[Federal Register Volume 82, Number 58 (Tuesday, March 28, 2017)]
[Notices]
[Pages 15400-15404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06053]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80296; File No. SR-NYSEArca-2017-07]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendment Nos. 1, 3, and 4 
Thereto, To List and Trade Shares of the ProShares UltraPro 3x Crude 
Oil ETF and ProShares UltraPro 3x Short Crude Oil ETF Under NYSE Arca 
Equities Rule 8.200

March 22, 2017.

I. Introduction

    On January 26, 2017, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \2\ and Rule 19b-4 
thereunder,\3\ a proposed rule change to list and trade shares 
(``Shares'') of the ProShares UltraPro 3x Crude Oil ETF and ProShares 
UltraPro 3x Short Crude Oil ETF (each a ``Fund,'' and collectively the 
``Funds'') under NYSE Arca Equities Rule 8.200. The proposed rule 
change was published for comment in the Federal Register on February 7, 
2017.\4\ On March 9, 2017, the Exchange filed Amendment No. 1 to the 
proposed rule change.\5\ On March 10, 2017, the Exchange filed and 
withdrew Amendment No. 2 to the proposed rule change,\6\ and filed 
Amendment No. 3 to the proposed rule change.\7\ On March 20, 2017, the 
Exchange filed Amendment No. 4 to the proposed rule change.\8\ The 
Commission received no comments on the proposed rule change. This order 
approves the proposed rule change, as modified by Amendment Nos. 1, 3, 
and 4 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 79917 (February 1, 
2017), 82 FR 9620.
    \5\ In Amendment No. 1, which amended and replaced the proposed 
rule change in its entirety, the Exchange: (1) Supplemented its 
description of the Funds' investments in over-the-counter (``OTC'') 
transactions; (2) provided clarification and additional specificity 
regarding the holding and settlement of futures contracts and 
options on such futures; (3) provided additional details regarding 
the calculation of the Bloomberg WTI Crude Oil Subindex\SM\; (4) 
provided information regarding the calculation and dissemination of 
the Indicative Fund Value of the Funds; (5) provided additional 
clarification regarding the difference between the net asset value 
calculation time and the creation and redemption cut-off time for 
the Funds; (6) clarified the information that will be made available 
on the Funds' Web site regarding the Funds and their portfolio 
holdings; (7) supplemented its description of the Exchange's 
surveillance procedures; (8) represented that the applicability of 
Exchange listing rules specified in the proposed rule change shall 
constitute continued listing requirements for listing the Shares on 
the Exchange; (9) clarified the type of information that will be 
available in the Information Bulletin regarding the Funds' portfolio 
holdings; and (10) made other technical amendments. Amendment No. 1 
to the proposed rule change is available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1630210-137426.pdf. 
Amendment No. 1 is not subject to notice and comment because it is a 
technical amendment that does not materially alter the substance of 
the proposed rule change or raise any novel regulatory issues.
    \6\ Notice of the Exchange's withdrawal of Amendment No. 2 is 
available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1644096-147899.pdf.
    \7\ In Amendment No. 3, which partially amended the proposed 
rule change, as modified by Amendment No. 1 thereto, the Exchange 
added a representation regarding the dissemination of the value of 
the Bloomberg WTI Crude Oil Subindex\SM\. Amendment No. 3 to the 
proposed rule change is available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1644096-147899.pdf. Amendment No. 
3 is not subject to notice and comment because it is a technical 
amendment that does not materially alter the substance of the 
proposed rule change or raise any novel regulatory issues.
    \8\ In Amendment No. 4, which partially amended the proposed 
rule change, as modified by Amendment Nos. 1 and 3 thereto, the 
Exchange: (1) Clarified its use of the term ``Futures Contracts'' 
and (2) provided additional clarification regarding the calculation 
of the Indicative Fund Value. Amendment No. 4 to the proposed rule 
change is available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1657390-148729.pdf. Amendment No. 4 is not 
subject to notice and comment because it is a technical amendment 
that does not materially alter the substance of the proposed rule 
change or raise any novel regulatory issues.
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II. Exchange's Description of the Proposal \9\
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    \9\ A more detailed description of the Funds, the Shares, and 
the Benchmark, as well as investment risks, creation and redemption 
procedures, net asset value (``NAV'') calculation, availability of 
values and other information regarding the Funds' portfolio 
holdings, and fees, among other things, is included in the 
Registration Statement, as well as Amendment Nos. 1, 3, and 4, as 
applicable. See infra note 11, and supra notes 5, 7, and 8, 
respectively.
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    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.200, Commentary .02, which governs the listing and 
trading of Trust Issued Receipts.\10\ Each Fund is a

[[Page 15401]]

series of the ProShares Trust II (``Trust''), a Delaware statutory 
trust.\11\ The Trust and the Funds are managed and controlled by 
ProShare Capital Management LLC (``ProShare Capital''). ProShare 
Capital is registered as a commodity pool operator with the Commodity 
Futures Trading Commission and is a member of the National Futures 
Association. Brown Brothers Harriman & Co. will be the custodian, 
registrar, and transfer agent, and administrator for the Funds. SEI 
Investments Distribution Co. serves as distributor for the Funds.
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    \10\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
Trust Issued Receipts that invest in ``Financial Instruments.'' The 
term ``Financial Instruments,'' as defined in Commentary .02(b)(4) 
to NYSE Arca Equities Rule 8.200, 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.
    \11\ The Trust is registered under the Securities Act of 1933 
(15 U.S.C. 77a) (``Securities Act''). On December 9, 2016, the Trust 
filed with the Commission a registration statement on Form S-1 under 
the Securities Act relating to the Funds (File No. 333-214904) 
(``Registration Statement''). The description of the operation of 
the Trust and the Funds herein is based, in part, on the 
Registration Statement.
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Overview of the Funds

    The investment objective of the ProShares UltraPro 3x Crude Oil ETF 
is to seek, on a daily basis,\12\ investment results that correspond 
(before fees and expenses) to three times (3x) the performance of the 
Bloomberg WTI Crude Oil Subindex\SM\ (``Benchmark'').\13\ The 
investment objective of the ProShares UltraPro 3x Short Crude Oil ETF 
is to seek, on a daily basis, investment results that correspond 
(before fees and expenses) to three times (3x) the inverse of the 
performance of the Benchmark. The Benchmark is intended to reflect the 
performance of crude oil as measured by the price of futures contracts 
of West Texas Intermediate sweet, light crude oil listed on the New 
York Mercantile Exchange (``NYMEX''), including the impact of rolling, 
without regard to income earned on cash positions.
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    \12\ The Fund does not seek to achieve its investment objective 
over a period greater than a single trading day. The Exchange states 
that the return of a Fund for a period longer than a single trading 
day is the result of its return for each day compounded over the 
period and thus will usually differ from a Fund's multiple times the 
return of the Benchmark for the same period. See Amendment No. 1, 
supra note 5, at 5.
    \13\ According to the Exchange, the Bloomberg WTI Crude Oil 
Subindex\SM\ is a ``rolling index,'' which means that the Index 
performance includes the impact of closing out futures contracts 
that are nearing expiration and replacing them with futures 
contracts with later expirations. The Exchange states that this 
process is commonly referred to as ``rolling.'' See id. at 5 n.6.
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    In seeking to achieve the Funds' investment objectives, ProShare 
Capital will utilize a mathematical approach to determine the type, 
quantity and mix of investment positions that ProShare Capital 
believes, in combination, should produce daily returns consistent with 
the Funds' respective objectives. ProShare Capital will rely on a pre-
determined model to generate orders that result in repositioning the 
Funds' investments in accordance with their respective investment 
objectives.

Investments of the Funds

    Each Fund will seek to achieve its respective investment objective 
by investing, under normal market conditions,\14\ substantially all of 
its assets in futures contracts for West Texas Intermediate sweet, 
light crude oil listed on the NYMEX, ICE Futures U.S. or other U.S. 
exchanges (``Futures'') and listed options on such contracts 
(``Options'' and, together with Futures, ``Futures Contracts''). The 
Funds will not invest directly in oil. A Fund's investments in Futures 
Contracts will be used to produce economically ``leveraged'' or 
``inverse leveraged'' investment in a manner consistent with the 
respective Fund's investment objective.
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    \14\ The term ``normal market conditions'' includes, but is not 
limited to, the absence of trading halts in the applicable financial 
markets generally; operational issues (e.g., systems failure) 
causing dissemination of inaccurate market information; or force 
majeure type events such as natural or manmade disaster, act of God, 
armed conflict, act of terrorism, riot or labor disruption or any 
similar intervening circumstance. See id. at 6 n.9.
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    In the event position, price or accountability limits are reached 
with respect to Futures Contracts,\15\ each Fund may obtain exposure to 
the Benchmark through investments in swap agreements and forward 
contracts referencing such Benchmark (``Financial Instruments''). To 
the extent that a Fund invests in Financial Instruments, it would first 
make use of exchange-traded Financial Instruments, if available. If an 
investment in exchange-traded Financial Instruments is unavailable, 
then a Fund would invest in Financial Instruments that clear through 
derivatives clearing organizations that satisfy the Trust's criteria, 
if available. If an investment in cleared Financial Instruments is 
unavailable, then a Fund would invest in other Financial Instruments, 
including uncleared Financial Instruments in the OTC market. The Funds 
may also invest in Financial Instruments 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) that prevent or make it impractical for a Fund to obtain the 
appropriate amount of investment exposure using Futures Contracts.
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    \15\ Designated contract markets, such as the NYMEX and ICE 
Futures U.S., have established accountability levels and position 
limits on the maximum net long or net short Futures Contracts in 
commodity interests that any person or group of persons under common 
trading control (other than as a hedge, which an investment by a 
Fund is not) may hold, own or control. These levels and position 
limits apply to the Futures Contracts that each Fund would invest in 
to meet its investment objective. In addition to accountability 
levels and position limits, NYMEX and ICE Futures U.S. also set 
price fluctuation limits on Futures Contracts. The price fluctuation 
limit establishes the amount that the price of Futures may vary 
either up or down from the previous day's settlement price. Options 
do not have individual price limits but rather are linked to the 
price limit of Futures. See id. at 6 n.10.
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    Although each Fund, under normal market conditions, will invest 
substantially all of its assets in Futures Contracts, each 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 and collateralized 
repurchase agreements) pending investment in Futures Contracts or 
Financial Instruments or as collateral for the Funds' investments.
    The Exchange represents that, to the extent a Fund enters into swap 
agreements and other OTC transactions, it will do so only with large, 
established and well capitalized financial institutions that meet the 
Sponsor's credit quality standards and monitoring policies. The 
Exchange states that each Fund will use various techniques to minimize 
credit risk including early termination or reset and payment, using 
different counterparties and limiting the net amount due from any 
individual counterparty.\16\
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    \16\ See id. at 7.
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    The Funds do not intend to hold Futures \17\ through expiration, 
but instead intend to ``roll'' or close their respective positions 
before expiration. 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

[[Page 15402]]

than the price of the more distant contract.\18\
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    \17\ The Exchange states that out-of-the-money Options will be 
held to expiration and will expire worthless. According to the 
Exchange, Funds intend to hold in-the-money options to expiration, 
which would occur before the expiration of Futures. In-the-money 
Options are settled through receipt or delivery of Futures. With 
respect to Futures positions established through the Options 
settlement procedure, the Funds intend to close such positions by 
entering into simultaneous offsetting Futures positions. The effects 
of contango and backwardation on the price of Futures will impact 
the price of Options to the same degree of any change in the price 
of the underlying Futures. See id. at 7 n.11.
    \18\ The Exchange states that this pattern of higher futures 
prices for longer expiration Futures is 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 
futures prices for shorter expiration Futures is referred to as 
``backwardation.'' According to the Exchange, the presence of 
contango in certain Futures at the time of rolling could adversely 
affect a Fund with long positions, and positively affect a Fund with 
short positions. Similarly, the presence of backwardation in certain 
Futures at the time of rolling such contracts could adversely affect 
a Fund with short positions and positively affect a Fund with long 
positions. See id. at 7.
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    The Exchange states that the Funds do not expect to have exposure 
to Futures Contracts and Financial Instruments greater than three times 
(3x) the Funds' net assets. Thus, the maximum margin held at a future 
commission merchant would not exceed three times the margin requirement 
for either Fund.\19\ The Exchange represents that not more than 10% of 
the net assets of a Fund in the aggregate invested in Futures Contracts 
shall consist of Futures Contracts whose principal market is not a 
member of the Intermarket Surveillance Group (``ISG'') or is a market 
with which the Exchange does not have a comprehensive surveillance 
sharing agreement (``CSSA'').\20\
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    \19\ See id.
    \20\ See id. at 14.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\21\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment Nos. 1, 3, and 4 
thereto, is consistent with Section 6(b)(5) of the Exchange Act,\22\ 
which requires, among other things, that the Exchange's rules be 
designed 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.
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    \21\ 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).
    \22\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Exchange Act,\23\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers and investors of information with respect to 
quotations for and transactions in securities. According to the 
Exchange, quotation and last-sale information regarding the Shares will 
be disseminated through the facilities of the Consolidated Tape 
Association (``CTA''). Quotation information for cash equivalents, OTC 
swaps and forward contracts may be obtained from brokers and dealers 
who make markets in such instruments. Quotation information for 
exchange-traded swaps will be available from the applicable exchange 
and major market vendors. The intraday, closing prices, and settlement 
prices of the Futures Contracts will be readily available from the 
applicable futures exchange Web sites, automated quotation systems, 
published or other public sources, or major market data vendors. 
Complete real-time data for the Futures Contracts is available by 
subscription through on-line information services. ICE Futures U.S. and 
NYMEX also provide delayed futures and options on futures information 
on current and past trading sessions and market news free of charge on 
their respective Web sites. The specific contract specifications for 
Futures Contracts are also available on such Web sites, as well as 
other financial informational sources. Intra-day price and closing 
price level information for the Benchmark will be available from major 
market data vendors.
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    \23\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Funds' Web site, www.ProShares.com, will display the applicable 
end of day closing NAV. Each Fund's total portfolio composition will be 
disclosed each business day that the NYSE Arca is open for trading, on 
the Funds' Web site. The Funds' Web site will also include a form of 
the prospectus for the Funds that may be downloaded. The Web site will 
include the Shares' ticker and CUSIP information, along with additional 
quantitative information updated on a daily basis for each Fund.\24\ 
The Web site disclosure of portfolio holdings will be made daily and 
will include, as applicable, (i) the name, quantity, value, expiration 
and strike price of Futures and Options, (ii) the counterparty to and 
value of swap agreements and forward contracts, and (ii) the aggregate 
net value of other assets (i.e., Treasury securities, cash equivalents 
and cash) held in each Fund's portfolio, if applicable.
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    \24\ The Funds' Web site will include (1) daily trading volume, 
the prior business day's reported NAV and closing price, and a 
calculation of the premium and discount of the closing price or mid-
point of the bid/ask spread at the time of NAV calculation (``Bid/
Ask Price'') against the NAV; and (2) data in chart format 
displaying the frequency distribution of discounts and premiums of 
the daily closing price or Bid/Ask Price against the NAV, within 
appropriate ranges, for at least each of the four previous calendar 
quarters.
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    The Benchmark will be disseminated by one or more major market data 
vendors every 15 seconds during the NYSE Arca Core Trading Session of 
9:30 a.m. to 4:00 p.m. Eastern Time (``E.T.''). The Indicative Fund 
Value (``IFV'') \25\ per Share will be widely disseminated by one or 
more major market data vendors every 15 seconds during the Exchange's 
Core Trading Session.\26\ The Funds will compute their NAVs at 2:30 
p.m. E.T., which is the designated closing time of the crude oil 
futures listed on NYMEX,\27\ or an earlier time as set forth on 
www.ProShares.com, if necessitated by the New York Stock Exchange LLC, 
the Exchange, or other exchange material to the valuation or operation 
of such Fund closing early. The NAV for the Shares will be disseminated 
daily to all market participants at the same time.
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    \25\ The IFV will be calculated by using the prior day's closing 
NAV per Share of a Fund as a base and will be updating throughout 
the Exchange's Core Trading Session to reflect changes in the 
approximate aggregate per Share value of the investments held by a 
Fund based on the most recently available prices for the Fund's 
investments. According to the Exchange, there may be times when 
trading in the Shares is occurring during the NYSE Arca Core Trading 
Session, but trading in Futures is not occurring. This may occur 
when, for example, a futures exchange and NYSE Arca have different 
holiday schedules, a futures exchange closes prior to the close of 
the NYSE Arca Core Trading Session, price fluctuation limits are 
reached in Futures, or a futures exchange imposes any other 
suspension or limitation on trading in Futures. In such instances, 
the IFV would be static or priced at the applicable early cut-off 
time of the exchange trading the applicable Futures. See Amendment 
No. 1, supra note 5, at 9; Amendment No. 4, supra note 8.
    \26\ The Exchange notes that several major market data vendors 
display and/or make widely available IFVs taken from the CTA or 
other data feeds. See Amendment No. 1, supra note 5, at 9 n.13.
    \27\ The Exchange states that the daily value of the Benchmark 
is calculated as of 2:30 p.m. E.T. to coincide with the designated 
closing time. Futures Contracts, however, continue to trade past 
2:30 p.m. E.T. and through the end of the NYSE Arca Core Trading 
Session at 4:00 p.m. E.T. See id. at 8 n.12.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. If the Exchange becomes aware that the NAV with respect to the 
Shares is not

[[Page 15403]]

disseminated to all market participants at the same time, it will halt 
trading in the Shares until such time as the NAV is available to all 
market participants. Further, the Exchange may halt trading during the 
day in which an interruption to the dissemination of the IFV or the 
value of the Benchmark occurs. If the interruption to the dissemination 
of the IFV or the value of the Benchmark 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. Trading in 
Shares of a Fund will be halted if the circuit breaker parameters in 
NYSE Arca Equities Rule 7.12 have been reached. Trading also may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. The Exchange 
states that it has a general policy prohibiting the distribution of 
material, non-public information by its employees.\28\ Moreover, 
trading of the Shares will be subject to NYSE Arca Equities Rule 8.200, 
Commentary .02(e), which sets forth certain restrictions on Equity 
Trading Permit (``ETP'') Holders acting as registered Market Makers in 
Trust Issued Receipts to facilitate surveillance.
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    \28\ See id. at 14.
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    The Commission notes that the Exchange or the Financial Industry 
Regulatory Authority (``FINRA''), on behalf of the Exchange, or both, 
will communicate as needed regarding trading in the Shares and certain 
Futures Contracts with other markets and other entities that are 
members of the ISG, and the Exchange or FINRA, on behalf of the 
Exchange, or both, may obtain trading information regarding trading in 
the Shares and certain Futures Contracts from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and certain Futures Contracts from markets and 
other entities that are members of ISG or with which the Exchange has 
in place a CSSA.\29\ The Exchange is also able to obtain information 
regarding trading in the Shares, the physical commodities underlying 
Futures Contracts through ETP Holders, in connection with such ETP 
Holders' proprietary or customer trades which they effect through ETP 
Holders on any relevant market. The Exchange can obtain market 
surveillance information, including customer identity information, with 
respect to transactions (including transactions in Futures Contracts) 
occurring on US futures exchanges, which are members of the ISG.
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    \29\ For a list of the current members of ISG, see 
www.isgportal.org. According to the Exchange, not all components of 
a Fund may trade on markets that are members of ISG or with which 
the Exchange has in place a CSSA. See id. at 13 n.18.
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    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. In support of this 
proposal, the Exchange represented that:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.200.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances administered by the Exchange, as well as cross-market 
surveillances administered by FINRA on behalf of the Exchange, which 
are designed to detect violations of Exchange rules and applicable 
federal securities laws, 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.
    (4) 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. 
Specifically, the Information Bulletin will discuss the following: (a) 
The risks involved in trading the Shares during the Early and Late 
Trading Sessions when an updated IFV will not be calculated or publicly 
disseminated; (b) the procedures for purchases and redemptions of 
Shares in Creation Units (and that Shares are not individually 
redeemable); (c) NYSE Arca Equities Rule 9.2(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; (d) how 
information regarding the IFV is disseminated; (e) how information 
regarding portfolio holdings is disseminated; (f) 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 (g) trading information.
    (5) For initial and continued listing, each Fund will be in 
compliance with Rule 10A-3 under the Act,\30\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \30\ 17 CFR 240.10A-3.
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    (6) Each Fund will seek to achieve its respective investment 
objective by investing, under normal market conditions, substantially 
all of its assets in Futures Contracts.'' In the event position, price 
or accountability limits are reached with respect to Futures Contracts, 
each Fund may obtain exposure to the Benchmark through investments in 
Financial Instruments. To the extent that a Fund invests in Financial 
Instruments, it would first make use of exchange-traded Financial 
Instruments, if available. If an investment in exchange-traded 
Financial Instruments is unavailable, then a Fund would invest in 
Financial Instruments that clear through derivatives clearing 
organizations that satisfy the Trust's criteria, if available. If an 
investment in cleared Financial Instruments is unavailable, then a Fund 
would invest in other Financial Instruments, including uncleared 
Financial Instruments in the OTC market.
    (7) Not more than 10% of the net assets of a Fund in the aggregate 
invested in Futures Contracts shall consist of Futures Contracts whose 
principal market is not a member of the ISG or is a market with which 
the Exchange does not have a CSSA.
    (8) To the extent a Fund enters into swap agreements and other OTC 
transactions, it will do so only with large, established and well 
capitalized financial institutions that meet the Sponsor's credit 
quality standards and monitoring policies. Each Fund will use various 
techniques to minimize credit risk including early termination or reset 
and payment, using different counterparties and limiting the net amount 
due from any individual counterparty.
    (9) A minimum of 100,000 Shares of each Fund will be outstanding at 
the commencement of trading on the Exchange.
    The Exchange represents that all statements and representations 
made in this filing regarding (a) the description of the portfolios of 
the Funds or Benchmark, (b) limitations on portfolio holdings or the 
Benchmark, or (c) the applicability of Exchange listing rules specified 
in this rule filing shall constitute continued listing requirements for 
listing the Shares on the Exchange. The issuer has represented to the 
Exchange that it will advise the Exchange of any failure by the Funds 
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

[[Page 15404]]

requirements.\31\ If a Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
under NYSE Arca Equities Rule 5.5(m).
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    \31\ The Commission notes that certain other proposals for the 
listing and trading of Managed Fund Shares 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 (April 7, 2016) (Notice of Filing 
of Amendment No. 2, and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 2, to List and 
Trade Shares of the SPDR DoubleLine Short Duration Total Return 
Tactical ETF of the SSgA Active Trust), available at: http://www.sec.gov/rules/sro/bats/2016/34-77499.pdf. In the context of this 
representation, it is the Commission's view that ``monitor'' and 
``surveil'' both mean ongoing oversight of the Fund's 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.
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    This approval order is based on all of the Exchange's 
representations and description of the Funds, including those set forth 
above and in Amendment Nos. 1, 3, and 4. The Commission notes that the 
Shares must comply with the requirements of NYSE Arca Equities Rule 
8.200 and Commentary .02 thereto to be listed and traded on the 
Exchange on an initial and continuing basis.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 1, 3, and 4 thereto, is 
consistent with Section 6(b)(5) of the Act \32\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \32\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\33\ that the proposed rule change (SR-NYSEArca-2017-07), 
as modified by Amendment Nos. 1, 3, and 4 thereto, be, and it hereby 
is, approved.
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    \33\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06053 Filed 3-27-17; 8:45 am]
BILLING CODE 8011-01-P