
[Federal Register Volume 82, Number 157 (Wednesday, August 16, 2017)]
[Notices]
[Pages 38973-38979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17275]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81373; File No. SR-NYSEArca-2017-85]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To Amend NYSE Arca Equities Rule 8.700 To 
Reference EURO STOXX 50 Volatility Index Futures and To List and Trade 
Shares of the ProShares European Volatility Futures ETF

August 10, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on July 28, 2017, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
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 self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 8.700 to add 
EURO STOXX 50 Volatility Index (VSTOXX[supreg]) futures to the 
financial instruments that an issue of Managed Trust Securities may 
hold; and (2) to list and trade shares of the ProShares European 
Volatility Futures ETF under proposed amended NYSE Arca Equities Rule 
8.700. The proposed change is available on the Exchange's Web site at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    NYSE Arca Equities Rule 8.700 permits the trading of Managed Trust 
Securities either by listing or pursuant to unlisted trading privileges 
(``UTP'').\3\

[[Page 38974]]

The Exchange proposes to amend NYSE Arca Equities Rule 8.700 to add 
futures and swaps on the EURO STOXX 50 Volatility Index (VSTOXX) to the 
financial instruments in which an issue of Managed Trust Securities may 
hold long and/or short positions. (Futures on VSTOXX are referred to 
herein as ``Futures Contracts.'') In addition, the Exchange proposes to 
list and trade the shares (the ``Shares'') of the ProShares European 
Volatility Futures ETF (the ``Fund'') under proposed amended NYSE Arca 
Equities Rule 8.700.\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''), is issued by a trust that (1) is a commodity 
pool as defined in the Commodity Exchange Act (7 U.S.C. 1) (the 
``CEA''), and that is managed by a commodity pool operator 
registered with the Commodity Futures Trading Commission (the 
``CFTC''), 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, 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, 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 Equities Rule 
8.700(c)(1).
    \4\ On May 12, 2017, the Trust filed with the Commission a 
registration statement on Form S-1 under the Securities Act of 1933 
(15 U.S.C. 77a) (``Securities Act'') relating to the Fund (File No. 
333-217962) (the ``Registration Statement''). The description of the 
operation of the Trust and the Fund herein is based, in part, on the 
Registration Statement.
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Proposed Amendments to NYSE Arca Equities Rule 8.700
    The Exchange proposes to amend NYSE Arca Equities Rule 8.700(c)(1) 
to add Futures Contracts and/or swaps on VSTOXX to the financial 
instruments in which an issue of Managed Trust Securities may hold long 
and/or short positions.
    The VSTOXX is based on EURO STOXX 50 Index (``Index'') real-time 
option prices that are listed on the Eurex Exchange (``Eurex'') and are 
designed to reflect the market expectations of near-term up to long-
term volatility by measuring the square root of the implied variances 
across all options of a given time to expiration.\5\ The Index includes 
50 stocks that are among the largest free-float market capitalization 
stocks from 11 Eurozone countries.\6\ Futures Contracts are cash 
settled and trade between the hours of 7:30 a.m. and 10:30 p.m. Central 
European Time (``CET'') (2:30 a.m. and 5:30 p.m. Eastern Time). The 
Futures Contract value is 100 Euros per index point of the underlying 
and it is traded to two decimal places with a minimum price change of 
0.05 points (equivalent to a value of 5 Euros). The daily settlement 
price is determined during the closing auction of the respective 
Futures Contract. The last trading day and final settlement day is 30 
calendar days prior to the third Friday of the expiration month of the 
underlying options, which is usually the Wednesday prior to the second 
to last Friday of the respective maturity month. Information regarding 
the VSTOXX and the Futures Contracts can be found on the STOXX Limited 
(``STOXX'') Web site and the Eurex Web site, respectively.\7\
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    \5\ The VSTOXX is a non-investable index that seeks to measure 
the volatility of the Index over a future time horizon as implied by 
the price of option contracts on the Index available on the Eurex. 
The VSTOXX does not measure the actual volatility of the Index.
    \6\ These countries include Austria, Belgium, Finland, France, 
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and 
Spain.
    \7\ Eurex is a member of the ISG and, as such, the Exchange may 
obtain information regarding trading in the Futures Contracts. For a 
list of the current members and affiliate members of ISG, see 
www.isgportal.com.
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    STOXX computes the Index on a real-time basis throughout each 
trading day, from 8:50 a.m. until 5:30 CET (3:50 a.m. until 12:30 p.m. 
Eastern Time [sic]. VSTOXX levels will be calculated by STOXX and 
disseminated by major market data vendors on a real-time basis 
throughout each trading day.
    The Exchange believes that the proposed amendment to add Futures 
Contracts and/or swaps on VSTOXX 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 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.\8\
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    \8\ The Exchange notes that the Commission has issued a notice 
of effectiveness regarding amendments to NYSE Arca Equities Rule 
5.2(j)(6)(v) to add futures on VSTOXX as a ``Futures Reference 
Asset'' underlying an issue of ``Futures-Linked Securities''. 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)). See also, 
Securities Exchange Act Release No. 79069 (October 7, 2016), 81 FR 
70714 (October 13, 2016) (SR-BatsBZX-2016-26) (order approving 
amendments to Bats BZX Exchange, Inc. Rule 14.11(d) to add EURO 
STOXX 50 Volatility Futures to the definition of Futures Reference 
Asset).
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ProShares European Volatility Futures ETF
    The Exchange proposes to list and trade the Shares of the Fund 
under proposed amended NYSE Arca Equities Rule 8.700. The Fund will be 
a commodity pool that is a series of the ProShares Trust II 
(``Trust''). The Fund's sponsor and commodity pool operator will be 
ProShare Capital Management LLC (the ``Sponsor''). Brown Brothers 
Harriman & Co. will be the Administrator, Custodian and Transfer Agent 
of the Fund and its Shares. SEI Investments Distribution Co. (``SEI'') 
will be the distributor for the Fund's Shares.\9\
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    \9\ The Commission has previously approved the listing and 
trading of other issues of Managed Trust Securities on the Exchange. 
See Securities Exchange Act Release Nos. 60064 (June 8, 2009), 74 FR 
28315 (June 15, 2009) (SR-NYSEArca-2009-30) (order approving the 
adoption of listing standards for Managed Trust Securities and the 
listing and trading of shares of the iShares[supreg] Diversified 
Alternatives Trust); 80254 (March 15, 2017), 82 FR 14548 (March 21, 
2017) (SR-NYSEArca-2016-96) (order approving proposed rule change to 
amend NYSE Arca Equities Rule 8.700 and to list and trade shares of 
the Managed Emerging Markets Trust).
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    The Sponsor is registered as a commodity pool operator and is 
affiliated with a FINRA-registered broker-dealer through common 
ownership. As part of the enterprise-wide compliance program, the 
Sponsor has implemented a ``fire wall'' regarding access to information 
concerning the composition and/or changes to the Fund's portfolio. The 
Sponsor's Code of Ethics and internal controls are designed to prevent 
and detect such exchange of information.
    In the event (a) the Sponsor becomes newly affiliated with a 
broker-dealer, or (b) any new sponsor becomes affiliated with a broker-
dealer, such broker-dealer shall erect and maintain a ``fire wall'' 
around the personnel of the sponsor who have access to information 
concerning changes and adjustments to the Disclosed Portfolio (as 
defined in NYSE Arca Equities Rule 8.700(c)(2)). Personnel of the 
sponsor who make decisions regarding the composition of the Disclosed 
Portfolio must be subject to procedures designed to prevent the use and 
dissemination of material nonpublic information regarding the Disclosed 
Portfolio.
Operation of the Trust
    According to the Registration Statement, the Fund's primary 
investment objective will be to provide long exposure to lead month 
Futures Contracts. The Futures Contracts are widely regarded as a 
general measure of the forward implied volatility of certain

[[Page 38975]]

blue-chip European companies.\10\ The Fund will use these Futures 
Contracts as a performance benchmark (``Benchmark''). The Fund will be 
actively managed and will have a secondary investment objective to 
outperform its Benchmark by actively managing the ``rolling'' of these 
Futures Contracts.\11\
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    \10\ The Futures Contracts offer traders the ability to take a 
view on European implied volatility changes, trade the spread 
between different volatility indexes or hedge the volatility 
exposure of portfolios. The Futures Contracts are denominated in 
Euros and are traded on the Eurex under the ticker symbol ``FVS''. 
The performance of the Futures Contracts is tied to the performance 
of the VSTOXX. Both the Futures Contracts and the VSTOXX are 
negatively correlated to the Index. Investors that believe the 
forward implied market volatility of the Index will increase may buy 
the Futures Contracts. Conversely, investors that believe that the 
forward implied market volatility of the Index will decline may sell 
the Futures Contracts. The Futures Contracts are available with 
respect to the eight nearest successive calendar months. The market 
value of the Futures Contracts is available on the Eurex.
    \11\ According to the Registration Statement, to ``roll'' a 
Futures Contract means to sell a Futures Contract as it nears its 
expiration date and to replace it with a new contract that has a 
later expiration date. When rolling Futures Contracts, the Fund 
generally will select between Futures Contracts with the three 
nearest expiration dates (known as the front, second and third month 
contracts) based on an analysis of the cost of establishing and 
maintaining such positions. Futures Contracts with a longer term to 
expiration may be priced higher than Futures Contracts with a 
shorter term to expiration, a relationship called ``contango''. When 
rolling Futures Contracts that are in contango, the Fund may sell 
the expiring Futures Contract at a lower price and buy a longer-
dated Futures Contract at a higher price, resulting in a negative 
roll yield. During contango environments, the Fund's active 
investment strategy will attempt to select among the front, second, 
and third month Futures Contracts in a manner that mitigates 
negative roll yield and potentially increases returns as compared to 
a strategy that uses a formulaic roll, always rolling to the Futures 
Contract with the nearest expiration. Conversely, Futures Contracts 
with a longer term to expiration may be priced lower than Futures 
Contracts with a shorter term to expiration, a relationship called 
``backwardation''. When rolling Futures Contracts that are in 
backwardation, the Fund may sell the expiring Futures Contract at a 
higher price and buy the longer-dated Futures Contract at a lower 
price, resulting in a positive roll yield. During backwardation 
environments, the Fund's active strategy will attempt to select 
among the front, second, and third month Futures Contracts in a 
manner that maximizes positive roll yield and potentially increases 
returns.
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    According to the Registration Statement, by being long Futures 
Contracts, the Fund will seek to benefit from increases in the price of 
the Futures Contracts. When the price of Futures Contracts held by the 
Fund declines the Fund will lose value. The performance of the Futures 
Contracts is related to the performance of the VSTOXX. The Fund will 
not seek to track or outperform either the VSTOXX or the Index and the 
performance of the Fund will be very different from the performance of 
either the VSTOXX Index or the Index.
    According to the Registration Statement, in seeking to achieve the 
Fund's investment objectives, the Sponsor will use a mathematical 
approach to investing. Using this approach, the Sponsor will determine 
the type, quantity and mix of investment positions that the Sponsor 
believes, in combination, should produce daily returns consistent with 
the Fund's objectives. The Sponsor will rely upon a pre-determined 
model to generate orders that result in repositioning the Fund's 
investments in accordance with its investment objective.
    Under normal market conditions,\12\ the Fund generally will seek to 
remain fully invested at all times in the Futures Contracts in a manner 
consistent with its investment objectives without regard to market 
conditions, trends or direction.
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    \12\ The term ``normal market conditions'' is defined in NYSE 
Arca Equities Rule 8.600(c)(5).
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    The Fund will invest the remainder of its un-invested assets in 
high-quality, short-term debt instruments that have terms-to-maturity 
of less than 397 days, such as U.S. government securities and 
repurchase agreements (``Money Market Instruments'').
    Under limited circumstances, the Fund also may invest in swap 
contracts and forward contracts that reference its Benchmark 
(``Financial Instruments''). In the event position price or 
accountability limits are reached with respect to Futures Contracts, 
the Sponsor may, in its commercially reasonable judgment, cause the 
Fund to obtain exposure to the Futures Contracts through swaps 
referencing the Futures Contracts.\13\ The Fund may also invest in 
swaps if the market for a specific Futures Contract experiences 
emergencies (e.g., natural disaster, terrorist attack or an act of God) 
or disruptions (e.g., a trading halt or a flash crash) which, in the 
Sponsor's commercially reasonable judgment, prevent, or otherwise make 
it impractical, for the Fund to obtain the appropriate amount of 
investment exposure to the affected Futures Contracts.
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    \13\ The Fund intends to enter into swap agreements only with 
major, global financial institutions; however, there are no 
limitations on the percentage of its assets the Fund may invest in 
swap agreements with a particular counterparty. The Fund may use 
various techniques to minimize credit risk. The Fund will seek to 
mitigate risks in connection with the uncleared OTC swaps by 
generally requiring that the counterparties for the Fund agree to 
post collateral for the benefit of the Fund, marked to market daily, 
subject to certain minimum thresholds.
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    The Fund will also hold cash or cash equivalents, such as U.S. 
Treasury securities or other high credit quality, short-term fixed-
income or similar securities (such as shares of money market funds and 
collateralized repurchase agreements), for direct investment or as 
collateral for Futures Contracts and Financial Instruments and pending 
investment in Futures Contracts and Financial Instruments. The Fund may 
invest up to 100% of its assets in any of these types of cash or cash 
equivalent securities.
    Subject to the Sponsor's rolling methodology used for the Fund, the 
Sponsor will not invest the assets of the Fund based on its view of the 
investment merit of a particular investment, other than for cash 
management purposes, nor does it conduct conventional volatility 
research or analysis, or forecast market movement or trends, in 
managing the assets of the Fund. The Fund will seek to remain fully 
invested at all times in Futures Contracts, Financial Instruments and 
Money Market Instruments that, in combination, provide exposure to the 
Futures Contracts consistent with its investment objective without 
regard to market conditions, trends or direction.
Creation and Redemption Transactions
    According to the Registration Statement, an ``Authorized 
Participant'' may purchase (i.e., create) or redeem ``Creation Units'' 
in the Fund. A Creation Unit is a block of 50,000 Shares of a Fund. The 
size of a Creation Unit is subject to change. A creation transaction 
generally will take place when an Authorized Participant deposits a 
specified amount of cash in exchange for a specified number of Creation 
Units. Similarly, Shares can be redeemed only in Creation Units, 
generally for cash.\14\ Purchase orders

[[Page 38976]]

will be irrevocable. Except when aggregated in Creation Units, Shares 
will not be redeemable. The prices at which creations and redemptions 
occur will be based on the next calculation of the NAV after an order 
is received in proper form.
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    \14\ According to the Registration Statement, Creation Units of 
the Fund are expected to be created when there is sufficient demand 
for Shares of the Fund that the market price per Share is at a 
premium to the net asset value (``NAV'') per Share. Authorized 
Participants will likely sell the Shares to the public at prices 
that are expected to reflect, among other factors, the trading price 
of the Shares and the supply of and demand for the Shares at the 
time of sale and are expected to fall between the NAV and the 
trading price of the Shares at the time of sale. Similarly, it is 
expected that Creation Units of the Fund will be redeemed when the 
market price per Share of the Fund is at a discount to the NAV per 
Share. The Sponsor expects that the exploitation of such arbitrage 
opportunities by Authorized Participants and their clients and 
customers will tend to cause the public trading price of the Shares 
to track the NAV per Share of the Fund closely over time. Retail 
investors seeking to purchase or sell Shares on any day are expected 
to effect such transactions in the secondary market at the market 
price per Share, rather than in connection with the creation or 
redemption of Creation Units.
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    Creation and redemption transactions must be placed each day with 
SEI by the create/redeem cut-off time (i.e., 3:00 Central Europe Time 
(9:00 a.m. Eastern Time most of the year)), or earlier if the Exchange 
or other exchange material to the valuation or operation of the Fund 
closes before the cut-off time, to receive that day's NAV. The total 
payment required to create each Creation Unit is the NAV of 50,000 
Shares on the purchase order date plus the applicable transaction fee.
    If permitted by the Sponsor in its sole discretion with respect to 
the Fund, an Authorized Participant may also agree to enter into or 
arrange for an exchange of a futures contract for related position 
(``EFCRP'') or block trade with the Fund whereby the Authorized 
Participant would also transfer to the Fund Futures Contracts at or 
near the closing settlement price for such contracts on the purchase 
order date.
Redemption Procedures
    According to the Registration Statement, the procedures by which an 
Authorized Participant can redeem one or more Creation Units will 
mirror the procedures for the creation of Creation Units. On any 
``Business Day'',\15\ an Authorized Participant may place an order with 
the Distributor to redeem one or more Creation Units. If a redemption 
order is received prior to the applicable cut-off time, or earlier if 
the Exchange or other exchange material to the valuation or operation 
of the Fund closes before the cut-off time, the day on which SEI 
receives a valid redemption order is the redemption order date. If the 
redemption order is received after the applicable cut-off time, the 
redemption order date will be the next day. Redemption orders will be 
irrevocable.
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    \15\ A Business Day is any day on which the NAV of the Fund is 
determined.
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    Upon request of an Authorized Participant made at the time of a 
redemption order, the Sponsor at its sole discretion may determine, in 
addition to delivering redemption proceeds, to transfer Futures 
Contracts to the Authorized Participant pursuant to an EFCRP or to a 
block trade sale of Futures Contracts to the Authorized Participant.
    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 as described in ``--Creation and Redemption Transactions'' above. 
The cash redemption amount will be 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.
Net Asset Value
    According to the Registration Statement, the NAV in respect of the 
Fund means the total assets of the Fund including, but not limited to, 
all cash and cash equivalents or other debt securities less total 
liabilities of the Fund, consistently applied under the accrual method 
of accounting. In particular, the NAV will include any unrealized 
profit or loss on open Futures Contracts and Financial Instruments, and 
any other credit or debit accruing to the Fund but unpaid or not 
received by the Fund. The NAV per Share of the Fund will be computed by 
dividing the value of the net assets of the Fund (i.e., the value of 
its total assets less total liabilities) by its total number of Shares 
outstanding. Expenses and fees will be accrued daily and taken into 
account for purposes of determining the NAV. The Fund will compute its 
NAV at the time set forth below, or an earlier time as set forth on 
www.ProShares.com, if necessitated by the Exchange or other exchange 
material to the valuation or operation of the Fund closing early. The 
Fund's NAV is calculated only once each trading day. The NAV 
calculation time for the Fund will typically be 5:30 Central Europe 
Time (11:30 a.m. Eastern Time most of the year).
    In calculating the NAV of the Fund, the settlement value of the 
Fund's non-exchange-traded Financial Instruments will be determined by 
applying the then-current disseminated levels for the Futures Contracts 
to the terms of the Fund's non-exchange-traded Financial Instruments. 
However, in the event that underlying Futures Contracts are not trading 
due to the operation of daily limits or otherwise, the Sponsor may, in 
its sole discretion, choose to fair value the Futures Contracts in 
order to value the Fund's non-exchange-traded Financial Instruments for 
purposes of the NAV calculation. Such fair value prices would generally 
be determined based on available inputs about the current value of the 
Futures Contracts and would be based on principles that the Sponsor 
deems fair and equitable so long as such principles are consistent with 
normal industry standards.
    Futures Contracts will be calculated at their then current market 
value, which is based upon the settlement price (for the Fund) or the 
last traded price before the NAV time, for that particular Futures 
Contract traded on the applicable exchange on the date with respect to 
which the NAV is being determined. If a Futures Contract could not be 
liquidated on such day, due to the operation of daily limits or other 
rules of the exchange upon which that position is traded or otherwise, 
the Sponsor may, in its sole discretion, choose to determine a fair 
value price as the basis for determining the market value of such 
position for such day. Such fair value prices would generally be 
determined based on available inputs about the current value of the 
Futures Contracts and would be based on principles that the Sponsor 
deems fair and equitable so long as such principles are consistent with 
normal industry standards.
    Short-term debt instruments will be priced at amortized cost.
Indicative Optimized Portfolio Value (``IOPV'')
    The IOPV is an indicator of the value of the Fund's net assets at 
the time the IOPV is disseminated. The IOPV will be calculated and 
disseminated every 15 seconds throughout the trading day. The IOPV will 
generally be 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 Futures Contracts and Financial Instruments held by the 
Fund. The IOPV should not be viewed as an actual real time update of 
the NAV because NAV is calculated only once at the end of each trading 
day. The IOPV also should not be viewed as a precise value of the 
Shares.
    The Exchange will disseminate the IOPV. In addition, the IOPV will 
be published on the Exchange's Web site and is available through on-
line information services such as Bloomberg Finance L.P. and/or 
Reuters.
Availability of Information
    The Trust's Web site, 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

[[Page 38977]]

closing price and the reported daily trading volume; (b) the daily 
composition of the Disclosed Portfolio, as defined in NYSE Arca 
Equities Rule 8.700(c)(2);\16\ (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 (4) 
previous calendar quarters; and (f) the current prospectus of the 
Trust, included in the Registration Statement.
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    \16\ NYSE Arca Equities Rule 8.700(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 Web site 
(www.Proshares.com) for the Futures Contracts and Financial Instruments 
in the Disclosed Portfolio 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 Web 
site information will be publicly available at no charge. In addition, 
price information for the Futures Contracts and Financial Instruments 
held by the Trust will be available through major market data vendors 
and/or the exchange on which they are listed and traded, as applicable.
    As noted above, the Trust's NAV and the NAV per Share will be 
calculated and disseminated daily.\17\ 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 Web site daily trading 
volume, closing prices and the NAV per Share.
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    \17\ 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 Futures Contracts will be available from Eurex and 
pricing for Financial Instruments will be available from major market 
data vendors. Price information for cash equivalents and Money Market 
Instruments will be 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 Equities Rule 7.34).\18\
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    \18\ 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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    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.
    The current trading price per Share will be published continuously 
as trades occur throughout each trading day through CTA, or through 
major market data vendors.
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, including 
swaps. Market makers and participants should be able to value 
derivatives, including swaps, 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, including swaps.
Criteria for Initial and Continued Listing
    The Trust will be subject to the criteria in NYSE Arca Equities 
Rule 8.700 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 Equities Rule 5.3 and 
Rule 10A-3 under the Exchange Act.\19\
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    \19\ 17 CFR 240.10A-3.
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Trading Rules
    Under NYSE Arca Equities Rule 8.700(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 
Equities Rule 8.700 provides that transactions in Managed Trust 
Securities will occur during the trading hours specified in NYSE Arca 
Equities Rule 7.34. Therefore, in accordance with NYSE Arca Equities 
Rule 7.34, 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 Equities Rule 7.6, the minimum price variation (``MPV'') for 
quoting and entry of orders in equity securities traded on the NYSE 
Arca Marketplace is $0.01, with the exception of securities that are 
priced less than $1.00 for which the MPV for order entry is $0.0001.
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 Equities Rule 7.12 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

[[Page 38978]]

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.\20\ 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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    \20\ 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 Futures 
Contracts 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 Futures 
Contracts from such markets or entities. In addition, the Exchange may 
obtain information regarding trading in the Shares and Futures 
Contracts from markets or other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement (``CSSA'').\21\ FINRA, on behalf of the Exchange, is 
able to access, as needed, trade information for certain Money Market 
Instruments held by the Fund reported to FINRA's Trade Reporting and 
Compliance Engine (``TRACE'').
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    \21\ 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 or Benchmark, (b) 
limitations on portfolio of the Fund or Benchmark, 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 a Fund is not in compliance with the 
applicable listing requirements, the Exchange will commence delisting 
procedures under NYSE Arca Equities Rule 5.5(m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin (``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) NYSE Arca Equities Rule 9.2(a), which 
imposes a duty of due diligence on its ETP Holders to learn the 
essential facts relating to every customer prior to trading the Shares; 
(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 the Futures Contracts.
    The Bulletin also will discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Exchange Act.
    The Bulletin also will disclose that the NAV and NAV per Share will 
be calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \22\ 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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    \22\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendment to add Futures 
Contracts and/or swaps on VSTOXX 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 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.
    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 Equities Rule 
8.700. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws. The Exchange may obtain information 
via the ISG from other exchanges that are members of the ISG or with 
which the Exchange has entered into a CSSA. 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 Web site 
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 Futures Contracts will be available from Eurex and 
pricing for forward contracts and swaps 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,

[[Page 38979]]

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 Futures Contracts occurs. 
If the interruption to the dissemination of the IOPV or the value of 
the underlying 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. 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 Equities Rule 7.12 have been reached or because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. 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 via the ISG 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 futures contracts, and that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace.

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

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

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or 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-2017-85 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2017-85. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2017-85 and should 
be submitted on or before September 6, 2017.
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    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-17275 Filed 8-15-17; 8:45 am]
 BILLING CODE 8011-01-P


