Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 88685 

30 17 CFR 200.30–3(a)(57). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 98467 

(Sept. 21, 2023), 88 FR 66515 (‘‘Notice’’). The 

Commission has received no comments on the 

proposal. 

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

5See Securities Exchange Act Release No. 98565, 

88 FR 68187 (Oct. 3, 2023). The Commission 

designated December 26, 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 66518. 21Shares US LLC (‘‘Sponsor’’) 

is the sponsor of the Trust. See id. at 66515. 

9See id. at 66515. 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. at 66515–16. 

10See id. at 66518. 

11See id. at 66519. 

12See id. 

13See id. at 66516. 

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 

Continued 

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–2023–069 and should be 

submitted on or before January 12, 2024. 

Rebuttal comments should be submitted 

by January 26, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–28192 Filed 12–21–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99196; File No. SR– 

CboeBZX–2023–070] 

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 ARK 21Shares Ethereum ETF 

Under BZX Rule 14.11(e)(4), 

Commodity-Based 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 ARK 21Shares 

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 27, 

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 

will be to seek to track the performance 

of ether, as measured by the 

performance of the CME CF Ether-Dollar 

Reference Rate—New York Variant 

(‘‘Index’’), adjusted for the Trust’s 

expenses and other liabilities.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 value of ether as 

reflected by the Index.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 Index 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 

5,000 Shares.13

II. Proceedings To Determine Whether 

To Approve or Disapprove SR– 

CboeBZX–2023–070 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
88686 Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 

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 

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. 

18See Notice, 88 FR at 66521. 

19See id. at 66518. 

20See id. at 66522. 

21See id. 

22See id. at 66521 n.29. 

23See id. 

24See id. at 66522. 

25See id. 

26See id. at 66522–23. The Exchange states that 

‘‘[t]his means that the Exchange expects to receive 

market data for orders and trades from Coinbase, 

which it will utilize in surveillance of the trading 

of Commodity-Based Trust Shares.’’ Id. at 66523. 

27See id. at 66522. 

28See id. at 66521. The Exchange states that this 

is based on a pairwise correlation performed by the 

Sponsor of ether daily returns across top centralized 

spot cryptocurrency platforms and the CME from 

March 19, 2021, to September 5, 2023. See id. 

29See id. at 66522. 

30Section 19(b)(2) of the Act, as amended by the 

Securities Acts Amendments of 1975, Public Law 

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

flexibility to determine what type of proceeding— 

either oral or notice and opportunity for written 

comments—is appropriate for consideration of a 

particular proposal by a self-regulatory 

organization. See Securities Acts Amendments of 

1975, Senate Comm. on Banking, Housing & Urban 

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

(1975). 

2. The Exchange raises substantially 

similar arguments to support the listing 

and trading of the Shares as those made 

in proposals to list and trade spot 

bitcoin exchange-traded products 

(‘‘Bitcoin ETPs’’). Do commenters agree 

that arguments to support the listing of 

Bitcoin ETPs apply equally to the 

Shares? Are there particular features 

related to ether and its ecosystem, 

including its proof of stake consensus 

mechanism and concentration of control 

or influence by a few individuals or 

entities, that raise unique concerns 

about ether’s susceptibility to fraud and 

manipulation? 

3. What are commenters’ views on 

whether the proposed Trust and Shares 

would be susceptible to manipulation? 

What are commenters’ views generally 

on whether the Exchange’s proposal is 

designed to prevent fraudulent and 

manipulative acts and practices? What 

are commenters’ views generally with 

respect to the liquidity and transparency 

of the ether markets and the ether 

markets’ susceptibility to manipulation? 

4. Based on data and analysis 

provided by the Exchange,18 do 

commenters agree with the Exchange 

that the Chicago Mercantile Exchange 

(‘‘CME’’), on which CME ether futures 

trade, represents a regulated market of 

significant size related to spot ether? 19

What are commenters’ views on 

whether there is a reasonable likelihood 

that a person attempting to manipulate 

the Shares would also have to trade on 

the CME to manipulate the Shares? 20 Do 

commenters agree with the Exchange 

that trading in the Shares would not be 

the predominant influence on prices in 

the CME ether futures market? 21

5. The Exchange states that ether is 

resistant to price manipulation and that 

other means to prevent fraudulent and 

manipulative acts and practices ‘‘exist 

to justify dispensing with the requisite 

surveillance sharing agreement’’ with a 

regulated market of significant size 

related to spot ether.22 In support, the 

Exchange states, among other things, 

that the geographically diverse and 

continuous nature of ether trading make 

it difficult and prohibitively costly to 

manipulate the price of ether, and that 

the fragmentation across ether 

platforms, the relatively slow speed of 

transactions, and the capital necessary 

to maintain a significant presence on 

each trading platform make 

manipulation of ether prices through 

continuous trading activity 

challenging.23 The Exchange also states 

that offering only in-kind creations and 

redemptions ‘‘reduces the potential for 

manipulation of the Shares through 

manipulation of the Index or any of its 

individual constituents, again 

emphasizing that a potential 

manipulator of the Shares would have 

to manipulate the entirety of the ether 

spot market, which is led by the [CME] 

ether [f]utures market.’’ 24 Do 

commenters agree with the Exchange’s 

statements regarding the ether market’s 

resistance to price manipulation? 

6. The Exchange also states that it will 

execute a surveillance-sharing 

agreement with Coinbase, Inc. 

(‘‘Coinbase’’) that is intended to 

supplement the Exchange’s market 

surveillance program.25 According to 

the Exchange, the agreement is 

‘‘expected to have the hallmarks of a 

surveillance-sharing agreement between 

two members of the [Intermarket 

Surveillance Group], which would give 

the Exchange supplemental access to 

data regarding spot [ether] trades on 

Coinbase where the Exchange 

determines it is necessary as part of its 

surveillance program for the 

Commodity-Based Trust Shares.’’ 26

Based on the description of the 

surveillance-sharing agreement as 

provided by the Exchange, what are 

commenters’ views of such an 

agreement if finalized and executed? Do 

commenters agree with the Exchange 

that such an agreement with Coinbase 

would be ‘‘helpful in detecting, 

investigating, and deterring fraud and 

market manipulation in the CommodityBased Trust Shares’’? 27

7. The Exchange states that the 

‘‘Sponsor’s research indicates that daily 

correlation between the [s]pot [ether] 

and the CME [ether] [f]utures . . . was 

over 99.88%.’’ 28 The Exchange further 

states that this ‘‘high correlation’’ in 

pricing between CME ether futures and 

spot ether indicates that there is a 

reasonable likelihood that a person 

attempting to manipulate the Trust 

would also have to trade on the CME 

ether futures market.29 What are 

commenters’ views on the correlation 

between the ether spot market and the 

CME ether futures market? What are 

commenters’ views on the extent to 

which a surveillance-sharing agreement 

with the CME would assist in detecting 

and deterring fraud and manipulation 

that impacts an exchange-traded 

product (‘‘ETP’’) that holds spot ether, 

and on whether the Sponsor’s daily 

return correlation analysis provides any 

evidence to this effect? What are 

commenters’ views generally on 

whether an ETP that holds CME ether 

futures and an ETP that holds spot ether 

are similar products? 

III. Procedure: Request for Written 

Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data, and 

arguments with respect to the issues 

identified above, as well as any other 

concerns they may have with the 

proposal. In particular, the Commission 

invites the written views of interested 

persons concerning whether the 

proposal is consistent with Section 

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

and the rules and regulations 

thereunder. Although there do not 

appear to be any issues relevant to 

approval or disapproval that would be 

facilitated by an oral presentation of 

views, data, and arguments, the 

Commission will consider, pursuant to 

Rule 19b–4, any request for an 

opportunity to make an oral 

presentation.30

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposed rule change should be 

approved or disapproved by January 12, 

2024. Any person who wishes to file a 

rebuttal to any other person’s 

submission must file that rebuttal by 

January 26, 2024. 

Comments may be submitted by any 

of the following methods: 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 245 / Friday, December 22, 2023 / Notices 88687 

31 17 CFR 200.30–3(a)(57). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 98563 

(Sept. 27, 2023), 88 FR 68214 (‘‘Notice’’). The 

Commission has received no comments on the 

proposal. 

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

5See Securities Exchange Act Release No. 98948, 

88 FR 81156 (Nov. 21, 2023). The Commission 

designated January 1, 2024, 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 Notice, 88 FR at 68215. The Fund is 

managed and controlled by Toroso Investments LLC 

(‘‘Sponsor’’). See id. at 68214. 

9See id. 

10According to the Exchange, the CME currently 

offers two ether futures contracts: one contract 

representing 50 ether (‘‘ETH Contracts’’) and 

another contract representing 0.10 ether (‘‘MET 

Contracts,’’ and collectively, ‘‘Ether Futures 

Contracts’’). See id. at 68214. 

11See id. at 68214. The Fund will hold a mix of 

Ether Futures Contracts, spot ether, and cash and 

cash equivalents, subject to certain investment 

restrictions. See id. at 68219. 

12See id. at 68219. According to the Exchange, 

EFP transactions are a type of private agreement 

between two parties to trade a futures position for 

the underlying asset. In an EFP transaction, two 

parties exchange equivalent but offsetting positions 

in an Ether Futures Contract and the underlying 

physical ether. In the context of the Fund, these 

transactions will be used to purchase and sell spot 

ether by delivering or receiving the equivalent 

futures position. See id. at 68229. 

13See id. at 68227–28. 

14See id. at 68231. The Fund’s NAV will include 

any unrealized profit or loss on open ether futures 

contacts and any other credit or debit accruing to 

the Fund but unpaid or not received by the Fund. 

See id. 

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–2023–070 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–2023–070. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

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

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeBZX–2023–070 and should be 

submitted on or before January 12, 2024. 

Rebuttal comments should be submitted 

by January 26, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–28193 Filed 12–21–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99200; File No. SR– 

NASDAQ–2023–035] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Order 

Instituting Proceedings To Determine 

Whether To Approve or Disapprove a 

Proposed Rule Change To List and 

Trade Shares of the Hashdex Nasdaq 

Ethereum ETF Under Nasdaq Rule 

5711(i) (Trust Units) 

December 18, 2023. 

On September 20, 2023, The Nasdaq 

Stock Market LLC (‘‘Nasdaq’’ 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 

Hashdex Nasdaq Ethereum ETF 

(‘‘Fund’’) under Nasdaq Rule 5711(i) 

(Trust Units). The proposed rule change 

was published for comment in the 

Federal Register on October 3, 2023.3

On November 15, 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 Fund, a 

series of the Tidal Commodities Trust I 

(‘‘Trust’’), under Nasdaq Rule 5711(i), 

which governs the listing and trading of 

Trust Units on the Exchange. 

The investment objective of the Fund 

is to have the daily changes in the net 

asset value (‘‘NAV’’) of the Shares 

reflect the daily changes in the price of 

the Nasdaq Ether Reference Price 

(NQETH) (‘‘Benchmark’’), less expenses 

from the Fund’s operations.8 The 

Benchmark is designed to track the 

price performance of ether.9 Under 

normal market conditions, the Fund 

will invest in ether, ether futures 

contracts listed on the Chicago 

Mercantile Exchange, Inc. (‘‘CME’’),10

and in cash and cash equivalents.11 The 

Fund will use the CME’s Exchange for 

Physical (‘‘EFP’’) transactions to acquire 

and dispose of spot ether.12 The Fund 

will be subject to investment restrictions 

on spot ether which cap the Fund’s 

exposure to the ether spot market to a 

specified proportion of the Fund’s NAV 

and restrict the Fund’s notional 

exposure to ether to a set proportion.13

The sub-administrator of the Fund will 

calculate the NAV of the Fund once 

each trading day, as of the earlier of the 

close of the Nasdaq or 4:00 p.m. New 

York time.14 To determine the value of 

Ether Futures Contracts, the Fund’s subadministrator will use the Ether Futures 

Contract settlement price on the 

exchange on which the contract is 

traded, except that the fair value of 

Ether Futures Contracts may be used 

when Ether Futures Contracts close at 

their price fluctuation limit for the day. 

The value of spot ether held by the 

Fund would be determined by the 

Sponsor and by Hashdex Asset 

Management Ltd. (‘‘Digital Asset 

Adviser’’) in good faith based on a 

methodology that is entirely derived 

from the settlement prices of Ether 

Futures Contracts on the CME and that 

considers all available facts and all 

available information on the valuation 


ddrumheller on DSK120RN23PROD with NOTICES1