Cboe BZX is asking the Securities and Exchange Commission (SEC) for an exception to its own generic listing rules so it can list funds targeting three times the daily performance of Bitcoin and Ethereum futures.
The Aug. 10 proposal covers six Volatility Shares funds tied to Bitcoin, Ethereum, gold, silver, crude oil and natural gas. The crypto products would use futures traded primarily on CME rather than hold BTC or ETH directly.
The filing remains pending. An SEC notice dated Aug. 14 said the funds’ registration statement was not yet effective and the shares had not been authorized for trading.
The proposed funds would reset leverage every trading day, making longer-term returns dependent on the sequence of daily moves, futures performance, costs, and rebalancing rather than simply three times Bitcoin or ETH’s return.
Cboe needs a specific exemption
The proposed funds do not qualify for Cboe’s normal commodity-trust listing route because they seek three times the daily performance of their benchmarks.
BZX Rule 14.11(e)(4) allows qualifying Commodity-Based Trust Shares to list under generic standards, but Rule 14.11(e)(4)(F) specifically excludes products seeking a multiple of a benchmark. Cboe is therefore using a Section 19(b) filing to seek case-specific SEC approval for the six Volatility Shares funds.
The filing says the products would otherwise operate within Cboe’s commodity-trust framework.
Volatility Shares LLC would sponsor the funds, which would be organized as a series of the VS Trust. The sponsor is registered with the Commodity Futures Trading Commission as a commodity pool operator and would handle the day-to-day management of each fund’s assets.
US Bancorp Fund Services would serve as transfer agent, fund accountant, and administrator, while US Bank National Association would act as custodian.
The funds themselves would operate as commodity pools registered with the CFTC rather than as investment companies registered under the Investment Company Act of 1940. They would still require an effective Securities Act registration statement and SEC approval of Cboe’s proposed listing rule before trading could begin.
The sponsor would actively increase or decrease each fund’s futures holdings to account for benchmark changes and investor creations or redemptions, keeping exposure aligned with the daily 3x objective.
For Bitcoin and Ethereum, the benchmarks would use first- and second-month futures contracts traded primarily on CME. The near-month position would be rolled into the following contract over five business days, with about 20% of the expiring position moved each day.
That structure introduces risks beyond the direction of Bitcoin or ETH itself. Futures basis, roll execution, financing, expenses and tracking error can all affect shareholder returns.
The filing also allows the funds to use later-month futures, linked exchange-traded products or listed options if preferred contracts become unavailable because of price limits, margin requirements, position restrictions or risk controls imposed by exchanges and futures commission merchants.
Those alternatives could preserve exposure while changing how closely the funds track their intended benchmarks.
SEC approval would therefore resolve the specific exchange-rule problem created by the 3x leverage target. It would not, by itself, complete the separate registration and trading steps required before the funds could launch.
Existing 2x funds show how 3x leverage could amplify losses and rebalancing
Volatility Shares already offers 2x Bitcoin and Ethereum futures ETFs, giving investors a live comparison for how daily leveraged crypto products can behave over longer holding periods.
Its 2x ETH ETF, ETHU, reported a -48.81% NAV return for the second quarter, -79.61% for one year, and -96.15% on an average annualized basis since its June 4, 2024 inception, with all periods ending June 30.
Its 2x Bitcoin ETF, BITX, reported a -29.76% quarterly NAV return and a -78.93% one-year return over the same quarter end.
Those results do not predict how the proposed 3x funds would perform, nor can the losses be attributed solely to leverage. Crypto prices, futures performance, roll execution, expenses, and daily compounding all contributed to the realized path.
Compounding alone can create a substantial gap between a leveraged fund and the benchmark it tracks.
FINRA illustrates the effect with a benchmark that falls 10% and then rises 10%. The benchmark moves from 100 to 90 and then to 99, leaving it down 1%.
A 2x daily product falls from 100 to 80, then gains 20% from that smaller base to finish at 96, down 4%. On the other hand, a frictionless 3x version would fall to 70, then rise 30% to 91, leaving it down 9%.
| Exposure | Start | After -10% | After +10% | Two-day return |
|---|---|---|---|---|
| Benchmark | 100 | 90 | 99 | -1% |
| Daily 2x | 100 | 80 | 96 | -4% |
| Daily 3x | 100 | 70 | 91 | -9% |
The example excludes fees, financing, futures basis, roll costs, and tracking error, isolating the effect of daily resetting.
That is also why ETHU and BITX cannot simply be scaled up to estimate a hypothetical 3x return. Even when Bitcoin or ETH finishes at the same level, different sequences of gains and losses can produce materially different outcomes for a daily leveraged fund.
The same daily reset that creates that path dependence also determines how much the fund must trade to restore its target exposure after each market move.
In a simplified model, a 3x fund beginning with assets of A starts with exposure of 3A. After a one-day benchmark return of r, restoring exposure to three times the fund’s new NAV requires an approximate gross adjustment of 6Ar.
For a hypothetical $100 million fund, a 5% benchmark move implies roughly $30 million of additional buying or selling in the direction of that move.
The calculation does not estimate market impact. The filing provides no launch asset level or flow forecast, and execution would depend on fund size, liquidity, investor creations and redemptions, positioning, and the instruments used.
It does, however, show how moving from 2x to 3x raises both sides of the structure: investors take greater path-dependent exposure, while the fund must make larger daily adjustments to maintain that exposure.
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