.200-E applies to Trust
Issued Receipts that invest in ``Financial Instruments.'' The term
``Financial Instruments,'' as defined in Commentary .02(b)(4) to
NYSE Arca Rule 8.200-E, means any combination of investments,
including cash; securities; options on securities and indices;
futures contracts; options on futures contracts; forward contracts;
equity caps, collars, and floors; and swap agreements.
\14\ The Sponsor is not registered as a broker-dealer or
affiliated with a broker-dealer. In the event (a) the Sponsor
becomes registered as a broker-dealer or becomes newly affiliated
with a broker-dealer, or (b) any new sponsor becomes registered as a
broker-dealer or becomes newly affiliated with a broker-dealer, it
will implement and maintain a fire wall with respect to its relevant
personnel of the broker-dealer or broker-dealer affiliate, as
applicable, regarding access to information concerning the
composition and/or changes to the portfolio, and will be subject to
procedures designed to prevent the use and dissemination of material
non-public information regarding the portfolio.
\15\ The Sub-Adviser is not registered as a broker-dealer or
affiliated with a broker-dealer. In the event (a) the Sub-Adviser
becomes registered as a broker-dealer or becomes newly affiliated
with a broker-dealer, or (b) any new Sub-Adviser becomes registered
as a broker-dealer or becomes newly affiliated with a broker-dealer,
it will implement and maintain a fire wall with respect to its
relevant personnel of the broker-dealer or broker-dealer affiliate,
as applicable, regarding access to information concerning the
composition and/or changes to the portfolio, and will be subject to
procedures designed to prevent the use and dissemination of material
non-public information regarding the portfolio.
---------------------------------------------------------------------------
The Fund will seek daily investment results, before fees and
expenses, that correspond to one-and-a-half times (1.5x) the
performance of its benchmark index for a single day. The Fund is
benchmarked to the T3 SPIKE Front 2 Futures Index (``Index''), an
investable index of SPIKES futures contracts.\16\ The Index is intended
to reflect the returns that are potentially available through an
unleveraged investment in a theoretical portfolio of first- and second-
month futures contracts on the SPIKES Volatility Index (``SPIKES
Index'').\17\
---------------------------------------------------------------------------
\16\ The Index is sponsored by Triple Three Partners Pty Ltd,
which licenses the use of the Index to its affiliated company, T3i
Pty Ltd (Triple Three Partners Pty Ltd and T3i Pty Ltd. are
collectively referred to herein as ``T3 Index'' or ``Index
Sponsor''). The Index Sponsor is affiliated with the Sponsor. The
Index Sponsor has implemented and will maintain a fire wall
regarding access to information concerning the composition of and/or
changes to the Index. In addition, the Index Sponsor has implemented
and will maintain procedures that are designed to prevent the use
and dissemination of material, non-public information regarding the
Index. The Index Sponsor is not registered as an investment adviser
or broker-dealer and is not affiliated with any broker-dealers. The
Index is calculated and published by Solactive AG, which is not
affiliated with T3 Index.
\17\ The Exchange states that the SPIKES Index is a non-
investable index that measures the implied volatility of the SPDR
S&P 500 ETF Trust (``SPY'') over 30 days in the future. SPY is a
unit investment trust that holds a portfolio of common stocks that
closely tracks the price performance and dividend yield of the S&P
500 Composite Price Index (``S&P 500''). The SPIKES Index does not
represent the actual or the realized volatility of SPY. The SPIKES
Index is calculated based on the prices of a constantly changing
portfolio of SPY put and call options. The SPIKES Index is
reflective of the premium paid by investors for certain options
linked to the level of the S&P 500. The SPIKES Index is a
theoretical calculation and cannot be traded on a spot basis. T3
Index is the owner, creator and licensor of the SPIKES Index. The
SPIKES Index is calculated, maintained and published by Miami
International Securities Exchange, LLC via the Options Price
Reporting Authority.
---------------------------------------------------------------------------
The Index is comprised solely of SPIKES futures contracts.\18\ The
Index
[[Page 4309]]
employs rules for selecting the SPIKES futures contracts comprising the
Index and a formula to calculate a level for the Index from the prices
of these SPIKES futures contracts. Currently, the SPIKES futures
contracts comprising the Index represent the prices of two near-term
SPIKES futures contracts, replicating a position that rolls the nearest
month SPIKES futures contracts to the next month SPIKES futures
contracts at or close to the daily settlement price via a Trade-At-
Settlement \19\ program towards the end of each business day in equal
fractional amounts. This results in a constant weighted average
maturity of one month.
---------------------------------------------------------------------------
\18\ According to the Exchange, SPIKES futures contracts were
launched for trading by the Minneapolis Grain Exchange, LLC
(``MGEX'') on December 14, 2020. While the SPIKES Index represents a
measure of the expected 30-day volatility of SPY, the prices of
SPIKES futures contracts are based on the current expectation of the
expected 30-day volatility of SPY on the expiration date of the
futures contract.
\19\ According to the Exchange, a Trade at Settlement (``TAS'')
transaction is a transaction at a price equal to the daily
settlement price, or at a specified differential above or below the
daily settlement price. The TAS transaction price will be determined
following execution and based upon the daily settlement price of the
respective SPIKES futures contracts month. The permissible price
range for permitted TAS transactions is from 0.50 index points below
the daily settlement price to 0.50 index points above the daily
settlement price. The permissible minimum increment for a TAS
transaction is 0.01 index points. See MGEX Rule 83.15 at https://www.mgex.com/documents/20210318-Rulebook.pdf.
---------------------------------------------------------------------------
The Fund will invest primarily in SPIKES futures contracts to gain
the appropriate exposure to the Index. Under certain circumstances
(described below), the Fund may also invest in futures contracts and
swap contracts (``VIX Related Positions'') on the Cboe Volatility Index
(``VIX'').\20\ The Exchange states that the VIX is an index that tracks
volatility and would be expected to perform in a substantially similar
manner as the SPIKES Index.
---------------------------------------------------------------------------
\20\ According to the Exchange, the VIX is a measure of
estimated near-term future volatility based upon the weighted
average of the implied volatilities of near-term put and call
options on the S&P 500.
---------------------------------------------------------------------------
The Fund seeks to achieve its investment objective through the
appropriate amount of exposure to the SPIKES futures contracts included
in the Index. The Sponsor or Sub-Adviser determines the type, quantity
and mix of investments that the Sponsor or Sub-Adviser believes, in
combination, should provide daily leveraged exposure to the Index to
seek investment results equal to one-and-a-half times the performance
of the Index. In the event accountability rules, price limits, position
limits, margin limits or other exposure limits are reached with respect
to SPIKES futures contracts, or if the market for a specific futures
contract experiences emergencies (e.g., natural disaster, terrorist
attack or an act of God) or disruptions (e.g., a trading halt or a
flash crash), or in situations where the Sponsor or Sub-Adviser deems
it impractical or inadvisable to buy or sell SPIKES futures contracts
(such as during periods of market volatility or illiquidity, or when
trading in SPY is halted), the Sponsor or Sub-Adviser may cause the
Fund to invest in VIX Related Positions. The Sponsor expects the Fund's
positions in VIX Related Positions to consist primarily of VIX futures
contracts, which are traded on the Cboe Futures Exchange. However, in
the event accountability rules, price limits, position limits, margin
limits or other exposure limits are reached with respect to VIX futures
contracts, or if the market for a specific VIX futures contract
experiences emergencies or disruptions or in situations where the
Sponsor or Sub-Adviser deems it impractical or inadvisable to buy or
sell VIX futures contracts, the Fund would hold VIX swap
agreements.\21\ The Fund will also hold cash or cash equivalents such
as U.S. Treasury securities or other high credit quality, short-term
fixed-income or similar securities (such as shares of money market
funds) as collateral for investments and pending investments.
---------------------------------------------------------------------------
\21\ The Fund will attempt to limit counterparty risk in
uncleared swap agreements by entering into such agreements only with
counterparties the Sponsor and Sub-Adviser believe are creditworthy
and by limiting the Fund's exposure to each counterparty. The
Exchange represents that the Sponsor and Sub-Adviser will monitor
the creditworthiness of each counterparty and the Fund's exposure to
each counterparty on an ongoing basis.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful review of the proposed rule change, as modified by
Amendment No. 1, the Commission finds that the proposed rule change, as
modified by Amendment No. 1, is consistent with the Act and the rules
and regulations thereunder applicable to a national securities
exchange.\22\ In particular, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with Section
6(b)(5) of the Act,\23\ which requires, among other things, that the
Exchange's rules be 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 a national market system, and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------
\22\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The proposal is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading in the Shares when a reasonable degree of certain
pricing transparency cannot be assured. Specifically, the Exchange will
obtain a representation from the issuer of the Shares that the net
asset value (``NAV'') per Share will be calculated and disseminated
daily and will be made available to all market participants at the same
time. Each day before 9:30 a.m., E.T., the daily holdings of the Fund
will be available on the Fund's website, www.convexityshares.com, which
will be publicly accessible at no charge.\24\ This website disclosure
of the Fund's daily holdings will occur at approximately the same time
as the disclosure by the Trust of the daily holdings to authorized
participants, so that all market participants will be provided daily
holdings information at approximately the same time, and the same
holdings information will be provided on the public website as in
electronic files provided to authorized participants. Quotation and
last-sale information regarding the Shares will be disseminated through
the facilities of the Consolidated Tape Association. As required by
NYSE Arca Rule 8.200-E, Commentary .02, an updated Intraday Fund Value
(``IFV'') will be calculated and widely disseminated by one or more
major market data vendors every 15 seconds during the Exchange's Core
Trading Session (9:30 a.m., E.T., to 4:00 p.m., E.T.). The IFV will be
readily available from the Fund's website, automated quotation systems,
published or other public sources, or major market data vendors'
website or on-line information services. 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 Fund's website will include a form of
the prospectus for the Fund and additional data relating to NAV and
[[Page 4310]]
other applicable quantitative information. The level of the Index will
be published at least every 15 seconds, both in real time from 9:30
a.m. to 4 p.m., E.T., and at the close of trading on each business day
by Bloomberg and Reuters. The Fund's website will also provide
information regarding the SPIKES futures contracts constituting the
Index and the Index methodology. In addition, the level of the SPIKES
Index and the VIX is available from Bloomberg and Reuters.
---------------------------------------------------------------------------
\24\ The daily website disclosure of portfolio holdings will
include, as applicable, (i) the composite value of the total
portfolio, (ii) the quantity and type of each holding (including the
ticker symbol, maturity date or other identifier, if any) and other
descriptive information including, in the case of a swap, the type
of swap, its notional value and the underlying instrument, index or
asset on which the swap is based, (iii) the market value of each
investment held by the Fund, (iv) the type (including maturity,
ticker symbol, or other identifier) and value of each Treasury
security and cash equivalent, and (v) the amount of cash held in the
Fund's portfolio.
---------------------------------------------------------------------------
Complete real-time data for SPIKES futures contracts, which trade
on MGEX, is available by subscription through on-line information
services. MGEX also provides delayed futures information on current and
past trading sessions and market news free of charge on its website.
Price information regarding cleared VIX swap contracts is available
from major market data vendors and price information for non-exchange-
traded VIX swap contracts may be obtained from brokers and dealers who
make markets in such instruments. Price information regarding VIX
futures is available from the Cboe Futures Exchange and from major
market data vendors. Price information for cash equivalents is
available from major market data vendors.
The Exchange's rules regarding trading halts further help to ensure
the maintenance of fair and orderly markets for the Shares, which is
consistent with the protection of investors and the public interest.
Trading in the Shares may be halted because of market conditions or for
reasons that, in the view of the Exchange, make trading in the Shares
inadvisable. These may include: (1) The extent to which trading is not
occurring in the securities and/or the financial instruments composing
the daily disclosed portfolio of the Fund; or (2) whether other unusual
conditions or circumstances detrimental to the maintenance of a fair
and orderly market are present. Trading in Shares of the Fund will be
halted if the circuit breaker parameters in NYSE Arca Rule 7.12-E
(Trading Halts Due to Extraordinary Market Volatility) have been
reached. The Exchange may halt trading during the day in which an
interruption to the dissemination of the IFV or the value of the Index
occurs. If the interruption to the dissemination of the IFV or the
value of the Index 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. In addition, if the Exchange
becomes aware that the NAV with respect to the Shares or disclosure of
the Fund's daily holdings is not disseminated to all market
participants at the same time, it will halt trading in the Shares until
such time as the NAV and the Fund's daily holdings is available to all
market participants. NYSEArca Rule 8.200-E, Commentary .02, enumerates
additional circumstances under which the Exchange will consider the
suspension of trading in and will commence delisting proceedings for
the Shares.
The Exchange's proposal is designed to safeguard material non-
public information relating to the Fund's portfolio. Specifically, as
the Exchange states, neither the Sponsor nor the Sub-Adviser is
registered as a broker-dealer or affiliated with a broker-dealer. In
the event that (a) either the Sponsor or the Sub-Adviser becomes
registered as a broker-dealer or newly affiliated with a broker-dealer,
or (b) any new sponsor or sub-adviser is registered as a broker-dealer
or becomes affiliated with a broker-dealer, it will implement and
maintain a fire wall with respect to its relevant personnel or
personnel of the broker-dealer affiliate, as applicable, regarding
access to information concerning the composition of and/or changes to
the portfolio, and will be subject to procedures designed to prevent
the use and dissemination of material non-public information regarding
the portfolio. Moreover, trading of the Shares will be subject to NYSE
Arca Rule 8.200-E, Commentary .02(e), which sets forth certain
restrictions on Equity Trading Permit Holders (``ETP Holders'') acting
as registered Market Makers \25\ in Trust Issued Receipts to facilitate
surveillance. In addition, the Exchange has a general policy
prohibiting the distribution of material, non-public information by its
employees.
---------------------------------------------------------------------------
\25\ As defined in NYSE Arca Rule 1.1(z) the term ``Market
Maker'' means an ETP Holder that acts as a Market Maker pursuant to
NYSEArca Rule 7-E.
---------------------------------------------------------------------------
Furthermore, the Exchange or the Financial Industry Regulatory
Authority (``FINRA''), on behalf of the Exchange, or both, will
communicate as needed, and may obtain information, regarding trading in
the Shares, SPIKES futures, VIX futures and other underlying exchange-
listed instruments with other markets and entities that are members of
the Intermarket Surveillance Group (``ISG''). In addition, the Exchange
may obtain information regarding trading in the Shares, SPIKES futures,
VIX futures and other underlying exchange-listed instruments from
markets and other entities with which the Exchange has in place a
comprehensive surveillance sharing agreement (``CSSA''). All futures
contracts in which the Fund invests shall consist of futures contracts
whose principal market is a member of the ISG or is a market with which
the Exchange has a CSSA. The Exchange states that trading in the Shares
will be subject to existing trading surveillances administered by the
Exchange, as well as cross-market surveillances administered by FINRA
on behalf of the Exchange, and these procedures are adequate to
properly monitor Exchange trading of the Shares in all trading sessions
and to deter and detect violations of Exchange rules and federal
securities laws applicable to trading on the Exchange.
The Exchange has demonstrated there is an appropriate regulatory
framework to support listing and trading of the Shares, including
trading rules, surveillance, and listing standards. Moreover, the
trading of the Shares on the Exchange will be subject to the Exchange's
and other rules listed below. Specifically:
(1) 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;
(2) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Rule 8.200-E;
(3) Pursuant to NYSEArca Rule 8.200-E(a), all statements and
representations made in the filing regarding (a) the description of the
Index, portfolio, or reference asset, (b) limitations on Index or
portfolio holdings or reference assets, or (c) the applicability of
Exchange listing rules specified in the filing will constitute
continued listing requirements for the Shares. The issuer 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 \26\ 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).
---------------------------------------------------------------------------
\26\ Certain proposals for the listing and trading of exchange-
traded products include a representation that the exchange will
``surveil'' for compliance with the continued listing requirements.
See, e.g., Securities Exchange Act Release No. 77499 (April 1,
2016), 81 FR 20428, 20432 (April 7, 2016) (SR-BATS-2016-04). In the
context of this representation, it is the Commission's view that
``monitor'' and ``surveil'' both mean ongoing oversight of
compliance with the continued listing requirements. Therefore, the
Commission does not view ``monitor'' as a more or less stringent
obligation than ``surveil'' with respect to the continued listing
requirements.
---------------------------------------------------------------------------
[[Page 4311]]
(4) The Exchange has the appropriate rules to facilitate
transactions in the Shares during all trading sessions;
(5) Prior to the commencement of trading, the Exchange will inform
its ETP Holders in an Information Bulletin of the special
characteristics and risks associated with trading the Shares; \27\
---------------------------------------------------------------------------
\27\ The Exchange states that the Information Bulletin will
discuss the following: (1) The risks involved in trading the Shares
during the Opening and Late Trading Sessions when an updated IFV
will not be calculated or publicly disseminated; (2) the procedures
for purchases and redemptions of Shares in Creation Units and
Redemption Units (and that Shares are not individually redeemable);
(3) 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; (4) how information regarding
the IFV is disseminated; (5) how information regarding portfolio
holdings is disseminated; (6) the requirement that ETP Holders
deliver a prospectus to investors purchasing newly issued Shares
prior to or concurrently with the confirmation of a transaction; and
(7) trading information.
---------------------------------------------------------------------------
(6) FINRA has implemented increased sales practice and customer
margin requirements for FINRA members applicable to inverse, leveraged
and inverse leveraged securities (which include the Shares) and options
on such securities, as described in FINRA Regulatory Notices 09-31
(June 2009), 09-53 (August 2009), and 09-65 (November 2009). ETP
Holders that carry customer accounts will be required to follow the
FINRA guidance set forth in these notices;
(7) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act; \28\ and
---------------------------------------------------------------------------
\28\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
(8) A minimum of 100,000 Shares of the Fund will be outstanding at
the commencement of trading on the Exchange.
Accordingly, the Commission finds that the proposed rule change, as
modified by Amendment No. 1, is consistent with Section 6(b)(5) of the
Act \29\ and the rules and regulations thereunder applicable to a
national securities exchange.
---------------------------------------------------------------------------
\29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\30\ that the proposed rule change (SR-NYSEArca-2021-28), as
modified by Amendment No. 1, be, and hereby is, approved.
---------------------------------------------------------------------------
\30\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
---------------------------------------------------------------------------
\31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01564 Filed 1-26-22; 8:45 am]
BILLING CODE 8011-01-P
