68188 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

4 15 U.S.C. 78s(b)(2). 

5 15 U.S.C. 78s(b)(2). 

6 17 CFR 200.30–3(a)(31). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Securities Exchange Act Release No. 34– 

94620 (April 6, 2022), 87 FR 21676 (April 12, 2022) 

(SR–NYSEArca–2021–53) (Order Approving a 

Proposed Rule Change, as Modified by Amendment 

No. 2, To List and Trade Shares of the Teucrium 

Bitcoin Futures Fund Under NYSE Arca Rule 

8.200–E, Commentary .02 (Trust Issued Receipts)) 

(the ‘‘Approval Order’’). The representations herein 

supersede and replace the representations in the 

Exchange’s prior rule filing relating to the Teucrium 

Bitcoin Futures Fund and Partial Amendment No. 

2 thereto. See Securities Exchange Act Release No. 

92573 (August 5, 2021), 86 FR 44062 (August 11, 

2021) (SR–NYSEArca–2021–53) (Notice of Filing of 

a Proposed Rule Change To List and Trade Shares 

of Teucrium Bitcoin Futures Fund Under NYSE 

Arca Rule 8.200–E) and Partial Amendment No. 2, 

available at: https://www.sec.gov/comments/srnysearca-2021-53/srnysearca202153-20118884- 

271701.pdf. 

5On April 18, 2022, Teucrium Commodity Trust 

filed with the Commission Pre-Effective 

Amendment No. 2 to the registration statement on 

Form S–1 under the Securities Act of 1933 (the 

‘‘Securities Act’’) (File No. 333–256339) changing 

the name of the Fund from Teucrium Bitcoin 

Futures Fund to Hashdex Bitcoin Futures ETF. 

6On July 21, 2023, the Trust filed with the 

Commission a registration statement on Form S–1 

under the Securities Act (15 U.S.C. 77a) (File No. 

333–ll) (the ‘‘July 21, 2023 Form S–1’’) reflecting 

the Trust’s assumption of management and control 

of Fund from Teucrium Commodity Trust. The 

Shares of the Fund were originally issued by the 

Teucrium Commodity Trust pursuant to a 

registration statement on Form S–1 filed with the 

Commission on May 20, 2021 (File No. 333– 

256339). The Exchange will submit a separate 

proposed rule change relating to the transfer of 

management and control of the Fund from 

Teucrium Commodity Trust to the Trust. 

7On August 25, 2023, the Trust confidentially 

filed a draft registration statement under the 

Securities Act (the ‘‘Registration Statement’’). The 

Jumpstart Our Business Startups Act (the ‘‘JOBS 

Act’’), enacted on April 5, 2012, added Section 6(e) 

to the Securities Act. Section 6(e) of the Securities 

Act provides that an ‘‘emerging growth company’’ 

may confidentially submit to the Commission a 

draft registration statement for confidential, nonpublic review by the Commission staff prior to 

public filing, provided that the initial confidential 

submission and all amendments thereto shall be 

publicly filed not later than 21 days before the date 

on which the issuer conducts a road show, as such 

term is defined in Securities Act Rule 433(h)(4). An 

emerging growth company is defined in Section 

2(a)(19) of the Securities Act as an issuer with less 

than $1,000,000,000 total annual gross revenues 

during its most recently completed fiscal year. The 

Trust meets the definition of an emerging growth 

company and consequently submitted its 

Registration Statement to the Commission on a 

confidential basis. The description of the operation 

of the Trust and the Fund herein is based, in part, 

on the Registration Statement. 

8The July 21, 2023 Form S–1 also reflects that 

Toroso Investments LLC has assumed role of the 

Sponsor of the Trust from Teucrium Trading, LLC. 

The Sponsor is not registered as a broker-dealer or 

affiliated with a broker-dealer. In the event that (a) 

the Sponsor becomes registered as a broker-dealer 

or newly affiliated with a broker-dealer, or (b) any 

new sponsor or sub-adviser is registered as a brokerdealer or becomes affiliated with a broker-dealer, it 

will implement and maintain a fire wall with 

respect to its relevant personnel or personnel of the 

broker-dealer affiliate, as applicable, regarding 

access to information concerning the composition 

of and/or changes to the portfolio, and will be 

subject to procedures designed to prevent the use 

and dissemination of material non-public 

information regarding the portfolio. 

Section 19(b)(2) of the Act 4 provides 

that within 45 days of the publication of 

notice of the filing of a proposed rule 

change, or within such longer period up 

to 90 days as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or as to which the 

self-regulatory organization consents, 

the Commission shall either approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether the 

proposed rule change should be 

disapproved. The 45th day after 

publication of the notice for this 

proposed rule change is November 11, 

2023. The Commission is extending this 

45-day time period. 

The Commission finds it appropriate 

to designate a longer period within 

which to take action on the proposed 

rule change so that it has sufficient time 

to consider the proposed rule change 

and the issues raised therein. 

Accordingly, the Commission, pursuant 

to Section 19(b)(2) of the Act,5

designates December 26, 2023, as the 

date by which the Commission shall 

either approve or disapprove, or 

institute proceedings to determine 

whether to disapprove, the proposed 

rule change (File No. SR-CboeBZX– 

2023–070). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21790 Filed 10–2–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98564; File No. SR– 

NYSEARCA–2023–58)] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of a 

Proposed Rule Change Regarding the 

Hashdex Bitcoin Futures ETF 

September 27, 2023. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on 

September 22, 2023, NYSE Arca, Inc. 

(‘‘NYSE Arca’’ or the ‘‘Exchange’’) 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 selfregulatory organization. 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 list and 

trade shares of the Hashdex Bitcoin 

Futures ETF under NYSE Arca Rule 

8.500–E (‘‘Trust Units’’). The proposed 

rule change is available on the 

Exchange’s website at www.nyse.com, 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 

self-regulatory organization 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 those 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade shares of the Hashdex Bitcoin 

Futures ETF (the ‘‘Fund’’) under NYSE 

Arca Rule 8.500–E. The Commission 

previously approved the listing and 

trading of the Shares pursuant to NYSE 

Arca Rule 8.200–E, Commentary .02 as 

shares of the Teucrium Bitcoin Futures 

Fund.4 The Fund’s name was 

subsequently changed to the Hashdex 

Bitcoin Futures ETF pursuant to an 

April 18, 2022 amendment to the Fund’s 

registration statement.5 In addition to 

the proposed changes to the Fund’s 

investment objective and strategy, as 

further discussed below, the Exchange 

proposes to update the name of the 

Fund to the Hashdex Bitcoin ETF to 

reflect the same. This new name for the 

Fund is reflected in the Form S–1 filed 

by the Tidal Commodities Trust I (the 

‘‘Trust’’) on July 21, 2023.6

The Fund is a series of the Trust, a 

Delaware statutory trust.7 The Fund is 

managed and controlled by Toroso 

Investments LLC (the ‘‘Sponsor’’).8 The 


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9BTC Contracts began trading on the CME Globex 

(‘‘Globex’’) trading platform on December 15, 2017, 

and are cash-settled in U.S. dollars. MBT Contracts 

began trading on the Globex trading platform on 

May 3, 2021, under the ticker symbol ‘‘MBT’’ and 

are also cash-settled in U.S. dollars. 

10The CME CF BRR aggregates the trade flow of 

major Bitcoin spot platforms during a specific 

calculation window into a once-a-day reference rate 

of the U.S. dollar price of Bitcoin. 

11See https://indexes.nasdaqomx.com/Index/ 

Overview/NQBTCS. 

12The Approval Order stated that the Benchmark 

would be calculated using the closing settlement 

prices of BTC Contracts listed on the CME. See 

Approval Order, 87 FR at 21676. 13See https://indexes.nasdaqomx.com/docs/

methodology_NCI.pdf. 

Sponsor is registered as a commodity 

pool operator (‘‘CPO’’) and a commodity 

trading adviser (‘‘CTA’’) with the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) and is a member 

of the National Futures Association 

(‘‘NFA’’). 

The Fund’s Investment Objective and 

Strategy 

According to the Registration 

Statement, the Chicago Mercantile 

Exchange, Inc. (‘‘CME’’) offers two 

Bitcoin futures contracts, one contract 

representing five (5) Bitcoins (‘‘BTC 

Contract’’) and another contract 

representing one-tenth of one (0.10) 

Bitcoin (‘‘MBT Contract’’).9 Each BTC 

Contract and MBT Contract settles daily 

to the BTC Contract volume-weighted 

average price (‘‘VWAP’’) of all trades 

that occur between 2:59 p.m. and 3:00 

p.m., Central Time, the settlement 

period, rounded to the nearest tradable 

tick. BTC Contracts and MBT Contracts 

each expire on the last Friday of the 

contract month, and the final settlement 

value for each contract is based on the 

CME CF Bitcoin Reference Rate (‘‘CME 

CF BRR’’).10

BTC Contracts and MBT Contracts 

each trade six consecutive monthly 

contracts plus two additional December 

contract months (if the 6 consecutive 

months include December, only one 

additional December contract month is 

listed). Because BTC Contracts and MBT 

Contracts are exchange-listed, they 

allow investors to gain exposure to 

Bitcoin without having to hold the 

underlying cryptocurrency. Like a 

futures contract on a commodity or 

stock index, BTC Contracts and MBT 

Contracts allow investors to hedge 

investment positions or speculate on the 

future price of Bitcoin. 

According to the Registration 

Statement, the investment objective of 

the Fund is to have the daily changes in 

the net asset value (‘‘NAV’’) of the 

Fund’s shares (‘‘Shares’’) reflect the 

daily changes in the price of a specified 

benchmark (the ‘‘Benchmark’’). The 

Benchmark will be calculated using the 

Nasdaq Bitcoin Reference Price— 

Settlement (the ‘‘NQBTCS’’),11 which 

ultimately tracks the price of Bitcoin.12

According to the Sponsor, the NQBTCS 

is designed to allow institutional 

investors to track the price of Bitcoin by 

applying a rigorous methodology to 

trade data captured from cryptocurrency 

exchanges that meet eligibility criteria 

of the Nasdaq Crypto Index (‘‘NCI’’). 

The NQBTCS is calculated once every 

trading day through the application of a 

publicly available rules-based pricing 

methodology to a diverse collection of 

pricing sources to provide an 

institutional-grade reference price for 

Bitcoin.13 The pricing methodology is 

designed to account for variances in 

price across a wide range of sources, 

each of which has been vetted according 

to criteria identified in the 

methodology. Specifically, the 

settlement value is the Time Weighted 

Average Price (‘‘TWAP’’) calculated 

across VWAPs for each minute in the 

settlement price window, which is 

between 2:50:00 and 3:00:00 p.m. New 

York time. Where there are no 

transactions observed in any given 

minute of the settlement price window, 

that minute is excluded from the 

calculation of the TWAP. 

According to the Sponsor, the 

NQBTCS methodology also utilizes 

penalty factors to mitigate the impact of 

anomalous trading activity such as 

manipulation, illiquidity, large block 

trading, or operational issues that could 

compromise price representation. Three 

types of penalties are applied: abnormal 

price penalties, abnormal volatility 

penalties, and abnormal volume 

penalties. These penalties are defined as 

adjustment factors on the weight of 

information from each exchange that 

contributes pricing information based 

on the deviation of an exchange’s price, 

volatility, or volume from the median 

across all exchanges. For example, if a 

core exchange’s price is 2.5 standard 

deviations away from the median price, 

its price penalty factor will be a 1/2.5 

multiplier. 

Finally, as a means of achieving the 

highest degrees of confidence in the 

reported volume, data is sourced only 

from ‘‘core exchanges’’ that are 

screened, selected, and approved by the 

Nasdaq Crypto Index Oversight 

Committee (the ‘‘NCIOC’’). Core 

exchanges must: (1) have strong forking 

controls; (2) have effective anti-money 

laundering (AML) controls; (3) have 

reliable and transparent application 

programming interface (API) that 

provides real-time and historical trading 

data; (4) charge fees for trading and 

structure trading incentives that do not 

interfere with the forces of supply and 

demand; (5) be licensed by a public 

independent governing body; (6) 

include surveillance for manipulative 

trading practices and erroneous 

transactions; (7) evidence a robust IT 

infrastructure; (8) demonstrate active 

capacity management; (9) evidence 

cooperation with regulators and law 

enforcement; and (10) have a minimum 

market representation for trading 

volume. Additionally, the NCIOC 

conducts further diligence to assess an 

exchange’s eligibility and will consider 

additional criteria such as the 

exchange’s organizational and 

ownership structure, security history, 

and reputation; the list of existing core 

exchanges will be recertified by the 

NCIOC at minimum on an annual basis. 

The Sponsor believes that the 

NQBTCS is suitable for use in 

calculating the Benchmark because (i) it 

would provide reliable pricing for 

purposes of tracking the actual 

performance of spot Bitcoin, (ii) it is 

administered by an independent index 

administrator, and (iii) its methodology 

is specifically designed to mitigate 

potential manipulation coming from 

unregulated markets. Specifically, the 

Sponsor believes that (i) by tracking the 

actual price of spot Bitcoin, which 

would better represent the Fund’s 

strategy, NQBTCS is a Benchmark that 

will be more transparent and adequate 

for the Fund’s investors; (ii) using a 

Benchmark that has its own 

independent index administrator 

provides investors the best practices in 

governance and accountability and 

benchmark quality; and (iii) the pricing 

methodology underlying the NQBTCS is 

designed to be resistant to potential 

price manipulation by applying a robust 

methodology to trade data captured 

from NCI core exchanges, which have to 

meet strict criteria created by the 

NCIOC, thereby drawing on a diverse 

collection of trustworthy pricing sources 

to provide an institutional-grade 

reference price for Bitcoin that accounts 

for variances in price across a wide 

range of sources and that adjusts to 

mitigate the impact of anomalous 

trading activity that could compromise 

the integrity of the NQBTCS price. 

According to the Registration 

Statement, the Fund seeks to maintain 

its holdings in Bitcoin Futures Contracts 

with a roughly constant expiration 

profile. Therefore, the Fund’s positions 

will be changed or ‘‘rolled’’ on a regular 

basis in order to track the changing 

nature of the Benchmark by closing out 

first to expire contracts prior to 


ddrumheller on DSK120RN23PROD with NOTICES1
68190 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

14As discussed in more detail below, the CME 

determines the daily settlements for Bitcoin futures 

based on trading activity on CME Globex between 

14:59:00 and 15:00:00 Central Time (CT), which is 

the ‘‘settlement period.’’ 

15The Approval Order stated that the Fund 

would only invest in BTC Contracts and MBT 

Contracts and in cash and cash equivalents. 

settlement that are no longer part of the 

Benchmark, and then entering into 

second to expire contracts. Accordingly, 

the Fund will never carry futures 

positions all the way to cash 

settlement—the Fund will price only off 

of the daily settlement prices of the 

Bitcoin Futures Contracts.14 To achieve 

this, the Fund will roll its futures 

holdings prior to cash settlement of the 

expiring contract. 

In seeking to achieve the Fund’s 

investment objective, the Sponsor will 

employ a ‘‘neutral’’ investment strategy 

that is intended to track the changes in 

the Benchmark regardless of whether 

the Benchmark goes up or goes down. 

The Fund will endeavor to trade in 

Bitcoin Futures Contracts and spot 

Bitcoin so that the Fund’s average daily 

tracking error against the Benchmark 

will be less than 10 percent over any 

period of 30 trading days. The Fund’s 

‘‘neutral’’ investment strategy is 

designed to permit investors generally 

to purchase and sell the Fund’s Shares 

for the purpose of investing in the 

Bitcoin Futures Contracts and spot 

Bitcoin (as discussed below). Such 

investors may include participants in 

the Bitcoin market seeking to hedge the 

risk of losses in their Bitcoin-related 

transactions, as well as investors 

seeking price exposure to the Bitcoin 

market. 

According to the Registration 

Statement, one factor determining the 

total return from investing in futures 

contracts is the price relationship 

between soon to expire contracts and 

later to expire contracts. If the futures 

market is in a state of backwardation 

(i.e., when the price of BTC Contracts 

and MBT Contracts in the future is 

expected to be less than the current 

price), the Fund will buy later to expire 

contracts for a lower price than the 

sooner to expire contracts that it sells. 

Hypothetically, and assuming no 

changes to either prevailing BTC 

Contracts and MBT Contracts’ prices or 

the price relationship between soon to 

expire contracts and later to expire 

contracts, the value of a contract will 

rise as it approaches expiration. Over 

time, if backwardation remained 

constant, the performance of a portfolio 

would continue to be affected. If the 

futures market is in contango, the Fund 

will buy later to expire contracts for a 

higher price than the sooner to expire 

contracts that it sells. Hypothetically, 

and assuming no other changes to either 

prevailing BTC Contracts and MBT 

Contracts’ prices or the price 

relationship between the spot price, 

soon to expire contracts and later to 

expire contracts, the value of a contract 

will fall as it approaches expiration. 

Over time, if contango remained 

constant, the performance of a portfolio 

would continue to be affected. 

Frequently, whether contango or 

backwardation exists is a function, 

among other factors, of the prevailing 

market conditions of the underlying 

market and government policy. 

The Fund’s investments will be 

consistent with the Fund’s investment 

objective and will not be used to 

enhance leverage. That is, the Fund’s 

investments will not be used to seek 

performance that is the multiple or 

inverse multiple (e.g., 2Xs, 3Xs, –2Xs, 

and –3Xs) of the Fund’s Benchmark. 

According to the Registration 

Statement, the Fund will seek to achieve 

its investment objective by investing in 

Bitcoin Futures Contracts as well as in 

physical Bitcoin to the extent allowed 

by the Fund’s investment restrictions on 

spot Bitcoin, using a pricing 

methodology, for purposes of 

calculating the Fund’s NAV, that will 

derive spot Bitcoin prices from Bitcoin 

Futures Contracts and not from 

unregulated exchanges, as further 

explained below (‘‘Spot Bitcoin’’).15 In 

doing so, the Sponsor expects to provide 

a better tracking of Bitcoin exposure to 

investors, while using Bitcoin Futures 

Contracts in its strategy and relying on 

the CME as its ‘‘market of relevant size.’’ 

In particular, to avoid any exposure to 

potential manipulation from 

unregulated exchanges, the Fund’s NAV 

will be calculated using a spot Bitcoin 

price derived from CME futures prices, 

as further explained below, and the 

Fund expects to purchase and sell 

physical Bitcoin via CME’s Exchange for 

Physical Transactions, which are subject 

to CME’s market surveillance. 

The Bitcoin and Bitcoin Futures 

Markets Have Progressed and Matured 

Significantly 

According to the Registration 

Statement, Bitcoin is a digital asset that 

serves as the unit of account on an 

open-source, decentralized, peer-to-peer 

computer network. It may be used to 

pay for goods and services, stored for 

future use, or converted to governmentbacked currency. As of the date of this 

prospectus, the adoption of bitcoin for 

these purposes has been limited. The 

value of Bitcoin is not backed by any 

government, corporation, or other 

identified body. 

The value of Bitcoin depends on its 

supply (which is limited), and demand 

for bitcoin in the markets for exchange 

that have been organized to facilitate the 

trading of Bitcoin. By design, the supply 

of Bitcoin is intentionally limited to 21 

million Bitcoins. According to the 

Registration Statement, there are 

approximately 19 million Bitcoins in 

circulation. 

Bitcoin is maintained on the 

decentralized, open source, peer-to-peer 

computer network, the ‘‘Bitcoin 

Network.’’ No single entity owns or 

operates the Bitcoin Network. The 

Bitcoin Network is accessed through 

software and governs bitcoin’s creation 

and movement. The source code for the 

Bitcoin Network, often referred to as the 

Bitcoin Protocol, is open-source, and 

anyone can contribute to its 

development. 

The infrastructure of the Bitcoin 

Network is collectively maintained by 

various participants in the Bitcoin 

Network, which include miners, 

developers, and users. Miners validate 

transactions and provide security to the 

network, and are currently compensated 

for that service in Bitcoin. Developers 

maintain and contribute updates to the 

Bitcoin Network’s source code, often 

referred to as the Bitcoin Protocol. Users 

access the Bitcoin Network using opensource software. Anyone can be a user, 

developer, or miner. 

Bitcoin is ‘‘stored’’ on a digital 

transaction ledger commonly known as 

a ‘‘blockchain.’’ A blockchain is a 

distributed database that is 

continuously updated and reconciled 

among certain users and is protected by 

cryptography. The Bitcoin blockchain 

contains a complete record and history 

for each bitcoin transaction. New 

Bitcoins are created through a process 

called ‘‘mining.’’ Miners use specialized 

computer software and hardware to 

solve a highly complex mathematical 

problem presented by the Bitcoin 

Protocol. The first miner to successfully 

solve the problem is permitted to add a 

block of transactions to the Bitcoin 

blockchain. The new block is then 

confirmed through acceptance by a 

majority of users who maintain versions 

of the blockchain on their individual 

computers. Miners that successfully add 

a block to the Bitcoin blockchain are 

automatically rewarded with a fixed 

amount of Bitcoin for their effort plus 

any transaction fees paid by transferors 

whose transactions are recorded in the 

block. This reward system is the means 

by which new Bitcoin enter circulation 

and is the mechanism by which 

versions of the blockchain held by users 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68191 

16See Order Setting Aside Action by Delegated 

Authority and Disapproving a Proposed Rule 

Change, as Modified by Amendments No. 1 and 2, 

to List and Trade Shares of the Winklevoss Bitcoin 

Trust, Securities Exchange Act Release No. 83723 

(July 26, 2018), 83 FR 37579 (August 1, 2018) (the 

‘‘Winklevoss II Order’’). This proposal was 

subsequently disapproved by the Commission. See 

id. 

17 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. 

18See ‘‘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.’’ 

19A list of virtual currency businesses that are 

entities regulated by the NYDFS is available on the 

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

virtual_currency_businesses#:∼:text=

A%20business%20

must%20obtain%20a,business%20in

%20New%20York%20State. 

20See Bitcoin Investment Trust Form S–1, dated 

May 27, 2016, available at: https://www.sec.gov/

Archives/edgar/data/1588489/

000095012316017801/filename1.htm (data as of 

March 31, 2016 according to publicly available 

filings). 

21See 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. 

22See 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. 

23See Prospectus filed by Stone Ridge Trust VI 

on behalf of NYDIG Bitcoin Strategy Fund 

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

Archives/edgar/data/1764894/000119312519

309942/d693146d497.htm. 

24See 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). 

25See 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. 

26See 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. 

on a decentralized network are kept in 

consensus. 

The Bitcoin Protocol is an open 

source project with no official company 

or group in control, and anyone can 

review the underlying code. There are, 

however, a number of individual 

developers that regularly contribute to a 

specific distribution of Bitcoin software 

known as the ‘‘Bitcoin Core.’’ 

Developers of the Bitcoin Core loosely 

oversee the development of the source 

code. There are many other compatible 

versions of the Bitcoin software, but 

Bitcoin Core is the most widely adopted 

and currently provides the de facto 

standard for the Bitcoin Protocol. The 

core developers are able to access, and 

can alter, the Bitcoin Network source 

code and, as a result, they are 

responsible for quasi-official releases of 

updates and other changes to the 

Bitcoin Network’s source code. 

However, because Bitcoin has no central 

authority, the release of updates to the 

Bitcoin Network’s source code by the 

core developers does not guarantee that 

the updates will be automatically 

adopted by the other purchasers. Users 

and miners must accept any changes 

made to the source code by 

downloading the proposed modification 

and that modification is effective only 

with respect to those Bitcoin users and 

miners who choose to download it. As 

a practical matter, a modification to the 

source code becomes part of the Bitcoin 

Network only if it is accepted by 

purchasers that collectively have a 

majority of the processing power on the 

Bitcoin Network. If a modification is 

accepted by only a percentage of users 

and miners, a division will occur such 

that one network will run the premodification source code and the other 

network will run the modified source 

code. Such a division is known as a 

‘‘fork.’’ 

The first rule filing proposing to list 

an exchange-traded product to provide 

exposure to Bitcoin in the U.S. was 

submitted by the Cboe BZX Exchange, 

Inc. on June 30, 2016.16 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 offering had not begun 

to develop.17 Similarly, regulated U.S. 

Bitcoin futures contracts did not exist. 

The Commodity Futures Trading 

Commission (the ‘‘CFTC’’) had 

determined that Bitcoin is a 

commodity,18 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, 2016.19 While the first over-thecounter Bitcoin fund launched in 2013, 

public trading was limited and the fund 

had only $60 million in assets.20 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.21

As of the first quarter of 2021, the 

digital assets financial ecosystem, 

including Bitcoin, has progressed and 

matured 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 22 and shares 

in investment vehicles holding Bitcoin 

futures.23 Additionally, licensed and 

regulated service providers have 

emerged to provide fund custodial 

services for digital assets, among other 

services. For example, 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.24 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.25 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; 26 and 

multiple transfer agents who provide 


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27See, 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. 

28See https://coinmarketcap.com/largestcompanies/. 

29See Coinbase 2022 10–K, available at: https:// 

s27.q4cdn.com/397450999/files/doc_financials/

2022/q4/86fe25e0-342b-40fa-aaccea04faf322cb.pdf. 

30All statistics and charts included in this 

proposal with respect to the CME are sourced from 

https://www.cmegroup.com/trading/bitcoinfutures.html. In addition, as further discussed 

below, the Sponsor believes the CME represents a 

regulated market of significant size for purposes of 

addressing the Commission’s concerns about 

potential manipulation of the Bitcoin market. 

31The CFTC’s annual report for Fiscal Year 2020 

(which ended on September 30, 2020) noted that 

the CFTC ‘‘continued to aggressively prosecute 

misconduct involving digital assets that fit within 

the CEA’s definition of commodity’’ and ‘‘brought 

a record setting seven cases involving digital 

assets.’’ See CFTC FY2020 Division of Enforcement 

Annual Report, available at: https://www.cftc.gov/

media/5321/DOE_FY2020_AnnualReport_120120/ 

download. Additionally, the CFTC filed on October 

1, 2020, a civil enforcement action against the 

owner/operators of the BitMEX trading platform, 

which was one of the largest Bitcoin derivative 

exchanges. See CFTC Release No. 8270–20 

(October1, 2020), available at: https://www.cftc.gov/ 

PressRoom/PressReleases/8270-20. 32See OCC News Release 2021–2 (January 4, 

2021), available at: https://www.occ.gov/newsissuances/news-releases/2021/nr-occ-2021-2.html. 33See FinCEN Guidance FIN–2019–G001 (May 9, 

2019) (Application of FinCEN’s Regulations to 

Certain Business Models Involving Convertible 

Virtual Currencies), available at: https://

www.fincen.gov/sites/default/files/2019-05/FinCEN

%20Guidance%20CVC%20FINAL%20508.pdf. 34See U.S. Department of the Treasury Press 

Release: ‘‘The Financial Crimes Enforcement 

Network Proposes Rule Aimed at Closing AntiMoney Laundering Regulatory Gaps for Certain 

Convertible Virtual Currency and Digital Asset 

Transactions’’ (December 18, 2020), available at: 

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

sm1216. 35See 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. 36On December 10, 2020, Massachusetts Mutual 

Life Insurance Company (MassMutual) announced 

that it had purchased $100 million in Bitcoin for 

its general investment account. See MassMutual 

Press Release ‘‘Institutional Bitcoin provider NYDIG 

announces minority stake purchase by 

MassMutual’’ (December 10, 2020), available at: 

https://www.massmutual.com/about-us/news-andpress-releases/press-releases/2020/12/institutionalbitcoin-provider-nydig-announces-minority-stakepurchase-by-massmutual. 

37See, e.g., ‘‘Morgan Stanley to Offer Rich Clients 

Access to Bitcoin Funds’’ (March 17, 2021) 

available at: https://www.bloomberg.com/news/ 

articles/2021-03-17/morgan-stanley-to-offer-richclients-access-to-bitcoin-funds. 

38See, e.g., ‘‘BlackRock’s Rick Rieder says the 

world’s largest asset manager has ‘started to dabble’ 

in Bitcoin’’ (February 17, 2021), available at: 

https://www.cnbc.com/2021/02/17/blackrock-hasstarted-to-dabble-in-bitcoin-says-rick-rieder.html 

and ‘‘Guggenheim’s Scott Minerd Says Bitcoin 

Should Be Worth $400,000’’ (December 16, 2020), 

available at: https://www.bloomberg.com/news/ 

articles/2020-12-16/guggenheim-s-scott-minerdsays-bitcoin-should-be-worth-400-000. 

39See, e.g., ‘‘Visa Moves to Allow Payment 

Settlements Using Cryptocurrency’’ (March 29, 

2021), available at: https://www.reuters.com/ 

business/autos-transportation/exclusive-visamoves-allow-payment-settlements-usingcryptocurrency-2021-03-29/. 

40See, e.g., ‘‘Harvard and Yale Endowments 

Among Those Reportedly Buying Crypto’’ (January 

25, 2021), available at: https://

www.bloomberg.com/news/articles/2021-01-26/ 

harvard-and-yale-endowments-among-thosereportedly-buying-crypto. 

41See, e.g., ‘‘Virginia Police Department Reveals 

Why its Pension Fund is Betting on Bitcoin’’ 

(February 14, 2019), available at: https://

finance.yahoo.com/news/virginia-policedepartment-reveals-why-194558505.html. 

42See, e.g., ‘‘Bridgewater: Our Thoughts on 

Bitcoin’’ (January 28, 2021) available at: https://

www.bridgewater.com/research-and-insights/ourthoughts-on-bitcoin and ‘‘Paul Tudor Jones says he 

likes bitcoin even more now, rally still in the ‘first 

inning’ ’’ (October 22, 2020), available at: https://

www.cnbc.com/2020/10/22/-paul-tudor-jones-sayshe-likes-bitcoin-even-more-now-rally-still-in-thefirst-inning.html. 

43See Letter from Division of Corporation 

Finance, Office of Real Estate & Construction to 

Barry E. Silbert, Chief Executive Officer, Grayscale 

Bitcoin Trust (January 31, 2020), available at: 

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

000000000020000953/filename1.pdf. 

44See Form 10–K submitted by Tesla, Inc. for the 

fiscal year ended December 31, 2020 at 23: https:// 

www.sec.gov/ix?doc=/Archives/edgar/data/ 

1318605/000156459021004599/tsla-10k_

20201231.htm. 

45See Form 10–Q submitted by MicroStrategy 

Incorporated for the quarterly period ended 

September 30, 2020 at 8: https://www.sec.gov/ 

ix?doc=/Archives/edgar/data/1050446/

000156459020047995/mstr-10q_20200930.htm. 

46See Form 10–Q submitted by Square, Inc. for 

the quarterly period ended September 30, 2020 at 

51: https://www.sec.gov/ix?doc=/Archives/edgar/ 

data/1512673/000151267320000012/sq20200930.htm. 

services for digital asset securities have 

registered with the Commission.27

Beyond the Commission’s purview, 

the regulatory landscape has also 

changed significantly since 2016, and 

cryptocurrency markets have grown and 

evolved as well. The market for Bitcoin 

grew approximately 100 times larger 

through 2021, reaching a market cap of 

$1.3 trillion at its all-time high. 

Although Bitcoin’s market cap is down 

to $500 billion (as of September 7, 

2023), its market cap is greater than 

companies 28 such as Visa, Inc., Exxon 

Mobil Corporation, Walmart, Inc., and 

JP Morgan Chase & Co. The number of 

verified users at Coinbase, the largest 

U.S.-based Bitcoin exchange, has grown 

to over 110 million at the end of 2022, 

compared to 43 million at the end of 

2020.29 CFTC-regulated Bitcoin futures 

(‘‘Bitcoin Futures’’) represented 

approximately $42 billion in notional 

trading on the CME in August 2023, 

compared to $3.9 billion, $28 billion, 

$60 billion, and $20 billion in total 

trading in December 2019, December 

2020, December 2021, and December 

2022 respectively. Bitcoin Futures 

represented $2.2 billion in open interest 

in August 2023, compared to $115 

million, $1.29 billion, $3.27 billion, and 

$1.31 billion in December 2019, 

December 2020, December 2021, and 

December 2022 respectively.30 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.31 The U.S. 

Office of the Comptroller of the 

Currency (the ‘‘OCC’’) has made clear 

that federally-chartered banks are able 

to provide custody services for 

cryptocurrencies and other digital 

assets.32 NYDFS has granted no fewer 

than thirty BitLicenses, including to 

established public payment companies 

like PayPal Holdings, Inc. and Square, 

Inc., and limited purpose trust charters 

to entities providing cryptocurrency 

custody services. The U.S. Treasury 

Financial Crimes Enforcement Network 

(‘‘FinCEN’’) has released extensive 

guidance regarding the applicability of 

the Bank Secrecy Act (‘‘BSA’’) and 

implementing regulations to virtual 

currency businesses,33 and has 

proposed rules imposing requirements 

on entities subject to the BSA that are 

specific to the technological context of 

virtual currencies.34 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 provision of wallet 

management services for digital assets.35

In addition to the regulatory 

developments noted above, more 

traditional financial market participants 

appear to be embracing cryptocurrency: 

large insurance companies,36

investment banks,37 asset 

managers,38credit card 

companies,39university endowments,40

pension funds,41 and even historically 

Bitcoin skeptical fund managers 42 are 

allocating to Bitcoin. The largest overthe-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.43 Established companies like 

Tesla, Inc.,44 MicroStrategy 

Incorporated,45 and Square, Inc.,46

among others, have recently announced 

substantial investments in Bitcoin in 

amounts as large as $1.5 billion (Tesla) 

and $425 million (MicroStrategy). 

The Sponsor maintains that despite 

these developments, access for U.S. 

retail investors to gain exposure to 

Bitcoin via a transparent and regulated 


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47Securities regulators in a number of other 

countries have either approved or otherwise 

allowed the listing and trading of Bitcoin ETPs. 

Specifically, these funds (with their respective 

approximate AUMs as of April 14, 2021) include 

the Purpose Bitcoin ETF ($993,000,000), VanEck 

Vectors Bitcoin ETN ($209,000,000), WisdomTree 

Bitcoin ETP ($407,000,000), Bitcoin Tracker One 

($1,380,000,000), BTCetc Bitcoin ETP 

($1,410,000,000), 21Shares Bitcoin ETP 

($362,000,000), 21Shares Bitcoin Suisse ETP 

($30,000,000), CoinShares Physical Bitcoin ETP 

($396,000,000). 

48See, e.g., Stone Ridge Trust VI (File No. 333– 

234055); BlackRock Global Allocation Fund, Inc. 

(File No. 33–22462); and BlackRock Funds V (File 

No. 333–224371). 

49See, e.g., Amplify Transformational Data 

Sharing ETF (File No. 333–207937); and ARK 

Innovation ETF (File No. 333–191019). 

50See Stone Ridge Trust, Post-Effective 

Amendment No. 74 to Registration Statement on 

Form N–1A (File No. 333–184477), available at: 

https://www.sec.gov/Archives/edgar/data/1559992/

000119312521072856/d129263d485apos.htm. 

51See Dalia Blass, ‘‘Keynote Address—2019 ICI 

Securities Law Developments Conference’’ 

(December 3, 2019), available at: https://

www.sec.gov/news/speech/blass-keynote-address2019-ici-securities-law-developments-conference. 

52Because OTC Bitcoin Funds are not listed on 

an exchange, they are also not subject to the same 

transparency and regulatory oversight by a listing 

exchange as the Shares would be. In the case of the 

Fund, the common membership of the Exchange 

and the CME in the Intermarket Surveillance Group 

(‘‘ISG’’) results in increased investor protections as 

compared to OTC Bitcoin Funds. 

53The inability to trade in line with NAV may at 

some point result in OTC Bitcoin Funds trading at 

a discount to their NAV, which has occurred more 

recently with respect to one prominent OTC Bitcoin 

Fund. While that has not historically been the case, 

and it is not clear whether such discounts will 

continue, such a prolonged, significant discount 

scenario would give rise to nearly identical 

potential issues related to trading at a premium. 

exchange-traded vehicle remains 

limited. As investors and advisors 

increasingly utilize Exchange-Traded 

Products (‘‘ETPs’’) to manage diversified 

portfolios (including equities, fixed 

income securities, commodities, and 

currencies) quickly, easily, relatively 

inexpensively, tax-efficiently, and 

without having to hold directly any of 

the underlying assets; options for 

Bitcoin exposure for U.S. investors 

remain limited to: (i) investing in overthe-counter Bitcoin funds (‘‘OTC Bitcoin 

Funds’’) that are subject to high 

premium/discount volatility (and high 

management fees) to the advantage of 

more sophisticated investors that are 

able to purchase shares at NAV directly 

with the issuing trust; (ii) investing in 

Bitcoin Futures ETFs that are subject to 

higher complexity and costs due to need 

for rolling the futures contracts; (iii) 

facing the technical risk, complexity, 

and generally high fees associated with 

buying and storing Bitcoin directly; or 

(iv) purchasing shares of operating 

companies that they believe will 

provide proxy exposure to Bitcoin with 

limited disclosure about the associated 

risks. Meanwhile, investors in many 

other countries, including Canada, are 

able to use more traditional exchange 

listed and traded products to gain 

exposure to Bitcoin.47

For example, the Purpose Bitcoin 

ETF, a retail physical Bitcoin ETP 

launched in Canada, reportedly reached 

$421.8 million in assets under 

management (‘‘AUM’’) in two days, and 

has achieved $993 million in assets as 

of April 14, 2021, demonstrating the 

demand for a North American market 

listed Bitcoin ETP. The Sponsor 

believes that the demand for the 

Purpose Bitcoin ETF is driven primarily 

by investors’ desire to have a regulated 

and accessible means of exposure to. 

The Purpose Bitcoin ETF also offers a 

class of units that is U.S. dollar Bitcoin 

denominated, which could appeal to 

U.S. investors. Without an approved 

Bitcoin ETP in the U.S. as a viable 

alternative, the Sponsor believes U.S. 

investors will seek to purchase these 

shares in order to get access to Bitcoin 

exposure, leaving them without the 

protections of U.S. securities laws. 

Given the separate regulatory regime 

and the potential difficulties associated 

with any international litigation, such 

an arrangement would create more risk 

exposure for U.S. investors than they 

would otherwise have with a U.S. 

exchange listed ETP. With the addition 

of more Bitcoin ETPs in non-U.S. 

jurisdictions expected to grow, the 

Sponsor anticipates that such risks will 

only continue to grow. 

In addition, several funds registered 

under the Investment Company Act of 

1940 (the ‘‘1940 Act’’) have effective 

registration statements that contemplate 

Bitcoin exposure through a variety of 

means, including through investments 

in Bitcoin futures contracts 48 and 

through OTC Bitcoin Funds.49 As of the 

date of this filing, it is anticipated that 

other 1940 Act funds will soon begin to 

pursue Bitcoin through other means, 

including through options on Bitcoin 

futures contracts and investments in 

privately offered pooled investment 

vehicles that invest in Bitcoin.50 In 

previous statements, the Staff of the 

Commission has acknowledged how 

such funds can satisfy their concerns 

regarding custody, valuation, and 

manipulation.51 The funds that have 

already invested in Bitcoin instruments 

have no reported issues regarding 

custody, valuation, or manipulation of 

the instruments held by these funds. 

While these funds do offer investors 

some means of exposure to Bitcoin, the 

Sponsor believes the current offerings 

fall short of giving investors an 

accessible, regulated product that 

provides concentrated exposure to 

Bitcoin and Bitcoin prices. 

OTC Bitcoin Funds and Investor 

Protection 

The Sponsor notes that U.S. investor 

exposure to Bitcoin through OTC 

Bitcoin Funds has grown into the tens 

of billions of dollars. With that growth, 

so too has grown the potential risk to 

U.S. investors. As described below, 

premium and discount volatility, high 

fees, insufficient disclosures, and 

technical hurdles are exposing U.S. 

investors to risks that could potentially 

be eliminated through access to a 

Bitcoin futures-based ETP. Investor 

protection concerns remain and are 

growing related to OTC Bitcoin Funds. 

The Sponsor understands the 

Commission’s previous focus in prior 

disapproval orders on potential 

manipulation of a Bitcoin ETP holding 

actual Bitcoin, but believes that such 

concerns have been sufficiently 

mitigated by the use of futures contracts, 

futures-based pricing for Spot Bitcoin, 

and EFP transactions for Spot Bitcoin in 

the proposed ETP. Accordingly, the 

Sponsor believes that the Fund 

represents an opportunity for U.S. 

investors to gain price exposure to 

Bitcoin futures contracts and Spot 

Bitcoin in a regulated and transparent 

exchange-traded vehicle that limits risks 

by: (i) reducing premium and discount 

volatility; (ii) reducing management fees 

through meaningful competition; (iii) 

reducing risks associated with investing 

in operating companies that are 

imperfect proxies for Bitcoin exposure; 

and (iv) avoiding regulatory concerns 

regarding valuation posed by ETFs and 

ETPs that invest directly in Bitcoin 

rather than in Bitcoin futures contracts 

or Bitcoin via EFP. 

OTC Bitcoin Funds and Premium/ 

Discount Volatility 

According to the Sponsor, OTC 

Bitcoin Funds are generally designed to 

provide exposure to Bitcoin in a manner 

similar to the Shares. However, unlike 

the Shares, OTC Bitcoin Funds are 

unable to freely offer creation and 

redemption in a way that incentivizes 

market participants to keep their shares 

trading in line with their NAV 52 and, as 

a result, shares of OTC Bitcoin Funds 

frequently trade at a price that is out of 

line with the value of their assets held. 

Historically, OTC Bitcoin Funds have 

traded at a significant premium to 

NAV.53

Trading at a premium or a discount is 

not unique to OTC Bitcoin Funds and is 

not in itself problematic, but the size of 

such premiums/discounts and volatility 


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54As compared to an AUM of approximately $2.6 

billion on February 26, 2020. While the price of one 

Bitcoin has increased approximately 193% in the 

intervening period, the market price of a share of 

the fund has increased by approximately 80%, 

indicating that the price of a share of the fund is 

attributable to more than just price appreciation in 

Bitcoin. 

55See ‘‘Traders Piling Into Overvalued Crypto 

Funds Risk a Painful Exit’’ (February 4, 2021), 

available at: https://www.bloomberg.com/news/ 

articles/2021-02-04/bitcoin-one-big-risk-wheninvesting-in-crypto-funds. 

56For example, similar premiums/discounts and 

premium/discount volatility exist for other nonBitcoin cryptocurrency related over-the-counter 

funds, but the size and investor interest in those 

funds does not give rise to the same investor 

protection concerns that exist for OTC Bitcoin 

Funds. 

57At $16 billion in AUM, the largest OTC Bitcoin 

Fund would be among the top 90 largest out of 

roughly 2,400 U.S. listed ETPs. Source: https://

etfdb.com/compare/market-cap/. 

58Over the 12 months, there were 4 occurrences 

where the discount changed overnight by 500 

percentage points or more in a single day, either 

narrowing or widening the discount. In two 

incidents, the premium dropped from 28.28% to 

12.29% from the close on 3/19/20 to the close on 

3/20/20 and from 38.40% to 21.05% from the close 

on 5/13/19 to the close on 5/14/19. Similarly, over 

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

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%. 

59According to the CME, the CME CF BRR 

aggregates the trade flow of major Bitcoin spot 

exchanges during a specific calculation window 

into a once-a-day reference rate of the U.S. dollar 

price of Bitcoin. Calculation rules are geared toward 

maximum transparency and real-time replicability 

in underlying spot markets, including Bitstamp, 

Coinbase, Gemini, itBit, and Kraken. For additional 

information, refer to https://www.cmegroup.com/ 

trading/cryptocurrency-indices/cf-bitcoin-referencerate.html?redirect=/trading/cf-bitcoin-referencerate.html. 

thereof highlight the key differences in 

operations and market structure of OTC 

Bitcoin Funds as compared to ETPs. 

Combined with the significant 

increase in AUM for OTC Bitcoin Funds 

over the past year, the size and volatility 

of premiums and discounts for OTC 

Bitcoin Funds have given rise to 

significant and quantifiable investor 

protection issues, as further described 

below. In fact, the largest OTC Bitcoin 

Fund has grown to $16.0 billion in 

AUM as of September 6, 2023.54 In the 

past it has traded at a premium of 

between roughly five and forty percent, 

though it has seen premiums at times 

above one hundred percent.55 Recently, 

however, it has traded at a discount, 

reaching almost 50% discount a few 

times and trading at an average 40% 

discount to NAV from October 2022 to 

June 2023. As of September 6, 2023, the 

discount to NAV has narrowed and was 

approximately 19.5%, representing 

around $3.1 billion less in market value 

than the Bitcoin actually held by the 

fund. If premium/discount numbers 

move back to the middle of its historical 

range to a 20% premium (which 

historically could occur), it would 

represent a swing of approximately $6.4 

billion in value unrelated to the value 

of Bitcoin held by the fund and if the 

premium returns to the upper end of its 

typical range, that number increases to 

$18.9 billion. The Sponsor notes that, as 

these numbers are only associated with 

a single OTC Bitcoin Fund, the potential 

dollars at risk for the whole industry is 

even higher. 

The Sponsor believes that the risks 

associated with volatile premiums/ 

discounts for OTC Bitcoin Funds raise 

significant investor protection issues in 

several ways. First, investors may be 

buying shares of a fund for a price that 

is not reflective of the per share value 

of the fund’s underlying assets. Even 

operating within the normal premium 

range, it is 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 without 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/ 

discount. As more investment vehicles, 

including mutual funds and ETFs, seek 

to gain exposure to Bitcoin, the easiest 

option for a buy and hold strategy 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. 

The second issue is related to the first 

and explains how the premium in OTC 

Bitcoin Funds essentially creates a 

transfer of value from retail investors to 

more sophisticated investors. Generally 

speaking, only accredited investors are 

able to purchase shares from the issuing 

fund, which means that they are able to 

purchase shares directly with the fund 

at NAV (in exchange for either cash or 

Bitcoin) without having to pay the 

premium or sell into the discount. 

While there are often minimum holding 

periods for shares required by law, an 

investor that is allowed to purchase 

directly from the fund is able to hedge 

their Bitcoin exposure as needed to 

satisfy the holding requirements and 

collect on the premium or discount 

opportunity. 

As noted above, the existence of a 

premium or discount and the premium/ 

discount collection opportunity is not 

unique to OTC Bitcoin Funds and does 

not in itself warrant the approval of an 

exchange traded product.56 What is 

unique is that such significant and 

persistent premiums and discounts can 

exist in a product with over $16 billion 

in assets under management,57 that 

billions of retail investor dollars are 

constantly under threat of premium/ 

discount volatility,58 and that premium/ 

discount volatility is generally captured 

by more sophisticated investors on a 

riskless basis. While the Sponsor 

appreciates the Commission’s focus on 

potential manipulation of a Bitcoin ETP 

in prior disapproval orders and believes 

those concerns are adequately addressed 

in this filing, the Sponsor believes that 

the Commission should also consider 

the direct, quantifiable investor 

protection issue in determining whether 

to approve this proposal, particularly 

when the Trust, as a Bitcoin ETP, is 

designed to reduce the likelihood of 

significant and prolonged premiums 

and discounts with its open-ended 

nature as well as the ability of market 

participants (i.e., market makers and 

authorized participants) to create and 

redeem on a daily basis. 

The Bitcoin Futures Market Has 

Developed Alongside the Bitcoin Spot 

Market Into a Strong and Viable 

Marketplace That Stands on Its Own 

As noted above, CME began offering 

trading in BTC Contracts in 2017, and 

in MBT Contracts in 2021. Each of the 

contract’s final cash settlement is based 

on the CME CF Bitcoin Reference Rate 

(the ‘‘CME CF BRR’’).59 The contracts 

trade and settle like other cash-settled 

commodity futures contracts. According 

to the Sponsor, trading in CME Bitcoin 

futures contracts has increased 

significantly, in particular with respect 

to BTC Contracts. Nearly every 

measurable metric related to BTC 

Contracts has trended consistently up 

since launch and/or accelerated upward 

in the past year, as the market recovered 

some of the ground lost since falling 

from the all-time high activity levels of 

end 2021. This general upward trend in 

trading volume and open interest is 

captured in the following chart. 

BILLING CODE 8011–01–P 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68195 

60A large open interest holder in BTC Contracts 

is an entity that holds at least 25 contracts, which 

is the equivalent of 125 Bitcoin. At a price of 

approximately $26,025 per Bitcoin on 9/7/23, more 

than 110 firms had outstanding positions of greater 

than $3.25 million in BTC Contracts. Source: 

https://www.theblock.co/data/crypto-markets/cmecots/large-open-interest-holders-of-cme-bitcoinfutures. 

BILLING CODE 8011–01–C 

Similarly, the number of large open 

interest holders 60 has continued to 

increase even as the price of Bitcoin has 

risen, as have the number of unique 

accounts trading Bitcoin Futures. 

As it pertains specifically to the 

Bitcoin Futures Contracts in which the 

Fund will invest, the statistics are 

equally as profound. The following table 

sets forth the approximate daily 

notional average volume for the Bitcoin 

Futures Contracts, followed by the daily 

average volume for all of the Bitcoin 

Futures Contracts, the first to expire and 

the second to expire. With a Daily 

Notional Average Volume of $1.4 billion 

in 2023, that is almost 6 times the 2019 

level and almost 3 times the 2020 ones. 

Despite the bear market, the trading 

volume in 2023 has been resilient and 

slightly increasing compared to 2022. 

Daily notional 

average volume 

for bitcoin 

futures contracts 

(in million $) 

Average daily 

volume for 

bitcoin futures 

contracts 

First-to-expire 

bitcoin futures 

contract 

Second-toexpire 

bitcoin futures 

contract 

2019 ..................................................................................................... 242 6,365 5,400 700 

2020 ..................................................................................................... 523 8,782 7,100 1,300 

2021 ..................................................................................................... 2,379 10,035 7,300 2,100 

2022 ..................................................................................................... 1,426 10,735 8,200 2,100 

2023 ..................................................................................................... 1,413 10,775 8,400 1,900 

Note: The 2023 data is for the period 

ending on August 31, 2023. Source: 

CME; Bloomberg. 

The Sponsor notes that individual 

users, institutional investors and 

investment funds that want to provide 

exposure to Bitcoin by investing directly 

in Bitcoin, and therefore must transact 

in Bitcoin, must use the Bitcoin 

Network to download specialized 

software referred to as a ‘‘Bitcoin 

wallet.’’ This wallet may be used to 

send and receive Bitcoin through users’ 

unique ‘‘Bitcoin addresses.’’ The 

amount of Bitcoin associated with each 

Bitcoin address, as well as each Bitcoin 

transaction to or from such address, is 

captured on the Blockchain. Bitcoin 

transactions are secured by 

cryptography known as public-private 

key cryptography, represented by the 

Bitcoin addresses and digital signature 

in a transaction’s data file. Each Bitcoin 

Network address, or wallet, is associated 

with a unique ‘‘public key’’ and ‘‘private 

key’’ pair, both of which are lengthy 

alphanumeric codes, derived together 


ddrumheller on DSK120RN23PROD with NOTICES1EN03OC23.014</GPH>

lltcolnl'uturff Voll.lme andOplnlnteml 

Note: The 2023 daily average notional value is for the period through September 1, 2023. 

Source: CME, https://www.cmegroup.com/reports/bitcoin-futures-liquidityreport.pdf 
68196 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

61See Order Setting Aside Action by Delegated 

Authority and Disapproving a Proposed Rule 

Change, as Modified by Amendments No. 1 and 2, 

To List and Trade Shares of the Winklevoss Bitcoin 

Trust, Securities Exchange Act Release No. 83723 

(July 26, 2018), 83 FR 37579 at 37592–94 (Aug. 1, 

2018) (SR–BatsBZX–2016–30) (the ‘‘Winklevoss 

Order’’); ’’); Order Disapproving a Proposed Rule 

Change, as Modified by Amendment No. 1, Relating 

to the Listing and Trading of Shares of the Bitwise 

Bitcoin ETF Trust Under NYSE Arca Rule 8.201– 

E, Securities Exchange Act Release No. 87267 (Oct. 

9, 2019), 84 FR 55382 at 55383, 55410 (Oct. 16, 

2019) (SR–NYSEArca–2019–01) (the ‘‘Bitwise 

Order’’); Order Disapproving a Proposed Rule 

Change, as Modified by Amendment No. 1, to 

Amend NYSE Arca Rule 8.201–E (CommodityBased Trust Shares) and to List and Trade Shares 

of the United States Bitcoin and Treasury 

Investment Trust Under NYSE Arca Rule 8.201–E, 

Securities Exchange Act Release No. 88284 

(February 26, 2020), 85 FR 12595 at 12609 (March 

3, 2020) (SR–NYSEArca–2019–39) (the ‘‘Wilshire 

Phoenix Order’’). 

62See, e.g., Winklevoss Order, 83 FR at 37594. 

The Commission further noted that ‘‘[t]here could 

be other types of ‘‘significant markets’’ and 

‘‘markets of significant size,’’ but this definition is 

an example that will provide guidance to market 

participants.’’ Id. 

63See Approval Order, 87 FR at 21678 and further 

discussion at 21678–81. 

64See Securities Exchange Act Release No. 95180 

(June 29, 2022), 87 FR 40299 at 40312 (July 6, 2022) 

(SR–NYSEArca–2021–90) (Order Disapproving a 

Proposed Rule Change, as Modified by Amendment 

No. 1, to List and Trade Shares of Grayscale Bitcoin 

Trust Under NYSE Arca Rule 8.201–E (CommodityBased Trust Shares)). 

and possessing a unique relationship. 

The private key is a secret and must be 

kept in accordance with appropriate 

controls and procedures to ensure it is 

used only for legitimate and intended 

transactions. If an unauthorized third 

person learns of a user’s private key, 

that third person could forge the user’s 

digital signature and send the user’s 

Bitcoin to any arbitrary Bitcoin address, 

thereby stealing the user’s Bitcoin. 

Similarly, if a user loses his private key 

and cannot restore such access (e.g., 

through a backup), the user may 

permanently lose access to the Bitcoin 

contained in the associated address. 

According to the Registration 

Statement, institutional purchasers of 

Bitcoin, including other Bitcoin funds 

that provide exposure to Bitcoin by 

investing directly in Bitcoin, generally 

maintain their Bitcoin account with a 

Bitcoin custodian. Bitcoin custodians 

are financial institutions that have 

implemented a series of specialized 

security precautions, including holding 

Bitcoin in ‘‘cold storage,’’ to try to 

ensure the safety of an account holder’s 

Bitcoin. These Bitcoin custodians must 

carefully consider the design of the 

physical, operational, and cryptographic 

systems for secure storage of private 

keys in an effort to lower the risk of loss 

or theft, and many use a multi-factor 

security system under which actions by 

multiple individuals working together 

are required to access the private keys 

necessary to transfer such digital assets 

and ensure exclusive ownership. 

Considering that the Fund will be able 

to hold spot bitcoin acquired via EFP 

transactions made on the CME, the 

Sponsor will engage a third-party 

custodian to act as the bitcoin custodian 

for the Fund to maintain custody of the 

Fund’s bitcoin assets. 

The Structure and Operation of the 

Trust Satisfies Commission 

Requirements for Bitcoin-Based 

Exchange Traded Products 

The Sponsor believes that the Fund’s 

holding a combination of Bitcoin 

Futures Contracts, Spot Bitcoin, and 

cash could significantly mitigate the risk 

of market manipulation while still 

providing the market with a regulated 

product that tracks the actual price of 

Bitcoin, creating a secure way for U.S. 

investors to gain exposure to spot 

Bitcoin without having to rely on 

unregulated products, offshore regulated 

products, or indirect strategies such as 

investing in publicly traded companies 

that hold Bitcoin. 

In determining whether to approve 

listing and trading of new ExchangeTraded Products (‘‘ETPs’’), the 

Commission conducts a thorough 

analysis to ensure the proposal is 

consistent with Section 6(b)(5) of the 

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

that the rules of a national securities 

exchange be designed to prevent 

fraudulent and manipulative acts and 

practices, and to protect investors and 

the public interest. With respect to 

ETPs, the Commission often considers 

how the listing exchange would access 

necessary information to detect and 

deter market manipulation, illegal 

trading, and other abuses, which listing 

exchanges may accomplish by entering 

into a comprehensive surveillancesharing agreement with other entities, 

such as the markets trading the ETP’s 

underlying assets. Historically, for 

commodity-trust ETPs, there has always 

been at least one regulated market of 

significant size for trading futures on the 

underlying commodity—whether gold, 

silver, platinum, palladium, or copper. 

Then, the listing exchange would enter 

into surveillance-sharing agreements 

with, or hold ISG membership in 

common with, that regulated market.61

In the context of Bitcoin, the CME 

Bitcoin Futures Market (the ‘‘CME 

Market’’) is currently the only regulated 

market in the U.S. 

The Commission has previously 

interpreted the terms ‘‘significant 

market’’ and ‘‘market of significant size’’ 

to include a market (or group of 

markets) where: 

(1) There is a reasonable likelihood that a 

person attempting to manipulate the ETP 

would also have to trade on that market to 

successfully manipulate the ETP, such that a 

surveillance-sharing agreement would assist 

the ETP listing market in detecting and 

deterring misconduct; and 

(2) It is unlikely that trading in the ETP 

would be the predominant influence on 

prices in that market.62

With respect to the first prong of the 

Commission’s interpretation, the 

Commission has previously explained 

that the lead/lag relationship between 

the Bitcoin futures market and the spot 

market is central to understanding this 

first prong. With respect to the second 

prong, the Commission’s prior analysis 

has focused on the potential size and 

liquidity of the ETP compared to the 

size and liquidity of the market. 

The Commission recognized in the 

Approval Order that ‘‘the CME [Market] 

is a ‘significant market’ related to CME 

bitcoin futures contracts, and thus that 

the Exchange has entered into the 

requisite surveillance-sharing agreement 

with respect to its Bitcoin Futures 

Contracts holdings.63 However, there is 

still a lack of consensus on whether the 

CME Market is of ‘‘significant size’’ in 

relation to the spot Bitcoin market based 

on the test historically applied by the 

Commission. 

Interrelationship Between the CME and 

the Fund 

The Commission has previously 

stated that ‘‘the interpretation of the 

term market of significant size depends 

on the interrelationship between the 

market with which the listing exchange 

has a surveillance-sharing agreement 

and the proposed ETP.’’ 64 The Sponsor 

intends to adopt an innovative approach 

to mitigate the risks of fraud and 

manipulation that are unique to the 

Fund. The core principle of this 

approach would be to structure the 

operation of the Fund such that the 

regulated market of significant size in 

relation to the Fund is the CME Market 

because it is the same market on which 

the Fund trades its non-cash assets. 

Therefore, the Sponsor’s strategy aims to 

establish a comprehensive 

interrelationship between the CME 

Market and the Fund to unequivocally 

classify the CME Market as the market 

of significant size in relation to the ETP. 

The Sponsor notes that, although the 

Fund may, as proposed, hold physical 

Bitcoin, it does not rely on any 

information or services from 

unregulated Bitcoin spot exchanges 

(such as Binance and others). Therefore, 

no spot Bitcoin exchange could be 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68197 

65See https://www.cmegroup.com/trading/equityindex/exchange-for-physical-efp-transactions.html. 

66 In a cash creation/redemption format, the 

Authorized Participant delivers cash to the fund 

instead of Spot Bitcoin. 

67See Approval Order, 87 FR at 21679. 

68 Id. 

considered a ‘‘market of relevant size’’ 

in relation to the Fund. 

The Sponsor has designed the Fund to 

have five novel features that underscore 

its significant interrelationship with the 

CME: 

1. Investment strategy: The Fund will hold 

a mix of Spot Bitcoin, Bitcoin Futures 

Contracts, and cash and cash equivalents, 

subject to certain investment restrictions (as 

further discussed below). 

2. Futures-based pricing for Spot Bitcoin: 

The price determination for Spot Bitcoin 

holdings in the NAV calculation will be 

derived from the CME Market’s Bitcoin 

futures curve. As a result, the price of Spot 

Bitcoin holdings will depend solely on 

Bitcoin futures settlement prices on the CME 

Market and will not depend directly on price 

information from unregulated spot Bitcoin 

markets (as further discussed below). 

3. Investment restrictions on Spot Bitcoin: 

The Fund will be subject to dynamic 

investment restrictions that are designed to 

mitigate the risk that Shares of the Fund 

could be manipulated by manipulating the 

Bitcoin spot market and ensuring that the 

CME Market is the only ‘‘market of 

significant size’’ with respect to the Fund. 

4. Physical Bitcoin purchases on the CME 

Market: The Fund will use the CME Market’s 

Exchange for Physical (‘‘EFP’’) 65 transactions 

to acquire and dispose of Spot Bitcoin, 

instead of transactions on unregulated spot 

exchanges. Accordingly, the only non-cash 

assets held by the Fund (Bitcoin Futures 

Contracts and Bitcoin via EFP) would be 

traded on the CME Market, such that the 

exchanges’ ability to share information 

pursuant to their common ISG membership 

could assist in detecting and deterring 

fraudulent or manipulative misconduct 

related to those assets. 

5. Creations and redemptions: The Fund 

will use cash creations and redemptions 66 to 

deter intraday Share price manipulation that 

could originate from in kind creation or 

redemption from physical spot Bitcoin 

sourced in unregulated spot markets. 

Investment in Spot Bitcoin thus would not be 

directly related to creation/redemptions, but 

instead on target portfolio exposure, as 

allowed by the investment restrictions on 

spot Bitcoin. Trading for Spot Bitcoin could 

thus be accomplished in smaller sizes and at 

unpredictable times, reducing the risk of 

manipulation in the creation or redemption 

processes. 

The Sponsor believes that these 

features of the Fund are designed to 

provide a robust framework for 

mitigating the risks of market 

manipulation, thereby protecting 

investors and maintaining the integrity 

of the market, and further believes that, 

given these features of the Fund, the 

CME Market would be considered the 

regulated market of significant size in 

relation to the Fund. 

Additionally, as further discussed 

below, the Sponsor believes that the 

Fund investment strategy is designed 

such that it would be highly unlikely 

that a person attempting to manipulate 

the Fund could be successful by trading 

on unregulated spot and derivatives 

markets. Thus, no market other than 

CME could be considered as of 

significant size in relation to the Fund. 

The Sponsor further believes that the 

novel approach proposed is in line with 

the first prong of the Commission’s 

interpretation of the definition of 

‘‘regulated market of significant size’’ as 

to the CME Market and that there is a 

reasonable likelihood that a person 

attempting to manipulate the Fund 

would also have to trade on the CME 

Market to successfully manipulate the 

ETP (and, accordingly, the exchange’s 

common ISG membership would aid the 

Exchange in detecting and deterring 

potential misconduct). 

According to the Sponsor, the 

Sponsor’s approach is designed in such 

a way that any attempt to manipulate 

the Fund would require trading on the 

CME Market, for the following reasons: 

1. Futures-based pricing for Spot Bitcoin: 

Because the price determination for Spot 

Bitcoin holdings in the Fund would be 

derived from the CME Market futures curve, 

any attempt to manipulate the price of the 

Fund would require influencing the futures 

curve on the CME Market because the spot 

price (which could be a target for 

manipulation) does not directly influence the 

price of the Fund. There is thus a direct and 

unequivocal lead-lag relationship in which 

CME Market prices lead both the spot price 

used by the Fund to determine its NAV and 

the Fund’s market price. 

2. Investment restrictions on Spot Bitcoin: 

The dynamic investment restrictions in place 

for the Fund (as discussed in the section 

below entitled ‘‘Investment Restrictions on 

Spot Bitcoin’’) ensure that any significant 

trading activity aimed at manipulating the 

Fund would likely spill over into the CME 

Market because the investment restrictions 

are designed to prevent the Fund from 

becoming so large in relation to the 

unregulated spot market that the cost-benefit 

tradeoff is favorable for the potential 

manipulator to execute without influencing 

the futures market. 

3. Spot Bitcoin operations via EFP on the 

CME Market: Because the Fund’s Spot 

Bitcoin operations would take place via CME 

Market EFP transactions, any attempt to 

manipulate the Fund’s transactions in Spot 

Bitcoin holdings would need to occur on the 

CME Market. Accordingly, any potential 

manipulation of the Fund is closely tied to 

the CME Market. 

4. Creations and redemptions: The Fund’s 

use of cash creations and redemptions also 

reduces the potential for manipulation 

through the creation and redemption 

processes. Any significant creation or 

redemption activity aimed at manipulating 

the Fund would likely influence the futures 

market, given that the investment in spot is 

based on target portfolio exposure and not 

directly related to creations or redemptions. 

Given these factors, the Sponsor 

believes that the Exchange and CME 

Market’s common membership in the 

ISG would be an effective tool in 

assisting the Exchange in detecting and 

deterring potential misconduct. The 

agreement would provide the Exchange 

with access to necessary trading data 

from the CME Market, which is 

intrinsically linked to the Fund, 

allowing for comprehensive oversight 

and the ability to quickly identify and 

investigate any suspicious trading 

activity. 

The Approval Order stated that 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’’ and 

that 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 [Fund] 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.’’ 67 The Commission further 

noted in the Approval Order that, as a 

result, ‘‘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 [Fund].’’ 68

The Sponsor further believes that, 

consistent with the Approval Order, 

CME surveillance can be relied upon to 

capture any possible manipulation of 

the CME Bitcoin futures markets, even 

when the attempt is made indirectly by 

trading outside the CME in unregulated 

markets. 

The Sponsor also believes that it is 

unlikely that trading in the Fund would 

be the predominant influence on prices 

on the CME Market. The addition of 

Spot Bitcoin to the Fund’s holdings, 

using EFP transactions on the CME 

Market, does not significantly alter the 

influence of the Fund’s trading on the 

CME Market, for the following reasons: 

1. The Fund’s limited influence over the 

market: As the Commission noted in the 


ddrumheller on DSK120RN23PROD with NOTICES1
68198 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

69See id. at 21681. 

70See Securities Exchange Act Release No. 92573 

(August 5, 2021), 86 FR 44062 at 44073 (August 11, 

2021) (SR–NYSEArca–2021–53) (Notice of Filing of 

a Proposed Rule Change To List and Trade Shares 

of Teucrium Bitcoin Futures Fund Under NYSE 

Arca Rule 8.200–E). 

71 Data in this table is sourced from: https://

www.theblock.co/data/crypto-markets/futures. 

Trading volume data for Bitcoin futures in 

unregulated markets was only available on a 

monthly frequency. Therefore, the trading volume 

figures displayed in the table are approximations 

derived from the daily average trading volumes 

reported for their respective months. 

Approval Order,69 the Commission observed 

no disruption to the CME or evidence that 

the Fund exerted a dominant influence on 

CME Bitcoin futures prices. That being the 

case, the Sponsor believes that it is very 

unlikely that the Fund’s trading, even with 

the addition of Spot Bitcoin to its holdings, 

would become the predominant influence on 

the futures market. 

2. Spot Bitcoin would be purchased using 

market-neutral EFP transactions: The Spot 

Bitcoin in the Fund’s portfolio would be 

converted from futures positions using EFP 

transactions on the CME Market. The Fund’s 

Spot Bitcoin holdings would thus be directly 

linked to the futures market and would not 

introduce a new, independent variable that 

could significantly influence the futures 

market. Indeed, because both sides of the 

trade track the same benchmark, an EFP is 

market-neutral and, as such, the pricing of an 

EFP is quoted in terms of the basis between 

the price of the futures contract and the level 

of the underlying index. 

3. Investment restrictions on Spot Bitcoin 

and futures-based pricing: The dynamic 

investment restrictions and futures-based 

pricing for Spot Bitcoin would ensure that 

the Fund’s Spot Bitcoin holdings remain at 

a level where they are unlikely to 

significantly impact the futures market and 

that the futures market continues to influence 

the price of the Fund’s Spot Bitcoin holdings 

(and not the other way around). 

The Sponsor therefore believes that 

the proposed addition of Spot Bitcoin to 

the Fund’s holdings would not 

significantly alter the influence of the 

Fund’s trading on the CME Market and 

that the proposed design of the Fund’s 

investment strategy ensures that its 

potential impact on the CME Market is 

the same or smaller than the previous 

investment strategy (as represented in 

the Approval Order). 

The Sponsor notes that, as of April 

2021 and as noted in the Fund’s original 

proposal to list and trade its Shares on 

the Exchange, the CME Market was 

already showing a significant increase 

in size, as per the table below:70

CHICAGO MERCANTILE EXCHANGE

BITCOIN FUTURES

February 26, 

2020 

(million) 

April 7, 2021 

(million) 

Trading Volume ... $433 $4,321 

Open Interest ...... 238 2,582 

The Sponsor notes that growth of the 

CME Market at that time coincided with 

similar growth in the Bitcoin spot 

market. Moreover, the market for 

Bitcoin futures was and still is rapidly 

approaching the size of markets for 

other commodity interests, including 

interests in metals, agricultural, and 

petroleum products. 

Accordingly, as the CME Market 

continues to develop and more closely 

resemble other commodity futures 

markets, the Sponsor believes that it is 

reasonable to expect that the 

relationship between the Bitcoin futures 

market and Bitcoin spot market will 

behave similarly to other future/spot 

market relationships, where the spot 

market may have no relationship to the 

futures market (although the current 

proposal does not depend on such 

similarity). 

In addition, in the time since the 

Approval Order was issued, there has 

been significant growth in Bitcoin 

futures in terms of trading volumes, as 

reflected in the table below: 

CHICAGO MERCANTILE EXCHANGE

BITCOIN FUTURES

April 6, 2022 

(million) 

June 30, 2023 

(million) 

Trading Volume ... $1,692 $3,473 

Open Interest ...... 2,529 2,800 

The Sponsor also notes that in the 

same period during which CME Market 

open interest remained at roughly at the 

same level, trading volume and open 

interest of unregulated Bitcoin futures 

markets had a significant drawdown: 71

UNREGULATED FUTURES MARKET

April 7, 2021 

(million) 

April 6, 2022 

(million) 

June 30, 2023 

(million) 

Trading Volume ........................................................................................................................... $68,333 $37,333 $29,693 

Open Interest ............................................................................................................................... 20,420 13,980 11,630 

Furthermore, the Sponsor notes that 

in the same period the trading volume 

of spot Bitcoin also fell significantly: 

SPOT BITCOIN

April 7, 2021 

(million) 

April 6, 2022 

(million) 

June 1, 2023 

(million) 

Trading Volume ........................................................................................................................... $698,000 $297,000 $116,000 

The Sponsor believes that the data 

above suggests an increase in market 

appetite for regulated products (e.g., 

CME Market Bitcoin futures) vis-a-vis a 

significant decrease in interest for 

unregulated products (e.g., unregulated 

futures and spot Bitcoin). 

The Sponsor further believes that an 

analysis of the data presented above 

indicates that the CME Market managed 

to maintain its open interest level 

despite the price volatility that Bitcoin 

experienced in 2022, demonstrating its 

resilience and that it is sufficiently 

developed such that it is unlikely that 

trading in the Fund would be the 

predominant influence on its prices. 

The Sponsor further notes that the 

Commission stated in the Approval 

Order ‘‘that the CME bitcoin futures 

market has sufficiently developed to 

support ETPs seeking exposure to 

bitcoin by holding CME Bitcoin Futures 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68199 

72See Approval Order at 21681. 

73The difference in the price metrics introduces 

an artificial distortion in the comparison. Indeed, a 

regression analysis shows that the ratio between the 

maximum and minimum spot prices within the 

Bitcoin Futures VWAP window is a significant 

variable that explains the absolute divergences 

between FBSP and the spot prices. The higher the 

ratio between the maximum and minimum spot 

prices, the higher expected absolute divergence 

between FBSP and the spot prices. The correlation 

of these two metrics in the case of the real time 

version of NQBTCS is approximately 30%, 

suggesting that the actual adherence between FBSP 

and the spot benchmarks is even higher than the 

figures discussed herein indicate. 

Contracts.’’ 72 The Sponsor believes that 

the CME Market is also sufficiently 

developed to support ETPs that seek 

exposure to Bitcoin by holding a mix of 

CME Market Bitcoin Futures Contracts 

and physical Bitcoin through the use of 

CME Market EFP transactions, because 

the CME Market is the only market on 

which the Fund’s only proposed noncash assets would trade. Thus, the CME 

Market remains the ‘‘significant market’’ 

in relation to the Fund, as proposed. 

Moreover, as detailed above, the 

Sponsor’s proposed investment strategy 

ensures that no unregulated spot 

exchange could be considered a ‘‘market 

of relevant size’’ in relation to the Fund, 

given that the Fund does not rely on any 

information or services coming from 

unregulated markets. All of the Fund’s 

operations, including the purchase and 

sale of spot Bitcoin and its NAV 

determination, are conducted through 

the CME Market. Thus, all transactions 

are registered and monitored on a 

regulated exchange, providing an 

additional layer of security and 

transparency. Because any attempt to 

manipulate the Fund would require 

significant trading on the CME Market, 

and not on any unregulated spot Bitcoin 

exchange, there is significantly reduced 

potential for manipulation and fraud, 

further protecting investors and 

maintaining the integrity of the market. 

Futures-Based Spot Price (‘‘FBSP’’) 

The value of Spot Bitcoin held by the 

Fund would be determined by the 

Sponsor and by Hashdex Asset 

Management Ltd. (the ‘‘Digital Asset 

Adviser’’) in good faith based on a 

methodology that is entirely derived 

from the settlement prices of Bitcoin 

Futures Contracts on the CME Market 

and that considers all available facts and 

all available information on the 

valuation date. 

The method involves a calculation 

that is sensitive to both the length of 

time (the ‘‘tenor’’) until each Bitcoin 

Futures Contract is due for settlement 

and the final settlement price for each 

contract. The calculation takes into 

account each contract’s tenor and the 

tenor squared. This approach is 

designed to give more importance to 

contracts that are due for settlement in 

the near term, considering that the 

prices of these near-term contracts are 

more reliable indicators of the current 

spot price of Bitcoin and are also more 

heavily traded. The calculation 

produces a set of weighting factors, with 

each factor indicating the contribution 

of the corresponding Bitcoin Futures 

Contract to the estimated current spot 

price of Bitcoin. The estimated spot 

price is the component of the result 

corresponding to a tenor of zero days. 

The Sponsor and Digital Asset Advisor 

do not use data from Bitcoin exchanges 

or directly from spot Bitcoin trading 

activity in determining the value of Spot 

Bitcoin held by the Fund. 

As an example, the table below 

demonstrates how the weights of each 

hypothetical Bitcoin Futures Contract 

change over time as the first contract 

gets closer to maturity. 

BILLING CODE 8011–01–P 

The Sponsor believes that the 

accuracy of the proposed pricing 

methodology can be measured by 

comparing its pricing results to the real 

time version of Bitcoin price 

benchmarks such as CME CF BRR and 

NQBTCS. FBSP is derived from futures 

settlement prices, which are usually 

VWAPs from all contracts traded on 

Globex between 14:59:00 and 15:00:00 

Central Time. Accordingly, for purposes 

of developing a useful proxy, the 

Sponsor’s analysis uses the arithmetic 

average of the Benchmark closing prices 

at 14:59:00 and 15:00:00 CT, which is 

not sensitive to the fluctuations that 

occur within this minute. By design, 

this difference in the price metric 

introduces an artificial distortion in the 

comparison, resulting in figures that are 

less adherent than in reality. Therefore, 

the figures set forth below represent a 

conservative estimation of the true 

adherence between FBSP and the 

Benchmark, considering that the actual 

adherence to the Benchmark is higher 

than these results can indicate.73


ddrumheller on DSK120RN23PROD with NOTICES1EN03OC23.015</GPH>

First Mun, tenor 

Future 27days 21days 15days &days 3days .. 

1st 130.81% 125.92% 120.39% 113.79% 105.33% 

2nd U)1% -0.84% ,.2.94% ..S.80% ~26% 

3rd .,a~ -7.57% -5.86% ..S.76% -1~31% 

4th -9.1~ -7.05" -4;M ~~78% -0,83% 

5th -7~81% -5.73% ..S.78% -2~02% ..();57% 

8th ..$;26% -4~47% -2;~ -1.47% -0.39" 

9th -.2.61% -1.76% •. 'f.05% ..();~ -0.12% 

12th ..0~29% -0.14% -0.04% 0.01% 0.01% 

18th 2.35% 1.65% 1.04% 0.53% 0.14% 

Total 100~00% 100.00% 100.00% 100.00% 100;00% 
68200 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

Using data available on Bloomberg on 

July 10, 2023, the Sponsor compared 

FBSP to NQBTCS and CME CF BRR 

from December 27, 2022 to July 7, 2023 

and determined that FBSP behaves very 

similarly to both indexes. The following 

charts show a direct comparison 

between those two benchmark values 

and FBSP: 

In the above charts, each black point 

indicates one day, and their proximity 

to the red line shows how similar FBSP 

is to each of NQBTCS and CME CF BRR. 

The correlations between FBSP and 

each of NQBTCS and CME CF BRR 

exceed 99.9%, and the mean absolute 

percentage divergences are 21 basis 

points (‘‘bps’’) and 22 bps, respectively, 

while the median absolute percentage 

divergences are 18 bps and 17 bps, 

respectively. 

The charts below provide another 

visualization of the results of this 

comparison, as time series of the 

percentage divergences: 


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Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68201 

74See, e.g., Wu, Jinghong; Xu, Ke. Fractional 

cointegration in bitcoin spot and futures markets. 

The Journal of Futures Markets. Vol. 41, Is. 9 

(September 2021), available at: https://onlinelibrary.

wiley.com/doi/epdf/10.1002/fut.22216#pane-pcwreferences; Chang, Alexander and Herrmann, 

William and Cai, William. Efficient Price Discovery 

in the Bitcoin Markets (October 14, 2020), available 

at SSRN: https://ssrn.com/abstract=3733924; Kapar, 

Burcu; Olmo, Jose. An analysis of price discovery 

between Bitcoin futures and spot markets. 

Economics Letters, Vol. 174 (January 2019), 

available at: https://www.sciencedirect.com/ 

science/article/abs/pii/S0165176518304440. 

BILLING CODE 8011–01–C 

These charts show that there are no 

clusters of abnormal divergences. In 

both cases, more than 90% of the days 

exhibit percentage divergences between 

¥50 bps and +50 bps. The highest 

percentage divergence in absolute terms, 

with 81 bps for the NQBTCS and 76 bps 

for the CME CF BRR, was observed on 

March 9, 2023, and coincided with 

significant volatility in the Bitcoin 

markets; on that day, NQBTCS dropped 

5.34% from $22,003.92 to $20,827.67 

and the FBSP, which settles one hour 

later, dropped by 9.3%, from $22,055.85 

to $20,012.10. The Sponsor notes that, 

even on the day with the highest 

percentage divergence between FBSP 

and the other two benchmarks, that 

percentage divergence was insignificant 

in comparison to the intraday volatility 

of Bitcoin itself and could be 

attributable to the different market 

structures of the regulated CME Market 

and the unregulated spot markets. 

The Sponsor believes that this data 

strongly suggests that FBSP is a suitable 

choice for the NAV calculation, both for 

the settlement and the real time proxy, 

and that the following additional 

considerations further support the 

soundness of the FBSP methodology: 

• Bitcoin is a highly volatile asset 

traded in multiple venues across the 

world, and divergences of the 

magnitude found in this analysis are not 

unusual across different price sources or 

exchanges. 

• Although it is not a consensus, 

academic research 74 has found 

evidence that CME Bitcoin futures lead 

spot in the price discovery process, so 

the divergences presented here are 

impacted by the possibility that spot 

prices are delayed. 

• As noted above, the mean absolute 

percentage divergences are 21 bps and 

22 bps respectively, the median absolute 

percentage divergences are 18 bps and 

17 bps, and March 9, 2023 was the day 

with the highest percentage divergence 

in absolute terms, with 81 bps for the 

NQBTCS and ¥76 bps for CME CF BRR. 

The Sponsor believes that these 

divergences between FBSP and the 

underlying benchmarks are in a 

reasonable range and support that FBSP 

closely tracks NQBTCS and CME CF 

BRR. 

Finally, the Sponsor notes that, even 

considering that FBSP could create 

some level of uncertainty due to the 

potential divergences between the FBSP 

and the spot prices observed in 

unregulated markets, the Authorized 

Purchasers are able to hedge potential 

exposure by buying the basket of futures 

that represents FBSP and selling it 

during the futures settlement window. 

In doing so, APs can emulate a situation 

where they know ex ante the value of 

the creation basket. The opposite trade 

can have the same effect for the case of 

redemptions. Thus, the APs providing 

liquidity on the secondary market 

during the day will always be in a 

position to hedge their exposure using 

exclusively the CME Market, which will 

make them more likely to provide 

liquidity to the Fund thus making its 

market price converge to its NAV. 

Preventing Manipulation 

While the Commission has raised 

valid concerns about the potential 

influence of unregulated Bitcoin 

markets on the daily settlement price on 

CME Market, the Sponsor believes that 

the proposed methodology described 

above provides a significant and 

sufficient degree of insulation from such 

influences, for the following reasons: 

1. Regulated market influence: The daily 

settlement price of Bitcoin Futures Contracts 

on the CME Market, which is the basis for the 

NAV calculation of both futures contracts 

and physical holdings of the Fund, is 

primarily influenced by trading activity 

within the regulated futures market itself. 

This market is subject to stringent oversight 

and surveillance mechanisms designed to 

detect and deter manipulative and fraudulent 

practices, thus significantly limiting the 

possible influence of unregulated Bitcoin 

markets on the daily settlement price. 

2. High liquidity and volume: The CME 

Market is characterized by high liquidity and 

trading volume, such that any attempt to 

influence the daily settlement price through 

trading activity in other, unregulated Bitcoin 

markets would require a significant amount 

of capital and coordination. The Sponsor 

thus believes that any such manipulation 

attempts would be highly detectable by the 

CME Market’s market surveillance. 

3. Complex pricing methodology: The NAV 

calculation methodology is comprehensive 

and accounts for both the tenor and final 

settlement price of each futures contract. In 

addition, the FBSP used in the NAV 

calculation methodology incorporates all 

maturities of Bitcoin Futures Contracts, 

which exhibit a robust price relationship 

among themselves. As a result, attempting to 

manipulate these prices in a coordinated 

manner to generate a substantial impact on 

NAV would be very challenging for potential 

manipulators and likely financially 

unfeasible. The Sponsor thus believes that 

the complexity of the methodology provides 

an additional layer of protection against 

manipulation, as it would be extremely 


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68202 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

75This date range represents days with intraday 

data available on Bloomberg as of July 27, 2023. 

Days with less than 40 observations for a given ABP 

were excluded from the analysis of such ABP. 

76The core exchanges as of December 31, 2022 

were BitStamp, Coinbase, Gemini, itBit, and 

Kraken. 

77The market depth information was obtained 

from CoinMarketCap on July 19, 2023. The ABPs 

with blank cells in this table were not included in 

the July 19, 2023 snapshot. 

difficult for a manipulator to influence all 

these factors in a coordinated way to impact 

the Fund’s NAV without leaving a detectable 

trail that would alert market surveillance. 

4. Focus on near-term contracts: The 

Fund’s methodology gives more importance 

to futures contracts that are due for 

settlement in the near term because such 

contracts are more heavily traded, and their 

prices are more reliable indicators of the 

current spot price of Bitcoin. The Sponsor 

believes that the methodology’s focus on 

near-term contracts further reduces the 

potential for manipulation, as these contracts 

are less susceptible to manipulation due to 

their higher trading volumes and liquidity. 

The Sponsor also believes that it is 

highly unlikely that a person attempting 

to manipulate the NAV of the Fund 

could do so successfully by trading on 

unregulated spot and derivatives 

markets. Because of direct arbitrage, it is 

reasonable to assume that the ETP’s 

market price (in the secondary market) 

would be highly adherent to the Fund’s 

Intraday Net Asset Value, since APs can 

always create and redeem shares of the 

Fund hedging with a basket of Bitcoin 

Futures Contracts and the value of the 

creation basket is determined based on 

the NAV of the Fund, which is 

calculated using the FBSP prices that is 

based on such basket of Bitcoin Futures 

Contracts. Consequently, the likelihood 

of a potential manipulator of the ETP to 

succeed by exclusively trading in 

unregulated Bitcoin markets would 

depend on how much the prices in 

these markets have an impact over the 

CME Bitcoin Futures Contracts prices. 

The likelihood that a potential 

manipulator would undertake such an 

effort is also decreased when 

considering the financial burden of 

manipulating the unregulated markets 

and the overall expected profitability of 

any such manipulation. 

To further assess such likelihood, the 

Sponsor carried out the following 

analysis to investigate the relationship 

between prices from relevant 

unregulated Bitcoin markets and the 

prices of the CME Bitcoin Futures 

Contracts, to assess the impact that a 

manipulation on those markets would 

have on CME. The Sponsor collected 

one-minute bars data between January 

18, 2023 and July 26, 2023 75 of prices 

for the nearest CME Bitcoin Futures 

Contract (‘‘CME Futures’’) and the 

following alternative Bitcoin prices 

(‘‘ABP’’): spot Bitcoin (in USD) on each 

of NQBTCS’s Core Exchanges,76 spot 

Bitcoin (in USDT), and BTCUSDT 

USDs-Margined Perpetuals on Binance. 

For each day and each ABP, a simple 

regression model was estimated with 

one-minute CME Futures log-returns as 

the dependent variable, and two 

independent variables: (1) the log CME 

Futures closing price of the previous 

minute (as a control variable) and (2) the 

difference between the ABP log return 

and the CME Futures log return in the 

previous minute (as the variable of 

interest). 

The estimated coefficients associated 

with the variable of interest are a 

measure of the expected response from 

the CME Futures (as measured by its 

returns) to a divergence between its own 

return information and the one from 

ABP in the near past (one-minute lagged 

returns). Such divergences are expected 

to occur in cases of manipulation. A 

higher coefficient (closer to one) would 

indicate that CME Futures are more 

sensitive to and strongly influenced by 

the divergence, while a lower coefficient 

(closer to zero) would suggest that CME 

Futures are less responsive and not 

significantly influenced by the 

information coming from ABP. The 

Sponsor believes that these coefficients 

can be considered a conservative 

estimation of the real impact that 

manipulation in an ABP would have 

over the CME Futures price because the 

estimations are calculated under normal 

circumstances rather than under a 

manipulative attack, in which some 

other indicators, such as abnormal 

volume and volatility, would warn 

market participants and undermine 

their perception of the attacked ABP as 

a reliable price reference. 

The results of the Sponsor’s analysis 

are summarized in the table below: 77

The Sponsor’s analysis suggests that 

the influence of ABP over the CME 

Futures prices is relatively low. For 

instance, if a would-be manipulator 

chose to attack Coinbase, which is an 

ABP with higher coefficients and thus 

higher potential to impact CME futures, 

the average coefficient of 0.39 means 

that in order to manipulate CME Futures 

prices by 1%, the would-be manipulator 

would have to distort Coinbase prices 

by more than 2.5% (1% divided by 0.39) 

on average. To be successful with 90% 

confidence (1st Decile) this manipulator 

would have to distort Coinbase prices 

by more than 4.7% (1% divided by 

0.21). The Sponsor believes that its 

analysis supports that, even considering 

these conservative estimations, indirect 

manipulation would be extremely 

inefficient. 

The market depth columns in the 

above table indicate that substantial 

financial resources, running into tens of 

millions of dollars, are present on both 

sides of the order book for the most 

influential ABPs (even without 

including hidden orders, bots, and 

arbitrageurs that effectively enhance 

liquidity). The considerable financial 

commitment that would be required 

makes the manipulation of these prices 

an expensive endeavor. 

The Sponsor believes that its analysis 

demonstrates that the low efficiency of 

attempts to manipulate ABPs, coupled 

with the significant cost involved in 

influencing impactful ABPs, makes 

potential manipulation of spot Bitcoin 

markets an unattractive proposition, and 

that it is therefore highly unlikely that 

a potential manipulator of the ETP 


ddrumheller on DSK120RN23PROD with NOTICES1EN03OC23.019</GPH>

Estimated Parameters Market Deeth 

ABP Average 1st Decile Median 9th Decile +2%Del!th -2%De!!th 

Coinbase (spot USD) 0.39 0.21 OAl 0.53 $10,317,109 $17,320,315 

Binance (spot USDT) 0.36 0.15 0.38 0.52 $17,523,531 $42,136,404 

Kraken (spot USD) 0.22 0.03 0.23 0.40 $28,189,731 $30,375,259 

Bitstamp (spot USD) 0.17 0.03 0.18 0.33 $5,083,934 $4,831,827 

Gemini (spot USD) 0.15 -0.01 0.16 0.30 

ItBit (spot USD) 0.08 -0.o7 0.o7 0.23 

Binance (oemetual USDT} 0.01 -0.07 0.00 0.09 
Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68203 

78The Sponsor believes that the methodology 

could significantly reduce the potential influence of 

malicious agents targeting the Fund by only 

accepting data from sources subject to regulatory 

regimes that obligate them to ensure the integrity 

of data reported. As of the date of this filing, 

Coinbase Inc. is the only Bitcoin Exchange to satisfy 

this criterion. 

79Source: https://www.theblock.co/data/cryptomarkets/spot/the-block-legitimate-volume-indexbtc-only. 

could succeed by exclusively trading in 

unregulated Bitcoin markets. The 

combination of the high costs and the 

inefficiencies associated with 

manipulation makes it a daunting and 

unprofitable venture. 

In summary, while the Sponsor 

acknowledges the potential for 

influence from trades settled in 

unregulated Bitcoin markets, the 

Sponsor believes that the NAV 

calculation methodology, coupled with 

the inherent characteristics of the CME, 

provides a significant degree of 

protection against such influence being 

deliberately used to manipulate the 

Fund’s market price or NAV without it 

being subject to detection by CME 

market surveillance. 

Investment Strategy 

The Sponsor believes that the 

investment strategy of the Fund is 

designed to mitigate the risk of 

manipulation by diversifying its 

holdings and is responsive to the 

Commission’s concerns with respect to 

an ETP that holds spot Bitcoin. Instead 

of holding 100% spot Bitcoin, which 

could make it more susceptible to price 

manipulation in the spot market, the 

Fund will hold a mix of Spot Bitcoin, 

Bitcoin Futures Contracts, and cash. 

This diversified portfolio is subject to 

investment restrictions, which further 

reduces the potential for manipulation, 

as explained below: 

1. Diversification: By holding a 

combination of Spot Bitcoin, Bitcoin Futures 

Contracts, and cash, the Fund reduces its 

exposure to any single asset class. This 

diversification also makes it more difficult 

for a would-be manipulator to influence the 

NAV of the Fund by manipulating the price 

of spot Bitcoin alone; for instance, even if a 

manipulator were able to influence the spot 

price of Bitcoin, their actions would only 

affect a portion of the Fund’s portfolio, 

thereby limiting the overall impact of such 

manipulation on the Fund’s NAV. 

2. Investment restrictions: The Fund’s 

holdings of Spot Bitcoin would be subject to 

investment restrictions, which are further 

discussed below. These restrictions cap the 

amount of Spot Bitcoin that the Fund can 

hold, further reducing the potential for 

manipulation by, for example, preventing the 

Fund from becoming so large in relation to 

the spot market that it could be manipulated 

without influencing the futures market. The 

Sponsor believes that these investment 

restrictions ensure that any significant 

trading activity aimed at manipulating the 

Fund would likely spill over into the CME 

Market, a regulated market with robust 

surveillance mechanisms in place to detect 

and deter manipulation, and with which the 

Exchange could receive information pursuant 

to common ISG membership. 

3. Reduced dependence on spot market: By 

holding Bitcoin Futures Contracts and cash 

in addition to Spot Bitcoin, the Fund reduces 

its dependence on the spot market, thereby 

mitigating concerns about potential 

manipulation in unregulated Bitcoin spot 

exchanges. Instead, the Fund will rely on 

Bitcoin Futures Contracts and Bitcoin futures 

EFPs that are traded on the CME Market, a 

regulated exchange, which provides a higher 

level of transparency and oversight compared 

to unregulated spot exchanges. 

4. Dynamic adjustment: The mix of Spot 

Bitcoin, Bitcoin Futures Contracts, and cash 

in the Fund’s portfolio can be dynamically 

adjusted based on market conditions and 

regulatory developments. This flexibility 

allows the Fund to respond quickly to any 

signs of potential manipulation or other 

market abuses, further enhancing its 

resilience against manipulation. 

In summary, by diversifying its 

holdings and imposing investment 

restrictions, the Fund reduces its 

vulnerability to manipulation in any 

single market, thereby protecting 

investors and maintaining the integrity 

of the Fund. 

Investment Restrictions on Spot Bitcoin 

According to the Sponsor, the Fund 

will be subject to investment restrictions 

on Spot Bitcoin (the ‘‘Investment 

Restrictions’’) that are specific 

constraints on its exposure to Bitcoin, 

particularly with respect to spot 

holdings. These investment restrictions 

are designed to mitigate the risk of 

manipulation of the Fund’s Shares by 

insulating the Fund from events 

impacting the Bitcoin spot market, are 

not fixed, and may be adjusted based on 

factors such as the Commission’s 

recognition of the CME as a regulated 

market of significant size related to spot 

Bitcoin, the NAV of the Fund, and the 

prevailing trading conditions on the 

core exchanges of the Benchmark. 

The Sponsor believes that the 

Investment Restrictions are intended to 

ensure that the Fund’s notional 

exposure to Bitcoin will be restricted to 

a set proportion and are currently set at 

100% of the 30-day Average Daily 

Traded Volume (‘‘ADTV’’) on the core 

exchanges of the NQBTCS that are 

subject to regulatory and reporting rules 

in the United States, including 

companies that are publicly traded in 

the United States.78 The Sponsor 

believes that the Investment Restrictions 

serve two main purposes: 

1. They deter potential manipulative 

actions directed towards the Fund’s Shares 

by making the cost-benefit tradeoff highly 

unfavorable for the manipulator. To 

manipulate the Fund’s price using an 

unregulated spot market, a manipulator 

would need to transact a volume that 

surpasses the Fund’s total exposure in spot 

Bitcoin, making the potential costs of 

manipulation outweigh the benefits. 

2. They ensure that the Fund’s trading 

activities do not become the primary driving 

force behind price variations in the Bitcoin 

spot market. By restricting the Fund’s 

notional exposure to a proportion of the 

ADTV, this constraint ensures that the 

Fund’s trading activities are always a fraction 

of the overall market activity, thereby 

reducing the potential for the Fund to unduly 

influence market prices. 

As an example, in the 30-day period 

ending on August 31, 2023, the ADTV 

of spot Bitcoin on Coinbase was $293 

million. Thus, the Fund’s notional 

exposure to Bitcoin is restricted to up to 

$293 million, meaning that if the Fund’s 

AUM is, for example, $250 million, it 

could have up to 100% allocation to 

Spot Bitcoin. However, if the Fund’s 

AUM is, for example, $1 billion, it could 

still only have up to $293 million of 

notional exposure to Spot Bitcoin, 

which would be the equivalent of up to 

29% of the Fund’s NAV, and the rest of 

the portfolio would need to be allocated 

to Bitcoin Futures Contracts, cash, or 

cash equivalents. 

To ensure that the Fund’s trading 

activities do not become the primary 

driving force of the Spot Bitcoin price, 

the Sponsor intends to keep its notional 

allocation to spot Bitcoin as a small 

proportion of the overall trading activity 

of spot bitcoin. 

The Sponsor intends to do so by 

restricting the maximum notional 

exposure to Spot Bitcoin to a proportion 

of the 30-day ADTV, with the ADTV 

data based on the most trusted 

exchanges (meeting the double 

requirements of being a core exchange 

per the NQBTCS methodology and 

being subject to regulatory and reporting 

rules in the United States, which make 

them liable for any false volume data 

reporting). 

Currently, only one exchange meets 

those requirements, and over the last 

three months, it accounted for 4.30% to 

5.70% of all Bitcoin trading, whereas 

the largest unregulated spot Bitcoin 

exchange accounted for over 50% of the 

spot Bitcoin volume.79


ddrumheller on DSK120RN23PROD with NOTICES1
68204 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

80Source: Messari, volume data is for USD, USDT 

and USDC traded against Bitcoin Core Exchanges. 

81See https://www.cmegroup.com/clearing/ 

operations-and-deliveries/accepted-trade-types/efpefr-eoo-trades.html. 

SPOT BITCOIN 30-DAY ADTV 80

June 30, 2023 July 31, 2023 August 31, 2023 

Top 10 Exchanges .......................................................... $7,646.21 million ............... $5,569.71 million ............... $6,853.92 million. 

Single Core Exchange meeting Sponsor’s requirement $419.60 million .................. 317.43 million .................... $293.84 million. 

Single Core Exchange’s market share ............................ 5.5% .................................. 5.7% .................................. 4.3%. 

All 5 Core Exchanges ...................................................... $624.74 million .................. $438.04 million .................. $411.51 million. 

All 5 Core Exchanges’ market share .............................. 8.2% .................................. 7.9% .................................. 6.0%. 

The Sponsor believes that it is 

therefore unlikely that the single 

exchange on which the Sponsor bases 

the ADTV data on will be the primary 

driver of spot Bitcoin price given its 

rather small market share. As a result, 

even with the Fund’s notional Spot 

Bitcoin exposure limited at 100% of the 

ADTV on that single exchange, the 

Fund’s Spot Bitcoin holdings would 

likely represent only 4.30% to 5.79% of 

the daily liquidity of the spot Bitcoin 

market and thus is unlikely to become 

the primary driver of the spot market 

price formation. 

Additionally, with the spot Bitcoin 

notional exposure at 4.30% to 5.70% of 

ADTV, a would-be manipulator would 

need to trade on exchanges that account 

for most of the liquidity and, in 

particular, the largest one. The Sponsor 

believes that the cost benefit analysis of 

attempting to distort the price on the 

largest exchange, which accounts for 

approximately 50% of the liquidity (or 

approximately 9 times the size of the 

Fund), to manipulate the price of the 

Fund would not be compelling. 

In summary, the Sponsor believes that 

the Investment Restrictions are a key 

tool in the Fund’s strategy to prevent 

manipulation. By limiting the Fund’s 

exposure to the spot market and 

ensuring that the Fund’s trading 

activities do not become the 

predominant influence on market 

prices, these restrictions provide a 

robust defense against potential 

manipulation attempts. 

Creations and Redemptions 

According to the Sponsor (and as 

discussed further below), the Fund uses 

cash creations and redemptions. With 

respect to Spot Bitcoin, an Authorized 

Purchaser delivers cash to the Fund 

instead of Spot Bitcoin in the creation 

process, and an Authorized Purchaser 

receives cash instead of Spot Bitcoin in 

the redemption process. The cash 

delivered or received during the 

creation or redemption process is then 

used by the Sponsor to purchase or sell 

Bitcoin Futures Contracts with an 

aggregate market value that 

approximates the amount of cash 

received or paid upon the creation or 

redemption. On a daily basis, the 

Sponsor will analyze the current 

portfolio allocation of the Fund between 

Spot Bitcoin and Bitcoin Futures 

Contracts and, based on the Investment 

Restrictions and target portfolio 

exposure, may decide to engage in an 

EFP transaction on CME to buy or sell 

Spot Bitcoin for the equivalent position 

in Bitcoin Futures Contracts. 

The Sponsor believes that this method 

protects against manipulation in the 

creation and redemption process and of 

the Fund’s market price from trading in 

unregulated spot markets. Investment in 

spot Bitcoin will not be directly related 

to creation or redemption of Fund 

Shares, but instead on target portfolio 

exposure, such that trades can be 

performed in smaller sizes and at 

unpredictable times, reducing the risk of 

creation or redemption manipulation. 

The Sponsor believes that the use of 

cash creations and redemptions in the 

Fund serves as a deterrent to 

manipulation in several ways: 

1. Decoupling from spot market: By using 

cash instead of Spot Bitcoin for creations and 

redemptions, the Fund’s operations are 

decoupled from the unregulated spot market. 

The creation and redemption process does 

not directly influence the unregulated spot 

market or vice versa, thereby reducing the 

potential for manipulation through this 

process. 

2. Unpredictable trading times: The Fund’s 

investment in Spot Bitcoin is not directly 

related to creations or redemptions, but 

instead on target portfolio exposure. As a 

result, trading can be done in smaller sizes 

and at unpredictable times, making it harder 

for potential manipulators to time their 

actions. 

3. Reduced impact of large trades: By 

effecting creations and redemptions in cash, 

large trades that could potentially influence 

the unregulated spot market are mitigated. 

Instead, these trades are absorbed in the CME 

Market, which is sufficiently liquid and can 

reasonably be relied upon to assist in 

detecting and deterring fraudulent or 

manipulative misconduct. 

4. Reduced influence from unregulated 

spot exchanges: In-kind creation may create 

a direct relationship between the Fund’s 

market price and prices on unregulated 

exchanges such as Binance by arbitrage, 

because an AP could buy or sell Bitcoin from 

Binance and receive or deliver Bitcoin from 

the Fund through the creation or redemption 

process. With creations and redemptions in 

cash, however, that arbitrage cannot be 

executed without going through pricing and 

trading on the CME Market. Thus, the 

Sponsor believes that, by removing this 

direct causal relationship between 

unregulated markets and the Fund’s market 

price, it is unlikely that a person attempting 

to manipulate the ETP would be reasonably 

successful by trading only on unregulated 

spot exchanges, such that the Exchange’s 

common ISG membership with the CME 

Market would assist NYSE Arca in detecting 

and deterring misconduct. 

The Sponsor believes that the Fund’s 

creation and redemption process is 

designed to minimize the potential for 

market manipulation, thereby protecting 

investors and maintaining the integrity 

of the markets. 

Exchange for Physical Transactions 

EFP transactions, also known as 

Exchange for Related Position or EFRP 

transactions,81 are a type of private 

agreement between two parties to trade 

a futures position for the underlying 

asset. In the context of the Fund, these 

transactions will be used to purchase 

and sell Spot Bitcoin by delivering or 

receiving the equivalent futures 

position. 

In an EFP transaction, two parties 

exchange equivalent but offsetting 

positions in a Bitcoin Futures Contract 

and the underlying physical Bitcoin. 

One party is the buyer of futures and the 

seller of the physical Bitcoin, and the 

other party takes the opposite position 

(seller of futures and buyer of physical). 

While the EFP is a privately-negotiated 

transaction between the two parties to 

the trade, the consummated transaction 

must be reported to CME Market and its 

conditions and prices are subject to 

CME Market’s market regulation 

oversight. 

EFPs may be transacted at such 

commercially reasonable prices as are 

mutually agreed upon by the parties to 

the transaction, provided that the price 

conforms to the applicable futures price 

increments set forth for the relevant 

Futures contract. The Sponsor believes 

that EFPs executed at off-market prices 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68205 

82See https://www.cmegroup.com/trading/ 

bitcoin-brokers-and-block-liquidity-providers.html. 

83See https://www.cmegroup.com/rulebook/files/ 

cme-group-Rule-538.pdf. 

are more likely to be reviewed by CME’s 

Market Regulation. CME’s Rule 538 

establishes that ‘‘EFPs may not be 

priced off-market for the purpose of 

shifting substantial sums of cash from 

one party to another, to allocate gains 

and losses between the futures or 

options on futures and the cash or OTC 

derivative components of the EFRP, to 

evade taxes, to circumvent financial 

controls by disguising a firm’s financial 

condition, or to accomplish some other 

unlawful purpose.’’ 

Because both sides of the trade track 

the same benchmark (Bitcoin), an EFP is 

market-neutral. As such, the pricing of 

an EFP is quoted in terms of the basis 

between the price of the futures contract 

and the level of the underlying Bitcoin. 

Because the Fund proposes to use EFP 

transactions to purchase and sell Spot 

Bitcoin, the only non-cash assets held 

by the Fund (Bitcoin Futures Contracts 

and Bitcoin) are traded on CME Market. 

Because the Exchange and the CME 

Market are both ISG members, 

information shared by the CME Market 

with the Exchange can be used to assist 

in detecting and deterring fraudulent or 

manipulative misconduct related to 

those assets. 

In the proposed strategy for the 

operation of the Fund, every time the 

Fund is required to purchase or sell 

Bitcoin, the Sponsor will perform a 

request for quotation auction (‘‘RFQ 

Auction’’) with multiple market makers 

using the settlement price as the 

reference for the futures contracts. 

Market makers present their quotes in 

terms of basis points (‘‘bps’’), where 1bp 

= 0.01% between the futures contract 

price and the spot price. The Sponsor 

will then confirm the trade with the best 

offer and report the EFP transaction to 

the CME Market. The Sponsor believes 

that performing an RFQ Auction with 

multiple market makers is an efficient 

price formation mechanism that 

generates enough competition and 

attracts sufficient liquidity to minimize 

the transaction costs for the ETP. 

As an example, assume that the Fund 

needs to buy 50 bitcoins (BTC) in 

exchange for 10 units of the next 

maturity of Bitcoin Futures Contracts 

(‘‘BTCA’’). The Sponsor will perform an 

RFQ Auction by requesting 3 market 

makers to provide their best price for 

buying BTCA versus BTC. The Market 

Makers provide a bid/ask quote in terms 

of basis between the futures and spot. 

Market Maker 1 (MM1) bids +22bps, 

Market Maker 2 (MM2) bids +20bps, 

and Market Maker 3 (MM3) bids 

+25bps. The Sponsor will then agree to 

pay the best bid of +25bps from MM3. 

Assuming BTCA is at $26,060, the price 

for the spot transaction is fixed at 

$25,995.01. The transaction is then 

reported within the time period and in 

the manner specified by the CME 

Market. Upon completion of the EFP, 

the Fund and MM3 would have 

different positions but same exposure: 

• The Fund was long 10 Bitcoin 

Futures Contracts and now has 

converted this exposure into 50 

Bitcoins. 

• MM3 had 50 Bitcoins and now 

holds an equal position long 10 Bitcoin 

Futures Contracts. 

The table below illustrates the steps 

in this EFP transaction: 

Steps MM3 Fund 

1. Starting position .................................................................................. 50 BTC .......................................... 10 BTCA. 

2. EFP is privately negotiated ................................................................. MM3 and the Fund agree to terms of the EFP: 

• Fund sells/MM3 buys 10 BTCA at $26,060. 

• Fund buys/MM3 sells 50 BTC at 25,995.01 (+25bps). 

3. MM3 sends bitcoin to the Fund .......................................................... ¥50 BTC ....................................... +50 BTC. 

4. EFP reported to CME ......................................................................... +10 BTCA ...................................... ¥10 BTCA. 

5. Final position ....................................................................................... 10 BTCA ........................................ 50 BTC. 

As required by CME Market’s 

regulation, the Fund and all other 

parties related to the transaction will 

maintain all records relevant to this 

transaction, including order tickets, 

RFQ Auction message history, and 

custody transaction records, and 

provide them to CME upon request for 

surveillance purposes pursuant to CFTC 

Regulation 1.35. 

EFP volumes are reported daily on the 

CME Group website. Historically, 

trading activity in EFP transactions is 

sporadic as it depends on the demand 

for a regulated conversion between 

futures and spot positions. Nonetheless, 

the Sponsor believes that a large number 

of liquidity providers are ready to 

execute this type of transaction and can 

provide enough liquidity to support the 

proposed ETP’s demand. A subset of 

firms that are ready to provide liquidity 

on EFP Bitcoin transactions is available 

on CME’s website.82

The Sponsor believes that EFP 

transactions are a powerful tool in 

preventing market manipulation for 

several reasons: 

1. Regulated environment: EFP 

transactions occur on the CME Market, which 

is a regulated exchange with processes in 

place to prevent market manipulation, 

including monitoring transaction prices and 

investigating potential manipulations, as 

outlined in CME Rule 538.83 All transactions 

are monitored and subject to rules and 

regulations designed to prevent market 

manipulation. Moreover, all parties to an EFP 

transaction are required to maintain all 

records relevant to the transaction pursuant 

to CFTC Regulation 1.35, thus providing the 

ability for CME and the CFTC to conduct 

surveillance inquiries and investigations in 

an efficient and effective manner for the 

protection of customers and ensuring market 

integrity. Furthermore, as an additional 

protection measure, to enforce the highest 

standard on the sourcing of such underlying 

physical Bitcoin, the Sponsor represents that 

it will only participate in EFP transactions 

with broker-dealers that are FINRA regulated 

or part of corporate groups that are, which 

would provide another layer of regulatory 

oversight in how Bitcoin exposures are 

sourced, as those counterparties already have 

an ongoing commercial relationship with the 

Sponsor and are active participants in trading 

Bitcoin regulated products worldwide. 

2. Surveillance-sharing agreement: NYSE 

Arca and the CME Market are both members 

of the ISG, which allows for the sharing of 

information and cooperation in 

investigations, which can help detect and 

deter market manipulation. 

3. Transparency: EFP transactions must be 

reported to the CME Market, which is a 

regulated exchange, providing transparency 

and making it more difficult for manipulative 

practices to go unnoticed. Parties to EFP 

transactions must maintain all records 

relevant to the CME futures contract and the 

related position transaction, pursuant to 

CFTC Regulation 1.35, adding another layer 

of regulatory scrutiny and transparency. In 

addition, EFP transactions volumes are 

required to be reported with the daily large 

trader positions by each clearing member, 

omnibus account, and foreign broker. 

4. Market-neutrality: Because EFP 

transactions involve exchanging equivalent 


ddrumheller on DSK120RN23PROD with NOTICES1
68206 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

84 VWAP is calculated based first on Tier 1 (if 

there are trades during the settlement period); then 

Tier 2 (if there are no trades during the settlement 

period); and then Tier 3 (in the absence of any trade 

activity or bid/ask in a given contract month during 

the current trading day, as follows: Tier 1: Each 

contract month settles to its VWAP of all trades that 

occur between 14:59:00 and 15:00:00 CT, the 

settlement period, rounded to the nearest tradable 

tick. If the VWAP is exactly in the middle of two 

tradable ticks, then the settlement will be the 

tradable price that is closer to the contract’s prior 

day settlement price. Tier 2: If no trades occur on 

CME Globex between 14:59:00 and 15:00:00 CT, the 

settlement period, then the last trade (or the 

contract’s settlement price from the previous day in 

the absence of a last trade price) is used to 

determine whether to settle to the bid or the ask 

during this period. a. If the last trade price is 

outside of the bid/ask spread, then the contract 

month settles to the nearest bid or ask price. b. If 

the last trade price is within the bid/ask spread, or 

if a bid/ask spread is not available, then the contract 

month settles to the last trade price. Tier 3: In the 

absence of any trade activity or bid/ask in a given 

contract month during the current trading day, the 

daily settlement price will be determined by 

applying the net change from the preceding contract 

month to the given contract month’s prior daily 

settlement price. 

85Several major market data vendors display and/ 

or make widely available IFVs taken from the 

Consolidated Tape Association (‘‘CTA’’) or other 

data feeds. 

but offsetting positions, they are marketneutral. As a result, EFP transactions do not 

create imbalances in the market that could be 

exploited for manipulative purposes. 

5. Unpredictability: EFP transactions are 

privately negotiated between the fund and 

other parties, making them less predictable 

and therefore more difficult to manipulate. 

The Sponsor believes that, by using 

EFP transactions to purchase and sell 

spot Bitcoin, the Fund would ensure 

that its operations are conducted in a 

regulated, transparent, and marketneutral manner, significantly reducing 

the dependency on and the risk of 

manipulation from unregulated spot 

exchanges. 

Settlement of BTC Contracts and MBT 

Contracts 

According to the Registration 

Statement, each BTC Contract and MBT 

Contract settles daily to the BTC 

Contract volume-weighted average price 

(‘‘VWAP’’) of all trades that occur 

between 2:59 p.m. and 3:00 p.m. Central 

Time, the settlement period, rounded to 

the nearest tradable tick.84

BTC Contracts and MBT Contracts 

each expire on the last Friday of the 

contract month and are settled with 

cash. The final settlement value is based 

on the CME CF BRR at 4:00 p.m. 

London time on the expiration day of 

the futures contract. 

As proposed, the Fund will rollover 

its soon to expire Bitcoin Futures 

Contracts to extend the expiration or 

maturity of its position forward by 

closing the initial contract holdings and 

opening a new longer-term contract 

holding for the same underlying asset at 

the then-current market price. The Fund 

does not intend to hold any Bitcoin 

futures positions into cash settlement. 

Net Asset Value 

According to the Registration 

Statement, the Fund’s NAV per Share 

will be calculated by taking the current 

market value of its total assets, 

subtracting any liabilities, and dividing 

that total by the number of Shares. 

The Administrator of the Fund will 

calculate the NAV once each trading 

day, as of the earlier of the close of the 

New York Stock Exchange or 4:00 p.m. 

Eastern Standard Time (EST). 

According to the Registration 

Statement, to determine the value of 

Bitcoin Futures Contracts, the Fund’s 

Administrator will use the Bitcoin 

Futures Contract settlement price on the 

exchange on which the contract is 

traded, except that the ‘‘fair value’’ of 

Bitcoin Futures Contracts (as described 

in more detail below) may be used when 

Bitcoin Futures Contracts close at their 

price fluctuation limit for the day. The 

Fund’s Administrator will determine 

the value of Fund investments as of the 

earlier of the close of the New York 

Stock Exchange or 4:00 p.m. EST. The 

Fund’s NAV will include any 

unrealized profit or loss on open Bitcoin 

futures contacts and any other credit or 

debit accruing to the Fund but unpaid 

or not received by the Fund. 

According to the Registration 

Statement, the fair value of the Fund’s 

holdings will be determined by the 

Fund’s Sponsor in good faith and in a 

manner that assesses the future Bitcoin 

market value based on a consideration 

of all available facts and all available 

information on the valuation date. 

When a Bitcoin Futures Contract has 

closed at its price fluctuation limit, the 

fair value determination will attempt to 

estimate the price at which such Bitcoin 

Futures Contract would be trading in 

the absence of the price fluctuation limit 

(either above such limit when an 

upward limit has been reached or below 

such limit when a downward limit has 

been reached). Typically, this estimate 

will be made primarily by reference to 

exchange traded instruments at 4:00 

p.m. EST on settlement day. The fair 

value of BTC Contracts and MBT 

Contracts may not reflect such security’s 

market value or the amount that the 

Fund might reasonably expect to receive 

for the BTC Contracts and MBT 

Contracts upon its current sale. 

According to the Registration 

Statement and as discussed above, the 

value of Spot Bitcoin held by the Fund 

would be determined by the Sponsor 

and by Hashdex Asset Management Ltd. 

(the ‘‘Digital Asset Adviser’’) via an 

FBSP methodology that is sensitive to 

both the tenor of a Bitcoin Futures 

Contract and the final settlement price 

for such contract. The calculation 

produces a set of weighting factors, with 

each factor indicating the contribution 

of the corresponding Bitcoin Futures 

Contract to the estimated current spot 

price of Bitcoin. The estimated spot 

price is the component of the result 

corresponding to a tenor of zero days. 

The Sponsor and Digital Asset Advisor 

will not use data from Bitcoin 

exchanges or directly from spot Bitcoin 

trading activity in determining the value 

of Spot Bitcoin held by the Fund. 

Indicative Fund Value 

According to the Registration 

Statement, in order to provide updated 

information relating to the Fund for use 

by investors and market professionals, 

ICE Data Indices, LLC will calculate an 

updated Indicative Fund Value (‘‘IFV’’). 

The IFV will be calculated by using the 

prior day’s closing NAV per Share of the 

Fund as a base and will be updated 

throughout the Core Trading Session of 

9:30 a.m. E.T. to 4:00 p.m. E.T. to reflect 

changes in the value of the Fund’s 

holdings during the trading day. 

The IFV will be disseminated on a per 

Share basis every 15 seconds during the 

Exchange’s Core Trading Session and be 

widely disseminated by one or more 

major market data vendors during the 

Exchange’s Core Trading Session.85

Creation and Redemption of Shares 

According to the Registration 

Statement, the Shares issued by the 

Fund may only be purchased by 

Authorized Purchasers and only in 

blocks of 12,500 Shares called ‘‘Creation 

Baskets.’’ The amount of the purchase 

payment for a Creation Basket is equal 

to the total NAV of Shares in the 

Creation Basket. Similarly, only 

Authorized Purchasers may redeem 

Shares and only in blocks of 12,500 

Shares called ‘‘Redemption Baskets.’’ 

The amount of the redemption proceeds 

for a Redemption Basket is equal to the 

total NAV of Shares in the Redemption 

Basket. The purchase price for Creation 

Baskets and the redemption price for 

Redemption Baskets are the actual NAV 

calculated at the end of the business day 

when a request for a purchase or 

redemption is received by the Fund. 

Shares of the Fund will be created and 

redeemed in cash. 

Authorized Purchasers will be the 

only persons that may place orders to 

create and redeem Creation Baskets. 

Authorized Purchasers must be (1) 

either registered broker-dealers or other 

securities market participants, such as 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68207 

banks and other financial institutions, 

that are not required to register as 

broker-dealers to engage in securities 

transactions, and (2) DTC Participants. 

An Authorized Purchaser is an entity 

that has entered into an Authorized 

Purchaser Agreement with the Sponsor. 

An Authorized Purchaser delivers 

cash to the Fund in the creation process, 

and an AP receives cash in the 

redemption process. The cash delivered 

or received during the creation or 

redemption process is then used by the 

Sponsor to purchase or sell Bitcoin 

Futures Contracts with an aggregate 

market value that approximates the 

amount of cash received or paid upon 

the creation or redemption. On a daily 

basis, the Sponsor will analyze the 

current portfolio allocation of the Fund 

between Spot Bitcoin and Bitcoin 

Futures Contracts and, based on the 

Investment Restrictions, may decide to 

engage in an EFP transaction on CME to 

buy or sell Spot Bitcoin for the 

equivalent position in Bitcoin Futures 

Contracts. 

Creation Procedures 

According to the Registration 

Statement, on any ‘‘Business Day,’’ an 

Authorized Purchaser may place an 

order with the Transfer Agent to create 

one or more Creation Baskets. For 

purposes of processing both purchase 

and redemption orders, a ‘‘Business 

Day’’ means any day other than a day 

when the CME or the New York Stock 

Exchange is closed for regular trading. 

Purchase orders for Creation Baskets 

must be placed by 3:00 p.m. EST or one 

hour prior to the close of trading on the 

New York Stock Exchange, whichever is 

earlier. The day on which the 

Distributor receives a valid purchase 

order is referred to as the purchase order 

date. If the purchase order is received 

after the applicable cut-off time, the 

purchase order date will be the next 

Business Day. Purchase orders are 

irrevocable. 

By placing a purchase order, an 

Authorized Purchaser agrees to deposit 

cash with the Custodian. 

Redemption Procedures 

According to the Registration 

Statement, the procedures by which an 

Authorized Purchaser can redeem one 

or more Creation Baskets will mirror the 

procedures for the creation of Creation 

Baskets. On any Business Day, an 

Authorized Purchaser may place an 

order with the Transfer Agent to redeem 

one or more Creation Baskets. 

The redemption procedures allow 

Authorized Purchasers to redeem 

Creation Baskets. Individual 

shareholders may not redeem directly 

from the Fund. By placing a redemption 

order, an Authorized Purchaser agrees 

to deliver the Creation Baskets to be 

redeemed through DTC’s book entry 

system to the Fund by the end of the 

next Business Day following the 

effective date of the redemption order or 

by the end of such later business day. 

Determination of Redemption 

Distribution 

According to the Registration 

Statement, the redemption distribution 

from the Fund will consist of an amount 

of cash and/or cash equivalents that is 

in the same proportion to the total assets 

of the Fund on the date that the order 

to redeem is properly received as the 

number of Shares to be redeemed under 

the redemption order is in proportion to 

the total number of Shares outstanding 

on the date the order is received. 

Delivery of Redemption Distribution 

According to the Registration 

Statement, an Authorized Purchaser 

who places a purchase order will 

transfer to the Custodian the required 

amount of cash and/or cash equivalents 

by the end of the next business day 

following the purchase order date or by 

the end of such later business day, not 

to exceed three business days after the 

purchase order date, as agreed to 

between the Authorized Purchaser and 

the Custodian when the purchase order 

is placed (the ‘‘Purchase Settlement 

Date’’). Upon receipt of the deposit 

amount, the Custodian will direct DTC 

to credit the number of Creation Baskets 

ordered to the Authorized Purchaser’s 

DTC account on the Purchase 

Settlement Date. 

Availability of Information 

The NAV for the Fund’s Shares will 

be calculated and disseminated daily 

and will be made available to all market 

participants at the same time. The 

intraday, closing prices, and settlement 

prices of the Bitcoin Futures Contracts 

will be readily available from the 

applicable futures exchange websites, 

automated quotation systems, published 

or other public sources, or major market 

data vendors. Information regarding 

market price and trading volume of the 

Shares will be continually available on 

a real-time basis throughout the day on 

brokers’ computer screens and other 

electronic services. 

Complete real-time data for the 

Bitcoin Futures Contracts will be 

available by subscription through online information services. ICE Futures 

U.S. and CME also provide delayed 

futures and options on futures 

information on current and past trading 

sessions and market news free of charge 

on their respective websites. The 

specific contract specifications for 

Bitcoin Futures Contracts will also be 

available on such websites, as well as 

other financial informational sources. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the CTA. Quotation information for cash 

equivalents and commodity futures may 

be obtained from brokers and dealers 

who make markets in such instruments. 

Intra-day price and closing price level 

information for the Benchmark will be 

available from major market data 

vendors. The Benchmark value will be 

disseminated once every 15 seconds 

during the Core Trading Session. The 

Benchmark components and 

methodology will be made publicly 

available. The IFV will be available 

through on-line information services. 

In addition, the Fund’s website, 

https://hashdex-etfs.com/, will display 

the applicable end of day closing NAV. 

The daily holdings of the Fund will be 

available on the Fund’s website. The 

Fund’s website will also include a form 

of the prospectus for the Fund that may 

be downloaded. The website will 

include the Shares’ ticker and CUSIP 

information along with additional 

quantitative information updated on a 

daily basis, including: (1) the prior 

Business Day’s reported NAV and 

closing price and a calculation of the 

premium and discount of the closing 

price or mid-point of the bid/ask spread 

at the time of NAV calculation (the 

‘‘Bid/Ask Price’’) against the NAV; and 

(2) data in chart format displaying the 

frequency distribution of discounts and 

premiums of the daily closing price or 

Bid/Ask Price against the NAV, within 

appropriate ranges, for at least each of 

the four previous calendar quarters. The 

website disclosure of portfolio holdings 

will be made daily and will include, as 

applicable, (i) the name, quantity, price, 

and market value of the Fund’s 

holdings, (ii) the counterparty to and 

value of forward contracts and any other 

financial instruments tracking the 

Benchmark, and (iii) the total cash and 

cash equivalents held in the Fund’s 

portfolio, if applicable. 

The Fund’s website will be publicly 

available at the time of the public 

offering of the Shares and accessible at 

no charge. 

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 of 


ddrumheller on DSK120RN23PROD with NOTICES1
68208 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

86See NYSE Arca Rule 7.12–E. 

87See Rule 10A–3(c)(7), 17 CFR 240.10A–3(c)(7) 

(stating that a listed issuer is not subject to the 

requirements of Rule 10A–3 if the issuer is 

organized as an unincorporated association that 

does not have a board of directors and the activities 

of the issuer are limited to passively owning or 

holding securities or other assets on behalf of or for 

the benefit of the holders of the listed securities). 88FINRA conducts cross-market surveillances on 

behalf of the Exchange pursuant to a regulatory 

services agreement. The Exchange is responsible for 

FINRA’s performance under this regulatory services 

agreement. 

89For a list of the current members of ISG, see 

www.isgportal.org. The Exchange notes that not all 

components of the Fund may trade on markets that 

are members of ISG or with which the Exchange has 

in place a CSSA. 

the Fund.86 Trading in Shares of the 

Fund will be halted if the circuit breaker 

parameters in NYSE Arca Rule 7.12–E 

have been reached. Trading also 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 BTC and/or MBT Contracts and the 

securities and/or the financial 

instruments composing the daily 

disclosed portfolio of the Fund; or (2) 

whether other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. 

The Exchange may halt trading during 

the day in which an interruption to the 

dissemination of the IFV or the value of 

the Benchmark occurs. The Benchmark 

value will be disseminated once every 

15 seconds during the Core Trading 

Session. The Benchmark components 

and methodology will be made publicly 

available. If the interruption to the 

dissemination of the IFV, or to the value 

of the Benchmark persists past the 

trading day in which it occurred, the 

Exchange will halt trading no later than 

the beginning of the trading day 

following the interruption. In addition, 

if the Exchange becomes aware that the 

NAV with respect to the Shares is not 

disseminated to all market participants 

at the same time, it will halt trading in 

the Shares until such time as the NAV 

is available to all market participants. 

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. Shares will trade on 

the NYSE Arca Marketplace from 4 a.m. 

to 8 p.m. E.T. in accordance with NYSE 

Arca Rule 7.34–E (Early, Core, and Late 

Trading Sessions). The Exchange has 

appropriate rules to facilitate 

transactions in the Shares during all 

trading sessions. As provided in NYSE 

Arca Rule 7.6–E, the minimum price 

variation (‘‘MPV’’) for quoting and entry 

of orders in equity securities traded on 

the NYSE Arca Marketplace is $0.01, 

with the exception of securities that are 

priced less than $1.00 for which the 

MPV for order entry is $0.0001. 

The Shares will conform to the initial 

and continued listing criteria under 

NYSE Arca Rule 8.500–E. The trading of 

the Shares will be subject to NYSE Arca 

Rule 8.500–E(g), which sets forth certain 

restrictions on Equity Trading Permit 

Holders (‘‘ETP Holders’’) acting as 

registered Market Makers in Trust 

Issued Receipts [sic] to facilitate 

surveillance. Pursuant to NYSE Arca 

Rule 8.500–E(f), an ETP Holder acting as 

a registered Market Maker in Trust Units 

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 

Market Maker may have or over which 

it may exercise investment discretion. 

No 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 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, the ETP Holder acting as a 

Market Maker in Trust Units 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. 

For initial and continued listing, the 

Fund will be in compliance with Rule 

10A–3 under the Act, the Trust will rely 

on the exception contained in Rule 

10A–3(c)(7).87 A minimum of 50,000 

Shares of the Fund will be outstanding 

at the commencement of trading on the 

Exchange. 

Surveillance 

The Exchange represents that trading 

in the Shares of the Fund will be subject 

to the existing trading surveillances 

administered by the Exchange, as well 

as cross-market surveillances 

administered by the Financial Industry 

Regulatory Authority (‘‘FINRA’’) on 

behalf of the Exchange, which are 

designed to detect violations of 

Exchange rules and applicable federal 

securities laws.88 The Exchange 

represents that these procedures are 

adequate to properly monitor Exchange 

trading of the Shares in all trading 

sessions and to deter and detect 

violations of Exchange rules and federal 

securities laws applicable to trading on 

the Exchange. 

The surveillances referred to above 

generally focus on detecting securities 

trading outside their normal patterns, 

which could be indicative of 

manipulative or other violative activity. 

When such situations are detected, 

surveillance analysis follows and 

investigations are opened, where 

appropriate, to review the behavior of 

all relevant parties for all relevant 

trading violations. 

The Exchange or FINRA, on behalf of 

the Exchange, or both, will 

communicate as needed regarding 

trading in the Shares and the Fund’s 

holdings with other markets and other 

entities that are members of the ISG, and 

the Exchange or FINRA, on behalf of the 

Exchange, or both, may obtain trading 

information regarding trading in the 

Shares and the Fund’s holdings from 

such markets and other entities. In 

addition, the Exchange may obtain 

information regarding trading in the 

Shares and the Fund’s holdings from 

markets and other entities that are 

members of ISG or with which the 

Exchange has in place a CSSA. The 

Exchange is also able to obtain 

information regarding trading in the 

Shares, the physical commodities 

underlying the futures contracts through 

ETP Holders, in connection with such 

ETP Holders’ proprietary or customer 

trades which they effect through ETP 

Holders on any relevant market. The 

Exchange can obtain market 

surveillance information, including 

customer identity information, with 

respect to transactions (including 

transactions in futures contracts) 

occurring on US futures exchanges, 

which are members of the ISG. In 

addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

Bitcoin Futures Contracts held by the 

Fund will be listed on an exchange that 

is a member of the ISG or is a market 

with which the Exchange has a CSSA.89

All statements and representations 

made in this filing regarding (a) the 

description of the portfolios of the Fund 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68209 

90 15 U.S.C. 78f(b)(5). 

or Benchmark, (b) limitations on 

portfolio holdings or the Benchmark, or 

(c) the applicability of Exchange listing 

rules specified in this rule filing shall 

constitute continued listing 

requirements for listing the Shares on 

the Exchange. 

The issuer has represented to the 

Exchange that it will advise the 

Exchange of any failure by the Fund to 

comply with the continued listing 

requirements, and, pursuant to its 

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

Act, the Exchange will monitor for 

compliance with the continued listing 

requirements. If the Fund is not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

NYSE Arca Rule 5.5–E(m). 

Information Bulletin 

Prior to the commencement of trading 

of the Shares, the Exchange will inform 

its ETP Holders in an information 

bulletin (‘‘Information Bulletin’’) of the 

special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Bulletin 

will discuss the following: (1) the risks 

involved in trading the Shares during 

the Early and Late Trading Sessions 

when an updated IFV will not be 

calculated or publicly disseminated; (2) 

the procedures for purchases and 

redemptions of Shares in Creation 

Baskets and Redemption Baskets (and 

that Shares are not individually 

redeemable); (3) NYSE Arca Rule 9.2– 

E(a), which imposes a duty of due 

diligence on its ETP Holders to learn the 

essential facts relating to every customer 

prior to trading the Shares; (4) how 

information regarding the IFV is 

disseminated; (5) how information 

regarding portfolio holdings is 

disseminated; (6) the requirement that 

ETP Holders deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction; and (7) 

trading information. 

In addition, the Information Bulletin 

will advise ETP Holders, prior to the 

commencement of trading, of the 

prospectus delivery requirements 

applicable to the Fund. The Exchange 

notes that investors purchasing Shares 

directly from the Fund will receive a 

prospectus. ETP Holders purchasing 

Shares from the Fund for resale to 

investors will deliver a prospectus to 

such investors. The Information Bulletin 

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

the Commission from any rules under 

the Act. In addition, the Information 

Bulletin will reference that the Fund is 

subject to various fees and expenses 

described in the Registration Statement. 

The Information Bulletin will also 

disclose the trading hours of the Shares 

and that the NAV for the Shares will be 

calculated after 4:00 p.m. E.T. each 

trading day. The Information Bulletin 

will disclose that information about the 

Shares will be publicly available on the 

Fund’s website. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 90 that an 

exchange have rules that are designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to remove 

impediments to, and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest. 

The Exchange believes the proposed 

rule change is designed to remove 

impediments to and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest because it would 

reflect the change in the Fund’s name, 

as set forth in the Registration 

Statement. Specifically, the proposed 

rule change would reflect a change in 

the Fund’s name from the Hashdex 

Bitcoin Futures ETF to the Hashdex 

Bitcoin ETF. The proposed change is 

also designed to remove impediments to 

and perfect the mechanism of a free and 

open market, promote just and equitable 

principles of trade, and protect investors 

and the public interest by ensuring that 

the Fund’s name is consistent with the 

Registration Statement and reflects the 

Fund’s proposed updated investment 

strategy. 

The Exchange believes that the 

proposed rule change is designed to 

remove impediments to and perfect the 

mechanism of a free and open market 

and, in general to protect investors and 

the public interest because the NQBTCS 

would provide reliable pricing on which 

to base the Benchmark because it is 

administered by an independent index 

administrator, it is intended to provide 

an institutional-grade reference price for 

Bitcoin, and the pricing methodology 

underlying the NQBTCS is reasonably 

designed to be resistant to potential 

price manipulation. Specifically, 

NQBTCS is calculated via a rigorous 

and publicly available methodology that 

incorporates trade data captured from 

cryptocurrency exchanges that meet 

eligibility criteria of the NCI and that is 

designed to adjust for variances in price, 

volume and volatility across a wide 

range of sources, as well as to protect 

against the impact of anomalous trading 

activity that could impact the NQBTCS 

price. Accordingly, the proposed use of 

NQBTCS would remove impediments to 

and perfect the mechanism of a free and 

open market and, in general to protect 

investors and the public interest by 

allowing the Fund to calculate a 

Benchmark that would track Bitcoin 

pricing broadly, consistent with the 

proposed change regarding the Fund’s 

investment strategy as discussed above. 

The Exchange believes the proposed 

rule change is designed to remove 

impediments to and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest because it reflects the 

Fund’s proposed investment strategy, 

through which the Fund would seek to 

achieve its investment objectives by 

investing in both Bitcoin futures and 

Spot Bitcoin, in addition to being able 

to hold part of its net assets in cash. The 

Exchange believes that the Fund’s 

strategy of holding a mix of Spot 

Bitcoin, Bitcoin futures and cash would 

remove impediments to and perfect the 

mechanism of a free market and protect 

investors and the public interest 

because it would allow the Fund to 

limit its exposure to any single asset 

class, while offering investors exposure 

to Spot Bitcoin without relying on 

unregulated products or markets. The 

Exchange also believes that the Sponsor 

has designed the Fund to includes 

features intended to provide a robust 

framework for mitigating the risks of 

market manipulation, such as its 

proposed investment strategy, its use of 

futures-based pricing for Spot Bitcoin, 

the proposed Investment Restrictions, 

the use of EFP transactions on the CME 

Market for Spot Bitcoin, and the use of 

cash creations and redemptions, which 

would remove impediments to and 

perfect the mechanism of a free and 

open market and promote the protection 

of investors and the public interest. The 

Exchange also believes that, given these 

features of the Fund, the CME Market 

could be considered the regulated 

market of significant size in relation to 

the Fund and that there is a reasonable 

likelihood that a person attempting to 

manipulate the Fund would also have to 

trade on the CME Market to do so, such 

that information shared pursuant to 

NYSE Arca and the CME Market’s 

common ISG membership would aid the 

Exchange in detecting and deterring 

potential misconduct. 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices and to protect 

investors and the public interest in that 


ddrumheller on DSK120RN23PROD with NOTICES1
68210 Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 

the Shares would be listed and traded 

on the Exchange pursuant to the initial 

and continued listing criteria in NYSE 

Arca Rule 8.500–E. The Exchange has in 

place surveillance procedures that are 

adequate to properly monitor trading in 

the Shares in all trading sessions and to 

deter and detect violations of Exchange 

rules and applicable federal securities 

laws. The Exchange or FINRA, on behalf 

of the Exchange, or both, will 

communicate as needed regarding 

trading in the Shares and the Fund’s 

holdings with other markets and other 

entities that are members of the ISG, and 

the Exchange or FINRA, on behalf of the 

Exchange, or both, may obtain trading 

information regarding trading in the 

Shares and the Fund’s holdings from 

such markets and other entities. In 

addition, the Exchange may obtain 

information regarding trading in the 

Shares and the Fund’s holdings from 

markets and other entities that are 

members of ISG or with which the 

Exchange has in place a CSSA. The 

Exchange is also able to obtain 

information regarding trading in the 

Shares and the Fund’s holdings through 

ETP Holders, in connection with such 

ETP Holders’ proprietary or customer 

trades which they effect through ETP 

Holders on any relevant market. The 

Exchange can obtain market 

surveillance information, including 

customer identity information, with 

respect to transactions (including 

transactions in Bitcoin Futures 

Contracts) occurring on US futures 

exchanges, which are members of the 

ISG. The intraday, closing prices, and 

settlement prices of the Bitcoin Futures 

Contracts will be readily available from 

the applicable futures exchange 

websites, automated quotation systems, 

published or other public sources, or 

major market data vendors website or 

on-line information services. 

Information regarding market price and 

trading volume of the Shares will be 

continually available on a real-time 

basis throughout the day on brokers’ 

computer screens and other electronic 

services. 

Complete real-time data for the 

Bitcoin Futures Contracts will be 

available by subscription from on-line 

information services. ICE Futures U.S. 

and CME also provide delayed futures 

information on current and past trading 

sessions and market news free of charge 

on the Fund’s website. The specific 

contract specifications for Bitcoin 

Futures Contracts will also be available 

on such websites, as well as other 

financial informational sources. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the CTA. The IFV will be disseminated 

on a per Share basis every 15 seconds 

during the Exchange’s Core Trading 

Session and be widely disseminated by 

one or more major market data vendors 

during the NYSE Arca Core Trading 

Session. The Fund’s website will also 

include a form of the prospectus for the 

Fund that may be downloaded. The 

website will include the Share’s ticker 

and CUSIP information along with 

additional quantitative information 

updated on a daily basis, including, for 

the Fund: (1) the prior business day’s 

reported NAV and closing price and a 

calculation of the premium and 

discount of the closing price or midpoint of the Bid/Ask Price against the 

NAV; and (2) data in chart format 

displaying the frequency distribution of 

discounts and premiums of the daily 

closing price or Bid/Ask Price against 

the NAV, within appropriate ranges, for 

at least each of the four previous 

calendar quarters. The website 

disclosure of portfolio holdings will be 

made daily and will include, as 

applicable, (i) the name, quantity, price, 

and market value of Bitcoin Futures 

Contracts, (ii) the counterparty to and 

value of forward contracts, and (iii) 

other financial instruments, if any, and 

the characteristics of such instruments 

and cash equivalents, and amount of 

cash held in the Fund’s portfolio, if 

applicable. 

Trading in Shares of the Fund will be 

halted if the circuit breaker parameters 

in NYSE Arca Rule 7.12–E have been 

reached or 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 BTC and/or MBT Contracts and the 

securities and/or the financial 

instruments composing the daily 

disclosed portfolio of the Fund; or (2) 

whether other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of Trust Units based on Bitcoin that will 

enhance competition among market 

participants, to the benefit of investors 

and the marketplace. As noted above, 

the Exchange has in place surveillance 

procedures that are adequate to properly 

monitor trading in the Shares in all 

trading sessions and to deter and detect 

violations of Exchange rules and 

applicable federal securities laws. 

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 will 

facilitate the listing and trading of Trust 

Units based on Bitcoin and that will 

enhance competition among market 

participants, 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 

No written comments were solicited 

or received with respect to 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 self-regulatory organization 

consents, the Commission will: 

(A) by order approve or disapprove 

the 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: 

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–NYSEARCA–2023–58 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–NYSEARCA–2023–58. 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 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 190 / Tuesday, October 3, 2023 / Notices 68211 

91 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Notice of Filing infra note 4, at 88 FR at 

20195. 

4Securities Exchange Act Release No. 97225 

(Mar. 30, 2023), 88 FR 20195 (Apr. 5, 2023) (File 

No. SR–OCC–2023–003) (‘‘Notice of Filing’’). 

5Comments on the proposed rule change are 

available at https://www.sec.gov/comments/sr-occ2023-003/srocc2023003.htm. 

6 15 U.S.C. 78s(b)(2). 

7Securities Exchange Act Release No. 97525 (May 

18, 2023), 88 FR 33655 (May 24, 2023) (File No. SR– 

OCC–2023–003). 

8Securities Exchange Act Release No. 97602 (May 

26, 2023), 88 FR 36351 (Jun. 2, 2023) (File No. SR– 

OCC–2023–003) (‘‘Partial Amendment No. 1’’). 

9 15 U.S.C. 78s(b)(2)(B). 

10Securities Exchange Act Release No. 97832 

(July 3, 2023), 88 FR 43640 (July 10, 2023) (File No. 

SR–OCC–2023–003). 

11 15 U.S.C. 78s(b)(2). 

12 15 U.S.C 78s(b)(2)(B)(ii)(II). 

13 Id. 

14 17 CFR 200.30–3(a)(57). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 98200 

(Aug. 22, 2023), 88 FR 58628 (Aug. 28, 2023) (File 

No. SR–ICC–2023–013) (‘‘Notice’’). 

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–NYSEARCA–2023–58 and should be 

submitted on or before October 24, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.91

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21789 Filed 10–2–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98559; File No. SR–OCC– 

2023–003] 

Self-Regulatory Organizations; 

Options Clearing Corporation; Notice 

of Designation of Longer Period for 

Commission Action on Proceedings To 

Determine Whether To Approve or 

Disapprove a Proposed Rule Change, 

as Modified by Partial Amendment No. 

1, Concerning Clearing Member 

Cybersecurity Obligations 

September 27, 2023. 

On March 21, 2023, the Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change SR–OCC–2023– 

003 pursuant to Section 19(b) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and Rule 19b–4 2

thereunder to amend certain provisions 

in OCC’s Rules relating to each Clearing 

Member’s obligation to address a 

’’Security Incident’’ (i.e., the occurrence 

of a cyber-related disruption or 

intrusion) of that Clearing Member.3

The proposed rule change was 

published for public comment in the 

Federal Register on April 5, 2023.4 The 

Commission has received comments 

regarding the proposed rule change.5

On May 18, 2023, pursuant to Section 

19(b)(2) of the Exchange Act,6 the 

Commission designated a longer period 

within which to approve, disapprove, or 

institute proceedings to determine 

whether to approve or disapprove the 

proposed rule change.7 On May 24, 

2023, OCC filed Partial Amendment No. 

1 to the proposed rule change.8 On July 

3, 2023, the Commission instituted 

proceedings, pursuant to Section 

19(b)(2)(B) of the Exchange Act,9 to 

determine whether to approve or 

disapprove the Proposed Rule Change, 

as modified by Partial Amendment No. 

1 (hereinafter defined as ‘‘Proposed Rule 

Change’’).10

Section 19(b)(2) of the Exchange 

Act 11 provides that proceedings to 

determine whether to approve or 

disapprove a proposed rule change must 

be concluded within 180 days of the 

date of publication of notice of filing of 

the proposed rule change. The time for 

conclusion of the proceedings may be 

extended for up to 60 days if the 

Commission determines that a longer 

period is appropriate and publishes the 

reasons for such determination.12 The 

180th day after publication of the Notice 

in the Federal Register is October 2, 

2023. 

The Commission is extending the 

period for Commission action on the 

Proposed Rule Change. The Commission 

finds that it is appropriate to designate 

a longer period within which to take 

action on the Proposed Rule Change so 

that the Commission has sufficient time 

to consider the issues raised by the 

Proposed Rule Change and to take 

action on the Proposed Rule Change. 

Accordingly, pursuant to Section 

19(b)(2)(B)(ii)(II) of the Exchange Act,13

the Commission designates December 1, 

2023, as the date by which the 

Commission should either approve or 

disapprove the Proposed Rule Change 

SR–OCC–2023–003. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21784 Filed 10–2–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98572; File No. SR–ICC– 

2023–013] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Order Approving 

Proposed Rule Change Relating to 

ICC’s Treasury Operations Policies 

and Procedures 

September 27, 2023. 

I. Introduction 

On August 15, 2023, ICE Clear Credit 

LLC (‘‘ICC’’), filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

revise the ICC Treasury Operations 

Policies and Procedures (‘‘Treasury 

Policy’’). The proposed rule change was 

published for comment in the Federal 

Register on August 28, 2023.3 The 

Commission has not received any 

comments on the proposed rule change. 

For the reasons discussed below, the 

Commission is approving the proposed 

rule change. 

II. Description of the Proposed Rule 

Change 

ICC is registered with the Commission 

as a clearing agency for the purpose of 


ddrumheller on DSK120RN23PROD with NOTICES1