Notice2024-22413
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 14.11(e)(10) (Managed Trust Securities) and To List and Trade Shares of the Dynamic Short Short-Term Volatility Futures ETF Under Amended Rule 14.11(e)(10)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 1, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 190 (Tuesday, October 1, 2024)</title>
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[Federal Register Volume 89, Number 190 (Tuesday, October 1, 2024)]
[Notices]
[Pages 79990-79996]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-22413]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101190; File No. SR-CboeBZX-2024-089]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Exchange Rule 14.11(e)(10) (Managed Trust Securities) and To List and
Trade Shares of the Dynamic Short Short-Term Volatility Futures ETF
Under Amended Rule 14.11(e)(10)
September 25, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 16, 2024, Cboe BZX Exchange, Inc. (``Exchange'') filed
with the Securities and Exchange
[[Page 79991]]
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Exchange filed the proposal as a ``non-controversial'' proposed
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and
Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
a proposed rule change to (1) amend Exchange Rule 14.11(e)(10) to add
certain financial instruments that an issue of Managed Trust Securities
may hold; and (2) list and trade shares of the Dynamic Short Short-Term
Volatility Futures ETF (the ``Fund''), a series of Dynamic Shares Trust
(the ``Trust''), under Rule 14.11(e)(10) (Managed Trust Securities),
which is currently listed on NYSE Arca, Inc. (``Arca'').
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/">http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/</a>), at the Exchange's Office of the Secretary, 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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Exchange Rule 14.11(e)(10) permits the trading of Managed Trust
Securities either by listing or pursuant to unlisted trading privileges
(``UTP'').\5\ The Exchange proposes to amend Rule 14.11(e)(10)(C)(i)
to, among other things, permit the use of exchange-traded futures
contracts involving commodity indices, currency indices, Cboe
Volatility Index (VIX), or the EURO STOXX 50 Volatility Index (VSTOXX),
permit the use of swaps on stock indices, fixed income indices,
commodity indices, the VIX, VSTOXX, commodities, currencies, currency
indices, or interest rates, and to permit the trust to hold cash and
cash equivalents.\6\ The Exchange also proposes to list and trade
Shares of the Dynamic Short Short-Term Volatility Futures ETF (the
``Fund''), under Rule 14.11(e)(10), as proposed to be amended, which
governs the listing and trading of Managed Trust Securities on the
Exchange.\7\ The Exchanges notes that the listing and trading of the
Shares has previously been approved by the Commission and are currently
listed on NYSE Arca.\8\ This proposal to list and trade Shares of the
Fund is substantively identical to the Prior Release and the issuer
represents that all material representations contained within the Prior
Release remain true. Further, the Fund is already trading on the
Exchange pursuant to unlisted trading privileges, as provided in Rule
14.11(j).
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\5\ The term ``Managed Trust Securities'' as used in the Rules
shall, unless the context otherwise requires, mean a security that
is registered under the Securities Act of 1933, as amended, (a) is
issued by a trust (``Trust'') that (1) is a commodity pool as
defined in the Commodity Exchange Act and regulations thereunder,
and that 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 selected by the Trust's advisor
consistent with the Trust's investment objectives, which will only
include exchange-traded futures contracts involving commodities,
currencies, stock indices, fixed income indices, interest rates and
sovereign, private and mortgage or asset backed debt instruments,
and/or forward contracts on specified currencies, each as disclosed
in the Trust's prospectus as such may be amended from time to time;
and (b) is issued and redeemed continuously in specified aggregate
amounts at the next applicable net asset value. See Exchange Rule
14.11(e)(10)(C)(i).
\6\ Another exchange rule similarly provides for a series of
Managed Trust Securities to hold such instruments. See NYSE Arca
Rule 8.700-E. Managed Trust Securities. For purposes of the proposed
amendment to Exchange Rule 14.11(e)(10)(C)(i), cash and cash
equivalents means short-term instruments with maturities of less
than three months, including: (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.
\7\ The Commission approved BZX Rule 14.11(e)(10) in Securities
Exchange Act Release No. 70250 (August 23, 2013), 78 FR 53510
(August 29, 2013) (SR-BATS-2013-038).
\8\ See Securities Exchange Act Nos. 86714 (August 20, 2019) 84
FR 44642 (August 26, 2019) (SR-NYSEArca-2019-55) (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) (the ``Prior Proposal''); 87223 (October 4, 2019) 84 FR 54707
(October 10, 2019) (Order Approving a 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) (the ``Approval Order'' and
together with the Prior Proposal, the ``Prior Release'').
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Managed Trust Securities
The Exchange proposes to modify Exchange Rule 14.11(e)(10(C)(i) to
substantively conform to Arca Rule 8.700(E)[sic](c)(1). Thus, the
proposed changes to Rule 14.11(e)(10)(C)(i) would make the Exchange
Rule substantively identical to NYSE Arca Rule 8.700-E(c)(1).
Dynamic Short Short-Term Volatility Futures ETF
The Exchange proposes to list and trade the Shares of the Fund
under proposed amended Rule 14.11(e)(10). Dynamic Shares LLC will serve
as the Trust's sponsor (``Sponsor'') and will serve as its commodity
pool operator. 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 is 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 Exchange Rule
14.11(e)(10)(C)(ii)), and will be subject to procedures designed to
prevent the use and dissemination of material non-
[[Page 79992]]
public information regarding such portfolio.
According to the Registration Statement,\9\ 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 futures
on the VIX Index \11\ (``VIX Futures'') with monthly expirations.
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\9\ On April 25, 2024, the Trust filed with the Commission an
amended registration statement on Form S-1 under the Securities Act
of 1933 relating to the Trust (File No. 333-277681) (``Registration
Statement''). The description of the operation of the Trust herein
is based, in part, on the Prior Release and the Registration
Statement.
\10\ The term ``normal market conditions'' is defined in
Exchange Rule 14.11(i)(3)(D).
\11\ The ``VIX Index'' refers to the Cboe Volatility Index.
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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 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.\12\
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\12\ 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.
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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 on changes in the implied level
of future market volatility to the extent these changes are reflected
in the price of VIX Futures. 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, 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.\13\
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.
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\13\ 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.''
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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.
Purchases and Redemptions of Creation Units
Except for the creation unit size, all representations pertaining
to the purchases and redemptions of creation units are identical to
those in the Prior Release. Specifically, the Fund will create and
redeem Shares from time to time in one or more creation units. A
creation unit is a block of 10,000 Shares.
[[Page 79993]]
Net Asset Value
Everything stated in the Prior Release pertaining to the NAV per
Share of the Fund will remain true and in effect.
Intraday Indicative Value (``IIV'') \14\
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\14\ The Exchange notes that the Prior Release provided that the
Indicative Optimized Portfolio Value (``IOPV'') would be calculated
rather than the IIV. However, Arca Rule 8.700-E(c)(3) has since been
updated to reflect that IIV is currently used for Managed Trust
Securities listed and traded on Arca rather than the IOPV. The
definition of IIV in Arca Rule 8.700-E(c)(3) is substantively
identical to Exchange Rule 14.11(e)(10)(C)(iii).
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Everything stated in the Prior Release pertaining to the IIV will
remain true and in effect.
Availability of Information
The Trust's website, <a href="http://www.dynamicsharesetf.com">www.dynamicsharesetf.com</a>, 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 Exchange Rule
14.11(e)(10)(C)(ii); (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.
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).
As noted above, the Trust's NAV and the NAV per Share will be
calculated and disseminated daily after the close of the Regular
Trading Hours (normally 4:00 p.m., E.T.).\15\ 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 at no charge.
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\15\ 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.
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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.
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 Exchange Rule
14.11(e)(10)(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 Exchange Rule 14.10 and Rule 10A-3
under the Exchange Act.\16\
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\16\ 17 CFR 240.10A-3.
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Trading Rules
Under Exchange Rule 14.11(e)(10)(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. Interpretation and Policy
.02 to Exchange Rule 14.11(e)(10) provides that transactions in Managed
Trust Securities will occur during Regular Trading Hours, and the Early
Trading,\17\ Pre-Opening \18\ and After Hours Sessions.\19\ Therefore,
the Shares will trade on the Exchange from 7:00 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 Exchange Rule 11.11,
the minimum price variation (``MPV'') for quoting and entry of orders
in equity securities traded on the Exchange 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.
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\17\ See Exchange Rule 1.5(ff).
\18\ See Exchange Rule 1.5(r).
\19\ See Exchange Rule 1.5(c).
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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 Exchange Rule 11.18 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
[[Page 79994]]
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.\20\ 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.
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\20\ 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.
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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
intermarket surveillance group (``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.\21\ 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'').
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\21\ For a list of the current members of ISG, see
<a href="http://www.isgportal.org">www.isgportal.org</a>. 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
comprehensive surveillance sharing agreement.
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In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Any of the statements or representations regarding the index
composition, the description of the portfolio or reference assets,
limitations on portfolio holdings or reference assets, dissemination
and availability of index, reference asset, intraday indicative values
(as applicable), or the applicability of Exchange listing rules
relating to the Shares shall constitute continued listing requirements
for the Shares listed 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 Exchange Rule 14.12.
Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) the procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) BZX Rule 3.7, which imposes suitability
obligations on Exchange members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the IIV and the Disclosed Portfolio is disseminated; (4) the risks
involved in trading the Shares outside of Regular Trading Hours when an
updated IIV will not be calculated or publicly disseminated; (5) the
requirement that members deliver a prospectus to investors purchasing
newly issued Shares prior to or concurrently with the confirmation of a
transaction; and (6) trading information.
The Information Circular 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.
In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Fund. Members purchasing Shares from the Fund for
resale to investors will deliver a prospectus to such investors. The
Information Circular will also discuss any exemptive, no-action and
interpretive relief granted by the Commission from any rules under the
Act. In addition, the Information Circular will reference that the Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Circular will also disclose the trading
hours of the Shares of the Fund and the applicable NAV calculation time
for the Shares. The Information Circular will disclose that information
about the Shares of the Fund will be publicly available on the Fund's
website.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\22\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \23\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \24\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(5).
\24\ Id.
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In particular, the Exchange is proposing to adopt rules identical
to those of another exchange and is further proposing a proposed rule
change to facilitate the transfer of the security to the Exchange.
Except for the size of the creation unit, all other representations
made in the Prior Release remain true for the Fund.
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices with respect to
the proposal to list and trade Shares on the Exchange pursuant to the
initial and continued listing criteria in Exchange Rule 14.11(e)(10).
The Exchange believes that its surveillance procedures are adequate to
properly monitor the trading of the Shares on the Exchange during all
trading sessions and to deter and detect violations of Exchange rules
and the applicable federal securities laws. The Sponsor is not a
broker-dealer and is not affiliated with a broker-dealer dealer. In the
event (a) the Sponsor becomes registered as a broker-dealer or newly
affiliated with a broker-dealer, or
[[Page 79995]]
(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 Exchange Rule
14.11(e)(10)(C)(ii)), and will be subject to procedures designed to
prevent the use and dissemination of material non-public information
regarding such portfolio. The Exchange, FINRA, on behalf of the
Exchange, or both may obtain information regarding trading in the
Shares and the underlying VIX Futures via the ISG from other exchanges
who are members or affiliates of the ISG or with which the Exchange has
entered into a comprehensive surveillance sharing agreement. In
addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
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 in that it will facilitate the listing and trading of
exchange-traded products 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 via ISG from other
exchanges that are members of ISG or with which the Exchange has
entered into a comprehensive surveillance sharing agreement.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.
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 purpose of the Act. The Exchange notes that the
proposed rule change, rather will facilitate the transfer from NYSE
Arca and listing of an additional exchange-traded product on the
Exchange, which will enhance competition among listing venues, to the
benefit of issuers, investors, and the marketplace more broadly. The
Exchange does not believe its proposal to amend Exchange Rule
14.11(e)(10)(C)[sic] will burden competition as the proposed changes
would make the Rule identical to NYSE Arca Rule 8.700(E)[sic](c)(1).
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A) of the Act \25\ and Rule 19b-
4(f)(6) \26\ thereunder, the Exchange has designated this proposal as
one that effects a change that: (i) does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) by its terms, does not
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest.\27\
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\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 17 CFR 240.19b-4(f)(6).
\27\ In addition, Rule 19b-4(f)(6) requires a self-regulatory
organization to give the Commission written notice of its intent to
file the proposed rule change at least five business days prior to
the date of filing of the proposed rule change, or such shorter time
as designated by the Commission. See id. The Exchange has satisfied
this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \28\ permits the Commission
to designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requested
that the Commission waive the 30-day operative delay so that the
proposal may become operative immediately upon filing. The proposed
rule change, which modifies certain listing standards applicable to
Managed Trust Securities, conforms to substantially similar standards
of another national securities exchange \29\ and raises no novel legal
or regulatory issues. In addition, the Exchange proposes to list and
trade the Fund's shares, which were previously approved for listing and
trading and are currently listed and trading on NYSE Arca, Inc.\30\
According to the Exchange, the proposal to list and trade the shares of
the Fund is substantively identical to the Prior Release and, except
for the modification of the creation unit size, all representations
contained in the Prior Release remain true.\31\ As such, the proposal
to list and trade the shares of the Fund on the Exchange raises no
novel legal or regulatory issues. Therefore, the Commission believes
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposed rule change operative upon filing.\32\
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\28\ 17 CFR 240.19b-4(f)(6)(iii).
\29\ See NYSE Arca Rule 8.700-E(c)(1) (setting forth the initial
and continued listing standards for Managed Trust Securities). See
also supra note 6 and accompanying text.
\30\ See supra note 8 and accompanying text. BZX represents that
the date the Fund shares will transfer listing to the Exchange is
anticipated to be September 30, 2024. See Item 3 of Form 19b-4 at
22.
\31\ While the size of a creation unit for the Fund has changed
from the Prior Release (in the current proposal, a creation unit is
a block of 10,000 shares, and in the Prior Release, a creation unit
is a block of 50,000 shares), the Prior Release represented that the
size of a creation unit is subject to change. See Prior Proposal,
supra note 8, 84 FR at 44645. BZX represents that, except for the
creation unit size, all representations pertaining to the purchases
and redemptions of creation units are identical to those in the
Prior Release. The Commission also recognizes that other proposals
to list and trade shares of exchange-traded products provide for
similar creation unit sizes and representations. See, e.g.,
Securities Exchange Act Release No. 94569 (March 31, 2022) 87 FR
19990 (April 6, 2022) (SR-NYSEArca-2022-16) (representing that the
shares of the DoubleLine Shiller CAPE U.S. Equities ETF will be
issued and redeemed in creation units of 10,000 shares and that the
size of a creation unit is subject to change).
\32\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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:
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#89fbfce5eca4eae6e4e4ece7fdfac9faeceaa7eee6ff"><span class="__cf_email__" data-cfemail="0f7d7a636a226c6062626a617b7c4f7c6a6c21686079">[email protected]</span></a>. Please include
file number SR-CboeBZX-2024-089 on the subject line.
Paper Comments:
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
[[Page 79996]]
All submissions should refer to file number SR-CboeBZX-2024-089. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CboeBZX-2024-089 and should
be submitted on or before October 22, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12), (59).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-22413 Filed 9-30-24; 8:45 am]
BILLING CODE 8011-01-P
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