Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices 43919 

69See Notice, supra note 3, 83 FR at 3387. 

70See supra note 66 and accompanying text. 

71See supra note 68 and accompanying text. The 

Commission also notes that the Exchange did not 

respond to questions in the Order Instituting 

Proceedings seeking comment on how the Funds’ 

striking NAV as of 11:00 a.m. E.T. (five hours before 

the close of the regular trading session) would affect 

arbitrage, and what the potential effect on investors 

would be if the arbitrage mechanism were impaired. 

See Order Instituting Proceedings, supra note 7, 83 

FR at 18605. 

72See Ahn Letter, supra note 9. 

73See Galt Letter, supra note 9; Santos Letter, 

supra note 9. 

74See David Letter, supra note 9; Santos Letter, 

supra note 9. 

75See David Letter, supra note 9. 

76See Williams Letter, supra note 9, at 1. 

77See Santos Letter, supra note 9. 

78 In disapproving the proposed rule change, the 

Commission has considered its impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). See also supra note 67 and 

accompanying text. 

79 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

2. Analysis 

The Exchange asserts that approval of 

the proposal would enhance 

competition among market participants, 

to the benefit of investors.69 One 

commenter asserts that approval of the 

proposal will provide greater security, 

transparency, and liquidity, as well as 

safe custody, for investors in 

cryptocurrencies.70 And one commenter 

suggests that the Commission should 

seek to protect investors through 

disclosure requirements or suitability 

standards, rather than disapproving a 

bitcoin-ETP proposal.71

The Commission acknowledges that, 

compared to trading in unregulated 

bitcoin spot markets, trading a bitcoinbased ETP on a national securities 

exchange may provide some additional 

protection to investors, but the 

Commission must consider this 

potential benefit in the broader context 

of whether the proposal meets each of 

the applicable requirements of the 

Exchange Act. Pursuant to Section 

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

Commission must disapprove a 

proposed rule change filed by a national 

securities exchange if it does not find 

that the proposed rule change is 

consistent with the applicable 

requirements of the Exchange Act— 

including the requirement under 

Section 6(b)(5) that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices. 

Thus, even if a proposed rule change 

would provide certain benefits to 

investors and the markets, the proposed 

rule change may still fail to meet other 

requirements under the Exchange Act. 

For the reasons discussed above, the 

Exchange has not met its burden of 

demonstrating an adequate basis in the 

record for the Commission to find that 

the proposal is consistent with 

Exchange Act Section 6(b)(5), and, 

accordingly, the Commission must 

disapprove the proposal. 

D. Other Comments 

Comment letters also addressed the 

intrinsic value of bitcoin 72; the desire of 

individuals to invest in a bitcoin-based 

ETP 73; the ways in which approval of 

the proposal would increase investor 

confidence 74; the ways in which 

promoting the adoption of bitcoin and 

other cryptocurrencies would ease intergenerational tension and wealth 

inequality and foster the confidence of 

younger generations in the economic 

system 75; the Commission’s process for 

granting Exchange Act exemptive relief 

in connection with ETP approval 76; and 

the potential impact of Commission 

approval of the proposed ETPs on the 

price of bitcoin.77 Ultimately, however, 

additional discussion of these tangential 

topics is unnecessary, as they do not 

bear on the basis for the Commission’s 

decision to disapprove the proposal. 

E. Basis for Disapproval 

The record before the Commission 

does not provide a basis for the 

Commission to conclude that the 

Exchange has met its burden under the 

Exchange Act and the Commission’s 

Rules of Practice to demonstrate that its 

proposed rule change is consistent with 

Exchange Act Section 6(b)(5).78

IV. Conclusion 

For the reasons set forth above, the 

Commission does not find, pursuant to 

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

that the proposed rule change is 

consistent with the requirements of the 

Exchange Act and the rules and 

regulations thereunder applicable to a 

national securities exchange, and in 

particular, with Section 6(b)(5) of the 

Exchange Act. 

It is therefore ordered, pursuant to 

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

that proposed rule change SR– 

NYSEArca–2018–02 is disapproved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.79

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–18577 Filed 8–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83898; File No. SR– 

NYSEAMER–2018–41] 

Self-Regulatory Organizations; NYSE 

American LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Rule 7.31E 

Relating to Reserve Orders and ReName an Order Type 

August 22, 2018. 

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 August 

10, 2018, NYSE American LLC 

(‘‘Exchange’’ or ‘‘NYSE American’’) filed 

with the Securities and Exchange 

Commission (‘‘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 amend 

Rule 7.31E relating to Reserve Orders 

and re-name an order type. 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 amend its 

Cash Equities Pillar Platform Rule 7.31E 


daltland on DSKBBV9HB2PROD with NOTICES
43920 Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices 

4The terms ‘‘Priority 2—Display Orders’’ and 

‘‘Priority 3—Non-Display Orders’’ are defined in 

Rule 7.36E(e). 

5See Securities Exchange Act Release No. 83768 

(August 3, 2018), 83 FR 39488 (August 9, 2018) 

(SR–NYSE–2018–26) (Approval Order). 

6See Cboe BZX Exchange, Inc. (‘‘BZX’’) Rule 

11.9(c)(1); Nasdaq Stock Market LLC (‘‘Nasdaq’’) 

Rule 7503(h). 

relating to Reserve Orders and re-name 

an order type. 

Background 

Rule 7.31E(d)(1) defines a Reserve 

Order as a Limit or Inside Limit Order 

with a quantity of the size displayed 

and with a reserve quantity of the size 

(‘‘reserve interest’’) that is not 

displayed. The displayed quantity of a 

Reserve Order is ranked Priority 2— 

Display Orders and the reserve interest 

is ranked Priority 3—Non-Display 

Orders.4 Rule 7.31E(d)(1)(A) provides 

that on entry, the display quantity of a 

Reserve Order must be entered in round 

lots and the displayed portion of a 

Reserve Order will be replenished 

following any execution. That rule 

further provides that the Exchange will 

display the full size of the Reserve 

Order when the unfilled quantity is less 

than the minimum display size for the 

order. Rule 7.31E(d)(1)(B) provides that 

each time a Reserve Order is 

replenished from reserve interest, a new 

working time is assigned to the 

replenished quantity of the Reserve 

Order, while the reserve interest retains 

the working time of original order entry. 

Pursuant to Rule 7.31E(d)(1)(C), a 

Reserve Order must be designated Day 

and may be combined with a NonRoutable Limit Order. 

Proposed Rule Change Relating To 

Renaming of Order Type 

The Exchange proposes nonsubstantive amendments to Rules 7.31E 

and 7.46E to rename the ‘‘Limit NonDisplayed Order’’ as the ‘‘NonDisplayed Limit Order.’’ The Exchange 

believes this proposed rule change 

would conform the style of this order 

type with the name of the Non-Routable 

Limit Order. The Exchange therefore 

believes that this proposed rule change 

would promote clarity and consistency 

in its rules. 

Proposed Rule Change Relating to 

Reserve Orders 

The Exchange proposes to amend 

Rule 7.31E(d)(1) to change the manner 

by which the display portion of a 

Reserve Order would be replenished. As 

proposed, rather than replenishing the 

display quantity following any 

execution, the Exchange proposes to 

replenish the Reserve Order when the 

display quantity is decremented to 

below a round lot. The changes that the 

Exchange is proposing to Rule 7.31 

relating to Reserve Orders are identical 

to changes that were recently approved 

for the Exchange’s affiliate, New York 

Stock Exchange LLC (‘‘NYSE’’).5 In 

addition, the proposed changes to how 

Reserve Orders would be replenished 

are consistent with how Reserve Orders 

are replenished on other equity 

exchanges.6

As is currently the case, the replenish 

quantity would be the minimum display 

size of the order or the remaining 

quantity of reserve interest if it is less 

than the minimum display quantity. To 

reflect this functionality, the Exchange 

proposes that Rule 7.31E(d)(1)(A) would 

be amended as follows (deleted text 

bracketed; new text underlined): 

(A) On entry, the display quantity of a 

Reserve Order must be entered in round lots. 

The displayed portion of a Reserve Order 

will be replenished when the display 

quantity is decremented to below a round lot. 

The replenish quantity will be the minimum 

display quantity of the order or the remaining 

quantity of the reserve interest if it is less 

than the minimum display quantity 

[following any execution. The Exchange will 

display the full size of the Reserve Order 

when the unfilled quantity is less than the 

minimum display size for the order]. 

Under current functionality, because 

the replenished quantity is assigned a 

new working time, it is feasible for a 

single Reserve Order to have multiple 

replenished quantities with separate 

working times, each, a ‘‘child’’ order. 

The proposed change to limit when a 

Reserve Order would be replenished to 

when the display quantity is 

decremented to below a round lot only 

would reduce the number of child 

orders for a Reserve Order. The 

Exchange believes that minimizing the 

number of child orders for a Reserve 

Order would reduce the potential for 

market participants to detect that a child 

order displayed on the Exchange’s 

proprietary market data feeds is 

associated with a Reserve Order. 

In most cases, the maximum number 

of child orders for a Reserve Order 

would be two. For example, assume a 

Reserve Order to buy has a display 

quantity of 100 shares and an additional 

200 shares of reserve interest. A sell 

order of 50 shares would trade with the 

display quantity of such Reserve Order, 

which would decrement the display 

quantity to 50 shares. As proposed, the 

Exchange would then replenish the 

Reserve Order with 100 shares from the 

reserve interest, i.e., the minimum 

display size for the order. After this 

second replenishment, the Reserve 

Order would have two child orders, one 

for 50 shares, the other for 100 shares, 

each with different working times. 

Generally, when there are two child 

orders, the older child order of less than 

a round lot will be executed before the 

second child order. However, there are 

limited circumstances when a Reserve 

Order could have two child orders that 

equal less than a round lot, which, as 

proposed, would trigger a 

replenishment. For such circumstance, 

the Exchange proposes that when a 

Reserve Order is replenished from 

reserve interest and already has two 

child orders that equal less than a round 

lot, the child order with the later 

working time would be reassigned the 

new working time assigned to the next 

replenished quantity. 

For example, taking the same Reserve 

Order as above: 

• If 100 shares of such order (‘‘A’’) are 

routed on arrival, it would have a 

display quantity of 100 shares (‘‘B’’) and 

100 shares in reserve interest. 

• While ‘‘A’’ is routed, a sell order of 

50 shares would trade with ‘‘B,’’ 

decrementing ‘‘B’’ to 50 shares and the 

Reserve Order would be replenished 

from reserve interest, creating a second 

child order ‘‘C’’ of 100 shares. 

• Next, the Exchange receives a 

request to reduce the size of the Reserve 

Order from 300 shares to 230 shares. 

Because ‘‘A’’ is still routed away and 

there is no reserve interest, and as 

described in more detail below, this 70 

share reduction in size would be 

applied against the most recent child 

order of ‘‘C,’’ which would be reduced 

to 30 shares. Together with ‘‘B,’’ which 

would still be 50 shares, the two 

displayed child orders would equal less 

than a round lot, but with no quantity 

in reserve interest. 

• Next, ‘‘A’’ is returned unexecuted, 

and as described below, becomes 

reserve interest and is evaluated for 

replenishment. Because the total display 

quantity (‘‘B’’ + ‘‘C’’) is less than a 

round lot, this Reserve Order would be 

replenished. But because the Reserve 

Order already has two child orders, the 

child order with the later working time, 

‘‘C,’’ would be returned to the reserve 

interest, which would now have a 

quantity of 130 shares (‘‘C’’ + ‘‘A’’), and 

the Reserve Order would be replenished 

with 100 shares from the reserve interest 

with a new working time, which would 

be a new child order ‘‘D.’’ 

• After this replenishment, this 

Reserve Order would have two child 

orders of ‘‘B’’ for 50 shares and ‘‘D’’ for 

100 shares, and a reserve interest of 30 

shares. 

To effect these changes, the Exchange 

proposes to amend current Rule 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices 43921 

7The term ‘‘PBBO’’ is defined in Rule 1.1E. The 

term ‘‘MPV’’ is defined in Rule 7.6E. 

8 15 U.S.C. 78f(b). 

9 15 U.S.C. 78f(b)(5). 

10See supra notes 5 and 6. 

7.31E(d)(1)(B) to specify that each 

display quantity of a Reserve Order with 

a different working time would be 

referred to as a child order. The 

Exchange further proposes new Rule 

7.31E(d)(1)(B)(i) that would provide that 

when a Reserve Order is replenished 

from reserve interest and already has 

two child orders that equal less than a 

round lot, the child order with the later 

working time would rejoin the reserve 

interest and be assigned the new 

working time assigned to the next 

replenished quantity. 

The Exchange also proposes new Rule 

7.31E(d)(1)(B)(ii) to provide that if a 

Reserve Order is not routable (i.e., is 

combined with a Non-Routable Limit 

Order), the replenish quantity would be 

assigned a display and working price 

consistent with the instructions for the 

order, which represents current 

functionality. For example, for a NonRoutable Limit Reserve Order, if the 

display price would lock or cross the 

contra-side PBBO, the replenished 

quantity would be assigned a display 

price one MPV worse than the PBBO 

and a working price equal to the contraside PBBO, as provided for in Rule 

7.31E(e)(1)(A)(i).7 The Exchange 

believes that this proposed rule text 

would provide transparency and clarity 

to Exchange rules. 

The Exchange further proposes to add 

new subsection (D) to Rule 7.31E(d)(1) 

to describe when a Reserve Order would 

be routed. As proposed, a routable 

Reserve Order would be evaluated for 

routing both on arrival and each time 

the display quantity is replenished. 

Proposed Rule 7.31E(d)(1)(D)(i) would 

provide that if routing is required, the 

Exchange would route from reserve 

interest before publishing the display 

quantity. In addition, if after routing, 

there is less than a round lot available 

to display, the Exchange would wait 

until the routed quantity returns 

(executed or unexecuted) before 

publishing the display quantity. In the 

example described above, the Exchange 

would have published the display 

quantity before the routed quantity 

returned because the display quantity 

was at least a round lot. If, however, 250 

shares of a Reserve Order of 300 shares 

had been routed on arrival, because the 

unrouted quantity was less than a round 

lot (50 shares), the Exchange would wait 

for the routed quantity to return, either 

executed or unexecuted, before 

publishing the display quantity. 

The Exchange proposes this 

functionality to reduce the possibility 

for a Reserve Order to have more than 

one child order. If the Exchange did not 

wait, and instead displayed the 50 

shares when the balance of the Reserve 

Order has routed, if the 250 shares 

returns unexecuted, such Reserve Order 

would be replenished and would have 

two child orders—one for the 50 shares 

that was displayed when the order was 

entered and a second for the 100 shares 

that replenished the Reserve Order from 

the quantity that returned unexecuted. 

By contrast, by waiting for a report on 

the routed quantity, if the routed 

quantity was not executed, the 

Exchange would display the minimum 

display quantity as a single child order. 

If the routed quantity was executed, the 

Exchange would display the 50 shares, 

but only because that would be the full 

remaining quantity of the Reserve 

Order. 

Proposed Rule 7.31E(d)(1)(D)(ii) 

would provide that any quantity of a 

Reserve Order that is returned 

unexecuted would join the working 

time of the reserve interest, which is 

current functionality. If there is no 

quantity of reserve interest to join, the 

returned quantity would be assigned a 

new working time as reserve interest. As 

further proposed, in either case, such 

reserve interest would replenish the 

display quantity as provided for in 

Rules 7.31E(d)(1)(A) and (B). The 

Exchange believes that this proposed 

rule text would promote transparency 

and clarity in Exchange rules. The 

Exchange further believes it is 

appropriate for a returned quantity of a 

Reserve Order to join the reserve 

interest first because the order may not 

be eligible for a replenishment to the 

display quantity. 

Proposed Rule 7.31E(d)(1)(E) would 

provide that a request to reduce in size 

a Reserve Order would cancel the 

reserve interest before canceling the 

display quantity and if there is more 

than one child order, the child order 

with the later working time would be 

cancelled first. This represents current 

functionality and the example set forth 

above demonstrates how this would 

function. The Exchange believes that 

canceling reserve interest before a child 

order would promote the display of 

liquidity on an exchange. The Exchange 

further believes that canceling a latertimed child order would respect the 

time priority of the first child order, and 

any priority such child order may have 

for allocations. 

* * * * * 

Because of the technology changes 

associated with the proposed rule 

changes to Reserve Orders, the 

Exchange will announce by Trader 

Update when these changes will be 

implemented, which the Exchange 

anticipates will be in the third quarter 

of 2018. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),8 in general, and furthers the 

objectives of Section 6(b)(5),9 in 

particular, because it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, to remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. 

The Exchange believes that the 

proposed rule change to replenish a 

Reserve Order only if the display 

quantity is decremented to below a 

round lot would remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system because it would reduce the 

number of child orders associated with 

a single Reserve Order. By reducing the 

number of child orders, the Exchange 

believes it would reduce the potential 

for market participants to detect that a 

child order is associated with a Reserve 

Order. The proposed changes to Reserve 

Orders are identical to recently 

approved changes to the rules of its 

affiliated exchange, NYSE, and how a 

Reserve Order would be replenished is 

also consistent with how Reserve Orders 

function on BZX and Nasdaq.10

For similar reasons, the Exchange 

believes that if a Reserve Order has two 

child orders that equal less than a round 

lot, it would remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system to assign a new working time to 

the later child order so that when such 

Reserve Order is replenished, it would 

have a maximum of only two child 

orders. The Exchange believes that this 

proposed change would streamline the 

operation of Reserve Orders and meet 

the objective to reduce the potential for 

market participants to be able to identify 

that a child order is associated with a 

Reserve Order. 

The Exchange further believes that the 

proposed rule change to evaluate a 

Reserve Order for routing both on 

arrival and when replenishing would 

remove impediments to and perfect the 


daltland on DSKBBV9HB2PROD with NOTICES
43922 Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices 

11 15 U.S.C. 78s(b)(3)(A)(iii). 

12 17 CFR 240.19b–4(f)(6). 

13 17 CFR 240.19b–4(f)(6). 

14 17 CFR 240.19b–4(f)(6)(iii). 

15 15 U.S.C. 78s(b)(2)(B). 16 17 CFR 200.30–3(a)(12). 

mechanism of a free and open market 

and a national market system because it 

would reduce the potential for the 

display quantity of a Reserve Order to 

lock or cross the PBBO of an away 

market. The Exchange further believes 

that routing from reserve interest would 

promote the display of liquidity on the 

Exchange, because if there is at least a 

round lot remaining of a Reserve Order 

that is not routed, the Exchange would 

display that quantity. The Exchange also 

believes that it would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system to wait to 

display a Reserve Order if there is less 

than a round lot remaining after routing 

because it would reduce the potential 

for such Reserve Order to have more 

than one child order. Finally, the 

Exchange believes that joining any 

quantity of a Reserve Order that is 

returned unexecuted with reserve 

interest first would be consistent with 

the proposed replenishment logic that a 

Reserve Order would be replenished 

only if the display quantity is 

decremented to below a round lot. 

The Exchange believes that it would 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system to apply 

a request to reduce in size a Reserve 

Order to the reserve interest first, and 

then next to the child order with the 

later working time, because such 

functionality would promote the display 

of liquidity on the Exchange and honor 

the priority of the first child order with 

the earlier working time. The Exchange 

believes that including this existing 

functionality in Rule 7.31E would 

promote transparency and clarity in 

Exchange rules. 

The Exchange believes that the 

proposed non-substantive amendment 

to rename the ‘‘Limit Non-Displayed 

Order’’ as the ‘‘Non-Displayed Limit 

Order’’ would remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system because the proposed change 

would conform to the naming 

convention of the Exchange’s NonRoutable Limit Order and would 

therefore promote clarity and 

consistency in Exchange rules. 

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 purposes of the Act. The 

proposed rule change is not designed to 

address any competitive issues. Rather, 

the proposed rule change to Reserve 

Orders is designed to reduce the 

potential for market participants to 

identify that a child order is related to 

a Reserve Order. The additional 

proposed rule changes are nonsubstantive and are designed to promote 

clarity and consistency in Exchange 

rules. 

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 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 11 and Rule 

19b–4(f)(6) thereunder.12 Because the 

proposed rule change does not: (i) 

Significantly affect the protection of 

investors or the public interest; (ii) 

impose any significant burden on 

competition; and (iii) become operative 

prior to 30 days from the date on which 

it was filed, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act and Rule 19b–4(f)(6)(iii) 

thereunder. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 13 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b4(f)(6)(iii),14 the Commission 

may designate a shorter time if such 

action is consistent with the protection 

of investors and the public interest. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 15 of the Act to 

determine whether the proposed rule 

change should be approved or 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEAMER–2018–41 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–NYSEAMER–2018–41. 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 (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NYSEAMER–2018–41 and 

should be submitted on or 

beforeSeptember 18, 2018. 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices 43923 

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

2 17 CFR 240.19b–4. 

3The Trust filed a registration statement with the 

Commission on December 15, 2017. See 

Registration Statement on Form S–1, dated 

December 15, 2017 (File No. 333–222109) 

(‘‘Registration Statement’’). The Registration 

Statement ‘‘will be effective as of the date of any 

offer and sale pursuant to the Registration 

Statement.’’ Notice, infra note 5, 83 FR at 2705 n.7. 

4On August 21, 2018, the Exchange filed 

Amendment No. 1 to the proposal, and on August 

22, 2018, the Exchange filed Amendment No. 2 to 

the proposal. As discussed below, however, see 

Section III.E, infra, the Commission views these 

amendments as untimely. Furthermore, even if 

these amendments had been timely filed, they 

would not alter the Commission’s conclusion that 

the Exchange’s proposal is not consistent with the 

Exchange Act. See id. 

5See Securities Exchange Act Release No. 82484 

(Jan. 11, 2018), 83 FR 2704 (Jan. 18, 2018) 

(‘‘Notice’’). 

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

7See Securities Exchange Act Release No. 82759 

(Feb. 22, 2018), 83 FR 8719 (Feb. 28, 2018). 

8 15 U.S.C. 78s(b)(2)(B). 

9See Securities Exchange Act Release No. 82995 

(Apr. 5, 2018), 83 FR 15425 (Apr. 10, 2018) (‘‘Order 

Instituting Proceedings’’). 

10See id. at 15426. 

11See Securities Exchange Act Release No. 83548 

(June 28, 2018), 83 FR 31246 (July 3, 2018). 

12See Letters from Anita Desai (Apr. 6, 2018) 

(‘‘Desai Letter’’); Ed Kaleda (Apr. 6, 2018) (‘‘Kaleda 

Letter’’); Don Krohn (Apr. 7, 2018) (‘‘Krohn Letter’’); 

Adam Malkin (Apr. 8, 2018) (‘‘Malkin Letter’’); 

Shravan Kumar (Apr. 11, 2018) (‘‘Kumar Letter’’); 

David Barnwell (Apr. 12, 2018) (‘‘Barnwell Letter’’); 

Louise Fitzgerald (Apr. 18, 2018) (‘‘Fitzgerald 

Letter’’); Sharon Brown-Hruska, Managing Director, 

and Trevor Wagener, Consultant, NERA Economic 

Consulting (May 18, 2018) (‘‘NERA Letter’’); Alex 

Hales (July 8, 2018) (‘‘Hales Letter’’); Anthony C. 

Otenyi (July 18, 2018) (‘‘Otenyi Letter’’); V.K. Bhat 

(July 28, 2018) (‘‘Bhat Letter’’); Sami Santos (Aug. 

7, 2018) (‘‘Santos Letter’’); Arthur Netto (Aug. 9, 

2018) (‘‘Netto Letter’’); Sam M. Ahn (Aug. 17, 2018) 

(‘‘Ahn Letter’’); and William Rhind, CEO, 

GraniteShares (Aug. 20, 2018) (‘‘GraniteShares 

Letter’’). All comments on the proposed rule change 

are available on the Commission’s website at: 

https://www.sec.gov/comments/sr-cboebzx-2018- 

001/cboebzx2018001.htm. 

13See 15 U.S.C. 78f(b)(5). 

14See infra notes 31–33 and accompanying text. 

15BZX Rule 14.11(f)(4) applies to Trust Issued 

Receipts that invest in ‘‘Financial Instruments.’’ 

The term ‘‘Financial Instruments,’’ as defined in 

BZX Rule 14.11(f)(4)(A)(iv), means any combination 

of investments, including cash; securities; options 

on securities and indices; futures contracts; options 

on futures contracts; forward contracts; equity caps, 

collars, and floors; and swap agreements. 

16See Notice, supra note 5, 83 FR at 2707. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18570 Filed 8–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83913; File No. SR– 

CboeBZX–2018–001] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Order 

Disapproving a Proposed Rule Change 

To List and Trade the Shares of the 

GraniteShares Bitcoin ETF and the 

GraniteShares Short Bitcoin ETF 

August 22, 2018. 

I. Introduction 

On January 5, 2018, 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 (‘‘Exchange 

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

proposed rule change to list and trade 

the shares (‘‘Shares’’) of the 

GraniteShares Bitcoin ETF (‘‘Long 

Fund’’) and the GraniteShares Short 

Bitcoin ETF (‘‘Short Fund’’) (each a 

‘‘Fund’’ and, collectively, ‘‘Funds’’) 

issued by the GraniteShares ETP Trust 

(‘‘Trust’’) 3 under BZX Rule 14.11(f)(4).4

The proposed rule change was 

published for comment in the Federal 

Register on January 18, 2018.5 The 

comment period for the Notice of 

Proposed Rule Change closed on 

February 8, 2018. 

On February 22, 2018, pursuant to 

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

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 

approve or disapprove the proposed 

rule change.7 On April 5, 2018, the 

Commission instituted proceedings 

under Section 19(b)(2)(B) of the 

Exchange Act 8 to determine whether to 

approve or disapprove the proposed 

rule change.9 The comment period and 

rebuttal comment period for the Order 

Instituting Proceedings closed on May 1, 

2018, and May 15, 2018, respectively.10

Finally, on June 28, 2018, the 

Commission extended the period for 

consideration of the proposed rule 

change to September 15, 2018.11 As of 

August 21, 2018, the Commission had 

received 15 comments on the proposed 

rule change.12

This order disapproves the proposed 

rule change. Although the Commission 

is disapproving this proposed rule 

change, the Commission emphasizes 

that its disapproval does not rest on an 

evaluation of whether bitcoin, or 

blockchain technology more generally, 

has utility or value as an innovation or 

an investment. Rather, the Commission 

is disapproving this proposed rule 

change because, as discussed below, the 

Exchange has not met its burden under 

the Exchange Act and the Commission’s 

Rules of Practice to demonstrate that its 

proposal is consistent with the 

requirements of the Exchange Act 

Section 6(b)(5), in particular the 

requirement that a national securities 

exchange’s rules be designed to prevent 

fraudulent and manipulative acts and 

practices.13 Among other things, the 

Exchange has offered no record 

evidence to demonstrate that bitcoin 

futures markets are ‘‘markets of 

significant size.’’ That failure is critical 

because, as explained below, the 

Exchange has failed to establish that 

other means to prevent fraudulent and 

manipulative acts and practices will be 

sufficient, and therefore surveillancesharing with a regulated market of 

significant size related to bitcoin is 

necessary to satisfy the statutory 

requirement that the Exchange’s rules be 

designed to prevent fraudulent and 

manipulative acts and practices.14

II. Description of the Proposal 

The Exchange proposes to list and 

trade the Shares under BZX Rule 

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

and trading of Trust Issued Receipts on 

the Exchange.15 Each Fund will be a 

series of the Trust, and the Trust and the 

Funds will be managed and controlled 

by GraniteShares Advisors LLC 

(‘‘Sponsor’’). Bank of New York Mellon 

will serve as administrator, custodian, 

and transfer agent for the Funds. 

Foreside Fund Services, LLC will serve 

as the distributor of the Shares 

(‘‘Distributor’’). The Trust will offer 

Shares of the Funds for sale through the 

Distributor in ‘‘Creation Units’’ in 

transactions with ‘‘Authorized 

Participants’’ who have entered into 

agreements with the Distributor.16

According to the Exchange, the Long 

Fund’s investment objective will be to 

seek results (before fees and expenses) 

that, both for a single day and over time, 

correspond to the performance of lead 

month bitcoin futures contracts listed 

and traded on the Cboe Futures 

Exchange, Inc. (‘‘CFE’’) (‘‘Benchmark 

Futures Contracts’’). Conversely, the 

Short Fund’s investment objective will 

be to seek results (before fees and 

expenses) that, on a daily basis, 

correspond to the inverse (¥1x) of the 

daily performance of the Benchmark 

Futures Contracts for a single day. Each 

Fund generally intends to invest 

substantially all of its assets in the 

Benchmark Futures Contracts and cash 

and cash equivalents (which would be 

used to collateralize the Benchmark 

Futures Contracts), but may invest in 

other U.S. exchange listed bitcoin 

futures contracts, as available (together 


daltland on DSKBBV9HB2PROD with NOTICES