December 20, 2018

VIA ELECTRONIC SUBMISSION

rule-comments@sec.gov

FORCESHARES LLC P.O.Box 16772

St. Louis, MO 63105

Eduardo A. Aleman, Assistant Secretary U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, DC 2549-1090

Re: File No. SR-NYSEArca-2016-120 Comment on Proposed Rule Change to List and Trade Shares ofthe ForceShares Daily 4X US Market Futures Long Fund and ForceShares Daily 4X US Market Futures Short Fund Under Commentary .02 to NYSE Arca Equities Rule 8.200

Dear Mr. Aleman:

ForceShares LLC ("ForceShares") submits this letter to provide supplemental comments regarding the above-referenced proposed rule change. These supplemental comments address the U.S. Securities and Exchange Commission's ("Commission") recent request included in Release No. 34-84676, dated November 29th

, 2018.

Background

ForceShares and NYSE Arca, Inc. ("Exchange") have sought regulatory approval for two new commodity pools, to be sponsored by ForceShares. The respective primary investment objectives of these pools is to seek daily investment results, before fees and expenses, that correspond to approximately four times the daily performance ("Long Fund") and four times the inverse of the daily performance ("Short Fund", and together with the Long Fund, the "Funds") of the closing settlement prices for lead month Standard & Poor's 500 Stock Price Index Futures contracts ("Benchmark"). ForceShares intends that each Fund to be listed on the Exchange, a registered and regulated national securities exchange, and for each Fund's primary investments to be listed futures and options contracts that are traded on a regulated designated contract market and cleared on a designated clearing organization.

Mr. Eduardo A. Aleman

December 20, 2018 Page 2

ForceShares first filed with the Commission a draft registration statement describing the Funds on July

27, 2015. The Exchange first filed with the Commission a proposed rule change to list and trade shares

of the Funds on October 17, 2016.1 Following submission of the proposed rule change, the Commission

sought public comment. On May 2, 2017, the Division of Trading and Markets, for the Commission

pursuant to delegated authority, approved the proposed rule change, as amended ("May 2, 2017

Order").

On May 12, 2017, the Exchange was notified that the May 2, 2017 Order had been stayed pending Commission review pursuant to Rule 431 of the Commission's Rules of Practice.2 In sum, the Commission had solicited comments on the Exchange's proposed rules and ForceShares proposed products five times. To date, the only comments received and published have been in support of approval.

The Commission now seeks comments for the sixth time, and references research conducted by staff of

the Federal Reserve Board ("FRB") as the basis for comments. It should be noted that ForceShares, in its prior comments, referenced the Ivanov and Lenkey Paper (defined below), which was last updated in 2017. The Commission references a different, older paper prepared by FRB staff.

General discussion

1. The Commission's request for comment references Federal Reserve Board ("FRB") research that has been supplanted by newer and more complete FRB staff research.

The Commission most recent requests for comment reference FRB research, particularly citing work by Tuzun

3 (a working paper dated May 28, 2014) and by Ivanov and Lenkey4 (a working paper last revised

on July 25, 2017). The Commission has previously acknowledged that excerpts from the Ivanov and Lenkey Paper that argues against the notion that leveraged and inverse Exchange-Traded Products ("ETPs") can impact the markets. Nevertheless, the Commission's most recent request for comment suggests that the concerns regarding market impact remain, with reference to the older Tuzun Paper.

We believe the Ivanov and Lenkey Paper should be read to supplant and correct the analysis of the Tuzun Paper. Both papers are prepared by FRB staff; however, the Ivanov and Len key Paper takes a

1 On October 17, 2016, NYSE Arca, Inc. filed with the Securities and Exchange Commission ("Commission"),

pursuant to Section 19(b)(l) of the Securities Exchange Act of 1934 ("Act") and Rule 19b-4 thereunder, a proposed rule change to list and trade shares of the ForceShares Daily 4X US Market Futures Long Fund and ForceShares Daily 4X US Market Futures Short Fund under Commentary .02 to NYSE Arca Equities Rule 8.200. 2

On May 12, 2017, the Secretary of the Commission notified the Exchange that pursuant to Rule 431 of the Commission's Rules of Practice, the Commission would review the delegated action and that the May 2, 2017 Order was stayed until the Commission ordered otherwise. 3

See Tugkan Tuzun, Are Leveraged and Inverse ETFs the New Portfolio Insurers? (Board of Governors of the Federal Reserve System, Working Paper May 28, 2014)) ("Tuzun Paper"). Available at https://pa pers.ssrn .com/sol3/papers.cfm ?abstract_id=2504012. 4

See Ivan T. Ivanov and Stephen L. Lenkey, Are Concerns About Leveraged ETFs Overblown? (Finance and

Economics Discussion Series, Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board, Washington, D.C., Working Paper 2014-106), last revised July 25, 2017. Available at https ://papers .ssrn .com/ sol3/ papers. cfm ?abstract _id =2190708.

Mr. Eduardo A. Aleman

December 20, 2018 Page 3

more comprehensive review of the impact of leveraged and inverse ETPs, considers broader metrics in its analysis (e.g., taking into account capital flows), and has the benefit of three additional years of review, including analysis of the Tuzun Paper methodology and conclusions. We believe greater weight and deference should be granted by the Commission to FRB research that is both more recent and more comprehensive.

2. The Tuzun Paper makes flawed comparisons to portfolio insurers of the 1980s.

The Tuzun Paper makes broad comparisons between portfolio insurers and leveraged ETPs, noting the belief that portfolio insurance programs exacerbated the 1987 market crash. We believe this comparison to be flawed.

The size and number of portfolio insurance programs were not known in 1987, meaning the market could not adequately or accurately assess the level of risk created by opaque programs. Conversely, the market may adequately assess the size (assets) and nature of leveraged ETPs, which are publicly known and could limit the impact of anticipatory trading.

Portfolio insurance programs were, in essence, recommendations for large institutional investors to trade, in aggregate, in the same direction of the market. Unlike portfolio insurance, leveraged ETPs are simply tools that facilitate investment and hedging, where both a long and short product are typically available at the same time. The opposing long and short products allow for market participants to make contrarian investments. Leveraged ETPs also are subject to capital flows which, as Ivanov and Lenkey point out, greatly diminishes the potential for large one-sided moves.

Portfolio insurance programs were simple one-dimensional trading programs and were neither funds nor trading tools that could adequately serve and be assessed by the market at large.

3. The Tuzun Paper does not account for the current liquidity of 2018 markets and the present, broad product ecosystem that did not exist in the 1980s.

The Tuzun Paper does account for various evolutions in modern financial markets. Chief among these evolutions is the difference in market size and the breadth of financial products that have emerged between 1987 and today. Fewer trading instruments based on the S&P 500 existed in 1987 than today, and that broader array of products facilitates more trading strategies. Furthermore, the overall size of the market in S&P 500-based products is much larger now than it was in 1987, further diminishing the potential for any one product set to impact the underlying index components, or the market at large. As we note and discuss below, the market for S&P 500-based instruments is among the most liquid, if not the most liquid, in the world.

4. The library of research continues to expand, we point to recent research focused on leveraged ETPs (including 4x ETPs) and the benefits they may provide for portfolio insurance strategies.5

5 See William Trainor and Jeffrey George, Portfolio Insurance Using Leveraged ETFs (October 18, 2017). Available at

https://ssrn.com/abstract=3055199

Mr. Eduardo A. Aleman December 20, 2018

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The 2017 study produced by Trainor and George demonstrates that leveraged ETPs can provide a cost benefit to investors. It specifically references 4x leveraged products and the hedging benefits they may provide market participants.

5. We reiterate that synthetic 4x leveraged products currently exist in the market.6

Since our comment letter of July 24t\ 2017, Exchange-Traded Notes ("ETNs") have since entered the market with 4x leverage. The VelocityShares 4x currency pair ETNs further supports the position that the market can withstand the demand of 4x ETP products.7

Responses to the Commission's questions

1. Would the rebalancing activities of the ForceShares ETPs impact daily volatility of the portfolio holdings, the underlying index, or the underlying names comprising the index (together "underlying assets")? If so, how?

We believe that the Funds would have insignificant impact on futures markets or the index components. The Ivanov and Len key Paper is likely the most recent and thorough analysis on leveraged ETP rebalancing, and the authors conclude that the impact of ETP rebalancing is "economically insignificant."

It is important to note that the authors studied a much wider range of products and indexes than what is proposed here by ForceShares. The proposed Funds intend to use S&P 500 derivatives, which are part of the largest and most liquid suite of products in the world and which include exchange-traded funds, exchange-traded fund options, exchange-traded futures, exchange-traded futures options, and other instruments. Due to the broad array of products that exist today, the overall impact of rebalancing activities will be muted.

Regarding the underlying index itself, the components comprising the index are very large and liquid companies. The weighted average market cap of the index components is currently over $215 billion and the aggregate market cap is over $24 trillion8

• The average daily trading value in the individual components is also very high. The highest weighted component Microsoft Corp (MSFT, ~3.65%) trades approximately $3.8 billion on average each day, and the average daily trading value in the lowest weighted component, Aetna Inc. (AET, ~o.22%) is about $585 million. The assets under management in just ETFs that track the S&P 500 index (not including mutual funds and other fund structures) is over $500 billion.

9 In other words, the proposed Funds would have little impact due to the enormity of the

other funds and associated market participants that trade the index components every day.

6 See page 2 of ForceShares letter dated July 24, 2017, available ast https://www.sec.gov/comments/sr-nysearca-

2016-120/nysearca2016120-2109427-15 7714. pdf 7

See https:/ /www.velocityshares.com/etns/ 8

See StateStreet Global Advisors' website https://us.spdrs.com/en/etf/spdr-sp-500-etf-SPY 9

See StateStreet Global Advisors' website https://us.spdrs.com/en/et f/spdr-sp-500-etf-SPY, as well as publicly available data from Yahoo Finance.

Mr. Eduardo A. Aleman

December 20, 2018

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2. How much additional end of day trading volume in the underlying assets would the ForceShares ETPs potentially add? How much volume has existing leveraged and inverse ETPs added to end of day trading in their underlying assets?

ForceShares believes the following represents a fair, hypothetical increase in trading end of day considering the market's current price valuation:

+/-$SOM in fund AUM would possibly create +/-1500 e-minis / +/-1500 option contracts +/-$SOOM in fund AUM would possibly create 15,000 e-minis / 15,000 or less option contracts

For the second point, this is hard to determine. We do not have the ability to distinguish the end of day trading that would occur in the numerous underlying positions of current ETP structures. We have noticed that current leveraged funds hold an assortment of swaps, futures, equities, etc. Certain holdings, such as private swap transactions, would be difficult to assess as activity in these transactions are not publicly cleared or reported .

3. Would the trading activity relating to the ForceShares ETPs exacerbate market movements or market volatility? Why or why not?

We believe that trading activity in the proposed Funds would not exacerbate market movements or volatility. The diversity in the number of products, as well as the size and liquidity of such products, based on the same underlying index helps facilitate a broad range of trading strategies that would diminish the effects of the ForceShares products in the market. As noted above, the S&P 500 remains one of the most liquid market segments, both with respect to the the underlying components of the S&P 500 Index and the derivative products based on the index.

4. What type of hedging exposure is expected to arise from trading activity in these products?

There are several types of hedging activity that could be generated by market participants with exposure to the Funds. There is also hedging activity that will be generated by the Funds themselves.

Market participants may hedge their exposure to the Funds by trading any combination of S&P 500-based products, including futures, ETPs, and even individual underlying components. The needs of the market participant, the expense of trading a particular instrument, or its current positions in other related products, etc., will dictate the mix of products that may be used, and that mix could change at different times. Therefore, due to the number of alternative products that may be used under different market conditions, too many assumptions would have to be made in order estimate the type of hedging exposure across all market participants.

5. How would this hedging exposure change or otherwise react to significant down market moves? For example, how might such hedging exposure be adjusted?

We believe significant down-market moves (for the Long Fund) or up market moves (for the Short Fund) would not have a significant impact on hedging available for the Fund due to the liquidity and diversity of products available to hedge exposure to the S&P 500. There is no indication that the liquidity of these markets, when considering the diversity of means of hedging exposure, presents a challenge. We

Mr. Eduardo A. Aleman

December 20, 2018

note that no such difficulties have been reported with respect to the existing 2X and 3X products tracking the S&P 500.

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With respect to the ability of market participants to hedge exposure relating to the Funds, we do not foresee significant issues but welcome commentary from market makers and other industry participants. We note that our holdings will be transparent, and that the same hedging tools available to the Funds are readily accessible to market makers and other industry participants.

6. Would the listing and trading of shares of the ForceShares ETPs change the current leveraged and inverse ETP market? If so, how?

We believe the listing and trading of the Funds would positively impact the overall leveraged and inverse ETP market and ultimately benefit investors.

First, a new entrant will bring competition to an area of the ETP market with an entrenched duopoly. The regulatory barriers to entry for this part of the ETP market has essentially deprived investors of product innovation to the benefit of two firms. Allowing new entrants could spur the creation of new product ideas, improved structures, and lower fees.

Second, the proposed Funds support the Commission's position regarding derivative use in its proposed rule 18f-4, and if the proposed Funds were allowed to trade, new entrants would likely also follow the same path of offering products under an exchange-traded commodity pool structure pursuant to the 1933 Act.

7. Do investors have access to information sufficient to fully understand the operation and risks of the ForceShares ETPs?

Yes. The proposed Funds would be offered pursuant to a registration statement on Form S-1 under the 1933 Act. In addition, the Funds would have as their primary holdings exchange-listed and cleared derivative products that investors already have access to today.

Furthermore, there are many authoritative sources of information on leveraged and inverse ETPs in general. The website of the SEC (www.sec.gov) contains hundreds of documents that focus on, reference, or relate to leverage ETPs in the form of investor alerts, bulletins, proposed rules of the SEC as well as exchanges, and public comments. The website of the Financial industry Regulatory Authority (www.finra.org) contains dozens of documents in the form of official publications, notices, investor alerts, and FAQs that either focus on or relate to leveraged ETPs. Lastly, there are thousands of articles and research papers that are freely available on the internet and focus on leveraged ETPs and provide investor education and awareness.

Lastly, ForceShares intends to operate a publicly available website which will contain offering documents, informational, and educational materials regarding the products.

Summary

We believe the proposed Funds are well constructed and worthy of the positive consideration of the Commission and its Staff. We note that the proposed offering of the Funds conforms to the

Mr. Eduardo A. Aleman

December 20, 2018

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requirements of the Securities Act of 1933. The Funds are in concert with the Commission's position regarding derivative use in its proposed Rule 18f-4. The proposed Funds would provide leverage that is far below what is currently available to individual investors today through derivatives and margin accounts, and that new ETNs have been introduced that currently provide 4x leveraged exposure. The proposed Funds would introduce product innovation and competition to a part of the ETP industry where entrenched competition has been unfairly shielded. We believe that the S&P 500 is a highly liquid and diverse market ecosystem that can easily support leveraged ETPs, and that it is arbitrary and capricious to use the ForceShares proposal as a platform for evaluating the merits of potential future products not currently at issue.

We respectfully request that the Commission lift the stay on the approval that was previously granted for the above-referenced proposed rule.

Sincerely,

ForceShares LLC

~4~ Kris Wallace Managing Member

Cc: The office of Chairman Jay Clayton

The office of Commissioner Robert J. Jackson Jr. The office of Commissioner Hester M. Peirce The office of Commissioner Elad L. Roisman The officer of Commissioner Kara M. Stein