Document ID: SEC-2017-0174-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-02-07T05:00Z

[Federal Register Volume 82, Number 24 (Tuesday, February 7, 2017)]
[Notices]
[Pages 9620-9625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02445]

[[Page 9620]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79917; File No. SR-NYSEArca-2017-07]

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

February 1, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 26, 2017, 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 and II 
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 Equities Rule 8.200, Commentary .02 (``Trust Issued 
Receipts''): ProShares UltraPro 3x Crude Oil ETF and ProShares UltraPro 
3x Short Crude Oil ETF. The proposed rule change is available on the 
Exchange's Web site 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 Equities Rule 8.200, Commentary .02, which 
governs the listing and trading of Trust Issued Receipts: ProShares 
UltraPro 3x Crude Oil ETF and ProShares UltraPro 3x Short Crude Oil ETF 
(each a ``Fund'' and, collectively, the ``Funds'').\4\
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    \4\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
Trust Issued Receipts that invest in ``Financial Instruments.'' The 
term ``Financial Instruments,'' as defined in Commentary .02(b)(4) 
to NYSE Arca Equities Rule 8.200, 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''). 
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 
December 9, 2016, 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-
214904) (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 oil on the American Stock Exchange (now 
known as NYSE MKT LLC) and NYSE Arca. See, e.g., Securities Exchange 
Act Release Nos. 53582 (March 31, 2006), 71 FR 17510 (April 6, 2006) 
(SR-Amex-2005-127) (order approving listing and trading of shares of 
United States Oil Fund, LP); 57188 (January 23, 2008), 73 FR 5607 
(January 30, 2008) (SR-Amex-2007-70) (order approving listing and 
trading of shares of United States Heating Oil Fund, LP and United 
States Gasoline Fund, LP); 61881 (April 9, 2010), 75 FR 20028 (April 
16, 2010) (SR-NYSEArca-2010-14) (order approving listing and trading 
of shares of United States Brent Oil Fund, LP); and 62527 (July 19, 
2010), 75 FR 43606 (July 26, 2010) (order approving listing and 
trading of shares of United States Commodity Index Fund).
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    In its capacity as the Custodian for the Funds, Brown Brothers 
Harriman & Co. (the ``Custodian'') is responsible for holding and 
safekeeping the Funds' investment assets and cash and/or cash 
equivalents pursuant to a custodial agreement. The Custodian is also 
the registrar and transfer agent for the Shares. In addition, in its 
capacity as Administrator for the Funds, Brown Brothers Harriman & Co. 
(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. (the ``Distributor'') performs 
functions and duties relating to distribution and marketing.
ProShares UltraPro 3x Crude Oil ETF
    According to the Registration Statement, the investment objective 
of the Fund is to seek, on a daily basis, investment results that 
correspond (before fees and expenses) to three times (3x) the 
performance of the Bloomberg WTI Crude Oil Subindex\SM\ (the 
``Benchmark'').\7\ The Fund does not seek to achieve its investment 
objective over a period greater than a single trading day.\8\ The 
Benchmark is intended to reflect the performance of crude oil as 
measured by the price of futures contracts of West Texas Intermediate 
sweet, light crude oil traded 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.
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    \7\ According to the Registration Statement, the Bloomberg WTI 
Crude Oil Subindex\SM\ 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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ProShares UltraPro 3x Short Crude Oil ETF
    According to the Registration Statement, the investment objective 
of the Fund is to seek, on a daily basis, investment results that 
correspond (before fees and expenses) to three times (3x) the inverse 
of the performance of the Benchmark. The Fund does not seek to achieve 
its investment objective over a period greater than a single trading 
day.
Investment Strategies of the Funds
    In seeking to achieve the Funds' investment objectives, ProShare 
Capital 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. ProShare Capital would rely on a pre-
determined model to generate orders that result in repositioning the 
Funds'

[[Page 9621]]

investments in accordance with their respective investment objectives.
    Each Fund will seek to achieve its respective investment objective 
by investing, under normal market conditions,\9\ substantially all of 
its assets in futures contracts for West Texas Intermediate sweet, 
light crude oil traded on the NYMEX, ICE Futures U.S. or other U.S. 
exchanges and listed options on such contracts (together, the ``Futures 
Contracts''). The Funds will not invest directly in oil. A Fund's 
investments in Futures Contracts will be used to produce economically 
``leveraged'' or ``inverse leveraged'' investment in a manner 
consistent with the respective Fund's investment objective.
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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.
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    In the event position, price or accountability limits are reached 
with respect to Futures Contracts,\10\ each Fund may obtain exposure to 
the Benchmark through investment in swap transactions and forward 
contracts referencing such Benchmark (the ``Financial Instruments''). 
To the extent that a Fund invests in Financial Instruments, it would 
first make use of exchange-traded Financial Instruments, if available. 
If an investment in exchange-traded Financial Instruments is 
unavailable, then a Fund would invest in Financial Instruments that 
clear through derivatives clearing organizations that satisfy the 
Trust's criteria, if available. If an investment in cleared Financial 
Instruments is unavailable, then a Fund would invest in other Financial 
Instruments, including uncleared Financial Instruments in the over-the-
counter (``OTC'') market. The Funds may also invest in Financial 
Instruments 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) that prevent or make it 
impractical for a Fund to obtain the appropriate amount of investment 
exposure using Futures Contracts.
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    \10\ According to the Registration Statements, designated 
contract markets, such as the NYMEX and ICE Futures U.S., 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 (other 
than as a hedge, which an investment by a Fund is not) may hold, own 
or control. These levels and position limits apply to the Futures 
Contracts that each Fund would invest in to meet its investment 
objective. In addition to accountability levels and position limits, 
NYMEX and ICE Futures U.S. also set price fluctuation limits on 
Futures Contracts. The price fluctuation limit establishes the 
amount that the price of a Futures Contract may vary either up or 
down from the previous day's settlement price.
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    Although each Fund, under normal market conditions, will invest 
substantially all of its assets in Futures Contracts, 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 as collateral for the Funds' investments.
    The Funds do not intend to hold Futures Contracts through 
expiration, but instead intend to ``roll'' their respective positions. 
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 
at the time of rolling such contracts could adversely affect a Fund 
with short positions and positively affect a Fund with long positions.
    The Funds do not expect to have exposure to Futures Contracts and 
Financial Instruments greater than three times (3x) the Funds' net 
assets. Thus, the maximum margin held at a Future Commission Merchant 
would not exceed three times the margin requirement for either Fund.
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 will compute 
their NAVs at 2:30 p.m. Eastern Time (``E.T.''), which is the 
designated closing time of the crude oil futures market on NYMEX, or an 
earlier time as set forth on www.ProShares.com, if necessitated by the 
New York Stock Exchange LLC (``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.
    Futures Contracts traded on a U.S. exchange are calculated at their 
then current market value, which is based upon the settlement price or 
the last traded price before the NAV time, for that particular Futures 
Contract traded on the applicable U.S. exchange on the date with 
respect to which the NAV is being determined. If a Futures Contract 
traded on a U.S. exchange could not be liquidated on such day, due to 
the operation of daily limits or other rules of the exchange upon which 
that position is traded or otherwise, ProShare Capital may choose to 
determine a fair value price as the basis for determining the market 
value of such position for such day. Such fair value prices would 
generally be determined based on available inputs about the current 
value of the Futures Contracts and would be based on principles that 
ProShare Capital deems fair and equitable so long as such principles 
are consistent with normal industry standards. Money market instruments 
will be priced for NAV purposes at amortized cost.
    In calculating the NAV of a Fund, the settlement value of a Fund's 
non-exchange traded Financial Instruments will be determined by 
applying the closing price level of the Benchmark to the terms of such 
Financial Instruments. However, in the event that the Benchmark is not 
being priced due to the operation of daily limits or otherwise, 
ProShare Capital may choose to fair value a Fund's non-exchange traded 
Financial Instruments for purposes of the NAV calculation. Such fair 
value prices would generally be determined based on available inputs 
about the current value of the underlying Benchmark and would be based 
on principles that ProShare Capital deems fair and equitable so long as 
such principles are consistent with normal industry standards.
    Cash and cash equivalents will be valued based on price quotations 
or other indications of value provided by

[[Page 9622]]

a third party pricing service. Fixed-income securities with sixty days 
or less remaining maturity may be valued using the amortized cost 
method.
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 
updating throughout the Core Trading Session of 9:30 a.m. E.T. to 4:00 
p.m. E.T. changes in the value of the investments held by a Fund.
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 50,000 
Shares each. 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 generally 
may be redeemed only in Creation Units, 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 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. 
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.
    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 an exchange of 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 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.
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 Web sites, 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 Web sites. The specific contract specifications for 
Futures Contracts are also available on such Web sites, 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, OTC swaps and forward contracts 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' Web site, www.ProShares.com, will display 
the applicable end of day closing NAV. The daily holdings of each Fund 
will be available on the Funds' Web site before 9:30 a.m. E.T. Each 
Fund's total portfolio composition will be disclosed each Business Day 
that the NYSE Arca is open for trading, on the Funds' Web site. The Web 
site disclosure of portfolio holdings will be made daily and will 
include, as applicable, (i) the composite value of the total portfolio, 
(ii) the name, percentage weighting, and value of the Futures Contracts 
and Financial Instruments, (iii) the name and value of each Treasury 
security and cash equivalent, and (iv) the amount of cash held in each 
Fund's portfolio. The Funds' Web site will be publicly accessible at no 
charge. The spot price of oil 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.\11\ Trading in Shares of a Fund will 
be halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 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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    \11\ See NYSE Arca Equities Rule 7.12.
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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, 
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

[[Page 9623]]

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 Equities Rule 7.34 (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 Equities 
Rule 7.6, 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 Equities Rule 8.200. The trading of the Shares 
will be subject to NYSE Arca Equities Rule 8.200, 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 continued listing, each Fund will be in compliance with 
Rule 10A-3 \12\ under the Act, as provided by NYSE Arca Equities Rule 
5.3. A minimum of 100,000 Shares of each Fund will be outstanding at 
the commencement of trading on the Exchange.
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    \12\ 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.\13\ 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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    \13\ 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 Intermarket Surveillance Group (``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'').\14\
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    \14\ 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, and 
(b) limitations on portfolio Benchmark 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 Equities Rule 5.5(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 
Equities Rule 9.2(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) that a static IFV will be disseminated, between the 
close of trading on the ICE Futures U.S. and NYMEX and the close of the 
NYSE Arca Core Trading Session; (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; and (7) 
trading information.
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders of the suitability requirements of NYSE Arca Equities Rule 
9.2(a) in an Information Bulletin. Specifically, ETP Holders will be 
reminded in the Information Bulletin that, in recommending transactions 
in the Shares, they must have a reasonable basis to believe that (1) 
the recommendation is suitable for a customer given reasonable inquiry 
concerning the customer's investment objectives, financial situation, 
needs, and any other information known by such ETP Holder, and (2) the 
customer can evaluate the special characteristics, and is able to bear 
the financial risks, of an investment in the Shares. In connection with 
the suitability obligation, the Information Bulletin will also provide 
that ETP Holders must make reasonable efforts to obtain the following 
information: (1) The customer's financial status; (2) the customer's 
tax status; (3) the customer's investment objectives; and (4) such 
other information used or considered to be reasonable by such ETP 
Holder or registered representative in making recommendations to the 
customer.
    Further, the Exchange states that FINRA has implemented increased 
sales

[[Page 9624]]

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, on a daily basis, investment results that correspond (before 
fees and expenses) to 3x, or -3x, respectively, the performance of the 
Benchmark). Over a period of time in excess of one day, the cumulative 
percentage increase or decrease in the NAV of the Shares of a Fund may 
diverge significantly from a multiple or inverse multiple of the 
cumulative percentage decrease or increase in the relevant benchmark 
due to a compounding effect.
    In addition, 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' Web site.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \15\ 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.
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    \15\ 15 U.S.C. 78f(b)(5).
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    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 Equities Rule 8.200. 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. 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 Web sites, 
automated quotation systems, published or other public sources, major 
market data vendors 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' Web site. 
The specific contract specifications for Futures Contracts are also 
available on such Web sites, 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. In addition, the Funds' Web site will display 
the applicable end of day closing NAV. Each Fund's total portfolio 
composition will be disclosed each Business Day on the Funds' Web site. 
The Web site disclosure of portfolio holdings will be made daily and 
will include, as applicable, (i) the composite value of the total 
portfolio, (ii) the name, percentage weighting, and value of the 
Futures Contracts and Financial Instruments, (iii) the name and value 
of each Treasury security and cash equivalent, and (iv) the amount of 
cash held in each Fund's portfolio.
    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 Equities Rule 
9.2(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' Web site.
    Trading in Shares of a Fund will be halted if the circuit breaker 
parameters in NYSE Arca Equities Rule 7.12 have been 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 oil 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

[[Page 9625]]

notes that the proposed rule change will facilitate the listing and 
trading of additional types of Trust Issued Receipts based on oil 
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 within such longer period 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 such 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 rule4comments@sec.gov. Please include 
File Number SR-NYSEArca-2017-07 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-2017-07. 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 such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2017-07 and should 
be submitted on or before February 28, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02445 Filed 2-6-17; 8:45 am]
BILLING CODE 8011-01-P