88668 Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 

1See Docket No. RM2018–3, Order Adopting 

Final Rules Relating to Non-Public Information, 

June 27, 2018, Attachment A at 19–22 (Order No. 

4679). 

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

2 17 CFR 240.19b–4. 

3The Trust was formed as a Delaware statutory 

trust on November 16, 2023, and is operated as a 

grantor trust for U.S. federal tax purposes. The 

Trust has no fixed termination date. 

Rockville, Maryland. The public is 

invited to attend the Commission’s 

meeting in person or watch live via 

webcast at the Web address—https://

video.nrc.gov/. 

Week of January 22, 2024—Tentative 

Tuesday, January 23, 2024 

10:00 a.m. Briefing on International 

Activities (Public Meeting) 

(Contacts: Jennifer Holzman: 301– 

415–8537, Doris Lewis 301–287– 

3794) 

Additional Information: The meeting 

will be held in the Commissioners’ 

Conference Room, 11555 Rockville Pike, 

Rockville, Maryland. The public is 

invited to attend the Commission’s 

meeting in person or watch live via 

webcast at the Web address—https://

video.nrc.gov/. 

Week of January 29, 2024—Tentative 

There are no meetings scheduled for 

the week of January 29, 2024. 

CONTACT PERSON FOR MORE INFORMATION: 

For more information or to verify the 

status of meetings, contact Wesley Held 

at 301–287–3591 or via email at 

Wesley.Held@nrc.gov. 

The NRC is holding the meetings 

under the authority of the Government 

in the Sunshine Act, 5 U.S.C. 552b. 

Dated: December 20, 2023. 

For the Nuclear Regulatory Commission. 

Wesley W. Held, 

Policy Coordinator, Office of the Secretary. 

[FR Doc. 2023–28451 Filed 12–20–23; 4:15 pm] 

BILLING CODE 7590–01–P 

POSTAL REGULATORY COMMISSION 

[Docket Nos. MC2024–127 and CP2024–133] 

New Postal Products 

AGENCY: Postal Regulatory Commission. 

ACTION: Notice. 

SUMMARY: The Commission is noticing a 

recent Postal Service filing for the 

Commission’s consideration concerning 

a negotiated service agreement. This 

notice informs the public of the filing, 

invites public comment, and takes other 

administrative steps. 

DATES: Comments are due: December 

27, 2023. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http://

www.prc.gov. Those who cannot submit 

comments electronically should contact 

the person identified in the FOR FURTHER

INFORMATION CONTACT section by 

telephone for advice on filing 

alternatives. 

FOR FURTHER INFORMATION CONTACT: 

David A. Trissell, General Counsel, at 

202–789–6820. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

II. Docketed Proceeding(s) 

I. Introduction 

The Commission gives notice that the 

Postal Service filed request(s) for the 

Commission to consider matters related 

to negotiated service agreement(s). The 

request(s) may propose the addition or 

removal of a negotiated service 

agreement from the Market Dominant or 

the Competitive product list, or the 

modification of an existing product 

currently appearing on the Market 

Dominant or the Competitive product 

list. 

Section II identifies the docket 

number(s) associated with each Postal 

Service request, the title of each Postal 

Service request, the request’s acceptance 

date, and the authority cited by the 

Postal Service for each request. For each 

request, the Commission appoints an 

officer of the Commission to represent 

the interests of the general public in the 

proceeding, pursuant to 39 U.S.C. 505 

(Public Representative). Section II also 

establishes comment deadline(s) 

pertaining to each request. 

The public portions of the Postal 

Service’s request(s) can be accessed via 

the Commission’s website (http://

www.prc.gov). Non-public portions of 

the Postal Service’s request(s), if any, 

can be accessed through compliance 

with the requirements of 39 CFR 

3011.301.1

The Commission invites comments on 

whether the Postal Service’s request(s) 

in the captioned docket(s) are consistent 

with the policies of title 39. For 

request(s) that the Postal Service states 

concern Market Dominant product(s), 

applicable statutory and regulatory 

requirements include 39 U.S.C. 3622, 39 

U.S.C. 3642, 39 CFR part 3030, and 39 

CFR part 3040, subpart B. For request(s) 

that the Postal Service states concern 

Competitive product(s), applicable 

statutory and regulatory requirements 

include 39 U.S.C. 3632, 39 U.S.C. 3633, 

39 U.S.C. 3642, 39 CFR part 3035, and 

39 CFR part 3040, subpart B. Comment 

deadline(s) for each request appear in 

section II. 

II. Docketed Proceeding(s) 

1. Docket No(s).: MC2024–127 and 

CP2024–133; Filing Title: USPS Request 

to Add USPS Ground Advantage 

Contract 10 to Competitive Product List 

and Notice of Filing Materials Under 

Seal; Filing Acceptance Date: December 

18, 2023; Filing Authority: 39 U.S.C. 

3642, 39 CFR 3040.130 through 

3040.135, and 39 CFR 3035.105; Public 

Representative: Alireza Motameni; 

Comments Due: December 27, 2023. 

This Notice will be published in the 

Federal Register. 

Jennie L. Jbara, 

Alternate Certifying Officer. 

[FR Doc. 2023–28272 Filed 12–21–23; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99197; File No. SR– 

CboeBZX–2023–101] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing of 

a Proposed Rule Change To List and 

Trade Shares of the Pando Asset Spot 

Bitcoin Trust Under BZX Rule 

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

Shares 

December 18, 2023. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on December 

5, 2023, Cboe BZX Exchange, Inc. 

(‘‘Exchange’’ or ‘‘BZX’’) 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 Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe BZX Exchange, Inc. (‘‘BZX’’ or 

the ‘‘Exchange’’) is filing with the 

Securities and Exchange Commission 

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

rule change to list and trade shares of 

the Pando Asset Spot Bitcoin Trust (the 

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

Commodity-Based Trust Shares. 

The text of the proposed rule change 

is also available on the Exchange’s 

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

equities/regulation/rule_filings/bzx/), at 

the Exchange’s Office of the Secretary, 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 88669 

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

in Securities Exchange Act Release No. 65225 

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

(SR–BATS–2011–018). 

5Any of the statements or representations 

regarding the index composition, the description of 

the portfolio or reference assets, limitations on 

portfolio holdings or reference assets, dissemination 

and availability of index, reference asset, intraday 

indicative values, and Verified Intraday Indicative 

Values (as applicable), or the applicability of 

Exchange listing rules specified in any filing to list 

a series of Other Securities (collectively, 

‘‘Continued Listing Representations’’) shall 

constitute continued listing requirements for the 

securities listed on the Exchange. 

6See Form S–1 Registration Statement filed on 

November 29, 2023 (Registration No. 333–275781). 

The Registration Statement is not yet effective, and 

the Shares will not trade on the Exchange until 

such time that the Registration Statement is 

effective. 

7See Exchange Rule 14.11(f)(1). 

8See Securities Exchange Act Release No. 83723 

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

proposal was subsequently disapproved by the 

Commission. See Securities Exchange Act Release 

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

2018) (the ‘‘Winklevoss Order’’). 

9See streetTRACKS Gold Shares, Exchange Act 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2009–28); ETFS Palladium Trust, Exchange Act 

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

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

(notice of proposed rule change included NYSE 

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

palladium futures exchanges are the NYMEX and 

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

the largest exchange in the world for trading 

precious metals futures and options,’’ and that 

NYSE Arca ‘‘may obtain trading information via the 

Intermarket Surveillance Group,’’ of which NYMEX 

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

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

2009)); ETFS Platinum Trust, Exchange Act Release 

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

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

proposed rule change included NYSE Arca’s 

representation that ‘‘[t]he most significant platinum 

futures exchanges are the NYMEX and the Tokyo 

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

exchange in the world for trading precious metals 

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

obtain trading information via the Intermarket 

Surveillance Group,’’ of which NYMEX is a 

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

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

Sprott Physical Gold Trust, Exchange Act Release 

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

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

proposed rule change included NYSE Arca’s 

representation that the COMEX is one of the ‘‘major 

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

trading information via the Intermarket 

Surveillance Group,’’ and that NYMEX, of which 

COMEX is a division, is a member of the 

Intermarket Surveillance Group, Exchange Act 

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

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

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

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

NYSEArca–2010–84); ETFS Precious Metals Basket 

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

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

NYSEArca–2010–56) (notice of proposed rule 

change included NYSE Arca’s representation that 

‘‘the most significant gold, silver, platinum and 

palladium futures exchanges are the COMEX and 

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

trading information via the Intermarket 

Surveillance Group,’’ of which COMEX is a 

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

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

ETFS White Metals Basket Trust, Exchange Act 

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

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

(notice of proposed rule change included NYSE 

Arca’s representation that ‘‘the most significant 

silver, platinum and palladium futures exchanges 

are the COMEX and the TOCOM’’ and that NYSE 

Arca ‘‘may obtain trading information via the 

Intermarket Surveillance Group,’’ of which COMEX 

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

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

2010)); ETFS Asian Gold Trust, Exchange Act 

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

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

(notice of proposed rule change included NYSE 

Arca’s representation that ‘‘the most significant gold 

futures exchanges are the COMEX and the Tokyo 

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

exchange in the world for trading precious metals 

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

obtain trading information via the Intermarket 

Surveillance Group,’’ of which COMEX is a 

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

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

2010)); Sprott Physical Platinum and Palladium 

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

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

NYSEArca–2012–111) (notice of proposed rule 

change included NYSE Arca’s representation that 

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

two major exchanges: The New York Mercantile 

Exchange . . . and Tokyo Commodities Exchange’’ 

and that NYSE Arca ‘‘may obtain trading 

information via the Intermarket Surveillance 

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

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

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

1 oz. Gold Redeemable Trust, Exchange Act Release 

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

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

proposed rule change included NYSE Arca’s 

representation that NYSE Arca ‘‘may obtain trading 

information via the Intermarket Surveillance 

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

gold futures are traded on COMEX and the Tokyo 

Commodity Exchange, with a cross-reference to the 

proposed rule change to list and trade shares of the 

ETFS Gold Trust, in which NYSE Arca represented 

that COMEX is one of the ‘‘major world gold 

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

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

2012)); JPM XF Physical Copper Trust, Exchange 

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

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

NYSEArca–2012–28); iShares Copper Trust, 

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

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

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

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

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

NYSEArca–2013–61) (notice of proposed rule 

change included NYSE Arca’s representation that 

FINRA, on behalf of the exchange, may obtain 

trading information regarding gold futures and 

options on gold futures from members of the 

Intermarket Surveillance Group, including COMEX, 

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

place a comprehensive surveillance sharing 

agreement,’’ and that gold futures are traded on 

COMEX and the Tokyo Commodity Exchange, with 

a cross-reference to the proposed rule change to list 

and trade shares of the ETFS Gold Trust, in which 

NYSE Arca represented that COMEX is one of the 

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

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

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

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

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

(notice of proposed rule change included NYSE 

Continued 

and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade the Shares under BZX Rule 

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

and trading of Commodity-Based Trust 

Shares on the Exchange.5 Pando Asset 

AG (‘‘Sponsor’’). The Shares will be 

registered with the Commission by 

means of the Trust’s registration 

statement on Form S–1 (the 

‘‘Registration Statement’’).6 Coinbase 

Custody Trust Company, LLC (the 

‘‘Bitcoin Custodian’’), which is a thirdparty U.S.-based trust company and 

qualified custodian, will be responsible 

for custody of the Trust’s bitcoin 

holdings. 

As further discussed below, the 

Commission has historically approved 

or disapproved exchange filings to list 

and trade series of Trust Issued 

Receipts,7 including spot-based 

Commodity-Based Trust Shares, on the 

basis of whether the listing exchange 

has in place a comprehensive 

surveillance sharing agreement with a 

regulated market of significant size 

related to the underlying commodity to 

be held.8 Prior orders from the 

Commission have pointed out that in 

every prior approval order for 

Commodity-Based Trust Shares, there 

has been a derivatives market that 

represents the regulated market of 

significant size, generally a Commodity 

Futures Trading Commission (the 

‘‘CFTC’’) regulated futures market.9


ddrumheller on DSK120RN23PROD with NOTICES1
88670 Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 

Arca’s representation that ‘‘COMEX is the largest 

gold futures and options exchange’’ and that NYSE 

Arca ‘‘may obtain trading information via the 

Intermarket Surveillance Group,’’ including with 

respect to transactions occurring on COMEX 

pursuant to CME and NYMEX’s membership, or 

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

place a comprehensive surveillance sharing 

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

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

2013)); Long Dollar Gold Trust, Exchange Act 

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

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

NYSEArca–2016–84). 

10See Exchange Rule 14.11(e)(5). 11See Winklevoss Order at 37592. 12See Exchange Act Release No. 94620 (April 6, 

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

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

with the Teucrium Approval, the ‘‘Bitcoin Futures 

Approvals’’). 

13 Grayscale Investments, LLC v. Securities and 

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

‘‘Grayscale Order’’). 

14 Id. 

15See Winklevoss Order. 

16 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. 

17See ‘‘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.’’ 

18A list of virtual currency businesses that are 

entities regulated by the NYDFS is available on the 

Further to this point, the Commission’s 

prior orders have noted that the spot 

commodities and currency markets for 

which it has previously approved spot 

exchange-traded products (‘‘ETPs’’) are 

generally unregulated and that the 

Commission relied on the underlying 

futures market as the regulated market 

of significant size that formed the basis 

for approving the series of Currency 10

and Commodity-Based Trust Shares, 

including gold, silver, platinum, 

palladium, copper, and other 

commodities and currencies. The 

Commission specifically noted in the 

Winklevoss Order that the First Gold 

Approval Order ‘‘was based on an 

assumption that the currency market 

and the spot gold market were largely 

unregulated.’’ 11

As such, the regulated market of 

significant size test does not require that 

the spot bitcoin market be regulated in 

order for the Commission to approve 

this proposal, and precedent makes 

clear that an underlying market for a 

spot commodity or currency being a 

regulated market would actually be an 

exception to the norm. These largely 

unregulated currency and commodity 

markets do not provide the same 

protections as the markets that are 

subject to the Commission’s oversight, 

but the Commission has consistently 

looked to surveillance sharing 

agreements with the underlying futures 

market in order to determine whether 

such products were consistent with the 

Act. With this in mind, the Chicago 

Mercantile Exchange (‘‘CME’’) bitcoin 

futures (‘‘Bitcoin Futures’’) market is the 

proper market to consider in 

determining whether there is a related 

regulated market of significant size. 

Further to this point, the Exchange 

notes that the Commission has approved 

proposals related to the listing and 

trading of funds that would primarily 

hold CME Bitcoin Futures that are 

registered under the Securities Act of 

1933.12 In the Teucrium Approval, the 

Commission found the CME Bitcoin 

Futures market to be a regulated market 

of significant size as it relates to CME 

Bitcoin Futures; a position that 

represents a departure from prior 

disapproval orders for ETPs that would 

hold actual bitcoin instead of 

derivatives contracts (‘‘Spot Bitcoin 

ETPs’’) that use the exact same pricing 

methodology as the CME Bitcoin 

Futures. In the recently decided 

Grayscale Investments, LLC v Securities 

and Exchange Commission,13 however, 

the court addressed this conflict by 

finding that the SEC had failed to 

provide a coherent explanation as to 

why it had approved the Bitcoin Futures 

ETPs while disapproving the proposal 

to list and trade shares of the Grayscale 

Bitcoin Trust and vacating the 

disapproval order.14 As further 

discussed below, both the Exchange and 

the Sponsor believe that this proposal 

and the included analysis are sufficient 

to establish that the CME Bitcoin 

Futures market represents a regulated 

market of significant size as it relates 

both to the CME Bitcoin Futures market 

and to the spot bitcoin market and that 

this proposal should be approved, 

consistent with the Teucrium precedent 

and in view of the court’s findings 

relating to the Grayscale Order. 

Finally, as discussed in greater detail 

below, by using professional custodians 

and other service providers, the Trust 

provides investors interested in 

exposure to bitcoin via the securities 

markets with important protections that 

are not always available to investors that 

invest directly in bitcoin, including 

protection against counterparty 

insolvency, cyber attacks, and other 

risks. For example, an exchange-traded 

vehicle such as the Trust, which will be 

subject to the registration and periodic 

reporting requirements of the 1933 Act 

and the Exchange Act, would offer U.S. 

investors an alternative to directing 

their bitcoin investments into loosely 

regulated offshore vehicles (including 

loosely regulated centralized exchanges 

that have since faced bankruptcy 

proceedings or other insolvencies). 

Background 

Bitcoin is a digital asset based on the 

decentralized, open source protocol of 

the peer-to-peer computer network 

launched in 2009 that governs the 

creation, movement, and ownership of 

bitcoin and hosts the public ledger, or 

‘‘blockchain,’’ on which all bitcoin 

transactions are recorded (the ‘‘Bitcoin 

Network’’ or ‘‘Bitcoin’’). The 

decentralized nature of the Bitcoin 

Network allows parties to transact 

directly with one another based on 

cryptographic proof instead of relying 

on a trusted third party. The protocol 

also lays out the rate of issuance of new 

bitcoin within the Bitcoin Network, a 

rate that is reduced by half 

approximately every four years with an 

eventual hard cap of 21 million. It’s 

generally understood that the 

combination of these two features—a 

systemic hard cap of 21 million bitcoin 

and the ability to transact trustlessly 

with anyone connected to the Bitcoin 

Network—gives bitcoin its value. The 

first rule filing proposing to list an ETP 

to provide exposure to bitcoin in the 

U.S. was submitted by the Exchange on 

June 30, 2016.15 At that time, 

blockchain technology, and digital 

assets that utilized it, were relatively 

new to the broader public. The market 

capitalization 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.16 Similarly, regulated U.S. 

Bitcoin Futures contracts did not exist. 

The CFTC had determined that bitcoin 

is a commodity,17 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, 2016.18 While the first over-theVerDate Sep<11>2014 18:10 Dec 21, 2023 Jkt 262001 PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 E:\FR\FM\22DEN1.SGM 22DEN1

ddrumheller on DSK120RN23PROD with NOTICES1
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NYDFS website. See https://www.dfs.ny.gov/apps_

and_licensing/virtual_currency_businesses/ 

regulated_entities. 

19 Data as of March 31, 2016 according to publicly 

available filings. See Bitcoin Investment Trust Form 

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

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

000095012316017801/filename1.htm. 

20See 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. 

21See 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. 

22See Prospectus filed by Stone Ridge Trust VI 

on behalf of NYDIG Bitcoin Strategy Trust 

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

Archives/edgar/data/1764894/ 

000119312519309942/d693146d497.htm. 

23See Investment Advisers Act Release No. 6240 

88 FR 14672 (March 9, 2023) (Safeguarding 

Advisory Client Assets). 

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. 

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. 

28As of December 1, 2021, the total market 

capitalization of all bitcoin in circulation was 

approximately $1.08 trillion. 

29 Data sourced from the CME Bitcoin Futures 

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

www.cmegroup.com/markets/cryptocurrencies/ 

bitcoin/bitcoin.volume.htm. 

30See, e.g., Id. 

31The CFTC’s annual report for Fiscal Year 2022 

(which ended on September 30, 2022) noted that 

the CFTC completed the fiscal year with 18 

enforcement filings related to digital assets. ‘‘Digital 

asset actions included manipulation, a $1.7 billion 

fraudulent scheme, and a decentralized 

autonomous organization (DAO) failing to register 

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

CFTC FY 2022 Agency Financial Report, available 

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

download. Additionally, the CFTC filed on March 

27, 2023, a civil enforcement action against the 

owner/operators of the Binance centralized digital 

asset trading platform, which is one of the largest 

bitcoin derivative exchanges. See CFTC Release No. 

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

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

32See https://www.dfs.ny.gov/virtual_currency_

businesses. 

33See U.S. Department of the Treasury 

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

Settlement with BitGo, Inc. for Apparent Violations 

of Multiple Sanctions Programs Related to Digital 

Currency Transactions’’ (December 30, 2020) 

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

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

of the Treasury Enforcement Release: ‘‘Treasury 

Announces Two Enforcement Actions for over 

$24M and $29M Against Virtual Currency 

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

available at: https://home.treasury.gov/news/pressreleases/jy1006. See also U.S. Department of 

Treasure Enforcement Release ‘‘OFAC Settles with 

Virtual Currency Exchange Kraken for $362,158.70 

Related to Apparent Violations of the Iranian 

Transactions and Sanctions Regulations’’ 

(November 28, 2022) available at: https://

home.treasury.gov/system/files/126/20221128_

kraken.pdf. 

counter bitcoin fund launched in 2013, 

public trading was limited and the fund 

had only $60 million in assets.19 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 (‘‘ICI’’) 

and Securities Industry and Financial 

Markets Association (‘‘SIFMA’’) that it 

was not aware, at that time, of a single 

custodian providing fund custodial 

services for digital assets.20 The digital 

assets financial ecosystem, including 

bitcoin, has progressed significantly in 

the intervening years. 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 21 and shares 

in investment vehicles holding Bitcoin 

Futures.22 Additionally, licensed and 

regulated service providers have 

emerged to provide fund custodial 

services for digital assets, among other 

services, including the bitcoin 

Custodian. For example, in February 

2023, the Commission proposed to 

amend Rule 206(4)–2 under the 

Advisers Act of 1940 (the ‘‘custody 

rule’’) to expand the scope beyond 

client funds and securities to include all 

crypto assets, among other assets; 23 in 

May 2021, the staff of the Commission 

released a statement permitting openend mutual funds to invest in cashsettled Bitcoin Futures; in December 

2020, the Commission adopted a 

conditional no-action position 

permitting certain special purpose 

broker-dealers to custody digital asset 

securities under Rule 15c3–3 under the 

Exchange Act (the ‘‘Custody 

Statement’’); 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 

services for digital asset securities 

registered with the Commission.27

Outside 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 

is approximately 100 times larger, 

having at one point reached a market 

capitalization of over $1 trillion.28

According to the CME Bitcoin Futures 

Report, from February 13, 2023 through 

March 27, 2023, CFTC regulated Bitcoin 

Futures represented between $750 

million and $3.2 billion in notional 

trading volume on CME Bitcoin Futures 

on a daily basis.29 Open interest was 

over $1.4 billion for the entirety of the 

period and at one point was over $2 

billion.30 ETPs that primarily hold CME 

Bitcoin Futures have raised over $1 

billion dollars in assets. The CFTC has 

exercised its regulatory jurisdiction in 

bringing a number of enforcement 

actions related to bitcoin and against 

trading platforms that offer 

cryptocurrency trading.31 As of 

February 14, 2023, the NYDFS has 

granted no fewer than thirty-four 

BitLicenses,32 including to established 

public payment companies like PayPal 

Holdings, Inc. and Square, Inc., and 

limited purpose trust charters to entities 

providing cryptocurrency custody 

services. In addition, the Treasury’s 

Office of Foreign Assets Control 

(‘‘OFAC’’) has brought enforcement 

actions over apparent violations of 

applicable sanctions laws in connection 

with the provision of wallet 

management services for digital assets.33

In addition to the regulatory 

developments laid out above, more 

traditional financial market participants 

have become more active in 

cryptocurrency trading and investment 

activity: large insurance companies, 

asset managers, university endowments, 

pension funds, and even historically 

bitcoin skeptical fund managers have 

allocated to bitcoin investments. As 

noted in the Financial Stability 

Oversight Council (‘‘FSOC’’) report on 

Digital Asset Financial Stability Risks 

and Regulation, ‘‘[i]ndustry surveys 

suggest that the scale of these 

investments grew quickly during the 


ddrumheller on DSK120RN23PROD with NOTICES1
88672 Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 

34See the FSOC ‘‘Report on Digital Asset 

Financial Stability Risks and Regulation 2022’’ 

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

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

35See Letter from Division of Corporation 

Finance, Office of Real Estate & Construction to 

Barry E. Silbert, Chief Executive Officer, Grayscale 

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

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

000000000020000953/filename1.pdf. 

36The premium and discount for OTC Bitcoin 

Trusts is known to move rapidly. For example, over 

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

the largest OTC Bitcoin Trust went from 40.18% to 

2.79%. While the price of bitcoin appreciated 

significantly during this period and NAV per share 

increased by 41.25%, the price per share increased 

by only 3.58%. This means that investors are 

buying shares of a fund that experiences significant 

volatility in its premium and discount outside of 

the fluctuations in price of the underlying asset. 

Even operating within the normal premium and 

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

shares of an OTC Bitcoin Trust only to have those 

shares quickly lose 10% or more in dollar value 

excluding any movement of the price of bitcoin. 

That is to say—the price of bitcoin could have 

stayed exactly the same from market close on one 

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

shares held by the investor decreased only because 

of the fluctuation of the premium. As more 

investment vehicles, including mutual funds and 

ETFs, seek to gain exposure to bitcoin, the easiest 

option for a buy and hold strategy for such vehicles 

is often an OTC Bitcoin Trust, meaning that even 

investors that do not directly buy OTC Bitcoin 

Trusts can be disadvantaged by extreme premiums 

(or discounts) and premium/discount volatility. 

37A number of operating companies engaged in 

unrelated businesses—such as Tesla (a car 

manufacturer) and MicroStrategy (an enterprise 

software company)—have announced investments 

as large as $5.3 billion in bitcoin. Without access 

to bitcoin exchange-traded products, retail investors 

seeking investment exposure to bitcoin may end up 

purchasing shares in these companies in order to 

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

mainstream financial news networks have written 

a number of articles providing investors with 

guidance for obtaining bitcoin exposure through 

publicly traded companies (such as MicroStrategy, 

Tesla, and bitcoin mining companies, among 

others) instead of dealing with the complications 

associated with buying spot bitcoin in the absence 

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

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

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

trade without holding bitcoin yourself? Here are 

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

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

38The Exchange notes that the list of countries 

above is not exhaustive and that securities 

regulators in a number of additional countries have 

either approved or otherwise allowed the listing 

and trading of Spot Bitcoin ETPs. 

39See FTX Trading Ltd., et al., Case No. 22– 

11068. 

40See Celsius Network LLC, et al., Case No. 22– 

10964. 

41See BlockFi Inc., Case No. 22–19361. 

42See Voyager Digital Holdings, Inc., et al., Case 

No. 22–10943. 

boom in crypto-asset markets through 

late 2021. In June 2022, PwC estimated 

that the number of crypto-specialist 

hedge funds was more than 300 

globally, with $4.1 billion in assets 

under management. In addition, in a 

survey PwC found that 38 percent of 

surveyed traditional hedge funds were 

currently investing in ‘digital assets,’ 

compared to 21 percent the year 

prior.’’ 34 The largest over-the-counter 

bitcoin fund previously filed a Form 10 

registration statement, which the staff of 

the Commission reviewed and which 

took effect automatically, and is now a 

reporting company.35 Established U.S. 

exchange-traded companies like Tesla, 

Inc., MicroStrategy Incorporated, and 

Square, Inc., among others, have 

announced substantial investments in 

bitcoin in amounts as large as $1.5 

billion (Tesla) and $425 million 

(MicroStrategy). The foregoing examples 

demonstrate that bitcoin has gained 

mainstream usage and recognition 

across the U.S. market. 

Despite these developments, access 

for U.S. retail investors to gain exposure 

to bitcoin via a transparent and U.S. 

regulated, U.S. exchange-traded vehicle 

remains limited. Instead current options 

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

legal uncertainty, technical risk, and 

complexity associated with accessing 

spot bitcoin; (ii) over-the-counter 

bitcoin funds (‘‘OTC Bitcoin Trusts’’) 

with high management fees and 

potentially volatile premiums and 

discounts; 36 (iii) purchasing shares of 

operating companies that they believe 

will provide proxy exposure to bitcoin 

with limited disclosure about the 

associated risks; 37 or (iv) purchasing 

Bitcoin Futures exchange-traded funds 

(‘‘ETFs’’), as defined below, which 

represent a sub-optimal structure for 

long-term investors that will cost them 

significant amounts of money every year 

compared to Spot Bitcoin ETPs, as 

further discussed below. Meanwhile, 

investors in many other countries, 

including Canada and Brazil, are able to 

use more traditional exchange listed and 

traded products (including ETFs 

holding physical bitcoin) to gain 

exposure to bitcoin. Similarly, investors 

in Switzerland and across Europe have 

access to ETPs which trade on regulated 

exchanges and provide exposure to a 

broad array of spot crypto assets. U.S. 

investors, by contrast, are left with 

fewer and more risky means of getting 

bitcoin exposure, as described above.38

To this point, the lack of a Spot 

Bitcoin ETP exposes U.S. investor assets 

to significant risk because investors that 

would otherwise seek crypto asset 

exposure through a Spot Bitcoin ETP are 

forced to find alternative exposure 

through generally riskier means. For 

instance, many U.S. investors that held 

their digital assets in accounts at FTX,39

Celsius Network LLC,40 BlockFi Inc.41

and Voyager Digital Holdings, Inc.42

have become unsecured creditors in the 

insolvencies of those entities. If a Spot 

Bitcoin ETP was available, it is likely 

that at least a portion of the billions of 

dollars tied up in those proceedings 

would still reside in the brokerage 

accounts of U.S. investors, having 

instead been invested in a transparent, 

regulated, and well-understood 

structure—a Spot Bitcoin ETP. To this 

point, approval of a Spot Bitcoin ETP 

would represent a major win for the 

protection of U.S. investors in the 

crypto asset space. As further described 

below, the Trust, like all other series of 

Commodity-Based Trust Shares, is 

designed to protect investors against the 

risk of losses through fraud and 

insolvency that arise by holding bitcoin, 

on centralized platforms. 

Additionally, investors in other 

countries, specifically Canada, generally 

pay lower fees than U.S. retail investors 

that invest in OTC Bitcoin Trusts due to 

the fee pressure that results from 

increased competition among available 

bitcoin investment options. Without an 

approved and regulated Spot Bitcoin 

ETP in the U.S. as a viable alternative, 

U.S. investors could seek to purchase 

shares of non-U.S. bitcoin vehicles in 

order to get access to bitcoin exposure. 

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. In addition to the 

benefits to U.S. investors articulated 

throughout this proposal, approving this 

proposal (and others like it) would 

provide U.S. ETFs and mutual funds 

with a U.S.-listed and regulated product 

to provide such access rather than 

relying on either more expensive, riskier 

U.S. based products or products listed 

and primarily regulated in other 

countries. 

Bitcoin Futures ETFs 

The Exchange and Sponsor applaud 

the Commission for allowing the launch 

of ETFs registered under the Investment 

Company Act of 1940, as amended (the 

‘‘1940 Act’’) and the Bitcoin Futures 

Approvals that provide exposure to 

bitcoin primarily through CME Bitcoin 

Futures (‘‘Bitcoin Futures ETFs’’). 

Allowing such products to list and trade 

is a productive first step in providing 

U.S. investors and traders with 

transparent, exchange-listed tools for 

expressing an investment view on 

bitcoin. The Bitcoin Futures Approvals, 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 88673 

43See Winklevoss Order at 37593, specifically 

footnote 202, which includes the language from 

numerous approval orders for which the underlying 

futures markets formed the basis for approving 

series of ETPs that hold physical metals, including 

gold, silver, palladium, platinum, and precious 

metals more broadly; and 37600, specifically where 

the Commission provides that ‘‘when the spot 

market is unregulated—the requirement of 

preventing fraudulent and manipulative acts may 

possibly be satisfied by showing that the ETP listing 

market has entered into a surveillance-sharing 

agreement with a regulated market of significant 

size in derivatives related to the underlying asset.’’ 

As noted above, the Exchange believes that these 

citations are particularly helpful in making clear 

that the spot market for a spot commodity ETP need 

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

ETP to be approved by the Commission, and in fact 

that it’s been the common historical practice of the 

Commission to rely on such derivatives markets as 

the regulated market of significant size because 

such spot commodities markets are largely 

unregulated. 

44As further outlined below, both the Exchange 

and the Sponsor believe that the Bitcoin Futures 

market represents a regulated market of significant 

size and that this proposal and others like it should 

be approved on this basis. 

45See Teucrium Approval at 21679. 

46 Grayscale Investments, LLC v. Securities and 

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

47See e.g., ‘‘Bitcoin ETF’s Success Could Come at 

Trustholders’ Expense,’’ Wall Street Journal 

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

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

‘‘Physical Bitcoin ETF Prospects Accelerate,’’ 

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

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

=pmd_JsK.fjXz9eAQW9zol0qpzhXDrrlp

IVdoCloLXbLjl44-1635476946-0- 

gqNtZGzNApCjcnBszQql. 

however, have created a logical 

inconsistency in the application of the 

standard the Commission applies when 

considering Bitcoin ETP proposals. 

As discussed further below, the 

standard applicable to Bitcoin ETPs is 

whether the listing exchange has in 

place a comprehensive surveillance 

sharing agreement with a regulated 

market of significant size in the 

underlying asset. Previous disapproval 

orders have made clear that a market 

that constitutes a regulated market of 

significant size is generally a futures 

and/or options market based on the 

underlying reference asset rather than 

the spot commodity markets, which are 

often unregulated.43 Leaving aside the 

analysis of that standard until later in 

this proposal,44 the Exchange believes 

that the following rationale the 

Commission applied to a Bitcoin 

Futures ETF should result in the 

Commission approving this and other 

Spot Bitcoin ETP proposals: 

The CME ‘‘comprehensively surveils 

futures market conditions and price 

movements on a real-time and ongoing basis 

in order to detect and prevent price 

distortions, including price distortions 

caused by manipulative efforts.’’ Thus, the 

CME’s surveillance can reasonably be relied 

upon to capture the effects on the CME 

Bitcoin Futures market caused by a person 

attempting to manipulate the proposed 

futures ETP by manipulating the price of 

CME Bitcoin Futures contracts, whether that 

attempt is made by directly trading on the 

CME Bitcoin Futures market or indirectly by 

trading outside of the CME Bitcoin Futures 

market. As such, when the CME shares its 

surveillance information with Arca, the 

information would assist in detecting and 

deterring fraudulent or manipulative 

misconduct related to the non-cash assets 

held by the proposed ETP.45

CME Bitcoin Futures pricing is based 

on pricing from spot bitcoin markets. 

The statement from the Teucrium 

Approval that ‘‘CME’s surveillance can 

reasonably be relied upon to capture the 

effects on the CME Bitcoin Futures 

market caused by a person attempting to 

manipulate the proposed futures ETP by 

manipulating the price of CME Bitcoin 

Futures contracts . . . indirectly by 

trading outside of the CME Bitcoin 

Futures market,’’ makes clear that the 

Commission believes that CME’s 

surveillance can capture the effects of 

trading on the relevant spot markets on 

the pricing of CME Bitcoin Futures. 

This was further acknowledged in the 

‘‘Grayscale lawsuit’’ 46 when Judge Rao 

stated ‘‘. . . the Commission in the 

Teucrium order recognizes that the 

futures prices are influenced by the spot 

prices, and the Commission concludes 

in approving futures ETPs that any 

fraud on the spot market can be 

adequately addressed by the fact that 

the futures market is a regulated one 

. . .’’. The Exchange agrees with the 

Commission on this point and notes that 

the pricing mechanism applicable to the 

Shares is similar to that of the CME 

Bitcoin Futures. 

In addition to potentially being more 

susceptible to manipulation than a Spot 

Bitcoin ETP, the structure of Bitcoin 

Futures ETFs provides negative 

outcomes for buy and hold investors as 

compared to a Spot Bitcoin ETP.47

Specifically, the cost of rolling CME 

Bitcoin Futures contracts will cause the 

Bitcoin Futures ETFs to lag the 

performance of bitcoin itself and would 

cost U.S. investors significant amounts 

of money on an annual basis compared 

to Spot Bitcoin ETPs. Such rolling costs 

would not be required for Spot Bitcoin 

ETPs that hold bitcoin. Further, Bitcoin 

Futures ETFs could potentially hit CME 

position limits, which would force a 

Bitcoin Futures ETF to invest in nonfutures assets for bitcoin exposure and 

cause potential investor confusion and 

lack of certainty about what such 

Bitcoin Futures ETFs are actually 

holding to try to get exposure to bitcoin, 

which would also materially change the 

risk profile associated with such an 

ETF. While Bitcoin Futures ETFs 

represent a useful trading tool, they are 

clearly sub-optimal as the sole exchange 

traded vehicle structure for U.S. 

investors that are looking for long-term 

exposure to bitcoin and could, based on 

the calculations above, unnecessarily 

cost U.S. investors significant amounts 

of money every year compared to Spot 

Bitcoin ETPs. The Exchange believes 

that any proposal to list and trade a Spot 

Bitcoin ETP should be reviewed by the 

Commission with this important 

investor protection context in mind. 

Based on the foregoing, the Exchange 

and Sponsor believe that an objective 

review of the proposals to list Spot 

Bitcoin ETPs compared to and in view 

of the Bitcoin Futures ETFs and the 

Bitcoin Futures Approvals as well as 

limitations of existing approved product 

structures, would lead to the conclusion 

that Spot Bitcoin ETPs would benefit 

U.S. investors and should be available 

to U.S. investors. As such, this proposal 

and other comparable proposals to list 

and trade Spot Bitcoin ETPs should be 

approved by the Commission. In 

summary, U.S. investors lose significant 

amounts of money from holding Bitcoin 

Futures ETFs as compared to Spot 

Bitcoin ETPs, losses which could be 

prevented by the Commission approving 

Spot Bitcoin ETPs. Additionally, any 

concerns related to preventing 

fraudulent and manipulative acts and 

practices related to Spot Bitcoin ETPs 

would apply equally to the spot markets 

underlying the futures contracts held by 

a Bitcoin Futures ETF. Both the 

Exchange and Sponsor believe that the 

CME Bitcoin Futures market is a 

regulated market of significant size and 

that such manipulation concerns are 

mitigated, as described extensively 

below. After allowing and approving the 

listing and trading of Bitcoin Futures 

ETFs that hold primarily CME Bitcoin 

Futures, however, the only consistent 

outcome would be approving Spot 

Bitcoin ETPs on the basis that the CME 

Bitcoin Futures market is a regulated 

market of significant size. 

Given the current landscape, 

approving this proposal (and others like 

it) and allowing Spot Bitcoin ETPs to be 

listed and traded alongside Bitcoin 

Futures ETFs would establish a 

consistent regulatory approach, provide 

U.S. investors with choice in product 

structures for bitcoin exposure, and 

offer flexibility in the means of gaining 

exposure to bitcoin through transparent, 

regulated, U.S. exchange-listed vehicles. 


ddrumheller on DSK120RN23PROD with NOTICES1
88674 Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 

48According to CME, the CME CF Bitcoin 

Reference Rate 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/cryptocurrencyindices/cf-bitcoin-reference-rate.html?redirect=/ 

trading/cf-bitcoin-reference-rate.html. 

49Source: CME, Yahoo Finance 4/30/23. 

50A large open interest holder in Bitcoin Futures 

is an entity that holds at least 25 contracts, which 

is the equivalent of 125 bitcoin. At a price of 

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

more than 100 firms had outstanding positions of 

greater than $3.65 million in Bitcoin Futures. 

Bitcoin Futures 

CME began offering trading in Bitcoin 

Futures in 2017. Each contract 

represents five bitcoin and is based on 

the CME CF Bitcoin Reference Rate.48

The contracts trade and settle like other 

cash-settled commodity futures 

contracts. Nearly every measurable 

metric related to Bitcoin Futures has 

generally trended up since launch, 

although certain notional volume 

calculations have decreased roughly in 

line with the decrease in the price of 

bitcoin. For example, there were 

143,215 Bitcoin Futures contracts traded 

in April 2023 (approximately $20.7 

billion) compared to 193,182 ($5 

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

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

billion) contracts traded in April 2019, 

April 2020, April 2021, and April 2022, 

respectively.49

The number of large open interest 

holders 50 and unique accounts trading 

Bitcoin Futures have both increased, 

even in the face of heightened bitcoin 

price volatility. 


ddrumheller on DSK120RN23PROD with NOTICES1EN22DE23.015</GPH> EN22DE23.016</GPH>

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120 

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2019 2020 2021 2022 2023 
Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 88675 

51See Exchange Act Releases No. 94080 (January 

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

‘‘Amendment No. 1 to the Proposed Rule Change 

To List and Trade Shares of the Wise Origin Bitcoin 

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

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

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

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

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

do futures markets play in Bitcoin pricing? 

Causality, cointegration and price discovery from a 

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

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

This academic research paper concludes that 

‘‘There exist no episodes where the Bitcoin spot 

markets dominates the price discovery processes 

with regard to Bitcoin futures. This points to a 

conclusion that the price formation originates solely 

in the Bitcoin futures market. We can, therefore, 

conclude that the Bitcoin futures markets dominate 

the dynamic price discovery process based upon 

time-varying information share measures. Overall, 

price discovery seems to occur in the Bitcoin 

futures markets rather than the underlying spot 

market based upon a time-varying perspective.’’ 

52See Exchange Rule 14.11(f). 

53Commodity-Based Trust Shares, as described in 

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

Issued Receipt. 

54As the Exchange has stated in a number of 

other public documents, it continues to believe that 

bitcoin is resistant to price manipulation and that 

‘‘other means to prevent fraudulent and 

manipulative acts and practices’’ exist to justify 

dispensing with the requisite surveillance sharing 

agreement. The geographically diverse and 

continuous nature of bitcoin trading render it 

difficult and prohibitively costly to manipulate the 

price of bitcoin. The fragmentation across bitcoin 

platforms, the relatively slow speed of transactions, 

and the capital necessary to maintain a significant 

presence on each trading platform make 

manipulation of bitcoin prices through continuous 

trading activity challenging. To the extent that there 

are bitcoin exchanges engaged in or allowing wash 

trading or other activity intended to manipulate the 

price of bitcoin on other markets, such pricing does 

not normally impact prices on other exchange 

because participants will generally ignore markets 

with quotes that they deem non-executable. 

Moreover, the linkage between the bitcoin markets 

and the presence of arbitrageurs in those markets 

means that the manipulation of the price of bitcoin 

price on any single venue would require 

manipulation of the global bitcoin price in order to 

be effective. Arbitrageurs must have funds 

distributed across multiple trading platforms in 

order to take advantage of temporary price 

dislocations, thereby making it unlikely that there 

will be strong concentration of funds on any 

particular bitcoin exchange or OTC platform. As a 

result, the potential for manipulation on a trading 

platform would require overcoming the liquidity 

supply of such arbitrageurs who are effectively 

eliminating any cross-market pricing differences. 

55As previously articulated by the Commission, 

‘‘The standard requires such surveillance-sharing 

agreements since ‘‘they provide a necessary 

deterrent to manipulation because they facilitate the 

availability of information needed to fully 

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

Commission has emphasized that it is essential for 

an exchange listing a derivative securities product 

to enter into a surveillance-sharing agreement with 

markets trading underlying securities for the listing 

exchange to have the ability to obtain information 

necessary to detect, investigate, and deter fraud and 

market manipulation, as well as violations of 

exchange rules and applicable federal securities 

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

for the sharing of information about market trading 

activity, clearing activity, and customer identity; 

that the parties to the agreement have reasonable 

ability to obtain access to and produce requested 

information; and that no existing rules, laws, or 

practices would impede one party to the agreement 

Continued 

The Sponsor further believes that 

publicly available research, including 

research done as part of rule filings 

proposing to list and trade shares of 

Spot Bitcoin ETPs, corroborates the 

overall trend outlined above and 

supports the thesis that the Bitcoin 

Futures pricing leads the spot market 

and, thus, a person attempting to 

manipulate the Shares would also have 

to trade on that market to manipulate 

the ETP. Specifically, the Sponsor 

believes that such research indicates 

that Bitcoin Futures lead the bitcoin 

spot market in price formation.51

Section 6(b)(5) and the Applicable 

Standards 

The Commission has approved 

numerous series of Trust Issued 

Receipts,52 including Commodity-Based 

Trust Shares,53 to be listed on U.S. 

national securities exchanges. In order 

for any proposed rule change from an 

exchange to be approved, the 

Commission must determine that, 

among other things, the proposal is 

consistent with the requirements of 

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

including: (i) the requirement that a 

national securities exchange’s rules are 

designed to prevent fraudulent and 

manipulative acts and practices; 54 and 

(ii) the requirement that an exchange 

proposal be designed, in general, to 

protect investors and the public interest. 

The Exchange believes that this 

proposal is consistent with the 

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

Act and that this filing sufficiently 

demonstrates that the CME Bitcoin 

Futures market represents a regulated 

market of significant size and that, on 

the whole, the manipulation concerns 

previously articulated by the 

Commission are sufficiently mitigated to 

the point that they are outweighed by 

quantifiable investor protection issues 

that would be resolved by approving 

this proposal. 

(i) Designed To Prevent Fraudulent and 

Manipulative Acts and Practices 

In order to meet this standard in a 

proposal to list and trade a series of 

Commodity-Based Trust Shares, the 

Commission requires that an exchange 

demonstrate that there is a 

comprehensive surveillance-sharing 

agreement in place 55 with a regulated 


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88676 Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 

from obtaining this information from, or producing 

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

historically held that joint membership in the ISG 

constitutes such a surveillance-sharing agreement. 

See Securities Exchange Act Release No. 88284 

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

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

Disapproval’’). 

56For a list of the current members and affiliate 

members of ISG, see www.isgportal.com. 

57See Wilshire Phoenix Disapproval. 

58See Winklevoss Order at 37580. The 

Commission has also specifically noted that it ‘‘is 

not applying a ‘cannot be manipulated’ standard; 

instead, the Commission is examining whether the 

proposal meets the requirements of the Exchange 

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

burden on the listing exchange to demonstrate the 

validity of its contentions and to establish that the 

requirements of the Exchange Act have been met.’’ 

Id. at 37582. 

59As further described below, the ‘‘Index’’ for the 

Trust is the CME CF Bitcoin Reference Rate. 60 15 U.S.C. 80a–1. 

market of significant size. Both the 

Exchange and CME are members of the 

intermarket surveillance group 

(‘‘ISG’’).56 The only remaining issue to 

be addressed is whether the Bitcoin 

Futures market constitutes a market of 

significant size, which both the 

Exchange and the Sponsor believe that 

it does. The terms ‘‘significant market’’ 

and ‘‘market of significant size’’ include 

a market (or group of markets) as to 

which: (a) there is a reasonable 

likelihood that a person attempting to 

manipulate the ETP would also have to 

trade on that market to manipulate the 

ETP, so that a surveillance-sharing 

agreement would assist the listing 

exchange in detecting and deterring 

misconduct; and (b) it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in that 

market.57

The Commission has also recognized 

that the ‘‘regulated market of significant 

size’’ standard is not the only means for 

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

specifically providing that a listing 

exchange could demonstrate that ‘‘other 

means to prevent fraudulent and 

manipulative acts and practices’’ are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement.58

(a) Manipulation of the ETP 

According to the research and 

analysis presented above, the Bitcoin 

Futures market is the leading market for 

bitcoin price formation. Where Bitcoin 

Futures lead the price in the spot market 

such that a potential manipulator of the 

bitcoin spot market (beyond just the 

constituents of the Reference Rate) 59

would have to participate in the Bitcoin 

Futures market, it follows that a 

potential manipulator of the Shares 

would similarly have to transact in the 

Bitcoin Futures market because the 

Index is based on spot prices. As such, 

the Exchange believes that part (a) of the 

significant market test outlined above is 

satisfied and that common membership 

in ISG between the Exchange and CME 

would assist the listing exchange in 

detecting and deterring misconduct in 

the trading of the Shares. 

(b) Predominant Influence on Prices in 

Spot and Bitcoin Futures 

The Exchange and Sponsor also 

believe that trading in the Shares would 

not be the predominant force 

influencing prices in the Bitcoin Futures 

market or spot market for a number of 

reasons, including the significant daily 

trading volume in the Bitcoin Futures 

market, the size of bitcoin’s market 

capitalization, and the significant 

liquidity available in the spot market. In 

addition to the Bitcoin Futures market 

data points cited above, the spot market 

for bitcoin is also very liquid. As the 

court found in the Grayscale Order, the 

Exchange and the Sponsor submit that 

‘‘[b]ecause the spot market is deeper and 

more liquid than the futures market, 

manipulation should be more difficult, 

not less.’’ 

(c) Other Means To Prevent Fraudulent 

and Manipulative Acts and Practices 

The Commission also permits a listing 

exchange to demonstrate that ‘‘other 

means to prevent fraudulent and 

manipulative acts and practices’’ are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement. The Exchange and Sponsor 

believe that such conditions are present. 

(ii) Designed To Protect Investors and 

the Public Interest 

The Exchange believes that the 

proposal is designed to protect investors 

and the public interest. Over the past 

several years, U.S. investor exposure to 

bitcoin through OTC Bitcoin Trusts has 

grown into the tens of billions of 

dollars, including through Bitcoin 

Futures ETFs. With that growth, so too 

has grown the quantifiable investor 

protection issues to U.S. investors 

including in connection with roll costs 

for Bitcoin Futures ETFs and premium/ 

discount volatility and management fees 

for OTC Bitcoin Trusts. The Exchange 

believes that the concerns related to the 

prevention of fraudulent and 

manipulative acts and practices have 

been sufficiently addressed for this 

proposal to be consistent with the Act 

and, to the extent that the Commission 

disagrees with that assertion, such 

concerns are now outweighed by 

investor protection concerns. As such, 

the Exchange believes that approving 

this proposal (and comparable 

proposals) provides the Commission 

with the opportunity to allow U.S. 

investors to access bitcoin in a regulated 

and transparent exchange-traded vehicle 

that would act to limit risk and benefit 

U.S. investors by: (i) reducing premium 

and discount volatility as compared to 

OTC investment vehicles; (ii) increasing 

competitive pressure on management 

fees resulting in fee compression/ 

reductions; (iii) reducing risks and costs 

as compared to those associated with 

investing in Bitcoin Futures ETFs and 

operating companies that represent 

imperfect proxies for bitcoin exposure; 

and (iv) providing an alternative to 

custodying spot bitcoin. 

Pando Asset Spot Bitcoin Trust 

Donald J. Puglisi is the trustee 

(‘‘Trustee’’). The Bitcoin Custodian will 

be responsible for safekeeping of the 

Trust’s bitcoin. 

According to the Registration 

Statement, each Share will represent a 

fractional undivided beneficial interest 

and ownership in the Trust. The Trust’s 

assets will consist of bitcoin held by the 

Bitcoin Custodian on behalf of the Trust 

and cash holdings, if any. 

According to the Registration 

Statement, the Trust is neither an 

investment company registered under 

the Investment Company Act of 1940, as 

amended,60 nor a commodity pool for 

purposes of the Commodity Exchange 

Act (‘‘CEA’’), and none of the Trust, the 

Trust or the Sponsor is subject to 

regulation as a commodity pool operator 

or a commodity trading adviser in 

connection with the Shares. 

When the Trust sells or redeems its 

Shares, it will do so in cash or ‘‘in-kind’’ 

transactions in blocks of 5,000 Shares (a 

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

Authorized participants will deliver, or 

facilitate the delivery of, cash or bitcoin 

to the Trust’s account with the Bitcoin 

Custodian in exchange for Shares when 

they purchase Shares, and the Trust, 

through the Bitcoin Custodian, will 

deliver cash or bitcoin to such 

authorized participants when they 

redeem Shares. Authorized participants 

may then offer Shares to the public at 

prices that depend on various factors, 

including the supply and demand for 

Shares, the value of the Trust’s assets, 

and market conditions at the time of a 

transaction. Shareholders who buy or 

sell Shares during the day from their 

broker may do so at a premium or 

discount relative to the NAV of the 

Shares of the Trust. 

Investment Objective 

According to the Registration 

Statement and as further described 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 88677 

below, the investment objective of the 

Trust is to generally reflect the 

performance of the price of bitcoin 

before payment of the Trust’s expenses. 

In seeking to achieve its investment 

objective, the Trust will only hold 

bitcoin, cash and cash equivalents. The 

Trust will value its Shares daily based 

on the value of bitcoin as reflected by 

the CME CF Bitcoin Reference Rate (the 

‘‘Index’’), which is an independently 

calculated value based on an 

aggregation of executed trade flow of 

major bitcoin spot exchanges. 

Specifically, the Index is calculated 

based on certain transactions of all of its 

constituent bitcoin exchanges, which 

are currently Bitstamp, Coinbase, itBit, 

Kraken, Gemini, and LMAX Digital, and 

which may change from time to time. If 

the Index is not available or the Sponsor 

determines, in its sole discretion, that 

the Index should not be used, the 

Trust’s holdings may be fair valued in 

accordance with the policy approved by 

the Sponsor. 

The Index 

As described in the Registration 

Statement, the Trust will determine the 

bitcoin Index price and value its Shares 

daily based on the value of bitcoin as 

reflected by the Index. The Index is 

calculated daily and aggregates the 

notional value of bitcoin trading activity 

across major bitcoin spot exchanges. 

The Index uses the same methodology 

as the CME CF Bitcoin Reference Rate 

(‘‘BRR’’), including utilizing the same 

constituent bitcoin exchanges, which is 

the underlying rate to determine 

settlement of CME Bitcoin Futures 

contracts, except that the Index is 

calculated as of 4 p.m. ET, whereas the 

BRR is calculated as of 4 p.m. London 

time. The Index is designed based on 

the International Organization of 

Securities Commissions (‘‘IOSCO’’) 

Principals for Financial Benchmarks. 

The administrator of the Index is CF 

Benchmarks Ltd. (the ‘‘Index Provider’’). 

The Index was created to facilitate 

financial products based on bitcoin. It 

serves as a once-a-day benchmark rate of 

the U.S. dollar price of bitcoin (USD/ 

BTC), calculated as of 4:00 p.m. ET. The 

Index aggregates the trade flow of 

several bitcoin exchanges, during an 

observation window between 3:00 p.m. 

and 4:00 p.m. ET into the U.S. dollar 

price of one bitcoin at 4:00 p.m. ET. 

Specifically, the Index is calculated 

based on the ‘‘Relevant Transactions’’ 

(as defined below) of all of its 

constituent bitcoin exchanges, which 

are currently Coinbase, Bitstamp, 

Kraken, itBit, LMAX Digital and Gemini 

(the ‘‘Constituent Platforms’’), as 

follows: 

• All Relevant Transactions are added 

to a joint list, recording the time of 

execution, trade price and size for each 

transaction. 

• The list is partitioned by timestamp 

into 12 equally-sized time intervals of 5 

(five) minute length. 

• For each partition separately, the 

volume-weighted median trade price is 

calculated from the trade prices and 

sizes of all Relevant Transactions, i.e., 

across all Constituent Platforms. A 

volume-weighted median differs from a 

standard median in that a weighting 

factor, in this case trade size, is factored 

into the calculation. 

• The Index is then determined by 

the equally-weighted average of the 

volume medians of all partitions. 

The Index does not include any 

futures prices in its methodology. A 

‘‘Relevant Transaction’’ is any 

cryptocurrency versus U.S. dollar spot 

trade that occurs during the observation 

window between 3:00 p.m. and 4:00 

p.m. ET on a Constituent Platform in the 

BTC/USD pair that is reported and 

disseminated by a Constituent Platform 

through its publicly available 

Application Programming Interface 

(‘‘API’’) and observed by the Index 

Provider. 

The Sponsor believes that the use of 

the Index is reflective of a reasonable 

valuation of the average spot price of 

bitcoin and that resistance to 

manipulation is a priority aim of its 

design methodology. The methodology: 

(i) takes an observation period and 

divides it into equal partitions of time; 

(ii) then calculates the volume-weighted 

median of all transactions within each 

partition; and (iii) the value is 

determined from the arithmetic mean of 

the volume-weighted medians, equally 

weighted. By employing the foregoing 

steps, the Index thereby seeks to ensure 

that transactions in bitcoin conducted at 

outlying prices do not have an undue 

effect on the value of the Index, large 

trades or clusters of trades transacted 

over a short period of time will not have 

an undue influence on the Index value, 

and the effect of large trades at prices 

that deviate from the prevailing price 

are mitigated from having an undue 

influence on the Index value. 

In addition, the Sponsor notes that an 

oversight function is implemented by 

the Index Provider in seeking to ensure 

that the Index is administered through 

codified policies for Index integrity. 

Index data and the description of the 

Index are based on information made 

publicly available by the Index Provider 

on its website at https://

www.cfbenchmarks.com. 

Net Asset Value 

NAV means the total assets of the 

Trust (which includes bitcoin and cash 

holdings) less total liabilities of the 

Trust. The Administrator will determine 

the NAV of the Trust on each day that 

the Exchange is open for regular trading, 

as promptly as practical after 4:00 p.m. 

EST. The NAV of the Trust is the 

aggregate value of the Trust’s assets less 

its estimated accrued but unpaid 

liabilities (which include accrued 

expenses). In determining the Trust’s 

NAV, the Administrator values the 

bitcoin held by the Trust based on the 

price set by the Index as of 4:00 p.m. 

EST. The Administrator also determines 

the NAV per Share. 

The NAV for the Trust will be 

calculated by the Administrator once a 

day and will be disseminated daily to 

all market participants at the same time. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the Consolidated Tape Association 

(‘‘CTA’’). 

If the Index is not available or the 

Sponsor determines, in its sole 

discretion, that the Index should not be 

used, the Trust’s holdings may be fair 

valued in accordance with the policy 

approved by the Sponsor. 

Intraday Indicative Value 

The Trust will provide an Intraday 

Indicative Value (‘‘IIV’’) per Share 

updated every 15 seconds, as calculated 

by the Exchange or a third-party 

financial data provider during the 

Exchange’s Regular Trading Hours (9:30 

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

calculated by using the prior day’s 

closing NAV per Share as a base and 

updating that value during Regular 

Trading Hours to reflect changes in the 

value of the Trust’s bitcoin holdings 

during the trading day. 

The IIV disseminated during Regular 

Trading Hours should not be viewed as 

an actual real-time update of the NAV, 

which will be calculated only once at 

the end of each trading day. The IIV will 

be widely disseminated on a per Share 

basis every 15 seconds during the 

Exchange’s Regular Trading Hours by 

one or more major market data vendors. 

In addition, the IIV will be available 

through on-line information services. 

Availability of Information 

In addition to the price transparency 

of the Index, the Trust will provide 

information regarding the Trust’s 

bitcoin holdings as well as additional 

data regarding the Trust. The Trust will 

provide an Intraday Indicative Value 

(‘‘IIV’’) per Share updated every 15 


ddrumheller on DSK120RN23PROD with NOTICES1
88678 Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 

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

Official Closing Price’’ shall mean the price 

disseminated to the consolidated tape as the market 

center closing trade. 

62The term ‘‘cold storage’’ refers to a safeguarding 

method by which the private keys corresponding to 

bitcoins stored on a digital wallet are removed from 

any computers actively connected to the internet. 

Cold storage of private keys may involve keeping 

such wallet on a non-networked computer or 

electronic device or storing the public key and 

private keys relating to the digital wallet on a 

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

printed medium (for example, papyrus or paper) 

and deleting the digital wallet from all computers. 

seconds, as calculated by the Exchange 

or a third-party financial data provider 

during the Exchange’s Regular Trading 

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

IIV will be calculated by using the prior 

day’s closing NAV per Share as a base 

and updating that value during Regular 

Trading Hours to reflect changes in the 

value of the Trust’s bitcoin holdings 

during the trading day. 

The IIV disseminated during Regular 

Trading Hours should not be viewed as 

an actual real-time update of the NAV, 

which will be calculated only once at 

the end of each trading day. The IIV will 

be widely disseminated on a per Share 

basis every 15 seconds during the 

Exchange’s Regular Trading Hours by 

one or more major market data vendors. 

In addition, the IIV will be available 

through on-line information services. 

The website for the Trust, which will 

be publicly accessible at no charge, will 

contain the following information: (a) 

the current NAV per Share daily and the 

prior business day’s NAV and the 

reported closing price; (b) the BZX 

Official Closing Price 61 in relation to 

the NAV as of the time the NAV is 

calculated and a calculation of the 

premium or discount of such price 

against such NAV; (c) data in chart form 

displaying the frequency distribution of 

discounts and premiums of the Official 

Closing Price against the NAV, within 

appropriate ranges for each of the four 

previous calendar quarters (or for the 

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

prospectus; and (e) other applicable 

quantitative information. The Trust will 

also disseminate the Trust’s holdings on 

a daily basis on the Trust’s website. The 

price of bitcoin will be made available 

by one or more major market data 

vendors, updated at least every 15 

seconds during Regular Trading Hours. 

Information about the Index, including 

key elements of how the Index is 

calculated, will be publicly available at 

https://www.cfbenchmarks.com. 

The NAV for the Trust will be 

calculated by the Administrator once a 

day and will be disseminated daily to 

all market participants at the same time. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the Consolidated Tape Association 

(‘‘CTA’’). 

Quotation and last sale information 

for bitcoin is widely disseminated 

through a variety of major market data 

vendors, including Bloomberg and 

Reuters, as well as the Index. 

Information relating to trading, 

including price and volume 

information, in bitcoin is available from 

major market data vendors and from the 

exchanges on which bitcoin are traded. 

Depth of book information is also 

available from bitcoin exchanges. The 

normal trading hours for bitcoin 

exchanges are 24 hours per day, 365 

days per year. 

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. 

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. Information regarding the 

previous day’s closing price and trading 

volume information for the Shares will 

be published daily in the financial 

section of newspapers. 

The Bitcoin Custodian 

The Bitcoin Custodian carefully 

considers the design of the physical, 

operational and cryptographic systems 

for secure storage of the Trust’s private 

keys in an effort to lower the risk of loss 

or theft. The Bitcoin Custodian utilizes 

a variety of security measures to ensure 

that private keys necessary to transfer 

digital assets remain uncompromised 

and that the Trust maintains exclusive 

ownership of its assets. The Bitcoin 

Custodian will keep a substantial 

portion of the private keys associated 

with the Trust’s bitcoin in ‘‘cold 

storage’’ 62 or similarly secure 

technology (the ‘‘Cold Vault Balance’’) 

The hardware, software, systems, and 

procedures of the Bitcoin Custodian 

may not be available or cost-effective for 

many investors to access directly Only 

specific individuals are authorized to 

participate in the custody process, and 

no individual acting alone will be able 

to access or use any of the private keys. 

In addition, no combination of the 

executive officers of the Sponsor, acting 

alone or together, will be able to access 

or use any of the private keys that hold 

the Trust’s bitcoin. 

Creation and Redemption of Shares 

When the Trust sells or redeems its 

Shares, it will do so in cash or in-kind 

transactions in blocks of 5,000 Shares 

that are based on the quantity of bitcoin 

attributable to each Share of the Trust 

(e.g., a Creation Basket) at the NAV. 

According to the Registration Statement, 

on any business day, an authorized 

participant may place an order to create 

one or more baskets. Purchase orders 

must be placed by 4:00 p.m. Eastern 

Time, or the close of regular trading on 

the Exchange, whichever is earlier. The 

day on which an order is received is 

considered the purchase order date. The 

total deposit of bitcoin required is an 

amount of bitcoin that is in the same 

proportion to the total assets of the 

Trust, net of accrued expenses and other 

liabilities, on the date the order to 

purchase is properly received, as the 

number of Shares to be created under 

the purchase order is in proportion to 

the total number of Shares outstanding 

on the date the order is received. Each 

night, the Sponsor will publish the 

amount of bitcoin that will be required 

in exchange for each creation order. The 

Administrator determines the required 

deposit for a given day by dividing the 

number of bitcoin held by the Trust as 

of the opening of business on that 

business day, adjusted for the amount of 

bitcoin constituting estimated accrued 

but unpaid fees and expenses of the 

Trust as of the opening of business on 

that business day, by the quotient of the 

number of Shares outstanding at the 

opening of business divided by the 

number of Shares in a Creation Basket. 

The procedures by which an authorized 

participant can redeem one or more 

Creation Baskets mirror the procedures 

for the creation of Creation Baskets. 

Rule 14.11(e)(4)—Commodity-Based 

Trust Shares 

The Shares will be subject to BZX 

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

initial and continued listing criteria 

applicable to Commodity-Based Trust 

Shares. The Exchange represents that, 

for initial and continued listing, the 

Trust must be in compliance with Rule 

10A–3 under the Act. A minimum of 

100,000 Shares will be outstanding at 

the commencement of listing on the 

Exchange. The Exchange will obtain a 

representation that the NAV will be 

calculated daily and that these values 

and information about the assets of the 

Trust will be made available to all 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 88679 

63For purposes of Rule 14.11(e)(4), the term 

commodity takes on the definition of the term as 

provided in the Commodity Exchange Act. As noted 

above, the CFTC has opined that Bitcoin is a 

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

Commodity Exchange Act. See Coinflip. 

market participants at the same time. 

The Exchange notes that, as defined in 

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

(a) issued by a trust that holds a 

specified commodity 63 deposited with 

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

specified aggregate minimum number in 

return for a deposit of a quantity of the 

underlying commodity; and (c) when 

aggregated in the same specified 

minimum number, may be redeemed at 

a holder’s request by such trust which 

will deliver to the redeeming holder the 

quantity of the underlying commodity. 

Upon termination of the Trust, the 

Shares will be removed from listing. 

The Trustee, Delaware Trust Company, 

is a trust company having substantial 

capital and surplus and the experience 

and facilities for handling corporate 

trust business, as required under Rule 

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

will be made to the trustee without prior 

notice to and approval of the Exchange. 

The Exchange also notes that, pursuant 

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

Exchange nor any agent of the Exchange 

shall have any liability for damages, 

claims, losses or expenses caused by 

any errors, omissions or delays in 

calculating or disseminating any 

underlying commodity value, the 

current value of the underlying 

commodity required to be deposited to 

the Trust in connection with issuance of 

Commodity-Based Trust Shares; 

resulting from any negligent act or 

omission by the Exchange, or any agent 

of the Exchange, or any act, condition or 

cause beyond the reasonable control of 

the Exchange, its agent, including, but 

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

extraordinary weather conditions; war; 

insurrection; riot; strike; accident; 

action of government; communications 

or power failure; equipment or software 

malfunction; or any error, omission or 

delay in the reports of transactions in an 

underlying commodity. Finally, as 

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

Exchange notes that any registered 

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

Shares must file with the Exchange in 

a manner prescribed by the Exchange 

and keep current a list identifying all 

accounts for trading in an underlying 

commodity, related commodity futures 

or options on commodity futures, or any 

other related commodity derivatives, 

which the registered Market Maker may 

have or over which it may exercise 

investment discretion. No registered 

Market Maker shall trade in an 

underlying commodity, related 

commodity futures or options on 

commodity futures, or any other related 

commodity derivatives, in an account in 

which a registered Market Maker, 

directly or indirectly, controls trading 

activities, or has a direct interest in the 

profits or losses thereof, which has not 

been reported to the Exchange as 

required by this Rule. In addition to the 

existing obligations under Exchange 

rules regarding the production of books 

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

registered Market Maker in CommodityBased Trust Shares shall make available 

to the Exchange such books, records or 

other information pertaining to 

transactions by such entity or registered 

or non-registered employee affiliated 

with such entity for its or their own 

accounts for trading the underlying 

physical commodity, related commodity 

futures or options on commodity 

futures, or any other related commodity 

derivatives, as may be requested by the 

Exchange. 

The Exchange is able to obtain 

information regarding trading in the 

Shares and the underlying bitcoin, 

Bitcoin Futures contracts, options on 

Bitcoin Futures, or any other bitcoin 

derivative through members acting as 

registered Market Makers, in connection 

with their proprietary or customer 

trades. 

As a general matter, the Exchange has 

regulatory jurisdiction over its members, 

and their associated persons. The 

Exchange also has regulatory 

jurisdiction over any person or entity 

controlling a member, as well as a 

subsidiary or affiliate of a member that 

is in the securities business. A 

subsidiary or affiliate of a member 

organization that does business only in 

commodities would not be subject to 

Exchange jurisdiction, but the Exchange 

could obtain information regarding the 

activities of such subsidiary or affiliate 

through surveillance sharing agreements 

with regulatory organizations of which 

such subsidiary or affiliate is a member. 

Trading Halts 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares. 

The Exchange will halt trading in the 

Shares under the conditions specified in 

BZX Rule 11.18. Trading may be halted 

because of market conditions or for 

reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable. These may include: (1) the 

extent to which trading is not occurring 

in the bitcoin underlying the Shares; or 

(2) whether other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. Trading in the 

Shares also will be subject to Rule 

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

circumstances under which trading in 

the Shares may be halted. 

If the IIV or the value of the Index is 

not being disseminated as required, the 

Exchange may halt trading during the 

day in which the interruption to the 

dissemination of the IIV or the value of 

the Index occurs. If the interruption to 

the dissemination of the IIV or the value 

of the Index 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. BZX will allow trading 

in the Shares during all trading sessions 

on the Exchange. The Exchange has 

appropriate rules to facilitate 

transactions in the Shares during all 

trading sessions. As provided in BZX 

Rule 11.11(a) the minimum price 

variation for quoting and entry of orders 

in securities traded on the Exchange is 

$0.01 where the price is greater than 

$1.00 per share or $0.0001 where the 

price is less than $1.00 per share. The 

Shares of the Trust will conform to the 

initial and continued listing criteria set 

forth in BZX Rule 14.11(e)(4). 

Surveillance 

The Exchange believes that its 

surveillance procedures are adequate to 

properly monitor the trading of the 

Shares on the Exchange during all 

trading sessions and to deter and detect 

violations of Exchange rules and the 

applicable federal securities laws. 

Trading of the Shares through the 

Exchange will be subject to the 

Exchange’s surveillance procedures for 

derivative products, including 

Commodity-Based Trust Shares. 

The Exchange will communicate as 

needed regarding trading in the Shares 

and Bitcoin Futures with other markets 

and other entities that are members of 

the ISG, and the Exchange, or FINRA, 

on behalf of the Exchange, may obtain 

trading information regarding trading in 


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64For a list of the current members and affiliate 

members of ISG, see www.isgportal.com. 

65Regular Trading Hours is the time between 9:30 

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

66 15 U.S.C. 78f. 

67 15 U.S.C. 78f(b)(5). 

68As the Exchange has stated in a number of 

other public documents, it continues to believe that 

bitcoin is resistant to price manipulation and that 

‘‘other means to prevent fraudulent and 

manipulative acts and practices’’ exist to justify 

dispensing with the requisite surveillance sharing 

agreement. The geographically diverse and 

continuous nature of bitcoin trading render it 

difficult and prohibitively costly to manipulate the 

price of bitcoin. The fragmentation across bitcoin 

platforms, the relatively slow speed of transactions, 

and the capital necessary to maintain a significant 

presence on each trading platform make 

manipulation of bitcoin prices through continuous 

trading activity challenging and impractical. To the 

extent that there are bitcoin exchanges engaged in 

or allowing wash trading or other activity intended 

to manipulate the price of bitcoin on other markets, 

such pricing does not normally impact prices on 

other exchange because participants will generally 

ignore markets with quotes that they deem nonexecutable. Moreover, the linkage between the 

bitcoin markets and the presence of arbitrageurs in 

those markets means that the manipulation of the 

price of bitcoin price on any single venue would 

require manipulation of the global bitcoin price in 

order to be effective. Arbitrageurs must have funds 

distributed across multiple trading platforms in 

order to take advantage of temporary price 

dislocations, thereby making it unlikely that there 

will be strong concentration of funds on any 

particular bitcoin exchange or OTC platform. As a 

result, the potential for manipulation on a trading 

platform would require overcoming the liquidity 

supply of such arbitrageurs who are effectively 

eliminating any cross-market pricing differences. 

69As previously articulated by the Commission, 

‘‘The standard requires such surveillance-sharing 

agreements since ‘‘they provide a necessary 

deterrent to manipulation because they facilitate the 

availability of information needed to fully 

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

Commission has emphasized that it is essential for 

an exchange listing a derivative securities product 

to enter into a surveillance-sharing agreement with 

markets trading underlying securities for the listing 

exchange to have the ability to obtain information 

necessary to detect, investigate, and deter fraud and 

market manipulation, as well as violations of 

exchange rules and applicable federal securities 

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

the Shares and Bitcoin Futures from 

such markets and other entities.64

The Exchange is able to obtain 

information regarding trading in the 

Shares and the underlying bitcoin, 

Bitcoin Futures contracts, options on 

Bitcoin Futures, or any other bitcoin 

derivative through members acting as 

registered Market Makers, in connection 

with their proprietary or customer 

trades. As a general matter, the 

Exchange has regulatory jurisdiction 

over its members, and their associated 

persons. The Exchange also has 

regulatory jurisdiction over any person 

or entity controlling a member, as well 

as a subsidiary or affiliate of a member 

that is in the securities business. A 

subsidiary or affiliate of a member 

organization that does business only in 

commodities would not be subject to 

Exchange jurisdiction, but the Exchange 

could obtain information regarding the 

activities of such subsidiary or affiliate 

through surveillance sharing agreements 

with regulatory organizations of which 

such subsidiary or affiliate is a member. 

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

The issuer has represented to the 

Exchange that it will advise the 

Exchange of any failure by the Trust or 

the Shares to comply with the 

continued listing requirements, and, 

pursuant to its obligations under 

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

Exchange will surveil for compliance 

with the continued listing requirements. 

If the Trust or the Shares are not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

Exchange Rule 14.12. 

Information Circular 

Prior to the commencement of 

trading, the Exchange will inform its 

members in an Information Circular of 

the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Circular 

will discuss the following: (i) the 

procedures for the creation and 

redemption of Creation Baskets (and 

that the Shares are not individually 

redeemable); (ii) BZX Rule 3.7, which 

imposes suitability obligations on 

Exchange members with respect to 

recommending transactions in the 

Shares to customers; (iii) how 

information regarding the IIV and the 

Trust’s NAV are disseminated; (iv) the 

risks involved in trading the Shares 

outside of Regular Trading Hours 65

when an updated IIV will not be 

calculated or publicly disseminated; (v) 

the requirement that members deliver a 

prospectus to investors purchasing 

newly issued Shares prior to or 

concurrently with the confirmation of a 

transaction; and (vi) trading 

information. The Information Circular 

will also reference the fact that there is 

no regulated source of last sale 

information regarding bitcoin, that the 

Commission has no jurisdiction over the 

trading of bitcoin as a commodity, and 

that the CFTC has regulatory 

jurisdiction over the trading of Bitcoin 

Futures contracts and options on 

Bitcoin Futures contracts. 

In addition, the Information Circular 

will advise members, prior to the 

commencement of trading, of the 

prospectus delivery requirements 

applicable to the Shares. Members 

purchasing the Shares for resale to 

investors will deliver a prospectus to 

such investors. The Information Circular 

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

the Commission from any rules under 

the Act. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with Section 6(b) 

of the Act 66 in general and Section 

6(b)(5) of the Act 67 in particular in that 

it is designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. 

The Commission has approved 

numerous series of Trust Issued 

Receipts, including Commodity-Based 

Trust Shares, to be listed on U.S. 

national securities exchanges. In order 

for any proposed rule change from an 

exchange to be approved, the 

Commission must determine that, 

among other things, the proposal is 

consistent with the requirements of 

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

including: (i) the requirement that a 

national securities exchange’s rules are 

designed to prevent fraudulent and 

manipulative acts and practices; 68 and 

(ii) the requirement that an exchange 

proposal be designed, in general, to 

protect investors and the public interest. 

The Exchange believes that this 

proposal is consistent with the 

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

Act and that this filing, in conjunction 

with precedent filings, sufficiently 

demonstrates that the CME Bitcoin 

Futures market represents a regulated 

market of significant size and that, on 

the whole, the manipulation concerns 

previously articulated by the 

Commission are sufficiently mitigated to 

the point that they are outweighed by 

quantifiable investor protection issues 

that would be resolved by approving 

this proposal. 

(i) Designed To Prevent Fraudulent and 

Manipulative Acts and Practices 

In order to meet this standard in a 

proposal to list and trade a series of 

Commodity-Based Trust Shares, the 

Commission requires that an exchange 

demonstrate that there is a 

comprehensive surveillance-sharing 

agreement in place 69 with a regulated 


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for the sharing of information about market trading 

activity, clearing activity, and customer identity; 

that the parties to the agreement have reasonable 

ability to obtain access to and produce requested 

information; and that no existing rules, laws, or 

practices would impede one party to the agreement 

from obtaining this information from, or producing 

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

historically held that joint membership in the ISG 

constitutes such a surveillance sharing agreement. 

See Wilshire Phoenix Disapproval). 

70 Id. 

71See Winklevoss Order at 37580. The 

Commission has also specifically noted that it ‘‘is 

not applying a ‘cannot be manipulated’ standard; 

instead, the Commission is examining whether the 

proposal meets the requirements of the Exchange 

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

burden on the listing exchange to demonstrate the 

validity of its contentions and to establish that the 

requirements of the Exchange Act have been met.’’ 

Id. at 37582. 

market of significant size. Both the 

Exchange and CME are members of ISG. 

The only remaining issue to be 

addressed is whether the Bitcoin 

Futures market constitutes a market of 

significant size, which both the 

Exchange and the Sponsor believe that 

it does. The terms ‘‘significant market’’ 

and ‘‘market of significant size’’ include 

a market (or group of markets) as to 

which: (a) there is a reasonable 

likelihood that a person attempting to 

manipulate the ETP would also have to 

trade on that market to manipulate the 

ETP, so that a surveillance-sharing 

agreement would assist the listing 

exchange in detecting and deterring 

misconduct; and (b) it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in that 

market.70

The Commission has also recognized 

that the ‘‘regulated market of significant 

size’’ standard is not the only means for 

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

specifically providing that a listing 

exchange could demonstrate that ‘‘other 

means to prevent fraudulent and 

manipulative acts and practices’’ are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement.71

(a) Manipulation of the ETP 

According to the research and 

analysis presented above, the Bitcoin 

Futures market is the leading market for 

bitcoin price formation. Where Bitcoin 

Futures lead the price in the spot market 

such that a potential manipulator of the 

bitcoin spot market (beyond just the 

constituents of the Index) would have to 

participate in the Bitcoin Futures 

market, it follows that a potential 

manipulator of the Shares would 

similarly have to transact in the Bitcoin 

Futures market because the Index is 

based on spot prices. As such, the 

Exchange believes that part (a) of the 

significant market test outlined above is 

satisfied and that common membership 

in ISG between the Exchange and CME 

would assist the listing exchange in 

detecting and deterring misconduct in 

the Shares. 

(b) Predominant Influence on Prices in 

Spot and Bitcoin Futures 

The Exchange and Sponsor also 

believe that trading in the Shares would 

not be the predominant influence on 

prices in the Bitcoin Futures market or 

spot market for a number of reasons, 

including the significant daily trading 

volume in the Bitcoin Futures market, 

the size of bitcoin’s market 

capitalization, and the significant 

liquidity available in the spot market. In 

addition to the Bitcoin Futures market 

data points cited above, the spot market 

for bitcoin is also very liquid. As the 

court found in the Grayscale Order, the 

Exchange and the Sponsor submit that 

‘‘[b]ecause the spot market is deeper and 

more liquid than the futures market, 

manipulation should be more difficult, 

not less.’’ 

(c) Other Means To Prevent Fraudulent 

and Manipulative Acts and Practices 

As noted above, the Commission also 

permits a listing exchange to 

demonstrate that ‘‘other means to 

prevent fraudulent and manipulative 

acts and practices’’ are sufficient to 

justify dispensing with the requisite 

surveillance-sharing agreement. The 

Exchange and Sponsor believe that such 

conditions are present in this case, in 

addition to the existence of a 

surveillance sharing agreement that 

meets the Commission’s previously 

articulated standards. 

(ii) Designed To Protect Investors and 

the Public Interest 

The Exchange believes that the 

proposal is designed to protect investors 

and the public interest. Over the past 

several years, U.S. investor exposure to 

bitcoin through OTC Bitcoin Trusts has 

grown into the tens of billions of 

dollars, including through Bitcoin 

Futures ETFs. With that growth, so too 

has grown the quantifiable investor 

protection issues to U.S. investors 

including in connection with roll costs 

for Bitcoin Futures ETFs and premium/ 

discount volatility and management fees 

for OTC Bitcoin Trusts. The Exchange 

believes that the concerns related to the 

prevention of fraudulent and 

manipulative acts and practices have 

been sufficiently addressed for this 

proposal to be consistent with the Act 

and, to the extent that the Commission 

disagrees with that assertion, such 

concerns are now outweighed by 

investor protection concerns. As such, 

the Exchange believes that approving 

this proposal (and comparable 

proposals) provides the Commission 

with the opportunity to allow U.S. 

investors to access bitcoin in a regulated 

and transparent exchange-traded vehicle 

that would act to limit risk and benefit 

U.S. investors by: (i) reducing premium 

and discount volatility as compared to 

OTC investment vehicles; (ii) increasing 

competitive pressure on management 

fees resulting in fee compression/ 

reductions; (iii) reducing risks and costs 

as compared to those associated with 

investing in Bitcoin Futures ETFs and 

operating companies that represent 

imperfect proxies for bitcoin exposure; 

and (iv) providing an alternative to 

custodying spot bitcoin. 

Commodity-Based Trust Shares 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

be listed on the Exchange pursuant to 

the initial and continued listing criteria 

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

Exchange believes that its surveillance 

procedures are adequate to properly 

monitor the trading of the Shares on the 

Exchange during all trading sessions 

and to deter and detect violations of 

Exchange rules and the applicable 

federal securities laws. Trading of the 

Shares through the Exchange will be 

subject to the Exchange’s surveillance 

procedures for derivative products, 

including Commodity-Based Trust 

Shares. The issuer has represented to 

the Exchange that it will advise the 

Exchange of any failure by the Trust or 

the Shares to comply with the 

continued listing requirements, and, 

pursuant to its obligations under 

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

Exchange will surveil for compliance 

with the continued listing requirements. 

If the Trust or the Shares are not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

Exchange Rule 14.12. The Exchange 

may obtain information regarding 

trading in the Shares and listed bitcoin 

derivatives via the ISG, from other 

exchanges who are members or affiliates 

of the ISG, or with which the Exchange 

has entered into a comprehensive 

surveillance sharing agreement. 

Availability of Information 

The Exchange also believes that the 

proposal promotes market transparency 

in that a large amount of information is 

currently available about bitcoin and 

will be available regarding the Trust and 

the Shares. In addition to the price 

transparency of the Index, the Trust will 


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provide information regarding the 

Trust’s bitcoin holdings as well as 

additional data regarding the Trust. 

The website for the Trust, which will 

be publicly accessible at no charge, will 

contain the following information: (a) 

the current NAV per Share daily and the 

prior business day’s NAV and the 

reported closing price; (b) the BZX 

Official Closing Price in relation to the 

NAV as of the time the NAV is 

calculated and a calculation of the 

premium or discount of such price 

against such NAV; (c) data in chart form 

displaying the frequency distribution of 

discounts and premiums of the Official 

Closing Price against the NAV, within 

appropriate ranges for each of the four 

previous calendar quarters (or for the 

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

prospectus; and (e) other applicable 

quantitative information. The Trust will 

also disseminate the Trust’s holdings on 

a daily basis on the Trust’s website. The 

price of bitcoin will be made available 

by one or more major market data 

vendors, updated at least every 15 

seconds during Regular Trading Hours. 

The aforementioned information will be 

published as of the close of business 

available on the Trust’s website 

www.pandoasset.com. 

The price of bitcoin will be made 

available by one or more major market 

data vendors, updated at least every 15 

seconds during Regular Trading Hours. 

The NAV for the Trust will be 

calculated by the Administrator once a 

day and will be disseminated daily to 

all market participants at the same time. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the Consolidated Tape Association 

(‘‘CTA’’). 

As noted above, the Index is 

calculated daily and aggregates the 

notional value of bitcoin trading activity 

across major bitcoin spot exchanges. 

Index data and the description of the 

Index are based on information made 

publicly available by the Index Provider 

on its website at https://

www.cfbenchmarks.com. 

Quotation and last sale information 

for bitcoin is widely disseminated 

through a variety of major market data 

vendors, including Bloomberg and 

Reuters, as well as the Index. 

Information relating to trading, 

including price and volume 

information, in bitcoin is available from 

major market data vendors and from the 

exchanges on which bitcoin are traded. 

Depth of book information is also 

available from bitcoin exchanges. The 

normal trading hours for bitcoin 

exchanges are 24 hours per day, 365 

days per year. 

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. 

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. Information regarding the 

previous day’s closing price and trading 

volume information for the Shares will 

be published daily in the financial 

section of newspapers. 

In sum, the Exchange believes that 

this proposal is consistent with the 

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

Act, that this filing sufficiently 

demonstrates that the CME Bitcoin 

Futures market represents a regulated 

market of significant size, and that on 

the whole the manipulation concerns 

previously articulated by the 

Commission are sufficiently mitigated to 

the point that they are outweighed by 

investor protection issues that would be 

resolved by approving this proposal. 

The Exchange believes that the 

proposal is, in particular, designed to 

protect investors and the public interest. 

The investor protection issues for U.S. 

investors has grown significantly over 

the last several years, through roll costs 

for Bitcoin Futures ETFs and premium/ 

discount volatility and management fees 

for OTC Bitcoin Trusts. As discussed 

herein, this growth investor protection 

concerns need to be reevaluated and 

rebalanced with the prevention of 

fraudulent and manipulative acts and 

practices concerns that previous 

disapproval orders have relied upon. 

Finally, the Exchange notes that in 

addition to all of the arguments herein 

which it believes sufficiently establish 

the CME Bitcoin Futures market as a 

regulated market of significant size, it is 

logically inconsistent to find that the 

CME Bitcoin Futures market is a 

significant market as it relates to the 

CME Bitcoin Futures market, but not a 

significant market as it relates to the 

bitcoin spot market for the numerous 

reasons laid out above. 

For the above reasons, the Exchange 

believes that the proposed rule change 

is consistent with the requirements of 

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

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Act. The Exchange 

notes that the proposed rule change, 

rather will facilitate the listing and 

trading of an additional exchange-traded 

product that will enhance competition 

among both market participants and 

listing venues, to the benefit of investors 

and the marketplace. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the Exchange consents, the Commission 

will: 

A. by order approve or disapprove 

such proposed rule change, or 

B. institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

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–2023–101 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–2023–101. 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. 245 / Friday, December 22, 2023 / Notices 88683 

72 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 98457 

(Sept. 20, 2023), 88 FR 66076 (‘‘Notice’’). The 

Commission has received no comments on the 

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

5See Securities Exchange Act Release No. 98566, 

88 FR 68236 (Oct. 3, 2023). The Commission 

designated December 25, 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 66078. VanEck Digital Assets, LLC 

(‘‘Sponsor’’) is the sponsor of the Trust. See id. at 

66077. 

9See id. at 66077. 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 66078. 

11See id. at 66079. 

12See id. 

13See id. at 66077. 

14 15 U.S.C. 78s(b)(2)(B). 

15 Id. 

16 15 U.S.C. 78f(b)(5). 

17BZX Rule 14.11(e)(4)(C)(i) defines the term 

‘‘Commodity-Based Trust Shares’’ as a security (a) 

that is issued by a trust that holds a specified 

commodity deposited with the trust; (b) that is 

issued by such trust in a specified aggregate 

minimum number in return for a deposit of a 

quantity of the underlying commodity; and (c) that, 

when aggregated in the same specified minimum 

Continued 

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–2023–101 and should be 

submitted on or before January 12, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.72

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–28194 Filed 12–21–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99195; File No. SR– 

CboeBZX–2023–069] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change To List and Trade Shares 

of the VanEck Ethereum ETF Under 

BZX Rule 14.11(e)(4), CommodityBased Trust Shares 

December 18, 2023. 

On September 6, 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 VanEck Ethereum ETF 

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

Commodity-Based Trust Shares. The 

proposed rule change was published for 

comment in the Federal Register on 

September 26, 2023.3

On September 27, 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.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. 

I. Summary of the Proposal 

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 for the Shares to reflect the 

performance of the MarketVectorTM

Ethereum Benchmark Rate 

(‘‘Benchmark’’) less the expenses of the 

Trust’s operations.8 The Trust’s assets 

will consist of ether held by the Trust’s 

custodian on behalf of the Trust.9 The 

Trust will value its Shares daily based 

on the reported Benchmark.10 The 

administrator of the Trust will 

determine the net asset value (‘‘NAV’’) 

of the Trust on each day that the 

Exchange is open for regular trading, as 

promptly as practicable after 4:00 p.m. 

ET.11 In determining the Trust’s NAV, 

the administrator values the ether held 

by the Trust based on the price set by 

the Benchmark as of 4:00 p.m. ET.12

When the Trust sells or redeems its 

Shares, it will do so in ‘‘in-kind’’ 

transactions with authorized 

participants in blocks of 50,000 

Shares.13

II. Proceedings To Determine Whether 

To Approve or Disapprove SR– 

CboeBZX–2023–069 and Grounds for 

Disapproval Under Consideration 

The Commission is instituting 

proceedings pursuant to Section 

19(b)(2)(B) of the Act 14 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,15 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.’’ 16

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. Given the nature of the underlying 

assets held by the Trust, has the 

Exchange properly filed its proposal to 

list and trade the Shares under BZX 

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

Trust Shares? 17


ddrumheller on DSK120RN23PROD with NOTICES1