The CME Group contract (symbol "BTC") began trading on December 18, 2017, building off of the success of the BRR and demand for a regulated trading venue for the digital asset market. The contract is cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin. Bitcoin futures are listed on and subject to the rules of CME.2
The Funds may invest in shares of foreign corporations that are classified under the Code as passive foreign investment companies (“PFICs”). In general, a foreign corporation is classified as a PFIC if at least one-half of its assets constitute investment-type assets, or 75% or more of its gross income is investment-type income. Certain distributions from a PFIC, as well as gain from the sale of PFIC shares, are treated as “excess distributions.” Excess distributions are taxable as ordinary income even though, absent
S&P 500 Dividend Aristocrats ETF; S&P MidCap 400 Dividend Aristocrats ETF; Russell 2000 Dividend Growers ETF; Equities for Rising Rates ETF; Morningstar Alternatives Solution ETF; S&P 500 Ex-Energy ETF, S&P 500 Ex-Financials ETF, S&P 500 Ex-Health Care ETF, S&P 500 Ex-Technology ETF 4:00 p.m. (3:30 p.m. if in cash) in order to receive that day’s closing NAV per Share
Corporate debt securities carry both credit risk and interest rate risk. Credit risk is the risk that a Fund could lose money if the issuer of a corporate debt security is unable to pay interest or repay principal when it is due. Some corporate debt securities that are rated below investment-grade are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. The credit risk of a particular issuer’s debt security may vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of higher-ranking senior securities may receive amounts otherwise payable to the holders of more junior securities. Interest rate risk is the risk that the value of certain corporate debt securities will tend to fall when interest rates rise. In general, corporate debt securities with longer terms tend to fall more in value when interest rates rise than corporate debt securities with shorter terms.
The Funds may invest in equity securities. The market price of securities owned by a Fund may go up or down, sometimes rapidly or unpredictably. Securities may decline in value due to factors affecting securities markets generally or particular industries represented in the securities markets. The value of a security may decline due to general market conditions not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates, or adverse investor sentiment generally. A security’s value may also decline due to factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. The value of a security may also decline for a number of reasons that directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or services. Equity securities generally have greater price volatility than fixed income securities, and the Funds are particularly sensitive to these market risks.
The CME Bitcoin futures contracts will be cash-settled, meaning that you will receive USD on the expiration date if your speculation was successful and you have not sold the derivative before the expiration date. You will not receive Bitcoin – that would be a physical settlement, even though Bitcoin is not a physical asset. This is a crucial difference because it enables traders to trade in Bitcoin futures without having a cryptocurrency wallet. Every transaction is done in USD.Thus, it is easy for mainstream traders to take part in this market.
• A decline in the adoption of bitcoin could have a negative effect on the price of bitcoin and bitcoin-related investments. Bitcoin’s adoption has been on a generally continuous climb since bitcoin first gained mass media attention in 2013. However, there can be no guarantees this growth will continue. Further, adoption of bitcoin as a means of payment has been limited when compared with the increase in the price of bitcoin, indicating that the majority of bitcoin’s use is for investment and speculative purposes. A lack of acceptance of bitcoin as a means of payment could negatively impact the price of the Bitcoin Futures contracts in which the Fund invests.
the price of Bitcoin and Bitcoin Futures Contracts. In particular, it is possible that the price of the Bitcoin Futures Contracts subsequent to a “fork” may be linked to the price of bitcoin on only one of the resulting Bitcoin Networks, rather than the aggregate price of bitcoin on all resulting Bitcoin Networks. The CBOE Futures Exchange (“CFE”) and Chicago Mercantile Exchange (“CME”) have announced different protocols for addressing forks.
Some Funds focus their investments in particular foreign geographical regions or countries. In addition to the risks of investing in foreign securities discussed above, the investments of such Funds may be exposed to special risks that are specific to the country or region in which the investments are focused. Furthermore, Funds with such a focus may be subject to additional risks associated with events in nearby countries or regions or those of a country’s principal trading partners. Additionally, some Funds have an investment focus in a foreign country or region that is an emerging market and, therefore, are subject to heightened risks relative to Funds that focus their investments in more developed countries or regions.
INTERACTIVE DATA MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ICE U.S. 7-10 YEAR BOND INDEX™ and ICE U.S. 20+ YEAR BOND INDEX™ OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL INTERACTIVE DATA HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, DIRECT, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
• Active Management Risk — The performance of actively managed funds reflects, in part, the ability of ProShare Advisors to select investments and make investment decisions that are suited to achieving the Fund’s investment objective. ProShare Advisors’ judgments about the Fund’s investments may prove to be incorrect. If the investments selected and strategies employed by ProShare Advisors fail to produce the intended results, the Fund may not achieve its investment objective and could underperform other funds with a similar investment objective and/or strategies.
risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. If such a default occurs, a Fund will have contractual remedies pursuant to the swap agreements, but such remedies may be subject to bankruptcy and insolvency laws that could affect the Fund’s right as a creditor. The counterparty risk for cleared swaps is generally lower than for uncleared over-the-counter swaps because generally a clearing organization becomes substituted for each counterparty to a cleared swap agreement and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing organization for performance of financial obligations. However, there can be no assurance that the clearing organization, or its members, will satisfy its obligations to a Fund. Upon entering into a cleared swap, a Fund may be required to deposit with the broker an amount of cash or cash equivalents in the range of approximately 3% to 6% of the notional amount for CDS on high yield debt issuers and 1% to 5% for CDS on investment grade debt issuers (this amount is subject to change by the clearing organization that clears the trade). This amount, known as “initial margin,” is in the nature of a performance bond or good faith deposit on the cleared swap and is returned to a Fund upon termination of the swap, assuming all contractual obligations have been satisfied. Subsequent payments, known as “variation margin” to and from the broker will be made daily as the price of the swap fluctuates, making the long and short position in the swap contract more or less valuable, a process known as “marking-to-market.” The premium (discount) payments are built into the daily price of the swap and thus are amortized through the variation margin. The variation margin payment also includes the daily portion of the periodic payment stream.
The value of the bitcoin futures contracts is generally based on the expected value of bitcoin at a future point in time, specifically, the expiration date of the bitcoin futures contracts. Other factors, such as cost of mining, storing and securing bitcoin may affect the value of bitcoin futures. A change in the price of bitcoin today (sometimes referred to as the “spot” price) will not necessarily result in a corresponding movement in the price of the bitcoin futures contracts since the price of the bitcoin futures contracts is based on expectations of the price of bitcoin at a future point in time. Additionally, there is no one centralized source for pricing bitcoin and pricing from one bitcoin exchange to the next can vary widely. Therefore, the value of the bitcoin futures contracts held by the Fund should not be expected to track the price of bitcoin on the Bitcoin Exchange Market.
Institutional markets for restricted securities have developed as a result of the promulgation of Rule 144A under the 1933 Act, which provides a safe harbor from 1933 Act registration requirements for qualifying sales to institutional investors. When Rule 144A securities present an attractive investment opportunity and otherwise meet selection criteria, a Fund may make such investments. Whether or not such securities are illiquid depends on the market that exists for the particular security. The staff of the SEC has taken the position that the liquidity of Rule 144A restricted securities is a question of fact for a board of trustees to determine, such determination to be based on a consideration of the readily-available trading markets and the review of any contractual restrictions.
Well since then bitcoin is up more than 50 percent; it reached a record of $19,511 early Monday, hours after CME launched its futures contract. "Bitcoin Climbs as Futures Debut Fails to Incite Attack by Shorts," is the Bloomberg headline about Sunday's start of trading on CME. On the other hand, bitcoin was actually down a bit on the first full day of CME trading yesterday, and fell further overnight; "Bitcoin Futures Prices Fall in CME Debut" is the Wall Street Journal headline about Monday's trading. It is of course still very early days for the futures, and it's still possible that the shorts will come in and drive the price down. I guess it's even possible bitcoin bulls and bears will both flock to the futures market and trade with each other to find an efficient and stable price that reflects bitcoin's fundamental value, whatever that is.
The promoters of these products promise traders a way to beat the market by arbitraging prices between different exchanges. Don’t believe the hype. Bitcoin exchanges often have expensive withdrawal processes and hefty fees for trading bitcoin with fiat currencies, such as dollars or euros. Also, settlement of bitcoin trades can take hours. These factors will eliminate any profits from bitcoin arbitrage and may even lead to losses.
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.
When rolling futures contracts that are in contango, the Short Bitcoin Fund may buy the expiring bitcoin futures contract at a lower price and sell a longer-dated bitcoin futures contract at a higher price, resulting in a positive roll yield (i.e., a gain). When rolling futures contracts that are in backwardation, the Short Bitcoin Fund may buy the expiring bitcoin futures contract at a higher price and sell the longer-dated bitcoin futures contract at a lower price, resulting in a negative roll yield (i.e., a loss).
The Funds are exchange-traded funds (“ETFs”) and the shares of each Fund (“Shares”) are listed on NYSE Arca, The NASDAQ Stock Market or the Bats BZX Exchange, Inc., (each, an “Exchange”). The Shares trade on the relevant Exchange at market prices that may differ to some degree from the Shares’ NAVs. Each Fund issues and redeems Shares on a continuous basis at NAV in large, specified numbers of Shares called “Creation Units.” Creation Units of the Funds are issued and redeemed in-kind for securities and an amount of cash or entirely in cash, in each case at the discretion of ProShare Advisors LLC (the “Advisor” or “ProShare Advisors”). Except when aggregated in Creation Units, Shares cannot be purchased from and are not redeemable securities of the Funds. Retail investors, therefore, generally will not be able to purchase or redeem the Shares directly. Rather, most retail investors will purchase and sell Shares in the secondary market with the assistance of a broker. Reference is made to the Prospectus for a discussion of the investment objectives and policies of each of the Funds. The discussion below supplements, and should be read in conjunction with, the Prospectus. Portfolio management is provided to the Funds by ProShare Advisors, a Maryland limited liability company with offices at 7501 Wisconsin Avenue, Suite 1000E, Bethesda, MD 20814.
On May 7, 2014, the SEC published an investor alert that highlighted fraud and other concerns relating to certain investment opportunities denominated in bitcoin and fraudulent and unregistered investment schemes targeted at participants in online bitcoin forums. On July 25, 2017, the SEC issued a Report of Investigation or Report which concluded that digital assets or tokens issued for the purpose of raising funds may be securities within the meaning of the federal securities laws. The Report emphasized that whether a digital asset is a security is based on the particular facts and circumstances, including the economic realities of the transactions. This was reiterated in a December 11, 2017 Public Statement emphasizing the risks of investing in digital assets such as bitcoin and noting the possibility that bitcoin and other digital assets may be deemed to be securities. The SEC continues to take action against persons or entities misusing bitcoin in connection with fraudulent schemes (i.e., Ponzi scheme), inaccurate and inadequate publicly disseminated information, and the offering of unregistered securities.
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A piece of software or hardware that gives you the ability to store and exchange your cryptocurrencies. Each cryptocurrency wallet is encrypted and unique. When you send funds you actually broadcast an encrypted message to the recipient. Only the recipient’s cryptocurrency wallet can decrypt that message and thus receive the funds. A hardware cryptocurrency wallet is considered to have key advantages over other software wallets:
The investment restrictions of the Funds specifically identified as fundamental policies may not be changed without the affirmative vote of at least a majority of the outstanding voting securities of that Fund, as defined in the 1940 Act. The investment objectives and all other investment policies of the Funds not specified as fundamental (including the index of a Fund) may be changed by the Board without the approval of shareholders.
A mortgage-backed security is a type of pass-through security, which is a security representing pooled debt obligations repackaged as interests that pass income through an intermediary to investors. Each Fund may invest in mortgage-backed securities, as “cover” for the investment techniques these Funds employ. In the case of mortgage-backed securities, the ownership interest is in a pool of mortgage loans.
You may wonder: where do these contracts come from? We know on the spot market that bitcoins are being bought and sold for fiat, but how the heck are bitcoins being used to trade bitcoin futures contracts? Let's walk through a really simple example showing how an exchange functions when there's just a simple two traders who want to go long and short.
Always pay attention to Bitcoin. Most altcoins (every cryptocurrency except Bitcoin) are pegged more closely to Bitcoin than Asian currencies were to the USD during the Asian Financial Crisis. If Bitcoin price pump drastically, altcoins price can go down as people try to exit altcoins to ride the BTC profits; inversely, if Bitcoin prices dump drastically, altcoin prices can go down, too, as people exit altcoins to exchange back into fiat. The best times for altcoin growth appear when Bitcoin shows organic growth or decline, or remains stagnant in price.
Collateralized mortgage obligations (“CMOs”) are debt obligations collateralized by mortgage loans or mortgage pass-through securities (collateral collectively hereinafter referred to as “Mortgage Assets”). Multi-class pass-through securities are interests in a trust composed of Mortgage Assets and all references in this section to CMOs include multi-class pass-through securities. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates, resulting in a loss of all or part of the premium if any has been paid. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semi-annual basis. The principal and interest payments on the Mortgage Assets may be allocated among the various classes of CMOs in several ways. Typically, payments of principal, including any prepayments, on the underlying mortgages are applied to the classes in the order of their respective stated maturities or final distribution dates, so that no payment of principal is made on CMOs of a class until all CMOs of other classes having earlier stated maturities or final distribution dates have been paid in full.
• Intellectual property claims. A proliferation of recent startups attempting to apply blockchain technology in different contexts means the possibility of conflicting intellectual property claims could be a risk to an issuer, its operations or its business. This could also pose a risk to blockchain platforms that permit transactions in digital securities.
An Authorized Participant that wishes to place an order to purchase Creation Units outside the Clearing Process must state that it is not using the Clearing Process and that the purchase instead will be effected through a transfer of securities and cash directly through DTC or as described below for Global Funds (defined below). Purchases (and redemptions) of Creation Units of the Matching and Ultra ProShares Funds settled outside the Clearing Process will be subject to a higher Transaction Fee than those settled through the Clearing Process. Purchase orders effected outside the Clearing Process are likely to require transmittal by the Authorized Participant earlier on the transmittal date than orders effected using the Clearing Process. Those persons placing orders outside the Clearing Process should ascertain the deadlines applicable to DTC and the Federal Reserve Bank wire system by contacting the operations department of the broker or depository institution effectuating such transfer of Deposit Securities and Balancing Amount (for the Matching and Ultra ProShares Funds), each as applicable and at the discretion of the Advisor, or of the Cash Purchase Amount together with the applicable Transaction Fee.
Although forward currency contracts may be used by the Funds to try to manage currency exchange risks, unanticipated changes in currency exchange rates could result in poorer performance than if a Fund had not entered into these transactions. Even if the Advisor correctly predicts currency exchange rate movements, a hedge could be unsuccessful if changes in the value of a Fund’s position do not correspond to changes in the value of the currency in which its investments are denominated. This lack of correlation between a Fund’s forwards and currency positions may be caused by differences between the futures and currency markets.
When you hear "margin", you may be thinking that you are borrowing money to trade bitcoin futures. This is not quite true. A key feature of these futures contracts is that the leverage comes from counterparties providing it to one another, not from the exchange lending funds and not from any bitcoin being lent from third parties. The contracts are simply like stocks with a market price, which represents the agreements between traders to take the opposing sides of where price of bitcoin will go, so no actual bitcoins are being exchanged per se, however the profit and loss between counterparties is very real!
It will not, though: Everyone is exhausted, so P&G will just add Peltz to its board. This makes sense. The election is for all practical purposes a tie; the difference in votes appears to be well within the margin for measurement error. I think in that scenario a tie has to go to the activist: If 49.98 percent of your shareholders think something is going wrong, you might as well do something to appease them.
Interestingly, the cryptocurrency market seems to rise and fall simultaneously with the altcoins. Is a systemic issue that causes this harmonious rise and fall of prices on the exchanges? The answer is a little fuzzy, but there are several factors at play. Most exchanges use Bitcoin as the universal trading currency, which leads to many investors buying and selling Bitcoin to buy and sell altcoins. When bitcoin starts a bull run, many of the altcoins fall, as investors jump on the Bitcoin train and vice versa. It’s also systemic because most exchanges require Bitcoin rather than fiat currency to transact. It is easy to invest fiat currency in the market and then leave there as an investor trades it; moving it from one currency to another and not cashing it back to fiat currency. Furthermore, When the Bitcoin price falls or rises against the fiat currency, all the altcoins will usually follow. This is because all altcoin prices are based on their Bitcoin exchange rate, not their fiat currency exchange rate. The value of an altcoin in fiat currency is the value of the altcoin in Bitcoin and then Bitcoin’s value in that fiat currency. It is Bitcoin that strongly affects pricing.