Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices 929 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Commission originally approved BZX Rule 

14.11(i) in Securities Exchange Act Release No. 

65225 (August 30, 2011), 76 FR 55148 (September 

6, 2011) (SR–BATS–2011–018) and subsequently 

approved generic listing standards for Managed 

Fund Shares under Rule 14.11(i) in Securities 

Exchange Act Release No. 78396 (July 22, 2016), 81 

FR 49698 (July 28, 2016) (SR–BATS–2015–100). 

4See Registration Statement on Form N–1A for 

the Trust, dated December 11, 2017 (File Nos. 333– 

184918 and 811–22767). The descriptions of the 

Funds and the Shares contained herein are based, 

in part, on information in the Registration 

Statement. The Commission has issued an order, 

upon which the Trust may rely, granting certain 

exemptive relief under the Investment Company 

Act of 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) (the 

‘‘Exemptive Order’’). See Investment Company Act 

Release No. 30029, April 10, 2012 (File No. 812– 

13795). In addition, on December 6, 2012, the staff 

of the Commission’s Division of Investment 

Management (‘‘Division’’) issued a no-action letter 

(‘‘No-Action Letter’’) relating to the use of 

derivatives by actively-managed exchange-traded 

funds (‘‘ETFs’’). See No-Action Letter dated 

December 6, 2012 from Elizabeth G. Osterman, 

Associate Director, Office of Exemptive 

Applications, Division of Investment Management. 

The No-Action Letter stated that the Division would 

not recommend enforcement action to the 

Commission under applicable provisions of and 

rules under the 1940 Act if ETFs operating in 

reliance on specified orders (which include the 

Exemptive Order) invest in options contracts, 

futures contracts, or swap agreements provided that 

they comply with certain representations stated in 

the No-Action Letter. 

5An investment adviser to an open-end fund is 

required to be registered under the Investment 

Advisers Act of 1940, as amended (the ‘‘Advisers 

Act’’). As a result, the Adviser and its related 

personnel are subject to the provisions of Rule 

204A–1 under the Advisers Act relating to codes of 

ethics. This Rule requires investment advisers to 

adopt a code of ethics that reflects the fiduciary 

nature of the relationship to clients as well as 

compliance with other applicable securities laws. 

Accordingly, procedures designed to prevent the 

communication and misuse of non-public 

information by an investment adviser must be 

consistent with Rule 204A–1 under the Advisers 

Act. In addition, Rule 206(4)–7 under the Advisers 

Act makes it unlawful for an investment adviser to 

provide investment advice to clients unless such 

investment adviser has (i) adopted and 

implemented written policies and procedures 

reasonably designed to prevent violation, by the 

Continued 

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 DTC and on DTCC’s website 

(http://dtcc.com/legal/sec-rulefilings.aspx). 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–DTC– 

2017–023 and should be submitted on 

or before January 29, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–00081 Filed 1–5–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–82429; File No. SR– 

CboeBZX–2017–021] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing of 

a Proposed Rule Change To List and 

Trade Shares of the First Trust Bitcoin 

Strategy ETF and the First Trust 

Inverse Bitcoin Strategy ETF, Each a 

Series of the First Trust ExchangeTraded Fund VII, Under Rule 14.11(i), 

Managed Fund Shares 

January 2, 2018. 

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 December 

19, 2017, Cboe BZX Exchange, Inc. (the 

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

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange filed a proposal to list 

and trade shares of the First Trust 

Bitcoin Strategy ETF and the First Trust 

Inverse Bitcoin Strategy ETF (each a 

‘‘Fund’’ and, collectively, the ‘‘Funds’’), 

each a series of the First Trust 

Exchange-Traded Fund VII (the 

‘‘Trust’’), under Rule 14.11(i) (‘‘Managed 

Fund Shares’’). The shares of the Funds 

are referred to herein as the ‘‘Shares.’’ 

The text of the proposed rule change 

is available at the Exchange’s website at 

www.markets.cboe.com, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant parts 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 shares of the First Trust Bitcoin 

Strategy ETF (the ‘‘Long Bitcoin Fund’’) 

and the First Trust Inverse Bitcoin 

Strategy ETF (the ‘‘Inverse Bitcoin 

Fund’’) under Rule 14.11(i), which 

governs the listing and trading of 

Managed Fund Shares on the 

Exchange.3

The Shares will be offered by the 

Trust, which was organized as a 

Massachusetts business trust on 

November 6, 2012. The Trust is 

registered with the Commission as an 

open-end investment company and has 

filed a registration statement on behalf 

of the Funds on Form N–1A 

(‘‘Registration Statement’’) with the 

Commission.4 The Adviser, as defined 

below, is also registered as a Commodity 

Pool Operator. 

First Trust Advisors L.P. is the 

investment adviser (the ‘‘Adviser’’) to 

the Funds and a commodity pool 

operator (‘‘CPO’’). The Funds will be 

operated in accordance with applicable 

Commodity Futures Trading 

Commission (‘‘CFTC’’) rules, as well as 

the regulatory scheme applicable to 

registered investment companies. 

Registration as a CPO imposes 

additional compliance obligations on 

the Adviser and the Funds related to 

additional laws, regulations, and 

enforcement policies. 

Rule 14.11(i)(7) provides that, if the 

investment adviser to the investment 

company issuing Managed Fund Shares 

is affiliated with a broker-dealer, such 

investment adviser shall erect a ‘‘fire 

wall’’ between the investment adviser 

and the broker-dealer with respect to 

access to information concerning the 

composition and/or changes to such 

investment company portfolio.5 In 


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930 Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices 

investment adviser and its supervised persons, of 

the Advisers Act and the Commission rules adopted 

thereunder; (ii) implemented, at a minimum, an 

annual review regarding the adequacy of the 

policies and procedures established pursuant to 

subparagraph (i) above and the effectiveness of their 

implementation; and (iii) designated an individual 

(who is a supervised person) responsible for 

administering the policies and procedures adopted 

under subparagraph (i) above. 

6Section 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.’’ The 

definition of commodity is broad. 7 U.S.C. 1a(9). 

7Bitcoin is a digital asset based on the 

decentralized, open source protocol of the peer-topeer bitcoin computer network (the ‘‘Bitcoin 

Network’’). No single entity owns or operates the 

Bitcoin Network; the infrastructure is collectively 

maintained by a decentralized user base. The 

Bitcoin Network is accessed through software, and 

software governs bitcoin’s creation, movement, and 

ownership. The value of bitcoin is determined by 

the supply of and demand for bitcoin on websites 

that facilitate the transfer of bitcoin in exchange for 

government-issued currencies, and in private enduser-to-end-user transactions. 

8Bitcoin is a commodity as defined in Section 

1a(9) of the CEA. 7 U.S.C. 1a(9). See In re Coinflip, 

Inc., No. 15–29 (CFTC Sept. 17, 2015), available at: 

http://www.cftc.gov/ucm/groups/public/ 

@lrenforcementactions/documents/legalpleading/ 

enfcoinfliprorder09172015.pdf. 

9The XBT Futures are cash-settled futures 

contracts based on the auction price of bitcoin in 

U.S. dollars on the Gemini Exchange that will 

expire on a weekly, monthly and quarterly basis. 

XBT Futures are designed to reflect economic 

exposure related to the price of bitcoin. XBT 

Futures began trading on December 10, 2017. 

10The CME Futures are also cash-settled futures 

contracts based on the CME CF Bitcoin Reference 

Rate, which is based on an aggregation of trade flow 

from several bitcoin spot exchanges, that will expire 

on a monthly and quarterly basis. CME Futures 

began trading on December 17, 2017. 

11Bitcoin Futures Contracts (as defined herein) 

are measures of the market’s expectation of the 

price of bitcoin at certain points in the future, and 

as such will behave differently than current or spot 

bitcoin prices. The Funds are not linked to bitcoin 

and in many cases the Funds could significantly 

underperform or outperform the price of bitcoin. 

12Rule 14.11(i)(4)(C)(iv)(b) provides that ‘‘the 

aggregate gross notional value of listed derivatives 

based on any five or fewer underlying reference 

assets shall not exceed 65% of the weight of the 

portfolio (including gross notional exposures), and 

the aggregate gross notional value of listed 

derivatives based on any single underlying 

reference asset shall not exceed 30% of the weight 

of the portfolio (including gross notional 

exposures).’’ The Exchange is proposing that the 

Funds be exempt from the requirement of Rule 

14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross 

notional value of listed derivatives based on any 

single underlying reference asset from exceeding 

30% of the weight of the portfolio (including gross 

notional exposures) and the requirement that the 

aggregate gross notional value of listed derivatives 

based on any five or fewer underlying reference 

assets shall not exceed 65% of the weight of the 

portfolio (including gross notional exposures). 

13The term ‘‘Non-U.S. Component Stock’’ means 

an equity security that (a) is not registered under 

Sections 12(b) or 12(g) of the Act, (b) is issued by 

an entity that is not organized, domiciled or 

incorporated in the United States, and (c) is issued 

by an entity that is an operating company 

(including Real Estate Investment Trusts (REITs) 

and income trusts, but excluding investment trusts, 

unit trusts, mutual funds, and derivatives). 

14Rule 14.11(i)(4)(C)(i)(b)(3) provides that ‘‘the 

most heavily weighted Non-U.S. Component stock 

shall not exceed 25% of the equity weight of the 

portfolio, and, to the extent applicable, the five 

most heavily weighted Non-U.S. Component Stocks 

shall not exceed 60% of the equity weight of the 

portfolio.’’ As proposed, each Fund may hold as 

few as one Non-U.S. Component Stock, meaning 

that the Non-U.S. Component Stock could 

constitute 100% of the equity weight of the 

portfolio. As noted below, however, neither Fund 

will hold more than 25% of the weight of the 

portfolio in Non-U.S. Component Stocks. 

15Rule 14.11(i)(4)(C)(i)(b)(4) provides that ‘‘where 

the equity portion of the portfolio includes NonU.S. Component Stocks, the equity portion of the 

portfolio shall include a minimum of 20 total 

component stocks; provided, however, that there 

shall be no minimum number of component stocks 

if (a) one or more series of Derivative Securities 

Products or Linked Securities constitute, at least in 

part, components underlying a series of Managed 

Fund Shares, or (b) one or more series of Derivative 

Securities Products or Linked Securities account for 

100% of the equity weight of the portfolio of a 

series of Managed Fund Shares.’’ While the Funds, 

as proposed, would be permitted to hold Derivative 

Securities Products or Linked Securities (both of 

which are ETPs, as defined below), they won’t 

necessarily hold such instruments and may hold 

fewer than 20 Non-U.S. Component Stocks, which 

would not comply with this Rule. 

16For purposes of this proposal, the term 

‘‘Generic Listing Standards’’ shall mean the generic 

listing rules for Managed Fund Shares under Rule 

14.11(i)(4)(C). 

17The term ‘‘Normal Market Conditions’’ 

includes, but is not limited to, the absence of 

trading halts in the applicable financial markets 

generally; operational issues causing dissemination 

addition, Rule 14.11(i)(7) further 

requires that personnel who make 

decisions on the investment company’s 

portfolio composition must be subject to 

procedures designed to prevent the use 

and dissemination of material 

nonpublic information regarding the 

applicable investment company 

portfolio. Rule 14.11(i)(7) is similar to 

Rule 14.11(b)(5)(A)(i), however, Rule 

14.11(i)(7) in connection with the 

establishment of a ‘‘fire wall’’ between 

the investment adviser and the brokerdealer reflects the applicable open-end 

fund’s portfolio, not an underlying 

benchmark index, as is the case with 

index-based funds. The Adviser is not a 

registered broker-dealer, but is currently 

affiliated with a broker-dealer and, in 

the future may be affiliated with other 

broker-dealers. The Adviser has 

implemented and will maintain a fire 

wall with respect to its broker-dealer 

affiliate regarding access to information 

concerning the composition and/or 

changes to each Fund’s portfolio. The 

Adviser personnel who make decisions 

regarding each Fund’s portfolio are 

subject to procedures designed to 

prevent the use and dissemination of 

material nonpublic information 

regarding each Fund’s portfolio. In the 

event that (a) the Adviser becomes a 

broker-dealer or newly affiliated with a 

broker-dealer, or (b) any new adviser or 

sub-adviser is a broker-dealer or 

becomes affiliated with a broker-dealer, 

it will implement a fire wall with 

respect to its relevant personnel or such 

broker-dealer affiliate, as applicable, 

regarding access to information 

concerning the composition and/or 

changes to the portfolio, and will be 

subject to procedures designed to 

prevent the use and dissemination of 

material non-public information 

regarding such portfolio. 

Bitcoin Futures Contracts 

Prior to listing a new commodity 

futures contract, a designated contract 

market must either submit a selfcertification to the CFTC that the 

contract complies with the Commodity 

Exchange Act (‘‘CEA’’) and CFTC 

regulations or voluntarily submit the 

contract for CFTC approval. This 

process applies to all futures contracts 

and all commodities underlying the 

futures contracts, whether the new 

futures contracts are related to oil, gold, 

or any other commodity.6 On December 

1, 2017, it was announced that both 

Cboe Futures Exchange, Inc. (‘‘CFE’’) 

and Chicago Mercantile Exchange, Inc. 

(‘‘CME’’) had self-certified with the 

CFTC new contracts for bitcoin 7 futures 

products.8 While the CFE bitcoin 

futures contracts (‘‘XBT Futures’’) 9 and 

the CME bitcoin futures contracts 

(‘‘CME Futures’’) 10 will differ in certain 

of their implementation details, both 

contracts will generally trade and settle 

like any other cash-settled commodity 

futures contracts.11

The Exchange proposes to list the 

Funds pursuant to Rule 14.11(i), 

however there are two ways in which 

the Funds will not necessarily meet the 

listing standards included in that Rule. 

As such, the Exchange submits this 

proposal in order to allow each Fund to 

hold: (i) Listed derivatives in a manner 

that does not comply with Rule 

14.11(i)(4)(C)(iv)(b); 12 and (ii) Non-U.S. 

Component Stocks 13 in a manner that 

may not comply with Rule 

14.11(i)(4)(C)(i)(b)(3) 14 and (4).15

Otherwise, the Funds will comply with 

all other listing requirements of the 

Generic Listing Standards 16 for 

Managed Fund Shares on an initial and 

continued listing basis under Rule 

14.11(i). 

First Trust Bitcoin Strategy ETF 

According to the Registration 

Statement, the Long Bitcoin Fund is an 

actively managed fund that seeks to 

provide investors with long exposure to 

the price movements of bitcoin 

instruments. Under Normal Market 

Conditions,17 the Long Bitcoin Fund 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices 931 

of inaccurate market information or system failures; 

or force majeure type events such as natural or manmade disaster, act of God, armed conflict, act of 

terrorism, riot or labor disruption, or any similar 

intervening circumstance. On a temporary basis, 

including for defensive purposes, during the initial 

invest-up period (i.e., the six-week period following 

the commencement of trading of Shares on the 

Exchange) and during periods of high cash inflows 

or outflows, the Long Bitcoin Fund may depart from 

its principal investment strategies; for example, it 

may hold a higher than normal proportion of its 

assets in cash. During such periods, the Long 

Bitcoin Fund may not be able to achieve its 

investment objective. The Long Bitcoin Fund may 

adopt a defensive strategy when the Adviser 

believes instruments in which the Long Bitcoin 

Fund normally invests have elevated risks due to 

political or economic factors and in other 

extraordinary circumstances. 

18For purposes of this proposal, the term ‘‘Bitcoin 

Futures Contracts’’ shall mean XBT Futures, CME 

Futures, and any other exchange-listed bitcoin 

futures contracts, as available. 

19The term ‘‘Listed Bitcoin Derivatives’’ includes 

Bitcoin Futures Contracts and other listed 

derivatives (as provided in Rule 14.11(i)(4)(C)(iv)) 

including options contracts on Bitcoin Futures 

Contracts as well as options contracts, swap 

contracts, and other derivative instruments linked 

to bitcoin, the price of bitcoin, or an index thereof. 

20The term ‘‘OTC Bitcoin Derivatives’’ includes 

over-the-counter options on bitcoin and bitcoin 

indices and over-the-counter swaps, including total 

return swaps on bitcoin, Bitcoin Futures, or bitcoin 

indices. The Exchange notes that the Long Bitcoin 

Fund’s holdings in OTC Bitcoin Derivatives will 

meet the Generic Listing Standards related to OTC 

derivatives under Rule 14.11(i)(4)(C)(v). 

21For purposes of this filing, the term ‘‘ETP’’ 

means Portfolio Depository Receipts, Index Fund 

Shares, Linked Securities, Trust Issued Receipts, 

and Managed Fund Shares, as defined in Rule 

14.11(b), 14.11(c), 14.11(d), 14.11(f), and 14.11(i), 

respectively, and the analogous products and listing 

rules on other national securities exchanges. 

22As defined in Rule 14.11(i)(4)(C)(iii), Cash 

Equivalents are short-term instruments with 

maturities of less than three months, including: (i) 

U.S. Government securities, including bills, notes, 

and bonds differing as to maturity and rates of 

interest, which are either issued or guaranteed by 

the U.S. Treasury or by U.S. Government agencies 

or instrumentalities; (ii) certificates of deposit 

issued against funds deposited in a bank or savings 

and loan association; (iii) bankers acceptances, 

which are short-term credit instruments used to 

finance commercial transactions; (iv) repurchase 

agreements and reverse repurchase agreements; (v) 

bank time deposits, which are monies kept on 

deposit with banks or savings and loan associations 

for a stated period of time at a fixed rate of interest; 

(vi) commercial paper, which are short-term 

unsecured promissory notes; and (vii) money 

market funds. 

23The Exchange notes that the Long Bitcoin 

Fund’s holdings in cash, Cash Equivalents, and GSE 

Securities will meet the Generic Listing Standards 

related to fixed income securities and cash and cash 

equivalents under Rules 14.11(i)(4)(C)(ii) and (iii). 

24On a temporary basis, including for defensive 

purposes, during the initial invest-up period (i.e., 

the six-week period following the commencement 

of trading of Shares on the Exchange) and during 

periods of high cash inflows or outflows, the 

Inverse Bitcoin Fund may depart from its principal 

investment strategies; for example, it may hold a 

higher than normal proportion of its assets in cash. 

During such periods, the Inverse Bitcoin Fund may 

not be able to achieve its investment objective. The 

Inverse Bitcoin Fund may adopt a defensive 

strategy when the Adviser believes instruments in 

which the Inverse Bitcoin Fund normally invests 

have elevated risks due to political or economic 

factors and in other extraordinary circumstances. 

25The Exchange notes that the Inverse Bitcoin 

Fund’s holdings in OTC Bitcoin Derivatives, which 

are included in the definition of Bitcoin 

Instruments, will meet the Generic Listing 

Standards related to OTC derivatives under Rule 

14.11(i)(4)(C)(v). 

26The Exchange notes that the Inverse Bitcoin 

Fund’s holdings in cash, Cash Equivalents, and GSE 

Securities will meet the Generic Listing Standards 

related to fixed income securities and cash and cash 

equivalents under Rules 14.11(i)(4)(C)(ii) and (iii). 

27 In reaching liquidity decisions, the Adviser 

may consider the following factors: The frequency 

of trades and quotes for the security; the number of 

dealers wishing to purchase or sell the security and 

the number of other potential purchasers; dealer 

undertakings to make a market in the security; and 

the nature of the security and the nature of the 

marketplace trades (e.g., the time needed to dispose 

of the security, the method of soliciting offers, and 

the mechanics of transfer). 

28The Commission has stated that long-standing 

Commission guidelines have required open-end 

funds to hold no more than 15% of their net assets 

in illiquid securities and other illiquid assets. See 

Investment Company Act Release No. 28193 (March 

11, 2008), 73 FR 14618 (March 18, 2008), footnote 

34. See also, Investment Company Act Release No. 

5847 (October 21, 1969), 35 FR 19989 (December 

31, 1970) (Statement Regarding ‘‘Restricted 

Securities’’); Investment Company Act Release No. 

18612 (March 12, 1992), 57 FR 9828 (March 20, 

1992) (Revisions of Guidelines to Form N–1A). A 

fund’s portfolio security is illiquid if it cannot be 

disposed of in the ordinary course of business 

within seven days at approximately the value 

ascribed to it by the fund. See Investment Company 

Act Release No. 14983 (March 12, 1986), 51 FR 

9773 (March 21, 1986) (adopting amendments to 

Rule 2a–7 under the 1940 Act); Investment 

Company Act Release No. 17452 (April 23, 1990), 

55 FR 17933 (April 30, 1990) (adopting Rule 144A 

under the Securities Act of 1933). 

29Each Fund will include appropriate risk 

disclosure in its offering documents, including 

leveraging risk. Leveraging risk is the risk that 

certain transactions of a fund, including a fund’s 

use of derivatives, may give rise to leverage, causing 

a fund to be more volatile than if it had not been 

leveraged. Each Fund’s investments in derivative 

instruments will be made in accordance with the 

1940 Act and consistent with each Fund’s 

investment objective and policies. To mitigate 

leveraging risk, each Fund will segregate or earmark 

liquid assets determined to be liquid by the Adviser 

in accordance with procedures established by the 

Trust’s Board and in accordance with the 1940 Act 

or otherwise cover the transactions that give rise to 

such risk. These procedures have been adopted 

consistent with Section 18 of the 1940 Act and 

related Commission guidance. See 15 U.S.C. 80a 18; 

Investment Company Act Release No. 10666 (April 

Continued 

seeks to achieve its investment objective 

by investing in a portfolio of financial 

instruments that provide exposure to 

movements in the value of bitcoin. 

While the Long Bitcoin Fund intends to 

invest primarily in Bitcoin Futures 

Contracts,18 it may also invest in other 

Listed Bitcoin Derivatives,19 OTC 

Bitcoin Derivatives,20 U.S. exchangelisted ETPs,21 and Non-U.S. Component 

Stocks (collectively, ‘‘Bitcoin 

Instruments’’), cash and Cash 

Equivalents,22 and U.S. government and 

agency securities with maturities of five 

years or less (‘‘GSE Securities’’). While 

the Long Bitcoin Fund intends to invest 

primarily in Bitcoin Instruments, the 

remainder of the Fund’s assets will 

primarily be invested in cash, Cash 

Equivalents, and GSE Securities. The 

Long Bitcoin Fund intends to use such 

instruments as investments and, to the 

extent applicable, to collateralize the 

Fund’s Bitcoin Instrument exposure on 

a day-to-day basis.23

First Trust Inverse Bitcoin Strategy ETF 

According to the Registration 

Statement, the Inverse Bitcoin Fund 

seeks to provide investors with short 

exposure to the price movements of 

bitcoin instruments. Under Normal 

Market Conditions, the Inverse Bitcoin 

Fund seeks to achieve its investment 

objective by investing in a portfolio of 

financial instruments that provide short 

exposure to movements in the value of 

bitcoin.24 While the Inverse Bitcoin 

Fund intends to invest primarily in 

Bitcoin Futures Contracts, it may also 

invest in Bitcoin Instruments,25 cash 

and Cash Equivalents, and GSE 

Securities. While the Inverse Bitcoin 

Fund intends to invest primarily in 

Bitcoin Instruments, the remainder of 

the Inverse Bitcoin Fund’s assets will 

primarily be invested in cash, Cash 

Equivalents, and GSE Securities. The 

Inverse Bitcoin Fund intends to use 

such instruments as investments and, to 

the extent applicable, to collateralize the 

Inverse Bitcoin Fund’s Bitcoin 

Instrument exposure on a day-to-day 

basis.26

Investment Restrictions 

Each Fund may hold up to an 

aggregate amount of 15% of its net 

assets in illiquid assets (calculated at 

the time of investment) deemed illiquid 

by the Adviser 27 under the 1940 Act.28

Each Fund will monitor its portfolio 

liquidity on an ongoing basis to 

determine whether, in light of current 

circumstances, an adequate level of 

liquidity is being maintained, and will 

consider taking appropriate steps in 

order to maintain adequate liquidity if, 

through a change in values, net assets, 

or other circumstances, more than 15% 

of a Fund’s net assets are held in 

illiquid assets. Illiquid assets include 

assets subject to contractual or other 

restrictions on resale and other 

instruments that lack readily available 

markets as determined in accordance 

with Commission staff guidance. 

Under Normal Market Conditions, 

each Fund’s investments will be 

consistent with the Fund’s investment 

objective and will not be used to 

enhance leverage (although certain 

derivatives and other investments may 

result in leverage).29 Each Fund’s 


sradovich on DSK3GMQ082PROD with NOTICES
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18, 1979), 44 FR 25128 (April 27, 1979); Dreyfus 

Strategic Investing, Commission No-Action Letter 

(June 22, 1987); Merrill Lynch Asset Management, 

L.P., Commission No-Action Letter (July 2, 1996). 

30See note 12, supra. 

31See note 14, supra. 

32See note 15, supra. 

33See Rule 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii). 

34See Rule 14.11(i)(4)(A)(ii). 

35See Rule 14.11(i)(4)(B)(i). 

36See Rule 14.11(i)(4)(B)(iii). 

37See Rule 14.11(i)(4)(B)(iv). 

38See Rule 14.11(i)(2)(C). 

39See Rule 14.11(i)(2)(B). 

40See Rule 14.11(i)(6). 

investments will not be used to seek 

leveraged or inverse leveraged returns 

(i.e. two times or three times the Fund’s 

benchmark). Each Fund’s use of 

derivative instruments will be 

collateralized or earmarked. 

Additional Information 

Each Fund’s holdings will meet the 

Generic Listing Standards with two 

exceptions, and, as such, the Exchange 

submits this proposal in order to allow 

each Fund to hold: (i) listed derivatives 

in a manner that does not comply with 

Rule 14.11(i)(4)(C)(iv)(b); 30 and (ii) 

Non-U.S. Component Stocks in a 

manner that may not comply with Rules 

14.11(i)(4)(C)(i)(b)(3) 31 and (4).32 The 

Exchange, however, believes that the 

policy concerns that these rules are 

intended to address are mitigated as 

they relate to the Funds and their 

holdings for a number of reasons. 

First, the policy concerns underlying 

all three rules are mitigated by the fact 

that the Exchange believes that the 

underlying reference asset is not 

susceptible to manipulation because the 

nature of the bitcoin ecosystem makes 

manipulation of bitcoin difficult. The 

geographically diverse and continuous 

nature of bitcoin trading makes it 

difficult and prohibitively costly to 

manipulate the price of bitcoin and, in 

many instances, the bitcoin market is 

generally less susceptible to 

manipulation than the equity, fixed 

income, and commodity futures 

markets. There are a number of reasons 

this is the case, including that there is 

not inside information about revenue, 

earnings, corporate activities, or sources 

of supply; manipulation of the price on 

any single venue would require 

manipulation of the global bitcoin price 

in order to be effective; a substantial 

over-the-counter market provides 

liquidity and shock-absorbing capacity; 

bitcoin’s 24/7/365 nature provides 

constant arbitrage opportunities across 

all trading venues; and it is unlikely that 

any one actor could obtain a dominant 

market share. 

Further, bitcoin is arguably less 

susceptible to manipulation than other 

commodities that underlie ETPs; there 

may be inside information relating to 

the supply of the physical commodity 

such as the discovery of new sources of 

supply or significant disruptions at 

mining facilities that supply the 

commodity that simply are inapplicable 

as it relates to bitcoin. Further, the 

Exchange believes that the 

fragmentation across bitcoin exchanges, 

the relatively slow speed of 

transactions, and the capital necessary 

to maintain a significant presence on 

each exchange make manipulation of 

bitcoin prices through continuous 

trading activity unlikely. 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 bitcoin 

exchanges 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. As a result, 

the potential for manipulation on a 

particular bitcoin exchange would 

require overcoming the liquidity supply 

of such arbitrageurs who are effectively 

eliminating any cross-market pricing 

differences. For all of these reasons, 

bitcoin is not particularly susceptible to 

manipulation, especially as compared to 

other approved ETP reference assets. 

Second, the Exchange believes that 

the concerns on which Rule 

14.11(i)(4)(C)(iv)(b) are based related to 

ensuring that no single listed derivative 

and underlying reference asset that is 

susceptible to manipulation constitutes 

greater than 35% of the weight of the 

portfolio are further mitigated by the 

liquidity that the Exchange expects to 

exist in the market for Listed Bitcoin 

Derivatives. This belief is based on 

numerous conversations with market 

participants, issuers, and discussions 

with personnel of CFE. This expected 

liquidity in the market for Bitcoin 

Futures Contracts, the surveillance 

programs of the futures exchanges 

listing such Bitcoin Futures Contracts, 

Exchange surveillance procedures 

related to trading in the Shares, and 

CFTC oversight of the Bitcoin Futures 

Contracts, all combined with the 

difficulty in manipulating the bitcoin 

market described above will mitigate the 

concerns that Rule 14.11(i)(4)(C)(iv)(b) 

was designed to protect against and 

further prevent trading in the Shares 

from being susceptible to manipulation. 

Third, the Exchange believes that the 

market cap and liquidity of the NonU.S. Component Stocks held by the 

Funds along with a cap at 25% of each 

Fund’s total assets that can be allocated 

to Non-U.S. Component Stocks would 

mitigate the concerns which Rules 

14.11(i)(4)(C)(i)(b)(3) and (4) are 

intended to address. Any Non-U.S. 

Component Stock held by the Funds 

will have at least $100 million in market 

cap and will have a minimum global 

monthly trading volume of 250,000 

shares, or a minimum global notional 

volume traded per month of $25 

million, averaged over the last six 

months. This combination of large 

market cap with significant trading 

volume reduces the likelihood of 

manipulation of any particular security 

and the cap of 25% of the Fund’s total 

assets assures that, while the Non-U.S. 

Component Stock holdings may not 

meet the concentration and diversity 

requirements of Rules 

14.11(i)(4)(C)(i)(b)(3) and (4), 

respectively, such diversity and 

concentration requirements will not be 

met only for a limited portion of the 

portfolio. 

The Exchange represents that, except 

for the diversification requirements for 

listed derivatives in Rule 

14.11(i)(4)(C)(iv)(b) and the 

concentration and diversification 

requirements for Non-U.S. Component 

Stocks in Rules 14.11(i)(4)(C)(i)(b)(3) 

and (4), the Funds’ proposed 

investments will satisfy, on an initial 

and continued listing basis, all of the 

Generic Listing Standards and all other 

applicable requirements for Managed 

Fund Shares under Rule 14.11(i). The 

Trust is required to comply with Rule 

10A–3 under the Act for the initial and 

continued listing of the Shares of the 

Funds. A minimum of 100,000 Shares 

will be outstanding at the 

commencement of trading on the 

Exchange. In addition, the Exchange 

represents that the Shares of the Funds 

will comply with all other requirements 

applicable to Managed Fund Shares, 

which includes the dissemination of key 

information such as the Disclosed 

Portfolio,33 Net Asset Value,34 and the 

Intraday Indicative Value,35 suspension 

of trading or removal,36 trading halts,37

surveillance,38 minimum price variation 

for quoting and order entry,39 and the 

information circular,40 as set forth in 

Exchange rules applicable to Managed 

Fund Shares. Moreover, at least 90% of 

the weight of the Listed Bitcoin 

Derivatives held by each Fund will 

consist of instruments that trade on 

markets that are a member of the 

Intermarket Surveillance Group (‘‘ISG’’) 

or affiliated with a member of ISG or 

with which the Exchange has in place 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices 933 

41The CFTC issued a press release on December 

1, 2017, noting the self-certifications from CFE and 

CME and highlighting the rigorous process that the 

CFTC had undertaken in its engagement with CFE 

and CME prior to the self-certification for the 

applicable Bitcoin Futures Contracts. The press 

release focused on the ongoing surveillances that 

will occur on each listing exchange, including 

surveillance based on information sharing with the 

underlying cash bitcoin exchanges as well as the 

actions that the CFTC will undertake after the 

contracts are launched, including monitoring and 

analyzing the size and development of the market, 

positions and changes in positions over time, open 

interest, initial margin requirements, and variation 

margin payments, stress testing positions, conduct 

reviews of designated contract markets, derivatives 

clearing organizations, clearing firms, and 

individual traders involved in trading and clearing 

bitcoin futures. For more information, see http://

www.cftc.gov/PressRoom/PressReleases/pr7654-17. 

42For a list of the current members and affiliate 

members of ISG, see www.isgportal.com. The 

Exchange notes that not all components of the 

Disclosed Portfolio for a Fund may trade on markets 

that are members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. At least 90% of the 

weight of the Listed Bitcoin Derivatives held by 

each Fund will consist of instruments that trade on 

markets that are a member of ISG or affiliated with 

a member of ISG or with which the Exchange has 

in place a comprehensive surveillance sharing 

agreement. 

43 15 U.S.C. 78f. 

44 15 U.S.C. 78f(b)(5). 

45See note 12, supra. 

46See note 14, supra. 

47See note 15, supra. 

a comprehensive surveillance sharing 

agreement. Information regarding 

market price and trading volume of the 

Shares will be continually available on 

a real-time basis throughout the day on 

brokers’ computer screens and other 

electronic services, and quotation and 

last sale information will be available 

via the CTA high-speed line. Quotation, 

intra-day, closing and settlement prices 

of Listed Bitcoin Derivatives will be 

readily available from their respective 

exchange or swap execution facility, as 

applicable, as well as through 

automated quotation systems, published 

or other public sources, or online 

information services such as Bloomberg 

or Reuters. Quotation, intra-day, closing 

and settlement prices of U.S. exchangelisted ETPs will be readily available 

from the listing exchange, automated 

quotation systems, published or other 

public sources, or online information 

services such as Bloomberg or Reuters. 

Quotation information for OTC Bitcoin 

Derivatives may be obtained from 

brokers and dealers who make markets 

in such instruments. Quotation, intraday, closing and settlement prices of 

Non-U.S. Component Stocks will be 

readily available from automated 

quotation systems, published or other 

public sources, or online information 

services such as Bloomberg or Reuters. 

Price information on Cash Equivalents 

and GSE Securities is available from 

major broker-dealer firms or market data 

vendors, as well as from automated 

quotation systems, published or other 

public sources, or online information 

services. 

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. 

Additionally, the Listed Bitcoin 

Derivatives will be subject to the rules 

and surveillance programs of their 

respective listing venue and the CFTC.41

Trading of the Shares through the 

Exchange will be subject to the 

Exchange’s surveillance procedures for 

derivative products, including Managed 

Fund Shares. The Exchange or FINRA, 

on behalf of the Exchange, will 

communicate as needed regarding 

trading in the Shares and the underlying 

Listed Bitcoin Derivatives with the ISG, 

other exchanges who are members or 

affiliates of the ISG, or with which the 

Exchange has entered into a 

comprehensive surveillance sharing 

agreement.42 The Exchange may also 

obtain information regarding trading in 

the spot bitcoin market via exchanges 

with which the Exchange has entered 

into a comprehensive surveillance 

sharing agreement. In addition, the 

Exchange is able to access, as needed, 

trade information for certain fixed 

income instruments reported to FINRA’s 

Trade Reporting and Compliance Engine 

(‘‘TRACE’’). The Exchange prohibits the 

distribution of material non-public 

information by its employees. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with Section 6(b) 

of the Act 43 in general and Section 

6(b)(5) of the Act 44 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 Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

meet each of the initial and continued 

listing criteria in BZX Rule 14.11(i) 

except that each Fund may hold: (i) 

Listed derivatives in a manner that does 

not comply with Rule 

14.11(i)(4)(C)(iv)(b); 45 and (ii) Non-U.S. 

Component Stocks in a manner that may 

not comply with Rule 

14.11(i)(4)(C)(i)(b)(3) 46 and (4).47 The 

Exchange, however, believes that the 

policy concerns that these rules are 

intended to address are mitigated as 

they relate to the Funds and their 

holdings for a number of reasons. 

First, the policy concerns underlying 

all three rules are mitigated by the fact 

that the Exchange believes that the 

underlying reference asset is not 

susceptible to manipulation because the 

nature of the bitcoin ecosystem makes 

manipulation of bitcoin difficult. The 

geographically diverse and continuous 

nature of bitcoin trading makes it 

difficult and prohibitively costly to 

manipulate the price of bitcoin and, in 

many instances, the bitcoin market is 

generally less susceptible to 

manipulation than the equity, fixed 

income, and commodity futures 

markets. There are a number of reasons 

this is the case, including that there is 

not inside information about revenue, 

earnings, corporate activities, or sources 

of supply; manipulation of the price on 

any single venue would require 

manipulation of the global bitcoin price 

in order to be effective; a substantial 

over-the-counter market provides 

liquidity and shock-absorbing capacity; 

bitcoin’s 24/7/365 nature provides 

constant arbitrage opportunities across 

all trading venues; and it is unlikely that 

any one actor could obtain a dominant 

market share. 

Further, bitcoin is arguably less 

susceptible to manipulation than other 

commodities that underlie ETPs; there 

may be inside information relating to 

the supply of the physical commodity 

such as the discovery of new sources of 

supply or significant disruptions at 

mining facilities that supply the 

commodity that simply are inapplicable 

as it relates to bitcoin. Further, the 

Exchange believes that the 

fragmentation across bitcoin exchanges, 

the relatively slow speed of 

transactions, and the capital necessary 

to maintain a significant presence on 

each exchange make manipulation of 

bitcoin prices through continuous 

trading activity unlikely. 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 bitcoin 

exchanges in order to take advantage of 

temporary price dislocations, thereby 


sradovich on DSK3GMQ082PROD with NOTICES
934 Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices 

48See note 41, supra. 

49See note 42, supra. 

50See note 42, supra. 

making it unlikely that there will be 

strong concentration of funds on any 

particular bitcoin exchange. As a result, 

the potential for manipulation on a 

particular bitcoin exchange would 

require overcoming the liquidity supply 

of such arbitrageurs who are effectively 

eliminating any cross-market pricing 

differences. For all of these reasons, 

bitcoin is not particularly susceptible to 

manipulation, especially as compared to 

other approved ETP reference assets. 

Second, the Exchange believes that 

the concerns on which Rule 

14.11(i)(4)(C)(iv)(b) are based related to 

ensuring that no single listed derivative 

and underlying reference asset that is 

susceptible to manipulation constitutes 

greater than 35% of the weight of the 

portfolio are further mitigated by the 

liquidity that the Exchange expects to 

exist in the market for Listed Bitcoin 

Derivatives. This belief is based on 

numerous conversations with market 

participants, issuers, and discussions 

with personnel of CFE. This expected 

liquidity in the market for Bitcoin 

Futures Contracts, the surveillance 

programs of the futures exchanges 

listing such Bitcoin Futures Contracts, 

Exchange surveillance procedures 

related to trading in the Shares, and 

CFTC oversight of the Bitcoin Futures 

Contracts, all combined with the 

difficulty in manipulating the bitcoin 

market described above will mitigate the 

concerns that Rule 14.11(i)(4)(C)(iv)(b) 

was designed to protect against and 

further prevent trading in the Shares 

from being susceptible to manipulation. 

Third, the Exchange believes that the 

market cap and liquidity of the NonU.S. Component Stocks held by the 

Funds along with a cap at 25% of each 

Fund’s total assets that can be allocated 

to Non-U.S. Component Stocks would 

mitigate the concerns which Rules 

14.11(i)(4)(C)(i)(b)(3) and (4) are 

intended to address. Any Non-U.S. 

Component Stock held by the Funds 

will have at least $100 million in market 

cap and will have a minimum global 

monthly trading volume of 250,000 

shares, or a minimum global notional 

volume traded per month of $25 

million, averaged over the last six 

months. This combination of large 

market cap with significant trading 

volume reduces the likelihood of 

manipulation of any particular security 

and the cap of 25% of the Fund’s total 

assets assures that, while the Non-U.S. 

Component Stock holdings may not 

meet the concentration and diversity 

requirements of Rules 

14.11(i)(4)(C)(i)(b)(3) and (4), 

respectively, such diversity and 

concentration requirements will not be 

met only for a limited portion of the 

portfolio. 

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. 

Additionally, the Listed Bitcoin 

Derivatives will be subject to the rules 

and surveillance programs of their 

respective listing venue and the CFTC.48

Trading of the Shares through the 

Exchange will be subject to the 

Exchange’s surveillance procedures for 

derivative products, including Managed 

Fund Shares. The Exchange or FINRA, 

on behalf of the Exchange, will 

communicate as needed regarding 

trading in the Shares and the underlying 

Listed Bitcoin Derivatives with the ISG, 

other exchanges who are members or 

affiliates of the ISG, or with which the 

Exchange has entered into a 

comprehensive surveillance sharing 

agreement.49 The Exchange may also 

obtain information regarding trading in 

the spot bitcoin market via exchanges 

with which the Exchange has entered 

into a comprehensive surveillance 

sharing agreement. In addition, the 

Exchange is able to access, as needed, 

trade information for certain fixed 

income instruments reported to TRACE. 

The Exchange prohibits the distribution 

of material non-public information by 

its employees. If the investment adviser 

to the investment company issuing 

Managed Fund Shares is affiliated with 

a broker-dealer, such investment adviser 

to the investment company shall erect a 

‘‘fire wall’’ between the investment 

adviser and the broker-dealer with 

respect to access to information 

concerning the composition and/or 

changes to such investment company 

portfolio. The Adviser is not a registered 

broker-dealer, but is affiliated with a 

broker-dealer and has implemented a 

‘‘fire wall’’ with respect to such brokerdealer regarding access to information 

concerning the composition and/or 

changes to the Fund’s portfolio. The 

Exchange may obtain information 

regarding trading in the Shares and the 

underlying futures contracts held by the 

Funds 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.50 In addition, the 

Exchange is able to access, as needed, 

trade information for certain fixed 

income instruments reported to FINRA’s 

TRACE. 

The Exchange further believes that the 

proposal is designed to prevent 

fraudulent and manipulative acts and 

practices in that the Exchange expects 

that the market for Bitcoin Futures 

Contracts will be sufficiently liquid to 

support numerous ETPs shortly after 

launch. This belief is based on 

numerous conversations with market 

participants, issuers, and discussions 

with personnel of CFE. As such, the 

Exchange believes that the expected 

liquidity in the market for Listed Bitcoin 

Derivatives combined with the 

Exchange surveillance procedures 

related to the Shares and the broader 

regulatory structure will prevent trading 

in the Shares from being susceptible to 

manipulation. 

Because of its innovative features as a 

cryptoasset, bitcoin has gained wide 

acceptance as a secure means of 

exchange in the commercial 

marketplace and has generated 

significant interest among investors. In 

less than a decade since its creation in 

2008, bitcoin has achieved significant 

market penetration, with payments giant 

PayPal and thousands of merchants and 

businesses accepting it as a form of 

commercial payment, as well as 

receiving official recognition from 

several governments, including Japan 

and Australia. Accordingly, investor 

interest in gaining exposure to bitcoin is 

increasing exponentially as well. As 

expected, the total volume of bitcoin 

transactions in the market continues to 

grow exponentially. 

Despite the growing investor interest 

in bitcoin, the primary means for 

investors to gain access to bitcoin 

exposure remains either through the 

Listed Bitcoin Derivatives or direct 

investment through bitcoin exchanges 

or over-the-counter trading. For regular 

investors simply wishing to express an 

investment viewpoint in bitcoin, 

investment through the Listed Bitcoin 

Derivatives is complex and requires 

active management and direct 

investment in bitcoin brings with it 

significant inconvenience, complexity, 

expense and risk. The Shares would 

therefore represent a significant 

innovation in the bitcoin market by 

providing an inexpensive and simple 

vehicle for investors to gain long or 

short exposure to bitcoin in a secure and 

easily accessible product that is familiar 

and transparent to investors. Such an 

innovation would help to perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest by improving 

investor access to bitcoin exposure 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices 935 

through efficient and transparent 

exchange-traded derivative products. 

In addition to improved convenience, 

efficiency and transparency, the Funds 

will also help to prevent fraudulent and 

manipulative acts and practices by 

enhancing the security afforded to 

investors as compared to a direct 

investment in bitcoin. Despite the 

extensive security mechanisms built 

into the Bitcoin Network, a remaining 

risk to owning bitcoin directly is the 

need for the holder to retain and protect 

the ‘‘private key’’ required to spend or 

sell bitcoin after purchase. If a holder’s 

private key is compromised or simply 

lost, their bitcoin can be rendered 

unavailable—i.e., effectively lost to the 

investor. This risk will be eliminated by 

the Long Bitcoin Fund because the 

exposure to bitcoin is gained through 

cash-settled Listed Bitcoin Derivatives 

that do not present any of the security 

issues that exist with direct investment 

in bitcoin. 

Additionally, the Funds may each 

hold up to an aggregate amount of 15% 

of its net assets in illiquid assets 

(calculated at the time of investment). 

Each Fund will monitor its portfolio 

liquidity on an ongoing basis to 

determine whether, in light of current 

circumstances, an adequate level of 

liquidity is being maintained, and will 

consider taking appropriate steps in 

order to maintain adequate liquidity if, 

through a change in values, net assets, 

or other circumstances, more than 15% 

of the Fund’s net assets are held in 

illiquid assets. Illiquid assets include 

assets subject to contractual or other 

restrictions on resale and other 

instruments that lack readily available 

markets as determined in accordance 

with Commission staff guidance. 

The proposed rule change is designed 

to promote just and equitable principles 

of trade and to protect investors and the 

public interest in that the Exchange will 

obtain a representation from the issuer 

of the Shares that the NAV will be 

calculated daily and that the NAV and 

the Disclosed Portfolio will be made 

available to all market participants at 

the same time. In addition, a large 

amount of information is publicly 

available regarding the Funds and the 

Shares, thereby promoting market 

transparency. Moreover, the Intraday 

Indicative Value will be disseminated 

by one or more major market data 

vendors at least every 15 seconds during 

Regular Trading Hours. On each 

business day, before commencement of 

trading in Shares during Regular 

Trading Hours, each Fund will disclose 

on its website the Disclosed Portfolio 

that will form the basis for the Fund’s 

calculation of NAV at the end of the 

business day. Pricing information will 

be available on each Fund’s website 

including: (1) The prior business day’s 

reported NAV, the Bid/Ask Price of the 

Fund, and a calculation of the premium 

and discount of the Bid/Ask Price 

against the NAV; and (2) data in chart 

format displaying the frequency 

distribution of discounts and premiums 

of the daily Bid/Ask Price against the 

NAV, within appropriate ranges, for 

each of the four previous calendar 

quarters. Additionally, information 

regarding market price and trading of 

the Shares will be continually available 

on a real-time basis throughout the day 

on brokers’ computer screens and other 

electronic services, and quotation and 

last sale information for the Shares will 

be available on the facilities of the CTA. 

The website for the Funds will include 

a form of the prospectus for the Funds 

and additional data relating to NAV and 

other applicable quantitative 

information. Trading in Shares of the 

Funds will be halted under the 

conditions specified in BZX Rule 11.18. 

Trading may also be halted because of 

market conditions or for reasons that, in 

the view of the Exchange, make trading 

in the Shares inadvisable. Finally, 

trading in the Shares will be subject to 

BZX Rule 14.11(i)(4)(B)(iv), which sets 

forth circumstances under which the 

Shares of each Fund may be halted. In 

addition, as noted above, investors will 

have ready access to information 

regarding the Fund’s holdings, the 

Intraday Indicative Value, the Disclosed 

Portfolio, and quotation and last sale 

information for the Shares. 

Information regarding market price 

and trading volume of the Shares will be 

continually available on a real-time 

basis throughout the day on brokers’ 

computer screens and other electronic 

services, and quotation and last sale 

information will be available via the 

CTA high-speed line. Quotation, intraday, closing and settlement prices of 

Listed Bitcoin Derivatives will be 

readily available from their respective 

exchange or swap execution facility, as 

applicable, as well as through 

automated quotation systems, published 

or other public sources, or online 

information services such as Bloomberg 

or Reuters. Quotation, intra-day, closing 

and settlement prices of U.S. exchangelisted ETPs will be readily available 

from the listing exchange, automated 

quotation systems, published or other 

public sources, or online information 

services such as Bloomberg or Reuters. 

Quotation information for OTC Bitcoin 

Derivatives may be obtained from 

brokers and dealers who make markets 

in such instruments. Quotation, intraday, closing and settlement prices of 

Non-U.S. Component Stocks will be 

readily available from automated 

quotation systems, published or other 

public sources, or online information 

services such as Bloomberg or Reuters. 

Price information on Cash Equivalents 

and GSE Securities is available from 

major broker-dealer firms or market data 

vendors, as well as from automated 

quotation systems, published or other 

public sources, or online information 

services. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of additional types of actively-managed 

exchange-traded product [sic] that will 

enhance competition among market 

participants, to the benefit of investors 

and the marketplace. As noted above, 

the Exchange has in place surveillance 

procedures relating to trading in the 

Shares and may obtain information via 

ISG from other exchanges that are 

members of ISG or affiliated with a 

member of ISG or with which the 

Exchange has entered into a 

comprehensive surveillance sharing 

agreement as well as trade information 

for certain fixed income instruments as 

reported to FINRA’s TRACE. At least 

90% of the weight of the Listed Bitcoin 

Derivatives held by each Fund will 

consist of instruments that will trade on 

markets that are a member of ISG or 

affiliated with a member of ISG or with 

which the Exchange has in place a 

comprehensive surveillance sharing 

agreement. In addition, as noted above, 

investors will have ready access to 

information regarding the Fund’s 

holdings, the Intraday Indicative Value, 

the Disclosed Portfolio, and quotation 

and last sale information for the Shares. 

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 additional actively-managed 

exchange-traded products that will 

enhance competition among both 

market participants and listing venues, 

to the benefit of investors and the 

marketplace. 


sradovich on DSK3GMQ082PROD with NOTICES
936 Federal Register / Vol. 83, No. 5 / Monday, January 8, 2018 / Notices 

51 17 CFR 200.30–3(a)(12). 

1CSX Transp., Inc.—Discontinuance of Serv. 

Exemption—in Clark, Floyd, Lawrence, Orange, & 

Wash. Ctys., Ind., AB 55 (Sub–No. 698X) (STB 

served Apr. 7, 2010). 

2The Board will grant a stay if an informed 

decision on environmental issues (whether raised 

by a party or by the Board’s Office of Environmental 

Analysis (OEA) in its independent investigation) 

cannot be made before the exemption’s effective 

date. See Exemption of Out-of-Serv. Rail Lines, 5 

I.C.C.2d 377 (1989). Any request for a stay should 

be filed as soon as possible so that the Board may 

take appropriate action before the exemption’s 

effective date. 

3Each OFA must be accompanied by the filing 

fee, which is currently set at $1,800. See 

Regulations Governing Fees for Servs. Performed in 

Connection with Licensing & Related Servs.—2017 

Update, EP 542 (Sub–No. 25), slip op. App. C at 20 

(STB served July 28, 2017). 

(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 self-regulatory organization 

consents, the Commission will: 

A. By order approve or disapprove the 

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–2017–021 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–2017–021. 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 will also 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–CboeBZX–2017–021 and 

should be submitted on or before 

January 29, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.51

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–00077 Filed 1–5–18; 8:45 am] 

BILLING CODE 8011–01–P 

SURFACE TRANSPORTATION BOARD 

[Docket No. AB 55 (Sub–No. 775X)] 

CSX Transportation, Inc.— 

Abandonment Exemption—in Clark, 

Floyd, Lawrence, Orange, & 

Washington Counties, Ind. 

CSX Transportation, Inc. (CSXT), has 

filed a verified notice of exemption 

under 49 CFR pt. 1152 subpart F– 

Exempt Abandonments to abandon an 

approximately 62.3-mile rail line on its 

Northern Region, Louisville Division, 

Hoosier Subdivision between milepost 

00Q 251.7, near Bedford, and milepost 

00Q 314.0, near New Albany, in Clark, 

Floyd, Lawrence, Orange, and 

Washington Counties, Ind. (the Line). 

The Line traverses United States Postal 

Service Zip Codes 47150, 47172, 47106, 

47143, 47165, 47167, 47108, 47452, 

47446, and 47421 and serves the 

stations of Orleans (milepost 00Q 262), 

Leipsic (milepost 00Q 267), 

Campbellsburg (milepost 00Q 273), 

Salem (milepost 00Q 284), Pekin 

(milepost 00Q 295), and Borden 

(milepost 00Q 300). CSXT was 

previously granted authority to 

discontinue service over the Line.1

CSXT has certified that: (1) No local 

freight traffic has moved over the Line 

for at least two years; (2) any overhead 

traffic on the Line can be rerouted over 

other lines; (3) no formal complaint 

filed by a user of rail service on the Line 

(or by a state or local government entity 

acting on behalf of such user) regarding 

cessation of service over the Line either 

is pending with the Surface 

Transportation Board (Board) or with 

any U.S. District Court or has been 

decided in favor of a complainant 

within the two-year period; and (4) the 

requirements at 49 CFR 1105.7(c) 

(environmental report), 49 CFR 1105.12 

(newspaper publication), and 49 CFR 

1152.50(d)(1) (notice to governmental 

agencies) have been met. 

As a condition to this exemption, any 

employee adversely affected by the 

abandonment shall be protected under 

Oregon Short Line Railroad— 

Abandonment Portion Goshen Branch 

Between Firth & Ammon, in Bingham & 

Bonneville Counties, Idaho, 360 I.C.C. 

91 (1979). To address whether this 

condition adequately protects affected 

employees, a petition for partial 

revocation under 49 U.S.C. 10502(d) 

must be filed. 

Provided no formal expression of 

intent to file an offer of financial 

assistance (OFA) has been received, this 

exemption will be effective on February 

7, 2018, unless stayed pending 

reconsideration. Petitions to stay that do 

not involve environmental issues,2

formal expressions of intent to file an 

OFA under 49 CFR 1152.27(c)(2),3 and 

interim trail use/rail banking requests 

under 49 CFR 1152.29 must be filed by 

January 18, 2018. Petitions to reopen or 

requests for public use conditions under 

49 CFR 1152.28 must be filed by January 

29, 2018, with the Surface 

Transportation Board, 395 E Street SW, 

Washington, DC 20423–0001. 

A copy of any petition filed with the 

Board should be sent to Louis E. 

Gitomer, Law Offices of Louis E. 

Gitomer, LLC, 600 Baltimore Avenue, 

Suite 301, Towson, MD 21204. 

If the verified notice contains false or 

misleading information, the exemption 

is void ab initio. 


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