Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2281 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

23 17 CFR 240.19b–4(f)(6). 

24 17 CFR 240.19b–4(f)(6)(iii). 

25For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

26 15 U.S.C. 78s(b)(2)(B). 27 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 97922 

(July 17, 2023), 88 FR 47214. Comments on the 

proposed rule change are available at: https://

www.sec.gov/comments/sr-nasdaq-2023-019/ 

srnasdaq2023019.htm. 

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

5See Securities Exchange Act Release No. 98262, 

88 FR 61658 (Sept. 7, 2023). 

6See Securities Exchange Act Release No. 98606, 

88 FR 68894 (Oct. 4, 2023). 

A proposed rule change filed under 

Rule 19b–4(f)(6) 23 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b4(f)(6)(iii),24 the Commission 

may designate a shorter time if such 

action is consistent with the protection 

of investors and the public interest. The 

Exchange has asked the Commission to 

waive the 30-day operative delay so that 

the proposal may become operative 

immediately upon filing. The Exchange 

states that it wants to implement the 

RFTY during the first quarter of 2024 

and granting the waiver would allow 

market participants and their customers 

to benefit more immediately from the 

increased order handling flexibility 

provided by the RFTY routing option. In 

addition, the Exchange stated that the 

proposed rule change presents no 

unique or novel issues that have not 

already been addressed by the 

Commission. Accordingly, the 

Commission hereby waives the 30-day 

operative delay and designates the 

proposal operative upon filing.25

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under section 19(b)(2)(B) 26 of the Act to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NASDAQ–2023–057 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–NASDAQ–2023–057. 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–2023–057 and should be 

submitted on or before February 2, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–00504 Filed 1–11–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99287; File No. SR– 

NASDAQ–2023–019] 

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 Valkyrie Bitcoin 

Fund Under Nasdaq Rule 5711(d), 

Commodity-Based Trust Shares 

January 8, 2024. 

On July 3, 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 

Valkyrie Bitcoin Fund under Nasdaq 

Rule 5711(d), Commodity-Based Trust 

Shares. The proposed rule change was 

published for comment in the Federal 

Register on July 21, 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 

publishing this notice to solicit 

comments on the proposed rule change, 

as modified by Amendment No. 1, from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade shares of the Valkyrie Bitcoin 

Fund (the ‘‘Trust’’) under Nasdaq Rule 

5711(d) (‘‘Commodity-Based Trust 


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2282 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

7Nasdaq Rule 5711(d)(iv)(A) defines CommodityBased Trust Shares as ‘‘a security (1) that is issued 

by a trust that holds (a) a specified commodity 

deposited with the trust, or (b) a specified 

commodity and, in addition to such specified 

commodity, cash; (2) that is issued by such trust in 

a specified aggregate minimum number in return for 

a deposit of a quantity of the underlying commodity 

and/or cash; and (3) that, when aggregated in the 

same specified minimum number, may be 

redeemed at a holder’s request by such trust which 

will deliver to the redeeming holder the quantity of 

the underlying commodity and/or cash.’’ 

8See Amendment No. 5 to Registration Statement 

on Form S–1, dated December 29, 2023 filed with 

the Commission by the Sponsor on behalf of the 

Trust (File No. 333–252344). 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. 

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 Shares of the Trust under Nasdaq 

Rule 5711(d), which governs the listing 

and trading of Commodity-Based Trust 

Shares on the Exchange.7

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 Valkyrie Digital Assets, LLC 

(the ‘‘Sponsor’’) and Delaware Trust 

Company, as the Trust’s trustee (the 

‘‘Trustee’’). The Shares will be 

registered with the Commission by 

means of the Trust’s registrations 

statement on Form S–1 (the 

‘‘Registration Statement’’).8 Pursuant to 

the Trust Agreement, the Sponsor will 

enter into a custodian agreement (the 

‘‘Custodian Agreement’’) with Coinbase 

Custody Trust Company, LLC (the 

‘‘Custodian’’) to act as custodian for the 

Trust’s bitcoins. The Custodian is not an 

affiliate of the Trust or the Sponsor. 

Pursuant to the Custodian Agreement, 

the Custodian will establish accounts 

that hold the bitcoins deposited with 

the Custodian on behalf of the Trust. 

U.S. Bancorp Fund Services, LLC will 

act as the transfer agent for the Trust 

(the ‘‘Transfer Agent’’) and as the 

administrator of the Trust (the 

‘‘Administrator’’) to perform various 

administrative, accounting and 

recordkeeping functions on behalf of the 

Trust. One or more cash custodians 

(each, a ‘‘Cash Custodian’’) will act as 

custodian for the cash held by the Trust. 

The investment objective of the Trust 

is for the Shares to reflect the 

performance of the value of a bitcoin as 

represented by the CME CF Bitcoin 

Reference Rate—New York Variant (the 

‘‘Index’’), less the Trust’s liabilities and 

expenses. The purpose of the Trust is to 

provide investors with a cost-effective 

and convenient way to invest in bitcoin 

in a manner that is more efficient and 

convenient than the purchase of a standalone bitcoin, while also mitigating 

some of the risk by reducing the 

volatility typically associated with the 

purchase of stand-alone bitcoin and 

without the uncertain and often 

complex requirements relating to 

acquiring and/or holding bitcoin. 

The Trust will only hold bitcoin and 

cash, and will, from time to time, issue 

a block of 5,000 Shares (a ‘‘Basket’’) in 

exchange for deposits of cash to the 

Trust. The Trust intends to hold cash 

only to the extent necessary to pay Trust 

expenses, when receiving cash in 

connection the creation of Baskets, or 

when distributing cash in connection 

with redemptions of Baskets. The 

Shares of the Trust represent units of 

fractional undivided beneficial interest 

in, and ownership of, the Trust. The 

bitcoins held by the Custodian on behalf 

of the Trust will be transferred out of its 

custody only to be sold on an as-needed 

basis in connection with the redemption 

of Baskets, to pay additional trust 

expenses, or in the event the Trust 

terminates and liquidates its assets or as 

otherwise required by law or regulation. 

Custody of the Trust’s Bitcoins 

The Custodian will custody all of the 

Trust’s bitcoin, other than that which 

may be maintained in a trading account 

(the ‘‘Trading Balance’’) with Coinbase, 

Inc. (‘‘Coinbase,’’ which is an affiliate of 

the Custodian), in accounts that are 

required to be segregated from the assets 

held by the Custodian as principal and 

the assets of its other customers (the 

‘‘Vault Balance’’). The Custodian will 

keep all of the private keys associated 

with the Trust’s bitcoin held by the 

Custodian in the Vault Balance in ‘‘cold 

storage’’, which refers to a safeguarding 

method by which the private keys 

corresponding to the Trust’s bitcoins are 

generated and stored in an offline 

manner using computers or devices that 

are not connected to the internet, which 

is intended to make them more resistant 

to hacking. By contrast, in hot storage, 

the private keys are held online, where 

they are more accessible, leading to 

more efficient transfers, though they are 

potentially more vulnerable to being 

hacked. While the Custodian will 

generally keep a substantial portion of 

the Trust’s bitcoin in cold storage on an 

ongoing basis, from time to time, 

portions of the Trust’s bitcoin will be 

held outside of cold storage temporarily 

in the Trading Balance maintained by 

Coinbase as part of trade facilitation in 

connection with creations and 

redemptions of Baskets or to sell 

bitcoins including to pay Trust 

expenses. The Trust’s bitcoin held in 

the Vault Balance by the Custodian are 

held in segregated wallets and therefore 

are not commingled with the 

Custodian’s or other customer assets. 

All bitcoins exist and are stored on 

the decentralized transaction ledger of 

the Bitcoin network (the ‘‘Blockchain’’). 

The Blockchain records most 

transactions (including mining of new 

bitcoins) for all bitcoins in existence, 

and in doing so verifies the location of 

each bitcoin (or fraction thereof) in a 

particular digital wallet. Each digital 

wallet of the Custodian may be accessed 

using its corresponding private key. The 

Custodian’s custodial operations will 

maintain custody of the private keys 

that have been deposited in cold storage 

at its various vaulting premises which 

are located in geographically dispersed 

locations across the world, including 

but not limited to the United States, 

Europe, including Switzerland and 

South America. The locations of the 

vaulting premises may change regularly 

and are kept confidential by the 

Custodian for security purposes. 

The Custodian is the custodian of the 

Trust’s private keys corresponding to 

the Trust’s bitcoins in accordance with 

the terms and provisions of the 

Custodian Agreement and will utilize 

the certain security procedures such as 

algorithms, codes, passwords, 

encryption or telephone call-backs 


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Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2283 

9Several major market data vendors display and/ 

or make widely available IIVs taken from the 

relevant securities information processor or other 

data feeds. In addition, the indicative fund value 

will be available through on-line information 

services such as Bloomberg and Reuters. 

(together, the ‘‘Security Procedures’’) in 

the administration and operation of the 

Trust and the safekeeping of its bitcoins 

and private keys. The Custodian will 

create a Vault Balance for the Trust 

assets in which private keys are placed 

in cold storage. The Custodian will 

segregate the private keys stored with it 

from any other assets it holds or holds 

for others. Further, multiple distinct 

private keys must sign any transaction 

in order to transfer the Trust’s bitcoins 

from a multi-signature address to any 

other address on the bitcoin blockchain. 

Distinct private keys required for multisignature address transfers reside in 

geographically dispersed vault 

locations, known as ‘‘signing vaults.’’ In 

addition to multiple signing vaults, the 

Custodian maintains multiple ‘‘back-up 

vaults’’ in which backup private keys 

are stored. In the event that one or more 

of the ‘‘signing vaults’’ is compromised, 

the back-up vaults would be activated 

and used as signing vaults to complete 

a transaction within 72 hours. As such, 

if any one signing vault is compromised, 

it would have no impact on the ability 

of the Trust to access its bitcoins, other 

than a possible delay in operations of 72 

hours, while one or more of the ‘‘backup 

vaults’’ is transitioned to a signing vault. 

These Security Procedures ensure that 

there is no single point of failure in the 

protection of the Trust’s assets. 

Calculation of Net Asset Value 

The Trust’s net asset value (‘‘NAV’’) 

per Share is calculated by taking the 

current market value of its total assets, 

less any liabilities of the Trust 

(including accrued by unpaid expenses) 

and dividing that total by the total 

number of outstanding Shares. The 

bitcoin held by the Trust will typically 

be valued based on the price set by the 

Index (the ‘‘Bitcoin Index Price’’). The 

Sponsor holds full discretion to change 

either the index used for calculating 

NAV or the index provider subject to 

proper notification to shareholders 

(such notification will be made via a 

prospectus supplement to the 

Registration Statement and/or a current 

report filed with the SEC and will occur 

in advance of any such change). 

Shareholder approval is not required to 

effect such change. Any permanent 

change to the Index and/or calculation 

of the NAV will require a 19b–4 filing. 

The Administrator will calculate the 

NAV of the Trust once each Exchange 

trading day. The Exchange’s Regular 

Market Session closes at 4:00 p.m. ET. 

The NAV for a normal trading day will 

be released after the end of the Regular 

Market Session. However, NAVs are not 

officially struck until later in the day 

(often by 5:30 p.m. Eastern Time and 

almost always by 8:00 p.m. Eastern 

Time). The pause between 4:00 p.m. 

Eastern Time and 5:30 p.m. Eastern 

Time provides an opportunity to detect, 

flag, investigate, and correct unusual 

pricing should it occur. 

The Sponsor anticipates that the 

Bitcoin Index Price will be reflective of 

a reasonable valuation of the average 

spot price of bitcoin. However, in the 

event the Bitcoin Index Price is not 

available or determined by the Sponsor 

to not be reliable, the Sponsor would 

‘‘fair value’’ the Trust’s bitcoin holdings 

on a temporary basis. The Sponsor will 

monitor for significant events related to 

crypto assets that may impact the value 

of bitcoin and will determine in good 

faith, and in accordance with its 

valuation policies and procedures, 

whether to fair value the Trust’s bitcoin 

on a given day (e.g., if the Index is not 

available the Sponsor). In certain 

circumstances, the Sponsor will 

determine whether to fair value the 

Trust’s bitcoin on a given day on 

whether certain pre-determined criteria 

have been met. For example, if the 

Index deviates by more than a predetermined amount from an alternate 

benchmark available to the Sponsor, 

then the Sponsor may determine to 

utilize the alternate benchmark. The 

Trust and the Sponsor have licensed use 

of the Lukka Prime Reference Rate as 

such an alternative benchmark. The 

Sponsor may also fair value the Trust’s 

bitcoin using observed market 

transactions from various platforms, 

including some or all of the Constituent 

Bitcoin Platforms (as defined below) 

included in the Index. The Sponsor may 

also fair value the Trust’s bitcoin using 

a combination of inputs in certain 

situations (e.g., using observed market 

transactions, OTC quotations from 

brokers, etc.). 

The NAV for the Trust’s Shares will 

be disseminated daily to all market 

participants at the same time. The 

Sponsor will publish the NAV and NAV 

per Share at https://valkyrieinvest.com/ 

BRRR as soon as practicable after their 

determination and availability. 

Intraday Indicative Value 

In order to provide updated 

information relating to the Trust for use 

by shareholders and market 

professionals, an updated intraday 

indicative value (‘‘IIV’’) per Share 

updated every 15 seconds will be 

disseminated by one of more major 

market data vendors during the 

Exchange’s Regular Market Session 

through the facilities of the relevant 

securities information processor and 

Consolidated Quotation System (CQS) 

high speed lines. In addition, the IIV 

will be available through on-line 

information services such as Bloomberg 

and Reuters.9 The IIV will be calculated 

by a third-party financial data provider 

during the Exchange’s Regular Market 

Session. The IIV will be calculated by 

using the prior day’s closing NAV per 

Share of the Trust as a base and 

updating that value throughout the 

trading day to reflect changes in the 

most recently reported price level of the 

CME CF Bitcoin Real-Time Index 

(‘‘BRTI’’), as reported by CME Group, 

Inc., Bloomberg, L.P. or another 

reporting service. The BRTI is a real 

time index of the U.S. dollar price of 

one bitcoin, published once per second, 

24 hours per day, 7 days per week, and 

365 days per year. The BRTI is 

calculated once per second in real time 

based on the Relevant Order Books of all 

Constituent Bitcoin Platforms. A 

‘‘Relevant Order Book’’ is the universe 

of the currently unmatched limit orders 

to buy or sell in the BTC/USD pair that 

is reported and disseminated by CF 

Benchmarks Ltd., as the BRTI. 

calculation agent. 

Creation and Redemption of Shares 

The Trust will issue Shares on an 

ongoing basis, but only in one or more 

Baskets. The creation and redemption of 

a Basket requires the delivery to the 

Trust, or the distribution by the Trust, 

of the cash value of the amount of 

bitcoin represented by each Basket 

being created or redeemed, which is 

calculated pursuant to the same 

procedures used to calculate the Trust’s 

NAV (the ‘‘Basket Amount’’). The 

amount of bitcoin represented by each 

Basket is determined by dividing the 

number of bitcoins owned by the Trust 

at 4:00 p.m. ET, on the trade date of a 

creation or redemption order, as 

adjusted for the number of whole and 

fractional bitcoins constituting accrued 

but unpaid fees and expenses of the 

Trust, by the number of Shares 

outstanding at such time (the quotient 

so obtained calculated to one-hundredmillionth of one bitcoin) and 

multiplying such quotient by 5,000. The 

Basket Amount multiplied by the 

number of Baskets being created or 

redeemed is the ‘‘Total Basket Amount.’’ 

The only persons that may place 

orders to create or redeem Baskets are 

authorized participants (‘‘Authorized 

Participants’’). Each Authorized 

Participant must (i) be a registered 

broker-dealer or similar exempt 


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10For the purpose of this section, Bitcoin with an 

upper case ‘‘B’’ is used to describe the system as 

a whole that is involved in maintaining the ledger 

of bitcoin ownership and facilitating the transfer of 

bitcoin among parties. When referring to the digital 

asset within the bitcoin network, bitcoin is written 

with a lower case ‘‘b’’ (except, at the beginning of 

sentences or paragraph sections). 

financial institution and (ii) enter into a 

participant agreement with the Sponsor, 

the Administrator, and the marketing 

agent (the ‘‘Marketing Agent’’). 

Authorized Participants may act for 

their own accounts or as agents for 

broker-dealers, custodians and other 

securities market participants that wish 

to create or redeem Baskets. 

Shareholders who are not Authorized 

Participants will only be able to redeem 

their Shares through an Authorized 

Participant. 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 Sponsor will maintain ownership 

and control of the bitcoin in a manner 

consistent with good delivery 

requirements for spot commodity 

transactions. 

Creation Procedures 

On any ‘‘Business Day’’ (defined as 

any day other than a day when the 

Exchange is closed for regular trading), 

an Authorized Participant may order 

one or more Baskets (each a ‘‘Creation 

Basket’’) from the Trust by placing a 

creation order with the Administrator. 

Creation orders may only be placed in 

exchange for cash. Creation orders must 

be placed no later than 12:59:59 p.m. 

Eastern Time on each Business Day. 

Authorized Participants may only create 

Baskets and cannot create any Shares in 

an amount less than a Basket. 

Upon receiving instruction from the 

Administrator that a creation order has 

been accepted by the Transfer Agent, 

the Authorized Participant will on the 

same day send the U.S. Dollar value of 

the Total Basket Amount, which will be 

based on the NAV per Share multiplied 

by the number of Shares. The 

Authorized Participant will also be 

responsible for any difference in the 

price of bitcoin used to calculate the 

NAV per Share and the actual price at 

which the Trust purchases bitcoin in 

connection with such order, as well as 

any brokerage fees, transfer fees, 

network fees or other costs of the Trust 

in purchasing bitcoin in connection 

with the creation order. After the 

Administrator receives the Total Basket 

Amount, the Administrator will instruct 

the Transfer Agent to deliver the 

Creation Baskets to the Authorized 

Participant on the day following the 

creation order date. 

Redemption Procedures 

The procedures by which an 

Authorized Participant can redeem one 

or more Baskets (each, a ‘‘Redemption 

Basket’’) mirror the procedures for the 

creation of Creation Baskets. On any 

Business Day, an Authorized Participant 

may place a redemption order 

specifying the number of Redemption 

Baskets to be redeemed. Redemption 

orders may only be placed in exchange 

for cash. Redemption orders must be 

placed no later than 12:59:59 p.m. ET, 

on each Business Day. Authorized 

Participants may only redeem 

Redemption Baskets and cannot redeem 

any Shares in an amount less than a 

Basket. 

To redeem Redemption Baskets, 

Authorized Participants will send the 

Administrator a redemption order. The 

Transfer Agent will accept or reject the 

redemption order on that same date. On 

the date following the redemption order 

date, the Administrator will send the 

Total Basket Amount to the Authorized 

Participant and the Transfer Agent will 

cancel the Shares once the Authorized 

Participant delivers the Redemption 

Baskets to the Transfer Agent. The 

amount of the redemption proceeds will 

be calculated in the same manner as the 

determination of the creation basket 

deposits discussed above. 

With respect to the Authorized 

Participant involved with a creation or 

redemption order, the following 

conditions apply to such Authorized 

Participant and the Trust: 

• 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. 

Overview of the Bitcoin Industry and 

Market 10

Bitcoin 

Bitcoin is the digital asset that is 

native to, and created and transmitted 

through the operations of, the peer-topeer Bitcoin network, a decentralized 

network of computers that operates on 

cryptographic protocols. No single 

entity owns or operates the Bitcoin 

network, the infrastructure of which is 

collectively maintained by a 

decentralized 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 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 trading 

platforms or in individual end-user-toend-user transactions under a barter 

system. 

The value of bitcoin is determined by 

the supply of and demand for bitcoin. 

New bitcoins are created and rewarded 

to the parties providing the Bitcoin 

network’s infrastructure (‘‘miners’’) in 

exchange for their expending 

computational power to verifying 

transactions and add them to the 

Blockchain. The Blockchain is 

effectively a decentralized 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 Blockchain. 

As each new block records outstanding 

bitcoin transactions, and outstanding 

transactions are settled and validated 

through such recording, the Blockchain 

represents a complete, transparent and 

unbroken history of all transactions of 

the Bitcoin network. 

Bitcoin Network 

Bitcoin was first described in a white 

paper released in 2008 and published 

under the pseudonym ‘‘Satoshi 

Nakamoto.’’ The protocol underlying 

Bitcoin was subsequently released in 

2009 as open-source software and 

currently operates on a worldwide 

network of computers. 

The first step in directly using the 

Bitcoin network for transactions is to 

download specialized software referred 


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Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2285 

to as a ‘‘bitcoin wallet.’’ A user’s bitcoin 

wallet can run on a computer or 

smartphone and can be used both to 

send and to receive bitcoin. Within a 

bitcoin wallet, a user can generate one 

or more unique ‘‘bitcoin addresses,’’ 

which are conceptually similar to bank 

account numbers. After establishing a 

bitcoin address, a user can send or 

receive bitcoin from his or her bitcoin 

address to another user’s address. 

Sending bitcoin from one bitcoin 

address to another is similar in concept 

to sending a bank wire from one 

person’s bank account to another 

person’s bank account; provided, 

however, that such transactions are not 

managed by an intermediary and 

erroneous transactions generally may 

not be reversed or remedied once sent. 

The amount of bitcoin associated with 

each bitcoin address, as well as each 

bitcoin transaction to or from such 

address, is transparently reflected in the 

Blockchain and can be viewed by 

websites that operate as ‘‘blockchain 

explorers.’’ Copies of the Blockchain 

exist on thousands of computers on the 

Bitcoin network. A user’s bitcoin wallet 

will either contain a copy of the 

blockchain or be able to connect with 

another computer that holds a copy of 

the blockchain. The innovative design 

of the Bitcoin network protocol allows 

each Bitcoin user to trust that their copy 

of the Blockchain will generally be 

updated consistent with each other 

user’s copy. 

Bitcoin Protocol 

The Bitcoin protocol is open-source 

software, meaning any developer can 

review the underlying code and suggest 

changes. There is no official company or 

group that is responsible for making 

modifications to Bitcoin. There are, 

however, a number of individual 

developers that regularly contribute to a 

specific distribution of Bitcoin software 

known as the ‘‘Bitcoin Core,’’ which is 

maintained in an open-source repository 

on the website Github. There are many 

other compatible versions of Bitcoin 

software, but Bitcoin Core provides the 

de-facto standard for the Bitcoin 

protocol, also known as the ‘‘reference 

software.’’ The core developers for 

Bitcoin Core operate under a volunteer 

basis and without strict hierarchical 

administration. 

Significant changes to the Bitcoin 

protocol are typically accomplished 

through a so-called ‘‘Bitcoin 

Improvement Proposal’’ or ‘‘BIP.’’ Such 

proposals are generally posted on 

websites, and the proposals explain 

technical requirements for the protocol 

change as well as reasons why the 

change should be accepted. Upon its 

inclusion in the most recent version of 

Bitcoin Core, a new BIP becomes part of 

the reference software’s Bitcoin 

protocol. Several BIPs have been 

implemented since 2011 and have 

provided various new features and 

scaling improvements. 

Because Bitcoin has no central 

authority, updating the reference 

software’s Bitcoin protocol will not 

immediately change the Bitcoin 

network’s operations. Instead, the 

implementation of a change is achieved 

by users and miners downloading and 

running updated versions of Bitcoin 

Core or other Bitcoin software that 

abides by the new Bitcoin protocol. 

Users and miners must accept any 

changes made to the Bitcoin source code 

by downloading a version of their 

Bitcoin software that incorporates the 

proposed modification of the Bitcoin 

network’s source code. A modification 

of the Bitcoin network’s source code is 

only effective with respect to the Bitcoin 

users and miners that download it. If an 

incompatible modification is accepted 

only by a percentage of users and 

miners, a division in the Bitcoin 

network will occur such that one 

network will run the pre-modification 

source code and the other network will 

run the modified source code. Such a 

division is known as a ‘‘fork’’ in the 

Bitcoin network. 

Such a fork in the Bitcoin network 

occurred on August 1, 2017, when a 

group of developers and miners 

accepted certain changes to the Bitcoin 

network software intended to increase 

transaction capacity. Blocks mined on 

this network now diverge from blocks 

mined on the Bitcoin network, which 

has resulted in the creation of a new 

blockchain whose digital asset is 

referred to as ‘‘bitcoin cash.’’ Bitcoin 

and bitcoin cash now operate as 

separate, independent networks, and 

have distinct related assets (bitcoin and 

bitcoin cash). Additional forks have 

followed the Bitcoin Cash fork, 

including those for Bitcoin Gold and 

Bitcoin SegWit2X, in the months after 

the creation of Bitcoin Cash. 

Bitcoin Transactions 

A bitcoin transaction contains the 

sender’s bitcoin address, the recipient’s 

bitcoin address, the amount of bitcoin to 

be sent, a transaction fee and the 

sender’s digital signature. Bitcoin 

transactions are secured by 

cryptography known as public-private 

key cryptography, represented by the 

bitcoin addresses and digital signature 

in a transaction’s data file. Each Bitcoin 

network address, or wallet, is associated 

with a unique ‘‘public key’’ and ‘‘private 

key’’ pair, both of which are lengthy 

alphanumeric codes, derived together 

and possessing a unique relationship. 

The public key is visible to the public 

and analogous to the Bitcoin network 

address. The private key is a secret and 

may be used to digitally sign a 

transaction in a way that proves the 

transaction has been signed by the 

holder of the public-private key pair, 

without having to reveal the private key. 

The Bitcoin network incorporates a 

system to prevent double spending of a 

single bitcoin. To prevent the possibility 

of double spending a single bitcoin, 

each validated transaction is recorded, 

time stamped and publicly displayed in 

a ‘‘block’’ in the Blockchain, which is 

publicly available. Any user may 

validate, through their bitcoin wallet or 

a blockchain explorer, that each 

transaction in the Bitcoin network was 

authorized by the holder of the 

applicable private key, and Bitcoin 

network mining software consistent 

with reference software requirements 

typically validates each such transaction 

before including it in the Blockchain. 

Bitcoin Mining—Creation of New 

Bitcoins 

The process by which bitcoins are 

created and bitcoin transactions are 

verified is called mining. To begin 

mining, a user, or ‘‘miner,’’ can 

download and run a mining client, 

which, like regular Bitcoin network 

software, turns the user’s computer into 

a ‘‘node’’ on the Bitcoin network that 

validates blocks. Each time transactions 

are validated and bundled into new 

blocks added to the Blockchain, the 

Bitcoin network awards the miner 

solving such blocks with newly issued 

bitcoin and any transaction fees paid by 

bitcoin transaction senders. This reward 

system is the method by which new 

bitcoins enter into circulation to the 

public. 

Mathematically Controlled Supply 

The method for creating new bitcoin 

is mathematically controlled in a 

manner so that the supply of bitcoin 

grows at a limited rate pursuant to a preset schedule. The number of bitcoin 

awarded for solving a new block is 

automatically halved every 210,000 

blocks. Thus, the current fixed reward 

for solving a new block is 6.25 bitcoin 

per block; the reward decreased from 

twenty-five (25) bitcoin in July 2016 and 

12.5 in May 2020. It is estimated to 

halve again at the start of 2024. This 

deliberately controlled rate of bitcoin 

creation means that the number of 

bitcoin in existence will never exceed 

twenty-one (21) million and that bitcoin 

cannot be devalued through excessive 

production unless the Bitcoin network’s 


khammond on DSKJM1Z7X2PROD with NOTICES
2286 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

11The Index is calculated as of 4 p.m. Eastern 

Time, whereas the BRR is calculated as of 4 p.m. 

London Time. 

12A ‘‘Relevant Transaction’’ is any 

cryptocurrency versus U.S. dollar spot trade that 

occurs during the observation window between 

3:00 p.m. and 4:00 p.m. Eastern Time on a 

Constituent Bitcoin Platforms in the BTC/USD pair 

that is reported and disseminated by a Constituent 

Bitcoin Platforms through its publicly available 

application programming interface and observed by 

the Benchmark Administrator, CF Benchmarks Ltd. 

13See 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’’). 

14See 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 

source code (and the underlying 

protocol for bitcoin issuance) is altered. 

As of January 1, 2023, approximately 

19,250,000 bitcoin have been mined. 

Bitcoin Value 

The value of bitcoin is determined by 

the value that various market 

participants place on bitcoin through 

their transactions. The most common 

means of determining the value of a 

bitcoin is by surveying one or more 

bitcoin platforms where bitcoin is 

traded publicly and transparently (e.g., 

Bitstamp, Coinbase, Kraken, itBit, 

Gemini and LMAX Digital). 

Additionally, in parallel to the open 

bitcoin platforms, informal ‘‘over-thecounter’’ or ‘‘OTC markets’’ for bitcoin 

trading also exist as a result of the peerto-peer nature of the Bitcoin network, 

which allows direct transactions 

between any seller and buyer. 

On each platform, bitcoin is traded 

with publicly disclosed valuations for 

each executed trade, measured by one or 

more fiat currencies such as the U.S. 

dollar or Euro. OTC markets do not 

typically disclose their trade data. 

Currently, there are many platforms 

operating worldwide, and each such 

platform represents a substantial 

percentage of bitcoin buying and selling 

activity. 

The Index 

As described in the Registration 

Statement, the Fund will typically use 

the Index to calculate the Trust’s NAV 

for days on which the Trust does not 

trade bitcoin. The Index is not affiliated 

with the Sponsor and was created and 

is administered by CF Benchmarks Ltd. 

(the ‘‘Benchmark Administrator’’), an 

independent entity, to facilitate 

financial products based on bitcoin. The 

Index is designed based on the IOSCO 

Principals for Financial Benchmarks 

and 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. 

Eastern Time. The Index is based on 

materially the same methodology 

(except calculation time) 11 as the 

Benchmark Administrator’s CME CF 

Bitcoin Reference Rate (the ‘‘BRR’’), 

which was first introduced on 

November 14, 2016 and is the rate on 

which bitcoin futures contracts 

(‘‘Bitcoin Futures’’) are cash-settled in 

U.S. dollars at the CME. The Index 

aggregates the trade flow of several 

bitcoin platforms, during an observation 

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

p.m. Eastern Time into the U.S. dollar 

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

Time. The current constituent bitcoin 

platforms of the Index are Bitstamp, 

Coinbase, Gemini, itBit, Kraken and 

LMAX Digital (the ‘‘Constituent Bitcoin 

Platforms’’). 

The Index is calculated based on the 

‘‘Relevant Transactions’’ 12 of all of its 

Constituent Bitcoin Platforms, as 

follows: 

• All Relevant Transactions are added 

to a joint list, recording the time of 

execution, trade price and size for each 

transaction. 

• The list is partitioned by timestamp 

into 12 equally-sized time intervals of 5 

(five) minute length. 

• For each partition separately, the 

volume-weighted median trade price is 

calculated from the trade prices and 

sizes of all Relevant Transactions, i.e., 

across all Constituent Bitcoin Platforms. 

A volume-weighted median differs from 

a standard median in that a weighting 

factor, in this case trade size, is factored 

into the calculation. 

• The Index is then determined by 

the arithmetic mean of the volumeweighted medians of all partitions. 

By employing the foregoing steps, the 

Index thereby seeks to ensure that 

transactions in bitcoin conducted at 

outlying prices do not have an undue 

effect on the value of a specific 

partition, large trades or clusters of 

trades transacted over a short period of 

time will not have an undue influence 

on the Index level, and the effect of 

large trades at prices that deviate from 

the prevailing price are mitigated from 

having an undue influence on the Index 

level. In addition, the Sponsor notes 

that an oversight function is 

implemented by the Benchmark 

Administrator in seeking to ensure that 

the Index is administered through 

codified policies for Index integrity. 

The Sponsor believes the Index 

provides an accurate reference to the 

average spot price of bitcoin and the 

methodology employed in constructing 

the Index, specifically its use of 

medians in filtering out small trades, 

makes the Index more resistant to 

manipulation than other measurements 

that employ different methodologies. In 

addition, the Index included over $375 

billion in bitcoin trades during the oneyear period ended December 31, 2022. 

Finally, an oversight committee is 

responsible for regularly reviewing and 

overseeing the methodology, practice, 

standards and scope of the Index to 

ensure that it continues to accurately 

track the spot prices of bitcoin. 

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.13 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 regulated 

futures market.14 Further to this point, 


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Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2287 

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). 

15See Winklevoss Order at 37592. 

16See 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’’). 

17The CME CF Bitcoin Reference Rate is based on 

a publicly available calculation methodology based 

on pricing sourced from several crypto and trading 

platforms, including Bitstamp, Coinbase, Gemini, 

itBit, Kraken, and LMAX Digital. 

the Commission’s prior orders have 

noted that the spot commodities and 

currency markets for which it has 

previously approved spot 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.’’ 15

As such, the regulated market of 

significant size test does not require that 

the spot bitcoin market be regulated in 

order for the Commission to approve 

this proposal, and precedent makes 

clear that an underlying market for a 

spot commodity or currency being a 

regulated market would actually be an 

exception to the norm. These largely 

unregulated currency and commodity 

markets do not provide the same 

protections as the markets that are 

subject to the Commission’s oversight, 

but the Commission has consistently 

looked to surveillance sharing 

agreements with the underlying futures 

market in order to determine whether 

such products were consistent with the 

Act. With this in mind, the Bitcoin 

Futures market, as defined 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 Investment 

Company Act of 1940, as amended (the 

‘‘1940 Act’’).16 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 exchange traded 

products (‘‘ETPs’’) that would hold 

actual bitcoin instead of derivatives 

contracts (‘‘Spot Bitcoin ETPs’’) that use 

the exact same pricing methodology as 

the Bitcoin Futures. As further 

discussed below, both the Exchange and 

the Sponsor believe that this proposal 

and the included analysis are sufficient 

to establish that the Bitcoin Futures 

market represents a regulated market of 

significant size as it relates both to the 

Bitcoin Futures market and to the spot 

bitcoin market and that this proposal 

should be approved. 

Bitcoin Futures 

CME began offering trading in Bitcoin 

Futures in 2017. Each contract 

represents five bitcoin and is based on 

the CME CF Bitcoin Reference Rate.17

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 

276,542 Bitcoin Futures contracts traded 

in March 2023 compared to 165,567, 

233,345, and 183,131 contracts traded in 

March 2020, March 2021, and March 

2023, respectively. 

BILLING CODE 8011–01–P 


khammond on DSKJM1Z7X2PROD with NOTICES
2288 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

18See Exchange Act Releases No. 94080 (January 

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

‘‘Amendment No. 1 to the Proposed Rule Change 

To List and Trade Shares of the Wise Origin Bitcoin 

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

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

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

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

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

do futures markets play in Bitcoin pricing? 

Causality, cointegration and price discovery from a 

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

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

This academic research paper concludes that 

‘‘There exist no episodes where the Bitcoin spot 

markets dominates the price discovery processes 

with regard to Bitcoin futures. This points to a 

conclusion that the price formation originates solely 

in the Bitcoin futures market. We can, therefore, 

conclude that the Bitcoin futures markets dominate 

BILLING CODE 8011–01–C 

The Sponsor further believes that 

publicly available research, including 

research done as part of rule filings 

proposing to list and trade shares of 

Spot Bitcoin ETPs, corroborates the 

overall trend outlined above and 

supports the thesis that the Bitcoin 

Futures pricing leads the spot market 

and, thus, a person attempting to 

manipulate the Shares would also have 

to trade on that market to manipulate 

the ETP. Specifically, the Sponsor 

believes that such research indicates 

that bitcoin futures lead the bitcoin spot 

market in price formation.18


khammond on DSKJM1Z7X2PROD with NOTICESEN12JA24.024</GPH> EN12JA24.025</GPH>

CME Sltroln futures Av<1rrage Dally Volume and Opt1n lnter<1rst 

Source: CME 4l20/23. 

@ Large Open Interest Holders of CME Bitcoin Futures 

150 

:125 

75 

25 

0 

2019 

SOURCE: CFTC COT 

UPDATED: MAY 2, 2023 

2021 2022 2023 

ZOOMThe number oflarge open interest holders and unique accounts trading Bitcoin Futures 

halle both increased, even in the face of heightened Bitcoin price volatility. 

A large open interest holder in Bitcoin Futures is an entity that holds at least 25 contracts, 

which is the equivalent of 125 bitcoin. 
Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 2289 

the dynamic price discovery process based upon 

time-varying information share measures. Overall, 

price discovery seems to occur in the Bitcoin 

futures markets rather than the underlying spot 

market based upon a time-varying perspective.’’ 

19The 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 platforms 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 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. 

20As previously articulated by the Commission, 

‘‘The standard requires such surveillance-sharing 

agreements since ‘‘they provide a necessary 

deterrent to manipulation because they facilitate the 

availability of information needed to fully 

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

Commission has emphasized that it is essential for 

an exchange listing a derivative securities product 

to enter into a surveillance-sharing agreement with 

markets trading underlying securities for the listing 

exchange to have the ability to obtain information 

necessary to detect, investigate, and deter fraud and 

market manipulation, as well as violations of 

exchange rules and applicable federal securities 

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

for the sharing of information about market trading 

activity, clearing activity, and customer identity; 

that the parties to the agreement have reasonable 

ability to obtain access to and produce requested 

information; and that no existing rules, laws, or 

practices would impede one party to the agreement 

from obtaining this information from, or producing 

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

historically held that joint membership in the 

Intermarket Surveillance Group (‘‘ISG’’) constitutes 

such a surveillance sharing agreement. See 

Securities Exchange Act Release No. 88284 

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

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

Disapproval’’). 

21For a list of the current members and affiliate 

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

22See Wilshire Phoenix Disapproval. 

23See 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. 

24These statistics are based on samples of bitcoin 

liquidity in USD (excluding stablecoins or Euro 

liquidity) based on executable quotes on Coinbase, 

FTX and Kraken during the one-year period ending 

May 2022. 

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; 19 and 

(ii) the requirement that an exchange 

proposal be designed, in general, to 

protect investors and the public interest. 

The Exchange believes that this 

proposal is consistent with the 

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

Act and that this filing sufficiently 

demonstrates that the Bitcoin Futures 

market represents a regulated market of 

significant size and that, on the whole, 

the manipulation concerns previously 

articulated by the Commission are 

sufficiently mitigated to the point that 

they are outweighed by quantifiable 

investor protection issues that would be 

resolved by approving this proposal. 

(i) Designed To Prevent Fraudulent and 

Manipulative Acts and Practices 

In order to meet this standard in a 

proposal to list and trade a series of 

Commodity-Based Trust Shares, the 

Commission requires that an exchange 

demonstrate that there is a 

comprehensive surveillance-sharing 

agreement in place 20 with a regulated 

market of significant size. Both the 

Exchange and CME are members of 

ISG.21 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.22

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.23

(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 

CME bitcoin futures market caused by a 

person attempting to manipulate the 

proposed futures ETP by manipulating 

the price of CME bitcoin futures 

contracts . . . indirectly by trading 

outside of the CME bitcoin futures 

market,’’ makes clear that the 

Commission believes that CME’s 

surveillance can capture the effects of 

trading on the relevant spot markets on 

the pricing of 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. 

(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 Skew, the cost to buy or 

sell $5 million worth of bitcoin averages 

roughly 48 basis points with a market 

impact of $139.08.24 Stated another 

way, a market participant could enter a 

market buy or sell order for $5 million 


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2290 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

25The bid-ask price of the Trust is determined 

using the highest bid and lowest offer on the 

Consolidated Tape as of the time of calculation of 

the closing day NAV. 

26The IIV on a per Share basis disseminated 

during the Regular Market Session should not be 

viewed as a real-time update of the NAV, which is 

calculated once a day. 

of bitcoin and only move the market 

0.48%. 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 leading price discovery, 

the overall size of the bitcoin market, 

and the ability for market participants to 

buy or sell large amounts of bitcoin 

without significant market impact will 

help prevent the Shares from becoming 

the predominant force on pricing in 

either the bitcoin spot or Bitcoin 

Futures markets, satisfying part (b) of 

the test outlined above. 

(c) Other Means To Prevent Fraudulent 

and Manipulative Acts and Practices 

The Exchange is also proposing to 

take additional steps to those described 

above to supplement its ability to obtain 

information that would be helpful in 

detecting, investigating, and deterring 

fraud and market manipulation in the 

Commodity-Based Trust Shares. 

As noted in the Surveillance section, 

the surveillance program includes realtime patterns for price and volume 

movements and post-trade surveillance 

patterns (e.g., spoofing, marking the 

close, pinging, phishing). In addition to 

the Exchange’s existing surveillance, a 

new pattern will be added to surveil for 

significant deviation in the CommodityBased Trust Shares’ price from the 

underlying asset’s price. The Exchange 

will use the trade data from an external 

vendor that consolidates the real-time 

data from multiple bitcoin platforms. 

Trading of Shares on the Exchange 

will be subject to the Exchange’s 

surveillance program for derivative 

products, as well as cross-market 

surveillances administered by Financial 

Industry Regulatory Authority 

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

pursuant to a regulatory services 

agreement, which are also designed to 

detect violations of Exchange rules and 

applicable federal securities laws. The 

Exchange is responsible for FINRA’s 

performance under this regulatory 

services agreement. 

The Exchange will require the Trust 

to represent to the Exchange that it will 

advise the Exchange of any failure by 

the Trust to comply with the continued 

listing requirements, and, pursuant to 

its obligations under section 19(g)(1) of 

the Exchange Act, the Exchange will 

surveil for compliance with the 

continued listing requirements. If the 

Trust is not in compliance with the 

applicable listing requirements, the 

Exchange will commence delisting 

procedures under the Nasdaq 5800 

Series. In addition, the Exchange also 

has a general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

The Exchange will communicate as 

needed regarding trading in the Shares 

with other markets and other entities 

that are members of the ISG, and the 

Exchange may obtain trading 

information regarding trading in the 

Shares from such markets and other 

entities. 

Availability of Information 

The Trust’s website (https://valkyrie

invest.com/BRRR) will include, free of 

charge, quantitative information on a 

per Share basis updated on a daily basis, 

including (i) the current NAV per Share 

daily and the prior business day’s NAV 

and the reported closing price; (ii) the 

mid-point of the bid-ask price 25 in 

relation to the NAV as of the time the 

NAV is calculated (‘‘Bid-Ask Price’’) 

and a calculation of the premium or 

discount of such price against such 

NAV; (iii) data in chart format 

displaying the frequency distribution of 

discounts and premiums of the daily 

Bid-Ask Price against the NAV, within 

appropriate ranges, for each of the four 

previous calendar quarters (or for the 

life of the Trust, if shorter); and (iv) 

copies of the Trust’s prospectus in 

electronic format. In addition, on each 

business day the Trust’s website will 

also provide free of charge: (i) the 

Trust’s NAV and NAV per Share; (ii) 

information regarding the Trust’s 

holdings; and (iii) information regarding 

the Index and the value of a bitcoin as 

calculated by the Index (which may also 

be found on the Index’s website (https:// 

www.cfbenchmarks.com/data/indices/ 

BRRNY), or, if an alternative fair value 

methodology is used to value the Trust’s 

bitcoin, such other pricing source(s) 

used in such calculation. 

The Trust’s website will provide an 

IIV per Share updated every 15 seconds, 

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

Exchange’s Regular Market Session 

(9:30 a.m. to 4:00 p.m. (Eastern Time)).26

The IIV will be calculated by using the 

prior day’s closing NAV per Share as a 

base and updating that value throughout 

the trading day to reflect changes in the 

most recently reported price level of the 

BRTI, as reported by CME Group, Inc., 

Bloomberg, L.P. or another reporting 

service. The BRTI is calculated in real 

time once per second based on the 

Relevant Order Books of all Constituent 

Bitcoin Platforms. All aspects of the 

BRTI methodology are publicly 

available at the website of the 

Benchmark Administrator. 

The IIV disseminated during the 

Exchange’s Regular Market Session 

should not be viewed as an actual realtime update of the NAV, which will be 

calculated only once at the end of each 

trading day. The IIV will be widely 

disseminated on a per Share basis every 

15 seconds during the Exchange’s 

Regular Market Session by one or more 

major market data vendors. In addition, 

the IIV will be available published on 

the Exchange’s website and through online information services such as 

Bloomberg and Reuters. 

The NAV for the Trust will be 

calculated by the Sponsor 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. 

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. 

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. Market prices for 

the Shares will be available from a 

variety of sources, including brokerage 

firms, information websites and other 

information service providers. 

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 will 


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be calculated daily and will be made 

available to all market participants at 

the same time. A minimum of 40,000 

Commodity-Based Trust Shares will be 

required to be outstanding at the time of 

commencement of trading on the 

Exchange. The Sponsor expects there to 

be multiple creation units in circulation 

at launch of the Trust. Upon termination 

of the Trust, the Shares will be removed 

from listing. The Trustee, Delaware 

Trust Company, is a trust company 

having substantial capital and surplus 

and the experience and facilities for 

handling corporate trust business, as 

required under Nasdaq Rule 

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

made to the trustee without prior notice 

to and approval of the Exchange. 

As required in Nasdaq Rule 

5711(d)(viii), the Exchange notes that 

any registered market maker (‘‘Market 

Maker’’) in the Shares must file with the 

Exchange, in a manner prescribed by the 

Exchange, and keep current a list 

identifying all accounts for trading the 

underlying commodity, related futures 

or options on futures, or any other 

related derivatives, which the registered 

Market Maker may have or over which 

it may exercise investment discretion. 

No registered Market Maker in the 

Shares shall trade in the underlying 

commodity, related futures or options 

on futures, or any other related 

derivatives, in an account in which a 

registered Market Maker, directly or 

indirectly, controls trading activities, or 

has a direct interest in the profits or 

losses thereof, which has not been 

reported to the Exchange as required by 

Nasdaq Rule 5711(d). In addition to the 

existing obligations under Exchange 

rules regarding the production of books 

and records, the registered Market 

Maker in the Shares shall make 

available to the Exchange such books, 

records or other information pertaining 

to transactions by such entity or any 

limited partner, officer or approved 

person thereof, registered or nonregistered employee affiliated with such 

entity for its or their own accounts in 

the underlying commodity, related 

futures or options on futures, or any 

other related derivatives, as may be 

requested by the Exchange. 

The Exchange is able to obtain 

information regarding trading in the 

Shares and the underlying bitcoin, 

Bitcoin Futures contracts, options on 

Bitcoin Futures, or any other bitcoin 

derivative through members acting as 

registered Market Makers, in connection 

with their proprietary or customer 

trades. 

As a general matter, the Exchange has 

regulatory jurisdiction over its members, 

and their associated persons. The 

Exchange also has regulatory 

jurisdiction over any person or entity 

controlling a member, as well as a 

subsidiary or affiliate of a member that 

is in the securities business. A 

subsidiary or affiliate of a member 

organization that does business only in 

commodities would not be subject to 

Exchange jurisdiction, but the Exchange 

could obtain information regarding the 

activities of such subsidiary or affiliate 

through surveillance sharing agreements 

with regulatory organizations of which 

such subsidiary or affiliate is a member. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. The Exchange will 

allow trading in the Shares from 4:00 

a.m. to 8:00 p.m. (Eastern Time). 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 Index value 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 Index 

value occurs. If the interruption to the 

dissemination of the IIV or the Index 

value persists past the trading day in 

which it occurred, the Exchange will 

halt trading no later than the beginning 

of the trading day following the 

interruption. In addition, if the 

Exchange becomes aware that the NAV 

with respect to the Shares is not 

disseminated to all market participants 

at the same time, it will halt trading in 

the Shares until such time as the NAV 

is available to all market participants. 

Surveillance 

The Exchange believes that its 

surveillance procedures are adequate to 

properly monitor the trading of the 

Shares on the Exchange during all 

trading sessions and to deter and detect 

violations of Exchange rules and the 

applicable federal securities laws. The 

surveillance program includes real-time 

patterns for price and volume 

movements and post-trade surveillance 

patterns (e.g., spoofing, marking the 

close, pinging, phishing). In addition to 

the Exchange’s existing surveillance, a 

new pattern will be added to surveil for 

significant deviation in the CommodityBased Trust Shares’ price from the 

underlying asset’s price. The Exchange 

will use the trade data from an external 

vendor that consolidates the real-time 

data from multiple bitcoin platforms. 

Trading of Shares on the Exchange 

will be subject to the Exchange’s 

surveillance program for derivative 

products, as well as cross-market 

surveillances administered by FINRA, 

on behalf of the Exchange pursuant to 

a regulatory services agreement, which 

are also designed to detect violations of 

Exchange rules and applicable federal 

securities laws. The Exchange is 

responsible for FINRA’s performance 

under this regulatory services 

agreement. 

The Exchange will require the Trust 

to represent to the Exchange that it will 

advise the Exchange of any failure by 

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 


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27 15 U.S.C. 78f. 

28 15 U.S.C. 78f(b)(5). 

29See Exchange Rule 5720. 

30Commodity-Based Trust Shares, as described in 

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

Receipt. 

31For a list of the current members and affiliate 

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

32See Wilshire Phoenix Disapproval. 

33See Winklevoss Order at 37580. The 

Commission has also specifically noted that it ‘‘is 

not applying a ‘‘cannot be manipulated’’ standard; 

instead, the Commission is examining whether the 

proposal meets the requirements of the Exchange 

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

burden on the listing exchange to demonstrate the 

validity of its contentions and to establish that the 

requirements of the Exchange Act have been met. 

Id. at 37582. 

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 of 

the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Circular 

will discuss the following: (1) the 

procedures for purchases and 

redemptions of Shares in Creation Units 

(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 PreMarket 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 disclose the trading hours of the 

Shares. The Information Circular will 

also 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 27 in general and section 

6(b)(5) of the Act 28 in particular in that 

it is designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. 

The Commission has approved 

numerous series of Trust Issued 

Receipts,29 including Commodity-Based 

Trust Shares,30 to be listed on U.S. 

national securities exchanges. In order 

for any proposed rule change from an 

exchange to be approved, the 

Commission must determine that, 

among other things, the proposal is 

consistent with the requirements of 

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

including: (i) the requirement that a 

national securities exchange’s rules are 

designed to prevent fraudulent and 

manipulative acts and practices; and (ii) 

the requirement that an exchange 

proposal be designed, in general, to 

protect investors and the public interest. 

The Exchange believes that this 

proposal is consistent with the 

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

Act because this filing sufficiently 

demonstrates that the standard that has 

previously been articulated by the 

Commission applicable to CommodityBased Trust Shares has been met as 

outlined below. 

Designed To Prevent Fraudulent and 

Manipulative Acts and Practices 

In order for a proposal to list and 

trade a series of Commodity-Based Trust 

Shares to be deemed consistent with the 

Act, the Commission requires that an 

exchange demonstrate that there is a 

comprehensive surveillance-sharing 

agreement in place with a regulated 

market of significant size. Both the 

Exchange and CME are members of 

ISG.31 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.32

The Commission has also recognized 

that the ‘‘regulated market of significant 

size’’ standard is not the only means for 

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

specifically providing that a listing 

exchange could demonstrate that ‘‘other 

means to prevent fraudulent and 

manipulative acts and practices’’ are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement.33

(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 

CME bitcoin futures market caused by a 

person attempting to manipulate the 

proposed futures ETP by manipulating 

the price of CME bitcoin futures 

contracts . . . indirectly by trading 

outside of the CME bitcoin futures 

market,’’ makes clear that the 

Commission believes that CME’s 

surveillance can capture the effects of 

trading on the relevant spot markets on 

the pricing of 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. 

(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 


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34The bid-ask price of the Trust is determined 

using the highest bid and lowest offer on the 

Consolidated Tape as of the time of calculation of 

the closing day NAV. 

35The IIV on a per Share basis disseminated 

during the Regular Market Session should not be 

viewed as a real-time update of the NAV, which is 

calculated once a day. 

addition to the Bitcoin Futures market 

data points cited above, the spot market 

for bitcoin is also very liquid. 

As such, the combination of the 

Bitcoin Futures leading price discovery, 

the overall size of the bitcoin market, 

and the ability for market participants to 

buy or sell large amounts of bitcoin 

without significant market impact will 

help prevent the Shares from becoming 

the predominant force on pricing in 

either the bitcoin spot or Bitcoin 

Futures markets, satisfying part (b) of 

the test outlined above. 

(c) Other Means To Prevent Fraudulent 

and Manipulative Acts and Practices 

The Exchange is also proposing to 

take additional steps to those described 

above to supplement its ability to obtain 

information that would be helpful in 

detecting, investigating, and deterring 

fraud and market manipulation in the 

Commodity-Based Trust Shares. 

As noted in the Surveillance section, 

the surveillance program includes realtime patterns for price and volume 

movements and post-trade surveillance 

patterns (e.g., spoofing, marking the 

close, pinging, phishing). In addition to 

the Exchange’s existing surveillance, a 

new pattern will be added to surveil for 

significant deviation in the CommodityBased Trust Shares’ price from the 

underlying asset’s price. The Exchange 

will use the trade data from an external 

vendor that consolidates the real-time 

data from multiple bitcoin platforms. 

Trading of Shares on the Exchange 

will be subject to the Exchange’s 

surveillance program for derivative 

products, as well as cross-market 

surveillances administered by FINRA, 

on behalf of the Exchange pursuant to 

a regulatory services agreement, which 

are also designed to detect violations of 

Exchange rules and applicable federal 

securities laws. The Exchange is 

responsible for FINRA’s performance 

under this regulatory services 

agreement. 

The Exchange will require the Trust 

to represent to the Exchange that it will 

advise the Exchange of any failure by 

the Trust to comply with the continued 

listing requirements, and, pursuant to 

its obligations under section 19(g)(1) of 

the Exchange Act, the Exchange will 

surveil for compliance with the 

continued listing requirements. If the 

Trust is not in compliance with the 

applicable listing requirements, the 

Exchange will commence delisting 

procedures under the Nasdaq 5800 

Series. In addition, the Exchange also 

has a general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

The Exchange will communicate as 

needed regarding trading in the Shares 

with other markets and other entities 

that are members of the ISG, and the 

Exchange may obtain trading 

information regarding trading in the 

Shares from such markets and other 

entities. 

Commodity-Based Trust Shares 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

be listed on the Exchange pursuant to 

the initial and continued listing criteria 

in Exchange Rule 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, including 

Commodity-Based Trust Shares. 

Trading of the Shares through the 

Exchange will be subject to the 

Exchange’s surveillance procedures for 

derivative products, including 

Commodity-Based Trust Shares. The 

issuer has represented to the Exchange 

that it will advise the Exchange of any 

failure by the Trust or the Shares to 

comply with the continued listing 

requirements, and, pursuant to its 

obligations under section 19(g)(1) of the 

Exchange Act, the Exchange will surveil 

for compliance with the continued 

listing requirements. If the Trust or the 

Shares are not in compliance with the 

applicable listing requirements, the 

Exchange will commence delisting 

procedures under Exchange Rule 5800 

and following. 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 Trust’s website (https://valkyrie

invest.com/BRRR) will include, free of 

charge, quantitative information on a 

per Share basis updated on a daily basis, 

including (i) the current NAV per Share 

daily and the prior business day’s NAV 

and the reported closing price; (ii) the 

mid-point of the bid-ask price 34 in 

relation to the NAV as of the time the 

NAV is calculated (‘‘Bid-Ask Price’’) 

and a calculation of the premium or 

discount of such price against such 

NAV; (iii) data in chart format 

displaying the frequency distribution of 

discounts and premiums of the daily 

Bid-Ask Price against the NAV, within 

appropriate ranges, for each of the four 

previous calendar quarters (or for the 

life of the Trust, if shorter); and (iv) 

copies of the Trust’s prospectus in 

electronic format. In addition, on each 

business day the Trust’s website will 

also provide free of charge: (i) the 

Trust’s NAV and NAV per Share; (ii) 

information regarding the Trust’s 

holdings; and (iii) information regarding 

the Index and the value of a bitcoin as 

calculated by the Index (which may also 

be found on the Index’s website (https:// 

www.cfbenchmarks.com/data/indices/ 

BRRNY), or, if an alternative fair value 

methodology is used to value the Trust’s 

bitcoin, such other pricing source(s) 

used in such calculation. 

The Trust’s website will provide an 

IIV per Share updated every 15 seconds, 

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

Exchange’s Regular Market Session 

(9:30 a.m. to 4:00 p.m. (Eastern Time)).35

The IIV will be calculated by using the 

prior day’s closing NAV per Share as a 

base and updating that value throughout 

the trading day to reflect changes in the 

most recently reported price level of the 

BRTI, as reported by CME Group, Inc., 

Bloomberg, L.P. or another reporting 

service. The BRTI is calculated in real 

time once per second based on the 

Relevant Order Books of all Constituent 

Bitcoin Platforms. All aspects of the 

BRTI methodology are publicly 

available at the website of the 

Benchmark Administrator. 

The IIV disseminated during the 

Exchange’s Regular Market Session 

should not be viewed as an actual realtime update of the NAV, which will be 

calculated only once at the end of each 

trading day. The IIV will be widely 

disseminated on a per Share basis every 

15 seconds during the Exchange’s 

Regular Market Session by one or more 

major market data vendors. In addition, 

the IIV will be available published on 

the Exchange’s website and through online information services such as 

Bloomberg and Reuters. 

The NAV for the Trust will be 

calculated by the Sponsor 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 


khammond on DSKJM1Z7X2PROD with NOTICES
2294 Federal Register / Vol. 89, No. 9 / Friday, January 12, 2024 / Notices 

36 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

the relevant securities information 

processor. 

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. 

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. Market prices for 

the Shares will be available from a 

variety of sources, including brokerage 

firms, information websites and other 

information service providers. 

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 actively-managed 

exchange-traded products that will 

enhance competition among both 

market participants and listing venues, 

to the benefit of investors and the 

marketplace. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NASDAQ–2023–019 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–NASDAQ–2023–019. 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–2023–019 and should be 

submitted on or before February 2, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.36

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–00507 Filed 1–11–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99282; File No. SR– 

NYSEAMER–2024–01] 

Self-Regulatory Organizations; NYSE 

American LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Change To Amend Certain Transaction 

Fees and Credits in the NYSE 

American Equities Price List and Fee 

Schedule 

January 8, 2024. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’),2 and Rule 19b–4 thereunder,3

notice is hereby given that on January 2, 

2024, NYSE American LLC (‘‘NYSE 

American’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

certain transaction fees and credits in 

the NYSE American Equities Price List 

and Fee Schedule (‘‘Price List’’) 

pertaining to its optional monthly 

credits applicable to Electronic 

Designated Market Makers (‘‘eDMM’’) in 

assigned securities. The Exchange 

proposes to implement the fee changes 

effective January 2, 2024. The proposed 

rule change is available on the 

Exchange’s website at www.nyse.com, at 

the principal office of the Exchange, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

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

of the most significant parts of such 

statements. 


khammond on DSKJM1Z7X2PROD with NOTICES