Document ID: SEC-2019-1225-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2019-08-26T04:00Z

[Federal Register Volume 84, Number 165 (Monday, August 26, 2019)]
[Notices]
[Pages 44642-44649]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18270]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86714; File No. SR-NYSEArca-2019-55]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To Amend NYSE Arca Rule 8.700-E and To List and 
Trade Shares of the Dynamic Short Short-Term Volatility Futures ETF

August 20, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'' or the ``Exchange Act'') \2\ and Rule 19b-4 
thereunder,\3\ notice is hereby given that, on August 7, 2019, NYSE 
Arca, Inc. (``NYSE Arca'' or the ``Exchange'') filed with the 
Securities and Exchange Commission (the ``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by the self-regulatory

[[Page 44643]]

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 (1) to amend NYSE Arca Rule 8.700-E to add 
futures contracts and swaps on the Cboe Volatility Index (``VIX'') to 
the financial instruments that an issue of Managed Trust Securities may 
hold; and (2) to list and trade shares of the Dynamic Short Short-Term 
Volatility Futures ETF under proposed amended NYSE Arca Rule 8.700-E. 
The proposed change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    NYSE Arca Rule 8.700-E permits the trading of Managed Trust 
Securities either by listing or pursuant to unlisted trading privileges 
(``UTP'').\3\ The Exchange proposes to amend NYSE Arca Rule 8.700-E 
(c)(1) to add futures contracts and/or swaps on the Cboe Volatility 
Index (``VIX Index'' or ``VIX'') to the financial instruments that an 
issue of Managed Trust Securities may hold long and/or short positions. 
(Futures on the VIX Index are referred to herein as ``VIX Futures'' or 
``VIX Futures Contracts''). In addition, the Exchange proposes to list 
and trade the shares (the ``Shares'') of the Dynamic Short Short-Term 
Volatility Futures ETF (the ``Fund'') a series of Dynamic Shares Trust 
(``Trust'') under proposed amended NYSE Arca Rule 8.700-E.\4\
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    \3\ Managed Trust Security means a security that is registered 
under the Securities Act of 1933 (15 U.S.C. 77a), as amended (the 
``Securities Act''), and (i) is issued by a trust (``Trust''), or 
any series thereof, that (1) is a commodity pool as defined in the 
Commodity Exchange Act and regulations thereunder, is not registered 
or required to be registered as an investment company under the 
Investment Company Act of 1940, as amended, and is managed by a 
commodity pool operator registered with the Commodity Futures 
Trading Commission, and (2) holds long and/or short positions in 
exchange-traded futures contracts and/or certain currency forward 
contracts and/or swaps selected by the Trust's advisor consistent 
with the Trust's investment objectives, which will only include 
exchange-traded futures contracts involving commodities, commodity 
indices, currencies, currency indices, stock indices, the EURO STOXX 
50 Volatility Index (VSTOXX), fixed income indices, interest rates 
and sovereign, private and mortgage or asset backed debt 
instruments, and/or forward contracts on specified currencies, and/
or swaps on stock indices, fixed income indices, commodity indices, 
VSTOXX, commodities, currencies, currency indices, or interest 
rates, each as disclosed in the Trust's prospectus as such may be 
amended from time to time, and cash and cash equivalents; and (ii) 
is issued and redeemed continuously in specified aggregate amounts 
at the next applicable net asset value. See NYSE Arca Rule 8.700-E 
(c)(1).
    \4\ On June 5, 2019, the Trust submitted to the Commission its 
draft registration statement on Form S-1 under the Securities Act of 
1933 (15 U.S.C. 77a) (``Securities Act''). The Jumpstart Our 
Business Startups Act, enacted on April 5, 2012, added Section 6(e) 
to the Securities Act. Section 6(e) of the Securities Act provides 
that an ``emerging growth company'' may confidentially submit to the 
Commission a draft registration statement for confidential, non-
public review by the Commission staff prior to public filing, 
provided that the initial confidential submission and all amendments 
thereto shall be publicly filed not later than 21 days before the 
date on which the issuer conducts a road show, as such term is 
defined in Securities Act Rule 433(h)(4). An emerging growth company 
is defined in Section 2(a)(19) of the Securities Act as an issuer 
with less than $1,000,000,000 total annual gross revenues during its 
most recently completed fiscal year. The Trust meets the definition 
of an emerging growth company and consequently has submitted its 
Form S-1 registration statement (``Registration Statement'') on a 
confidential basis with the Commission. The description of the 
operation of the Trust and the Fund herein is based, in part, on the 
Registration Statement.
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    The Commission has previously approved the listing and trading of 
options on the VIX.\5\ In addition, the Commission has previously 
approved an amendment to NYSE Arca Rule 5.2-E(j)(6) (``Index-Linked 
Securities'') to add VIX Futures to the definition of Futures Reference 
Assets applicable to ``Futures-Linked Securities,'' \6\ and has 
approved listing and trading on the Exchange of series of Trust Issued 
Receipts that invest in VIX Futures.\7\
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    \5\ See Securities Exchange Release No. 48807 (November 19, 
2003), 68 FR 66516 (November 26, 2003) (SR-CBOE-2003-40).
    \6\ See Securities Exchange Act Release Nos. 65134 (August 15, 
2011), 76 FR 52034 (August 19, 2011) (SR-NYSEArca-2011-23) (Order 
Granting Approval of Proposed Rule Change to List and Trade Shares 
of ProShares Short VIX Short-Term Futures ETF, ProShares Short VIX 
Mid-Term Futures ETF, ProShares Ultra VIX Short-Term Futures ETF, 
ProShares Ultra VIX Mid-Term Futures ETF, ProShares UltraShort VIX 
Short-Term Futures ETF, and ProShares UltraShort VIX Mid-Term 
Futures ETF under NYSE Arca Equities Rule 8.200, Commentary .02). 
See also, Securities Exchange Act Release No. 58968 (November 17, 
2008), 73 FR 71082 (November 24, 2008) (SR-NYSEArca-2008-111) (Order 
Granting Accelerated Approval of Proposed Rule Change to Amend NYSE 
Arca Equities Rule 5.2(j)(6)(v) in Order to Add the CBOE Volatility 
Index Futures to the Definition of Futures Reference Asset).
    \7\ See, e.g., Securities Exchange Act Release Nos. 58457 
(September 3, 2008), 73 FR 52711 (September 10, 2008) (SR-NYSEArca-
2008-91) (order granting accelerated approval to list on NYSE Arca 
of 14 ProShares funds); 63610 (December 27, 2010), 76 FR 199 
(January 3, 2011) (SR-NYSEArca-2010-101) (order approving listing 
and trading of the ProShares VIX Short-Term Futures ETF and the 
ProShares VIX Mid-Term Futures ETF). See also Securities Exchange 
Act Release No. 58968 (November 17, 2008), 73 FR 71082 (November 24, 
2008) (SR-NYSEArca-2008-111) (order granting accelerated approval of 
proposed rule change to amend NYSE Arca Equities Rule 5.2(j)(6)(v) 
to add VIX Futures to the definition of Futures Reference Asset.
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    The Exchange notes that the Commission has issued a notice of 
effectiveness regarding amendments to NYSE Arca Rule 5.2-E(j)(6)(v) to 
add futures on another index referencing market volatility--the EURO 
STOXX 50 Volatility Index (``VSTOXX'')--as a ``Futures Reference 
Asset'' underlying an issue of ``Futures-Linked Securities.'' \8\ In 
addition, the Commission has approved an amendment to NYSE Arca Rule 
8.700-E to add the VSTOXX as a reference asset to the futures contracts 
and swaps that may be held by trusts that issue Managed Trust 
Securities.\9\
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    \8\ See Securities Exchange Act Release No. 79975 (February 6, 
2017), 82 FR 10418 (February 10, 2017) (SR-NYSEArca-2017-08) (Notice 
of Filing and Immediate Effectiveness to Amend NYSE Arca Equities 
Rule 5.2(j)(6)(v) to Add EURO STOXX 50 Volatility Futures to the 
Definition of Futures Reference Asset in Rule 5.2(j)(6)).
    \9\ See Securities Exchange Act Release No. 82066 (November 13, 
2017), 82 FR 54434 (November 17, 2017) (SR-NYSEArca-2017-85) (Notice 
of Filing of Amendment No. 3, and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment No. 3, 
to Amend NYSE Arca Rule 8.700-E and to List and Trade Shares of the 
ProShares European Volatility Futures ETF).
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    The Exchange believes that the proposed amendment to add VIX 
Futures and/or swaps on VIX to the financial instruments in which an 
issue of Managed Trust Securities may hold long and/or short positions 
will provide investors with the ability to better diversify and hedge 
their portfolios using an exchange traded security without having to 
trade directly in the underlying VIX Futures, and will facilitate the 
listing and trading on the Exchange of additional Managed Trust 
Securities that will enhance competition among market participants, to 
the benefit of investors and the marketplace.
    The Exchange believes that its surveillance procedures are adequate 
to continue to properly monitor the trading of Managed Trust Securities 
that hold

[[Page 44644]]

VIX Futures and/or swaps on VIX in all trading sessions and to deter 
and detect violations of Exchange rules.
The VIX Index
    The information in this filing relating to the VIX Index was taken 
from the website of the Cboe Futures Exchange (the ``CFE'') and from 
the Registration Statement.
    The VIX Index is an up-to-the-minute market estimate of expected 
volatility that is calculated by using real-time prices of options on 
the S&P 500[supreg] Index listed on Cboe Exchange, Inc. (``Cboe'') 
(``Cboe Options'') (Symbol: SPX). The VIX Index is designed to reflect 
investors' consensus view of future (30-day) expected stock market 
volatility. Only SPX options with Friday expirations are used to 
calculate the VIX Index. The VIX Index is calculated between 2:15 a.m. 
Central Time (``C.T.'') and 8:15 a.m. C.T. and between 8:30 a.m. C.T. 
and 3:15 p.m. C.T. The VIX Index is calculated by using the midpoints 
of real-time SPX option bid/ask quotes. Only SPX options with more than 
23 days and less than 37 days to the Friday SPX expiration are used to 
calculate the VIX Index. These SPX options are then weighted to yield a 
constant, 30-day measure of the expected volatility of the S&P 500 
Index.
    VIX levels are calculated by Cboe and disseminated at 15-second 
intervals to market information vendors via the Options Price Reporting 
Authority (``OPRA'').
VIX Futures
    The information in this filing relating to VIX Futures was taken 
from the CFE website and from the Registration Statement.
    The CFE began listing and trading VIX Futures on March 26, 2004 
under the ticker symbol VX. VIX Futures reflect the market's estimate 
of the value of the VIX Index on various expiration dates in the 
future. According to the Registration Statement, the value of a VIX 
Futures Contract is based on the expected reading of the VIX Index at 
the expiration of such VIX Futures, and therefore represents forward 
implied volatility of the S&P 500 over the 30-day period following the 
expiration of the VIX Futures. As a result, a movement in the VIX Index 
today will not necessarily result in a corresponding movement in the 
price of VIX Futures.
    VIX Futures, which trade only on CFE, trade between the hours of 
8:30 a.m.-3:15 p.m. C.T. The CFE is a member of the Intermarket 
Surveillance Group (``ISG'').
    Monthly and weekly expirations in VIX Futures are available and 
trade nearly 24 hours a day, five days a week. VIX Weekly futures began 
trading on CFE in 2015.
    The monthly volume and open interest (number of contracts) as of 
the last day of each month (November 2018 through April 2019) for VIX 
Futures was as follows:

------------------------------------------------------------------------
                                                  Monthly        Open
                                                   volume      interest
------------------------------------------------------------------------
Nov-18........................................    5,602,563    9,704,691
Dec-18........................................    6,127,137    8,120,281
Jan-19........................................    4,896,371    7,605,976
Feb-19........................................    3,793,922    6,880,121
Mar-19........................................    5,294,713    7,419,836
Apr-19........................................    4,524,300    8,875,583
------------------------------------------------------------------------

Dynamic Short Short-Term Volatility Futures ETF
    The Exchange proposes to list and trade the Shares of the Fund 
under proposed amended NYSE Arca Rule 8.700-E. Dynamic Shares LLC will 
serve as the Trust's sponsor (``Sponsor''), and will serve as its 
commodity pool operator upon its registration with the Commodity 
Futures Trading Commission (``CFTC''), which will be prior to the 
effectiveness of the Registration Statement. Wilmington Trust Company 
is the sole ``Trustee'' of the Trust. The Nottingham Company will be 
the ``Administrator'' for the Fund. Nottingham Shareholder Services, 
LLC will serve as the ``Transfer Agent'' for the Fund for ``Authorized 
Participants.'' Capital Investment Group, Inc. will serve as the 
``Distributor'' for the Fund.
    The Sponsor will be registered as a commodity pool operator and is 
not registered or affiliated with a broker-dealer. In the event (a) the 
Sponsor becomes registered as a broker-dealer or newly affiliated with 
a broker-dealer, or (b) any new sponsor is a registered broker-dealer 
or becomes affiliated with a broker-dealer, it will implement and 
maintain a fire wall with respect to its relevant personnel or its 
broker-dealer affiliate regarding access to information concerning the 
composition and/or changes to the Disclosed Portfolio (as defined in 
NYSE Arca Rule 8.700-E(c)(2)), 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, the Fund will seek to 
provide investors with inverse exposure to the implied volatility of 
the broad-based, large-cap U.S. equity market. Such exposure will be 
for one full trading day. The Fund will seek to achieve its investment 
objective, under normal market conditions,\10\ by obtaining investment 
exposure to an actively managed portfolio of short positions in VIX 
Futures Contracts with monthly expirations.
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    \10\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
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    The Fund expects to primarily take short positions in VIX Futures 
by shorting the next two near term VIX Futures and rolling the nearest 
month VIX Futures Contract to the next month on a daily basis. As such, 
the Fund expects to have a constant one-month rolling short position in 
first and second month VIX Futures.
    The Fund also may hold cash and cash equivalents, including U.S. 
Treasury securities.\11\
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    \11\ For purposes of this filing, cash equivalents are the 
following short-term instruments: (i) U.S. Government securities, 
including bills, notes and bonds differing as to maturity and rates 
of interest, which are either issued or guaranteed by the U.S. 
Treasury or by U.S. Government agencies or instrumentalities; (ii) 
certificates of deposit issued against funds deposited in a bank or 
savings and loan association; (iii) bankers' acceptances, which are 
short-term credit instruments used to finance commercial 
transactions; (iv) repurchase agreements and reverse repurchase 
agreements; (v) bank time deposits, which are monies kept on deposit 
with banks or savings and loan associations for a stated period of 
time at a fixed rate of interest; (vi) commercial paper, which are 
short-term unsecured promissory notes; and (vii) money market funds.
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    The Fund will seek to dynamically manage its notional exposure to 
VIX Futures. For instance, when the VIX Index is below its historical 
average, the Fund's notional exposure will be lower than a traditional 
short VIX short term futures ETF, which may maintain a fixed notional 
exposure every day.
    When the VIX Index is going up, the Fund will gradually increase 
its notional exposure, up to a ceiling of -0.5 times its net asset 
value (``NAV''). The Fund expects that its notional exposure will not 
exceed -0.5 times its NAV, but that its notional exposure may exceed -
0.5 times its NAV during intraday trading before recalibration (as 
described further below).
    The Fund will be actively managed and is not benchmarked to the VIX 
Index. As such, according to the Registration Statement, the Fund can 
be expected to perform very differently from the inverse of the VIX 
Index. The Fund does not seek to track the performance of the VIX Index 
or the S&P 500[supreg] and can be expected to perform very differently 
from the VIX Index over all periods of time.
    According to the Registration Statement, the Fund will experience 
positive or negative performance based

[[Page 44645]]

on changes in the implied level of future market volatility to the 
extent these changes are reflected in the price of VIX Futures 
Contracts. The Fund generally will experience positive performance, 
before accounting for fees and expenses, to the extent that the implied 
level of future volatility, as reflected by the value of the Fund's 
short position in VIX Futures Contracts, decreases. Similarly, the Fund 
generally will experience negative performance, before accounting for 
fees and expenses, to the extent that the implied level of future 
volatility increases.
    According to the Registration Statement, at the close of each 
trading day, the Fund expects to recalibrate its notional exposure 
value upon the change of the VIX Index and contango on that day.\12\ 
The Fund expects its notional exposure to range from -0.1 to -0.5 after 
each calibration. Movements of the VIX Futures during the day will 
affect whether the Fund's portfolio needs to be repositioned. For 
example, if the levels of the VIX Futures have risen on a given day, 
net assets of the Fund should fall. As a result of the calibration, the 
Fund's inverse exposure will generally increase to a level not beyond -
0.5. Conversely, if the levels of the VIX Futures have fallen on a 
given day, net assets of the Fund should rise. As a result of the 
calibration, the Fund's inverse exposure will generally decrease to as 
low as -0.1.
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    \12\ According to the Registration Statement, the contractual 
obligations of a buyer or seller holding a futures contract to 
expiration may generally be satisfied by taking or making physical 
delivery of the underlying reference asset or settling in cash as 
designated in the contract specifications. Alternatively, futures 
contracts may be closed out prior to expiration by making an 
offsetting sale or purchase of an identical futures contract on the 
same or linked exchange before the designated date of delivery. Once 
this date is reached, the futures contract ``expires.'' As the 
futures contracts held by the Fund near expiration, they are 
generally closed out and replaced by contracts with a later 
expiration. This process is referred to as ``rolling.'' 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 future prices for 
longer expiration futures contracts is often 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 future prices of shorter expiration futures 
contracts is referred to as ``backwardation.''
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    In seeking to achieve the Fund's investment objective, the Sponsor 
uses a proprietary algorithm, which learns from VIX Futures historical 
prices and contango trend, to optimize VIX Futures trading risks and 
returns. The algorithm starts with a relatively low notional exposure 
(-0.1 to -0.15) and recalibrates its notional exposure upon the change 
of price and contango of VIX Futures. The Sponsor expects the algorithm 
to slightly increase the Fund's notional exposure when the price of VIX 
Futures go up to a level not beyond -0.5, and, when the price of VIX 
Futures goes down, the Sponsor expects the algorithm to decrease the 
Fund's notional exposure to lower levels to prepare for potential 
upcoming spikes in the price of VIX Futures. In the event that the 
Fund's notional exposure has already reached -0.5 and the price of VIX 
Futures increases, the Fund expects to maintain its notional exposure 
at -0.5 at the close of each trading day. Conversely, if the price of 
VIX Futures decreases when the Fund's notional exposure is below -0.1, 
the Fund expects to maintain its notional exposure at -0.1 when 
calibrating its notional exposure.
    According to the Registration Statement, the pursuit of the Fund's 
daily investment objective means that the Fund's return for a period 
longer than a full trading day will be the product of the series of 
daily returns, with daily repositioned exposure, for each trading day 
during the relevant period. As a consequence, the return for investors 
that invest for periods less than a full trading day or for a period 
different than a trading day will not be the product of the return of 
the Fund's stated daily inverse investment objective.
Creation and Redemption Transactions
    According to the Registration Statement, ``Authorized 
Participants'' may purchase (i.e., create) or redeem Shares only in 
blocks of 50,000 Shares (each such block, a ``Creation Unit'') in the 
Fund. An Authorized Participant is an entity that has entered into an 
Authorized Participant Agreement with the Trust and the Sponsor. 
Creation Units are offered to Authorized Participants at the Fund's 
NAV. The size of a Creation Unit is subject to change.
    A creation transaction generally takes place when an Authorized 
Participant deposits a specified amount of cash in exchange for a 
specified number of Creation Units. Similarly, Shares generally can be 
redeemed only in Creation Units, generally for cash. The prices at 
which creations and redemptions occur are based on the next calculation 
of NAV after an order is received in proper form. By placing a purchase 
order, an Authorized Participant agrees to deposit cash (unless as 
provided otherwise in the Registration Statement) with the 
``Custodian.'' Creation and redemption transactions must be placed each 
day with the Distributor by the create/redeem cutoff time (generally 
2:00 p.m., E.T.) to receive that day's NAV.
    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 on which the NAV of the Fund is determined.
    Purchase orders must be placed by the cutoff time of 2:00 p.m., 
E.T. The cut-off time may be earlier if, for example, the Exchange or 
other exchange material to the valuation or operation of the Fund 
closes before the cut-off time.
    The total payment required to create each Creation Unit is the NAV 
of the Shares required for such Creation Unit on the purchase order 
date plus the applicable transaction fee.
Delivery of Cash
    Cash required for settlement will typically be transferred to the 
Custodian through: (1) The Continuous Net Settlement (``CNS'') clearing 
process of the National Securities Clearing Corporation (``NSCC''), as 
such processes have been enhanced to effect creations and redemptions 
of Creation Units; or (2) the facilities of the Depository Trust 
Company (``DTC'') on a Delivery Versus Payment (``DVP'') basis, which 
is the procedure in which the buyer's payment for securities is due at 
the time of delivery. The Sponsor reserves the right to extend the 
deadline for the Custodian to receive the cash required for settlement 
up to the second Business Day following the purchase order date (T+2). 
The Creation Units will be delivered to the Authorized Participant upon 
the Custodian's receipt of the purchase amount.
Delivery of Exchange of Futures Contract for Related Position 
(``EFCRP'') Futures
Contracts or Block Trades
    If the Sponsor shall have determined to permit the Authorized 
Participant to transfer VIX Futures pursuant to an EFCRP or to engage 
in a block trade purchase of futures contracts from the Authorized 
Participant with respect to the Fund, as well as to deliver cash, in 
the creation process, VIX Futures required for settlement must be 
transferred directly to the Fund's account at its futures commission 
merchant. The Creation Units will be delivered to the Authorized 
Participant

[[Page 44646]]

upon the Custodian's receipt of the cash purchase amount and the VIX 
Futures.
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. A redemption order must be received 
prior to applicable cutoff time (generally 2:00 p.m., E.T.).
    By placing a redemption order, an Authorized Participant agrees to 
deliver the Creation Units to be redeemed through DTC's book-entry 
system to the 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 the Fund to receive the 
Creation Units required for settlement up to the second Business Day 
following the redemption order date (T+2).
    The redemption proceeds from the Fund will consist of the cash 
redemption amount and, if permitted by the Sponsor in its sole 
discretion with respect to the Fund, an EFCRP or block trade with the 
Fund. The cash redemption amount is equal to the NAV of the number of 
Creation Unit(s) of the Fund requested in the Authorized Participant's 
redemption order as of the time of the calculation of the Fund's NAV on 
the redemption order date, less transaction fees and any amounts 
attributable to any applicable EFCRP or block trade.
    The redemption proceeds due from the Fund will be delivered to the 
Authorized Participant at noon E.T. on the third Business Day 
immediately following the redemption order date if, by such time on 
such Business Day immediately following the redemption order date, the 
Fund's DTC account has been credited with the Creation Units to be 
redeemed.
Net Asset Value
    The NAV per Share of the Fund will be computed by dividing the 
value of the net assets of the Fund by its total number of Shares 
outstanding. Expenses and fees are accrued daily and taken into account 
for purposes of determining NAV. The Fund's NAV is calculated on each 
day other than a day when the Exchange is closed for regular trading. 
The Fund will compute its NAV once each trading day (the ``NAV 
Calculation Time''), or an earlier time set forth on the Trust's 
website (www.dynamicsharesetf.com). The Fund's website will be operable 
prior to commencement of Exchange trading of the Shares. The NAV 
Calculation Time is 4:15 p.m., E.T.
    VIX Futures prices are calculated at their then current market 
value, which typically is based upon the settlement price or the last 
traded price before the NAV time for that particular futures contract.
    In certain circumstances (e.g., if the Sponsor believes market 
quotations do not accurately reflect the fair value of a Fund 
investment, or a trading halt closes an exchange or market early), the 
Sponsor may, in its sole discretion, choose to determine a fair value 
price as the basis for determining the market value of such position 
for such day. Such fair value prices would generally be determined 
based on available inputs about the current underlying reference assets 
and would be based on principles that the Sponsor deems fair and 
equitable.
Indicative Optimized Portfolio Value (``IOPV'')
    According to the Registration Statement, the IOPV is an indicator 
of the value of the Fund's net assets at the time the IOPV is 
disseminated. The IOPV is calculated and disseminated every 15 seconds 
throughout the trading day. The IOPV is generally calculated using the 
prior day's closing net assets of the Fund as a base and updating 
throughout the trading day changes in the value of the financial 
instruments held by the Fund.
    The IOPV will be disseminated by the Exchange or a major market 
data vendor. In addition, the IOPV is published on the NYSE Arca's 
website and is available through on-line information services such as 
Bloomberg Finance L.P. and Reuters.
Availability of Information
    The Trust's website, www.dynamicsharesetf.com, which will be 
publicly accessible at no charge, will contain the following 
information: (a) The daily NAV of the Trust, the daily NAV per Share, 
the prior Business Day's NAV per Share, the reported daily closing 
price and the reported daily trading volume; (b) the daily composition 
of the Disclosed Portfolio, as defined in NYSE Arca Rule 8.700-E (c)(2) 
\13\; (c) the midpoint of the bid-ask price as of the time the NAV per 
Share is calculated (the ``Bid-Ask Price''); (d) the calculation of the 
premium or discount of such price against such NAV per Share; (e) data 
in chart form displaying the frequency distribution of discounts or 
premiums of the bid-ask price against the NAV per Share, within 
appropriate ranges for each of the four previous calendar quarters; and 
(f) the current prospectus of the Trust, included in the Registration 
Statement.
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    \13\ NYSE Arca Rule 8.700-E(c)(2) provides that the term 
``Disclosed Portfolio'' means ``the identities and quantities of the 
securities and other assets held by the Trust that will form the 
basis for the Trust's calculation of net asset value at the end of 
the business day''.
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    On a daily basis, the Trust will disclose on its website for all of 
the assets held by the Fund the following information: Name; ticker 
symbol (if applicable); CUSIP or other identifier (if applicable); 
description of the holding; with respect to derivatives, the identity 
of the security, commodity, index or other underlying asset; the 
quantity or aggregate amount of the holding as measured by par value, 
notional value or amount, number of contracts or number of units (if 
applicable); maturity date; coupon rate (if applicable); effective date 
or issue date (if applicable); market value; percentage weighting in 
the Disclosed Portfolio; and expiration date (if applicable). The 
website information will be publicly available at no charge.
    As noted above, the Trust's NAV and the NAV per Share will be 
calculated and disseminated daily after the close of the New York Stock 
Exchange (normally 4:00 p.m., E.T.).\14\ The Exchange will disseminate 
for the Trust on a daily basis by means of the Consolidated Tape 
Association (the ``CTA'') high-speed line information with respect to 
the most recent NAV per Share, and the number of Shares outstanding. 
The Exchange also will make available on its website daily trading 
volume, closing prices and the NAV per Share.
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    \14\ The Exchange will obtain a representation from the Trust 
that the NAV and the NAV per Share will be calculated daily and that 
the NAV, the NAV per Share and the composition of the Disclosed 
Portfolio will be made available to all market participants at the 
same time.
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    Pricing for VIX is available from major market data vendors. 
Pricing for VIX Futures is available from CFE and from major market 
data vendors. Pricing for Cboe Options is available from Cboe and from 
major market data vendors. Price information for cash equivalents is 
available from major market data vendors.
    The IOPV will be widely disseminated by one or more major market 
data vendors at least every 15 seconds during the Exchange's Core 
Trading Session (as defined in NYSE Arca Rule 7.34-E).\15\
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    \15\ Currently, it is the Exchange's understanding that several 
major market data vendors widely disseminate IOPVs taken from the 
CTA high-speed line or other data feeds.

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[[Page 44647]]

    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. The 
previous day's closing price and trading volume information for the 
Shares will be published daily in the financial section of newspapers. 
Quotation and last sale information for the Shares will be available 
via the CTA high-speed line.
Impact on Arbitrage Mechanism
    The Sponsor believes there will be minimal, if any, impact to the 
arbitrage mechanism as a result of the use of derivatives. Market 
makers and participants should be able to value derivatives as long as 
the positions are disclosed with relevant information. The Sponsor 
believes that the price at which Shares trade will continue to be 
disciplined by arbitrage opportunities created by the ability to 
purchase or redeem Shares at their NAV, which should help ensure that 
Shares will not trade at a material discount or premium in relation to 
their NAV.
    The Sponsor does not believe there will be any significant impacts 
to the settlement or operational aspects of the Fund's arbitrage 
mechanism due to the use of derivatives.
Criteria for Initial and Continued Listing
    The Trust will be subject to the criteria in NYSE Arca Rule 8.700-E 
for initial and continued listing of the Shares.
    The minimum number of Shares to be outstanding at the start of 
trading will be 100,000 Shares. The Exchange believes that this minimum 
number of Shares to be outstanding at the start of trading is 
sufficient to provide adequate market liquidity. The Exchange 
represents that, for the initial and continued listing of the Shares, 
the Trust must be in compliance with NYSE Arca Rule 5.3-E and Rule 10A-
3 under the Exchange Act.\16\
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    \16\ 17 CFR 240.10A-3.
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Trading Rules
    Under NYSE Arca Rule 8.700-E(b), Managed Trust Securities are 
included within the Exchange's definition of ``securities.'' 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. Commentary .02 to NYSE Arca 
Rule 8.700-E provides that transactions in Managed Trust Securities 
will occur during the trading hours specified in NYSE Arca Rule 7.34-E. 
Therefore, in accordance with NYSE Arca Rule 7.34-E, the Shares will 
trade on the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. The 
Exchange has appropriate rules to facilitate transactions in the Shares 
during all trading sessions. As provided in NYSE Arca Rule 7.6-E, the 
minimum price variation (``MPV'') for quoting and entry of orders in 
equity securities traded on the NYSE Arca Marketplace is $0.01, with 
the exception of securities that are priced less than $1.00 for which 
the MPV for order entry is $0.0001.
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. Trading in the Shares will be halted if the 
circuit breaker parameters under NYSE Arca Rule 7.12-E are reached. 
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.
    In addition, if the Exchange becomes aware that the NAV, the NAV 
per Share and/or the Disclosed Portfolio with respect to a series of 
Managed Trust Securities is not disseminated to all market participants 
at the same time, it will halt trading in such series until such time 
as the NAV, the NAV per Share and the Disclosed Portfolio is available 
to all market participants.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange, as 
well as cross-market surveillances administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\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 applicable federal securities laws.
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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 VIX Futures 
with other markets or 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 VIX Futures 
from such markets or entities. In addition, the Exchange may obtain 
information regarding trading in the Shares and VIX Futures from 
markets or other entities that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement 
(``CSSA'').\18\ FINRA, on behalf of the Exchange, is able to access, as 
needed, trade information for certain cash equivalents held by the Fund 
reported to FINRA's Trade Reporting and Compliance Engine (``TRACE'').
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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 the 
Disclosed Portfolio for the Fund may trade on markets that are 
members of ISG or with which the Exchange has in place a CSSA.
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    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 portfolio of the Fund, (b) limitations on 
portfolio of the Fund, or (c) the applicability of Exchange listing 
rules specified in this rule filing shall constitute continued listing 
requirements for listing the Shares on the Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund 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 the Fund is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E (m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin (``Bulletin'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares (and that Shares are 
not individually redeemable); (2)

[[Page 44648]]

NYSE Arca Rule 9.2-E (a), which imposes a duty of due diligence on its 
ETP Holders to learn the essential facts relating to every customer 
prior to trading the Shares; (3) the requirement that ETP Holders 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction; (4) how 
information regarding the IOPV and the Disclosed Portfolio is 
disseminated; (5) the risks involved in trading the Shares during the 
opening and late trading sessions when an updated IOPV will not be 
calculated or publicly disseminated; and (6) trading information.
    In addition, the Bulletin will reference that the Trust is subject 
to various fees and expenses described in the Registration Statement.
    The Bulletin also will reference the fact that there is no 
regulated source of last sale information regarding certain of the 
asset classes that the Trust may hold and that the Commission has no 
jurisdiction over the trading of VIX Futures.
    The Bulletin also will discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.

2. Statutory Basis

    The basis under the Exchange 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).
---------------------------------------------------------------------------

    The Exchange believes that the proposed amendment to Rule 8.700-
E(c)(1) to add VIX Futures Contracts and/or swaps on VIX to the 
financial instruments in which an issue of Managed Trust Securities may 
hold long and/or short positions will provide investors with the 
ability to better diversify and hedge their portfolios using an 
exchange traded security without having to trade directly in the 
underlying VIX Futures Contracts, and will facilitate the listing and 
trading on the Exchange of additional Managed Trust Securities that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace.
    As noted above, the Commission previously has (1) approved the 
listing and trading of options on the VIX,\20\ (2) approved an 
amendment to NYSE Arca Rule 5.2-E(j)(6) to add VIX Futures to the 
definition of Futures Reference Assets applicable to ``Futures-Linked 
Securities,'' \21\ (3) approved listing and trading on the Exchange of 
series of Trust Issued Receipts that invest in VIX Futures,\22\ (4) 
issued a notice of effectiveness regarding amendments to NYSE Arca Rule 
5.2-E(j)(6)(v) to add futures on VSTOXX (another index referencing 
market volatility) as a ``Futures Reference Asset'' underlying an issue 
of ``Futures-Linked Securities'' \23\, and (5) approved an amendment to 
NYSE Arca Rule 8.700-E to add the VSTOXX as a reference asset to the 
futures contracts and swaps that may be held by trusts that issue 
Managed Trust Securities.\24\
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    \20\ See note 5, supra.
    \21\ See note 6, supra.
    \22\ See note 7, supra.
    \23\ See note 8, supra.
    \24\ See note 9, supra.
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices because the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.700-E. The 
Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws. The NAV of the Trust, the NAV per Share and the 
Disclosed Portfolio will be disseminated to all market participants at 
the same time. The Trust will provide website disclosure of portfolio 
holdings daily. The IOPV per Share (quoted in U.S. dollars) will be 
widely disseminated at least every 15 seconds during the Exchange's 
Core Trading Session by major market data vendors. Pricing for the 
Index and VIX are available from major market data vendors. Pricing for 
VIX Futures and VIX Options will be available from the CFE and Cboe, 
respectively. Price information for cash equivalents will be available 
from major market data vendors. Quotation and last-sale information 
regarding the Shares will be disseminated through the CTA high-speed 
line.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest 
given that a large amount of information will be publicly available 
regarding the Trust and the Shares, thereby promoting market 
transparency. The Exchange may halt trading during the day in which an 
interruption to the dissemination of the IOPV occurs, or the value of 
the underlying VIX Futures occurs. If the interruption to the 
dissemination of the IOPV or the value of the underlying VIX Futures 
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. If the Exchange becomes aware that the NAV, the NAV 
per Share and the Disclosed Portfolio with respect to a series of 
Managed Trust Securities are not disseminated to all market 
participants at the same time, it will halt trading in such series 
until such time as the NAV, the NAV per Share and the Disclosed 
Portfolio are available to all market participants. Trading in Shares 
of the Trust will be halted if the circuit breaker parameters under 
NYSE Arca Rule 7.12-E have been reached or because of market conditions 
or for reasons that, in the view of the Exchange, make trading in the 
Shares inadvisable. Moreover, prior to the commencement of trading, the 
Exchange will inform its ETP Holders in the Bulletin of the special 
characteristics and risks associated with trading the Shares.
    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 given that it will facilitate the listing and trading 
of an additional type of exchange-traded product that will principally 
hold futures contracts and 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 relating to trading in 
the Shares and VIX Futures from other exchanges that are members of the 
ISG or with which the Exchange has entered into a CSSA. In addition, as 
noted above, investors will have ready access to information regarding 
the IOPV and quotation and last sale information for the Shares.

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 purposes of the Exchange Act. The Exchange notes 
that the proposed rule change will facilitate the listing and trading 
of an additional type of actively-managed exchange-traded product that 
will principally hold VIX Futures, and that will enhance competition 
among market participants, to the benefit of investors and the 
marketplace.

[[Page 44649]]

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

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

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

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

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2019-55 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2019-55. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2019-55 and should be submitted 
on or before September 16, 2019.
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    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-18270 Filed 8-23-19; 8:45 am]
 BILLING CODE 8011-01-P