Company: SVIX
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-044385
Chunk: 301

Company: VS Trust
Filing Date: 2025-05-15
Form: 10-Q
Item: Part II, Item 8
Chunk 301
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ants and representations. The triggering of certain events or the default on certain terms
of the agreement could allow a party to terminate a transaction under the agreement and request immediate payment in an amount equal to
the net positions owed to the party under the agreement. For example, if the level of the Fund’s benchmark has a dramatic intraday
move that would cause a material decline in the Fund’s NAV, the terms of the swap may permit the counterparty to immediately close
out the transaction with the Fund. In that event, it may not be possible for the Fund to enter into another swap or to invest in other
Financial Instruments necessary to achieve the desired exposure consistent with the Fund’s objective. This, in turn, may prevent
the Fund from achieving its investment objective, particularly if the level of the Fund’s benchmark reverses all or part of its
intraday move by the end of the day.

In addition, cleared derivatives benefit from daily
marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries. To the extent the Fund
enters into cleared swap transactions, the Fund will deposit collateral with a FCM in cleared swaps customer accounts, which are required
by CFTC regulations to be separate from its proprietary collateral posted for cleared swaps transactions. Cleared swap customer collateral
is subject to regulations that closely parallel the regulations governing customer segregated funds for futures transactions but provide
certain additional protections to cleared swaps collateral in the event of a clearing broker or clearing broker customer default. For
example, in the event of a default of both the clearing broker and a customer of the clearing broker, a clearing house is only permitted
to access the cleared swaps collateral in the legally separate (but operationally comingled) account of the defaulting cleared swap customer
of the clearing broker, as opposed to the treatment of customer segregated funds, under which the clearing house may access all of the
commingled customer segregated funds of a defaulting clearing broker. Derivatives entered into directly between two counterparties do
not necessarily benefit from such protections, particularly if entered into with an entity that is not registered as a “swap dealer”
with the CFTC. This exposes the Funds to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions
because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing
the Funds to suffer a loss.

The Sponsor regularly reviews the performance of