68888 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 97899 

(July 13, 2023), 88 FR 46249 (‘‘Notice’’). Comments 

on the proposed rule change, as modified by 

Amendment No. 2, are available at: https:// 

www.sec.gov/comments/sr-cboebzx-2023-044/

srcboebzx2023044.htm. 

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

5See Securities Exchange Act Release No. 98263, 

88 FR 61642 (Sept. 7, 2023). The Commission 

designated October 17, 2023, as the date by which 

the Commission shall approve or disapprove, or 

institute proceedings to determine whether to 

disapprove, the proposed rule change. 

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

7See Notice, supra note 3. 

8See id. at 46278. FD Funds Management LLC 

(‘‘Sponsor’’) is the sponsor of the Trust. 

9See id. The Trust generally does not intend to 

hold cash or cash equivalents; however, there may 

be situations where the Trust would unexpectedly 

hold cash on a temporary basis. See id. 

10See id. at 46279. 

11See id. 

12See id. 

13 15 U.S.C. 78s(b)(2)(B). 

14 Id. 

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

16See Notice, 88 FR at 46255–77. 

17See id. at 46281. 

18See id. at 46282. 

19See id. 

20See id. at 46257 n.52. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98639; File No. SR– 

CboeBZX–2023–044] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change, as Modified by 

Amendment No. 2, To List and Trade 

Shares of the Wise Origin Bitcoin Trust 

Under BZX Rule 14.11(e)(4), 

Commodity-Based Trust Shares 

September 28, 2023. 

On June 30, 2023, Cboe BZX 

Exchange, Inc. (‘‘BZX’’ or ‘‘Exchange’’) 

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 list and trade shares 

(‘‘Shares’’) of the Wise Origin Bitcoin 

Trust (‘‘Trust’’) under BZX Rule 

14.11(e)(4), Commodity-Based Trust 

Shares. On July 11, 2023, the Exchange 

filed Amendment No. 1 to the proposed 

rule change, which amended and 

replaced the proposed rule change in its 

entirety. On July 13, 2023, the Exchange 

filed Amendment No. 2 to the proposed 

rule change, which amended and 

replaced the proposed rule change, as 

modified by Amendment No. 1, in its 

entirety. The proposed rule change, as 

modified by Amendment No. 2, was 

published for comment in the Federal 

Register on July 19, 2023.3

On August 31, 2023, pursuant to 

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

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change, as modified by 

Amendment No. 2.5 This order 

institutes proceedings under Section 

19(b)(2)(B) of the Act 6 to determine 

whether to approve or disapprove the 

proposed rule change, as modified by 

Amendment No. 2. 

I. Summary of the Proposal, as 

Modified by Amendment No. 2 

As described in more detail in the 

Notice,7 the Exchange proposes to list 

and trade the Shares of the Trust under 

BZX Rule 14.11(e)(4), which governs the 

listing and trading of Commodity-Based 

Trust Shares on the Exchange. 

The investment objective of the Trust 

is to seek to track the performance of 

bitcoin, as measured by the performance 

of the Fidelity Bitcoin Index PR (the 

‘‘Index’’), less the Trust’s expenses and 

other liabilities.8 The Trust’s assets will 

consist of bitcoin held by the Trust’s 

custodian on behalf of the Trust.9 The 

Trust’s holdings of bitcoin will be 

valued using the same methodology as 

used to calculate the Index.10 The 

administrator of the Trust will calculate 

the net asset value of the Trust once 

each Exchange trading day after 4:00 

p.m. ET.11 When the Trust sells or 

redeems its Shares, it will do so in ‘‘inkind’’ transactions with authorized 

participants in blocks of Shares.12

II. Proceedings To Determine Whether 

To Approve or Disapprove SR– 

CboeBZX–2023–044 and Grounds for 

Disapproval Under Consideration 

The Commission is instituting 

proceedings pursuant to Section 

19(b)(2)(B) of the Act 13 to determine 

whether the proposed rule change 

should be approved or disapproved. 

Institution of proceedings is appropriate 

at this time in view of the legal and 

policy issues raised by the proposed 

rule change, as discussed below. 

Institution of proceedings does not 

indicate that the Commission has 

reached any conclusions with respect to 

any of the issues involved. Rather, as 

described below, the Commission seeks 

and encourages interested persons to 

provide comments on the proposed rule 

change. 

Pursuant to Section 19(b)(2)(B) of the 

Act,14 the Commission is providing 

notice of the grounds for disapproval 

under consideration. The Commission is 

instituting proceedings to allow for 

additional analysis of the proposed rule 

change’s consistency with Section 

6(b)(5) of the Act, which requires, 

among other things, 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.’’ 15

The Commission asks that 

commenters address the sufficiency of 

the Exchange’s statements in support of 

the proposal, which are set forth in the 

Notice, in addition to any other 

comments they may wish to submit 

about the proposed rule change. In 

particular, the Commission seeks 

comment on the following questions 

and asks commenters to submit data 

where appropriate to support their 

views: 

1. What are commenters’ views on 

whether the proposed Trust and Shares 

would be susceptible to manipulation? 

What are commenters’ views generally 

on whether the Exchange’s proposal is 

designed to prevent fraudulent and 

manipulative acts and practices? What 

are commenters’ views generally with 

respect to the liquidity and transparency 

of the bitcoin markets and the bitcoin 

markets’ susceptibility to manipulation? 

2. Based on data and analysis 

provided and the academic research 

cited by the Exchange,16 do commenters 

agree with the Exchange that the 

Chicago Mercantile Exchange (‘‘CME’’), 

on which CME bitcoin futures trade, 

represents a regulated market of 

significant size related to spot bitcoin? 17

What are commenters’ views on 

whether there is a reasonable likelihood 

that a person attempting to manipulate 

the Shares would also have to trade on 

the CME to manipulate the Shares? 18 Do 

commenters agree with the Exchange 

that trading in the Shares would not be 

the predominant influence on prices in 

the CME bitcoin futures market? 19

3. The Exchange states that bitcoin is 

resistant to price manipulation and that 

other means to prevent fraudulent and 

manipulative acts and practices ‘‘exist 

to justify dispensing with the requisite 

surveillance sharing agreement’’ with a 

regulated market of significant size 

related to spot bitcoin.20 In support, the 

Exchange states, among other things, 

that the geographically diverse and 

continuous nature of bitcoin trading 

make it difficult and prohibitively costly 

to manipulate the price of bitcoin, and 

that the fragmentation across bitcoin 


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Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 68889 

21See id. 

22See id. at 46278. 

23See id. at 46277. 

24See id. The Exchange states that ‘‘[t]his means 

that the Exchange expects to receive market data for 

orders and trades from Coinbase, which it will 

utilize in surveillance of the trading of CommodityBased Trust Shares.’’ Id. 

25See id. 

26See, e.g. Notice of Filing of Amendment No. 3 

to, and Order Instituting Proceedings to Determine 

Whether to Approve or Disapprove, a Proposed 

Rule Change to List and Trade Shares of the ARK 

21Shares Bitcoin ETF under BZX Rule 14.11(e)(4), 

Commodity-Based Trust Shares, Securities 

Exchange Act Release No. 98112 (Aug. 11, 2023), 

88 FR 55743 (Aug. 16, 2023) (including data from 

sponsor 21Shares US LLC that purports to show 

correlations of returns across the two-year period 

from January 20, 2021, to February 1, 2023, of no 

less than 92% among certain spot bitcoin platforms 

and between the CME bitcoin futures market and 

such spot bitcoin platforms on an hourly basis, and 

no less than 78% on a minutely basis). 

27Section 19(b)(2) of the Act, as amended by the 

Securities Acts Amendments of 1975, Public Law 

94–29 (June 4, 1975), grants the Commission 

flexibility to determine what type of proceeding— 

either oral or notice and opportunity for written 

comments—is appropriate for consideration of a 

particular proposal by a self-regulatory 

organization. See Securities Acts Amendments of 

1975, Senate Comm. on Banking, Housing & Urban 

Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 

(1975). 28 17 CFR 200.30–3(a)(57). 

platforms, the relatively slow speed of 

transactions, and the capital necessary 

to maintain a significant presence on 

each trading platform make 

manipulation of bitcoin prices through 

continuous trading activity 

challenging.21 The Exchange also states 

that offering only in-kind creations and 

redemptions provides ‘‘unique 

protections against potential attempts to 

manipulate the price of the Shares’’ and 

that it makes the benchmark that the 

Sponsor uses to value the Trust’s bitcoin 

‘‘not particularly important.’’ 22 Do 

commenters agree with the Exchange’s 

statements regarding the bitcoin 

market’s resistance to price 

manipulation? 

4. The Exchange also states that it will 

execute a surveillance-sharing 

agreement with Coinbase, Inc. 

(‘‘Coinbase’’) that is intended to 

supplement the Exchange’s market 

surveillance program.23 According to 

the Exchange, the agreement is 

‘‘expected to have the hallmarks of a 

surveillance-sharing agreement between 

two members of the [Intermarket 

Surveillance Group], which would give 

the Exchange supplemental access to 

data regarding spot [b]itcoin trades on 

Coinbase where the Exchange 

determines it is necessary as part of its 

surveillance program for the 

Commodity-Based Trust Shares.’’ 24

Based on the description of the 

surveillance-sharing agreement as 

provided by the Exchange, what are 

commenters’ views of such an 

agreement if finalized and executed? Do 

commenters agree with the Exchange 

that such an agreement with Coinbase 

would be ‘‘helpful in detecting, 

investigating, and deterring fraud and 

market manipulation in the CommodityBased Trust Shares’’? 25

5. Some sponsors of proposed spot 

bitcoin exchange-traded products have 

also provided data regarding the 

correlation between certain bitcoin spot 

markets and the CME bitcoin futures 

market.26 What are commenters’ views 

on the correlation between the bitcoin 

spot market and the CME bitcoin futures 

market? What are commenters’ views on 

the extent to which that correlation 

provides evidence that the CME bitcoin 

futures market is ‘‘significant’’ related to 

spot bitcoin? 

III. Procedure: Request for Written 

Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data, and 

arguments with respect to the issues 

identified above, as well as any other 

concerns they may have with the 

proposal. In particular, the Commission 

invites the written views of interested 

persons concerning whether the 

proposal is consistent with Section 

6(b)(5) or any other provision of the Act, 

and the rules and regulations 

thereunder. Although there do not 

appear to be any issues relevant to 

approval or disapproval that would be 

facilitated by an oral presentation of 

views, data, and arguments, the 

Commission will consider, pursuant to 

Rule 19b–4, any request for an 

opportunity to make an oral 

presentation.27

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposed rule change should be 

approved or disapproved by October 25, 

2023. Any person who wishes to file a 

rebuttal to any other person’s 

submission must file that rebuttal by 

November 8, 2023. 

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– 

CboeBZX–2023–044 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–CboeBZX–2023–044. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

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

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeBZX–2023–044 and should be 

submitted on or before October 25, 

2023. Rebuttal comments should be 

submitted by November 8, 2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21959 Filed 10–3–23; 8:45 am] 

BILLING CODE 8011–01–P 


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