Document ID: SEC-2020-2043-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2020-12-22T05:00Z

[Federal Register Volume 85, Number 246 (Tuesday, December 22, 2020)]
[Notices]
[Pages 83643-83650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28151]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90691; File No. SR-CboeBZX-2020-093]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To List 
and Trade Shares of the ProShares Short VIX Short-Term Futures ETF and 
the ProShares Ultra VIX Short-Term Futures ETF, Each a Series of 
ProShares Trust II, Under Rule 14.11(f)(4), Trust Issued Receipts

December 16, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 14, 2020, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Exchange filed the proposal as 
a ``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 Shares of the ProShares 
Short VIX Short-Term Futures ETF (the ``Short Fund'') and the ProShares 
Ultra VIX Short-Term Futures ETF (the ``Ultra Fund'', and collectively 
the ``Funds'') under Rule 14.11(f)(4), which governs the listing and 
trading of Trust Issued Receipts \5\ on the Exchange.\6\ The Exchange 
notes that the Funds have previously been approved by the Commission 
and are currently listed on Arca.\7\ This proposal is substantively

[[Page 83644]]

identical to the Original Proposal with updates from the Prior 
Proposal, and the issuer represents that all material representations 
contained within the Original Proposal as updated by the Prior Proposal 
remain true. Further, the Funds are already trading on the Exchange 
pursuant to unlisted trading privileges, as provided in Rule 14.11(j).
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    \5\ Rule 14.11(f)(4) applies to Trust Issued Receipts that 
invest in ``Financial Instruments.'' The term ``Financial 
Instruments,'' as defined in Rule 14.11(f)(4)(A)(iv), 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.
    \6\ The Commission approved BZX Rule 14.11(f)(4) in Securities 
Exchange Act Release No. 68619 (January 10, 2013), 78 FR 3489 
(January 16, 2013) (SR-BATS-2012-044).
    \7\ See Securities Exchange Act No. 64470 (May 11, 2011) 76 FR 
28493 (May 15, 2011) (SR-NYSEArca-2011-23) (Proposal to list and 
trade Shares of the ProShares Short VIX Short-Term Futures ETF and 
the ProShares Ultra VIX Short-Term Futures ETF (the ``Original 
Proposal'')). See also Securities Exchange Act No. 65134 (August 15, 
2011) 76 FR 52037 (August 19, 2011) (SR-NYSEArca-2011-23) (Order 
approving the listing and trading of the ProShares Short VIX Short-
Term Futures ETF and the ProShares Ultra VIX Short-Term Futures 
ETF). See also Securities Exchange Act No. 83000 (April 5, 2018) 83 
FR 15659 (April 11, 2018) (SR-NYSEArca-2018-17) (Notice of filing 
and immediate effectiveness to amend certain representations made in 
the Prior Proposal relating to Shares of the ProShares Short VIX 
Short-Term Futures ETF and the ProShares Ultra VIX Short-Term 
Futures ETF (the ``Prior Proposal'')).
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    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, 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 Exchange 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 these 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 aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to list and trade Shares of the ProShares 
Short VIX Short-Term Futures ETF (the ``Short Fund'') and the ProShares 
Ultra VIX Short-Term Futures ETF (the ``Ultra Fund'', and collectively 
the ``Funds'') under Rule 14.11(f)(4), which governs the listing and 
trading of Trust Issued Receipts \8\ on the Exchange.\9\ The Exchange 
notes that the Funds have previously been approved by the Commission 
and are currently listed on Arca.\10\ This proposal is substantively 
identical to the Original Proposal with updates from the Prior 
Proposal, and the issuer represents that all material representations 
contained within the Original Proposal as updated by the Prior Proposal 
remain true. Further, the Funds are already trading on the Exchange 
pursuant to unlisted trading privileges, as provided in Rule 14.11(j).
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    \8\ Rule 14.11(f)(4) applies to Trust Issued Receipts that 
invest in ``Financial Instruments.'' The term ``Financial 
Instruments,'' as defined in Rule 14.11(f)(4)(A)(iv), 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.
    \9\ The Commission approved BZX Rule 14.11(f)(4) in Securities 
Exchange Act Release No. 68619 (January 10, 2013), 78 FR 3489 
(January 16, 2013) (SR-BATS-2012-044).
    \10\ See Securities Exchange Act No. 64470 (May 11, 2011) 76 FR 
28493 (May 15, 2011) (SR-NYSEArca-2011-23) (Proposal to list and 
trade Shares of the ProShares Short VIX Short-Term Futures ETF and 
the ProShares Ultra VIX Short-Term Futures ETF (the ``Original 
Proposal'')). See also Securities Exchange Act No. 65134 (August 15, 
2011) 76 FR 52037 (August 19, 2011) (SR-NYSEArca-2011-23) (Order 
approving the listing and trading of the ProShares Short VIX Short-
Term Futures ETF and the ProShares Ultra VIX Short-Term Futures 
ETF). See also Securities Exchange Act No. 83000 (April 5, 2018) 83 
FR 15659 (April 11, 2018) (SR-NYSEArca-2018-17) (Notice of filing 
and immediate effectiveness to amend certain representations made in 
the Prior Proposal relating to Shares of the ProShares Short VIX 
Short-Term Futures ETF and the ProShares Ultra VIX Short-Term 
Futures ETF (the ``Prior Proposal'')).
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    The Sponsor, a Maryland limited liability company, serves as the 
Sponsor of Trust. The Sponsor is a commodity pool operator.\11\ Bank of 
New York Mellon serves as the administrator (the ``Administrator''), 
custodian and transfer agent of the Funds and their respective Shares. 
SEI Investments Distribution Co. (``Distributor'') serves as 
Distributor of the Shares. Wilmington Trust Company, a Delaware banking 
corporation, is the sole trustee of the Trust.
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    \11\ The Trust filed on behalf of the Funds a registration 
statement on Form S-3 under the Securities Act of 1933 (File No. 
333-231875) (``Registration Statement'') on May 11, 2020 that was 
declared effective on September 9, 2020. The Funds' prospectus 
containing the previous investment objectives for the Funds was 
filed pursuant to Rule 424(b)(3) on February 15, 2018. A prospectus 
containing the new objectives, as described in the Prior Proposal, 
was filed pursuant to Rule 424(b)(3) on February 28, 2018 (the 
``Prior Registration Statement''). The description of the Funds and 
the Shares contained in the Prior Proposal are based on the Prior 
Registration Statement. As noted above, all material representations 
contained within the Original Proposal as updated by the Prior 
Proposal remain true. The change to each Fund's investment objective 
as described in the Prior Proposal was implemented effective as of 
the close of business on February 27, 2018. The Sponsor issued a 
press release dated February 26, 2018 regarding the Sponsor's plans 
to reduce the target exposure for the Funds. See http://www.proshares.com/news/proshare_capital_management_llc_plans_to_reduce_target_exposure_on_two_etfs.html.
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    The Short Fund seeks, on a daily basis, to provide investment 
results (before fees and expenses) that correspond to one-half the 
inverse (-0.5x) of the daily performance, at the time of the net asset 
value (``NAV'') calculation, of a benchmark that seeks to offer 
exposure to market volatility through publicly traded futures markets. 
The Ultra Fund seeks, on a daily basis, to provide investment results 
(before fees and expenses) that correspond to one and one-half times 
(1.5x) the daily performance, at the time of NAV calculation, of a 
benchmark that seeks to offer exposure to market volatility through 
publicly traded futures markets. The benchmark for the Funds is the S&P 
500 VIX Short-Term Futures Index (ticker symbol SPVIXSTR, the 
``Index'').\12\ The Index utilizes prices of the next two near-term VIX 
futures contracts to replicate a position that rolls the nearest month 
VIX futures contracts to the next month on a daily basis in equal 
fractional amounts. The Ultra Fund will take long positions in futures 
contracts based on the Cboe Volatility Index (``VIX''), while the Short 
Fund will take short positions in futures contracts based on the VIX.
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    \12\ Standard & Poor's Financial Services LLC, the index sponsor 
with respect to the Index, is not a broker-dealer and has 
implemented procedures designed to prevent the use and dissemination 
of material, non-public information regarding the Index.
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    The Index is comprised of, and the value of the Funds will be based 
on, VIX futures contracts traded on the Cboe Futures Exchange, Inc. 
(``CFE'') (hereinafter referred to as ``VIX Futures Contracts''). VIX 
Futures Contracts are measures of the market's expectation of the level 
of VIX at certain points in the future, and as such will behave 
differently than current or spot VIX values.\13\ The Funds are not 
linked to the VIX, and in many cases the Index, and by extension the 
Funds, could

[[Page 83645]]

significantly underperform or outperform the VIX.
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    \13\ VIX is the ticker symbol for the Cboe Volatility Index, a 
popular measure of implied volatility. According to the Registration 
Statement, the goal of the VIX is to estimate the implied volatility 
of the S&P 500 over the next 30 days. A relatively high level of the 
VIX corresponds to a more volatile U.S. equity market as expressed 
by more costly options on the S&P 500 Index. The VIX represents one 
measure of the market's expectation of the volatility over the next 
30 day period. It is a composite value of options on the S&P 500 
Index. The formula used to calculate the composite value utilizes 
current market prices for a series of out-of-the-money calls and 
puts for the front month and second month expirations.
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    While the VIX represents a measure of the current expected 
volatility of the S&P 500 over the next 30 days, the prices of VIX 
Futures Contracts are based on the current expectation of what the 
expected 30-day volatility will be at a particular time in the future 
(on the expiration date). For example, a VIX Futures Contract purchased 
in March that expires in May, in effect, is a forward contract on what 
the level of the VIX, as a measure of 30-day implied volatility of the 
S&P 500, will be on the May expiration date. The forward volatility 
reading of the VIX may not correlate directly to the current volatility 
reading of the VIX because the implied volatility of the S&P 500 at a 
future expiration date may be different from the current implied 
volatility of the S&P 500. As a result, the Index and the Funds should 
be expected to perform very differently from one-half the inverse of 
the daily performance or a multiple of the daily performance of the 
Index over all periods of time. To illustrate, on December 4, 2019, the 
VIX closed at a price of 14.8 and the price of the February 2020 VIX 
Futures Contracts expiring on February 19, 2020 was 18.125. In this 
example, the price of the VIX represented the 30-day implied, or 
``spot,'' volatility (the volatility expected for the period from 
December 5, 2019 to January 5, 2020) of the S&P 500 and the February 
2020 VIX Futures Contracts represented forward implied volatility (the 
volatility expected for the period from February 19 to March 19, 2020) 
of the S&P 500.
    If the Short Fund is successful in meeting its objective, its value 
(before fees and expenses) should gain approximately half as much on a 
percentage basis as its Index when the Index declines on a given day. 
Conversely, its value (before fees and expenses) should lose 
approximately half as much on a percentage basis as the Index when the 
Index rises on a given day.
    If the Ultra Fund is successful in meeting its objective, its value 
(before fees and expenses) should gain approximately 1.5 times as much 
on a percentage basis as its Index when the Index rises on a given day. 
Conversely, its value (before fees and expenses) should lose 
approximately 1.5 times as much on a percentage basis as its Index when 
the Index declines on a given day.
    Each Fund will under Normal Market Conditions \14\ invest in VIX 
Futures Contracts based on components of the Index to pursue its 
investment objective. In the event position accountability rules are 
reached with respect to VIX Futures Contracts, ProShare Capital 
Management LLC (``the Sponsor''), may, in its commercially reasonable 
judgment, cause such Fund to obtain exposure through swaps referencing 
the relevant Index or particular VIX Futures Contracts, or invest in 
other futures contracts or swaps not based on the particular VIX 
Futures Contracts if such instruments tend to exhibit trading prices or 
returns that correlate with the Index or any VIX Futures Contract and 
will further the investment objective of such Fund.\15\ The Funds may 
also invest in swaps if the market for a specific VIX Futures Contract 
experiences emergencies (e.g., natural disaster, terrorist attack or an 
act of God) or disruptions (e.g., a trading halt or a flash crash) that 
prevent a Fund from obtaining the appropriate amount of investment 
exposure to the affected VIX Futures Contracts directly or to other 
futures contracts.\16\ Each Fund also may invest in Cash and Cash 
Equivalents \17\ such as U.S. Treasury securities or other high credit 
quality short-term fixed-income or similar securities (including shares 
of money market funds, bank deposits, bank money market accounts, 
certain variable rate-demand notes and repurchase agreements 
collateralized by government securities) that may serve as collateral 
for the futures contracts.
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    \14\ For the purpose of this filing, the term ``Normal Market 
Conditions'' shall have the same definition as Rule 14.11(i)(3)(D), 
which provides that Normal Market Conditions ``includes, but is not 
limited to, the absence of trading halts in the applicable financial 
markets generally; operational issues causing dissemination of 
inaccurate market information or system failures; or force majeure 
type events such as natural or man-made disaster, act of God, armed 
conflict, act of terrorism, riot or labor disruption, or any similar 
intervening circumstance.''
    \15\ To the extent practicable, the Funds will invest in swaps 
cleared through the facilities of a centralized clearing house.
    \16\ According to the Registration Statement, the Sponsor will 
also attempt to mitigate the Funds' credit risk by transacting only 
with large, well-capitalized institutions using measures designed to 
determine the creditworthiness of a counterparty. The Sponsor will 
take various steps to limit counterparty credit risk, as described 
in the Registration Statement.
    \17\ For purposes of this proposal, the term ``Cash and Cash 
Equivalents'' shall have the definition provided in Exchange Rule 
14.11(i)(4)(C)(iii), applicable to Managed Fund Shares.
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    If the Sponsor to the Trust issuing the Trust Issued Receipts is 
affiliated with a broker-dealer, such Sponsor to the Trust shall erect 
and maintain a ``fire wall'' between the Sponsor and the broker-dealer 
with respect to access to information concerning the composition and/or 
changes to such Trust portfolio. The Sponsor is not a broker-dealer, 
but is affiliated with a broker-dealer and has implemented and will 
maintain a ``fire wall'' with respect to such broker-dealer regarding 
access to information concerning the composition and/or changes to the 
portfolio. In the event that (a) the Sponsor becomes a broker-dealer or 
newly affiliated with a broker-dealer, or (b) any new sponsor is a 
broker-dealer or becomes affiliated with a broker-dealer, it will 
implement and maintain a fire wall with respect to its relevant 
personnel or such broker-dealer affiliate, as applicable, regarding 
access to information concerning the composition and/or changes to the 
portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding such 
portfolio.
    Each of the Funds uses investment techniques that include the use 
of any one or a combination of VIX Futures Contracts and may, if 
applicable, include swaps. The Funds' investment techniques may involve 
a small investment relative to the amount of investment exposure 
assumed and may result in losses exceeding the amounts invested. Such 
techniques, particularly when used to create leverage, may expose the 
Funds to potentially dramatic changes (losses or gains) in the value of 
their investments and imperfect correlation between the value of the 
investments and the security or Index.
    The Funds do not seek to achieve their stated investment objective 
over a period greater than one day because mathematical compounding 
prevents the Funds from perfectly achieving such results. Accordingly, 
results over periods of time greater than one day typically will not be 
a simple one-half of the inverse correlation (-50%) or multiple 
correlation (+150%) of the period return of the Index and may differ 
significantly.
    According to the Registration Statement, each Fund is not actively 
managed by traditional methods, which typically involve effecting 
changes in the composition of a portfolio on the basis of judgments 
relating to economic, financial and market considerations with a view 
toward obtaining positive results under all market conditions. Rather, 
each Fund seeks to remain fully invested at all times in investment 
positions that, in combination, provide exposure to its Index 
consistent with its investment objective even during periods in which 
that benchmark is flat or moving in a manner which causes the value of 
a Fund to decline.
    In seeking to achieve each Fund's investment objective, the Sponsor 
uses a mathematical approach to investing. Using this approach, the 
Sponsor

[[Page 83646]]

determines the type, quantity and mix of investment positions that the 
Sponsor believes in combination should produce returns consistent with 
such Fund's objective. The Sponsor relies upon a pre-determined model 
to generate orders that result in repositioning the Funds' investments 
in accordance with their respective investment objectives.
    The S&P 500 VIX Short-Term Futures Index
    According to the Registration Statement, the Index is intended to 
reflect the returns that are potentially available through an 
unleveraged investment in the VIX Futures Contracts comprising the 
Index (the ``Index Components'').
    Unlike the Index, the VIX, which is not a benchmark for any Fund, 
is calculated based on the prices of put and call options on the S&P 
500, which are traded on Cboe Exchange, Inc.
    The S&P 500 VIX Short-Term Futures Index employs rules for 
selecting the Index Components and a formula to calculate a level for 
the Index from the prices of these components. Currently, the Index 
Components represent the prices of the two near-term VIX futures 
months, replicating a position that rolls the nearest month VIX Futures 
Contract to the next month VIX Futures Contract on a daily basis in 
equal fractional amounts. This results in a constant weighted average 
maturity of one month. The roll period begins on the Tuesday prior to 
the monthly CFE VIX Futures Contracts settlement date and runs through 
the Tuesday prior to the subsequent month's CFE VIX Futures Contract 
settlement date.
Calculation of the Index
    The level of the Index is calculated in accordance with the method 
described in the Registration Statement. The level of the Index will be 
published at least every 15 seconds both in real time from 9:30 a.m. to 
4:00 p.m., E.T. and at the close of trading on each Business Day \18\ 
by Bloomberg L.P. and Reuters.
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    \18\ A ``Business Day'' means any day other than a day when any 
of BZX, Cboe, CFE or other exchange material to the valuation or 
operation of the Funds, or the calculation of the VIX, options 
contracts underlying the VIX, VIX Futures Contracts or the Index is 
closed for trading.
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    The Index Components comprising the Index represent the prices of 
certain VIX Futures Contracts. The Index takes a daily rolling long 
position in contracts of specified maturities and is intended to 
reflect the returns that are potentially available through an 
unleveraged investment in those contracts. The Index measures the 
return from a rolling long position in the first and second month VIX 
Futures Contracts. The Index rolls continuously throughout each month 
from the first month VIX Futures Contract into the second month VIX 
Futures Contract.
    The Index rolls on a daily basis. According to the Registration 
Statement, one of the effects of daily rolling is to maintain a 
constant weighted average maturity for the underlying futures 
contracts. Unlike equities, which typically entitle the holder to a 
continuing stake in a corporation, futures contracts normally specify a 
certain date for the delivery of the underlying asset or financial 
instrument or, in the case of futures contracts relating to indices 
such as the VIX, a certain date for payment in cash of an amount 
determined by the level of the underlying index. The Index operates by 
selling, on a daily basis, Index Components with a nearby settlement 
date and purchasing Index Components with a longer-dated settlement 
date. The roll for each contract occurs on each Business Day according 
to a pre-determined schedule that has the effect of keeping constant 
the weighted average maturity of the relevant Index Components. This 
process is known as ``rolling'' a futures position, and the Index is a 
``rolling index''. The constant weighted average maturity for the 
futures underlying the Index is one month.
    Because the Index incorporates this process of rolling futures 
positions on a daily basis, and the Funds, in general, also roll their 
positions on a daily basis, the daily roll is not anticipated to be a 
significant source of tracking error between the Funds and the Index. 
The Index is based on VIX Futures Contracts and not the VIX, and as 
such neither the Funds nor the Index are expected to track the VIX.
Purchases and Redemptions of Creation Units
    The Funds will create and redeem Shares from time to time in one or 
more Creation Units. A Creation Unit is a block of 50,000 Shares. 
Except when aggregated in Creation Units, the Shares are not redeemable 
securities.
    On any Business Day, an authorized participant may place an order 
with the Distributor to create one or more Creation Units.\19\ The 
total cash payment required to create each Creation Unit is the NAV of 
50,000 Shares of each Fund on the purchase order date plus the 
applicable transaction fee.
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    \19\ Authorized participants have a cut-off time of 2:00 p.m. 
E.T. to place creation and redemption orders.
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    The procedures by which an authorized participant can redeem one or 
more Creation Units mirror the procedures for the purchase 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 proceeds from a Fund consist of the cash redemption amount. 
The cash redemption amount is equal to the NAV of the number of 
Creation Unit(s) of a Fund requested in the authorized participant's 
redemption order as of the time of the calculation of a Fund's NAV on 
the redemption order date, less applicable transaction fees.
Availability of Information Regarding the Shares
    The NAV for the Funds' Shares will be calculated by the 
Administrator once a day and will be disseminated daily to all market 
participants at the same time.\20\ Pricing information will be 
available on each Fund's website including: (1) The prior Business 
Day's reported NAV, the closing market price or the bid/ask price, 
daily trading volume, and a calculation of the premium and discount of 
the closing market price or 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 against the NAV, within appropriate 
ranges, for each of the four previous calendar quarters.
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    \20\ According to the Registration Statement, net asset value 
means the total assets of the Funds including, but not limited to, 
all Cash and Cash Equivalents or other debt securities less total 
liabilities of the Funds, each determined on the basis of generally 
accepted accounting principles in the United States, consistently 
applied under the accrual method of accounting. Each Fund's NAV is 
calculated once each trading day as of 4 p.m. (E.T.), or an earlier 
time as set forth on www.proshares.com.
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    The intraday, closing, and settlement prices of the Index 
Components are also readily available from the websites of CFE 
(www.cfe.cboe.com), automated quotation systems, published or other 
public sources, or on-line information services such as Bloomberg or 
Reuters. Complete real-time data for component futures underlying the 
Index is available by subscription from Reuters and Bloomberg. 
Specifically, the level of the Index will be published at least every 
15 seconds both in real time from 9:30 a.m. to 4:00 p.m. E.T. and at 
the close of trading on each Business Day by Bloomberg and Reuters. The 
CFE also provides delayed futures information on current and past 
trading sessions and market news free of charge on its website. The 
specific contract specifications for component futures

[[Page 83647]]

underlying the Index 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 and last-sale information regarding 
VIX Futures Contracts will be available from the exchanges on which 
such instruments are traded. Quotation and last-sale information for 
swaps will be available from nationally recognized data services 
providers, such as Reuters and Bloomberg, through subscription 
agreements or from a broker-dealer who makes markets in such 
instruments. Quotation and last-sale information for swaps are 
available through third-party pricing services or broker-dealers who 
make markets in such instruments. Pricing information regarding Cash 
and Cash Equivalents in which the Funds may invest is generally 
available through nationally recognized data services providers, such 
as Reuters and Bloomberg, through subscription agreements.
    In addition, the Funds' website at www.proshares.com will display 
the end of day closing Index level, and NAV per Share for the 
applicable Fund. The Funds will provide website disclosure of portfolio 
holdings daily and will include, as applicable, the notional value (in 
U.S. dollars) of VIX Futures Contracts, swaps, as well as Cash and Cash 
Equivalents held in the portfolio of the Funds. This website disclosure 
of the portfolio composition of the Funds will occur at the same time 
as the disclosure by the Funds of the portfolio composition to 
authorized participants so that all market participants are provided 
portfolio composition information at the same time. Therefore, the same 
portfolio information will be provided on the public website as well as 
in electronic files provided to authorized participants.
    In addition, in order to provide updated information relating to 
the Funds for use by investors and market professionals, an updated 
Intraday Indicative Value (``IIV'') will be calculated. The IIV is an 
indicator of the value of the VIX Futures Contracts, swaps, and Cash 
and/or Cash Equivalents less liabilities of a Fund at the time the IIV 
is disseminated. The IIV will be calculated and widely disseminated by 
one or more major market data vendors every 15 seconds throughout 
Regular Trading Hours.\21\
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    \21\ As defined in Rule 1.5(w), the term ``Regular Trading 
Hours'' means the time between 9:30 a.m. and 4:00 p.m. E.T.
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    In addition, the IIV is available through on-line information 
services such as Bloomberg and Reuters.
    The IIV disseminated during Regular Trading Hours should not be 
viewed as an actual real time update of the NAV, which is calculated 
only once a day. The IIV also should not be viewed as a precise value 
of the Shares.
    The Exchange believes that dissemination of the IIV provides 
additional information regarding the Funds that is not otherwise 
available to the public and is useful to professionals and investors in 
connection with the related Shares trading on the Exchange or the 
creation or redemption of such Shares.
    Additional information regarding the Funds and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, distributions 
and taxes is included in the Registration Statement.
Initial and Continued Listing
    The Shares of each Fund will conform to the initial and continued 
listing criteria under BZX Rule 14.11(f)(4). The Exchange represents 
that, for initial and continued listing, the Funds and the Trust must 
be in compliance with Rule 10A-3 under the Act. A minimum of 100,000 
Shares of each Fund will be outstanding at the commencement of trading 
on the Exchange. The Exchange will obtain a representation from the 
issuer of the Shares that the NAV per Share for each Fund will be 
calculated daily and will be made available to all market participants 
at the same time.
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 the Funds. The Exchange will halt trading in 
the Shares under the conditions specified in BZX Rule 11.18. Trading 
may be halted because of market conditions or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable. These may 
include: (1) The extent to which trading is not occurring in the 
securities and/or the financial instruments composing the daily 
disclosed portfolio of the Funds; or (2) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. Trading in the Shares also will be 
subject to Rule 14.11(f)(4)(C)(ii), which sets forth circumstances 
under which Shares of a Fund may be halted.
    The Exchange represents that the Exchange may halt trading during 
the day in which an interruption to the dissemination of the IIV, the 
value of the Index, the VIX or the value of the underlying VIX Futures 
Contracts occurs. If an interruption to the dissemination of the IIV, 
the value of an Index, the VIX or the value of the underlying VIX 
Futures Contracts 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.
Suitability
    Currently, Interpretation and Policy .01 of Exchange Rule 3.7 
(Recommendations to Customers) provides that a member, in recommending 
a transaction in connection with products listed pursuant to Chapter 
XIV, must have reasonable grounds to believe that the recommendation is 
suitable for the customer based on any facts disclosed by the customer 
as to its other security holdings and as to its financial situation and 
needs. Further, the rule provides, that no member shall recommend to a 
customer a transaction in any such product unless the member has a 
reasonable basis for believing at the time of making the recommendation 
that the customer has such knowledge and experience in financial 
matters that he may reasonably be expected to be capable of evaluating 
the risks of the recommended transaction and is financially able to 
bear the risks of the recommended position.
    Prior to the commencement of trading, the Exchange will inform its 
members of the suitability requirements of, Interpretation and Policy 
.01 of Exchange Rule 3.7 in an Information Circular. Specifically, 
members will be reminded in the Information Circular 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 member, 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 Circular will also provide that members 
must make reasonable efforts to obtain the following

[[Page 83648]]

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 member or 
registered representative in making recommendations to the customer.
    In addition, FINRA has implemented increased sales practice and 
customer margin requirements for FINRA members applicable to inverse 
and leveraged ETFs (which include the Shares) and options on leveraged 
ETFs, as described in FINRA Regulatory Notices 09-31 (June 2009), 09-53 
(August 2009) and 09-65 (November 2009) (the ``FINRA Regulatory 
Notices''). Members 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 the Index. The Funds do not seek to achieve their 
respective primary investment objective over a period of time greater 
than a single day. The return of the Funds for a period longer than a 
single day will not be a simple multiple (one-half of the inverse 
correlation (-50%) with respect to the ProShares Short VIX Short-Term 
Futures ETF or multiple correlation (+150%) with respect to the 
ProShares Ultra VIX Short-Term Futures ETF) of the period return of the 
Index because the return of each Fund is the result of its return for 
each day compounded over the period and usually will differ in amount 
and possibly even direction for the same period. These differences can 
be significant.
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. The Exchange will 
allow trading in the Shares during all trading sessions and has the 
appropriate rules to facilitate transactions in the Shares during all 
trading sessions. As provided in BZX Rule 11.11(a), the minimum price 
variation for quoting and entry of orders in securities traded on the 
Exchange is $0.01, with the exception of securities that are priced 
less than $1.00, for which the minimum price variation for order entry 
is $0.0001.
Surveillance
    Trading of the Shares through the Exchange will be subject to the 
Exchange's surveillance procedures for derivative products, including 
Trust Issued Receipts. The Exchange will allow trading in the Shares 
during all trading sessions on the Exchange and has the appropriate 
rules to facilitate transactions in the Shares during all trading 
sessions. The Exchange believes that its surveillance procedures are 
adequate to properly monitor the trading of the Shares on the Exchange 
during all trading sessions and to deter and detect violations of 
Exchange rules and the applicable federal securities laws. All of the 
VIX Futures Contracts held by the Funds will trade on markets that are 
a member of ISG or affiliated with a member of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing 
agreement.\22\ The Exchange, FINRA, on behalf of the Exchange, or both 
will communicate regarding trading in the Shares and the underlying 
listed instruments, including listed derivatives held by the Funds, 
with the ISG, other markets or entities who are members or affiliates 
of the ISG, or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, the Exchange, FINRA, on 
behalf of the Exchange, or both may obtain information regarding 
trading in the Shares and the underlying listed instruments, including 
listed derivatives, held by the Funds from markets and other entities 
that are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. 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 the Index composition, description of the 
portfolio or reference assets, limitations on portfolio holdings or 
reference assets, dissemination and availability of the Index, 
reference asset, and IIV, and the applicability of Exchange rules 
specified in this filing shall constitute continued listing 
requirements for the Funds. The issuer has represented to the Exchange 
that it will advise the Exchange of any failure by the Funds or the 
Shares to comply with the continued listing requirements, and, pursuant 
to its obligations under Section 19(g)(1) of the Act, the Exchange will 
surveil for compliance with the continued listing requirements. If the 
Funds or the Shares are not in compliance with the applicable listing 
requirements, the Exchange will commence delisting procedures under 
Exchange Rule 14.12. In addition, the Exchange also has a general 
policy prohibiting the distribution of material, non-public information 
by its employees.
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    \22\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com. The Exchange notes that not all 
components of the Funds' holdings may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
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Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (1) The procedures for purchases 
and redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) BZX Rule 3.7, which imposes suitability 
obligations on Exchange members with respect to recommending 
transactions in the Shares to customers; (3) how information regarding 
the IIV and the Disclosed Portfolio is disseminated; (4) the risks 
involved in trading the Shares outside of Regular Trading Hours \23\ 
when an updated IIV will not be calculated or publicly disseminated; 
(5) the requirement that members deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information.
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    \23\ As defined in Rule 1.5(w), ``Regular Trading Hours'' means 
the time between 9:30 a.m. and 4:00 p.m. Eastern Time.
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    The Information Circular will advise ETP Holders, prior to the 
commencement of trading, of the prospectus delivery requirements 
applicable to the Funds. The Exchange notes that investors purchasing 
Shares directly from the Funds will receive a prospectus. Members 
purchasing Shares from the Funds for resale to investors will deliver a 
prospectus to such investors. The Information Circular will reference 
the FINRA Regulatory Notices regarding sales practice and customer 
margin requirements for FINRA members applicable to leveraged ETFs and 
options on leveraged ETFs. The Information Circular will also discuss 
any exemptive, no-action and interpretive relief granted by the 
Commission from any rules under the Act.
    In addition, the Information Circular will reference that the Funds 
are subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also reference that the 
Commodity Futures Trading Commission has regulatory jurisdiction over 
futures contracts traded on U.S. markets.

[[Page 83649]]

    The Information Circular will also disclose the trading hours of 
the Shares of the Funds and that the NAV for the Shares is calculated 
after 4:00 p.m. E.T. each trading day. The Information Circular will 
disclose that information about the Shares of the Funds is publicly 
available on the Funds' website.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \24\ in general and Section 6(b)(5) of the Act \25\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest.
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    \24\ 15 U.S.C. 78f.
    \25\ 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 in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria under Rule 14.11(f)(4). If the 
Sponsor to the Trust issuing the Trust Issued Receipts is affiliated 
with a broker-dealer, such Sponsor to the Trust shall erect and 
maintain a ``fire wall'' between the Sponsor and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to the Funds' portfolio. The Sponsor is not a broker-dealer, 
but is affiliated with a broker-dealer dealer and has implemented and 
will maintain a ``fire wall'' with respect to such broker-dealer 
regarding access to information concerning the composition and/or 
changes to the portfolio. In the event that (a) the Sponsor becomes a 
broker-dealer or newly affiliated with a broker-dealer, or (b) any new 
sponsor is a broker-dealer or becomes affiliated with a broker-dealer, 
it will implement and maintain a fire wall with respect to its relevant 
personnel or such broker-dealer affiliate, as applicable, regarding 
access to information concerning the composition and/or changes to the 
portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding the 
portfolio. The Exchange, FINRA, on behalf of the Exchange, or both may 
obtain information regarding trading in the Shares and the underlying 
listed instruments, including listed derivatives, held by the Funds 
from markets and other entities that are members of ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement. In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV will be calculated daily and that the NAV and the 
Funds' holdings will be made available to all market participants at 
the same time. In addition, a large amount of information is publicly 
available regarding the Funds and the Shares, thereby promoting market 
transparency. Moreover, the IIV will be disseminated by one or more 
major market data vendors at least every 15 seconds during Regular 
Trading Hours. On each Business Day, before commencement of trading in 
Shares during Regular Trading Hours, the Funds will disclose on their 
website the holdings that will form the basis for the Fund's 
calculation of NAV at the end of the Business Day. Pricing information 
will be available on the Funds' website including: (1) The prior 
Business Day's reported NAV, the closing market price or the bid/ask 
price, daily trading volume, and a calculation of the premium and 
discount of the closing market price or 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 against the NAV, 
within appropriate ranges, for each of the four previous calendar 
quarters. Additionally, information regarding market price and trading 
of the Shares will be continually available on a real-time basis 
throughout the day on brokers' computer screens and other electronic 
services, and quotation and last sale information for the Shares will 
be available on the facilities of the CTA. The website for the Funds 
will include a form of the prospectus for each Fund and additional data 
relating to NAV and other applicable quantitative information. Trading 
in Shares of the Funds will be halted under the conditions specified in 
Exchange Rule 11.18. Trading may also be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. Finally, trading in the Shares will 
be subject to 14.11(f)(4)(C)(ii), which sets forth circumstances under 
which Shares of the Funds may be halted. In addition, as noted above, 
investors will have ready access to information regarding the Funds' 
holdings, the IIV, the Index value, and quotation and last sale 
information for the Shares.
    Quotation and last-sale information regarding the Shares will be 
disseminated through the facilities of the CTA. Quotation and last-sale 
information regarding VIX Futures Contracts will be available from the 
exchanges on which such instruments are traded. Quotation and last-sale 
information for swaps will be available from nationally recognized data 
services providers, such as Reuters and Bloomberg, through subscription 
agreements or from a broker-dealer who makes markets in such 
instruments. Quotation and last-sale information for swaps will be 
valued on the basis of quotations or equivalent indication of value 
supplied by a third- party pricing service or broker-dealer who makes 
markets in such instruments. Pricing information regarding Cash 
Equivalents in which the Fund may invest is generally available through 
nationally recognized data services providers, such as Reuters and 
Bloomberg, through subscription agreements.
    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 
an exchange-traded product 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 relating to 
trading in the Shares and may obtain information via ISG from other 
exchanges that are members of ISG or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement. In 
addition, as noted above, investors will have ready access to 
information regarding the Funds' holdings, the IIV, and quotation and 
last sale information for the Shares. The Information Circular will 
also reference the FINRA Regulatory Notices regarding sales practice 
and customer margin requirements for FINRA members applicable to 
leveraged ETFs and options on leveraged ETFs.
    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

[[Page 83650]]

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, rather will facilitate the transfer from Arca and 
listing of additional exchange-traded products on the Exchange, which 
will enhance competition among listing venues, to the benefit of 
issuers, investors, and the marketplace more broadly.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \26\ and Rule 19b-
4(f)(6) thereunder.\27\
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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \28\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\29\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange states that 
waiver of the 30-day operative delay will allow the Funds to transfer 
listing to the Exchange as soon as is practicable and minimize the 
amount of time that the Funds' listing venue will be in transition. The 
Funds have previously been approved by the Commission to list and trade 
on NYSE Arca, Inc.\30\ The Exchange states that this proposal is 
substantively identical to the Original Proposal, including changes 
from the Prior Proposal, and the issuer represents that all material 
representations contained within the Original Proposal, as updated by 
the Prior Proposal, remain true. For these reasons, the Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest. Accordingly, the 
Commission waives the 30-day operative delay and designates the 
proposed rule change operative upon filing.\31\
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    \28\ 17 CFR 240.19b-4(f)(6).
    \29\ 17 CFR 240.19b-4(f)(6)(iii).
    \30\ See supra note.
    \31\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

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-CboeBZX-2020-093 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-CboeBZX-2020-093. 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-CboeBZX-2020-093 and should be submitted 
on or before January 12, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28151 Filed 12-21-20; 8:45 am]
BILLING CODE 8011-01-P