Document ID: SEC-2017-0173-0001
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 9608-9613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02444]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79916; File No. SR-NYSEArca-2017-05]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of Shares 
of the Direxion Daily Crude Oil Bull 3x Shares and Direxion Daily Crude 
Oil Bear 3x Shares 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 23, 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''): Direxion Daily Crude Oil Bull 3x Shares and Direxion Daily 
Crude Oil Bear 3x Shares. 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: Direxion 
Daily Crude Oil Bull 3x Shares and Direxion Daily Crude Oil Bear 3x 
Shares (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 Direxion Shares ETF Trust II (the 
``Trust''), a Delaware statutory trust.\5\ The Trust and the Funds are 
managed and controlled by Direxion Asset Management, LLC (the 
``Sponsor''). The Sponsor 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 14, 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. 
333-215091) (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, Bank of New York 
Mellon (the ``Custodian'') may hold the Funds' investment assets and 
cash and cash equivalents pursuant to a custodial agreement. The 
Custodian is also the transfer agent for the Shares. In addition, in 
its capacity as Administrator for the Funds, U.S. Bancorp Fund 
Services, LLC (the ``Administrator'') prepares and files certain 
regulatory filings on behalf of the Funds.
    Foreside Fund Services, LLC serves as the distributor of the Shares 
(the ``Distributor''). The Distributor is a broker-dealer registered 
with the Commission under the Securities Exchange Act of 1934 and a 
member of the Financial Industry Regulatory Authority (``FINRA''). The 
Trust offers Shares of the Funds for sale through the Distributor in 
``Creation Units'', as described below. The Distributor will also 
assist the Sponsor and administrator with certain functions and duties 
relating to distribution and marketing.
Direxion Daily Crude Oil Bull 3x Shares
    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 a multiple three times (3x ) 
of the daily performance of the Bloomberg WTI Crude Oil Subindex\SM\, a 
subindex of the Bloomberg Commodity Index\SM\ (the

[[Page 9609]]

``Benchmark'').\7\ The Benchmark is intended to reflect the performance 
of crude oil as measured by the price of West Texas Intermediate crude 
oil futures contracts traded on the New York Mercantile Exchange (the 
``NYMEX,'' which is part of the Chicago Mercantile Exchange (``CME'')), 
including the impact of rolling,\8\ without regard to income earned on 
cash positions. The Fund will not be directly linked to the ``spot'' 
price of crude oil. The Fund does not seek to achieve its investment 
objective over a period greater than a single trading day.\9\
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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 does not take physical possession of any commodities. See also 
note 8, infra.
    \8\ According to the Registration Statement, futures contracts 
held by the Funds near expiration are generally closed out and 
replaced by contracts with a later expiration as required by the 
Bloomberg WTI Crude Oil Subindex\SM\. This process is referred to as 
``rolling.'' The Funds do not intend to hold futures contracts 
through expiration, but instead to ``roll'' their respective 
positions.
    \9\ According to the Registration Statement, a single trading 
day is measured from the time a Fund calculates its NAV to the time 
of a Fund's next NAV calculation.
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Direxion Daily Crude Oil Bear 3x Shares
    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 which, as noted, is intended to 
reflect the performance of crude oil as measured by the price of West 
Texas Intermediate crude oil futures contracts traded on the NYMEX. The 
Fund will not be directly linked to the ``spot'' price of crude oil. 
The Fund does not seek to achieve its investment objective over a 
period greater than a single trading day.\10\
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    \10\ 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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Investment Strategies of the Funds
    In seeking to achieve the Funds' investment objectives, the Sponsor 
will utilize a mathematical approach to determine the type, quantity 
and mix of investment positions that the Sponsor believes, in 
combination, should produce daily returns consistent with the Funds' 
respective objectives. The Sponsor would rely on a pre-determined model 
to generate orders that result in repositioning the Funds' investments 
in accordance with their respective investment objectives.
    The Funds will seek to achieve their investment objectives by 
investing, under normal market conditions,\11\ substantially all of its 
assets in oil futures contracts traded in the U.S. and listed options 
on such contracts (together, the ``Futures Contracts''). The Funds' 
investments in Futures Contracts will be used to produce economically 
``leveraged'' or ``inverse leveraged'' investment results for the 
Funds.
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    \11\ 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 or accountability limits are reached with 
respect to Futures Contracts, each Fund may obtain exposure to the 
Benchmark through investment in swap transactions and forward contracts 
referencing such Benchmark or other benchmarks the Sponsor believes 
should be closely correlated to the performance of each Fund's 
benchmark such as the Energy Select Sector Index or the S&P Oil & Gas 
Exploration & Production Select Industry Index (the ``Financial 
Instruments''). To the extent that the Trust 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 the Trust 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 the 
Trust 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 or a flash crash) that prevent or make it impractical for 
a Fund to obtain the appropriate amount of investment exposure using 
Futures Contracts.
    The Funds will invest such that each Fund's exposure to the 
Benchmark will consist substantially of Futures Contracts. The Funds' 
remaining net assets, which may be substantial, may be invested in cash 
or cash equivalents and/or 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) 
for direct investment or as collateral for the Funds' investments.
    The Funds do not intend to hold Futures Contracts through 
expiration, but instead 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.
    According to the Registration Statement, U.S. future [sic] 
exchanges 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, 
U.S. futures exchanges also set daily price fluctuation limits on 
Futures Contracts. The daily price fluctuation limit establishes the 
maximum amount that the price of a Futures Contract may vary either up 
or down from the previous day's settlement price.
    The Funds do not expect to have leveraged exposure 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.

[[Page 9610]]

Net Asset Value
    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 Business Day that the New York Stock Exchange LLC (``NYSE'') is 
open. Each Fund will compute its NAVs at 2:30 p.m. Eastern Time 
(``E.T.''), which is the designated closing time of the crude oil 
futures market on NYMEX,\12\ or if the NYSE closes earlier than 2:30 
p.m. E.T., each Fund will compute its NAVs at the time the NYSE closes. 
Each Fund's NAV will be calculated only once each trading day. Each 
Fund's daily NAV may be found at www.direxioninvestments.com.
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    \12\ The normal trading hours of the NYMEX are 10:00 a.m. E.T. 
to 2:30 p.m. E.T.
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    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 then-current prices for the applicable reference asset to 
the terms of such Fund's non-exchange traded Financial Instruments. 
However, in the event that an underlying reference asset is not trading 
due to the operation of daily limits or otherwise, the Sponsor may in 
its sole discretion choose to fair value the reference asset in order 
to 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 reference assets and would be based on principles that the 
Sponsor deems fair and equitable so long as such principles are 
consistent with normal industry standards.
    Futures Contracts traded on a U.S. exchange will be calculated at 
their then current market value, which is based upon the settlement or 
the last traded price before the NAV calculation time, for that 
particular Futures Contract traded on the applicable exchange on the 
date with respect to which NAV is being determined; provided, that if a 
Futures Contract traded on an 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, the Sponsor 
may in its sole discretion choose to determine a fair value price as 
the basis for determining the market value of such position for such 
day.
    Cash and cash equivalents will be valued on the basis of broker 
quotes or valuations provided by a third party pricing service.
    Collateralized repurchase agreements will be valued based on price 
quotations or other equivalent indications of value provided by a 
third-party pricing service.
Indicative Fund Value
    In order to provide updated information relating to the Funds 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 net assets of a Fund as a 
base and updating throughout the Exchange's Core Trading Session of 
9:30 a.m. E.T. to 4:00 p.m. E.T. changes in the value of the Futures 
Contracts and Financial Instruments held by a Fund.
    The IFV will be disseminated on a per Share basis every 15 seconds 
during the Exchange's Core Trading Session.
    The IFV will be available through on-line information services.
Creation and Redemption of Shares
    According to the Registration Statement, each Fund intends to 
create and redeem Shares in one or more Creation Units.\13\ A creation 
transaction generally takes place when an Authorized Participant 
deposits generally a specified amount of cash in exchange for a 
specified number of Creation Units. Similarly, Shares can be redeemed 
only in Creation Units for cash. The prices at which creations and 
redemptions occur would be based on the next calculation of the NAV 
after an order is received.
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    \13\ A Creation Unit is a block of 50,000 Shares of a Fund. 
Except when aggregated in Creation Units, the Shares are not 
redeemable securities.
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    Only Authorized Participants may purchase and redeem Creation 
Units. An Authorized Participant is an entity that has entered into an 
Authorized Participant Agreement with the Trust and the Sponsor.
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'' means any day other than a day when any of the NYSE, 
NYSE Arca, the Chicago Board Options Exchange, Incorporated (``CBOE''), 
CBOE Futures Exchange (``CFE''), the Chicago Mercantile Exchange 
(``CME'') (including the Chicago Board of Trade and NYMEX) or the 
Intercontinental Exchange (``ICE'') or other exchange material to the 
valuation or operation of the Funds is closed for regular trading. 
Purchase orders must be placed by 2:30 p.m. E.T. or earlier if the NYSE 
closes before the cut-off time.
Redemption Procedures
    According to the Registration Statement, the procedures by which an 
Authorized Participant can redeem one or more Creation Units 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 the Depository 
Trust Company's (``DTC'') 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). The Sponsor reserves the right to 
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).
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 would also be 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 and OTC swaps may be obtained from 
brokers and dealers who make markets in such instruments. Quotation 
information for exchange-traded swaps will be available from the 
applicable exchange and major market vendors. Intra-day price 
information for

[[Page 9611]]

forward contracts 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.direxioninvestments.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.\14\ Each Fund's total portfolio composition will be disclosed each 
Business Day that 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.
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    \14\ 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.
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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.\15\ 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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    \15\ 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 [sic] or the value of the Benchmark persists past the 
trading day in which it occurred, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption. 
In addition, if the Exchange becomes aware that the NAV with respect to 
the Shares is not disseminated to all market participants at the same 
time, it will halt trading in the Shares until such time as the NAV is 
available to all market participants.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with 
NYSE Arca 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 \16\ 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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    \16\ 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 
FINRA on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities 
laws.\17\ 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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    \17\ 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'').\18\
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    \18\ 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 the Benchmark, 
and (b) limitations on portfolio holdings, reference assets or the 
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).

[[Page 9612]]

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 practice and customer margin requirements for FINRA members 
applicable to inverse, leveraged and inverse leveraged exchange-traded 
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 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 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) \19\ 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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    \19\ 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 the 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, or 
major market data vendors Web site 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 their Web sites. The 
specific contract specifications for Futures Contracts would also be 
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

[[Page 9613]]

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 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2017-05 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-2017-05. 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-2017-05 and should 
be submitted on or before February 28, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Eduardo A. Aleman,
Assistant Secretary.
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    \20\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-02444 Filed 2-6-17; 8:45 am]
BILLING CODE 8011-01-P