94828 Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices 

60 17 CFR 200.30–3(a)(12), (59). 

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

2 17 CFR 240.19b–4. 

3The Exchange notes that its affiliate exchanges, 

MIAX Pearl and MIAX Sapphire, submitted 

substantively identical proposals. The Exchange 

notes that all the rules of Chapter III of the MIAX 

Options Exchange, including Rules 307 and 309, are 

incorporated by reference to MIAX Pearl and MIAX 

Sapphire. The Exchange also notes that all of the 

rules of Chapter III of the MIAX Options Exchange, 

including Rules 307 and 309, and the rules of 

Chapter IV of the MIAX Options Exchange, 

including Rule 402, are incorporated by reference 

to MIAX Emerald. 

4On 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 iShares Bitcoin Trust. 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’’). 

5See Securities Exchange Act Release No. 101387 

(October 18, 2024), 89 FR 84948 (October 24, 2024) 

(SR–CBOE–2024–35)(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). 

6See Exchange Rule 402(i), which permits 

options trading on ETFS that: (1) represent interests 

in registered investment companies (or series 

thereof) organized as open-end management 

investment companies, unit investment trusts or 

similar entities that hold portfolios of securities 

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

but not limited to, stock index futures contracts, 

options on futures, options on securities and 

indices, equity caps, collars and floors, swap 

agreements, forward contracts, repurchase 

agreements and reverse repurchase agreements (the 

‘‘Financial Instruments’’), and money market 

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

government securities and repurchase agreements 

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

otherwise based on or representing investments in 

broad-based indexes or portfolios of securities and/ 

or Financial Instruments and Money Market 

Instruments (or that hold securities in one or more 

other registered investment companies that 

themselves hold such portfolios of securities and/ 

or Financial Instruments and Money Market 

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

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

currency or currencies deposited with the trust 

which when aggregated in some specified minimum 

number may be surrendered to the trust or similar 

entity by the beneficial owner to receive the 

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

the beneficial owner interest and other distributions 

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

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

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

interests principally engaged, directly or indirectly, 

in holding and/or managing portfolios or baskets of 

securities, commodity futures contracts, options on 

commodity futures contracts, swaps, forward 

contracts and/or options on physical commodities 

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

ETFs’’); (4) are issued by the are issued by the 

SPDR® Gold Trust, the iShares COMEX Gold Trust, 

the iShares Silver Trust, the ETFS Silver Trust, the 

Aberdeen Standard Physical Gold Trust, the ETFS 

Palladium Trust, the ETFS Platinum Trust, the 

Sprott Physical Gold Trust, or the iShares Bitcoin 

Trust; or (5) represent an interest in a registered 

investment company (‘‘Investment Company’’) 

organized as an open-end management company or 

similar entity, that invests in a portfolio of 

securities selected by the Investment Company’s 

investment adviser consistent with the Investment 

Company’s investment objectives and policies, 

which is issued in a specified aggregate minimum 

number in return for a deposit of a specified 

portfolio of securities and/or a cash amount with a 

value equal to the next determined net asset value 

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

specified minimum number, may be redeemed at a 

holder’s request, which holder will be paid a 

specified portfolio of securities and/or cash with a 

value equal to the next determined NAV (‘‘Managed 

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

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

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.60

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–27997 Filed 11–27–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101717; File No. SR–MIAX– 

2024–43] 

Self-Regulatory Organizations; MIAX 

Exchange LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Exchange 

Rule 402, Criteria for Underlying 

Securities, Exchange Rule 307, 

Position Limits, and Exchange Rule 

309, Exercise Limits To Allow the 

Exchange To List and Trade Options 

on the Fidelity Wise Origin Bitcoin 

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

21Shares Bitcoin ETF (the ‘‘ARK 21 

Fund’’) 

November 22, 2024. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on November 

21, 2024, Miami International Securities 

Exchange, LLC (‘‘MIAX’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Exchange Rule 402, Criteria for 

Underlying Securities, Exchange Rule 

307, Position Limits, and Exchange Rule 

309, Exercise Limits. 

The text of the proposed rule change 

is available on the Exchange’s website at 

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

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

MIAX’s principal office, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Exchange Rule 402, Criteria for 

Underlying Securities, Exchange Rule 

307, Position Limits, and Exchange Rule 

309, Exercise Limits,3 to allow the 

Exchange to list and trade options on 

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’’), designating the Bitcoin Funds 

as appropriate for options trading on the 

Exchange.4 This is a competitive filing 

based on a similar proposal submitted 

by Cboe Exchange, Inc. (‘‘Cboe’’) and 

approved by the Securities and 

Exchange Commission 

(‘‘Commission’’).5

Current Exchange Rule 402(i)(4) 

provides that securities deemed 

appropriate for options trading include 

shares or other securities (‘‘Exchange 

Traded Fund Shares’’ or ‘‘ETFs’’) that 

represent certain types of interests,6

including interests in certain 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 ETFs currently deemed 

appropriate for options trading under 

Exchange Rule 402(i), 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 


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7The trust may include minimal cash. 

8Subparagraphs a and b of Exchange Rule 402 

provide for guidelines to be used by the Exchange 

when evaluating potential underlying securities for 

Exchange option transactions. 

9The criteria and guidelines for a security to be 

considered widely held and actively traded are set 

forth in Exchange Rule 403(b). 

10An ‘‘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’’). 

11The Bitcoin Funds began trading on January 11, 

2024. 

opportunity to gain exposure to Bitcoin 

without the complexities of Bitcoin 

delivery. As is the case for ETFs 

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.7 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 ETFs 

currently deemed appropriate for 

options trading are that ETFs 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 ETFs on which the 

Exchange may list options. Specifically, 

each Bitcoin Fund satisfies the initial 

listing standards set forth in Exchange 

Rule 402(i)(5)(i), as is the case for other 

ETFs on which the Exchange lists 

options (including trusts that hold 

commodities). Exchange Rule 

402(i)(5)(i) requires that the ETFs must 

either (1) meet the criteria and standards 

set forth in Exchange Rule 402(a) or 

402(b),8 or (2) be available for creation 

or redemption each business day from 

or through the issuer in cash or in kind 

at a price related to net asset value, and 

the issuer must be obligated to issue 

ETFs in a specified aggregate number 

even if some or all of the investment 

assets required to be deposited have not 

been received by the issuer, subject to 

the condition that the person obligated 

to deposit the investments has 

undertaken to deliver the investment 

assets as soon as possible and such 

undertaking is secured by the delivery 

and maintenance of collateral consisting 

of cash or cash equivalents satisfactory 

to the issuer, as provided in the 

respective prospectus. Each Bitcoin 

Fund satisfies Exchange Rule 

402(i)(5(i)(B), 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 Exchange Rule 402. Pursuant to 

Exchange Rule 402, a security (which 

includes ETFs) on which options may 

be listed and traded on the Exchange 

must be duly registered (with the 

Commission) and be an NMS stock (as 

defined in Rule 600 of Regulation NMS 

under the Act, and be characterized by 

a substantial number of outstanding 

shares that are widely held and actively 

traded.9 Each Bitcoin Fund is an NMS 

Stock as defined in Rule 600 of 

Regulation NMS under the Act.10 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 Exchange Rule 

402(b)(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 Exchange Rule 

402(b)(2). Therefore, the Exchange 

believes the shares of each Bitcoin Fund 

are widely held. 

As demonstrated above, despite the 

fact that the Bitcoin Funds had been 

trading for approximately seven 

months 11 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 Exchange Rule 402(b)(4). 

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 

also be subject to the Exchange’s 

continued listing standards set forth in 

Exchange Rule 403(g), for ETFs deemed 

appropriate for options trading pursuant 

to Exchange Rule 402(i). Specifically, 

Exchange Rule 403(g) provides that 

ETFs that were initially approved for 

options trading pursuant to Exchange 

Rule 402(i) shall be deemed not to meet 

the requirements for continued 

approval, and the Exchange shall not 

open for trading any additional series of 

option contracts of the class covering 

that such ETFs, if the ETFs are delisted 

from trading pursuant to Exchange Rule 

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

trading in their primary market. 

Additionally, options on ETFs may be 

subject to the suspension of opening 

transactions in any of the following 

circumstances: (1) in the case of options 

covering ETFs approved for trading 


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12See Exchange Rule 401, which provides that 

the rights and obligations of holders and writers are 

set forth in the Rules of the Options Clearing 

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

VIII (which governs exercise and assignment) and 

Chapter IX (which governs the discharge of delivery 

and payment obligations arising out of the exercise 

of physically settled stock option contracts). 

13See Exchange Rule 404(b). The monthly 

expirations are subject to certain listing criteria for 

underlying securities described within Exchange 

Rule 404 and its Interpretations and Policies. 

Monthly listings expire the third Friday of the 

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

separately defined elsewhere in the OCC By-Laws), 

when used in respect of an option contract (subject 

to certain exceptions), means the third Friday of the 

expiration month of such option contract, or if such 

Friday is a day on which the exchange on which 

such option is listed is not open for business, the 

preceding day on which such exchange is open for 

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

Pursuant to Exchange Rule 404(c), additional series 

of options of the same class may be opened for 

trading on the Exchange when the Exchange deems 

it necessary to maintain an orderly market, to meet 

customer demand or when the market price of the 

underlying stock moves more than five strike prices 

from the initial exercise price or prices. Pursuant 

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

an individual stock may be added until the 

beginning of the month in which the options 

contract will expire. Due to unusual market 

conditions, the Exchange, in its discretion, may add 

a new series of options on an individual stock until 

the close of trading on the business day prior to 

expiration. 

14See Exchange Rule 404, Interpretations and 

Policies .02. 

15See Exchange Rule 404, Interpretations and 

Policies .13. 

16See Exchange Rule 404, Interpretations and 

Policies .03. 

17See Exchange Rule 404(d). 

18See Exchange Rule 404, Interpretations and 

Policies .02(e). 

19 Id. 

20See Exchange Rule 404, Interpretation and 

Policy .01. 

21See Exchange Rule 404, Interpretation and 

Policy .04. 

22See Exchange Rule 404(f). 23See Exchange Rule 510. 

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

accordance with the terms of paragraphs 

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

(2) in the case of options covering ETFs 

approved for trading under Exchange 

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

twelve-month period beginning upon 

the commencement of trading in the 

ETFs on a national securities exchange 

and are defined as an NMS stock, there 

are fewer than 50 record and/or 

beneficial holders of such ETFs for 30 

or more consecutive trading days; (3) 

the value of the index or portfolio of 

securities, non-U.S. currency, or 

portfolio of commodities including 

commodity futures contracts, options on 

commodity futures contracts, swaps, 

forward contracts and/or options on 

physical commodities and/or financial 

instruments and money market 

instruments on which the ETFs 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 would 

be physically settled contracts with 

American-style exercise.12 Consistent 

with current Exchange Rule 404, which 

governs the opening of options series on 

a specific underlying security (including 

ETFs), the Exchange will open at least 

one expiration month for options on 

each Bitcoin Fund 13 at the 

commencement of trading on the 

Exchange and may also list series of 

options on a Bitcoin Fund for trading on 

a weekly,14 monthly,15 or quarterly 16

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

that expire from 12 to 39 months from 

the time they are listed.17

Pursuant to Exchange Rule 404, 

Interpretation and Policy .06, which 

governs strike prices of series of options 

on ETFs, the interval between strike 

prices of series of options on ETFs 

approved for options trading pursuant 

to Exchange Rule 402(i) shall be fixed at 

a price per share which is reasonably 

close to the price per share at which the 

underlying security is traded in the 

primary market at or about the same 

time such series of options is first open 

for trading on the Exchange, or at such 

intervals as may have been established 

on another options exchange prior to the 

initiation of trading on the Exchange. 

With respect to the Short Term Options 

Series or Weekly Program, during the 

month prior to expiration of an option 

class that is selected for the Short Term 

Option Series Program, the strike price 

intervals for the related non-Short Term 

Option (‘‘Related non-Short Term 

Option’’) shall be the same as the strike 

price intervals for the Short Term 

Option.18 Specifically, the Exchange 

may open for trading Short Term Option 

Series at strike price intervals of (i) 

$0.50 or greater where the strike price 

is less than $100, and $1 or greater 

where the strike price is between $100 

and $150 for all option classes that 

participate in the Short Term Options 

Series Program; (ii) $0.50 for option 

classes that trade in one dollar 

increments and are in the Short Term 

Option Series Program; or (iii) $2.50 or 

greater where the strike price is above 

$150.19 Additionally, the Exchange may 

list series of options pursuant to the $1 

Strike Price Interval Program,20 the 

$0.50 Strike Program,21 and the $2.50 

Strike Price Program.22 Pursuant to 

Exchange Rule 510, where the price of 

a series of options for a Bitcoin Fund 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 23 consistent 

with the minimum increments for 

options on other ETFs listed on the 

Exchange. Any and all new series of a 

Bitcoin Fund options that the Exchange 

lists will be consistent and comply with 

the expirations, strike prices, and 

minimum increments set forth in Rules 

404 and 510, as applicable. 

Bitcoin Fund options will trade in the 

same manner as any other ETF options 

on the Exchange. The Exchange Rules 

that currently apply to the listing and 

trading of all ETFs options on the 

Exchange, including, for example, 

Exchange Rules that govern listing 

criteria, expiration and exercise prices, 

minimum increments, position and 

exercise limits, margin requirements, 

customer accounts and trading halt 

procedures will apply to the listing and 

trading of Bitcoin Funds options on the 

Exchange in the same manner as they 

apply to other options on all other ETFs 

that are listed and traded on the 

Exchange, including the precious-metal 

backed commodity ETFs already 

deemed appropriate for options trading 

on the Exchange pursuant to current 

Exchange Rule 402(i)(4). 

The Exchange also proposes to amend 

Rules 307 and 309. Specifically, the 

Exchange proposes to amend 

Supplementary Material .01 to Exchange 

Rule 307 to provide a position limit of 

25,000 same side option contracts for 

each Bitcoin Fund option. Additionally, 

pursuant to the proposed change to 

Supplementary Material .01 to Exchange 

Rule 309, the exercise limits for options 

on each Bitcoin Fund will be equivalent 

to this proposed position limit. 

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): 


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24Over 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. 

25Nearly 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. 

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. 

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: 

Underlying Bitcoin Fund 

Average limit 

of other ETF 

options 

(contracts) 

Proposed limit 

(contracts) 

Fidelity Fund ............................................................................................................................................................ 24 188,110 25,000 

ARK 21 Fund ........................................................................................................................................................... 25 108,696 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 402(b)(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 402(b)(2); 

and (3) each Bitcoin Fund had a sixmonth 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 402(b)(3). 

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. 

Rule 309 provides two methods of 

qualifying for a position limit tier above 

25,000 option contracts. 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. 

Position/Exercise Limit 

(in equivalent shares) 

Minimum 

Outstanding 

Shares 

Percentage of 

Outstanding 

Shares 

(%) 

2,500,000 ........................................................................................................................................................... 26 6,300,000 40.0 

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


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26This 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 404, 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 an even larger percentage 

of outstanding shares of the underlying ETF than 

set forth above. 

27As 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. 

28The surveillance program includes real-time 

patterns for price and volume movements and posttrade surveillance patterns (e.g., spoofing, marking 

the close, pinging, phishing). 

29Section 19(g)(1) of the Act, among other things, 

requires every SRO registered as a national 

securities exchange or national securities 

association to comply with the Act, the rules and 

regulations thereunder, and the SRO’s own rules, 

and, absent reasonable justification or excuse, 

enforce compliance by its members and persons 

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

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

of the Act allows the Commission to relieve an SRO 

of certain responsibilities with respect to members 

of the SRO who are also members of another SRO 

(‘‘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. 

30See Bitcoin ETP Order, 89 FR at 3010–11. 

Position/Exercise Limit 

(in equivalent shares) 

Minimum 

Outstanding 

Shares 

Percentage of 

Outstanding 

Shares 

(%) 

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.27

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 307. 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. 

The Exchange further notes that 

Exchange Rule 1502, which governs 

margin requirements applicable to 

trading on the Exchange, including 

options on ETFs, will also apply to the 

trading of the Bitcoin Fund options. 

Notwithstanding the position limits in 

Exchange Rule 307(d) and exercise 

limits in Exchange Rule 309, the 

Exchange proposes the position and 

exercise limits for the options on the 

Bitcoin Fund to be 25,000 contracts on 

the same side pursuant to proposed 

Supplementary Material .01 to Exchange 

Rule 307 and proposed Supplementary 

Material .01 to Exchange Rule 309. 

The Exchange represents that the 

same surveillance procedures applicable 

to all other options on other ETFs 

currently listed and traded on the 

Exchange will apply to options on the 

Bitcoin Funds. Also the Exchange 

represents that it has the necessary 

systems capacity to support the new 

option series. The Exchange believes 

that its existing surveillance and 

reporting safeguards are designed to 

deter and detect possible manipulative 

behavior which might potentially arise 

from listing and trading options on 

ETFs, including the proposed Bitcoin 

Funds options. 

Today, the Exchange has an adequate 

surveillance program in place for 

options. The Exchange intends to apply 

those same program procedures to 

Bitcoin Fund options that it applies to 

the Exchange’s other options 

products.28 The Exchange’s staff will 

have access to the surveillance programs 

conducted by its affiliate exchanges, 

MIAX Pearl and MIAX Sapphire with 

respect to trading in the shares of 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 to obtaining surveillance data 

from MIAX Pearl and MIAX Sapphire, 

the Exchange will be able to obtain 

information regarding trading in the 

shares of the underlying Bitcoin Funds 

from Cboe and other markets through 

ISG. In addition, the Exchange has a 

Regulatory Services Agreement with the 

Financial Industry Regulatory Authority 

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

17d–2 joint plan, all options exchanges 

allocate regulatory responsibilities to 

FINRA to conduct certain optionsrelated market surveillance that are 

common to rules of all options 

exchanges.29

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 Bitcoin ETP Order: 

Each Exchange has a comprehensive 

surveillance-sharing agreement with the CME 

via their common membership in the 

Intermarket Surveillance Group. This 

facilitates the sharing of information that is 

available to the CME through its surveillance 

of its markets, including its surveillance of 

the CME bitcoin futures market.30

The Exchange states that, given the 

consistently high correlation between the 

CME bitcoin futures market and the spot 

bitcoin market, as confirmed by the 

Commission through robust correlation 

analysis, the Commission was able to 

conclude that such surveillance sharing 

agreements could reasonably be ‘‘expected to 

assist in surveilling for fraudulent and 


khammond on DSK9W7S144PROD with NOTICES
Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices 94833 

31See Bitcoin ETP Order, 89 FR at 3010–11. 

32See 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 (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’’). 

33The Exchange understands from customers that 

investors have historically transacted in options on 

ETFs in the OTC options market if such options 

were not available for trading in a listed 

environment. 34 15 U.S.C. 78f(b). 35 15 U.S.C. 78f(b)(5). 36 Id. 37See Exchange Rule 402(i)(4). 

manipulative acts and practices in the 

specific context of the [Bitcoin ETPs].’’ 31

In light of surveillance measures 

related to both options and futures as 

well as the underlying Bitcoin Funds,32

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 represents that it will 

implement any new surveillance 

procedures it deems necessary to 

effectively monitor the trading of 

options on Bitcoin Funds. 

The Exchange has also analyzed its 

capacity and represents that it believes 

the Exchange and Options Price 

Reporting Authority or ‘‘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 one class, the Exchange 

believes any additional traffic that may 

be generated from the introduction of 

Bitcoin Funds 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 ETPs in the 

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

options market (if the Commission 

approves Bitcoin ETPs for exchangetrading),33 but may prefer to trade such 

options in a listed environment to 

receive the benefits of trading listing 

options, including (1) enhanced 

efficiency in initiating and closing out 

position; (2) increased market 

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

OCC as issuer and guarantor of all listed 

options. The Exchange believes that 

listing Bitcoin 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 ETFs that hold financial 

instruments, money market instruments, 

or precious metal commodities on 

which the Exchange may already list 

and trade options are trusts structured 

in substantially the same manner as 

Bitcoin 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 

ETFs options, including ETFs that hold 

commodities (i.e., precious metals) that 

it currently lists and trades on the 

Exchange. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

Section 6(b) of the Act.34 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 35 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) 36 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 a greater 

opportunity to realize the benefits of 

utilizing options on an ETF based on a 

Bitcoin Fund, including cost efficiencies 

and increased hedging strategies. The 

Exchange believes that offering Bitcoin 

Funds options will benefit investors by 

providing them with an additional, 

relatively lower-cost risk management 

tool, allowing them to manage, more 

easily, their positions and associated 

risks in their portfolios 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 option market, 

which would increase market 

transparency and enhance the process of 

price discovery conducted on the 

Exchange through increased order flow 

to the benefit of all investors. The 

Exchange also notes that it already lists 

options on other commodity-based 

ETFs,37 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 ETF 

options it currently lists for trading. 

The Exchange also believes the 

proposed rule change will remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, because 

it is consistent with current Exchange 

Rules, previously filed with the 

Commission. Options on Bitcoin Funds 

must satisfy the initial listing standards 

and continued listing standards 

currently in the Exchange Rules, 

applicable to options on all ETFs, 

including ETFs that hold other 

commodities already deemed 

appropriate for options trading on the 

Exchange. Additionally, as 

demonstrated above, each Bitcoin Fund 

is characterized by a substantial number 

of shares that are widely held and 

actively traded. Bitcoin Fund options 

will trade in the same manner as any 

other ETF options—the same Exchange 

Rules that including permissible 


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94834 Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices 

38See Blockchain.com | Charts—Total Circulating 

Bitcoin. 

39See 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. 

40See CME Rulebook Chapter 5, Position Limit, 

Position Accountability and Reportable Level Table 

in the Interpretations & Special Notices. 

41 Id. 

expirations, strike prices, minimum 

increments, position and exercise limits 

(as proposed herein), and margin 

requirements, will govern the listing 

and trading of options on the Bitcoin 

Funds. 

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 for options on each of the 

Bitcoin Funds is 25,000 contracts. These 

position and exercise limits are the 

lowest position and exercise limits 

available in the options industry, are 

extremely conservative and more than 

appropriate given each of the Bitcoin 

Funds market capitalization, average 

daily volume, and high number of 

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 

$59,466.82,38 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: 

Underlying 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.39

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: 

Underlying 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).40 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.41 If a position exceeds 

position limits because of an option 

assignment, CME permits market 

participants to liquidate the excess 

position within one business day 

without being considered in violation of 

its rules. Additionally, if at the close of 

trading, a position that includes options 

exceeds position limits for futures 

contracts, when evaluated using the 

delta factors as of that day’s close of 

trading but does not exceed the limits 

when evaluated using the previous 

day’s delta factors, then the position 


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Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices 94835 

42See Blockchain.com | Charts—Total Circulating 

Bitcoin (which also shows the price of one Bitcoin 

equal to $55,033.47). 

43See 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. 44The market capitalization of Bitcoin would 

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

companiesmarketcap.com/usa/largest-companiesin-the-usa-by-market-cap/. 45This would be even more unlikely with respect 

to the Bitcoin Funds for which the Exchange 

proposes lower position limits. 

46The 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 Cboe 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. 

47For 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. 

48See Securities Exchange Act Release No. 39489 

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

(SR–CBOE–1997–11). 

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 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: 

Underlying 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 

19,736,528.42 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.43 The supply of Bitcoin is larger 

than the available supply of most 

securities.44 Given the significant 

unlikelihood of any of these events ever 

occurring, the Exchange does not 

believe options on the Bitcoin Funds 

should be subject to position and 

exercise limits even lower than those 

proposed (which are already equal to 

the lowest available limit for equity 

options in the industry) to protect the 

supply of Bitcoin.45

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.46 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.47 ‘‘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.’’ 48 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 


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94836 Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices 

49See id. 

50See 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. 

51See Bitcoin ETP Order. 

52See Securities Exchange Act Release No. 39489 

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

(SR–CBOE–1997–11). 

53The surveillance program includes real-time 

patterns for price and volume movements and posttrade surveillance patterns (e.g., spoofing, marking 

the close, pinging, phishing). 

54Section 19(g)(1) of the Act, among other things, 

requires every SRO registered as a national 

securities exchange or national securities 

association to comply with the Act, the rules and 

regulations thereunder, and the SRO’s own rules, 

and, absent reasonable justification or excuse, 

enforce compliance by its members and persons 

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

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

of the Act allows the Commission to relieve an SRO 

of certain responsibilities with respect to members 

of the SRO who are also members of another SRO 

(‘‘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. 

55See Bitcoin ETP Order, 89 FR at 3010–11. 

56See Bitcoin ETP Order, 89 FR at 3010–11. 

57See Securities Exchange Act Release No. 99295 

(January 8, 2024), 89 FR 2321, 2334–35 (January 12, 

2024) (SR–NASDAQ–2023–016) (Notice of Filing of 

Amendment No. 1 to a Proposed Rule Change To 

List and Trade Shares of the iShares Bitcoin Trust 

Under Nasdaq Rule 5711(d)). 

58See Securities Exchange Act Release No. 57897 

(May 30, 2008), 73 FR 32061 (June 5, 2008) (SR– 

Amex–2008–15; SR–CBOE–2005–11; SR–ISE–2008– 

12; SR–NYSEArca–2008–52; and SRPhlx–2008–17) 

(Order Granting Approval of a Proposed Rule 

Change, as Modified, and Notice of Filing and 

Order Granting Accelerated Approval of Proposed 

Rule Changes, as Modified, Relating to Listing and 

Trading Options on the SPDR Gold Trust). 

exercise limits are designed to minimize 

the potential for mini-manipulations 

and for corners or squeezes of the 

underlying market. In addition, such 

limits serve to reduce the possibility for 

disruption of the options market itself, 

especially in illiquid options classes.’’ 49

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 2140.50 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.51 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.52

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 ETF options, including 

Bitcoin Fund options. 

Today, the Exchange has an adequate 

surveillance program in place for 

options. The Exchange intends to apply 

those same program procedures to 

options on the Bitcoin Fund that it 

applies to the Exchange’s other options 

products.53 The Exchange’s staff will 

have access to the surveillance programs 

conducted by its affiliate exchanges, 

MIAX Pearl and MIAX Sapphire with 

respect to the underlying Bitcoin Funds 

when conducting surveillances for 

market abuse or manipulation in the 

options on the Bitcoin Funds. The 

Exchange will review activity in the 

underlying Bitcoin Fund when 

conducting surveillances for market 

abuse or manipulation in the options on 

the Bitcoin Funds. Additionally, the 

Exchange is a member of the ISG under 

the Intermarket Surveillance Group 

Agreement. ISG members work together 

to coordinate surveillance and 

investigative information sharing in the 

stock, options, and futures markets. In 

addition to obtaining surveillance data 

from MIAX Pearl and MIAX Sapphire, 

the Exchange will be able to obtain 

information from Cboe and other 

markets through ISG. In addition, the 

Exchange has a Regulatory Services 

Agreement with FINRA. Pursuant to a 

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

exchanges allocate regulatory 

responsibilities to FINRA to conduct 

certain options-related market 

surveillance that are common to rules of 

all options exchanges.54

The underlying shares of spot bitcoin 

ETPs, including the Bitcoin Funds, are 

also subject to safeguards related to 

addressing market abuse and 

manipulation. As the Commission 

stated in Bitcoin ETP Order: 

Each Exchange has a comprehensive 

surveillance-sharing agreement with the 

CME via their common membership in 

the Intermarket Surveillance Group. 

This facilitates the sharing of 

information that is available to the CME 

through its surveillance of its markets, 

including its surveillance of the CME 

bitcoin futures market.55

The Exchange states that, given the 

consistently high correlation between 

the CME bitcoin futures market and the 

spot bitcoin market, as confirmed by the 

Commission through robust correlation 

analysis, the Commission was able to 

conclude that such surveillance sharing 

agreements could reasonably be 

‘‘expected to assist in surveilling for 

fraudulent and manipulative acts and 

practices in the specific context of the 

[Bitcoin ETPs].’’ 56

In light of surveillance measures 

related to both options and futures as 

well as the underlying Bitcoin Funds,57

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 represents that it will 

implement any new surveillance 

procedures it deems necessary to 

effectively monitor the trading of 

options on the Bitcoin Funds. Finally, 

the Commission has previously 

approved the listing and trading of 

options on other commodity ETFs 

structured as a trust, such as SPDR®

Gold Trust,58 the iShares COMEX Gold 


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Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices 94837 

59See Securities Exchange Act Release No. 59055 

(December 4, 2008), 73 FR 75148 (December 10, 

2008) (SR–Amex–2008–68; SR–BSE–2008–51; SR– 

CBOE–2008–72; SR–ISE–2008–58; SRNYSEArca– 

2008–66; and SR–Phlx–2008–58) (Notice of Filing 

and Order Granting Accelerated Approval of 

Proposed Rule Changes Relating to the Listing and 

Trading Options on Shares of the iShares COMEX 

Gold Trust and the iShares Silver Trust). 

60 Id. 

61See Securities Exchange Act Release No. 61483 

(February 3, 2010), 75 FR 6753 (February 10, 2010) 

(SR–CBOE–2010–007; SR–ISE–2009–106; SR– 

NYSEAmex–2009–86; and SR–NYSEArca–2009– 

110) (Order Granting Approval of Proposed Rule 

Changes and Notice of Filing and Order Granting 

Accelerated Approval of a Proposed Rule Change 

Relating to Listing and Trading Options on the 

ETFS Gold Trust and the ETFS Silver Trust). 

62 Id. 

63See supra note 5. 

64See Exchange Rule 402(i)(4). 

65 15 U.S.C. 78s(b)(3)(A)(iii). 

66 17 CFR 240.19b–4(f)(6). 

67 15 U.S.C. 78s(b)(3)(A)(iii). 

68 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Commission 

waives this requirement. 

69 17 CFR 240.19b–4(f)(6). 

70 17 CFR 240.19b–4(f)(6)(iii). 

71See Securities Exchange Act Release No. 

101387 (October 18, 2024), 89 FR 84948 (October 

24, 2024) (SR–Cboe–2024–035) (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). 

72For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

Trust 59 the iShares Silver Trust,60 the 

ETFS Gold Trust,61 and the ETFS Silver 

Trust.62

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. In this regard 

and as indicated above, the Exchange 

notes that the rule change is being 

proposed as a competitive response to 

filings submitted by Cboe.63

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 options on 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. Further, 

options on the Bitcoin Funds will be 

subject to Exchange Rules that currently 

govern the listing and trading of options 

on ETFs, including permissible 

expirations, strike prices, minimum 

increments, position and exercise limits 

(including as proposed to modify 

herein), and margin requirements. Also, 

and as stated above, the Exchange 

already lists options on other 

commodity ETFs structured as a trust.64

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 

ETF for the Exchange to continue listing 

options on them. 

The Exchange does not believe that 

the proposal to list to list and trade 

Bitcoin Funds options 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 the Bitcoin 

Funds. The Exchange notes that listing 

and trading Bitcoin Fund options on the 

Exchange will subject such options to 

transparent exchange-based rules as 

well as price discovery and liquidity, as 

opposed to alternatively trading such 

options in the OTC market. 

The Exchange believes that the 

proposed rule change may relieve any 

burden on, or otherwise promote, 

competition as it is designed to increase 

competition for order flow on the 

Exchange in a manner that is beneficial 

to investors by providing them with a 

lower-cost option to hedge their 

investment portfolios. The Exchange 

notes that it operates in a highly 

competitive market in which market 

participants can readily direct order 

flow to competing venues that offer 

similar products. Ultimately, the 

Exchange believes that offering Bitcoin 

Fund options for trading on the 

Exchange will promote competition by 

providing investors with an additional, 

relatively low-cost means to hedge their 

portfolios and meet their investment 

needs in connection with Bitcoin prices 

and Bitcoin-related products and 

positions on a listed options exchange. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received from 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 65 and Rule 

19b–4(f)(6) thereunder.66 Because the 

foregoing proposed rule change does 

not: (i) significantly affect the protection 

of investors or the public interest; (ii) 

impose any significant burden on 

competition; and (iii) become operative 

for 30 days from the date on which it 

was filed, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A)(iii) of the Act 67 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.68

A proposed rule change filed under 

Rule 19b–4(f)(6) 69 under the Act does 

not normally become operative prior to 

30 days after the date of the filing. 

However, pursuant to Rule 19b– 

4(f)(6)(iii),70 the Commission may 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange has requested that the 

Commission waive the 30-day operative 

delay so that the proposal may become 

operative immediately upon filing. The 

Commission previously approved the 

listing of options on the Fidelity Wise 

Origin Bitcoin Fund the ARK 21Shares 

Bitcoin ETF.71 The Exchange has 

provided information regarding the 

underlying Bitcoin Funds, including, 

among other things, information 

regarding trading volume, the number of 

beneficial holders, and the market 

capitalization of the Bitcoin Funds. The 

proposal also establishes position and 

exercise limits for options on the 

Bitcoin Funds and provides information 

regarding the surveillance procedures 

that will apply to Bitcoin Fund options. 

The Commission believes that waiver of 

the operative delay could benefit 

investors by providing an additional 

venue for trading Bitcoin Fund options. 

Therefore, the Commission believes that 

waiver of the 30-day operative delay is 

consistent with the protection of 

investors and the public interest. 

Accordingly, the Commission hereby 

waives the 30-day operative delay and 

designates the proposed rule change as 

operative upon filing.72

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 


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94838 Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices 

73 17 CFR 200.30–3(a)(12), (59). 

1Staff estimate is based on a three-year average 

of funds reporting reliance on rule 17e–1 covering 

calendar years 2022–2024. 

2 1,614 funds × 50 hours per fund = 80,700 hours. 

3The Commission’s estimates concerning the 

allocation of burden hours and the relevant wage 

rates are based on consultations with industry 

representatives and on salary information for the 

securities industry compiled by the Securities 

Industry and Financial Markets Association; the 

estimated wage figures are also based on published 

rates for senior accountants and in-house attorneys, 

modified to account for an 1800-hour work-year 

and multiplied by 5.35 to account for bonuses, firm 

size, employee benefits, and overhead, yielding 

effective hourly rates of $266 and $511, 

respectively; see Securities Industry and Financial 

Markets Association, Report on Management & 

Professional Earnings in the Securities Industry 

2013. 

4 48,420 hours × $266 per hour = $12,879,720. 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

MIAX–2024–43 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–MIAX–2024–43. 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–MIAX–2024–43 and should be 

submitted on or before December 20, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.73

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–27989 Filed 11–27–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–224, OMB Control No. 

3235–0217] 

Submission for OMB Review; 

Comment Request; Extension: Rule 

17e–1 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 et seq.) (‘‘Paperwork 

Reduction Act’’), the Securities and 

Exchange Commission (the 

‘‘Commission’’) has submitted to the 

Office of Management and Budget 

(‘‘OMB’’) a request for extension of the 

previously approved collection of 

information described below. 

Rule 17e–1 (17 CFR 270.17e–1) under 

the Investment Company Act of 1940 

(15 U.S.C. 80a–1 et seq.) (the 

‘‘Investment Company Act’’) deems a 

remuneration as ‘‘not exceeding the 

usual and customary broker’s 

commission’’ for purposes of Section 

17(e)(2)(A) of the Investment Company 

Act (15 U.S.C. 80a–17(e)(2)(A)) if, 

among other things, a registered 

investment company’s (‘‘fund’s’’) board 

of directors, including a majority of the 

directors who are not interested persons 

of the fund, has adopted procedures 

reasonably designed to provide that the 

remuneration to an affiliated broker is 

reasonable and fair compared to that 

received by other brokers in connection 

with comparable transactions involving 

similar securities being purchased or 

sold on a securities exchange during a 

comparable period of time and the 

board makes and approves such changes 

as it deems necessary. In addition, each 

quarter, the board must determine that 

all transactions effected under the rule 

during the preceding quarter complied 

with the established procedures 

(‘‘review requirement’’). Rule 17e–1 also 

requires the fund to (i) maintain 

permanently in an easily accessible 

place a written copy of the procedures 

adopted by the board for complying 

with the requirements of the rule; and 

(ii) maintain for a period of six years, 

the first two in an easily accessible 

place, a written record of each 

transaction subject to the rule, setting 

forth the amount and source of the 

commission, fee, or other remuneration 

received; the identity of the broker; the 

terms of the transaction; and the 

materials used to determine that the 

transactions were effected in 

compliance with the procedures 

adopted by the board (‘‘recordkeeping 

requirement’’). The review and 

recordkeeping requirements of rule 17e– 

1 permit Commission staff to monitor 

the reasonableness and fairness of 

remuneration received by affiliated 

persons of the fund. Without the 

recordkeeping requirement, 

Commission inspectors would have 

difficulty ascertaining whether funds 

were complying with rule 17e–1. 

Based upon an analysis of fund filings 

on Form N–CEN, approximately 1,614 

funds report reliance on rule 17e–1.1

Based on staff experience and 

conversations with fund representatives, 

we estimate that the burden of 

compliance with rule 17e–1 is 

approximately 50 hours per fund per 

year. This time is spent, for example, 

reviewing the applicable transactions 

and maintaining records. Accordingly, 

we calculate the total estimated annual 

internal burden of complying with the 

review and recordkeeping requirements 

of rule 17e–1 to be approximately 

80,700 hours.2 We further estimate that, 

of these: 

• 60 percent (48,420 hours) are spent 

by senior accountants, at an estimated 

hourly wage of $266,3 for a total of 

approximately $12,879,720 per year; 4

• 30 percent (24,210 hours) are spent 

by in-house attorneys at an estimated 

hourly wage of $511, for a total of 


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