82 FR 45643 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment Nos. 2 and 3 Thereto, To List and Trade Shares of Direxion Daily Crude Oil Bull 3x Shares and Direxion Daily Crude Oil Bear 3x Shares Under NYSE Arca Equities Rule 8.200

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 188 (September 29, 2017)

Page Range		45643-45647
FR Document		2017-20896

Federal Register, Volume 82 Issue 188 (Friday, September 29, 2017)

[Federal Register Volume 82, Number 188 (Friday, September 29, 2017)]
[Notices]
[Pages 45643-45647]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-20896]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81686; File No. SR-NYSEArca-2017-05]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 2 and
3 Thereto, To List and Trade Shares of Direxion Daily Crude Oil Bull 3x
Shares and Direxion Daily Crude Oil Bear 3x Shares Under NYSE Arca
Equities Rule 8.200

September 22, 2017.

I. Introduction

On January 23, 2017, NYSE Arca, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'' or
``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule
change to list and trade shares (``Shares'') of Direxion Daily Crude
Oil Bull 3x Shares and Direxion Daily Crude Oil Bear 3x Shares
(individually, ``Fund,'' and, collectively, ``Funds'') Under NYSE Arca
Equities Rule 8.200. The proposed rule change was published for comment
in the Federal Register on February 7, 2017.\3\ On March 16, 2017,
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 disapprove the proposed rule change.\5\ On May 5,
2017, the Commission instituted proceedings to determine whether to
approve or disapprove the proposed rule change.\6\ On June 23, 2017,
the Exchange filed Amendment No. 1 to the proposed rule change.\7\ On
July 27, 2017, the Commission designated a longer period for Commission
action on the proposed rule change.\8\ On August 1, 2017, the Exchange
filed Amendment No. 2 to the proposed rule change.\9\ On September 19,
2017, the Exchange filed Amendment No. 3 to the proposed rule
change.\10\ The Commission has received

[[Page 45644]]

no comments on the proposed rule change. This order grants approval of
the proposed rule change, as modified by Amendment Nos. 2 and 3
thereto.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 79916 (February 1,
2017), 82 FR 9608.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 80265, 82 FR 14778
(March 22, 2017).
\6\ See Securities Exchange Act Release No. 80606, 82 FR 22042
(May 11, 2017). Specifically, the Commission instituted proceedings
to allow for additional analysis of the proposed rule change's
consistency with Section 6(b)(5) of the Act, which requires, among
other things, that the rules of a national securities exchange be
``designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade,'' and
``to protect investors and the public interest.'' See id. at 22043.
\7\ Amendment No. 1, which amended the replaced the original
filing in its entirety, is available on the Commission's Web site
at: https://www.sec.gov/comments/sr-nysearca-2017-05/nysearca201705-1822806-154288.pdf.
\8\ See Securities Exchange Act Release No. 81224, 82 FR 36030
(August 2, 2017).
\9\ In Amendment No. 2, which amended and replaced the proposed
rule change, as modified by Amendment No. 1 thereto, in its
entirety, the Exchange: (1) Supplemented its descriptions of the
Funds' investments in over-the-counter transactions and Short-Term
Investments; (2) supplemented its description of the calculation of
the daily value of each Fund's net asset value (``NAV''); (3)
provided information regarding the calculation and dissemination of
the Indicative Fund Value of the Funds; (4) added a representation
regarding the dissemination of the Benchmark; (5) clarified the
information that will be made available on the Funds' Web site
regarding the Funds and their portfolio holdings; (6) supplemented
its description of the Exchange's surveillance procedures; (7)
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; (8)
clarified the type of information that will be available in the
Information Bulletin regarding the Funds' portfolio holdings; and
(9) made other technical changes. Amendment No. 2 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. Amendment No. 2 to the proposed rule
change is available on the Commission's Web site at: https://www.sec.gov/comments/sr-nysearca-2017-05/nysearca201705-2161993-157780.pdf.
\10\ In Amendment No. 3, which partially amended the proposed
rule change, as modified by Amendment No. 2 thereto, the Exchange
made representations regarding the size and liquidity of the oil
contract market. Amendment No. 3 is not subject to notice and
comment because it does not materially alter the substance of the
proposed rule change or raise any novel regulatory issues. Amendment
No. 3 to the proposed rule change is available on the Commission's
Web site at: https://www.sec.gov/comments/sr-nysearca-2017-05/nysearca201705-2583842-161105.pdf.
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II. Exchange's Description of the Proposal \11\
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\11\ A more detailed description of the Funds, the Shares, and
the Benchmark, as well as investment risks, creation and redemption
procedures, 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 defined
herein), as well as Amendment No. 2 to the proposed rule change, as
applicable. See infra note 13, and supra note 9, 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.\12\ Each Fund is a series of the
Direxion Shares ETF Trust II (``Trust''), a Delaware statutory
trust.\13\ The Trust and the Funds are managed and controlled by
Direxion Asset Management, LLC (``Sponsor''). The Sponsor is registered
as a commodity pool operator with the Commodity Futures Trading
Commission (``CFTC'') and is a member of the National Futures
Association. Bank of New York Mellon will be the custodian and transfer
agent for the Funds. U.S. Bancorp Fund Services, LLC serves as
administrator for the Funds, and Foreside Fund Services, LLC serves as
the distributor of the Funds.
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\12\ 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.
\13\ The Trust is registered under the Securities Act of 1933
(``Securities Act''). According to the Exchange, on December 14,
2016, the Trust filed with the Commission a registration statement
on Form S-1 under the Securities Act relating to the Funds (File No.
333-215091) (``Registration Statement'').
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Overview of the Funds

The investment objective of Direxion Daily Crude Oil Bull 3X Shares
is to seek, on a daily basis, investment results that correspond
(before fees and expenses) to a multiple of three times (3x) of the
daily performance of the Bloomberg WTI Crude Oil Subindex, a subindex
of the Bloomberg Commodity Index (``Benchmark'').\14\ The investment
objective of Direxion Daily Crude Oil Bear 3X Shares 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 West Texas Intermediate crude oil
futures contracts traded on the New York Mercantile Exchange
(``NYMEX''), including the impact of rolling, without regard to income
earned on cash positions. The Funds will not be directly linked to the
``spot'' price of crude oil. The Exchange states that a Fund will not
seek to achieve its investment objective over a period greater than a
single trading day.\15\
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\14\ According to the Exchange, the Bloomberg WTI Crude Oil
Subindex is a ``rolling index,'' which means that the index does not
take physical possession of any commodities. The Exchange states
that futures contracts held by the Funds near expiration are
generally closed out and replaced by contracts with a later
expiration as required by the Bloomberg WTI Crude Oil Subindex. The
Exchange states that this process is referred to as ``rolling.'' See
Amendment No. 2, supra note 9, at 5 n.6-7.
\15\ According to the Exchange, a single trading day is measured
from the time a Fund calculates its NAV to the time of a Fund's next
NAV calculation. 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 id. at 5 n.8-9.
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In seeking to achieve the Funds' investment objectives, the Sponsor
will utilize a mathematical approach to determine the type, quantity,
and mix of investment positions that the Sponsor believes, in
combination, should produce daily returns consistent with the Funds'
respective objectives. The Sponsor 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,\16\ substantially all of
its assets in oil futures contracts traded in the U.S. and listed
options on such contracts (collectively, ``Futures Contracts''). The
Funds' investments in Futures Contracts will be used to produce
economically ``leveraged'' or ``inverse leveraged'' investment results
for the Funds.
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\16\ 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.10.
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In the event position, price, or accountability limits are reached
with respect to Futures Contracts,\17\ each Fund may obtain exposure to
the Benchmark through investment in swap transactions and forward
contracts referencing such Benchmark or other benchmarks the Sponsor
believes should be closely correlated to the performance of each Fund's
benchmark such as the Energy Select Sector Index or the S&P Oil & Gas
Exploration & Production Select Industry Index (``Financial
Instruments''). To the extent that the Trust 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 the Trust 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 the
Trust would invest in other Financial Instruments, including uncleared
Financial Instruments in the over-the-counter (``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 or a flash crash) that prevent or make it impractical for
a Fund to obtain the appropriate amount of investment exposure using
Futures Contracts.
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\17\ According to the Exchange, U.S. futures exchanges 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,
U.S. futures exchanges also set daily price fluctuation limits on
Futures Contracts. The daily price fluctuation limit establishes the
maximum amount that the price of a Futures Contract may vary either
up or down from the previous day's settlement price. See id. at 7-8.
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The Exchange represents that each Fund will enter into swap
agreements and other OTC transactions only with large, established, and
well capitalized financial institutions that meet certain 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.\18\
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\18\ See id. at 6-7.
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Although the Funds will invest such that each Fund's exposure to
the Benchmark will consist substantially of

[[Page 45645]]

Futures Contracts, the Funds' remaining net assets may be invested in
cash or cash equivalents and/or 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,
collectively, ``Short-Term Investments'') for direct investment or as
collateral for the Funds' investments.
The Funds do not intend to hold Futures Contracts through
expiration, but instead intend to either close or ``roll'' their
respective positions. 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.\19\
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\19\ The Exchange states that the pattern of higher futures
prices for longer expiration Futures Contracts 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. The
Exchange states that the pattern of higher futures prices for
shorter expiration Futures Contracts is referred to as
``backwardation.'' According to the Exchange, the presence of
contango in certain Futures Contracts at the time of rolling could
adversely affect a Fund with long positions, and positively affect a
Fund with short positions. Similarly, the Exchange states that the
presence of backwardation in certain Futures Contracts 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 leveraged
exposure 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.\20\ 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'').\21\
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\20\ See id. at 8.
\21\ See id. at 13.
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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.\22\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment Nos. 2 and 3 thereto, is
consistent with Section 6(b)(5) of the Exchange Act,\23\ 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. The Commission also 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,\24\ 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.
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\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).
\24\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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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
Short-Term Investments and OTC swaps may be obtained from brokers and
dealers who make markets in such instruments, and intra-day price
information for forward contracts will be available from major market
data vendors. 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 also 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 would
also be available on such Web sites, as well as other financial
informational sources.
The Funds' Web site will display the applicable end of day closing
NAV. Each Fund's total portfolio composition will be disclosed on the
Funds' Web site each business day that the Exchange is open for
trading. The Funds' Web site also will 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.\25\
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 Contracts and Financial Instruments, (ii)
the counterparty to and value of Financial Instruments, and (iii) the
aggregate net value of the Short-Term Investments held in each Fund's
portfolio, if applicable.
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\25\ 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'') \26\ will be widely disseminated by one or more major
market data vendors during the NYSE Arca Core Trading Session Share
will be widely disseminated by one or more major market data vendors
every 15 seconds during the Exchange's Core Trading Session.\27\ Each
Fund will compute its NAV at 2:30 p.m. E.T., which is the designated
closing time of

[[Page 45646]]

the crude oil futures market on NYMEX,\28\ or if the New York Stock
Exchange (``NYSE'') closes earlier than 2:30 p.m. E.T., each Fund will
compute its NAV at the time the NYSE closes. The NAV for the Funds'
Shares will be disseminated daily to all market participants at the
same time.
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\26\ The IFV will be calculated by using the prior day's closing
net assets of a Fund as a base and updating throughout the
Exchange's Core Trading Session of 9:30 a.m. E.T. to 4:00 p.m. E.T.
changes in the value of the Futures Contracts and Financial
Instruments held by a Fund based on the most recently available
prices for the Fund's investments. According to the Exchange,
circumstances may arise in which the NYSE Arca Core Trading Session
is in progress, but trading in Futures Contracts is not occurring.
Such circumstances may result from reasons including, but not
limited to, a futures exchange having a separate holiday schedule
than the NYSE Arca, a futures exchange closing prior to the close of
the NYSE Arca, price fluctuation limits being reached in a Futures
Contract, or a futures exchange, imposing any other suspension or
limitation on trading in a Futures Contract. In such instances, for
IFV calculation purposes, the price of the applicable Futures
Contracts, as well as Financial Instruments whose price is derived
from the Futures Contracts, would be static or priced by the Fund at
the applicable early cut-off time of the exchange trading the
applicable Futures Contract. See Amendment No. 2, supra note 9, at 7
n.13.
\27\ 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 id.
\28\ The Exchange states that the daily value of the NAV 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 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.\29\ 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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\29\ See id. at 13.
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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.\30\ 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 cash-settled options
on Futures Contracts) occurring on U.S. futures exchanges, which are
members of the ISG.
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\30\ 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) that a static IFV
will be disseminated, between the close of trading on the ICE Futures
U.S. and NYMEX and the close of the NYSE Arca Core Trading Session; (g)
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 (h) trading information.
(5) For initial and continued listing, each Fund will be in
compliance with Rule 10A-3 under the Act,\31\ as provided by NYSE Arca
Equities Rule 5.3.
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\31\ 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 the Trust 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 the Trust 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 the
Trust would invest in other Financial Instruments, including uncleared
Financial Instruments in the OTC market.
(7) The oil contract market is of significant size and liquidity,
and has average daily volume of 650,000 contracts and daily open
interest of 450,000 contracts. The Sponsor is registered as a commodity
pool operator with the CFTC and is a member of the National Futures
Association, and the Information Bulletin will reference that the CFTC
has regulatory jurisdiction over the trading of Futures Contracts
traded on U.S. markets.
(8) 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

[[Page 45647]]

ISG or is a market with which the Exchange does not have a CSSA.
(9) Each Fund will enter into swap agreements and other OTC
transactions only with large, established and well capitalized
financial institutions that meet certain 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.
(10) 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 requirements.\32\ 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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\32\ 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.
---------------------------------------------------------------------------

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 No. 2 to the proposed rule change. 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. 2 and 3 thereto, is
consistent with Section 6(b)(5) of the Act \33\ and the rules and
regulations thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

\33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\34\ that the proposed rule change (SR-NYSEArca-2017-05),
as modified by Amendment Nos. 2 and 3 thereto, be, and it hereby is,
approved.
---------------------------------------------------------------------------

\34\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
---------------------------------------------------------------------------

\35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20896 Filed 9-28-17; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 82, No. 188 / Friday, September 29, 2017 / Notices 45647

ISG or is a market with which the traded on the Exchange on an initial and I. Self-Regulatory Organization’s
Exchange does not have a CSSA. continuing basis. Statement of the Terms of Substance of
(9) Each Fund will enter into swap For the foregoing reasons, the the Proposed Rule Change
agreements and other OTC transactions Commission finds that the proposed The Exchange proposes to amend
only with large, established and well rule change, as modified by Amendment NYSE Arca Rule 14.2 (Liability of
capitalized financial institutions that Nos. 2 and 3 thereto, is consistent with Exchange) to make technical and
meet certain credit quality standards conforming updates in connection with
Section 6(b)(5) of the Act 33 and the
and monitoring policies. Each Fund will the recent merger of NYSE Arca
rules and regulations thereunder
use various techniques to minimize Equities, Inc. (‘‘NYSE Arca Equities’’)
applicable to a national securities
credit risk including early termination with and into the Exchange.
or reset and payment, using different exchange.
The proposed rule change is available
counterparties and limiting the net IV. Conclusion on the Exchange’s Web site at
amount due from any individual www.nyse.com, at the principal office of
counterparty. It is therefore ordered, pursuant to the Exchange, and at the Commission’s
(10) A minimum of 100,000 Shares of Section 19(b)(2) of the Exchange Act,34 Public Reference Room.
each Fund will be outstanding at the that the proposed rule change (SR–
commencement of trading on the NYSEArca–2017–05), as modified by II. Self-Regulatory Organization’s
Exchange. Amendment Nos. 2 and 3 thereto, be, Statement of the Purpose of, and
and it hereby is, approved. Statutory Basis for, the Proposed Rule
The Exchange represents that all
Change
statements and representations made in For the Commission, by the Division of
this filing regarding (a) the description Trading and Markets, pursuant to delegated In its filing with the Commission, the
of the portfolios of the Funds or authority.35 self-regulatory organization included
Benchmark, (b) limitations on portfolio statements concerning the purpose of,
Eduardo A. Aleman,
holdings or the Benchmark, or (c) the and basis for, the proposed rule change
Assistant Secretary. and discussed any comments it received
applicability of Exchange listing rules
[FR Doc. 2017–20896 Filed 9–28–17; 8:45 am] on the proposed rule change. The text
specified in this rule filing shall
constitute continued listing BILLING CODE 8011–01–P of those statements may be examined at
requirements for listing the Shares on the places specified in Item IV below.
the Exchange. The issuer has The Exchange has prepared summaries,
represented to the Exchange that it will SECURITIES AND EXCHANGE set forth in sections A, B, and C below,
advise the Exchange of any failure by COMMISSION of the most significant parts of such
the Funds to comply with the continued statements.
listing requirements, and, pursuant to [Release No. 34–81713; File No. SR– A. Self-Regulatory Organization’s
its obligations under Section 19(g)(1) of NYSEArca–2017–109] Statement of the Purpose of, and the
the Act, the Exchange will monitor for Statutory Basis for, the Proposed Rule
compliance with the continued listing Self-Regulatory Organizations; NYSE Change
requirements.32 If a Fund is not in Arca, Inc.; Notice of Filing and
compliance with the applicable listing Immediate Effectiveness of Proposed 1. Purpose
requirements, the Exchange will Rule Change Amending NYSE Arca The Exchange proposes to amend
commence delisting procedures under Rule 14.2 To Make Technical and NYSE Arca Rule 14.2 to make technical
NYSE Arca Equities Rule 5.5(m). Conforming Updates in Connection and conforming updates in connection
This approval order is based on all of With the Recent Merger of NYSE Arca with the recent merger of its wholly-
the Exchange’s representations and Equities, Inc. With and Into the owned subsidiary NYSE Arca Equities,
description of the Funds, including Exchange Inc. (‘‘NYSE Arca Equities’’) with and
those set forth above and in Amendment into the Exchange (the ‘‘Merger’’).
No. 2 to the proposed rule change. The September 25, 2017. On June 2, 2017, the Exchange filed
Commission notes that the Shares must Pursuant to Section 19(b)(1) 1 of the rule changes with the Securities and
comply with the requirements of NYSE Securities Exchange Act of 1934 (the Exchange Commission (‘‘Commission’’)
Arca Equities Rule 8.200 and ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 in connection with the proposed Merger
Commentary .02 thereto to be listed and notice is hereby given that, on (the ‘‘Original Filing’’).4 On August 15,
September 12, 2017, NYSE Arca, Inc. 2017, the Exchange filed a partial
32 The Commission notes that certain other
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed amendment to the Original Filing (the
proposals for the listing and trading of Managed ‘‘Amendment’’), which, among other
Fund Shares include a representation that the
with the Securities and Exchange
exchange will ‘‘surveil’’ for compliance with the Commission (‘‘SEC’’ or ‘‘Commission’’) things, amended the Original Filing to
continued listing requirements. See, e.g., Securities the proposed rule change as described reflect changes to the proposed rule text
Exchange Act Release No. 77499 (April 1, 2016), 81 in Items I and II below, which Items that resulted from changes to the NYSE
FR 20428 (April 7, 2016) (Notice of Filing of Arca and NYSE Arca Equities rules that
Amendment No. 2, and Order Granting Accelerated have been prepared by the self-
Approval of a Proposed Rule Change, as Modified regulatory organization. The became operative after June 2, 2017.5 On
by Amendment No. 2, to List and Trade Shares of Commission is publishing this notice to
asabaliauskas on DSKBBXCHB2PROD with NOTICES

4 See Securities Exchange Act Release No. 80929
the SPDR DoubleLine Short Duration Total Return
Tactical ETF of the SSgA Active Trust), available
solicit comments on the proposed rule (June 14, 2017), 82 FR 28157 (June 20, 2017) (SR–
at: http://www.sec.gov/rules/sro/bats/2016/34- change from interested persons. NYSEArca–2017–40) (‘‘Notice’’).
77499.pdf. In the context of this representation, it 5 See Partial Amendment 2 to SR–NYSEArca–

is the Commission’s view that ‘‘monitor’’ and 33 15 U.S.C. 78f(b)(5). 2017–40 (August 15, 2017). The Amendment also
‘‘surveil’’ both mean ongoing oversight of the 34 15 was submitted to the Commission as a comment
U.S.C. 78s(b)(2).
Fund’s compliance with the continued listing 35 17 CFR 200.30–3(a)(12).
letter on the Original Filing. See letter from Martha
requirements. Therefore, the Commission does not Redding, Associate General Counsel, NYSE Group,
1 15 U.S.C. 78s(b)(1).
view ‘‘monitor’’ as a more or less stringent to Brent J. Fields, Secretary, Commission (August
2 15 U.S.C. 78a.
obligation than ‘‘surveil’’ with respect to the 15, 2017), available at https://www.sec.gov/
continued listing requirements. 3 17 CFR 240.19b–4. Continued

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Document Created: 2017-09-29 03:27:07
Document Modified: 2017-09-29 03:27:07

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		82 FR 45643