84948 Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Notices 

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. 

5Amendment No. 2 narrows the scope of the 

proposal to the Fidelity Wise Origin Bitcoin Fund 

and the ARK 21Shares Bitcoin ETF; proposes new 

position and exercise limits for options on the 

funds and provides justification and analysis for the 

proposed position and exercise limits; provides 

additional discussion of surveillance procedures 

that will apply to the proposed options; and 

eliminates references to the applicability of 

specified Interpretations and Policies in Exchange 

Rule 8.30. 

6Amendment No. 3 narrows the scope of the 

proposal by providing that options on the Fidelity 

Wise Origin Bitcoin Fund and the ARK 21Shares 

Bitcoin ETF will not be available for FLEX trading. 

FLEX Options are flexible exchange options. A 

FLEX Option on an equity security may be referred 

to as a ‘‘FLEX Equity Option,’’ and a FLEX Option 

on an index may be referred to as a ‘‘FLEX Index 

Option.’’ See Exchange Rule 1.1 The Exchange may 

authorize for trading a FLEX Option class on any 

equity security or index if it may authorize for 

trading a non-FLEX Option class on that equity 

security or index pursuant to Exchange Rules 4.3 

and 4.10, respectively, even if the Exchange does 

not list that non-FLEX Option class for trading. See 

Exchange Rule 4.20. There are no position limits for 

FLEX Equity Options, other than as set forth in 

Exchange Rules 8.35(c)(1)(B) and (d). See Exchange 

Rule 8.35(c)(1)(A). Amendment Nos. 2 and 3 are 

available on the Exchange’s website at https://

www.cboe.com/us/options/regulation/rule_filings/. 

7Rule 1.1 defines a ‘‘Unit’’ (which may also be 

referred to as an ETF) as a share or other security 

traded on a national securities exchange and 

defined as an NMS stock as set forth in Rule 4.3. 

8See Securities Exchange Act Release No. 99306 

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

2024) (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 Bitcoin-Based Commodity-Based 

Trust Shares and Trust Units) (‘‘Bitcoin ETP 

Approval Order’’). 

9See Rule 4.3, Interpretation and Policy .06(a), 

which permits options trading on Units that 

represent (1) 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); (2) interests in a 

trust or similar entity that holds a specified nonU.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’’); (3) 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’’); (4) interests in the SPDR Gold Trust, the 

iShares COMEX Gold Trust, the iShares Silver 

Trust, the Aberdeen Standard Physical Silver Trust, 

the Aberdeen Standard Physical Gold Trust, the 

Aberdeen Standard Physical Palladium Trust, the 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101387; File No. SR– 

CBOE–2024–035] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing of 

Amendment Nos. 2 and 3 and Order 

Granting Accelerated Approval of a 

Proposed Rule Change, as Modified by 

Amendment Nos. 2 and 3, To Permit 

the Listing and Trading of Options on 

Bitcoin Exchange-Traded Funds 

October 18, 2024. 

On August 19, 2024, Cboe Exchange, 

Inc. (‘‘Cboe’’ or ‘‘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 

ARK21Shares Bitcoin ETF, the Invesco 

Galaxy Bitcoin ETF, the Franklin 

Bitcoin ETF, the VanEck Bitcoin Trust, 

the WisdomTree Bitcoin Fund, the 

Grayscale Bitcoin Trust BTC, the 

Bitwise Bitcoin ETF, the iShares Bitcoin 

Trust ETF, 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 27, 2024, the Exchange filed 

Amendment No. 1 to the proposed rule 

change. On September 30, 2024, the 

Exchange withdrew Amendment No. 1 

and filed Amendment No. 2 to the 

proposal, which supersedes and 

replaces the original proposal in its 

entirety.5 On October 10, 2024, the 

Exchange filed Amendment No. 3 to the 

proposal.6 The Commission received no 

comments regarding the proposal. The 

Commission is publishing this notice to 

solicit comments on Amendment Nos. 2 

and 3 from interested persons, and is 

approving the proposed rule change, as 

modified by Amendment Nos. 2 and 3, 

on an accelerated basis. 

I. The Exchange’s Description of the 

Proposed Rule Change, as Modified by 

Amendment Nos. 2 and 3 

The Exchange filed with the 

Commission a proposal to list and trade 

options on the Fidelity Wise Origin 

Bitcoin Fund and the ARK 21Shares 

Bitcoin ETF. The text of the proposed 

rule change is provided in Exhibit 5. 

The text of the proposed rule change is 

also available on the Exchange’s website 

https://www.cboe.com/us/options/ 

regulation/rule_filings/, at the 

Exchange’s Office of the Secretary, 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 4.3 regarding the criteria for 

underlying securities. Specifically, the 

Exchange proposes to amend Rule 4.3, 

Interpretation and Policy .06(a)(4) to 

allow the Exchange to list and trade 

options on Units 7 that represent 

interests in the Fidelity Wise Origin 

Bitcoin Fund (the ‘‘Fidelity Fund’’) and 

the ARK 21Shares Bitcoin ETF (the 

‘‘ARK 21 Fund’’ and, with the Fidelity 

Fund, the ‘‘Bitcoin Funds’’) 8, 

designating them as ‘‘Units’’ deemed 

appropriate for options trading on the 

Exchange. Current Rule 4.3, 

Interpretation and Policy .06 provides 

that, subject to certain other criteria set 

forth in that Rule, securities deemed 

appropriate for options trading include 

Units that represent certain types of 

interests,9 including interests in certain 


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Aberdeen Standard Physical Platinum Trust, the 

Sprott Physical Gold Trust or the Goldman Sachs 

Physical Gold ETF; or (5) 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’’). 

10The trust may include minimal cash. 

11Rule 4.3, Interpretation and Policy .01 provides 

for guidelines to be by the Exchange when 

evaluating potential underlying securities for 

Exchange option transactions. 

12The criteria and guidelines for a security to be 

considered widely held and actively traded are set 

forth in Rule 4.3, Interpretation and Policy .01, 

subject to exceptions. 

13An ‘‘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’’). 

14The Exchange continues to believe assets under 

management (‘‘AUM’’), rather than shares 

outstanding and number of holders, is a better 

measure of investable capacity of ETFs and a more 

appropriate figure for determining position and 

exercise limits of ETFs and looks forward to further 

discussions with the Commission staff on this topic. 

specific trusts that hold financial 

instruments, money market instruments, 

or precious metals (which are deemed 

commodities). 

The Bitcoin Funds are Bitcoin-backed 

commodity ETFs structured as trusts. 

Similar to any Unit currently deemed 

appropriate for options trading under 

Rule 4.3, Interpretation and Policy .06, 

the investment objective of each Bitcoin 

Fund is for its shares to reflect the 

performance of Bitcoin (less the 

expenses of the trust’s operations), 

offering investors an opportunity to gain 

exposure to Bitcoin without the 

complexities of Bitcoin delivery. As is 

the case for Units currently deemed 

appropriate for options trading, a 

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.10 The Bitcoin Funds 

provide investors with cost-efficient 

alternatives that allow a level of 

participation in the Bitcoin market 

through the securities market. The 

primary substantive difference between 

Bitcoin Funds and Units currently 

deemed appropriate for options trading 

are that Units may hold securities, 

certain financial instruments, and 

specified precious metals (which are 

deemed commodities), while Bitcoin 

Funds hold Bitcoin (which is also 

deemed a commodity). 

The Exchange believes each Bitcoin 

Fund satisfies the Exchange’s initial 

listing standards for Units on which the 

Exchange may list options. Specifically, 

each Bitcoin Fund satisfies the initial 

listing standards set forth in Rule 4.3, 

Interpretation and Policy .06(b), as is the 

case for other Units on which the 

Exchange lists options (including trusts 

that hold commodities). Rule 4.3, 

Interpretation and Policy .06 requires 

that Units must either (1) meet the 

criteria and standards set forth in Rule 

4.3, Interpretation and Policy .01(a),11 or 

(2) be available for creation or 

redemption each business day from or 

through the issuer in cash or in kind at 

a price related to net asset value, and 

the issuer must be obligated to issue 

Units 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. Each Bitcoin 

Fund satisfies Rule 4.3, Interpretation 

and Policy .06(b)(2), as each is subject 

to this creation and redemption process. 

While not required by the Rules for 

purposes of options listings, the 

Exchange believes each Bitcoin Fund 

satisfies the criteria and guidelines set 

forth in Rule 4.3, Interpretation and 

Policy .01. Pursuant to Rule 4.3(a), a 

security (which includes a Unit) 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 Securities 

Exchange Act of 1934, as amended (the 

‘‘Act’’)), and be characterized by a 

substantial number of outstanding 

shares that are widely held and actively 

traded.12 Each Bitcoin Fund is an NMS 

Stock as defined in Rule 600 of 

Regulation NMS under the Act.13 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 7, 2024, the Bitcoin 

Funds had the following number of 

shares outstanding: 

Bitcoin Fund Shares 

outstanding 

Fidelity Fund ......................... 201,100,100 

ARK 21 Fund ........................ 45,495,000 

Each Bitcoin Fund had significantly 

more than 7,000,000 shares outstanding 

(approximately 29 and 6.5 times that 

amount, respectively), which is the 

minimum number of shares of a 

corporate stock that the Exchange 

generally requires to list options on that 

stock pursuant to Rule 4.3, 

Interpretation and Policy .01(a)(1). 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 the specified dates: 

Bitcoin Fund Beneficial 

holders Date 

Fidelity Fund ..... 279,656 6/27/2024 

ARK 21 Fund .... 69,425 6/26/2024 

As this table shows, each Bitcoin Fund 

has significantly more than 2,000 

beneficial holders (approximately 140 

and 35 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 Rule 4.3, 

Interpretation and Policy .01(a)(2). 

Therefore, the Exchange believes the 

shares of each Bitcoin Fund are widely 

held.14


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15The Bitcoin Funds began trading on January 11, 

2024. 

16See Rule 4.2, which provides that the rights 

and obligations of holders and writers are set forth 

in the Rules of the Options Clearing Corporation 

(‘‘OCC’’); and Equity Options Product 

Specifications January 3, 2024), available at Equity 

Options Specifications (cboe.com); see also OCC 

Rules, Chapters VIII (which governs exercise and 

assignment) and Chapter IX (which governs the 

discharge of delivery and payment obligations 

arising out of the exercise of physically settled stock 

option contracts). 

17See Rule 4.5(b). The monthly expirations are 

subject to certain listing criteria for underlying 

securities described within Rule 4.3. 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 4.5(c), additional series of options 

of the same class may be opened for trading on the 

Exchange when the Exchange deems it necessary to 

maintain an orderly market, to meet customer 

demand or when the market price of the underlying 

stock moves more than five strike prices from the 

initial exercise price or prices. 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. 

18See Rule 4.5(d). 

19See Rule 4.5(g). 

20See Rule 4.5(e). 

21The 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 4.5(d), (e), 

and (g) specifically sets forth intervals between 

strike prices on Quarterly Options Series, Short 

Term Option Series, and Monthly Options Series, 

respectively. 

22See Rule 4.5, Interpretation and Policy .01(a). 

23See Rule 4.5, Interpretation and Policy .01(b). 

24See Rule 4.5, Interpretation and Policy .04. 

25See Rule 4.5, Interpretation and Policy .01(f). 

26 If options on a Bitcoin Fund are eligible to 

participate in the Penny Interval Program, the 

minimum increment will be $0.01 for series with 

a price below $3.00 and $0.05 for series with a price 

at or above $3.00. See 5.4(d) (which describes the 

requirements for the Penny Interval Program). 

The Exchange also believes the shares 

of each Bitcoin Fund are actively traded. 

As of August 7, 2024, the total trading 

volume (by shares) for each fund for the 

six-month period of February 8 through 

August 7, 2024 and the approximate 

average daily volume (‘‘ADV’’) (in 

shares and notional) over the 30-day 

period of July 9 through August 7, 2024 

for each Bitcoin Fund was as follows: 

Bitcoin Fund 

6-Month 

trading volume 

(shares) 

30-Day ADV 

(shares) 

30-Day ADV 

(notional $) 

Fidelity Fund ................................................................................................................ 1,112,861,581 6,014,335 250,354,755 

ARK 21 Fund ............................................................................................................... 297,360,739 1,893,335 90,484,307 

As demonstrated above, despite the fact 

that the Bitcoin Funds had been trading 

for approximately seven months 15 only 

as of August 7, 2024, the six-month 

trading volume for each as of that date 

was substantially higher than 2,400,000 

shares (approximately 464 and 124 

times that amount, respectively), which 

is the minimum 12-month volume the 

Exchange generally requires for a 

corporate stock in order to list options 

on that security as set forth in Rule 4.3, 

Interpretation and Policy .01. 

Additionally, as of August 7, 2024, the 

trading volume for each Bitcoin Fund 

was in the top 5% of all ETFs that are 

currently trading. The Exchange 

believes this data demonstrates each 

Bitcoin Fund is characterized as having 

shares that are actively traded. 

Options on the Bitcoin Funds will be 

subject to the Exchange’s continued 

listing standards set forth in Rule 4.4, 

Interpretation and Policy .06 for Units 

deemed appropriate for options trading 

pursuant to Rule 4.3, Interpretation and 

Policy .06. Specifically, Rule 4.4, 

Interpretation and Policy .06 provides 

that Units that were initially approved 

for options trading pursuant to Rule 4.3, 

Interpretation and Policy .06 shall be 

deemed not to meet the requirements for 

continued approval, and the Exchange 

shall not open for trading any additional 

series of option contracts of the class 

covering that such Units, if the Units 

cease to be an NMS stock or the Units 

are halted from trading in their primary 

market. Additionally, options on Units 

may be subject to the suspension of 

opening transactions in any of the 

following circumstances: (1) in the case 

of options covering Units approved for 

trading under Rule 4.3, Interpretation 

and Policy .06(b)(1), in accordance with 

the terms of paragraphs (a), (b), and (c) 

of Rule 4.4, Interpretation and Policy 

.01; (2) in the case of options covering 

Units approved for trading under Rule 

4.3 Interpretation and Policy .06(b)(2) 

(as is the case for the Bitcoin Funds), 

following the initial twelve-month 

period beginning upon the 

commencement of trading in the Units 

on a national securities exchange and 

are defined as an NMS stock, there are 

fewer than 50 record and/or beneficial 

holders of such Units for 30 or more 

consecutive trading days; (3) the value 

of the index or portfolio of securities, 

non-U.S. currency, or portfolio of 

commodities including commodity 

futures contracts, options on commodity 

futures contracts, swaps, forward 

contracts and/or options on physical 

commodities and/or financial 

instruments and money market 

instruments on which the Units are 

based is no longer calculated or 

available; or (4) such other event shall 

occur or condition exist that in the 

opinion of the Exchange makes further 

dealing in such options on the Exchange 

inadvisable. 

Options on each Bitcoin Fund will be 

physically settled contracts with 

American-style exercise.16 Consistent 

with current Rule 4.5, which governs 

the opening of options series on a 

specific underlying security (including 

Units), the Exchange will open at least 

one expiration month for options on 

each Bitcoin Fund 17 at the 

commencement of trading on the 

Exchange and may also list series of 

options on a Bitcoin Fund for trading on 

a weekly,18 monthly,19 or quarterly 20

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

that expire from 12 to 180 months from 

the time they are listed. 

Pursuant to Rule 4.5, Interpretation 

and Policy .07, which governs strike 

prices of series of options on Units, the 

interval of strikes prices for series of 

options 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 $200.21 Additionally, the 

Exchange may list series of options 

pursuant to the $1 Strike Price Interval 

Program,22 the $0.50 Strike Program,23

the $2.50 Strike Price Program,24 and 

the $5 Strike Program.25 Pursuant to 

Rule 5.4, 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 $0.10.26

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 


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27See Amendment No. 3 at 3. 

28The Exchange also proposes to amend the last 

sentence of Rule 8.30 by deleting the references to 

Interpretations and Policies .02 and .04. Therefore, 

the rule as proposed would state that limits shall 

be determined in the manner described in the 

Interpretations and Policies in that Rule. The 

Exchange believes all the Interpretations and 

Policies to Rule 8.30 are relevant for determining 

position limits pursuant to Rule 8.30, not just the 

two currently specified ones. 

29Over 80% of the ETFs used for comparison 

have a limit of at least 200,000, and more than half 

have a limit of 250,000. Additionally, the threemonth ADV of the majority of the ETFs used for 

comparison was lower than the Fidelity Fund threemonth ADV of 5,665,027 shares. 

30Nearly 80% of the ETFs used for comparison 

have a limit of at least 75,000 (and up to 250,000). 

Additionally, the three-month ADV of the majority 

of ETFs used for comparison was lower (many more 

than four times lower) than the ARK 21 Fund threemonth ADV of 1,737,327 shares. 

increments set forth in Rules 4.5 and 

5.4, as applicable. 

Rule 4.20 currently permits the 

Exchange to authorize for trading a 

FLEX option class on any equity 

security if it may authorize for a trading 

a non-FLEX option class on that equity 

security pursuant to Rule 4.3. The 

proposed rule change amends Rule 4.20 

to exclude the Bitcoin Funds from this 

provision.27

Bitcoin Fund options will trade in the 

same manner as any other Unit options 

on the Exchange. The Exchange Rules 

that currently apply to the listing and 

trading of all Unit options on the 

Exchange, including, for example, Rules 

that govern listing criteria, expirations, 

exercise prices, minimum increments, 

margin requirements, customer 

accounts, and trading halt procedures 

will apply to the listing and trading of 

Bitcoin Funds options on the Exchange 

in the same manner as they apply to 

other options on all other Units that are 

listed and traded on the Exchange, 

including the precious-metal backed 

commodity Units already deemed 

appropriate for options trading on the 

Exchange pursuant to current Rule 4.3, 

Interpretation and Policy .06(a)(4). 

The Exchange also proposes to amend 

Rules 8.30 and 8.42. Specifically, the 

Exchange proposes to adopt Rule 8.30, 

Interpretation and Policy .10 to provide 

a position limit of 25,000 same side 

option contracts for each Bitcoin Fund 

option. Additionally, pursuant to the 

proposed change to Rule 8.42, 

Interpretation and Policy .02, the 

exercise limits for options on each 

Bitcoin Fund will be equivalent to this 

proposed position limit.28

The Exchange determined these 

proposed position and exercise limits 

considering, among other things, the 

approximate six-month average daily 

volume (‘‘ADV’’) and outstanding shares 

of each underlying Bitcoin Fund (which 

as discussed above demonstrate that 

each Bitcoin Fund is widely held and 

actively traded and thus justify these 

conservatively proposed position 

limits), as set forth below, along with 

market capitalization (as of August 7, 

2024): 

Underlying Bitcoin Fund Six-month ADV 

(shares) 

Outstanding 

shares 

Market capitalization 

($) 

Fidelity Fund .................................................................................................... 8,902,893 201,100,100 14,217,013,188 

ARK 21 Fund ................................................................................................... 2,378,886 45,495,000 2,487,666,600 

The Exchange then compared the 

number of outstanding shares of the 

Bitcoin Funds to those of other ETFs.29

The following table provides the 

approximate average position (and 

exercise limit) of ETF options with 

similar outstanding shares (as of August 

27, 2024), compared to the proposed 

position and exercise limit for the 

Bitcoin Fund options: 30

Underlying 

Bitcoin Fund 

Average 

Limit of 

other 

ETF options 

(contracts) 

Proposed 

limit 

(contracts) 

Fidelity Fund ..... 188,110 25,000 

ARK 21 Fund .... 108,696 25,000 

The Exchange considered current 

position and exercise limits of options 

on ETFs with outstanding shares 

comparable to those of each Bitcoin 

Fund, with the proposed limit 

significantly lower (between two and 

ten times lower) than the average limits 

of the options on the other ETFs. As 

discussed above, the Bitcoin Funds are 

actively held and widely traded: (1) 

each Bitcoin Fund (as of August 7, 2024) 

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 Rule 4.3, 

Interpretation and Policy .01(a)(1); (2) 

each Bitcoin Fund (as of the dates listed 

above) had significantly more than 

2,000 beneficial holders, which is the 

minimum number of holders the 

Exchange generally requires for 

corporate stock in order to list options 

on that stock pursuant to Rule 4.3, 

Interpretation and Policy .01(a)(2); and 

(3) each Bitcoin Fund had a six-month 

trading volume substantially higher 

than 2,400,000 shares, 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 Rule 4.3, 

Interpretation and Policy .01. 

With respect to outstanding shares, if 

a market participant held the maximum 

number of positions possible pursuant 

to the proposed position and exercise 

limits, the equivalent shares represented 

by the proposed position/exercise limit 

would represent the following 

approximate percentage of current 

outstanding shares: 

Underlying Bitcoin Fund 

Proposed 

position/exercise limit 

(in equivalent shares) 

Outstanding 

shares 

Percentage of 

outstanding 

shares 

Fidelity Fund .................................................................................................... 2,500,000 201,100,100 1.2 

ARK 21 Fund ................................................................................................... 2,500,000 45,495,000 5.5 

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. 

Cboe Options Rule 8.30, 

Interpretation and Policy .02, provides 

two methods of qualifying for a position 

limit tier above 25,000 option contracts. 


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31 In the ‘‘Minimum Shares Outstanding’’ column 

in the chart below, 6,300,000 shares is the 

minimum number of outstanding shares an 

underlying security must have for the Exchange to 

continue to list options on that security, so this 

would be the smallest number of outstanding shares 

permissible for any corporate option that would 

have a position limit of 25,000 contract. See Rule 

4.5, Interpretation and Policy .01. This rule applies 

to corporate stock options but not ETF options, 

which currently have no requirement regarding 

outstanding shares of the underlying ETF for the 

Exchange to continue listing options on that ETF. 

Therefore, there may be ETF options trading for 

which the 25,000 contract position limits represents 

[sic] an even larger percentage of outstanding shares 

of the underlying ETF than set forth above. 

32As these percentages are based on the 

minimum number of outstanding shares an 

underlying security must have to qualify for the 

applicable position limit, these are the highest 

possible percentages that would apply to any option 

subject to that position and exercise limit. 

33The surveillance program includes surveillance 

patterns for price and volume movements as well 

as patterns for potential manipulation (e.g., 

spoofing and marking the close). 

34Cboe BZX Exchange, Inc. is an affiliated market 

of the Exchange. 

35Section 19(g)(1) of the Act, among other things, 

requires every self-regulatory organization (‘‘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 (‘‘common members’’). 

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. 

36See Bitcoin ETP Approval Order. 

The first method is based on six-month 

trading volume in the underlying 

security, and the second method is 

based on slightly lower six-month 

trading volume and number of shares 

outstanding in the underlying security. 

An underlying stock or ETF that 

qualifies for method two based on 

trading volume and number of shares 

outstanding would be required to have 

the minimum number of outstanding 

shares as shown in middle column of 

the table below. 

The table, which provides the 

equivalent shares of the position limits 

applicable to equity options, including 

ETFs, further represents the percentages 

of the minimum number of outstanding 

shares that an underlying stock or ETF 

must have to qualify for that position 

limit (under the second method 

described above), all of which are higher 

than the percentages for the Bitcoin 

Funds.31

Position/exercise 

limit 

(in equivalent shares) 

Minimum 

outstanding 

shares 

Percentage of 

outstanding 

shares 

2,500,000 ................................................................................................................................................................... 6,300,000 40.0 

5,000,000 ................................................................................................................................................................... 40,000,000 12.5 

7,500,000 ................................................................................................................................................................... 120,000,000 6.3 

20,000,000 ................................................................................................................................................................. 240,000,000 8.3 

25,000,000 ................................................................................................................................................................. 300,000,000 8.3 

The equivalent shares represented by 

the proposed position and exercise 

limits for each Bitcoin Fund as a 

percentage of outstanding shares of the 

underlying Bitcoin Fund is significantly 

lower than the percentage for the lowest 

possible position limit for equity 

options of 25,000 (under 6% compared 

to 40%) and is lower than that 

percentage for each current position 

limit bucket.32

Further, the proposed position and 

exercise limits for each Bitcoin Fund 

option are significantly below the limits 

that would otherwise apply pursuant to 

current Rule 8.30. 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 market capitalization, average 

daily volume, and high number of 

outstanding shares of the Bitcoin Funds. 

All of the above information 

demonstrates that the proposed position 

and exercise limits for the Bitcoin Fund 

options are more than reasonable and 

appropriate. The trading volume, ADV, 

and outstanding shares of each Bitcoin 

Fund demonstrate that these funds are 

actively traded and widely held, and 

proposed position and exercise limits 

are well below those of other ETFs with 

similar market characteristics. The 

proposed position and exercise limits 

are the lowest position and exercise 

limits available for equity options in the 

industry, are extremely conservative, 

and are more than appropriate given 

each Bitcoin Fund’s market 

capitalization, ADV, and high number of 

outstanding shares. 

Today, the Exchange has an adequate 

surveillance program in place for 

options. Cboe intends to apply those 

same program procedures to options on 

the Bitcoin Funds that it applies to the 

Exchange’s other options products.33

Cboe’s market surveillance staff would 

have access to the surveillances 

conducted by Cboe BZX Exchange, 

Inc.34 with respect to the Bitcoin Funds 

and would review activity in the 

underlying Bitcoin Funds when 

conducting surveillances for market 

abuse or manipulation in the options on 

the Bitcoin Funds. 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, Cboe has a Regulatory Services 

Agreement with the Financial Industry 

Regulatory Authority (‘‘FINRA’’) for 

certain market surveillance, 

investigation and examinations 

functions. Pursuant to a multi-party 

17d–2 joint plan, all options exchanges 

allocate amongst themselves and FINRA 

responsibilities to conduct certain 

options-related market surveillance that 

are common to rules of all options 

exchanges.35

The underlying shares of spot bitcoin 

exchange-traded products (‘‘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.36 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 


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37See Bitcoin ETP Approval Order, 89 FR at 

3010–11. 

38See Securities Exchange Act Release Nos. 

99290 (January 8, 2024), 89 FR 2338, 2343, 2347– 

2348 (January 12, 2024) (SR–CboeBZX–2023–044) 

Notice of Filing of Amendment No. 3 to a Proposed 

Rule Change to List and Trade Shares of the Fidelity 

Wise Origin Bitcoin Fund Under BZX Rule 

14.11(e)(4), Commodity-Based Trust Shares); and 

99288 (January 8, 2024), 89 FR 2387, 2392, 2399– 

2400 (January 12, 2024) (SR–CboeBZX–2023–028) 

(Notice of Filing of Amendment No. 5 to a Proposed 

Rule Change To List and Trade Shares of the ARK 

21Shares Bitcoin ETF Under BZX Rule 14.11(e)(4), 

Commodity-Based Trust Shares). See also Securities 

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

89 FR 3008, 3009 (January 17, 2024) (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 Bitcoin-Based Commodity-Based Trust 

Shares and Trust Units) (‘‘Bitcoin ETP Approval 

Order’’). 

39The Exchange understands from customers that 

investors have historically transacted in options on 

Units in the OTC options market if such options 

were not available for trading in a listed 

environment. 

40 15 U.S.C. 78f(b). 

41 15 U.S.C. 78f(b)(5). 

42 Id. 

43See Rule 4.3, Interpretation and Policy 

.06(a)(4). 

‘‘expected to assist in surveilling for 

fraudulent and manipulative acts and 

practices in the specific context of the 

[Bitcoin ETPs].’’ 37 In light of 

surveillance measures related to both 

options and futures as well as the 

underlying Bitcoin Funds,38 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. Further, 

the Exchange will implement any new 

surveillance procedures it deems 

necessary to effectively monitor the 

trading of options on Bitcoin ETPs. 

The Exchange has also analyzed its 

capacity and represents that it believes 

the Exchange and OPRA have the 

necessary systems capacity to handle 

the additional traffic associated with the 

listing of new series that may result 

from the introduction of options on 

Bitcoin Funds up to the number of 

expirations currently permissible under 

the Rules. Because the proposal is 

limited to two classes, the Exchange 

believes any additional traffic that may 

be generated from the introduction of 

Bitcoin Fund options will be 

manageable. 

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,39 but may prefer to 

trade such options in a listed 

environment to receive the benefits of 

trading listing options, including (1) 

enhanced efficiency in initiating and 

closing out positions; (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 Units that 

hold financial instruments, money 

market instruments, or precious metal 

commodities on which the Exchange 

may already list and trade options are 

trusts structured in substantially the 

same manner as Bitcoin 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 any 

Unit options, including Units that hold 

commodities (i.e., precious metals) that 

it currently lists and trades on the 

Exchange. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

Section 6(b) of the Act.40 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 41 requirements that the rules of 

an exchange be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

Additionally, the Exchange believes the 

proposed rule change is consistent with 

the Section 6(b)(5) 42 requirement that 

the rules of an exchange not be designed 

to permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

In particular, the Exchange believes 

that the proposal to list and trade 

options on the 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 the 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 lowercost 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 

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 

Units,43 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 Unit 

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 the Bitcoin 

Funds satisfy the initial listing 

standards and continued listing 

standards currently in the Exchange 

Rules applicable to options on all Units, 

including Units 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 


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44The 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). See 

Amendment No. 3 at 4. 45See Rule 8.30. The Exchange notes in the initial 

Rule Filing, the position and exercise limit for each 

Bitcoin Fund option would have been 25,000 

contracts once the options began trading (pursuant 

to Rule 8.30, no Bitcoin Fund option would have 

a higher position and exercise limit until the next 

time the Exchange conducted the review of limits). 

Therefore, this Amendment No. 2 is proposing to 

adopt the same or lower position and exercise 

limits as were practically proposed in the initial 

Rule Filing. 

46See Blockchain.com | Charts—Total Circulating 

Bitcoin. 

47See 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. 

48See CME Rulebook Chapter 5, Position Limit, 

Position Accountability and Reportable Level Table 

in the Interpretations & Special Notices. 

49 Id. 

of shares that are widely held and 

actively traded. Bitcoin Fund options 

will trade in the same manner as any 

other Unit options—the same Exchange 

Rules that currently govern the listing 

and trading of all Unit options, 

including permissible expirations, strike 

prices and minimum increments, and 

applicable 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 

ETF options.44

The Exchange believes the proposed 

position and exercise limits are 

designed to prevent fraudulent and 

manipulative acts and practices and 

promote just and equitable principles of 

trade, as they are designed 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. The proposed position and 

exercise limits in this Amendment No. 

2 for the Bitcoin Fund options are 

25,000 contracts, which is currently the 

lowest limit applicable to any equity 

options (including ETF options).45 The 

Exchange believes the proposed 

position and exercise limits are 

extremely conservative for each Bitcoin 

Fund option given the trading volume 

and outstanding shares for each. The 

information above demonstrates that the 

average position and exercise limits of 

options on ETFs with comparable 

outstanding shares and trading volume 

to those of the Bitcoin Funds are 

significantly higher than the proposed 

position and exercise limits for Bitcoin 

Fund options. Therefore, the proposed 

position and exercise limits for the 

Bitcoin Fund options are conservative 

relative to options on ETFs with 

comparable market characteristics. 

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 27, 2024, the global supply of 

Bitcoin was 19,745,940, and the price of 

one Bitcoin was approximately 

$59,466.82,46 which equates to a market 

capitalization of approximately $1.165 

trillion. 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 of Fidelity 

Fund shares or ARK 21 Fund shares, as 

applicable (if that market participant 

exercised all its options. The following 

table shows the share price of each 

Bitcoin Fund on August 27, 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 

August 27, 2024 

share price 

($) 

Value of 

2,500,000 shares of 

Bitcoin Fund 

($) 

Percentage of 

bitcoin market 

Fidelity Fund .......................................................................................... 54.33 135,825,000 0.01% 

ARK 21 Fund ......................................................................................... 62.08 155,200,000 0.01% 

Therefore, if a market participant with 

the maximum 25,000 same side 

contracts in either Fidelity Fund options 

or ARK 21 Fund options exercised all 

positions at one time, such an event 

would have no practical impact on the 

Bitcoin market. 

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.47

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 

August 28, 

2024 

Share price 

($) 

Number 

of option 

contracts 

Fidelity Fund ..... 51.47 114,532 

ARK 21 Fund .... 58.83 100,203 

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).48 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.49 If a position exceeds 

position limits because of an option 

assignment, CME permits market 

participants to liquidate the excess 


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50See Blockchain.com | Charts—Total Circulating 

Bitcoin (which also shows the price of one Bitcoin 

equal to $55,033.47). 

51See Pre-Effective Amendment No. 5 to Form S– 

1 Registration Statement No. 333–254652, Fidelity 

Fund, filed January 9, 2024, at 53–54; and 

Amendment No. 8 to Form S–1 Registration 

Statement No. 333–257474, ARK 21 Fund, filed 

January 9, 2024, at 15. 

52The market capitalization of Bitcoin would 

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

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

53This would be even more unlikely with respect 

to the Bitcoin Funds for which the Exchange 

proposes lower position limits. 

54The 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 8.30 were the 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. 

55For 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. 

56See Securities Exchange Act Release No. 39489 

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

(SR–CBOE–1997–11). 

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 proposed 

position and exercise limits in this 

Amendment No. 2 will have no material 

impact to the supply of Bitcoin. For 

example, consider again the proposed 

position limit of 25,000 option contracts 

for each Bitcoin Fund option. 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). As 

of August 7, 2024, the Bitcoin Funds 

had the number of shares outstanding 

set forth in the table below. The table 

below also 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 

Fidelity Fund 201,100,100 80 

ARK 21 Fund 45,495,000 18 

This means if 80 market participants 

had 25,000 same side positions in 

Fidelity Fund options, 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 18 

market participants had 25,000 same 

side positions in ARK 21 Fund options, 

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 either such event to occur; 

however, even if either such event did 

occur, the Exchange would not expect 

either 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. 

As of August 7, 2024, the global 

supply of Bitcoin was approximately 

19,736,528.50 Based on the $47.88 price 

of a Fidelity Fund share on August 7, 

2024, a market participant could have 

redeemed one Bitcoin for approximately 

1,149 Fidelity Fund shares. Another 

22,677,270,672 Fidelity Fund shares 

could be created before the supply of 

Bitcoin was exhausted. As a result, 

9,070 market participants would have to 

simultaneously exercise 25,000 same 

side positions in Fidelity Fund options 

to receive shares of the Fidelity Fund 

holding the entire global supply of 

Bitcoin. Similarly, based on the $54.68 

price of an ARK 21 Fund share on 

August 7, 2024, a market participant 

could have redeemed one Bitcoin for 

approximately 1,006 ARK 21 Fund 

Shares. Another 19,855 ARK 21 Fund 

shares could be created before the 

supply of Bitcoin were exhausted. As a 

result, 7,941 market participants would 

have to simultaneously exercise 25,000 

same side positions in ARK 21 Fund 

options to receive shares of the ARK 21 

Fund 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.51 The supply of Bitcoin is larger 

than the available supply of most 

securities.52 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.53

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.54 Position and exercise limits are 

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.55 ‘‘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.’’ 56 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 


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57See id. 

58See Pre-Effective Amendment No. 5 to Form S– 

1 Registration Statement No. 333–254652, Fidelity 

Fund, filed January 9, 2024, at 53—54; and 

Amendment No. 8 to Form S–1 Registration 

Statement No. 333–257474, ARK 21 Fund, filed 

January 9, 2024, at 15. 

59See Bitcoin ETP Approval Order. 

60See Securities Exchange Act Release No. 39489 

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

(SR–CBOE–1997–11). 

61See Rule 4.3, Interpretation and Policy 

.06(a)(4). 

62The Exchange notes the Commission recently 

approved a rule filing of another exchange to permit 

the listing and trading of options on the iShares 

Bitcoin Trust. See Securities Exchange Act Release 

No. 101128 (September 20, 2024), 89 FR 78942 

(September 26, 2024) (SR–ISE–2024–03). 

disruption of the options market itself, 

especially in illiquid options classes.’’ 57

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 2140.58 Each Registration 

Statement permits an unlimited number 

of shares of the applicable Bitcoin ETF 

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.59 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 above information 

demonstrating, among other things, that 

each Bitcoin Fund is characterized by a 

substantial number of outstanding 

shares that are actively traded and 

widely held, the Exchange believes the 

proposed position and exercise limits 

are extremely conservative compared to 

those of ETF options with similar 

market characteristics. 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 as well as the Bitcoin 

market.60

The Exchange represents that it has 

the necessary systems capacity to 

support the new Bitcoin Fund options. 

As discussed above, 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 Unit options, including 

Bitcoin Fund options. 

Finally, the Exchange believes the 

proposed change to amend the last 

sentence of Rule 8.30 by deleting the 

references to Interpretations and 

Policies .02 and .04 is consistent with 

the Act and will perfect the mechanism 

of a free and open market, by clarifying 

and making more accurate the 

Exchange’s Rulebook. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange does not believe that the 

proposed rule change will impose any 

burden on intramarket competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act 

as the Bitcoin Funds will be equally 

available to all market participants who 

wish to trade such options and will 

trade generally in the same manner as 

other options. The Exchange Rules that 

currently apply to the listing and 

trading of all Unit options on the 

Exchange, including, for example, Rules 

that govern listing criteria, expirations, 

exercise prices, minimum increments, 

margin requirements, customer 

accounts, and trading halt procedures 

will apply to the listing and trading of 

Bitcoin Funds options on the Exchange 

in the same manner as they apply to 

other options on all other Units that are 

listed and traded on the Exchange. Also, 

and as stated above, the Exchange 

already lists options on other 

commodity-based Units.61 Further, the 

Bitcoin Funds would need to satisfy the 

maintenance listing standards set forth 

in the Exchange Rules in the same 

manner as any other Unit for the 

Exchange to continue listing options on 

them. 

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. 

Additionally, other options exchanges 

are free to amend their listing rules, as 

applicable, to permit them to list and 

trade options on Bitcoin Funds.62 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. 

Finally, the Exchange does not believe 

the proposed change to amend the last 

sentence of Rule 8.30 by deleting the 

references to Interpretations and 

Policies .02 and .04 will impose any 

burden on intermarket competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act. 

The change is clarifying in nature, as the 

Exchange believes all the Interpretations 

and Policies to Rule 8.30 are relevant for 

determining position limits pursuant to 

Rule 8.30, not just the two currently 

specified ones, and therefore, the 

proposed change makes the Exchange’s 

Rulebook more accurate. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received written comments on the 

proposed rule change. 


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63 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). 

64 15 U.S.C. 78f. 

65 15 U.S.C. 78f(b)(5). 

66See Exchange Rule 4.3(a)(2). 

67See Amendment No. 2 at 8 and 12. 

68See id. 

69See Amendment No. 2 at 8. 

70See id. 

71See Amendment No. 2 at 9. 

72See id. at 12. 

73See 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’’). 

74 Id. 

75 Id. 

76See, 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). 

77See id. 

78See Amendment No. 2 and proposed Exchange 

Rules 8.30, Interpretation and Policy .10, and 8.42, 

Interpretation and Policy .02. 

79See Amendment No. 2 at 13–14. 

80The Exchange states that options on ETFs with 

outstanding shares similar to the Fidelity Fund had 

average position and exercise limits of 188,110 

contracts, and that options on ETFs with 

outstanding shares similar to the ARK 21 Fund had 

average position and exercise limits of 108,696 

contracts. See Amendment No. 2 at 13. 

81See Amendment No. 2 at 14 (using outstanding 

shares as of August 7, 2024). 

82Amendment No. 2 at 16. 

III. Discussion and Commission 

Findings 

After careful consideration, 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,63 and, in 

particular, the requirements of Section 6 

of the Act.64 Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,65 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.’’ 66 As described above, the 

Exchange states that, as of August 7, 

2024, the Fidelity Fund had 201,100,100 

shares outstanding and that, as of June 

27, 2024, the Fidelity Fund had 279,656 

beneficial holders.67 The Exchange 

states that, as of August 7, 2024, the 

ARK 21 Fund had 45,495,000 shares 

outstanding and that, as of June 26, 

2024, the ARK 21 Fund had 69,425 

beneficial holders.68 In addition, the 

Exchange states that, as of August 7, 

2024, the Fidelity Fund had six-month 

total trading volume of 1,112,861,581 

shares and, for the period from July 9, 

2024, through August 7, 2024, 30-day 

average daily volume of 6,014,335 

shares and 30-day average notional 

daily volume of $250,354,755.69 The 

Exchange states that, as of August 7, 

2024, the ARK 21 Fund had six-month 

total trading volume of 297,360,739 

shares and, for the period from July 9, 

2024, through August 7, 2024, 30-day 

average daily volume of 1,893,335 

shares and 30-day average notional 

daily volume of $90,484,307.70 The 

Exchange further states that, as of 

August 7, 2024, the trading volume for 

both Bitcoin Funds was in the top 5% 

of all ETFs trading at that time.71 In 

addition, the Exchange states that, as of 

August 7, 2024, the Fidelity Fund had 

a market capitalization of 

$14,217,013,188 and the ARK 21 Fund 

had a market capitalization of 

$2,487,666,600.72

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 4.3(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.73 In addition, such 

limits serve to reduce the possibility of 

disruption in the options market itself, 

especially in illiquid classes.74 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.75 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.76 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.77

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.78 In proposing these position and 

exercise limits, the Exchange 

considered, among other things, the 

approximate six-month ADV, 

outstanding shares, and market 

capitalization of each Bitcoin Fund.79

The Exchange states that the proposed 

position and exercise limits of 25,000 

contracts are significantly lower than 

the position and exercise limits of 

options on other ETFs with a similar 

number of outstanding shares.80 In 

addition, the Exchange states that the 

number of shares represented by the 

proposed position and exercise limits 

were equal to approximately 1.2% of the 

outstanding shares of the Fidelity Fund 

and approximately 5.5% of the 

outstanding shares of the ARK 21 

Fund.81 The Exchange further states that 

‘‘[t]he proposed position and exercise 

limits are the lowest position and 

exercise limits available for equity 

options in the industry, are extremely 

conservative, and are more than 

appropriate given each Bitcoin Fund’s 

market capitalization, ADV, and high 

number of outstanding share.’’ 82

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 


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83See Amendment No. 2 at 23. 

84 Id. 

85See id. 

86See id. at 23–24. 

87See id. at 24. 

88See id. 

89The Exchange bases this calculation on the 

number of Fidelity Fund and ARK 21 Fund shares 

outstanding as of August 7, 2024. See Amendment 

No. 2 at 26. 

90See id. at 34. 

91See id. at 29–30 (citing the Position Limit 

Order, supra note 70). 

92See supra note 73 and accompanying text. 

93See Securities Exchange Act Release No. 57352 

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

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

94See Amendment No. 2 at 14. 

95The Exchange bases this calculation on the 

number of Fidelity Fund and ARK 21 Fund shares 

outstanding as of August 7, 2024. See Amendment 

No. 2 at 25–26. 

96The 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 ETF options. See 

Amendment No. 3 at 4. 

97The surveillance program includes surveillance 

patterns for price and volume movements as well 

as patterns for potential manipulation (e.g., 

spoofing and marking the close). See Amendment 

No. 2 at 16. 

98Cboe BZX Exchange, Inc. is an affiliated market 

of the Exchange. See Amendment No. 2 at 17, 

footnote 28. 

99See Amendment No. 2 at 17. 

100See id. 

$1.165 trillion as of August 27, 2024.83

The Exchange calculated that with a 

position limit of 25,000 contracts 

(2,500,000 shares of the underlying 

Fund), as of August 27, 2024, a market 

participant could hold a position in 

shares of the Fidelity Fund that 

represented 0.01% of the bitcoin 

market, and a position in ARK 21 Fund 

shares that represented 0.01% of the 

Bitcoin market, positions that the 

Exchange states ‘‘would have no 

practical impact on the Bitcoin 

market.’’ 84

The Exchange states that the proposed 

position and exercise limits also are 

appropriate given position limits for 

Bitcoin futures.85 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 $589,500,000.86 The Exchange 

states that, as of that date, 114,532 

options on the Fidelity Fund, and 

100,203 options on the ARK 21 Fund, 

would be the equivalent of the 

$589,500,000 CME bitcoin futures 

notional value.87 The Exchange states 

that the option contract equivalent 

numbers are significantly higher than 

the proposed position and exercise limit 

of 25,000 contracts.88

In addition, the Exchange states that 

with a position limit of 25,000 contracts, 

80 market participants, each with a 

position of 25,000 contracts, would have 

to exercise all of their Fidelity Fund 

options to place the Fidelity Fund 

shares under stress, and 18 market 

participants, each with a position of 

25,000 contracts, would have exercise 

all of their ARK 21 Fund options to 

place the ARK 21 Fund shares under 

stress.89 Based on the information 

provided, demonstrating, among other 

things, that each Bitcoin Fund is 

characterized by a substantial number of 

outstanding shares that are actively 

traded and widely held, the Exchange 

believes the proposed position and 

exercise limits are extremely 

conservative compared to those of ETF 

options with similar market 

characteristics.90 The Exchange states 

that the proposed position and exercise 

limits reasonably and appropriately 

balance the liquidity provisioning in the 

market against the prevention of 

manipulation. 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 as well as the Bitcoin 

market.91

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.92 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.93 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 7, 2024, the proposed 

position and exercise limits of 25,000 

contracts represented 1.2% of the 

outstanding shares of the Fidelity Fund 

and 5.5% of the outstanding shares of 

the ARK 21 Fund.94 The Commission 

also has considered and reviewed the 

Exchange’s statement that with a 

position limit of 25,000 contracts, 80 

market participants, each with a same 

side position of 25,000 contracts, would 

have to exercise all of their Fidelity 

Fund options to place the Fidelity Fund 

shares under stress, and 18 market 

participants, each with a same side 

position of 25,000 contracts, would have 

to exercise all of their ARK 21 Fund 

options to place the ARK 21 Fund 

shares under stress.95 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.96

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. 

C. Surveillance 

As described more fully above, the 

Exchange states that it will apply its 

existing options surveillance program 

procedures to options on the Bitcoin 

Funds.97 The Exchange states that its 

market surveillance staff would have 

access to the surveillances conducted by 

Cboe BZX Exchange, Inc.98 with respect 

to the Bitcoin Funds and would review 

activity in the underlying Bitcoin Funds 

when conducting surveillances for 

market abuse or manipulation in the 

options on the Bitcoin Funds.99

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.100

CME also is a member of ISG. In 


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101See Bitcoin ETP Order, 89 FR at 3010–11. 

102See Exchange Rule 9.1(b). 

103See id. 

104See FINRA Rule 2360(b)(19). 

105See Amendment No. 2. 

106The 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. 

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].101

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 

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.’’ 102 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.103 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.’’ 104

E. Additional Change 

The Exchange proposes to amend 

Exchange Rule 8.30 to delete references 

to Interpretation and Policies .02 and 

.04. The Exchange states that the 

proposed change is designed to clarify 

the rule by indicating that all of the 

Interpretations and Policies to Exchange 

Rule 8.30 are relevant for determining 

position limits pursuant to Exchange 

Rule 8.30, not just the two currently 

specified provisions. The Commission 

agrees that this change will help to 

clarify and ensure the accuracy of 

Exchange Rule 8.30 by indicating that 

all of the Interpretations and Policies to 

Exchange Rule 8.30, not only 

Interpretation and Policies .02 and .04, 

apply when determining position limits. 

IV. Solicitation of Comments on 

Amendment Nos. 2 and 3 to the 

Proposed Rule Change 

Interested persons are invited to 

submit written data, views, and 

arguments concerning whether 

Amendment Nos. 2 and 3 are 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– 

CBOE–2024–035 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–CBOE–2024–035. 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–CBOE–2024–035 and should be 

submitted on or before November 14, 

2024. 

V. Accelerated Approval of 

Amendment Nos. 2 and 3 

The Commission finds good cause, 

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

for approving Amendment Nos. 2 and 3 

prior to the 30th day after the date of 

publication of notice of Amendment 

Nos. 2 and 3 in the Federal Register. 

Amendment No. 2 narrows the scope of 

the proposal to the Fidelity Fund and 

the ARK 21 Fund; proposes new 

position and exercise limits for options 

on the Bitcoin Funds and provides 

justification and analysis for the 

proposed position and exercise limits; 

provides additional discussion of 

surveillance procedures that will apply 

to the proposed options; and eliminates 

references to the applicability of 

specified Interpretations and Policies in 

Exchange Rule 8.30. As described 

above, in Amendment No. 2 the 

Exchange provided data and analysis 

supporting the proposed position and 

exercise limits and stated, among other 

things, that the proposed position and 

exercise limits would represent 1.2% of 

the outstanding shares of the Fidelity 

Fund and 5.5% of the outstanding 

shares of the ARK 21 Fund.105 The 

Commission concludes that the 

proposed position and exercise limits 

are designed to minimize the potential 

for manipulations or disruptions of the 

underlying market.106 Amendment No. 

2 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. The proposed change 

to Exchange Rule 8.30 to delete 

references to specified Interpretations 

and Policies, and to indicate that all of 

the Interpretations and Policies in 


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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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