8318 Federal Register / Vol. 87, No. 30 / Monday, February 14, 2022 / Notices 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f). 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Trust was formed as a Delaware statutory 

trust on March 8, 2021 and is operated as a grantor 

trust for U.S. federal tax purposes. The Trust has 

no fixed termination date. 

4The Commission approved BZX Rule 14.11(e)(4) 

in Securities Exchange Act Release No. 65225 

(August 30, 2011), 76 FR 55148 (September 6, 2011) 

(SR–BATS–2011–018). 

5All statements and representations made in this 

filing regarding (a) the description of the portfolio, 

(b) limitations on portfolio holdings or reference 

assets, or (c) the applicability of Exchange rules and 

surveillance procedures shall constitute continued 

listing requirements for listing the Shares on the 

Exchange. 

market share percentages for granted’ 

because ‘no exchange possesses a 

monopoly, regulatory or otherwise, in 

the execution of order flow from broker 

dealers’ . . . .’’. Accordingly, the 

Exchange does not believe its proposed 

fee change imposes any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

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

of the Act 12 and paragraph (f) of Rule 

19b–4 13 thereunder. At any time within 

60 days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

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 will institute proceedings 

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– 

CboeEDGX–2022–006 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–CboeEDGX–2022–006. 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–CboeEDGX–2022–006 and 

should be submitted on or before March 

7, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03021 Filed 2–11–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94184; File No. SR– 

CboeBZX–2022–006] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing of 

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 

February 8, 2022. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on January 

25, 2022, Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes rule change to 

list and trade shares of the WisdomTree 

Bitcoin Trust (the ‘‘Trust’’),3 under BZX 

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

Trust Shares. The shares of the Trust are 

referred to herein as the ‘‘Shares.’’ 

The text of the proposed rule change 

is available on the Exchange’s website 

(http://markets.cboe.com/us/equities/ 

regulation/rule_filings/bzx/), at the 

Exchange’s Office of the Secretary, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade the Shares under BZX Rule 

14.11(e)(4),4 which governs the listing 

and trading of Commodity-Based Trust 

Shares on the Exchange.5 6 WisdomTree 


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The Exchange notes that a different proposal to 

list and trade shares of the WisdomTree Bitcoin 

Trust was disapproved by the Commission on 

December 1, 2021. See Exchange Act Release No. 

93700 (December 1, 2021), 86 FR 69322 (December 

7, 2021). The Sponsor has subsequently submitted 

an amended Registration Statement that includes a 

number of additional voluntary disclosures and 

shareholder protections that the Sponsor intends to 

undertake. This proposal is also significantly 

different than the previously disapproved proposal 

in that it includes additional information related to 

such voluntary disclosures and protections, 

additional information related to Bitcoin Futures 

ETFs, as defined below, and additional statistical 

and statutory analysis that seeks to respond to the 

concerns of the Commission. 

7The Trust has filed an amended registration 

statement on Form S–1 under the Securities Act of 

1933, dated December 8, 2021 (File No. 333– 

254134) (‘‘Registration Statement’’). The description 

of the Trust and the Shares contained herein are 

based on the Registration Statement. The 

Registration Statement for the Trust is not yet 

effective and the Shares will not trade on the 

Exchange until such time that the Registration 

Statement is effective. 

8See Securities Exchange Act Release No. 83723 

(July 26, 2018), 83 FR 37579 (August 1, 2018). This 

proposal was subsequently disapproved by the 

Commission. See Securities Exchange Act Release 

No. 83723 (July 26, 2018), 83 FR 37579 (August 1, 

2018) (the ‘‘Winklevoss Order’’). 

9See Winklevoss Order at 37592 and Exchange 

Act Release No. 50603 (Oct. 28, 2004), 69 FR 64614 

(Nov. 5, 2004) (SR–NYSE–2004–22) (order 

approving the listing and trading of streetTRACKS 

Gold Shares) (the ‘‘First Gold Approval Order’’). 

10See Winklevoss Order at 37592. See also the 

First Gold Approval Order at 64618–19; iShares 

COMEX Gold Trust, Exchange Act Release No. 

51058 (Jan. 19, 2005), 70 FR 3749, 3751, 3754–55 

(Jan. 26, 2005) (SR–Amex–2004–38); iShares Silver 

Trust, Exchange Act Release No. 53521 (Mar. 20, 

2006), 71 FR 14967, 14968, 14973–74 (Mar. 24, 

2006) (SR–Amex–2005–072); ETFS Gold Trust, 

Exchange Act Release No. 59895 (May 8, 2009), 74 

FR 22993, 22994–95, 22998, 23000 (May 15, 2009) 

(SR–NYSEArca–2009–40); ETFS Silver Trust, 

Exchange Act Release No. 59781 (Apr. 17, 2009), 74 

FR 18771, 18772, 18775–77 (Apr. 24, 2009) (SR– 

NYSEArca–2009–28); ETFS Palladium Trust, 

Exchange Act Release No. 61220 (Dec. 22, 2009), 74 

FR 68895, 68896 (Dec. 29, 2009) (SR–NYSEArca– 

2009–94) (notice of proposed rule change included 

NYSE Arca’s representation that ‘‘[t]he most 

significant palladium futures exchanges are the 

NYMEX and the Tokyo Commodity Exchange,’’ that 

‘‘NYMEX is the largest exchange in the world for 

trading precious metals futures and options,’’ and 

that NYSE Arca ‘‘may obtain trading information 

via the Intermarket Surveillance Group,’’ of which 

NYMEX is a member, Exchange Act Release No. 

60971 (Nov. 9, 2009), 74 FR 59283, 59285–86, 

59291 (Nov. 17, 2009)); ETFS Platinum Trust, 

Exchange Act Release No. 61219 (Dec. 22, 2009), 74 

FR 68886, 68887–88 (Dec. 29, 2009) (SR– 

NYSEArca–2009–95) (notice of proposed rule 

change included NYSE Arca’s representation that 

‘‘[t]he most significant platinum futures exchanges 

are the NYMEX and the Tokyo Commodity 

Exchange,’’ that ‘‘NYMEX is the largest exchange in 

the world for trading precious metals futures and 

options,’’ and that NYSE Arca ‘‘may obtain trading 

information via the Intermarket Surveillance 

Group,’’ of which NYMEX is a member, Exchange 

Act Release No. 60970 (Nov. 9, 2009), 74 FR 59319, 

59321, 59327 (Nov. 17, 2009)); Sprott Physical Gold 

Trust, Exchange Act Release No. 61496 (Feb. 4, 

2010), 75 FR 6758, 6760 (Feb. 10, 2010) (SR– 

NYSEArca–2009–113) (notice of proposed rule 

change included NYSE Arca’s representation that 

the COMEX is one of the ‘‘major world gold 

markets,’’ that NYSE Arca ‘‘may obtain trading 

information via the Intermarket Surveillance 

Group,’’ and that NYMEX, of which COMEX is a 

division, is a member of the Intermarket 

Surveillance Group, Exchange Act Release No. 

61236 (Dec. 23, 2009), 75 FR 170, 171, 174 (Jan. 4, 

2010)); Sprott Physical Silver Trust, Exchange Act 

Release No. 63043 (Oct. 5, 2010), 75 FR 62615, 

62616, 62619, 62621 (Oct. 12, 2010) (SR– 

NYSEArca–2010–84); ETFS Precious Metals Basket 

Trust, Exchange Act Release No. 62692 (Aug. 11, 

2010), 75 FR 50789, 50790 (Aug. 17, 2010) (SR– 

NYSEArca–2010–56) (notice of proposed rule 

change included NYSE Arca’s representation that 

‘‘the most significant gold, silver, platinum and 

palladium futures exchanges are the COMEX and 

the TOCOM’’ and that NYSE Arca ‘‘may obtain 

trading information via the Intermarket 

Surveillance Group,’’ of which COMEX is a 

member, Exchange Act Release No. 62402 (Jun. 29, 

2010), 75 FR 39292, 39295, 39298 (July 8, 2010)); 

ETFS White Metals Basket Trust, Exchange Act 

Release No. 62875 (Sept. 9, 2010), 75 FR 56156, 

56158 (Sept. 15, 2010) (SR–NYSEArca–2010–71) 

(notice of proposed rule change included NYSE 

Arca’s representation that ‘‘the most significant 

silver, platinum and palladium futures exchanges 

are the COMEX and the TOCOM’’ and that NYSE 

Arca ‘‘may obtain trading information via the 

Intermarket Surveillance Group,’’ of which COMEX 

is a member, Exchange Act Release No. 62620 (July 

30, 2010), 75 FR 47655, 47657, 47660 (Aug. 6, 

2010)); ETFS Asian Gold Trust, Exchange Act 

Release No. 63464 (Dec. 8, 2010), 75 FR 77926, 

77928 (Dec. 14, 2010) (SR–NYSEArca–2010–95) 

(notice of proposed rule change included NYSE 

Arca’s representation that ‘‘the most significant gold 

futures exchanges are the COMEX and the Tokyo 

Commodity Exchange,’’ that ‘‘COMEX is the largest 

exchange in the world for trading precious metals 

futures and options,’’ and that NYSE Arca ‘‘may 

obtain trading information via the Intermarket 

Surveillance Group,’’ of which COMEX is a 

member, Exchange Act Release No. 63267 (Nov. 8, 

2010), 75 FR 69494, 69496, 69500–01 (Nov. 12, 

2010)); Sprott Physical Platinum and Palladium 

Trust, Exchange Act Release No. 68430 (Dec. 13, 

2012), 77 FR 75239, 75240–41 (Dec. 19, 2012) (SR– 

NYSEArca–2012–111) (notice of proposed rule 

change included NYSE Arca’s representation that 

‘‘[f]utures on platinum and palladium are traded on 

two major exchanges: The New York Mercantile 

Exchange ... and Tokyo Commodities Exchange’’ 

and that NYSE Arca ‘‘may obtain trading 

information via the Intermarket Surveillance 

Group,’’ of which COMEX is a member, Exchange 

Act Release No. 68101 (Oct. 24, 2012), 77 FR 65732, 

65733, 65739 (Oct. 30, 2012)); APMEX Physical— 

1 oz. Gold Redeemable Trust, Exchange Act Release 

No. 66930 (May 7, 2012), 77 FR 27817, 27818 (May 

11, 2012) (SR–NYSEArca–2012–18) (notice of 

proposed rule change included NYSE Arca’s 

representation that NYSE Arca ‘‘may obtain trading 

information via the Intermarket Surveillance 

Group,’’ of which COMEX is a member, and that 

gold futures are traded on COMEX and the Tokyo 

Commodity Exchange, with a cross-reference to the 

proposed rule change to list and trade shares of the 

ETFS Gold Trust, in which NYSE Arca represented 

that COMEX is one of the ‘‘major world gold 

markets,’’ Exchange Act Release No. 66627 (Mar. 

20, 2012), 77 FR 17539, 17542–43, 17547 (Mar. 26, 

2012)); JPM XF Physical Copper Trust, Exchange 

Act Release No. 68440 (Dec. 14, 2012), 77 FR 75468, 

75469–70, 75472, 75485–86 (Dec. 20, 2012) (SR– 

NYSEArca–2012–28); iShares Copper Trust, 

Exchange Act Release No. 68973 (Feb. 22, 2013), 78 

FR 13726, 13727, 13729–30, 13739–40 (Feb. 28, 

2013) (SR–NYSEArca–2012–66); First Trust Gold 

Trust, Exchange Act Release No. 70195 (Aug. 14, 

2013), 78 FR 51239, 51240 (Aug. 20, 2013) (SR– 

NYSEArca–2013–61) (notice of proposed rule 

change included NYSE Arca’s representation that 

FINRA, on behalf of the exchange, may obtain 

trading information regarding gold futures and 

options on gold futures from members of the 

Intermarket Surveillance Group, including COMEX, 

or from markets ‘‘with which [NYSE Arca] has in 

place a comprehensive surveillance sharing 

agreement,’’ and that gold futures are traded on 

COMEX and the Tokyo Commodity Exchange, with 

a cross-reference to the proposed rule change to list 

and trade shares of the ETFS Gold Trust, in which 

NYSE Arca represented that COMEX is one of the 

‘‘major world gold markets,’’ Exchange Act Release 

No. 69847 (June 25, 2013), 78 FR 39399, 39400, 

39405 (July 1, 2013)); Merk Gold Trust, Exchange 

Act Release No. 71378 (Jan. 23, 2014), 79 FR 4786, 

4786–87 (Jan. 29, 2014) (SR–NYSEArca–2013–137) 

(notice of proposed rule change included NYSE 

Arca’s representation that ‘‘COMEX is the largest 

gold futures and options exchange’’ and that NYSE 

Arca ‘‘may obtain trading information via the 

Intermarket Surveillance Group,’’ including with 

respect to transactions occurring on COMEX 

pursuant to CME and NYMEX’s membership, or 

from exchanges ‘‘with which [NYSE Arca] has in 

place a comprehensive surveillance sharing 

agreement,’’ Exchange Act Release No. 71038 (Dec. 

11, 2013), 78 FR 76367, 76369, 76374 (Dec. 17, 

2013)); Long Dollar Gold Trust, Exchange Act 

Release No. 79518 (Dec. 9, 2016), 81 FR 90876, 

90881, 90886, 90888 (Dec. 15, 2016) (SR– 

NYSEArca–2016–84). 

Digital Commodity Services, LLC is the 

sponsor of the Trust (the ‘‘Sponsor’’). 

The Shares will be registered with the 

Commission by means of the Trust’s 

registration statement on Form S–1 (the 

‘‘Registration Statement’’).7 As further 

discussed below, the Commission has 

historically approved or disapproved 

exchange filings to list and trade series 

of Trust Issued Receipts, including spotbased Commodity-Based Trust Shares, 

on the basis of whether the listing 

exchange has in place a comprehensive 

surveillance sharing agreement with a 

regulated market of significant size 

related to the underlying commodity.8 A 

survey of previously approved series of 

Commodity-Based Trust Shares and 

Currency Trust Shares makes clear that 

the spot markets for commodities and 

currencies held in such ETPs are 

generally unregulated. In fact, the 

Commission specifically noted in the 

Winklevoss Order that the first gold ETP 

approval order, which was also the first 

commodity-trust ETP, ‘‘was based on an 

assumption that the currency market 

and the spot gold market were largely 

unregulated.’’ 9 This makes clear that 

the applicable standard is not whether 

the underlying commodity market itself 

is regulated. Further to this point, prior 

orders have also emphasized that in 

every prior approval order for 

Commodity-Based Trust Shares there 

was a regulated derivatives market of 

significant size, generally a Commodity 

Futures Trading Commission (the 

‘‘CFTC’’) regulated futures market.10

Despite the lack of regulation of the 

underlying spot commodity and 

currency markets, the Commission 

approved series of Currency and 

Commodity-Based Trust Shares, 

including those that held gold, silver, 


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11 Id. 

12For additional information about bitcoin and 

the Bitcoin Network, see https://bitcoin.org/en/ 

getting-started; https://www.wisdomtree.com/ 

strategies/crypto; https://

www.fidelitydigitalassets.com/articles/addressingbitcoin-criticisms; and https://www.vaneck.com/ 

education/investment-ideas/investing-in-bitcoinand-digital-assets/. 

13See Winklevoss Order. 

14 Digital assets that are securities under U.S. law 

are referred to throughout this proposal as ‘‘digital 

asset securities.’’ All other digital assets, including 

bitcoin, are referred to interchangeably as 

‘‘cryptocurrencies’’ or ‘‘virtual currencies.’’ The 

term ‘‘digital assets’’ refers to all digital assets, 

including both digital asset securities and 

cryptocurrencies, together. 

15See ‘‘In the Matter of Coinflip, Inc.’’ 

(‘‘Coinflip’’) (CFTC Docket 15–29 (September 17, 

2015)) (order instituting proceedings pursuant to 

Sections 6(c) and 6(d) of the CEA, making findings 

and imposing remedial sanctions), in which the 

CFTC stated: 

‘‘Section 1a(9) of the CEA defines ‘commodity’ to 

include, among other things, ‘all services, rights, 

and interests in which contracts for future delivery 

are presently or in the future dealt in.’ 7 U.S.C. 

1a(9). The definition of a ‘commodity’ is broad. See, 

e.g., Board of Trade of City of Chicago v. SEC, 677 

F. 2d 1137, 1142 (7th Cir. 1982). Bitcoin and other 

virtual currencies are encompassed in the definition 

and properly defined as commodities.’’ 

16A list of virtual currency businesses that are 

entities regulated by the NYDFS is available on the 

NYDFS website. See https://www.dfs.ny.gov/apps_

and_licensing/virtual_currency_businesses/ 

regulated_entities. 

17 Data as of March 31, 2016 according to publicly 

available filings. See Bitcoin Investment Trust Form 

S–1, dated May 27, 2016, available: https://

www.sec.gov/Archives/edgar/data/1588489/ 

000095012316017801/filename1.htm. 

18See letter from Dalia Blass, Director, Division 

of Investment Management, U.S. Securities and 

Exchange Commission to Paul Schott Stevens, 

President & CEO, Investment Company Institute 

and Timothy W. Cameron, Asset Management 

Group—Head, Securities Industry and Financial 

Markets Association (January 18, 2018), available at 

https://www.sec.gov/divisions/investment/ 

noaction/2018/cryptocurrency-011818.htm. 

19See Prospectus supplement filed pursuant to 

Rule 424(b)(1) for INX Tokens (Registration No. 

333–233363), available at: https://www.sec.gov/ 

Archives/edgar/data/1725882/ 

000121390020023202/ea125858-424b1_

inxlimited.htm. 

20See Prospectus filed by Stone Ridge Trust VI 

on behalf of NYDIG Bitcoin Strategy Fund 

Registration, available at: https://www.sec.gov/ 

Archives/edgar/data/1764894/ 

000119312519309942/d693146d497.htm. 

21See Securities Exchange Act Release No. 90788, 

86 FR 11627 (February 26, 2021) (File Number S7– 

25–20) (Custody of Digital Asset Securities by 

Special Purpose Broker-Dealers). 

platinum, palladium, copper, and other 

commodities and currencies, because it 

determined that the futures markets for 

these commodities and currencies 

represented regulated markets of 

significant size and that the listing 

exchange had a surveillance sharing 

agreement in place with that market.11

The Exchange acknowledges that 

largely unregulated currency and spot 

commodity markets do not provide the 

same protections as the markets that are 

subject to the Commission’s oversight. 

However, the Commission has 

consistently looked to surveillance 

sharing agreements with an underlying 

futures market to determine whether 

ETPs holding currency or commodities 

were consistent with the Act, as 

established above. As such, the 

Commission’s regulated market of 

significant size test does not require that 

the spot bitcoin market be regulated to 

approve this proposal. To the contrary, 

precedent makes clear that any 

requirement that the spot bitcoin market 

be a ‘‘regulated market’’ prior to 

approval would be incongruous with all 

prior spot commodity and currency 

approval orders. With this in mind, the 

CME Bitcoin Futures market is the 

proper market for the Commission to 

consider in determining whether this 

proposal is consistent with the Act. The 

Exchange has a comprehensive 

surveillance sharing agreement in place 

with CME, which operates a bitcoin 

futures market that, as established by 

the included analysis below, represents 

a regulated market of significant size 

related to the underlying commodity 

(bitcoin) to be held by the Trust. 

Therefore, both the Exchange and the 

Sponsor believe that the CME Bitcoin 

Futures market satisfies the standard 

that the Commission has applied to all 

previously approved series of 

Commodity-Based Trust Shares and that 

this proposal should be approved. 

Background 

Bitcoin is a digital asset based on the 

decentralized, open source protocol of 

the peer-to-peer computer network 

launched in 2009 that governs the 

creation, movement, and ownership of 

bitcoin and hosts the public ledger, or 

‘‘blockchain,’’ on which all bitcoin 

transactions are recorded (the ‘‘Bitcoin 

Network’’ or ‘‘Bitcoin’’). The 

decentralized nature of the Bitcoin 

Network allows parties to transact 

directly with one another based on 

cryptographic proof instead of relying 

on a trusted third party. The protocol 

also lays out the rate of issuance of new 

bitcoin within the Bitcoin Network, a 

rate that is reduced by half 

approximately every four years with an 

eventual hard cap of 21 million. It’s 

generally understood that the 

combination of these two features—a 

systemic hard cap of 21 million bitcoin 

and the ability to transact trustlessly 

with anyone connected to the Bitcoin 

Network—gives bitcoin its value.12

The first rule filing proposing to list 

an exchange-traded product to provide 

exposure to bitcoin in the U.S. was 

submitted by the Exchange on June 30, 

2016.13 At that time, blockchain 

technology, and digital assets that 

utilized it, were relatively new to the 

broader public. The market cap of all 

bitcoin in existence at that time was 

approximately $10 billion. No registered 

offering of digital asset securities or 

shares in an investment vehicle with 

exposure to bitcoin or any other 

cryptocurrency had yet been conducted, 

and the regulated infrastructure for 

conducting a digital asset securities 

offering had not begun to develop.14

Similarly, regulated U.S. bitcoin futures 

contracts did not exist. The CFTC had 

determined that bitcoin is a 

commodity,15 but had not engaged in 

significant enforcement actions in the 

space. The New York Department of 

Financial Services (‘‘NYDFS’’) adopted 

its final BitLicense regulatory 

framework in 2015, but had only 

approved four entities to engage in 

activities relating to virtual currencies 

(whether through granting a BitLicense 

or a limited-purpose trust charter) as of 

June 30, 2016.16 While the first over-thecounter bitcoin fund launched in 2013, 

public trading was limited and the fund 

had only $60 million in assets.17 There 

were very few, if any, traditional 

financial institutions engaged in the 

space, whether through investment or 

providing services to digital asset 

companies. In January 2018, the Staff of 

the Commission noted in a letter to the 

Investment Company Institute and 

SIFMA that it was not aware, at that 

time, of a single custodian providing 

fund custodial services for digital 

assets.18

Fast forward to the fourth quarter of 

2021 and the digital assets financial 

ecosystem, including bitcoin, has 

progressed significantly. The 

development of a regulated market for 

digital asset securities has significantly 

evolved, with market participants 

having conducted registered public 

offerings of both digital asset 

securities 19 and shares in investment 

vehicles holding bitcoin futures.20

Additionally, licensed and regulated 

service providers have emerged to 

provide fund custodial services for 

digital assets, among other services. For 

example, in May 2021, the Staff of the 

Commission released a statement 

permitting open-end mutual funds to 

invest in cash-settled bitcoin futures; in 

December 2020, the Commission 

adopted a conditional no-action 

position permitting certain special 

purpose broker-dealers to custody 

digital asset securities under Rule 15c3– 

3 under the Exchange Act (the ‘‘Custody 

Statement’’); 21 in September 2020, the 

Staff of the Commission released a noVerDate Sep<11>2014 17:54 Feb 11, 2022 Jkt 256001 PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 E:\FR\FM\14FEN1.SGM 14FEN1

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22See letter from Elizabeth Baird, Deputy 

Director, Division of Trading and Markets, U.S. 

Securities and Exchange Commission to Kris 

Dailey, Vice President, Risk Oversight & 

Operational Regulation, Financial Industry 

Regulatory Authority (September 25, 2020), 

available at: https://www.sec.gov/divisions/ 

marketreg/mr-noaction/2020/finra-ats-role-insettlement-of-digital-asset-security-trades09252020.pdf. 

23See letter from Jeffrey S. Mooney, Associate 

Director, Division of Trading and Markets, U.S. 

Securities and Exchange Commission to Charles G. 

Cascarilla & Daniel M. Burstein, Paxos Trust 

Company, LLC (October 28, 2019), available at: 

https://www.sec.gov/divisions/marketreg/mrnoaction/2019/paxos-trust-company-102819- 

17a.pdf. 

24See, e.g., Form TA–1/A filed by Securrency 

Transfers, Inc. (CIK: 0001846640) on August 13, 

2021, available at https://www.sec.gov/Archives/ 

edgar/data/0001846640/000184664021000006/ 

xslFTA1X01/primary_doc.xml; and Form TA–1/A 

filed by Tokensoft Transfer Agent LLC (CIK: 

0001794142) on January 8, 2021, available at: 

https://www.sec.gov/Archives/edgar/data/1794142/ 

000179414219000001/xslFTA1X01/primary_

doc.xml. 

25As of December 1, 2021, the total market cap 

of all bitcoin in circulation was approximately 

$1.08 trillion. 

26 Data sourced from the CME Bitcoin Futures 

Report: 19 Nov, 2021, available at: https://

www.cmegroup.com/ftp/bitcoinfutures/Bitcoin_

Futures_Liquidity_Report.pdf. 

27The CFTC’s annual report for Fiscal Year 2020 

(which ended on September 30, 2020) noted that 

the CFTC ‘‘continued to aggressively prosecute 

misconduct involving digital assets that fit within 

the CEA’s definition of ‘‘commodity’’ and ‘‘brought 

a record setting seven cases involving digital 

assets.’’ See CFTC FY2020 Division of Enforcement 

Annual Report, available at: https://www.cftc.gov/ 

media/5321/DOE_FY2020_AnnualReport_120120/ 

download. Additionally, the CFTC filed on October 

1, 2020, a civil enforcement action against the 

owner/operators of the BitMEX trading platform, 

which was one of the largest bitcoin derivative 

exchanges. See CFTC Release No. 8270–20 (October 

1, 2020) available at: https://www.cftc.gov/ 

PressRoom/PressReleases/8270-20. 

28See OCC News Release 2021–2 (January 4, 

2021) available at: https://www.occ.gov/newsissuances/news-releases/2021/nr-occ-2021-2.html. 

29See U.S. Bank Announces New Cryptocurrenty 

Custodian Services for Institutional Investment 

Managers (October 5, 2021) available at: https://

ir.usbank.com/news-releases/news-release-details/ 

us-bank-announces-new-cryptocurrency-custodyservices. 

30See OCC News Release 2021–6 (January 13, 

2021) available at: https://www.occ.gov/newsissuances/news-releases/2021/nr-occ-2021-6.html 

and OCC News Release 2021–19 (February 5, 2021) 

available at: https://www.occ.gov/news-issuances/ 

news-releases/2021/nr-occ-2021-19.html. 

31See FinCEN Guidance FIN–2019–G001 (May 9, 

2019) (Application of FinCEN’s Regulations to 

Certain Business Models Involving Convertible 

Virtual Currencies) available at: https://

www.fincen.gov/sites/default/files/2019-05/ 

FinCEN%20Guidance%20CVC%20FINAL

%20508.pdf. 

32See U.S. Department of the Treasury Press 

Release: ‘‘The Financial Crimes Enforcement 

Network Proposes Rule Aimed at Closing AntiMoney Laundering Regulatory Gaps for Certain 

Convertible Virtual Currency and Digital Asset 

Transactions’’ (December 18, 2020), available at: 

https://home.treasury.gov/news/press-releases/ 

sm1216. 

33See U.S. Department of the Treasury 

Enforcement Release: ‘‘OFAC Enters Into $98,830 

Settlement with BitGo, Inc. for Apparent Violations 

of Multiple Sanctions Programs Related to Digital 

Currency Transactions’’ (December 30, 2020) 

available at: https://home.treasury.gov/system/files/ 

126/20201230_bitgo.pdf. 

34On December 10, 2020, Massachusetts Mutual 

Life Insurance Company (MassMutual) announced 

that it had purchased $100 million in bitcoin for its 

general investment account. See MassMutual Press 

Release ‘‘Institutional Bitcoin provider NYDIG 

announces minority stake purchase by 

MassMutual’’ (December 10, 2020) available at: 

https://www.massmutual.com/about-us/news-andpress-releases/press-releases/2020/12/institutionalbitcoin-provider-nydig-announces-minority-stakepurchase-by-massmutual. 

35See e.g., ‘‘BlackRock’s Rick Rieder says the 

world’s largest asset manager has ‘started to dabble’ 

in bitcoin’’ (February 17, 2021) available at: https:// 

www.cnbc.com/2021/02/17/blackrock-has-startedto-dabble-in-bitcoin-says-rick-rieder.html and 

‘‘Guggenheim’s Scott Minerd Says Bitcoin Should 

Be Worth $400,000’’ (December 16, 2020) available 

at: https://www.bloomberg.com/news/articles/2020- 

12-16/guggenheim-s-scott-minerd-says-bitcoinshould-be-worth-400-000. 

36See e.g., ‘‘Harvard and Yale Endowments 

Among Those Reportedly Buying Crypto’’ (January 

25, 2021) available at: https://www.bloomberg.com/ 

news/articles/2021-01-26/harvard-and-yaleendowments-among-those-reportedly-buyingcrypto. 

37See e.g., ‘‘Virginia Police Department Reveals 

Why its Pension Fund is Betting on Bitcoin’’ 

(February 14, 2019) available at: https://

finance.yahoo.com/news/virginia-policedepartment-reveals-why-194558505.html. 

38See e.g., ‘‘Bridgewater: Our Thoughts on 

Bitcoin’’ (January 28, 2021) available at: https://

www.bridgewater.com/research-and-insights/ourthoughts-on-bitcoin and ‘‘Paul Tudor Jones says he 

likes bitcoin even more now, rally still in the ‘first 

inning’ ’’ (October 22, 2020) available at: https://

www.cnbc.com/2020/10/22/-paul-tudor-jones-sayshe-likes-bitcoin-even-more-now-rally-still-in-thefirst-inning.html. 

action letter permitting certain brokerdealers to operate a non-custodial 

Alternative Trading System (‘‘ATS’’) for 

digital asset securities, subject to 

specified conditions; 22 and in October 

2019, the Staff of the Commission 

granted temporary relief from the 

clearing agency registration requirement 

to an entity seeking to establish a 

securities clearance and settlement 

system based on distributed ledger 

technology,23 and multiple transfer 

agents who provide services for digital 

asset securities registered with the 

Commission.24

Outside the Commission’s purview, 

the regulatory landscape has changed 

significantly since 2016, and 

cryptocurrency markets have grown and 

evolved as well. The market for bitcoin 

is approximately 100 times larger, with 

a market cap of over $1 trillion.25

According to the CME Bitcoin Futures 

Report, from October 25, 2021 through 

November 19, 2021, CFTC regulated 

bitcoin futures represented 

approximately $2.9 billion in notional 

trading volume on Chicago Mercantile 

Exchange (‘‘CME’’) (‘‘CME Bitcoin 

Futures’’) on a daily basis and notional 

volume was never below $1.2 billion 

per day.26 Open interest was over $4 

billion for the entirety of the period and 

at one point reached $5.5 billion. The 

CFTC has exercised its regulatory 

jurisdiction in bringing a number of 

enforcement actions related to bitcoin 

and against trading platforms that offer 

cryptocurrency trading.27 The U.S. 

Office of the Comptroller of the 

Currency (the ‘‘OCC’’) has made clear 

that federally-chartered banks are able 

to provide custody services for 

cryptocurrencies and other digital 

assets 28 and major U.S. banks that 

currently serve as asset custodians for 

investment companies registered under 

the Investment Company Act of 1940, as 

amended (‘‘1940 Act’’), are now serving, 

or have expressed an intention of 

serving, as bitcoin custodians.29 One 

such bank, U.S. Bank, N.A., will be 

serving as the custodian of the Trust 

(the ‘‘Custodian’’). The OCC has also 

recently granted conditional approval of 

two charter conversions by statechartered trust companies to national 

banks, both of which provide 

cryptocurrency custody services.30

NYDFS has granted no fewer than 

twenty-five BitLicenses, including to 

established public payment companies 

like PayPal Holdings, Inc. and Square, 

Inc., and limited purpose trust charters 

to entities providing cryptocurrency 

custody services. The U.S. Treasury 

Financial Crimes Enforcement Network 

(‘‘FinCEN’’) has released extensive 

guidance regarding the applicability of 

the Bank Secrecy Act (‘‘BSA’’) and 

implementing regulations to virtual 

currency businesses,31 and has 

proposed rules imposing requirements 

on entities subject to the BSA that are 

specific to the technological context of 

virtual currencies.32 In addition, the 

Treasury’s Office of Foreign Assets 

Control (‘‘OFAC’’) has brought 

enforcement actions over apparent 

violations of the sanctions laws in 

connection with the provision of wallet 

management services for digital assets.33

In addition to the regulatory 

developments laid out above, more 

traditional financial market participants 

have embraced and continue to embrace 

cryptocurrency: Large insurance 

companies,34 asset managers,35

university endowments,36 pension 

funds,37 and even historically bitcoin 

skeptical fund managers 38 are allocating 

to bitcoin. The largest over-the-counter 

bitcoin fund previously filed a Form 10 

registration statement, which the Staff of 

the Commission reviewed and which 

took effect automatically, and is now a 


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8322 Federal Register / Vol. 87, No. 30 / Monday, February 14, 2022 / Notices 

39See Letter from Division of Corporation 

Finance, Office of Real Estate & Construction to 

Barry E. Silbert, Chief Executive Officer, Grayscale 

Bitcoin Trust (January 31, 2020) https://

www.sec.gov/Archives/edgar/data/1588489/ 

000000000020000953/filename1.pdf. 

40See Form 10–K submitted by Tesla, Inc. for the 

fiscal year ended December 31, 2020 at 23: https:// 

www.sec.gov/ix?doc=/Archives/edgar/data/ 

1318605/000156459021004599/tsla-10k_

20201231.htm. 

41See Form 10–Q submitted by MicroStrategy 

Incorporated for the quarterly period ended 

September 30, 2020 at 8: https://www.sec.gov/ 

ix?doc=/Archives/edgar/data/1050446/0001564590

20047995/mstr-10q_20200930.htm. 

42See Form 10–Q submitted by Square, Inc. for 

the quarterly period ended September 30, 2020 at 

51: https://www.sec.gov/ix?doc=/Archives/edgar/ 

data/1512673/000151267320000012/sq20200930.htm. 

43Amount obtained from https://

bitcointreasuries.net as of December 3, 2021. 

44The largest OTC Bitcoin Fund has grown its 

AUM from approximately $2.6 billion on February 

26, 2020, the date on which the Commission issued 

the disapproval order for the United States Bitcoin 

and Treasury Investment Trust, to $37.1 billion on 

December 1, 2021, according to Grayscale’s website. 

See Securities Exchange Act Release No. 88284 

(February 26, 2020), 85 FR 12595 (March 3, 2020) 

(SR–NYSEArca–2019–39) (the ‘‘Wilshire Phoenix 

Disapproval’’). While the price of one bitcoin has 

increased approximately 690% in the intervening 

period, the total AUM has increased by 

approximately 1540%, indicating that the increase 

in AUM was created beyond just price appreciation 

in bitcoin. The premium and discount for OTC 

Bitcoin Funds is known to move rapidly. For 

example, over the period of 12/21/20 to 1/21/20, the 

premium for the largest OTC Bitcoin Fund went 

from 40.18% to 2.79%. While the price of bitcoin 

appreciated significantly during this period and 

NAV per share increased by 41.25%, the price per 

share increased by only 3.58%. This means that 

investors are buying shares of a fund that 

experiences significant volatility in its premium 

and discount outside of the fluctuations in price of 

the underlying asset. Even operating within the 

normal premium and discount range, it’s possible 

for an investor to buy shares of an OTC Bitcoin 

Fund only to have those shares quickly lose 10% 

or more in dollar value excluding any movement of 

the price of bitcoin. That is to say—the price of 

bitcoin could have stayed exactly the same from 

market close on one day to market open the next, 

yet the value of the shares held by the investor 

decreased only because of the fluctuation of the 

premium. As more investment vehicles, including 

mutual funds and ETFs, seek to gain exposure to 

bitcoin, the easiest option for a buy and hold 

strategy for such vehicles is often an OTC Bitcoin 

Fund, meaning that even investors that do not 

directly buy OTC Bitcoin Funds can be 

disadvantaged by extreme premiums (or discounts) 

and premium volatility. Trading at a premium (or 

a discount) is not unique to OTC Bitcoin Funds and 

is not in itself problematic, but the Commission has 

recognized the risks that are posed by a persistent 

premium or discount and accordingly mandated 

website disclosure for ETFs under Rule 6c–11. That 

mandate was in the context of a persistent 2% 

premium or discount, whereas OTC Bitcoin Funds 

have had persistent premiums or discounts at least 

10 times that percentage. 

45Recently a number of operating companies 

engaged in unrelated businesses—such as Tesla (a 

car manufacturer) and MicroStrategy (an enterprise 

software company)—have announced investments 

as large as $5.3 billion in bitcoin. Without access 

to bitcoin exchange-traded products, retail investors 

seeking investment exposure to bitcoin may end up 

purchasing shares in these companies in order to 

gain the exposure to bitcoin that they seek. In fact, 

mainstream financial news networks have written 

a number of articles providing investors with 

guidance for obtaining bitcoin exposure through 

publicly traded companies (such as MicroStrategy, 

Tesla, and bitcoin mining companies, among 

others) instead of dealing with the complications 

associated with buying spot bitcoin in the absence 

of a bitcoin ETP. See e.g., ‘‘7 public companies with 

exposure to bitcoin’’ (February 8, 2021) available at: 

https://finance.yahoo.com/news/7-publiccompanies-with-exposure-to-bitcoin154201525.html; and ‘‘Want to get in the crypto 

trade without holding bitcoin yourself? Here are 

some investing ideas’’ (February 19, 2021) available 

at: https://www.cnbc.com/2021/02/19/ways-toinvest-in-bitcoin-without-holding-thecryptocurrency-yourself-.html. Such operating 

companies, however, are imperfect bitcoin proxies 

and provide investors with partial bitcoin exposure 

paired with a host of additional risks associated 

with whichever operating company they decide to 

purchase. Additionally, the disclosures provided by 

such operating companies with respect to risks 

relating to their bitcoin holdings are generally 

substantially smaller than the registration statement 

of a bitcoin ETP, including the Registration 

Statement, typically amounting to a few sentences 

of narrative description and a handful of risk 

factors. In other words, investors seeking bitcoin 

exposure through publicly traded companies are 

gaining only partial exposure to bitcoin and are not 

fully benefitting from the risk disclosures and 

associated investor protections that come from the 

securities registration process. 

46The Exchange notes that the Purpose Bitcoin 

ETF, a retail physical bitcoin ETP launched in 

Canada, reportedly reached $1.2 billion in assets 

under management as of October 15, 2021 

(‘‘AUM’’), demonstrating the demand for a North 

American market listed bitcoin exchange-traded 

product (‘‘ETP’’). The Purpose Bitcoin ETF also 

offers a class of units that is U.S. dollar 

denominated, which could appeal to U.S. investors. 

47The Exchange notes that securities regulators in 

a number of other countries have either approved 

or otherwise allowed the listing and trading of 

bitcoin ETPs. Specifically, these funds include the 

Purpose Bitcoin ETF, Bitcoin ETF, VanEck Vectors 

Bitcoin ETN, WisdomTree Bitcoin ETP, Bitcoin 

Tracker One, BTCetc bitcoin ETP, Amun Bitcoin 

ETP, Amun Bitcoin Suisse ETP, 21Shares Short 

Bitcoin ETP, CoinShares Physical Bitcoin ETP. 

reporting company.39 Established 

companies like Tesla, Inc.,40

MicroStrategy Incorporated,41 and 

Square, Inc.,42 among others, have 

recently announced substantial 

investments in bitcoin in amounts as 

large as 43,200 BTC,43 worth around 

$2.5 billion (Tesla) valued at a BTCUSD 

price of $60,000 and 121,043 BTC worth 

$7.2 billion (MicroStrategy). The 

foregoing examples demonstrate that 

bitcoin has gained mainstream usage 

and recognition. 

Despite these developments, access 

for U.S. retail investors to gain exposure 

to bitcoin via a transparent and U.S. 

regulated, U.S. exchange-traded vehicle 

remains limited. Instead current options 

include: (i) Paying a potentially high 

premium (and high management fees) to 

buy over-the-counter bitcoin funds 

(‘‘OTC Bitcoin Funds’’), to the 

advantage of more sophisticated 

investors that are able to create shares 

at net asset value (‘‘NAV’’) directly with 

the issuing trust; 44 (ii) facing the 

technical risk, complexity and generally 

high fees associated with buying spot 

bitcoin; (iii) purchasing shares of 

operating companies that they believe 

will provide proxy exposure to bitcoin 

with limited disclosure about the 

associated risks; 45 or (iv) through the 

purchase of CME Bitcoin Futures ETFs, 

which represent a sub-optimal structure 

for long-term investors that will cost 

them collectively tens of millions of 

dollars every year, as further discussed 

below. Meanwhile, investors in many 

other countries, including Canada 46 and 

Brazil, are able to use more traditional 

exchange listed and traded products 

(including exchange-traded funds 

holding physical bitcoin) to gain 

exposure to bitcoin, disadvantaging U.S. 

investors and leaving them with more 

risky means of getting bitcoin 

exposure.47 Additionally, investors in 

other countries and regions, specifically 

Canada and Europe, generally pay lower 

fees than U.S. retail investors that invest 

in OTC Bitcoin Funds due to the fee 

pressure that results from increased 

competition among available bitcoin 

investment options. Without an 

approved and regulated spot bitcoin 

ETP in the U.S. as a viable alternative, 

U.S. investors could seek to purchase 

shares of non-U.S. bitcoin vehicles in 

order to get access to bitcoin exposure. 

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. Further to this 

point, the lack of a U.S.-listed spot 

bitcoin ETP is not preventing U.S. funds 

from gaining exposure to bitcoin— 

several U.S. exchange-traded funds are 

using Canadian bitcoin ETPs to gain 

exposure to spot bitcoin. In addition to 

the benefits to U.S. investors articulated 

throughout this proposal, approving this 

proposal (and others like it) would 

provide U.S. exchange-traded funds 

with a U.S.-listed and regulated product 

to provide such access rather than 

relying on either flawed products or 

products listed and primarily regulated 

in other countries. 

Bitcoin Futures ETFs 

The Exchange and Sponsor applaud 

the Commission for allowing the recent 

launch of several ETFs registered under 

the Investment Company Act of 1940, as 

amended (the ‘‘1940 Act’’), that provide 

exposure to bitcoin through CME 

Bitcoin Futures (‘‘Bitcoin Futures 

ETFs’’). Allowing such products to list 


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Federal Register / Vol. 87, No. 30 / Monday, February 14, 2022 / Notices 8323 

48See e.g., ‘‘Bitcoin ETF’s Success Could Come at 

Fundholders’ Expense,’’ Wall Street Journal 

(October 24, 2021), available at: https://

www.wsj.com/articles/bitcoin-etfs-success-couldcome-at-fundholders-expense-11635080580; 

‘‘Physical Bitcoin ETF Prospects Accelerate,’’ 

ETF.com (October 25, 2021), available at: https:// 

www.etf.com/sections/blog/physical-bitcoin-etfprospects-shine?nopaging=1&__cf_chl_jschl_tk__

=pmd_JsK.fjXz9eAQW9zol0qpzhXDrrlpIVdoCloL

XbLjl44-1635476946-0-gqNtZGzNApCjcnBszQql. 

49 Id. 

50See Winklevoss Order at 37593, specifically 

footnote 202, which includes the language from 

numerous approval orders for which the underlying 

futures markets formed the basis for approving 

series of ETPs that hold physical metals, including 

gold, silver, palladium, platinum, and precious 

metals more broadly; and 37600, specifically where 

the Commission provides that ‘‘when the spot 

market is unregulated—the requirement of 

preventing fraudulent and manipulative acts may 

possibly be satisfied by showing that the ETP listing 

market has entered into a surveillance-sharing 

agreement with a regulated market of significant 

size in derivatives related to the underlying asset.’’ 

As noted above, the Exchange believes that these 

citations are particularly helpful in making clear 

that the spot market for a spot commodity ETP need 

not be ‘‘regulated’’ in order for a spot commodity 

ETP to be approved by the Commission, and in fact 

that it’s been the common historical practice of the 

Commission to rely on such derivatives markets as 

the regulated market of significant size because 

such spot commodities markets are largely 

unregulated. 

51As further outlined below, both the Exchange 

and the Sponsor believe that the CME Bitcoin 

Futures market represents a regulated market of 

significant size and that this proposal and others 

like it should be approved on this basis. 

52 15 U.S.C. 78f(b)(5). For additional detail, see 

Winklevoss Order at 37600. 

53For a further description of the Reference Rate 

methodology and relevance to the requirements of 

Section 6(b)(5) of the Act, please see the comment 

letter from CF Benchmarks at https://www.sec.gov/ 

comments/sr-cboebzx-2021-024/srcboebzx2021024- 

8771282-237582.pdf. 

54We note that the largest OTC Bitcoin Funds 

holding spot Bitcoin today are not 1940 Act Funds 

and in any event do not provide the type of 

transparency and other protections described 

herein. 

and trade is a productive first step in 

providing transparent, exchange-listed 

tools for expressing a view on bitcoin 

for U.S. investors and traders. However, 

as has been reported by numerous 

outlets, the structure of such products 

provides negative outcomes for buy and 

hold investors as compared to an ETP 

that would hold actual bitcoin instead 

of derivatives contracts (‘‘Spot Bitcoin 

ETPs’’).48 Specifically, the cost of rolling 

CME Bitcoin Futures contracts (which 

has reached as high as 17% annually 49

excluding a fund’s management fees and 

borrowing costs, if any) will cause the 

Bitcoin Futures ETFs to lag the 

performance of bitcoin itself and, at over 

a billion dollars in assets under 

management, would cost U.S. investors 

hundreds of millions of dollars on an 

annual basis. Such rolling costs would 

not be required for Spot Bitcoin ETPs 

that hold bitcoin. Further, Bitcoin 

Futures ETFs have grown so rapidly that 

they face potentially running into CME 

position limits, which would force a 

Bitcoin Futures ETF to invest in nonfutures assets for bitcoin exposure and 

cause potential investor confusion and 

lack of certainty about what such 

Bitcoin Futures ETFs are actually 

holding to try to get exposure to bitcoin, 

not to mention completely changing the 

risk profile associated with such an 

ETF. While Bitcoin Futures ETFs 

represent a useful trading tool, they are 

clearly a sub-optimal structure for U.S. 

investors that are looking for long-term 

exposure to bitcoin that will, based on 

the calculations above, unnecessarily 

cost U.S. investors millions of dollars 

every year and the Exchange believes 

that any proposal to list and trade a Spot 

Bitcoin ETP should be reviewed by the 

Commission with this important 

investor protection context in mind. 

As discussed further below, the 

Commission’s primary test in 

determining whether to approve or 

disapprove a series of Commodity-Based 

Trust Shares, a product type which 

includes Spot Bitcoin ETPs, is whether 

the listing exchange has in place a 

comprehensive surveillance sharing 

agreement with a regulated market of 

significant size in the underlying asset. 

Previous disapproval orders have made 

clear that a regulated market of 

significant size is generally a futures 

and/or options market rather than the 

spot commodity markets, which are 

often unregulated.50 Leaving aside the 

analysis of that standard for now,51

Cboe believes it would be inconsistent 

to allow the listing and trading of 

Bitcoin Futures ETFs that hold 

primarily CME Bitcoin Futures while 

simultaneously disapproving Spot 

Bitcoin ETPs on the basis that the CME 

Bitcoin Futures market is not a 

regulated market of significant size. If 

the CME Bitcoin Futures market were 

not, in the opinion of the Commission, 

a regulated market of significant size, 

permitting Bitcoin Futures ETFs that 

trade on such market would seem to be 

inconsistent with the requirement under 

the Act of being designed to ‘‘prevent 

fraudulent and manipulative acts and 

practices.’’ 52 This is particularly true for 

the Trust, which will use the CF Bitcoin 

US Settlement Price (the ‘‘Reference 

Rate’’) as its price source to calculate its 

daily net asset value (‘‘NAV’’), with 

inputs from the same bitcoin trading 

platforms (‘‘Constituent Platform’’) and 

materially the same methodology as is 

used to price CME Bitcoin Futures.53

Hence, to qualify as part of the bitcoin 

pricing input for the Trust, as well as 

CME Bitcoin Futures, a Constituent 

Platform must: 

Have policies to ensure fair and 

transparent market conditions at all 

times and has processes in place to 

identify and impede illegal, unfair or 

manipulative trading practices, comply 

with applicable law and regulation, 

including, but not limited to capital 

markets regulations, money 

transmission regulations, client money 

custody regulations, know-your-client 

(KYC) regulations and anti-money 

laundering (AML) regulations. 

Hence, not only are the Constituent 

Exchanges’ pricing inputs and 

methodology (except for the calculation 

time) the same with respect to the Trust 

and CME Bitcoin Futures, but the 

Sponsor has represented that the Trust 

will qualify as an investment company 

under Accounting Standards Update 

2013–08, which is the same accounting 

standards for Bitcoin Futures ETFs 

under the 1940 Act. As such, the 

Sponsor will ensure that the Trust’s 

financial statements will be audited at 

least annually by an independent 

registered public accounting firm and as 

part of such audit, the auditor will be 

expected to perform procedures similar 

to those used for ETFs registered under 

the 1940 Act, including: 

(i) Applying the accounting and 

reporting guidance for investment 

companies; and 

(ii) testing and evaluating processes 

for determining bitcoin valuation and 

evaluate the reasonableness and 

consistency of assumptions, models, 

and calculations used, as well as the 

completeness, accuracy, and relevance 

of underlying data used. 

In addition, the Sponsor will facilitate 

the Trust’s compliance with the 

financial record keeping and reporting 

requirements under the Sarbanes-Oxley 

Act of 2002. 

Additional 1940 Act Considerations 54

In addition to the foregoing, the 

Sponsor has taken 1940 Act 

considerations into account in 

structuring the Trust’s operations in 

seeking ‘‘to protect investors and the 

public interest.’’ 

First, the Trust will use U.S. Bank as 

the Custodian, which qualifies as a 

‘‘custodian’’ under the 1940 Act and 

serves as the custodian for a significant 

number of ETFs registered under the 

1940 Act. Similar to an engagement for 

an ETF registered under the 1940 Act, 

the Sponsor has represented that U.S. 

Bank is expected to agree to exercise 

reasonable care, prudence, and 

diligence such as a person having 


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55To the extent the Commission may view 

differential treatment of Bitcoin Futures ETFs and 

Spot Bitcoin ETPs as warranted based on the 

Commission’s concerns about the custody of 

physical Bitcoin that a Spot Bitcoin ETP would 

hold (compared to cash-settled futures contracts), 

the Sponsor believes this concern is mitigated by 

such custodial arrangements, whether directly 

through the Custodian or through a subcustodial 

relationship overseen by the Custodian. 

56See Winklevoss Order at 37594. 

57See Fund Holdings Information available at 

https://www.proshares.com/funds/bito.html. 

58See Volume and Open Interest data available at 

https://www.cmegroup.com/markets/ 

cryptocurrencies/bitcoin/bitcoin.volume.html. 59See Winklevoss Order at 37594–37595. 

responsibility for the safekeeping of 

property of the Trust would exercise.55

Second, the Sponsor has represented 

that the Trust will be subject to the 

transparency requirements of Rule 6c– 

11 under the 1940 Act, which is 

commonly referred to as the ‘‘ETF 

Rule.’’ In particular, the Trust will 

disclose prominently on the Trust’s 

website on a daily basis, which shall be 

publicly accessible and free of charge: 

(i) The Trust’s portfolio holdings (i.e., 

bitcoin); 

(ii) NAV per share, market price, and 

premium or discount, each as of the end 

of the prior business day; 

(iii) a table showing the number of 

days the Trust’s shares traded at a 

premium or discount during the most 

recently completed calendar year and 

calendar quarters since that year (or the 

life of the Trust, if shorter); 

(iv) a line graph showing the Trust’s 

premiums or discounts for the most 

recently completed calendar year and 

the most recently completely calendar 

quarters since that year (or the life of the 

Trust, if shorter); 

(v) the Trust’s median bid-ask spread, 

expressed as a percentage rounded to 

the nearest hundredth, in the manner 

computed under Rule 6c–11(c)(1)(v); 

and 

(vi) if the Trust’s premium or discount 

is greater than 2% for more than seven 

consecutive trading days, a statement 

that the Trust’s premium or discount, as 

applicable, was greater than 2% and a 

discussion of the factors that are 

reasonably believed to have materially 

contributed to the premium or discount. 

In addition, the Sponsor has 

represented: (i) That it will adopt 

procedures to ensure there are no 

transactions with affiliated persons that 

would be prohibited by the Section 17 

of 1940 Act and the applicable rules and 

regulations thereunder; (ii) that the 

Trust will maintain a fidelity bond for 

the benefit of the Trust in the maximum 

amount required per Rule 17g–1 of the 

1940 Act; and (iii) the Sponsor or 

applicable service provider of the Trust 

will maintain the books and records of 

the Trust in satisfaction of the 

requirements of Section 31 of the 1940 

Act. 

Part of the analysis of the regulated 

market of significant size test is whether 

an underlying market is sufficiently 

large to support an ETP is whether 

trading in the ETP is likely to be the 

predominant influence on prices in the 

market of significant size.56 According 

to publicly available data, the largest 

Bitcoin Futures ETF represents 3,803 

contracts 57 of the total 9,625 contracts 

of open interest in December CME 

Bitcoin Futures 58 as of 12/2/21 (roughly 

40% of open interest). This seems to 

directly contradict the previously 

articulated standards by the 

Commission in the disapproval orders 

issued for Spot Bitcoin ETPs related to 

whether the trading in the ETP would 

be the predominant influence on prices 

in that market.59 As further discussed 

below, research indicates that the CME 

Bitcoin Futures market is a regulated 

market of significant size with a 

predominant influence on prices in 

USD-based trading in bitcoin futures 

and spot markets globally. 

Based on the foregoing, the Exchange 

and Sponsor believe that any objective 

review of the proposals to list Spot 

Bitcoin ETPs compared to the already 

listed and traded Bitcoin Futures ETFs 

would lead to the conclusion that Spot 

Bitcoin ETPs should be available to U.S. 

investors and, as such, this proposal and 

other comparable proposals to list and 

trade Spot Bitcoin ETPs should be 

approved by the Commission. Stated 

simply, U.S. investors stand to lose 

hundreds of millions of dollars from 

holding Bitcoin Futures ETFs, losses 

which could be prevented by the 

Commission approving Spot Bitcoin 

ETPs. This is particularly evident as 

demonstrated by the chart on the next 

page, which shows the dramatic 

underperformance of Bitcoin Futures as 

compared to the WisdomTree Bitcoin 

exchange traded product (‘‘WisdomTree 

Europe Bitcoin Fund’’) (BTCW) in 

Europe that holds spot bitcoin (not 

Bitcoin Futures) and is listed and traded 

on the Swiss Stock Exchange (‘‘SIX’’). 

BTCW also uses the Reference Rate 

(London Time) as its price source. 

BILLING CODE 8011–01–P 


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60According to CME, the CME CF Bitcoin 

Reference Rate aggregates the trade flow of major 

bitcoin spot exchanges during a specific calculation 

window into a once-a-day reference rate of the U.S. 

dollar price of bitcoin. Calculation rules are geared 

toward maximum transparency and real-time 

replicability in underlying spot markets, including 

Bitstamp, Coinbase, Gemini, itBit, and Kraken. For 

additional information, refer to https://

www.cmegroup.com/trading/cryptocurrencyindices/cf-bitcoin-reference-rate.html?redirect=/ 

trading/cf-bitcoin-reference-rate.html. 

Additionally, any concerns related to 

preventing fraudulent and manipulative 

acts and practices related to Spot 

Bitcoin ETPs would apply equally to the 

spot markets underlying the futures 

contracts held by a Bitcoin Futures ETF. 

The Sponsor has structured the Trust’s 

operations to operate as if certain 1940 

Act provisions apply, providing 

transparency and investor protections 

such that a distinction between Bitcoin 

Futures ETFs and Spot Bitcoin ETPs is 

unwarranted. To be clear, both the 

Exchange and Sponsor believe that the 

CME Bitcoin Futures market is a 

regulated market of significant size and 

that such manipulation concerns are 

mitigated, as described extensively 

below. After allowing the listing and 

trading of Bitcoin Futures ETFs that 

hold primarily CME Bitcoin Futures, 

however, the only consistent outcome 

would be approving Spot Bitcoin ETPs 

on the basis that the CME Bitcoin 

Futures market is a regulated market of 

significant size. Including in the 

analysis the significant and preventable 

losses to U.S. investors that comes with 

Bitcoin Futures ETFs, disapproving 

Spot Bitcoin ETPs seems even more 

arbitrary and capricious. Given the 

current landscape, approving this 

proposal (and others like it) and 

allowing Spot Bitcoin ETPs to be listed 

and traded alongside Bitcoin Futures 

ETFs would establish a consistent 

regulatory approach, provide U.S. 

investors with choice in product 

structures for bitcoin exposure, and 

offer flexibility in the means of gaining 

exposure to bitcoin through transparent, 

regulated, U.S. exchange-listed vehicles. 

Bitcoin Futures 

CME began offering trading in CME 

Bitcoin Futures in December 2017. Each 

contract represents five bitcoin and is 

based on the CME CF Bitcoin Reference 

Rate.60 The contracts trade and settle 

like other cash-settled commodity 

futures contracts. Nearly every 

measurable metric related to CME 

Bitcoin Futures has trended consistently 

up since launch and/or accelerated 

upward in the past year. For example, 

there was approximately $12 billion in 

trading in Bitcoin Futures in August 

2021 compared to $3.9 billion, $4.5b 

billion, and $9b billion in total trading 

in August 2017, August 2018, and 

August 2019, respectively. Bitcoin 

Futures traded over $500m and 

represented $1.5 billion in open interest 

compared to $115 million in December 

2019. This general upward trend in 

trading volume and open interest is 

captured in the following chart. (Source: 

CME, Bloomberg 8/31/21) 


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61A large open interest holder in Bitcoin Futures 

is an entity that holds at least 25 contracts, which 

is the equivalent of 125 bitcoin. At a price of 

approximately $46,996 per bitcoin on 8/31/21, more 

than 80 firms had outstanding positions of greater 

than $5.8 million in Bitcoin Futures. 

Similarly, the number of large open 

interest holders 61 has continued to 

increase even as the price of bitcoin has 

risen, as have the number of unique 

accounts trading Bitcoin Futures. 


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62See Amendment No. 1 to SR–CboeBZX–2021– 

051, filed December 9, 2021 (proposal to list and 

trade shares of the ARK 21Shares Bitcoin ETF) (the 

‘‘ARK 21Shares Proposal’’); Securities Exchange Act 

Release No. 91994 (May 25, 2021), 86 FR 29321 

(June 1, 2021) (proposal to list and trade shares of 

the Wise Origin Bitcoin Trust) (the ‘‘Wise Origin 

Bitcoin Trust Filing’’); Staff Memorandum re: 

Meeting with Representatives of Fidelity Digital 

Assets, et al. on September 8th, 2021 regarding the 

Wise Origin Bitcoin Trust Filing (the ‘‘Wise Origin 

Bitcoin Trust Presentation’’); and Hu, Y., Hou, Y. 

and Oxley, L. (2019). ‘‘What role do futures markets 

play in Bitcoin pricing? Causality, cointegration and 

price discovery from a time-varying perspective’’ 

(available at: https://www.ncbi.nlm.nih.gov/pmc/ 

articles/PMC7481826/). This academic research 

paper concludes that ‘‘There exist no episodes 

where the Bitcoin spot markets dominates the price 

discovery processes with regard to Bitcoin futures. 

This points to a conclusion that the price formation 

originates solely in the Bitcoin futures market. We 

can, therefore, conclude that the Bitcoin futures 

markets dominate the dynamic price discovery 

process based upon time-varying information share 

measures. Overall, price discovery seems to occur 

in the Bitcoin futures markets rather than the 

underlying spot market based upon a time-varying 

perspective.’’ 

63See Exchange Rule 14.11(f). 64Commodity-Based Trust Shares, as described in 

Exchange Rule 14.11(e)(4), are a type of Trust 

Issued Receipt. 

65As the Exchange has stated in a number of 

other public documents, it continues to believe that 

bitcoin is resistant to price manipulation and that 

‘‘other means to prevent fraudulent and 

manipulative acts and practices’’ exist to justify 

dispensing with the requisite surveillance sharing 

agreement. The geographically diverse and 

continuous nature of bitcoin trading render it 

difficult and prohibitively costly to manipulate the 

price of bitcoin. The fragmentation across bitcoin 

platforms, the relatively slow speed of transactions, 

and the capital necessary to maintain a significant 

presence on each trading platform make 

manipulation of bitcoin prices through continuous 

trading activity challenging. To the extent that there 

are bitcoin exchanges engaged in or allowing wash 

trading or other activity intended to manipulate the 

price of bitcoin on other markets, such pricing does 

not normally impact prices on other exchange 

because participants will generally ignore markets 

with quotes that they deem non-executable. 

Moreover, the linkage between the bitcoin markets 

and the presence of arbitrageurs in those markets 

means that the manipulation of the price of bitcoin 

price on any single venue would require 

manipulation of the global bitcoin price in order to 

be effective. Arbitrageurs must have funds 

distributed across multiple trading platforms in 

order to take advantage of temporary price 

dislocations, thereby making it unlikely that there 

will be strong concentration of funds on any 

particular bitcoin exchange or OTC platform. As a 

result, the potential for manipulation on a trading 

platform would require overcoming the liquidity 

supply of such arbitrageurs who are effectively 

eliminating any cross-market pricing differences. 

66As previously articulated by the Commission, 

‘‘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 were to occur.’’ The 

Commission has emphasized that it is essential for 

an exchange listing a derivative securities product 

to enter into a surveillance-sharing agreement with 

markets trading underlying securities 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. The hallmarks of a surveillancesharing agreement are that the agreement provides 

for the sharing of information about market trading 

Continued 

BILLING CODE 8011–01–C 

The Sponsor further believes that 

academic research corroborates this 

overall trend and supports the thesis 

that bitcoin futures, and more 

particularly CME Bitcoin Futures given 

the recent significant growth in that 

market, is a predominant influence in 

bitcoin price formation.62

Section 6(b)(5) and the Applicable 

Standards 

The Commission has approved 

numerous series of Trust Issued 

Receipts,63 including Commodity-Based 

Trust Shares,64 to be listed on U.S. 

national securities exchanges. In order 

for any proposed rule change from an 

exchange to be approved, the 

Commission must determine that, 

among other things, the proposal is 

consistent with the requirements of 

Section 6(b)(5) of the Act, specifically 

including: (i) The requirement that a 

national securities exchange’s rules are 

designed to prevent fraudulent and 

manipulative acts and practices; 65 and 

(ii) the requirement that an exchange 

proposal be designed, in general, to 

protect investors and the public interest. 

The Exchange believes that this 

proposal is consistent with the 

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

Act and that this filing sufficiently 

demonstrates that the CME Bitcoin 

Futures market represents a regulated 

market of significant size and that, on 

the whole, the manipulation concerns 

previously articulated by the 

Commission are sufficiently addressed 

to warrant approval. Specifically, the 

Exchange believes that the significant 

increase in trading volume in CME 

Bitcoin Futures and the growing body of 

evidence that the CME Bitcoin Futures 

market represents a regulated market of 

significant size as such a market has 

previously been described by the 

Commission, the growth of liquidity at 

the inside in the spot market for bitcoin, 

and certain features of the Shares and 

the Reference Rate (as defined below) 

mitigate potential manipulation 

concerns to the point that it is 

consistent with the requirements of 

Section 6(b)(5) of the Act and therefore 

provides a basis for the Commission to 

approve this proposal. 

(i) Designed To Prevent Fraudulent and 

Manipulative Acts and Practices 

In order to meet this standard in a 

proposal to list and trade a series of 

Commodity-Based Trust Shares, the 

Commission requires that an exchange 

demonstrate that there is a 

comprehensive surveillance-sharing 

agreement in place 66 with a regulated 


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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.’’ The Commission has 

historically held that joint membership in the 

Intermarket Surveillance Group (‘‘ISG’’) constitutes 

such a surveillance sharing agreement. See Wilshire 

Phoenix Disapproval. 

67As described above, the precedent makes clear 

that the spot market for a series of CommodityBased Trust Shares need not be ‘‘regulated’’ in order 

to be consistent with the requirement under the Act 

that the exchange proposal be designed to ‘‘prevent 

fraudulent and manipulative acts and practices,’’ 

and in fact that it’s been the common historical 

practice of the Commission to rely on such 

derivatives markets as the regulated market of 

significant size because such spot commodities 

markets are largely unregulated. Specifically, the 

precedent includes language from numerous 

approval orders for which the underlying futures 

markets formed the basis for approving series of 

ETPs that hold commodities including physical 

metals, including gold, silver, palladium, platinum, 

and precious metals more broadly. The Commission 

also provides that ‘‘when the spot market is 

unregulated—the requirement of preventing 

fraudulent and manipulative acts may possibly be 

satisfied by showing that the ETP listing market has 

entered into a surveillance-sharing agreement with 

a regulated market of significant size in derivatives 

related to the underlying asset.’’ The precedent 

indicates that common historical practice of the 

Commission is to rely on such derivatives markets 

as the regulated market of significant size because 

such spot commodities markets are largely 

unregulated. See supra note 10. 

68For a list of the current members and affiliate 

members of ISG, see www.isgportal.com. 69See Wilshire Phoenix Disapproval. 70See Winklevoss Order at 37580. The 

Commission has also specifically noted that it ‘‘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. 

Id. at 37582. 

71See ARK 21Shares Proposal and the Wise 

Origin Bitcoin Trust Presentation for additional 

analysis on this point. 

72As further described below, the Reference Rate 

for the Fund is based on materially the same 

methodology (except calculation time) as the 

Administrator’s BRR, which is the rate on which 

bitcoin futures contracts are cash-settled in U.S. 

dollars at the CME. 

73See supra footnote 44 for an example of an ETP 

trading close to NAV, which is just one example of 

bitcoin ETPs trading in other global markets today 

that trade close to NAV. 

74These 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. 

market of significant size.67 Both the 

Exchange and CME are members of 

ISG.68 The only remaining issue to be 

addressed is whether the CME Bitcoin 

Futures market constitutes a market of 

significant size, which both the 

Exchange and the Sponsor believe that 

it does. 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 manipulate the 

ETP, so that a surveillance-sharing 

agreement would assist the listing 

exchange 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.69

The Commission has also recognized 

that the ‘‘regulated market of significant 

size’’ standard is not the only means for 

satisfying Section 6(b)(5) of the Act, 

specifically providing that a listing 

exchange could demonstrate that ‘‘other 

means to prevent fraudulent and 

manipulative acts and practices’’ are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement.70

(a) Manipulation of the ETP 

The significant growth in CME 

Bitcoin Futures across each of trading 

volumes, open interest, large open 

interest holders, and total market 

participants over the last two years are 

reflective of that market’s growing 

influence on the spot price.71 Where 

CME Bitcoin Futures act as a 

predominant influence on the price in 

the spot market, such that a potential 

manipulator of the bitcoin spot market 

(beyond just the constituents of the 

Reference Rate 72) would have to 

participate in the CME Bitcoin Futures 

market, it follows that a potential 

manipulator of the Shares would 

similarly have to transact in the CME 

Bitcoin Futures market because the 

Reference Rate is based on spot prices. 

Further, the Trust only allows for inkind creation and redemption, which, as 

further described below, reduces the 

potential for manipulation of the Shares 

through manipulation of the Reference 

Rate or any of its individual 

constituents, again emphasizing that a 

potential manipulator of the Shares 

would have to manipulate the entirety 

of the bitcoin spot market, of which the 

CME Bitcoin Futures market appears to 

be a predominant influence. As such, 

the Exchange believes that part (a) of the 

significant market test outlined above is 

satisfied and that common membership 

in ISG between the Exchange and CME 

would assist the listing exchange in 

detecting and deterring misconduct in 

the Shares. 

(b) Predominant Influence on Prices in 

Spot and Bitcoin Futures 

The Exchange and Sponsor also 

believe that trading in the Shares would 

not be the predominant force on prices 

in the CME Bitcoin Futures market (or 

spot market) for a number of reasons, 

including the significant volume in the 

CME Bitcoin Futures market, the size of 

bitcoin’s market cap, and the significant 

liquidity available in the spot market. 

Moreover, the Shares should trade close 

to NAV given that market participants 

would arbitrage any significant price 

deviations between the price of the 

Shares and prices in the spot market.73

In addition to the CME Bitcoin Futures 

market data points cited above, the spot 

market for bitcoin is also very liquid. 

According to data from CoinRoutes from 

February 2021, the cost to buy or sell $5 

million worth of bitcoin averages 

roughly 10 basis points with a market 

impact of 30 basis points.74 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%. 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. 

As such, the combination of CME 

Bitcoin Futures acting as a predominant 

influence on price discovery, the overall 

size of the bitcoin market, and the 

ability for market participants, 

including authorized participants 

creating and redeeming in-kind 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 

CME Bitcoin Futures markets, satisfying 

part (b) of the test outlined above. 

(c) Other Means To Prevent Fraudulent 

and Manipulative Acts and Practices 

As noted above, the Commission also 

permits a listing exchange to 

demonstrate that ‘‘other means to 

prevent fraudulent and manipulative 

acts and practices’’ are sufficient to 

justify dispensing with the requisite 

surveillance-sharing agreement. The 

Exchange and Sponsor believe that such 

conditions are present. Specifically, the 

significant liquidity in the spot market 

and the impact of market orders on the 

overall price of bitcoin mean that 

attempting to move the price of bitcoin 

is costly and has grown more expensive 

over the past year. In January 2020, for 

example, the cost to buy or sell $5 

million worth of bitcoin averaged 

roughly 30 basis points (compared to 10 


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75These 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. 

76 15 U.S.C. 80a–1. However, as previously stated, 

the Trust has undertaken to comply with certain 

provisions of the Investment Company Act of 1940. 

77The Reference Rate is calculated as of 4 p.m. 

Eastern Time, whereas the BRR is calculated as of 

4 p.m. London Time. 

78A ‘‘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. Eastern time on a 

Constituent Bitcoin Exchange in the BTC/USD pair 

that is reported and disseminated by a Constituent 

Bitcoin Exchange through its publicly available API 

and observed by the Benchmark Administrator, CF 

Benchmarks Ltd. 

basis points in 2/2021) with a market 

impact of 50 basis points (compared to 

30 basis points in 2/2021).75 For a $10 

million market order, the cost to buy or 

sell was roughly 50 basis points 

(compared to 20 basis points in 2/2021) 

with a market impact of 80 basis points 

(compared to 50 basis points in 2/2021). 

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 the 

overall impact in spot price. 

(ii) Designed To Protect Investors and 

the Public Interest 

The Exchange believes that the 

proposal is designed to protect investors 

and the public interest. Over the past 

1.5 years, U.S. investor exposure to 

bitcoin through OTC Bitcoin Funds has 

grown into the tens of billions of dollars 

and more than a billion dollars of 

exposure through Bitcoin Futures ETFs. 

With that growth, so too has grown the 

quantifiable investor protection issues 

to U.S. investors through roll costs for 

Bitcoin Futures ETFs and premium/ 

discount volatility and management fees 

for OTC Bitcoin Funds. The Exchange 

believes that the concerns related to the 

prevention of fraudulent and 

manipulative acts and practices have 

been sufficiently addressed to be 

consistent with the Act. As such, the 

Exchange believes that approving this 

proposal (and comparable proposals) 

provides the Commission with the 

opportunity to allow U.S. investors with 

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 and 

costs associated with investing in 

Bitcoin Futures ETFs and operating 

companies that are imperfect proxies for 

bitcoin exposure; and (iv) providing an 

alternative for investors to selfcustodying spot bitcoin. 

WisdomTree Bitcoin Trust 

Delaware Trust Company is the 

trustee (‘‘Trustee’’). U.S. Bancorp Fund 

Services, LLC dba U.S. Bank Global 

Fund Services will be the administrator 

(‘‘Administrator’’) and transfer agent 

(‘‘Transfer Agent’’), with U.S. Bank, 

N.A. serving as Custodian. Foreside 

Fund Services LLC will be the 

marketing agent (‘‘Marketing Agent’’) in 

connection with the creation and 

redemption of ‘‘Baskets’’ of Shares. 

According to the Registration 

Statement, each Share will represent a 

fractional undivided beneficial interest 

in and ownership of the Trust. The 

Trust’s assets will consist of bitcoin 

held by the Custodian on behalf of the 

Trust. The Trust generally does not 

intend to hold cash or cash equivalents. 

However, there may be situations where 

the Trust will unexpectedly hold cash 

on a temporary basis. 

According to the Registration 

Statement, the Trust is neither an 

investment company registered under 

the Investment Company Act of 1940, as 

amended,76 nor a commodity pool for 

purposes of the Commodity Exchange 

Act (‘‘CEA’’), and neither the Trust nor 

the Sponsor is subject to regulation as 

a commodity pool operator or a 

commodity trading adviser in 

connection with the Shares. 

When the Trust sells or redeems its 

Shares, it will do so in ‘‘in-kind’’ 

transactions in blocks of 50,000 Shares 

(a ‘‘Creation Basket’’) at the Trust’s 

NAV. Authorized participants will 

deliver, or facilitate the delivery of, 

bitcoin to the Trust’s account with the 

Custodian in exchange for Shares when 

they purchase Shares, and the Trust, 

through the Custodian, will deliver 

bitcoin to such authorized participants 

when they redeem Shares with the 

Trust. Authorized participants may then 

offer Shares to the public at prices that 

depend on various factors, including the 

supply and demand for Shares, the 

value of the Trust’s assets, and market 

conditions at the time of a transaction. 

Shareholders who buy or sell Shares 

during the day from their broker may do 

so at a premium or discount relative to 

the NAV of the Shares of the Trust. 

Investment Objective 

According to the Registration 

Statement and as further described 

below, the investment objective of the 

Trust is to gain exposure to the price of 

bitcoin, less expenses and liabilities of 

the Trust’s operation. In seeking to 

achieve its investment objective, the 

Trust will hold bitcoin and value its 

Shares daily based on the value of 

bitcoin as reflected by the CF Bitcoin US 

Settlement Price (the ‘‘Reference Rate’’), 

which is an independently calculated 

value based on an aggregation of 

executed trade flow of major bitcoin 

spot exchanges. The Trust will process 

all creations and redemptions in-kind in 

transactions with authorized 

participants. The Trust is not actively 

managed. 

The Reference Rate 

As described in the Registration 

Statement, the Fund will use the 

Reference Rate to calculate the Trust’s 

NAV. The Reference Rate is not 

affiliated with the Sponsor and was 

created and is administered by CF 

Benchmarks Ltd. (the ‘‘Benchmark 

Administrator’’), an independent entity, 

to facilitate financial products based on 

bitcoin. The Reference Rate is designed 

based on the IOSCO Principals for 

Financial Benchmarks and serves as a 

once-a-day benchmark rate of the U.S. 

dollar price of bitcoin (USD/BTC), 

calculated as of 4 p.m. Eastern time. The 

Reference Rate is based on materially 

the same methodology (except 

calculation time) 77 as the Benchmark 

Administrator’s CME CF Bitcoin 

Reference Rate (‘‘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 

at the CME. The Reference Rate 

aggregates the trade flow of several 

bitcoin exchanges, during an 

observation window between 3:00 p.m. 

and 4:00 p.m. Eastern time into the U.S. 

dollar price of one bitcoin at 4:00 p.m. 

Eastern time. The current constituent 

bitcoin exchanges of the Reference Rate 

are Bitstamp, Coinbase, Gemini, itBit 

and Kraken (the ‘‘Constituent Bitcoin 

Exchanges’’). 

The Reference Rate is calculated 

based on the ‘‘Relevant Transactions’’ 78

of all of its Constituent Bitcoin 

Exchanges, as follows: 

• All Relevant Transactions are added 

to a joint list, recording the time of 

execution, trade price and size for each 

transaction. 

• The list is partitioned by timestamp 

into 12 equally-sized time intervals of 5 

(five) minute length. 

• For each partition separately, the 

volume-weighted median trade price is 

calculated from the trade prices and 

sizes of all Relevant Transactions, i.e., 

across all Constituent Bitcoin 

Exchanges. A volume-weighted median 

differs from a standard median in that 

a weighting factor, in this case trade 

size, is factored into the calculation. 


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79For purposes of Rule 14.11(e)(4), the term 

commodity takes on the definition of the term as 

provided in the Commodity Exchange Act. As noted 

above, the CFTC has opined that bitcoin is a 

commodity as defined in Section 1a(9) of the 

Commodity Exchange Act. See Coinflip. 

• The Reference Rate is then 

determined by the arithmetic mean of 

the volume-weighted medians of all 

partitions. 

By employing the foregoing steps, the 

Reference Rate thereby seeks to ensure 

that transactions in bitcoin conducted at 

outlying prices do not have an undue 

effect on the value of a specific 

partition, large trades or clusters of 

trades transacted over a short period of 

time will not have an undue influence 

on the index level, and the effect of 

large trades at prices that deviate from 

the prevailing price are mitigated from 

having an undue influence on the 

benchmark level. In addition, the 

Sponsor notes that an oversight function 

is implemented by the Benchmark 

Administrator in seeking to ensure that 

the Reference Rate is administered 

through codified policies for Reference 

Rate integrity. 

Availability of Information 

In addition to the price transparency 

of the Reference Rate, the Trust will 

provide information regarding the 

Trust’s bitcoin holdings as well as 

additional data regarding the Trust. The 

Trust will provide an Intraday 

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 Regular Trading Hours (9:30 

a.m. to 4:00 p.m. E.T.). The IIV will be 

calculated by using the prior day’s 

closing NAV per Share as a base and 

updating that value during Regular 

Trading Hours to reflect changes in the 

value of the Trust’s bitcoin holdings 

during the trading day. 

The IIV disseminated during Regular 

Trading Hours should not be viewed as 

an actual real-time update of the NAV, 

which will be calculated only once at 

the end of each trading day. The IIV will 

be widely disseminated on a per Share 

basis every 15 seconds during the 

Exchange’s Regular Trading Hours by 

one or more major market data vendors. 

In addition, the IIV will be available 

through on-line information services. 

As noted above, the website for the 

Trust, which will be publicly accessible 

at no charge, will contain information 

consistent with the disclosure 

requirements of Rule 6c–11 under the 

1940 Act. The price of bitcoin will be 

made available by one or more major 

market data vendors, updated at least 

every 15 seconds during Regular 

Trading Hours. Information about the 

Reference Rate, including key elements 

of how the Reference Rate is calculated, 

will be publicly available at https://

www.cfbenchmarks.com. 

The NAV for the Trust will be 

calculated by the Administrator once a 

day and will be disseminated daily to 

all market participants at the same time. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the Consolidated Tape Association 

(‘‘CTA’’). 

Quotation and last sale information 

for bitcoin is widely disseminated 

through a variety of major market data 

vendors, including Bloomberg and 

Reuters, as well as the Reference Rate. 

Information relating to trading, 

including price and volume 

information, in bitcoin is available from 

major market data vendors and from the 

exchanges on which bitcoin are traded. 

Depth of book information is also 

available from bitcoin exchanges. The 

normal trading hours for bitcoin 

exchanges are 24 hours per day, 365 

days per year. 

Net Asset Value 

NAV means the total assets of the 

Trust including, but not limited to, all 

bitcoin cash or other assets, less total 

liabilities of the Trust, each determined 

on the basis of generally accepted 

accounting principles. In determining 

the Trust’s NAV, the administrator 

values the bitcoin held by the Trust 

based on the price set by the Reference 

Rate as of 4:00 p.m. Eastern Time. The 

administrator will determine the NAV 

of the Trust on each day that the 

Exchange is open for regular trading. 

The NAV for a normal trading day will 

be released after 4:00 p.m. Eastern Time. 

However, NAVs are not officially struck 

until later in the day (often by 5:30 p.m. 

Eastern Time and almost always by 8:00 

p.m. Eastern Time). The pause between 

4:00 p.m. Eastern Time and 5:30 p.m. 

Eastern Time (or later) provides an 

opportunity for the Trust, Benchmark 

Administrator or administrator to 

detect, flag, investigate, and correct 

unusual pricing should it occur. The 

Sponsor anticipates that the Reference 

Rate will be reflective of a reasonable 

valuation of the average spot price of 

bitcoin. However, in the event the 

Reference Rate was not available or 

determined by the Sponsor to not be 

reliable, the Sponsor would ‘‘fair value’’ 

the Trust’s bitcoin holdings. The 

Sponsor does not anticipate that the 

need to ‘‘fair value’’ bitcoin will be a 

common occurrence. The Sponsor will 

publish the NAV and NAV per Share at 

www.wisdomtree.com as soon as 

practicable after their determination and 

availability. 

Creation and Redemption of Shares 

According to the Registration 

Statement, on any business day, an 

authorized participant may place an 

order to create one or more baskets. 

Purchase orders must be placed by 4:00 

p.m. Eastern Time, or the close of 

regular trading on the Exchange, 

whichever is earlier. The day on which 

an order is received is considered the 

purchase order date. The total deposit of 

bitcoin required is an amount of bitcoin 

that is in the same proportion to the 

total assets of the Trust, net of accrued 

expenses and other liabilities, on the 

date the order to purchase is properly 

received, as the number of Shares to be 

created under the purchase order is in 

proportion to the total number of Shares 

outstanding on the date the order is 

received. Prior to market open each day, 

the Sponsor will publish the amount of 

bitcoin that will be required in exchange 

for each creation order. The 

Administrator determines the required 

deposit for a given day by dividing the 

number of bitcoin held by the Trust as 

of the opening of business on that 

business day, adjusted for the amount of 

bitcoin constituting estimated accrued 

but unpaid fees and expenses of the 

Trust as of the opening of business on 

that business day, by the quotient of the 

number of Shares outstanding at the 

opening of business divided by the 

aggregation of shares (i.e., 50,000) 

associated with a creation unit. The 

procedures by which an authorized 

participant can redeem one or more 

Creation Baskets mirror the procedures 

for the creation of Creation Baskets. 

Rule 14.11(e)(4)—Commodity-Based 

Trust Shares 

The Shares will be subject to BZX 

Rule 14.11(e)(4), which sets forth the 

initial and continued listing criteria 

applicable to Commodity-Based Trust 

Shares. The Exchange will obtain a 

representation that the Trust’s NAV will 

be calculated daily and that these values 

and information about the assets of the 

Trust will be made available to all 

market participants at the same time. 

The Exchange notes that, as defined in 

Rule 14.11(e)(4)(C)(i), the Shares will be: 

(a) Issued by a trust that holds a 

specified commodity 79 deposited with 

the trust; (b) issued by such trust in a 

specified aggregate minimum number in 

return for a deposit of a quantity of the 

underlying commodity; and (c) when 


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80For a list of the current members and affiliate 

members of ISG, see www.isgportal.com. 

81Regular Trading Hours is the time between 9:30 

a.m. and 4:00 p.m. Eastern Time. 

82 15 U.S.C. 78f. 

aggregated in the same specified 

minimum number, may be redeemed at 

a holder’s request by such trust which 

will deliver to the redeeming holder the 

quantity of the underlying commodity. 

Upon termination of the Trust, the 

Shares will be removed from listing. 

The Trustee, Delaware Trust Company, 

is a trust company having substantial 

capital and surplus and the experience 

and facilities for handling corporate 

trust business, as required under Rule 

14.11(e)(4)(E)(iv)(a) and that no change 

will be made to the trustee without prior 

notice to and approval of the Exchange. 

The Exchange also notes that, pursuant 

to Rule 14.11(e)(4)(F), neither the 

Exchange nor any agent of the Exchange 

shall have any liability for damages, 

claims, losses or expenses caused by 

any errors, omissions or delays in 

calculating or disseminating any 

underlying commodity value, the 

current value of the underlying 

commodity required to be deposited to 

the Trust in connection with issuance of 

Commodity-Based Trust Shares; 

resulting from any negligent act or 

omission by the Exchange, or any agent 

of the Exchange, or any act, condition or 

cause beyond the reasonable control of 

the Exchange, its agent, including, but 

not limited to, an act of God; fire; flood; 

extraordinary weather conditions; war; 

insurrection; riot; strike; accident; 

action of government; communications 

or power failure; equipment or software 

malfunction; or any error, omission or 

delay in the reports of transactions in an 

underlying commodity. Finally, as 

required in Rule 14.11(e)(4)(G), the 

Exchange notes that any registered 

market maker (‘‘Market Maker’’) in the 

Shares must file with the Exchange in 

a manner prescribed by the Exchange 

and keep current a list identifying all 

accounts for trading in an underlying 

commodity, related commodity futures 

or options on commodity futures, or any 

other related commodity derivatives, 

which the registered Market Maker may 

have or over which it may exercise 

investment discretion. No registered 

Market Maker shall trade in an 

underlying commodity, related 

commodity futures or options on 

commodity futures, or any other related 

commodity derivatives, in an account in 

which a registered Market Maker, 

directly or indirectly, controls trading 

activities, or has a direct interest in the 

profits or losses thereof, which has not 

been reported to the Exchange as 

required by this Rule. In addition to the 

existing obligations under Exchange 

rules regarding the production of books 

and records (see, e.g., Rule 4.2), the 

registered Market Maker in CommodityBased Trust Shares shall make available 

to the Exchange such books, records or 

other information pertaining to 

transactions by such entity or registered 

or non-registered employee affiliated 

with such entity for its or their own 

accounts for trading the underlying 

physical commodity, related commodity 

futures or options on commodity 

futures, or any other related commodity 

derivatives, as may be requested by the 

Exchange. 

Trading Halts 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares. 

The Exchange will halt trading in the 

Shares under the conditions specified in 

BZX Rule 11.18. Trading may be halted 

because of market conditions or for 

reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable. These may include: (1) The 

extent to which trading is not occurring 

in the bitcoin underlying the Shares; or 

(2) whether other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. Trading in the 

Shares also will be subject to Rule 

14.11(e)(4)(E)(ii), which sets forth 

circumstances under which trading in 

the Shares may be halted. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. BZX will allow trading 

in the Shares during all trading sessions 

on the Exchange. The Exchange has 

appropriate rules to facilitate 

transactions in the Shares during all 

trading sessions. As provided in BZX 

Rule 11.11(a) the minimum price 

variation for quoting and entry of orders 

in securities traded on the Exchange is 

$0.01 where the price is greater than 

$1.00 per share or $0.0001 where the 

price is less than $1.00 per share. 

Surveillance 

The Exchange believes that its 

surveillance procedures are adequate to 

properly monitor the trading of the 

Shares on the Exchange during all 

trading sessions and to deter and detect 

violations of Exchange rules and the 

applicable federal securities laws. 

Trading of the Shares through the 

Exchange will be subject to the 

Exchange’s surveillance procedures for 

derivative products, including 

Commodity-Based Trust Shares. The 

issuer has represented to the Exchange 

that it will advise the Exchange of any 

failure by the Trust or the Shares to 

comply with the continued listing 

requirements, and, pursuant to its 

obligations under Section 19(g)(1) of the 

Exchange Act, the Exchange will surveil 

for compliance with the continued 

listing requirements. If the Trust or the 

Shares are not in compliance with the 

applicable listing requirements, the 

Exchange will commence delisting 

procedures under Exchange Rule 14.12. 

The Exchange may obtain information 

regarding trading in the Shares and CME 

Bitcoin Futures via ISG, from other 

exchanges who are members or affiliates 

of the ISG, or with which the Exchange 

has entered into a comprehensive 

surveillance sharing agreement.80

Information Circular 

Prior to the commencement of 

trading, the Exchange will inform its 

members in an Information Circular of 

the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Circular 

will discuss the following: (i) The 

procedures for the creation and 

redemption of Baskets (and that the 

Shares are not individually redeemable); 

(ii) BZX Rule 3.7, which imposes 

suitability obligations on Exchange 

members with respect to recommending 

transactions in the Shares to customers; 

(iii) how information regarding the IIV 

and the Trust’s NAV are disseminated; 

(iv) the risks involved in trading the 

Shares outside of Regular Trading 

Hours 81 when an updated IIV will not 

be calculated or publicly disseminated; 

(v) the requirement that members 

deliver a prospectus to investors 

purchasing newly issued Shares prior to 

or concurrently with the confirmation of 

a transaction; and (vi) trading 

information. 

In addition, the Information Circular 

will advise members, prior to the 

commencement of trading, of the 

prospectus delivery requirements 

applicable to the Shares. Members 

purchasing the Shares for resale to 

investors will deliver a prospectus to 

such investors. The Information Circular 

will also discuss any exemptive, noaction and interpretive relief granted by 

the Commission from any rules under 

the Act. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with Section 6(b) 

of the Act 82 in general and Section 


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83 15 U.S.C. 78f(b)(5). 

84See Exchange Rule 14.11(f). 

85Commodity-Based Trust Shares, as described in 

Exchange Rule 14.11(e)(4), are a type of Trust 

Issued Receipt. 

86As the Exchange has stated in a number of 

other public documents, it continues to believe that 

bitcoin is resistant to price manipulation and that 

‘‘other means to prevent fraudulent and 

manipulative acts and practices’’ exist to justify 

dispensing with the requisite surveillance sharing 

agreement. The geographically diverse and 

continuous nature of bitcoin trading render it 

difficult and prohibitively costly to manipulate the 

price of bitcoin. The fragmentation across bitcoin 

platforms, the relatively slow speed of transactions, 

and the capital necessary to maintain a significant 

presence on each trading platform make 

manipulation of bitcoin prices through continuous 

trading activity challenging. To the extent that there 

are bitcoin exchanges engaged in or allowing wash 

trading or other activity intended to manipulate the 

price of bitcoin on other markets, such pricing does 

not normally impact prices on other exchanges 

because participants will generally ignore markets 

with quotes that they deem non-executable. 

Moreover, the linkage between the bitcoin markets 

and the presence of arbitrageurs in those markets 

means that the manipulation of the price of bitcoin 

price on any single venue would require 

manipulation of the global bitcoin price in order to 

be effective. Arbitrageurs must have funds 

distributed across multiple trading platforms in 

order to take advantage of temporary price 

dislocations, thereby making it unlikely that there 

will be strong concentration of funds on any 

particular bitcoin exchange or OTC platform. As a 

result, the potential for manipulation on a trading 

platform would require overcoming the liquidity 

supply of such arbitrageurs who are effectively 

eliminating any cross-market pricing differences. 

87As previously articulated by the Commission, 

‘‘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 were to occur.’’ The 

Commission has emphasized that it is essential for 

an exchange listing a derivative securities product 

to enter into a surveillance-sharing agreement with 

markets trading underlying securities 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. The hallmarks of a surveillancesharing 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.’’ The Commission has 

historically held that joint membership in ISG 

constitutes such a surveillance sharing agreement. 

See Wilshire Phoenix Disapproval. 

88For a list of the current members and affiliate 

members of ISG, see www.isgportal.com. 

89See Wilshire Phoenix Disapproval. 

90See Winklevoss Order at 37580. The 

Commission has also specifically noted that it ‘‘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.’’ 

Id. at 37582. 

6(b)(5) of the Act 83 in particular in that 

it is 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 

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. 

The Commission has approved 

numerous series of Trust Issued 

Receipts,84 including Commodity-Based 

Trust Shares,85 to be listed on U.S. 

national securities exchanges. In order 

for any proposed rule change from an 

exchange to be approved, the 

Commission must determine that, 

among other things, the proposal is 

consistent with the requirements of 

Section 6(b)(5) of the Act, specifically 

including: (i) The requirement that a 

national securities exchange’s rules are 

designed to prevent fraudulent and 

manipulative acts and practices; 86 and 

(ii) the requirement that an exchange 

proposal be designed, in general, to 

protect investors and the public interest. 

The Exchange believes that the 

proposal is, in particular, designed to 

protect investors and the public interest. 

Over the past 1.5 years, U.S. investor 

exposure to bitcoin through OTC 

Bitcoin Funds has grown into the tens 

of billions of dollars. With that growth, 

so too has grown the potential risk to 

U.S. investors. Premium and discount 

volatility, high fees, insufficient 

disclosures, and technical hurdles are 

putting U.S. investor money at risk on 

a daily basis that could potentially be 

eliminated through access to a bitcoin 

ETP. The Exchange understands the 

Commission’s previous focus on 

potential manipulation of a bitcoin ETP 

in prior disapproval orders, but now 

believes that such concerns have been 

sufficiently mitigated and that the 

growing and quantifiable investor 

protection concerns should be a central 

consideration as the Commission 

reviews this proposal. As such, the 

Exchange believes that this proposal 

acts to limit the risk to U.S. investors 

that are increasingly seeking exposure to 

bitcoin by providing direct, 1-for-1 

exposure to bitcoin in a regulated, 

transparent, exchange-traded vehicle, 

specifically by: (i) Reducing premium 

volatility; (ii) reducing management fees 

through meaningful competition; (iii) 

reducing risks associated with investing 

in operating companies that are 

imperfect proxies for bitcoin exposure; 

and (iv) providing an alternative to 

custodying spot bitcoin. 

The Exchange also believes that this 

proposal is consistent with the 

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

Act and that it has sufficiently 

demonstrated that, on the whole, the 

manipulation concerns previously 

articulated by the Commission are 

sufficiently addressed to warrant 

approval. Specifically, the Exchange 

believes that the significant increase in 

trading volume in Bitcoin Futures, the 

growth of liquidity at the inside in the 

spot market for bitcoin, and certain 

features of the Shares and the Reference 

Rate mitigate potential manipulation 

concerns to the point that it is 

consistent with the requirements of 

Section 6(b)(5) of the Act and therefore 

provides a basis for the Commission to 

approve this proposal. 

(i) Designed To Prevent Fraudulent and 

Manipulative Acts and Practices 

In order to meet this standard in a 

proposal to list and trade a series of 

Commodity-Based Trust Shares, the 

Commission requires that an exchange 

demonstrate that there is a 

comprehensive surveillance-sharing 

agreement in place 87 with a regulated 

market of significant size. Both the 

Exchange and CME are members of 

ISG.88 The only remaining issue to be 

addressed is whether the CME Bitcoin 

Futures market constitutes a market of 

significant size, which both the 

Exchange and the Sponsor believe that 

it does. 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 manipulate the 

ETP, so that a surveillance-sharing 

agreement would assist the listing 

exchange 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.89

The Commission has also recognized 

that the ‘‘regulated market of significant 

size’’ standard is not the only means for 

satisfying Section 6(b)(5) of the act, 

specifically providing that a listing 

exchange could demonstrate that ‘‘other 

means to prevent fraudulent and 

manipulative acts and practices’’ are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement.90

(a) Manipulation of the ETP 

The significant growth in CME 

Bitcoin Futures across each of trading 

volumes, open interest, large open 

interest holders, and total market 

participants since the Wilshire Phoenix 


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91As noted above, the Constituent Bitcoin 

Exchanges are Bitstamp, Coinbase, Gemini, itBit 

and Kraken. 

92These 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. 

93These 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. 

94While the Reference Rate will not be 

particularly important for the creation and 

redemption process, it will be used for calculating 

fees. 

Disapproval was issued are reflective of 

that market’s growing influence on the 

spot price, which according to the 

academic research cited above, was 

already leading the spot price in 2018 

and 2019. Where Bitcoin Futures act as 

a predominant influence on the price in 

the spot market such that a potential 

manipulator of the bitcoin spot market 

(beyond just the constituents of the 

Reference Rate 91) would have to 

participate in the Bitcoin Futures 

market, it follows that a potential 

manipulator of the Shares would 

similarly have to transact in the Bitcoin 

Futures market because the Reference 

Rate is based on spot prices. Further, the 

Trust only allows for in-kind creation 

and redemption, which, as further 

described below, reduces the potential 

for manipulation of the Shares through 

manipulation of the Reference Rate or 

any of its individual constituents, again 

emphasizing that a potential 

manipulator of the Shares would have 

to manipulate the entirety of the bitcoin 

spot market, which is led by the CME 

Bitcoin Futures market. As such, the 

Exchange believes that part (a) of the 

significant market test outlined above is 

satisfied and that common membership 

in ISG between the Exchange and CME 

would assist the listing exchange in 

detecting and deterring misconduct in 

the Shares. 

(b) Predominant Influence on Prices in 

Spot and Bitcoin Futures 

The Exchange and Sponsor also 

believe that trading in the Shares would 

not be the predominant force on prices 

in the CME Bitcoin Futures market (or 

spot market) for a number of reasons, 

including the significant volume in the 

CME Bitcoin Futures market, the size of 

bitcoin’s market cap, and the significant 

liquidity available in the spot market. 

Moreover, the Shares should trade close 

to NAV given that market participants 

would arbitrage any significant price 

deviations between the price of the 

Shares and prices in the spot market. In 

addition to the CME Bitcoin Futures 

market data points cited above, the spot 

market for bitcoin is also very liquid. 

According to data from CoinRoutes from 

February 2021, the cost to buy or sell $5 

million worth of bitcoin averages 

roughly 10 basis points with a market 

impact of 30 basis points.92 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%. 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. 

As such, the combination of CME 

Bitcoin Futures leading price discovery, 

the overall size of the bitcoin market, 

and the ability for market participants, 

including authorized participants 

creating and redeeming in-kind 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 

CME Bitcoin Futures markets, satisfying 

part (b) of the test outlined above. 

(c) Other Means To Prevent Fraudulent 

and Manipulative Acts and Practices 

As noted above, the Commission also 

permits a listing exchange to 

demonstrate that ‘‘other means to 

prevent fraudulent and manipulative 

acts and practices’’ are sufficient to 

justify dispensing with the requisite 

surveillance-sharing agreement. The 

Exchange believes that such conditions 

are present. Specifically, the significant 

liquidity in the spot market and the 

impact of market orders on the overall 

price of bitcoin mean that attempting to 

move the price of bitcoin is costly and 

has grown more expensive over the past 

year. 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 2/2021) 

with a market impact of 50 basis points 

(compared to 30 basis points in 2/ 

2021).93 For a $10 million market order, 

the cost to buy or sell was roughly 50 

basis points (compared to 20 basis 

points in 2/2021) with a market impact 

of 80 basis points (compared to 50 basis 

points in 2/2021). 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 

the overall impact in spot price. 

Additionally, offering only in-kind 

creation and redemption will provide 

unique protections against potential 

attempts to manipulate the Shares. 

While the Sponsor believes that the 

independently maintained and 

administered Reference Rate which it 

uses to value the Trust’s bitcoin is itself 

resistant to manipulation based on the 

methodology further described below, 

the fact that creations and redemptions 

are only available in-kind makes the 

manipulability of the Reference Rate 

significantly less important. 

Specifically, because the Trust will not 

accept cash to buy bitcoin in order to 

create new shares or, barring a forced 

redemption of the Trust or under other 

extraordinary circumstances, be forced 

to sell bitcoin to pay cash for redeemed 

shares, the price that the Sponsor uses 

to value the Trust’s bitcoin is not 

particularly important.94 When 

authorized participants are creating 

with the Trust, they need to deliver a 

certain number of bitcoin per share 

(regardless of the valuation used) and 

when they’re redeeming, they can 

similarly expect to receive a certain 

number of bitcoin per share. As such, 

even if the price used to value the 

Trust’s bitcoin is manipulated (which 

the Sponsor believes that its 

methodology is resistant to), 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. This 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. 

Commodity-Based Trust Shares 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

be listed on the Exchange pursuant to 

the initial and continued listing criteria 

in Exchange Rule 14.11(e)(4). The 

Exchange believes that its surveillance 

procedures are adequate to properly 

monitor the trading of the Shares on the 

Exchange during all trading sessions 

and to deter and detect violations of 

Exchange rules and the applicable 

federal securities laws. Trading of the 

Shares through the Exchange will be 

subject to the Exchange’s surveillance 

procedures for derivative products, 

including Commodity-Based Trust 

Shares. The issuer has represented to 

the Exchange that it will advise the 

Exchange of any failure by the Trust or 

the Shares to comply with the 


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continued listing requirements, and, 

pursuant to its obligations under 

Section 19(g)(1) of the Exchange Act, the 

Exchange will surveil for compliance 

with the continued listing requirements. 

If the Trust or the Shares are not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

Exchange Rule 14.12. The Exchange 

may obtain information regarding 

trading in the Shares and listed bitcoin 

derivatives via the ISG, from other 

exchanges who are members or affiliates 

of the ISG, or with which the Exchange 

has entered into a comprehensive 

surveillance sharing agreement. 

Availability of Information 

The Exchange also believes that the 

proposal promotes market transparency 

in that a large amount of information is 

currently available about bitcoin and 

will be available regarding the Trust and 

the Shares. In addition to the price 

transparency of the Reference Rate, the 

Trust will provide information 

regarding the Trust’s bitcoin holdings as 

well as additional data regarding the 

Trust. The Trust will provide an IIV per 

Share updated every 15 seconds, as 

calculated by the Exchange or a thirdparty financial data provider during the 

Exchange’s Regular Trading Hours (9:30 

a.m. to 4:00 p.m. E.T.). The IIV will be 

calculated by using the prior day’s 

closing NAV per Share as a base and 

updating that value during Regular 

Trading Hours to reflect changes in the 

value of the Trust’s bitcoin holdings 

during the trading day. 

The IIV disseminated during Regular 

Trading Hours should not be viewed as 

an actual real-time update of the NAV, 

which will be calculated only once at 

the end of each trading day. The IIV will 

be widely disseminated on a per Share 

basis every 15 seconds during the 

Exchange’s Regular Trading Hours by 

one or more major market data vendors. 

In addition, the IIV will be available 

through on-line information services. 

The website for the Trust, which will 

be publicly accessible at no charge, will 

contain the following information: (a) 

The prior business day’s NAV and the 

reported closing price; (b) the BZX 

Official Closing Price in relation to the 

NAV as of the time the NAV is 

calculated and a calculation of the 

premium or discount of such price 

against such NAV; (c) data in chart form 

displaying the frequency distribution of 

discounts and premiums of the Official 

Closing Price against the NAV, within 

appropriate ranges for each of the four 

previous calendar quarters (or for the 

life of the Trust, if shorter); (d) the 

prospectus; and (e) other applicable 

quantitative information, including the 

information noted with respect to Rule 

6c–11 under the 1940 Act. The Trust 

will also disseminate the Trust’s 

holdings on a daily basis on the Trust’s 

website. The price of bitcoin will be 

made available by one or more major 

market data vendors, updated at least 

every 15 seconds during Regular 

Trading Hours. Information about the 

Reference Rate, including key elements 

of how the Reference Rate is calculated, 

will be publicly available at https://

www.cfbenchmarks.com. 

The NAV for the Trust will be 

calculated by the Administrator once a 

day and will be disseminated daily to 

all market participants at the same time. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the CTA. 

Quotation and last sale information 

for bitcoin is widely disseminated 

through a variety of major market data 

vendors, including Bloomberg and 

Reuters, as well as the Reference Rate. 

Information relating to trading, 

including price and volume 

information, in bitcoin is available from 

major market data vendors and from the 

exchanges on which bitcoin are traded. 

Depth of book information is also 

available from bitcoin exchanges. The 

normal trading hours for bitcoin 

exchanges are 24 hours per day, 365 

days per year. 

For the above reasons, the Exchange 

believes that the proposed rule change 

is consistent with the requirements of 

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

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Act. The Exchange 

notes that the proposed rule change, 

rather will facilitate the listing and 

trading of an additional exchange-traded 

product that will enhance competition 

among both market participants and 

listing venues, to the benefit of investors 

and the marketplace. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the Exchange consents, the Commission 

will: 

A. By order approve or disapprove 

such proposed rule change, or 

B. institute proceedings to determine 

whether the proposed rule change 

should be 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– 

CboeBZX–2022–006 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–CboeBZX–2022–006. 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 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 30 / Monday, February 14, 2022 / Notices 8335 

95 17 CFR 200.30–3(a)(12). 

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–CboeBZX–2022–006 and 

should be submitted on or before March 

7, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.95

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03019 Filed 2–11–22; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF STATE 

[Public Notice: 11652] 

Notice of Determinations; Additional 

Culturally Significant Object Being 

Imported for Exhibition— 

Determinations: ‘‘The Language of 

Beauty in African Art’’ Exhibition 

SUMMARY: On December 16, 2021, notice 

was published on page 71313 of the 

Federal Register (volume 86, number 

238) of determinations pertaining to 

certain objects to be included in an 

exhibition entitled ‘‘The Language of 

Beauty in African Art.’’ Notice is hereby 

given of the following determinations: I 

hereby determine that a certain 

additional object being imported from 

abroad pursuant to an agreement with 

its foreign owner or custodian for 

temporary display in the aforesaid 

exhibition at the Art Institute of 

Chicago, in Chicago, Illinois; and at 

possible additional exhibitions or 

venues yet to be determined, are of 

cultural significance, and, further, that 

its temporary exhibition or display 

within the United States as 

aforementioned is in the national 

interest. I have ordered that Public 

Notice of these determinations be 

published in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Chi 

D. Tran, Program Administrator, Office 

of the Legal Adviser, U.S. Department of 

State (telephone: 202–632–6471; email: 

section2459@state.gov). The mailing 

address is U.S. Department of State, L/ 

PD, 2200 C Street NW (SA–5), Suite 

5H03, Washington, DC 20522–0505. 

SUPPLEMENTARY INFORMATION: The 

foregoing determinations were made 

pursuant to the authority vested in me 

by the Act of October 19, 1965 (79 Stat. 

985; 22 U.S.C. 2459), E.O. 12047 of 

March 27, 1978, the Foreign Affairs 

Reform and Restructuring Act of 1998 

(112 Stat. 2681, et seq.; 22 U.S.C. 6501 

note, et seq.), Delegation of Authority 

No. 234 of October 1, 1999, Delegation 

of Authority No. 236–3 of August 28, 

2000, and Delegation of Authority No. 

523 of December 22, 2021. 

Stacy E. White, 

Deputy Assistant Secretary for Professional 

and Cultural Exchanges, Bureau of 

Educational and Cultural Affairs, Department 

of State. 

[FR Doc. 2022–03052 Filed 2–11–22; 8:45 am] 

BILLING CODE 4710–05–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

[Docket No. FAA–2022–0187] 

Agency Information Collection 

Activities: Requests for Comments; 

Clearance of Renewed Approval of 

Information Collection: General 

Operating and Flight Rules FAR 91 and 

FAR 107 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice and request for 

comments. 

SUMMARY: In accordance with the 

Paperwork Reduction Act of 1995, FAA 

invites public comments about our 

intention to request the Office of 

Management and Budget (OMB) 

approval to renew an information 

collection. The collection involves the 

submission of an application to obtain 

a Letter of Deviation Authority to permit 

flight instruction for compensation or 

hire aboard experimental category 

aircraft under 14 CFR 91.319. The 

information to be collected will be used 

to determine whether such flight 

instruction can be conducted safely. 

DATES: Written comments should be 

submitted by April 15, 2022. 

ADDRESSES: Please send written 

comments: 

By Electronic Docket: 

www.regulations.gov (Enter docket 

number into search field). 

By mail: Dwayne C. Morris, 800 

Independence Ave. SW, Washington, 

DC 20591. 

By email: chris.morris@faa.gov. 

FOR FURTHER INFORMATION CONTACT: 

Jabari Raphael by email at: 

Jabari.Raphael@faa.gov; phone: 202– 

267–1088. 

SUPPLEMENTARY INFORMATION: 

Public Comments Invited: You are 

asked to comment on any aspect of this 

information collection, including (a) 

whether the proposed collection of 

information is necessary for FAA’s 

performance; (b) the accuracy of the 

estimated burden; (c) ways for FAA to 

enhance the quality, utility and clarity 

of the information collection; and (d) 

ways that the burden could be 

minimized without reducing the quality 

of the collected information. The agency 

will summarize and/or include your 

comments in the request for OMB’s 

clearance of this information collection. 

OMB Control Number: 2120–0005. 

Title: General Operating and Flight 

Rules FAR 91 and FAR 107. 

Form Numbers: N/A. 

Type of Review: Renewal. 

Background: In 2004, the FAA 

published a final rule requiring 

operators of experimental aircraft to 

apply for a Letter of Deviation Authority 

(LODA) to conduct operations for 

compensation or hire under 14 CFR 

19.319. See 69 FR 44771 (July 27, 2004). 

When publishing the 2004 final rule, the 

FAA inadvertently omitted its 

submission to the OMB detailing the 

information collection burden under the 

Paperwork Reduction Act (PRA). See 69 

FR at 44858 (explaining estimated PRA 

burden and OMB compliance 

requirements). As a result of this 

omission, the existing OMB collection 

does not account for the PRA burden of 

LODAs issued to operators under 

§ 91.319. 

In the 2004 final rule, the FAA also 

required that, beginning January 31, 

2010, all experimental light sport 

aircraft (ELSA) operators would 

similarly need to apply for a LODA to 

conduct operations for compensation or 

hire. 69 FR at 44853 (explaining LODA 

requirements for ELSA operators). This 

additional LODA requirement— 

published in the 2004 final rule with an 

effective date in 2010—was also 

inadvertently not accounted for in the 

OMB’s information collection. As a 

result of these inadvertent omissions to 

OMB, the FAA submits this Notice for 

Public Comment to ensure compliance 

with the PRA. 

Importantly, the FAA has already 

requested and received public comment 

on the anticipated PRA burden for 

obtaining a LODA for experimental and 

ELSA aircraft operators. See 69 FR at 

44858 (adjudicating comments from 

public regarding PRA burden). Thus, the 

FAA notes that it considered comments 

from interested members of the public 

when finalizing the LODA requirements 

under § 91.319. In other words, the FAA 

submits this Notice merely to ensure 

technical compliance with the OMB’s 


jspears on DSK121TN23PROD with NOTICES1