Credit Default Swaps (“CDS”): In the case of a CDS, the agreement will reference one or more debt securities or reference entities. The protection “buyer” in a credit default contract is generally obligated to pay the protection “seller” an upfront or a periodic stream of payments over the term of the contract until a credit event, such as a default, on a reference entity has occurred. If a credit event occurs, the seller generally must pay the buyer: a) the full notional value of the swap; or b) the difference between the notional value of the defaulted reference entity and the recovery price/rate for the defaulted reference entity. CDS are designed to reflect changes in credit quality, including events of default. The CDS Short North American HY Credit ETF will normally be a “buyer” of CDS (also referred to as a buyer of protection or a seller of risk). The CDS Short North American HY Credit ETF will primarily invest in centrally cleared, index-based CDS that provide credit exposure through a single trade to a basket of reference entities. The CDS Short North American HY Credit ETF may also invest in single-name CDS. Single-name CDS provide exposure to a single reference entity and are not centrally cleared.
Caspian offers an institutional-grade system that allows traders to avoid this barrier and seamlessly connect to multiple exchanges. Right now, Caspian connects to 15 major crypto-exchanges, including BitMEX, Gemini (FIX), GDAX (FIX), Bitfinex, Poloniex, BitFlyer and Binance. Caspian plans to add up to 40 additional trading platforms by Q3 of this year.
• Tax Risk — In order to qualify for the special tax treatment accorded a regulated investment company (“RIC”) and its shareholders, the 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. The 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. The Fund can make certain investments, the treatment of which for these purposes is unclear. If, in any year, the 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.
• The bitcoin exchanges on which bitcoin trades are relatively new and, in most cases, largely unregulated and, therefore, may be more exposed to volatility, 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 price of the futures contract can deviate from the underlying price of bitcoin on spot markets, which can vary based on sentiment. But in the end, at expiration of the contract, the contract MUST settle at the price of spot. So you need to watch the main spot market price movements because the futures contracts will track the movements underlying (sometimes leading, sometimes lagging, sometimes simultaneously). There are three Chinese exchanges worth following: OKCoin, Houbi, and BTCC; there are two Western exchanges worth following: Bitfinex and Bitstamp. Other exchanges that are currently less important but still worth keeping an eye on are: ItBit, Coinbase, OKCoin USD, BTC-e, and Kraken (which has the largest BTC/EUR orderbook as of December 2015).
Describe any other business, profession, vocation or employment of a substantial nature in which the investment adviser and each director, officer or partner of the investment adviser, or has been, engaged within the last two fiscal years for his or her own account or in the capacity of director, officer, employee, partner or trustee (disclose the name and principal business address of any company for which a person listed above serves in the capacity of director, officer, employee, partner or trustee, and the nature of the relationship.)
Writer and hustler. Adventurer and vagabond. Master of the handstand pushup. Conqueror of mountains, survivor of deserts and crusader for cheap escapades. Will has been on the road for nine years, travelling to far-flung lands on a budget. Today, he runs a number of online ventures. He is passionate about teaching others how to ditch their desks, hit the road and achieve real freedom by earning money online. Currently, Will is on a four year journey from the UK to Papua New Guinea; travelling through truly special countries such as Iran, Pakistan and Bhutan whilst running his businesses online.
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)
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.
Ripple is an open-source digital payment network, and it’s already being used by some of the world’s largest banks – such as the bank of Tokyo and Santandar. XRP has shown significant potential recently and has been turning a lot of heads. Ripple aims to become the go-to tool for banks on a global scale, while still giving an exciting investment opportunity to crypto advocates and solo investors. Ripple has many haters and I’ve been burned by it myself in the past – I sold 30,000 XRP at 20 cents… painful. Still, I did buy them at 3 cents a pop, so it could have been worse. I hold 10,000 XRP today and will hold until 2022.
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.
Lawrence Pines is a Princeton University graduate with more than 25 years of experience as an equity and foreign exchange options trader for multinational banks and proprietary trading groups. Mr. Pines has traded on the NYSE, CBOE and Pacific Stock Exchange. In 2011, Mr. Pines started his own consulting firm through which he advises law firms and investment professionals on issues related to trading, and derivatives. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts.
It is important to note, however, that leverage means that your potential losses may also be much higher. If pork belly prices fall, call options lose value in a much higher proportion than the pork bellies themselves. In the above example, if the price of pork bellies falls from 1,000 to 900 USD (by 10%), the price of call options may fall from 10.5 USD to almost zero, resulting in a near-total loss of your funds instead of a small loss of just 10%.