Federal Register / Vol. 87, No. 28 / Thursday, February 10, 2022 / Notices 7889 

15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

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

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 

16 15 U.S.C. 78s(b)(2)(B). 

17 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. 93504 

(Nov. 2, 2021), 86 FR 61804 (‘‘Notice’’). Comments 

received on the proposed rule change are available 

at: https://www.sec.gov/comments/sr-nysearca2021-90/srnysearca202190.htm. 

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

5See Securities Exchange Act Release No. 93788, 

86 FR 72291 (Dec. 21, 2021). The Commission 

designated February 6, 2022, as the date by which 

it should approve, disapprove, or institute 

proceedings to determine whether to disapprove the 

proposed rule change. 

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

7See Notice, supra note 3. 

8See id. at 61805. Grayscale Investments, LLC 

(‘‘Sponsor’’) is the sponsor of the Trust and is a 

wholly-owned subsidiary of Digital Currency 

Group, Inc. Delaware Trust Company (‘‘Trustee’’) is 

the trustee of the Trust, the custodian for the Trust 

is Coinbase Custody Trust Company, LLC 

(‘‘Custodian’’), and the distribution and marketing 

agent for the Trust is Genesis. The Trust operates 

pursuant to a trust agreement (‘‘Trust Agreement’’) 

between the Sponsor and the Trustee. See id. 

9See id. at 61810. The index provider for the 

Trust is TradeBlock, Inc. (‘‘Index Provider’’). See id. 

at 61805. While the Exchange does not name the 

Index that the Trust would use to value the bitcoin 

held by the Trust, the Exchange provides that the 

value of the Index, as well as additional information 

regarding the Index, may be found at: https://

tradeblock.com/markets/index/xbx. See id. at 

61817. 

19b–4(f)(6) thereunder.15 Because the 

proposed rule change does not: (i) 

Significantly affect the protection of 

investors or the public interest; (ii) 

impose any significant burden on 

competition; and (iii) become operative 

prior to 30 days from the date on which 

it was filed, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act and Rule 19b–4(f)(6)(iii) 

thereunder. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 16 of the Act to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEAMER–2022–10 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEAMER–2022–10. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (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–NYSEAMER–2022– 

10 and should be submitted on or before 

March 3, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–02782 Filed 2–9–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94151; File No. SR– 

NYSEArca–2021–90] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change To List and Trade Shares 

of Grayscale Bitcoin Trust (BTC) Under 

NYSE Arca Rule 8.201–E 

February 4, 2022. 

On October 19, 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 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to list and trade shares 

(‘‘Shares’’) of Grayscale Bitcoin Trust 

(BTC) (‘‘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 November 8, 2021.3

On December 15, 2021, pursuant to 

Section 19(b)(2) of the 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 This order 

institutes proceedings under Section 

19(b)(2)(B) of the Act 6 to determine 

whether to approve or disapprove the 

proposed rule change. 

I. Summary of the Proposal 

As described in more detail in the 

Notice,7 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 

is for the value of the Shares (based on 

bitcoin per Share) to reflect the value of 

the bitcoins held by the Trust, as 

determined by reference to the ‘‘Index 

Price,’’ less the Trust’s expenses and 

other liabilities.8 The ‘‘Index Price’’ is 

the U.S. dollar value of a bitcoin as 

represented by the ‘‘Index,’’ calculated 

at 4:00 p.m., New York time, on each 

business day.9 According to the 

Exchange, the Index Provider develops, 

calculates, and publishes the Index on 


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7890 Federal Register / Vol. 87, No. 28 / Thursday, February 10, 2022 / Notices 

10See id. at 61809. 11See id. 12 ‘‘Incidental Rights’’ are rights to acquire, or 

otherwise establish dominion and control over, any 

virtual currency or other asset or right, which rights 

are incident to the Trust’s ownership of bitcoins 

and arise without any action of the Trust, or of the 

Sponsor or Trustee on behalf of the Trust. See id. 

at 61805 n.9. 13 ‘‘IR Virtual Currency’’ is any virtual currency 

tokens, or other asset or right, acquired by the Trust 

through the exercise (subject to the applicable 

provisions of the Trust Agreement) of any 

Incidental Right. See id. at 61805 n.10. 14 ‘‘Additional Trust Expenses’’ are any expenses 

incurred by the Trust in addition to the Sponsor’s 

fee that are not Sponsor-paid expenses. See id. at 

61805 n.11. 15See id. at 61805, 61807. 

16The Exchange does not define this term in the 

proposed rule change. Additional information about 

the calculation of the Digital Asset Holdings can be 

found in the Notice. See id. at 61807. 

17See id. at 61817. 

18See id. 

19See id. at 61815. 

20See id. at 61816. 

21 15 U.S.C. 78s(b)(2)(B). 

22 Id. 

23 15 U.S.C. 78f(b)(5). 

24See Notice, supra note 3. 

25See id. at 61812. 

26See id. at 61808–09. 

27See id. at 61809–10. 

a continuous basis using the volumeweighted price at certain bitcoin spot 

trading platforms selected by the Index 

Provider. As of June 30, 2021, the 

bitcoin spot trading platforms included 

in the Index were: Coinbase Pro, 

Bitstamp, Kraken, and LMAX Digital 

(‘‘Constituent Platforms’’). The Index 

applies an algorithm to the 24-hour 

volume-weighted average price of 

bitcoin on the Constituent Platforms 

calculated on a per second basis.10 To 

calculate volume weighted price, the 

weighting algorithm is applied to the 

price and volume of all inputs for the 

immediately preceding 24-hour period 

at 4:00 p.m., New York time, on the 

trade date.11 The Trust’s assets will 

consist solely of bitcoins; Incidental 

Rights; 12 IR Virtual Currency; 13

proceeds from the sale of bitcoins, 

Incidental Rights, and IR Virtual 

Currency pending use of such cash for 

payment of Additional Trust 

Expenses 14 or distribution to the 

shareholders; and any rights of the Trust 

pursuant to any agreements, other than 

the Trust Agreement, to which the Trust 

is a party. Each Share represents a 

proportional interest, based on the total 

number of Shares outstanding, in each 

of the Trust’s assets as determined in 

the case of bitcoin by reference to the 

Index Price, less the Trust’s expenses 

and other liabilities (which include 

accrued but unpaid fees and 

expenses).15

On each business day at 4:00 p.m., 

New York time, or as soon thereafter as 

practicable, the Sponsor will evaluate 

the bitcoin held by the Trust and 

calculate and publish the ‘‘Digital Asset 

Holdings’’ 16 of the Trust. 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., E.T.). The IIV will be 

calculated using the same methodology 

as the Digital Asset Holdings of the 

Trust, specifically by using the prior 

day’s closing Digital Asset Holdings per 

Share as a base and updating that value 

during the NYSE Arca Core Trading 

Session to reflect changes in the value 

of the Trust’s Digital Asset Holdings 

during the trading day.17 In addition, 

according to the Exchange, ‘‘each 

investor will have access to the current 

Digital Asset Holdings of the Trust 

through the Trust’s website, as well as 

from one or more major market data 

vendors.’’ 18

The Trust will issue Shares to 

authorized participants from time to 

time, but only in one or more Baskets 

(each ‘‘Basket’’ being a block of 100 

Shares).19 The creation of Baskets will 

be made only in exchange for the 

delivery to the Trust of the number of 

whole and fractional bitcoins 

represented by each Basket being 

created. The Trust may redeem Shares 

from time to time but only in Baskets. 

The redemption of Baskets requires the 

distribution by the Trust of the number 

of bitcoins represented by the Baskets 

being redeemed. The redemption of a 

Basket will be made only in exchange 

for the distribution by the Trust of the 

number of whole and fractional bitcoins 

represented by each Basket being 

redeemed.20

II. Proceedings To Determine Whether 

To Approve or Disapprove SR– 

NYSEArca–2021–90 and Grounds for 

Disapproval under Consideration 

The Commission is instituting 

proceedings pursuant to Section 

19(b)(2)(B) of the Act 21 to determine 

whether the proposed rule change 

should be approved or disapproved. 

Institution of proceedings is appropriate 

at this time in view of the legal and 

policy issues raised by the proposed 

rule change, as discussed below. 

Institution of proceedings does not 

indicate that the Commission has 

reached any conclusions with respect to 

any of the issues involved. Rather, as 

described below, the Commission seeks 

and encourages interested persons to 

provide comments on the proposed rule 

change. 

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

Act,22 the Commission is providing 

notice of the grounds for disapproval 

under consideration. The Commission is 

instituting proceedings to allow for 

additional analysis of the proposed rule 

change’s consistency with Section 

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

among other things, 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.’’ 23

The Commission asks that 

commenters address the sufficiency of 

the Exchange’s statements in support of 

the proposal, which are set forth in the 

Notice,24 in addition to any other 

comments they may wish to submit 

about the proposed rule change. In 

particular, the Commission seeks 

comment on the following questions 

and asks commenters to submit data 

where appropriate to support their 

views: 

1. What are commenters’ views on 

whether the proposed Trust and Shares 

would be susceptible to manipulation? 

What are commenters’ views generally 

on whether the Exchange’s proposal is 

designed to prevent fraudulent and 

manipulative acts and practices? What 

are commenters’ views generally with 

respect to the liquidity and transparency 

of the bitcoin markets, the bitcoin 

markets’ susceptibility to manipulation, 

and thus the suitability of bitcoin as an 

underlying asset for an exchange-traded 

product? 

2. The Exchange asserts that ‘‘the 

Index represents a novel means to 

prevent fraud and manipulation from 

impacting a reference price for [b]itcoin 

and that it offers protections beyond 

those that exist in traditional 

commodity markets or equity 

markets.’’ 25 Specifically, the Exchange 

states that the Index Price is determined 

through a process in which trade data is 

cleansed and compiled ‘‘in such a 

manner as to algorithmically reduce the 

impact of anomalistic or manipulative 

trading . . . by adjusting the weight of 

each data input based on price deviation 

relative to the observable set, as well as 

recent and long-term trading volume at 

each venue relative to the observable 

set’’ 26 and that the Index Price only 

includes data from executed trades on 

Constituent [Platforms] that charge 

trading fees to its users ‘‘in order to 

attach a real, quantifiable cost to any 

manipulation attempts.’’ 27 The 

Exchange concludes that, ‘‘[b]y 

referencing multiple trading venues and 


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Federal Register / Vol. 87, No. 28 / Thursday, February 10, 2022 / Notices 7891 

28See id. 

29See id. at 61818. 

30See id. at 61814. 

31See id. 

32See id. at 61815. 

33See id. at 61814–15. 

34See id. at 61815. 

35See id. 

36Section 19(b)(2) of the Act, as amended by the 

Securities Act Amendments of 1975, Pub. L. 94–29 

(June 4, 1975), grants the Commission flexibility to 

determine what type of proceeding—either oral or 

notice and opportunity for written comments—is 

appropriate for consideration of a particular 

proposal by a self-regulatory organization. See 

Securities Act Amendments of 1975, Senate Comm. 

on Banking, Housing & Urban Affairs, S. Rep. No. 

75, 94th Cong., 1st Sess. 30 (1975). 37 17 CFR 200.30–3(a)(57). 

weighting them based on trade activity, 

. . . the impact of any potential fraud, 

manipulation or anomalous trading 

activity occurring on any single venue is 

reduced.’’ 28 What are commenters’ 

views of these assertions and 

conclusion? 

3. The Exchange also asserts that, 

although the global spot bitcoin market 

‘‘is not inherently resistant to fraud and 

manipulation, the Index serves as a 

means sufficient to mitigate the impact 

of instances of fraud and manipulation 

on a reference price for [b]itcoin.’’ 29 Are 

the characteristics of the Index that the 

Exchange identifies sufficient to support 

a determination that the proposal to list 

and trade the Shares is designed to 

protect investors and the public interest 

and is consistent with the other 

applicable requirements of Section 

6(b)(5) of the Act? 

4. The Exchange asserts that the 

Sponsor ‘‘conducted a lead/lag analysis 

of per minute data comparing the 

[b]itcoin futures maker, as represented 

by the [Chicago Mercantile Exchange 

(‘‘CME’’)] futures market, to the [b]itcoin 

spot market, as represented by the 

Index’’ and that ‘‘[b]ased on this 

analysis, the Sponsor has concluded 

that there does not appear to be a 

significant lead/lag relationship 

between the two instruments for the 

period of November 1, 2019 to August 

31, 2021.’’ 30 What are commenters’ 

views on this assertion? 

5. The Exchange states that, 

‘‘[a]lthough there is no significant lead/ 

lag relationship’’ between the bitcoin 

futures and the bitcoin spot market, ‘‘the 

CME futures market represents a large, 

surveilled and regulated market.’’ 31 The 

Exchange also asserts that ‘‘[g]iven the 

significant size of the CME futures 

markets . . . 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, since arbitrage 

between the derivative and spot markets 

would tend to counter an attempt to 

manipulate the spot market alone.’’ 32

What are commenters’ views regarding 

these assertions? Do these assertions 

provide an appropriate basis for 

determining that the proposal is 

consistent with the applicable 

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

Act? Based on data provided by the 

Exchange, do commenters agree that the 

CME bitcoin futures market now 

represents a regulated market of 

significant size? 33 What are 

commenters’ views on whether there is 

a reasonable likelihood that a person 

attempting to manipulate the Shares 

would also have to trade on CME to 

manipulate the Shares? 

6. The Exchange states that, if ‘‘the 

Commission is open to reviewing and 

potentially approving proposals for 

[b]itcoin-based ETPs registered under 

the [Investment Act of 1940], then it 

should take a similar view towards 

proposals for [b]itcoin based ETPs 

registered under the [Securities Act of 

1933], given that both products would 

be reliant on [b]itcoin’s underlying price 

in the spot markets.’’ 34 The Exchange 

further states that ‘‘any potential fraud 

or manipulation in the underlying 

[bitcoin spot market] would impact both 

types of ETP proposals.’’ 35 What are 

commenters’ views on such assertions? 

III. Procedure: Request for Written 

Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data, and 

arguments with respect to the issues 

identified above, as well as any other 

concerns they may have with the 

proposal. In particular, the Commission 

invites the written views of interested 

persons concerning whether the 

proposal is consistent with Section 

6(b)(5) or any other provision of the Act, 

and the rules and regulations 

thereunder. Although there do not 

appear to be any issues relevant to 

approval or disapproval that would be 

facilitated by an oral presentation of 

views, data, and arguments, the 

Commission will consider, pursuant to 

Rule 19b–4, any request for an 

opportunity to make an oral 

presentation.36

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposal should be approved or 

disapproved by March 3, 2022. Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by March 17, 2022. 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEArca–2021–90 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEArca–2021–90. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (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–NYSEArca–2021–90 and 

should be submitted by March 3, 2022. 

Rebuttal comments should be submitted 

by March 17, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.37

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–02781 Filed 2–9–22; 8:45 am] 

BILLING CODE 8011–01–P 


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