Document ID: SEC-2020-2042-0001
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 83650-83656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28149]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90685; File No. SR-CboeBZX-2020-092]

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 VIX Short-Term Futures ETF and the 
ProShares VIX Mid-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''

[[Page 83651]]

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 VIX 
Short-Term Futures ETF and the ProShares VIX Mid-Term Futures ETF (each 
a ``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 identical to the Prior Proposal and the 
issuer represents that all material representations contained within 
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. 63317 (November 16, 2010) 75 
FR 71158 (November 22, 2010) (SR-NYSEArca-2010-101) (Proposal to 
list and trade Shares of the ProShares VIX Short-Term Futures ETF 
and the ProShares VIX Mid-Term Futures ETF (the ``Prior 
Proposal'')). See also Securities Exchange Act No. 63610 (December 
27, 2010) 76 FR 199 (January 3, 2011) (SR-NYSEArca-2010-101) (Order 
approving the listing and trading of the ProShares VIX Short-Term 
Futures ETF and the ProShares VIX Mid-Term Futures ETF).
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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 VIX 
Short-Term Futures ETF and the ProShares VIX Mid-Term Futures ETF (each 
a ``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 Prior Proposal and the 
issuer represents that all material representations contained within 
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 
futurescontracts; 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. 63317 (November 16, 2010) 
75 FR 71158 (November 22, 2010) (SR-NYSEArca-2010-101) (Proposal to 
list and trade Shares of the ProShares VIX Short-Term Futures ETF 
and the ProShares VIX Mid-Term Futures ETF (the ``Prior 
Proposal'')). See also Securities Exchange Act No. 63610 (December 
27, 2010) 76 FR 199 (January 3, 2011) (SR-NYSEArca-2010-101) (Order 
approving the listing and trading of the ProShares VIX Short-Term 
Futures ETF and the ProShares VIX Mid-Term Futures ETF).
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    The Funds seek to provide investment results (before fees and 
expenses) that match the performance of a benchmark that seeks to offer 
exposure to market volatility through publicly traded futures markets. 
The benchmark for ProShares VIX Short-Term Futures ETF is the S&P 500 
VIX Short-Term Futures Index (ticker symbol SPVIXSTR) and the benchmark 
for ProShares VIX Mid-Term Futures ETF is the S&P 500 VIX Mid-Term 
Futures Index (ticker symbol SPVIXMTR, each an ``Index'', and, 
collectively, the ``Indexes'').\11\ As discussed in further detail 
below, the S&P 500 VIX Short-Term Futures Index utilizes prices of the 
next two near-term Cboe Volatility Index (``VIX'') futures contracts to 
replicate a position that rolls the nearest month VIX futures to the 
next month on a daily basis in equal fractional amounts, while the S&P 
500 VIX Mid-Term Futures Index measures the return of a daily rolling 
long position in the fourth, fifth, sixth and seventh month of VIX 
futures contracts. The Funds will invest in futures contracts based on 
the VIX to pursue their respective investment objectives. Each Fund 
also may invest in Cash and Cash Equivalents \12\ 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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    \11\ Standard & Poor's Financial Services LLC is the index 
sponsor with respect to the Indexes and has implemented procedures 
designed to prevent the use and dissemination of material, non-
public information regarding the Indexes.
    \12\ 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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    ProShare Capital Management LLC (the ``Sponsor''), a Maryland 
limited liability company, serves as the Sponsor of ProShares Trust II 
(the ``Trust''). The Sponsor is a commodity pool operator.\13\ 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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    \13\ The ProShares VIX Short-Term Futures ETF has filed a 
registration statement on Form S-3 under the Securities Act of 1933, 
dated May 11, 2020 (File No. 333-238175) and the ProShares VIX Mid-
Term Futures ETF has filed a registration statement on Form S-1 
under the Securities Exchange Act of 1933, dated August 12, 2020 
(File No.: 333-244420) (collectively, the ``Registration 
Statement''). The description of the Funds and the Shares contained 
herein are based on the Registration Statement.
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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 
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

[[Page 83652]]

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 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.
    According to the Registration Statement, if a Fund is successful in 
meeting its objective, its value (before fees and expenses) should gain 
approximately as much on a percentage basis as the level of its 
corresponding Index when the Index rises. Conversely, its value (before 
fees and expenses) should lose approximately as much on a percentage 
basis as the level of its corresponding Index when the Index declines. 
Each Fund acquires exposure through VIX futures contracts traded on the 
Cboe Futures Exchange (``VIX Futures Contracts'') (``CFE''), such that 
each Fund typically has exposure intended to approximate the benchmark 
at the time of its net asset value (``NAV'') calculation.\14\
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    \14\ Terms relating to the Funds, the Shares and the Indexes 
referred to, but not defined, herein are defined in the Registration 
Statement.
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    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 determines the type, quantity and mix of investment positions 
that the Sponsor believes in combination should produce daily 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.
VIX Futures Contracts
    The Indexes are comprised of, and the value of the Funds will be 
based on, 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.\15\ The Funds are not linked to the VIX, and in many cases the 
Indexes, and by extension the Funds, will significantly underperform 
the VIX.
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    \15\ VIX is the ticker symbol for the Cboe Volatility Index, a 
popular measure of implied volatility. 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 over the next 30 day period. It is a blend of prices 
for a range of options on the S&P 500 Index. The formula utilizes 
current market prices for a series of out-of-the-money calls and 
puts for the near and next-term 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. 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.
The S&P 500 VIX Short-Term Futures Index and S&P 500 VIX Mid-Term 
Futures Index
    According to the Registration Statement, the Indexes act as a 
measure of the implied volatility of the S&P 500 as reflected by the 
price of certain VIX Futures Contracts (the ``Index Components''), with 
the price of each VIX Futures Contract reflecting the market's measure 
of the expected volatility (i.e., the rate and magnitude of variations 
in performance) of the S&P 500 over the next 30 days. Each Index seeks 
to reflect the returns that are potentially available from holding an 
unleveraged long position in certain VIX Futures Contracts.
    Unlike the Indexes, the VIX, which is not a benchmark for either 
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. Specifically, 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.
    The S&P 500 VIX Mid Term Futures Index also employs rules for 
selecting the Index Components and a formula to calculate the level of 
the Index from the prices of these components. Currently, the Index 
Components represent the prices for four contract months of VIX Futures 
Contracts, representing a market-based estimation of constant maturity, 
five month forward implied VIX values. The S&P 500 VIX Mid-Term Futures 
Index measures the return from a rolling long position in the fourth, 
fifth, sixth and seventh month VIX Futures Contracts, and rolls 
continuously throughout each month while maintaining positions in the 
fifth and sixth month contracts. This results in a constant weighted 
average maturity of five months.
Calculation of the Indexes
    The level of each Index is calculated in accordance with the method 
described in the Registration Statement. The level of each 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 
\16\ by Bloomberg L.P. and Reuters.
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    \16\ 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 Indexes 
is closed for regular trading.

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[[Page 83653]]

    The Index Components comprising each Index represent the prices of 
certain futures contracts on the VIX. Each 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 S&P 500 VIX Short-Term 
Futures 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 
Contracts into the second month VIX Futures Contracts. The S&P 500 VIX 
Mid-Term Futures Index measures the return from a rolling long position 
in the fourth, fifth, sixth and seventh month VIX Futures Contracts. 
The Index rolls continuously throughout each month from the fourth 
month contract into the seventh month contract while maintaining 
positions in the fifth month and sixth month contracts.
    The Indexes roll on a daily basis. 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 
Indexes operate 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 
futures contracts. This process is known as ``rolling'' a futures 
position, and each Index is a ``rolling index''. The constant weighted 
average maturity for the futures underlying the S&P 500 VIX Short-Term 
Futures Index is one month and for the futures underlying the S&P 500 
VIX Mid-Term Futures Index is five months.
    Because the Indexes incorporate 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 either Fund and its 
respective Index. The Indexes are based on VIX Futures Contracts and 
not the VIX, and, as such, neither the Funds nor the Indexes 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 25,000 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.\17\ The 
total cash payment required to create each Creation Unit is the NAV of 
25,000 Shares of the Funds on the purchase order date plus the 
applicable transaction fee.
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    \17\ 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.\18\ Pricing information will be 
available on the 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. The closing 
prices and settlement prices of the Index Components are also readily 
available from the websites of CFE (http://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 Indexes is available by 
subscription from Reuters and Bloomberg. Specifically, the level of 
each 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 underlying the Indexes are also 
available on such websites, as well as other financial informational 
sources.
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    \18\ 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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    Quotation and last-sale information regarding the Shares will be 
disseminated through the facilities of the Consolidated Tape 
Association (``CTA''). Information relating to VIX Futures Contracts 
will be available from the exchange on which such instruments are 
traded. Pricing information regarding VIX Futures Contracts is 
generally available through nationally recognized data services 
providers through subscription agreements. 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 levels, and NAV per share for the Funds. 
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 and characteristics of such instruments and 
Cash and Cash Equivalents, and amount of cash 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. Accordingly, each investor

[[Page 83654]]

will have access to the current portfolio composition of the Funds 
through the Funds' website.
    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 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.\19\
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    \19\ 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 published on the Exchange's website and 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 in the 
Shares of a Fund during the day in which an interruption to the 
dissemination of the IIV, the value of an 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.
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 on the Exchange 
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 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.\20\ 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 
or FINRA 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. All statements and representations made in this 
filing regarding index composition, description of the portfolio or 
reference assets, limitations on portfolio holdings or reference 
assets, dissemination and availability of an index, reference asset, 
and IIVs, 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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    \20\ 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 Fund's 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

[[Page 83655]]

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 each Fund's holdings is disseminated; (4) the risks 
involved in trading the Shares outside of Regular Trading Hours 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.
    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Funds. Members purchasing Shares from the Funds for 
resale to investors will deliver a prospectus to such investors. 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 disclose the trading 
hours of the Shares of the Funds and the applicable NAV calculation 
time for the Shares. The Information Circular will disclose that 
information about the Shares of the Funds will be publicly available on 
the Funds' website.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \21\ in general and Section 6(b)(5) of the Act \22\ 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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    \21\ 15 U.S.C. 78f.
    \22\ 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 in Exchange Rule 14.11(f). 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. 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' 
portfolios. 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 VIX Futures 
Contracts via the ISG from other exchanges 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 
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 each 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 Indexes, the IIV, 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. Pricing information 
regarding Cash and Cash Equivalents in which the Funds will 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

[[Page 83656]]

investors and the public interest in that it will facilitate the 
listing and trading of exchange-traded products 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 each Fund's holdings, the IIV, and 
quotation and last sale information for the Shares.
    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.

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 \23\ and Rule 19b-
4(f)(6) thereunder.\24\
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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) \25\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\26\ 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.\27\ The Exchange states that this proposal is 
substantively identical to the Prior Proposal and the issuer represents 
that all material representations contained within 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.\28\
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    \25\ 17 CFR 240.19b-4(f)(6).
    \26\ 17 CFR 240.19b-4(f)(6)(iii).
    \27\ See supra note 10.
    \28\ 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-2020-092 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-2020-092. 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-2020-092 and should be submitted 
on or before January 12, 2021.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28149 Filed 12-21-20; 8:45 am]
BILLING CODE 8011-01-P