Do you remember, like, two weeks ago, when people were talking about how the launch of bitcoin futures at Cboe Global Markets Inc. and CME Group Inc. would allow for efficient short-selling of bitcoin and finally deflate the bubble? Smart hedge-fund money was lining up to bet against bitcoin, the thinking went, but had no convenient way to do it on the actual bitcoin exchanges. The only people trading bitcoin were the true believers, so of course it kept going up, but once it was opened up to normal financial players that would end. "The futures reduce the frictions of going short more than they do of going long, so it’s probably net bearish," said Craig Pirrong.
Government regulation could adversely impact the operation of the Bitcoin Network or the use of bitcoin. As bitcoin and other digital assets have grown in popularity and in market size, certain U.S. federal and state governments, foreign governments and self-regulatory agencies have begun to examine the operations of bitcoin, digital assets, the Bitcoin Network, bitcoin users and related issues. Although currently bitcoin is not regulated or is lightly regulated in most countries, including the United States, some countries have, and one or more countries may in the future, take regulatory actions that severely restrict the right to acquire, own, hold, sell or use bitcoin or to exchange bitcoin for fiat currency. Regulation in the U.S. and foreign jurisdictions may restrict the use of bitcoin or otherwise materially impact the global demand for bitcoin. Regulation of initial coin offerings (“ICOs”) and other cryptocurrencies may have an impact the price of bitcoin. If Bitcoin Exchanges become subject to regulation, that may also impact trading in bitcoin as trading may be concentrated in a smaller number of regulated exchanges, which may impact price, volatility and trading volumes. Also, most Bitcoin Exchanges currently require bitcoin trading accounts to be fully funded, but if margin trading is introduced, there may be additional risks, including
Matthew Roszak, one of block.one’s early investors, said EOS holders shouldn’t worry too much about the warnings the company has given about the tokens. “I don’t think it’s fair reading into that language too tightly,” he said. Given the “regulatory environment is as clear as mud,” he said block.one needed to write something to provide the broadest protection possible.
The Board oversight of the Trust and the Funds extends to the Trust’s risk management processes. The Board and its Audit Committee consider risk management issues as part of their responsibilities throughout the year at regular and special meetings. The Advisor and other service providers prepare regular reports for Board and Audit Committee meetings that address a variety of risk-related matters, and the Board as a whole or the Audit Committee may also receive special written reports or presentations on a variety of risk issues at the request of the Board or the Audit Committee. For example, the portfolio managers of the Funds meet regularly with the Board to discuss portfolio performance, including investment risk, counterparty risk and the impact on the Funds of investments in particular securities or derivatives. As noted above, given the relatively small size of the Board, the Board determined it is not necessary to adopt a complex leadership structure in order for the Board to effectively exercise its risk oversight function.
Although certain securities exchanges attempt to provide continuously liquid markets in which holders and writers of options can close out their positions at any time prior to the expiration of the option, no assurance can be given that a market will exist at all times for all outstanding options purchased or sold by a Fund. If an options market were to become unavailable, the Fund would be unable to realize its profits or limit its losses until the Fund could exercise options it holds, and the Fund would remain obligated until options it wrote were exercised or expired. Reasons for the absence of liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the OCC may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options) and those options would cease to exist, although outstanding options on that exchange that had been issued by the OCC as a result of trades on that exchange would continue to be exercisable in accordance with their terms.
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this post-effective amendment (the “Amendment”) to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Bethesda and the State of Maryland on December 19, 2017.
Unlike many commodity futures, Bitcoin futures are cash settled rather than physically settled. Cash settlement is a relatively new development in futures trading, first introduced in 1981 for Eurodollar futures, that addresses the problem of how to settle futures contracts on things that are difficult/impossible to deliver physicially—things like interest rates, large stock indexes (e.g., S&P 500), and volatility indexes (Cboe’s VIX). Futures physical settlement involves actual shipment/change of ownership of the underlying product to the contract holder but in practice, it’s rarely used (~2% of the time). Instead, most organizations that are using futures to hedge prices of future production/usage will make separate arrangements with suppliers/customers for physical delivery and just use the futures to protect against contrary price changes. In practice, the final settlement price of the contract can be used to provide the desired price protection regardless of whether the futures contract specifies physically delivery or cash-settlement.
Creation Units of Shares may be purchased only by or through a DTC Participant that has entered into an Authorized Participant Agreement with the Distributor. Such Authorized Participant will agree pursuant to the terms of such Authorized Participant Agreement on behalf of itself or any investor on whose behalf it will act, as the case may be, to certain conditions, including that such Authorized Participant will make available an amount of cash sufficient to pay the Balancing Amount, defined below, and the Transaction Fee, described below in “Transaction Fees”. The Authorized Participant may require the investor to enter into an agreement with such Authorized Participant with respect to certain matters, including payment of the Balancing Amount. Investors who are not Authorized Participants must make appropriate arrangements with an Authorized Participant. Investors should be aware that their particular broker may not be a DTC Participant or may not have executed an Authorized Participant Agreement, and that therefore orders to purchase Creation Units may have to be placed by the investor’s broker through an Authorized Participant. As a result, purchase orders placed through an Authorized Participant may result in additional charges to such investor. The Trust does not expect to enter into an Authorized Participant Agreement with more than a small number of DTC Participants.
Each Fund, from time to time, in the ordinary course of business, may purchase securities on a when-issued or delayed-delivery basis (i.e., delivery and payment can take place between 30 and 120 days after the date of the transaction). These securities are subject to market fluctuations and no interest accrues to the purchaser during this period. At the time a Fund makes the commitment to purchase securities on a when-issued or delayed-delivery basis, the Fund will record the transaction and thereafter reflect the value of the securities, each day, in determining the Fund’s NAV. Each Fund will not purchase securities on a when-issued or delayed-delivery basis if, as a result, it determines that more than 15% of the Fund’s net assets would be invested in illiquid securities. At the time of delivery of the securities, the value of the securities may be more or less than the purchase price.
• Lack of liquid markets, and possible manipulation of blockchain-based assets. Digital assets that are represented and trade on a blockchain may not necessarily benefit from viable trading markets. Stock exchanges have listing requirements and vet issuers, and perhaps users. These conditions may not necessarily be replicated on a blockchain, depending on the platform’s controls and other policies. The more lenient a blockchain is about vetting issuers of digital assets or users that transact on the platform, the higher the potential risk for fraud or the manipulation of digital assets. These factors may decrease liquidity or volume, or increase volatility of digital securities or other assets trading on a blockchain.
While it is likely that regulatory laws surrounding ICOs will only be settled in court (perhaps even the Supreme Court), if ICO tokens are legally classified as securities, any exchange that wants to list those tokens needs to either register as a national securities exchange or operate under an exemption and set itself up as an alternative trading system (ATS).
You’ll find that different exchanges cater to different markets. Today, most countries have at least one cryptocurrency exchange specializing in their own currency. There are exchanges that can accept New Zealand Dollars in exchange for bitcoin, for example. Other exchanges are known for certain pairs. Bithumb, for example, has particularly strong liquidity in the ETH/KRW (South Korean Won) pair at the moment (and it’s easily the most popular cryptocurrency exchange in Korea).
Each Fund may be required to withhold federal income tax (“backup withholding”) from dividends and capital gains distributions paid to shareholders. Federal tax will be withheld if (1) the shareholder fails to furnish the Fund with the shareholder’s correct taxpayer identification number or social security number, (2) the IRS notifies the shareholder or the Fund that the shareholder has failed to report properly certain interest and dividend income to the IRS and to respond to notices to that effect, or (3) when required to do so, the shareholder fails to certify to the Fund that he or she is not subject to backup withholding. The backup withholding rate is 28%. Any amounts withheld under the backup withholding rules may be credited against the shareholder’s federal income tax liability.
When cash markets are not functioning well, cash and carry arbitrage (and its reverse) futures markets may make the underlying asset accessible to more people. It is possible that A is bullish on bitcoin, but does not wish to go through the hassles of creating a wallet and storing it safely. At the same time, B might be comfortable with bitcoin wallets, but might be unwilling to take bitcoin price risk. Then B can buy bitcoin spot and sell cash settled bitcoin futures to A; the result is that A obtains exposure to bitcoin without creating a bitcoin wallet, while B obtains a risk free investment (a synthetic T-bill). Similarly, suppose C wishes to bet against bitcoin, but does not have the ability to short it; while D has no views on bitcoin, but has sufficient access to the cash market to be able to short bitcoin. Then D can take a risk free position by shorting bitcoin in the cash market and buying bitcoin futures from C who obtains a previously unavailable short position.
The Distribution and Service Plan is intended to permit the financing of a broad array of distribution-related activities and services, as well as shareholder services, for the benefit of investors. These activities and services are intended to make the Shares an attractive investment alternative, which may lead to increased assets, increased investment opportunities and diversification, and reduced per share operating expenses. There are currently no plans to impose distribution fees.
• In order to qualify for the special tax treatment accorded a regulated investment company (“RIC”) and its shareholders, a Fund must derive at least 90% of its gross income for each taxable year from “qualifying income,” meet certain asset diversification tests at the end of each taxable quarter, and meet annual distribution requirements. A Fund’s pursuit of its investment strategies will potentially be limited by the Fund’s intention to qualify for such treatment and could adversely affect the Fund’s ability to so qualify. A Fund can make certain investments, the treatment of which for these purposes is unclear. If, in any year, a Fund were to fail to qualify for the special tax treatment accorded a RIC and its shareholders, and were ineligible to or were not to cure such failure, the Fund would be taxed in the same manner as an ordinary corporation subject to U.S. federal income tax on all its income at the fund level. The resulting taxes could substantially reduce the Fund’s net assets and the amount of income available for distribution. In addition, in order to requalify for taxation as a RIC, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make certain distributions. Please see the Statement of Additional Information for more information.
Qualifying Income described in clause (i) of subparagraph (a) above) will be treated as Qualifying Income. In general, such entities will be treated as partnerships for federal income tax purposes because they meet the passive income requirement under Code section 7704(c)(2). In addition, although in general the passive loss rules of the Code do not apply to RICs, such rules do apply to a RIC with respect to items attributable to an interest in a qualified publicly traded partnership. Moreover, the amounts derived from investments in foreign currency will be treated as Qualifying Income for purposes of subparagraph (a) above. There is a remote possibility that the Internal Revenue Service (“IRS”) could issue guidance contrary to such treatment with respect to foreign currency gains that are not directly related to a RIC’s principal business of investing in stocks or securities (or options or futures with respect to stocks or securities), which could affect a Fund’s ability to meet the 90% gross income test and adversely affect the manner in which that Fund is managed.
The Verge (XVG) technology revolves around providing an incredibly safe, private, and fast digital payment transactions – on an everyday basis. It offers all individuals and businesses a fast, efficient, and a decentralized option to make and receive direct payments in an average 5-second window per transaction. It runs on open-source technology, it is not a private company, and it isn’t funded by pre-mined coins. This is one of the reasons why people are so excited about it, all of its development, marketing, and other endeavors are completely done by the community – for the community.
Hey Jhon, I haven’t found a crypto yet that is really related to my hobbies – Crossfit and backpacking – but I would actually advise steering clear of investing in things linked too closely to what you’re passionate about; whilst insider knowledge of an industry is really valuable, it’s important to trade without emotion and if your trading a coin that is linked to a great love of yours, that becomes harder.
A Precautionary Note Regarding Unusual Circumstances — ProShares Trust can postpone payment of redemption proceeds for any period during which (1) [the Exchange] is closed other than customary weekend and holiday closings, (2) trading on [the Exchange] is restricted, (3) any emergency circumstances exist, as determined by the SEC, and (4) the SEC by order permits for the protection of shareholders of the Fund, as further described in the SAI.
The DJ Brookfield Global Infrastructure ETF, the Global Listed Private Equity ETF, the Merger ETF, the MSCI EAFE Dividend Growers ETF, and the MSCI Europe Dividend Growers ETF contain portfolio investments that are primarily listed or traded on foreign markets. To the extent a Fund’s portfolio investments trade in foreign markets on days when a Fund is not open for business or when the primary exchange for the Shares is not open, the value of the Fund’s assets may vary and shareholders may not be able to purchase or sell Fund Shares and Authorized Participants may not be able to create or redeem Creation Units. Also, certain portfolio investments may not be traded on days a Fund is open for business.
Banks may not provide banking services, or may cut off banking services, to businesses that provide bitcoin-related services or that accept bitcoin as payment, which could damage the public perception of bitcoin and the utility of bitcoin as a payment system and could decrease the price of bitcoin and the Bitcoin Instruments and adversely affect an investment in the Funds.
It is the policy of the Funds (excluding, Managed Futures Strategy ETF, Crude Oil Strategy ETF, CDS Short North American HY Credit ETF, Bitcoin Futures Strategy ETF, Blockchain/Bitcoin Strategy ETF, Bitcoin Futures/Equity Strategy ETF, and Short Bitcoin Futures Strategy ETF) to pursue their investment objectives of correlating with their indices regardless of market conditions, to attempt to remain nearly fully invested and not to take defensive positions.
It is expected that each Subsidiary will neither be subject to taxation on its net income in the same manner as a corporation formed in the United States nor subject to branch profits tax on the income and gain derived from its activities in the United States. A foreign corporation will generally not be subject to such taxation unless it is engaged in or is treated as engaged in a U.S. trade or business. Each Subsidiary expects to operate in a manner such that it is not so engaged or so treated.
Michael L. Sapir, Co-Founder and Chief Executive Officer of ProShare Advisors since inception and ProFund Advisors LLC since April 1997. Mr. Sapir formerly practiced law, primarily representing financial institutions for over 13 years, most recently as a partner in a Washington, D.C.-based law firm. He holds degrees from Georgetown University Law Center (J.D.) and the University of Miami (M.B.A. and B.A.).
The BofA Merrill Lynch Marks are trademarks of Merrill Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and have been licensed for use by Trust. S&P, MSCI and Russell, respectively, are trademarks of Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. and Standard & Poor’s Financial Services LLC, MSCI, Inc. and Frank Russell Company and have been licensed for use by BofA Merrill Lynch.
The Code generally imposes a 3.8% Medicare contribution tax on the net investment income of certain individuals, trusts, and estates to the extent their income exceeds certain threshold amounts. For these purposes, “net investment income” generally includes, among other things, (i) distributions paid by a Fund of ordinary dividends and capital gain dividends as described above, and (ii) any net gain from the sale, redemption or exchange of Fund shares. Shareholders are advised to consult their tax advisors regarding the possible implications of this additional tax on their investment in a Fund.
• Futures Position Limit Risk — Limits on the amount of futures any one entity can hold may negatively impact the Fund’s ability to meet its investment objective if such limits are reached and exceptions to such limits are not granted. Currently the position limits for bitcoin futures contracts are much lower than they are for most other futures contracts.
Interest Rate Swaps. Interest rate swaps, in their most basic form, involve the exchange by a Fund with another party of their respective commitments to pay or receive interest. For example, a Fund might exchange its right to receive certain floating rate payments in exchange for another party’s right to receive fixed rate payments. Interest rate swaps can take a variety of other forms, such as agreements to pay the net differences between two different interest indexes or rates, even if the parties do not own the underlying instruments. Despite their differences in form, the function of interest rate swaps is generally the same: to increase or decrease a Fund’s exposure to long- or short-term interest rates. For example, a Fund may enter into a swap transaction to preserve a return or spread on a particular investment or a portion of its portfolio or to protect against any increase in the price of securities the Fund anticipates purchasing at a later date.
• The bitcoin exchanges on which bitcoin trades are relatively new and, in most cases, largely unregulated and, therefore, may be more exposed to fraud and security breaches than established, regulated exchanges for other products. Over the past several years, a number of Bitcoin Exchanges have been closed due to fraud, failure, security breaches or governmental regulations. The nature of the assets held at Bitcoin Exchanges make them appealing targets for hackers and a number of Bitcoin Exchanges have been victims of cybercrimes. No Bitcoin Exchange is immune from these risks. Fraudulent activity can increase volatility and have an adverse effect on the price of bitcoin, the general acceptance of bitcoin as an investment or means of currency and could have a negative impact on the bitcoin futures contracts in which the Fund invests and the value of the Fund.
The introduction of futures didn't lead to a wave of hedge-fund money shorting bitcoin. It led to retail and institutional money going long bitcoin. We talked last week about the spread between Cboe's bitcoin futures price and the actual price of bitcoin, which was wider than $1,000 for a while. The spread has tightened considerably -- as of 8:15 a.m. today, the CME futures traded at $18,585, Cboe futures at $18,670, and spot bitcoin at about $18,245, for a spread of about 2 percent -- but it still exists. Why would you pay more for a synthetic bitcoin in a month than you would for an actual bitcoin today? The answer, presumably, is that the synthetic bitcoin is more valuable to you: You want bitcoin exposure, but you'd prefer to get it through a standardized contract on a regulated exchange that settles in dollars.
Special Note Regarding the Correlation Risks of Geared Funds (All Funds, except the Matching ProShares Funds, the Managed Futures Strategy ETF, the Crude Oil Strategy ETF, the Bitcoin Futures Strategy ETF, the Short Bitcoin Futures Strategy ETF, the Blockchain/Bitcoin Strategy ETF, and the Bitcoin Futures/Equity Strategy ETF and the CDS Short North American HY Credit ETF)
The rules regarding the extent to which such subpart F inclusions will be treated as “qualifying income” for purposes of the 90% gross income requirement described above are unclear and currently under consideration. In the absence of further guidance, each Parent Fund will seek to ensure that it satisfies the 90% gross income requirement, including but not limited to by ensuring that its Subsidiary timely distributes to it an amount equal to the Subsidiary’s subpart F income by the end of the Subsidiary’s taxable year. In order to make such distributions, the Subsidiary may be required to sell investments, including at a time when it may be disadvantageous to do so. If a Parent Fund were to fail to qualify as a RIC accorded special tax treatment in any taxable year, it would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. In addition, the Parent Fund could be required to pay substantial taxes, penalties and interest, and to make substantial distributions, in order to re-qualify for such special treatment.
Some Centra investors have their doubts, and a plaintiffs' law firm has brought a class action complaint against Centra demanding the investors' money back. The complaint is fun -- Centra had a “Blog/Media Bounty” program to "Reward Experienced Writers who write quality Reviews, Articles About the Centra Project and the ICO crowdsale" -- but not that fun, because the plaintiffs' lawyers don't actually need to prove that Centra was a scam. Their job is much easier: All they need to do is prove that the tokens Centra sold in its initial coin offering were securities. If they were securities, they were sold illegally: They were offered publicly without being registered with the Securities and Exchange Commission, or being exempt from registration. And one remedy for the illegal sale of securities is that the buyers can demand their money back -- whether or not Centra is legitimate, whether or not it is actually using the money to build a cryptocurrency debit card, whether or not it made any misleading statements in the ICO.
ProShare Advisors is also responsible for the general management and administration of each Subsidiary, pursuant to separate investment advisory and management agreements. Under those advisory and management agreements, ProShare Advisors provides each Subsidiary with the same type of services under essentially the same terms (except at no cost to such Subsidiary) as are provided for its respective Parent Fund.
The Fund is an actively managed exchange traded fund. The Fund seeks to achieve its investment objective by investing substantially all of its assets in a combination of bitcoin futures contracts and money market instruments. The Fund is designed to benefit when the price of bitcoin futures contracts increases. The Fund generally seeks to have 30% of the value of its portfolio invested in bitcoin futures contracts and 70% of the value of its portfolio invested in money market instruments. The Fund does not invest directly in bitcoin.
Most swap agreements entered into by a Fund (but generally not CDS) calculate and settle the obligations of the parties to the agreement on a “net basis” with a single payment. Consequently, a Fund’s current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net amount”). Other swap agreements, such as CDS, may require initial premium (discount) payments as well as periodic payments (receipts) related to the interest leg of the swap or to the default of the reference entity.
One traditional attraction of trading futures is the ability to use relatively small amounts of money to potentially achieve outsized returns. In many futures markets the margin, the amount of money that your broker requires up-front before executing the trade can be quite small compared to the ultimate value of the contract. For example, as of 22-Dec-2017, each E-mini S&P 500 contract was worth $134K ($50*S&P 500 index value)—this “list price” of the contract is called its notional value. The CME only requires you to maintain a minimum margin of $4.5K (3.4% of notional) to control this contract (brokers often require additional margin). Margin requirements this low are only possible because the volatility of the S&P 500 is well understood and your margin account balance is adjusted at the end of every trading day to account for the winnings or losses of the day. If your account balance falls below the margin minimum of $4.5K you’ll need to quickly add money to your account or your position will be summarily closed out by your broker. On the plus side, if you’ve predicted the S&P’s direction correctly your profits will be that same as if you completely owned the underlying stocks in the index. A +1% daily move in the S&P500 would yield $1340 in profit even though you only have $4500 invested— a 29% return—this multiplier effect is called leverage.