August
24, 2022
|
Ms.
Jessica Livingston
Division
of Corporation Finance
U.S.
Securities and Exchange Commission
100 F
Street, NE
Washington,
DC 20549
|
Re:
Teucrium
Commodity Trust
Amendment
No. 4 to
Registration
Statement on Form S-1
Filed
July 20, 2022
File
No. 333-256339
Dear
Ms. Livingston:
On
behalf of the sponsor, Teucrium Trading LLC (the
“Sponsor”), and the Hashdex Bitcoin Futures Fund (the
“Fund”), a series of the Teucrium Commodity Trust (the
“Trust”), we are responding to your comments dated
August 11, 2022 in regard to the Fund’s amended
registration statement on Form S-1 filed on July 20, 2022 (the
“Registration Statement”). All capitalized terms not
defined herein shall have the meaning assigned to them in the
Registration Statement.
Please
note that the page numbers in the Staff's comments may no longer
apply due to the deletion or addition of disclosure. Accordingly,
we have included new page numbers in our responses corresponding to
the newly revised disclosure. For convenience, each of the
Staff’s comments are restated below, with the response
following.
Pre-Effective Amendment No. 4 to Form S-1 Filed July 20,
2022
General
1.
Comment: We
note your cover page disclosure that the Trustee will transfer
sponsorship of the Fund to Toroso Investments, LLC, who will
organize a New Fund as a series of a New Trust to which the assets
of the Fund will be transferred. Please revise to clarify the
reasons Teucrium has chosen to enter into the Tosoro transaction
and to disclose whether shareholders will vote on the transaction,
whether the transaction will be registered under the Securities Act
or will it be exempt from registration, whether the transaction
will require an amendment to your existing listing standards, and
all other regulatory approvals required.
Response:
The referenced
cover page disclosure has been revised to describe the reasons that
Teucrium has chosen to enter into the Toroso transaction and
whether shareholders will vote on the transaction. With respect to
whether the transaction will be registered under the Securities Act
or will it be exempt from registration, whether the transaction
will require an amendment to the Fund's existing listing standards
and what other regulatory approvals will be required, the Support
Agreement simply provides that the formalization of the respective
roles of the Parties with respect to the New Fund will be made in
the format and at a time mutually agreed, taking into account the
operations of the New Fund and any applicable regulatory
requirements. Until such time as the transaction has been
definitively structured, a definitive legal analysis of the Staff's
questions is not possible. However, to ensure that Fund
shareholders have relevant information in this regard, the cover
page disclosure has been revised to indicate that the transaction
is not expected to materially modify the rights of Fund
shareholders.
The
referenced Cover Page disclosure has been revised as
follows:
The
Marketing Agents, Digital Asset Advisor and Sponsor have entered
into an agreement (the “Support Agreement”) that sets
forth the terms and conditions applicable to the launch, marketing,
promotion, development, and ongoing operation of the Fund, as well
the respective rights in profits and obligations for expenses.
Additionally, the Parties believe that it would further certain of
their long-term business goals to transfer sponsorship of the Fund
from the Sponsor to Toroso. Accordingly, the Support Agreement
provides that the Parties expect that Toroso will use commercially
reasonable efforts to organize a new Delaware statutory trust (the
“New Trust”) and a new series thereof (the “New
Fund”) and enter into an agreement pursuant to which, among
other things, the assets of the Fund will be transferred to the New
Fund as a series of the New Trust. The Trust's Declaration of Trust
permits the Sponsor, without a Shareholder vote, to transfer the
assets of the Fund to the New Fund. The transfer is not expected to
materially modify the rights of Fund shareholders. There is no
timeline for this transaction.
Cover Page
2.
Comment:
We have reviewed your response to comment 3. Please disclose on the
cover page and in Plan of Distribution that the initial Authorized
Purchaser is an underwriter.
Response:
The cover page of
the Registration Statement and the Plan of Distribution have been
revised to disclose that the initial Authorized Purchaser is an
underwriter.
3.
Comment:
Refer to the statement in the
first paragraph: “[U]nder its current investment objective
(which may be changed under certain circumstances, see “The
Fund’s Investment Strategies” on page 8), the Fund will
not hold, purchase, or otherwise own any bitcoin. Purchasing Shares
of the Fund is not a direct investment in bitcoin.” Please
revise to eliminate the parenthetical or advise regarding your
plans to hold bitcoin or provide a direct investment in
bitcoin.
Response:
The referenced
parenthetical has been deleted.
4.
Comment:
Refer to the blank offering termination date in the tenth
paragraph. Please update the termination date or
advise.
Response:
Rule 415 under the
Securities Act provides that continuous offerings of securities may
be offered and sold under a registration statement if not more than
three years have elapsed since the initial effective date of the
registration statement. Accordingly, this information will be
populated in a definitive prospectus filed after the Registration
Statement has been declared effective.
5.
Comment:
Please revise to expand your disclosure that
purchasing Shares of the Fund “is not a direct investment in
bitcoin” to state clearly that the investment is subject to
the risks of bitcoin as well as the additional risks of investing
in the Fund.”
Response:
The Registration
Statement has been revised to state that the investment is subject
to the risks of bitcoin as well as the additional risks of
investing in the Fund.
Prospectus Summary
The Fund’s Investment Strategies, page 8
6.
Comment:
Refer to your disclosure here and elsewhere that
“the Fund, in its sole discretion and without Shareholder
approval or advance notice, may change its investment objective,
Benchmark, or investment strategies.” Please revise your
disclosures on Fund changes throughout to highlight that
shareholders of the Fund will not have any rights with respect to
any such changes.
Response:
The Registration
Statement has been revised throughout to state that shareholders of
the Fund will not have any rights with respect to changes to the
investment objective, Benchmark or investment
strategies.
7.
Comment:
We note your disclosure that the market for
Bitcoin Component Futures Contracts were in contango 89% of the
time since January 2019. Please revise your disclosures throughout
to provide this statistic whenever you discuss futures market
conditions.
Response:
The Registration
Statement has been revised to state when discussing market
conditions that Bitcoin Futures Contracts were in contango 90% of
the time for the period from 1/1/2019 to 6/30/2022.
The Fund’s Operating Risks
The Fund is not a registered investment company, page
26
8.
Comment:
Refer to your response to
comment 21. Please briefly describe the following 1940 Act
protections not available to investors in this offering: provisions
prohibiting the suspension of redemptions (except under limited
circumstances), limiting leverage, and imposing a fiduciary duty on
fund managers with respect to receipt of compensation for
services.
Response:
The disclosure has
been revised as follows:
The
Fund is not an investment company subject to the Investment Company
Act of 1940. Accordingly, you do not have the protections expressly
provided by that statute, including provisions preventing Fund
insiders from managing the Fund to their benefit and to the
detriment of Fund Shareholders; provisions preventing the Fund from
issuing securities having inequitable or discriminatory provisions;
provisions preventing Fund management by irresponsible persons;
provisions preventing the use of unsound or misleading methods of
computing Fund earnings and asset value; provisions prohibiting
suspension of redemptions (except under limited circumstances);
provisions limiting fund leverage; provisions imposing a fiduciary
duty on fund managers with respect to receipt of compensation for
services; and provisions preventing changes in the Fund's character
without the consent of Fund Shareholders.
What Are the Risk Factors Involved with an Investment in the
Fund
Sponsoring the Fund will be the Sponsor's first experience in the
crypto asset markets, page 31
9.
Comment:
Refer to your response to comment 14. Please revise the new risk
factor to clarify the specific risks to investors of the Sponsor,
despite the Support Agreement, not having requisite marketing
knowledge to grow the Fund or maintain a viable size.
Response:
The following
disclosure has been added to the noted risk factor: “To the
extent that the Fund does not grow to or maintain a viable size, it
may be liquidated, and the expenses, timing and tax consequences of
such liquidation may not be favorable to some
Shareholders.”
Futures Contracts
Bitcoin Futures Contracts, page 42
10.
Comment:
Refer to your response to comment 27. Please revise to explain how
the identified bitcoin exchanges are selected and to describe in
greater detail how the CME CF Bitcoin Reference Rate is calculated,
including how the collected purchase and sale transactions are used
and whether all transactions during the calculation window are
collected. Please also revise to include a table quantifying the
average daily trading volume of the constituent exchanges included
in the reference rate.
Response:
The following
disclosure has been added:
The CME
selects constituent exchanges for the BRR on the basis of the
following criteria, which each exchange must demonstrate that it
continues to fulfil on an ongoing basis:
●
The exchange has
policies to ensure fair and transparent market conditions at all
times and has processes in place to identify and impede illegal,
unfair or manipulative trading practices.
●
The exchange does
not impose undue barriers to entry or restrictions on market
participants, and utilizing the venue does not expose market
participants to undue credit risk, operational risk, legal risk or
other risks.
●
The exchange
complies with applicable law and regulation, including, but not
limited to capital markets regulations, money transmission
regulations, client money custody regulations, know-your-client
(KYC) regulations and anti-money-laundering (AML)
regulations.
●
The exchange
cooperates with inquiries and investigations of regulators and the
administrator upon request and has executed data sharing agreements
with the CME.
The Offering
Plan of Distribution, page 50
11.
Comment:
Please revise to clarify whether there is any hierarchy among the
Authorized Purchasers or whether they are on equal footing with
respect to their creation or redemption transactions with the
Fund.
Response:
The Sponsor
confirms that there is no hierarchy among the Authorized
Purchasers, with creation or redemption orders processed in the
order in which they are received.
Notes to Statement of Assets and Liabilities
Note 1 – Organization and Business
Calculation of Net Asset Value, page 88
12.
Comment:
Please revise your next amendment to include more fulsome
disclosure in your footnotes regarding how you calculate NAV when
the Futures Contract of the Fund closes at its daily price
fluctuation limit for the day, similar to the disclosure included
on page 51 under ‘Calculating NAV.’
Response:
The following has
been added after the fourteenth paragraph under the caption
"Note 1 –
Organization and Business":
When
a Bitcoin Futures Contract has closed at its daily price
fluctuation limit, that limit price will be the daily settlement
price that the CME publishes. The Fund will use the published
settlement price to price its Shares on that day. If the CME halted
trading in Bitcoin Futures Contracts for other reasons, including
if trading were halted for an entire trading day or several trading
days, the Fund would value its Bitcoin Futures Contracts by using
the settlement price that the CME publishes.
Additionally,
attached as Appendix A is a copy of the fact sheet for the Fund.
Please contact the undersigned at (202) 312-3331
(tconner@vedderprice.com) or John Sanders at (202) 312-3332
(jsanders@vedderprice.com) with any questions or
comments.
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Very
truly yours,
W.
Thomas ConnerShareholder
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cc:
APPENDIX A
