[Federal Register Volume 85, Number 246 (Tuesday, December 22, 2020)]
[Notices]
[Pages 83643-83650]
[FR Doc No: 2020-28151]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90691; File No. SR-CboeBZX-2020-093]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To List
and Trade Shares of the ProShares Short VIX Short-Term Futures ETF and
the ProShares Ultra VIX Short-Term Futures ETF, Each a Series of
ProShares Trust II, Under Rule 14.11(f)(4), Trust Issued Receipts

December 16, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 14, 2020, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Exchange filed the proposal as
a ``non-controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to list and trade Shares of the ProShares
Short VIX Short-Term Futures ETF (the ``Short Fund'') and the ProShares
Ultra VIX Short-Term Futures ETF (the ``Ultra Fund'', and collectively
the ``Funds'') under Rule 14.11(f)(4), which governs the listing and
trading of Trust Issued Receipts \5\ on the Exchange.\6\ The Exchange
notes that the Funds have previously been approved by the Commission
and are currently listed on Arca.\7\ This proposal is substantively

identical to the Original Proposal with updates from the Prior
Proposal, and the issuer represents that all material representations
contained within the Original Proposal as updated by the Prior Proposal
remain true. Further, the Funds are already trading on the Exchange
pursuant to unlisted trading privileges, as provided in Rule 14.11(j).
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    \5\ Rule 14.11(f)(4) applies to Trust Issued Receipts that
invest in ``Financial Instruments.'' The term ``Financial
Instruments,'' as defined in Rule 14.11(f)(4)(A)(iv), means any
combination of investments, including cash; securities; options on
securities and indices; futures contracts; options on futures
contracts; forward contracts; equity caps, collars and floors; and
swap agreements.
    \6\ The Commission approved BZX Rule 14.11(f)(4) in Securities
Exchange Act Release No. 68619 (January 10, 2013), 78 FR 3489
(January 16, 2013) (SR-BATS-2012-044).
    \7\ See Securities Exchange Act No. 64470 (May 11, 2011) 76 FR
28493 (May 15, 2011) (SR-NYSEArca-2011-23) (Proposal to list and
trade Shares of the ProShares Short VIX Short-Term Futures ETF and
the ProShares Ultra VIX Short-Term Futures ETF (the ``Original
Proposal'')). See also Securities Exchange Act No. 65134 (August 15,
2011) 76 FR 52037 (August 19, 2011) (SR-NYSEArca-2011-23) (Order
approving the listing and trading of the ProShares Short VIX Short-
Term Futures ETF and the ProShares Ultra VIX Short-Term Futures
ETF). See also Securities Exchange Act No. 83000 (April 5, 2018) 83
FR 15659 (April 11, 2018) (SR-NYSEArca-2018-17) (Notice of filing
and immediate effectiveness to amend certain representations made in
the Prior Proposal relating to Shares of the ProShares Short VIX
Short-Term Futures ETF and the ProShares Ultra VIX Short-Term
Futures ETF (the ``Prior Proposal'')).
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    The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to list and trade Shares of the ProShares
Short VIX Short-Term Futures ETF (the ``Short Fund'') and the ProShares
Ultra VIX Short-Term Futures ETF (the ``Ultra Fund'', and collectively
the ``Funds'') under Rule 14.11(f)(4), which governs the listing and
trading of Trust Issued Receipts \8\ on the Exchange.\9\ The Exchange
notes that the Funds have previously been approved by the Commission
and are currently listed on Arca.\10\ This proposal is substantively
identical to the Original Proposal with updates from the Prior
Proposal, and the issuer represents that all material representations
contained within the Original Proposal as updated by the Prior Proposal
remain true. Further, the Funds are already trading on the Exchange
pursuant to unlisted trading privileges, as provided in Rule 14.11(j).
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    \8\ Rule 14.11(f)(4) applies to Trust Issued Receipts that
invest in ``Financial Instruments.'' The term ``Financial
Instruments,'' as defined in Rule 14.11(f)(4)(A)(iv), means any
combination of investments, including cash; securities; options on
securities and indices; futures contracts; options on futures
contracts; forward contracts; equity caps, collars and floors; and
swap agreements.
    \9\ The Commission approved BZX Rule 14.11(f)(4) in Securities
Exchange Act Release No. 68619 (January 10, 2013), 78 FR 3489
(January 16, 2013) (SR-BATS-2012-044).
    \10\ See Securities Exchange Act No. 64470 (May 11, 2011) 76 FR
28493 (May 15, 2011) (SR-NYSEArca-2011-23) (Proposal to list and
trade Shares of the ProShares Short VIX Short-Term Futures ETF and
the ProShares Ultra VIX Short-Term Futures ETF (the ``Original
Proposal'')). See also Securities Exchange Act No. 65134 (August 15,
2011) 76 FR 52037 (August 19, 2011) (SR-NYSEArca-2011-23) (Order
approving the listing and trading of the ProShares Short VIX Short-
Term Futures ETF and the ProShares Ultra VIX Short-Term Futures
ETF). See also Securities Exchange Act No. 83000 (April 5, 2018) 83
FR 15659 (April 11, 2018) (SR-NYSEArca-2018-17) (Notice of filing
and immediate effectiveness to amend certain representations made in
the Prior Proposal relating to Shares of the ProShares Short VIX
Short-Term Futures ETF and the ProShares Ultra VIX Short-Term
Futures ETF (the ``Prior Proposal'')).
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    The Sponsor, a Maryland limited liability company, serves as the
Sponsor of Trust. The Sponsor is a commodity pool operator.\11\ Bank of
New York Mellon serves as the administrator (the ``Administrator''),
custodian and transfer agent of the Funds and their respective Shares.
SEI Investments Distribution Co. (``Distributor'') serves as
Distributor of the Shares. Wilmington Trust Company, a Delaware banking
corporation, is the sole trustee of the Trust.
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    \11\ The Trust filed on behalf of the Funds a registration
statement on Form S-3 under the Securities Act of 1933 (File No.
333-231875) (``Registration Statement'') on May 11, 2020 that was
declared effective on September 9, 2020. The Funds' prospectus
containing the previous investment objectives for the Funds was
filed pursuant to Rule 424(b)(3) on February 15, 2018. A prospectus
containing the new objectives, as described in the Prior Proposal,
was filed pursuant to Rule 424(b)(3) on February 28, 2018 (the
``Prior Registration Statement''). The description of the Funds and
the Shares contained in the Prior Proposal are based on the Prior
Registration Statement. As noted above, all material representations
contained within the Original Proposal as updated by the Prior
Proposal remain true. The change to each Fund's investment objective
as described in the Prior Proposal was implemented effective as of
the close of business on February 27, 2018. The Sponsor issued a
press release dated February 26, 2018 regarding the Sponsor's plans
to reduce the target exposure for the Funds. See http://www.proshares.com/news/proshare_capital_management_llc_plans_to_reduce_target_exposure_on_two_etfs.html.
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    The Short Fund seeks, on a daily basis, to provide investment
results (before fees and expenses) that correspond to one-half the
inverse (-0.5x) of the daily performance, at the time of the net asset
value (``NAV'') calculation, of a benchmark that seeks to offer
exposure to market volatility through publicly traded futures markets.
The Ultra Fund seeks, on a daily basis, to provide investment results
(before fees and expenses) that correspond to one and one-half times
(1.5x) the daily performance, at the time of NAV calculation, of a
benchmark that seeks to offer exposure to market volatility through
publicly traded futures markets. The benchmark for the Funds is the S&P
500 VIX Short-Term Futures Index (ticker symbol SPVIXSTR, the
``Index'').\12\ The Index utilizes prices of the next two near-term VIX
futures contracts to replicate a position that rolls the nearest month
VIX futures contracts to the next month on a daily basis in equal
fractional amounts. The Ultra Fund will take long positions in futures
contracts based on the Cboe Volatility Index (``VIX''), while the Short
Fund will take short positions in futures contracts based on the VIX.
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    \12\ Standard & Poor's Financial Services LLC, the index sponsor
with respect to the Index, is not a broker-dealer and has
implemented procedures designed to prevent the use and dissemination
of material, non-public information regarding the Index.
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    The Index is comprised of, and the value of the Funds will be based
on, VIX futures contracts traded on the Cboe Futures Exchange, Inc.
(``CFE'') (hereinafter referred to as ``VIX Futures Contracts''). VIX
Futures Contracts are measures of the market's expectation of the level
of VIX at certain points in the future, and as such will behave
differently than current or spot VIX values.\13\ The Funds are not
linked to the VIX, and in many cases the Index, and by extension the
Funds, could

significantly underperform or outperform the VIX.
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    \13\ VIX is the ticker symbol for the Cboe Volatility Index, a
popular measure of implied volatility. According to the Registration
Statement, the goal of the VIX is to estimate the implied volatility
of the S&P 500 over the next 30 days. A relatively high level of the
VIX corresponds to a more volatile U.S. equity market as expressed
by more costly options on the S&P 500 Index. The VIX represents one
measure of the market's expectation of the volatility over the next
30 day period. It is a composite value of options on the S&P 500
Index. The formula used to calculate the composite value utilizes
current market prices for a series of out-of-the-money calls and
puts for the front month and second month expirations.
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    While the VIX represents a measure of the current expected
volatility of the S&P 500 over the next 30 days, the prices of VIX
Futures Contracts are based on the current expectation of what the
expected 30-day volatility will be at a particular time in the future
(on the expiration date). For example, a VIX Futures Contract purchased
in March that expires in May, in effect, is a forward contract on what
the level of the VIX, as a measure of 30-day implied volatility of the
S&P 500, will be on the May expiration date. The forward volatility
reading of the VIX may not correlate directly to the current volatility
reading of the VIX because the implied volatility of the S&P 500 at a
future expiration date may be different from the current implied
volatility of the S&P 500. As a result, the Index and the Funds should
be expected to perform very differently from one-half the inverse of
the daily performance or a multiple of the daily performance of the
Index over all periods of time. To illustrate, on December 4, 2019, the
VIX closed at a price of 14.8 and the price of the February 2020 VIX
Futures Contracts expiring on February 19, 2020 was 18.125. In this
example, the price of the VIX represented the 30-day implied, or
``spot,'' volatility (the volatility expected for the period from
December 5, 2019 to January 5, 2020) of the S&P 500 and the February
2020 VIX Futures Contracts represented forward implied volatility (the
volatility expected for the period from February 19 to March 19, 2020)
of the S&P 500.
    If the Short Fund is successful in meeting its objective, its value
(before fees and expenses) should gain approximately half as much on a
percentage basis as its Index when the Index declines on a given day.
Conversely, its value (before fees and expenses) should lose
approximately half as much on a percentage basis as the Index when the
Index rises on a given day.
    If the Ultra Fund is successful in meeting its objective, its value
(before fees and expenses) should gain approximately 1.5 times as much
on a percentage basis as its Index when the Index rises on a given day.
Conversely, its value (before fees and expenses) should lose
approximately 1.5 times as much on a percentage basis as its Index when
the Index declines on a given day.
    Each Fund will under Normal Market Conditions \14\ invest in VIX
Futures Contracts based on components of the Index to pursue its
investment objective. In the event position accountability rules are
reached with respect to VIX Futures Contracts, ProShare Capital
Management LLC (``the Sponsor''), may, in its commercially reasonable
judgment, cause such Fund to obtain exposure through swaps referencing
the relevant Index or particular VIX Futures Contracts, or invest in
other futures contracts or swaps not based on the particular VIX
Futures Contracts if such instruments tend to exhibit trading prices or
returns that correlate with the Index or any VIX Futures Contract and
will further the investment objective of such Fund.\15\ The Funds may
also invest in swaps if the market for a specific VIX 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 a Fund from obtaining the appropriate amount of investment
exposure to the affected VIX Futures Contracts directly or to other
futures contracts.\16\ Each Fund also may invest in Cash and Cash
Equivalents \17\ such as U.S. Treasury securities or other high credit
quality short-term fixed-income or similar securities (including shares
of money market funds, bank deposits, bank money market accounts,
certain variable rate-demand notes and repurchase agreements
collateralized by government securities) that may serve as collateral
for the futures contracts.
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    \14\ For the purpose of this filing, the term ``Normal Market
Conditions'' shall have the same definition as Rule 14.11(i)(3)(D),
which provides that Normal Market Conditions ``includes, but is not
limited to, the absence of trading halts in the applicable financial
markets generally; operational issues causing dissemination of
inaccurate market information or system failures; or force majeure
type events such as natural or man-made disaster, act of God, armed
conflict, act of terrorism, riot or labor disruption, or any similar
intervening circumstance.''
    \15\ To the extent practicable, the Funds will invest in swaps
cleared through the facilities of a centralized clearing house.
    \16\ According to the Registration Statement, the Sponsor will
also attempt to mitigate the Funds' credit risk by transacting only
with large, well-capitalized institutions using measures designed to
determine the creditworthiness of a counterparty. The Sponsor will
take various steps to limit counterparty credit risk, as described
in the Registration Statement.
    \17\ For purposes of this proposal, the term ``Cash and Cash
Equivalents'' shall have the definition provided in Exchange Rule
14.11(i)(4)(C)(iii), applicable to Managed Fund Shares.
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    If the Sponsor to the Trust issuing the Trust Issued Receipts is
affiliated with a broker-dealer, such Sponsor to the Trust shall erect
and maintain a ``fire wall'' between the Sponsor and the broker-dealer
with respect to access to information concerning the composition and/or
changes to such Trust portfolio. The Sponsor is not a broker-dealer,
but is affiliated with a broker-dealer and has implemented and will
maintain a ``fire wall'' with respect to such broker-dealer regarding
access to information concerning the composition and/or changes to the
portfolio. In the event that (a) the Sponsor becomes a broker-dealer or
newly affiliated with a broker-dealer, or (b) any new sponsor is a
broker-dealer or becomes affiliated with a broker-dealer, it will
implement and maintain a fire wall with respect to its relevant
personnel or such broker-dealer affiliate, as applicable, regarding
access to information concerning the composition and/or changes to the
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding such
portfolio.
    Each of the Funds uses investment techniques that include the use
of any one or a combination of VIX Futures Contracts and may, if
applicable, include swaps. The Funds' investment techniques may involve
a small investment relative to the amount of investment exposure
assumed and may result in losses exceeding the amounts invested. Such
techniques, particularly when used to create leverage, may expose the
Funds to potentially dramatic changes (losses or gains) in the value of
their investments and imperfect correlation between the value of the
investments and the security or Index.
    The Funds do not seek to achieve their stated investment objective
over a period greater than one day because mathematical compounding
prevents the Funds from perfectly achieving such results. Accordingly,
results over periods of time greater than one day typically will not be
a simple one-half of the inverse correlation (-50%) or multiple
correlation (+150%) of the period return of the Index and may differ
significantly.
    According to the Registration Statement, each Fund is not actively
managed by traditional methods, which typically involve effecting
changes in the composition of a portfolio on the basis of judgments
relating to economic, financial and market considerations with a view
toward obtaining positive results under all market conditions. Rather,
each Fund seeks to remain fully invested at all times in investment
positions that, in combination, provide exposure to its Index
consistent with its investment objective even during periods in which
that benchmark is flat or moving in a manner which causes the value of
a Fund to decline.
    In seeking to achieve each Fund's investment objective, the Sponsor
uses a mathematical approach to investing. Using this approach, the
Sponsor

determines the type, quantity and mix of investment positions that the
Sponsor believes in combination should produce returns consistent with
such Fund's objective. The Sponsor relies upon a pre-determined model
to generate orders that result in repositioning the Funds' investments
in accordance with their respective investment objectives.
    The S&P 500 VIX Short-Term Futures Index
    According to the Registration Statement, the Index is intended to
reflect the returns that are potentially available through an
unleveraged investment in the VIX Futures Contracts comprising the
Index (the ``Index Components'').
    Unlike the Index, the VIX, which is not a benchmark for any Fund,
is calculated based on the prices of put and call options on the S&P
500, which are traded on Cboe Exchange, Inc.
    The S&P 500 VIX Short-Term Futures Index employs rules for
selecting the Index Components and a formula to calculate a level for
the Index from the prices of these components. Currently, the Index
Components represent the prices of the two near-term VIX futures
months, replicating a position that rolls the nearest month VIX Futures
Contract to the next month VIX Futures Contract on a daily basis in
equal fractional amounts. This results in a constant weighted average
maturity of one month. The roll period begins on the Tuesday prior to
the monthly CFE VIX Futures Contracts settlement date and runs through
the Tuesday prior to the subsequent month's CFE VIX Futures Contract
settlement date.
Calculation of the Index
    The level of the Index is calculated in accordance with the method
described in the Registration Statement. The level of the Index will be
published at least every 15 seconds both in real time from 9:30 a.m. to
4:00 p.m., E.T. and at the close of trading on each Business Day \18\
by Bloomberg L.P. and Reuters.
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    \18\ A ``Business Day'' means any day other than a day when any
of BZX, Cboe, CFE or other exchange material to the valuation or
operation of the Funds, or the calculation of the VIX, options
contracts underlying the VIX, VIX Futures Contracts or the Index is
closed for trading.
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    The Index Components comprising the Index represent the prices of
certain VIX Futures Contracts. The Index takes a daily rolling long
position in contracts of specified maturities and is intended to
reflect the returns that are potentially available through an
unleveraged investment in those contracts. The Index measures the
return from a rolling long position in the first and second month VIX
Futures Contracts. The Index rolls continuously throughout each month
from the first month VIX Futures Contract into the second month VIX
Futures Contract.
    The Index rolls on a daily basis. According to the Registration
Statement, one of the effects of daily rolling is to maintain a
constant weighted average maturity for the underlying futures
contracts. Unlike equities, which typically entitle the holder to a
continuing stake in a corporation, futures contracts normally specify a
certain date for the delivery of the underlying asset or financial
instrument or, in the case of futures contracts relating to indices
such as the VIX, a certain date for payment in cash of an amount
determined by the level of the underlying index. The Index operates by
selling, on a daily basis, Index Components with a nearby settlement
date and purchasing Index Components with a longer-dated settlement
date. The roll for each contract occurs on each Business Day according
to a pre-determined schedule that has the effect of keeping constant
the weighted average maturity of the relevant Index Components. This
process is known as ``rolling'' a futures position, and the Index is a
``rolling index''. The constant weighted average maturity for the
futures underlying the Index is one month.
    Because the Index incorporates this process of rolling futures
positions on a daily basis, and the Funds, in general, also roll their
positions on a daily basis, the daily roll is not anticipated to be a
significant source of tracking error between the Funds and the Index.
The Index is based on VIX Futures Contracts and not the VIX, and as
such neither the Funds nor the Index are expected to track the VIX.
Purchases and Redemptions of Creation Units
    The Funds will create and redeem Shares from time to time in one or
more Creation Units. A Creation Unit is a block of 50,000 Shares.
Except when aggregated in Creation Units, the Shares are not redeemable
securities.
    On any Business Day, an authorized participant may place an order
with the Distributor to create one or more Creation Units.\19\ The
total cash payment required to create each Creation Unit is the NAV of
50,000 Shares of each Fund on the purchase order date plus the
applicable transaction fee.
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    \19\ Authorized participants have a cut-off time of 2:00 p.m.
E.T. to place creation and redemption orders.
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    The procedures by which an authorized participant can redeem one or
more Creation Units mirror the procedures for the purchase of Creation
Units. On any Business Day, an authorized participant may place an
order with the Distributor to redeem one or more Creation Units. The
redemption proceeds from a Fund consist of the cash redemption amount.
The cash redemption amount is equal to the NAV of the number of
Creation Unit(s) of a Fund requested in the authorized participant's
redemption order as of the time of the calculation of a Fund's NAV on
the redemption order date, less applicable transaction fees.
Availability of Information Regarding the Shares
    The NAV for the Funds' Shares will be calculated by the
Administrator once a day and will be disseminated daily to all market
participants at the same time.\20\ Pricing information will be
available on each Fund's website including: (1) The prior Business
Day's reported NAV, the closing market price or the bid/ask price,
daily trading volume, and a calculation of the premium and discount of
the closing market price or bid/ask price against the NAV; and (2) data
in chart format displaying the frequency distribution of discounts and
premiums of the daily closing price against the NAV, within appropriate
ranges, for each of the four previous calendar quarters.
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    \20\ According to the Registration Statement, net asset value
means the total assets of the Funds including, but not limited to,
all Cash and Cash Equivalents or other debt securities less total
liabilities of the Funds, each determined on the basis of generally
accepted accounting principles in the United States, consistently
applied under the accrual method of accounting. Each Fund's NAV is
calculated once each trading day as of 4 p.m. (E.T.), or an earlier
time as set forth on www.proshares.com.
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    The intraday, closing, and settlement prices of the Index
Components are also readily available from the websites of CFE
(www.cfe.cboe.com), automated quotation systems, published or other
public sources, or on-line information services such as Bloomberg or
Reuters. Complete real-time data for component futures underlying the
Index is available by subscription from Reuters and Bloomberg.
Specifically, the level of the Index will be published at least every
15 seconds both in real time from 9:30 a.m. to 4:00 p.m. E.T. and at
the close of trading on each Business Day by Bloomberg and Reuters. The
CFE also provides delayed futures information on current and past
trading sessions and market news free of charge on its website. The
specific contract specifications for component futures

underlying the Index are also available on such websites, as well as
other financial informational sources.
    Quotation and last-sale information regarding the Shares will be
disseminated through the facilities of the Consolidated Tape
Association (``CTA''). Quotation and last-sale information regarding
VIX Futures Contracts will be available from the exchanges on which
such instruments are traded. Quotation and last-sale information for
swaps will be available from nationally recognized data services
providers, such as Reuters and Bloomberg, through subscription
agreements or from a broker-dealer who makes markets in such
instruments. Quotation and last-sale information for swaps are
available through third-party pricing services or broker-dealers who
make markets in such instruments. Pricing information regarding Cash
and Cash Equivalents in which the Funds may invest is generally
available through nationally recognized data services providers, such
as Reuters and Bloomberg, through subscription agreements.
    In addition, the Funds' website at www.proshares.com will display
the end of day closing Index level, and NAV per Share for the
applicable Fund. The Funds will provide website disclosure of portfolio
holdings daily and will include, as applicable, the notional value (in
U.S. dollars) of VIX Futures Contracts, swaps, as well as Cash and Cash
Equivalents held in the portfolio of the Funds. This website disclosure
of the portfolio composition of the Funds will occur at the same time
as the disclosure by the Funds of the portfolio composition to
authorized participants so that all market participants are provided
portfolio composition information at the same time. Therefore, the same
portfolio information will be provided on the public website as well as
in electronic files provided to authorized participants.
    In addition, in order to provide updated information relating to
the Funds for use by investors and market professionals, an updated
Intraday Indicative Value (``IIV'') will be calculated. The IIV is an
indicator of the value of the VIX Futures Contracts, swaps, and Cash
and/or Cash Equivalents less liabilities of a Fund at the time the IIV
is disseminated. The IIV will be calculated and widely disseminated by
one or more major market data vendors every 15 seconds throughout
Regular Trading Hours.\21\
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    \21\ As defined in Rule 1.5(w), the term ``Regular Trading
Hours'' means the time between 9:30 a.m. and 4:00 p.m. E.T.
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    In addition, the IIV is available through on-line information
services such as Bloomberg and Reuters.
    The IIV disseminated during Regular Trading Hours should not be
viewed as an actual real time update of the NAV, which is calculated
only once a day. The IIV also should not be viewed as a precise value
of the Shares.
    The Exchange believes that dissemination of the IIV provides
additional information regarding the Funds that is not otherwise
available to the public and is useful to professionals and investors in
connection with the related Shares trading on the Exchange or the
creation or redemption of such Shares.
    Additional information regarding the Funds and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings disclosure policies, distributions
and taxes is included in the Registration Statement.
Initial and Continued Listing
    The Shares of each Fund will conform to the initial and continued
listing criteria under BZX Rule 14.11(f)(4). The Exchange represents
that, for initial and continued listing, the Funds and the Trust must
be in compliance with Rule 10A-3 under the Act. A minimum of 100,000
Shares of each Fund will be outstanding at the commencement of trading
on the Exchange. The Exchange will obtain a representation from the
issuer of the Shares that the NAV per Share for each Fund will be
calculated daily and will be made available to all market participants
at the same time.
Trading Halts
    With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Funds. The Exchange will halt trading in
the Shares under the conditions specified in BZX Rule 11.18. Trading
may be halted because of market conditions or for reasons that, in the
view of the Exchange, make trading in the Shares inadvisable. These may
include: (1) The extent to which trading is not occurring in the
securities and/or the financial instruments composing the daily
disclosed portfolio of the Funds; or (2) whether other unusual
conditions or circumstances detrimental to the maintenance of a fair
and orderly market are present. Trading in the Shares also will be
subject to Rule 14.11(f)(4)(C)(ii), which sets forth circumstances
under which Shares of a Fund may be halted.
    The Exchange represents that the Exchange may halt trading during
the day in which an interruption to the dissemination of the IIV, the
value of the Index, the VIX or the value of the underlying VIX Futures
Contracts occurs. If an interruption to the dissemination of the IIV,
the value of an Index, the VIX or the value of the underlying VIX
Futures Contracts persists past the trading day in which it occurred,
the Exchange will halt trading no later than the beginning of the
trading day following the interruption. In addition, if the Exchange
becomes aware that the NAV with respect to the Shares is not
disseminated to all market participants at the same time, it will halt
trading in the Shares until such time as the NAV is available to all
market participants.
Suitability
    Currently, Interpretation and Policy .01 of Exchange Rule 3.7
(Recommendations to Customers) provides that a member, in recommending
a transaction in connection with products listed pursuant to Chapter
XIV, must have reasonable grounds to believe that the recommendation is
suitable for the customer based on any facts disclosed by the customer
as to its other security holdings and as to its financial situation and
needs. Further, the rule provides, that no member shall recommend to a
customer a transaction in any such product unless the member has a
reasonable basis for believing at the time of making the recommendation
that the customer has such knowledge and experience in financial
matters that he may reasonably be expected to be capable of evaluating
the risks of the recommended transaction and is financially able to
bear the risks of the recommended position.
    Prior to the commencement of trading, the Exchange will inform its
members of the suitability requirements of, Interpretation and Policy
.01 of Exchange Rule 3.7 in an Information Circular. Specifically,
members will be reminded in the Information Circular that, in
recommending transactions in the Shares, they must have a reasonable
basis to believe that (1) the recommendation is suitable for a customer
given reasonable inquiry concerning the customer's investment
objectives, financial situation, needs, and any other information known
by such member, and (2) the customer can evaluate the special
characteristics, and is able to bear the financial risks, of an
investment in the Shares. In connection with the suitability
obligation, the Information Circular will also provide that members
must make reasonable efforts to obtain the following

information: (1) The customer's financial status; (2) the customer's
tax status; (3) the customer's investment objectives; and (4) such
other information used or considered to be reasonable by such member or
registered representative in making recommendations to the customer.
    In addition, FINRA has implemented increased sales practice and
customer margin requirements for FINRA members applicable to inverse
and leveraged ETFs (which include the Shares) and options on leveraged
ETFs, as described in FINRA Regulatory Notices 09-31 (June 2009), 09-53
(August 2009) and 09-65 (November 2009) (the ``FINRA Regulatory
Notices''). Members that carry customer accounts will be required to
follow the FINRA guidance set forth in these notices. As noted above,
each Fund will seek daily investment results, before fees and expenses,
that correspond to the Index. The Funds do not seek to achieve their
respective primary investment objective over a period of time greater
than a single day. The return of the Funds for a period longer than a
single day will not be a simple multiple (one-half of the inverse
correlation (-50%) with respect to the ProShares Short VIX Short-Term
Futures ETF or multiple correlation (+150%) with respect to the
ProShares Ultra VIX Short-Term Futures ETF) of the period return of the
Index because the return of each Fund is the result of its return for
each day compounded over the period and usually will differ in amount
and possibly even direction for the same period. These differences can
be significant.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. The Exchange will
allow trading in the Shares during all trading sessions and has the
appropriate rules to facilitate transactions in the Shares during all
trading sessions. As provided in BZX Rule 11.11(a), the minimum price
variation for quoting and entry of orders in securities traded on the
Exchange is $0.01, with the exception of securities that are priced
less than $1.00, for which the minimum price variation for order entry
is $0.0001.
Surveillance
    Trading of the Shares through the Exchange will be subject to the
Exchange's surveillance procedures for derivative products, including
Trust Issued Receipts. The Exchange will allow trading in the Shares
during all trading sessions on the Exchange and has the appropriate
rules to facilitate transactions in the Shares during all trading
sessions. The Exchange believes that its surveillance procedures are
adequate to properly monitor the trading of the Shares on the Exchange
during all trading sessions and to deter and detect violations of
Exchange rules and the applicable federal securities laws. All of the
VIX Futures Contracts held by the Funds will trade on markets that are
a member of ISG or affiliated with a member of ISG or with which the
Exchange has in place a comprehensive surveillance sharing
agreement.\22\ The Exchange, FINRA, on behalf of the Exchange, or both
will communicate regarding trading in the Shares and the underlying
listed instruments, including listed derivatives held by the Funds,
with the ISG, other markets or entities who are members or affiliates
of the ISG, or with which the Exchange has entered into a comprehensive
surveillance sharing agreement. In addition, the Exchange, FINRA, on
behalf of the Exchange, or both may obtain information regarding
trading in the Shares and the underlying listed instruments, including
listed derivatives, held by the Funds from markets and other entities
that are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement. 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 the Index composition, description of the
portfolio or reference assets, limitations on portfolio holdings or
reference assets, dissemination and availability of the Index,
reference asset, and IIV, and the applicability of Exchange rules
specified in this filing shall constitute continued listing
requirements for the Funds. The issuer has represented to the Exchange
that it will advise the Exchange of any failure by the Funds or the
Shares to comply with the continued listing requirements, and, pursuant
to its obligations under Section 19(g)(1) of the Act, the Exchange will
surveil for compliance with the continued listing requirements. If the
Funds or the Shares are not in compliance with the applicable listing
requirements, the Exchange will commence delisting procedures under
Exchange Rule 14.12. In addition, the Exchange also has a general
policy prohibiting the distribution of material, non-public information
by its employees.
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    \22\ For a list of the current members and affiliate members of
ISG, see www.isgportal.com. The Exchange notes that not all
components of the Funds' holdings may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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Information Circular
    Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) The procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) BZX Rule 3.7, which imposes suitability
obligations on Exchange members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the IIV and the Disclosed Portfolio is disseminated; (4) the risks
involved in trading the Shares outside of Regular Trading Hours \23\
when an updated IIV will not be calculated or publicly disseminated;
(5) the requirement that members deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (6) trading information.
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    \23\ As defined in Rule 1.5(w), ``Regular Trading Hours'' means
the time between 9:30 a.m. and 4:00 p.m. Eastern Time.
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    The Information Circular will advise ETP Holders, prior to the
commencement of trading, of the prospectus delivery requirements
applicable to the Funds. The Exchange notes that investors purchasing
Shares directly from the Funds will receive a prospectus. Members
purchasing Shares from the Funds for resale to investors will deliver a
prospectus to such investors. The Information Circular will reference
the FINRA Regulatory Notices regarding sales practice and customer
margin requirements for FINRA members applicable to leveraged ETFs and
options on leveraged ETFs. The Information Circular will also discuss
any exemptive, no-action and interpretive relief granted by the
Commission from any rules under the Act.
    In addition, the Information Circular will reference that the Funds
are subject to various fees and expenses described in the Registration
Statement. The Information Circular will also reference that the
Commodity Futures Trading Commission has regulatory jurisdiction over
futures contracts traded on U.S. markets.

    The Information Circular will also disclose the trading hours of
the Shares of the Funds and that the NAV for the Shares is calculated
after 4:00 p.m. E.T. each trading day. The Information Circular will
disclose that information about the Shares of the Funds is publicly
available on the Funds' website.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section
6(b) of the Act \24\ in general and Section 6(b)(5) of the Act \25\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
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    \24\ 15 U.S.C. 78f.
    \25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria under Rule 14.11(f)(4). If the
Sponsor to the Trust issuing the Trust Issued Receipts is affiliated
with a broker-dealer, such Sponsor to the Trust shall erect and
maintain a ``fire wall'' between the Sponsor and the broker-dealer with
respect to access to information concerning the composition and/or
changes to the Funds' portfolio. The Sponsor is not a broker-dealer,
but is affiliated with a broker-dealer dealer and has implemented and
will maintain a ``fire wall'' with respect to such broker-dealer
regarding access to information concerning the composition and/or
changes to the portfolio. In the event that (a) the Sponsor becomes a
broker-dealer or newly affiliated with a broker-dealer, or (b) any new
sponsor is a broker-dealer or becomes affiliated with a broker-dealer,
it will implement and maintain a fire wall with respect to its relevant
personnel or such broker-dealer affiliate, as applicable, regarding
access to information concerning the composition and/or changes to the
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding the
portfolio. The Exchange, FINRA, on behalf of the Exchange, or both may
obtain information regarding trading in the Shares and the underlying
listed instruments, including listed derivatives, held by the Funds
from markets and other entities that are members of ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement. In addition, the Exchange also has a general policy
prohibiting the distribution of material, non-public information by its
employees.
    The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV will be calculated daily and that the NAV and the
Funds' holdings will be made available to all market participants at
the same time. In addition, a large amount of information is publicly
available regarding the Funds and the Shares, thereby promoting market
transparency. Moreover, the IIV will be disseminated by one or more
major market data vendors at least every 15 seconds during Regular
Trading Hours. On each Business Day, before commencement of trading in
Shares during Regular Trading Hours, the Funds will disclose on their
website the holdings that will form the basis for the Fund's
calculation of NAV at the end of the Business Day. Pricing information
will be available on the Funds' website including: (1) The prior
Business Day's reported NAV, the closing market price or the bid/ask
price, daily trading volume, and a calculation of the premium and
discount of the closing market price or bid/ask price against the NAV;
and (2) data in chart format displaying the frequency distribution of
discounts and premiums of the daily closing price against the NAV,
within appropriate ranges, for each of the four previous calendar
quarters. Additionally, information regarding market price and trading
of the Shares will be continually available on a real-time basis
throughout the day on brokers' computer screens and other electronic
services, and quotation and last sale information for the Shares will
be available on the facilities of the CTA. The website for the Funds
will include a form of the prospectus for each Fund and additional data
relating to NAV and other applicable quantitative information. Trading
in Shares of the Funds will be halted under the conditions specified in
Exchange Rule 11.18. Trading may also be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. Finally, trading in the Shares will
be subject to 14.11(f)(4)(C)(ii), which sets forth circumstances under
which Shares of the Funds may be halted. In addition, as noted above,
investors will have ready access to information regarding the Funds'
holdings, the IIV, the Index value, and quotation and last sale
information for the Shares.
    Quotation and last-sale information regarding the Shares will be
disseminated through the facilities of the CTA. Quotation and last-sale
information regarding VIX Futures Contracts will be available from the
exchanges on which such instruments are traded. Quotation and last-sale
information for swaps will be available from nationally recognized data
services providers, such as Reuters and Bloomberg, through subscription
agreements or from a broker-dealer who makes markets in such
instruments. Quotation and last-sale information for swaps will be
valued on the basis of quotations or equivalent indication of value
supplied by a third- party pricing service or broker-dealer who makes
markets in such instruments. Pricing information regarding Cash
Equivalents in which the Fund may invest is generally available through
nationally recognized data services providers, such as Reuters and
Bloomberg, through subscription agreements.
    The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an exchange-traded product that will enhance competition among market
participants, to the benefit of investors and the marketplace. As noted
above, the Exchange has in place surveillance procedures relating to
trading in the Shares and may obtain information via ISG from other
exchanges that are members of ISG or with which the Exchange has
entered into a comprehensive surveillance sharing agreement. In
addition, as noted above, investors will have ready access to
information regarding the Funds' holdings, the IIV, and quotation and
last sale information for the Shares. The Information Circular will
also reference the FINRA Regulatory Notices regarding sales practice
and customer margin requirements for FINRA members applicable to
leveraged ETFs and options on leveraged ETFs.
    For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change, rather will facilitate the transfer from Arca and
listing of additional exchange-traded products on the Exchange, which
will enhance competition among listing venues, to the benefit of
issuers, investors, and the marketplace more broadly.

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

    The Exchange has neither solicited nor received written comments on
the proposed rule change.

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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \26\ and Rule 19b-
4(f)(6) thereunder.\27\
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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \28\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\29\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Exchange states that
waiver of the 30-day operative delay will allow the Funds to transfer
listing to the Exchange as soon as is practicable and minimize the
amount of time that the Funds' listing venue will be in transition. The
Funds have previously been approved by the Commission to list and trade
on NYSE Arca, Inc.\30\ The Exchange states that this proposal is
substantively identical to the Original Proposal, including changes
from the Prior Proposal, and the issuer represents that all material
representations contained within the Original Proposal, as updated by
the Prior Proposal, remain true. For these reasons, the Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission waives the 30-day operative delay and designates the
proposed rule change operative upon filing.\31\
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    \28\ 17 CFR 240.19b-4(f)(6).
    \29\ 17 CFR 240.19b-4(f)(6)(iii).
    \30\ See supra note.
    \31\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-CboeBZX-2020-093 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CboeBZX-2020-093. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeBZX-2020-093 and should be submitted
on or before January 12, 2021.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28151 Filed 12-21-20; 8:45 am]
BILLING CODE 8011-01-P