5058 Federal Register / Vol. 89, No. 17 / Thursday, January 25, 2024 / Notices 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Exchange notes that its affiliate exchange, 

MIAX Options, has submitted a substantively 

identical proposal. 

4See Exchange Rule 402(i), which permits 

options trading on ETFS that: (1) represent interests 

in registered investment companies (or series 

thereof) organized as open-end management 

investment companies, unit investment trusts or 

similar entities that hold portfolios of securities 

and/or financial instruments (‘‘Funds’’), including, 

but not limited to, stock index futures contracts, 

options on futures, options on securities and 

indices, equity caps, collars and floors, swap 

agreements, forward contracts, repurchase 

agreements and reverse repurchase agreements (the 

‘‘Financial Instruments’’), and money market 

instruments, including, but not limited to, U.S. 

government securities and repurchase agreements 

(the ‘‘Money Market Instruments’’) comprising or 

otherwise based on or representing investments in 

broad-based indexes or portfolios of securities and/ 

or Financial Instruments and Money Market 

Instruments (or that hold securities in one or more 

other registered investment companies that 

themselves hold such portfolios of securities and/ 

or Financial Instruments and Money Market 

Instruments); (2) represent interests in a trust or 

similar entity that holds a specified non-U.S. 

currency or currencies deposited with the trust 

which when aggregated in some specified minimum 

number may be surrendered to the trust or similar 

entity by the beneficial owner to receive the 

specified non-U.S. currency or currencies and pays 

the beneficial owner interest and other distributions 

on the deposited non-U.S. currency or currencies, 

if any, declared and paid by the trust (‘‘Currency 

Trust Shares’’); (3) represent commodity pool 

interests principally engaged, directly or indirectly, 

in holding and/or managing portfolios or baskets of 

securities, commodity futures contracts, options on 

commodity futures contracts, swaps, forward 

contracts and/or options on physical commodities 

and/or non-U.S. currency (‘‘Commodity Pool 

ETFs’’); (4) are issued by the SPDR® Gold Trust or 

the iShares COMEX Gold Trust or the iShares Silver 

Trust or the ETFS Silver Trust or the ETFS Gold 

Trust or the ETFS Palladium Trust or the ETFS 

Platinum Trust or the Sprott Physical Gold Trust; 

or (5) represent an interest in a registered 

investment company (‘‘Investment Company’’) 

organized as an open-end management company or 

similar entity, that invests in a portfolio of 

securities selected by the Investment Company’s 

investment adviser consistent with the Investment 

Company’s investment objectives and policies, 

which is issued in a specified aggregate minimum 

number in return for a deposit of a specified 

portfolio of securities and/or a cash amount with a 

value equal to the next determined net asset value 

(‘‘NAV’’), and when aggregated in the same 

specified minimum number, may be redeemed at a 

holder’s request, which holder will be paid a 

specified portfolio of securities and/or cash with a 

value equal to the next determined NAV (‘‘Managed 

Fund Share’’); provided that all of the conditions 

listed in (5)(i) and 5(ii) are met. 

5The Exchange notes several filings to list and 

trade ETFs that hold bitcoin as NMS stocks (and 

registration statements for those Units) are currently 

pending with the Securities and Exchange 

Commission (the ‘‘Commission’’). Pursuant to the 

Exchange’s Rules, the Exchange would only have 

authority to list and trade ETFs that are trading as 

NMS stocks. 

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–BOX–2024–05 and should be 

submitted on or before February 15, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–01393 Filed 1–24–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99394; File No. SR– 

PEARL–2024–03] 

Self-Regulatory Organizations; MIAX 

PEARL LLC; Notice of Filing of a 

Proposed Rule Change To Amend 

Exchange Rule 402, Criteria for 

Underlying Securities 

January 19, 2024. 

Pursuant to the provisions of Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on January 12, 2024, MIAX PEARL LLC 

(‘‘MIAX Pearl’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Exchange Rule 402, Criteria for 

Underlying Securities. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://www.miaxglobal.com/markets/ 

us-options/pearl-options/rule-filings, at 

MIAX Pearl’s principal office, 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 amend 

Exchange Rule 402, Criteria for 

Underlying Securities,3 to allow the 

Exchange to list and trade options on 

Exchange-Traded Fund Shares (‘‘ETFs’’) 

that represent interests in a trust that 

holds bitcoin (‘‘Bitcoin ETPs’’), 

designating them as ETFs deemed 

appropriate for options trading on the 

Exchange. 

Current Exchange Rule 402(i)(4) 

provides that, subject to certain other 

criteria set forth in that Rule, securities 

deemed appropriate for options trading 

include ETFs that represent certain 

types of interests,4 including interests in 

certain specific trusts that hold financial 

instruments, money market instruments, 

or precious metals (which are deemed 

commodities). 

Bitcoin ETPs are bitcoin-backed 

commodity ETPs structured as trusts.5

Similar to any ETFs currently deemed 

appropriate for options trading under 

Exchange Rule 402, the investment 

objective of a Bitcoin ETP trust is for its 

shares to reflect the performance of 

bitcoin (less the expenses of the trust’s 

operations), offering investors an 

opportunity to gain exposure to bitcoin 

without the complexities of bitcoin 

delivery. As is the case for ETFs 

currently deemed appropriate for 


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6The trust may include minimal cash. 

7As noted above, there are currently no Bitcoin 

ETPs trading as NMS stocks on a national securities 

exchange; however, registration statements and rule 

filings to list and trade several Bitcoin ETPs are 

currently pending with the Commission. See 

Securities Exchange Act Release No. 99306 (January 

10, 2024) (citing all the proposed rule changes to 

list and trade Bitcoin ETPs on U.S. securities 

exchanges). The Exchange represents it would not 

list options on a Bitcoin ETP unless it satisfied the 

criteria in Exchange Rule 402(a) the proposed 

listing criteria, and any other applicable listing 

criteria. 

8See, e.g., Form S–1 Registration Statement filed 

on November 29, 2023 (Registration No. 333– 

275781) (pending registration statement for shares 

of the Pando Asset Spot Bitcoin Trust); and Form 

S–1 Registration Statement filed on September 12, 

2023 (Registration No. 333- 274474) (pending 

registration statement for shares of the Franklin 

Bitcoin ETF). 

9See Exchange Rule 401, which provides that the 

rights and obligations of holders and writers are set 

forth in the Rules of the Options Clearing 

Corporation (‘‘OCC’’); see also OCC Rules, Chapters 

VIII (which governs exercise and assignment) and 

Chapter IX (which governs the discharge of delivery 

and payment obligations arising out of the exercise 

of physically settled stock option contracts). 

10See Exchange Rule 404(b). The monthly 

expirations are subject to certain listing criteria for 

underlying securities described within Exchange 

Rule 404 and its Interpretations and Policies. 

Monthly listings expire the third Friday of the 

month. The term ‘‘expiration date’’ (unless 

separately defined elsewhere in the OCC By-Laws), 

when used in respect of an option contract (subject 

to certain exceptions), means the third Friday of the 

expiration month of such option contract, or if such 

Friday is a day on which the exchange on which 

such option is listed is not open for business, the 

preceding day on which such exchange is open for 

business. See OCC By-Laws Article I, Section 1. 

Pursuant to Exchange Rule 404(c), additional series 

of options of the same class may be opened for 

trading on the Exchange when the Exchange deems 

it necessary to maintain an orderly market, to meet 

customer demand or when the market price of the 

underlying stock moves more than five strike prices 

from the initial exercise price or prices. Pursuant 

to Exchange Rule 404(e), new series of options on 

an individual stock may be added until the 

beginning of the month in which the options 

contract will expire. Due to unusual market 

conditions, the Exchange, in its discretion, may add 

a new series of options on an individual stock until 

the close of trading on the business day prior to 

expiration. 

11See Exchange Rule 404, Interpretations and 

Policies .02. 

12See Exchange Rule 404, Interpretations and 

Policies .13. 

13See Exchange Rule 404, Interpretations and 

Policies .03. 

14See Exchange Rule 404(d). 

15See Exchange Rule 404, Interpretation and 

Policy .06. 

16See Exchange Rule 404, Interpretation and 

Policy .01. 

options trading, a Bitcoin ETP’s shares 

represent units of fractional undivided 

beneficial interest in the trust, the assets 

of which consist principally of bitcoin 

and are designed to track bitcoin or the 

performance of the price of bitcoin and 

offer access to the bitcoin market.6

Bitcoin ETPs provide investors with 

cost efficient alternatives that allow a 

level of participation in the bitcoin 

market through the securities market. 

The primary substantive difference 

between Bitcoin ETPs and ETFs 

currently deemed appropriate for 

options trading are that ETFs may hold 

securities, certain financial instruments, 

and specified precious metals (which 

are commodities), while Bitcoin ETPs 

hold bitcoin (which is also deemed a 

commodity). 

The Exchange’s initial listing 

standards for ETFs on which options 

may be listed and traded on the 

Exchange will apply to the Bitcoin 

ETPs. The Exchange expects Bitcoin 

ETPs to satisfy the initial listing 

standards as set forth in Exchange Rule 

402(a) and Exchange Rule 402(i). 

Pursuant to Exchange Rule 402(a), a 

security (which includes ETFs) on 

which options may be listed and traded 

on the Exchange must be duly registered 

(with the Commission) and be an NMS 

stock (as defined in Rule 600 of 

Regulation NMS under the Act,) and be 

characterized by a substantial number of 

outstanding shares that are widely held 

and actively traded.7 Exchange Rule 

402(i) requires that ETFs must either (1) 

meet the criteria and standards set forth 

in Exchange Rule 402(a) or Exchange 

Rule 402(b), or (2) be available for 

creation or redemption each business 

day from or through the issuer in cash 

or in kind at a price related to net asset 

value, and the issuer must be obligated 

to issue ETFs in a specified aggregate 

number even if some or all of the 

investment assets required to be 

deposited have not been received by the 

issuer, subject to the condition that the 

person obligated to deposit the 

investments has undertaken to deliver 

the investment assets as soon as 

possible and such undertaking is 

secured by the delivery and 

maintenance of collateral consisting of 

cash or cash equivalents satisfactory to 

the issuer, as provided in the respective 

prospectus. The Exchange expects that 

Bitcoin ETPs would satisfy Exchange 

Rule 402(i)(5)(i)(B).8

Options on Bitcoin ETPs will also be 

subject to the Exchange’s continued 

listing standards set forth in Exchange 

Rule 403(g), for ETFs deemed 

appropriate for options trading pursuant 

to Exchange Rule 402(i). Specifically, 

Exchange Rule 403(g) provides that 

ETFs that were initially approved for 

options trading pursuant to Exchange 

Rule 402(i) shall be deemed not to meet 

the requirements for continued 

approval, and the Exchange shall not 

open for trading any additional series of 

option contracts of the class covering 

that such ETFs, if the ETFs are delisted 

from trading pursuant to Exchange Rule 

403(b)(4), are halted or suspended from 

trading in their primary market. 

Additionally, options on ETFs may be 

subject to the suspension of opening 

transactions in any of the following 

circumstances: (1) in the case of options 

covering ETFs approved for trading 

under Exchange Rule 402(i)(5)(i)(A), in 

accordance with the terms of paragraphs 

(b)(1), (2), and (3) of Exchange Rule 403; 

(2) in the case of options covering ETFs 

approved for trading under Exchange 

Rule 402(i)(5)(i)(B), following the initial 

twelve-month period beginning upon 

the commencement of trading in the 

ETFs on a national securities exchange 

and are defined as an NMS stock [sic], 

there are fewer than 50 record and/or 

beneficial holders of such ETFs for 30 

or more consecutive trading days; (3) 

the value of the index or portfolio of 

securities, non-U.S. currency, or 

portfolio of commodities including 

commodity futures contracts, options on 

commodity futures contracts, swaps, 

forward contracts and/or options on 

physical commodities and/or financial 

instruments and money market 

instruments on which the Units are 

based is no longer calculated or 

available; or (4) such other event shall 

occur or condition exist that in the 

opinion of the Exchange makes further 

dealing in such options on the Exchange 

inadvisable. 

Options on a Bitcoin ETP will be 

physically settled contracts with 

American-style exercise.9 Consistent 

with current Exchange Rule 404, which 

governs the opening of options series on 

a specific underlying security (including 

ETFs), the Exchange will open at least 

one expiration month for options on 

each Bitcoin ETP 10 at the 

commencement of trading on the 

Exchange and may also list series of 

options on a Bitcoin ETP for trading on 

a weekly 11 monthly,12 or quarterly 13

basis. The Exchange may also list longterm equity option series (‘‘LEAPS’’) 

that expire from 12 to 180 months from 

the time they are listed.14

Pursuant to Exchange Rule 404, 

Interpretation and Policy .06, which 

governs strike prices of series of options 

on Trust Issued Receipts, the interval of 

strikes prices for series of options 

Bitcoin ETPs will be $1 or greater when 

the strike price is $200 or less and $5 

or greater where the strike price is over 

$200.15 Additionally, the Exchange may 

list series of options pursuant to the $1 

Strike Price Interval Program,16 the 


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17See Exchange Rule 404, Interpretation and 

Policy .04. 

18See Exchange Rule 404(f). 

19See Exchange Rule 510. 

20The term ‘‘underlying security’’ in respect of an 

option contract means the security which the 

Clearing Corporation shall be obligated to sell (in 

the case of a call option contract) or purchase (in 

the case of a put option contract) upon the valid 

exercise of the option contract. See Exchange Rule 

100. 

21As Bitcoin ETPs do not currently trade, options 

on Bitcoin ETPs would be subject to the 25,000 

option contract limit. 

22The Exchange understands from customers that 

investors have historically transacted in options on 

ETFs in the OTC options market if such options 

were not available for trading in a listed 

environment. 

23 15 U.S.C. 78f(b). 

24 15 U.S.C. 78f(b)(5). 

$0.50 Strike Program,17 and the $2.50 

Strike Price Program.18 Pursuant to 

Exchange Rule 510, where the price of 

a series of a Bitcoin ETP option is less 

than $3.00, the minimum increment 

will be $0.05, and where the price is 

$3.00 or higher, the minimum 

increment will be $0.10.19 Any and all 

new series of Bitcoin ETP options that 

the Exchange lists will be consistent and 

comply with the expirations, strike 

prices, and minimum increments set 

forth in Rules 404 and 510, as 

applicable. 

Bitcoin ETP options will trade in the 

same manner as any other ETF options 

on the Exchange. The Exchange Rules 

that currently apply to the listing and 

trading of all ETFs options on the 

Exchange, including, for example, 

Exchange Rules that govern listing 

criteria, expiration and exercise prices, 

minimum increments, position and 

exercise limits, margin requirements, 

customer accounts and trading halt 

procedures will apply to the listing and 

trading of Bitcoin ETPs on the Exchange 

in the same manner as they apply to 

other options on all other ETFs that are 

listed and traded on the Exchange, 

including the precious-metal backed 

commodity ETFs already deemed 

appropriate for options trading on the 

Exchange pursuant to current Exchange 

Rule 402(i)(4). 

Position and exercise limits for 

options on ETFs, including options on 

Bitcoin ETPs, are determined pursuant 

to Exchange Rules, Chapter III, Business 

Conduct. Position and exercise limits 

for ETFs options vary according to the 

number of outstanding shares and the 

trading volumes of the Underlying 

Security 20 over the past six months, 

where the largest in capitalization and 

the most frequently traded ETFs have an 

option position and exercise limit of 

250,000 contracts (with adjustments for 

splits, re-capitalizations, etc.) on the 

same side of the market; and smaller 

capitalization Units have position and 

exercise limits of 200,000, 75,000, 

50,000 or 25,000 contracts (with 

adjustments for splits, re-capitalizations, 

etc.) on the same side of the market.21

The Exchange further notes that 

Exchange Rules, Chapter XV, Margins, 

which governs margin requirements 

applicable to trading on the Exchange, 

will also apply to the trading of Bitcoin 

ETP options. 

The Exchange represents that the 

same surveillance procedures applicable 

to all other options on ETFs currently 

listed and traded on the Exchange will 

apply to options on Bitcoin ETPs, and 

that it has the necessary systems 

capacity to support the new option 

series. The Exchange believes that its 

existing surveillance and reporting 

safeguards are designed to deter and 

detect possible manipulative behavior 

which might potentially arise from 

listing and trading ETFs options, 

including precious metal-commodity 

backed ETFs options, as proposed. Also, 

the Exchange may obtain information 

from CME Group Inc.’s designated 

contract markets that are members of the 

Intermarket Surveillance Group related 

to any financial instrument that is 

based, in whole or in part, upon an 

interest in or performance of bitcoin, as 

applicable. 

The Exchange has also analyzed its 

capacity and represents that it believes 

the Exchange and OPRA have the 

necessary systems capacity to handle 

the additional traffic associated with the 

listing of new series that may result 

from the introduction of options on 

Bitcoin ETPs up to the number of 

expirations currently permissible under 

the Rules. Because the proposal is 

limited to ETFs on a single commodity, 

the Exchange believes any additional 

traffic that may be generated from the 

introduction of Bitcoin ETP options will 

be manageable. 

The Exchange believes that offering 

options on Bitcoin ETPs will benefit 

investors by providing them with an 

additional, relatively lower cost 

investing tool to gain exposure to the 

price of bitcoin and [sic] hedging 

vehicle to meet their investment needs 

in connection with bitcoin-related 

products and positions. The Exchange 

expects investors will transact in 

options on Bitcoin ETPs in the 

unregulated over-the-counter (‘‘OTC’’) 

options market (if the Commission 

approves Bitcoin ETPs for exchangetrading),22 but may prefer to trade such 

options in a listed environment to 

receive the benefits of trading listing 

options, including (1) enhanced 

efficiency in initiating and closing out 

position; (2) increased market 

transparency; and (3) heightened contraparty creditworthiness due to the role of 

OCC as issuer and guarantor of all listed 

options. The Exchange believes that 

listing Bitcoin ETP options may cause 

investors to bring this liquidity to the 

Exchange, would increase market 

transparency and enhance the process of 

price discovery conducted on the 

Exchange through increased order flow. 

The ETFs that hold financial 

instruments, money market instruments, 

or precious metal commodities on 

which the Exchange may already list 

and trade options are trusts structured 

in substantially the same manner as 

Bitcoin ETPs and essentially offer the 

same objectives and benefits to 

investors, just with respect to different 

assets. The Exchange notes that it has 

not identified any issues with the 

continued listing and trading of any 

ETFs options, including ETFs that hold 

commodities (i.e., precious metals) that 

it currently lists and trades on the 

Exchange. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

Section 6(b) of the Act.23 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 24 requirements that the rules of 

an exchange be 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 regulating, clearing, settling, 

processing information with respect to, 

and 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. 

In particular, the Exchange believes 

that the proposal to list and trade 

options on Bitcoin ETPs will remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, protect investors because 

offering options on Bitcoin ETPs will 

provide investors with an opportunity 

to realize the benefits of utilizing 

options on a bitcoin-based ETP, 

including cost efficiencies and 

increased hedging strategies. The 

Exchange believes that offering Bitcoin 

ETP options will benefit investors by 

providing them with a relatively lowercost risk management tool, which will 


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25See Exchange Rule 402(i)(4). 26 Id. 

allow them to manage their positions 

and associated risk in their portfolios 

more easily in connection with 

exposure to the price of bitcoin and 

with bitcoin-related products and 

positions. Additionally, the Exchange’s 

offering of Bitcoin ETP options will 

provide investors with the ability to 

transact in such options in a listed 

market environment as opposed to in 

the unregulated OTC options market, 

which would increase market 

transparency and enhance the process of 

price discovery conducted on the 

Exchange through increased order flow 

to the benefit of all investors. The 

Exchange also notes that it already lists 

options on other commodity-based 

ETFs,25 which, as described above, are 

trusts structured in substantially the 

same manner as Bitcoin ETPs and 

essentially offer the same objectives and 

benefits to investors, just with respect to 

a different commodity (i.e., bitcoin 

rather than precious metals) and for 

which the Exchange has not identified 

any issues with the continued listing 

and trading of commodity-backed ETFs 

options it currently lists for trading. 

The Exchange also believes the 

proposed rule change will remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, because 

it is consistent with current Exchange 

Rules, previously filed with the 

Commission. Options on Bitcoin ETPs 

must satisfy the initial listing standards 

and continued listing standards 

currently in the Exchange Rules, 

applicable to options on all ETFs, 

including ETFs that hold other 

commodities already deemed 

appropriate for options trading on the 

Exchange. Bitcoin ETP options will 

trade in the same manner as any other 

ETFs options—the same Exchange Rules 

that currently govern the listing and 

trading of all ETsF [sic] options, 

including permissible expirations, strike 

prices and minimum increments, and 

applicable position and exercise limits 

and margin requirements, will govern 

the listing and trading of options on 

Bitcoin ETPs in the same manner. 

The Exchange represents that it has 

the necessary systems capacity to 

support the new ETF option series. The 

Exchange believes that its existing 

surveillance and reporting safeguards 

are designed to deter and detect possible 

manipulative behavior which might 

arise from listing and trading ETF 

options, including Bitcoin ETP options. 

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 purposes of the Act. The 

Exchange does not believe that the 

proposed rule change will impose any 

burden on intramarket competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act 

as Bitcoin ETPs would need to satisfy 

the initial listing standards set forth in 

the Exchange Rules in the same manner 

as any other ETFs before the Exchange 

could list options on them. 

Additionally, Bitcoin ETP options will 

be equally available to all market 

participants who wish to trade such 

options. The Exchange Rules currently 

applicable to the listing and trading of 

options on ETFs on the Exchange will 

apply in the same manner to the listing 

and trading of all options on Bitcoin 

ETPs. Also, and as stated above, the 

Exchange already lists options on other 

commodity-based ETFs.26

The Exchange does not believe that 

the proposal to list and trade options on 

Bitcoin ETPs will impose any burden on 

intermarket competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. To the extent 

that the advent of Bitcoin ETP options 

trading on the Exchange may make the 

Exchange a more attractive marketplace 

to market participants at other 

exchanges, such market participants are 

free to elect to become market 

participants on the Exchange. 

Additionally, other options exchanges 

are free to amend their listing rules, as 

applicable, to permit them to list and 

trade options on Bitcoin ETPs. 

Additionally, the Exchange notes that 

listing and trading Bitcoin ETP options 

on the Exchange will subject such 

options to transparent exchange- based 

rules as well as price discovery and 

liquidity, as opposed to alternatively 

trading such options in the OTC market. 

The Exchange believes that the 

proposed rule change may relieve any 

burden on, or otherwise promote, 

competition as it is designed to increase 

competition for order flow on the 

Exchange in a manner that is beneficial 

to investors by providing them with a 

lower-cost option to hedge their 

investment portfolios. The Exchange 

notes that it operates in a highly 

competitive market in which market 

participants can readily direct order 

flow to competing venues that offer 

similar products. Ultimately, the 

Exchange believes that offering Bitcoin 

ETP options for trading on the Exchange 

will promote competition by providing 

investors with an additional, relatively 

low-cost means to hedge their portfolios 

and meet their investment needs in 

connection with bitcoin prices and 

bitcoin-related products and positions 

on a listed options exchange. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the Exchange consents, the Commission 

will: 

A. by order approve or disapprove 

such proposed rule change, or 

B. institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

PEARL–2024–03 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–PEARL–2024–03. 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 


khammond on DSKJM1Z7X2PROD with NOTICES
5062 Federal Register / Vol. 89, No. 17 / Thursday, January 25, 2024 / Notices 

27 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3OCC’s By-Laws and Rules can be found on 

OCC’s public website: https://www.theocc.com/ 

Company-Information/Documents-and-Archives/ 

By-Laws-and-Rules. 

4See Standards for Covered Clearing Agencies, 

Exchange Act Release No. 78961 (Sept. 28, 2016), 

81 FR 70786, 70816 n.318 (S7–03–14) (‘‘In this 

context, procyclicality typically refers to changes in 

risk-management practices that are positively 

correlated with market, business, or credit cycle 

fluctuations that may cause or exacerbate financial 

[in]stability.’’). 

5A mutualized, pre-funded guaranty fund 

comprised of deposits from each member, such as 

OCC’s Clearing Fund, is another financial safeguard 

commonly employed by central counterparties to 

address credit risk as the guarantor of the products 

it clears. 

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–PEARL–2024–03 and should be 

submitted on or before February 15, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–01387 Filed 1–24–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99393; File No. SR–OCC– 

2024–001] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change by 

The Options Clearing Corporation 

Concerning Its Process for Adjusting 

Certain Parameters in Its Proprietary 

System for Calculating Margin 

Requirements During Periods When 

the Products It Clears and the Markets 

It Serves Experience High Volatility 

January 19, 2024. 

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

Securities Exchange Act of 1934 

(‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule 

19b–4 thereunder,2 notice is hereby 

given that on January 10, 2024, The 

Options Clearing Corporation (‘‘OCC’’) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III below, which Items 

have been prepared primarily by OCC. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

This proposed rule change would 

codify OCC’s process for adjusting 

certain parameters in its proprietary 

system for calculating margin 

requirements during periods when the 

products OCC clears and the markets it 

serves experience high volatility. 

Proposed changes to OCC’s Margin 

Policy are submitted in Exhibit 5 to File 

No. SR–OCC–2024–001. Material 

proposed to be added is marked by 

underlining and material proposed to be 

deleted is marked with strikethrough 

text. All terms with initial capitalization 

that are not otherwise defined herein 

have the same meaning as set forth in 

the OCC By-Laws and Rules.3

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

OCC 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. OCC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

OCC is the sole clearing agency for 

standardized equity options listed on 

national securities exchanges registered 

with the Commission. OCC also clears 

certain stock loan and futures 

transactions. In its role as a clearing 

agency, OCC guarantees the 

performance of its Clearing Members for 

all transactions cleared by OCC by 

becoming the buyer to every seller and 

the seller to every buyer (or the lender 

to every borrower and the borrower to 

every lender, in the case of stock loan 

transactions). These clearing activities 

could expose OCC to financial risks if a 

Clearing Member fails to fulfil its 

obligations to OCC. In its role as 

guarantor for all transactions cleared 

through OCC, one of the more material 

risks related to a Clearing Member’s 

failure to perform is credit risk arising 

from the activity of the Clearing 

Members whose performance OCC 

guarantees. OCC manages these 

financial risks through financial 

safeguards, including the collection of 

margin collateral from Clearing 

Members designed to, among other 

things, address the market risk 

associated with a Clearing Member’s 

positions during the period of time OCC 

has determined it would take to 

liquidate those positions. 

OCC has established a proprietary 

system, the System for Theoretical 

Analysis and Numerical Simulation 

(‘‘STANS’’), that runs various models 

used to calculate each Clearing 

Member’s margin requirements. One of 

OCC’s margin models generates variance 

forecasts for the returns on individual 

equity securities, the result of which 

OCC then includes as one of the inputs 

to the margin calculation. As discussed 

in more detail below, OCC has observed 

that this particular model may produce 

results that are ‘‘procyclical,’’ which 

means that changes in margin 

requirements produced by the model 

may be positively correlated with the 

overall state of the market and, if not 

appropriately addressed, could threaten 

the stability of its members during 

periods of heightened volatility.4 For 

example, procyclicality may be 

evidenced by increasing margin in times 

of stressed market conditions and low 

margin when markets are calm. A 

sudden, extreme increase in margin 

requirements could stress a Clearing 

Member’s ability to obtain liquidity to 

meet its obligations to OCC, particularly 

in periods of high volatility. If that 

Clearing Member subsequently 

defaulted, the resulting suspension and 

liquidation of the defaulting Clearing 

Member’s positions could result in 

losses chargeable to the mutualized 

Clearing Fund.5 Charging a loss to the 

Clearing Fund may result in unexpected 

costs for non-defaulting Clearing 

Members, stressing their ability to 

obtain liquidity to meet their own 

financial obligations in stressed market 

conditions. 


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