57490 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 

35 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The Trust was formed as a Delaware statutory 

trust on July 13, 2021 and is operated as a grantor 

trust for U.S. federal tax purposes. The Trust has 

no fixed termination date. 

4The Commission approved BZX Rule 14.11(e)(4) 

in Securities Exchange Act Release No. 65225 

(August 30, 2011), 76 FR 55148 (September 6, 2011) 

(SR–BATS–2011–018). 

5All statements and representations made in this 

filing regarding (a) the description of the portfolio, 

(b) limitations on portfolio holdings or reference 

assets, or (c) the applicability of Exchange rules and 

surveillance procedures shall constitute continued 

listing requirements for listing the Shares on the 

Exchange. 

6See Form S–1 Registration Statement submitted 

to the Commission on July 21, 2021. The 

Registration Statement is not yet effective and the 

Shares will not trade on the Exchange until such 

time that the Registration Statement is effective. 

7See Securities Exchange Act Release No. 83723 

(July 26, 2018), 83 FR 37579 (August 1, 2018). This 

proposal was subsequently disapproved by the 

Commission. See Securities Exchange Act Release 

No. 83723 (July 26, 2018), 83 FR 37579 (August 1, 

2018) (the ‘‘Winklevoss Order’’). 

8See streetTRACKS Gold Shares, Exchange Act 

Release No. 50603 (Oct. 28, 2004), 69 FR 64614, 

64618–19 (Nov. 5, 2004) (SR–NYSE–2004–22) (the 

‘‘First Gold Approval Order’’); iShares COMEX 

Gold Trust, Exchange Act Release No. 51058 (Jan. 

19, 2005), 70 FR 3749, 3751, 3754–55 (Jan. 26, 2005) 

(SR–Amex–2004–38); iShares Silver Trust, 

Exchange Act Release No. 53521 (Mar. 20, 2006), 71 

FR 14967, 14968, 14973–74 (Mar. 24, 2006) (SR– 

Amex–2005–072); ETFS Gold Trust, Exchange Act 

Release No. 59895 (May 8, 2009), 74 FR 22993, 

22994–95, 22998, 23000 (May 15, 2009) (SR– 

NYSEArca–2009–40); ETFS Silver Trust, Exchange 

Act Release No. 59781 (Apr. 17, 2009), 74 FR 18771, 

18772, 18775–77 (Apr. 24, 2009) (SR–NYSEArca– 

2009–28); ETFS Palladium Trust, Exchange Act 

Release No. 61220 (Dec. 22, 2009), 74 FR 68895, 

68896 (Dec. 29, 2009) (SR–NYSEArca–2009–94) 

(notice of proposed rule change included NYSE 

Arca’s representation that ‘‘[t]he most significant 

palladium futures exchanges are the NYMEX and 

the Tokyo Commodity Exchange,’’ that ‘‘NYMEX is 

the largest exchange in the world for trading 

precious metals futures and options,’’ and that 

NYSE Arca ‘‘may obtain trading information via the 

Intermarket Surveillance Group,’’ of which NYMEX 

is a member, Exchange Act Release No. 60971 (Nov. 

9, 2009), 74 FR 59283, 59285–86, 59291 (Nov. 17, 

2009)); ETFS Platinum Trust, Exchange Act Release 

No. 61219 (Dec. 22, 2009), 74 FR 68886, 68887–88 

(Dec. 29, 2009) (SR–NYSEArca–2009–95) (notice of 

proposed rule change included NYSE Arca’s 

representation that ‘‘[t]he most significant platinum 

futures exchanges are the NYMEX and the Tokyo 

Commodity Exchange,’’ that ‘‘NYMEX is the largest 

exchange in the world for trading precious metals 

futures and options,’’ and that NYSE Arca ‘‘may 

obtain trading information via the Intermarket 

Surveillance Group,’’ of which NYMEX is a 

member, Exchange Act Release No. 60970 (Nov. 9, 

2009), 74 FR 59319, 59321, 59327 (Nov. 17, 2009)); 

Sprott Physical Gold Trust, Exchange Act Release 

No. 61496 (Feb. 4, 2010), 75 FR 6758, 6760 (Feb. 

10, 2010) (SR–NYSEArca–2009–113) (notice of 

proposed rule change included NYSE Arca’s 

representation that the COMEX is one of the ‘‘major 

world gold markets,’’ that NYSE Arca ‘‘may obtain 

trading information via the Intermarket 

Surveillance Group,’’ and that NYMEX, of which 

COMEX is a division, is a member of the 

Intermarket Surveillance Group, Exchange Act 

Release No. 61236 (Dec. 23, 2009), 75 FR 170, 171, 

174 (Jan. 4, 2010)); Sprott Physical Silver Trust, 

Exchange Act Release No. 63043 (Oct. 5, 2010), 75 

FR 62615, 62616, 62619, 62621 (Oct. 12, 2010) (SR– 

NYSEArca–2010–84); ETFS Precious Metals Basket 

Trust, Exchange Act Release No. 62692 (Aug. 11, 

2010), 75 FR 50789, 50790 (Aug. 17, 2010) (SR– 

NYSEArca–2010–56) (notice of proposed rule 

change included NYSE Arca’s representation that 

‘‘the most significant gold, silver, platinum and 

palladium futures exchanges are the COMEX and 

the TOCOM’’ and that NYSE Arca ‘‘may obtain 

trading information via the Intermarket 

Surveillance Group,’’ of which COMEX is a 

member, Exchange Act Release No. 62402 (Jun. 29, 

2010), 75 FR 39292, 39295, 39298 (July 8, 2010)); 

ETFS White Metals Basket Trust, Exchange Act 

Release No. 62875 (Sept. 9, 2010), 75 FR 56156, 

56158 (Sept. 15, 2010) (SR–NYSEArca–2010–71) 

(notice of proposed rule change included NYSE 

Arca’s representation that ‘‘the most significant 

silver, platinum and palladium futures exchanges 

are the COMEX and the TOCOM’’ and that NYSE 

Arca ‘‘may obtain trading information via the 

Intermarket Surveillance Group,’’ of which COMEX 

is a member, Exchange Act Release No. 62620 (July 

30, 2010), 75 FR 47655, 47657, 47660 (Aug. 6, 

2010)); ETFS Asian Gold Trust, Exchange Act 

Release No. 63464 (Dec. 8, 2010), 75 FR 77926, 

77928 (Dec. 14, 2010) (SR–NYSEArca–2010–95) 

(notice of proposed rule change included NYSE 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.35

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–18106 Filed 8–22–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98156; File No. SR– 

CboeBZX–2023–058] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing of 

a Proposed Rule Change To List and 

Trade Shares of the Global X Bitcoin 

Trust, Under BZX Rule 14.11(e)(4), 

Commodity-Based Trust Shares 

August 17, 2023. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on August 4, 

2023, Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe BZX Exchange, Inc. (‘‘BZX’’ or 

the ‘‘Exchange’’) is filing with the 

Securities and Exchange Commission 

(‘‘Commission’’ or ‘‘SEC’’) a proposed 

rule change to list and trade shares of 

the Global X Bitcoin Trust (the 

‘‘Trust’’),3 under BZX Rule 14.11(e)(4), 

Commodity-Based Trust Shares. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://markets.cboe.com/us/ 

equities/regulation/rule_filings/bzx/), at 

the Exchange’s Office of the Secretary, 

and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade the Shares under BZX Rule 

14.11(e)(4),4 which governs the listing 

and trading of Commodity-Based Trust 

Shares on the Exchange.5 Global X 

Digital Assets is the sponsor of the Trust 

(‘‘Sponsor’’). The Shares will be 

registered with the Commission by 

means of the Trust’s registration 

statement on Form S–1 (the 

‘‘Registration Statement’’).6 A thirdparty U.S.-based trust company and 

qualified custodian will be responsible 

for custody of the Trust’s bitcoin (the 

‘‘Custodian’’). 

As further discussed below, the 

Commission has historically approved 

or disapproved exchange filings to list 

and trade series of Trust Issued 

Receipts, including spot-based 

Commodity-Based Trust Shares, on the 

basis of whether the listing exchange 

has in place a comprehensive 

surveillance sharing agreement with a 

regulated market of significant size 

related to the underlying commodity to 

be held.7 Prior orders from the 

Commission have pointed out that in 

every prior approval order for 

Commodity-Based Trust Shares, there 

has been a derivatives market that 

represents the regulated market of 

significant size, generally a Commodity 

Futures Trading Commission (the 

‘‘CFTC’’) regulated futures market.8


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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 57491 

Arca’s representation that ‘‘the most significant gold 

futures exchanges are the COMEX and the Tokyo 

Commodity Exchange,’’ that ‘‘COMEX is the largest 

exchange in the world for trading precious metals 

futures and options,’’ and that NYSE Arca ‘‘may 

obtain trading information via the Intermarket 

Surveillance Group,’’ of which COMEX is a 

member, Exchange Act Release No. 63267 (Nov. 8, 

2010), 75 FR 69494, 69496, 69500–01 (Nov. 12, 

2010)); Sprott Physical Platinum and Palladium 

Trust, Exchange Act Release No. 68430 (Dec. 13, 

2012), 77 FR 75239, 75240–41 (Dec. 19, 2012) (SR– 

NYSEArca–2012–111) (notice of proposed rule 

change included NYSE Arca’s representation that 

‘‘[f]utures on platinum and palladium are traded on 

two major exchanges: The New York Mercantile 

Exchange . . . and Tokyo Commodities Exchange’’ 

and that NYSE Arca ‘‘may obtain trading 

information via the Intermarket Surveillance 

Group,’’ of which COMEX is a member, Exchange 

Act Release No. 68101 (Oct. 24, 2012), 77 FR 65732, 

65733, 65739 (Oct. 30, 2012)); APMEX Physical— 

1 oz. Gold Redeemable Trust, Exchange Act Release 

No. 66930 (May 7, 2012), 77 FR 27817, 27818 (May 

11, 2012) (SR–NYSEArca–2012–18) (notice of 

proposed rule change included NYSE Arca’s 

representation that NYSE Arca ‘‘may obtain trading 

information via the Intermarket Surveillance 

Group,’’ of which COMEX is a member, and that 

gold futures are traded on COMEX and the Tokyo 

Commodity Exchange, with a cross-reference to the 

proposed rule change to list and trade shares of the 

ETFS Gold Trust, in which NYSE Arca represented 

that COMEX is one of the ‘‘major world gold 

markets,’’ Exchange Act Release No. 66627 (Mar. 

20, 2012), 77 FR 17539, 17542–43, 17547 (Mar. 26, 

2012)); JPM XF Physical Copper Trust, Exchange 

Act Release No. 68440 (Dec. 14, 2012), 77 FR 75468, 

75469–70, 75472, 75485–86 (Dec. 20, 2012) (SR– 

NYSEArca–2012–28); iShares Copper Trust, 

Exchange Act Release No. 68973 (Feb. 22, 2013), 78 

FR 13726, 13727, 13729–30, 13739–40 (Feb. 28, 

2013) (SR–NYSEArca–2012–66); First Trust Gold 

Trust, Exchange Act Release No. 70195 (Aug. 14, 

2013), 78 FR 51239, 51240 (Aug. 20, 2013) (SR– 

NYSEArca–2013–61) (notice of proposed rule 

change included NYSE Arca’s representation that 

FINRA, on behalf of the exchange, may obtain 

trading information regarding gold futures and 

options on gold futures from members of the 

Intermarket Surveillance Group, including COMEX, 

or from markets ‘‘with which [NYSE Arca] has in 

place a comprehensive surveillance sharing 

agreement,’’ and that gold futures are traded on 

COMEX and the Tokyo Commodity Exchange, with 

a cross-reference to the proposed rule change to list 

and trade shares of the ETFS Gold Trust, in which 

NYSE Arca represented that COMEX is one of the 

‘‘major world gold markets,’’ Exchange Act Release 

No. 69847 (June 25, 2013), 78 FR 39399, 39400, 

39405 (July 1, 2013)); Merk Gold Trust, Exchange 

Act Release No. 71378 (Jan. 23, 2014), 79 FR 4786, 

4786–87 (Jan. 29, 2014) (SR–NYSEArca–2013–137) 

(notice of proposed rule change included NYSE 

Arca’s representation that ‘‘COMEX is the largest 

gold futures and options exchange’’ and that NYSE 

Arca ‘‘may obtain trading information via the 

Intermarket Surveillance Group,’’ including with 

respect to transactions occurring on COMEX 

pursuant to CME and NYMEX’s membership, or 

from exchanges ‘‘with which [NYSE Arca] has in 

place a comprehensive surveillance sharing 

agreement,’’ Exchange Act Release No. 71038 (Dec. 

11, 2013), 78 FR 76367, 76369, 76374 (Dec. 17, 

2013)); Long Dollar Gold Trust, Exchange Act 

Release No. 79518 (Dec. 9, 2016), 81 FR 90876, 

90881, 90886, 90888 (Dec. 15, 2016) (SR– 

NYSEArca–2016–84). 

9See Winklevoss Order at 37592. 

10See Exchange Act Release Nos. 94620 (April 6, 

2022), 87 FR 21676 (April 12, 2022) (the ‘‘Teucrium 

Approval’’) and 94853 (May 5, 2022) (collectively, 

with the Teucrium Approval, the ‘‘Bitcoin Futures 

Approvals’’). 11See Winklevoss Order. 

Further to this point, the Commission’s 

prior orders have noted that the spot 

commodities and currency markets for 

which it has previously approved spot 

ETPs are generally unregulated and that 

the Commission relied on the 

underlying futures market as the 

regulated market of significant size that 

formed the basis for approving the series 

of Currency and Commodity-Based 

Trust Shares, including gold, silver, 

platinum, palladium, copper, and other 

commodities and currencies. The 

Commission specifically noted in the 

Winklevoss Order that the First Gold 

Approval Order ‘‘was based on an 

assumption that the currency market 

and the spot gold market were largely 

unregulated.’’ 9

As such, the regulated market of 

significant size test does not require that 

the spot bitcoin market be regulated in 

order for the Commission to approve 

this proposal, and precedent makes 

clear that a regulated underlying market 

for a spot commodity or currency would 

be an exception to the norm. These 

largely unregulated currency and 

commodity markets do not provide the 

same protections as the markets that are 

subject to the Commission’s oversight, 

but the Commission has consistently 

looked to surveillance sharing 

agreements with the relevant underlying 

futures market to determine whether 

such products were consistent with the 

Act. With this in mind, the CME Bitcoin 

Futures market is the appropriate 

market to consider in determining 

whether there is a related regulated 

market of significant size. 

Further to this point, the Exchange 

notes that the Commission has approved 

proposals related to the listing and 

trading of funds that would primarily 

hold CME Bitcoin Futures that are 

registered under the Securities Act of 

1933.10 In the Teucrium Approval, the 

Commission found the CME Bitcoin 

Futures market to be a regulated market 

of significant size as it relates to CME 

Bitcoin Futures, an odd tautological 

truth that is also inconsistent with prior 

disapproval orders for ETPs that would 

hold actual bitcoin instead of 

derivatives contracts (‘‘Spot Bitcoin 

ETPs’’) that use the exact same pricing 

methodology as the CME Bitcoin 

Futures. As further discussed below, 

both the Exchange and the Sponsor 

believe that this proposal and the 

included analysis are sufficient to 

establish that the CME Bitcoin Futures 

market represents a regulated market of 

significant size as it relates both to the 

CME Bitcoin Futures market and to the 

spot bitcoin market and that this 

proposal should be approved. 

Finally, as discussed in greater detail 

below, by using professional custodians 

and other service providers, the Trust 

provides investors interested in 

exposure to bitcoin with important 

protections that are not always available 

to investors that invest directly in 

bitcoin, including protection against 

insolvency, cyber attacks, and other 

risks. If U.S. investors had access to 

vehicles such as the Trust for their 

bitcoin investments, instead of directing 

their bitcoin investments into loosely 

regulated offshore vehicles (such as 

loosely regulated centralized exchanges 

that have since faced bankruptcy 

proceedings or other insolvencies), then 

countless investors would have had the 

option to better protect their principal 

investments in bitcoin from the aforementioned events and risks. 

Background 

Bitcoin is a digital asset based on the 

decentralized, open source protocol of 

the peer-to-peer computer network 

launched in 2009 that governs the 

creation, movement, and ownership of 

bitcoin and hosts the public ledger, or 

‘‘blockchain,’’ on which all bitcoin 

transactions are recorded (the ‘‘Bitcoin 

Network’’ or ‘‘Bitcoin’’). The 

decentralized nature of the Bitcoin 

Network allows parties to transact 

directly with one another based on 

cryptographic proof instead of relying 

on a trusted third party. The protocol 

also lays out the rate of issuance of new 

bitcoin within the Bitcoin Network, a 

rate that is reduced by half 

approximately every four years with an 

eventual hard cap of 21 million. It’s 

generally understood that the 

combination of these two features—a 

systemic hard cap of 21 million bitcoin 

and the ability to transact trustlessly 

with anyone connected to the Bitcoin 

Network—gives bitcoin its value. The 

first rule filing proposing to list an 

exchange-traded product to provide 

exposure to bitcoin in the U.S. was 

submitted by the Exchange on June 30, 

2016.11 At that time, blockchain 

technology, and digital assets that 

utilized it, were relatively new to the 

broader public. The market cap of all 

bitcoin in existence at that time was 

approximately $10 billion. No registered 

offering of digital asset securities or 

shares in an investment vehicle with 

exposure to bitcoin or any other 

cryptocurrency had yet been conducted, 

and the regulated infrastructure for 

conducting a digital asset securities 


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57492 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 

12 Digital assets that are securities under U.S. law 

are referred to throughout this proposal as ‘‘digital 

asset securities.’’ All other digital assets, including 

bitcoin, are referred to interchangeably as 

‘‘cryptocurrencies’’ or ‘‘virtual currencies.’’ The 

term ‘‘digital assets’’ refers to all digital assets, 

including both digital asset securities and 

cryptocurrencies, together. 

13See ‘‘In the Matter of Coinflip, Inc.’’ 

(‘‘Coinflip’’) (CFTC Docket 15–29 (September 17, 

2015)) (order instituting proceedings pursuant to 

Sections 6(c) and 6(d) of the CEA, making findings 

and imposing remedial sanctions), in which the 

CFTC stated: ‘‘Section 1a(9) of the CEA defines 

‘commodity’ to include, among other things, ‘all 

services, rights, and interests in which contracts for 

future delivery are presently or in the future dealt 

in.’ 7 U.S.C. § 1a(9). The definition of a ‘commodity’ 

is broad. See, e.g., Board of Trade of City of Chicago 

v. SEC, 677 F. 2d 1137, 1142 (7th Cir. 1982). Bitcoin 

and other virtual currencies are encompassed in the 

definition and properly defined as commodities.’’ 

14A list of virtual currency businesses that are 

entities regulated by the NYDFS is available on the 

NYDFS website. See https://www.dfs.ny.gov/apps_

and_licensing/virtual_currency_businesses/ 

regulated_entities. 

15 Data as of March 31, 2016 according to publicly 

available filings. See Bitcoin Investment Trust Form 

S–1, dated May 27, 2016, available at https:// 

www.sec.gov/Archives/edgar/data/1588489/

000095012316017801/filename1.htm. 

16See letter from Dalia Blass, Director, Division 

of Investment Management, U.S. Securities and 

Exchange Commission to Paul Schott Stevens, 

President & CEO, Investment Company Institute 

and Timothy W. Cameron, Asset Management 

Group—Head, Securities Industry and Financial 

Markets Association (January 18, 2018), available at 

https://www.sec.gov/divisions/investment/ 

noaction/2018/cryptocurrency-011818.htm. 

17See Prospectus supplement filed pursuant to 

Rule 424(b)(1) for INX Tokens (Registration No. 

333–233363), available at https://www.sec.gov/ 

Archives/edgar/data/1725882/

000121390020023202/ea125858-424b1_

inxlimited.htm. 

18See Prospectus filed by Stone Ridge Trust VI 

on behalf of NYDIG Bitcoin Strategy Fund 

Registration, available at https://www.sec.gov/ 

Archives/edgar/data/1764894/

000119312519309942/d693146d497.htm. 

19See Investment Advisers Act Release No. 6240 

88 FR 14672 (March 9, 2023) (Safeguarding 

Advisory Client Assets). 

20See Securities Exchange Act Release No. 90788, 

86 FR 11627 (February 26, 2021) (File Number S7– 

25–20) (Custody of Digital Asset Securities by 

Special Purpose Broker-Dealers). 

21See letter from Elizabeth Baird, Deputy 

Director, Division of Trading and Markets, U.S. 

Securities and Exchange Commission to Kris 

Dailey, Vice President, Risk Oversight & 

Operational Regulation, Financial Industry 

Regulatory Authority (September 25, 2020), 

available at https://www.sec.gov/divisions/ 

marketreg/mr-noaction/2020/finra-ats-role-insettlement-of-digital-asset-security-trades09252020.pdf. 

22See letter from Jeffrey S. Mooney, Associate 

Director, Division of Trading and Markets, U.S. 

Securities and Exchange Commission to Charles G. 

Cascarilla & Daniel M. Burstein, Paxos Trust 

Company, LLC (October 28, 2019), available at 

https://www.sec.gov/divisions/marketreg/mrnoaction/2019/paxos-trust-company-102819- 

17a.pdf. 

23See, e.g., Form TA–1/A filed by Tokensoft 

Transfer Agent LLC (CIK: 0001794142) on January 

8, 2021, available at https://www.sec.gov/Archives/ 

edgar/data/1794142/000179414219000001/ 

xslFTA1X01/primary_doc.xml. 

24As of December 1, 2021, the total market cap 

of all bitcoin in circulation was approximately 

$1.08 trillion. 

25 Data sourced from the CME Bitcoin Futures 

Report: 30 March, 2023, available at https:// 

www.cmegroup.com/markets/cryptocurrencies/ 

bitcoin/bitcoin.volume.htm. 

26The CFTC’s annual report for Fiscal Year 2022 

(which ended on September 30, 2022) noted that 

the CFTC completed the fiscal year with 18 

enforcement filings related to digital assets. ‘‘Digital 

asset actions included manipulation, a $1.7 billion 

fraudulent scheme, and a decentralized 

autonomous organization (DAO) failing to register 

as a SEF or FCM or to seek DCM designation.’’ See 

CFTC FY 2022 Agency Financial Report, available 

at https://www.cftc.gov/media/7941/2022afr/ 

download. Additionally, the CFTC filed on March 

27, 2023, a civil enforcement action against the 

owner/operators of the Binance centralized digital 

asset trading platform, which is one of the largest 

bitcoin derivative exchanges. See CFTC Release No. 

8680–23 (March 27, 2023), available at https:// 

www.cftc.gov/PressRoom/PressReleases/8680-23. 

27See https://www.dfs.ny.gov/

virtual_currency_businesses. 

offering had not begun to develop.12

Similarly, regulated U.S. bitcoin futures 

contracts did not exist. The CFTC had 

determined that bitcoin is a 

commodity,13 but had not engaged in 

significant enforcement actions in the 

space. The New York Department of 

Financial Services (‘‘NYDFS’’) adopted 

its final BitLicense regulatory 

framework in 2015, but had only 

approved four entities to engage in 

activities relating to virtual currencies 

(whether through granting a BitLicense 

or a limited-purpose trust charter) as of 

June 30, 2016.14 While the first over-thecounter bitcoin fund launched in 2013, 

public trading was limited and the fund 

had only $60 million in assets.15 There 

were very few, if any, traditional 

financial institutions engaged in the 

space, whether through investment or 

providing services to digital asset 

companies. In January 2018, the Staff of 

the Commission noted in a letter to the 

Investment Company Institute and 

SIFMA that it was not aware, at that 

time, of a single custodian providing 

fund custodial services for digital 

assets.16 Fast forward to today and the 

digital assets financial ecosystem, 

including bitcoin, has progressed 

significantly. The development of a 

regulated market for digital asset 

securities has significantly evolved, 

with market participants having 

conducted registered public offerings of 

both digital asset securities 17 and shares 

in investment vehicles holding bitcoin 

futures.18 Additionally, licensed and 

regulated service providers have 

emerged to provide fund custodial 

services for digital assets, among other 

services, including the Custodian. For 

example, in February 2023, the 

Commission proposed to amend Rule 

206(4)–2 under the Advisers Act of 1940 

(the ‘‘custody rule’’) to expand the scope 

beyond client funds and securities to 

include all crypto assets, among other 

assets; 19 in May 2021, the Staff of the 

Commission released a statement 

permitting open-end mutual funds to 

invest in cash-settled bitcoin futures; in 

December 2020, the Commission 

adopted a conditional no-action 

position permitting certain special 

purpose broker-dealers to custody 

digital asset securities under Rule 15c3– 

3 under the Exchange Act (the ‘‘Custody 

Statement’’); 20 in September 2020, the 

Staff of the Commission released a noaction letter permitting certain brokerdealers to operate a non-custodial 

Alternative Trading System (‘‘ATS’’) for 

digital asset securities, subject to 

specified conditions; 21 in October 2019, 

the Staff of the Commission granted 

temporary relief from the clearing 

agency registration requirement to an 

entity seeking to establish a securities 

clearance and settlement system based 

on distributed ledger technology,22 and 

multiple transfer agents who provide 

services for digital asset securities 

registered with the Commission.23

Outside the Commission’s purview, 

the regulatory landscape has changed 

significantly since 2016, and 

cryptocurrency markets have grown and 

evolved as well. The market for bitcoin 

is approximately 100 times larger, 

having at one point reached a market 

cap of over $1 trillion.24 According to 

the CME Bitcoin Futures Report, from 

February 13, 2023 through March 27, 

2023, CFTC regulated bitcoin futures 

represented between $750 million and 

$3.2 billion in notional trading volume 

on Chicago Mercantile Exchange 

(‘‘CME’’) (‘‘Bitcoin Futures’’) on a daily 

basis.25 Open interest was over $1.4 

billion for the entirety of the period and 

at one point was over $2 billion. ETPs 

that primarily hold CME Bitcoin Futures 

have raised over $1 billion dollars in 

assets. The CFTC has exercised its 

regulatory jurisdiction in bringing a 

number of enforcement actions related 

to bitcoin and against trading platforms 

that offer cryptocurrency trading.26 As 

of February 14, 2023 the NYDFS has 

granted no fewer than thirty-four 

BitLicenses,27 including to established 

public payment companies like PayPal 

Holdings, Inc. and Square, Inc., and 

limited purpose trust charters to entities 

providing cryptocurrency custody 

services. In addition, the Treasury’s 

Office of Foreign Assets Control 

(‘‘OFAC’’) has brought enforcement 

actions over apparent violations of the 

sanctions laws in connection with the 


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28See U.S. Department of the Treasury 

Enforcement Release: ‘‘OFAC Enters Into $98,830 

Settlement with BitGo, Inc. for Apparent Violations 

of Multiple Sanctions Programs Related to Digital 

Currency Transactions’’ (December 30, 2020) 

available at https://home.treasury.gov/system/files/ 

126/20201230_bitgo.pdf See also U.S. Department 

of the Treasury Enforcement Release: ‘‘Treasury 

Announces Two Enforcement Actions for over 

$24M and $29M Against Virtual Currency 

Exchange, Bittrex, Inc.’’ (October 11, 2022) available 

at https://home.treasury.gov/news/press-releases/ 

jy1006. See also U.S. Department of Treasure 

Enforcement Release ‘‘OFAC Settles with Virtual 

Currency Exchange Kraken for $362,158.70 Related 

to Apparent Violations of the Iranian Transactions 

and Sanctions Regulations’’ (November 28, 2022) 

available at https://home.treasury.gov/system/files/ 

126/20221128_kraken.pdf. 

29See the FSOC ‘‘Report on Digital Asset 

Financial Stability Risks and Regulation 2022’’ 

(October 3, 2022) (at footnote 26) at https:// 

home.treasury.gov/system/files/261/FSOC-DigitalAssets-Report-2022.pdf. 

30 See Letter from Division of Corporation 

Finance, Office of Real Estate Construction to Barry 

E. Silbert, Chief Executive Officer, Grayscale 

Bitcoin Trust (January 31, 2020) https:// 

www.sec.gov/Archives/edgar/data/1588489/

000000000020000953/filename1.pdf. 

31The premium and discount for OTC Bitcoin 

Funds is known to move rapidly. For example, over 

the period of 12/21/20 to 1/21/21, the premium for 

the largest OTC Bitcoin Fund went from 40.18% to 

2.79%. While the price of bitcoin appreciated 

significantly during this period and NAV per share 

increased by 41.25%, the price per share increased 

by only 3.58%. This means that investors are 

buying shares of a fund that experiences significant 

volatility in its premium and discount outside of 

the fluctuations in price of the underlying asset. 

Even operating within the normal premium and 

discount range, it’s possible for an investor to buy 

shares of an OTC Bitcoin Fund only to have those 

shares quickly lose 10% or more in dollar value 

excluding any movement of the price of bitcoin. 

That is to say—the price of bitcoin could have 

stayed exactly the same from market close on one 

day to market open the next, yet the value of the 

shares held by the investor decreased only because 

of the fluctuation of the premium. As more 

investment vehicles, including mutual funds and 

ETFs, seek to gain exposure to bitcoin, the easiest 

option for a buy and hold strategy for such vehicles 

is often an OTC Bitcoin Fund, meaning that even 

investors that do not directly buy OTC Bitcoin 

Funds can be disadvantaged by extreme premiums 

(or discounts) and premium volatility. 

32A number of operating companies engaged in 

unrelated businesses—such as Tesla (a car 

manufacturer) and MicroStrategy (an enterprise 

software company)—have announced investments 

as large as $5.3 billion in bitcoin. Without access 

to bitcoin exchange-traded products, retail investors 

seeking investment exposure to bitcoin may end up 

purchasing shares in these companies in order to 

gain the exposure to bitcoin that they seek. In fact, 

mainstream financial news networks have written 

a number of articles providing investors with 

guidance for obtaining bitcoin exposure through 

publicly traded companies (such as MicroStrategy, 

Tesla, and bitcoin mining companies, among 

others) instead of dealing with the complications 

associated with buying spot bitcoin in the absence 

of a bitcoin ETP. See e.g., ‘‘7 public companies with 

exposure to bitcoin’’ (February 8, 2021) available at: 

https://finance.yahoo.com/news/7-publiccompanies-with-exposure-to-bitcoin154201525.html; and ‘‘Want to get in the crypto 

trade without holding bitcoin yourself? Here are 

some investing ideas’’ (February 19, 2021) available 

at: https://www.cnbc.com/2021/02/19/ways-toinvest-in-bitcoin-without-holding-thecryptocurrency-yourself-.html. 

33The Exchange notes that the list of countries 

above is not exhaustive and that securities 

regulators in a number of additional countries have 

either approved or otherwise allowed the listing 

and trading of Spot Bitcoin ETPs. 34See FTX Trading Ltd., et al., Case No. 22– 

11068. 35See Celsius Network LLC, et al., Case No. 22– 

10964. 36See BlockFi Inc., Case No. 22–19361. 37See Voyager Digital Holdings, Inc., et al., Case 

No. 22–10943. 

provision of wallet management 

services for digital assets.28

In addition to the regulatory 

developments laid out above, more 

traditional financial market participants 

become more active in cryptocurrency: 

large insurance companies, asset 

managers, university endowments, 

pension funds, and even historically 

bitcoin skeptical fund managers have 

allocated to bitcoin. As noted in the 

Financial Stability Oversight Council 

(‘‘FSOC’’) Report on Digital Asset 

Financial Stability Risks and 

Regulation, ‘‘[i]ndustry surveys suggest 

that the scale of these investments grew 

quickly during the boom in crypto-asset 

markets through late 2021. In June 2022, 

PwC estimated that the number of 

crypto-specialist hedge funds was more 

than 300 globally, with $4.1 billion in 

assets under management. In addition, 

in a survey PwC found that 38 percent 

of surveyed traditional hedge funds 

were currently investing in ‘digital 

assets,’ compared to 21 percent the year 

prior.’’ 29 The largest over-the-counter 

bitcoin fund previously filed a Form 10 

registration statement, which the Staff of 

the Commission reviewed and which 

took effect automatically, and is now a 

reporting company.30 Established 

companies like Tesla, Inc., 

MicroStrategy Incorporated, and Square, 

Inc., among others, have announced 

substantial investments in bitcoin in 

amounts as large as $1.5 billion (Tesla) 

and $425 million (MicroStrategy). The 

foregoing examples demonstrate that 

bitcoin has gained mainstream usage 

and recognition. 

Despite these developments, access 

for U.S. retail investors to gain exposure 

to bitcoin via a transparent and U.S. 

regulated, U.S. exchange-traded vehicle 

remains limited. Instead current options 

include: (i) facing the counter-party risk, 

legal uncertainty, technical risk, and 

complexity associated with accessing 

spot bitcoin; (ii) over-the-counter 

bitcoin funds (‘‘OTC Bitcoin Funds’’) 

with high management fees and 

potentially volatile premiums and 

discounts; 31 (iii) purchasing shares of 

operating companies that they believe 

will provide proxy exposure to bitcoin 

with limited disclosure about the 

associated risks; 32 or (iv) purchasing 

Bitcoin Futures ETFs, as defined below, 

which represent a sub-optimal structure 

for long-term investors that will cost 

them significant amounts of money 

every year compared to Spot Bitcoin 

ETPs, as further discussed below. 

Meanwhile, investors in many other 

countries, including Canada and Brazil, 

are able to use more traditional 

exchange listed and traded products 

(including exchange-traded funds 

holding physical bitcoin) to gain 

exposure to bitcoin. Similarly, investors 

in Switzerland and across Europe have 

access to Exchange Traded Products 

which trade on regulated exchanges and 

provide exposure to a broad array of 

spot crypto assets. U.S. investors, by 

contrast, are left with fewer and more 

risky means of getting bitcoin exposure, 

as described above.33

To this point, the lack of a Spot 

Bitcoin ETP exposes U.S. investor assets 

to significant risk because investors that 

would otherwise seek cryptoasset 

exposure through a Spot Bitcoin ETP are 

forced to find exposure through 

generally riskier alternatives. For 

instance, many U.S. investors that held 

their digital assets in accounts at FTX,34

Celsius Network LLC,35 BlockFi Inc.36

and Voyager Digital Holdings, Inc.37

have become unsecured creditors in the 

insolvencies of those entities. If a Spot 

Bitcoin ETP was available, it is likely 

that at least a portion of the billions of 

dollars tied up in those proceedings 

would still reside in the brokerage 

accounts of U.S. investors, having 

instead been invested in a transparent, 

regulated, and well-understood 

structure—a Spot Bitcoin ETP. For this 

reason alone, the approval of a Spot 

Bitcoin ETP would represent a major 

win for the protection of U.S. investors 

in the cryptoasset space. As further 

described below, the Trust, like all other 

series of Commodity-Based Trust 

Shares, is designed to protect investors 

against the risk of losses through fraud 

and insolvency that arise by holding 

digital assets, including bitcoin, on 

centralized platforms. 

Additionally, investors in other 

countries, specifically Canada, generally 

pay lower fees than U.S. retail investors 

that invest in OTC Bitcoin Funds due to 

the fee pressure that results from 

increased competition among available 

bitcoin investment options. Without an 

approved and regulated Spot Bitcoin 

ETP in the U.S., U.S. investors could 

seek to purchase shares of non-U.S. 

bitcoin vehicles to get access to bitcoin 

exposure. Given the separate regulatory 

regime, potentially adverse foreign and 

U.S. tax implications, and the 


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38See Winklevoss Order at 37593, specifically 

footnote 202, which includes the language from 

numerous approval orders for which the underlying 

futures markets formed the basis for approving 

series of ETPs that hold physical metals, including 

gold, silver, palladium, platinum, and precious 

metals more broadly; and 37600, specifically where 

the Commission provides that ‘‘when the spot 

market is unregulated—the requirement of 

preventing fraudulent and manipulative acts may 

possibly be satisfied by showing that the ETP listing 

market has entered into a surveillance-sharing 

agreement with a regulated market of significant 

size in derivatives related to the underlying asset.’’ 

As noted above, the Exchange believes that these 

citations are particularly helpful in making clear 

that the spot market for a spot commodity ETP need 

not be ‘‘regulated’’ in order for a spot commodity 

ETP to be approved by the Commission, and in fact 

that it’s been the common historical practice of the 

Commission to rely on such derivatives markets as 

the regulated market of significant size because 

such spot commodities markets are largely 

unregulated. 

39As further outlined below, both the Exchange 

and the Sponsor believe that the Bitcoin Futures 

market represents a regulated market of significant 

size and that this proposal and others like it should 

be approved on this basis. 

40See Teucrium Approval at 21679. 

41 Grayscale Investments, LLC v. Securities and 

Exchange Commission, et al., Case No. 22–1142. 

42See e.g., ‘‘Bitcoin ETF’s Success Could Come at 

Fundholders’ Expense,’’ Wall Street Journal 

(October 24, 2021), available at https:// 

www.wsj.com/articles/bitcoin-etfs-success-couldcome-at-fundholders-expense-11635080580; 

‘‘Physical Bitcoin ETF Prospects Accelerate,’’ 

ETF.com (October 25, 2021), available at: https:// 

www.etf.com/sections/blog/physical-bitcoin-etfprospects-shine?nopaging=1&__cf_chl_jschl_tk__=

pmd_JsK.fjXz9eAQW9zol0qpzhXDrrlpIVdoCl

oLXbLjl44-1635476946-0-gqNtZGzNApCjcnBszQql. 

difficulties associated with any 

international legal proceeding, 

including litigation, such an 

arrangement would create more risk 

exposure and a diminished investment 

opportunity for U.S. investors than they 

would otherwise have with a U.S. 

exchange-listed ETP. In addition to the 

benefits to U.S. investors articulated 

throughout this proposal, approving this 

proposal (and others like it) would 

provide U.S. ETFs and mutual funds 

with an additional U.S.-listed and 

regulated product through which to 

obtain exposure to bitcoin thereby 

lessening the need to seek such 

exposure through investments in either 

flawed products or, to the limited extent 

currently permitted by Commission 

Staff (i.e., 10% to 15% of a fund’s 

assets), products listed and primarily 

regulated in other countries. Such an 

approval would also give rise to 

increased competition among the 

limited product range available in the 

U.S. benefitting both ETFs and mutual 

funds, including those seeking only 

minimal exposure to bitcoin for its noncorrelative investment performance, and 

individual investors. 

Bitcoin Futures ETFs 

The Exchange and Sponsor applaud 

the Commission for allowing the launch 

of ETFs registered under the Investment 

Company Act of 1940, as amended (the 

‘‘1940 Act’’) and the Bitcoin Futures 

Approvals that provide exposure to 

bitcoin primarily through CME Bitcoin 

Futures (‘‘Bitcoin Futures ETFs’’). 

Allowing such products to list and trade 

is a productive first step in providing 

U.S. investors and traders with 

transparent, exchange-listed tools for 

expressing a view on bitcoin. The 

Bitcoin Futures Approvals, however, 

have created a logical inconsistency in 

the application of the standard the 

Commission applies when considering 

bitcoin ETP proposals. 

As discussed further below, the 

standard applicable to bitcoin ETPs is 

whether the listing exchange has in 

place a comprehensive surveillance 

sharing agreement with a regulated 

market of significant size in the 

underlying asset. Previous disapproval 

orders have made clear that a market 

that constitutes a regulated market of 

significant size is generally a futures 

and/or options market based on the 

underlying reference asset rather than 

the spot commodity markets, which are 

often unregulated.38 Leaving aside the 

analysis of that standard until later in 

this proposal,39 the Exchange believes 

that the following rationale the 

Commission applied to a Bitcoin 

Futures ETF should result in the 

Commission approving this and other 

Spot Bitcoin ETP proposals: 

The CME ‘‘comprehensively surveils 

futures market conditions and price 

movements on a real-time and ongoing 

basis in order to detect and prevent 

price distortions, including price 

distortions caused by manipulative 

efforts.’’ Thus the CME’s surveillance 

can reasonably be relied upon to capture 

the effects on the CME bitcoin futures 

market caused by a person attempting to 

manipulate the proposed futures ETP by 

manipulating the price of CME bitcoin 

futures contracts, whether that attempt 

is made by directly trading on the CME 

bitcoin futures market or indirectly by 

trading outside of the CME bitcoin 

futures market. As such, when the CME 

shares its surveillance information with 

Arca, the information would assist in 

detecting and deterring fraudulent or 

manipulative misconduct related to the 

non-cash assets held by the proposed 

ETP.40

CME Bitcoin Futures pricing is based 

on pricing from spot bitcoin markets. 

The statement from the Teucrium 

Approval that ‘‘CME’s surveillance can 

reasonably be relied upon to capture the 

effects on the CME bitcoin futures 

market caused by a person attempting to 

manipulate the proposed futures ETP by 

manipulating the price of CME bitcoin 

futures contracts . . . indirectly by 

trading outside of the CME bitcoin 

futures market,’’ makes clear that the 

Commission believes that CME’s 

surveillance can capture the effects of 

trading on the relevant spot markets on 

the pricing of CME Bitcoin Futures. This 

was further acknowledged in the 

‘‘Grayscale lawsuit’’ 41 when Judge Rao 

stated ‘‘. . . the Commission in the 

Teucrium order recognizes that the 

futures prices are influenced by the spot 

prices, and the Commission concludes 

in approving futures ETPs that any 

fraud on the spot market can be 

adequately addressed by the fact that 

the futures market is a regulated one 

. . .’’ The Exchange agrees with the 

Commission on this point. 

Further to this point, a Bitcoin 

Futures ETF is potentially more 

susceptible to potential manipulation 

than a Spot Bitcoin ETP that offers only 

in-kind creation and redemption 

because settlement of CME Bitcoin 

Futures (and thus the value of the 

underlying holdings of a Bitcoin Futures 

ETF) occurs at a single price derived 

from spot bitcoin pricing, while shares 

of a Spot Bitcoin ETP would represent 

interest in bitcoin directly and 

authorized participants for a Spot 

Bitcoin ETP (as proposed herein) would 

be able to source bitcoin from any 

exchange and create or redeem with the 

applicable trust regardless of the price 

of the underlying index. It is not 

logically possible to conclude that the 

CME Bitcoin Futures market represents 

a significant market for a futures-based 

product, but also conclude that the CME 

Bitcoin Futures market does not 

represent a significant market for a spotbased product. 

In addition to potentially being more 

susceptible to manipulation than a Spot 

Bitcoin ETP, the structure of Bitcoin 

Futures ETFs provides negative 

outcomes for buy and hold investors as 

compared to a Spot Bitcoin ETP.42

Specifically, the cost of rolling CME 

Bitcoin Futures contracts cause the 

Bitcoin Futures ETFs to lag the 

performance of bitcoin and cost U.S. 

investors significantly more on an 

annual basis than the cost of a 

comparable investment in a Spot 

Bitcoin ETP. Spot Bitcoin ETPs hold 

bitcoin and therefore, do not incur 

rolling costs. Further, Bitcoin Futures 

ETFs could potentially hit CME position 

limits, which would force a Bitcoin 

Futures ETF to halt its investments in 

Bitcoin Futures and seek other 

instruments that would provide 


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43The CME CF Bitcoin Reference Rate is based on 

a publicly available calculation methodology based 

on pricing sourced from several crypto exchanges 

and trading platforms, including Bitstamp, 

Coinbase, Gemini, itBit, Kraken, and LMAX Digital. 

44Source: CME, Yahoo Finance 4/30/23. 

exposure to bitcoin of which there are 

few options as discussed previously. 

Such an event could not only cause 

investor confusion as to the Bitcoin 

Futures ETF’s investment strategy, but 

also prevent the Bitcoin Futures ETF 

from achieving its investment objective 

(e.g., capital appreciation through 

exposure to CME Bitcoin Futures), not 

to mention completely changing its risk 

profile. While Bitcoin Futures ETFs 

represent a useful trading tool, they are 

clearly a sub-optimal structure for U.S. 

investors seeking long-term exposure to 

bitcoin that will unnecessarily cost U.S. 

investors significantly more every year 

when compared to the cost of investing 

in Spot Bitcoin ETPs. The Exchange 

believes any proposal to list and trade 

a Spot Bitcoin ETP should be reviewed 

by the Commission with this important 

investor protection context in mind, as 

well as the benefit of encouraging 

increased competition among market 

participants in this space. 

Based on the foregoing, the Exchange 

and Sponsor believe that any objective 

review of the proposals to list Spot 

Bitcoin ETPs compared to the Bitcoin 

Futures ETFs and the Bitcoin Futures 

Approvals would lead to the conclusion 

that Spot Bitcoin ETPs should be 

available to U.S. investors and, as such, 

this proposal and other comparable 

proposals to list and trade Spot Bitcoin 

ETPs should be approved by the 

Commission. Stated simply, U.S. 

investors will continue to lose 

significant amounts of money from 

holding Bitcoin Futures ETFs as 

compared to Spot Bitcoin ETPs, losses 

which could be prevented by the 

Commission approving Spot Bitcoin 

ETPs. Additionally, any concerns 

related to preventing fraudulent and 

manipulative acts and practices related 

to Spot Bitcoin ETPs would apply 

equally to the spot markets underlying 

the futures contracts held by a Bitcoin 

Futures ETF. Both the Exchange and 

Sponsor believe that the CME Bitcoin 

Futures market is a regulated market of 

significant size and that such 

manipulation concerns are mitigated, as 

described extensively below. After 

allowing and approving the listing and 

trading of Bitcoin Futures ETFs that 

hold primarily CME Bitcoin Futures, 

however, the only consistent outcome 

would be approving Spot Bitcoin ETPs 

on the basis that the CME Bitcoin 

Futures market is a regulated market of 

significant size. 

Given the current landscape, 

approving this proposal (and others like 

it) and allowing Spot Bitcoin ETPs to be 

listed and traded alongside Bitcoin 

Futures ETFs would establish a 

consistent regulatory approach, provide 

U.S. investors with choice in product 

structures for bitcoin exposure, and 

offer flexibility in the means of gaining 

exposure to bitcoin through transparent, 

regulated, U.S. exchange-listed vehicles. 

Bitcoin Futures 

CME began offering trading in Bitcoin 

Futures in 2017. Each contract 

represents five bitcoin and is based on 

the CME CF Bitcoin Reference Rate.43

The contracts trade and settle like other 

cash-settled commodity futures 

contracts. Nearly every measurable 

metric related to Bitcoin Futures has 

generally trended up since launch, 

although certain notional volume 

calculations have decreased roughly in 

line with the decrease in the price of 

bitcoin. For example, there were 

143,215 Bitcoin Futures contracts traded 

in April 2023 (approximately $20.7 

billion) compared to 193,182 ($5 

billion), 104,713 ($3.9 billion), 118,714 

($42.7 billion), and 111,964 ($23.2 

billion) contracts traded in April 2019, 

April 2020, April 2021, and April 2022, 

respectively.44

BILLING CODE 8011–01–P 


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45A large open interest holder in Bitcoin Futures 

is an entity that holds at least 25 contracts, which 

is the equivalent of 125 bitcoin. At a price of 

approximately $29,268.81 per bitcoin on 4/30/2023, 

more than 100 firms had outstanding positions of 

greater than $3.65 million in Bitcoin Futures. 

The number of large open interest 

holders 45 and unique accounts trading 

Bitcoin Futures have both increased, 

even in the face of heightened Bitcoin 

price volatility. 


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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 57497 

46See Exchange Act Releases No. 94080 (January 

27, 2022), 87 FR 5527 (April 12, 2022) (specifically 

‘‘Amendment No. 1 to the Proposed Rule Change 

To List and Trade Shares of the Wise Origin Bitcoin 

Trust Under BZX Rule 14.11(3)(4), CommodityBased Trust Shares’’); 94982 (May 25, 2022), 87 FR 

33250 (June 1, 2022); 94844 (May 4, 2022), 87 FR 

28043 (May 10, 2022); and 93445 (October 28, 

2021), 86 FR 60695 (November 3, 2021). See also 

Hu, Y., Hou, Y. and Oxley, L. (2019). ‘‘What role 

do futures markets play in Bitcoin pricing? 

Causality, cointegration and price discovery from a 

time-varying perspective’’ (available at: https:// 

www.ncbi.nlm.nih.gov/pmc/articles/PMC7481826/). 

This academic research paper concludes that 

‘‘There exist no episodes where the Bitcoin spot 

markets dominates the price discovery processes 

with regard to Bitcoin futures. This points to a 

conclusion that the price formation originates solely 

in the Bitcoin futures market. We can, therefore, 

conclude that the Bitcoin futures markets dominate 

the dynamic price discovery process based upon 

time-varying information share measures. Overall, 

price discovery seems to occur in the Bitcoin 

futures markets rather than the underlying spot 

market based upon a time-varying perspective.’’ 

47See Exchange Rule 14.11(f). 

48Commodity-Based Trust Shares, as described in 

Exchange Rule 14.11(e)(4), are a type of Trust 

Issued Receipt. 

49As the Exchange has stated in a number of 

other public documents, it continues to believe that 

bitcoin is resistant to price manipulation and that 

‘‘other means to prevent fraudulent and 

manipulative acts and practices’’ exist to justify 

dispensing with the requisite surveillance sharing 

agreement. The geographically diverse and 

continuous nature of bitcoin trading render it 

difficult and prohibitively costly to manipulate the 

price of bitcoin. The fragmentation across bitcoin 

platforms, the relatively slow speed of transactions, 

and the capital necessary to maintain a significant 

presence on each trading platform make 

manipulation of bitcoin prices through continuous 

trading activity challenging. To the extent that there 

are bitcoin exchanges engaged in or allowing wash 

trading or other activity intended to manipulate the 

price of bitcoin on other markets, such pricing does 

not normally impact prices on other exchange 

because participants will generally ignore markets 

with quotes that they deem non-executable. 

Moreover, the linkage between the bitcoin markets 

and the presence of arbitrageurs in those markets 

means that the manipulation of the price of bitcoin 

price on any single venue would require 

manipulation of the global bitcoin price in order to 

be effective. Arbitrageurs must have funds 

distributed across multiple trading platforms in 

order to take advantage of temporary price 

dislocations, thereby making it unlikely that there 

will be strong concentration of funds on any 

particular bitcoin exchange or OTC platform. As a 

result, the potential for manipulation on a trading 

platform would require overcoming the liquidity 

supply of such arbitrageurs who are effectively 

eliminating any cross-market pricing differences. 

50As previously articulated by the Commission, 

‘‘The standard requires such surveillance-sharing 

agreements since ‘‘they provide a necessary 

deterrent to manipulation because they facilitate the 

availability of information needed to fully 

investigate a manipulation if it were to occur.’’ The 

Commission has emphasized that it is essential for 

an exchange listing a derivative securities product 

to enter into a surveillance-sharing agreement with 

markets trading underlying securities for the listing 

exchange to have the ability to obtain information 

necessary to detect, investigate, and deter fraud and 

market manipulation, as well as violations of 

exchange rules and applicable federal securities 

laws and rules. The hallmarks of a surveillancesharing agreement are that the agreement provides 

for the sharing of information about market trading 

activity, clearing activity, and customer identity; 

that the parties to the agreement have reasonable 

ability to obtain access to and produce requested 

information; and that no existing rules, laws, or 

practices would impede one party to the agreement 

Continued 

BILLING CODE 8011–01–C 

The Sponsor further believes that 

publicly available research, including 

research done as part of rule filings 

proposing to list and trade shares of 

Spot Bitcoin ETPs, corroborates the 

overall trend outlined above and 

supports the thesis that the Bitcoin 

Futures pricing leads the spot market 

and, thus, a person attempting to 

manipulate the Shares would also have 

to trade on that market to manipulate 

the ETP. Specifically, the Sponsor 

believes that such research indicates 

that bitcoin futures lead the bitcoin spot 

market in price formation.46

Section 6(b)(5) and the Applicable 

Standards 

The Commission has approved 

numerous series of Trust Issued 

Receipts,47 including Commodity-Based 

Trust Shares,48 to be listed on U.S. 

national securities exchanges. In order 

for any proposed rule change from an 

exchange to be approved, the 

Commission must determine that, 

among other things, the proposal is 

consistent with the requirements of 

Section 6(b)(5) of the Act, specifically 

including: (i) the requirement that a 

national securities exchange’s rules are 

designed to prevent fraudulent and 

manipulative acts and practices; 49 and 

(ii) the requirement that an exchange 

proposal be designed, in general, to 

protect investors and the public interest. 

The Exchange believes that this 

proposal is consistent with the 

requirements of Section 6(b)(5) of the 

Act and that this filing sufficiently 

demonstrates that the CME Bitcoin 

Futures market represents a regulated 

market of significant size and that, on 

the whole, the manipulation concerns 

previously articulated by the 

Commission are sufficiently mitigated to 

the point that they are outweighed by 

quantifiable investor protection issues 

that would be resolved by approving 

this proposal. 

(i) Designed To Prevent Fraudulent and 

Manipulative Acts and Practices 

In order to meet this standard in a 

proposal to list and trade a series of 

Commodity-Based Trust Shares, the 

Commission requires that an exchange 

demonstrate that there is a 

comprehensive surveillance-sharing 

agreement in place 50 with a regulated 


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57498 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 

from obtaining this information from, or producing 

it to, the other party.’’ The Commission has 

historically held that joint membership in the 

Intermarket Surveillance Group (‘‘ISG’’) constitutes 

such a surveillance sharing agreement. See 

Securities Exchange Act Release No. 88284 

(February 26, 2020), 85 FR 12595 (March 3, 2020) 

(SR–NYSEArca–2019–39) (the ‘‘Wilshire Phoenix 

Disapproval’’). 

51For a list of the current members and affiliate 

members of ISG, see www.isgportal.com. 

52See Wilshire Phoenix Disapproval. 

53See Winklevoss Order at 37580. The 

Commission has also specifically noted that it ‘‘is 

not applying a ‘cannot be manipulated’ standard; 

instead, the Commission is examining whether the 

proposal meets the requirements of the Exchange 

Act and, pursuant to its Rules of Practice, places the 

burden on the listing exchange to demonstrate the 

validity of its contentions and to establish that the 

requirements of the Exchange Act have been met.’’ 

Id. at 37582. 

54According to a Kaiko Research report dated 

June 26, 2023, Coinbase represented roughly 50% 

of exchange trading volume in USD–BTC trading on 

a daily basis during May 2023. 

55For additional information regarding ISG and 

the hallmarks of surveillance-sharing between ISG 

members, see https://isgportal.org/overview. 

56The Exchange also notes that it already has in 

place ISG-like surveillance sharing agreement with 

Cboe Digital Exchange, LLC and Cboe Clear Digital, 

LLC. 

57While the Index will not be particularly 

important for the creation and redemption process, 

it will be used for calculating fees. 

market of significant size. Both the 

Exchange and CME are members of 

ISG.51 The only remaining issue to be 

addressed is whether the Bitcoin 

Futures market constitutes a market of 

significant size, which both the 

Exchange and the Sponsor believe that 

it does. The terms ‘‘significant market’’ 

and ‘‘market of significant size’’ include 

a market (or group of markets) as to 

which: (a) there is a reasonable 

likelihood that a person attempting to 

manipulate the ETP would also have to 

trade on that market to manipulate the 

ETP, so that a surveillance-sharing 

agreement would assist the listing 

exchange in detecting and deterring 

misconduct; and (b) it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in that 

market.52

The Commission has also recognized 

that the ‘‘regulated market of significant 

size’’ standard is not the only means for 

satisfying Section 6(b)(5) of the act, 

specifically providing that a listing 

exchange could demonstrate that ‘‘other 

means to prevent fraudulent and 

manipulative acts and practices’’ are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement.53

(a) Manipulation of the ETP 

According to the research and 

analysis presented above, the Bitcoin 

Futures market is the leading market for 

bitcoin price formation. Where Bitcoin 

Futures lead the price in the spot market 

such that a potential manipulator of the 

bitcoin spot market would have to 

participate in the Bitcoin Futures 

market, it follows that a potential 

manipulator of the Shares would 

similarly have to transact in the Bitcoin 

Futures market because the NAV is 

based on the price of bitcoin on the 

principal market, which identified 

market must be an active market with 

orderly transactions. Further, the Trust 

only allows for in-kind creation and 

redemption, which, as further described 

below, reduces the potential for 

manipulation of the Shares through 

manipulation of the Trust’s 

methodology for calculating NAV or any 

of its individual constituents, again 

emphasizing that a potential 

manipulator of the Shares would have 

to manipulate the entirety of the bitcoin 

spot market, which is led by the Bitcoin 

Futures market. As such, the Exchange 

believes that part (a) of the significant 

market test outlined above is satisfied 

and that common membership in ISG 

between the Exchange and CME would 

assist the listing exchange in detecting 

and deterring misconduct in the Shares. 

(b) Predominant Influence on Prices in 

Spot and Bitcoin Futures 

The Exchange and Sponsor also 

believe that trading in the Shares would 

not be the predominant force on prices 

in the Bitcoin Futures market or spot 

market for a number of reasons, 

including the significant volume in the 

Bitcoin Futures market, the size of 

bitcoin’s market cap, and the significant 

liquidity available in the spot market. In 

addition to the Bitcoin Futures market 

data points cited above, the spot market 

for bitcoin is also very liquid. 

(c) Other Means To Prevent Fraudulent 

and Manipulative Acts and Practices 

As noted above, the Commission also 

permits a listing exchange to 

demonstrate that ‘‘other means to 

prevent fraudulent and manipulative 

acts and practices’’ are sufficient to 

justify dispensing with the requisite 

surveillance-sharing agreement. The 

Exchange and Sponsor believe that such 

conditions are present. 

The Exchange is proposing to take 

additional steps to those described 

above to supplement its ability to obtain 

information that would be helpful in 

detecting, investigating, and deterring 

fraud and market manipulation in the 

Commodity-Based Trust Shares. On 

June 21, 2023, the Exchange reached an 

agreement on terms with Coinbase, Inc. 

(‘‘Coinbase’’), an operator of a United 

States-based spot trading platform for 

Bitcoin that represents a substantial 

portion of US-based and USD 

denominated Bitcoin trading,54 to enter 

into a surveillance-sharing agreement 

(‘‘Spot BTC SSA’’) and executed an 

associated term sheet. Based on this 

agreement on terms, the Exchange and 

Coinbase will finalize and execute a 

definitive agreement that the parties 

expect to be executed prior to allowing 

trading of the Commodity-Based Trust 

Shares. 

The Spot BTC SSA is expected to be 

a bilateral surveillance-sharing 

agreement between the Exchange and 

Coinbase that is intended to supplement 

the Exchange’s market surveillance 

program. The Spot BTC SSA is expected 

to have the hallmarks of a surveillancesharing agreement between two 

members of the ISG, which would give 

the Exchange supplemental access to 

data regarding spot Bitcoin trades on 

Coinbase where the Exchange 

determines it is necessary as part of its 

surveillance program for the 

Commodity-Based Trust Shares.55 This 

means that the Exchange expects to 

receive market data for orders and 

trades from Coinbase, which it will 

utilize in surveillance of the trading of 

Commodity-Based Trust Shares. In 

addition, the Exchange can request 

further information from Coinbase 

related to spot bitcoin trading activity 

on the Coinbase exchange platform, if 

the Exchange determines that such 

information would be necessary to 

detect and investigate potential 

manipulation in the trading of the 

Commodity-Based Trust Shares.56

Further, and consistent with prior 

points above, offering only in-kind 

creation and redemption will also 

provide unique protections against 

potential attempts to manipulate the 

price of the Shares. While the Sponsor 

believes that the index which it uses to 

value the Trust’s bitcoin is itself 

resistant to manipulation based on the 

methodology further described below, 

the fact that creations and redemptions 

are only available in-kind makes the 

index significantly less important. 

Specifically, because the Trust will not 

accept cash to buy bitcoin in order to 

create new Shares or, barring a forced 

redemption of the Trust or under other 

extraordinary circumstances, be forced 

to sell bitcoin to pay cash for redeemed 

Shares, the price that the Sponsor uses 

to value the Trust’s bitcoin is not 

particularly important.57 When 

authorized participants are creating 

Shares with the Trust, they need to 

deliver a certain number of bitcoin per 

Share (regardless of the valuation used) 

and when they’re redeeming, they can 


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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 57499 

58The Exchange notes that the Sponsor is 

finalizing negotiations with the marketing agent and 

it will submit an amendment to this proposal upon 

execution of the agreement with the marketing 

agent. 

59 15 U.S.C. 80a–1. 

60 GAAP refers to generally accepted account 

principles. 

similarly expect to receive a certain 

number of bitcoin per Share. As such, 

even if the price used to value the 

Trust’s bitcoin is manipulated (which 

the Sponsor believes that its 

methodology is resistant to), the ratio of 

bitcoin per Share does not change and 

the Trust will either accept (for 

creations) or distribute (for 

redemptions) the same number of 

bitcoin regardless of the value. This not 

only mitigates the risk associated with 

potential manipulation, but also 

discourages and disincentivizes 

manipulation of the index because there 

is little financial incentive to do so. 

(ii) Designed To Protect Investors and 

the Public Interest 

The Exchange believes that the 

proposal is designed to protect investors 

and the public interest. Over the past 

several years, U.S. investor exposure to 

bitcoin through OTC Bitcoin Funds has 

grown into the tens of billions of 

dollars, including through Bitcoin 

Futures ETFs. With that growth, so too 

has grown the quantifiable investor 

protection issues to U.S. investors 

through roll costs for Bitcoin Futures 

ETFs and premium/discount volatility 

and management fees for OTC Bitcoin 

Funds. The Exchange believes that the 

concerns related to the prevention of 

fraudulent and manipulative acts and 

practices have been sufficiently 

addressed to be consistent with the Act 

and, to the extent that the Commission 

disagrees with that assertion, such 

concerns are now outweighed by 

investor protection concerns. As such, 

the Exchange believes that approving 

this proposal (and comparable 

proposals) provides the Commission 

with the opportunity to allow U.S. 

investors with access to bitcoin in a 

regulated and transparent exchangetraded vehicle that would act to limit 

risk to U.S. investors by: (i) reducing 

premium and discount volatility; (ii) 

reducing management fees through 

meaningful competition; (iii) reducing 

risks and costs associated with investing 

in Bitcoin Futures ETFs and operating 

companies that are imperfect proxies for 

bitcoin exposure; and (iv) providing an 

alternative to custodying spot bitcoin. 

Global X Bitcoin Trust 

Delaware Trust Company is the 

trustee (‘‘Trustee’’). The Bank of New 

York Mellon will be the administrator 

(‘‘Administrator’’) and transfer agent 

(‘‘Transfer Agent’’). Coinbase Custody 

Trust Company, LLC, a third-party 

regulated custodian (the ‘‘Custodian’’), 

will be responsible for custody of the 

Trust’s bitcoin. Sponsor selects the 

marketing agent in connection with the 

creation and redemption of ‘‘Baskets’’ of 

Shares.58

According to the Registration 

Statement, each Share will represent a 

fractional undivided beneficial interest 

and ownership in the Trust. The Trust’s 

assets will consist of bitcoin held by the 

Custodian on behalf of the Trust. The 

Trust generally does not intend to hold 

cash or cash equivalents. However, 

there may be situations where the Trust 

will unexpectedly hold cash or cash 

equivalents on a temporary basis. 

According to the Registration 

Statement, the Trust is neither an 

investment company registered under 

the Investment Company Act of 1940, as 

amended,59 nor a commodity pool for 

purposes of the Commodity Exchange 

Act (‘‘CEA’’), and neither the Trust nor 

the Sponsor is subject to regulation as 

a commodity pool operator or a 

commodity trading adviser in 

connection with the Shares. 

When the Trust sells or redeems its 

Shares, it will do so in ‘‘in-kind’’ 

transactions in large blocks of Shares (a 

‘‘Creation Basket’’) at the Trust’s NAV. 

Authorized participants will deliver, or 

facilitate the delivery of, bitcoin to the 

Trust’s account with the Custodian in 

exchange for Shares when they 

purchase Shares, and the Trust, through 

the Custodian, will deliver bitcoin to 

such authorized participants when they 

redeem Shares with the Trust. 

Authorized participants may then offer 

Shares to the public at prices that 

depend on various factors, including the 

supply and demand for Shares, the 

value of the Trust’s assets, and market 

conditions at the time of a transaction. 

Shareholders who buy or sell Shares 

during the day from their broker may do 

so at a premium or discount relative to 

the NAV of the Shares of the Trust. 

Investment Objective 

According to the Registration 

Statement and as further described 

below, the investment objective of the 

Trust is to reflect the performance of the 

price of bitcoin less the expenses of the 

Trust’s operations. In seeking to achieve 

its investment objective, the Trust will 

hold bitcoin. 

The Trust will value its Shares daily 

based on the value of bitcoin as 

reflected by the CoinDesk Bitcoin Price 

Index (XBX) (the ‘‘Index’’), a real-time, 

US dollar equivalent spot rate for 

Bitcoin. The Index leverages real-time 

prices from multiple constituent 

exchanges to provide a representative 

spot price. Each constituent exchange is 

weighted proportionally to its trailing 

24-hour liquidity with adjustments for 

price variance and inactivity. Given the 

potential for anomalies or manipulation 

at individual exchanges, constituent 

weights may dynamically adjust using 

CoinDesk Indices proprietary 

Constituent Weighting Adjustment 

Algorithm (CWAA). The algorithm is 

designed to calculate a real-time index 

that is an accurate and reliable 

reflection of the market price of each 

digital asset, using multi-sourced spot 

prices and dynamically reduce the 

weights of individual exchanges with 

lower liquidity, inactivity, and higher 

price variance. The Index is 

administered in alignment with the 

International Organization of Securities 

Commissions (‘‘IOSCO’’) Principles for 

Financial Benchmarks. The Index price 

is calculated using non-GAAP 60

methodology and is not used in the 

Trust’s financial statements. 

The Trust will process all creations 

and redemptions in-kind in transactions 

with authorized participants. The Trust 

is not actively managed. 

Net Asset Value 

The Net Asset Value (‘‘NAV’’) of the 

Trust is used by the Trust in its day-today operations to measure the net value 

of the Trust’s assets. The NAV is 

calculated on each business day and is 

equal to the aggregate value of the 

Trust’s assets less its liabilities based on 

the Index price. In determining the NAV 

of the Trust on any business day, the 

Administrator will calculate the price of 

the bitcoin held by the Trust as of 4:00 

p.m. EST on such day. The 

Administrator will also calculate the 

NAV per Share of the Trust, which 

equals the NAV of the Trust divided by 

the number of outstanding Shares. 

The Administrator will rely on the 

Index as the Index price to be used 

when determining NAV. The 

methodology used to calculate the Index 

price to value bitcoin in determining the 

net asset value of the Trust may not be 

deemed consistent with U.S. GAAP. 

However, the Trust will utilize a pricing 

source that is consistent with GAAP for 

the Trust’s periodic financial 

statements. Therefore, to the extent the 

methodology used to calculate the Index 

is deemed not to be consistent with 

GAAP, the Trust’s periodic financial 

statements may not utilize net asset 

value or NAV. The Sponsor will 

determine in its sole discretion the 

valuation sources and policies used to 


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57500 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 

61As defined in Rule 11.23(a)(3), the term ‘‘BZX 

Official Closing Price’’ shall mean the price 

disseminated to the consolidated tape as the market 

center closing trade. 

62A portion of the Trust’s bitcoin holdings and 

cash holdings from time to time may be held with 

the Prime Broker, an affiliate of the Custodian, in 

the Trading Balance, in connection with in-kind 

creations and redemptions of Baskets and the sale 

of bitcoin to pay the Sponsor’s Fee and Trust 

expenses not assumed by the Sponsor. These 

periodic holdings held in the Trading Balance with 

the Prime Broker represent an omnibus claim on the 

Prime Broker’s bitcoins held on behalf of clients; 

these holdings exist across a combination of 

omnibus hot wallets, omnibus cold wallets, or in 

accounts in the Prime Broker’s name on a trading 

venue (including third-party venues and the Prime 

Broker’s own execution venue) where the Prime 

Broker executes orders to buy and sell bitcoin on 

behalf of its clients. 

63The term ‘‘cold storage’’ refers to a safeguarding 

method by which the private keys corresponding to 

bitcoins stored on a digital wallet are removed from 

any computers actively connected to the internet. 

Cold storage of private keys may involve keeping 

such wallet on a non-networked computer or 

electronic device or storing the public key and 

private keys relating to the digital wallet on a 

storage device (for example, a USB thumb drive) or 

printed medium (for example, papyrus or paper) 

and deleting the digital wallet from all computers. 

prepare the Trust’s financial statements 

in accordance with GAAP. 

Calculation of Net Asset Value and the 

Index 

On each Business Day, as soon as 

practicable after 4:00 p.m. EST, the 

Administrator evaluates the bitcoin held 

by the Trust as reflected by the Index 

and determines the net asset value of 

the Trust and the NAV. For purposes of 

making these calculations, a Business 

Day means any day other than a day 

when the Exchange is closed for regular 

trading. 

The Index is a real-time, USDequivalent spot rate for Bitcoin. The 

Index leverages real-time prices from 

multiple constituent exchanges to 

provide a representative spot price. 

Each constituent exchange is weighted 

proportionally to its trailing 24-hour 

liquidity with adjustments for price 

variance and inactivity. Given the 

potential for anomalies or manipulation 

at individual exchanges, constituent 

weights may dynamically adjust using 

CoinDesk Indices proprietary 

Constituent Weighting Adjustment 

Algorithm (CWAA). The algorithm is 

designed to calculate a real-time index 

that is an accurate and reliable 

reflection of the market price of each 

digital asset, using multi-sourced spot 

prices and dynamically reduce the 

weights of individual exchanges with 

lower liquidity, inactivity, and higher 

price variance. The Index is 

administered in alignment with the 

IOSCO Principles for Financial 

Benchmarks. 

If the Index is not available or the 

Sponsor determines, in its sole 

discretion, that the Index should not be 

used, the Trust’s holdings may be fair 

valued in accordance with the policy 

approved by the Sponsor. 

Availability of Information 

In addition to the price transparency 

of the Index, the Trust will provide 

information regarding the Trust’s 

bitcoin holdings as well as additional 

data regarding the Trust. The Trust will 

provide an Intraday Indicative Value 

(‘‘IIV’’) per Share updated every 15 

seconds, as calculated by the Exchange 

or a third-party financial data provider 

during the Exchange’s Regular Trading 

Hours (9:30 a.m. to 4:00 p.m. E.T.). The 

IIV will be calculated by using the prior 

day’s closing NAV per Share as a base 

and updating that value during Regular 

Trading Hours to reflect changes in the 

value of the Trust’s bitcoin holdings 

during the trading day. 

The IIV disseminated during Regular 

Trading Hours should not be viewed as 

an actual real-time update of the NAV, 

which will be calculated only once at 

the end of each trading day. The IIV will 

be widely disseminated on a per Share 

basis every 15 seconds during the 

Exchange’s Regular Trading Hours by 

one or more major market data vendors. 

In addition, the IIV will be available 

through on-line information services. 

The website for the Trust, which will 

be publicly accessible at no charge, will 

contain the following information: (a) 

the current NAV per Share daily and the 

prior business day’s NAV and the 

reported closing price; (b) the BZX 

Official Closing Price 61 in relation to 

the NAV as of the time the NAV is 

calculated and a calculation of the 

premium or discount of such price 

against such NAV; (c) data in chart form 

displaying the frequency distribution of 

discounts and premiums of the Official 

Closing Price against the NAV, within 

appropriate ranges for each of the four 

previous calendar quarters (or for the 

life of the Trust, if shorter); (d) the 

prospectus; and (e) other applicable 

quantitative information. The Trust will 

also disseminate the Trust’s holdings on 

a daily basis on the Trust’s website. The 

price of bitcoin will be made available 

by one or more major market data 

vendors, updated at least every 15 

seconds during Regular Trading Hours. 

Information about the Index, including 

key elements on how the Index is 

calculated, will be publicly available at 

https://www.coindesk.com/indices/xbx/. 

The NAV for the Trust will be 

calculated by the Administrator once a 

day and will be disseminated daily to 

all market participants at the same time. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the Consolidated Tape Association 

(‘‘CTA’’). 

Quotation and last sale information 

for bitcoin is widely disseminated 

through a variety of major market data 

vendors, including Bloomberg and 

Reuters. Information relating to trading, 

including price and volume 

information, in bitcoin is available from 

major market data vendors and from the 

exchanges on which bitcoin are traded. 

Depth of book information is also 

available from bitcoin exchanges. The 

normal trading hours for bitcoin 

exchanges are 24 hours per day, 365 

days per year. 

Custody of the Trust’s Bitcoins 

An investment in the Shares is backed 

by bitcoin held by the Custodian on 

behalf of the Trust. The Custodian will 

keep custody of all of the Trust’s 

bitcoin, other than that which is 

maintained in the Trading Balance with 

the Prime Broker, in accounts that are 

required to be segregated from the assets 

held by the Custodian as principal and 

the assets of its other customers (the 

‘‘Vault Balance’’), with any remainder of 

the Vault Balance held as part of a ‘‘hot 

storage’’.62 The Custodian will keep a 

substantial portion of the private keys 

associated with the Trust’s bitcoin in 

‘‘cold storage’’ 63 or similarly secure 

technology (the ‘‘Cold Vault Balance’’). 

The hardware, software, systems, and 

procedures of the Custodian may not be 

available or cost effective for many 

investors to access directly. 

Creation and Redemption of Shares 

According to the Registration 

Statement, on any business day, an 

authorized participant may place an 

order to create one or more baskets. 

Purchase orders must be placed by 4:00 

p.m. Eastern Time, or the close of 

regular trading on the Exchange, 

whichever is earlier. The day on which 

an order is received is considered the 

purchase order date. The total deposit of 

bitcoin required is an amount of bitcoin 

that is in the same proportion to the 

total assets of the Trust, net of accrued 

expenses and other liabilities, on the 

date the order to purchase is properly 

received, as the number of Shares to be 

created under the purchase order is in 

proportion to the total number of Shares 

outstanding on the date the order is 

received. Each night, the Sponsor will 

publish the amount of bitcoin that will 

be required in exchange for each 

creation order. The Administrator 

determines the required deposit for a 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 57501 

64For purposes of Rule 14.11(e)(4), the term 

commodity takes on the definition of the term as 

provided in the Commodity Exchange Act. As noted 

above, the CFTC has opined that Bitcoin is a 

commodity as defined in Section 1a(9) of the 

Commodity Exchange Act. See Coinflip. 

65For a list of the current members and affiliate 

members of ISG, see www.isgportal.com. 

given day by dividing the number of 

bitcoin held by the Trust as of the 

opening of business on that business 

day, adjusted for the amount of bitcoin 

constituting estimated accrued but 

unpaid fees and expenses of the Trust 

as of the opening of business on that 

business day, by the quotient of the 

number of Shares outstanding at the 

opening of business divided by the 

number of Shares in a Creation Unit. 

The procedures by which an authorized 

participant can redeem one or more 

Creation Baskets mirror the procedures 

for the creation of Creation Baskets. 

Rule 14.11(e)(4)—Commodity-Based 

Trust Shares 

The Shares will be subject to BZX 

Rule 14.11(e)(4), which sets forth the 

initial and continued listing criteria 

applicable to Commodity-Based Trust 

Shares. The Exchange will obtain a 

representation that the Trust’s NAV will 

be calculated daily and that these values 

and information about the assets of the 

Trust will be made available to all 

market participants at the same time. 

The Exchange notes that, as defined in 

Rule 14.11(e)(4)(C)(i), the Shares will be: 

(a) issued by a trust that holds a 

specified commodity 64 deposited with 

the trust; (b) issued by such trust in a 

specified aggregate minimum number in 

return for a deposit of a quantity of the 

underlying commodity; and (c) when 

aggregated in the same specified 

minimum number, may be redeemed at 

a holder’s request by such trust which 

will deliver to the redeeming holder the 

quantity of the underlying commodity. 

Upon termination of the Trust, the 

Shares will be removed from listing. 

The Trustee, Delaware Trust Company, 

is a trust company having substantial 

capital and surplus and the experience 

and facilities for handling corporate 

trust business, as required under Rule 

14.11(e)(4)(E)(iv)(a) and that no change 

will be made to the trustee without prior 

notice to and approval of the Exchange. 

The Exchange also notes that, pursuant 

to Rule 14.11(e)(4)(F), neither the 

Exchange nor any agent of the Exchange 

shall have any liability for damages, 

claims, losses or expenses caused by 

any errors, omissions or delays in 

calculating or disseminating any 

underlying commodity value, the 

current value of the underlying 

commodity required to be deposited to 

the Trust in connection with issuance of 

Commodity-Based Trust Shares; 

resulting from any negligent act or 

omission by the Exchange, or any agent 

of the Exchange, or any act, condition or 

cause beyond the reasonable control of 

the Exchange, its agent, including, but 

not limited to, an act of God; fire; flood; 

extraordinary weather conditions; war; 

insurrection; riot; strike; accident; 

action of government; communications 

or power failure; equipment or software 

malfunction; or any error, omission or 

delay in the reports of transactions in an 

underlying commodity. Finally, as 

required in Rule 14.11(e)(4)(G), the 

Exchange notes that any registered 

market maker (‘‘Market Maker’’) in the 

Shares must file with the Exchange in 

a manner prescribed by the Exchange 

and keep current a list identifying all 

accounts for trading in an underlying 

commodity, related commodity futures 

or options on commodity futures, or any 

other related commodity derivatives, 

which the registered Market Maker may 

have or over which it may exercise 

investment discretion. No registered 

Market Maker shall trade in an 

underlying commodity, related 

commodity futures or options on 

commodity futures, or any other related 

commodity derivatives, in an account in 

which a registered Market Maker, 

directly or indirectly, controls trading 

activities, or has a direct interest in the 

profits or losses thereof, which has not 

been reported to the Exchange as 

required by this Rule. In addition to the 

existing obligations under Exchange 

rules regarding the production of books 

and records (see, e.g., Rule 4.2), the 

registered Market Maker in CommodityBased Trust Shares shall make available 

to the Exchange such books, records or 

other information pertaining to 

transactions by such entity or registered 

or non-registered employee affiliated 

with such entity for its or their own 

accounts for trading the underlying 

physical commodity, related commodity 

futures or options on commodity 

futures, or any other related commodity 

derivatives, as may be requested by the 

Exchange. 

Trading Halts 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares. 

The Exchange will halt trading in the 

Shares under the conditions specified in 

BZX Rule 11.18. Trading may be halted 

because of market conditions or for 

reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable. These may include: (1) the 

extent to which trading is not occurring 

in the bitcoin underlying the Shares; or 

(2) whether other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. Trading in the 

Shares also will be subject to Rule 

14.11(e)(4)(E)(ii), which sets forth 

circumstances under which trading in 

the Shares may be halted. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. BZX will allow trading 

in the Shares during all trading sessions 

on the Exchange. The Exchange has 

appropriate rules to facilitate 

transactions in the Shares during all 

trading sessions. As provided in BZX 

Rule 11.11(a) the minimum price 

variation for quoting and entry of orders 

in securities traded on the Exchange is 

$0.01 where the price is greater than 

$1.00 per share or $0.0001 where the 

price is less than $1.00 per share. 

Surveillance 

The Exchange believes that its 

surveillance procedures are adequate to 

properly monitor the trading of the 

Shares on the Exchange during all 

trading sessions and to deter and detect 

violations of Exchange rules and the 

applicable federal securities laws. 

Trading of the Shares through the 

Exchange will be subject to the 

Exchange’s surveillance procedures for 

derivative products, including 

Commodity-Based Trust Shares. The 

issuer has represented to the Exchange 

that it will advise the Exchange of any 

failure by the Trust or the Shares to 

comply with the continued listing 

requirements, and, pursuant to its 

obligations under Section 19(g)(1) of the 

Exchange Act, the Exchange will surveil 

for compliance with the continued 

listing requirements. If the Trust or the 

Shares are not in compliance with the 

applicable listing requirements, the 

Exchange will commence delisting 

procedures under Exchange Rule 14.12. 

The Exchange may obtain information 

regarding trading in the Shares and 

Bitcoin Futures via ISG, from other 

exchanges who are members or affiliates 

of the ISG, or with which the Exchange 

has entered into a comprehensive 

surveillance sharing agreement.65

Information Circular 

Prior to the commencement of 

trading, the Exchange will inform its 

members in an Information Circular of 

the special characteristics and risks 

associated with trading the Shares. 


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57502 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 

66Regular Trading Hours is the time between 9:30 

a.m. and 4:00 p.m. Eastern Time. 

67 15 U.S.C. 78f. 

68 15 U.S.C. 78f(b)(5). 

69As the Exchange has stated in a number of 

other public documents, it continues to believe that 

bitcoin is resistant to price manipulation and that 

‘‘other means to prevent fraudulent and 

manipulative acts and practices’’ exist to justify 

dispensing with the requisite surveillance sharing 

agreement. The geographically diverse and 

continuous nature of bitcoin trading render it 

difficult and prohibitively costly to manipulate the 

price of bitcoin. The fragmentation across bitcoin 

platforms, the relatively slow speed of transactions, 

and the capital necessary to maintain a significant 

presence on each trading platform make 

manipulation of bitcoin prices through continuous 

trading activity challenging. To the extent that there 

are bitcoin exchanges engaged in or allowing wash 

trading or other activity intended to manipulate the 

price of bitcoin on other markets, such pricing does 

not normally impact prices on other exchange 

because participants will generally ignore markets 

with quotes that they deem non-executable. 

Moreover, the linkage between the bitcoin markets 

and the presence of arbitrageurs in those markets 

means that the manipulation of the price of bitcoin 

price on any single venue would require 

manipulation of the global bitcoin price in order to 

be effective. Arbitrageurs must have funds 

distributed across multiple trading platforms in 

order to take advantage of temporary price 

dislocations, thereby making it unlikely that there 

will be strong concentration of funds on any 

particular bitcoin exchange or OTC platform. As a 

result, the potential for manipulation on a trading 

platform would require overcoming the liquidity 

supply of such arbitrageurs who are effectively 

eliminating any cross-market pricing differences. 

70As previously articulated by the Commission, 

‘‘The standard requires such surveillance-sharing 

agreements since ‘‘they provide a necessary 

deterrent to manipulation because they facilitate the 

availability of information needed to fully 

investigate a manipulation if it were to occur.’’ The 

Commission has emphasized that it is essential for 

an exchange listing a derivative securities product 

to enter into a surveillance-sharing agreement with 

markets trading underlying securities for the listing 

exchange to have the ability to obtain information 

necessary to detect, investigate, and deter fraud and 

market manipulation, as well as violations of 

exchange rules and applicable federal securities 

laws and rules. The hallmarks of a surveillancesharing agreement are that the agreement provides 

for the sharing of information about market trading 

activity, clearing activity, and customer identity; 

that the parties to the agreement have reasonable 

ability to obtain access to and produce requested 

information; and that no existing rules, laws, or 

practices would impede one party to the agreement 

from obtaining this information from, or producing 

it to, the other party.’’ The Commission has 

historically held that joint membership in the ISG 

constitutes such a surveillance sharing agreement. 

See Wilshire Phoenix Disapproval). 

71 Id. 

72See Winklevoss Order at 37580. The 

Commission has also specifically noted that it ‘‘is 

not applying a ‘cannot be manipulated’ standard; 

instead, the Commission is examining whether the 

proposal meets the requirements of the Exchange 

Act and, pursuant to its Rules of Practice, places the 

burden on the listing exchange to demonstrate the 

validity of its contentions and to establish that the 

requirements of the Exchange Act have been met.’’ 

Id. at 37582. 

Specifically, the Information Circular 

will discuss the following: (i) the 

procedures for the creation and 

redemption of Baskets (and that the 

Shares are not individually redeemable); 

(ii) BZX Rule 3.7, which imposes 

suitability obligations on Exchange 

members with respect to recommending 

transactions in the Shares to customers; 

(iii) how information regarding the IIV 

and the Trust’s NAV are disseminated; 

(iv) the risks involved in trading the 

Shares outside of Regular Trading 

Hours 66 when an updated IIV will not 

be calculated or publicly disseminated; 

(v) the requirement that members 

deliver a prospectus to investors 

purchasing newly issued Shares prior to 

or concurrently with the confirmation of 

a transaction; and (vi) trading 

information. 

In addition, the Information Circular 

will advise members, prior to the 

commencement of trading, of the 

prospectus delivery requirements 

applicable to the Shares. Members 

purchasing the Shares for resale to 

investors will deliver a prospectus to 

such investors. The Information Circular 

will also discuss any exemptive, noaction and interpretive relief granted by 

the Commission from any rules under 

the Act. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with Section 6(b) 

of the Act 67 in general and Section 

6(b)(5) of the Act 68 in particular in that 

it is designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. 

The Commission has approved 

numerous series of Trust Issued 

Receipts, including Commodity-Based 

Trust Shares, to be listed on U.S. 

national securities exchanges. In order 

for any proposed rule change from an 

exchange to be approved, the 

Commission must determine that, 

among other things, the proposal is 

consistent with the requirements of 

Section 6(b)(5) of the Act, specifically 

including: (i) the requirement that a 

national securities exchange’s rules are 

designed to prevent fraudulent and 

manipulative acts and practices; 69 and 

(ii) the requirement that an exchange 

proposal be designed, in general, to 

protect investors and the public interest. 

The Exchange believes that this 

proposal is consistent with the 

requirements of Section 6(b)(5) of the 

Act and that this filing sufficiently 

demonstrates that the CME Bitcoin 

Futures market represents a regulated 

market of significant size and that, on 

the whole, the manipulation concerns 

previously articulated by the 

Commission are sufficiently mitigated to 

the point that they are outweighed by 

quantifiable investor protection issues 

that would be resolved by approving 

this proposal. 

(i) Designed To Prevent Fraudulent and 

Manipulative Acts and Practices 

In order to meet this standard in a 

proposal to list and trade a series of 

Commodity-Based Trust Shares, the 

Commission requires that an exchange 

demonstrate that there is a 

comprehensive surveillance-sharing 

agreement in place 70 with a regulated 

market of significant size. Both the 

Exchange and CME are members of ISG. 

The only remaining issue to be 

addressed is whether the Bitcoin 

Futures market constitutes a market of 

significant size, which both the 

Exchange and the Sponsor believe that 

it does. The terms ‘‘significant market’’ 

and ‘‘market of significant size’’ include 

a market (or group of markets) as to 

which: (a) there is a reasonable 

likelihood that a person attempting to 

manipulate the ETP would also have to 

trade on that market to manipulate the 

ETP, so that a surveillance-sharing 

agreement would assist the listing 

exchange in detecting and deterring 

misconduct; and (b) it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in that 

market.71

The Commission has also recognized 

that the ‘‘regulated market of significant 

size’’ standard is not the only means for 

satisfying Section 6(b)(5) of the act, 

specifically providing that a listing 

exchange could demonstrate that ‘‘other 

means to prevent fraudulent and 

manipulative acts and practices’’ are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement.72

(a) Manipulation of the ETP 

According to the research and 

analysis presented above, the Bitcoin 

Futures market is the leading market for 

bitcoin price formation. Where Bitcoin 

Futures lead the price in the spot market 

such that a potential manipulator of the 

bitcoin spot market (beyond just the 

constituents of the Index) would have to 

participate in the Bitcoin Futures 

market, it follows that a potential 

manipulator of the Shares would 

similarly have to transact in the Bitcoin 

Futures market because the NAV is 


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73According to a Kaiko Research report dated 

June 26, 2023, Coinbase represented roughly 50% 

of exchange trading volume in USD-BTC trading on 

a daily basis during May 2023. 

74For additional information regarding ISG and 

the hallmarks of surveillance-sharing between ISG 

members, see https://isgportal.org/overview. 

75The Exchange also notes that it already has in 

place ISG-like surveillance sharing agreement with 

Cboe Digital Exchange, LLC and Cboe Clear Digital, 

LLC. 

based on spot prices. Further, the Trust 

only allows for in-kind creation and 

redemption, which, as further described 

below, reduces the potential for 

manipulation of the Shares through 

manipulation of the Trust’s 

methodology for calculating NAV or any 

of its individual constituents, again 

emphasizing that a potential 

manipulator of the Shares would have 

to manipulate the entirety of the bitcoin 

spot market, which is led by the Bitcoin 

Futures market. As such, the Exchange 

believes that part (a) of the significant 

market test outlined above is satisfied 

and that common membership in ISG 

between the Exchange and CME would 

assist the listing exchange in detecting 

and deterring misconduct in the Shares. 

(b) Predominant Influence on Prices in 

Spot and Bitcoin Futures 

The Exchange and Sponsor also 

believe that trading in the Shares would 

not be the predominant force on prices 

in the Bitcoin Futures market or spot 

market for a number of reasons, 

including the significant volume in the 

Bitcoin Futures market, the size of 

bitcoin’s market cap, and the significant 

liquidity available in the spot market. In 

addition to the Bitcoin Futures market 

data points cited above, the spot market 

for bitcoin is also very liquid. 

(c) Other Means To Prevent Fraudulent 

and Manipulative Acts and Practices 

As noted above, the Commission also 

permits a listing exchange to 

demonstrate that ‘‘other means to 

prevent fraudulent and manipulative 

acts and practices’’ are sufficient to 

justify dispensing with the requisite 

surveillance-sharing agreement. The 

Exchange and Sponsor believe that such 

conditions are present. 

The Exchange is proposing to take 

additional steps to those described 

above to supplement its ability to obtain 

information that would be helpful in 

detecting, investigating, and deterring 

fraud and market manipulation in the 

Commodity-Based Trust Shares. On 

June 21, 2023, the Exchange reached an 

agreement on terms with Coinbase, Inc. 

(‘‘Coinbase’’), an operator of a United 

States-based spot trading platform for 

Bitcoin that represents a substantial 

portion of US-based and USD 

denominated Bitcoin trading,73 to enter 

into a surveillance-sharing agreement 

(‘‘Spot BTC SSA’’) and executed an 

associated term sheet. Based on this 

agreement on terms, the Exchange and 

Coinbase will finalize and execute a 

definitive agreement that the parties 

expect to be executed prior to allowing 

trading of the Commodity-Based Trust 

Shares. 

The Spot BTC SSA is expected to be 

a bilateral surveillance-sharing 

agreement between the Exchange and 

Coinbase that is intended to supplement 

the Exchange’s market surveillance 

program. The Spot BTC SSA is expected 

to have the hallmarks of a surveillancesharing agreement between two 

members of the ISG, which would give 

the Exchange supplemental access to 

data regarding spot Bitcoin trades on 

Coinbase where the Exchange 

determines it is necessary as part of its 

surveillance program for the 

Commodity-Based Trust Shares.74 This 

means that the Exchange expects to 

receive market data for orders and 

trades from Coinbase, which it will 

utilize in surveillance of the trading of 

Commodity-Based Trust Shares. In 

addition, the Exchange can request 

further information from Coinbase 

related to spot bitcoin trading activity 

on the Coinbase exchange platform, if 

the Exchange determines that such 

information would be necessary to 

detect and investigate potential 

manipulation in the trading of the 

Commodity-Based Trust Shares.75

Further, and consistent with prior 

points above, offering only in-kind 

creation and redemption will also 

provide unique protections against 

potential attempts to manipulate the 

price of the Shares. While the Sponsor 

believes that the Index which it uses to 

value the Trust’s bitcoin is itself 

resistant to manipulation based on the 

methodology further described below, 

the fact that creations and redemptions 

are only available in-kind makes the 

manipulability of the Index significantly 

less important. Specifically, because the 

Trust will not accept cash to buy bitcoin 

in order to create new Shares or, barring 

a forced redemption of the Trust or 

under other extraordinary 

circumstances, be forced to sell bitcoin 

to pay cash for redeemed Shares, the 

price that the Sponsor uses to value the 

Trust’s bitcoin is not particularly 

important. When authorized 

participants are creating Shares with the 

Trust, they need to deliver a certain 

number of bitcoin per Share (regardless 

of the valuation used) and when they’re 

redeeming, they can similarly expect to 

receive a certain number of bitcoin per 

Share. As such, even if the price used 

to value the Trust’s bitcoin is 

manipulated (which the Sponsor 

believes that its methodology is resistant 

to), the ratio of bitcoin per Share does 

not change and the Trust will either 

accept (for creations) or distribute (for 

redemptions) the same number of 

bitcoin regardless of the value. This not 

only mitigates the risk associated with 

potential manipulation, but also 

discourages and disincentivizes 

manipulation of the Index because there 

is little financial incentive to do so. 

(ii) Designed To Protect Investors and 

the Public Interest 

The Exchange believes that the 

proposal is designed to protect investors 

and the public interest. Over the past 

several years, U.S. investor exposure to 

bitcoin through OTC Bitcoin Funds has 

grown into the tens of billions of 

dollars, including through Bitcoin 

Futures ETFs. With that growth, so too 

has grown the quantifiable investor 

protection issues to U.S. investors 

through roll costs for Bitcoin Futures 

ETFs and premium/discount volatility 

and management fees for OTC Bitcoin 

Funds. The Exchange believes that the 

concerns related to the prevention of 

fraudulent and manipulative acts and 

practices have been sufficiently 

addressed to be consistent with the Act 

and, to the extent that the Commission 

disagrees with that assertion, such 

concerns are now outweighed by 

investor protection concerns. As such, 

the Exchange believes that approving 

this proposal (and comparable 

proposals) provides the Commission 

with the opportunity to allow U.S. 

investors with access to bitcoin in a 

regulated and transparent exchangetraded vehicle that would act to limit 

risk to U.S. investors by: (i) reducing 

premium and discount volatility; (ii) 

reducing management fees through 

meaningful competition; (iii) reducing 

risks and costs associated with investing 

in Bitcoin Futures ETFs and operating 

companies that are imperfect proxies for 

bitcoin exposure; and (iv) providing an 

alternative to custodying spot bitcoin. 

Commodity-Based Trust Shares 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

be listed on the Exchange pursuant to 

the initial and continued listing criteria 

in Exchange Rule 14.11(e)(4). The 

Exchange believes that its surveillance 

procedures are adequate to properly 

monitor the trading of the Shares on the 

Exchange during all trading sessions 

and to deter and detect violations of 


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57504 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 

Exchange rules and the applicable 

federal securities laws. Trading of the 

Shares through the Exchange will be 

subject to the Exchange’s surveillance 

procedures for derivative products, 

including Commodity-Based Trust 

Shares. The issuer has represented to 

the Exchange that it will advise the 

Exchange of any failure by the Trust or 

the Shares to comply with the 

continued listing requirements, and, 

pursuant to its obligations under 

Section 19(g)(1) of the Exchange Act, the 

Exchange will surveil for compliance 

with the continued listing requirements. 

If the Trust or the Shares are not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

Exchange Rule 14.12. The Exchange 

may obtain information regarding 

trading in the Shares and listed bitcoin 

derivatives via the ISG, from other 

exchanges who are members or affiliates 

of the ISG, or with which the Exchange 

has entered into a comprehensive 

surveillance sharing agreement. 

Availability of Information 

The Exchange also believes that the 

proposal promotes market transparency 

in that a large amount of information is 

currently available about bitcoin and 

will be available regarding the Trust and 

the Shares. In addition to the price 

transparency of the Index, the Trust will 

provide information regarding the 

Trust’s bitcoin holdings as well as 

additional data regarding the Trust. The 

Trust will provide an IIV per Share 

updated every 15 seconds, as calculated 

by the Exchange or a third-party 

financial data provider during the 

Exchange’s Regular Trading Hours (9:30 

a.m. to 4:00 p.m. E.T.). The IIV will be 

calculated by using the prior day’s 

closing NAV per Share as a base and 

updating that value during Regular 

Trading Hours to reflect changes in the 

value of the Trust’s bitcoin holdings 

during the trading day. 

The IIV disseminated during Regular 

Trading Hours should not be viewed as 

an actual real-time update of the NAV, 

which will be calculated only once at 

the end of each trading day. The IIV will 

be widely disseminated on a per Share 

basis every 15 seconds during the 

Exchange’s Regular Trading Hours by 

one or more major market data vendors. 

In addition, the IIV will be available 

through on-line information services. 

The website for the Trust, which will 

be publicly accessible at no charge, will 

contain the following information: (a) 

the current NAV per Share daily and the 

prior business day’s NAV and the 

reported closing price; (b) the BZX 

Official Closing Price in relation to the 

NAV as of the time the NAV is 

calculated and a calculation of the 

premium or discount of such price 

against such NAV; (c) data in chart form 

displaying the frequency distribution of 

discounts and premiums of the Official 

Closing Price against the NAV, within 

appropriate ranges for each of the four 

previous calendar quarters (or for the 

life of the Trust, if shorter); (d) the 

prospectus; and (e) other applicable 

quantitative information. The Trust will 

also disseminate the Trust’s holdings on 

a daily basis on the Trust’s website. The 

price of bitcoin will be made available 

by one or more major market data 

vendors, updated at least every 15 

seconds during Regular Trading Hours. 

The NAV for the Trust will be 

calculated by the Administrator once a 

day and will be disseminated daily to 

all market participants at the same time. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the CTA. 

Quotation and last sale information 

for bitcoin is widely disseminated 

through a variety of major market data 

vendors, including Bloomberg and 

Reuters. Information relating to trading, 

including price and volume 

information, in bitcoin is available from 

major market data vendors and from the 

exchanges on which bitcoin are traded. 

Depth of book information is also 

available from bitcoin exchanges. The 

normal trading hours for bitcoin 

exchanges are 24 hours per day, 365 

days per year 

In sum, the Exchange believes that 

this proposal is consistent with the 

requirements of Section 6(b)(5) of the 

Act, that this filing sufficiently 

demonstrates that the CME Bitcoin 

Futures market represents a regulated 

market of significant size, and that on 

the whole the manipulation concerns 

previously articulated by the 

Commission are sufficiently mitigated to 

the point that they are outweighed by 

investor protection issues that would be 

resolved by approving this proposal. 

The Exchange believes that the 

proposal is, in particular, designed to 

protect investors and the public interest. 

The investor protection issues for U.S. 

investors has grown significantly over 

the last several years, through roll costs 

for Bitcoin Futures ETFs and premium/ 

discount volatility and management fees 

for OTC Bitcoin Funds. As discussed 

throughout, this growth investor 

protection concerns need to be 

reevaluated and rebalanced with the 

prevention of fraudulent and 

manipulative acts and practices 

concerns that previous disapproval 

orders have relied upon. Finally, the 

Exchange notes that in addition to all of 

the arguments herein which it believes 

sufficiently establish the CME Bitcoin 

Futures market as a regulated market of 

significant size, it is logically 

inconsistent to find that the CME 

Bitcoin Futures market is a significant 

market as it relates to the CME Bitcoin 

Futures market, but not a significant 

market as it relates to the bitcoin spot 

market for the numerous reasons laid 

out above. 

For the above reasons, the Exchange 

believes that the proposed rule change 

is consistent with the requirements of 

Section 6(b)(5) of the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Act. The Exchange 

notes that the proposed rule change, 

rather will facilitate the listing and 

trading of an additional exchange-traded 

product that will enhance competition 

among both market participants and 

listing venues, to the benefit of investors 

and the marketplace. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the Exchange consents, the Commission 

will: 

A. by order approve or disapprove 

such proposed rule change, or 

B. institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 


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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Notices 57505 

76 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3This Proposal was initially filed by the 

Exchange on May 23, 2023. See Securities Exchange 

Act Release No. 97627 (May 31, 2023), 88 FR 37112 

(June 6, 2023) (SR–BX–2023–014). On July 7, 2023, 

that filing was withdrawn and replaced to provide 

supplemental information. See Securities Exchange 

Act Release No. 97946 (July 19, 2023), 88 FR 47937 

(July 25, 2023) (SR–BX–2023–016). On August 9, 

2023, the second filing was withdrawn and 

replaced with the instant filing, which provides 

additional information without changing the 

Proposal in substance. 

4See SR–BX–2023–011 (‘‘A proposal to offer 

field-programmable gate array (‘FPGA’) technology 

as an optional delivery mechanism for BX 

TotalView.’’), available at https://listingcenter.

nasdaq.com/rulebook/BX/rulefilings. A proposal to 

establish a fee schedule for the use of FPGA 

technology for the Phlx exchange is being filed 

concurrently with this proposal. 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

CboeBZX–2023–058 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–CboeBZX–2023–058. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeBZX–2023–058 and should be 

submitted on or before September 13, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.76

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–18103 Filed 8–22–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98158; File No. SR–BX– 

2023–020] 

Self-Regulatory Organizations; Nasdaq 

BX, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Set Fees for the 

Purchase of Field-Programmable Gate 

Array Technology as an Optional 

Delivery Mechanism for BX Totalview 

August 17, 2023. 

Pursuant to section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on August 9, 

2023, Nasdaq BX, Inc. (‘‘BX’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III, below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to set fees for 

the purchase of field-programmable gate 

array (‘‘FPGA’’) technology as an 

optional delivery mechanism for BX 

TotalView. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/bx/rules, at the principal office 

of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to establish a fee schedule for 

the purchase of field-programmable gate 

array (‘‘FPGA’’) technology as an 

optional delivery mechanism for BX 

TotalView (‘‘BX FPGA Service’’).3 This 

follows a recently-filed proposal to offer 

FPGA technology as an optional 

delivery mechanism for BX TotalView.4

FPGA 

FPGA is a hardware-based delivery 

mechanism that utilizes an integrated 

circuit that is programmed to reduce 

‘‘jitter’’—a technical term of art referring 

to the deviation in amplitude, phase 

timing or width of a signal pulse in a 

digital signal—that will allow data to be 

processed in a more predictable, or 

‘‘deterministic,’’ fashion. Reducing jitter 

can be useful for certain customers due 

to the variability in the timing of market 

data packets transmitted by an exchange 

over the course of the trading day. 

Orders, and therefore market data 

packets, typically accumulate in larger 

numbers at the beginning and end of the 

trading day, as well as during the peaks 

of activity that occur at random 

intervals during the day. These bursts of 

activity may alter the time interval 

between the delivery of data packets 

because software processes information 

at variable rates depending on load to 

the system. Processing times may 

increase at higher loads, and decrease 

during periods of lesser activity. FPGA 

technology processes data packets at a 

constant time interval, without regard to 

the number of packets processed. Higher 

levels of determinism mean less variable 

queuing, which improves the 

predictability of data transfer, 

particularly during times of peak market 

activity. 


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