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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-03-01 compared with 2022-03-16 · 59 added, 24 removed, 121 unchanged (41% of the section changed)

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The discussion and analysis which follows may contain trend analysis and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to future events and financial results.

Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “outlook” and “estimate,” as well as similar words and phrases, signify forward-looking statements.

The Trust’s forward-looking statements are not guarantees of future results and conditions, and important factors, risks and uncertainties may cause our actual results to differ materially from those expressed in our forward-looking statements.

Words such as “

anticipate, ”

expect, ”

intend, ”

plan, ”

believe, ”

seek, ”

outlook ”

estimate, ”

as well as similar words and phrases, signify forward-looking statements.

The Trust ’

s forward-looking statements are not guarantees of future results and conditions, and important factors, risks and uncertainties may cause our actual results to differ materially from those expressed in our forward-looking statements.

You should not place undue reliance on any forward-looking statements.

Except as expressly required by the Federal securities laws, the Sponsor undertakes no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Report.

Trading in Commodity Interests such as Futures Contracts will involve the Funds entering into contractual commitments to purchase or sell specific amounts of commodities at a specified date in the future.

Trading in Commodity or Cryptocurrency Interests such as Futures Contracts will involve the Funds entering into contractual commitments to purchase or sell specific amounts of commodities or cryptocurrencies at a specified date in the future.

The gross or face amount of the contracts is expected to significantly exceed the future cash requirements of each Fund as each Fund intends to close out any open positions prior to the contractual expiration date.

As a result, each Fund’s market risk is the risk of loss arising from the decline in value of the contracts, not from the need to make delivery under the contracts.

The Funds consider the “fair value” of derivative instruments to be the unrealized gain or loss on the contracts.

As a result, each Fund’s market risk is the risk of loss arising from the decline in value of the contracts, not from the need to make delivery under the contracts.

The Funds consider the “fair value”

of derivative instruments to be the unrealized gain or loss on the contracts.

The market risk associated with the commitment by the Funds to purchase a specific commodity will be limited to the aggregate face amount of the contacts held.

The exposure of the Funds to market risk will depend primarily on the market price of the specific commodities held by the Fund.

The market price of the commodities depends in part on the volatility of interest rates and foreign exchange rates and the liquidity of the commodity specific markets.

The exposure of the Funds to market risk will depend primarily on the market price of the specific commodities or cryptocurrency held by the Fund.

The market price of the commodities or cryptocurrency  depends in part on the volatility of interest rates and foreign exchange rates and the liquidity of the commodity or cryptocurrency specific markets.

TAGS is subject to the risks of the commodity specific futures contracts of the Underlying Funds as the fair value of its holdings is based on the NAV of each of the Underlying Funds, each of which is directly impacted by the factors discussed above.

The tables below present a quantitative analysis of hypothetical impact of price decreases and increases in each of the commodity futures contracts held by each of the Funds, or the Underlying Funds in the case of TAGS, on the actual holdings and NAV per share as of December 31, 2021.

The tables below present a quantitative analysis of hypothetical impact of price decreases and increases in each of the commodity or cryptocurrency futures contracts held by each of the Funds, or the Underlying Funds in the case of TAGS, on the actual holdings and NAV per share as of December 31, 2022.

For purposes of this analysis, all futures contracts held by the Funds and the Underlying Funds are assumed to change by the same percentage.

5 unchanged sentences

Number of Contracts Held

Closing Price

Notional Amount

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Total CBOT Corn Futures

$ 120,863,050

$ 108,776,745

$ 102,733,593

$ 132,949,355

$ 138,992,508

$ 145,035,660

Shares outstanding

6 unchanged sentences

Number of Contracts Held

Closing Price

Notional Amount

17 unchanged sentences

Number of Contracts Held

Closing Price

Notional Amount

17 unchanged sentences

Number of Contracts Held

Closing Price

Notional Amount

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Percent Change in the Net Asset Value per Share

December 31, 2022 as Reported

Holdings as of December 31, 2022

Number of Contracts Held

Closing Price

Notional Amount

CME Bitcoin Futures JAN23

CME Bitcoin Futures FEB23

Total CME Bitcoin Futures

Shares outstanding

Net Asset Value per Share attributable directly to CME Bitcoin Futures

Total Net Asset Value per Share as reported

Change in the Net Asset Value per Share

Percent Change in the Net Asset Value per Share

Qualitative Risk Analysis

Margin is the minimum amount of funds that must be deposited by a commodity interest trader with the trader’s broker to initiate and maintain an open position in futures contracts.

A margin deposit acts to assure the trader’s performance of the futures contracts purchased or sold.

Margin is the minimum amount of funds that must be deposited by a commodity or cryptocurrency interest trader with the trader’s broker to initiate and maintain an open position in futures contracts.

A margin deposit acts to assure the trader’s performance of the futures contracts purchased or sold.

Futures contracts are customarily bought and sold on initial margin that represents a very small percentage of the aggregate purchase or sales price of the contract.

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In addition, the amount of margin required in connection with a particular futures contract is set from time to time by the exchange on which the contract is traded and may be modified from time to time by the exchange during the term of the contract.

Brokerage firms, such as the Funds’ clearing brokers, carrying accounts for traders in commodity interest contracts generally require higher amounts of margin as a matter of policy to further protect themselves.

Brokerage firms, such as the Funds’

clearing brokers, carrying accounts for traders in commodity or cryptocurrency interest contracts generally require higher amounts of margin as a matter of policy to further protect themselves.

Over the counter trading generally involves the extension of credit between counterparties, so the counterparties may agree to require the posting of collateral by one or both parties to address credit exposure.

4 unchanged sentences

Complicated margin requirements apply to spreads and conversions, which are complex trading strategies in which a trader acquires a mixture of options positions and positions in the underlying interest.

Ongoing or “maintenance” margin requirements are computed each day by a trader’s clearing broker.

Ongoing or “maintenance”

margin requirements are computed each day by a trader’s clearing broker.

When the market value of a particular open futures contract changes to a point where the margin on deposit does not satisfy maintenance margin requirements, a margin call is made by the broker.

If the margin call is not met within a reasonable time, the broker may close out the trader’s position.

With respect to the Funds’ trading, the Funds (and not their shareholders personally) are subject to margin calls.

If the margin call is not met within a reasonable time, the broker may close out the trader’s position.

With respect to the Funds’

trading, the Funds (and not their shareholders personally) are subject to margin calls.

Finally, many major U.S.

exchanges have passed certain cross margining arrangements involving procedures pursuant to which the futures and options positions held in an account would, in the case of some accounts, be aggregated, and margin requirements would be assessed on a portfolio basis, measuring the total risk of the combined positions.

The Dodd-Frank Act requires the CFTC, the SEC and the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit System and the Federal Housing Finance Agency (collectively, the “Prudential Regulators”) to establish “both initial and variation margin requirements on all swaps that are not cleared by a registered clearing organization” (i.e., uncleared or over the counter swaps).

The proposed rules would require swap dealers and major swap participants to collect both variation and initial margin from counterparties known as “financial end-users” such as the Funds or Underlying Funds and in certain circumstances require these swap dealers or major swap participants to post variation margin or initial margin to the Funds or Underlying Funds.

(i.e., uncleared or over the counter swaps).

The proposed rules would require swap dealers and major swap participants to collect both variation and initial margin from counterparties known as “financial end-users”

such as the Funds or Underlying Funds and in certain circumstances require these swap dealers or major swap participants to post variation margin or initial margin to the Funds or Underlying Funds.

The CFTC and the Prudential Regulators finalized these rules in 2016 and compliance became necessary in September 2016.

An “exchange for related position” (“EFRP”) can be used by the Fund as a technique to facilitate the exchanging of a futures hedge position against a creation or redemption order, and thus the Fund may use an EFRP transaction in connection with the creation and redemption of shares.

An “exchange for related position”

(“EFRP”) can be used by the Fund as a technique to facilitate the exchanging of a futures hedge position against a creation or redemption order, and thus the Fund may use an EFRP transaction in connection with the creation and redemption of shares.

The market specialist/market maker that is the ultimate purchaser or seller of shares in connection with the creation or redemption basket, respectively, agrees to sell or purchase a corresponding offsetting futures position which is then settled on the same business day as a cleared futures transaction by the FCMs.

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The Fund reports all activity related to EFRP transactions under the procedures and guidelines of the CFTC and the exchanges on which the futures are traded.

The Funds, other than TAGS, will generally retain cash positions of approximately 95% of total net assets;

The Funds, other than TAGS and DEFI, will generally retain cash positions of approximately 95% of total net assets;

this balance represents the total net assets less the initial margin requirements held by the FCM.

DEFI will generally retain cash positions of approximately 70% of total net assets. 

These cash assets are either:

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk