Company: SVIX
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001013762-25-004207
Chunk: 18

Company: VS Trust
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1
Chunk 18
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each buyer and each seller of contracts traded on the exchange and, in effect, becomes the other party to each trader’s open position
in the market. Thereafter, each party to a trade looks only to the clearing house for performance. The clearing house generally establishes
some sort of security or guarantee fund to which all clearing members of the exchange must contribute. This fund acts as an emergency
buffer which is intended to enable the clearing house to meet its obligations with regard to the other side of an insolvent clearing
member’s contracts. Furthermore, clearing houses require margin deposits and continuously mark positions to market to provide some
assurance that their members will be able to fulfil their contractual obligations. Thus, members effecting derivatives transactions on
an organized exchange or clearing an OTC derivatives transaction through a clearing house do not bear the risk of the insolvency of the
party on the opposite side of the trade; their credit risk is limited to the respective solvencies of their commodity broker and the
clearing house. The clearing house “guarantee” of performance on open positions does not run to customers. If a member firm
goes bankrupt, customers could lose money.

If a Fund decides to execute derivatives transactions
through such derivatives exchanges — and especially if it decides to become a direct member of one or more exchanges or swap execution
facilities — the Fund would be subject to the rules of the exchange or swap executive facility, which would bring additional risks
and liabilities, and potential additional regulatory requirements.

Regulations

Derivatives exchanges in the United States are
subject to regulation under the CEA, by the CFTC, the governmental agency having responsibility for regulation of derivatives exchanges
and trading on those exchanges. Following the adoption of the Dodd-Frank Act, the CFTC also has authority to regulate OTC derivatives
markets, including certain OTC foreign exchange markets.

9

The CFTC has exclusive authority to designate
exchanges for the trading of specific futures contracts and to prescribe rules and regulations of the marketing of each. The CFTC also
regulates the activities of “commodity pool operators” and the CFTC has adopted regulations with respect to certain of such
persons’ activities. Pursuant to its authority, the CFTC requires a commodity pool operator, such as the Sponsor, to keep accurate,
current and orderly records with respect to each pool it operates. The CFTC may suspend, modify or terminate the registration of any
registrant for failure to comply with CFT