Cboe BZX filed with the Securities and Exchange Commission on August 10 to list six leveraged funds from Volatility Shares targeting three times the daily performance of Bitcoin and Ethereum futures, plus commodity contracts.
The filing requires a Section 19(b) exemption because the funds do not qualify under standard commodity-trust listing rules. Rule 14.11(e)(4)(F) specifically excludes products seeking a multiple of a benchmark, forcing Cboe to request case-specific SEC approval instead.
Volatility Shares is registered with the CFTC as a commodity pool operator. The proposed funds would operate as commodity pools under CFTC registration, not as investment companies under the Investment Company Act of 1940. US Bancorp Fund Services would serve as transfer agent, fund accountant, and administrator, while US Bank National Association would act as custodian.
Bitcoin and Ethereum benchmarks would use first- and second-month CME futures contracts, with near-month positions rolled over five business days before expiration. This daily reset structure creates path-dependent losses that diverge from simple benchmark multiples over time.
Existing 2x Funds Show Steep Losses
Volatility Shares already operates 2x Bitcoin and Ethereum futures ETFs under the tickers BITX and ETHU. Performance data underscores the risk profile of daily-reset leverage.
ETHU posted a negative 48.81% NAV return in the second quarter alone. Over one year, the fund lost 79.61%. Since its June 4, 2024 inception, ETHU has averaged a negative 96.15% annualized NAV return.
BITX declined 29.76% in the most recent quarter and fell 78.93% over the past year. Both funds demonstrate how daily rebalancing compounds losses during sideways or declining markets.
Mechanics of Leverage and Rebalancing
Daily reset leverage requires constant buying and selling to maintain the target multiple. A hypothetical $100 million fund would need to buy or sell approximately $30 million in notional exposure if the benchmark moved 5% in a single day. This rebalancing friction, repeated daily, erodes returns independent of the underlying asset’s direction.
The SEC issued a notice on August 14 stating that the funds’ registration statement was not yet effective and the shares had not been authorized for trading. SEC approval of the listing rule would not complete the separate registration and trading authorization steps required before the funds could launch.
Cboe has not disclosed a timeline for SEC decision on the exemption request.
