
[Federal Register Volume 82, Number 188 (Friday, September 29, 2017)]
[Notices]
[Pages 45643-45647]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20896]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81686; File No. SR-NYSEArca-2017-05]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 2 and 
3 Thereto, To List and Trade Shares of Direxion Daily Crude Oil Bull 3x 
Shares and Direxion Daily Crude Oil Bear 3x Shares Under NYSE Arca 
Equities Rule 8.200

September 22, 2017.

I. Introduction

    On January 23, 2017, NYSE Arca, Inc. (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'' or 
``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to list and trade shares (``Shares'') of Direxion Daily Crude 
Oil Bull 3x Shares and Direxion Daily Crude Oil Bear 3x Shares 
(individually, ``Fund,'' and, collectively, ``Funds'') Under NYSE Arca 
Equities Rule 8.200. The proposed rule change was published for comment 
in the Federal Register on February 7, 2017.\3\ On March 16, 2017, 
pursuant to Section 19(b)(2) of the Act,\4\ the Commission designated a 
longer period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to disapprove the proposed rule change.\5\ On May 5, 
2017, the Commission instituted proceedings to determine whether to 
approve or disapprove the proposed rule change.\6\ On June 23, 2017, 
the Exchange filed Amendment No. 1 to the proposed rule change.\7\ On 
July 27, 2017, the Commission designated a longer period for Commission 
action on the proposed rule change.\8\ On August 1, 2017, the Exchange 
filed Amendment No. 2 to the proposed rule change.\9\ On September 19, 
2017, the Exchange filed Amendment No. 3 to the proposed rule 
change.\10\ The Commission has received

[[Page 45644]]

no comments on the proposed rule change. This order grants approval of 
the proposed rule change, as modified by Amendment Nos. 2 and 3 
thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 79916 (February 1, 
2017), 82 FR 9608.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 80265, 82 FR 14778 
(March 22, 2017).
    \6\ See Securities Exchange Act Release No. 80606, 82 FR 22042 
(May 11, 2017). Specifically, the Commission instituted proceedings 
to allow for additional analysis of the proposed rule change's 
consistency with Section 6(b)(5) of the Act, which requires, among 
other things, that the rules of a national securities exchange be 
``designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade,'' and 
``to protect investors and the public interest.'' See id. at 22043.
    \7\ Amendment No. 1, which amended the replaced the original 
filing in its entirety, is available on the Commission's Web site 
at: https://www.sec.gov/comments/sr-nysearca-2017-05/nysearca201705-1822806-154288.pdf.
    \8\ See Securities Exchange Act Release No. 81224, 82 FR 36030 
(August 2, 2017).
    \9\ In Amendment No. 2, which amended and replaced the proposed 
rule change, as modified by Amendment No. 1 thereto, in its 
entirety, the Exchange: (1) Supplemented its descriptions of the 
Funds' investments in over-the-counter transactions and Short-Term 
Investments; (2) supplemented its description of the calculation of 
the daily value of each Fund's net asset value (``NAV''); (3) 
provided information regarding the calculation and dissemination of 
the Indicative Fund Value of the Funds; (4) added a representation 
regarding the dissemination of the Benchmark; (5) clarified the 
information that will be made available on the Funds' Web site 
regarding the Funds and their portfolio holdings; (6) supplemented 
its description of the Exchange's surveillance procedures; (7) 
represented that the applicability of Exchange listing rules 
specified in the proposed rule change shall constitute continued 
listing requirements for listing the Shares on the Exchange; (8) 
clarified the type of information that will be available in the 
Information Bulletin regarding the Funds' portfolio holdings; and 
(9) made other technical changes. Amendment No. 2 is not subject to 
notice and comment because it is a technical amendment that does not 
materially alter the substance of the proposed rule change or raise 
any novel regulatory issues. Amendment No. 2 to the proposed rule 
change is available on the Commission's Web site at: https://www.sec.gov/comments/sr-nysearca-2017-05/nysearca201705-2161993-157780.pdf.
    \10\ In Amendment No. 3, which partially amended the proposed 
rule change, as modified by Amendment No. 2 thereto, the Exchange 
made representations regarding the size and liquidity of the oil 
contract market. Amendment No. 3 is not subject to notice and 
comment because it does not materially alter the substance of the 
proposed rule change or raise any novel regulatory issues. Amendment 
No. 3 to the proposed rule change is available on the Commission's 
Web site at: https://www.sec.gov/comments/sr-nysearca-2017-05/nysearca201705-2583842-161105.pdf.
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II. Exchange's Description of the Proposal \11\
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    \11\ A more detailed description of the Funds, the Shares, and 
the Benchmark, as well as investment risks, creation and redemption 
procedures, NAV calculation, availability of values and other 
information regarding the Funds' portfolio holdings, and fees, among 
other things, is included in the Registration Statement (as defined 
herein), as well as Amendment No. 2 to the proposed rule change, as 
applicable. See infra note 13, and supra note 9, respectively.
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    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.200, Commentary .02, which governs the listing and 
trading of Trust Issued Receipts.\12\ Each Fund is a series of the 
Direxion Shares ETF Trust II (``Trust''), a Delaware statutory 
trust.\13\ The Trust and the Funds are managed and controlled by 
Direxion Asset Management, LLC (``Sponsor''). The Sponsor is registered 
as a commodity pool operator with the Commodity Futures Trading 
Commission (``CFTC'') and is a member of the National Futures 
Association. Bank of New York Mellon will be the custodian and transfer 
agent for the Funds. U.S. Bancorp Fund Services, LLC serves as 
administrator for the Funds, and Foreside Fund Services, LLC serves as 
the distributor of the Funds.
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    \12\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
Trust Issued Receipts that invest in ``Financial Instruments.'' The 
term ``Financial Instruments,'' as defined in Commentary .02(b)(4) 
to NYSE Arca Equities Rule 8.200, means any combination of 
investments, including cash; securities; options on securities and 
indices; futures contracts; options on futures contracts; forward 
contracts; equity caps, collars, and floors; and swap agreements.
    \13\ The Trust is registered under the Securities Act of 1933 
(``Securities Act''). According to the Exchange, on December 14, 
2016, the Trust filed with the Commission a registration statement 
on Form S-1 under the Securities Act relating to the Funds (File No. 
333-215091) (``Registration Statement'').
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Overview of the Funds

    The investment objective of Direxion Daily Crude Oil Bull 3X Shares 
is to seek, on a daily basis, investment results that correspond 
(before fees and expenses) to a multiple of three times (3x) of the 
daily performance of the Bloomberg WTI Crude Oil Subindex, a subindex 
of the Bloomberg Commodity Index (``Benchmark'').\14\ The investment 
objective of Direxion Daily Crude Oil Bear 3X Shares is to seek, on a 
daily basis, investment results that correspond (before fees and 
expenses) to three times (3x) the inverse of the performance of the 
Benchmark. The Benchmark is intended to reflect the performance of 
crude oil as measured by the price of West Texas Intermediate crude oil 
futures contracts traded on the New York Mercantile Exchange 
(``NYMEX''), including the impact of rolling, without regard to income 
earned on cash positions. The Funds will not be directly linked to the 
``spot'' price of crude oil. The Exchange states that a Fund will not 
seek to achieve its investment objective over a period greater than a 
single trading day.\15\
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    \14\ According to the Exchange, the Bloomberg WTI Crude Oil 
Subindex is a ``rolling index,'' which means that the index does not 
take physical possession of any commodities. The Exchange states 
that futures contracts held by the Funds near expiration are 
generally closed out and replaced by contracts with a later 
expiration as required by the Bloomberg WTI Crude Oil Subindex. The 
Exchange states that this process is referred to as ``rolling.'' See 
Amendment No. 2, supra note 9, at 5 n.6-7.
    \15\ According to the Exchange, a single trading day is measured 
from the time a Fund calculates its NAV to the time of a Fund's next 
NAV calculation. The Exchange states that the return of a Fund for a 
period longer than a single trading day is the result of its return 
for each day compounded over the period and thus will usually differ 
from a Fund's multiple times the return of the Benchmark for the 
same period. See id. at 5 n.8-9.
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    In seeking to achieve the Funds' investment objectives, the Sponsor 
will utilize a mathematical approach to determine the type, quantity, 
and mix of investment positions that the Sponsor believes, in 
combination, should produce daily returns consistent with the Funds' 
respective objectives. The Sponsor will rely on a pre-determined model 
to generate orders that result in repositioning the Funds' investments 
in accordance with their respective investment objectives.

Investments of the Funds

    Each Fund will seek to achieve its respective investment objective 
by investing, under normal market conditions,\16\ substantially all of 
its assets in oil futures contracts traded in the U.S. and listed 
options on such contracts (collectively, ``Futures Contracts''). The 
Funds' investments in Futures Contracts will be used to produce 
economically ``leveraged'' or ``inverse leveraged'' investment results 
for the Funds.
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    \16\ The term ``normal market conditions'' includes, but is not 
limited to, the absence of trading halts in the applicable financial 
markets generally; operational issues (e.g., systems failure) 
causing dissemination of inaccurate market information; or force 
majeure type events such as natural or manmade disaster, act of God, 
armed conflict, act of terrorism, riot or labor disruption or any 
similar intervening circumstance. See id. at 6 n.10.
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    In the event position, price, or accountability limits are reached 
with respect to Futures Contracts,\17\ each Fund may obtain exposure to 
the Benchmark through investment in swap transactions and forward 
contracts referencing such Benchmark or other benchmarks the Sponsor 
believes should be closely correlated to the performance of each Fund's 
benchmark such as the Energy Select Sector Index or the S&P Oil & Gas 
Exploration & Production Select Industry Index (``Financial 
Instruments''). To the extent that the Trust invests in Financial 
Instruments, it would first make use of exchange-traded Financial 
Instruments, if available. If an investment in exchange-traded 
Financial Instruments is unavailable, then the Trust would invest in 
Financial Instruments that clear through derivatives clearing 
organizations that satisfy the Trust's criteria, if available. If an 
investment in cleared Financial Instruments is unavailable, then the 
Trust would invest in other Financial Instruments, including uncleared 
Financial Instruments in the over-the-counter (``OTC'') market. The 
Funds may also invest in Financial Instruments if the market for a 
specific futures contract experiences emergencies (e.g., natural 
disaster, terrorist attack, or an act of God) or disruptions (e.g., a 
trading halt or a flash crash) that prevent or make it impractical for 
a Fund to obtain the appropriate amount of investment exposure using 
Futures Contracts.
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    \17\ According to the Exchange, U.S. futures exchanges have 
established accountability levels and position limits on the maximum 
net long or net short Futures Contracts in commodity interests that 
any person or group of persons under common trading control (other 
than as a hedge, which an investment by a Fund is not) may hold, own 
or control. These levels and position limits apply to the Futures 
Contracts that each Fund would invest in to meet its investment 
objective. In addition to accountability levels and position limits, 
U.S. futures exchanges also set daily price fluctuation limits on 
Futures Contracts. The daily price fluctuation limit establishes the 
maximum amount that the price of a Futures Contract may vary either 
up or down from the previous day's settlement price. See id. at 7-8.
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    The Exchange represents that each Fund will enter into swap 
agreements and other OTC transactions only with large, established, and 
well capitalized financial institutions that meet certain credit 
quality standards and monitoring policies. The Exchange states that 
each Fund will use various techniques to minimize credit risk including 
early termination or reset and payment, using different counterparties 
and limiting the net amount due from any individual counterparty.\18\
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    \18\ See id. at 6-7.
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    Although the Funds will invest such that each Fund's exposure to 
the Benchmark will consist substantially of

[[Page 45645]]

Futures Contracts, the Funds' remaining net assets may be invested in 
cash or cash equivalents and/or U.S. Treasury securities or other high 
credit quality, short-term fixed-income or similar securities (such as 
shares of money market funds and collateralized repurchase agreements, 
collectively, ``Short-Term Investments'') for direct investment or as 
collateral for the Funds' investments.
    The Funds do not intend to hold Futures Contracts through 
expiration, but instead intend to either close or ``roll'' their 
respective positions. When the market for these contracts is such that 
the prices are higher in the more distant delivery months than in the 
nearer delivery months, the sale during the course of the ``rolling 
process'' of the more nearby contract would take place at a price that 
is lower than the price of the more distant contract.\19\
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    \19\ The Exchange states that the pattern of higher futures 
prices for longer expiration Futures Contracts is referred to as 
``contango.'' Alternatively, when the market for these contracts is 
such that the prices are higher in the nearer months than in the 
more distant months, the sale during the course of the ``rolling 
process'' of the more nearby contract would take place at a price 
that is higher than the price of the more distant contract. The 
Exchange states that the pattern of higher futures prices for 
shorter expiration Futures Contracts is referred to as 
``backwardation.'' According to the Exchange, the presence of 
contango in certain Futures Contracts at the time of rolling could 
adversely affect a Fund with long positions, and positively affect a 
Fund with short positions. Similarly, the Exchange states that the 
presence of backwardation in certain Futures Contracts at the time 
of rolling such contracts could adversely affect a Fund with short 
positions and positively affect a Fund with long positions. See id. 
at 7.
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    The Exchange states that the Funds do not expect to have leveraged 
exposure greater than three times (3x) the Funds' net assets. Thus, the 
maximum margin held at a Future Commission Merchant would not exceed 
three times the margin requirement for either Fund.\20\ The Exchange 
represents that not more than 10% of the net assets of a Fund in the 
aggregate invested in Futures Contracts shall consist of Futures 
Contracts whose principal market is not a member of the Intermarket 
Surveillance Group (``ISG'') or is a market with which the Exchange 
does not have a comprehensive surveillance sharing agreement 
(``CSSA'').\21\
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    \20\ See id. at 8.
    \21\ See id. at 13.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\22\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment Nos. 2 and 3 thereto, is 
consistent with Section 6(b)(5) of the Exchange Act,\23\ which 
requires, among other things, that the Exchange's rules be designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. The Commission also finds that the proposal to list and trade 
the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) 
of the Exchange Act,\24\ which sets forth Congress' finding that it is 
in the public interest and appropriate for the protection of investors 
and the maintenance of fair and orderly markets to assure the 
availability to brokers, dealers and investors of information with 
respect to quotations for and transactions in securities.
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    \22\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    According to the Exchange, quotation and last-sale information 
regarding the Shares will be disseminated through the facilities of the 
Consolidated Tape Association (``CTA''). Quotation information for 
Short-Term Investments and OTC swaps may be obtained from brokers and 
dealers who make markets in such instruments, and intra-day price 
information for forward contracts will be available from major market 
data vendors. Quotation information for exchange-traded swaps will be 
available from the applicable exchange and major market vendors. The 
intraday, closing prices, and settlement prices of the Futures 
Contracts will be readily available from the applicable futures 
exchange Web sites, automated quotation systems, published or other 
public sources, or major market data vendors. Complete real-time data 
for the Futures Contracts also is available by subscription through on-
line information services. ICE Futures U.S. and NYMEX also provide 
delayed futures and options on futures information on current and past 
trading sessions and market news free of charge on their respective Web 
sites. The specific contract specifications for Futures Contracts would 
also be available on such Web sites, as well as other financial 
informational sources.
    The Funds' Web site will display the applicable end of day closing 
NAV. Each Fund's total portfolio composition will be disclosed on the 
Funds' Web site each business day that the Exchange is open for 
trading. The Funds' Web site also will include a form of the prospectus 
for the Funds that may be downloaded. The Web site will include the 
Shares' ticker and CUSIP information, along with additional 
quantitative information updated on a daily basis for each Fund.\25\ 
The Web site disclosure of portfolio holdings will be made daily and 
will include, as applicable, (i) the name, quantity, value, expiration 
and strike price of Futures Contracts and Financial Instruments, (ii) 
the counterparty to and value of Financial Instruments, and (iii) the 
aggregate net value of the Short-Term Investments held in each Fund's 
portfolio, if applicable.
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    \25\ The Funds' Web site will include (1) daily trading volume, 
the prior business day's reported NAV and closing price, and a 
calculation of the premium and discount of the closing price or mid-
point of the bid/ask spread at the time of NAV calculation (``Bid/
Ask Price'') against the NAV; and (2) data in chart format 
displaying the frequency distribution of discounts and premiums of 
the daily closing price or Bid/Ask Price against the NAV, within 
appropriate ranges, for at least each of the four previous calendar 
quarters.
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    The Benchmark will be disseminated by one or more major market data 
vendors every 15 seconds during the NYSE Arca Core Trading Session of 
9:30 a.m. to 4:00 p.m. Eastern Time (``E.T.''). The Indicative Fund 
Value (``IFV'') \26\ will be widely disseminated by one or more major 
market data vendors during the NYSE Arca Core Trading Session Share 
will be widely disseminated by one or more major market data vendors 
every 15 seconds during the Exchange's Core Trading Session.\27\ Each 
Fund will compute its NAV at 2:30 p.m. E.T., which is the designated 
closing time of

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the crude oil futures market on NYMEX,\28\ or if the New York Stock 
Exchange (``NYSE'') closes earlier than 2:30 p.m. E.T., each Fund will 
compute its NAV at the time the NYSE closes. The NAV for the Funds' 
Shares will be disseminated daily to all market participants at the 
same time.
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    \26\ The IFV will be calculated by using the prior day's closing 
net assets of a Fund as a base and updating throughout the 
Exchange's Core Trading Session of 9:30 a.m. E.T. to 4:00 p.m. E.T. 
changes in the value of the Futures Contracts and Financial 
Instruments held by a Fund based on the most recently available 
prices for the Fund's investments. According to the Exchange, 
circumstances may arise in which the NYSE Arca Core Trading Session 
is in progress, but trading in Futures Contracts is not occurring. 
Such circumstances may result from reasons including, but not 
limited to, a futures exchange having a separate holiday schedule 
than the NYSE Arca, a futures exchange closing prior to the close of 
the NYSE Arca, price fluctuation limits being reached in a Futures 
Contract, or a futures exchange, imposing any other suspension or 
limitation on trading in a Futures Contract. In such instances, for 
IFV calculation purposes, the price of the applicable Futures 
Contracts, as well as Financial Instruments whose price is derived 
from the Futures Contracts, would be static or priced by the Fund at 
the applicable early cut-off time of the exchange trading the 
applicable Futures Contract. See Amendment No. 2, supra note 9, at 7 
n.13.
    \27\ The Exchange notes that several major market data vendors 
display and/or make widely available IFVs taken from the CTA or 
other data feeds. See id.
    \28\ The Exchange states that the daily value of the NAV is 
calculated as of 2:30 p.m. E.T. to coincide with the designated 
closing time. Futures Contracts, however, continue to trade past 
2:30 p.m. E.T. and through the end of the NYSE Arca Core Trading 
Session at 4:00 p.m. E.T. See id. at 8 n.12.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. If the Exchange becomes aware that the NAV with respect to the 
Shares is not disseminated to all market participants at the same time, 
it will halt trading in the Shares until such time as the NAV is 
available to all market participants. Further, the Exchange may halt 
trading during the day in which an interruption to the dissemination of 
the IFV or the value of the Benchmark occurs. If the interruption to 
the dissemination of the IFV or the value of the Benchmark persists 
past the trading day in which it occurred, the Exchange will halt 
trading no later than the beginning of the trading day following the 
interruption. Trading in Shares of a Fund will be halted if the circuit 
breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. 
Trading also may be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. The Exchange states that it has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.\29\ Moreover, trading of the Shares will be subject to NYSE 
Arca Equities Rule 8.200, Commentary .02(e), which sets forth certain 
restrictions on Equity Trading Permit (``ETP'') Holders acting as 
registered market makers in Trust Issued Receipts to facilitate 
surveillance.
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    \29\ See id. at 13.
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    The Commission notes that the Exchange or the Financial Industry 
Regulatory Authority (``FINRA''), on behalf of the Exchange, or both, 
will communicate as needed regarding trading in the Shares and certain 
Futures Contracts with other markets and other entities that are 
members of the ISG, and the Exchange or FINRA, on behalf of the 
Exchange, or both, may obtain trading information regarding trading in 
the Shares and certain Futures Contracts from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and certain Futures Contracts from markets and 
other entities that are members of ISG or with which the Exchange has 
in place a CSSA.\30\ The Exchange is also able to obtain information 
regarding trading in the Shares, the physical commodities underlying 
Futures Contracts through ETP Holders, in connection with such ETP 
Holders' proprietary or customer trades which they effect through ETP 
Holders on any relevant market. The Exchange can obtain market 
surveillance information, including customer identity information, with 
respect to transactions (including transactions in cash-settled options 
on Futures Contracts) occurring on U.S. futures exchanges, which are 
members of the ISG.
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    \30\ For a list of the current members of ISG, see 
www.isgportal.org. According to the Exchange, not all components of 
a Fund may trade on markets that are members of ISG or with which 
the Exchange has in place a CSSA. See id. at 13 n.18.
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    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. In support of this 
proposal, the Exchange represented that:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.200.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances administered by the Exchange, as well as cross-market 
surveillances administered by FINRA on behalf of the Exchange, which 
are designed to detect violations of Exchange rules and applicable 
federal securities laws, and these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange.
    (4) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The risks involved in trading the Shares during the Early and Late 
Trading Sessions when an updated IFV will not be calculated or publicly 
disseminated; (b) the procedures for purchases and redemptions of 
Shares in Creation Units (and that Shares are not individually 
redeemable); (c) 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; (d) how 
information regarding the IFV is disseminated; (e) how information 
regarding portfolio holdings is disseminated; (f) that a static IFV 
will be disseminated, between the close of trading on the ICE Futures 
U.S. and NYMEX and the close of the NYSE Arca Core Trading Session; (g) 
the requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (h) trading information.
    (5) For initial and continued listing, each Fund will be in 
compliance with Rule 10A-3 under the Act,\31\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \31\ 17 CFR 240.10A-3.
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    (6) Each Fund will seek to achieve its respective investment 
objective by investing, under normal market conditions, substantially 
all of its assets in Futures Contracts. In the event position, price or 
accountability limits are reached with respect to Futures Contracts, 
each Fund may obtain exposure to the Benchmark through investments in 
Financial Instruments. To the extent that the Trust invests in 
Financial Instruments, it would first make use of exchange-traded 
Financial Instruments, if available. If an investment in exchange-
traded Financial Instruments is unavailable, then the Trust would 
invest in Financial Instruments that clear through derivatives clearing 
organizations that satisfy the Trust's criteria, if available. If an 
investment in cleared Financial Instruments is unavailable, then the 
Trust would invest in other Financial Instruments, including uncleared 
Financial Instruments in the OTC market.
    (7) The oil contract market is of significant size and liquidity, 
and has average daily volume of 650,000 contracts and daily open 
interest of 450,000 contracts. The Sponsor is registered as a commodity 
pool operator with the CFTC and is a member of the National Futures 
Association, and the Information Bulletin will reference that the CFTC 
has regulatory jurisdiction over the trading of Futures Contracts 
traded on U.S. markets.
    (8) Not more than 10% of the net assets of a Fund in the aggregate 
invested in Futures Contracts shall consist of Futures Contracts whose 
principal market is not a member of the

[[Page 45647]]

ISG or is a market with which the Exchange does not have a CSSA.
    (9) Each Fund will enter into swap agreements and other OTC 
transactions only with large, established and well capitalized 
financial institutions that meet certain credit quality standards and 
monitoring policies. Each Fund will use various techniques to minimize 
credit risk including early termination or reset and payment, using 
different counterparties and limiting the net amount due from any 
individual counterparty.
    (10) A minimum of 100,000 Shares of each Fund will be outstanding 
at the commencement of trading on the Exchange.

The Exchange represents that all statements and representations made in 
this filing regarding (a) the description of the portfolios of the 
Funds or Benchmark, (b) limitations on portfolio holdings or the 
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 Funds 
to comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Act, the Exchange will 
monitor for compliance with the continued listing requirements.\32\ 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).
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    \32\ The Commission notes that certain other proposals for the 
listing and trading of Managed Fund Shares include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
77499 (April 1, 2016), 81 FR 20428 (April 7, 2016) (Notice of Filing 
of Amendment No. 2, and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 2, to List and 
Trade Shares of the SPDR DoubleLine Short Duration Total Return 
Tactical ETF of the SSgA Active Trust), available at: http://www.sec.gov/rules/sro/bats/2016/34-77499.pdf. In the context of this 
representation, it is the Commission's view that ``monitor'' and 
``surveil'' both mean ongoing oversight of the Fund's compliance 
with the continued listing requirements. Therefore, the Commission 
does not view ``monitor'' as a more or less stringent obligation 
than ``surveil'' with respect to the continued listing requirements.
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    This approval order is based on all of the Exchange's 
representations and description of the Funds, including those set forth 
above and in Amendment No. 2 to the proposed rule change. The 
Commission notes that the Shares must comply with the requirements of 
NYSE Arca Equities Rule 8.200 and Commentary .02 thereto to be listed 
and traded on the Exchange on an initial and continuing basis.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 2 and 3 thereto, is 
consistent with Section 6(b)(5) of the Act \33\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \33\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\34\ that the proposed rule change (SR-NYSEArca-2017-05), 
as modified by Amendment Nos. 2 and 3 thereto, be, and it hereby is, 
approved.
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    \34\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20896 Filed 9-28-17; 8:45 am]
 BILLING CODE 8011-01-P


