[Federal Register Volume 89, Number 9 (Friday, January 12, 2024)]
[Notices]
[Pages 2321-2338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00508]


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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

[[Page 2322]]

publishing this notice to solicit comments on the proposed rule change, 
as modified by Amendment No. 1, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See 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).
    \5\ See Securities Exchange Act Release No. 98267, 88 FR 61652 
(Sept. 7, 2023).
    \6\ See Securities Exchange Act Release No. 98610, 88 FR 68768 
(Oct. 4, 2023).
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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\
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    \7\ The 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).
    \8\ See 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.
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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 peer-to-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 cost-effective for many investors to 
access directly.
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    \9\ The 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.
    \10\ The 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.
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    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

[[Page 2323]]

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.
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    \11\ The 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.
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    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-of-day 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,

[[Page 2324]]

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-to-day 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.
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    \12\ A ``Relevant Transaction'' is any cryptocurrency versus 
U.S. dollar spot trade that occurs during the observation window 
between 3:00 p.m. and 4:00 p.m. ET on a ``Constituent Platform'' in 
the BTC/USD pair that is reported and disseminated by a Constituent 
Platform through its publicly available application programming 
interface and observed by the ``Index Administrator'', as such terms 
are defined below.
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    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.
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    \13\ See 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.
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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 once-a-
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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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 
peer-to-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 third-
party 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.
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    \14\ Baskets 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.
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    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 bitcoin-on-bitcoin platforms 
or in private end-user-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 
double-spending 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

[[Page 2326]]

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 on-blockchain 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

[[Page 2327]]

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 pre-determined 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\
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    \15\ See 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'').
    \16\ See 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).
    \17\ See Winklevoss Order at 37592.
---------------------------------------------------------------------------

    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

[[Page 2328]]

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.
---------------------------------------------------------------------------

    \18\ See 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'').
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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:
---------------------------------------------------------------------------

    \19\ See 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.
    \20\ As 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.

    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\
---------------------------------------------------------------------------

    \21\ See Teucrium Approval at 21679.

    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

[[Page 2329]]

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.
---------------------------------------------------------------------------

    \22\ See 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-could-come-at-fundholders-expense-11635080580; ``Physical Bitcoin 
ETF Prospects Accelerate,'' ETF.com (October 25, 2021), available 
at: https://www.etf.com/sections/blog/physical-bitcoin-etf-prospects-shine.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \23\ See Teucrium Approval.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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-and-bulletins/ia_icorelatedclaims.
    \25\ See e.g., ``7 public companies with exposure to bitcoin'' 
(February 8, 2021) available at: https://finance.yahoo.com/news/7-public-companies-with-exposure-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-holding-the-cryptocurrency-yourself-.html.
    \26\ See, 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/tsla-10k_20201231.htm.

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[[Page 2330]]

[GRAPHIC] [TIFF OMITTED] TN12JA24.008

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.
---------------------------------------------------------------------------

    \27\ The 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.

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[[Page 2331]]

[GRAPHIC] [TIFF OMITTED] TN12JA24.009

    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.
---------------------------------------------------------------------------

    \28\ A 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.
[GRAPHIC] [TIFF OMITTED] TN12JA24.010


[[Page 2332]]


[GRAPHIC] [TIFF OMITTED] TN12JA24.011

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.
---------------------------------------------------------------------------

    \29\ The 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.
---------------------------------------------------------------------------

(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\
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    \30\ As 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 surveillance-sharing 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'').
    \31\ For a list of the current members and affiliate members of 
ISG, see https://www.isgportal.com/.
    \32\ See Wilshire Phoenix Disapproval.
---------------------------------------------------------------------------

    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\
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    \33\ See 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.

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[[Page 2333]]

(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 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 Commodity-Based 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,

[[Page 2334]]

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 non-registered 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 Commodity-Based 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

[[Page 2335]]

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.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f.
    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 Commodity-Based Trust Shares has been met as outlined 
below.
---------------------------------------------------------------------------

    \36\ See Exchange Rule 5720.
    \37\ Commodity-Based Trust Shares, as described in Exchange Rule 
5711(d), are a type of Trust Issued Receipt.
---------------------------------------------------------------------------

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\
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    \38\ For a list of the current members and affiliate members of 
ISG, see https://www.isgportal.com/.
    \39\ See Wilshire Phoenix Disapproval.
---------------------------------------------------------------------------

    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\
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    \40\ See 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.
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(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

[[Page 2336]]

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 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 Commodity-Based 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:
---------------------------------------------------------------------------

    \41\ See 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \42\ See Teucrium Approval at 21679.
---------------------------------------------------------------------------

    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

[[Page 2337]]

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 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, 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

[[Page 2338]]

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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#1a686f767f37797577777f746e695a697f79347d756c"><span class="__cf_email__" data-cfemail="99ebecf5fcb4faf6f4f4fcf7edead9eafcfab7fef6ef">[email protected]</span></a>. Please include 
file number SR-NASDAQ-2023-016 on the subject line.

Paper Comments

    <bullet> 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\
---------------------------------------------------------------------------

    \43\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00508 Filed 1-11-24; 8:45 am]
BILLING CODE 8011-01-P


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