82_FR_55923 82 FR 55699 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 2, and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade Shares of ProShares QuadPro Funds Under NYSE Arca Rule 8.200-E

82 FR 55699 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 2, and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade Shares of ProShares QuadPro Funds Under NYSE Arca Rule 8.200-E

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 224 (November 22, 2017)

Page Range55699-55702
FR Document2017-25241

Federal Register, Volume 82 Issue 224 (Wednesday, November 22, 2017)
[Federal Register Volume 82, Number 224 (Wednesday, November 22, 2017)]
[Notices]
[Pages 55699-55702]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-25241]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82105; File No. SR-NYSEArca-2017-69]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 2, and Order Instituting Proceedings To Determine 
Whether To Approve or Disapprove a Proposed Rule Change, as Modified by 
Amendment No. 2, To List and Trade Shares of ProShares QuadPro Funds 
Under NYSE Arca Rule 8.200-E

November 16, 2017.

I. Introduction

    On July 31, 2017, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder, \2\ a proposed rule change to 
list and trade shares (``Shares'') of ProShares QuadPro U.S. Large Cap, 
ProShares QuadPro Short U.S. Large Cap, ProShares QuadPro U.S. Small 
Cap, and ProShares QuadPro Short U.S. Small Cap (collectively, 
``Funds'') under NYSE Arca Rule 8.200-E. The proposed rule change was 
published for comment in the Federal Register on August 18, 2017.\3\ On 
September 28, 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 September 29, 2017, the Exchange filed Amendment No. 1 to 
the proposed rule change, which amended and superseded the proposed 
rule change as originally filed. On November 14, 2017, the Exchange 
filed Amendment No. 2 to the proposed rule change, which amended and 
superseded the proposed rule change as modified by Amendment No. 1.\6\ 
The Commission has received no comments on the proposed rule change. 
The Commission is publishing this notice and order to solicit comments 
on the proposed rule change, as modified by Amendment No. 2, from 
interested persons and to institute proceedings pursuant to Section 
19(b)(2)(B) of the Act \7\ to determine whether to approve or 
disapprove the proposed rule change, as modified by Amendment No. 2.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 81388 (August 14, 
2017), 82 FR 39477.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 81746, 82 FR 46315 
(October 4, 2017). The Commission designated November 16, 2017, as 
the date by which the Commission shall either approve or disapprove, 
or institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \6\ In Amendment No. 2, the Exchange: (1) Changed the names of 
the Funds; (2) provided the trading hours of the Chicago Mercantile 
Exchange (``CME''); (3) amended the description of the Funds' 
holdings of options and cash; (4) revised the description of the 
rolling of futures contracts; (5) amended and supplemented the 
description of the Funds' Net Asset Value (``NAV'') and Indicative 
Optimized Portfolio Value; (6) amended and supplemented the 
description of the availability of information relating to the 
Funds; (7) decreased the creation unit size from 50,000 Shares to 
25,000 Shares; and (8) made other clarifications, corrections, and 
technical changes. Amendment No. 2 to the proposed rule change is 
available at https://www.sec.gov/comments/sr-nysearca-2017-69/nysearca201769-2688277-161489.pdf.
    \7\ 15 U.S.C. 78s(b)(2)(B).

---------------------------------------------------------------------------

[[Page 55700]]

II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 2 8
---------------------------------------------------------------------------

    \8\ For more information regarding the Funds and the Shares, see 
Amendment No. 2, supra note 6.
---------------------------------------------------------------------------

    The Exchange proposes to list and trade the Shares under Commentary 
.02 to NYSE Arca Rule 8.200-E, which governs the listing and trading of 
Trust Issued Receipts on the Exchange. Each Fund is a commodity pool 
that is a series of the ProShares Trust II (``Trust'').\9\ The Funds' 
sponsor and commodity pool operator is ProShare Capital Management LLC 
(``Sponsor''). Brown Brothers Harriman & Co. is the administrator, the 
custodian, and the transfer agent of each Fund and the Shares. SEI 
Investments Distribution Co. is the distributor for the Shares.
---------------------------------------------------------------------------

    \9\ The Trust is registered under the Securities Act of 1933. On 
November 14, 2017, the Trust filed with the Commission Pre-Effective 
Amendment No. 1 to a registration statement on Form S-1 under the 
Securities Act of 1933 relating to the Funds (File No. 333-217767).
---------------------------------------------------------------------------

ProShares QuadPro U.S. Large Cap and ProShares QuadPro Short U.S. Large 
Cap

    ProShares QuadPro U.S. Large Cap and ProShares QuadPro Short U.S. 
Large Cap (collectively, ``Large Cap Funds'') will seek results that 
correspond (before fees and expenses) to four times (4X) or four times 
the inverse (-4X), respectively, of the return of lead month E-Mini S&P 
500 Stock Price Index Futures (``Large Cap Benchmark'') for a single 
day.\10\ More specifically, the Large Cap Benchmark is the last traded 
price of lead month (i.e., near-month or next-to-expire) E-Mini S&P 500 
Stock Price Index Futures Contracts on the CME prior to the calculation 
of the Funds' NAV, which is typically calculated as of 4:00 p.m. each 
day that NYSE Arca is open for trading.
---------------------------------------------------------------------------

    \10\ A ``single day'' is measured from the time a Fund 
calculates its NAV to the time of the Fund's next NAV calculation.
---------------------------------------------------------------------------

    Each Large Cap Fund will seek to engage in daily rebalancing to 
position its portfolio so that its leveraged or inverse exposure to the 
Large Cap Benchmark is consistent with the Fund's daily investment 
objective. Daily rebalancing and the compounding of each day's return 
over time means that the return of each Fund for a period longer than a 
single day will be the result of each day's returns compounded over the 
period, which will very likely differ from four times or four times the 
inverse, as applicable, of the return of the Fund's benchmark for the 
same period.
    Under normal market conditions,\11\ each Large Cap Fund will 
attempt to gain leveraged or inverse leveraged exposure, as applicable, 
to the Large Cap Benchmark primarily through investments in lead month 
E-Mini S&P 500 Stock Price Index Futures. Each Large Cap Fund may also 
take positions in standard futures contracts on the S&P 500 Index 
(together with lead month E-Mini S&P 500 Stock Price Index Futures, 
``Large Cap Futures Contracts''). In the event position, price, or 
accountability limits are reached with respect to Large Cap Futures 
Contracts, the Sponsor, in its commercially reasonable judgment, may 
cause each Large Cap Fund to obtain exposure to the Large Cap Benchmark 
through investment in swap transactions and forward contracts 
referencing the Large Cap Benchmark (``Large Cap Financial 
Instruments'' and, together with Large Cap Futures Contracts, ``S&P 500 
Interests''). The Large Cap Funds may also invest in Large Cap 
Financial Instruments if the market for a specific Large Cap Futures 
Contract experiences an emergency (e.g., natural disaster, terrorist 
attack or an act of God) or a disruption (e.g., a trading halt or a 
flash crash) that prevents or makes it impractical for a Fund to obtain 
the appropriate amount of investment exposure using Large Cap Futures 
Contracts (i.e., conditions other than normal market conditions). The 
Large Cap Funds do not intend to invest more than 25% of their 
respective net assets in Large Cap Financial Instruments.
---------------------------------------------------------------------------

    \11\ 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.
---------------------------------------------------------------------------

    Additionally, because an adverse Large Cap Benchmark move of 25% or 
more in a single day could cause the NAV of a Large Cap Fund to decline 
to zero and investors in the Fund to lose the full value of their 
investment, each Large Cap Fund will invest a limited portion of its 
assets (typically less than 5% of its net assets at the time of 
purchase) in listed option contracts that are designed to prevent a 
Large Cap Fund's NAV from going to zero and allow a Fund to recoup a 
small portion of the substantial losses that may result from 
significant adverse movements in the Large Cap Benchmark. Specifically, 
ProShares QuadPro U.S. Large Cap will hold CME-listed put options on 
Large Cap Futures Contracts, and ProShares QuadPro Short U.S. Large Cap 
will hold CME-listed call options on Large Cap Futures Contracts 
(collectively, ``Large Cap Stop Options'').\12\ If it is not 
practicable for a Large Cap Fund to invest in Large Cap Stop Options, 
the Funds may invest in over-the-counter (``OTC'') options on Large Cap 
Future Contracts.
---------------------------------------------------------------------------

    \12\ ProShares QuadPro U.S. Large Cap intends to hold Large Cap 
Stop Options with respect to all or substantially all of its S&P 500 
Interests with strike prices at approximately 75% of the value of 
the applicable underlying S&P 500 Interests as of the end of the 
preceding business day. ProShares QuadPro Short U.S. Large Cap 
intends to hold Large Cap Stop Options with respect to all or 
substantially all of its S&P 500 Interests with strike prices at 
approximately 125% of the value of the Fund's S&P Interests as of 
the end of the preceding business day.
---------------------------------------------------------------------------

    Each Large Cap Fund will invest the remainder of its assets in 
high-quality, short-term debt instruments that have terms-to-maturity 
of less than 397 days, such as U.S. government securities and 
repurchase agreements (``Money Market Instruments''). Each Large Cap 
Fund also may hold cash in order to pay expenses and distributions, if 
any, and satisfy redemption requests.

ProShares QuadPro U.S. Small Cap and ProShares QuadPro Short U.S. Small 
Cap

    ProShares QuadPro U.S. Small Cap and ProShares QuadPro Short U.S. 
Small Cap (collectively, ``Small Cap Funds'') will seek results that 
correspond (before fees and expenses) to four times (4X) or four times 
the inverse (-4X), respectively, of the return of lead month E-Mini 
Russell 2000 Index Futures (``Small Cap Benchmark'') for a single 
day.\13\ The Small Cap Benchmark is the last traded price of lead month 
(i.e., near-month or next-to-expire) E-Mini Russell 2000 Index Futures 
Contracts on the CME prior to the calculation of the Funds' NAV, which 
is typically calculated as of 4:00 p.m. each day NYSE Arca is open for 
trading.
---------------------------------------------------------------------------

    \13\ See supra note 10.
---------------------------------------------------------------------------

    Each Small Cap Fund will seek to engage in daily rebalancing to 
position its portfolio so that its leveraged or inverse exposure to the 
Small Cap Benchmark is consistent with the Fund's daily investment 
objective. Daily rebalancing and the compounding of each day's return 
over time means that the return of each Fund for a period longer than a 
single day will be the result of each day's returns compounded over the 
period, which will very likely differ from four times or four times the 
inverse, as applicable, of the return of the Fund's benchmark for the 
same period.

[[Page 55701]]

    Under normal market conditions,\14\ each Small Cap Fund will 
attempt to gain leveraged or inverse exposure, as applicable, to the 
Small Cap Benchmark primarily through investments in lead month E-Mini 
Russell 2000 Index Futures (``Small Cap Futures Contracts''). In the 
event position, price, or accountability limits are reached with 
respect to Small Cap Futures Contracts, the Sponsor, in its 
commercially reasonable judgment, may cause each Small Cap Fund to 
obtain exposure to the Small Cap Benchmark through investment in swap 
transactions and forward contracts referencing the Small Cap Benchmark 
(``Small Cap Financial Instruments'' and, together with Small Cap 
Futures Contracts, ``Russell 2000 Interests''). The Small Cap Funds may 
also invest in Small Cap Financial Instruments if the market for a 
specific Small Cap Futures Contract experiences an emergency (e.g., 
natural disaster, terrorist attack or an act of God) or disruption 
(e.g., a trading halt or a flash crash) that prevents or makes it 
impractical for a Fund to obtain the appropriate amount of investment 
exposure using Small Cap Futures Contracts (i.e., conditions other than 
normal market conditions). The Small Cap Funds do not intend to invest 
more than 25% of their respective net assets in Small Cap Financial 
Instruments.
---------------------------------------------------------------------------

    \14\ See supra note 11.
---------------------------------------------------------------------------

    Additionally, because an adverse Small Cap Benchmark move of 25% or 
more in a single day could cause the NAV of a Small Cap Fund to decline 
to zero and investors in the Fund to lose the full value of their 
investment, each Small Cap Fund will invest a limited portion of its 
assets (typically less than 5% of its net assets at the time of 
purchase) in listed option contracts that are designed to prevent a 
Small Cap Fund's NAV from going to zero and allow a Fund to recoup a 
small portion of the substantial losses that may result from 
significant adverse movements in the Small Cap Benchmark. Specifically, 
ProShares QuadPro U.S. Small Cap will hold CME-listed put options on 
Small Cap Futures Contracts and ProShares QuadPro Short U.S. Small Cap 
will hold CME-listed call options on Small Cap Futures Contracts 
(collectively, ``Small Cap Stop Options'').\15\ If it is not 
practicable for a Small Cap Fund to invest in Small Cap Stop Options, 
the Funds may invest in OTC options on Small Cap Future Contracts.
---------------------------------------------------------------------------

    \15\ ProShares QuadPro U.S. Small Cap intends to hold Small Cap 
Stop Options with respect to all or substantially all of its Russell 
2000 Interests with strike prices at approximately 75% of the value 
of the applicable underlying Russell 2000 Interests as of the end of 
the preceding business day. ProShares QuadPro Short U.S. Small Cap 
intends to hold Small Cap Stop Options with respect to all or 
substantially all of its Russell 2000 Interests with strike prices 
at approximately 125% of the value of the Fund's Russell 2000 
Interests as of the end of the preceding business day.
---------------------------------------------------------------------------

    Each Small Cap Fund will invest the remainder of its assets in 
Money Market Instruments. Each Small Cap Fund also may hold cash in 
order to pay expenses and distributions, if any, and satisfy redemption 
requests.

III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2017-69, as Modified by Amendment No. 2, and Grounds for 
Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \16\ to determine whether the proposed rule 
change, as modified by Amendment No. 2, should be approved or 
disapproved. Institution of such proceedings is appropriate at this 
time in view of the legal and policy issues raised by the proposed rule 
change. Institution of proceedings does not indicate that the 
Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described below, the Commission seeks and 
encourages interested persons to provide comments on the proposed rule 
change, as modified by Amendment No. 2.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\17\ the Commission is 
providing notice of the grounds for disapproval under consideration. As 
discussed above, the Exchange proposes to list and trade Shares of: (1) 
The Large Cap Funds, which will seek results that correspond (before 
fees and expenses) to four times and four times the inverse of the 
return of the Large Cap Benchmark for a single day, where the Large Cap 
Benchmark is the last traded price of lead month E-Mini S&P 500 Stock 
Price Index Futures Contracts on the CME prior to the calculation of 
the Funds' NAV; and (2) the Small Cap Funds, which will seek results 
that correspond (before fees and expenses) to four times and four times 
the inverse of the return of the Small Cap Benchmark for a single day, 
where the Small Cap Benchmark is the last traded price of lead month E-
Mini Russell 2000 Index Futures Contracts on the CME prior to the 
calculation of the Funds' NAV. The Commission is instituting 
proceedings to allow for additional analysis of the proposal'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.'' \18\
---------------------------------------------------------------------------

    \17\ Id.
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) or any other provision of the Act, or 
the rules and regulations thereunder. Although there do not appear to 
be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\19\
---------------------------------------------------------------------------

    \19\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Acts Amendments of 1975, Senate Comm. 
on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by December 13, 2017. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
December 27, 2017. The Commission asks that commenters address the 
sufficiency of the Exchange's statements in support of the proposal, 
which are set forth in Amendment No. 2, in addition to any other 
comments they may wish to submit about the proposed rule change. In 
particular, the Commission seeks comment, including, where relevant, 
any specific data, statistics, or studies, on the following:
    1. Would the proposed Funds impact daily volatility on the 
underlying indexes, or the underlying names comprising those indexes? 
Would any such impact be more or less than other leveraged or inverse 
leveraged exchange-traded products (``leveraged ETPs'') (such as 2X and 
3X)? Would the addition of the proposed Funds change

[[Page 55702]]

the current leveraged (inverse, 2X, and 3X) ETP market? If so, how?
    2. How much additional end-of-day volume in the underlying assets 
would the proposed Funds potentially add? How much volume do existing 
leveraged ETPs typically add to end-of-day trading in the underlying 
assets?
    3. What is the expected daily volume of trades for the proposed 
Funds? How much daily creation and redemption activity is expected in 
the proposed Funds? How much current daily creation and redemption 
activity is there for leveraged ETPs?
    4. Would the volume and activity increase during periods of 
downward market movement or high volatility, and exacerbate the 
downward movement or volatility? What type of hedging exposure is 
expected with these products, and during significant down market moves, 
how might related selling behavior be affected by such exposure?
    5. What types of investors would purchase Shares of the proposed 
Funds? Would they be different from investors in existing leveraged 
ETPs? If so, please explain why.
    6. Currently, are leveraged ETPs always accessed through a 
registered broker/dealer? If so, are transactions generally solicited 
or unsolicited? If not, how does an investor acquire a leveraged ETP? 
What is the proportion of volume from retail versus institutional 
trading?
    7. Do institutional investors buy and sell leveraged ETPs? If so, 
what is the purpose of institutional investments in leveraged ETPs? For 
example, are they used for hedging or are they ever held in mutual 
funds? Would institutional investors use the proposed Funds for a 
different purpose than with the existing leveraged ETPs? If so, please 
explain why. Do firms hold the securities on their books (for example, 
as trading securities or available-for-sale securities)? If so, how are 
they held? If the investors are not institutional investors, are there 
any restrictions placed on access to these investments, including 
accreditation or options eligibility?
    8. What exposures do retail investors seek when holding these ETPs? 
Would retail investors hold Shares of the proposed Funds to seek 
different types of exposures than with existing leveraged ETPs? If so, 
please explain why.
    9. What is the typical holding period of leveraged ETPs by retail 
investors? Are they holding the products in tax-advantaged accounts, 
such as Individual Retirement Accounts (IRAs), meant for long-term 
investment horizons?
    10. Do investors have access to information sufficient to fully 
understand the operation and risks of leveraged ETPs?
    11. Would the potential loss of investment be limited to the amount 
invested? For example, do investors frequently buy leveraged ETPs on 
margin?
    12. How does use of long positions versus short positions in 
leveraged ETPs differ across different types of investors?
    13. Which types of broker/dealers are active with leveraged ETP 
investments? Do they tend to also hold these investments in their own 
portfolio?
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2017-69 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2017-69. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2017-69 and should 
be submitted on or before December 13, 2017. Rebuttal comments should 
be submitted by December 27, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Eduardo A. Aleman,
Assistant Secretary.
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

[FR Doc. 2017-25241 Filed 11-21-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                                             Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices                                                   55699

                                                    action is consistent with the protection                Commission process and review your                     Commission (‘‘Commission’’), pursuant
                                                    of investors and the public interest. The               comments more efficiently, please use                  to Section 19(b)(1) of the Securities
                                                    Exchange has asked the Commission to                    only one method. The Commission will                   Exchange Act of 1934 (‘‘Act’’) 1 and Rule
                                                    waive the 30-day operative delay so that                post all comments on the Commission’s                  19b–4 thereunder, 2 a proposed rule
                                                    the proposal may become operative on                    Internet Web site (http://www.sec.gov/                 change to list and trade shares
                                                    November 20, 2017. The Commission                       rules/sro.shtml). Copies of the                        (‘‘Shares’’) of ProShares QuadPro U.S.
                                                    believes that waiver of the operative                   submission, all subsequent                             Large Cap, ProShares QuadPro Short
                                                    delay is consistent with the protection                 amendments, all written statements                     U.S. Large Cap, ProShares QuadPro U.S.
                                                    of investors and the public interest                    with respect to the proposed rule                      Small Cap, and ProShares QuadPro
                                                    because the Exchange’s proposal does                    change that are filed with the                         Short U.S. Small Cap (collectively,
                                                    not raise any new or novel issues, and                  Commission, and all written                            ‘‘Funds’’) under NYSE Arca Rule 8.200–
                                                    the waiver would permit the Exchange                    communications relating to the                         E. The proposed rule change was
                                                    to implement the proposed rule change                   proposed rule changes between the
                                                                                                                                                                   published for comment in the Federal
                                                    in coordination with other Plan                         Commission and any person, other than
                                                                                                                                                                   Register on August 18, 2017.3 On
                                                    Participants on the Amendment 12                        those that may be withheld from the
                                                    implementation date of November 20,                     public in accordance with the                          September 28, 2017, pursuant to Section
                                                    2017. Accordingly, the Commission                       provisions of 5 U.S.C. 552, will be                    19(b)(2) of the Act,4 the Commission
                                                    hereby waives the 30-day operative                      available for Web site viewing and                     designated a longer period within which
                                                    delay requirement and designates the                    printing in the Commission’s Public                    to approve the proposed rule change,
                                                    proposed rule change as operative on                    Reference Room, 100 F Street NE.,                      disapprove the proposed rule change, or
                                                    November 20, 2017.38                                    Washington, DC 20549 on official                       institute proceedings to determine
                                                       At any time within 60 days of the                    business days between the hours of                     whether to disapprove the proposed
                                                    filing of the proposed rule change, the                 10:00 a.m. and 3:00 p.m. Copies of the                 rule change.5 On September 29, 2017,
                                                    Commission summarily may                                filing also will be available for                      the Exchange filed Amendment No. 1 to
                                                    temporarily suspend such rule change if                 inspection and copying at the principal                the proposed rule change, which
                                                    it appears to the Commission that such                  office of the CHX. All comments                        amended and superseded the proposed
                                                    action is necessary or appropriate in the               received will be posted without change.                rule change as originally filed. On
                                                    public interest, for the protection of                  Persons submitting comments are                        November 14, 2017, the Exchange filed
                                                    investors, or otherwise in furtherance of               cautioned that we do not redact or edit                Amendment No. 2 to the proposed rule
                                                    the purposes of the Act. If the                         personal identifying information from                  change, which amended and superseded
                                                    Commission takes such action, the                       comment submissions. You should                        the proposed rule change as modified by
                                                    Commission shall institute proceedings                  submit only information that you wish                  Amendment No. 1.6 The Commission
                                                    under Section 19(b)(2)(B) of the Act 39 to              to make available publicly. All                        has received no comments on the
                                                    determine whether the proposed rule                     submissions should refer to File No.                   proposed rule change. The Commission
                                                    change should be approved or                            SR–CHX–2017–14 and should be                           is publishing this notice and order to
                                                    disapproved.                                            submitted on or before December 13,                    solicit comments on the proposed rule
                                                                                                            2017.                                                  change, as modified by Amendment No.
                                                    IV. Solicitation of Comments
                                                                                                              For the Commission, by the Division of               2, from interested persons and to
                                                      Interested persons are invited to                     Trading and Markets, pursuant to delegated             institute proceedings pursuant to
                                                    submit written data, views and                          authority.40                                           Section 19(b)(2)(B) of the Act 7 to
                                                    arguments concerning the foregoing,                     Eduardo A. Aleman,
                                                    including whether the proposal is                                                                              determine whether to approve or
                                                                                                            Assistant Secretary.                                   disapprove the proposed rule change, as
                                                    consistent with the Act. Comments may                   [FR Doc. 2017–25227 Filed 11–21–17; 8:45 am]
                                                    be submitted by any of the following                                                                           modified by Amendment No. 2.
                                                                                                            BILLING CODE 8011–01–P
                                                    methods:
                                                                                                                                                                     1 15 U.S.C. 78s(b)(1).
                                                    Electronic Comments                                                                                              2 17 CFR 240.19b–4.
                                                                                                            SECURITIES AND EXCHANGE
                                                      • Use the Commission’s Internet
                                                                                                                                                                     3 See Securities Exchange Act Release No. 81388

                                                                                                            COMMISSION                                             (August 14, 2017), 82 FR 39477.
                                                    comment form (http://www.sec.gov/                                                                                4 15 U.S.C. 78s(b)(2).
                                                    rules/sro.shtml); or                                    [Release No. 34–82105; File No. SR–                      5 See Securities Exchange Act Release No. 81746,
                                                      • Send an email to rule-comments@                     NYSEArca–2017–69]                                      82 FR 46315 (October 4, 2017). The Commission
                                                    sec.gov. Please include File No. SR–                                                                           designated November 16, 2017, as the date by
                                                    CHX–2017–14 on the subject line.                        Self-Regulatory Organizations; NYSE                    which the Commission shall either approve or
                                                                                                            Arca, Inc.; Notice of Filing of                        disapprove, or institute proceedings to determine
                                                    Paper Comments                                          Amendment No. 2, and Order                             whether to disapprove, the proposed rule change.
                                                                                                                                                                     6 In Amendment No. 2, the Exchange: (1) Changed
                                                       • Send paper comments in triplicate                  Instituting Proceedings To Determine                   the names of the Funds; (2) provided the trading
                                                    to Brent J. Fields, Secretary, Securities               Whether To Approve or Disapprove a                     hours of the Chicago Mercantile Exchange (‘‘CME’’);
                                                    and Exchange Commission, 100 F Street                   Proposed Rule Change, as Modified by                   (3) amended the description of the Funds’ holdings
                                                    NE., Washington, DC 20549–1090.                         Amendment No. 2, To List and Trade                     of options and cash; (4) revised the description of
                                                                                                                                                                   the rolling of futures contracts; (5) amended and
                                                    All submissions should refer to File No.                Shares of ProShares QuadPro Funds                      supplemented the description of the Funds’ Net
                                                    SR–CHX–2017–14. This file number                        Under NYSE Arca Rule 8.200–E
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                                                                                                                                   Asset Value (‘‘NAV’’) and Indicative Optimized
                                                    should be included on the subject line                                                                         Portfolio Value; (6) amended and supplemented the
                                                                                                            November 16, 2017.                                     description of the availability of information
                                                    if email is used. To help the                                                                                  relating to the Funds; (7) decreased the creation
                                                                                                            I. Introduction                                        unit size from 50,000 Shares to 25,000 Shares; and
                                                      38 For  purposes only of waiving the 30-day                                                                  (8) made other clarifications, corrections, and
                                                                                                               On July 31, 2017, NYSE Arca, Inc.
                                                    operative delay, the Commission has also                                                                       technical changes. Amendment No. 2 to the
                                                    considered the proposed rule’s impact on
                                                                                                            (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed                  proposed rule change is available at https://
                                                    efficiency, competition, and capital formation. See     with the Securities and Exchange                       www.sec.gov/comments/sr-nysearca-2017-69/
                                                    15 U.S.C. 78c(f).                                                                                              nysearca201769-2688277-161489.pdf.
                                                       39 15 U.S.C. 78s(b)(2)(B).                             40 17   CFR 200.30–3(a)(12).                           7 15 U.S.C. 78s(b)(2)(B).




                                               VerDate Sep<11>2014   18:57 Nov 21, 2017   Jkt 244001   PO 00000   Frm 00147    Fmt 4703   Sfmt 4703   E:\FR\FM\22NON1.SGM   22NON1


                                                    55700                    Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices

                                                    II. Description of the Proposed Rule                       Under normal market conditions,11                    CME-listed call options on Large Cap
                                                    Change, as Modified by Amendment                        each Large Cap Fund will attempt to                     Futures Contracts (collectively, ‘‘Large
                                                    No. 2 8                                                 gain leveraged or inverse leveraged                     Cap Stop Options’’).12 If it is not
                                                                                                            exposure, as applicable, to the Large                   practicable for a Large Cap Fund to
                                                       The Exchange proposes to list and                    Cap Benchmark primarily through                         invest in Large Cap Stop Options, the
                                                    trade the Shares under Commentary .02                   investments in lead month E-Mini S&P                    Funds may invest in over-the-counter
                                                    to NYSE Arca Rule 8.200–E, which                        500 Stock Price Index Futures. Each                     (‘‘OTC’’) options on Large Cap Future
                                                    governs the listing and trading of Trust                Large Cap Fund may also take positions                  Contracts.
                                                    Issued Receipts on the Exchange. Each                   in standard futures contracts on the S&P
                                                                                                                                                                       Each Large Cap Fund will invest the
                                                    Fund is a commodity pool that is a                      500 Index (together with lead month E-
                                                                                                                                                                    remainder of its assets in high-quality,
                                                    series of the ProShares Trust II                        Mini S&P 500 Stock Price Index
                                                                                                                                                                    short-term debt instruments that have
                                                    (‘‘Trust’’).9 The Funds’ sponsor and                    Futures, ‘‘Large Cap Futures
                                                                                                                                                                    terms-to-maturity of less than 397 days,
                                                    commodity pool operator is ProShare                     Contracts’’). In the event position, price,
                                                                                                                                                                    such as U.S. government securities and
                                                    Capital Management LLC (‘‘Sponsor’’).                   or accountability limits are reached with
                                                                                                                                                                    repurchase agreements (‘‘Money Market
                                                    Brown Brothers Harriman & Co. is the                    respect to Large Cap Futures Contracts,
                                                                                                                                                                    Instruments’’). Each Large Cap Fund
                                                    administrator, the custodian, and the                   the Sponsor, in its commercially
                                                                                                                                                                    also may hold cash in order to pay
                                                    transfer agent of each Fund and the                     reasonable judgment, may cause each
                                                                                                                                                                    expenses and distributions, if any, and
                                                    Shares. SEI Investments Distribution Co.                Large Cap Fund to obtain exposure to
                                                                                                                                                                    satisfy redemption requests.
                                                    is the distributor for the Shares.                      the Large Cap Benchmark through
                                                                                                            investment in swap transactions and                     ProShares QuadPro U.S. Small Cap and
                                                    ProShares QuadPro U.S. Large Cap and                    forward contracts referencing the Large                 ProShares QuadPro Short U.S. Small
                                                    ProShares QuadPro Short U.S. Large                      Cap Benchmark (‘‘Large Cap Financial                    Cap
                                                    Cap                                                     Instruments’’ and, together with Large
                                                                                                            Cap Futures Contracts, ‘‘S&P 500                           ProShares QuadPro U.S. Small Cap
                                                       ProShares QuadPro U.S. Large Cap
                                                                                                            Interests’’). The Large Cap Funds may                   and ProShares QuadPro Short U.S.
                                                    and ProShares QuadPro Short U.S.
                                                                                                            also invest in Large Cap Financial                      Small Cap (collectively, ‘‘Small Cap
                                                    Large Cap (collectively, ‘‘Large Cap
                                                                                                            Instruments if the market for a specific                Funds’’) will seek results that
                                                    Funds’’) will seek results that
                                                                                                            Large Cap Futures Contract experiences                  correspond (before fees and expenses) to
                                                    correspond (before fees and expenses) to
                                                                                                            an emergency (e.g., natural disaster,                   four times (4X) or four times the inverse
                                                    four times (4X) or four times the inverse
                                                                                                            terrorist attack or an act of God) or a                 (¥4X), respectively, of the return of
                                                    (¥4X), respectively, of the return of
                                                                                                            disruption (e.g., a trading halt or a flash             lead month E-Mini Russell 2000 Index
                                                    lead month E-Mini S&P 500 Stock Price
                                                                                                            crash) that prevents or makes it                        Futures (‘‘Small Cap Benchmark’’) for a
                                                    Index Futures (‘‘Large Cap Benchmark’’)
                                                                                                            impractical for a Fund to obtain the                    single day.13 The Small Cap Benchmark
                                                    for a single day.10 More specifically, the
                                                                                                            appropriate amount of investment                        is the last traded price of lead month
                                                    Large Cap Benchmark is the last traded
                                                                                                            exposure using Large Cap Futures                        (i.e., near-month or next-to-expire) E-
                                                    price of lead month (i.e., near-month or
                                                                                                            Contracts (i.e., conditions other than                  Mini Russell 2000 Index Futures
                                                    next-to-expire) E-Mini S&P 500 Stock
                                                                                                            normal market conditions). The Large                    Contracts on the CME prior to the
                                                    Price Index Futures Contracts on the
                                                                                                            Cap Funds do not intend to invest more                  calculation of the Funds’ NAV, which is
                                                    CME prior to the calculation of the
                                                                                                            than 25% of their respective net assets                 typically calculated as of 4:00 p.m. each
                                                    Funds’ NAV, which is typically
                                                                                                            in Large Cap Financial Instruments.                     day NYSE Arca is open for trading.
                                                    calculated as of 4:00 p.m. each day that                   Additionally, because an adverse
                                                    NYSE Arca is open for trading.                                                                                     Each Small Cap Fund will seek to
                                                                                                            Large Cap Benchmark move of 25% or                      engage in daily rebalancing to position
                                                       Each Large Cap Fund will seek to                     more in a single day could cause the
                                                                                                                                                                    its portfolio so that its leveraged or
                                                    engage in daily rebalancing to position                 NAV of a Large Cap Fund to decline to
                                                                                                                                                                    inverse exposure to the Small Cap
                                                    its portfolio so that its leveraged or                  zero and investors in the Fund to lose
                                                                                                                                                                    Benchmark is consistent with the
                                                    inverse exposure to the Large Cap                       the full value of their investment, each
                                                                                                                                                                    Fund’s daily investment objective. Daily
                                                    Benchmark is consistent with the                        Large Cap Fund will invest a limited
                                                                                                                                                                    rebalancing and the compounding of
                                                    Fund’s daily investment objective. Daily                portion of its assets (typically less than
                                                                                                                                                                    each day’s return over time means that
                                                    rebalancing and the compounding of                      5% of its net assets at the time of
                                                                                                                                                                    the return of each Fund for a period
                                                    each day’s return over time means that                  purchase) in listed option contracts that
                                                                                                                                                                    longer than a single day will be the
                                                    the return of each Fund for a period                    are designed to prevent a Large Cap
                                                                                                                                                                    result of each day’s returns
                                                    longer than a single day will be the                    Fund’s NAV from going to zero and
                                                                                                                                                                    compounded over the period, which
                                                    result of each day’s returns                            allow a Fund to recoup a small portion
                                                                                                            of the substantial losses that may result               will very likely differ from four times or
                                                    compounded over the period, which
                                                                                                            from significant adverse movements in                   four times the inverse, as applicable, of
                                                    will very likely differ from four times or
                                                                                                            the Large Cap Benchmark. Specifically,                  the return of the Fund’s benchmark for
                                                    four times the inverse, as applicable, of
                                                                                                            ProShares QuadPro U.S. Large Cap will                   the same period.
                                                    the return of the Fund’s benchmark for
                                                    the same period.                                        hold CME-listed put options on Large
                                                                                                                                                                      12 ProShares QuadPro U.S. Large Cap intends to
                                                                                                            Cap Futures Contracts, and ProShares                    hold Large Cap Stop Options with respect to all or
                                                      8 For  more information regarding the Funds and       QuadPro Short U.S. Large Cap will hold
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                                                                                                                                    substantially all of its S&P 500 Interests with strike
                                                    the Shares, see Amendment No. 2, supra note 6.                                                                  prices at approximately 75% of the value of the
                                                       9 The Trust is registered under the Securities Act     11 The term ‘‘normal market conditions’’ includes,    applicable underlying S&P 500 Interests as of the
                                                    of 1933. On November 14, 2017, the Trust filed with     but is not limited to, the absence of trading halts     end of the preceding business day. ProShares
                                                    the Commission Pre-Effective Amendment No. 1 to         in the applicable financial markets generally;          QuadPro Short U.S. Large Cap intends to hold Large
                                                    a registration statement on Form S–1 under the          operational issues (e.g., systems failure) causing      Cap Stop Options with respect to all or
                                                    Securities Act of 1933 relating to the Funds (File      dissemination of inaccurate market information; or      substantially all of its S&P 500 Interests with strike
                                                    No. 333–217767).                                        force majeure type events such as natural or            prices at approximately 125% of the value of the
                                                       10 A ‘‘single day’’ is measured from the time a      manmade disaster, act of God, armed conflict, act       Fund’s S&P Interests as of the end of the preceding
                                                    Fund calculates its NAV to the time of the Fund’s       of terrorism, riot or labor disruption or any similar   business day.
                                                    next NAV calculation.                                   intervening circumstance.                                 13 See supra note 10.




                                               VerDate Sep<11>2014   18:57 Nov 21, 2017   Jkt 244001   PO 00000   Frm 00148   Fmt 4703   Sfmt 4703   E:\FR\FM\22NON1.SGM     22NON1


                                                                             Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices                                                    55701

                                                       Under normal market conditions,14                    practicable for a Small Cap Fund to                   national securities exchange be
                                                    each Small Cap Fund will attempt to                     invest in Small Cap Stop Options, the                 ‘‘designed to prevent fraudulent and
                                                    gain leveraged or inverse exposure, as                  Funds may invest in OTC options on                    manipulative acts and practices, to
                                                    applicable, to the Small Cap Benchmark                  Small Cap Future Contracts.                           promote just and equitable principles of
                                                    primarily through investments in lead                     Each Small Cap Fund will invest the                 trade,’’ and ‘‘to protect investors and the
                                                    month E-Mini Russell 2000 Index                         remainder of its assets in Money Market               public interest.’’ 18
                                                    Futures (‘‘Small Cap Futures                            Instruments. Each Small Cap Fund also
                                                                                                            may hold cash in order to pay expenses                IV. Procedure: Request for Written
                                                    Contracts’’). In the event position, price,
                                                                                                            and distributions, if any, and satisfy                Comments
                                                    or accountability limits are reached with
                                                    respect to Small Cap Futures Contracts,                 redemption requests.                                     The Commission requests that
                                                    the Sponsor, in its commercially                        III. Proceedings To Determine Whether                 interested persons provide written
                                                    reasonable judgment, may cause each                     To Approve or Disapprove SR–                          submissions of their views, data, and
                                                    Small Cap Fund to obtain exposure to                    NYSEArca–2017–69, as Modified by                      arguments with respect to the issues
                                                    the Small Cap Benchmark through                         Amendment No. 2, and Grounds for                      identified above, as well as any other
                                                    investment in swap transactions and                     Disapproval Under Consideration                       concerns they may have with the
                                                    forward contracts referencing the Small                                                                       proposal. In particular, the Commission
                                                    Cap Benchmark (‘‘Small Cap Financial                       The Commission is instituting                      invites the written views of interested
                                                    Instruments’’ and, together with Small                  proceedings pursuant to Section                       persons concerning whether the
                                                    Cap Futures Contracts, ‘‘Russell 2000                   19(b)(2)(B) of the Act 16 to determine                proposal is consistent with Section
                                                    Interests’’). The Small Cap Funds may                   whether the proposed rule change, as                  6(b)(5) or any other provision of the Act,
                                                    also invest in Small Cap Financial                      modified by Amendment No. 2, should                   or the rules and regulations thereunder.
                                                    Instruments if the market for a specific                be approved or disapproved. Institution               Although there do not appear to be any
                                                    Small Cap Futures Contract experiences                  of such proceedings is appropriate at                 issues relevant to approval or
                                                    an emergency (e.g., natural disaster,                   this time in view of the legal and policy             disapproval that would be facilitated by
                                                    terrorist attack or an act of God) or                   issues raised by the proposed rule                    an oral presentation of views, data, and
                                                    disruption (e.g., a trading halt or a flash             change. Institution of proceedings does               arguments, the Commission will
                                                    crash) that prevents or makes it                        not indicate that the Commission has                  consider, pursuant to Rule 19b–4, any
                                                    impractical for a Fund to obtain the                    reached any conclusions with respect to               request for an opportunity to make an
                                                    appropriate amount of investment                        any of the issues involved. Rather, as                oral presentation.19
                                                    exposure using Small Cap Futures                        described below, the Commission seeks                    Interested persons are invited to
                                                    Contracts (i.e., conditions other than                  and encourages interested persons to                  submit written data, views, and
                                                    normal market conditions). The Small                    provide comments on the proposed rule                 arguments regarding whether the
                                                    Cap Funds do not intend to invest more                  change, as modified by Amendment No.                  proposal should be approved or
                                                    than 25% of their respective net assets                 2.                                                    disapproved by December 13, 2017. Any
                                                    in Small Cap Financial Instruments.                        Pursuant to Section 19(b)(2)(B) of the
                                                                                                                                                                  person who wishes to file a rebuttal to
                                                                                                            Act,17 the Commission is providing
                                                       Additionally, because an adverse                                                                           any other person’s submission must file
                                                                                                            notice of the grounds for disapproval                 that rebuttal by December 27, 2017. The
                                                    Small Cap Benchmark move of 25% or
                                                                                                            under consideration. As discussed                     Commission asks that commenters
                                                    more in a single day could cause the
                                                                                                            above, the Exchange proposes to list and              address the sufficiency of the
                                                    NAV of a Small Cap Fund to decline to
                                                                                                            trade Shares of: (1) The Large Cap                    Exchange’s statements in support of the
                                                    zero and investors in the Fund to lose
                                                                                                            Funds, which will seek results that                   proposal, which are set forth in
                                                    the full value of their investment, each
                                                                                                            correspond (before fees and expenses) to              Amendment No. 2, in addition to any
                                                    Small Cap Fund will invest a limited
                                                                                                            four times and four times the inverse of              other comments they may wish to
                                                    portion of its assets (typically less than
                                                                                                            the return of the Large Cap Benchmark                 submit about the proposed rule change.
                                                    5% of its net assets at the time of
                                                                                                            for a single day, where the Large Cap                 In particular, the Commission seeks
                                                    purchase) in listed option contracts that
                                                                                                            Benchmark is the last traded price of                 comment, including, where relevant,
                                                    are designed to prevent a Small Cap
                                                                                                            lead month E-Mini S&P 500 Stock Price                 any specific data, statistics, or studies,
                                                    Fund’s NAV from going to zero and
                                                                                                            Index Futures Contracts on the CME                    on the following:
                                                    allow a Fund to recoup a small portion
                                                                                                            prior to the calculation of the Funds’
                                                    of the substantial losses that may result                                                                        1. Would the proposed Funds impact
                                                                                                            NAV; and (2) the Small Cap Funds,
                                                    from significant adverse movements in                                                                         daily volatility on the underlying
                                                                                                            which will seek results that correspond
                                                    the Small Cap Benchmark. Specifically,                                                                        indexes, or the underlying names
                                                                                                            (before fees and expenses) to four times
                                                    ProShares QuadPro U.S. Small Cap will                                                                         comprising those indexes? Would any
                                                                                                            and four times the inverse of the return
                                                    hold CME-listed put options on Small                                                                          such impact be more or less than other
                                                                                                            of the Small Cap Benchmark for a single
                                                    Cap Futures Contracts and ProShares                                                                           leveraged or inverse leveraged
                                                                                                            day, where the Small Cap Benchmark is
                                                    QuadPro Short U.S. Small Cap will hold                                                                        exchange-traded products (‘‘leveraged
                                                                                                            the last traded price of lead month E-
                                                    CME-listed call options on Small Cap                                                                          ETPs’’) (such as 2X and 3X)? Would the
                                                                                                            Mini Russell 2000 Index Futures
                                                    Futures Contracts (collectively, ‘‘Small                                                                      addition of the proposed Funds change
                                                                                                            Contracts on the CME prior to the
                                                    Cap Stop Options’’).15 If it is not
                                                                                                            calculation of the Funds’ NAV. The
                                                                                                                                                                    18 15 U.S.C. 78f(b)(5).
                                                                                                            Commission is instituting proceedings
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                      14 See  supra note 11.                                                                                        19 Section  19(b)(2) of the Act, as amended by the
                                                       15 ProShares QuadPro U.S. Small Cap intends to       to allow for additional analysis of the               Securities Acts Amendments of 1975, Public Law
                                                    hold Small Cap Stop Options with respect to all or      proposal’s consistency with Section                   94–29 (June 4, 1975), grants the Commission
                                                    substantially all of its Russell 2000 Interests with    6(b)(5) of the Act, which requires,                   flexibility to determine what type of proceeding—
                                                    strike prices at approximately 75% of the value of      among other things, that the rules of a               either oral or notice and opportunity for written
                                                    the applicable underlying Russell 2000 Interests as                                                           comments—is appropriate for consideration of a
                                                    of the end of the preceding business day. ProShares                                                           particular proposal by a self-regulatory
                                                    QuadPro Short U.S. Small Cap intends to hold            the Fund’s Russell 2000 Interests as of the end of    organization. See Securities Acts Amendments of
                                                    Small Cap Stop Options with respect to all or           the preceding business day.                           1975, Senate Comm. on Banking, Housing & Urban
                                                                                                              16 15 U.S.C. 78s(b)(2)(B).
                                                    substantially all of its Russell 2000 Interests with                                                          Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
                                                    strike prices at approximately 125% of the value of       17 Id.                                              (1975).



                                               VerDate Sep<11>2014   18:57 Nov 21, 2017   Jkt 244001   PO 00000   Frm 00149   Fmt 4703   Sfmt 4703   E:\FR\FM\22NON1.SGM    22NON1


                                                    55702                   Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices

                                                    the current leveraged (inverse, 2X, and                    10. Do investors have access to                    to make available publicly. All
                                                    3X) ETP market? If so, how?                             information sufficient to fully                       submissions should refer to File
                                                       2. How much additional end-of-day                    understand the operation and risks of                 Number SR–NYSEArca–2017–69 and
                                                    volume in the underlying assets would                   leveraged ETPs?                                       should be submitted on or before
                                                    the proposed Funds potentially add?                        11. Would the potential loss of                    December 13, 2017. Rebuttal comments
                                                    How much volume do existing                             investment be limited to the amount                   should be submitted by December 27,
                                                    leveraged ETPs typically add to end-of-                 invested? For example, do investors                   2017.
                                                    day trading in the underlying assets?                   frequently buy leveraged ETPs on
                                                                                                            margin?                                                 For the Commission, by the Division of
                                                       3. What is the expected daily volume
                                                                                                               12. How does use of long positions                 Trading and Markets, pursuant to delegated
                                                    of trades for the proposed Funds? How
                                                                                                                                                                  authority.20
                                                    much daily creation and redemption                      versus short positions in leveraged ETPs
                                                    activity is expected in the proposed                    differ across different types of investors?           Eduardo A. Aleman,
                                                    Funds? How much current daily                              13. Which types of broker/dealers are              Assistant Secretary.
                                                    creation and redemption activity is                     active with leveraged ETP investments?                [FR Doc. 2017–25241 Filed 11–21–17; 8:45 am]
                                                    there for leveraged ETPs?                               Do they tend to also hold these                       BILLING CODE 8011–01–P
                                                       4. Would the volume and activity                     investments in their own portfolio?
                                                    increase during periods of downward                        Comments may be submitted by any
                                                    market movement or high volatility, and                 of the following methods:                             SECURITIES AND EXCHANGE
                                                    exacerbate the downward movement or                     Electronic Comments                                   COMMISSION
                                                    volatility? What type of hedging
                                                    exposure is expected with these                           • Use the Commission’s Internet
                                                                                                                                                                  [Release No. 34–82099; File No. SR–
                                                    products, and during significant down                   comment form (http://www.sec.gov/
                                                                                                                                                                  NYSEARCA–2017–129]
                                                    market moves, how might related selling                 rules/sro.shtml); or
                                                    behavior be affected by such exposure?                    • Send an email to rule-comments@                   Self-Regulatory Organizations; NYSE
                                                       5. What types of investors would                     sec.gov. Please include File Number SR–               Arca, Inc.; Notice of Filing and
                                                    purchase Shares of the proposed Funds?                  NYSEArca-2017–69 on the subject line.
                                                                                                                                                                  Immediate Effectiveness of Proposed
                                                    Would they be different from investors                  Paper Comments                                        Rule Change To Amend the Fees for
                                                    in existing leveraged ETPs? If so, please                                                                     NYSE Arca BBO and NYSE Arca
                                                    explain why.                                              • Send paper comments in triplicate
                                                                                                            to Secretary, Securities and Exchange                 Trades To Lower the Enterprise Fee for
                                                       6. Currently, are leveraged ETPs                                                                           Those Products
                                                    always accessed through a registered                    Commission, 100 F Street NE.,
                                                    broker/dealer? If so, are transactions                  Washington, DC 20549–1090.                            November 16, 2017.
                                                    generally solicited or unsolicited? If not,             All submissions should refer to File                     Pursuant to Section 19(b)(1) 1 of the
                                                    how does an investor acquire a                          Number SR–NYSEArca–2017–69. This
                                                                                                                                                                  Securities Exchange Act of 1934 (the
                                                    leveraged ETP? What is the proportion                   file number should be included on the
                                                    of volume from retail versus                                                                                  ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
                                                                                                            subject line if email is used. To help the
                                                    institutional trading?                                                                                        notice is hereby given that, on
                                                                                                            Commission process and review your
                                                       7. Do institutional investors buy and                comments more efficiently, please use                 November 3, 2017, NYSE Arca, Inc. (the
                                                    sell leveraged ETPs? If so, what is the                 only one method. The Commission will                  ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
                                                    purpose of institutional investments in                 post all comments on the Commission’s                 the Securities and Exchange
                                                    leveraged ETPs? For example, are they                   Internet Web site (http://www.sec.gov/                Commission (the ‘‘Commission’’) the
                                                    used for hedging or are they ever held                  rules/sro.shtml). Copies of the                       proposed rule change as described in
                                                    in mutual funds? Would institutional                    submission, all subsequent                            Items I, II, and III below, which Items
                                                    investors use the proposed Funds for a                  amendments, all written statements                    have been prepared by the self-
                                                    different purpose than with the existing                with respect to the proposed rule                     regulatory organization. The
                                                    leveraged ETPs? If so, please explain                   change that are filed with the                        Commission is publishing this notice to
                                                    why. Do firms hold the securities on                    Commission, and all written                           solicit comments on the proposed rule
                                                    their books (for example, as trading                    communications relating to the                        change from interested persons.
                                                    securities or available-for-sale                        proposed rule change between the
                                                    securities)? If so, how are they held? If               Commission and any person, other than                 I. Self-Regulatory Organization’s
                                                    the investors are not institutional                     those that may be withheld from the                   Statement of the Terms of Substance of
                                                    investors, are there any restrictions                   public in accordance with the                         the Proposed Rule Change
                                                    placed on access to these investments,                  provisions of 5 U.S.C. 552, will be                     The Exchange proposes to amend the
                                                    including accreditation or options                      available for Web site viewing and                    fees for NYSE Arca BBO and NYSE Arca
                                                    eligibility?                                            printing in the Commission’s Public                   Trades to lower the Enterprise Fee for
                                                       8. What exposures do retail investors                Reference Room, 100 F Street NE.,
                                                                                                                                                                  those products. The proposed rule
                                                    seek when holding these ETPs? Would                     Washington, DC 20549, on official
                                                                                                                                                                  change is available on the Exchange’s
                                                    retail investors hold Shares of the                     business days between the hours of
                                                    proposed Funds to seek different types                  10:00 a.m. and 3:00 p.m. Copies of the                Web site at www.nyse.com, at the
                                                                                                                                                                  principal office of the Exchange, and at
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                    of exposures than with existing                         filing also will be available for
                                                    leveraged ETPs? If so, please explain                   inspection and copying at the principal               the Commission’s Public Reference
                                                    why.                                                    office of the Exchange. All comments                  Room.
                                                       9. What is the typical holding period                received will be posted without change.
                                                    of leveraged ETPs by retail investors?                  Persons submitting comments are                         20 17 CFR 200.30–3(a)(12); 17 CFR 200.30–

                                                    Are they holding the products in tax-                   cautioned that we do not redact or edit               3(a)(57).
                                                    advantaged accounts, such as Individual                 personal identifying information from                   1 15 U.S.C. 78s(b)(1).

                                                    Retirement Accounts (IRAs), meant for                   comment submissions. You should                         2 15 U.S.C. 78a.

                                                    long-term investment horizons?                          submit only information that you wish                   3 17 CFR 240.19b–4.




                                               VerDate Sep<11>2014   18:57 Nov 21, 2017   Jkt 244001   PO 00000   Frm 00150   Fmt 4703   Sfmt 4703   E:\FR\FM\22NON1.SGM   22NON1



Document Created: 2017-11-22 00:49:10
Document Modified: 2017-11-22 00:49:10
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 55699 

2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR