Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 3869 

27 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 91962 

(May 21, 2021), 86 FR 28646 (May 27, 2021) 

(‘‘Notice’’). Comments on the proposed rule change 

can be found at: https://www.sec.gov/comments/srnysearca-2021-37/srnysearca202137.htm. 

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

5See Securities Exchange Act Release No. 92333, 

86 FR 36826 (July 13, 2021). 

6 15 U.S.C. 78s(b)(2)(B). 

7See Securities Exchange Act Release No. 92714, 

86 FR 47662 (Aug. 26, 2021). 

8See Securities Exchange Act Release No. 93570, 

86 FR 64975 (Nov. 19, 2021). 

9 15 U.S.C. 78f(b)(5). 

10Bitcoins are digital assets that are issued and 

transferred via a decentralized, open-source 

protocol used by a peer-to-peer computer network 

through which transactions are recorded on a 

public transaction ledger known as the ‘‘bitcoin 

blockchain.’’ The bitcoin protocol governs the 

creation of new bitcoins and the cryptographic 

system that secures and verifies bitcoin 

transactions. See, e.g., Notice, 86 FR at 28646–47. 

11See Order Setting Aside Action by Delegated 

Authority and Disapproving a Proposed Rule 

Change, as Modified by Amendments No. 1 and 2, 

To List and Trade Shares of the Winklevoss Bitcoin 

Trust, Securities Exchange Act Release No. 83723 

(July 26, 2018), 83 FR 37579 (Aug. 1, 2018) (SR– 

BatsBZX–2016–30) (‘‘Winklevoss Order’’); Order 

Disapproving a Proposed Rule Change, as Modified 

by Amendment No. 1, To Amend NYSE Arca Rule 

8.201–E (Commodity-Based Trust Shares) and To 

List and Trade Shares of the United States Bitcoin 

and Treasury Investment Trust Under NYSE Arca 

Rule 8.201–E, Securities Exchange Act Release No. 

88284 (Feb. 26, 2020), 85 FR 12595 (Mar. 3, 2020) 

(SR–NYSEArca–2019–39) (‘‘USBT Order’’); Order 

Disapproving a Proposed Rule Change To List and 

Trade Shares of the WisdomTree Bitcoin Trust 

Under BZX Rule 14.11(e)(4), Commodity-Based 

Trust Shares, Securities Exchange Act Release No. 

93700 (Dec. 1, 2021), 86 FR 69322 (Dec. 7, 2021) 

(SR–CboeBZX–2021–024) (‘‘WisdomTree Order’’); 

Order Disapproving a Proposed Rule Change to List 

and Trade Shares of the Valkyrie Bitcoin Fund 

under NYSE Arca Rule 8.201–E (Commodity-Based 

Trust Shares), Securities Exchange Act Release No. 

93859 (Dec. 22, 2021), 86 FR74156 (Dec. 29, 2021) 

(SR–NYSEArca–2021–31) (‘‘Valkyrie Order’’); Order 

Disapproving a Proposed Rule Change to List and 

Trade Shares of the Kryptoin Bitcoin ETF Trust 

under BZX Rule 14.11(e)(4), Commodity-Based 

Trust Shares, Securities Exchange Act Release No. 

93860 (Dec. 22, 2021), 86 FR 74166 (Dec. 29, 2021) 

(SR–CboeBZX–2021–029) (‘‘Kryptoin Order’’). See 

also Order Disapproving a Proposed Rule Change, 

as Modified by Amendment No. 1, Relating to the 

Listing and Trading of Shares of the SolidX Bitcoin 

Trust Under NYSE Arca Equities Rule 8.201, 

Securities Exchange Act Release No. 80319 (Mar. 

28, 2017), 82 FR 16247 (Apr. 3, 2017) (SR– 

NYSEArca–2016–101) (‘‘SolidX Order’’). The 

Commission also notes that orders were issued by 

delegated authority on the following matters: Order 

Disapproving a Proposed Rule Change To List and 

Trade the Shares of the ProShares Bitcoin ETF and 

the ProShares Short Bitcoin ETF, Securities 

Exchange Act Release No. 83904 (Aug. 22, 2018), 

83 FR 43934 (Aug. 28, 2018) (SR–NYSEArca–2017– 

139) (‘‘ProShares Order’’); Order Disapproving a 

Proposed Rule Change To List and Trade the Shares 

of the GraniteShares Bitcoin ETF and the 

GraniteShares Short Bitcoin ETF, Securities 

Exchange Act Release No. 83913 (Aug. 22, 2018), 

83 FR 43923 (Aug. 28, 2018) (SR–CboeBZX–2018– 

001) (‘‘GraniteShares Order’’); Order Disapproving a 

Proposed Rule Change To List and Trade Shares of 

the VanEck Bitcoin Trust Under BZX Rule 

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

Securities Exchange Act Release No. 93559 (Nov. 

12, 2021), 86 FR 64539 (Nov. 18, 2021) (SR– 

CboeBZX–2021–019). 

12See USBT Order, 85 FR at 12596. See also 

Winklevoss Order, 83 FR at 37592 n.202 and 

accompanying text (discussing previous 

Commission approvals of commodity-trust ETPs); 

GraniteShares Order, 83 FR at 43925–27 nn.35–39 

and accompanying text (discussing previous 

Commission approvals of commodity-futures ETPs). 

internet website (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–GEMX–2022–01 and 

should be submitted on or before 

February 15, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–01325 Filed 1–24–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94006; File No. SR– 

NYSEArca–2021–37] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Disapproving a 

Proposed Rule Change To List and 

Trade Shares of the First Trust 

SkyBridge Bitcoin ETF Trust Under 

NYSE Arca Rule 8.201–E 

January 20, 2022. 

I. Introduction 

On May 6, 2021, NYSE Arca, Inc. 

(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Exchange 

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

proposed rule change to list and trade 

shares (‘‘Shares’’) of the First Trust 

SkyBridge Bitcoin ETF Trust (‘‘Trust’’) 

under NYSE Arca Rule 8.201–E 

(Commodity-Based Trust Shares). The 

proposed rule change was published for 

comment in the Federal Register on 

May 27, 2021.3

On July 7, 2021, pursuant to Section 

19(b)(2) of the Exchange Act,4 the 

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change.5 On August 20, 

2021, the Commission instituted 

proceedings under Section 19(b)(2)(B) of 

the Exchange Act 6 to determine 

whether to approve or disapprove the 

proposed rule change.7 On November 

15, 2021, the Commission designated a 

longer period for Commission action on 

the proposed rule change.8

This order disapproves the proposed 

rule change. The Commission concludes 

that NYSE Arca has not met its burden 

under the Exchange Act and the 

Commission’s Rules of Practice to 

demonstrate that its proposal is 

consistent with the requirements of 

Exchange Act Section 6(b)(5), and in 

particular, the requirement that the 

rules of a national securities exchange 

be ‘‘designed to prevent fraudulent and 

manipulative acts and practices’’ and 

‘‘to protect investors and the public 

interest.’’ 9

When considering whether NYSE 

Arca’s proposal to list and trade the 

Shares is designed to prevent fraudulent 

and manipulative acts and practices, the 

Commission applies the same standard 

used in its orders considering previous 

proposals to list bitcoin 10-based 

commodity trusts and bitcoin-based 

trust issued receipts.11 As the 

Commission has explained, an exchange 

that lists bitcoin-based exchange-traded 

products (‘‘ETPs’’) can meet its 

obligations under Exchange Act Section 

6(b)(5) by demonstrating that the 

exchange has a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to the underlying or reference 

bitcoin assets.12

The standard requires such 

surveillance-sharing agreements since 

they ‘‘provide a necessary deterrent to 

manipulation because they facilitate the 

availability of information needed to 

fully investigate a manipulation if it 


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3870 Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 

13See Amendment to Rule Filing Requirements 

for Self-Regulatory Organizations Regarding New 

Derivative Securities Products, Securities Exchange 

Act Release No. 40761 (Dec. 8, 1998), 63 FR 70952, 

70959 (Dec. 22, 1998) (‘‘NDSP Adopting Release’’). 

See also Winklevoss Order, 83 FR at 37594; 

ProShares Order, 83 FR at 43936; GraniteShares 

Order, 83 FR at 43924; USBT Order, 85 FR at 12596. 

14See NDSP Adopting Release, 63 FR at 70959. 

15See Winklevoss Order, 83 FR at 37592–93; 

Letter from Brandon Becker, Director, Division of 

Market Regulation, Commission, to Gerard D. 

O’Connell, Chairman, Intermarket Surveillance 

Group (June 3, 1994), available at https://

www.sec.gov/divisions/marketreg/mr-noaction/ 

isg060394.htm. 

16See Winklevoss Order, 83 FR at 37594. This 

definition is illustrative and not exclusive. There 

could be other types of ‘‘significant markets’’ and 

‘‘markets of significant size,’’ but this definition is 

an example that will provide guidance to market 

participants. See id. 

17See USBT Order, 85 FR at 12597. 

18See Winklevoss Order, 83 FR at 37594. 19See USBT Order, 85 FR at 12597; Securities 

Exchange Act Release No. 33555 (Jan. 31, 1994), 59 

FR 5619, 5621 (Feb. 7, 1994) (SR–Amex–93–28) 

(order approving listing of options on American 

Depository Receipts (‘‘ADRs’’)). The Commission 

has also required a surveillance-sharing agreement 

in the context of index options even when (i) all 

of the underlying index component stocks were 

either registered with the Commission or exempt 

from registration under the Exchange Act; (ii) all of 

the underlying index component stocks traded in 

the U.S. either directly or as ADRs on a national 

securities exchange; and (iii) effective international 

ADR arbitrage alleviated concerns over the 

relatively smaller ADR trading volume, helped to 

ensure that ADR prices reflected the pricing on the 

home market, and helped to ensure more reliable 

price determinations for settlement purposes, due 

to the unique composition of the index and reliance 

on ADR prices. See Securities Exchange Act Release 

No. 26653 (Mar. 21, 1989), 54 FR 12705, 12708 

(Mar. 28, 1989) (SR–Amex–87–25) (stating that 

‘‘surveillance-sharing agreements between the 

exchange on which the index option trades and the 

markets that trade the underlying securities are 

necessary’’ and that ‘‘[t]he exchange of surveillance 

data by the exchange trading a stock index option 

and the markets for the securities comprising the 

index is important to the detection and deterrence 

of intermarket manipulation.’’). And the 

Commission has required a surveillance-sharing 

agreement even when approving options based on 

an index of stocks traded on a national securities 

exchange. See Securities Exchange Act Release No. 

30830 (June 18, 1992), 57 FR 28221, 28224 (June 24, 

1992) (SR–Amex–91–22) (stating that surveillancesharing agreements ‘‘ensure the availability of 

information necessary to detect and deter potential 

manipulations and other trading abuses’’). 

20See USBT Order, 85 FR at 12597. 

21See Winklevoss Order, 83 FR at 37580, 37582– 

91 (addressing assertions that ‘‘bitcoin and bitcoin 

[spot] markets’’ generally, as well as one bitcoin 

trading platform specifically, have unique 

resistance to fraud and manipulation); see also 

USBT Order, 85 FR at 12597. 

22See USBT Order, 85 FR at 12597. 

23See supra note 11. 

24See Notice, 86 FR at 28660–61. 

25See id. at 28656–58. 

26See id. at 28658. 

27See id. at 28650. 

were to occur.’’ 13 The Commission has 

emphasized that it is essential for an 

exchange listing a derivative securities 

product to enter into a surveillancesharing agreement with markets trading 

the underlying assets for the listing 

exchange to have the ability to obtain 

information necessary to detect, 

investigate, and deter fraud and market 

manipulation, as well as violations of 

exchange rules and applicable federal 

securities laws and rules.14 The 

hallmarks of a surveillance-sharing 

agreement are that the agreement 

provides for the sharing of information 

about market trading activity, clearing 

activity, and customer identity; that the 

parties to the agreement have reasonable 

ability to obtain access to and produce 

requested information; and that no 

existing rules, laws, or practices would 

impede one party to the agreement from 

obtaining this information from, or 

producing it to, the other party.15

In the context of this standard, the 

terms ‘‘significant market’’ and ‘‘market 

of significant size’’ include a market (or 

group of markets) as to which (a) there 

is a reasonable likelihood that a person 

attempting to manipulate the ETP 

would also have to trade on that market 

to successfully manipulate the ETP, so 

that a surveillance-sharing agreement 

would assist in detecting and deterring 

misconduct, and (b) it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in that 

market.16 A surveillance-sharing 

agreement must be entered into with a 

‘‘significant market’’ to assist in 

detecting and deterring manipulation of 

the ETP, because a person attempting to 

manipulate the ETP is reasonably likely 

to also engage in trading activity on that 

‘‘significant market.’’ 17

Consistent with this standard, for the 

commodity-trust ETPs approved to date 

for listing and trading, there has been in 

every case at least one significant, 

regulated market for trading futures on 

the underlying commodity—whether 

gold, silver, platinum, palladium, or 

copper—and the ETP listing exchange 

has entered into surveillance-sharing 

agreements with, or held Intermarket 

Surveillance Group (‘‘ISG’’) membership 

in common with, that market.18

Moreover, the surveillance-sharing 

agreements have been consistently 

present whenever the Commission has 

approved the listing and trading of 

derivative securities, even where the 

underlying securities were also listed on 

national securities exchanges—such as 

options based on an index of stocks 

traded on a national securities 

exchange—and were thus subject to the 

Commission’s direct regulatory 

authority.19

Listing exchanges have also attempted 

to demonstrate that other means besides 

surveillance-sharing agreements will be 

sufficient to prevent fraudulent and 

manipulative acts and practices, 

including that the bitcoin market as a 

whole or the relevant underlying bitcoin 

market is ‘‘uniquely’’ and ‘‘inherently’’ 

resistant to fraud and manipulation.20 In 

response, the Commission has agreed 

that, if a listing exchange could 

establish that the underlying market 

inherently possesses a unique resistance 

to manipulation beyond the protections 

that are utilized by traditional 

commodity or securities markets, it 

would not necessarily need to enter into 

a surveillance-sharing agreement with a 

regulated significant market.21 Such 

resistance to fraud and manipulation, 

however, must be novel and beyond 

those protections that exist in 

traditional commodity markets or equity 

markets for which the Commission has 

long required surveillance-sharing 

agreements in the context of listing 

derivative securities products.22 No 

listing exchange has satisfied its burden 

to make such demonstration.23

In its proposed rule change to list and 

trade Shares, NYSE Arca contends that 

approval of the proposal is consistent 

with Section 6(b)(5) of the Exchange 

Act, in particular Section 6(b)(5)’s 

requirement that the rules of a national 

securities exchange be designed to 

prevent fraudulent and manipulative 

acts and practices and to protect 

investors and the public interest.24 As 

discussed in more detail below, NYSE 

Arca asserts that the proposal is 

consistent with Section 6(b)(5) of the 

Exchange Act because the Exchange has 

a comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size,25 and there exist other 

means to prevent fraudulent and 

manipulative acts and practices that are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement.26

Moreover, although NYSE Arca 

recognizes the Commission’s focus on 

potential manipulation of bitcoin ETPs 

in prior disapproval orders, NYSE Arca 

states that the Commission should also 

consider the direct, quantifiable investor 

protection issues in determining 

whether to approve the proposal.27

Specifically, NYSE Arca believes that 

the proposal would give U.S. investors 

access to bitcoin in a regulated and 

transparent exchange-traded vehicle 

that would act to limit risk to U.S. 

investors by: (i) Reducing premium and 

discount volatility; (ii) reducing 

management fees through meaningful 

competition; (iii) reducing risks 

associated with investing in operating 

companies that are imperfect proxies for 


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Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 3871 

28See id. at 28649. 

29See Notice, supra note 3. See also Registration 

Statement on Form S–1/A, dated May 6, 2021 (File 

No. 333–254529), filed with the Commission on 

behalf of the Trust (‘‘Registration Statement’’). 

30See Notice, 86 FR at 28652. First Trust 

Advisors L.P. is the sponsor of the Trust, and 

Delaware Trust Company is the trustee. The subadviser for the Trust is SkyBridge Capital II, LLC 

(‘‘Sub-Adviser’’). The Bank of New York Mellon 

(‘‘Administrator’’) is the transfer agent and the 

administrator of the Trust. The bitcoin custodian for 

the Trust is NYDIG Trust Company LLC (‘‘Bitcoin 

Custodian’’). See id. at 28646. 

31See id. at 28652. 

32See id. at 28652, 28654. The Administrator acts 

as custodian of the Trust’s cash and cash 

equivalents. See id. at 28654. While the Trust may 

from time to time incur certain extraordinary, nonrecurring expenses that must be paid in U.S. dollars 

or other fiat currency, such events would only 

impact the amount of bitcoin represented by a 

Share of the Trust. See id. at 28655. 

33The Trust’s daily activities will generally not be 

reflected in the NAV determined for the Business 

Day on which the transactions are effected (the 

trade date), but rather on the following Business 

Day. See id. at 28654. 

34According to NYSE Arca, the Reference Rate is 

based on materially the same methodology (except 

calculation time) as the Benchmark Administrator’s 

CME CF Bitcoin Reference Rate (‘‘CME CF BRR’’), 

which was first introduced on November 14, 2016, 

and is the rate on which bitcoin futures contracts 

are cash-settled in U.S. dollars on the Chicago 

Mercantile Exchange (‘‘CME’’). See id. at 28654. 

35According to the Exchange, a ‘‘Relevant 

Transaction’’ is any cryptocurrency versus U.S. 

dollar spot trade that occurs during the observation 

window between 3:00 p.m. and 4:00 p.m., ET, on 

a Constituent Platform in the BTC/USD pair that is 

reported and disseminated by a Constituent 

Platform through its publicly available Automatic 

Programming Interface (‘‘API’’) and observed by the 

Benchmark Administrator. See id. at 28655. 

36According to the Exchange, a volume-weighted 

median differs from a standard median in that a 

weighting factor, in this case trade size, is factored 

into the calculation. See id. at 28655 n.64. 

37See id. at 28654–55. 

38See id. at 28659. 

39See id. at 28658–59. 

bitcoin exposure; and (iv) providing an 

alternative to custodying spot bitcoin.28

In the analysis that follows, the 

Commission examines whether the 

proposed rule change is consistent with 

Section 6(b)(5) of the Exchange Act by 

addressing: In Section III.B.1 assertions 

that other means besides surveillancesharing agreements will be sufficient to 

prevent fraudulent and manipulative 

acts and practices; in Section III.B.2 

assertions that NYSE Arca has entered 

into a comprehensive surveillancesharing agreement with a regulated 

market of significant size related to 

bitcoin; and in Section III.C assertions 

that the proposal is consistent with the 

protection of investors and the public 

interest. 

Based on the analysis, the 

Commission concludes that NYSE Arca 

has not established that other means to 

prevent fraudulent and manipulative 

acts and practices are sufficient to 

justify dispensing with the requisite 

surveillance-sharing agreement. The 

Commission further concludes that 

NYSE Arca has not established that it 

has a comprehensive surveillancesharing agreement with a regulated 

market of significant size related to 

bitcoin. As discussed further below, 

NYSE Arca repeats various assertions 

made in prior bitcoin-based ETP 

proposals that the Commission has 

previously addressed and rejected—and 

more importantly, NYSE Arca does not 

respond to the Commission’s reasons for 

rejecting those assertions but merely 

repeats them. As a result, the 

Commission does not find that the 

proposed rule change is consistent with 

the statutory requirements of Exchange 

Act Section 6(b)(5). 

The Commission again emphasizes 

that its disapproval of this proposed 

rule change does not rest on an 

evaluation of whether bitcoin, or 

blockchain technology more generally, 

has utility or value as an innovation or 

an investment. Rather, the Commission 

is disapproving this proposed rule 

change because, as discussed below, 

NYSE Arca has not met its burden to 

demonstrate that its proposal is 

consistent with the requirements of 

Exchange Act Section 6(b)(5). 

II. Description of the Proposed Rule 

Change 

As described in more detail in the 

Notice,29 the Exchange proposes to list 

and trade the Shares of the Trust under 

NYSE Arca Rule 8.201–E, which 

governs the listing and trading of 

Commodity-Based Trust Shares on the 

Exchange. 

The investment objective of the Trust 

will be for the Shares to reflect the 

performance of the value of bitcoin, less 

the Trust’s liabilities and expenses.30

The Trust will not seek to reflect the 

performance of any benchmark or index. 

In order to pursue its investment 

objective, the Trust will seek to 

purchase and sell such number of 

bitcoin so that the total value of the 

bitcoin held by the Trust is as close to 

100 percent of the net assets of the Trust 

as is reasonably practicable to achieve.31

The Shares would represent units of 

fractional undivided beneficial interest 

in, and ownership of, the Trust. The 

Trust will hold only bitcoins, which the 

Bitcoin Custodian will custody on 

behalf of the Trust. The Trust generally 

will not hold cash or cash equivalents; 

however, the Trust may hold cash and 

cash equivalents on a temporary basis to 

pay extraordinary expenses.32

The net asset value (‘‘NAV’’) of the 

Trust will be determined in accordance 

with Generally Accepted Accounting 

Principles as the total value of bitcoin 

held by the Trust, plus any cash or other 

assets, less any liabilities including 

accrued but unpaid expenses. The NAV 

of the Trust will be determined as of 

4:00 p.m. ET on each day that the 

Shares trade on the Exchange 

(‘‘Business Day’’).33 The Trust will use 

the CF Bitcoin US Settlement Price 

(‘‘Reference Rate’’) to calculate the 

Trust’s NAV. 

The Reference Rate is administered by 

CF Benchmarks Ltd. (‘‘Benchmark 

Administrator’’) and serves as a once-aday benchmark rate of the U.S. dollar 

price of bitcoin (USD/BTC), calculated 

as of 4:00 p.m. ET34 The Reference Rate 

aggregates the trade flow of several 

bitcoin platforms during an observation 

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

p.m. ET into the U.S. dollar price of one 

bitcoin at 4:00 p.m., ET The current 

constituent bitcoin platforms of the 

Reference Rate are Bitstamp, Coinbase, 

Gemini, itBit, and Kraken (‘‘Constituent 

Platforms’’). In calculating the Reference 

Rate, the methodology creates a joint list 

of all ‘‘Relevant Transactions’’ 35 from 

the Constituent Platforms. The 

methodology divides this list into a 

number of equally sized time intervals 

and calculates the volume-weighted 

median trade price for each of those 

time intervals.36 The Reference Rate is 

the equally weighted average of the 

volume-weighted median trade prices of 

all intervals.37

The Trust’s website, as well as one or 

more major market data vendors, will 

provide an intra-day indicative value 

(‘‘IIV’’) per Share updated every 15 

seconds, as calculated by the Exchange 

or a third party financial data provider 

during the Exchange’s Core Trading 

Session (9:30 a.m. to 4:00 p.m. ET). The 

IIV will be calculated by using the prior 

day’s closing NAV per Share as a base 

and updating that value during the 

Exchange’s Core Trading Session to 

reflect changes in the value of the 

Trust’s NAV during the trading day.38

The Trust will issue and redeem 

Shares to authorized participants on an 

ongoing basis in blocks of 50,000 Shares 

(‘‘Creation Units’’). The creation and 

redemption of Creation Units will be 

effected in ‘‘in-kind’’ transactions based 

on the quantity of bitcoin attributable to 

each Share. The creation and 

redemption of Creation Units require 

the delivery to the Trust, or the 

distribution by the Trust, of the number 

of bitcoins represented by the Creation 

Units being created or redeemed.39


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3872 Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 

40 15 U.S.C. 78f(b)(5). Pursuant to Section 19(b)(2) 

of the Exchange Act, 15 U.S.C. 78s(b)(2), the 

Commission must disapprove a proposed rule 

change filed by a national securities exchange if it 

does not find that the proposed rule change is 

consistent with the applicable requirements of the 

Exchange Act. Exchange Act Section 6(b)(5) states 

that an exchange shall not be registered as a 

national securities exchange unless the Commission 

determines that ‘‘[t]he rules of the exchange are 

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; and are not 

designed to permit unfair discrimination between 

customers, issuers, brokers, or dealers, or to regulate 

by virtue of any authority conferred by this title 

matters not related to the purposes of this title or 

the administration of the exchange.’’ 15 U.S.C. 

78f(b)(5). 

41Rule 700(b)(3), Commission Rules of Practice, 

17 CFR 201.700(b)(3). 

42See id. 

43See id. 

44Susquehanna Int’l Group, LLP v. Securities and 

Exchange Commission, 866 F.3d 442, 447 (D.C. Cir. 

2017) (‘‘Susquehanna’’). 

45See USBT Order, 85 FR at 12597 n.23. The 

Commission is not applying a ‘‘cannot be 

manipulated’’ standard. Instead, the Commission is 

examining whether the proposal meets the 

requirements of the Exchange Act and, pursuant to 

its Rules of Practice, places the burden on the 

listing exchange to demonstrate the validity of its 

contentions and to establish that the requirements 

of the Exchange Act have been met. See id. 

46See id. at 12597. 

47See Notice, 86 FR at 28658. 

48See id. 

49See id. 

50Aside from stating that the ‘‘statistics are based 

on samples of bitcoin liquidity in USD (excluding 

stablecoins or Euro liquidity) based on executable 

quotes on Coinbase Pro, Gemini, Bitstamp, Kraken, 

LMAX Exchange, BinanceUS, and OKCoin during 

February 2021,’’ the Exchange provides no other 

information pertaining to the methodology used to 

enable the Commission to evaluate these findings 

or their significance. See Notice, 86 FR at 28658 

n.91. 

51See USBT Order, 85 FR at 12601. 

52See USBT Order, 85 FR at 12600–01 & nn.66– 

67 (discussing J. Griffin & A. Shams, Is Bitcoin 

III. Discussion 

A. The Applicable Standard for Review 

The Commission must consider 

whether NYSE Arca’s proposal is 

consistent with the Exchange Act. 

Section 6(b)(5) of the Exchange Act 

requires, in relevant part, that the rules 

of a national securities exchange be 

designed ‘‘to prevent fraudulent and 

manipulative acts and practices’’ and 

‘‘to protect investors and the public 

interest.’’ 40 Under the Commission’s 

Rules of Practice, the ‘‘burden to 

demonstrate that a proposed rule change 

is consistent with the Exchange Act and 

the rules and regulations issued 

thereunder . . . is on the self-regulatory 

organization [‘SRO’] that proposed the 

rule change.’’ 41

The description of a proposed rule 

change, its purpose and operation, its 

effect, and a legal analysis of its 

consistency with applicable 

requirements must all be sufficiently 

detailed and specific to support an 

affirmative Commission finding,42 and 

any failure of an SRO to provide this 

information may result in the 

Commission not having a sufficient 

basis to make an affirmative finding that 

a proposed rule change is consistent 

with the Exchange Act and the 

applicable rules and regulations.43

Moreover, ‘‘unquestioning reliance’’ on 

an SRO’s representations in a proposed 

rule change is not sufficient to justify 

Commission approval of a proposed rule 

change.44

B. Whether NYSE Arca has Met Its 

Burden To Demonstrate That the 

Proposal Is Designed To Prevent 

Fraudulent and Manipulative Acts and 

Practices 

(1) Assertions That Other Means Besides 

Surveillance-Sharing Agreements Will 

Be Sufficient To Prevent Fraudulent and 

Manipulative Acts and Practices 

As stated above, the Commission has 

recognized that a listing exchange could 

demonstrate that other means to prevent 

fraudulent and manipulative acts and 

practices are sufficient to justify 

dispensing with a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size, 

including by demonstrating that the 

bitcoin market as a whole or the 

relevant underlying bitcoin market is 

uniquely and inherently resistant to 

fraud and manipulation.45 Such 

resistance to fraud and manipulation 

must be novel and beyond those 

protections that exist in traditional 

commodities or securities markets.46

NYSE Arca asserts that certain aspects 

of the market for bitcoin help to mitigate 

the potential for fraud and manipulation 

in connection with bitcoin pricing.47

Specifically, according to NYSE Arca, 

the significant liquidity in the bitcoin 

spot market and the impact of market 

orders on the overall price of bitcoin 

have made attempts to move the price 

of bitcoin increasingly expensive over 

the past year.48 The Exchange states 

that, in January 2020, for example, the 

cost to buy or sell $5 million worth of 

bitcoin averaged roughly 30 basis points 

(compared to 10 basis points in 

February 2021) with a market impact of 

50 basis points (compared to 30 basis 

points in February 2021). For a $10 

million market order, the cost to buy or 

sell was roughly 50 basis points 

(compared to 20 basis points in 

February 2021) with a market impact of 

80 basis points (compared to 50 basis 

points in February 2021). NYSE Arca 

contends that, as the liquidity in the 

bitcoin spot market increases, it follows 

that the impact of $5 million and $10 

million orders will continue to 

decrease.49

The Exchange’s assertions about the 

bitcoin market do not constitute other 

means to prevent fraud and 

manipulation sufficient to justify 

dispensing with the requisite 

surveillance-sharing agreement. First, 

the data furnished by NYSE Arca 

regarding the cost to move the price of 

bitcoin, and the market impact of such 

attempts, are incomplete. NYSE Arca 

does not provide meaningful analysis 

pertaining to how these figures compare 

to other markets or why one must 

conclude, based on the numbers 

provided, that the bitcoin market is 

costly to manipulate. Further, NYSE 

Arca’s analysis of the market impact of 

a mere two sample transactions is not 

sufficient evidence to conclude that the 

bitcoin market is resistant to 

manipulation.50 Even assuming that the 

Commission agreed with NYSE Arca’s 

premise, that it is costly to manipulate 

the bitcoin market, and it is becoming 

increasingly so, any such evidence 

speaks only to establish that there is 

some resistance to manipulation, not 

that it establishes unique resistance to 

manipulation to warrant dispensing 

with the standard surveillance-sharing 

agreement.51

Moreover, NYSE Arca does not 

sufficiently contest the presence of 

possible sources of fraud and 

manipulation in the bitcoin spot market 

generally that the Commission has 

raised in previous orders, which have 

included: (1) ‘‘wash’’ trading; (2) 

persons with a dominant position in 

bitcoin manipulating bitcoin pricing; (3) 

hacking of the bitcoin network and 

trading platforms; (4) malicious control 

of the bitcoin network; (5) trading based 

on material, non-public information 

(such as plans of market participants to 

significantly increase or decrease their 

holdings in bitcoin; new sources of 

demand for bitcoin; the decision of a 

bitcoin-based investment vehicle on 

how to respond to a ‘‘fork’’ in the 

bitcoin blockchain), or based on the 

dissemination of false and misleading 

information; (6) manipulative activity 

involving the purported ‘‘stablecoin’’ 

Tether (USDT); and (7) fraud and 

manipulation at bitcoin trading 

platforms.52


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Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 3873 

Really Untethered? (October 28, 2019), available at 

https://ssrn.com/abstract=3195066 and published 

in 75 J. Finance 1913 (2020)); Winklevoss Order, 83 

FR at 37585–86; Valkyrie Order, 86 FR at 74160. 

53See Registration Statement at 16, 18, 20–21. 

54See Notice, 86 FR at 28658. 

55See id. at 28661. 

56See id. 

57See id. 

58See id. at 28658. 

59See id. 

60See id. 

61See id. 

62See id. 

63The Commission has previously considered 

and rejected similar arguments about the valuation 

of bitcoin according to a benchmark or reference 

price. See, e.g., SolidX Order, 82 FR at 16258; 

Winklevoss Order, 83 FR at 37587–90; USBT Order, 

85 FR at 12599–601; WisdomTree Order, 86 FR at 

69326–28; Valkyrie Order, 86 FR at 74160–63; 

Kryptoin Order, 86 FR at 74172–73. 

64See USBT Order, 85 FR at 12601 n.66; see also 

id. at 12607. 

65See WisdomTree Order, 86 FR at 69327. 

66See USBT Order, 85 FR at 12607. 

67See supra notes 52–53 and accompanying text. 

In addition, NYSE Arca does not 

address risk factors specific to the 

bitcoin blockchain and bitcoin 

platforms described in the Trust’s 

Registration Statement that undermine 

its assertions about the bitcoin market. 

For example, the Registration Statement 

acknowledges that ‘‘platforms on which 

users trade bitcoin are relatively new 

and, in some cases, largely unregulated, 

and, therefore, may be more exposed to 

fraud and security breaches than 

established, regulated exchanges for 

other financial assets or instruments;’’ 

that the bitcoin blockchain could be 

vulnerable to a ‘‘51% attack,’’ in which 

a malicious actor(s) or botnet that 

controls a majority of the processing 

power dedicated to mining on the 

bitcoin network may be able to alter the 

bitcoin blockchain on which the bitcoin 

network and bitcoin transactions rely; 

that the nature of the assets held at 

bitcoin platforms makes them 

‘‘appealing targets for hackers’’ and that 

‘‘a number of bitcoin platforms have 

been victims of cybercrimes;’’ that ‘‘in 

2019 there were reports claiming that 

80–95% of bitcoin trading volume on 

[bitcoin platforms] was false or noneconomic in nature;’’ and that, over the 

past several years, bitcoin trading 

platforms ‘‘have been closed due to 

fraud and manipulative activity, 

business failure or security breaches.’’ 53

NYSE Arca also asserts that other 

means to prevent fraud and 

manipulation are sufficient to justify 

dispensing with the requisite 

surveillance-sharing agreement. The 

Exchange states that the Reference Rate, 

which is used to determine the value of 

the Trust’s bitcoin and NAV, is itself 

resistant to manipulation based on the 

Reference Rate’s methodology.54 The 

Reference Rate mitigates the effects of 

potential manipulation of the bitcoin 

market because the Reference Rate is 

exclusively based on Constituent 

Platforms.55 According to the Exchange, 

the capital necessary to maintain a 

significant presence on any Constituent 

Platform would make manipulation of 

the Reference Rate unlikely.56 The 

Exchange, moreover, asserts that 

‘‘[b]itcoin trades in a well-arbitraged 

and distributed market’’, and ‘‘[t]he 

linkage between the bitcoin markets and 

the presence of arbitrageurs in those 

markets means that the manipulation of 

the price of bitcoin on any Constituent 

Platform [(and, as implied by the 

Exchange, the Reference Rate)] would 

likely require overcoming the liquidity 

supply of such arbitrageurs who are 

potentially eliminating any cross-market 

pricing differences.’’ 57

Simultaneously with the Exchange’s 

assertions regarding the Reference Rate, 

the Exchange also states that, because 

the Trust will engage in in-kind 

creations and redemptions only, the 

‘‘manipulability of the Reference Rate 

[is] significantly less important.’’ 58 The 

Exchange elaborates further that, 

‘‘because the Trust will not accept cash 

to buy bitcoin in order to create or 

redeem Shares, the price that the 

Sponsor uses to value the Trust’s bitcoin 

is not particularly important.’’ 59

According to NYSE Arca, when 

authorized participants create Shares 

with the Trust, they would need to 

deliver a certain number of bitcoin per 

Share (regardless of the valuation used), 

and when they redeem with the Trust, 

they would similarly expect to receive 

a certain number of bitcoin per Share.60

As such, NYSE Arca argues that, even 

if the price used to value the Trust’s 

bitcoin has been manipulated, the ratio 

of bitcoin per Share does not change, 

and the Trust will either accept (for 

creations) or distribute (for 

redemptions) the same number of 

bitcoin regardless of the value.61 This, 

according to NYSE Arca, not only 

mitigates the risk associated with 

potential manipulation, but also 

discourages and disincentivizes 

manipulation of the Reference Rate 

because there is little financial incentive 

to do so.62

Based on assertions made and the 

information provided, the Commission 

can find no basis to conclude that NYSE 

Arca has articulated other means to 

prevent fraud and manipulation that are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement. The record does not 

demonstrate that the proposed 

methodology for calculating the 

Reference Rate would make the 

proposed ETP resistant to fraud or 

manipulation such that a surveillancesharing agreement with a regulated 

market of significant size is 

unnecessary.63

NYSE Arca has not shown that its 

proposed use of a number of equallysized time intervals over the observation 

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

p.m., E.T., to calculate the Reference 

Rate would effectively be able to 

eliminate fraudulent or manipulative 

activity that is not transient. Fraud and 

manipulation in the bitcoin spot market 

could persist for a ‘‘significant 

duration.’’ 64 The Exchange does not 

connect the use of such partitions to the 

duration of the effects of fraud and 

manipulation in the bitcoin spot 

market.65 Thus, the Exchange fails to 

establish how the Reference Rate’s 

methodology eliminates fraudulent or 

manipulative activity that is not 

transient.66

Moreover, the record does not 

demonstrate that the Benchmark 

Administrator’s reliance solely on the 

Constituent Platforms to calculate the 

Reference Rate make the proposed ETP 

resistant to fraud or manipulation. For 

example, even assuming, as the 

Exchange asserts, that the capital 

necessary to maintain a significant 

presence on any Constituent Platform 

make the Reference Rate resistant to 

manipulation, the Exchange has not 

assessed the possible influence that spot 

platforms not included among the 

Constituent Platforms would have on 

bitcoin prices used to calculate the 

Reference Rate. As discussed above, the 

Exchange has not sufficiently addressed 

the presence of possible sources of fraud 

and manipulation in the broader spot 

market previously raised by the 

Commission or by the Trust’s 

Registration Statement.67 Accordingly, 

to the extent that trading on platforms 

not directly used to calculate the 

Reference Rate affects prices on the 

Constituent Platforms, the 

characteristics of those other 

platforms—where various kinds of fraud 

and manipulation from a variety of 

sources may be present and persist— 

may affect whether the Reference Rate is 

resistant to manipulation. 

Likewise, the Commission is 

unpersuaded by NYSE Arca’s assertion 

that arbitrage across bitcoin markets 

makes it unlikely that the price of 

bitcoin on the Constituent Platforms 

would be manipulated. Here, the 

Exchange provides insufficient evidence 

to support its assertion of price arbitrage 

across bitcoin platforms and does not 


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3874 Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 

68See, e.g., Winklevoss Order, 83 FR at 37584; 

USBT Order, 85 FR at 12600–01. 

69See Registration Statement at 35. 

70See id. at 18. 

71See supra notes 58–62 and accompanying text. 

72See Notice, 86 FR at 28658 (‘‘While the Sponsor 

believes that the Reference Rate used to value the 

Trust’s bitcoin is itself resistant to manipulation 

based on the methodology described above, the fact 

that creations and redemptions are only available 

in-kind makes the manipulability of the Reference 

Rate significantly less important.’’). 

73See id. 

74See Winklevoss Order, 83 FR at 37589–90; 

USBT Order, 85 FR at 12607–08. 

75See, e.g., iShares COMEX Gold Trust, Securities 

Exchange Act Release No. 51058 (Jan. 19, 2005), 70 

FR 3749, 3751–55 (Jan. 26, 2005) (SR–Amex–2004– 

38); iShares Silver Trust, Securities Exchange Act 

Release No. 53521 (Mar. 20, 2006), 71 FR 14969, 

14974 (Mar. 24, 2006) (SR–Amex–2005–072). 

76See Winklevoss Order, 83 FR at 37594. This 

definition is illustrative and not exclusive. There 

could be other types of ‘‘significant markets’’ and 

‘‘markets of significant size,’’ but this definition is 

an example that provides guidance to market 

participants. See id. 

77See Notice, 86 FR at 28656–58, 28661. 

78See Winklevoss Order, 83 FR at 37580 n.19. 

79See Notice, 86 FR at 28656. 

80While the Commission recognizes that the 

CFTC regulates the CME, the CFTC is not 

responsible for direct, comprehensive regulation of 

the underlying bitcoin spot market. See Winklevoss 

Order, 83 FR at 37587, 37599. See also infra notes 

125–127 and accompanying text. 

take into account that a market 

participant with a dominant ownership 

position would not find it prohibitively 

expensive to overcome the liquidity 

supplied by arbitrageurs and could use 

dominant market share to engage in 

manipulation.68

In addition, the Exchange’s assertions 

about the Reference Rate are 

contradicted by the Registration 

Statement, which states that ‘‘the 

[Reference Rate] has a limited history 

and there are limitations with the price 

of bitcoin reflected there.’’ 69 The 

Registration Statement further states 

that ‘‘platforms on which users trade 

bitcoin. . . may be more exposed to 

fraud and security breaches than 

established, regulated exchanges for 

other financial assets or instruments, 

which could have a negative impact on 

the performance of the Trust.’’ 70 The 

Constituent Platforms are a subset of the 

bitcoin platforms currently in existence. 

Although the Sponsor raises concerns 

regarding fraud and security of bitcoin 

platforms in the Registration Statement, 

which would include the Constituent 

Platforms, the Exchange does not 

explain how or why such concerns are 

consistent with its assertion that the use 

of the Reference Rate mitigates the 

effects of potential manipulation of the 

bitcoin market. 

NYSE Arca also does not explain the 

significance of the Reference Rate’s 

purported resistance to manipulation to 

the overall analysis of whether the 

proposal to list and trade the Shares is 

designed to prevent fraud and 

manipulation. Even assuming that the 

Exchange’s argument is that, if the 

Reference Rate is resistant to 

manipulation, the Trust’s NAV, and 

thereby the Shares as well, would be 

resistant to manipulation, the Exchange 

has not established in the record a basis 

for such conclusion. That assumption 

aside, the Commission notes that the 

Shares would trade at market-based 

prices in the secondary market, not at 

NAV, which then raises the question of 

the significance of the NAV calculation 

to the manipulation of the Shares. 

The Exchange’s arguments are also 

contradictory. While arguing that the 

Reference Rate is resistant to 

manipulation, the Exchange 

simultaneously downplays the 

importance of the Reference Rate in 

light of the Trust’s in-kind creation and 

redemption mechanism.71 The 

Exchange points out that the Trust will 

create and redeem Shares in-kind, not in 

cash, which renders the NAV 

calculation, and thereby the ability to 

manipulate NAV, ‘‘significantly less 

important.’’ 72 The Trust will not accept 

cash to buy bitcoin in order to create 

Shares or sell bitcoin to pay cash for 

redeemed Shares. Accordingly, in NYSE 

Arca’s own words, the price that the 

Sponsor uses to value the Trust’s bitcoin 

‘‘is not particularly important.’’ 73 If the 

Reference Rate that the Trust uses to 

value the Trust’s bitcoin ‘‘is not 

particularly important,’’ it follows that 

the Reference Rate’s resistance to 

manipulation is not material to the 

Shares’ susceptibility to fraud and 

manipulation. As the Exchange does not 

address or provide any analysis with 

respect to these issues, the Commission 

cannot conclude that the Reference Rate 

aids in the determination that the 

proposal to list and trade the Shares is 

designed to prevent fraudulent and 

manipulative acts and practices. 

The Commission thus concludes that 

the Exchange has not demonstrated that 

its use of the Reference Rate makes the 

proposed ETP resistant to manipulation. 

While the proposed procedures for 

calculating the Reference Rate using 

only prices from the Constituent 

Platforms are intended to provide some 

degree of protection against attempts to 

manipulate the Reference Rate, these 

procedures are not sufficient for the 

Commission to dispense with the 

requisite surveillance-sharing agreement 

with a regulated market of significant 

size. 

Finally, the Commission finds that 

NYSE Arca has not demonstrated that 

in-kind creations and redemptions 

provide the Shares with a unique 

resistance to manipulation. The 

Commission has previously addressed 

similar assertions.74 As the Commission 

stated before, in-kind creations and 

redemptions are a common feature of 

ETPs, and the Commission has not 

previously relied on the in-kind creation 

and redemption mechanism as a basis 

for excusing exchanges that list ETPs 

from entering into surveillance-sharing 

agreements with significant, regulated 

markets related to the portfolio’s 

assets.75 Accordingly, the Commission 

is not persuaded here that the Trust’s inkind creations and redemptions afford it 

a unique resistance to manipulation. 

(2) Assertions That NYSE Arca Has 

Entered Into a Comprehensive 

Surveillance-Sharing Agreement With a 

Regulated Market of Significant Size 

As NYSE Arca has not demonstrated 

that other means besides surveillancesharing agreements will be sufficient to 

prevent fraudulent and manipulative 

acts and practices, the Commission next 

examines whether the record supports 

the conclusion that NYSE Arca has 

entered into a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

relating to the underlying assets. In this 

context, the term ‘‘market of significant 

size’’ includes a market (or group of 

markets) as to which (i) there is a 

reasonable likelihood that a person 

attempting to manipulate the ETP 

would also have to trade on that market 

to successfully manipulate the ETP, so 

that a surveillance-sharing agreement 

would assist in detecting and deterring 

misconduct, and (ii) it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in that 

market.76

In its proposal, NYSE Arca asserts 

that the CME, either alone as the sole 

market for bitcoin futures or as a group 

of markets together with the Constituent 

Platforms, is a ‘‘market of significant 

size.’’ 77 As the Commission has stated 

in the past, it considers two markets that 

are members of the ISG to have a 

comprehensive surveillance-sharing 

agreement with one another, even if 

they do not have a separate bilateral 

surveillance-sharing agreement.78

Accordingly, based on the common 

membership of NYSE Arca and the CME 

in the ISG,79 NYSE Arca has the 

equivalent of a comprehensive 

surveillance-sharing agreement with the 

CME. However, while the Commission 

recognizes that the Commodity Futures 

Trading Commission (‘‘CFTC’’) regulates 

the CME futures market,80 including the 


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Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 3875 

81See Winklevoss Order, 83 FR at 37594. 

82According to NYSE Arca, each contract 

represents five bitcoin and is based on the CME CF 

BRR. See Notice, 86 FR at 28651. 

83See id. 

84See id. 

85See id. 

86NYSE Arca represents that a large open interest 

holder in CME bitcoin futures is an entity that holds 

at least 25 contracts, which is the equivalent of 125 

bitcoin. According to NYSE Arca, at a price of 

approximately $30,000 per bitcoin on December 31, 

2020, more than 80 firms had outstanding positions 

of greater than $3.8 million in CME bitcoin futures. 

See id. at 28652 n.60. 

87See id. at 28652. 

88See id. at 28657. 

89See id. 

90See id. at 28657–58. 

91See id. at 28656. 

92See id. at 28656–57. 

93See id. at 28657. 

94See id. at 28657. 

95See id. The Exchange states that, as of April 12, 

2021, the initial margin required in connection with 

CME bitcoin futures for the April 2021 contract 

ranged from 42% to 38%. See id. at 28657 n.88. 

96See id. at 28657. 

97See id. 

98See id. 

99See USBT Order, 85 FR at 12611. 

CME bitcoin futures market, and thus 

such market is ‘‘regulated’’ in the 

context of the proposed ETP, the record 

does not, as explained further below, 

establish that the CME bitcoin futures 

market, either alone as the sole market 

for bitcoin futures or as a group of 

markets together with the Constituent 

Platforms, is a ‘‘market of significant 

size’’ as that term is used in the context 

of the applicable standard here. 

(a) Whether There Is a Reasonable 

Likelihood That a Person Attempting To 

Manipulate the ETP Would Also Have 

To Trade on the CME Bitcoin Futures 

Market, Alone or Together With 

Constituent Platforms, To Successfully 

Manipulate the ETP 

The first prong in establishing 

whether the CME bitcoin futures market 

constitutes a ‘‘market of significant size’’ 

is the determination that there is a 

reasonable likelihood that a person 

attempting to manipulate the ETP 

would have to trade on the CME bitcoin 

futures market to successfully 

manipulate the ETP.81

NYSE Arca notes that the CME began 

to offer trading in bitcoin futures in 

2017.82 According to NYSE Arca, nearly 

every measurable metric related to CME 

bitcoin futures contracts, which trade 

and settle like other cash-settled 

commodity futures contracts, has 

‘‘trended consistently up since launch 

and/or accelerated upward in the past 

year.’’ 83 For example, according to 

NYSE Arca, there was approximately 

$28 billion in trading in the CME 

bitcoin futures in December 2020 

compared to $737 million, $1.4 billion, 

and $3.9 billion in total trading in 

December 2017, December 2018, and 

December 2019, respectively.84

Additionally, CME bitcoin futures 

traded over $1.2 billion per day in 

December 2020 and represented $1.6 

billion in open interest compared to 

$115 million in December 2019.85

Similarly, NYSE Arca contends that the 

number of large open interest holders 86

has continued to increase, even as the 

price of bitcoin has risen, as have the 

number of unique accounts trading CME 

bitcoin futures.87

In addition, NYSE Arca states that 

there was approximately $4.321 billion 

in trading volume and $2.582 billion in 

open interest in CME bitcoin futures as 

of April 7, 2021, compared to $433 

million in trading volume and $238 

million in open interest as of February 

26, 2020.88 NYSE Arca states that the 

growth of the CME bitcoin futures 

market has coincided with similar 

growth in the bitcoin spot market and 

that the market for CME bitcoin futures 

is rapidly approaching the size of 

markets for other commodity interests.89

NYSE Arca concludes that, as the CME 

bitcoin futures market continues to 

develop and more closely resemble 

other commodity futures markets, it can 

be reasonably expected that the 

relationship between the CME bitcoin 

futures market and the bitcoin spot 

market will behave similar to other 

future/spot market relationships, 

including periods where a lead-lag 

relationship between the CME bitcoin 

futures market and bitcoin spot market 

exists.90

NYSE Arca also asserts that the CME 

is the primary market for bitcoin futures 

and ‘‘compares favorably’’ with other 

markets that were deemed to be markets 

of significant size in past precedents.91

In particular, NYSE Arca states that the 

bitcoin market is similar to the gold 

market and that the CME is similarly 

situated to COMEX with respect to gold 

ETPs.92 Namely, the Exchange states 

that, when the Commission approved 

the listing of gold ETPs and other 

commodity trust ETPs, rather than 

requiring surveillance-sharing 

agreements with the relevant OTC 

markets, the Commission relied on the 

surveillance-sharing agreements 

between the listing exchange and the 

regulated markets for trading futures on 

the underlying commodity.93

In addition, NYSE Arca asserts that a 

would-be manipulator of bitcoin prices 

would be reasonably likely to do so 

through the CME bitcoin futures market 

in order to take advantage of the 

leverage inherent in trading futures 

contracts.94 The Exchange argues that, 

given the tremendous growth in the spot 

bitcoin market since 2019, the chances 

of succesfully deploying a manipulative 

scheme are ‘‘increased exponentially’’ if 

a would-be manipulator can affect the 

CME bitcoin futures market (and thus 

the spot market) by posting only the 

minimum margin required.95 According 

to the Exchange, because the CME 

bitcoin futures market is the ‘‘cheapest’’ 

route to manipulate bitcoin, it is highly 

likely such manipulators would attempt 

to do so there rather than any spot 

market.96

Further, NYSE Arca maintains that, 

due to the decentralized nature of the 

bitcoin network, bitcoin manipulators 

would be much more likely to attempt 

to manipulate a limited number of 

futures markets rather than attempt 

simultaneous executions on potentially 

dozens of different spot bitcoin 

platforms.97 NYSE Arca states that, even 

if a would-be manipulator does attempt 

to manipulate bitcoin across platforms, 

such a scheme would also necessarily 

include some attempt to manipulate the 

price of bitcoin futures, including the 

CME.98

The record does not demonstrate that 

there is a reasonable likelihood that a 

person attempting to manipulate the 

proposed ETP would have to trade on 

the CME bitcoin futures market to 

successfully manipulate the proposed 

ETP. The Exchange’s assertions about 

the size of the CME bitcoin futures 

market, including the trading volume 

and open interest of, and number of 

large open interest holders and unique 

accounts trading in, CME bitcoin 

futures, and its assertion that the CME 

is the primary market for bitcoin 

futures, do not establish that the CME 

bitcoin futures market is of significant 

size. While NYSE Arca provides data 

showing absolute growth in the size of 

the CME bitcoin futures market, it 

provides no data relative to the 

concomitant growth in either the bitcoin 

spot markets or other bitcoin futures 

markets (including unregulated futures 

markets). Morover, even if the CME has 

grown in relative size, as the 

Commission has previously articulated, 

the interpretation of the term ‘‘market of 

significant size’’ or ‘‘significant market’’ 

depends on the interrelationship 

between the market with which the 

listing exchange has a surveillancesharing agreement and the proposed 

ETP.99 NYSE Arca’s recitation of data 

reflecting the size of the CME bitcoin 

futures market and its unsupported 

claim that the CME is the primary 


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3876 Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 

100See id. at 12612. 

101See id. at 12611. Listing exchanges have 

attempted to demonstrate such an 

‘‘interrelationship’’ by presenting the results of 

various econometric ‘‘lead-lag’’ analyses. The 

Commission considers such analyses to be central 

to understanding whether it is reasonably likely 

that a would-be manipulator of the ETP would need 

to trade on the CME bitcoin futures market. See id. 

at 12612. 

102See Notice, 86 FR at 28657–58. 

103See Susquehanna, 866 F.3d at 447. 

104See Winklevoss Order, 83 FR at 37594. 

105See Notice, 86 FR at 28657. 

106See supra note 95. 

107See supra note 44. 

108See https://www.bitmex.com/app/contract/ 

XBTUSD (last visited Dec. 1, 2021). Other 

unregulated platforms that trade bitcoin futures 

have similar margin requirements. For example, 

Deribit has an initial minimum margin requirement 

of 1% for bitcoin futures. See https://

legacy.deribit.com/pages/docs/futures (last visited 

Dec. 1, 2021). Binance has an initial minimum 

margin requirement of 2% for trading bitcoin 

futures. See https://www.binance.com/en/support/ 

announcement/34801a0c405a4b058f9ae18

a1a34cad3 (last visited Dec. 1, 2021). 

109See Notice, 86 FR at 28657 n.88. 

110See Notice, 86 FR at 28657. The Exchange 

states that because the CME CF BRR is based solely 

on price data from the Constituent Platforms, 

manipulating the CME CF BRR must necessarily 

entail manipulating the price data at one or more 

Constituent Platforms. The Exchange also states that 

the CME CF BRR calculation agent receives trading 

data from the Constituent Platforms through its API. 

See id. at 28657 nn.85–86. 

market for bitcoin futures are not 

sufficient to establish an 

interrelationship between the CME 

bitcoin futures market and the proposed 

ETP.100

Further, the econometric evidence in 

the record for this proposal also does 

not support the conclusion that an 

interrelationship exists between the 

CME bitcoin futures market and the 

bitcoin spot market such that it is 

reasonably likely that a person 

attempting to manipulate the proposed 

ETP would also have to trade on the 

CME bitcoin futures market to 

successfully manipulate the proposed 

ETP.101 The Exchange asserts that the 

relationship between the CME bitcoin 

futures market and the bitcoin spot 

market ‘‘can be reasonably expected’’ to 

behave similarly to other future/spot 

market relationships, including periods 

where a lead-lag relationship between 

the CME bitcoin futures market and 

bitcoin spot market exists,102 but the 

only data NYSE Arca presents to 

support its ‘‘expectation’’ is the growth 

in and current size of the CME bitcoin 

futures market. NYSE Arca’s 

‘‘expectation’’, without any supporting 

evidence or analysis, constitutes an 

insufficient basis for approving a 

proposed rule change in circumstances 

where, as here, the Exchange’s assertion 

would form such an integral role in the 

Commission’s analysis.103

Likewise, the Exchange’s comparison 

of the bitcoin spot market to the gold 

spot market is inapposite and does not 

establish the CME bitcoin futures 

market’s significance. First, the 

Exchange provides no data or analysis 

to support its assertion that the bitcoin 

market is similar to the gold market or 

that the COMEX gold futures market is 

similar to the CME bitcoin futures 

market. Further, as discussed above, for 

the commodity-trust ETPs approved to 

date for listing and trading, including 

where the underlying commodity is 

gold, there has been in every case at 

least one significant, regulated market 

for trading futures.104 The Exchange’s 

unsupported assertions that the bitcoin 

market is similar to the gold market or 

that the CME is similarly situated to 

COMEX with respect to futures does not 

establish that the CME bitcoin futures 

market is a significant market or that it 

is reasonably likely that an actor 

attempting to manipulate the price of 

the proposed ETP’s assets would have to 

trade in the CME bitcoin futures market. 

The Exchange also asserts that it is 

‘‘highly likely’’ that would-be 

manipulators of bitcoin prices would 

attempt to do so in the CME bitcoin 

futures market because it is the 

‘‘cheapest’’ route to manipulate 

bitcoin.105 However, the only data the 

Exchange provides to support its 

assertion is the initial margin 

requirement for CME bitcoin futures as 

of April 12, 2021.106 The Exchange does 

not provide any additional data or 

analysis to support its conclusions or 

any examples that would demonstrate 

that such assertions are reasonable. 

Furthermore, the Exchange does not 

provide any information on the margin 

requirements for bitcoin futures markets 

other than the CME. As stated above, 

‘‘unquestioning reliance’’ on an SRO’s 

representations in a proposed rule 

change is not sufficient to justify 

Commission approval of a proposed rule 

change.107

Indeed, although the Exchange 

implies that the ‘‘cheapest’’ route to 

manipulate bitcoin price is through 

CME bitcoin futures because of its 

margin requirement, other bitcoin 

futures platforms require even less 

margin than the CME. For example, the 

contract specifications for a bitcoin 

futures contract on BitMex (XBTUSD) 

specifies a maximum initial leverage 

ratio of 100-to-1,108 meaning that the 

required margin for bitcoin futures on 

BitMex is 1% of the notional value of 

the open contract position versus, 

according to the Exchange, 38% to 42% 

for CME bitcoin futures.109 Thus, 

applying the Exchange’s logic, it would 

appear to be ‘‘cheaper,’’ i.e., require less 

capital commitment, to manipulate the 

bitcoin price using bitcoin futures 

traded on BitMex or other unregulated 

futures platforms rather than the CME, 

given the lower margin requirements on 

such unregulated platforms. The 

Exchange, however, does not address 

the significance of other futures 

markets’ lower margin requirements to 

its assertion that a person attempting to 

manipulate the ETP would also have to 

trade on the CME bitcoin futures 

market. 

Similarly, although the Exchange 

asserts that, due to the decentralized 

nature of the bitcoin network, bitcoin 

manipulators would be more likely to 

attempt to manipulate a limited number 

of bitcoin futures markets rather than 

attempt simultaneous executions on 

potentially dozens of different bitcoin 

spot platforms, NYSE Arca provides no 

evidence to back up its assertions. The 

Exchange also claims that, even if a 

would-be manipulator does attempt to 

manipulate bitcoin across platforms, 

such a scheme would also necessarily 

include some attempts to manipulate 

the price of bitcoin futures, including 

the CME. The Exchange, however, does 

not explain, or provide supporting 

evidence to establish, why one must 

‘‘necessarily’’ conclude such outcome, 

especially as it relates to the CME. In 

other words, even assuming that the 

Commission concurred with the 

Exchange’s premise that a would-be 

manipulator would attempt to 

manipulate the ETP by trading on the 

bitcoin futures market, the Exchange 

does not explain why such manipulator 

would do so specifically on the CME. 

NYSE Arca also asserts that the CME, 

if not alone as the sole market for 

bitcoin futures, then together with the 

Constituent Platforms, is a ‘‘market of 

significant size.’’ The Exchange argues 

that, because CME bitcoin futures are 

cash-settled by reference to a final 

settlement price based on the CME CF 

BRR, anyone attempting to manipulate 

the CME CF BRR would have to trade 

on the Constituent Platforms, and the 

resulting manipulative trading patterns 

would be detectable by the Benchmark 

Administrator and the CME because of 

the CME’s and the Benchmark 

Administrator’s oversight of the 

Constituent Platforms.110 The Exchange, 

moreover, states that each Constituent 

Platform must: (1) Enter into a data 

sharing agreement with the CME; (2) 

cooperate with inquiries and 

investigations of regulators and the 

Benchmark Administrator; and (3) 

submit each of its clients to its KnowVerDate Sep<11>2014 17:19 Jan 24, 2022 Jkt 256001 PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 E:\FR\FM\25JAN1.SGM 25JAN1

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111See id. at 28657. 

112See id. 

113As further discussed below, the Commission 

finds that the level of regulation of the Constituent 

Platforms, including the oversight by the CME and 

the Benchmark Administrator, is not equivalent to 

the obligations, authority, and oversight of national 

securities exchanges or futures exchanges and 

therefore is not an appropriate substitute. See infra 

notes 118–132 and accompanying text. 

114See Notice, 86 FR at 28656 n.72. 

115See Winklevoss Order, 83 FR at 37549. 

116See Notice, 86 FR at 28657. 

117See, e.g., USBT Order, 85 FR at 12614–15. 

118See id., 85 FR at 12603–05. 

119See 15 U.S.C. 78f(b)(5). 

120 17 CFR 240.19b–4(a)(6)(i). 

121Section 6 of the Exchange Act, 15 U.S.C. 78f, 

requires national securities exchanges to register 

with the Commission and requires an exchange’s 

registration to be approved by the Commission, and 

Section 19(b) of the Exchange Act, 15 U.S.C. 78s(b), 

requires national securities exchanges to file 

proposed rules changes with the Commission and 

provides the Commission with the authority to 

disapprove proposed rule changes that are not 

consistent with the Exchange Act. Designated 

contract markets (‘‘DCMs’’) (commonly called 

‘‘futures markets’’) registered with and regulated by 

the CFTC must comply with, among other things, 

a similarly comprehensive range of regulatory 

principles and must file rule changes with the 

CFTC. See, e.g., Designated Contract Markets 

(DCMs), CFTC, available at http://www.cftc.gov/

IndustryOversight/TradingOrganizations/DCMs/

index.htm. 

122See Winklevoss Order, 83 FR at 37597. 

123See 15 U.S.C. 78e, 78f. 

124See USBT Order, 85 FR at 12603. The 

Commission has previously concluded that such 

KYC policies and procedures do not serve as a 

substitute for, and are not otherwise dispositive in 

the analysis regarding the importance of having a 

surveillance sharing agreement with a regulated 

market of significant size relating to bitcoin. For 

example, KYC policies and procedures do not 

substitute for the sharing of information about 

market trading activity or clearing activity and do 

not substitute for regulation of a national securities 

exchange. See USBT Order, 85 FR at 12603 n.101. 

125See USBT Order, 85 FR at 12604. 

126See id. 

127See Winklevoss Order, 83 FR at 37599 n.288 

(quoting CFTC Backgrounder on Oversight of and 

Approach to Virtual Currency Futures Markets (Jan. 

4, 2018), at 1, available at https://www.cftc.gov/

sites/default/files/idc/groups/public/@newsroom/

documents/file/backgrounder_virtual

currency01.pdf). 

Your Customer (‘‘KYC’’) procedures.111

As a result, in the case of any suspicious 

trades, the CME and the Exchange 

would be able to discover all material 

trade information, including the 

identities of the customers placing the 

trades.112

The Commission is not persuaded by 

the Exchange’s arguments. The 

Exchange does not explain the 

significance of its assertions, including 

its assertion that the CME and the 

Benchmark Administrator would be 

able to detect manipulative trading 

patterns on the Constituent Platforms, in 

the overall analysis of whether there is 

a reasonable likelihood that a person 

attempting to manipulate the proposed 

ETP would have to trade on the CME 

bitcoin futures market to successfully 

manipulate the ETP.113 In other words, 

even assuming that the Commission 

concurs with NYSE Arca’s assertion that 

the CME and the Benchmark 

Administrator can detect manipulation 

on the Constituent Platforms because 

CME bitcoin futures are cash-settled by 

reference to the CME CF BRR, the 

Exchange does not establish how this 

aids in the determination that either the 

CME bitcoin futures market, alone or 

together with the Constituent Platforms, 

is a significant market with respect to 

bitcoin. Moreover, the Exchange 

provides nothing to support its assertion 

that, to manipulate the CME CF BRR, 

the would-be manipulator would have 

to trade on the Constituent Platforms. 

Similar to the discussion above with 

respect to Constituent Platforms and the 

Reference Rate, the Exchange has not 

assessed the possible influence that spot 

platforms not included among the 

Constituent Platforms would have on 

the spot price of bitcoin on the 

Constituent Platforms and bitcoin prices 

used to calculate the CME CF BRR. To 

the extent that trading on platforms not 

directly used to calculate the CME CF 

BRR affects prices on the Constituent 

Platforms, transactions on those other 

platforms could affect the CME CF BRR. 

Furthermore, even assuming that the 

record does establish that the CME, 

together with the Constituent Platforms, 

is a market of significant size, NYSE 

Arca acknowledges that it has not 

entered into a surveillance-sharing 

agreement with any of the Constituent 

Platforms.114 As the Commission has 

previously stated, a surveillance-sharing 

agreement with a regulated, significant 

market facilitates the ETP listing 

exchange’s ability to obtain the 

necessary information to detect and 

deter manipulative misconduct.115

Although NYSE Arca states that the 

Constituent Platforms must enter into a 

data sharing agreement with the CME, 

and the CME and NYSE Arca, by virtue 

of their ISG membership, have a 

comprehensive surveillance-sharing 

agreement with one another, NYSE Arca 

does not have a surveillance sharing 

agreement with any of the Constituent 

Platforms.116 Accordingly, the Exchange 

fails to provide a basis for the 

Commission to conclude that it has 

entered into a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

relating to the underlying assets.117

The Constituent Platforms, moreover, 

are not ‘‘regulated.’’ The level of 

regulation of the Constituent Platforms 

is not equivalent to the obligations, 

authority, and oversight of national 

securities exchanges or futures 

exchanges and therefore is not an 

appropriate substitute.118 National 

securities exchanges are required to 

have rules that are ‘‘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.’’ 119

Moreover, national securities exchanges 

must file proposed rules with the 

Commission regarding certain material 

aspects of their operations,120 and the 

Commission has the authority to 

disapprove any such rule that is not 

consistent with the requirements of the 

Exchange Act.121 Thus, national 

securities exchanges are subject to 

Commission oversight of, among other 

things, their governance, membership 

qualifications, trading rules, 

disciplinary procedures, recordkeeping, 

and fees.122

The Constituent Platforms, on the 

other hand, have none of these 

requirements (none are registered as a 

national securities exchange).123 While 

the Exchange asserts that the 

Constituent Platforms must submit their 

clients to KYC procedures, such 

requirements are fundamentally 

different from the Exchange Act’s 

requirements for national securities 

exchanges.124 In addition, although the 

Commission recognizes that the CFTC 

maintains some jurisdiction over the 

bitcoin spot market, under the 

Commodity Exchange Act, the CFTC 

does not have regulatory authority over 

bitcoin spot trading platforms, including 

the Constituent Platforms.125 Except in 

certain limited circumstances, bitcoin 

spot trading platforms are not required 

to register with the CFTC, and the CFTC 

does not set standards for, approve the 

rules of, examine, or otherwise regulate 

bitcoin spot markets.126 As the CFTC 

itself stated, while the CFTC ‘‘has an 

important role to play,’’ U.S. law ‘‘does 

not provide for direct, comprehensive 

Federal oversight of underlying Bitcoin 

or virtual currency spot markets.’’ 127

And while NYSE Arca asserts that the 

Constituent Platforms must enter into 

data sharing agreements with the CME, 

it does not provide any information on 

the scope, terms, or enforcement 

authority for such data sharing 


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128See supra notes 125–127 and accompanying 

text. 

129See supra note 80 and accompanying text. 

130See https://blog.cfbenchmarks.com/legal/ 

(stating that the Benchmark Administrator is 

authorized and regulated by the UK Financial 

Conduct Authority (‘‘UK FCA’’) as a registered 

Benchmark Administrator (FRN 847100) under the 

EU benchmark regulation, and further noting that 

the Benchmark Administrator is a member of the 

Crypto Facilities group of companies which is in 

turn a member of the Payward, Inc. group of 

companies, and Payward, Inc. is the owner and 

operator of the Kraken Exchange, a venue that 

facilitates the trading of cryptocurrencies). The 

Commission notes that the Kraken is one of the 

Constituent Platforms underlying the Reference 

Rate. 

131See USBT Order, 85 FR at 12604. The 

Benchmark Administrator is also not required to 

apply certain provisions of EU benchmark 

regulation to the Constituent Platforms because the 

Reference Rate’s input data is not ‘‘contributed.’’ 

See Benchmark Statement, at 5 available at https:// 

docs-cfbenchmarks.s3.amazonaws.com/CME+CF+

Benchmark+Statement.pdf. 

132See 15 U.S.C. 78f(b). 

133See Winklevoss Order, 83 FR at 37594; USBT 

Order, 85 FR at 12596–97. 

134See Notice, 86 FR at 28656. 

135See id. at 28657. 

136See id. at 28657. 

137See id. at 28658. According to NYSE Arca, 

these statistics are based on samples of bitcoin 

liquidity in U.S. dollars (excluding stablecoins or 

Euro liquidity) based on executable quotes on 

Coinbase Pro, Gemini, Bitstamp, Kraken, LMAX 

Exchange, BinanceUS, and OKCoin during February 

2021. See id. at 28658 n.89. 

138See id. at 28658. 

139See id. 

140See id. 

agreements. Nor has NYSE Arca put any 

information in the record as to whether 

and how it would use or enforce such 

agreements. Moreover, such agreements 

are contractual in nature and do not 

satisfy the regulatory requirements or 

purposes of national securities 

exchanges and the Exchange Act. The 

CME (and the CFTC, as discussed 

above) does not have regulatory 

authority over the spot bitcoin trading 

platforms,128 and, while the CME is 

regulated by the CFTC,129 the CFTC’s 

regulations do not extend to the 

Constituent Platforms by virtue of such 

contractual agreements. 

Further, although NYSE Arca states 

that the Constituent Platforms must 

cooperate with inquiries and 

investigations of regulators and the 

Benchmark Administrator, it does not 

describe the scope of such requirements 

or what authority the Benchmark 

Administrator or regulators would have 

to compel the platforms’ cooperation or 

provide meaningful supporting 

evidence of the extent of such 

cooperation. Moreover, the Benchmark 

Administrator does not itself exercise 

governmental regulatory authority. 

Rather, the Benchmark Administrator is 

a registered, privately-held company in 

England.130 The Benchmark 

Administrator’s relationship with the 

Constituent Platforms is based on their 

participation in the determination of 

reference rates, such as the Reference 

Rate. While the Benchmark 

Administrator is regulated by the UK 

FCA as a benchmark administrator, the 

UK FCA’s regulations do not extend to 

the Constituent Platforms by virtue of 

their trade prices serving as input data 

underlying the Reference Rate.131

Further, the oversight performed by 

the Benchmark Administrator serves a 

fundamentally different purpose as 

compared to the regulation of national 

securities exchanges and the 

requirements of the Exchange Act. 

While the Commission recognizes that 

the Benchmark Administrator’s 

oversight functions may be important 

for ensuring the integrity of the 

Reference Rate, such requirements do 

not imbue either the Benchmark 

Administrator or the Constituent 

Platforms with regulatory authority 

similar to that the Exchange Act confers 

upon self-regulatory organizations such 

as national securities exchanges.132

The Commission accordingly 

concludes that the information provided 

in the record does not establish a 

reasonable likelihood that a would-be 

manipulator of the proposed ETP would 

have to trade on the CME bitcoin futures 

market to successfully manipulate the 

proposed ETP. Moreover, NYSE Arca 

has not entered into a surveillancesharing agreement with the Constituent 

Platforms, and the Constituent Platforms 

are not ‘‘regulated’’ markets. 

Accordingly, the information in the 

record also does not establish that the 

CME bitcoin futures market, alone or 

together with the Constituent Platforms, 

is a ‘‘market of significant size’’ with 

respect to the proposed ETP or that 

NYSE Arca has a surveillance-sharing 

agreement with such a market. 

(b) Whether It Is Unlikely That Trading in the 

Proposed ETP Would be the Predominant 

Influence on Prices in the CME Bitcoin 

Futures Market or Constituent Platforms 

The second prong in establishing 

whether a market (or group of markets) 

constitutes a ‘‘market of significant size’’ 

is the determination that it is unlikely 

that trading in the proposed ETP would 

be the predominant influence on prices 

in that market.133 As discussed above, 

NYSE Arca asserts that CME, either 

alone as the sole market for bitcoin 

futures or as a group of markets together 

with the Constituent Platforms, satisfies 

this prong.134

First, NYSE Arca asserts that trading 

in the Shares would not be the 

predominant force on prices in the CME 

bitcoin futures market (or spot market) 

because of the significant volume in the 

CME bitcoin futures market, the size of 

bitcoin’s market capitalization, which is 

approximately $1 trillion, and the 

significant liquidity available in the spot 

market.135

To support its assertion about the 

growth of the CME bitcoin futures 

market, NYSE Arca states that there was 

approximately $4.321 billion in trading 

volume and $2.582 billion in open 

interest in CME bitcoin futures as of 

April 7, 2021, compared to $433 million 

in trading volume and $238 million in 

open interest as of February 26, 2020.136

Based on these figures, NYSE Arca 

concludes that, as the CME bitcoin 

futures market continues to develop, it 

can be reasonably expected that the 

relationship between the bitcoin futures 

market and bitcoin spot market will 

behave similarly to other future/spot 

market relationships, including periods 

where a lead-lag relationship between 

the bitcoin futures market and bitcoin 

spot market exists. 

NYSE Arca also provides that, 

according to February 2021 data, the 

cost to buy or sell $5 million worth of 

bitcoin averages roughly 10 basis points 

with a market impact of 30 basis 

points.137 For a $10 million market 

order, the cost to buy or sell is roughly 

20 basis points with a market impact of 

50 basis points. Stated another way, 

NYSE Arca states that a market 

participant could enter a market buy or 

sell order for $10 million of bitcoin and 

only move the market 0.5 percent.138

NYSE Arca further asserts that more 

strategic purchases or sales (such as 

using limit orders and executing 

through OTC bitcoin trade desks) would 

likely have less obvious impact on the 

market, which is consistent with 

MicroStrategy, Tesla, and Square being 

able to collectively purchase billions of 

dollars in bitcoin.139 Thus, NYSE Arca 

concludes that the combination of CME 

bitcoin futures’ important role in price 

discovery, the overall size of the bitcoin 

market, and the ability for market 

participants (including authorized 

participants creating and redeeming inkind with the Trust) to buy or sell large 

amounts of bitcoin without significant 

market impact, will help prevent the 

Shares from becoming the predominant 

force on pricing in either the bitcoin 

spot or the CME bitcoin futures 

market.140

NYSE Arca also provides the results 

from a study conducted by the 

Benchmark Administrator (‘‘CF 


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141See id. at 28658 & n.90 (citing CF Benchmarks, 

‘‘An Analysis of the Suitability of the CME CF BRR 

for the Creation of Regulated Financial Products,’’ 

December 2020 (‘‘CF Benchmarks Analysis’’), 

available at: https://docsend.com/view/ 

kizk7rarzaba6jxf). 

142See id. at 28658. 

143See id. 

144See USBT Order, 85 FR at 12613–14. The 

Exchange asserts that the CME, either alone as the 

sole market for the bitcoin futures or as a group of 

markets together with the Constituent Platforms, is 

a ‘‘market of significant size.’’ As noted above, the 

second prong in establishing whether a market (or 

group of markets) constitutes a ‘‘market of 

significant size’’ is the determination that it is 

unlikely that trading in the proposed ETP would be 

the predominant influence on prices in that market. 

The Exchange states throughout its filing that 

trading in the Shares would not be the predominant 

influence on prices in the CME bitcoin futures 

market or spot market rather than the Constituent 

Platforms. See supra notes 135, 140, and 141 and 

accompanying text. Since the Constituent Platforms 

are a subset of the the bitcoin spot platforms 

currently in existence, the Commission’s analysis 

with respect to the spot market applies equally to 

the Constituent Platforms. 

145See supra notes 102–103 and accompanying 

text. 

146See Registration Statement at 21. 

147See Notice, 86 FR at 28659 (‘‘For a $10 million 

market order, the cost to buy or sell is roughly 20 

basis points with a market impact of 50 basis 

points. Stated another way, a market participant 

could enter a market buy or sell order for $10 

million of bitcoin and only move the market 

0.5%.’’). 148See CF Benchmark Analysis, at 16. 

Benchmarks Analysis’’) to determine the 

extent of ‘‘slippage’’ (i.e., the difference 

between the expected price of a trade 

and the price at which the trade was 

actually executed), which the Exchange 

states offers further evidence that 

trading in the Shares is unlikely to be 

the predominant influence in the 

bitcoin spot market.141 According to 

NYSE Arca, the CF Benchmarks 

Analysis simulated the purchase of 50 

bitcoins a day for 686 days (an amount 

chosen specifically to replicate 

hypothetical trades by an ETP) and 

found that the maximum amount of 

slippage on a particular day was 0.3%, 

with the remainder of values between 

0% and 0.15%.142 According to NYSE 

Arca, the CF Benchmarks Analysis 

demonstrates that the slippage in the 

study could be described as having been 

largely negligible or, at most, minor 

during the observation period.143

The record does not demonstrate that 

it is unlikely that trading in the 

proposed ETP would be the 

predominant influence on prices in the 

CME bitcoin futures market or the spot 

market, including the Constituent 

Platforms.144 As the Commission has 

already addressed and rejected one of 

the bases of NYSE Arca’s assertion— 

CME bitcoin futures’ role in price 

discovery 145—it will only address 

below the other bases—the overall size 

of, and the impact of buys and sells on, 

the bitcoin market and slippage. 

NYSE Arca’s assertions about the 

potential effect of trading in the Shares 

on the CME bitcoin futures market and 

bitcoin spot market are general and 

conclusory, repeating the 

aforementioned trade volume of the 

CME bitcoin futures market, and 

providing general statements about the 

size and liquidity of the bitcoin spot 

market as well as the market impact of 

a large transaction in the spot market, 

without any analysis or evidence to 

support these assertions. For example, 

there is no limit on the amount of mined 

bitcoin that the Trust may hold. Yet 

NYSE Arca does not provide any 

information on the expected growth in 

the size of the Trust and the resultant 

increase in the amount of bitcoin held 

by the Trust over time, or on the overall 

expected number, size, and frequency of 

creations and redemptions—or how any 

of the foregoing could (if at all) 

influence prices in the CME bitcoin 

futures market or the spot market. 

Moreover, in the Trust’s Registration 

Statement, the Sponsor acknowledges 

that there is no limit on the number of 

bitcoins that the Trust may acquire and 

that the Trust itself may have an impact 

on the supply and demand of bitcoins. 

Specifically, the Registration Statement 

states that the if the number of bitcoins 

acquired by the Trust is large enough 

relative to global bitcoin supply and 

demand, further creations and 

redemptions of Shares could have an 

impact on the supply of and demand for 

bitcoins and that such an impact could 

affect the price of bitcoin in U.S. 

dollars.146 Although the Trust’s 

Registration Statement concedes that the 

Trust could impact the price of bitcoin, 

NYSE Arca does not address this in the 

proposal or discuss how impacting the 

price of bitcoin can be consistent with 

the assertion that the Shares are 

unlikely to be the predominant 

influence on the prices of the CME 

bitcoin futures market or the spot 

market. Thus, the Commission cannot 

conclude, based on NYSE Arca’s 

statements alone and absent any 

evidence or analysis in support of NYSE 

Arca’s assertions, that it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in the 

CME bitcoin futures market or the spot 

market. 

The Commission also is not 

persuaded by NYSE Arca’s assertions 

about the minimal effect a large market 

order to buy or sell bitcoin would have 

on the bitcoin market.147 While NYSE 

Arca concludes by way of a $10 million 

market order example that buying or 

selling large amounts of bitcoin would 

have insignificant market impact, the 

conclusion does not analyze the extent 

of any impact on the CME bitcoin 

futures market, the market that the 

Exchange, in the proposal, argues is the 

significant market under consideration. 

Even assuming, however, that NYSE 

Arca is suggesting that a single $10 

million order in bitcoin would have 

immaterial impact on the prices in the 

CME bitcoin futures market, this prong 

of the ‘‘market of significant size’’ 

determination concerns the influence on 

prices from trading in the proposed 

ETP, which is broader than just trading 

by the proposed ETP. While authorized 

participants of the Trust might only 

transact in the bitcoin spot market as 

part of their creation or redemption of 

Shares, the Shares themselves would be 

traded in the secondary market on 

NYSE Arca. The record does not discuss 

the expected number or trading volume 

of the Shares, or establish the potential 

effect of the Shares’ trade prices on CME 

bitcoin futures prices, or the spot market 

prices. For example, NYSE Arca does 

not provide any data or analysis about 

the potential effect the quotations or 

trade prices of the Shares might have on 

market-maker quotations in CME bitcoin 

futures contracts and whether those 

effects would constitute a predominant 

influence on the prices of those futures 

contracts. 

Similarly, although NYSE Arca cites 

to the CF Benchmark Analysis as 

evidence that trading in the Shares is 

unlikely to be the predominant 

influence in the bitcoin spot market, 

NYSE Arca states that the simulation in 

the analysis was done specifically to 

replicate hypothetical trades by an ETP. 

The study further states that the 

simulation was performed to ‘‘represent 

a large [b]itcoin trade of the kind that 

institutional traders might need to 

undertake for a major client, or that an 

issuer of a financial product (such as an 

ETF or a derivative) would be required 

to execute in order to facilitate trading 

of that product.’’ 148 As discussed above, 

this prong concerns the influence on 

prices from trading in the proposed 

ETP. Under the proposal, the Shares 

themselves would be traded in the 

secondary market on NYSE Arca, and 

the CF Benchmark Analysis does not 

discuss the effect of the trade prices of 

ETP shares or other bitcoin derivatives 

on the bitcoin market, or more 

importantly, CME bitcoin futures 

market. Likewise, the CF Benchmark 

Analysis only analyzes the prices of 

hypothetical bitcoin spot transactions as 

compared to the CME CF BRR—a spot 

price index—and does not analyze the 


khammond on DSKJM1Z7X2PROD with NOTICES
3880 Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 

149See Winklevoss Order, 83 FR at 37601. See 

also GraniteShares Order, 83 FR at 43931; 

ProShares Order, 83 FR at 43941; USBT Order, 85 

FR at 12615. 

150See Notice, 86 FR at 28649. 

151See id. NYSE Arca states that while it 

understands the Commission’s previous focus on 

potential manipulation of a bitcoin ETP in prior 

disapproval orders, it believes that ‘‘such concerns 

have been sufficiently mitigated and may be 

outweighed by the growing and quantifiable 

investor protection concerns related to OTC 

[b]itcoin [f]unds.’’ See id. 152See id. 153See id. NYSE Arca also states that, unlike the 

Shares, because OTC bitcoin funds are not listed on 

an exchange, they are not subject to the same 

transparency and regulatory oversight by a listing 

exchange. NYSE Arca further asserts that the 

existence of a surveillance-sharing agreement 

between NYSE Arca and the CME bitcoin futures 

market would result in increased investor 

protections for the Shares compared to OTC bitcoin 

funds. See id. at 28649 n.44. 

154See id. at 28649. NYSE Arca further represents 

that the inability to trade in line with NAV may at 

some point result in OTC bitcoin funds trading at 

a discount to their NAV, which has occurred more 

recently with respect to one prominent OTC bitcoin 

fund. According to NYSE Arca, while that has not 

historically been the case, and it is not clear 

whether such discounts will continue, such a 

prolonged, significant discount scenario would give 

rise to nearly identical potential issues related to 

trading at a premium. See id. at 28649 n.45. 

155See id. at 28650. 

156See id. 

157See id. 

158See id. 

159See id. 

160See id. 

161See id. 

162See id. 

163See id. at 28650–51. NYSE Arca represents 

that the Sub-Adviser has previously conducted 

substantial due diligence on the capabilities of the 

Bitcoin Custodian. See id. at 28651 n.54. 

164See id. at 28651. 

extent of any impact of such 

hypothetical transactions on prices in 

the CME bitcoin futures market 

specifically. 

Thus, because NYSE Arca has not 

provided sufficient information to 

establish both prongs of the ‘‘market of 

significant size’’ determination, the 

Commission cannot conclude that the 

CME bitcoin futures market, either alone 

as the sole market for bitcoin futures or 

as a group of markets together with the 

Constituent Platforms, is a ‘‘market of 

significant size’’ such that NYSE Arca 

would be able to rely on a surveillancesharing agreement with the CME to 

provide sufficient protection against 

fraudulent and manipulative acts and 

practices. 

The requirements of Section 6(b)(5) of 

the Exchange Act apply to the rules of 

national securities exchanges. 

Accordingly, the relevant obligation for 

a comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size, or other means to 

prevent fraudulent and manipulative 

acts and practices that are sufficient to 

justify dispensing with the requisite 

surveillance-sharing agreement, resides 

with the listing exchange. Because there 

is insufficient evidence in the record 

demonstrating that NYSE Arca has 

satisfied this obligation, the 

Commission cannot approve the 

proposed ETP for listing and trading on 

NYSE Arca. 

C. Whether NYSE Arca Has Met Its 

Burden To Demonstrate That the 

Proposal Is Designed To Protect 

Investors and the Public Interest 

NYSE Arca contends that, if 

approved, the proposed ETP would 

protect investors and the public interest. 

However, the Commission must 

consider these potential benefits in the 

broader context of whether the proposal 

meets each of the applicable 

requirements of the Exchange Act.149

Because NYSE Arca has not 

demonstrated that its proposed rule 

change is designed to prevent 

fraudulent and manipulative acts and 

practices, the Commission must 

disapprove the proposal. 

NYSE Arca asserts that, with the 

growth of U.S. investor exposure to 

bitcoin through OTC bitcoin funds, so 

too has grown the potential risk to U.S. 

investors.150 Specifically, NYSE Arca 

argues that premium and discount 

volatility, high fees, insufficient 

disclosures, and technical hurdles are 

exposing U.S. investors to risks that 

could potentially be eliminated through 

access to a bitcoin ETP.151 As such, the 

Exchange believes that approving this 

proposal (and comparable proposals) 

represents an opportunity for U.S. 

investors to gain exposure to bitcoin in 

a regulated and transparent exchangetraded vehicle that limits risks by: (i) 

Reducing premium and discount 

volatility; (ii) reducing management fees 

through meaningful competition; (iii) 

providing an alternative to custodying 

spot bitcoin; and (iv) reducing risks 

associated with investing in operating 

companies that are imperfect proxies for 

bitcoin exposure.152

According to NYSE Arca, OTC bitcoin 

funds are generally designed to provide 

exposure to bitcoin in a manner similar 

to the Shares. However, unlike the 

Shares, NYSE Arca states that ‘‘OTC 

[b]itcoin [f]unds are unable to freely 

offer creation and redemption in a way 

that incentivizes market participants to 

keep their shares trading in line with 

their NAV and, as a result, shares of 

OTC [b]itcoin [f]unds frequently trade at 

a price that is out-of-line with the value 

of their assets held.’’ 153 NYSE Arca 

represents that, historically, OTC 

bitcoin funds have traded at a 

significant premium to NAV.154

Although the Exchange concedes that 

trading at a premium or a discount is 

not unique to OTC bitcoin funds and 

not inherently problematic, NYSE Arca 

believes that it raises certain investor 

protections issues. First, according to 

NYSE Arca, investors are buying shares 

of a fund for a price that is not reflective 

of the per share value of the fund’s 

underlying assets.155 Second, according 

to NYSE Arca, because only accredited 

investors, generally, are able to purchase 

shares directly from the issuing fund at 

NAV (in exchange for either cash or 

bitcoin) without having to pay the 

premium or sell into the discount, these 

investors that are allowed to purchase 

directly with the fund are able to hedge 

their bitcoin exposure as needed to 

satisfy holding requirements and collect 

on the premium or discount 

opportunity.156 NYSE Arca argues, 

therefore, that the premium in OTC 

bitcoin funds essentially creates a 

transfer in value from retail investors to 

more sophisticated investors.157 NYSE 

Arca further asserts that the risk of 

manipulation of a bitcoin ETP is also 

present in and potentially magnified by 

OTC bitcoin funds.158

NYSE Arca also asserts that exposure 

to bitcoin through an ETP presents 

advantages for retail investors compared 

to buying spot bitcoin directly.159 NYSE 

Arca asserts that, without the 

advantages of an ETP, an individual 

retail investor holding bitcoin through a 

cryptocurrency trading platform lacks 

protections.160 NYSE Arca explains that, 

typically, retail platforms hold most, if 

not all, retail investors’ bitcoin in ‘‘hot’’ 

(internet-connected) storage and do not 

make any commitments to indemnify 

retail investors or to observe any 

particular cybersecurity standard.161

Meanwhile, a retail investor holding 

spot bitcoin directly in a self-hosted 

wallet may suffer from inexperience in 

private key management (e.g., 

insufficient password protection, lost 

key, etc.), which could cause them to 

lose some or all of their bitcoin 

holdings.162 NYSE Arca represents that 

the Bitcoin Custodian would, by 

contrast, use ‘‘cold’’ (offline) storage to 

hold private keys, meet a certain degree 

of cybersecurity measures and 

operational best practices, be highly 

experienced in bitcoin custody, and be 

accountable for failures.163 In addition, 

NYSE Arca explains that retail investors 

would be able to hold the Shares in 

traditional brokerage accounts, which 

provide SIPC protection if a brokerage 

firm fails.164 Thus, with respect to 

custody of the Trust’s bitcoin assets, 

NYSE Arca concludes that, compared to 


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Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 3881 

165See id. 

166See id. 

167See id. 

168See id. 

169See id. 

170See Notice, 86 FR at 28649. NYSE Arca 

represents that the Purpose Bitcoin ETF, a retail 

bitcoin-based ETP launched in Canada, reportedly 

reached $421.8 million in assets under management 

in two days and has achieved $993 million in assets 

as of April 14, 2021, demonstrating the demand for 

a North American market listed bitcoin ETP. NYSE 

Arca contends that the demand for the Purpose 

Bitcoin ETF is driven primarily by investors’ desire 

to have a regulated and accessible means of 

exposure to bitcoin. NYSE Arca further represents 

that the Purpose Bitcoin ETF offers a class of units 

that is U.S. dollar denominated, which could 

appeal to U.S. investors. NYSE Arca argues that 

without an approved bitcoin ETP in the U.S. as a 

viable alternative, U.S. investors could seek to 

purchase these shares in order to get access to 

bitcoin exposure. NYSE Arca believes that, given 

the separate regulatory regime and the potential 

difficulties associated with any international 

litigation, such an arrangement would create more 

risk exposure for U.S. investors than they would 

otherwise have with a U.S. exchange-listed ETP. 

See id. 

171See id. 

172See id. 173See id. 174See id. 175See Exchange Act Section 19(b)(2)(C), 15 

U.S.C. 78s(b)(2)(C). 176See SolidX Order, 82 FR at 16259; 

WisdomTree Order, 86 FR at 69334. 

177See supra note 149. The Commission notes 

that the proposed rule change does not relate to a 

product regulated under the 1940 Act. The 

Commission considers the proposed rule change on 

its own merits and under the standards applicable 

to it. Namely, with respect to this proposed rule 

change, the Commission must apply the standards 

as provided by Section 6(b)(5) of the Exchange Act, 

which it has applied in connection with its orders 

considering previous proposals to list bitcoin-based 

commodity trusts and bitcoin-based trust issued 

receipts. 

178See 15 U.S.C. 78s(b)(2)(C). 

179 15 U.S.C. 78f(b)(5). 

180 In disapproving the proposed rule change the 

Commission has considered its impact on 

efficiency, competition, and capital formation. See 

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

181See letter from Sam Ahn, dated June 4, 2021. 

owning spot bitcoin directly, the Trust 

presents advantages from an investment 

protection standpoint for retail 

investors.165

NYSE Arca further asserts that a 

number of operating companies engaged 

in unrelated businesses have recently 

announced investments as large as $1.5 

billion in bitcoin.166 Without access to 

bitcoin ETPs, NYSE Arca argues that 

retail investors seeking investment 

exposure to bitcoin may purchase shares 

in these companies in order to gain the 

exposure to bitcoin that they seek.167

NYSE Arca contends that such 

operating companies, however, are 

imperfect bitcoin proxies and provide 

investors with partial bitcoin exposure 

paired with additional risks associated 

with whichever operating company they 

decide to purchase.168 NYSE Arca 

concludes that investors seeking bitcoin 

exposure through publicly traded 

companies are gaining only partial 

exposure to bitcoin, without the full 

benefit of the risk disclosures and 

associated investor protections that 

come from the securities registration 

process.169

NYSE Arca also states that investors 

in many other countries, including 

Canada, are able to use more traditional 

exchange listed and traded products to 

gain exposure to bitcoin, disadvantaging 

U.S. investors and leaving them with 

riskier, more expensive, and less 

regulated means of getting bitcoin 

exposure.170 NYSE Arca anticipates that 

with the addition of more bitcoin ETPs 

in non-U.S. jurisdictions expected to 

grow, such risks will only continue to 

grow.171

NYSE Arca further asserts that several 

funds registered under the Investment 

Company Act of 1940 (‘‘1940 Act’’) have 

effective registration statements that 

contemplate bitcoin exposure through a 

variety of means, including through 

investments in bitcoin futures contacts 

and through OTC bitcoin funds and that 

it is anticipated that other 1940 Act 

funds will begin to pursue bitcoin 

through other means.172 NYSE Arca 

asserts that these funds that have 

already invested in bitcoin instruments 

have no reported issues regarding 

custody, valuation, or manipulation of 

the instruments held by these funds.173

NYSE Arca argues that, while these 

funds offer investors some means of 

exposure to bitcoin, the current 

offerings fall short of giving investors an 

accessible, regulated product that 

provides concentrated exposure to 

bitcoin.174

In essence, NYSE Arca asserts that the 

risky nature of a direct investment in 

the underlying bitcoin and the 

unregulated markets on which bitcoin 

and OTC bitcoin funds trade compel 

approval of the proposed rule change. In 

addition, NYSE Arca essentially argues 

that, unlike other regulated products 

available, the Shares would offer more 

concentrated exposure to bitcoin and 

should therefore be approved. 

The Commission disagrees. Pursuant 

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

the Commission must approve a 

proposed rule change filed by a national 

securities exchange if it finds that the 

proposed rule change is consistent with 

the applicable requirements of the 

Exchange Act—including the 

requirement under Section 6(b)(5) that 

the rules of a national securities 

exchange be designed to prevent 

fraudulent and manipulative acts and 

practices—and it must disapprove the 

filing if it does not make such a 

finding.175 Thus, even if a proposed rule 

change purports to protect investors 

from a particular type of investment 

risk, such as the susceptibility of an 

asset to loss or theft, or to provide more 

efficient exposure to an asset class than 

another product, the proposed rule 

change may still fail to meet the 

requirements under the Exchange 

Act.176

Here, even if it were true that, 

compared to trading in unregulated 

bitcoin spot markets or OTC bitcoin 

funds, trading a bitcoin-based ETP on a 

national securities exchange provides 

some additional protection to investors, 

or that the Shares would provide more 

concentrated exposure to bitcoin than 

other products on the market, the 

Commission must consider this 

potential benefit in the broader context 

of whether the proposal meets each of 

the applicable requirements of the 

Exchange Act.177 As explained above, 

for bitcoin-based ETPs, the Commission 

has consistently required that the listing 

exchange have a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to bitcoin, or demonstrate that 

other means to prevent fraudulent and 

manipulative acts and practices are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement. The listing exchange has not 

met that requirement here. Therefore the 

Commission is unable to find that the 

proposed rule change is consistent with 

the statutory standard. 

Pursuant to Section 19(b)(2) of the 

Exchange Act, the Commission must 

disapprove a proposed rule change filed 

by a national securities exchange if it 

does not find that the proposed rule 

change is consistent with the applicable 

requirements of the Exchange Act— 

including the requirement under 

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

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices.178

For the reasons discussed above, 

NYSE Arca has not met its burden of 

demonstrating that the proposal is 

consistent with Exchange Act Section 

6(b)(5),179 and, accordingly, the 

Commission must disapprove the 

proposal.180

D. Other Comments 

The Commission received a comment 

letter that addressed the general nature 

and value of bitcoin.181 Ultimately, 

however, additional discussion of this 

topic is unnecessary, as it does not bear 


khammond on DSKJM1Z7X2PROD with NOTICES
3882 Federal Register / Vol. 87, No. 16 / Tuesday, January 25, 2022 / Notices 

on the basis for the Commission’s 

decision to disapprove the proposal. 

IV. Conclusion 

For the reasons set forth above, the 

Commission does not find, pursuant to 

Section 19(b)(2) of the Exchange Act, 

that the proposed rule change is 

consistent with the requirements of the 

Exchange Act and the rules and 

regulations thereunder applicable to a 

national securities exchange, and in 

particular, with Section 6(b)(5) of the 

Exchange Act. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act, 

that proposed rule change SR– 

NYSEArca–2021–37 be, and hereby is, 

disapproved. 

By the Commission. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–01384 Filed 1–24–22; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration #17312 and #17313; 

ALASKA Disaster Number AK–00048] 

Presidential Declaration of a Major 

Disaster for Public Assistance Only for 

the State of Alaska 

AGENCY: Small Business Administration. 

ACTION: Notice. 

SUMMARY: This is a Notice of the 

Presidential declaration of a major 

disaster for Public Assistance Only for 

the State of Alaska (FEMA–4638–DR), 

dated 01/15/2022. 

Incident: Severe Storms, Straight-line 

Winds, Flooding, Landslides, and 

Mudslides. 

Incident Period: 10/29/2021 through 

11/01/2021. 

DATES: Issued on 01/15/2022. 

Physical Loan Application Deadline 

Date: 03/16/2022. 

Economic Injury (EIDL) Loan 

Application Deadline Date: 10/17/2022. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 

Administration, Processing and 

Disbursement Center, 14925 Kingsport 

Road, Fort Worth, TX 76155. 

FOR FURTHER INFORMATION CONTACT: A. 

Escobar, Office of Disaster Assistance, 

U.S. Small Business Administration, 

409 3rd Street SW, Suite 6050, 

Washington, DC 20416, (202) 205–6734. 

SUPPLEMENTARY INFORMATION: Notice is 

hereby given that as a result of the 

President’s major disaster declaration on 

01/15/2022, Private Non-Profit 

organizations that provide essential 

services of a governmental nature may 

file disaster loan applications at the 

address listed above or other locally 

announced locations. 

The following areas have been 

determined to be adversely affected by 

the disaster: 

Primary Areas: Kenai Peninsula 

Borough. 

The Interest Rates are: 

Percent 

For Physical Damage:.

Non-Profit Organizations With 

Credit Available Elsewhere ... 1.875 

Non-Profit Organizations Without Credit Available Elsewhere ..................................... 1.875 

For Economic Injury:.

Non-Profit Organizations Without Credit Available Elsewhere ..................................... 1.875 

The number assigned to this disaster 

for physical damage is 17312 9 and for 

economic injury is 17313 0. 

(Catalog of Federal Domestic Assistance 

Number 59008) 

Barbara E. Carson, 

Acting Associate Administrator for Disaster 

Assistance. 

[FR Doc. 2022–01341 Filed 1–24–22; 8:45 am] 

BILLING CODE 8026–03–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration #17310 and #17311; 

TENNESSEE Disaster Number TN–00132] 

Presidential Declaration of a Major 

Disaster for the State of Tennessee 

AGENCY: Small Business Administration. 

ACTION: Notice. 

SUMMARY: This is a Notice of the 

Presidential declaration of a major 

disaster for the State of Tennessee 

(FEMA–4637–DR), dated 01/14/2022. 

Incident: Severe Storms, Straight-line 

Winds, and Tornadoes. 

Incident Period: 12/10/2021 through 

12/11/2021. 

DATES: Issued on 01/14/2022. 

Physical Loan Application Deadline 

Date: 03/15/2022. 

Economic Injury (EIDL) Loan 

Application Deadline Date: 10/14/2022. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 

Administration, Processing and 

Disbursement Center, 14925 Kingsport 

Road, Fort Worth, TX 76155. 

FOR FURTHER INFORMATION CONTACT: A. 

Escobar, Office of Disaster Assistance, 

U.S. Small Business Administration, 

409 3rd Street SW, Suite 6050, 

Washington, DC 20416, (202) 205–6734. 

SUPPLEMENTARY INFORMATION: Notice is 

hereby given that as a result of the 

President’s major disaster declaration on 

01/14/2022, applications for disaster 

loans may be filed at the address listed 

above or other locally announced 

locations. 

The following areas have been 

determined to be adversely affected by 

the disaster: 

Primary Counties (Physical Damage and 

Economic Injury Loans): Cheatham, 

Davidson, Dickson, Gibson, 

Henderson, Henry, Lake, Obion, 

Stewart, Sumner, Weakley, Wilson. 

Contiguous Counties (Economic Injury 

Loans Only): 

Tennessee: Benton, Cannon, Carroll, 

Chester, Crockett, Decatur, Dekalb, 

Dyer, Hardin, Hickman, Houston, 

Humphreys, Macon, Madison, 

Montgomery, Robertson, 

Rutherford, Smith, Trousdale, 

Williamson. 

Kentucky: Allen, Calloway, Christian, 

Fulton, Graves, Hickman, Simpson, 

Trigg. 

Missouri: New Madrid, Pemiscot. 

The Interest Rates are: 

Percent 

For Physical Damage:.

Homeowners With Credit Available Elsewhere ...................... 2.875 

Homeowners Without Credit 

Available Elsewhere .............. 1.438 

Businesses With Credit Available Elsewhere ...................... 5.660 

Businesses Without Credit 

Available Elsewhere .............. 2.830 

Non-Profit Organizations With 

Credit Available Elsewhere ... 1.875 

Non-Profit Organizations Without Credit Available Elsewhere ..................................... 1.875 

For Economic Injury:.

Businesses & Small Agricultural 

Cooperatives Without Credit 

Available Elsewhere .............. 2.830 

Non-Profit Organizations Without Credit Available Elsewhere ..................................... 1.875 

The number assigned to this disaster 

for physical damage is 17310 C and for 

economic injury is 17311 0. 

(Catalog of Federal Domestic Assistance 

Number 59008) 

Barbara E. Carson, 

Acting Associate Administrator for Disaster 

Assistance. 

[FR Doc. 2022–01340 Filed 1–24–22; 8:45 am] 

BILLING CODE 8026–03–P 


khammond on DSKJM1Z7X2PROD with NOTICES