Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2321 

106 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. 97905 

(July 13, 2023), 88 FR 46342. Comments on the 

proposed rule change are available at: https://

www.sec.gov/comments/sr-nasdaq-2023-016/

srnasdaq2023016.htm. 

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

5See Securities Exchange Act Release No. 98267, 

88 FR 61652 (Sept. 7, 2023). 

6See Securities Exchange Act Release No. 98610, 

88 FR 68768 (Oct. 4, 2023). 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the CTA. The Trust’s website will also 

include a form of the prospectus for the 

Trust that may be downloaded. The 

website will include the Shares’ ticker 

and CUSIP information, along with 

additional quantitative information 

updated on a daily basis for the Trust. 

The Trust’s website will include (1) 

daily trading volume, the prior Business 

Day’s reported NAV and closing price, 

and a calculation of the premium and 

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

NAV; and (ii) data in chart format 

displaying the frequency distribution of 

discounts and premiums of the daily 

closing price or Bid/Ask Price against 

the NAV, within appropriate ranges, for 

at least each of the four previous 

calendar quarters. The Trust’s website 

will be publicly available prior to the 

public offering of Shares and accessible 

at no charge. 

Trading in Shares of the Trust will be 

halted if the circuit breaker parameters 

in NYSE Arca Rule 7.12–E have been 

reached or because of market conditions 

or for reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of a new type of exchange-traded 

product based on the price of bitcoin 

that will enhance competition among 

market participants, to the benefit of 

investors and the marketplace. As noted 

above, the Exchange has in place 

surveillance procedures that are 

adequate to properly monitor trading in 

the Shares in all trading sessions and to 

deter and detect violations of Exchange 

rules and applicable federal securities 

laws. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Act. The Exchange 

notes that the proposed rule change will 

facilitate the listing and trading of a new 

type of Commodity-Based Trust Share 

based on the price of bitcoin that will 

enhance competition among market 

participants, to the benefit of investors 

and the marketplace. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NYSEARCA–2023–44 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–NYSEARCA–2023–44. 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–NYSEARCA–2023–44 and should be 

submitted on or before February 2, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.106

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–00510 Filed 1–11–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99295; File No. SR– 

NASDAQ–2023–016] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing of Amendment No. 1 to a 

Proposed Rule Change To List and 

Trade Shares of the iShares Bitcoin 

Trust Under Nasdaq Rule 5711(d) 

January 8, 2024. 

On June 29, 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 of the 

iShares Bitcoin Trust under Nasdaq 

Rule 5711(d), Commodity-Based Trust 

Shares. The proposed rule change was 

published for comment in the Federal 

Register on July 19, 2023.3 On August 

31, 2023, pursuant to section 19(b)(2) of 

the Act,4 the Commission designated a 

longer period within which to approve 

the proposed rule change, disapprove 

the proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change.5

On September 28, 2023, the 

Commission instituted proceedings to 

determine whether to disapprove the 

proposed rule change.6 On January 5, 

2024, the Exchange filed Amendment 

No. 1 to the proposed rule change as 

described in Items I and II below, which 

Items have been prepared by the 

Exchange. Amendment No. 1 amended 

and replaced the proposed rule change 

in its entirety. The Commission is 


khammond on DSKJM1Z7X2PROD with NOTICES
2322 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

7The Commission approved Nasdaq Rule 5711 in 

Securities Exchange Act Release No. 66648 (March 

23, 2012), 77 FR 19428 (March 30, 2012) (SR– 

NASDAQ–2012–013). 

8See Amendment No. 4 to Registration Statement 

on Form S–1, dated December 22, 2023 filed with 

the Commission by the Sponsor on behalf of the 

Trust. The descriptions of the Trust contained 

herein are based, in part, on information in the 

Registration Statement. The Registration Statement 

in not yet effective and the Shares will not trade 

on the Exchange until such time that the 

Registration Statement is effective. 

9The Trust issues and redeems Shares only in 

blocks of 40,000 or integral multiples thereof. A 

block of 40,000 Shares is called a ‘‘Basket.’’ These 

transactions take place in exchange for bitcoin. 

10The term ‘‘cold storage’’ refers to a safeguarding 

method by which the private keys corresponding to 

the Trust’s bitcoins are generated and stored in an 

offline manner, subject to layers of procedures 

designed to enhance security. Private keys are 

generated by the Bitcoin Custodian in offline 

computers that are not connected to the internet so 

that they are more resistant to being hacked. 

publishing this notice to solicit 

comments on the proposed rule change, 

as modified by Amendment No. 1, from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade shares of the iShares Bitcoin Trust 

(the ‘‘Trust’’) under Nasdaq Rule 

5711(d) (‘‘Commodity-Based Trust 

Shares’’). The shares of the Trust are 

referred to herein as the ‘‘Shares.’’ This 

Amendment No. 1 supersedes the 

original filing in its entirety. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/

rulebook/nasdaq/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

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 Nasdaq Rule 

5711(d),7 which governs the listing and 

trading of Commodity-Based Trust 

Shares on the Exchange. iShares 

Delaware Trust Sponsor LLC, a 

Delaware limited liability company and 

an indirect subsidiary of BlackRock, Inc. 

(‘‘BlackRock’’), is the sponsor of the 

Trust (the ‘‘Sponsor’’). The Shares will 

be registered with the SEC by means of 

the Trust’s registration statement on 

Form S–1 (the ‘‘Registration 

Statement’’).8

Description of the Trust 

The Shares will be issued by the 

Trust, a Delaware statutory trust. The 

Trust will operate pursuant to a trust 

agreement (the ‘‘Trust Agreement’’) 

between the Sponsor, BlackRock Fund 

Advisors (the ‘‘Trustee’’) as the trustee 

of the Trust and Wilmington Trust, 

National Association, as Delaware 

trustee (the ‘‘Delaware Trustee’’). The 

Trust issues Shares representing 

fractional undivided beneficial interests 

in its net assets. The assets of the Trust 

will consist only of bitcoin, held by a 

custodian on behalf of the Trust except 

under limited circumstances when 

transferred through the Trust’s prime 

broker temporarily (described below), 

and cash. Coinbase Custody Trust 

Company, LLC (the ‘‘Bitcoin 

Custodian’’) is the custodian for the 

Trust’s bitcoin holdings, and maintains 

a custody account for the Trust 

(‘‘Custody Account); Coinbase, Inc. (the 

‘‘Prime Execution Agent’’), an affiliate of 

the Bitcoin Custodian, is the prime 

broker for the Trust and maintains a 

trading account for the Trust (‘‘Trading 

Account); and Bank of New York 

Mellon is the custodian for the Trust’s 

cash holdings (the ‘‘Cash Custodian’’ 

and together with the Bitcoin Custodian, 

the ‘‘Custodians’’) and the administrator 

of the Trust (the ‘‘Trust Administrator’’). 

Under the Trust Agreement, the Trustee 

may delegate all or a portion of its 

duties to any agent, and has delegated 

the bulk of the day-to-day 

responsibilities to the Trust 

Administrator and certain other 

administrative and record-keeping 

functions to its affiliates and other 

agents. The Trust is not an investment 

company registered under the 

Investment Company Act of 1940, as 

amended (the ‘‘1940 Act’’). 

The investment objective of the Trust 

is to reflect generally the performance of 

the price of bitcoin. The Trust seeks to 

reflect such performance before 

payment of the Trust’s expenses and 

liabilities. The Shares are intended to 

constitute a simple means of making an 

investment similar to an investment in 

bitcoin through the public securities 

market rather than by acquiring, holding 

and trading bitcoin directly on a peerto-peer or other basis or via a digital 

asset platform. The Shares have been 

designed to remove the obstacles 

represented by the complexities and 

operational burdens involved in a direct 

investment in bitcoin, while at the same 

time having an intrinsic value that 

reflects, at any given time, the 

investment exposure to the bitcoin 

owned by the Trust at such time, less 

the Trust’s expenses and liabilities. 

Although the Shares are not the exact 

equivalent of a direct investment in 

bitcoin, they provide investors with an 

alternative method of achieving 

investment exposure to bitcoin through 

the public securities market, which may 

be more familiar to them. 

Custody of the Trust’s Bitcoin and 

Creation and Redemption 

An investment in the Shares is backed 

by bitcoin held by the Bitcoin Custodian 

on behalf of the Trust. All of the Trust’s 

bitcoin will be held in the Custody 

Account, other than the Trust’s bitcoin 

which is temporarily maintained in the 

Trading Account under limited 

circumstances, i.e., in connection with 

creation and redemption Basket 9

activity or sales of bitcoin deducted 

from the Trust’s holdings in payment of 

Trust expenses or the Sponsor’s fee (or, 

in extraordinary circumstances, upon 

liquidation of the Trust). The Custody 

Account includes all of the Trust’s 

bitcoin held at the Bitcoin Custodian, 

but does not include the Trust’s bitcoin 

temporarily maintained at the Prime 

Execution Agent in the Trading Account 

from time to time. The Bitcoin 

Custodian will keep all of the private 

keys associated with the Trust’s bitcoin 

held in the Custody Account in ‘‘cold 

storage’’.10 The hardware, software, 

systems, and procedures of the Bitcoin 

Custodian may not be available or costeffective for many investors to access 

directly. 

The Trust’s bitcoin holdings and cash 

holdings from time to time may 

temporarily be maintained in the 

Trading Account held with the Prime 

Execution Agent, an affiliate of the 

Bitcoin Custodian. Coinbase Inc. serves 

as the Trust’s Prime Execution Agent 

pursuant to the Trust’s agreement with 

the Prime Execution Agent (‘‘Prime 

Execution Agent Agreement’’). In this 

capacity, the Prime Execution Agent 

facilitates the buying and selling of 

bitcoin by the Trust in response to cash 

creations and redemptions between the 

Trust and registered broker-dealers that 

are Depositary Trust Company (‘‘DTC’’) 

participants that enter into an 


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Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2323 

11The Coinbase Prime service is an execution 

service pursuant to which Coinbase will execute 

bitcoin orders for the Trust by accessing liquidity 

from sources such as bitcoin trading platforms, 

which can include Coinbase’s own platform, and 

other liquidity providers. Trades can be executed 

according to an algorithm or on the basis of firm 

quotes sought by requests-for-quote (‘‘RFQ’’) for a 

two-way price sent to liquidity providers. 

Algorithmic trades can be self-directed or executed 

by Coinbase’s high touch execution desk, Coinbase 

Execution Services. 

authorized participant agreement with 

the Sponsor and the Trustee 

(‘‘Authorized Participants’’), and the 

sale of bitcoin to pay the Sponsor’s fee, 

any other Trust expenses not assumed 

by the Sponsor, to the extent applicable, 

and in extraordinary circumstances, in 

connection with the liquidation of the 

Trust’s bitcoin. 

The Authorized Participants will 

deliver only cash to create shares and 

will receive only cash when redeeming 

shares. Further, Authorized Participants 

will not directly or indirectly purchase, 

hold, deliver, or receive bitcoin as part 

of the creation or redemption process or 

otherwise direct the Trust or a third 

party with respect to purchasing, 

holding, delivering, or receiving bitcoin 

as part of the creation or redemption 

process. 

The Trust will create shares by 

receiving bitcoin from a third party that 

is not the Authorized Participant and 

the Trust—not the Authorized 

Participant—is responsible for selecting 

the third party to deliver the bitcoin. 

Further, the third party will not be 

acting as an agent of the Authorized 

Participant with respect to the delivery 

of the bitcoin to the Trust or acting at 

the direction of the Authorized 

Participant with respect to the delivery 

of the bitcoin to the Trust. The Trust 

will redeem shares by delivering bitcoin 

to a third party that is not the 

Authorized Participant and the Trust— 

not the Authorized Participant—is 

responsible for selecting the third party 

to receive the bitcoin. Further, the third 

party will not be acting as an agent of 

the Authorized Participant with respect 

to the receipt of the bitcoin from the 

Trust or acting at the direction of the 

Authorized Participant with respect to 

the receipt of the bitcoin from the Trust. 

The third party will be unaffiliated with 

the Trust and the Sponsor. 

In connection with cash creations and 

cash redemptions, the Authorized 

Participants will submit orders to create 

or redeem Baskets of Shares exclusively 

in exchange for cash. The Trust will 

engage in bitcoin transactions to convert 

cash into bitcoin (in association with 

creation orders) and bitcoin into cash 

(in association with redemption orders). 

The Trust will conduct its bitcoin 

purchase and sale transactions by, in its 

sole discretion, choosing to trade 

directly with designated third parties 

(each, a ‘‘Bitcoin Trading 

Counterparty’’), who are not registered 

broker-dealers pursuant to written 

agreements between each such Bitcoin 

Trading Counterparty and the Trust, or 

choosing to trade through the Prime 

Execution Agent acting in an agency 

capacity with third parties through its 

Coinbase Prime service 11 pursuant to 

the Prime Execution Agent Agreement. 

Bitcoin Trading Counterparties settle 

trades with the Trust using their own 

accounts at the Prime Execution Agent 

when trading with the Trust. 

For a creation of a Basket of Shares, 

the Authorized Participant will be 

required to submit the creation order by 

an early order cutoff (‘‘Creation Early 

Cutoff Time’’). The Creation Early Cutoff 

Time will initially be 6:00 p.m. ET on 

the business day prior to trade date. 

On the date of the Creation Early 

Cutoff Time for a creation order, the 

Trust will choose, in its sole discretion, 

to enter into a transaction with a Bitcoin 

Trading Counterparty or the Prime 

Execution Agent to buy bitcoin in 

exchange for the cash proceeds from 

such creation order. On settlement date 

for a creation, the Trust delivers Shares 

to the Authorized Participant in 

exchange for cash received from the 

Authorized Participant. Also, on or 

around the settlement date, the Bitcoin 

Trading Counterparty or Prime 

Execution Agent, as applicable, deposits 

the required bitcoin pursuant to its trade 

with the Trust into the Trust’s Trading 

Account in exchange for cash. In the 

event the Trust has not been able to 

successfully execute and complete 

settlement of a bitcoin transaction by 

the settlement date of the creation order, 

the Authorized Participant will be given 

the option to (1) cancel the creation 

order, or (2) accept that the Trust will 

continue to attempt to complete the 

execution, which will delay the 

settlement date of the creation order. 

With respect to a creation order, as 

between the Trust and the Authorized 

Participant, the Authorized Participant 

is responsible for the dollar cost of the 

difference between the bitcoin price 

utilized in calculating NAV per Share 

on trade date and the price at which the 

Trust acquires the bitcoin to the extent 

the price realized in buying the bitcoin 

is higher than the bitcoin price utilized 

in the NAV. To the extent the price 

realized in buying the bitcoin is lower 

than the price utilized in the NAV, the 

Authorized Participant shall get to keep 

the dollar impact of any such difference. 

Because the Trust’s Trading Account 

may not be funded with cash on trade 

date for the purchase of bitcoin 

associated with a cash creation order, 

the Trust may borrow trade credits 

(‘‘Trade Credits’’) in the form of cash 

from Coinbase Credit, Inc. (the ‘‘Trade 

Credit Lender’’), an affiliate of the Prime 

Execution Agent, under the trade 

financing agreement (‘‘Trade Financing 

Agreement’’) or may require the 

Authorized Participant to deliver the 

required cash for the creation order on 

trade date. The extension of Trade 

Credits on trade date allows the Trust to 

purchase bitcoin through the Prime 

Execution Agent on trade date, with 

such bitcoin being deposited in the 

Trust’s Trading Account. On settlement 

date for a creation order, the Trust 

delivers Shares to the Authorized 

Participant in exchange for cash 

received from the Authorized 

Participant. To the extent Trade Credits 

were utilized, the Trust uses the cash to 

repay the Trade Credits borrowed from 

the Trade Credit Lender. On settlement 

date for a creation order, the bitcoin 

purchased is swept from the Trust’s 

Trading Account to the Trust’s Custody 

Account pursuant to a regular end-ofday sweep process. 

For a redemption of a Basket of 

Shares, the Authorized Participant will 

be required to submit a redemption 

order by an early order cutoff (the 

‘‘Redemption Early Cutoff Time’’). The 

Redemption Early Cutoff Time will 

initially be 6:00 p.m. ET on the business 

day prior to trade date. On the date of 

the Redemption Early Cutoff Time for a 

redemption order, the Trust may 

choose, in its sole discretion, to enter 

into a transaction with a Bitcoin Trading 

Counterparty or the Prime Execution 

Agent, to sell bitcoin in exchange for 

cash. After the Redemption Early Cutoff 

Time, the Trust instructs the Bitcoin 

Custodian to prepare to move the 

associated bitcoin from the Trust’s 

Custody Account to the Trust’s Trading 

Account. On settlement date for a 

redemption order, the Authorized 

Participant delivers the necessary 

Shares to the Trust, and on or around 

settlement date, a Bitcoin Trading 

Counterparty or Prime Execution Agent, 

as applicable, delivers the cash 

associated with the Trust’s sale of 

bitcoin to the Trust in exchange for the 

Trust’s bitcoin, and the Trust delivers 

cash to the Authorized Participant. In 

the event the Trust has not been able to 

successfully execute and complete 

settlement of a bitcoin transaction by 

the settlement date, the Authorized 

Participant will be given the option to 

(1) cancel the redemption order, or (2) 

accept that the Trust will continue to 

attempt to complete the execution, 


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12A ‘‘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 and observed by the ‘‘Index 

Administrator’’, as such terms are defined below. 

13See FASB (Financial Accounting Standards 

Board) Accounting standards codification (ASC) 

820–10. For financial reporting purposes only, the 

Trustee has adopted a valuation policy that outlines 

the methodology for valuing the Trust’s assets. The 

policy also outlines the methodology for 

determining the principal market (or in the absence 

of a principal market, the most advantageous 

market) in accordance with FASB ASC 820–10. 

which will delay the settlement date. 

With respect to a redemption order, 

between the Trust and the Authorized 

Participant, the Authorized Participant 

will be responsible for the dollar cost of 

the difference between the bitcoin price 

utilized in calculating the NAV per 

Share on trade date and the price 

realized in selling the bitcoin to raise 

the cash needed for the cash redemption 

order to the extent the price realized in 

selling the bitcoin is lower than the 

bitcoin price utilized in the NAV. To the 

extent the price realized in selling the 

bitcoin is higher than the price utilized 

in the NAV, the Authorized Participant 

will get to keep the dollar impact of any 

such difference. 

The Trust may use financing in 

connection with a redemption order 

when bitcoin remains in the Trust’s 

Custody Account at the point of 

intended execution of a sale of bitcoin. 

In those circumstances, the Trust may 

borrow Trade Credits in the form of 

bitcoin from the Trade Credit Lender, 

which allows the Trust to sell bitcoin 

through the Prime Execution Agent on 

trade date, and the cash proceeds are 

deposited in the Trust’s Trading 

Account. On settlement date for a 

redemption order, the Trust delivers 

cash to the Authorized Participant in 

exchange for Shares received from the 

Authorized Participant. In the event 

financing was used, the Trust will use 

the bitcoin moved from the Trust’s 

Custody Account to the Trading 

Account to repay the Trade Credits 

borrowed from the Trade Credit Lender. 

Net Asset Value 

The net asset value (‘‘NAV’’) of the 

Trust is used by the Trust in its day-today operations to measure the net value 

of the Trust’s assets. The NAV of the 

Trust will be equal to the total assets of 

the Trust, which will consist of bitcoin 

and cash, less total liabilities of the 

Trust, each determined by the Trustee 

pursuant to policies established from 

time to time by the Trustee or its 

affiliates as described herein. The 

Sponsor has the exclusive authority to 

determine the Trust’s NAV, which it has 

delegated to the Trustee under the Trust 

Agreement. The Trustee has delegated 

to the Trust Administrator the 

responsibility to calculate the NAV and 

the NAV per Share for the Trust, based 

on a pricing source selected by the 

Trustee. In determining the Trust’s NAV 

per Share, the Trust Administrator will 

value the bitcoin held by the Trust 

based on the index price, unless the 

Sponsor in its sole discretion 

determines that the index is unreliable. 

The CME CF Bitcoin Reference Rate— 

New York Variant for the Bitcoin—U.S. 

Dollar trading pair (the ‘‘CF Benchmarks 

Index’’) shall constitute the index (the 

‘‘Index’’), unless the CF Benchmarks 

Index is not available or the Sponsor in 

its sole discretion determines that the 

CF Benchmarks Index is unreliable and 

therefore determines not to use the CF 

Benchmarks Index as the Index. If the 

CF Benchmarks Index is not available or 

the Sponsor determines, in its sole 

discretion, that the CF Benchmarks 

Index is unreliable, (together a ‘‘Fair 

Value Event’’) the Trust’s holdings may 

be fair valued on a temporary basis in 

accordance with the fair value policies 

approved by the Trustee. If the CF 

Benchmarks Index is not used as the 

Index price, owners of the beneficial 

interests of Shares (the ‘‘Shareholders’’) 

will be notified in a prospectus 

supplement or on the Trust’s website 

and, if this index change is on a 

permanent basis, a filing with the SEC 

under Rule 19b–4 of the Act will be 

required. 

A Fair Value Event value 

determination will be based upon all 

available factors that the Sponsor or 

Trustee deems relevant at the time of 

the determination, and may be based on 

analytical values determined by the 

Sponsor or Trustee using third-party 

valuation models. 

Fair value policies approved by the 

Trustee will seek to determine the fair 

value price that the Trust might 

reasonably expect to receive from the 

current sale of that asset or liability in 

an arm’s-length transaction on the date 

on which the asset or liability is being 

valued consistent with ‘‘Relevant 

Transactions’’.12 In the instance of a Fair 

Value Event and pursuant the Sponsor’s 

fair valuation policies and procedures 

Volume Weighted Average Prices 

(‘‘VWAP’’) or Volume Weighted Median 

Prices (‘‘VWMP’’) from another index 

administrator (‘‘Secondary Index’’) 

would be utilized. If a Secondary Index 

is not available or the Sponsor in its sole 

discretion determines the Secondary 

Index is unreliable the price set by the 

Trust’s principal market as of 4:00 p.m. 

ET, on the valuation date would be 

utilized. 

In the event the principal market 

price is not available or the Sponsor in 

its sole discretion determines the 

principal market valuation is unreliable 

the Sponsor will use its best judgment 

to determine a good faith estimate of fair 

value. The Trustee identifies and 

determines the Trust’s principal market 

(or in the absence of a principal market, 

the most advantageous market) for 

bitcoin consistent with the application 

of fair value measurement framework in 

FASB ASC 820–10.13 The principal 

market is the market where the 

reporting entity would normally enter 

into a transaction to sell the asset or 

transfer the liability. The principal 

market must be available to and be 

accessible by the reporting entity. The 

reporting entity is the Trust. 

Net Asset Value Calculation and Index 

On each Business Day (as defined 

below), as soon as practicable after 4:00 

p.m. ET, the Trust Administrator 

evaluates the bitcoin held by the Trust 

as reflected by the CF Benchmarks 

Index and determines NAV per Share. 

For purposes of making these 

calculations, a Business Day means any 

day other than a day when Nasdaq is 

closed for regular trading (‘‘Business 

Day’’). 

The CF Benchmarks Index employed 

by the Trust is calculated on each 

Business Day by aggregating the 

notional value of bitcoin trading activity 

across major bitcoin spot platforms. The 

CF Benchmarks Index is designed based 

on the IOSCO Principles for Financial 

Benchmarks. The administrator of the 

CF Benchmarks Index is CF Benchmarks 

Ltd. (the ‘‘Index Administrator’’). The 

CF Benchmarks Index serves as a oncea-day benchmark rate of the U.S. dollar 

price of bitcoin (USD/BTC), calculated 

as of 4:00 p.m. ET. The CF Benchmarks 

Index aggregates the trade flow of 

several bitcoin platforms, 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 CF Benchmarks Index 

is calculated based on the Relevant 

Transactions of all of its constituent 

bitcoin platforms, which are currently 

Bitstamp, Coinbase, itBit, Kraken, 

Gemini, and LMAX (the ‘‘Constituent 

Platforms’’), and which may change 

from time to time. 

If the CF Benchmarks Index is not 

available or the Sponsor determines, in 

its sole discretion, that the CF 

Benchmarks Index is unreliable and so 

should not be used, the Trust’s holdings 


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Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2325 

14Baskets will be offered continuously at NAV 

per Share for 40,000 Shares. Therefore, a Basket of 

Shares would be valued at NAV per Share 

multiplied by the Basket size and the bitcoin 

required to be delivered in exchange for a creation 

of a Basket would equal the dollar value of the NAV 

per Share multiplied by the Basket size for such 

creations. The Trust may change the number of 

Shares in a Basket. Only Authorized Participants 

may purchase or redeem Baskets. Shares will be 

offered to the public from time to time at varying 

prices that will reflect the price of bitcoin and the 

trading price of the Shares on Nasdaq at the time 

of the offer. 

may be fair valued in accordance with 

the policy approved by the Trustee. 

The Trust is intended to provide a 

way for Shareholders to obtain exposure 

to bitcoin by investing in the Shares 

rather than by acquiring, holding and 

trading bitcoin directly on a peer-to-peer 

or other basis or via a digital asset 

platform. An investment in Shares of 

the Trust is not the same as an 

investment directly in bitcoin on a peerto-peer or other basis or via a digital 

asset platform. 

Intraday Indicative Value 

In order to provide updated 

information relating to the Trust for use 

by Shareholders, the Trust intends to 

publish an intraday indicative value per 

Share (‘‘IIV’’) using the CME CF Bitcoin 

Real Time Index (‘‘BRTI’’). One or more 

major market data vendors will provide 

an IIV updated every 15 seconds, as 

calculated by the Exchange or a thirdparty financial data provider during the 

Exchange’s regular market session of 

9:30 a.m. to 4:00 p.m. ET (the ‘‘Regular 

Market Session’’). The IIV will be 

calculated by using the prior day’s 

closing NAV per Share as a base and 

updating that value during the 

Exchange’s Regular Market Session to 

reflect changes in the value of the 

Trust’s NAV per Share during the 

trading day. 

The IIV is disseminated during the 

Exchange’s Regular Market Session 

should not be viewed as an actual real 

time update of the NAV per Share, 

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 Market Session by 

one or more major market data vendors. 

In addition, the IIV will be available 

through online information services. All 

aspects of the Index Methodology are 

publicly available at the website of 

Index Provider, CF Benchmarks (https:// 

www.cfbenchmarks.com). 

Creation and Redemption of Shares 

The Trust issues and redeems 

Baskets 14 on a continuous basis. 

Baskets are only issued or redeemed in 

exchange for an amount of cash 

determined by the Trustee on each day 

that Nasdaq is open for regular trading. 

No Shares are issued unless the Cash 

Custodian has allocated to the Trust’s 

account the corresponding amount of 

cash. The amount of cash necessary for 

the creation of a Basket, or to be 

received upon redemption of a Basket, 

will decrease over the life of the Trust, 

due to the payment or accrual of fees 

and other expenses or liabilities payable 

by the Trust. Baskets may be created or 

redeemed only by Authorized 

Participants, who pay BlackRock 

Investments, LLC (‘‘BRIL’’), an affiliate 

of the Trustee and a wholly owned 

subsidiary of BlackRock, Inc., that has 

been retained by the Trust to perform 

certain order processing, Authorized 

Participant communications, and 

related services in connection with the 

issuance and redemption of Baskets, a 

transaction fee for each order to create 

or redeem Baskets. 

The Sponsor will maintain ownership 

and control of the bitcoin in a manner 

consistent with good delivery 

requirements for spot commodity 

transactions. 

Overview of the Bitcoin Industry 

Bitcoin is a digital asset that is created 

and transmitted through the operations 

of the peer-to-peer Bitcoin network, a 

decentralized network of computers that 

operates on cryptographic protocols (the 

‘‘Bitcoin network’’). No single entity 

owns or operates the Bitcoin network, 

the infrastructure of which is 

collectively maintained by its user base. 

The Bitcoin network allows people to 

exchange tokens of value, called bitcoin, 

which are recorded on a public 

transaction ledger known as the Bitcoin 

blockchain (the ‘‘Bitcoin blockchain’’). 

Bitcoin can be used to pay for goods and 

services, or it can be converted to fiat 

currencies, such as the U.S. dollar, at 

rates determined on bitcoin platforms 

that enable trading in bitcoin or in 

individual end-user-to-end-user 

transactions under a barter system. 

The Bitcoin network is commonly 

understood to be decentralized and does 

not require governmental authorities or 

financial institution intermediaries to 

create, transmit or determine the value 

of bitcoin. Rather, bitcoin is created and 

allocated by the Bitcoin network 

protocol through a ‘‘mining’’ process. 

The value of bitcoin is determined by 

the supply of and demand for bitcoinon-bitcoin platforms or in private enduser-to-end-user transactions. 

New bitcoins are created and 

rewarded to the miners of a block in the 

Bitcoin blockchain for verifying 

transactions. The Bitcoin blockchain is 

a shared database that includes all 

blocks that have been solved by miners 

and it is updated to include new blocks 

as they are solved. Each bitcoin 

transaction is broadcast to the Bitcoin 

network and, when included in a block, 

recorded in the Bitcoin blockchain. As 

each new block records outstanding 

bitcoin transactions, and outstanding 

transactions are settled and validated 

through such recording, the Bitcoin 

blockchain represents a complete, 

transparent and unbroken history of all 

transactions of the Bitcoin network. 

History of Bitcoin 

The Bitcoin network was initially 

contemplated in a whitepaper that also 

described bitcoin and the operating 

software to govern the Bitcoin network. 

The whitepaper was purportedly 

authored by Satoshi Nakamoto. 

However, no individual with that name 

has been reliably identified as bitcoin’s 

creator, and the general consensus is 

that the name is likely a pseudonym for 

the actual inventor or inventors. The 

first bitcoins were created in 2009 after 

Nakamoto released the Bitcoin network 

source code (the software and protocol 

that created and launched the Bitcoin 

network). The Bitcoin network has been 

under active development since that 

time by a loose group of software 

developers who have come to be known 

as core developers. 

Overview of Bitcoin Network 

Operations 

In order to own, transfer or use 

bitcoin directly on the Bitcoin network 

(as opposed to through an intermediary, 

such as an exchange), a person generally 

must have internet access to connect to 

the Bitcoin network. Bitcoin 

transactions may be made directly 

between end-users without the need for 

a third-party intermediary. To prevent 

the possibility of double-spending 

bitcoin, a user must notify the Bitcoin 

network of the transaction by 

broadcasting the transaction data to its 

network peers. The Bitcoin network 

provides confirmation against doublespending by memorializing every 

transaction in the Bitcoin blockchain, 

which is publicly accessible and 

transparent. This memorialization and 

verification against double-spending is 

accomplished through the Bitcoin 

network mining process, which adds 

‘‘blocks’’ of data, including recent 

transaction information, to the Bitcoin 

blockchain. 

Overview of Bitcoin Transfers 

Prior to engaging in bitcoin 

transactions directly on the Bitcoin 

network, a user generally must first 

install on its computer or mobile device 


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2326 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

a Bitcoin network software program that 

will allow the user to generate a private 

and public key pair associated with a 

bitcoin address commonly referred to as 

a ‘‘wallet.’’ The Bitcoin network 

software program and the bitcoin 

address also enable the user to connect 

to the Bitcoin network and transfer 

bitcoin to, and receive bitcoin from, 

other users. 

Each Bitcoin network address, or 

wallet, is associated with a unique 

‘‘public key’’ and ‘‘private key’’ pair. To 

receive bitcoin, the bitcoin recipient 

must provide its public key to the party 

initiating the transfer. This activity is 

analogous to a recipient for a transaction 

in U.S. dollars providing a routing 

address in wire instructions to the payor 

so that cash may be wired to the 

recipient’s account. The payor approves 

the transfer to the address provided by 

the recipient by ‘‘signing’’ a transaction 

that consists of the recipient’s public 

key with the private key of the address 

from where the payor is transferring the 

bitcoin. The recipient, however, does 

not make public or provide to the 

sender its related private key. 

Neither the recipient nor the sender 

reveals their private keys in a 

transaction because the private key 

authorizes transfer of the funds in that 

address to other users. Therefore, if a 

user loses his or her private key, the 

user may permanently lose access to the 

bitcoin contained in the associated 

address. Likewise, bitcoin is 

irretrievably lost if the private key 

associated with them is deleted and no 

backup has been made. When sending 

bitcoin, a user’s Bitcoin network 

software program must validate the 

transaction with the associated private 

key. The resulting digitally validated 

transaction is sent by the user’s Bitcoin 

network software program to the Bitcoin 

network to allow transaction 

confirmation. 

Some bitcoin transactions are 

conducted ‘‘off-blockchain’’ and are 

therefore not recorded in the Bitcoin 

blockchain. Some ‘‘off-blockchain 

transactions’’ involve the transfer of 

control over, or ownership of, a specific 

digital wallet holding bitcoin or the 

reallocation of ownership of certain 

bitcoin in a digital wallet containing 

assets owned by multiple persons, such 

as a digital wallet maintained by a 

digital assets platform. In contrast to onblockchain transactions, which are 

publicly recorded on the Bitcoin 

blockchain, information and data 

regarding off-blockchain transactions 

are generally not publicly available. 

Therefore, off-blockchain transactions 

are not truly bitcoin transactions in that 

they do not involve the transfer of 

transaction data on the Bitcoin network 

and do not reflect a movement of bitcoin 

between addresses recorded in the 

Bitcoin blockchain. For these reasons, 

off-blockchain transactions are subject 

to risks as any such transfer of bitcoin 

ownership is not protected by the 

protocol behind the Bitcoin network or 

recorded in, and validated through, the 

blockchain mechanism. 

Summary of a Bitcoin Transaction 

In a bitcoin transaction directly on the 

Bitcoin network between two parties (as 

opposed to through an intermediary, 

such as a custodian), the following 

circumstances must initially be in place: 

(i) the party seeking to send bitcoin 

must have a Bitcoin network public key, 

and the Bitcoin network must recognize 

that public key as having sufficient 

bitcoin for the transaction; (ii) the 

receiving party must have a Bitcoin 

network public key; and (iii) the 

spending party must have internet 

access with which to send its spending 

transaction. 

The receiving party must provide the 

spending party with its public key and 

allow the Bitcoin blockchain to record 

the sending of bitcoin to that public key. 

After the provision of a recipient’s 

Bitcoin network public key, the 

spending party must enter the address 

into its Bitcoin network software 

program along with the number of 

bitcoin to be sent. The number of 

bitcoin to be sent will typically be 

agreed upon between the two parties 

based on a set number of bitcoin or an 

agreed upon conversion of the value of 

fiat currency to bitcoin. Since every 

computation on the Bitcoin network 

requires the payment of bitcoin, 

including verification and 

memorialization of bitcoin transfers, 

there is a transaction fee involved with 

the transfer, which is based on 

computation complexity and not on the 

value of the transfer and is paid by the 

payor with a fractional number of 

bitcoin. 

After the entry of the Bitcoin network 

address, the number of bitcoin to be sent 

and the transaction fees, if any, to be 

paid, will be transmitted by the 

spending party. The transmission of the 

spending transaction results in the 

creation of a data packet by the 

spending party’s Bitcoin network 

software program, which is transmitted 

onto the decentralized Bitcoin network, 

resulting in the distribution of the 

information among the software 

programs of users across the Bitcoin 

network for eventual inclusion in the 

Bitcoin blockchain. 

As discussed in greater detail below, 

Bitcoin network miners record 

transactions when they solve for and 

add blocks of information to the Bitcoin 

blockchain. When a miner solves for a 

block, it creates that block, which 

includes data relating to (i) the solution 

to the block, (ii) a reference to the prior 

block in the Bitcoin blockchain to 

which the new block is being added and 

(iii) transactions that have occurred but 

have not yet been added to the Bitcoin 

blockchain. The miner becomes aware 

of outstanding, unrecorded transactions 

through the data packet transmission 

and distribution discussed above. 

Upon the addition of a block included 

in the Bitcoin blockchain, the Bitcoin 

network software program of both the 

spending party and the receiving party 

will show confirmation of the 

transaction on the Bitcoin blockchain 

and reflect an adjustment to the bitcoin 

balance in each party’s Bitcoin network 

public key, completing the bitcoin 

transaction. Once a transaction is 

confirmed on the Bitcoin blockchain, it 

is irreversible. 

Creation of a New Bitcoin 

New bitcoins are created through the 

mining process. The process by which 

bitcoin is ‘‘mined’’ results in new blocks 

being added to the Bitcoin blockchain 

and new bitcoin tokens being issued to 

the miners. Computers on the Bitcoin 

network engage in a set of prescribed 

complex mathematical calculations in 

order to add a block to the Bitcoin 

blockchain and thereby confirm bitcoin 

transactions included in that block’s 

data. The Bitcoin network is designed in 

such a way that the reward for adding 

new blocks to the Bitcoin blockchain 

decreases over time. In the future, once 

new bitcoin tokens are no longer 

awarded for adding a new block, miners 

will only have transaction fees to 

incentivize them, and as a result, it is 

expected that miners will need to be 

better compensated with higher 

transaction fees to ensure that there is 

adequate incentive for them to continue 

mining. 

Limits on Bitcoin Supply 

Under the source code that governs 

the Bitcoin network, the supply of new 

bitcoin is mathematically controlled so 

that the number of bitcoin grows at a 

limited rate pursuant to a pre-set 

schedule. The number of bitcoin 

awarded for solving a new block is 

automatically halved after every 210,000 

blocks are added to the Bitcoin 

blockchain, approximately every 4 

years. Currently, the fixed reward for 

solving a new block is 6.25 bitcoin per 

block and this is expected to decrease 

by half to become 3.125 bitcoin in 

approximately early 2024. This 


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15See 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’’). 

16See 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 

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). 

17See Winklevoss Order at 37592. 

deliberately controlled rate of bitcoin 

creation means that the number of 

bitcoin in existence will increase at a 

controlled rate until the number of 

bitcoin in existence reaches the predetermined 21 million bitcoin. 

However, the 21 million supply cap 

could be changed in a hard fork. A hard 

fork could change the source code to the 

Bitcoin network, including the 21 

million bitcoin supply cap. 

Background 

The Commission has historically 

approved or disapproved exchange 

filings to list and trade series of Trust 

Issued Receipts, 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.15 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 (‘‘CFTC’’) 

regulated futures market.16 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 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.’’ 17

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 


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18See 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’’). 

19See 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. 

20As 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. 

21See Teucrium Approval at 21679. 

22See e.g., ‘‘Bitcoin ETF’s Success Could Come at 

Fundholders’ 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. 

market in order to determine whether 

such products were consistent with the 

Act. With this in mind, the CME bitcoin 

futures (‘‘Bitcoin Futures’’) market, as 

described below, 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 recently 

approved proposals related to the listing 

and trading of funds that would 

primarily hold Bitcoin Futures that are 

registered under the Securities Act of 

1933 instead of the 1940 Act.18 In the 

Teucrium Approval, the Commission 

found the Bitcoin Futures market to be 

a regulated market of significant size as 

it relates to Bitcoin Futures, an odd 

tautological truth that is also 

inconsistent with 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 

Bitcoin Futures. As further discussed 

below, both the Exchange and the 

Sponsor believe that this proposal and 

the included analysis are sufficient to 

establish that the Bitcoin Futures market 

represents a regulated market of 

significant size as it relates both to the 

Bitcoin Futures market and to the spot 

bitcoin market and that this proposal 

should be approved. 

Bitcoin Futures ETFs 

The Exchange and Sponsor applaud 

the Commission for allowing the launch 

of exchange-traded funds (‘‘ETFs’’) 

registered under the 1940 Act and the 

recent Bitcoin Futures Approvals that 

provide exposure to bitcoin primarily 

through 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 a view on bitcoin. The 

Bitcoin Futures Approvals, 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.19 Leaving aside the 

analysis of that standard until later in 

this proposal,20 the Exchange believes 

that the below rationale that 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 Bitcoin 

Futures market caused by a person 

attempting to manipulate the proposed 

futures ETP by manipulating the price of 

Bitcoin Futures contracts, whether that 

attempt is made by directly trading on the 

Bitcoin Futures market or indirectly by 

trading outside of the 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.21

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 Bitcoin Futures market caused by a 

person attempting to manipulate the 

proposed futures ETP by manipulating 

the price of Bitcoin Futures contracts 

. . . indirectly by trading outside of the 

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 Bitcoin 

Futures. If CME is able to detect such 

attempts at manipulation in the 

complex and interconnected spot 

bitcoin market, how would such an 

ability to detect attempted manipulation 

and the utility in sharing that 

information with the listing exchange 

apply only to Bitcoin Futures ETFs and 

not Spot Bitcoin ETPs? Stated a 

different way, given that there is 

significant trading volume on numerous 

bitcoin platforms that are not part of the 

CME CF Bitcoin Reference Rate and that 

arbitrage opportunities across bitcoin 

platforms means that such trading 

volume will influence spot bitcoin 

prices across the market and, despite 

this, the Commission still believes that 

CME can detect attempted manipulation 

of the Bitcoin Futures through ‘‘trading 

outside of the Bitcoin Futures market,’’ 

it is clear that such ability would apply 

equally to both Bitcoin Futures ETFs 

and Spot Bitcoin ETPs. To take it a step 

further, such an ability would also seem 

to be a strong indication that the Bitcoin 

Futures market represents a regulated 

market of significant size. To be clear, 

the Exchange agrees with the 

Commission on this point (and the 

implications of their conclusions) and 

notes that the pricing mechanism 

applicable to the Shares is similar to the 

CME CF Bitcoin Reference Rate, as 

further discussed below. 

In addition, the structure of Bitcoin 

Futures ETFs provides negative 

outcomes for buy and hold investors as 

compared to a Spot Bitcoin ETP.22

Specifically, the cost of rolling Bitcoin 

Futures contracts will cause the Bitcoin 

Futures ETFs to typically lag the 

performance of bitcoin itself and, at over 

a billion dollars in assets under 

management, 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. While Bitcoin Futures ETFs 

represent a useful trading tool, they are 

clearly a sub-optimal structure for U.S. 

investors that are looking for long-term 

exposure to bitcoin that will, based on 

the calculations above, unnecessarily 

cost U.S. investors significant amounts 

of money every year compared to Spot 

Bitcoin ETPs and the Exchange believes 


khammond on DSKJM1Z7X2PROD with NOTICES
Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2329 

23See Teucrium Approval. 

24 In August 2017, the Commission’s Office of 

Investor Education and Advocacy warned investors 

about situations where companies were publicly 

announcing events relating to digital coins or 

tokens in an effort to affect the price of the 

company’s publicly traded common stock. See 

https://www.sec.gov/oiea/investor-alerts-andbulletins/ia_icorelatedclaims. 

25See e.g., ‘‘7 public companies with exposure to 

bitcoin’’ (February 8, 2021) available at: https://

finance.yahoo.com/news/7-public-companies-withexposure-to-bitcoin-154201525.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-to-invest-in-bitcoin-without-holdingthe-cryptocurrency-yourself-.html. 

26See, e.g., Tesla 10–K for the year ended 

December 31, 2020, which mentions bitcoin just 

nine times: https://www.sec.gov/ix?doc=/Archives/ 

edgar/data/1318605/000156459021004599/tsla10k_20201231.htm. 

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 any objective 

review of the proposals to list Spot 

Bitcoin ETPs compared to the Bitcoin 

Futures ETFs and the Bitcoin Futures 

Approvals would lead to the conclusion 

that Spot Bitcoin ETPs should be 

available to U.S. investors and, as such, 

this proposal and other comparable 

proposals to list and trade Spot Bitcoin 

ETPs should be approved by the 

Commission. Stated simply, U.S. 

investors will continue to 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. While the 1940 Act does 

offer certain investor protections, those 

protections do not relate to mitigating 

potential manipulation of the holdings 

of an ETF in a way that warrants 

distinction between Bitcoin Futures 

ETFs and Spot Bitcoin ETPs and the 

SEC has granted approval for a Bitcoin 

Futures ETP that is not regulated by the 

1940 Act.23 To be clear, both the 

Exchange and Sponsor believe that the 

Bitcoin Futures market is a regulated 

market of significant size and that such 

manipulation concerns are mitigated as 

described throughout this proposal. 

After issuing the Bitcoin Futures 

Approvals which conclude the Bitcoin 

Futures market is a regulated market of 

significant size as it relates to Bitcoin 

Futures, the only consistent outcome 

would be approving Spot Bitcoin ETPs 

on the basis that the Bitcoin Futures 

market is also a regulated market of 

significant size as it relates to the 

bitcoin spot market. Including in the 

analysis the significant and preventable 

losses to U.S. investors that comes with 

Bitcoin Futures ETFs, disapproving 

Spot Bitcoin ETPs seems even more 

arbitrary and capricious. 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. 

Spot and Proxy Exposure to Bitcoin 

Exposure to bitcoin through an ETP 

also presents certain advantages for 

retail investors compared to buying spot 

bitcoin directly. The most notable 

advantage from the Sponsor’s 

perspective is the elimination of the 

need for an individual retail investor to 

either manage their own private keys or 

to hold bitcoin through a 

cryptocurrency platform that lacks 

sufficient protections. Typically, retail 

platforms hold most, if not all, retail 

investors’ bitcoin in ‘‘hot’’ (internet 

connected) storage and do not make any 

commitments to indemnify retail 

investors or to observe any particular 

cybersecurity standard. Meanwhile, a 

retail investor holding spot bitcoin 

directly in a self-hosted wallet may 

suffer from inexperience in private key 

management (e.g., insufficient password 

protection, lost key, etc.), which point of 

failure could cause them to lose some or 

all of their bitcoin holdings. Thus, with 

respect to custody of the Trust’s bitcoin 

assets, the Trust presents advantages 

from an investment protection 

standpoint for retail investors compared 

to owning spot bitcoin directly or via a 

digital asset platform. 

Finally, some publicly traded 

companies with mostly unrelated 

businesses—such as Tesla (a car 

manufacturer) and MicroStrategy (an 

enterprise software company)—have 

announced significant investments 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.24 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.25 Such public companies, 

however, are imperfect bitcoin proxies 

and provide investors with partial 

bitcoin exposure paired with a host of 

additional risks associated with 

whichever operating company they 

decide to purchase. Additionally, the 

disclosures provided by the 

aforementioned public companies with 

respect to risks relating to their bitcoin 

holdings are generally substantially 

smaller than the registration statement 

of a bitcoin ETP, including the 

Registration Statement, typically 

amounting to a few sentences of 

narrative description and a handful of 

risk factors.26 In other words, investors 

seeking bitcoin exposure through 

publicly traded companies are gaining 

only partial exposure to bitcoin and are 

not fully benefitting from the risk 

disclosures and associated investor 

protections that come from the 

securities registration process. 


khammond on DSKJM1Z7X2PROD with NOTICES
2330 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

27The CME CF Bitcoin Reference Rate is based on 

a publicly available calculation methodology based 

on pricing sourced from several crypto platforms and trading platforms, including Bitstamp, 

Coinbase, Gemini, itBit, Kraken, and LMAX Digital. 

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.27

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. 


khammond on DSKJM1Z7X2PROD with NOTICESEN12JA24.008</GPH>

Analysis of Historical Price Index Returns of Spot Bitcoin vs. Common Alternative 

Exposure Vehicle 

g ,00 0 

1ii 

] 400 

... 

. It 

e;;, :300 

200 

100 

0 

Janwiry-20 

-1:lll(;(>il'.ISpot; 

Source: Bltcoin Spot sourced from WSJ.com; Blockchaln Equities Index is based on S&P ~Global Cryptocurrency & Blockchaln Equity 

Index (Total Return) sourced from S&P Dow Jones; Bltcoin Futures Index is based on the S&P CME Bltcoin Futures Index {Total Return} sourced 

from S&P Dow Jones; OTC Traded BTC Trust Index Is represented by the Grayscale Bltcoin Trust sourced form WSJ.com. Based on weekly 

data. 
Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2331 

28A 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. 

The number of large open interest 

holders 28 and unique accounts trading 

Bitcoin Futures have both increased, 

even in the face of heightened bitcoin 

price volatility. 


khammond on DSKJM1Z7X2PROD with NOTICESEN12JA24.009</GPH> EN12JA24.010</GPH>

CME Bitcoin Futures Open Interest {01) 

161(' 801{ 

141{ 701{ 

121{ 601{ e 

1J 10K SOK i ... Ill 

• 'ti i # 0 BK 401{ .. V C 

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6K: 30K ::I 

. 1111101111~11111111 I 

,f 

41{ 20K 

2'K 10K 

Qi(• OK ---- -~-- -- "-- -~~---

:201s 2019 2020 2021 2022 2023 

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

CME Bitcoin Futures Large Open Interest Holders (LOIH) 

120 

110 

100 

90 

.. 

(II 80 <:II 

"O 70 0 

:::i:: 60 0 

# 50 

40 

30 

20 

10 

2019 2020 2021 2022 2023 
2332 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

29The Exchange believes 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 

platforms 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 

platform or Over-the-Counter platform (‘‘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. 

30As 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 

from obtaining this information from, or producing 

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

historically held that joint membership in the 

Intermarket Surveillance Group (‘‘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’’). 

31For a list of the current members and affiliate 

members of ISG, see https://www.isgportal.com/. 

32See Wilshire Phoenix Disapproval. 

33See 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 

Preventing Fraudulent and 

Manipulative Practices 

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; 29 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 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 30 with a regulated 

market of significant size. Both the 

Exchange and CME are members of 

ISG.31 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.32

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.33


khammond on DSKJM1Z7X2PROD with NOTICESEN12JA24.011</GPH>

CME Bitcoin Futures Average Daily Volume (ADV) -- --- ~-~-,-- --------- -- -- - -- ------------

13K 

12K 

UK 

10K 

"' 9K' 

~ 8K f 

... "' 7K 0 

V 

-

0 6K # 

SK 

4K " 

II I 1111 

3K 

,111m 11 

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2018 2019 

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'60K 

SSK 

SOK "' . 0 45K ~ 

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35K ! • "' 

301{ .!! 

~ 251{ ·g. 

w 20K 

\15K 

10K 
Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2333 

requirements of the Exchange Act have been met.’’ 

Id. at 37582. 

(A) Reasonable Likelihood That a 

Person Attempting To Manipulate the 

ETP Would Also Have To Trade on That 

Market To Manipulate the ETP 

Bitcoin Futures represent a growing 

influence on pricing in the spot bitcoin 

market as has been laid out above and 

in other proposals to list and trade Spot 

Bitcoin ETPs. Pricing in Bitcoin Futures 

is based on pricing from spot bitcoin 

markets. As noted above, the statement 

from the Teucrium Approval that 

‘‘CME’s surveillance can reasonably be 

relied upon to capture the effects on the 

Bitcoin Futures market caused by a 

person attempting to manipulate the 

proposed futures ETP by manipulating 

the price of Bitcoin Futures contracts 

. . . indirectly by trading outside of the 

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 Bitcoin 

Futures. While the Commission makes 

clear in the Teucrium Approval that the 

analysis only applies to the Bitcoin 

Futures market as it relates to an ETP 

that invests in Bitcoin Futures as its 

only non-cash or cash equivalent 

holding, if CME’s surveillance is 

sufficient to mitigate concerns related to 

trading in Bitcoin Futures for which the 

pricing is based directly on pricing from 

spot bitcoin markets, it’s not clear how 

such a conclusion could apply only to 

ETPs based on Bitcoin Futures and not 

extend to Spot Bitcoin ETPs. 

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 force on prices 

in the Bitcoin Futures market or spot 

market for a number of reasons, 

including the significant volume in the 

Bitcoin Futures market, the size of 

bitcoin’s market cap, 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. According 

to data from Kaiko, the average daily 

adjusted volume for spot bitcoin across 

USD denominated trading pairs from 

January 1, 2023, to May 31, 2023, was 

$6.0 billion. According to data from 

Kaiko, the aggregate 2% bitcoin market 

depth on the bid and ask side for USD 

denominated trading pairs has been on 

average 6,875 BTC (approximately 

$167.2 million), for the period between 

January 1, 2023, and May 31, 2023. 

More strategic purchases or sales (such 

as using limit orders and executing 

through OTC bitcoin trade desks) would 

likely have less obvious impact on the 

market—which is consistent with 

MicroStrategy, Tesla, and Square being 

able to collectively purchase billions of 

dollars in bitcoin. 

As such, the combination of the 

Bitcoin Futures price discovery and the 

overall size of the bitcoin market will 

help prevent the Shares from becoming 

the predominant force on pricing in 

either the bitcoin spot or Bitcoin 

Futures markets, satisfying part (b) of 

the test outlined above. 

(C) Other Means To Prevent Fraudulent 

and Manipulative Acts and Practices 

The Exchange is also proposing to 

take additional steps to those described 

above to supplement its ability to obtain 

information that would be helpful in 

detecting, investigating, and deterring 

fraud and market manipulation in the 

Commodity-Based Trust Shares. 

As noted in the Surveillance section, 

the surveillance program includes realtime patterns for price and volume 

movements and post-trade surveillance 

patterns (e.g., spoofing, marking the 

close, pinging, phishing). In addition to 

the Exchange’s existing surveillance, a 

new pattern will be added to surveil for 

significant deviation in the CommodityBased Trust Shares’ price from the 

underlying asset’s price. The Exchange 

will use the trade data from an external 

vendor that consolidates the real-time 

data from multiple bitcoin platforms. 

Trading of Shares on the Exchange 

will be subject to the Exchange’s 

surveillance program for derivative 

products, as well as cross-market 

surveillances administered by Financial 

Industry Regulatory Authority 

(‘‘FINRA’’), on behalf of the Exchange 

pursuant to a regulatory services 

agreement, which are also designed to 

detect violations of Exchange rules and 

applicable federal securities laws. The 

Exchange is responsible for FINRA’s 

performance under this regulatory 

services agreement. 

The Exchange will require the Trust 

to represent to the Exchange that it will 

advise the Exchange of any failure by 

the Trust 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 is not in compliance with the 

applicable listing requirements, the 

Exchange will commence delisting 

procedures under the Nasdaq 5800 

Series. In addition, the Exchange also 

has a general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

The Exchange will communicate as 

needed regarding trading in the Shares 

with other markets and other entities 

that are members of the ISG, and the 

Exchange may obtain trading 

information regarding trading in the 

Shares from such markets and other 

entities. 

Availability of Information 

The website for the Trust, which will 

be publicly accessible at no charge, will 

contain the following information: (a) 

the prior Business Day’s NAV per Share; 

(b) the prior Business Day’s Nasdaq 

official closing price; (c) calculation of 

the premium or discount of such 

Nasdaq official closing price against 

such NAV per Share; (d) data in chart 

form displaying the frequency 

distribution of discounts and premiums 

of the Nasdaq official closing price 

against the NAV per Share, within 

appropriate ranges for each of the four 

previous calendar quarters (or for the 

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

prospectus; and (f) other applicable 

quantitative information. The Trust 

Administrator will also disseminate the 

Trust’s holdings on a daily basis on the 

Trust’s website. The NAV per Share for 

the Trust will be calculated by the Trust 

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 relevant securities 

information processor. 

Also, an estimated value that reflects 

an estimated IIV will be disseminated. 

For more information on the IIV, 

including the calculation methodology, 

see ‘‘Intraday Indicative Value’’ above. 

The IIV disseminated during the 

Exchange’s Regular Market Session 

should not be viewed as an actual real 

time update of the NAV per Share, 

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 Market Session by 

one or more major market data vendors. 

In addition, the IIV will be available 

through online information services. 

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 CF Benchmarks. 

Information relating to trading, 


khammond on DSKJM1Z7X2PROD with NOTICES
2334 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

including price and volume 

information, in bitcoin is available from 

major market data vendors and from the 

platforms on which bitcoin are traded. 

Depth of book information is also 

available from bitcoin platforms. The 

normal trading hours for bitcoin 

platforms are 24 hours per day, 365 days 

per year. 

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. 

Initial and Continued Listing 

The Shares will be subject to Nasdaq 

Rule 5711(d)(vi), which sets forth the 

initial and continued listing criteria 

applicable to Commodity-Based Trust 

Shares. The Exchange will obtain a 

representation that the Trust’s NAV per 

Share will be calculated daily and will 

be made available to all market 

participants at the same time. A 

minimum of 80,000 Commodity-Based 

Trust Shares, or the equivalent of two 

Baskets, will be required to be 

outstanding at the time of 

commencement of trading on the 

Exchange. Upon termination of the 

Trust, the Shares will be removed from 

listing. The Delaware Trustee, will be a 

trust company having substantial capital 

and surplus and the experience and 

facilities for handling corporate trust 

business, as required under Nasdaq Rule 

5711(d)(vi)(D) and no change will be 

made to the Delaware Trustee without 

prior notice to and approval of the 

Exchange. 

As required in Nasdaq Rule 

5711(d)(viii), 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 the 

underlying commodity, related futures 

or options on futures, or any other 

related derivatives, which the registered 

Market Maker may have or over which 

it may exercise investment discretion. 

No registered Market Maker in the 

Shares shall trade in the underlying 

commodity, related futures or options 

on futures, or any other related 

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 

Nasdaq Rule 5711(d). In addition to the 

existing obligations under Exchange 

rules regarding the production of books 

and records, the registered Market 

Maker in the Shares shall make 

available to the Exchange such books, 

records or other information pertaining 

to transactions by such entity or any 

limited partner, officer or approved 

person thereof, registered or nonregistered employee affiliated with such 

entity for its or their own accounts in 

the underlying commodity, related 

futures or options on futures, or any 

other related 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 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. The Exchange will 

allow trading in the Shares from 4:00 

a.m. to 8:00 p.m. ET. The Exchange has 

appropriate rules to facilitate 

transactions in the Shares during all 

trading sessions. The Shares of the Trust 

will conform to the initial and 

continued listing criteria set forth in 

Nasdaq Rule 5711(d). 

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 

Nasdaq Rules 4120 and 4121, including 

without limitation the conditions 

specified in Nasdaq Rule 4120(a)(9) and 

(10) and the trading pauses under 

Nasdaq Rules 4120(a)(11) and (12). 

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. 

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 per Share 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 

per Share is available to all market 

participants. 

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. The 

surveillance program includes real-time 

patterns for price and volume 

movements and post-trade surveillance 

patterns (e.g., spoofing, marking the 

close, pinging, phishing). In addition to 

the Exchange’s existing surveillance, a 

new pattern will be added to surveil for 

significant deviation in the CommodityBased Trust Shares’ price from the 

underlying asset’s price. The Exchange 

will use the trade data from an external 

vendor that consolidates the real-time 

data from multiple bitcoin platforms. 

Trading of Shares on the Exchange 

will be subject to the Exchange’s 

surveillance program for derivative 

products, as well as cross-market 

surveillances administered by FINRA, 

on behalf of the Exchange pursuant to 

a regulatory services agreement, which 

are also designed to detect violations of 

Exchange rules and applicable federal 

securities laws. The Exchange is 

responsible for FINRA’s performance 

under this regulatory services 

agreement. 

The Exchange will require the Trust 

to represent to the Exchange that it will 

advise the Exchange of any failure by 


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34 15 U.S.C. 78f. 

35 15 U.S.C. 78f(b)(5). 

36See Exchange Rule 5720. 

37Commodity-Based Trust Shares, as described in 

Exchange Rule 5711(d), are a type of Trust Issued 

Receipt. 

38For a list of the current members and affiliate 

members of ISG, see https://www.isgportal.com/. 

39See Wilshire Phoenix Disapproval. 

40See 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. 

the Trust 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 is not in compliance with the 

applicable listing requirements, the 

Exchange will commence delisting 

procedures under the Nasdaq 5800 

Series. In addition, the Exchange also 

has a general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

The Exchange or FINRA, on behalf of 

the Exchange, or both, will 

communicate as needed regarding 

trading in the Shares with other markets 

and other entities that are members of 

the ISG, and the Exchange or FINRA, on 

behalf of the Exchange, or both, may 

obtain trading information regarding 

trading in the Shares from such markets 

and other entities. The Exchange also 

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. 

Information Circular 

Prior to the commencement of 

trading, the Exchange will inform its 

members in an information circular 

(‘‘Information Circular’’) of the special 

characteristics and risks associated with 

trading the Shares. Specifically, the 

Information Circular will discuss the 

following: (1) the procedures for 

creations and redemptions of Shares in 

Baskets (and that Shares are not 

individually redeemable); (2) Section 10 

of Nasdaq General Rule 9, which 

imposes suitability obligations on 

Nasdaq members with respect to 

recommending transactions in the 

Shares to customers; (3) how 

information regarding the IIV is 

disseminated; (4) the risks involved in 

trading the Shares during the pre-market 

and post-market sessions when an 

updated IIV will not be calculated or 

publicly disseminated; (5) the 

requirement that members deliver a 

prospectus to investors purchasing 

newly issued Shares prior to or 

concurrently with the confirmation of a 

transaction; and (6) trading information. 

The Information Circular will also 

discuss any exemptive, no action and 

interpretive relief granted by the 

Commission from any rules under the 

Act. 

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. 

Additionally, the Information Circular 

will reference that the Trust is subject 

to various fees and expenses described 

in the Registration Statement. The 

Information Circular will also disclose 

the trading hours of the Shares. The 

Information Circular will disclose that 

information about the Shares will be 

publicly available on the Trust’s 

website. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with section 6(b) 

of the Act 34 in general and section 

6(b)(5) of the Act 35 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,36 including Commodity-Based 

Trust Shares,37 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; 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 because this filing sufficiently 

demonstrates that the standard that has 

previously been articulated by the 

Commission applicable to CommodityBased Trust Shares has been met as 

outlined below. 

Designed To Prevent Fraudulent and 

Manipulative Acts and Practices 

In order for a proposal to list and 

trade a series of Commodity-Based Trust 

Shares to be deemed consistent with the 

Act, the Commission requires that an 

exchange demonstrate that there is a 

comprehensive surveillance-sharing 

agreement in place with a regulated 

market of significant size. Both the 

Exchange and CME are members of 

ISG.38 As such, the only remaining issue 

to be addressed is whether the Bitcoin 

Futures market constitutes a market of 

significant size, which the Exchange 

believes 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.39

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.40

(A) Reasonable Likelihood That a 

Person Attempting To Manipulate the 

ETP Would Also Have To Trade on That 

Market To Manipulate the ETP 

Bitcoin Futures represent a growing 

influence on pricing in the spot bitcoin 

market as has been laid out above and 

in other proposals to list and trade Spot 

Bitcoin ETPs. Pricing in Bitcoin Futures 

is based on pricing from spot bitcoin 

markets. As noted above, the statement 

from the Teucrium Approval that 

‘‘CME’s surveillance can reasonably be 

relied upon to capture the effects on the 

Bitcoin Futures market caused by a 

person attempting to manipulate the 


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41See 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. 

42See Teucrium Approval at 21679. 

proposed futures ETP by manipulating 

the price of Bitcoin Futures contracts 

. . . indirectly by trading outside of the 

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 Bitcoin 

Futures. While the Commission makes 

clear in the Teucrium Approval that the 

analysis only applies to the Bitcoin 

Futures market as it relates to an ETP 

that invests in Bitcoin Futures as its 

only non-cash or cash equivalent 

holding, if CME’s surveillance is 

sufficient to mitigate concerns related to 

trading in Bitcoin Futures for which the 

pricing is based directly on pricing from 

spot bitcoin markets, it’s not clear how 

such a conclusion could apply only to 

ETPs based on Bitcoin Futures and not 

extend to Spot Bitcoin ETPs. 

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 force on prices 

in the Bitcoin Futures market or spot 

market for a number of reasons, 

including the significant volume in the 

Bitcoin Futures market, the size of 

bitcoin’s market cap, 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. According 

to data from Messari, the average daily 

adjusted real volume for spot bitcoin 

from January 1, 2023, to May 12, 2023 

was $8.5 billion. According to data from 

Kaiko, the aggregate 1% bitcoin market 

depth on the bid and ask side has been 

on average 5,373 bitcoin (approximately 

$161 million), for the period between 

April 26, 2023 and May 12, 2023. More 

strategic purchases or sales (such as 

using limit orders and executing 

through OTC bitcoin trade desks) would 

likely have less obvious impact on the 

market—which is consistent with 

MicroStrategy, Tesla, and Square being 

able to collectively purchase billions of 

dollars in bitcoin. 

As such, the combination of the 

Bitcoin Futures price discovery and the 

overall size of the bitcoin market will 

help prevent the Shares from becoming 

the predominant force on pricing in 

either the bitcoin spot or Bitcoin 

Futures markets, satisfying part (b) of 

the test outlined above. 

(C) Other Means To Prevent Fraudulent 

and Manipulative Acts and Practices 

The Exchange is also proposing to 

take additional steps to those described 

above to supplement its ability to obtain 

information that would be helpful in 

detecting, investigating, and deterring 

fraud and market manipulation in the 

Commodity-Based Trust Shares. 

As noted in the Surveillance section, 

the surveillance program includes realtime patterns for price and volume 

movements and post-trade surveillance 

patterns (e.g., spoofing, marking the 

close, pinging, phishing). In addition to 

the Exchange’s existing surveillance, a 

new pattern will be added to surveil for 

significant deviation in the CommodityBased Trust Shares’ price from the 

underlying asset’s price. The Exchange 

will use the trade data from an external 

vendor that consolidates the real-time 

data from multiple bitcoin platforms. 

Trading of Shares on the Exchange 

will be subject to the Exchange’s 

surveillance program for derivative 

products, as well as cross-market 

surveillances administered by FINRA, 

on behalf of the Exchange pursuant to 

a regulatory services agreement, which 

are also designed to detect violations of 

Exchange rules and applicable federal 

securities laws. The Exchange is 

responsible for FINRA’s performance 

under this regulatory services 

agreement. 

The Exchange will require the Trust 

to represent to the Exchange that it will 

advise the Exchange of any failure by 

the Trust 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 is not in compliance with the 

applicable listing requirements, the 

Exchange will commence delisting 

procedures under the Nasdaq 5800 

Series. In addition, the Exchange also 

has a general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

The Exchange will communicate as 

needed regarding trading in the Shares 

with other markets and other entities 

that are members of the ISG, and the 

Exchange may obtain trading 

information regarding trading in the 

Shares from such markets and other 

entities. 

The Exchange also believes that 

reviewing this proposal through the lens 

of the Bitcoin Futures Approvals would 

also lead the Commission to approving 

this proposal. Previous disapproval 

orders have made clear that a market 

that constitutes a regulated market of 

significant size is generally a future and/ 

or options market based on the 

underlying reference asset rather than 

the spot commodity markets, which are 

often unregulated.41 The Exchange 

believes that the following excerpt from 

the Teucrium Approval is particular 

informative: 

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 Bitcoin Futures market 

caused by a person attempting to 

manipulate the proposed futures ETP by 

manipulating the price of Bitcoin 

Futures contracts, whether that attempt 

is made by directly trading on the CME 

Bitcoin futures market or indirectly by 

trading outside of the 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.42

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 Bitcoin Futures market caused by a 

person attempting to manipulate the 

proposed futures ETP by manipulating 

the price of Bitcoin Futures 

contracts. . .indirectly by trading 

outside of the 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 

Bitcoin Futures. If CME is able to detect 


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such attempts at manipulation in the 

complex and interconnected spot 

bitcoin market, how would such an 

ability to detect attempted manipulation 

and the utility in sharing that 

information with the listing exchange 

apply only to Bitcoin Futures ETFs and 

not Spot Bitcoin ETPs? Stated a 

different way, given that there is 

significant trading volume on numerous 

bitcoin platforms that are not part of the 

CME CF Bitcoin Reference Rate and that 

arbitrage opportunities across bitcoin 

platforms means that such trading 

volume will influence spot bitcoin 

prices across the market and, despite 

this, the Commission still believes that 

CME can detect attempted manipulation 

of the Bitcoin Futures through ‘‘trading 

outside of the Bitcoin Futures market,’’ 

it is clear that such ability would apply 

equally to both Bitcoin Futures ETFs 

and Spot Bitcoin ETPs. To take it a step 

further, such an ability would also seem 

to be a strong indication that the Bitcoin 

Futures market represents a regulated 

market of significant size. To be clear, 

the Exchange agrees with the 

Commission on this point (and the 

implications of their conclusions) and 

notes that the pricing mechanism 

applicable to the Shares is similar to the 

CME CF Bitcoin Reference Rate. 

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 Nasdaq Rule 5711(d). 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, as well as crossmarket surveillances administered by 

FINRA, on behalf of the Exchange 

pursuant to a regulatory services 

agreement, which are also designed to 

detect violations of Exchange rules and 

applicable federal securities laws, 

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 

the Nasdaq 5800 Series. 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 CF Benchmarks 

Index, the Trust will provide 

information regarding the Trust’s 

bitcoin holdings as well as additional 

data regarding the Trust. 

The website for the Trust (https://

www.iShares.com), which will be 

publicly accessible at no charge, will 

contain the following information: (a) 

the prior Business Day’s NAV per Share; 

(b) the prior Business Day’s Nasdaq 

official closing price; (c) calculation of 

the premium or discount of such 

Nasdaq official closing price against 

such NAV per Share; (d) data in chart 

form displaying the frequency 

distribution of discounts and premiums 

of the Nasdaq official closing price 

against the NAV per Share, within 

appropriate ranges for each of the four 

previous calendar quarters (or for the 

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

prospectus; and (f) other applicable 

quantitative information. The Trust 

Administrator will also disseminate the 

Trust’s holdings on a daily basis on the 

Trust’s website. Information about the 

CF Benchmarks Index, including key 

elements of how the CF Benchmarks 

Index is calculated, is publicly available 

at https://www.cfbenchmarks.com/. The 

NAV per Share for the Trust will be 

calculated by the Trust 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 relevant securities information 

processor. 

Also, an estimated value that reflects 

an estimated IIV will be disseminated. 

For more information on IIV, including 

the calculation methodology, see 

‘‘Intraday Indicative Value x 02EE; 

above. One or more major market data 

vendors will provide an IIV per Share 

updated every 15 seconds, as calculated 

by the Exchange or a third-party 

financial data provider during the 

Exchange’s Regular Market Session 

(9:30 a.m. to 4:00 p.m. ET). The IIV will 

be calculated by using the prior day’s 

closing NAV per Share as a base and 

updating that value during the 

Exchange’s Regular Market Session to 

reflect changes in the value of the 

Trust’s NAV per Share during the 

trading day. 

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 CF Benchmarks. 

Information relating to trading, 

including price and volume 

information, in bitcoin is available from 

major market data vendors and from the 

platforms on which bitcoin are traded. 

Depth of book information is also 

available from bitcoin platforms. The 

normal trading hours for bitcoin 

platforms are 24 hours per day, 365 days 

per year. 

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 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. 

Premium and discount volatility, high 

fees, rolling costs, insufficient 

disclosures, and technical hurdles are 

putting U.S. investor money at risk on 

a daily basis that could potentially be 

eliminated through access to a Spot 

Bitcoin ETP. As such, the Exchange 

believes that this proposal acts to limit 

the risk to U.S. investors that are 

increasingly seeking exposure to bitcoin 

by providing direct, 1-for-1 exposure to 

bitcoin in a regulated, transparent, 

exchange-traded vehicle, specifically by: 

(i) reducing premium volatility; (ii) 

reducing management fees through 

meaningful competition; (iii) providing 

an alternative to Bitcoin Futures ETFs 

which will eliminate roll cost; (iv) 

reducing risks associated with investing 

in operating companies that are 

imperfect proxies for bitcoin exposure; 

and (v) providing an alternative to 

custodying spot bitcoin. Finally, the 

Exchange notes that in addition to all of 

the arguments herein which it believes 

sufficiently establishes the Bitcoin 

Futures market as a regulated market of 

significant size, it is logically 


khammond on DSKJM1Z7X2PROD with NOTICES
2338 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

43 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. 97899 

(July 13, 2023), 88 FR 46249. Comments on the 

proposed rule change are available at: https://

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

srcboebzx2023044.htm. 

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

5See Securities Exchange Act Release No. 98263, 

88 FR 61642 (Sept. 7, 2023). 

6See Securities Exchange Act Release No. 98639, 

88 FR 68888 (Oct. 4, 2023). 

7The Trust was formed as a Delaware statutory 

trust on March 17, 2021, and is operated as a 

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

Trust has no fixed termination date. 

inconsistent to find that the Bitcoin 

Futures market is a significant market as 

it relates to the 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 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 

No written comments were either 

solicited or received. 

III. 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– 

NASDAQ–2023–016 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–NASDAQ–2023–016. 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–NASDAQ–2023–016 and should be 

submitted on or before February 2, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.43

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–00508 Filed 1–11–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99290; File No. SR– 

CboeBZX–2023–044] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing of 

Amendment No. 3 to a Proposed Rule 

Change To List and Trade Shares of 

the Fidelity Wise Origin Bitcoin Fund 

Under BZX Rule 14.11(e)(4), 

Commodity-Based Trust Shares 

January 8, 2024. 

On June 30, 2023, Cboe BZX 

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

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to list and trade shares 

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

Bitcoin Fund (f/k/a Wise Origin Bitcoin 

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

Commodity-Based Trust Shares. On July 

11, 2023, the Exchange filed 

Amendment No. 1 to the proposed rule 

change, which amended and replaced 

the proposed rule change in its entirety. 

On July 13, 2023, the Exchange filed 

Amendment No. 2 to the proposed rule 

change, which amended and replaced 

the proposed rule change, as modified 

by Amendment No. 1, in its entirety. 

The proposed rule change, as modified 

by Amendment No. 2, was published for 

comment in the Federal Register on July 

19, 2023.3 On August 31, 2023, pursuant 

to section 19(b)(2) of the Act,4 the 

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change, as modified by 

Amendment No. 2.5 On September 28 

2023, the Commission instituted 

proceedings to determine whether to 

disapprove the proposed rule change, as 

modified by Amendment No. 2.6 On 

January 5, 2024, the Exchange filed 

Amendment No. 3 to the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. Amendment No. 3 

amended and replaced the proposed 

rule change, as modified by Amendment 

No. 2, in its entirety. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change, 

as modified by Amendment No. 3, 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 Fidelity Wise Origin Bitcoin Fund 

(the ‘‘Trust’’),7 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, 

and at the Commission’s Public 

Reference Room. 


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