[Federal Register Volume 86, Number 157 (Wednesday, August 18, 2021)]
[Notices]
[Pages 46287-46290]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17669]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92650; File No. SR-NYSEArca-2021-29]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Instituting Proceedings To Determine 
Whether To Approve or Disapprove a Proposed Rule Change, as Modified by 
Amendment No. 1, To List and Trade Shares of ConvexityShares 1x SPIKES 
Futures ETF Under NYSE Arca Rule 8.200-E (Trust Issued Receipts)

August 12, 2021.

I. Introduction

    On May 13, 2021, NYSE Arca, Inc. (``NYSE Arca'' or ``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 the 
ConvexityShares 1x SPIKES Futures ETF (``Fund''), a series of the 
ConvexityShares Trust (``Trust''), under NYSE Arca Rule 8.200-E, 
Commentary .02 (``Trust Issued Receipts''). The proposed rule change 
was published for comment in the Federal Register on May 26, 2021.\3\ 
On July 2, 2021, 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 approve or disapprove the proposed 
rule change.\5\ On July 26, 2021, the Exchange filed Amendment No. 1 to 
the proposed rule change, which replaced and superseded the proposed 
rule change as originally filed.\6\ The

[[Page 46288]]

Commission has received no comments on the proposed rule change. The 
Commission is publishing this notice and order to solicit comments on 
Amendment No. 1 from interested persons, and to institute proceedings 
pursuant to Section 19(b)(2)(B) of the Act \7\ to determine whether to 
approve or disapprove the proposed rule change, as modified by 
Amendment No. 1.
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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. 91952 (May 20, 
2021), 86 FR 28410.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 92321, 86 FR 36173 
(July 8, 2021). The Commission designated August 24, 2021, as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to approve or disapprove, 
the proposed rule change.
    \6\ In Amendment No. 1, the Exchange: (i) Stated that Teucrium 
Trading, LLC will be the Sub-Adviser for the Fund; (ii) represented 
that neither the Sponsor nor the Sub-Adviser (as such terms are 
defined below) is registered as a broker-dealer or affiliated with a 
broker-dealer and made additional representations with respect to 
firewalls; (iii) stated that the Fund will seek investment results, 
before fees and expenses, that correspond to the performance of the 
Index (as defined below) and that the Fund will seek to track the 
Index over time, not just for a single day; (iv) stated that the 
Sponsor or Sub-Adviser determines the type, quantity and mix of 
investments that the Sponsor or Sub-Adviser believes, in 
combination, should provide exposure to the Index to seek investment 
results equal to the performance of the Index; (v) stated that the 
Sponsor or Sub-Adviser may cause the Fund to invest in VIX Related 
Positions (as defined below) if the market for a specific futures 
contract experiences emergencies or disruptions or in situations 
where the Sponsor or Sub-Adviser deems it impractical or inadvisable 
to buy or sell SPIKES futures contracts; (vi) represented that (a) 
the Fund will attempt to limit counterparty risk in uncleared swap 
agreements by entering into such agreements only with counterparties 
the Sponsor and Sub-Adviser believes are creditworthy and by 
limiting the Fund's exposure to each counterparty and (b) the 
Sponsor and Sub-Adviser will monitor the creditworthiness of each 
counterparty and the Fund's exposure to each counterparty on an 
ongoing basis; (vii) stated that, with respect to halting trading in 
the Shares, the Exchange may consider (a) the extent to which 
trading is not occurring in the securities and/or the financial 
instruments composing the daily disclosed portfolio of the Fund; or 
(b) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present; (viii) 
represented that information regarding market price and trading 
volume for the Shares will be continually available on a real-time 
basis throughout the day on brokers' computer screens and other 
electronic services; (ix) represented that prior to the commencement 
of trading, the Exchange will inform its Equity Trading Permit 
Holders in an Information Bulletin of, among other things, the 
special characteristics and risks associated with trading the 
Shares, the prospectus delivery requirements applicable to the Fund, 
and any exemptive, no-action, and interpretive relief granted by the 
Commission from any rules under the Act; and (x) made technical, 
clarifying, and conforming changes. Amendment No. 1 is available at: 
https://www.sec.gov/comments/sr-nysearca-2021-29/srnysearca202129.htm.
    \7\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1 \8\
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    \8\ Additional information regarding the Fund, the Trust, and 
the Shares, including investment strategies, creation and redemption 
procedures, and portfolio holdings can be found in Amendment No. 1, 
supra note 6.
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    The Exchange proposes to list and trade Shares of the Fund \9\ 
under NYSE Arca Rule 8.200-E, Commentary .02 which governs the listing 
and trading of Trust Issued Receipts \10\ on the Exchange. The Fund 
will be managed and controlled by ConvexityShares, LLC (``Sponsor''), a 
commodity pool operator.\11\ Teucrium Trading, LLC, a commodity trading 
adviser registered with the Commodity Futures Trading Commission, will 
be the Sub-Adviser for the Fund (``Sub-Adviser'') and will manage the 
Fund's commodity futures investment strategy.\12\ U.S. Bank will 
provide custody and fund accounting to the Trust and the Fund; U.S. 
Bancorp Fund Services will be the transfer agent for the Shares and 
administrator for the Fund; and Foreside will serve as the distributor 
for the Fund.
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    \9\ On December 15, 2020, the Trust submitted to the Commission 
its draft registration statement on Form S-1 (``Registration 
Statement'') under the Securities Act of 1933 on a confidential 
basis. The Registration Statement for the Fund is not yet effective 
and the Exchange will not commence trading in Shares of the Fund 
until the Registration Statement becomes effective.
    \10\ Commentary .02 to NYSE Arca Rule 8.200-E applies to Trust 
Issued Receipts that invest in ``Financial Instruments.'' The term 
``Financial Instruments,'' as defined in Commentary .02(b)(4) to 
NYSE Arca Rule 8.200-E, 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.
    \11\ The Sponsor is not registered as a broker-dealer or 
affiliated with a broker-dealer. In the event (a) the Sponsor 
becomes registered as a broker-dealer or becomes newly affiliated 
with a broker-dealer, or (b) any new sponsor becomes registered as a 
broker-dealer or becomes newly affiliated with a broker-dealer, it 
will implement and maintain a fire wall with respect to its relevant 
personnel of the broker-dealer or broker-dealer affiliate, as 
applicable, regarding access to information concerning the 
composition and/or changes to the portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding the portfolio.
    \12\ The Sub-Adviser is not registered as a broker-dealer or 
affiliated with a broker-dealer. In the event (a) the Sub-Adviser 
becomes registered as a broker-dealer or becomes newly affiliated 
with a broker-dealer, or (b) any new Sub-Adviser becomes registered 
as a broker-dealer or becomes newly affiliated with a broker-dealer, 
it will implement and maintain a fire wall with respect to its 
relevant personnel of the broker-dealer or broker-dealer affiliate, 
as applicable, regarding access to information concerning the 
composition and/or changes to the portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding the portfolio.
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    The Fund will seek investment results, before fees and expenses, 
that correspond to the performance of its benchmark index. The Fund 
will seek to track the Index over time, not just for a single day. The 
Fund is benchmarked to the T3 SPIKE Front 2 Futures Index (``Index''), 
an investable index of SPIKES futures contracts.\13\ The Index is 
intended to reflect the returns that are potentially available through 
an unleveraged investment in a theoretical portfolio of first- and 
second-month futures contracts on the SPIKES Volatility Index (``SPIKES 
Index'').\14\
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    \13\ The Index is sponsored by Triple Three Partners Pty Ltd, 
which licenses the use of the Index to its affiliated company, T3i 
Pty Ltd (Triple Three Partners Pty Ltd and T3i Pty Ltd. are 
collectively referred to herein as ``T3 Index'' or ``Index 
Sponsor''). The Index Sponsor is affiliated with the Sponsor. The 
Index Sponsor has implemented and will maintain a fire wall 
regarding access to information concerning the composition of and/or 
changes to the Index. In addition, the Index Sponsor has implemented 
and will maintain procedures that are designed to prevent the use 
and dissemination of material, non-public information regarding the 
Index. The Index Sponsor is not registered as an investment adviser 
or broker-dealer and is not affiliated with any broker-dealers. The 
Index is calculated and published by Solactive AG, which is not 
affiliated with T3 Index.
    \14\ The Exchange states that the SPIKES Index is a non-
investable index that measures the implied volatility of the SPDR 
S&P 500 ETF Trust (``SPY'') over 30 days in the future. SPY is a 
unit investment trust that holds a portfolio of common stocks that 
closely tracks the price performance and dividend yield of the S&P 
500 Composite Price Index (``S&P 500''). The SPIKES Index does not 
represent the actual or the realized volatility of SPY. The SPIKES 
Index is calculated based on the prices of a constantly changing 
portfolio of SPY put and call options. The SPIKES Index is 
reflective of the premium paid by investors for certain options 
linked to the level of the S&P 500. The SPIKES Index is a 
theoretical calculation and cannot be traded on a spot basis. T3 
Index is the owner, creator and licensor of the SPIKES Index. The 
SPIKES Index is calculated, maintained and published by Miami 
International Securities Exchange, LLC via the Options Price 
Reporting Authority.
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    The Index is comprised solely of SPIKES futures contracts.\15\ The 
Index employs rules for selecting the SPIKES futures contracts 
comprising the Index and a formula to calculate a level for the Index 
from the prices of these SPIKES futures contracts. Currently, the 
SPIKES futures contracts comprising the Index represent the prices of 
two near-term SPIKES futures contracts, replicating a position that 
rolls the nearest month SPIKES futures contracts to the next month 
SPIKES futures contracts at or close to the daily settlement price via 
a Trade-At-Settlement \16\ program towards the end of each business day 
in equal fractional amounts. This results in a constant weighted 
average maturity of one month.
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    \15\ According to the Exchange, SPIKES futures contracts were 
launched for trading by the Minneapolis Grain Exchange, LLC 
(``MGEX'') on December 14, 2020. While the SPIKES Index represents a 
measure of the expected 30-day volatility of SPY, the prices of 
SPIKES futures contracts are based on the current expectation of the 
expected 30-day volatility of SPY on the expiration date of the 
futures contract.
    \16\ According to the Exchange, a Trade at Settlement (``TAS'') 
transaction is a transaction at a price equal to the daily 
settlement price, or at a specified differential above or below the 
daily settlement price. The TAS transaction price will be determined 
following execution and based upon the daily settlement price of the 
respective SPIKES futures contracts month. The permissible price 
range for permitted TAS transactions is from 0.50 index points below 
the daily settlement price to 0.50 index points above the daily 
settlement price. The permissible minimum increment for a TAS 
transaction is 0.01 index points. See MGEX Rule 83.15 at http://www.mgex.com/documents/20210318-Rulebook.pdf.
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    The Fund will invest primarily in SPIKES futures contracts to gain 
the appropriate exposure to the Index. Under certain circumstances 
(described below), the Fund may also invest in futures contracts and 
swap contracts (``VIX Related Positions'') on the Cboe Volatility Index 
(``VIX'').\17\ The Exchange states that the VIX is an index that tracks 
volatility and would be expected to perform in a substantially similar 
manner as the SPIKES Index.
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    \17\ According to the Exchange, the VIX is a measure of 
estimated near-term future volatility based upon the weighted 
average of the implied volatilities of near-term put and call 
options on the S&P 500.
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    The Fund seeks to achieve its investment objective through the 
appropriate amount of exposure to the SPIKES futures contracts included 
in the Index. The Fund will not directly invest in the SPIKES Index. 
The Sponsor or Sub-Adviser determines the

[[Page 46289]]

type, quantity and mix of investments that the Sponsor or Sub-Adviser 
believes, in combination, should provide exposure to the Index to seek 
investment results equal to the performance of the Index. In the event 
accountability rules, price limits, position limits, margin limits or 
other exposure limits are reached with respect to SPIKES futures 
contracts, or 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), or in 
situations where the Sponsor or Sub-Adviser deems it impractical or 
inadvisable to buy or sell SPIKES futures contracts (such as during 
periods of market volatility or illiquidity, or when trading in SPY is 
halted), the Sponsor or Sub-Adviser may cause the Fund to invest in VIX 
Related Positions. The Sponsor expects the Fund's positions in VIX 
Related Positions to consist primarily of VIX futures contracts, which 
are traded on the Cboe Futures Exchange. However, in the event 
accountability rules, price limits, position limits, margin limits or 
other exposure limits are reached with respect to VIX futures 
contracts, or if the market for a specific VIX futures contract 
experiences emergencies or disruptions or in situations where the 
Sponsor or Sub-Adviser deems it impractical or inadvisable to buy or 
sell VIX futures contracts, the Fund would hold VIX swap 
agreements.\18\ 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) as collateral for investments and pending investments.
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    \18\ The Fund will attempt to limit counterparty risk in 
uncleared swap agreements by entering into such agreements only with 
counterparties the Sponsor and Sub-Adviser believes are creditworthy 
and by limiting the Fund's exposure to each counterparty. The 
Exchange represents that the Sponsor and Sub-Adviser will monitor 
the creditworthiness of each counterparty and the Fund's exposure to 
each counterparty on an ongoing basis.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2021-29, as Modified by Amendment No. 1, and Grounds for 
Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \19\ to determine whether the proposed rule 
change, as modified by Amendment No. 1, should be approved or 
disapproved. Institution of such proceedings is appropriate at this 
time in view of the legal and policy issues raised by the proposal. 
Institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, as described below, the Commission seeks and encourages 
interested persons to provide comments on the proposed rule change.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\20\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposal'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.'' \21\
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    \20\ Id.
    \21\ 15 U.S.C. 78f(b)(5).
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    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the Exchange 
Act and the rules and regulations issued thereunder . . . is on the 
[SRO] that proposed the rule change.'' \22\ The description of a 
proposed rule change, its purpose and operation, its effect, and a 
legal analysis of its consistency with applicable requirements must all 
be sufficiently detailed and specific to support an affirmative 
Commission finding,\23\ and any failure of an SRO to provide this 
information may result in the Commission not having a sufficient basis 
to make an affirmative finding that a proposed rule change is 
consistent with the Act and the applicable rules and regulations.\24\
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    \22\ 17 CFR 201.700(b)(3).
    \23\ See id.
    \24\ See id.
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    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposal is consistent with the Act.

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule 
change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) or any other provision of the Act, or the rules and regulations 
thereunder. Although there do not appear to be any issues relevant to 
approval or disapproval that would be facilitated by an oral 
presentation of views, data, and arguments, the Commission will 
consider, pursuant to Rule 19b-4, any request for an opportunity to 
make an oral presentation.\25\
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    \25\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change, as modified by 
Amendment No. 1, should be approved or disapproved by September 8, 
2021. Any person who wishes to file a rebuttal to any other person's 
submission must file that rebuttal by September 22, 2021.
    The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of the proposal, which are set forth 
in the Amendment No. 1, in addition to any other comments they may wish 
to submit about the proposed rule change. In this regard, the 
Commission seeks commenters' views regarding whether the Exchange's 
proposal to list and trade the Shares, which seek to provide investment 
results that correspond to the return of an index designed to measure 
the daily performance of a theoretical portfolio of first- and second-
month SPIKES futures contracts, is adequately 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, 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-2021-29 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.


[[Page 46290]]


All submissions should refer to File Number SR-NYSEArca-2021-29. 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-2021-29 and should be submitted 
by September 8, 2021. Rebuttal comments should be submitted by 
September 22, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17669 Filed 8-17-21; 8:45 am]
BILLING CODE 8011-01-P


