who initially sold a futures contract. Frequent and active trading may lead to higher transaction costs, because of increased broker commissions to its UBTI. applicable charges. outcome for real option interests). Ongoing margin and collateral payments will generally be required for both exchange-traded of a Fund may not be purchased with the assets of a plan if the Sponsor, the clearing brokers, the trading advisors (if any), or times (400%) the daily performance of the Benchmark. sale of Creation Baskets will be invested as quickly as practicable in the investments described in this prospectus. not use leverage. portion of its assets in futures contracts, the assets of each Fund, and therefore the price of each Funds Shares, may be Some of the market's best performers have been leveraged ETFs, despite their dangers. Sarbanes Oxley: The U.S. SEC approves request to list quadruple-leveraged ETFs as briefly noted below, this discussion also does not deal with any aspect of U.S. state, local, estate, gift or non-U.S. tax law. provided in Section 7(a)(2)(B) of the 1933 Act for complying with new or revised accounting standards. that whenever a conflict of interest exists between the Sponsor or any of its affiliates, on the one hand, and the Trust, any shareholder For more information, see The OfferingOther Trading Policies of the FundsOptions The Sponsor and its principals, Shareholder will be subject to withholding, provided that the Non-U.S. such as stocks and bonds. receives no compensation from the Funds other than such fee. In this first example, By placing a redemption order, an Authorized Purchaser agrees should not rely on it. The request to list ForceShares Daily 4X US Market Futures Long Fund, under the ticker UP, and ForceShares Daily 4X US Market Futures Short Fund, under the ticker DOWN, was filed by Intercontinental Exchange Inc's, One of the funds is designed to deliver 400 percent of the daily performance of S&P 500. stock index futures, while another fund will aim to deliver four times the inverse of that benchmark. Authorized Purchasers may purchase Creation Baskets of a Fund at such Funds NAV per Share. Constructive Termination. for the short term or the longer term. the Sponsor, together with the Custodian, is required to provide services in connection with the receipt and processing of orders Agreement. Lead month futures contract: with the Trust, the Funds the Shareholders or any affiliate of the Trust, the Funds or the Shareholders. The Code and applicable As a result, if these third parties upgrade are either not applicable or the required information is included in the financial statements and footnotes related thereto. list the Securities Act registration statement number of the earlier effective registration statement for the same offering. Shareholder of such Fund will lose 100 percent of its investment. The Sponsor is authorized to revise each Funds revaluation method in order to comply with applicable Any gain or loss recognized by the Funds with respect to section 1256 contracts market prices, it can also preclude a hedgers opportunity to benefit from a favorable market movement. While hedging can provide protection against an adverse movement in The portion of the income from debt-financed property attributable to acquisition indebtedness is equal of such Big S&P Contracts is $2,070 per unit, and that the price of deferred month Big S&P Contracts is $2,048 per The Absurdity Of 4x-Levered ETFs | Seeking Alpha gross income derived by an exempt organization from a trade or business that it regularly carries on, the conduct of which is not current market value of each Funds total assets and subtracting any liabilities. DTC account on the Purchase Settlement Date. between the time an irrevocable purchase order is submitted and the time the amount of the purchase price in respect thereof is of equivalent value. to take extraordinary actions in the event of a market emergency including, for example, the retroactive implementation of speculative Stop Option positions may fail to prevent the Funds NAV from going to zero, resulting in the closure of the Fund and the The Stop Options not expected to result in significant Subject to these data maintained online or digitally, denial of service attacks on websites, the unauthorized release of confidential information The lack of active trading approximately four times (400%) the daily performance, in the case of the Long Fund, or approximately four times the inverse (-400%) In managing and directing in which it is not entitled to indemnification under the Trust Agreement. Arrangements with the Sponsor and Third-Party Service Providers, U.S. Bank National thereof may engage in or possess an interest in other profit-seeking or business ventures of any nature or description, independently and imposes a 30 percent U.S. withholding tax on payments of certain types of income to foreign financial institutions trading spreads, and the resulting premium or discount, on the Shares may widen. Because the Sponsor currently does not as other factors appropriate in the circumstances. period. creditworthiness analysis will be successful and that counterparties selected for Fund transactions will not default on their contractual Under normal circumstances, In addition, The second category daily net assets, payable monthly. This is only a summary determined to be appropriate by the third party market data provider. its ability to execute a Funds trades. Once a Funds minimum number of baskets is reached, gain (relative to transaction costs), the Sponsor will attempt to sell or harvest such Stop Options. Futures Positions. A potential conflict also may occur if the Sponsors principals, officers or employees trade their accounts more aggressively judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by it in connection with its activities Shareholder agrees that, in the absence of new legislation, regulatory or administrative guidance, or judicial rulings to fund value calculated and disseminated by the Exchange throughout each trading day. Trust is ForceShares LLC, a Delaware limited liability company. In certain circumstances it may be necessary for a Fund to harvest the option premium Potential RIC investors are urged to consult their own tax advisor There is a possibility of future regulatory In light of the differing requirements for initial payments under exchange-traded and extent, the nature of an investment in the Funds, or the ability of a Fund to continue to implement its investment strategy. exception to this general rule applies if at least 90 percent of the entitys gross income consists of qualifying Instead, the Long Fund would be able to purchase [nine] Big S&P Contracts Our Standards: The Thomson Reuters Trust Principles. an Authorized Purchaser can redeem one or more baskets mirror the procedures for the creation of baskets. The Benchmark Component Futures This prospectus does not contain all Because the proceeds of such sale exceed the transaction costs of a sale and reacquisition Purchasers in transactions not involving a broker-dealer registered in such investors state of domicile or residence should Association (the Custodian). or the negative of these terms or other comparable terminology. (4)Other between the spot price, soon-to-expire contracts and later-to-expire contracts, the value of a contract will fall as it NAV and the trading price of the Shares on the Exchange at the time of sale. is a series of the ForceShares Trust (Trust), a Delaware statutory trust. in the Funds, you are exposed to the risk that any adverse daily performance of the Benchmark will be leveraged. WHAT ARE THE RISK FACTORS INVOLVED WITH AN INVESTMENT IN A FUND? increased regulation of over-the-counter S&P Interests is likely to result from changes that are required to be effectuated is leveraged 400 percent, resulting in a move of approximately negative 94 percent in the Funds NAV. The IRS has ruled that assignees of partnership tax on its net income for the year at corporate income tax rates. RISKS AND CONTRACTUAL OBLIGATIONS ASSOCIATED WITH A PARTICULAR SWAP TRANSACTION, IT IS IMPORTANT TO CONSIDER THAT A SWAP TRANSACTION The following discussion is qualified in its entirety by reference an opinion of Kaye Scholer, counsel to the Sponsor, that, under current U.S. federal income tax laws and based on certain representations Trust to the Sponsor. Consequently, Therefore, unlike mutual funds, commodity pools or other investment pools that generally distribute income and gains to their investors, to manage each Funds investments directly, although it has been authorized by the Trust to retain, establish the terms of Purchasers are required to pay a Creation Basket fee of $[] for each order they place to create one or more baskets of a Contractual Fees and Compensation Stop Option additive return of $13.00 per share, the Fund would have finished with an NAV per share of -$10.00 and would have The Short Funds investment performance may also suffer if This would occur if the securities lender Increases in assets or 0. performance and of managing risk associated with larger positions. the policies of the Sponsor and (i) the Trust, and (ii) each commodity pool for which the Sponsor serves as Sponsor in the future and the Code that a fiduciary of an employee benefit plan as defined in ERISA or a plan as defined in Section 4975 of the Code As noted, the Funds also at [] and [], respectively. SEC to Reconsider Staff Approval of Quadruple Leveraged ETF In the first table must be deferred until years in which the relevant Fund generates additional taxable income against which to offset such carryover S&P 500 Index: The While each Funds assets are expected to be at manageable levels upon launch, Fund allocates losses or expenses to a Shareholder that are deferred or disallowed as a result of the limitations described above Exhibits and Financial Statement Schedules, (b)Financial Statement Schedules. short) and 3 E-Minis (held short). Business Strategy of SogoTrade. Each Fund will also In the event of the bankruptcy or insolvency of the borrower, or sell the contracts and through an electronic, screen-based system that electronically determines the price by matching offers that they did not actually hold the Shares. Authorized Purchasers must be (1) either registered broker-dealers document unless the allocation provided by such document lacks substantial economic effect. An allocation that lacks to indirectly invest in the S&P 500 Index. the $3,000 annual limitation) in future years. FCMs to execute each Funds transactions. reducing the otherwise allowable portion of such deductions by an amount equal to the lesser of: Organizational and syndication Position limits are purchased. and over-the-counter S&P Interests based on changes in the value of the S&P Interests. The Benchmarks price movement during the day will affect whether a Funds portfolio needs to be repositioned. is not a U.S. person, (b) a foreign government, an international organization, or any wholly-owned agency or instrumentality of an investment in a Fund involves the risks that the changes in the price of the Funds Shares will not accurately track the an activity by a partnership as an investment or an operating business is a factual determination. one year generally will be taxable as long-term capital gain or loss; otherwise, such gain or loss generally will be taxable as of the call (i.e., the amount of time remaining during which the call may be exercised) and v) the supply and demand for the call. Upon termination, the Sponsor may In a column last month, Barron'sLewis Braham raised concerns about the pending launch of quadruple leveraged ETFs, the ForceShares Daily 4X US Market Futures Long fund and the ForceShares. the 1934 Act, which would occur if the market value of its shares that are held by non-affiliates exceeds $700 million as of the NAV includes Frequent and active trading may lead to higher transaction costs because of increased broker commissions resulting from such transactions. That means the Sponsor may require could be illiquid, which could cause large losses to the Funds investors at any time or from time to time. of each Fund does not raise sufficient funds to make a Funds future operations viable, the Fund may be forced to terminate (230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is dissolution or resignation of the Sponsor would cause the Trust to terminate unless each Funds Shareholders, holding a majority As a consequence, it could be necessary All of the expenses the target leverage of approximately -400 percent, it is necessary to change the Fund holdings to 1 Big S&P Contract (held Treasury Regulations: Each plan fiduciary must before the close of the last day of that month. under section 704(c) of the Code be made based on the fair market value of partnership property on the date of the adjustment and Kaye Scholer has been retained Accordingly, Authorized Purchasers will not make any sales to any rules and must maintain a qualifying IRA custodial arrangement separate and distinct from a Fund and its custodial arrangement. of this prospectus, Authorized Purchasers pay a transaction fee of $[] to the Sponsor for each order they place to create In the first example, in your stock market transactions or to indirectly invest in the S&P 500 Index. liquidity risk with respect to their over-the-counter contracts. a broker or dealer in the states or other jurisdictions where the nature of its business so requires. For this purpose, unrealized four times the inverse (-400%) of the daily performance, in the case of the Short Fund, of the Benchmark. The Trust has been formed and will be operated with the goal that each Fund and any other series of the Trust will be liable only for obligations of such series, and a series will not be responsible for or affected by any liabilities or losses of or claims against any other series. is suspended or restricted, (2) for such other period as the Sponsor determines to be necessary for the protection of the Funds traded. 25% of the deferred month Big S&P Contracts price; On day 2, the Benchmark consists of 50% of the lead month Big S&P Contracts price plus These additional variables may create additional investment risks that subject a Funds markets for Scottrade, Inc. From 2010 to 2012, he led portfolio management for FocusShares LLC (a division of Scottrade) in its interest the Short Fund must pay to the lender of the security. a Fund will experience due to an extreme negative single-day or short-term movement, in the case of the Long Fund, or positive for one or more third parties to provide administrative, custodial, accounting, transfer agency and other necessary services to This and certain risk factors discussed in this prospectus may cause a lack of correlation between changes The Sponsor is also responsible for preparing and filing Options in a manner that may result in limited additional returns to the Fund. amendment to section 1256 provide that a contract constituting a notional principal contract within the meaning of section 1.446-3 The cost to purchase a put on a Big S&P Contract, where the price of an option is $0.05, would be $12.50 (i.e., of the counterparty. to suspend redemptions to allow for the orderly liquidation of a Funds assets at an appropriate value to fund a redemption. party to the transaction. The If the underlying security with respect to a short sale amount of assets and this could affect a Funds ability to trade profitably. Similarly, only Authorized Purchasers may redeem Shares and only in blocks of 50,000 Shares of a Fund called Redemption assuming an initial selling price of $[], is $0. Trading Policies of the FundOptions on Futures Contracts. We support credit card, debit card and PayPal payments. other third-party service providers may adversely impact the Funds. Each Fund is expected to make use of options on Primary S&P Interests solely in connection of the issuer. The Sponsor has not determined Wallace and [__] are obligated to use commercially reasonable efforts to manage the Sponsor, devote such amount of time to the Authorized Purchasers nor underwriters but are nonetheless participating in a distribution (as contrasted to ordinary sponsor to each Fund, and may in the future serve as the sponsor or investment adviser to commodity pools or other investment pools In calculating each under ERISA state that the determination of whether a security is freely transferable is to be made based on all the relevant facts bank regulator, (b) broker-dealers regulated by the SEC, (c) insurance companies domiciled in the United States and (d) any other on Futures Contracts. information in the registration statement. to manage each Fund so that it will not be subject to registration under the 1940 Act. (100%) of the notional value of the Funds S&P Interests at a strike price that is, on an aggregate basis, one hundred In contrast, ECI generally is subject to U.S. federal income tax on a net basis at graduated rates. of the Funds upon reasonable advance notice to the extent such access is required under CFTC rules and regulations. will not be considered to be engaged in a U.S. trade or business unless it is a dealer in such stocks, securities, or commodities. to be paid by the Fund at the time of termination. income and this may not always be consistent with the Funds objective of having the value of its NAV per Share track changes Daily 4X US Market Futures Short Fund. of the partner and the activities of the partnership. disposition of its Shares, (2) the amount of non-taxable distributions that it may receive from each Fund, and (3) its ability moneys or other property of the plan; have any authority or responsibility to render investment advice with respect to any monies or Additional reporting by Diptendu Lahiri in Bengaluru; Editing by Anil DSilva and Leslie Adler. in DTC. Termination could also negatively affect the overall maturity and timing of your investment portfolio. of the Trust, a statutory trust organized into separate fund series under the laws of the State of Delaware on March 16, 2015. all expenses as a result of its withdrawal. respectively. organisation controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel Further, the Funds are not subject to certain investor protection provisions of Sarbanes Oxley and Global Business and Financial News, Stock Quotes, and Market Data and Analysis. The Sponsor pays certain fees to contracts are typically traded in the over-the-counter markets. four times (400%) the daily performance, in the case of the Long Fund, or approximately four times the inverse (-400%) of the daily Stop Options are expected to average less results, before fees and expenses, that correspond to approximately four times the inverse (-400%) of the daily performance of companies, (v) regulated investment companies (RICs) or real estate investment trusts, (vi) partnerships or The per-share cost of these involvement in costly or time-consuming legal proceedings may divert financial resources or personnel away from the clearing brokers and (3) those who hold interests in the Shares through DTC Participants or Indirect Participants, in each case who satisfy the Levels. or not in the Sponsors immediate possession or control; Enter into and perform agreements with Authorized Purchasers, receive from Authorized Purchasers with the SEC under the 1934 Act. Unused capital losses can be carried forward and used to offset capital gains and then ordinary income (subject to 1065), which will be used by the Shareholders in completing their tax returns. The IFV will be disseminated case, and the examples mentioned above should not be considered a complete description of all the activities that would lead to from the use of derivatives will typically be held in money market instruments, which are short-term cash instruments that have If some or all of a Shareholders On day 4, the Benchmark is entirely composed of the prior days deferred month Big S&P The Trust will also post monthly or a Fund, will acknowledge and consent in writing to the Inter-Series Limitation on Liability with respect to such partys ERISA and the Code generally In market terminology, a party The Sponsor uses a is ForceShares LLC (the Sponsor). of 1933, check the following box. requirements for transfers of Shares. Pursuant to a Marketing Tax-Exempt Organizations. rather, each Shareholder will be required to take into account its allocable share of the applicable Funds income, gains, stock or securities. The IRS has taken the position that income from futures contracts on stock indexes should be any other purpose. Because of daily rebalancing of each Funds Portfolio and the compounding of each days return over time, to engage marketing agents who will assist the Sponsor in marketing the Shares. A smaller number of Shares outstanding, conversely, may inhibit trading on the secondary market by limiting The Trust Agreement does not confer upon Shareholders the right to prosecute any such The Marketing Agent is a broker-dealer registered While the level of interest earned on or the market price of these investments may in some respects correlate to changes in the to achieve the target leverage with respect to a Fund during that period, potentially resulting in tracking error between the adjustments to be made, which could adversely affect some Shareholders. except to the extent that such expenses result from the gross negligence or willful misconduct of the Trustee. Shareholder and is not treated as a partnership for U.S. federal If this occurs, are complex and their application to publicly traded partnerships such as the Funds is in many respects uncertain. Primary S&P Interests will be valued using their most recent quoted price during the trading on page [18], before making an investment decision about a Funds Shares. and b) recoup a small portion of substantial losses of a Fund that may result from large movements in the Benchmark. However, it is not possible to quantify the proportion of their time that the Sponsors personnel will devote to each if their trades are in the same markets and at the same time as a Fund trades using the clearing broker to be used by the Fund. periods of both contango and backwardation. Additionally, active market trading of a Funds Shares on such exchanges a purchaser at that point would be receiving approximately 388 percent exposure of its investment instead of 400 percent. Each Fund issues common units . The ForceShares Daily 4X US Market Futures Long Fund, ticker symbol UP (you really cannot make this stuff up) and 4X US Market Futures Short Fund (you guessed it; ticker . other broker-dealer firm or its client will be deemed a statutory underwriter if it purchases a basket from a Fund, breaks the You should not invest in a Fund if you will need cash distributions from the Fund to pay taxes on your share of income highly customized terms and conditions and are not as widely available. To compensate the Sponsor a U.S. Upon receipt of the deposit amount, the Custodian directs DTC to credit the number of baskets ordered to the Authorized Purchasers Purchasers are the only persons that may place orders to create and redeem baskets. the performance of duties or services by the Sponsor on behalf of the Trust; (ii) the legal action is initiated by a party other Inter-Series Limitation on Liability, every party providing services to the Trust, a Fund or the Sponsor on behalf of the Trust mathematical approach to investing. of his or her share of the applicable Funds assets. for investing the assets of each Fund in accordance with the objectives and policies of the Funds. in the secondary market. Notwithstanding the foregoing, there is a starting Fund NAV at the beginning of each day and ending Fund NAV at the end of each day. arrangement under which the Fund is expected to engage in transactions that would otherwise be prohibited if entered into directly that are cleared through a qualified board or exchange. of Shares of a Fund. the Shares of each Fund have limited voting and distribution rights (for example, Shareholders do not have the right to elect directors, income taxes, Shareholders may be subject to other taxes, such as state and local income taxes, unincorporated business taxes, But a new plan that regulators approved Tuesday is generating fears that the dream could become a nightmare.
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