Company: SVIX
Filing Date: 2025-09-16
Form Type: 424B3
Source: 0001213900-25-087932
Chunk: 52

Company: VS Trust
Filing Date: 2025-09-16
Form: 424B3
Chunk 52
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 and exchange trading of many types of OTC derivatives transactions. Pursuant to regulations adopted by the CFTC, swap dealers are required to be registered and are subject to various regulatory requirements, including, but not limited to, margin, recordkeeping, reporting and various business conduct requirements, as well as proposed minimum financial capital requirements. Pursuant to the Dodd -FrankAct, regulations adopted by the CFTC and the federal banking regulators that are now in effect require swap dealers to post and collect variation margin (comprised of specified liquid instruments and subject to a required haircut) in connection with trading of OTC swaps with a Fund. These requirements may increase the amount of collateral a Fund is required to provide and the costs associated with providing it. 27 OTC swap agreements submitted for clearing are subject to minimum initial and variation margin requirements set by the relevant clearing house, as well as margin requirements mandated by the CFTC, SEC and/or federal banking regulators. Swap dealers also typically demand the unilateral ability to increase a Fund’s collateral requirements for cleared swap agreements beyond any regulatory and clearing house minimums. Such requirements may make it more difficult and costly for investment funds, such as a Fund, to enter into customized transactions. They may also render certain strategies in which a Fund might otherwise engage impossible or so costly that they will no longer be economical to implement. If a Fund decides to execute swap agreements through such exchanges or execution facilities, the Fund would be subject to the rules of the exchange or execution facility, which would bring additional risks and liabilities, and potential requirements under applicable regulations and under rules of the relevant exchange or execution facility. With respect to cleared OTC derivatives, a Fund will not face a clearing house directly but rather will do so through a swap dealer that is registered with the CFTC or SEC and that acts as a clearing member. A Fund may face the indirect risk of the failure of another clearing member customer to meet its obligations to its clearing member. This risk could arise due to a default by the clearing member on its obligations to the clearing house triggered by a customer’s failure to meet its obligations to the clearing member. Swap dealers also are required to post margin to the clearing houses through which they clear their customers’ trades instead of using such margin in their operations, as was widely permitted before Dodd -Frank. This has increased and will continue to increase the swap dealers’ costs, and these increased costs are generally passed through to other market participants such as a Fund in the form of higher upfront and mark -to -marketmargin,