84960 Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Notices 

107 15 U.S.C. 78s(b)(2). 

108 15 U.S.C. 78f(b)(5). 

109 15 U.S.C. 78s(b)(2). 

110 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3On January 10, 2024, the Commission approved 

proposals by NYSE Arca, Inc., The Nasdaq Stock 

Market LLC, and Cboe BZX Exchange, Inc. to list 

and trade the shares of 11 bitcoin-based 

commodity-based trust shares and trust units, 

including the trusts underlying the proposed 

options. See Securities Exchange Act Release No. 

99306 (Jan. 10, 2024), 89 FR 3008 (Jan. 17, 2024) 

(order approving File Nos. SR–NYSEARCA–2021– 

90; SR–NYSEARCA–2023–44; SR–NYSEARCA– 

2023–58; SR–NASDAQ–2023–016; SR–NASDAQ– 

2023–019; SR–CboeBZX–2023–028; SR–CboeBZX– 

2023–038; SR–CboeBZX–2023–040; SR–CboeBZX– 

2023–042; SR–CboeBZX–2023–044; SR–CboeBZX– 

2023–072) (‘‘Bitcoin ETP Order’’). 

4See Securities Exchange Act Release No. 100861 

(Aug. 28, 2024), 89 FR 71982. 

5On September 9, 2024, the Exchange filed 

Amendment No. 1 to SR–NYSEAMER–2024–49, 

which replaced and superseded the original filing 

in its entirety and, on October 7, 2024, the 

Exchange filed Amendment No. 2 to SR– 

NYSEAMER–2024–49, which replaced and 

superseded in its entirety both Amendment No. 1 

and the original filing. See https://www.sec.gov/ 

comments/sr-nyseamer-2024-49/srnyseamer202449- 

518495-1491742.pdf and https://www.sec.gov/ 

comments/sr-nyseamer-2024-49/srnyseamer202449- 

527736-1516262.pdf, respectively. Amendment No. 

3, which supersedes and replaces Amendment No. 

2 in its entirety, modifies the original filing by (1) 

including reference to, and reliance on, the ‘‘ISE 

IBIT Approval Order,’’ as referenced infra; (2) 

narrowing the scope of the original filing by (i) 

eliminating the following bitcoin-related funds, and 

any information related thereto: the ARK21Shares 

Bitcoin ETF, the Invesco Galaxy Bitcoin ETF, the 

Franklin Bitcoin ETF, the VanEck Bitcoin Trust, 

and the WisdomTree Bitcoin Fund, and (ii) 

excluding the (remaining) Bitcoin Fund options 

from being available for flexible (‘‘FLEX’’) option 

trading; (3) providing additional information and 

analysis of trading data for the Bitcoin Funds in 

support of this proposal, including the proposed 

position limits of 25,000 per side for the options on 

the Bitcoin Funds; and (4) supplementing 

information related to the Exchange’s surveillance 

program, including the manner in which it would 

surveil suspicious trading activity in the underlying 

Bitcoin Funds and where the Exchange would 

obtain information about the bitcoin market. 

Amendment No. 3 is available on the Exchange’s 

website at https://www.nyse.com/regulation/rulefilings. A FLEX Option is a customized options 

contract that is subject to the rules in Section 15 

of the Exchange’s rules. A FLEX Equity Option is 

an option on a specified underlying equity security 

that is subject to the rules in Section 15 of the 

Exchange’s rules. See Exchange Rules 900G(b)(1) 

and (10). Except as provided in Exchange Rules 

906G(b)(i) and (ii), there are no position limits for 

FLEX Equity options. See Exchange Rule 906G(b). 

Exchange Rule 8.30 apply when 

determining position limits, is designed 

to clarify and make the Exchange’s rule 

more accurate. Amendment No. 3 

revises the proposal to exclude Bitcoin 

Fund options from FLEX trading. 

Excluding Bitcoin Fund options from 

FLEX trading will allow the 

Commission to consider the listing of 

FLEX options on the Bitcoin Funds in 

the context of any separate proposal the 

Exchange files to list such options. 

Accordingly, the Commission finds 

good cause, pursuant to Section 19(b)(2) 

of the Act,107 to approve the proposed 

rule change, as modified by Amendment 

Nos. 2 and 3, on an accelerated basis. 

VI. Conclusion 

For the reasons set forth above, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

Nos. 2 and 3, is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange and, in 

particular, the requirements of Section 

6(b)(5) of the Act.108

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,109 that the 

proposed rule change (SR–CBOE–2024– 

035), as modified by Amendment Nos. 

2 and 3, is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.110

J. Matthew DeLesDernier, 

Deputy Secretary. 

[FR Doc. 2024–24641 Filed 10–23–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101386; File No. SR– 

NYSEAMER–2024–49] 

Self-Regulatory Organizations; NYSE 

American LLC; Notice of Filing of 

Amendment No. 3 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 3, To Permit the 

Listing and Trading of Options on 

Bitcoin Exchange-Traded Funds 

October 18, 2024. 

On August 15, 2024, NYSE American 

LLC (‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

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

Rule 19b–4 thereunder,2 a proposed rule 

change to list and trade options on the 

Fidelity Wise Origin Bitcoin Fund (the 

‘‘Fidelity Fund’’), the ARK21Shares 

Bitcoin ETF (the ‘‘ARK 21Shares 

Fund’’), the Invesco Galaxy Bitcoin ETF 

(the ‘‘Invesco Fund’’), the Franklin 

Bitcoin ETF (the ‘‘Franklin Fund’’), the 

VanEck Bitcoin Trust (the ‘‘VanEck 

Fund’’), the WisdomTree Bitcoin Fund 

(the ‘‘WisdomTree Fund’’), the 

Grayscale Bitcoin Trust BTC (the 

‘‘Grayscale Fund’’), the Grayscale 

Bitcoin Mini Trust (the ‘‘Grayscale Mini 

Fund’’), the Bitwise Bitcoin ETF (the 

‘‘Bitwise Fund’’), the iShares Bitcoin 

Trust ETF (the ‘‘iShares Fund’’), and the 

Valkyrie Bitcoin Fund.3 The proposed 

rule change was published for comment 

in the Federal Register on September 4, 

2024.4 On September 9, 2024, the 

Exchange filed Amendment No. 1 to the 

proposed rule change, which replaced 

and superseded the original proposal in 

its entirety. On October 7, the Exchange 

filed Amendment No. 2 to the proposal, 

which replaced and superseded 

Amendment No. 1 in its entirety. On 

October 11, 2024, the Exchange filed 

Amendment No. 3 to the proposal, 

which replaces and supersedes 

Amendment No. 2 in its entirety.5 The 

Commission received no comments 

regarding the proposal. The Commission 

is publishing this notice to solicit 

comments on Amendment No. 3 from 

interested persons, and is approving the 

proposed rule change, as modified by 

Amendment No. 3, on an accelerated 

basis. 

I. The Exchange’s Description of the 

Proposed Rule Change, as Modified by 

Amendment No. 3 

The Exchange proposes to amend 

Rule 915 regarding the criteria for 

underlying securities. This Amendment 

No. 3 supersedes and replaces 

Amendment No. 2 to the original filing 

in its entirety. 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 

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 

Rule 915 (Criteria for Underlying 

Securities). Specifically, the Exchange 

proposes to amend Rule 915, 

Commentary .10 to allow the Exchange 

to list and trade options on the 

following exchange-traded products: the 


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6See proposed Rule 915, Commentary .10(a). On 

January 11, 2024, GBTC and BITB began trading on 

NYSE Arca, Inc. (‘‘NYSE Arca’’), the Exchange’s 

affiliated SRO, after the Commission approved rule 

changes to list and trade shares of ‘‘Bitcoin-Based 

Commodity-Based Trust Shares’’ pursuant to Rule 

8.201–E(c)(1) (Commodity-Based Trust Shares), 

including GBTC and BITB. See Securities Exchange 

Act Release No. 99306 (January 10, 2024) (Order 

Granting Accelerated Approval of Proposed Rule 

Changes, as Modified by Amendments Thereto, to 

List and Trade Bitcoin-Based Commodity-Based 

Trust Shares and Trust Units), 89 FR 3008 (January 

17, 2024) (SR–NYSEARCA–2023–44; SR– 

NYSEARCA–2021–90). 

On July 13, 2024, after receiving approval of the 

Commission, BTC began trading on NYSE Arca. See 

Securities Exchange Act Release No. 100610 (July 

26, 2024) (Order Granting Approval of Proposed 

Rule Changes, as Modified by Amendment No. 1, 

to List and Trade Share of BTC pursuant to NYSE 

Arca Rule 8.201–E (Commodity-Based Trust 

Shares)), 89 FR 62821 (August 1, 2024) (SR– 

NYSEARCA–2023–45). 

7See Securities Exchange Act Release No. 101128 

(September 20, 2024), 89 FR 78942 (September 26, 

2024) (SR–ISE–2024–03) (Notice of Filing of 

Amendment Nos. 4 and 5 and Order Granting 

Accelerated Approval of a Proposed Rule Change, 

as Modified by Amendment Nos. 1, 4, and 5, to 

Permit the Listing and Trading of Options on the 

iShares Bitcoin Trust (‘‘IBIT’’)) (‘‘ISE IBIT Approval 

Order’’). 

8See Rule 915, Commentary .06, which permits 

options trading on ETFs that are traded on a 

national securities exchange and are defined as an 

‘‘NMS stock’’ in Rule 600(b)(55) of Regulation NMS, 

that 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 

including, but not limited to, stock index futures 

contracts, options on futures, options on securities 

and indexes, equity caps, collars and floors, swap 

agreements, forward contracts, repurchase 

agreements and reverse purchase 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 

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); interests in a trust 

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

currency deposited with the trust or similar entity 

when aggregated in some specified minimum 

number may be surrendered to the trust by the 

beneficial owner to receive the specified non-U.S. 

currency and pays the beneficial owner interest and 

other distributions on deposited non-U.S. currency, 

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

Trust Shares’’); 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 

Units’’); or represents an interest in a registered 

investment company (‘‘Investment Company’’) 

organized as an open-end management investment 

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 Rules 915 and 916 are met. 

9See Rule 915, Commentary .10 (permitting the 

listing and trading of options on shares of the 

following trusts: SPDR Gold Trust, the iShares 

COMEX Gold Trust the iShares Silver Trust, the 

ETFS Gold Trust, and the ETFS Silver Trust, 

pursuant to Rule 915 and 916). 

10See proposed Rule 915, Commentary .10(a) 

(added to include the listing and trading of options 

on shares of GBTC, BTC, and BITB, pursuant to 

Rule 915 and 916). 

11The trust may include minimal cash. 

12Commentary .01 to Rule 915 provides for 

guidelines to be by the Exchange when evaluating 

potential underlying securities for Exchange option 

transactions. 

13Commentary .06(a)(ii) requires that ETFs must 

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. 

14The criteria and guidelines for a security to be 

considered widely held and actively traded are set 

forth in Commentary .01 to Rule 915, subject to 

exceptions. 

15An ‘‘NMS stock’’ means any NMS security 

other than an option, and an ‘‘NMS security’’ means 

any security or class of securities for which 

transaction reports are collected, processed, and 

made available pursuant to an effective transaction 

reporting plan (or an effective national market 

system plan for reporting transaction in listed 

options). See 17 CFR 242.600(b)(64) (definition of 

‘‘NMS security’’) and (65) (definition of ‘‘NMS 

stock’’). 

Grayscale Bitcoin Trust (BTC) (the 

‘‘Grayscale Fund’’ or ‘‘GBTC’’), the 

Grayscale Bitcoin Mini Trust BTC (the 

‘‘Grayscale Mini Fund’’ or ‘‘BTC’’), and 

the Bitwise Bitcoin ETF (the ‘‘Bitwise 

Fund’’ or ‘‘BITB’’ and, collectively, the 

‘‘Bitcoin Funds’’ or ‘‘Funds’’).6

The Exchange notes that this is a 

competitive filing as the Commission 

recently approved a rule proposal by 

Nasdaq ISE, LLC (‘‘ISE’’) to allow the 

listing and trading of options on iShares 

Bitcoin Trust (or IBIT), which is a trust 

that holds bitcoin (referred to herein as 

the ‘‘ISE IBIT Approval Order’’).7 As 

discussed herein, the Exchange believes, 

like the recently-approved options on 

IBIT, options on the Bitcoin Funds 

would permit hedging, and allow for 

more liquidity, better price efficiency, 

and less volatility with respect to the 

underlying Funds. Further, permitting 

the listing of such options would 

enhance the transparency and efficiency 

of markets in these and correlated 

products. 

Rule 915 provides that, subject to 

certain other criteria set forth in the 

Rule, securities deemed appropriate for 

options trading include ExchangeTraded Fund Shares (or ETFs) as 

defined in Commentary .06, that 

represent certain types of interests 8 and 

exchange-traded products (‘‘ETPs’’) 

structured as trusts that hold precious 

metals (which are deemed 

commodities).9 Like ETPs backed by 

precious metals (i.e., commodities), the 

Exchange proposes to allow options 

trading on the Bitcoin Funds that hold 

Bitcoin—which is also deemed a 

commodity.10

The Bitcoin Funds are structured as 

trusts that hold bitcoin. Like ETFs and 

ETPs currently deemed appropriate for 

options trading, the investment 

objective of each Bitcoin Fund 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. Each Bitcoin Fund’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.11 The 

Bitcoin Funds provide investors with 

cost-efficient alternatives that allow a 

level of participation in the Bitcoin 

market through the securities market. 

The Exchange believes each Bitcoin 

Fund satisfies the Exchange’s initial 

listing standards set forth in 

Commentary .01 to Rule 915.12 The 

Exchange notes that the Bitcoin Funds 

also satisfy the listing standard applied 

to ETFs traded on the Exchange that 

they be available for creation and 

redemption each business day as set 

forth in Commentary .06(a)(ii).13

First, each of the Bitcoin Funds satisfy 

the criteria and guidelines set forth in 

Rule 915(a). Pursuant to Rule 915(a), a 

security 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.14 Each 

of the Bitcoin Funds is an NMS Stock 

as defined in Rule 600 of Regulation 

NMS under the Act.15 The Exchange 

believes each Bitcoin Fund is 

characterized by a substantial number of 

outstanding shares that are widely held 

and actively traded. 

As of August 30, 2024, the Bitcoin 

Funds had the following number of 


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16As noted supra, GBTC and BITB began trading 

on January 11th and BTC began trading on July 

31st. Thus, the measurement period for the trading 

volume (shares/notional) is January 11 through 

September 20, 2024, for GBTC and BITB (i.e., nine 

months) and July 31 through September 20, 2024, 

for BTC (i.e., two months). 17See FactSet, 9/30/2024, https://

www.factset.com/data-attribution. 18The Exchange proposes to amend Commentary 

.11 to Rule 916 to include the Bitcoin Funds in the 

list of ETPs deemed ‘‘Exchange-Traded Fund 

Shares’’—of ETFs [sic]—for purposes of the 

continued listing standards set forth in Commentary 

.07 to Rule 916. See proposed Commentary .11 to 

Rule 916. For avoidance of doubt, the Exchange 

refers ‘‘funds’’ rather than ‘‘ETFs’’ to make clear 

that the Bitcoin Funds are subject to these 

continued listing standards. 

19See Commentary .07 to Rule 916. 

20See Rule 902 (Rights and Obligations of 

Holders and Writers), which provides that the rights 

and obligations of holders and writers of option 

contracts of any class of options dealt in on the 

Exchange shall be as set forth in the Rules of the 

Clearing Corporation. See also OCC Rules, Chapter 

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. OCC 

Rules can be located at: https://www.theocc.com/ 

getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/ 

occrules.pdf. 

21See Rule 903(c), Commentary .03. The monthly 

expirations are subject to certain listing criteria for 

underlying securities described within Rule 915. 

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 Rule 903(d), 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. 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. 

22See Rule 903(h). 

23See Rule 903, Commentary .11. 

24See Rule 903, Commentary .09. 

25See Rule 903, Commentary .03. 

shares outstanding (and corresponding 

market capitalization): 

Bitcoin fund Shares 

outstanding 

Market value 

(8/30/2024) 

GBTC ............ 284,570,100 $13,443,091,524 

BTC ............... 366,950,100 1,930,157,526 

BITB .............. 68,690,000 2,221,640,670 

As shown above, each of the Bitcoin 

Funds had significantly more than 

7,000,000 shares outstanding, which is 

the minimum number of shares of a 

corporate stock that the Exchange 

generally requires to list options on that 

stock pursuant to Commentary .01(1) to 

Rule 915. The Exchange believes this 

demonstrates that each Bitcoin Fund is 

characterized by a substantial number of 

outstanding shares. 

Further, the below table contains 

information regarding the number of 

beneficial holders of the Bitcoin Funds 

as of August 14, 2024. 

Bitcoin Fund 

Beneficial 

holders 

(8/14/24) 

GBTC .................................... 464,364 

BTC ....................................... 13,403 

BITB ...................................... 75,437 

As this table shows, each Bitcoin 

Fund has significantly more than 2,000 

beneficial holders (approximately 232, 

7, and 38 times more, respectively), 

which is the minimum number of 

holders the Exchange generally requires 

for corporate stock in order to list 

options on that stock pursuant to 

pursuant to [sic] Commentary .01(2) to 

Rule 915. Therefore, the Exchange 

believes the shares of each Bitcoin Fund 

are widely held. 

In addition, the Exchange believes the 

shares of each Bitcoin Fund are actively 

traded. Further, as of September 30, 

2024, the total trading volume (by 

shares and notional) for these funds 

since they began trading 16 and the 

average daily volume (‘‘ADV’’) over the 

30-day period of September 1 through 

September 30, 2024, was as follows: 17

Bitcoin Fund Trading volume 

(shares) 

Trading volume 

(notional $) 

ADV 

(shares) 

GBTC ......................................................................................................................... 1,803,567,700 93,472,544,497 3,266,138 

BTC ............................................................................................................................ 335,492,930 1,792,866,521 6,838,546 

BITB ........................................................................................................................... 434,815,840 14,433,361,384 1,949,835 

As demonstrated above, even though 

these Bitcoin Funds have been trading 

for less than one year (and in the case 

of the BTC, less than two months), the 

trading volume for each is substantially 

higher than 2,400,000 shares (between 

roughly 165 and 700 times that amount), 

which is the minimum 12-month 

volume the Exchange generally requires 

for a security in order to list options on 

that security as set forth in Commentary 

.01 to Rule 915. The Exchange believes 

this data demonstrates each Bitcoin 

Fund is characterized by a substantial 

number of outstanding shares that are 

actively traded. 

In addition to satisfying the 

Exchange’s initial listing standards, 

options on Bitcoin Funds will be subject 

to the Exchange’s continued listing 

standards as set forth in Commentary 

.07 to Rule 916.18 Pursuant to 

Commentary .07 to Rule 916, the 

Exchange will not open for trading any 

additional series of option contracts 

covering a fund traded on the Exchange 

if such fund ceases to be an ‘‘NMS 

stock’’ as provided for Commentary 

.01(5) to Rule 915 or the fund is halted 

from trading on its primary market.19

Additionally, options on funds traded 

on the Exchange may be subject to the 

suspension of opening transactions as 

follows: (1) the fund no longer meets the 

terms of Commentary .01 to Rule 916; 

(2) following the initial twelve-month 

period beginning upon the 

commencement of trading of the fund, 

there are fewer than 50 record and/or 

beneficial holders of the fund for 30 or 

more consecutive trading days; (3) the 

value of the underlying commodity is 

no longer calculated or available; or (4) 

such other event occurs or condition 

exists that in the opinion of the 

Exchange makes further dealing on the 

Exchange inadvisable. 

Options on each Bitcoin Fund will be 

physically settled contracts with 

American-style exercise.20 Consistent 

with Rule 903, which governs the 

opening of options series on a specific 

underlying security (including ETFs and 

ETPs), the Exchange will open at least 

one expiration month for options on 

each Bitcoin Fund 21 at the 

commencement of trading on the 

Exchange and may also list series of 

options on Bitcoin Funds for trading on 

a weekly,22 monthly,23 or quarterly 24

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

that expire from twelve to thirty-nine 

months from the time they are listed.25

Pursuant to Rule 903, Commentary 

.05(a), which governs strike prices of 

series of options on ETFs, the interval 

between strike prices of series of options 


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26The Exchange notes that for options listed 

pursuant to the Short Term Option Series Program, 

the Monthly Options Series Program, and the 

Quarterly Options Series Program, Rules 903(h) and 

Commentaries .09 and .03 to Rule 903, specifically 

set forth intervals between strike prices on 

Quarterly Options Series, Short Term Option Series, 

and Monthly Options Series, respectively. 

27See Rule 903, Commentary .06. 

28See Rule 903, Commentary .13. 

29See Rule 903, Commentary .07(a). 

30See Rule 903, Commentary .12. 

31 If options on a Bitcoin Fund are eligible to 

participate in the Penny Interval Program, the 

minimum increment of $0.01 below $3.00 and 

$0.50 above $3.00 would apply. See Rule 

960NY(a)(3). See also Rule 960.1NY (which 

describes the requirements for the Penny Interval 

Program). 

32See Rule 903G(a)(1). See generally Section 15 

(Flexible Exchange (‘‘FLEX’’) Options). 

33The Exchange will continue ongoing 

discussions with the Commission regarding 

appropriate position limits for the Bitcoin Funds 

and plans to submit a separate rule filing that 

would permit the Exchange to authorize for trading 

FLEX options on the Funds (which filing may 

propose changes to existing FLEX option position 

limits for such options if appropriate). 

34See proposed Rule 903G(a)(1) (providing, in 

relevant part, that the Exchange may approve and 

open for trading any FLEX Equity Options series on 

any equity security that is eligible for Non-FLEX 

Options trading under Rule 915 ‘‘except those set 

forth in Commentary .10(a) to Rule 915,’’ i.e., the 

Bitcoin Funds). 

35See Commentary .07(a)–(d) to Rule 904. For an 

option to be eligible for the 50,000-contract limit, 

the security underlying the option must have most 

recent six-month trading volume of at least 

20,000,000 shares, or most recent six-month trading 

volume of at least 15,000,000 shares and at least 

40,000,000 shares currently outstanding. For an 

option to be eligible for the 75,000-contract limit, 

the underlying security must have most recent sixmonth trading volume of at least 40,000,000 shares, 

or most recent six-month trading volume of at least 

30,000,000 shares and at least 120,000,000 shares 

currently outstanding. For an option to be eligible 

for the 200,000-contract limit, the underlying 

security must have most recent six-month trading 

volume of at least 80,000,000 shares, or most recent 

six-month trading volume of at least 60,000,000 

shares and at least 240,000,000 shares currently 

outstanding. For an option to be eligible for the 

250,000-contract limit, the security underlying the 

option must have most recent six-month trading 

volume of at least 100,000,000 shares, or most 

recent six-month trading volume of at least 

75,000,000 shares and at least 300,000,000 shares 

currently outstanding. The 25,000-contract limit 

applies to options on underlying securities that do 

not qualify for a higher contract limit. See 

Commentary .07(e) to Rule 904. In addition, 

Commentary .07(f) to Rule 904 establishes higher 

position limits for options on certain ETFs. 

36See proposed Rule 904, Commentary .07(f). See 

also ISE IBIT Approval Order, supra note 6. [sic] 

37The Exchange may file a subsequent rule 

change to amend the position and exercise limit for 

options on any or all the Bitcoin Funds based on 

additional data regarding trading activity, to 

continue to balance any concerns regarding 

manipulation. A higher position limit would allow 

institutional investors to utilize options on the 

Bitcoin Funds for prudent risk management 

purposes. 

38Per Commentary .07(a) to Rule 904, to qualify 

for the 250,000-contract position limit for options, 

the underlying security must (i) have trading 

volume of at least 100,000,000 shares during the 

most recent six-month trading period; or (ii) have 

trading volume of at least 75,000,000 shares during 

the most recent six-month trading period and have 

at least 300,000,000 shares currently outstanding. 

39See FactSet, 9/30/2024, https://

www.factset.com/data-attribution. For avoidance of 

doubt, the Exchange notes that this chart depicts 

the most recent six months of trading data by shares 

for GBTC and BITB whereas the earlier chart (that 

depicts volume by notional and shares) covered the 

first nine months of trading. For BTC, both charts 

depict the same two-month trading volume by 

shares. 

on Bitcoin Funds will be $1 or greater 

when the strike price is $200 or less and 

$5 or greater where the strike price is 

over $200.26 Additionally, the Exchange 

may list series of options pursuant to 

the $1 Strike Price Interval Program,27

the $0.50 Strike Program,28 the $2.50 

Strike Price Program,29 and the $5 Strike 

Program.30 Pursuant to Rule 960NY, 

where the price of a series of a Bitcoin 

Fund 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 $0.10.31

Any and all new series of Bitcoin Fund 

options that the Exchange lists will be 

consistent and comply with the 

expirations, strike prices, and minimum 

increments set forth in Rules 903 and 

960NY, as applicable. Further, the 

Exchange notes that Rule 462, which 

governs margin requirements applicable 

to the trading of all options on the 

Exchange, including options on ETFs 

and ETPs, will also apply to the trading 

of Bitcoin Fund options. 

Rule 903G(a)(1) permits the Exchange 

to authorize for trading a FLEX option 

class on any equity security if it may 

authorize for trading a non-FLEX option 

class on that equity security pursuant to 

Rule 915.32 At this time, the Exchange 

is not proposing to permit Bitcoin Fund 

options to trade as FLEX options.33 The 

Exchange therefore proposes to modify 

Rule 903G(a)(1) to specify this 

exception, which will add clarity and 

transparency to Exchange Rules.34

Position and Exercise Limits 

Position and exercise limits for 

options, including options on Bitcoin 

Funds, are determined pursuant to 

Rules 904 and 905, respectively. 

Position and exercise limits for options 

vary according to the number of 

outstanding shares and the trading 

volumes of the underlying security over 

the past six months, where the largest in 

capitalization and the most frequently 

traded funds have an option position 

and exercise limit of 250,000 contracts 

(with adjustments for splits, recapitalizations, etc.) on the same side of 

the market; and smaller capitalization 

funds 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.35

Position limits are designed to limit 

the number of options contracts traded 

on the Exchange in an underlying 

security that an investor, acting alone or 

in concert with others directly or 

indirectly, may control. The purpose of 

position limits, which are set forth in 

Rule 904, is to address potential 

manipulative schemes and adverse 

market impacts surrounding the use of 

options, such as disrupting the market 

in the security underlying the options. 

As such, position limits must balance 

concerns regarding mitigating potential 

manipulation and the cost of inhibiting 

potential hedging activity that investors 

may use for legitimate economic 

purposes. To achieve this balance, the 

Exchange proposes to set the position 

and exercise limits for the options on 

the Bitcoin Funds at 25,000 contracts, a 

limit which has already been approved 

for IBIT, an ETP that (like the Bitcoin 

Funds) holds bitcoin.36 Capping the 

position limit at 25,000 contracts, the 

lowest limit available in options, would 

address concerns related to 

manipulation and protection of 

investors as this number is conservative 

for the Bitcoin Funds and therefore 

appropriate given their liquidity. While 

the Exchange believes that the proposed 

25,000-contract position limit is 

conservative for options on the Bitcoin 

Funds, it nonetheless believes that, for 

the reasons set forth below, evidence 

exists to support a much higher position 

limit.37

As shown in the table below, GBTC, 

BITB and BTC would easily qualify for 

the 250,000-contract position limit 

available to other ETFs and ETPs 

pursuant to the criterion in Rule 904, 

Commentary .07(a)(i), which requires 

that, for the most recent six-month 

period, trading volume for the 

underlying security be at least 

100,000,000 shares.38 As noted herein, 

BTC began trading on July 31, 2024, and 

therefore has only two months of 

trading data available as shown below.39

Bitcoin Fund Total volume 

(9/30/2024) 

GBTC .......... 723,758,100 (6-months) 

BTC ............. 335,492,930 (2-months) 

BITB ............ 263,965,870 (6-months) 

Thus, based on the most-recent 

trading volume, each Bitcoin Fund 

exceeded the requisite minimum of 

100,000,000 shares necessary to qualify 

for the 250,000-contract position and 

exercise limits. By comparison, other 

options symbols with six-month trading 

volume less than GBTC, BITB, and BTC 


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40See https://www.theocc.com/Market-Data/ 

Market-Data-Reports/Series-and-Trading-Data/ 

Series-Search (including the following symbols that 

have a position limit of 250,000: GLD, IAU, SLV, 

SIVR, SGOL). 

41See https://www.blockchain.com/explorer/ 

charts/total-bitcoins. 

are eligible for position and exercise 

limits of at least 250,000.40

With respect to the outstanding shares 

of each Bitcoin Fund, if a market 

participant held the maximum number 

of contracts possible pursuant to the 

proposed position and exercise limits 

(25,000 contracts), the equivalent shares 

represented by the proposed position/ 

exercise limit (2,500,000 shares) would 

represent the following approximate 

percentage of current outstanding 

shares: 

Bitcoin Fund 

Proposed position/ 

exercise limits in 

equivalent shares 

Outstanding 

shares 

(8/30/24) 

Percentage of 

outstanding 

shares 

GBTC ......................................................................................................................... 2,500,000 284,570,100 0.9 

BTC ............................................................................................................................ 2,500,000 366,950,100 0.7 

BITB ........................................................................................................................... 2,500,000 68,690,000 3.6 

As this table demonstrates, if a market 

participant held the maximum 

permissible options positions in one of 

the Bitcoin Fund options and exercised 

all of them at the same time, that market 

participant would control a small 

percentage of the outstanding shares of 

the underlying Bitcoin Fund. For 

example, as noted above, a position 

limit of 25,000 same side contracts 

effectively restricts a market participant 

from holding positions that could result 

in the receipt of no more than 2,500,000 

shares of the applicable Bitcoin Fund (if 

that market participant exercised all its 

options). Based on the number of shares 

outstanding for each Bitcoin Fund as of 

August 30, 2024, the table below sets 

forth the approximate number of market 

participants that could hold the 

maximum of 25,000 same side positions 

in each Bitcoin Fund that would equate 

to the number of shares outstanding of 

that Bitcoin Fund: 

Bitcoin Fund Shares 

outstanding 

Number of market 

participants with 

25,000 same side 

positions 

GBTC ........................................................................................................................................................... 284,570,100 114 

BTC .............................................................................................................................................................. 366,950,100 147 

BITB ............................................................................................................................................................. 68,690,000 27 

This means if 114 market participants 

had 25,000 same side positions in 

options on GBTC, each of them would 

have to simultaneously exercise all of 

those options to create a scenario that 

may put the underlying security under 

stress. Similarly, this means if 147 

market participants had 25,000 same 

side positions in options on BTC, each 

of them would have to simultaneously 

exercise all of those options to create a 

scenario that may put the underlying 

security under stress. Finally, this 

means if 27 market participants had 

25,000 same side positions in options 

on BITB, each of them would have to 

simultaneously exercise all of those 

options to create a scenario that may put 

the underlying security under stress. 

The Exchange believes it is highly 

unlikely for this to occur; however, even 

if such event did occur, the Exchange 

would not expect any of the Bitcoin 

Fund to be under stress because such an 

event would merely induce the creation 

of more shares through the trust’s 

creation and redemption process. 

Further, given that the issuer of each 

Bitcoin Fund may create and redeem 

shares that represent an interest in 

Bitcoin, the Exchange believes it is 

relevant to compare the size of a 

position limit to the market 

capitalization of the Bitcoin market. As 

of August 30, 2024, the global supply of 

Bitcoin was 19,747,066, and the price of 

one Bitcoin was approximately 

$59,108.23, which equates to a market 

capitalization of approximately $1.167 

trillion.41 Consider the proposed 

position and exercise limit of 25,000 

option contracts for each Bitcoin Fund 

option. A position and exercise limit of 

25,000 same side contracts effectively 

restricts a market participant from 

holding positions that could result in 

the receipt of no more than 2,500,000 

shares of GBTC, BTC, or BITB, as 

applicable (if that market participant 

exercised all its options). The following 

table shows the share price of each 

Bitcoin Fund on August 30, 2024, the 

value of 2,500,000 shares of the Bitcoin 

Fund at that price, and the approximate 

percentage of that value of the size of 

the Bitcoin market: 

Bitcoin Fund 

Aug. 30th 

share price 

($) 

Value of 

2,500,000 shares 

of bitcoin fund 

($) 

Percentage of 

bitcoin market 

GBTC ......................................................................................................................... 46.75 116,875,000 0.010 

BTC ............................................................................................................................ 5.20 13,000,000 0.001 

BITB ........................................................................................................................... 31.95 79,875,000 0.007 

Therefore, if a market participant with 

the maximum 25,000 same side 

contracts in options on GBTC, BTC, or 

BITB exercised all positions at one time, 

such an event would have no practical 

impact on the Bitcoin market. 

The Exchange also reviewed the 

market capitalization of each Bitcoin 

Fund relative to the market 


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42See id. 43See https://www.blockchain.com/explorer/ 

assets/btc (citing 21 million as the ‘‘total supply’’ 

of bitcoin). 

44The market capitalization of Bitcoin would 

rank in the top 10 among securities. See https://

companiesmarketcap.com/usa/largest-companiesin-the-usa-by-market-cap/. 

45See CME Rulebook Chapter 350 (description of 

CME Bitcoin Futures) and Chapter 5, Position 

Limit, Position Accountability and Reportable Level 

Table in the Interpretations & Special Notices. Each 

CME Bitcoin futures contract is valued at five 

Bitcoins as defined by the CME CF Bitcoin 

Reference Rate (‘‘BRR’’). See CME Rule 35001. 

46See CME Rulebook Chapter 5, Position Limit, 

Position Accountability and Reportable Level Table 

in the Interpretations & Special Notices. 

47 Id. 

48The Exchange is unaware of any proposed rule 

change related to position and exercise limits for 

any equity option (including commodity ETF 

options) for which the Commission required 

consideration of whether the available supply of an 

underlying (whether it be a corporate stock or an 

ETF) or the contents of an ETF (commodity or 

otherwise) should be considered when an exchange 

proposed to establish those limits. See, e.g., 

Securities Exchange Act Release No. 57894 May 30, 

2008), 73 FR 32061 (June 5, 2008) (SR–CBOE–2005– 

11) (approval order in which the Commission stated 

that the ‘‘listing and trading of Gold Trust Options 

will be subject to the exchanges’ rules pertaining to 

position and exercise limits and margin’’). The 

Exchange notes when the Commission approved 

this filing, the position limits in Rule 9054 were the 

Continued 

capitalization of the entire bitcoin 

market, as of August 30, 2024. 

bitcoin/shares 

outstanding 

Market value 

(8/30/2024) 

% of total bitcoin 

market 

Total Bitcoin Market 42 ....................................................................................... 19,747,066 $1,167,214,096,788 100.00 

GBTC ................................................................................................................. 284,570,100 13,443,091,524 1.15 

BTC .................................................................................................................... 366,950,100 1,930,157,526 0.17 

BITB ................................................................................................................... 68,690,000 2,221,640,670 0.19 

As shown above, the Bitcoin Funds 

collectively represent approximately 

1.51% of the global supply of Bitcoin 

(19,747,066). Based on the $46.75 price 

of a GBTC share on August 30, 2024, a 

market participant could have redeemed 

one Bitcoin for approximately 1,264 

GBTC shares. Another 24,967,146,455 

GBTC shares could be created before the 

supply of Bitcoin was exhausted. As a 

result, 9,987 market participants would 

have to simultaneously exercise 25,000 

same side positions in GBTC options to 

receive shares of the GBTC holding the 

entire global supply of Bitcoin. 

Similarly, based on the $5.20 price of a 

BTC share on August 30, 2024, a market 

participant could have redeemed one 

Bitcoin for approximately 11,367 BTC 

shares. Another 224,464,249,382 BTC 

shares could be created before the 

supply of Bitcoin was exhausted. As a 

result, 89,786 market participants would 

have to simultaneously exercise 25,000 

same side positions in BTC options to 

receive shares of BTC holding the entire 

global supply of Bitcoin. Similarly, 

based on the $31.95 price of a BITB 

share on August 30, 2024, a market 

participant could have redeemed one 

Bitcoin for approximately 1,850 BITB 

shares. Another 36,532,522,591 BITB 

shares could be created before the 

supply of Bitcoin was exhausted. As a 

result, 14,613 market participants would 

have to simultaneously exercise 25,000 

same side positions in BITB options to 

receive shares of BITB holding the 

entire global supply of Bitcoin. Unlike 

the Bitcoin Funds, the number of shares 

that corporations may issue is limited. 

However, like corporations, which 

authorize additional shares, repurchase 

shares, or split their shares, the Bitcoin 

Funds may create, redeem, or split 

shares in response to demand. While the 

supply of Bitcoin is limited to 

21,000,000, it is believed that it will 

take more than 100 years to fully mine 

the remaining Bitcoin.43 The supply of 

Bitcoin is larger than the available 

supply of most securities.44 Given the 

significant unlikelihood of any of these 

events ever occurring, the Exchange 

does not believe options on the Bitcoin 

Funds should be subject to position and 

exercise limits even lower than those 

proposed (which are already equal to 

the lowest available limit for equity 

options in the industry) to protect the 

supply of Bitcoin. 

The Exchange also believes the 

proposed limits are appropriate given 

position limits for Bitcoin futures. For 

example, the Chicago Mercantile 

Exchange (‘‘CME’’) imposes a position 

limit of 2,000 futures (for the initial spot 

month) on its Bitcoin futures contract.45

On August 28, 2024, CME Aug 24 

Bitcoin Futures settled at $58,950. A 

position of 2,000 CME Bitcoin futures, 

therefore, would have a notional value 

of $589,500,000. The following table 

shows the share price of each Bitcoin 

Fund on August 28, 2024, and the 

approximate number of option contracts 

that equates to that notional value: 

Bitcoin Fund Aug. 28th 

share price 

Number of 

option 

contracts 

GBTC .................. 46.94 125,585 

BTC ..................... 5.23 1,127,151 

BITB .................... 32.08 183,759 

The approximate number of option 

contracts for each Bitcoin Fund that 

equate to the notional value of CME 

Bitcoin futures is significantly higher 

than the proposed limit of 25,000 

options contract for each Bitcoin Fund 

option. The fact that many options 

ultimately expire out-of-the-money and 

thus are not exercised for shares of the 

underlying, while the delta of a Bitcoin 

Future is 1, further demonstrates how 

conservative the proposed limits of 

25,000 options contracts are for the 

Bitcoin Fund options. 

The Exchange notes, unlike options 

contracts, CME position limits are 

calculated on a net futures-equivalent 

basis by contract and include contracts 

that aggregate into one or more base 

contracts according to an aggregation 

ratio(s).46 Therefore, if a portfolio 

includes positions in options on futures, 

CME would aggregate those positions 

into the underlying futures contracts in 

accordance with a table published by 

CME on a delta equivalent value for the 

relevant spot month, subsequent spot 

month, single month and all month 

position limits.47 If a position exceeds 

position limits because of an option 

assignment, CME permits market 

participants to liquidate the excess 

position within one business day 

without being considered in violation of 

its rules. Additionally, if at the close of 

trading, a position that includes options 

exceeds position limits for futures 

contracts, when evaluated using the 

delta factors as of that day’s close of 

trading but does not exceed the limits 

when evaluated using the previous 

day’s delta factors, then the position 

shall not constitute a position limit 

violation. Considering CME’s position 

limits on futures for Bitcoin, the 

Exchange believes that that the 

proposed same side position limits are 

more than appropriate for the Bitcoin 

Fund options. 

The Exchange believes the available 

supply of Bitcoin is not relevant to the 

determination of position and exercise 

limits for options overlying the Bitcoin 

Funds.48 Position and exercise limits are 


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I 
84966 Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Notices 

same as they are today. For reference, the current 

position and exercise limits for options on SPDR 

Gold Shares ETF (‘‘GLD’’) and options on iShares 

Silver Trust (‘‘SLV’’) are 250,000 contracts, or 10 

times that proposed position and exercise limit for 

the Bitcoin Fund options. 49For example, suppose an option has a position 

limit of 25,000 option contracts and there are a total 

of 10 investors trading that option. If all 10 

investors max out their positions, that would result 

in 250,000 option contracts outstanding at that 

time. However, suppose 10 more investors decide 

to begin trading that option and also max out their 

positions. This would result in 500,000 option 

contracts outstanding at that time. An increase in 

the number of investors could cause an increase in 

outstanding options even if position limits remain 

unchanged. 

50See Securities Exchange Act Release No. 39489 

(December 24, 1997), 63 FR 276 (January 5, 1998) 

(SR–CBOE–1997–11). 

51 Id. 

52See, e.g., GBTC Form S–1 Registration 

Statement, at p. 17, https://www.sec.gov/Archives/ 

edgar/data/1588489/000119312517013693/ 

d157414ds1.htm; BTC Form S–1 Registration 

Statement, at p. 21, https://www.sec.gov/Archives/ 

edgar/data/2015034/000119312524065444/ 

d785023ds1.htm; and BITB Amendment No 2. to S– 

1, at p. 47, https://www.sec.gov/Archives/edgar/ 

data/1763415/000199937123000735/bitwise-s1a_

120423.htm (‘‘Bitcoin Funds Reg. Stmts.’’). 

53See Bitcoin ETP Approval Order. 

54See Securities Exchange Act Release No. 39489 

(December 24, 1997), 63 FR 276 (January 5, 1998) 

(SR–CBOE–1997–11). 

not a tool that should be used to address 

a potential limited supply of the 

underlying of an underlying. Position 

and exercise limits do not limit the total 

number of options that may be held, but 

rather they limit the number of 

positions a single customer may hold or 

exercise at one time.49 ‘‘Since the 

inception of standardized options 

trading, the options exchanges have had 

rules imposing limits on the aggregate 

number of options contracts that a 

member or customer could hold or 

exercise.’’ 50 Position and exercise limit 

rules are intended ‘‘to prevent the 

establishment of options positions that 

can be used or might create incentives 

to manipulate or disrupt the underlying 

market so as to benefit the options 

position. In particular, position and 

exercise limits are designed to minimize 

the potential for mini-manipulations 

and for corners or squeezes of the 

underlying market. In addition, such 

limits serve to reduce the possibility for 

disruption of the options market itself, 

especially in illiquid options classes.’’ 51

The Exchange notes that a 

Registration Statement on Form S–1 was 

filed with the Commission for each 

Bitcoin Fund, each of which described 

the supply of Bitcoin as being limited to 

21,000,000 (of which approximately 

90% had already been mined), and that 

the limit would be reached around the 

year 2140.52 Each Registration 

Statement permits an unlimited number 

of shares of the applicable Bitcoin Fund 

to be created. Further, the Commission 

approved proposed rule changes that 

permitted the listing and trading of 

shares of each Bitcoin Fund, which 

approval did not comment on the 

sufficient supply of Bitcoin or address 

whether there was a risk that permitting 

an unlimited number of shares for a 

Bitcoin Fund would impact the supply 

of Bitcoin.53 Therefore, the Exchange 

believes the Commission had ample 

time and opportunity to consider 

whether the supply of Bitcoin was 

sufficient to permit the creation of 

unlimited Bitcoin Fund shares, and 

does not believe considering this supply 

with respect to the establishment of 

position and exercise limits is 

appropriate given its lack of relevance to 

the purpose of position and exercise 

limits. However, given the significant 

size of the Bitcoin supply, the proposed 

positions limits are more than sufficient 

to protect investors and the market. 

Based on the foregoing, the Exchange 

believes the proposal to list options on 

the Bitcoin Funds with positions and 

exercise limits of 25,000 on the same 

side, the lowest position limit available 

in the options industry, is conservative 

and appropriate given the market 

capitalization, average daily volume, 

and high number of outstanding shares 

for each of the Bitcoin Funds. The 

proposed position and exercise limits 

reasonably and appropriately balance 

the liquidity provisioning in the market 

against the prevention of manipulation. 

The Exchange believes these proposed 

limits are effectively designed to 

prevent an individual customer or entity 

from establishing options positions that 

could be used to manipulate the market 

of the underlying Bitcoin Funds as well 

as the Bitcoin market.54

As described herein, options on the 

Bitcoin Funds will trade in the same 

manner as any other ETF or ETP options 

on the Exchange, except that the Bitcoin 

Funds will not be eligible for FLEX 

option trading. The Exchange Rules that 

currently apply to the listing and 

trading of options on the Exchange, 

including, for example, Rules that 

govern listing criteria, expiration and 

exercise prices, minimum increments, 

margin requirements, customer accounts 

and trading halt procedures will apply 

to the listing and trading of Bitcoin 

Funds on the Exchange in the same 

manner as they apply to all other ETFs 

and ETPs that are listed and traded on 

the Exchange, including the precious 

metal-backed commodity ETPs already 

deemed appropriate for options trading 

on the Exchange pursuant to 

Commentary .10 to Rule 915. Further, as 

described above, Exchange Rules 

regarding position and exercise limits 

will likewise apply to options on the 

Bitcoin Funds except the that, as 

proposed, the position and exercise 

limits will be set at 25,000 on the same 

side. 

* * * * * 

The Exchange notes that options on 

Bitcoin Funds would not be available 

for trading until The Options Clearing 

Corporation (‘‘OCC’’) represents to the 

Exchange that it is fully able to clear 

and settle such options. The Exchange 

has also analyzed its capacity and 

represents that it and The Options Price 

Reporting Authority (‘‘OPRA’’) have the 

necessary systems capacity to handle 

the additional traffic associated with the 

listing of options on Bitcoin Funds. The 

Exchange believes any additional traffic 

that would be generated from the 

trading of options on Bitcoin Funds 

would be manageable. The Exchange 

represents that Exchange members will 

not have a capacity issue as a result of 

this proposed rule change. 

The Exchange represents that the 

same surveillance procedures applicable 

to all other options currently listed and 

traded on the Exchange will apply to 

options on Bitcoin Funds, and that it 

has the necessary systems capacity to 

support the new option series. The 

Exchange’s existing surveillance and 

reporting safeguards are designed to 

deter and detect possible manipulative 

behavior which might arise from listing 

and trading options on ETFs and ETPs, 

such as (existing) precious metalcommodity backed ETP options as well 

as the proposed options on Bitcoin 

Funds. The Exchange believes that its 

surveillance procedures are adequate to 

properly monitor the trading of options 

on Bitcoin Funds in all trading sessions 

and to deter and detect violations of 

Exchange rules. Specifically, the 

Exchange’s market surveillance staff 

will have access to the surveillances 

conducted by its affiliate NYSE, Arca 

Inc. with respect to the Bitcoin Funds 

and would review activity in the 

underlying Funds when conducting 

surveillances for market abuse or 

manipulation in the options on the 

Trust. Additionally, the Exchange is a 

member of the Intermarket Surveillance 

Group (‘‘ISG’’) under the Intermarket 

Surveillance Group Agreement. ISG 

members work together to coordinate 

surveillance and investigative 

information sharing in the stock, 

options, and futures markets. In 

addition, the Exchange has a Regulatory 

Services Agreement with the Financial 

Industry Regulatory Authority 

(‘‘FINRA’’). Pursuant to a multi-party 

17d–2 joint plan, all options exchanges 


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Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Notices 84967 

55Section 19(g)(1) of the Act, among other things, 

requires every SRO registered as a national 

securities exchange or national securities 

association to comply with the Act, the rules and 

regulations thereunder, and the SRO’s own rules, 

and, absent reasonable justification or excuse, 

enforce compliance by its members and persons 

associated with its members. See 15 U.S.C. 

78q(d)(1) and 17 CFR 240.17d–2. Section 17(d)(1) 

of the Act allows the Commission to relieve an SRO 

of certain responsibilities with respect to members 

of the SRO who are also members of another SRO. 

Specifically, Section 17(d)(1) allows the 

Commission to relieve an SRO of its responsibilities 

to: (i) receive regulatory reports from such 

members; (ii) examine such members for 

compliance with the Act and the rules and 

regulations thereunder, and the rules of the SRO; 

or (iii) carry out other specified regulatory 

responsibilities with respect to such members. 

56See Securities Exchange Act Release No. 99306 

(January 10, 2024), 89 FR 3008, 3009 (January 17, 

2024) (File Nos. SR–NYSEArca–2021–90; SR– 

NYSEArca–2023–44; SR–NYSEArca–2023–58; SR– 

NASDAQ–2023–016; SR–NASDAQ–2023–019; SR– 

CboeBZX–2023–028; SR–CboeBZX–2023–038; SR– 

CboeBZX–2023–040; SR–CboeBZX–2023–042; SR– 

CboeBZX–2023–044; and SR–CboeBZX–2023–072) 

(Order Granting Accelerated Approval of Proposed 

Rule Changes, as Modified by Amendments 

Thereto, to List and Trade Bitcoin-Based 

Commodity-Based Trust Shares and Trust Units). 

57See Bitcoin ETP Order, 89 FR at 3010–11. 

58See Amendment No. 2 to Proposed Rule 

Change to List and Trade Shares of the Grayscale 

Bitcoin Trust (BTC) under NYSE Arca Rule 8.201– 

E (Commodity-Based Trust Shares) (SR– 

NYSEARCA–2021–90), filed Jan. 5, 2024, available 

at https://www.sec.gov/comments/sr-nysearca-2021- 

90/srnysearca202190-358659-884182.pdf ; 

Amendment No. 2 to Proposed Rule Change to List 

and Trade Shares of the Bitwise Bitcoin ETF under 

NYSE Arca Rule 8.201–E (Commodity-Based Trust 

Shares) (SR–NYSEARCA–2023–44), filed Jan. 5, 

2024, available at https://www.sec.gov/comments/ 

sr-nysearca-2023-44/srnysearca202344-358800- 

884322.pdf; and Notice of Filing of Proposed Rule 

Change, as Modified by Amendment No. 1, To List 

and Trade Shares of the Grayscale Bitcoin Mini 

Trust Under NYSE Arca Rule 8.201–E, CommodityBased Trust Shares, Securities Exchange Act 

Release No. 100290 (June 6, 2024), 89 FR 49931 

(June 12, 2024) (SR–NYSEARCA–2024–45). 

59The 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. 

60See Rules 921(c) and (f), and Commentary .01 

to Rule 921 and 481. 

61See Rule 923. 

62 15 U.S.C. 78f(b). 

63 15 U.S.C. 78f(b)(5). 

allocate regulatory responsibilities to 

FINRA to conduct certain optionsrelated market surveillances.55 Further, 

the Exchange will implement any new 

surveillance procedures it deems 

necessary to effectively monitor the 

trading of options on the Bitcoin Funds. 

The underlying shares of spot bitcoin 

ETPs, including the Bitcoin Funds, are 

also subject to safeguards related to 

addressing market abuse and 

manipulation. As the Commission 

stated in its order approving proposals 

of several exchanges to list and trade 

shares of spot bitcoin-based exchangetraded products (‘‘Bitcoin ETP Order’’): 

Each Exchange has a comprehensive 

surveillance-sharing agreement with the CME 

via their common membership in the 

Intermarket Surveillance Group. This 

facilitates the sharing of information that is 

available to the CME through its surveillance 

of its markets, including its surveillance of 

the CME bitcoin futures market.56

The Exchange states that, given the 

consistently high correlation between 

the CME bitcoin futures market and the 

spot bitcoin market, as confirmed by the 

Commission through robust correlation 

analysis, the Commission was able to 

conclude that such surveillance sharing 

agreements could reasonably be 

‘‘expected to assist in surveilling for 

fraudulent and manipulative acts and 

practices in the specific context of the 

[Bitcoin ETPs].’’ 57

In light of surveillance measures 

related to both options and futures as 

well as the underlying Bitcoin Funds,58

the Exchange believes that existing 

surveillance procedures are designed to 

deter and detect possible manipulative 

behavior which might potentially arise 

from listing and trading the proposed 

options on the Bitcoin Funds. 

Finally, quotation and last sale 

information for ETFs is available via the 

Consolidated Tape Association (‘‘CTA’’) 

high speed line. Quotation and last sale 

information for such securities is also 

available from the exchange on which 

such securities are listed. Quotation and 

last sale information for options on 

Bitcoin Funds will be available via 

OPRA and major market data vendors. 

The Exchange believes that offering 

options on Bitcoin Funds will benefit 

investors by providing them with an 

additional, relatively lower cost 

investing tool to gain exposure to the 

price of Bitcoin and 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 Funds in the 

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

options market,59 but may prefer to 

trade such options in a listed 

environment to receive the benefits of 

trading listed options, including (1) 

enhanced efficiency in initiating and 

closing out position; (2) increased 

market transparency; and (3) heightened 

contra-party creditworthiness due to the 

role of OCC as issuer and guarantor of 

all listed options. The Exchange 

believes that listing Bitcoin Fund 

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 Exchange 

notes that the ETPs that hold precious 

metal commodities on which the 

Exchange may already list and trade 

options are trusts structured in 

substantially the same manner as 

Bitcoin Funds 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 options 

on any ETFs or ETPs that hold 

commodities (i.e., precious metals) that 

it currently lists and trades on the 

Exchange. 

Finally, the Exchange notes that 

applicable Exchange rules will require 

that customers receive appropriate 

disclosure before trading options in 

Bitcoin Funds.60 Further, brokers 

opening accounts and recommending 

options transactions must comply with 

relevant customer suitability 

standards.61

2. Statutory Basis 

The Exchange believes that its 

proposed rule change is consistent with 

Section 6(b) of the Act 62 in general and 

furthers the objectives of Section 6(b)(5) 

of the Act 63 in particular, in that it is 

designed to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanisms 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 Funds 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 Funds will 

provide investors with an opportunity 

to realize the benefits of utilizing 

options on a Bitcoin Fund, including 

cost efficiencies and increased hedging 

strategies. 

The Exchange believes that offering 

Bitcoin Fund options will benefit 

investors by providing them with a 

relatively lower-cost risk management 

tool, which will 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 Fund 

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 


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84968 Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Notices 

64See Rule 915, Commentary .10. 

65The Exchange will submit a separate rule filing 

that would permit the Exchange to authorize for 

trading FLEX options on the Bitcoin Funds (which 

filing may propose changes to existing FLEX option 

position limits for such options if appropriate). 

66The Exchange notes that IBIT—which has been 

approved for options trading—represents a larger 

percentage of the bitcoin market than all three 

Bitcoin Funds. See ISE IBIT Approval Order, supra 

note 6. As noted herein, the Bitcoin Funds 

collectively represent approximately 1.51% of the 

bitcoin market. By comparison, IBIT options have 

an approved position limit of 25,000 contracts per 

side, which represents 4% of total underlying spot 

BTC liquidity, and IBIT is the most liquid spot 

Bitcoin ETF. See id. 

67See Securities Exchange Act Release No. 99306 

(January 10, 2024), 89 FR 3008, 3009 (January 17, 

2024) (File Nos. SR–NYSEArca–2021–90; SR– 

NYSEArca–2023–44; SR–NYSEArca–2023–58; SR– 

NASDAQ–2023–016; SR–NASDAQ–2023–019; SR– 

CboeBZX–2023–028; SR–CboeBZX–2023–038; SR– 

CboeBZX–2023–040; SR–CboeBZX–2023–042; 

SRCboeBZX–2023–044; and SR–CboeBZX–2023– 

072) (Order Granting Accelerated Approval of 

Proposed Rule Changes, as Modified by 

Amendments Thereto, to List and Trade BitcoinBased Commodity-Based Trust Shares and Trust 

Units). 

68See Bitcoin ETP Order, 89 FR at 3010–11. 

69See Amendment No. 2 to Proposed Rule 

Change to List and Trade Shares of the Grayscale 

Bitcoin Trust (BTC) under NYSE Arca Rule 8.201– 

E (Commodity-Based Trust Shares) (SR– 

NYSEARCA–2021–90), filed Jan. 5, 2024, available 

at https://www.sec.gov/comments/sr-nysearca-2021- 

90/srnysearca202190-358659-884182.pdf; 

Amendment No. 2 to Proposed Rule Change to List 

and Trade Shares of the Bitwise Bitcoin ETF under 

NYSE Arca Rule 8.201–E (Commodity-Based Trust 

Shares) (SR–NYSEARCA–2023–44), filed Jan. 5, 

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 

ETPs,64 which, as described above, are 

trusts structured in substantially the 

same manner as Bitcoin Funds 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 ETP 

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 Funds 

satisfy the initial listing standards and 

continued listing standards currently in 

the Exchange Rules applicable to 

options on all ETFs and ETPs, including 

ETPs that hold other commodities 

already deemed appropriate for options 

trading on the Exchange. Additionally, 

as demonstrated above, each Bitcoin 

Fund is characterized by a substantial 

number of shares that are widely held 

and actively traded. Bitcoin Fund 

options will trade in the same manner 

as any other ETF or ETP options—the 

same Exchange Rules that currently 

govern the listing and trading of 

options, including permissible 

expirations, strike prices, minimum 

increments, and margin requirements, 

will govern the listing and trading of 

options on Bitcoin Funds in the same 

manner. 

The Exchange believes the proposed 

rule change to exclude the Bitcoin 

Funds from being eligible for trading as 

FLEX options is consistent with the Act, 

because it will permit the Exchange to 

continue to participate in ongoing 

discussions with the Commission 

regarding appropriate position limits for 

options on these Funds.65

The proposed position and exercise 

limit for options on the Bitcoin Funds 

is 25,000 contracts. These position and 

exercise limits are the lowest position 

and exercise limits available in the 

options industry, are extremely 

conservative and more than appropriate 

given the Bitcoin Funds’ market 

capitalization, average daily volume, 

number of beneficial holders, and high 

number of outstanding shares.66 The 

proposed position and exercise limits 

are consistent with the Act as they 

addresses concerns related to 

manipulation and protection of 

investors because the position and 

exercise limits are extremely 

conservative and more than appropriate 

given the Bitcoin Funds are actively 

traded. 

The Exchange also believes the 

proposed rule change to Rule 903G(a), 

to make clear that options on the Bitcoin 

Funds are not eligible for FLEX trading, 

will remove impediments to and perfect 

the mechanism of a free and open 

market and a national market system 

because it adds clarity and transparency 

to Exchange Rules making them easier 

to navigate and understand to the 

benefit of investors and the public 

interest. 

The Exchange represents that it has 

the necessary systems capacity to 

support the new Bitcoin Fund options. 

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 options, 

including Bitcoin Fund options. The 

Exchange’s existing surveillance and 

reporting safeguards are designed to 

deter and detect possible manipulative 

behavior which might arise from listing 

and trading options on ETFs and ETPs, 

such as (existing) precious metalcommodity backed ETP options as well 

as the proposed options on Bitcoin 

Funds. The Exchange believes that its 

surveillance procedures are adequate to 

properly monitor the trading of options 

on Bitcoin Funds in all trading sessions 

and to deter and detect violations of 

Exchange rules. Specifically, the 

Exchange’s market surveillance staff 

will have access to the surveillances 

conducted by its affiliated NYSE, Arca 

Inc. with respect to the Bitcoin Funds 

and would review activity in the 

underlying Funds when conducting 

surveillances for market abuse or 

manipulation in the options on the 

Trust. Additionally, the Exchange is a 

member of the ISG under the 

Intermarket Surveillance Group 

Agreement. ISG members work together 

to coordinate surveillance and 

investigative information sharing in the 

stock, options, and futures markets. In 

addition, the Exchange has a Regulatory 

Services Agreement with the FINRA 

and, as noted herein, pursuant to a 

multi-party 17d–2 joint plan, all options 

exchanges allocate regulatory 

responsibilities to FINRA to conduct 

certain options-related market 

surveillances. Further, the Exchange 

will implement any new surveillance 

procedures it deems necessary to 

effectively monitor the trading of 

options on the Bitcoin Funds. 

The underlying shares of spot bitcoin 

ETPs, including the Bitcoin Funds, are 

also subject to safeguards related to 

addressing market abuse and 

manipulation. As the Commission 

stated in its order approving proposals 

of several exchanges to list and trade 

shares of spot bitcoin-based ETPs, 

‘‘[e]ach Exchange has a comprehensive 

surveillance-sharing agreement with the 

CME via their common membership in 

the Intermarket Surveillance Group. 

This facilitates the sharing of 

information that is available to the CME 

through its surveillance of its markets, 

including its surveillance of the CME 

bitcoin futures market.67 The Exchange 

states that, given the consistently high 

correlation between the CME bitcoin 

futures market and the spot bitcoin 

market, as confirmed by the 

Commission through robust correlation 

analysis, the Commission was able to 

conclude that such surveillance sharing 

agreements could reasonably be 

‘‘expected to assist in surveilling for 

fraudulent and manipulative acts and 

practices in the specific context of the 

[Bitcoin ETPs].’’ 68 In light of 

surveillance measures related to both 

options and futures as well as the 

underlying Bitcoin Funds,69 the 


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Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Notices 84969 

2024, available at https://www.sec.gov/comments/ 

sr-nysearca-2023-44/srnysearca202344-358800- 

884322.pdf; and Notice of Filing of Proposed Rule 

Change, as Modified by Amendment No. 1, To List 

and Trade Shares of the Grayscale Bitcoin Mini 

Trust Under NYSE Arca Rule 8.201–E, CommodityBased Trust Shares, Securities Exchange Act 

Release No. 100290 (June 6, 2024), 89 FR 49931 

(June 12, 2024) (SR–NYSEARCA–2024–45). 

70See Rule 921(f). See also Rule 921(c), 

Commentary .01 to Rule 921, and Rule 481. 

71See Rule 923. 

72See Rule 915, Commentary .10. 73See ISE IBIT Approval Order, supra note 6. 

74 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

75 15 U.S.C. 78f. 

76 15 U.S.C. 78f(b)(5). 

77See Exchange Rule 915(a)(2). 

78See Amendment No. 3 at 6. 

79See id. at 7. 

80See id. at 7. 

81See id. 

82See id. 

83See id. at 6. 

Exchange believes that existing 

surveillance procedures are designed to 

deter and detect possible manipulative 

behavior which might potentially arise 

from listing and trading the proposed 

options on the Bitcoin Funds. Further, 

the Exchange will implement any new 

surveillance procedures it deems 

necessary to effectively monitor the 

trading of options on Bitcoin ETPs. 

Finally, the Exchange notes that this 

proposal 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 applicable Exchange rules will 

require that customers receive 

appropriate disclosure before trading 

options in Bitcoin Funds 70 and will 

require that brokers opening accounts 

and recommending options transactions 

comply with relevant customer 

suitability standards.71

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. 

Intramarket Competition: 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 Funds would need to satisfy 

the initial listing standards set forth in 

the Exchange Rules in the same manner 

as any other ETF before the Exchange 

could list options on them. 

Additionally, Bitcoin Fund 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 

Funds. Also, and as stated above, the 

Exchange already lists options on other 

commodity-based ETPs.72

Intermarket Competition: The 

Exchange does not believe that the 

proposal to list and trade options on 

Bitcoin Funds 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 Fund 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. As noted 

herein, this is a competitive filing as the 

Commission recently approved the 

listing and trading of options on an ETP 

that, like the Bitcoin Funds, holds 

bitcoin.73 Additionally, other options 

exchanges are free to amend their listing 

rules, as applicable, to permit them to 

list and trade options on Bitcoin Funds. 

The Exchange notes that listing and 

trading Bitcoin Fund 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 

Fund 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 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Discussion and Commission 

Findings 

After careful consideration, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 3, is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange,74 and, in 

particular, the requirements of Section 6 

of the Act.75 Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,76 which requires that 

an exchange have rules designed to 

prevent fraudulent and manipulative 

acts and practices, to remove 

impediments to and perfect the 

mechanism of a free and open market, 

and to protect investors and the public 

interest. 

A. Widely Held and Actively Traded 

The Exchange’s initial listing 

standards require, among other things, 

that the security underlying a listed 

option be ‘‘characterized by a 

substantial number of outstanding 

shares that are widely held and actively 

traded.’’ 77 As described above, the 

Exchange states that, as of August 30, 

2024, GBTC had 284,570,100 shares 

outstanding, BTC had 366,950,100 

shares outstanding, and BITB had 

68,690,000 shares outstanding.78 The 

Exchange states that, as of August 14, 

2024, GBTC had 464,364 beneficial 

holders, BTC had 13,403 beneficial 

holders, and BITB had 75,437 beneficial 

holders.79 In addition, the Exchange 

states that from January 11, 2024, 

through September 30, 2024, GBTC had 

trading volume of 1,803,567,700 shares 

($93,472,544,497 notional volume) and 

BITB had trading volume of 434,815,840 

shares ($14,433,361,384 notional 

volume).80 The Exchange states that 

from July 31, 2024, through September 

30, 2024, BTC had trading volume of 

335,492,930 shares ($1,792,866,521 

notional volume).81 The Exchange 

further states that, for the 30-day period 

from September 1, 2024, through 

September 30, 2024, GBTC had ADV of 

3,266,138 shares, BTC had ADV of 

6,838,546 shares, and BITB had ADV of 

1,949,835 shares.82 In addition, the 

Exchange states that, as of August 30, 

2024, GBTC had market capitalization of 

$13,443,091,524, BTC had market 

capitalization of $1,930,157,526, and 

BITB had market capitalization of 

$2,221,640,670.83


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84970 Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Notices 

84See Securities Exchange Act Release No. 39489 

(Dec. 24, 1997), 63 FR 276, 279 (Jan 5. 1998) (order 

approving File No. SR–Cboe–97–11) (‘‘Position 

Limit Order’’). 

85 Id. 

86 Id. 

87See, e.g., Securities Exchange Act Release Nos. 

21907 (Mar. 29, 1985), 50 FR 13440, 13441 (Apr. 

4, 1985) (order approving File Nos. SR–CBOE–84– 

21, SR–Amex–84–30, SR–Phlx–84–25, and SR– 

PSE–85–1); and 40875 (Dec. 31, 1998), 64 FR 1842, 

1843 (Jan. 12, 1999) (order approving File Nos. SR– 

CBOE–98–25; Amex–98–22; PCX–98–33; and Phlx– 

98–36). 

88See id. 

89See Amendment No. 3 and proposed Exchange 

Rule 904, Commentary .07(f) and Exchange Rule 

905(a)(i). 

90See Amendment No. 3 at 16. 

91See id. at 11. 

92See id. 

93See id. 

94See id. at 11–12. 

95 Id. at 21. 

96See id. at 12–13. 

97 Id. at 13. 

98See id. at 14–15. 

99See id. at 14. 

100See id. 

101See id. at 15. 

102See id. at 12. 

103 Id. at 21. 

The Commission has reviewed the 

Exchange’s analysis and publicly 

available data regarding the Bitcoin 

Funds. Based on this review of 

information provided by the Exchange 

and publicly available information— 

including information regarding the 

number of shares outstanding and the 

number of beneficial holders for each 

Bitcoin Fund, the ADV of each Bitcoin 

Fund, and the market capitalization of 

each Bitcoin Fund—the Commission 

concludes that it is reasonable for the 

Exchange to determine that the Bitcoin 

Funds satisfy the requirement of 

Exchange Rule 915(a)(2) that the 

security underlying a listed option be 

widely held and actively traded. 

B. Position and Exercise Limits 

Position and exercise limits serve as 

a regulatory tool designed to deter 

manipulative schemes and adverse 

market impact surrounding the use of 

options. Since the inception of 

standardized options trading, the 

options exchanges have had rules 

limiting the aggregate number of options 

contracts that a member or customer 

may hold or exercise. Options position 

and exercise limits are intended to 

prevent the establishment of options 

positions that can be used or might 

create incentives to manipulate or 

disrupt the underlying market to benefit 

the options position.84 In addition, such 

limits serve to reduce the possibility of 

disruption in the options market itself, 

especially in illiquid classes.85 As the 

Commission has previously recognized, 

markets with active and deep trading 

interest, as well as with broad public 

ownership, are more difficult to 

manipulate or disrupt than less active 

and deep markets with smaller public 

floats.86 The Commission also has 

recognized that position and exercise 

limits must be sufficient to prevent 

investors from disrupting the market for 

the underlying security by acquiring 

and exercising a number of options 

contracts disproportionate to the 

deliverable supply and average trading 

volume of the underlying security.87 At 

the same time, the Commission has 

recognized that limits must not be 

established at levels that are so low as 

to discourage participation in the 

options market by institutions and other 

investors with substantial hedging 

needs or to prevent specialists and 

market-makers from adequately meeting 

their obligations to maintain a fair and 

orderly market.88

The Exchange proposes a position 

limit of 25,000 contracts on the same 

side of the market for options on each 

Bitcoin Fund and an equivalent exercise 

limit.89 In proposing these position and 

exercise limits, the Exchange 

considered, among other things, the 

ADV, outstanding shares, and market 

capitalization of each Bitcoin Fund.90

The Exchange states that Exchange Rule 

904, Commentary .07(a)(i) establishes a 

position limit of 250,000 contracts for 

options on an underlying security with 

six-month trading volume of 

100,000,000 shares.91 The Exchange 

states that six-month trading volumes 

for GBTC and BITB were, respectively, 

723,758,100 shares and 263,965,870 

shares, and that the two-month trading 

volume for BTC was 335,492,930 

shares.92 The Exchange further states 

that the proposed position and exercise 

limits are lower than the position and 

exercise limits for options other 

commodity-based ETPs that have lower 

trading volumes than the Bitcoin 

Funds.93 In addition, the Exchange 

states that, as of August 30, 2024, the 

number of shares represented by the 

proposed position and exercise limits 

were equal to approximately 0.9% of the 

outstanding shares of GBTC, 0.7% of the 

outstanding shares of BTC, and 3.6% of 

the outstanding shares of BITB.94 The 

Exchange further states that the 

proposed ‘‘position and exercise limits 

are the lowest position and exercise 

limits available in the options industry, 

are extremely conservative and more 

than appropriate given the Bitcoin 

Funds’ market capitalization, average 

daily volume, number of beneficial 

holders, and high number of 

outstanding shares.’’ 95

The Exchange also compared the size 

of the position and exercise limits to the 

market capitalization of the Bitcoin 

market, which, according to the 

Exchange, had a market capitalization of 

approximately $1.167 trillion as of 

August 30, 2024.96 The Exchange 

calculated that with a position limit of 

25,000 contracts (2,500,000 shares of the 

underlying Bitcoin Fund), as of August 

30, 2024, a market participant could 

hold a position in shares of GBTC that 

represented 0.010% of the bitcoin 

market, a position in BTC that 

represented 0.001% of the bitcoin 

market, and a position in BITB that 

represented 0.007% of the bitcoin 

market, positions that the Exchange 

states ‘‘would have no practical impact 

on the Bitcoin market.’’ 97

The Exchange states that the proposed 

position and exercise limits also are 

appropriate given position limits for 

Bitcoin futures.98 The Exchange states 

that the Chicago Mercantile Exchange 

(‘‘CME’’) establishes a position limit of 

2,000 Bitcoin futures for the spot month 

and that, as of August 28, 2024, such a 

position would have had a notional 

value of $589,500,000.99 The Exchange 

states that, as of that date, 125,585 

GBTC options, 1,127,151 BTC options, 

and 183,759 BITB options would be the 

equivalent of the $589,500,000 CME 

bitcoin futures notional value.100 The 

Exchange states that the option contract 

equivalent numbers are significantly 

higher than the proposed position and 

exercise limit of 25,000 contracts.101

In addition, the Exchange states that, 

based on the number of shares 

outstanding for each Bitcoin Fund as of 

August 30, 2024, and with a position 

limit of 25,000 option contracts, 114 

market participants, each with a same 

side position of 25,000 contracts, would 

have to exercise all of their GBTC 

options to place the GBTC shares under 

stress; 147 market participants, each 

with a same side position of 25,000 

contracts, would have to exercise all of 

their BTC options to place the BTC 

shares under stress; and 27 market 

participants, each with a same side 

position of 25,000 contracts, would have 

to exercise all of their BITB options to 

place the BITB shares under stress.102

The Exchange states that the proposed 

position and exercise limits ‘‘are 

extremely conservative and more than 

appropriate given the Bitcoin Funds’ 

market capitalization, average daily 

volume, number of beneficial holders, 

and high number of outstanding 

shares.’’ 103 The Exchange states that the 

proposed position and exercise limits 


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Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Notices 84971 

104See id. at 16–17. 105See id. at 17 (citing the Position Limit Order 

supra note 84. 

106See supra note 73 and accompanying text. 

107See Securities Exchange Act Release No. 

57352 (Feb.19, 2008), 73 FR 10076, 10080 (Feb. 25, 

2008) (order approving File No. SR–Cboe–2008–07). 

108See Amendment No. 3 at 11–12. 

109See id. at 12. 

110See proposed Exchange Rule 903G(a)(1). The 

Exchange states that excluding Bitcoin Fund 

options from FLEX trading will allow the Exchange 

to continue to participate in ongoing discussions 

with the Commission regarding appropriate 

position limits for options on the Bitcoin Funds. 

See Amendment No. 3 at 21. 

111See id. at 17. 

112See Amendment No. 3 at 17. 

113See id. 

114See Bitcoin ETP Order, 89 FR at 3010–11. 

115See Amendment No. 3 at 19; Exchange Rules 

921(c), (f), and Commentary .01 to Exchange Rule 

921; and Exchange Rule 481. 

116See Amendment No. 3 at 19 and Exchange 

Rule 923. 

117See Exchange Rule 921(c). 

118See Exchange Rule 921, Commentary .01. 

119See FINRA Rule 2360(b)(19). 

reasonably and appropriately balance 

the liquidity provisioning in the market 

against the prevention of 

manipulation.104 The Exchange further 

states that the proposed limits are 

effectively designed to prevent an 

individual customer or entity from 

establishing options positions that could 

be used to manipulate the market of the 

underlying Bitcoin Funds as well as the 

Bitcoin market.105

The Commission finds that the 

proposed position and exercise limits 

are consistent with the Act, and in 

particular, with the requirements in 

Section 6(b)(5) that the rules of a 

national securities exchange designed to 

prevent fraudulent and manipulative 

acts and practices and to protect 

investors and the public interest. As 

discussed above, the Commission has 

recognized that position and exercise 

limits must be sufficient to prevent 

investors from disrupting the market for 

the underlying security by acquiring 

and exercising a number of options 

contracts disproportionate to the 

deliverable supply and average trading 

volume of the underlying security.106 In 

addition, the Commission has stated 

previously that rules regarding position 

and exercise limits are intended to 

prevent the establishment of options 

positions that can be used or might 

create incentives to manipulate or 

disrupt the underlying market so as to 

benefit the options position.107 Based on 

its review of the data and analysis 

provided by the Exchange, the 

Commission concludes that the 

proposed position and exercise limits 

satisfy these objectives. Specifically, the 

Commission has considered and 

reviewed the Exchange’s analysis that, 

as of August 30, 2024, the proposed 

position and exercise limits of 25,000 

contracts represented approximately 

0.9% of the outstanding shares of GBTC, 

0.7% of the outstanding shares of BTC, 

and 3.6% of the outstanding shares of 

BITB.108 The Commission also has 

considered and reviewed the Exchange’s 

statement that with a position limit of 

25,000 contracts, 114 market 

participants, each with a same side 

position of 25,000 contracts, would have 

to exercise all of their GBTC options to 

place the GBTC shares under stress; 147 

market participants, each with a same 

side position of 25,000 contracts, would 

have to exercise all of their BTC options 

to place the BTC shares under stress; 

and 27 market participants, each with a 

same side position of 25,000 contracts, 

would have to exercise all of their BITB 

options to place the BITB shares under 

stress.109 Based on the Commission’s 

review of this information and analysis, 

the Commission concludes that the 

proposed position and exercise limits 

are designed to prevent investors from 

disrupting the market for the underlying 

securities by acquiring and exercising a 

number of options contracts 

disproportionate to the deliverable 

supply and average trading volume of 

the underlying security, and to prevent 

the establishment of options positions 

that can be used or might create 

incentives to manipulate or disrupt the 

underlying market so as to benefit the 

options position. 

The proposal excludes the Bitcoin 

Fund options from FLEX trading.110

Excluding Bitcoin Fund options from 

FLEX trading will allow the 

Commission to consider the listing of 

FLEX options on the Bitcoin Funds in 

the context of any separate proposal to 

list such options. 

C. Surveillance 

As described more fully above, the 

Exchange states that the same 

surveillance procedures applicable to all 

other options currently listed and traded 

on the Exchange will apply to options 

on the Bitcoin Funds.111 The Exchange 

states that its market surveillance staff 

would have access to the surveillances 

conducted by its affiliate, NYSE Arca, 

Inc. with respect to the Bitcoin Funds 

and would review activity in the 

underlying Bitcoin Funds when 

conducting surveillance for market 

abuse or manipulations in options on 

the Bitcoin Funds.112 Additionally, the 

Exchange states that it is a member of 

the Intermarket Surveillance Group 

(‘‘ISG’’) under the Intermarket 

Surveillance Group Agreement, and that 

ISG members work together to 

coordinate surveillance and 

investigative information sharing in the 

stock, options, and futures markets.113

CME also is a member of ISG. In 

approving the Bitcoin ETPs, the 

Commission concluded that: 

fraud or manipulation that impacts prices in 

spot bitcoin markets would likely similarly 

impact CME bitcoin futures prices. And 

because the CME’s surveillance can assist in 

detecting those impacts on CME bitcoin 

futures prices, the Exchanges’ comprehensive 

surveillance-sharing agreement with the 

CME—a U.S. regulated market whose bitcoin 

futures market is highly correlated to spot 

bitcoin—can reasonably be expected to assist 

in surveilling for fraudulent and 

manipulative acts and practices in the 

specific context of [the Bitcoin ETPs].114

Together, these surveillance 

procedures should allow the Exchange 

to investigate suspected manipulations 

or other trading abuses in options on the 

Bitcoin Funds. 

D. Retail Customers 

The Exchange states that applicable 

Exchange rules will require that 

customers receive appropriate 

disclosure before trading options in 

Bitcoin Funds.115 Further, the Exchange 

states that brokers opening accounts and 

recommending options transactions 

must comply with relevant customer 

suitability standards.116

Existing rules governing broker-dealer 

conduct when dealing with retail 

customers will apply to the proposed 

Bitcoin Fund options. For example, the 

Exchange’s rules require its members to 

‘‘exercise due diligence to learn the 

essential facts as to the customer and his 

investment objectives and financial 

situation.’’ 117 In fulfilling this 

obligation, the member must consider, 

among other things, a customer’s 

investment objectives; employment 

status; estimated annual income; 

estimated net worth; and investment 

experience and knowledge.118 Further, 

FINRA’s heightened suitability 

requirements for options trading 

accounts require that a person 

recommending an opening position in 

any option contract have ‘‘a reasonable 

basis for believing, at the time of making 

the recommendation, that the customer 

has such knowledge and experience in 

financial matters that he may reasonably 

be expected to be capable of evaluating 

the risks of the recommended 

transaction, and is financially able to 

bear the risks of the recommended 

position in the option contract.’’ 119


lotter on DSK11XQN23PROD with NOTICES1
84972 Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Notices 

120See Amendment No. 3 at 11–12. 

121The Commission recognizes that position 

limits should not be established at levels that are 

so low as to discourage participation in the options 

market by institutions and other investors with 

substantial hedging needs or to prevent specialists 

and market makers from adequately meeting their 

obligations to maintain a fair and orderly market. 

See, e.g., Securities Exchange Act Release Nos. 

21907 (Mar. 29, 1985), 50 FR 13440 (Apr. 4, 1985) 

(order approving File Nos. SR–CBOE–84–21, SR– 

Amex–84–30, SR–Phlx–84–25, and SR–PSE–85–1); 

40875 (Dec. 31, 1998), 64 FR 1842, 1843 (Jan. 12, 

1999) (order approving File Nos. SR–CBOE–98–25; 

Amex–98–22; PCX–98–33; and Phlx–98–36). The 

Commission finds that the proposed position and 

exercise limits are consistent with these objectives. 

122 15 U.S.C. 78s(b)(2). 

123 15 U.S.C. 78f(b)(5). 

124 15 U.S.C. 78s(b)(2) 

125 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

IV. Solicitation of Comments on 

Amendment No. 3 to the Proposed Rule 

Change 

Interested persons are invited to 

submit written data, views, and 

arguments concerning whether 

Amendment No. 3 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– 

NYSEAMER–2024–49 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–NYSEAMER–2024–49. 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–NYSEAMER–2024–49 and should 

be submitted on or before November 14, 

2024. 

V. Accelerated Approval of 

Amendment No. 3 

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the Act, 

for approving Amendment No. 3 prior to 

the 30th day after the date of 

publication of notice of Amendment No. 

3 in the Federal Register. As described 

more fully above, Amendment No. 3 

narrows the scope of the proposal to 

provide for the listing of options on 

GBTC, BTC, and BITB; provides 

additional information and analysis of 

trading data for the Bitcoin Funds in 

support of the proposal, including the 

proposed position and exercise limits of 

25,000 contracts; provides additional 

information related to the Exchange’s 

surveillance program, including the 

manner in which the Exchange would 

surveil suspicious trading activity in the 

underlying Bitcoin Funds and where the 

Exchange would obtain information 

about the bitcoin market; and provides 

that the Exchange will not list FLEX 

options on the Bitcoin Funds. 

Amendment No. 3 provides data and 

analysis supporting the proposed 

position and exercise limits and states, 

among other things, that the proposed 

position and exercise limits would 

represent approximately 0.9% of the 

outstanding shares of GBTC, 0.7% of the 

outstanding shares of BTC, and 3.6% of 

the outstanding shares of BITB.120 The 

Commission concludes that proposed 

position and exercise limits are 

designed to minimize the potential for 

manipulations or disruptions of the 

underlying market.121 Amendment No. 

3 also describes in greater detail the 

surveillance procedures that will apply 

to the proposed Bitcoin Fund options. 

The additional information regarding 

these procedures assists the 

Commission in evaluating the proposal 

and determining that the proposal is 

consistent with the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange, as 

discussed above. In addition, 

Amendment No. 3 revises the proposal 

to exclude Bitcoin Fund options from 

FLEX trading. Excluding Bitcoin Fund 

options from FLEX trading will allow 

the Commission to consider the listing 

of FLEX options on the Bitcoin Funds 

in the context of any separate proposal 

to list such options. Accordingly, the 

Commission finds good cause, pursuant 

to Section 19(b)(2) of the Act,122 to 

approve the proposed rule change, as 

modified by Amendment No. 3 on an 

accelerated basis. 

VI. Conclusion 

For the reasons set forth above, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 3, is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange and, in 

particular, the requirements of Section 

6(b)(5) of the Act.123

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,124 that the 

proposed rule change (SR–NYSEAMER– 

2024–49), as modified by Amendment 

No. 3, is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.125

J. Matthew DeLesDernier, 

Deputy Secretary. 

[FR Doc. 2024–24640 Filed 10–23–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101383; File No. SR–LCH 

SA–2024–002] 

Self-Regulatory Organizations; LCH 

SA; Notice of Filing of Amendment No. 

1 and Partial Amendment No. 1 to 

Proposed Rule Change Relating to the 

CDSClear Select Membership Model 

October 18, 2024. 

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

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4,2 notice is 

hereby given that on March 13, 2024, 

Banque Centrale de Compensation, 

which conducts business under the 

name LCH SA (‘‘LCH SA’’), filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change (‘‘Proposed Rule 

Change’’), as described in Items I, II and 

III below, which Items have been 

primarily prepared by the clearing 

agency. The Proposed Rule Change was 


lotter on DSK11XQN23PROD with NOTICES1