Document ID: SEC-2019-0130-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2019-02-15T05:00Z

[Federal Register Volume 84, Number 32 (Friday, February 15, 2019)]
[Notices]
[Pages 4573-4579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02377]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85088; File No. SR-NYSEArca-2019-02]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of the 
Shares of the ProShares UltraPro 3x Natural Gas ETF and ProShares 
UltraPro 3x Short Natural Gas ETF Under NYSE Arca Rule 8.200-E

February 11, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the

[[Page 4574]]

``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, 
on January 28, 2019, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the following 
under NYSE Arca Rule 8.200-E, Commentary .02 (``Trust Issued 
Receipts''): ProShares UltraPro 3x Natural Gas ETF and ProShares 
UltraPro 3x Short Natural Gas ETF. The proposed change is available on 
the Exchange's website at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
following under NYSE Arca Rule 8.200-E, Commentary .02, which governs 
the listing and trading of Trust Issued Receipts: ProShares UltraPro 3x 
Natural Gas ETF and ProShares UltraPro 3x Short Natural Gas ETF (each a 
``Fund'' and, collectively, the ``Funds'').\4\
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    \4\ Commentary .02 to NYSE Arca Rule 8.200-E applies to Trust 
Issued Receipts that invest in ``Financial Instruments.'' The term 
``Financial Instruments,'' as defined in Commentary .02(b)(4) to 
NYSE Arca Rule 8.200-E, means any combination of investments, 
including cash; securities; options on securities and indices; 
futures contracts; options on futures contracts; forward contracts; 
equity caps, collars, and floors; and swap agreements.
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    Each Fund is a series of the ProShares Trust II (the ``Trust''), a 
Delaware statutory trust.\5\ The Trust and the Funds are managed and 
controlled by ProShare Capital Management LLC (``ProShare Capital'' or 
the ``Sponsor''). ProShare Capital is registered as a commodity pool 
operator (``CPO'') with the Commodity Futures Trading Commission 
(``CFTC'') and is a member of the National Futures Association 
(``NFA'').\6\
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    \5\ The Trust is registered under the Securities Act of 1933. On 
May 19, 2017, the Trust filed with the Commission a registration 
statement on Form S-1 under the Securities Act of 1933 (15 U.S.C. 
77a) (``Securities Act'') relating to the Funds (File No. 333-
218136) (the ``Registration Statement''). The description of the 
operation of the Trust and the Funds herein is based, in part, on 
the Registration Statement.
    \6\ The Commission has previously approved listing of Trust 
Issued Receipts based on natural gas on the American Stock Exchange 
LLC (now known as NYSE American LLC) and NYSE Arca. See, e.g., 
Securities Exchange Act Release Nos. 55632 (April 13, 2007), 72 FR 
19987 (April 20, 2007) (SR-Amex-2006-112) (order approving listing 
and trading of shares of United States Natural Gas Fund, LP); 56831 
(November 21, 2007), 72 FR 67612 (November 29, 2007) (SR-Amex-2007-
98) (order approving listing and trading of shares of United States 
12 Month Oil Fund, LP and United States 12 Month Natural Gas Fund, 
LP); 63753 (January 21, 2011), 76 FR 4963 (January 27, 2011) (SR-
NYSEArca-2010-110) (order approving listing and trading of shares of 
Teucrium Natural Gas Fund); and 65136 (August 15, 2011), 76 FR 52037 
(August 19, 2011) (SR-NYSEAra-2011-24) (order approving listing and 
trading of shares of ProShares Short DJ-UBS Natural Gas, ProShares 
Ultra DJ-UBS Natural Gas and ProShares UltraShort DJ-UBS Natural 
Gas).
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    In its capacity as the Custodian for the Funds, the Bank of New 
York Mellon (``BNYM'') may hold the Funds' securities and cash and/or 
cash equivalents pursuant to a custodial agreement (the ``Custodian''). 
The Custodian is also the transfer agent for the Shares. In addition, 
in its capacity as Administrator for the Funds, BNYM (the 
``Administrator'') performs certain administrative and accounting 
services for the Funds and prepares certain Commission, NFA and CFTC 
reports on behalf of the Funds. In its capacity as Distributor for the 
Funds, SEI Investments Distribution Co. performs functions and duties 
relating to distribution and marketing.
ProShares UltraPro 3x Natural Gas ETF
    According to the Registration Statement, the investment objective 
of the Fund is to seek daily investment results, before fees and 
expenses, that correspond to three times (3x) the performance of the 
Bloomberg Natural Gas Subindex\SM\ (the ``Benchmark'').\7\ The Fund 
seeks to achieve its investment objective for a single day, not for any 
other period.\8\
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    \7\ According to the Registration Statement, the Benchmark is a 
``rolling index,'' which means that the Index performance includes 
the impact of closing out futures contracts that are nearing 
expiration and replacing them with futures contracts with later 
expirations. This process is commonly referred to as ``rolling.''
    \8\ According to the Registration Statement, the return of a 
Fund for a period longer than a single trading day is the result of 
its return for each day compounded over the period and thus will 
usually differ from a Fund's multiple times the return of the 
Benchmark for the same period.
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    The Benchmark is intended to reflect the performance of a rolling 
position in natural gas futures contracts listed on the New York 
Mercantile Exchange (the ``NYMEX'', which is part of the CME Group, 
Inc. (``CME'')), including the impact of rolling, without regard to 
income earned on cash positions.
ProShares UltraPro 3x Short Natural Gas ETF
    According to the Registration Statement, the investment objective 
of the Fund is to seek daily investment results, before fees and 
expenses, that correspond to three times the inverse (-3x) of the 
performance of the Benchmark. The Fund seeks to achieve its investment 
objective for a single day, not for any other period.
Investment Strategies of the Funds
    In seeking to achieve the Funds' investment objectives, the Sponsor 
will utilize a mathematical approach to determine the type, quantity 
and mix of investment positions that ProShare Capital believes, in 
combination, should produce daily returns consistent with the Funds' 
respective objectives.
    Each Fund will seek to meet its respective investment objective by 
investing, under normal market conditions,\9\ in futures contracts 
traded in the United States and listed options on such contracts 
(together, the ``Futures Contracts'').\10\ The Funds will not invest 
directly in natural gas. The Funds' investments in Futures Contracts 
will be used to produce economically

[[Page 4575]]

``leveraged'' or ``inverse leveraged'' investment results for the 
Funds.
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    \9\ The term ``normal market conditions'' includes, but is not 
limited to, the absence of trading halts in the applicable financial 
markets generally; operational issues (e.g., systems failure) 
causing dissemination of inaccurate market information; or force 
majeure type events such as natural or manmade disaster, act of God, 
armed conflict, act of terrorism, riot or labor disruption or any 
similar intervening circumstance. See NYSE Arca Rule 8.600-E(c)(5).
    \10\ According to the Registration Statement, a Futures Contract 
is a standardized contract traded on, or subject to the rules of, an 
exchange that calls for the future delivery of a specified quantity 
and type of a particular underlying asset at a specified time and 
place or alternatively may call for cash settlement. The notional 
size and calendar term Futures Contracts on a particular underlying 
asset are identical and are not subject to any negotiation, other 
than with respect to price and the number of contracts traded 
between the buyer and seller.
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    Each Fund also may obtain exposure to the Benchmark through 
investment in over-the-counter (``OTC'') swap transactions and forward 
contracts referencing such Benchmark (``Financial Instruments''). For 
example, a Fund may invest in Financial Instruments in the event 
position, price or accountability limits are reached with respect to 
Futures Contracts \11\ or exposure limits are reached with a particular 
futures commission merchant (``FCM'') or if the market for a specific 
futures contract experiences emergencies (e.g., natural disaster, 
terrorist attack or an act of God) or disruptions (e.g., a trading 
halt) or in situations where the Sponsor deems it impractical or 
inadvisable to buy or sell Futures Contracts (such as during periods of 
market volatility or illiquidity).
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    \11\ According to the Registration Statement, many designated 
contract markets, such as the NYMEX, have established accountability 
levels and position limits on the maximum net long or net short 
futures contracts in commodity interests that any person or group of 
persons under common trading control may hold, own or control. In 
addition, NYMEX also sets price fluctuation limits on futures 
contracts. Options do not have individual price limits but rather 
are linked to the price limit of Futures Contracts.
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    Each Fund will also hold cash or cash equivalents, such as U.S. 
Treasury securities or other high credit quality, short-term fixed-
income or similar securities (such as shares of money market funds and 
collateralized repurchase agreements), pending investment in Futures 
Contracts or Financial Instruments or as collateral for the Funds' 
investments.
    In addition, to the extent a Fund enters into swap agreements and 
other over-the-counter transactions, it will do so only with large, 
established and well capitalized financial institutions that meet the 
Sponsor's credit quality standards and monitoring policies. Each Fund 
will use various techniques to minimize credit risk including early 
termination or reset and payment, using different counterparties and 
limiting the net amount due from any individual counterparty.
    The Funds do not intend to hold Futures Contracts through 
expiration, but instead intend to ``roll'' or close their respective 
positions before expiration. When the market for these contracts is 
such that the prices are higher in the more distant delivery months 
than in the nearer delivery months, the sale during the course of the 
``rolling process'' of the more nearby contract would take place at a 
price that is lower than the price of the more distant contract. This 
pattern of higher futures prices for longer expiration Futures 
Contracts is referred to as ``contango.'' Alternatively, when the 
market for these contracts is such that the prices are higher in the 
nearer months than in the more distant months, the sale during the 
course of the ``rolling process'' of the more nearby contract would 
take place at a price that is higher than the price of the more distant 
contract. This pattern of higher futures prices for shorter expiration 
Futures Contracts is referred to as ``backwardation.'' The presence of 
contango in certain Futures Contracts at the time of rolling could 
adversely affect a Fund with long positions, and positively affect a 
Fund with short positions. Similarly, the presence of backwardation in 
certain Futures Contracts \12\ at the time of rolling such contracts 
could adversely affect a Fund with short positions and positively 
affect a Fund with long positions.
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    \12\ The Funds may invest in options on Futures Contracts. 
Unlike Futures Contracts, which the Funds intend to roll before 
expiration, the Funds intend to hold ``in-the-money'' options on 
Futures Contracts to expiration. The Funds would exercise in-the-
money options on Futures Contracts at expiration of the options 
contract and they would settle through receipt or delivery of the 
underlying Futures Contracts. Out-of-the money options will be held 
to expiration and will be expired worthless. Options on Futures 
Contracts are subject to the effects of contango and backwardation 
to the same general extent as their underlying Futures Contracts.
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Net Asset Value (``NAV'')
    According to the Registration Statement, a Fund's per Share NAV 
will be calculated by taking the current market value of its total 
assets, subtracting any liabilities, and dividing that total by the 
total number of outstanding Shares.
    Each Fund's NAV will be calculated on each day other than a day 
when the Exchange is closed for regular trading. The Funds typically 
compute their NAVs as of 2:30 p.m. Eastern Time (``E.T.''), which is 
the designated closing time of the natural gas futures listed on 
NYMEX,\13\ or an earlier time as set forth on www.ProShares.com, if 
necessitated by NYSE, the Exchange or other exchange material to the 
valuation or operation of such Fund closing early. Each Fund's NAV is 
calculated only once each trading day.
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    \13\ The daily value of the Benchmark is calculated as of 2:30 
p.m. E.T. to coincide with the designated closing time. Futures 
Contracts, however, continue to trade past 2:30 p.m. E.T. and 
through the end of the NYSE Arca Core Trading Session at 4 p.m. E.T.
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    In calculating the NAV of a Fund, Futures Contracts generally are 
valued at their then current market value, which typically is based 
upon the settlement price or the last traded price before the NAV time, 
for that Futures Contract. The settlement value of a Fund's non-
exchange traded Financial Instruments generally is determined by 
applying the then-current disseminated levels for the Benchmark 
underlying such Financial Instrument to the terms of such Fund's non-
exchange traded Financial Instruments.
    In certain circumstances (e.g., if the Sponsor believes market 
quotations do not accurately reflect fair value of an investment, or a 
trading halt closes an exchange or market early), the Sponsor may, in 
its sole discretion, choose to determine a fair value price as the 
basis for determining the market value of an investment for such day. 
Such fair value price would generally be determined based on available 
inputs about the current value of the investment and would be based on 
principles that the Sponsor deems fair and equitable.
    Money market instruments held by a Fund generally will be valued 
using market prices or at amortized cost.
Indicative Fund Value
    In order to provide updated information relating to a Fund for use 
by investors and market professionals, the Exchange will calculate an 
updated ``Indicative Fund Value'' (``IFV''). The IFV will be calculated 
by using the prior day's closing NAV per Share of a Fund as a base and 
will be updating throughout the Core Trading Session of 9:30 a.m. E.T. 
to 4:00 p.m. E.T. to reflect changes in the approximate aggregate per 
Share value of the investments held by a Fund based on the most 
recently available prices for the Fund's investments.
    The IFV will be disseminated on a per Share basis every 15 seconds 
during the Exchange's Core Trading Session and be widely disseminated 
by one or more major market data vendors during the NYSE Arca Core 
Trading Session.\14\
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    \14\ Several major market data vendors display and/or make 
widely available IFVs taken from the CTA or other data feeds. In 
addition, circumstances may arise in which the NYSE Arca Core 
Trading Session is in progress, but trading in Futures Contracts is 
not occurring. Such circumstances may result from reasons including, 
but not limited to, a futures exchange having a separate holiday 
schedule than the NYSE Arca, a futures exchange closing prior to the 
close of the NYSE Arca, price fluctuation limits being reached in 
Futures Contracts, or a futures exchange imposing any other 
suspension or limitation on trading in Futures Contracts. In such 
instances, the IFV would be static or priced at the applicable early 
cut-off time of the exchange trading the applicable Futures 
Contracts.
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Creation and Redemption of Shares
    According to the Registration Statement, each Fund intends to 
create and redeem Shares in one or more ``Creation Units'' of 25,000 
Shares each.

[[Page 4576]]

The size of the Creation Units is subject to change. Creation Units in 
a Fund are expected to be created when there is sufficient demand for 
Shares in such Fund that the market price per Share is at a premium to 
the NAV per Share. A creation transaction generally takes place when an 
Authorized Participant deposits a specified amount of cash in exchange 
for a specified number of Creation Units. Similarly, Shares can be 
redeemed only in Creation Units, and generally only for cash. The 
prices at which creations and redemptions occur are based on the next 
calculation of the NAV after an order is received.
    ``Authorized Participants'' will be the only persons that may place 
orders to create and redeem Creation Units. An Authorized Participant 
is an entity that has entered into an Authorized Participant Agreement 
with the Trust and ProShare Capital.
Creation Procedures
    On any ``Business Day'', an Authorized Participant may place an 
order with the Distributor to create one or more Creation Units. For 
purposes of processing both purchase and redemption orders, a 
``Business Day'' for each Fund means any day on which the NAV of such 
Fund is determined. Purchase and redemption orders for Creation Units 
must be placed by 2:00 p.m. E.T. or earlier if NYSE Arca or other 
exchange material to the valuation or operation of such Fund closes 
before the cut-off time.\15\ The day on which the Distributor receives 
a valid purchase order is referred to as the purchase order date. If 
the purchase order is received after the applicable cut-off time, the 
purchase order date will be the next Business Day. Purchase orders are 
irrevocable.
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    \15\ The 2:00 p.m. E.T. creation and redemption cut-off time is 
designed to provide the Funds with sufficient time prior to the NAV 
calculation time to assess the potential impact of creation and 
redemption activity on a Fund's portfolio and to buy (or sell) 
Futures Contracts or other Financial Instruments in an orderly 
fashion and in a manner designed to position the Fund's portfolio so 
that its exposure to the Benchmark is consistent with its daily 
investment objective.
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    By placing a purchase order, an Authorized Participant generally 
agrees to deposit cash with the Custodian.
Redemption Procedures
    According to the Registration Statement, the procedures by which an 
Authorized Participant can redeem one or more Creation Units will 
mirror the procedures for the creation of Creation Units. On any 
Business Day, an Authorized Participant may place an order with the 
Distributor to redeem one or more Creation Units.
    The redemption procedures allow Authorized Participants to redeem 
Creation Units. Individual shareholders may not redeem directly from a 
Fund. By placing a redemption order, an Authorized Participant agrees 
to deliver the Creation Units to be redeemed through DTC's book entry 
system to the applicable Fund not later than noon E.T. on the first 
Business Day immediately following the redemption order date (T+1). 
ProShare Capital can extend the deadline for a Fund to receive the 
Creation Units required for settlement up to the third Business Day 
following the redemption order date (T+3).
    Upon request of an Authorized Participant made at the time of a 
redemption order, ProShare Capital may determine, in addition to 
delivering redemption proceeds, to transfer futures contracts to the 
Authorized Participant pursuant to a futures contract for related 
position (``EFCRP'') or to a block trade sale of futures contracts to 
the Authorized Participant.
Determination of Redemption Distribution
    The redemption proceeds from a Fund will consist of the cash 
redemption amount and, if permitted by ProShare Capital with respect to 
a Fund, an EFCRP or block trade with the relevant Fund as described 
above. The cash redemption amount is equal to the NAV of the number of 
Creation Unit(s) of such Fund requested in the Authorized Participant's 
redemption order as of the time of the calculation of such Fund's NAV 
on the redemption order date. The Benchmark will be disseminated by one 
or more major market data vendors every 15 seconds during the NYSE Arca 
Core Trading Session of 9:30 a.m. to 4:00 p.m. E.T.
Availability of Information
    The NAV for the Funds' Shares will be disseminated daily to all 
market participants at the same time. The intraday, closing prices, and 
settlement prices of the Futures Contracts will be readily available 
from the applicable futures exchange websites, automated quotation 
systems, published or other public sources, or major market data 
vendors.
    Complete real-time data for the Futures Contracts is available by 
subscription through on-line information services. ICE Futures U.S. and 
NYMEX also provide delayed futures and options on futures information 
on current and past trading sessions and market news free of charge on 
their respective websites. The specific contract specifications for 
Futures Contracts are also available on such websites, as well as other 
financial informational sources. Quotation and last-sale information 
regarding the Shares will be disseminated through the facilities of the 
Consolidated Tape Association (``CTA''). Quotation information for cash 
equivalents and OTC swaps may be obtained from brokers and dealers who 
make markets in such instruments. Quotation information for exchange-
traded swaps will be available from the applicable exchange and major 
market vendors. Intra-day price and closing price level information for 
the Benchmark will be available from major market data vendors. The IFV 
will be available through on-line information services.
    In addition, the Funds' website, www.ProShares.com, will display 
the applicable end of day closing NAV. The daily holdings of each Fund 
will be available on the Funds' website. The Funds' website will also 
include a form of the prospectus for the Funds that may be downloaded. 
The website will include the Shares' ticker and CUSIP information along 
with additional quantitative information updated on a daily basis, 
including, for each Fund: (1) Daily trading volume, the prior Business 
Day's reported NAV and closing price, and a calculation of the premium 
and discount of the closing price or mid-point of the bid/ask spread at 
the time of NAV calculation (the ``Bid/Ask Price'') against the NAV; 
and (2) data in chart format displaying the frequency distribution of 
discounts and premiums of the daily closing price or Bid/Ask Price 
against the NAV, within appropriate ranges, for at least each of the 
four previous calendar quarters. The website disclosure of portfolio 
holdings will be made daily and will include, as applicable, (i) the 
name, quantity, value, expiration and strike price of Futures Contracts 
and Options, (ii) the counterparty to and value of swap agreements and 
forward contracts, and (ii) the aggregate net value of other assets 
(i.e., Treasury securities, cash equivalents and cash) held in each 
Fund's portfolio, if applicable.
    The Funds' website will be publicly available at the time of the 
public offering of Shares and accessible at no charge. The spot price 
of natural gas also is available on a 24-hour basis from major market 
data vendors.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of a Fund.\16\ Trading in Shares of a Fund

[[Page 4577]]

will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable.
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    \16\ See NYSE Arca Rule 7.12-E.
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    The Exchange may halt trading during the day in which an 
interruption to the dissemination of the IFV or the value of the 
Benchmark occurs. If the interruption to the dissemination of the IFV, 
or the value of the or the value of the Benchmark persists past the 
trading day in which it occurred, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption. 
In addition, if the Exchange becomes aware that the NAV with respect to 
the Shares is not disseminated to all market participants at the same 
time, it will halt trading in the Shares until such time as the NAV is 
available to all market participants.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with 
NYSE Arca Rule 7.34-E (Early, Core, and Late Trading Sessions). The 
Exchange has appropriate rules to facilitate transactions in the Shares 
during all trading sessions. As provided in NYSE Arca Rule 7.6-E, the 
minimum price variation (``MPV'') for quoting and entry of orders in 
equity securities traded on the NYSE Arca Marketplace is $0.01, with 
the exception of securities that are priced less than $1.00 for which 
the MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.200-E. The trading of the Shares will 
be subject to NYSE Arca Rule 8.200-E, Commentary .02(e), which sets 
forth certain restrictions on Equity Trading Permit (``ETP'') Holders 
acting as registered Market Makers in Trust Issued Receipts to 
facilitate surveillance. The Exchange represents that, for initial and/
or continued listing, each Fund will be in compliance with Rule 10A-3 
\17\ under the Act, as provided by NYSE Arca Rule 5.3-E. A minimum of 
100,000 Shares of each Fund will be outstanding at the commencement of 
trading on the Exchange.
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    \17\ 17 CFR 240.10A-3.
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Surveillance
    The Exchange represents that trading in the Shares of each Fund 
will be subject to the existing trading surveillances administered by 
the Exchange, as well as cross-market surveillances administered by the 
Financial Industry Regulatory Authority (``FINRA'') on behalf of the 
Exchange, which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\18\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange.
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    \18\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and certain 
Futures Contracts with other markets and other entities that are 
members of the ISG, and the Exchange or FINRA, on behalf of the 
Exchange, or both, may obtain trading information regarding trading in 
the Shares and certain Futures Contracts from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and certain Futures Contracts from markets and 
other entities that are members of ISG or with which the Exchange has 
in place a comprehensive surveillance sharing agreement (``CSSA'').\19\ 
The Exchange is also able to obtain information regarding trading in 
the Shares, the physical commodities underlying Futures Contracts 
through ETP Holders, in connection with such ETP Holders' proprietary 
or customer trades which they effect through ETP Holders on any 
relevant market. The Exchange can obtain market surveillance 
information, including customer identity information, with respect to 
transactions (including transactions in Futures Contracts) occurring on 
U.S. futures exchanges, which are members of the ISG.
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    \19\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of a 
Fund may trade on markets that are members of ISG or with which the 
Exchange has in place a CSSA.
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    Not more than 10% of the net assets of a Fund in the aggregate 
invested in Futures Contracts shall consist of Futures Contracts whose 
principal market is not a member of the ISG or is a market with which 
the Exchange does not have a CSSA.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolios of the Funds or Benchmark, (b) 
limitations on portfolio holdings or the Benchmark, or (c) the 
applicability of Exchange listing rules specified in this rule filing 
shall constitute continued listing requirements for listing the Shares 
on the Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Funds to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If a Fund is not in compliance with the 
applicable listing requirements, the Exchange will commence delisting 
procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Bulletin will discuss the following: (1) The risks involved 
in trading the Shares during the Early and Late Trading Sessions when 
an updated IFV will not be calculated or publicly disseminated; (2) the 
procedures for purchases and redemptions of Shares in Creation Units 
(and that Shares are not individually redeemable); (3) NYSE Arca Rule 
9.2-E(a), which imposes a duty of due diligence on its ETP Holders to 
learn the essential facts relating to every customer prior to trading 
the Shares; (4) how information regarding the IFV is disseminated; (5) 
how information regarding portfolio holdings is disseminated; (6) the 
requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; (7) trading information, and (8) NYSE 
Arca suitability rules.
    Further, the Exchange states that FINRA has implemented increased 
sales

[[Page 4578]]

practice and customer margin requirements for FINRA members applicable 
to inverse, leveraged and inverse leveraged securities (which include 
the Shares) and options on such securities, as described in FINRA 
Regulatory Notices 09-31 (June 2009), 09-53 (August 2009), and 09-65 
(November 2009) (collectively, ``FINRA Regulatory Notices''). ETP 
Holders that carry customer accounts will be required to follow the 
FINRA guidance set forth in these notices. As noted above, each Fund 
will seek daily investment results, before fees and expenses, that 
correspond to either three times (3x) or three times the inverse (-3x) 
of the performance of the Benchmark. The return of a Fund for a period 
longer than a single day is the result of its return for each day 
compounded over the period and usually will differ in amount and 
possibly even direction from the Fund's stated multiple times the 
return of the Fund's Benchmark for the same period. These differences 
can be significant.
    The Information Bulletin will also discuss any exemptive, no-
action, and interpretive relief granted by the Commission from any 
rules under the Act. In addition, the Information Bulletin will 
reference that a Fund is subject to various fees and expenses described 
in the Registration Statement.
    The Information Bulletin will also disclose the trading hours of 
the Shares and that the NAV for the Shares will be calculated after 
2:30 p.m. E.T. each trading day. The Information Bulletin will disclose 
that information about the Shares will be publicly available on the 
Funds' website.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \20\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices and to protect 
investors and the public interest in that the Shares will be listed and 
traded on the Exchange pursuant to the initial and continued listing 
criteria in NYSE Arca Rule 8.200-E. The Exchange has in place 
surveillance procedures that are adequate to properly monitor trading 
in the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws. 
The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and certain 
Futures Contracts with other markets and other entities that are 
members of the ISG, and the Exchange or FINRA, on behalf of the 
Exchange, or both, may obtain trading information regarding trading in 
the Shares and certain Futures Contracts from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and certain Futures Contracts from markets and 
other entities that are members of ISG or with which the Exchange has 
in place a CSSA. The Exchange is also able to obtain information 
regarding trading in the Shares, the physical commodities underlying 
Futures Contracts through ETP Holders, in connection with such ETP 
Holders' proprietary or customer trades which they effect through ETP 
Holders on any relevant market. The Exchange can obtain market 
surveillance information, including customer identity information, with 
respect to transactions (including transactions in Futures Contracts) 
occurring on U.S. futures exchanges, which are members of the ISG. Not 
more than 10% of the net assets of a Fund in the aggregate invested in 
Futures Contracts shall consist of Futures Contracts whose principal 
market is not a member of the ISG or is a market with which the 
Exchange does not have a CSSA. The intraday, closing prices, and 
settlement prices of the Futures Contracts will be readily available 
from the applicable futures exchange websites, automated quotation 
systems, published or other public sources, or major market data 
vendors website or on-line information services.
    Complete real-time data for the Futures Contracts is available by 
subscription from on-line information services. ICE Futures U.S. and 
NYMEX also provide delayed futures information on current and past 
trading sessions and market news free of charge on the Funds' website. 
The specific contract specifications for Futures Contracts are also 
available on such websites, as well as other financial informational 
sources. Information regarding options will be available from the 
applicable exchanges or major market data vendors. Quotation and last-
sale information regarding the Shares will be disseminated through the 
facilities of the CTA. The IFV will be disseminated on a per Share 
basis every 15 seconds during the Exchange's Core Trading Session and 
be widely disseminated by one or more major market data vendors during 
the NYSE Arca Core Trading Session. The Funds' website will also 
include a form of the prospectus for the Funds that may be downloaded. 
The website will include the Shares' ticker and CUSIP information along 
with additional quantitative information updated on a daily basis, 
including, for each Fund: (1) Daily trading volume, the prior business 
day's reported NAV and closing price, and a calculation of the premium 
and discount of the closing price or mid-point of the Bid/Ask Price 
against the NAV; and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily closing price or 
Bid/Ask Price against the NAV, within appropriate ranges, for at least 
each of the four previous calendar quarters. The website disclosure of 
portfolio holdings will be made daily and will include, as applicable, 
(i) the name, quantity, value, expiration and strike price of Futures 
Contracts and Options, (ii) the counterparty to and value of swap 
agreements and forward contracts, and (ii) the aggregate net value of 
other assets (i.e. Treasury securities, cash equivalents and cash) held 
in each Fund's portfolio, if applicable.
    Moreover, prior to the commencement of trading, the Exchange will 
inform its Equity Trading Permit Holders in an Information Bulletin of 
the special characteristics and risks associated with trading the 
Shares and of the suitability requirements of NYSE Arca Rule 9.2-E(a). 
The Information Bulletin will advise ETP Holders, prior to the 
commencement of trading, of the prospectus delivery requirements 
applicable to a Fund. The Information Bulletin will also discuss any 
exemptive, no-action, and interpretive relief granted by the Commission 
from any rules under the Act. In addition, the Information Bulletin 
will reference that a Fund is subject to various fees and expenses 
described in the Registration Statement. The Information Bulletin will 
also reference that the CFTC has regulatory jurisdiction over the 
trading of Futures Contracts traded on U.S. markets. The Information 
Bulletin will also disclose the trading hours of the Shares and that 
the NAV for the Shares will be calculated after 2:30 p.m. E.T. each 
trading day. The Information Bulletin will disclose that information 
about the Shares will be publicly available on the Funds' website.
    Trading in Shares of a Fund will be halted if the circuit breaker 
parameters in NYSE Arca Rule 7.12-E have been

[[Page 4579]]

reached or because of market conditions or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of Trust Issued Receipts based on natural gas prices 
that will enhance competition among market participants, to the benefit 
of investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures that are adequate to properly monitor 
trading in the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of 
additional types of Trust Issued Receipts based on natural gas prices 
and that will enhance competition among market participants, to the 
benefit of investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2019-02 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-2019-02. 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 website (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 website 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-2019-02, and should be 
submitted on or before March 8, 2019.
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    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02377 Filed 2-14-19; 8:45 am]
BILLING CODE 8011-01-P