`[Federal Register Volume 89, Number 231 (Monday, December 2, 2024)]
[Notices]
[Pages 95264-95273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28105]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101735; File No. SR-BOX-2024-27]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend Rules 
3120 (Position Limits) and 5020 (Criteria for Underlying Securities) To 
Permit Trading of iShares Bitcoin ETF Options

November 25, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 21, 2024, BOX Exchange LLC (``Exchange'' or ``BOX 
Options'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have

[[Page 95265]]

been prepared by the Exchange. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rules 3120 (Position Limits), 5020 
(Criteria for Underlying Securities) to permit trading of iShares 
Bitcoin ETF options. Additionally, the Exchange proposes to amend Rule 
5055 (FLEX Equity Options). The text of the proposed rule change is 
available from the principal office of the Exchange, at the 
Commission's Public Reference Room and also on the Exchange's internet 
website at https://rules.boxexchange.com/rulefilings.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rules 3120 (Position Limits) and 
5020 (Criteria for Underlying Securities) to permit trading of iShares 
Bitcoin ETF options on BOX. Additionally, the Exchange proposes to 
amend Rule 5055 (FLEX Equity Options). This is a competitive filing 
that is based on a proposal recently submitted by Nasdaq ISE, LLC 
(``Nasdaq ISE'') and approved by the Commission.\3\
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    \3\ See Securities Exchange Act Release No. 101128 (September 
20, 2024) (Notice of Filing of Amendment Nos. 4 and 5 and Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment Nos. 1, 4, and 5, to Permit the Listing and Trading of 
Options on the iShares Bitcoin Trust), 89 FR 78942 (September 26, 
2024) (``ISE Approval Order'').
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    The Exchange proposes to amend Rule 5020, Criteria for Underlying 
Securities, to allow the Exchange to list and trade options on iShares 
Bitcoin Trust (the ``Trust'') \4\ as an ETF deemed appropriate for 
options trading on BOX. Specifically, the Exchange proposes to amend 
Rule 5020(h) to allow BOX to list and trade options on the Trust. 
Currently, Rule 5020(h) provides that securities deemed appropriate for 
options trading shall include shares or other securities (``Exchange-
Traded Fund Shares'') that are traded on a national securities exchange 
and are defined as an ``NMS stock'' under Rule 600 of Regulation NMS 
and that (i) represent interests in registered investment companies (or 
series thereof) organized as open-end management investment companies, 
unit investment trusts or similar entities that hold portfolios of 
securities and/or financial instruments, including, but not limited to, 
stock index futures contracts, options on futures, options on 
securities and indices, equity caps, collars and floors, swap 
agreements, forward contracts, repurchase agreements and reverse 
repurchase agreements (the ``Financial Instruments'') and money market 
instruments, including, but not limited to, U.S. government securities 
and repurchase agreements (the ``Money Market Instruments'') comprising 
or otherwise based on or representing investments in broad-based 
indexes or portfolios of securities and/or Financial Instruments and 
Money Market Instruments (or that hold securities in one or more other 
registered investment companies that themselves hold such portfolios of 
securities and/or Financial Instruments and Money Market Instruments); 
or (ii) represent interests in a trust that holds a specified non-U.S. 
currency deposited with the trust or similar entity when aggregated in 
some specified minimum number may be surrendered to the trust by the 
beneficial owner to receive the specified non-U.S. currency or 
currencies and pays the beneficial owner interest and other 
distributions on the deposited non-U.S. currency or currencies, if any, 
declared and paid by the trust (``Currency Trust Shares''); or (iii) 
represent commodity pool interests principally engaged, directly or 
indirectly, in holding and/or managing portfolios or baskets of 
securities, commodity futures contracts, options on commodity futures 
contracts, swaps, forward contracts and/or options on physical 
commodities and/or non-U.S. currency (``Commodity Pool ETFs''); or (iv) 
represent interests in the SPDR[supreg] Gold Trust, the iShares COMEX 
Gold Trust, the iShares Silver Trust, the ETFS Gold Trust, the ETFS 
Silver trust, the ETFS Palladium Trust, the ETFS Platinum Trust or the 
Sprott Physical Gold Trust. In addition to the aforementioned 
requirements, Rules 5020(h)(1) and (2) must be met to list options on 
ETFs.\5\
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    \4\ On January 10, 2024, the Commission approved proposals by 
NYSE Arca, Inc., The Nasdaq Stock Market LLC, and Cboe BZX Exchange, 
Inc. to list and trade the shares of 11 bitcoin-based commodity-
based trust shares and trust units, including the iShares Bitcoin 
Trust. See Securities Exchange Act Release No. 99306 (January 10, 
2024), 89 FR 3008 (Jan. 17, 2024) (order approving File Nos. SR-
NYSEARCA-2021-90; SR-NYSEARCA-2023-44; SR-NYSEARCA-2023-58; SR-
NASDAQ-2023-016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-
CboeBZX-2023-038; SR-CboeBZX-2023-040; SR-CboeBZX-2023-042; SR-
CboeBZX-2023-044; SR-CboeBZX-2023-072) (``Bitcoin ETP Order''). The 
Exchange represents it would not list options on the Trust unless it 
satisfied all applicable criteria in Rule 5020.
    \5\ Rule 5020(h)(1) states that the Exchange-Traded Fund Shares 
either (i) meet the criteria and guidelines set forth in paragraphs 
(a) and (b) of this Rule 5020 above; or (ii) the Exchange-Traded 
Fund Shares are available for creation or redemption each business 
day from or through the issuing trust, investment company, commodity 
pool or other entity in cash or in kind at a price related to net 
asset value, and the issuer is obligated to issue Exchange-Traded 
Fund Shares in a specified aggregate number even if some or all of 
the investment assets and/or cash required to be deposited have not 
been received by the issuer, subject to the condition that the 
person obligated to deposit the investment assets has undertaken to 
deliver them as soon as possible and such undertaking is secured by 
the delivery and maintenance of collateral consisting of cash or 
cash equivalents satisfactory to the issuer of the Exchange-Traded 
Fund Shares, all as described in the Exchange-Traded Fund Shares' 
prospectus; and meet other criteria.
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Proposal
    The Exchange proposes to expand the list of ETFs that are 
appropriate for options trading on the Exchange in Rule 5020(h) to 
include the Trust.\6\
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    \6\ Specifically, the Exchange proposes to amend Rule 5020(h) to 
include the name of the Trust to enable options to be listed on the 
Trust on BOX.
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Description of the Trust 7
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    \7\ See SR-NASDAQ-2023-016 for a complete description of the 
Trust.
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    The Shares are issued by the Trust, a Delaware statutory trust. The 
Trust operates pursuant to a trust agreement (the ``Trust Agreement'') 
between the Sponsor, BlackRock Fund Advisors (the ``Trustee'') as the 
trustee of the Trust and Wilmington Trust, National Association, as 
Delaware trustee (the ``Delaware Trustee''). The Trust issues Shares 
representing fractional undivided beneficial interests in its net 
assets. The assets of the Trust consist only of Bitcoin, held by a 
custodian on behalf of the Trust except under limited circumstances 
when transferred through the Trust's prime broker temporarily 
(described below), and cash. Coinbase Custody Trust Company, LLC (the 
``Bitcoin Custodian'') is the custodian for the Trust's Bitcoin 
holdings, and

[[Page 95266]]

maintains a custody account for the Trust (``Custody Account''); 
Coinbase, Inc. (the ``Prime Execution Agent''), an affiliate of the 
Bitcoin Custodian, is the prime broker for the Trust and maintains a 
trading account for the Trust (``Trading Account''); and Bank of New 
York Mellon is the custodian for the Trust's cash holdings (the ``Cash 
Custodian'' and together with the Bitcoin Custodian, the 
``Custodians'') and the administrator of the Trust (the ``Trust 
Administrator''). Under the Trust Agreement, the Trustee may delegate 
all or a portion of its duties to any agent, and has delegated the bulk 
of the day-to-day responsibilities to the Trust Administrator and 
certain other administrative and record-keeping functions to its 
affiliates and other agents. The Trust is not an investment company 
registered under the Investment Company Act of 1940, as amended, (the 
``1940 Act'').
    The investment objective of the Trust is to reflect generally the 
performance of the price of Bitcoin. The Trust seeks to reflect such 
performance before payment of the Trust's expenses and liabilities. The 
Shares are intended to constitute a simple means of making an 
investment similar to an investment in Bitcoin through the public 
securities market rather than by acquiring, holding and trading Bitcoin 
directly on a peer-to-peer or other basis or via a digital asset 
exchange. The Shares have been designed to remove the obstacles 
represented by the complexities and operational burdens involved in a 
direct investment in Bitcoin, while at the same time having an 
intrinsic value that reflects, at any given time, the investment 
exposure to the Bitcoin owned by the Trust at such time, less the 
Trust's expenses and liabilities. Although the Shares are not the exact 
equivalent of a direct investment in Bitcoin, they provide investors 
with an alternative method of achieving investment exposure to Bitcoin 
through the public securities market, which may be more familiar to 
them.
Custody of the Trust's Bitcoin
    An investment in the Shares is backed by Bitcoin held by the 
Bitcoin Custodian on behalf of the Trust. All of the Trust's Bitcoin 
will be held in the Custody Account, other than the Trust's Bitcoin 
which is temporarily maintained in the Trading Account under limited 
circumstances, i.e., in connection with creation and redemption Basket 
\8\ activity or sales of Bitcoin deducted from the Trust's holdings in 
payment of Trust expenses or the Sponsor's fee (or, in extraordinary 
circumstances, upon liquidation of the Trust). The Custody Account 
includes all of the Trust's Bitcoin held at the Bitcoin Custodian, but 
does not include the Trust's Bitcoin temporarily maintained at the 
Prime Execution Agent in the Trading Account from time to time. The 
Bitcoin Custodian will keep all of the private keys associated with the 
Trust's Bitcoin held in the Custody Account in ``cold storage.'' \9\ 
The hardware, software, systems, and procedures of the Bitcoin 
Custodian may not be available or cost-effective for many investors to 
access directly. As provided in the ISE Approval Order, the Exchange 
believes that offering options on the Trust will benefit investors by 
providing them with an additional, relatively lower cost investing tool 
to gain exposure to spot Bitcoin as well as a hedging vehicle to meet 
their investment needs in connection with Bitcoin products and 
positions. Similar to other commodity ETFs in which options may be 
listed on BOX (e.g., SPDR[supreg] Gold Trust, the iShares COMEX Gold 
Trust, the iShares Silver Trust, the ETFS Gold Trust, the ETFS Silver 
trust, the ETFS Palladium Trust, the ETFS Platinum Trust or the Sprott 
Physical Gold Trust),\10\ the proposed ETF is a trust that essentially 
offers the same objectives and benefits to investors. Options on the 
Trust will trade in the same manner as options on other ETFs on BOX. 
Exchange Rules that currently apply to the listing and trading of all 
options on ETFs on BOX, including, for example, rules that govern 
listing criteria, expirations, exercise prices, minimum increments, 
position and exercise limits (including as proposed herein), margin 
requirements, customer accounts, and trading halt procedures will apply 
to the listing and trading of options on the Trust on BOX. Today, these 
rules apply to options on the various commodities ETFs deemed 
appropriate for options trading on BOX pursuant to Rule 5020(h)(iv). 
The Exchange's initial listing standards for ETFs on which options may 
be listed and traded on BOX will apply to the Trust. The initial 
listing standard as set forth in Rule 5020(a) provides that: Underlying 
securities with respect to which put or call options contracts are 
approved for listing and trading on the Exchange must meet the 
following criteria: (1) the security must be registered and be an ``NMS 
stock'' as defined in Rule 600 of Regulation NMS under the Exchange 
Act; and (2) the security shall be characterized by a substantial 
number of outstanding shares that are widely held and actively traded. 
Pursuant to Rule 5020, ETFs on which options may be listed and traded 
must satisfy the listing standards set forth in Rule 5020(h). 
Specifically, the Trust must meet either: (1) the criteria and 
guidelines for underlying securities set forth in Rules 5020(a) and 
(b), or (2) it must be available for creation or redemption each 
business day from or through the issuing trust, investment company, 
commodity pool or other entity in cash or in kind at a price related to 
net asset value, and the issuer is obligated to issue Exchange-Traded 
Fund Shares in a specified aggregate number even if some or all of the 
investment assets and/or cash required to be deposited have not been 
received by the issuer, subject to the condition that the person 
obligated to deposit the investment assets has undertaken to deliver 
them as soon as possible and such undertaking is secured by the 
delivery and maintenance of collateral consisting of cash or cash 
equivalents satisfactory to the issuer of the Exchange-Traded Fund 
Shares, all as described in the Exchange-Traded Fund Shares' 
prospectus, and meet other criteria. Options on the Trust will also be 
subject to the Exchange's continued listing standards for options on 
ETFs set forth in Rule 5030(h). Specifically, options approved for 
trading pursuant to Rule 5020(h) will not be deemed to meet the 
requirements for continued approval, and the Exchange shall not open 
for trading any additional series of option contracts of the class 
covering such ETFs if the ETFs are delisted from trading as provided in 
Rule 5030(b)(6) \11\ or the ETFs are halted or suspended from trading 
on their primary market.\12\ In addition, the Exchange shall consider 
the suspension of opening transactions in any series of options of the 
class covering ETFs in any of the following circumstances: (1) in the 
case of options covering Exchange-Traded Fund Shares approved pursuant 
to Rule 5020(h)(1)(i), in accordance with the terms of

[[Page 95267]]

subparagraphs (b)(1), (2), (3) and (6) of Rule 5030; \13\ (2) in the 
case of options covering Fund Shares approved pursuant to Rule 
5020(h)(1)(ii), following the initial twelve-month period beginning 
upon the commencement of trading in the Exchange-Traded Fund Shares on 
a national securities exchange and are defined as an ``NMS stock'' 
under Rule 600 of Regulation NMS, there were fewer than 50 record and/
or beneficial holders of such Exchange-Traded Fund Shares for 30 or 
more consecutive trading days; (3) the value of the index or portfolio 
of securities or non-U.S. currency, portfolio of commodities including 
commodity futures contracts, options on commodity futures contracts, 
swaps, forward contracts, options on physical commodities and/or 
Financial Instruments and Money Market Instruments, on which the 
Exchange-Traded Fund Shares are based is no longer calculated or 
available; or (4) such other event occurs or condition exists that in 
the opinion of the Exchange makes further dealing in such options on 
BOX inadvisable. Options on the Trust would be physically settled 
contracts with American-style exercise.\14\ Consistent with current 
Rule 5050, which governs the opening of options series on a specific 
underlying security (including ETFs), the Exchange will open at least 
one expiration month for options on the Trust and may also list series 
of options on the Trust for trading on a weekly,\15\ monthly,\16\ or 
quarterly \17\ basis. The Exchange may also list long-term equity 
option series (``LEAPS'') \18\ that expire from twelve to one hundred 
eighty months from the time they are listed.
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    \8\ The Trust issues and redeems Shares only in blocks of 40,000 
or integral multiples thereof. A block of 40,000 Shares is called a 
``Basket.'' These transactions take place in exchange for Bitcoin.
    \9\ The term ``cold storage'' refers to a safeguarding method by 
which the private keys corresponding to the Trust's Bitcoin are 
generated and stored in an offline manner, subject to layers of 
procedures designed to enhance security. Private keys are generated 
by the Bitcoin Custodian in offline computers that are not connected 
to the internet so that they are more resistant to being hacked.
    \10\ See Rule 5020(h)(iv).
    \11\ Rule 5030(b)(6) provides, ``The underlying security ceases 
to be an ``NMS stock'' as defined in Rule 600 of Regulation NMS 
under the Exchange Act.''
    \12\ See Rule 5030(h).
    \13\ Rules 5030(b)(1)-(3) and (6) provide, if: (1) there are 
fewer than 6,300,000 shares of the underlying security held by 
persons other than those who are required to report their security 
holdings under Section 16(a) of the Act, (2) there are fewer than 
1,600 holders of the underlying security, (3) the trading volume (in 
all markets in which the underlying security is traded) has been 
less than 1,800,000 shares in the preceding twelve (12) months, or 
(6) the underlying security ceases to be an `NMS stock' as defined 
in Rule 600 of Regulation NMS under the Exchange Act.
    \14\ See Rule 5010, Rights and Obligations of Holders and 
Writers, which provides that the rights and obligations of holders 
and writers shall be as set forth in the Rules of the Clearing 
Corporation. See also OCC Rules, Chapter VIII, which governs 
exercise and assignment, and Chapter IX, which governs the discharge 
of delivery and payment obligations arising out of the exercise of 
physically settled stock option contracts. OCC Rules can be located 
at: https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occ_rules.pdf.
    \15\ See IM-5050-6.
    \16\ See IM-5050-13.
    \17\ See IM-5050-4.
    \18\ See Rule 5070.
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    Pursuant to Rule 5050(d)(4), which governs strike prices of series 
of options on ETFs, the interval between strike prices of series of 
options on ETFs approved for options trading pursuant to Rule 5020(h) 
shall be fixed at a price per share which is reasonably close to the 
price per share at which the underlying security is traded in the 
primary market at or about the same time such series of options is 
first open for trading on the Exchange, or at such intervals as may 
have been established on another options exchange prior to the 
initiation of trading on BOX. With respect to the Short Term Options 
Series or Weekly Program, during the month prior to expiration of an 
option class that is selected for the Short Term Option Series Program, 
the strike price intervals for the related non-Short Term Option 
(``Related non-Short Term Option'') shall be the same as the strike 
price intervals for the Short Term Option.\19\ Specifically, the 
Exchange may open for trading Short Term Option Series at strike price 
intervals of (i) $0.50 or greater where the strike price is less than 
$100, and $1 or greater where the strike price is between $100 and $150 
for all option classes that participate in the Short Term Options 
Series Program; (ii) $0.50 for option classes that trade in one dollar 
increments and are in the Short Term Option Series Program; or (iii) 
$2.50 or greater where the strike price is above $150.\20\ 
Additionally, the Exchange may list series of options pursuant to the 
$1 Strike Price Interval Program,\21\ the $0.50 Strike Program,\22\ and 
the $2.50 Strike Price Program.\23\ Rule 7050 governs the minimum 
increment for bids and offers for options traded on BOX. Pursuant to 
Rule 7050, where the price of a series of options for the Trust is less 
than $3.00 the minimum increment will be $0.05, and where the price is 
$3.00 or higher, the minimum increment will be $0.10 \24\ consistent 
with the minimum increments for options on other ETFs listed on BOX. 
Any and all new series of Trust options that BOX lists will be 
consistent and comply with the expirations, strike prices, and minimum 
increments set forth in Rules 5050 and 7050, as applicable. Position 
and exercise limits for options on ETFs, including options on the 
Trust, are determined pursuant to Rules 3120 and 3140, respectively. 
Position and exercise limits for ETFs options vary according to the 
number of outstanding shares and the trading volumes of the underlying 
ETF over the past six months, where the largest in capitalization and 
the most frequently traded ETFs have an option position and exercise 
limit of 250,000 contracts (with adjustments for splits, re-
capitalizations, etc.) on the same side of the market; and smaller 
capitalization ETFs have position and exercise limits of 200,000, 
75,000, 50,000 or 25,000 contracts (with adjustments for splits, re-
capitalizations, etc.) on the same side of the market. Notwithstanding 
the position limits in Rule 3120 and exercise limits in Rule 3140, the 
Exchange proposes the position and exercise limits for the options on 
the Trust to be 25,000 contracts on the same side pursuant to proposed 
IM-3120-2. Capping the position and exercise limits at 25,000 
contracts, the lowest limits available in options, would address 
concerns related to manipulation and protection of investors as this 
number is extremely conservative for the Trust and is more than 
appropriate given its liquidity.
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    \19\ See Rule 5050(d)(6).
    \20\ See IM-5050-6.
    \21\ See IM-5050-2.
    \22\ See IM-5050-5.
    \23\ See IM-5050-3.
    \24\ Options that are eligible to participate in the Penny 
Interval Program have a minimum increment of $0.01 below $3.00 and 
$0.05 above $3.00. See Rule 7260.
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    For purposes of addressing position and exercise limits, the 
Exchange applies position and exercise limits for options for each 
underlying security and does not aggregate position and exercise 
limits. In considering the appropriate position and exercise limits for 
the Trust, the Exchange reviewed the data presented by ISE in its 
filing, specifically in Exhibit 3 of the filing,\25\ where ISE measured 
the Trust's market capitalization and ADV against other industry data 
as explained further below. The Commission should consider the position 
and exercise limits for options on the Trust exclusive of other options 
on Bitcoin. In its filing, ISE considered the Trust's market 
capitalization and ADV, and prospective position limit in relation to 
other securities. In measuring the Trust against other securities, ISE 
aggregated market capitalization and volume data for securities that 
have defined position limits utilizing data from The Options

[[Page 95268]]

Clearing Corporations (``OCC'').\26\ This pool of data took into 
consideration 3,984 options on single stock securities, excluding broad 
based ETFs.\27\ Next, ISE aggregated the data based on market 
capitalization and ADV and grouped option symbols by position limit 
utilizing statistical thresholds for ADV and market capitalization that 
were one standard deviation above the mean for each position limit 
category (i.e., 25,000, 50,000 to 65,000, 75,000, 100,000 to less than 
250,000, 250,000 to 400,000, 450,000 to 1,000,000, and greater than or 
equal to 1,000,000) (sic).\28\ Rule 3120(d) sets out position limits 
for various contracts. For example, on the Exchange like on ISE, a 
25,000 contract limit applies to those options having an underlying 
security that does not meet the requirements for a higher options 
contract limit. ISE performed an exercise to demonstrate the Trust's 
position limit relative to other options symbols in terms of market 
capitalization and ADV. For reference the market capitalization for the 
Trust was 19,789,068 billion \29\ with an ADV, for the preceding three 
months prior to August 7, 2024, of greater than 26 million shares.\30\ 
Today, by comparison, other options symbols with similar market 
capitalization and ADV have a position limit in excess of 400,000.\31\ 
Therefore, the proposed 25,000 same side position limit for options on 
the Trust is extremely conservative relative to these options symbols 
which are a full standard deviation above the mean in comparison. 
Second, ISE reviewed the Trust's data relative to the market 
capitalization of the entire Bitcoin market in terms of exercise risk 
and availability of deliverables. Utilizing data as of August 3, 2024, 
there were 19,737,193 Bitcoins in circulation.\32\ ISE took a price of 
$57,000 that equates to a market capitalization of greater than 1.125 
trillion US dollars, and applied that to a position limit of 400,000 
for options on the Trust.\33\ If a position limit of 400,000 options 
were considered (the position limit that would be typically assigned 
based upon data) the exercisable risk would represent only 6.6% of the 
outstanding shares of the Trust. The 25,000 position limit being sought 
only represents 0.4% of the outstanding shares of the Trust. Since the 
Trust has a creation and redemption process managed through the issuer, 
additionally it can be compared the position limit sought to the total 
market capitalization of the entire Bitcoin market. In this case, the 
exercisable risk for options on the Trust would be less than 0.01% of 
the market capitalization of all outstanding Bitcoin. Assuming a 
scenario where all options on the Trust's shares were exercised given 
the proposed 25,000 per same side position limit, this would have a 
virtually unnoticed impact on the entire Bitcoin market. This analysis 
demonstrates that the proposed 25,000 per same side position limit is 
also extremely conservative and more than appropriate for options on 
the Trust. Third, ISE reviewed the proposed position limit by comparing 
it to position limits for derivative products regulated by the 
Commodity Futures Trading Commission (``CFTC''). While the CFTC, 
through the relevant Designated Contract Markets, only regulates 
options positions based upon delta equivalents (creating a less 
stringent standard), ISE examined equivalent Bitcoin futures position 
limits. In particular, ISE looked at the CME Bitcoin futures contract 
\34\ that has a position limit of 2,000 futures.\35\ On August 7, 2024, 
CME Bitcoin futures settled at $55,000.\36\ Taking the position limit 
of 2,000 futures at a $5 multiplier \37\ equates to $550 million of 
notional value for Bitcoin futures. By way of comparison, on August 7, 
2024, the Trust settled at $31.19 per share, which would equate to 
17,633,857 shares of the Trust \38\ if the CME notional position limit 
were utilized. Since substantial portions of any distributed options 
portfolio are likely to be out of the money on expiration, an options 
position limit equivalent to the CME position limit for Bitcoin futures 
(considering that all options deltas are <=1.00) should be a bit higher 
than the CME implied 176,338 limit. Of note, unlike options contracts, 
CME position limits are calculated on a net futures equivalent basis by 
contract and include contracts that aggregate into one or more base 
contracts according to an aggregation ratio(s).\39\ Therefore, if a 
portfolio includes positions in options on futures, CME would aggregate 
those positions into the underlying futures contracts in accordance 
with a table published by CME on a delta equivalent value for the 
relevant spot month, subsequent spot month, single month and all month 
position limits.\40\ If a position exceeds position limits because of 
an option assignment, CME permits market participants to liquidate the 
excess position within one business day without being considered in 
violation of its rules. Additionally, if at the close of trading, a 
position that includes options exceeds position limits for futures 
contracts, when evaluated using the delta factors as of that day's 
close of trading, but does not exceed the limits when evaluated using 
the previous day's delta factors, then the position shall not 
constitute a position limit violation. Considering CME's position 
limits on futures for bitcoin, the Exchange believes that that the 
proposed 25,000 per same side position limit is conservative and more 
than appropriate for options on the Trust.
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    \25\ See Securities Exchange Act Release No. 101128 (September 
20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment Nos. 1, 4, and 5, to Permit the Listing and Trading of 
Options on the iShares Bitcoin Trust) (Exhibit 3) (``IBIT Approval 
Order'') (letter from Angela Dunn, Nasdaq ISE, LLC, to Vanessa 
Countryman, Secretary, Commission, dated August 21, 2024) (``ISE 
Letter'').
    \26\ The computations are based on OCC data from August 6, 2024. 
Data displaying zero values in market capitalization or ADV were 
removed.
    \27\ The Trust has one asset and therefore is not comparable to 
a broad based ETF where there are typically multiple components.
    \28\ See ISE Letter at 10.
    \29\ ISE acquired this figure as of August 13, 2024. See https://www.ishares.com/us/products/333011/ishares-bitcoin-trust. The 
global supply of Bitcoin grows each day Bitcoin are minted.
    \30\ See ISE Letter at 10.
    \31\ See, e.g., iShares[supreg] iBoxx[supreg] $ High Yield 
Corporate Bond ETF (``HYG'') with a market capitalization of 
13,859,235,000 dollars as of November 4, 2024. See https://www.ishares.com/us/products/239565/ishares-iboxx-high-yield-corporate-bond-etf. The Exchange notes that HYG has a position limit 
of 500,000 contracts.
    \32\ See ISE Letter at 10.
    \33\ Id.
    \34\ CME Bitcoin Futures are described in Chapter 350 of CME's 
Rulebook.
    \35\ See the Position Accountability and Reportable Level Table 
in the Interpretations & Special Notices Section of Chapter 5 of 
CME's Rulebook.
    \36\ See https://finance.yahoo.com/quote/BTC%3DF/history/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAM7ngaS6ZQS9c2Wzx7JW2IUe-_-_1FnLyr8T-Qw4jjkleHyCENfSMIEpPPt2hCzPDEryTVyB78NIwxkwFB5Fuw-jA-YiuSmYJHBriWbV6dYn91VQfzQNt3p0I2RkYLD3HhzXPwu4AP5as-_WzHNpEBon4sk5sUZXgkapMrZR--CS.
    \37\ Each bitcoin futures contract is valued at 5 bitcoins as 
defined by the CME CF Bitcoin Reference Rate (``BRR''). See CME Rule 
35001.
    \38\ See ISE Letter at 11.
    \39\ See https://www.cmegroup.com/education/courses/market-regulation/position-limits/positionlimits-aggregation-of-contracts-and-table.htm.
    \40\ Id.
---------------------------------------------------------------------------

    In analyzing the proposed position limit for options on the Trust, 
ISE also considered the supply of Bitcoin. Specifically, ISE examined 
the number of market participants with position limits that would need 
to exercise in unison to put the underlying asset under stress. In the 
case of options on the Trust, the proposed 25,000 same side position 
limit effectively restricts a market participant from holding positions 
that could be exercised in excess of 2,500,000 shares of the Trust. 
Utilizing data from August 12, 2024, the Trust had 611,040,000 shares 
outstanding, therefore 244 market participants would have to 
simultaneously exercise position limits in order to create a scenario 
that may put the underlying asset (the Trust)

[[Page 95269]]

under stress.\41\ As unlikely an occurrence as all market participants 
exercising their position limits in unison would be, if it were to 
occur, it should be noted that even such an occurrence would not likely 
put the Trust under stress as economic incentives, would induce the 
creation of more shares through the ETF creation and redemption 
process. By way of example, given that the current global supply of 
Bitcoin, the underlying asset of the Trust, is 19,789,068 \42\ and that 
each Bitcoin can currently be redeemed for 1,755 shares of the Trust, 
another 34,729,814,340 shares of the Trust could be created. To exhaust 
this supply of the Trust, 13,891 market participants would have to 
simultaneously exercise their position limit. Comparing the Trust to 
the SPDR[supreg] Gold Shares (``GLD'') ETF or the iShares Silver Trust 
(``SLV'') ETF, which have position limits of 250,000 or ten times the 
proposed position limit for the Trust as well as lower shares 
outstanding in both products,\43\ it is unjustified to mandate a 
different level of stringency with respect to a position limit for 
options on the Trust. The supply of Bitcoin does have a limit, which 
will take years to fully mint.\44\ The Exchange notes that Bitcoin is a 
viable economic alternative to traditional assets. The price of goods 
denominated by Bitcoin has actually declined. This dynamic not only 
makes a fixed supply desirable, but a necessary condition of the value 
added by this asset in the broader economy. Further, the Exchange notes 
that corporations have a limited number of outstanding shares. 
Corporations may authorize additional shares, repurchase shares or 
split their shares. Similarly, ETFs, like the Trust, may also create, 
redeem, or split shares to suit the demand of the marketplace. 
Importantly, because the supply of Bitcoin is much larger than the 
available supply of most securities and the proposed 25,000 contract 
position limit is so conservative, the Exchange believes that 
evaluating the available supply of Bitcoin in establishing a position 
limit for options on the Trust would demonstrate that the proposed 
limit is safe for investors and the market.\45\ The Trust constitutes 
less than 2% of the entire Bitcoin supply. When comparing the market 
capitalization of Bitcoin against the largest securities, Bitcoin would 
rank 7th among those securities.\46\ Further, the Exchange believes 
that its proposal to list options on the Trust with a position limit of 
25,000 on the same side is a conservative position limit that does not 
lend itself to manipulation in the market given the ample market 
capitalization and liquidity in the Trust. If we look to the liquidity 
statistics of similar instruments and their concomitant position 
limits, we are able to extrapolate a reasonable standard for arriving 
at a position limit for a new product. In this case we can look to GLD, 
SLV, and the ProShares Bitcoin Strategy ETF (``BITO''). These products 
have volume statistics and ``float'' statistics, which gauge liquidity, 
which are in line, yet slightly lower than the Trust. All three of 
these reference products have position limits of 250,000 contracts. 
These reference products are remarkably similar in nature to the Trust; 
they are exchange-traded products (``ETPs'') holding one asset in a 
trust.
---------------------------------------------------------------------------

    \41\ See https://www.ishares.com/us/products/333011/ishares-bitcoin-trust.
    \42\ This figure was acquired as of August 13, 2024. See https://www.ishares.com/us/products/333011/ishares-bitcoin-trust. The 
global supply of bitcoin grows each day bitcoin are minted.
    \43\ As of August 13, 2024, GLD had 294,000,000 shares 
outstanding and SLV had 510,200,000 shares outstanding. See https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-gold-shares-gld and 
https://www.ishares.com/us/products/239855/ishares-silver-trust-fund.
    \44\ A recent article suggested that the remaining supply will 
take over 100 years to fully mint. See Sen, Vivek. ``94% of 
Bitcoin's Supply Has Now Been Issued.'' Bitcoin Magazine, https://bitcoinmagazine.com/business/94-of-bitcoins-supply-has-now-been-issued. August 19, 2024.
    \45\ A supply consideration would likely be valuable for an 
option symbol that had far less liquidity than the Trust.
    \46\ See https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/.
---------------------------------------------------------------------------

    Further, Rule Series 10100, which governs margin requirements 
applicable to the trading of all options on BOX including options on 
ETFs, will also apply to the trading of the Trust options.
    Lastly, Rule 5055(e)(2)(i) permits the Exchange to authorize for 
trading a FLEX Equity Option class on any equity security if it may 
authorize for trading a Non-FLEX Equity Option class on that equity 
security pursuant to Rule 5020.\47\ At this time, the Exchange is not 
proposing to permit Trust options to trade as FLEX Equity Options.\48\ 
The Exchange therefore proposes to modify Rule 5055(e)(2)(i) to specify 
this exception, which will add clarity and transparency to the Exchange 
Rules.\49\
---------------------------------------------------------------------------

    \47\ See Rule 5055(e)(2)(i).
    \48\ The Exchange would be required to submit a separate rule 
filing to permit the Exchange to authorize for trading FLEX Equity 
Options on the Trust (which filing may propose changes to existing 
FLEX Equity Option position limits for such options if appropriate).
    \49\ See proposed Rule 5055(e)(2)(i).
---------------------------------------------------------------------------

    The Exchange represents that the same surveillance procedures 
applicable to all other options on other ETFs currently listed and 
traded on the Exchange will apply to options on the Trust. Also, the 
Exchange represents that it has the necessary systems capacity to 
support the new option series. The Exchange believes that its existing 
surveillance and reporting safeguards are designed to deter and detect 
possible manipulative behavior which might potentially arise from 
listing and trading options on ETFs, including the proposed Trust 
options.
    Today, the Exchange has an adequate surveillance program in place 
for options. The Exchange intends to apply those same program 
procedures to options on the Trust that it applies to the Exchange's 
other options products.\50\ The Exchange would review activity in the 
underlying Trust when conducting surveillances for market abuse or 
manipulation in the options on the Trust. Additionally, the Exchange is 
a member of the Intermarket Surveillance Group (``ISG'') under the 
Intermarket Surveillance Group Agreement. The Exchange would be able to 
obtain information regarding trading in shares of the Trust from Nasdaq 
and other markets that trade shares of the Trust through ISG. ISG 
members work together to coordinate surveillance and investigative 
information sharing in the stock, options, and futures markets. In 
addition, the Exchange has a Regulatory Services Agreement with the 
Financial Industry Regulatory Authority (``FINRA''). Pursuant to a 
multi-party 17d-2 joint plan, all options exchanges allocate regulatory 
responsibilities to FINRA to conduct certain options-related market 
surveillance that are common to rules of all options exchanges.\51\
---------------------------------------------------------------------------

    \50\ The surveillance program includes real-time patterns for 
price and volume movements and post-trade surveillance patterns 
(e.g., spoofing, marking the close, phishing).
    \51\ Section 19(g)(1) of the Act, among other things, requires 
every SRO registered as a national securities exchange or exchange 
or national securities association to comply with the Act, the rules 
and regulations thereunder, and the SRO's own rules, and, absent 
reasonable justification or excuse, enforce compliance by its 
members and persons associated with its members. See 15 U.S.C. 
78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows 
the Commission to relieve an SRO of certain responsibilities with 
respect to members of the SRO who are also members of another SRO 
(``common members''). Specifically, Section 17(d)(1) allows the 
Commission to relieve an SRO of its responsibilities to: (i) receive 
regulatory reports from such members; (ii) examine such members for 
compliance with the Act and the rules and regulations thereunder, 
and the rules of the SRO; or (iii) carry out other specified 
regulatory responsibilities with respect to such members.
---------------------------------------------------------------------------

    The underlying shares of spot Bitcoin ETPs, including the Trust, 
are also subject to safeguards related to addressing market abuse and 
manipulation. As the Commission

[[Page 95270]]

stated in its orders approving proposals of several exchanges to list 
and trade shares of spot bitcoin-based exchange-traded products 
(``Bitcoin ETP Order''): Each Exchange has a comprehensive 
surveillance-sharing agreement with the CME via their common membership 
in the Intermarket Surveillance Group. This facilitates the sharing of 
information that is available to the CME through its surveillance of 
its markets, including its surveillance of the CME bitcoin futures 
market.\52\ Given the consistently high correlation between the CME 
Bitcoin futures market and the spot Bitcoin market, as confirmed by the 
Commission through robust correlation analysis, the Commission was able 
to conclude that such surveillance sharing agreements could reasonably 
be ``expected to assist in surveilling for fraudulent and manipulative 
acts and practices in the specific context of the [Bitcoin ETPs].'' 
\53\ In light of surveillance measures related to both options and 
futures as well as the underlying Trust,\54\ the Exchange believes that 
existing surveillance procedures are designed to deter and detect 
possible manipulative behavior which might potentially arise from 
listing and trading the proposed options on the Trust.
---------------------------------------------------------------------------

    \52\ See Securities Exchange Act Release No. 99306 (January 10, 
2024), 89 FR 3008, 3009 (January 17, 2024) (File Nos. SR-NYSEArca-
2021-90; SR-NYSEArca-2023-44; SR-NYSEArca-2023-58; SR-NASDAQ-2023-
016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-CboeBZX-2023-038; 
SR-CboeBZX-2023-040; SR-CboeBZX-2023-042; SRCboeBZX-2023-044; and 
SR-CboeBZX-2023-072) (Order Granting Accelerated Approval of 
Proposed Rule Changes, as Modified by Amendments Thereto, to List 
and Trade Bitcoin-Based Commodity-Based Trust Shares and Trust 
Units).
    \53\ See Bitcoin ETP Order, 89 FR at 3010-11.
    \54\ See Securities Exchange Act Release No. 99295 (January 8, 
2024), 89 FR 2321, 2334-35 (January 12, 2024) (SR-NASDAQ-2023-016) 
(Notice of Filing of Amendment No. 1 to a Proposed Rule Change To 
List and Trade Shares of the iShares Bitcoin Trust Under Nasdaq Rule 
5711(d)).
---------------------------------------------------------------------------

    The Exchange has also analyzed its capacity and represents that it 
believes the Exchange and the Options Price Reporting Authority or 
``OPRA'' have the necessary systems capacity to handle the additional 
traffic associated with the listing of new series that may result from 
the introduction of options on the Trust up to the number of 
expirations currently permissible under the Exchange Rules. Because the 
proposal is limited to one class, the Exchange believes any additional 
traffic that may be generated from the introduction of the Trust 
options will be manageable.
    Finally, the Exchange proposes a technical amendment to Rule 
5020(h)(iv) to amend the names ``ETFS Gold Trust'' to ``abrdn Gold ETF 
Trust,'' \55\ ``ETFS Silver trust'' to ``abrdn Silver ETF Trust,'' \56\ 
``ETFS Palladium Trust'' to ``abrdn Palladium ETF Trust,'' \57\ and 
``ETFS Platinum Trust'' to ``abrdn Platinum ETF Trust.'' \58\ In 2018 
and again in 2022 these trusts were renamed. As such, the Exchange 
proposes to amend the names of the ETFs to reflect their current names.
---------------------------------------------------------------------------

    \55\ Effective October 1, 2018, ETFS Gold Trust was renamed 
Aberdeen Standard Gold ETF Trust. See https://www.sec.gov/Archives/edgar/data/1450923/000138713118005292/ex10-2.htm. Effective March 
31, 2022, Aberdeen Standard Gold ETF Trust was renamed abrdn Gold 
ETF Trust. See https://www.sec.gov/Archives/edgar/data/1450923/000138713122003628/ex10-2.htm.
    \56\ Effective October 1, 2018 ETFS Silver Trust was renamed 
Aberdeen Standard Silver ETF Trust. See https://www.sec.gov/Archives/edgar/data/1450922/000138713118005294/ex10-2.htm. Effective 
March 31, 2022 Aberdeen Standard Silver ETF Trust was renamed abrdn 
Silver ETF Trust. See https://www.sec.gov/Archives/edgar/data/1450922/000138713122003632/ex10-2.htm.
    \57\ Effective October 1, 2018 ETFS Palladium Trust was renamed 
Aberdeen Standard Palladium ETF Trust. https://www.sec.gov/Archives/edgar/data/1459862/000138713118005304/ex10-2.htm. Effective March 
31, 2022 Aberdeen Standard Palladium ETF Trust was renamed abrdn 
Palladium ETF Trust. See https://www.sec.gov/Archives/edgar/data/1459862/000138713122003629/ex10-2.htm.
    \58\ Effective October 1, 2018 ETFS Platinum Trust was renamed 
Aberdeen Standard Platinum ETF Trust. See https://www.sec.gov/Archives/edgar/data/1460235/000138713118005301/ex10-2.htm. Effective 
March 31, 2022 Aberdeen Standard Platinum ETF Trust was renamed 
abrdn Platinum ETF Trust. See https://www.sec.gov/Archives/edgar/data/1460235/000138713122003633/ex10-2.htm.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\59\ in general, and Section 6(b)(5) of the Act,\60\ 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.
---------------------------------------------------------------------------

    \59\ 15 U.S.C. 78f(b).
    \60\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes that the proposal to list and 
trade options on the Trust will remove impediments to and perfect the 
mechanism of a free and open market and a national market system and, 
in general, protect investors because offering options on the Trust 
will provide investors with a greater opportunity to realize the 
benefits of utilizing options on an ETF based on spot Bitcoin, 
including cost efficiencies and increased hedging strategies. The 
Exchange believes that offering options on a competitively priced ETF 
based on spot Bitcoin will benefit investors by providing them with an 
additional, relatively lower cost risk management tool allowing them to 
manage, more easily, their positions, and associated risks, in their 
portfolios in connection with exposure to spot Bitcoin. Today, BOX 
lists options on other commodity ETFs structured as a trust, which 
essentially offer the same objectives and benefits to investors, and 
for which the Exchange has not identified any issues with the continued 
listing and trading of options on those ETFs. The Exchange also 
believes the proposal to permit options on the Trust will remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because options on the Trust will comply with 
current Exchange Rules. As discussed above, options on the Trust must 
satisfy the initial listing standards and continued listing standards 
currently in the Exchange Rules, applicable to options on all ETFs, 
including options on other commodity ETFs already deemed appropriate 
for options trading on BOX pursuant to Rule 5020(h). Further, Exchange 
Rules that currently govern the listing and trading of options on ETFs, 
including permissible expirations, strike prices, minimum increments, 
position and exercise limits (including as proposed herein), and margin 
requirements will govern the listing and trading of options on the 
Trust. The proposed position and exercise limits for options on the 
Trust is 25,000 contracts. These position and exercise limits are the 
lowest position and exercise limits available in the options industry, 
are extremely conservative and more than appropriate given the Trust's 
market capitalization, average daily volume, and high number of 
outstanding shares. The proposed position limit, and exercise limit, is 
consistent with the Act as it addresses concerns related to 
manipulation and protection of investors because the position limit 
(and exercise limit) is extremely conservative and more than 
appropriate given the Trust is actively traded. In support of the 
proposed position and exercise limits for options on the Trust of 
25,000 contracts, the Exchange is citing the in depth analysis ISE did 
in its filing. As noted above, in the IBIT Approval Order, ISE 
considered the: (i) Trust's market

[[Page 95271]]

capitalization and ADV, and prospective position limit in relation to 
other securities; (ii) market capitalization of the entire Bitcoin 
market in terms of exercise risk and availability of deliverables; 
(iii) proposed position limit by comparing it to position limits for 
derivative products regulated by the CFTC; and (iv) supply of Bitcoin. 
Based on the Exchange's review of IBIT Approval Order, the Exchange 
believes that setting position and exercise limits for options on the 
Trust of 25,000 contracts is more than appropriate for the Trust. The 
proposed position and exercise limits reasonably and appropriately 
balance the liquidity provisioning in the market against the prevention 
of manipulation. The Exchange believes these proposed limits are 
effectively designed to prevent an individual customer or entity from 
establishing options positions that could be used to manipulate the 
market of the underlying as well as the Bitcoin market.\61\
---------------------------------------------------------------------------

    \61\ See Securities Exchange Act Release No. 39489 (December 24, 
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change to exclude options 
on the Trust from being eligible for trading as FLEX Equity Options is 
consistent with the Act because, without this prohibition, trading a 
FLEX Equity Option in the Trust would otherwise establish different 
position and exercise limits than those proposed herein.\62\
---------------------------------------------------------------------------

    \62\ The Exchange would need to submit a separate rule filing to 
permit the Exchange to authorize for trading FLEX Equity Options on 
the Trust (which filing may propose changes to existing FLEX Equity 
Option position limits for such options if appropriate).
---------------------------------------------------------------------------

    The Exchange represents that BOX has the necessary systems capacity 
to support options on the Trust. The Exchange believes that its 
existing surveillance and reporting safeguards are designed to deter 
and detect possible manipulative behavior which might arise from 
listing and trading options on ETFs, including the Trust options.
    Today, the Exchange has an adequate surveillance program in place 
for options. The Exchange intends to apply those same program 
procedures to options on the Trust that it applies to the Exchange's 
other options products.\63\ The Exchange will review activity in the 
underlying Trust when conducting surveillances for market abuse or 
manipulation in the options on the Trust. Additionally, the Exchange is 
a member of the ISG under the Intermarket Surveillance Group Agreement. 
ISG members work together to coordinate surveillance and investigative 
information sharing in the stock, options, and futures markets. The 
Exchange will be able to obtain information from Nasdaq, LLC and other 
markets through ISG. In addition, the Exchange has a Regulatory 
Services Agreement with FINRA. Pursuant to a multi-party 17d-2 joint 
plan, all options exchanges allocate regulatory responsibilities to 
FINRA to conduct certain options-related market surveillance that are 
common to rules of all options exchanges.\64\
---------------------------------------------------------------------------

    \63\ The surveillance program includes real-time patterns for 
price and volume movements and post-trade surveillance patterns 
(e.g., spoofing, marking the close, phishing).
    \64\ Section 19(g)(1) of the Act, among other things, requires 
every SRO registered as a national securities exchange or national 
securities association to comply with the Act, the rules and 
regulations thereunder, and the SRO's own rules, and, absent 
reasonable justification or excuse, enforce compliance by its 
members and persons associated with its members. See 15 U.S.C. 
78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows 
the Commission to relieve an SRO of certain responsibilities with 
respect to members of the SRO who are also members of another SRO 
(``common members''). Specifically, Section 17(d)(1) allows the 
Commission to relieve an SRO of its responsibilities to: (i) receive 
regulatory reports from such members; (ii) examine such members for 
compliance with the Act and the rules and regulations thereunder, 
and the rules of the SRO; or (iii) carry out other specified 
regulatory responsibilities with respect to such members.
---------------------------------------------------------------------------

    The underlying shares of spot bitcoin ETPs, including the Trust, 
are also subject to safeguards related to addressing market abuse and 
manipulation. As the Commission stated in Bitcoin ETP Order:
    Each Exchange has a comprehensive surveillance-sharing agreement 
with the CME via their common membership in the Intermarket 
Surveillance Group. This facilitates the sharing of information that is 
available to the CME through its surveillance of its markets, including 
its surveillance of the CME bitcoin futures market.\65\
---------------------------------------------------------------------------

    \65\ See supra note 4.
---------------------------------------------------------------------------

    Given the consistently high correlation between the CME Bitcoin 
futures market and the spot Bitcoin market, as confirmed by the 
Commission through robust correlation analysis, the Commission was able 
to conclude that such surveillance sharing agreements could reasonably 
be ``expected to assist in surveilling for fraudulent and manipulative 
acts and practices in the specific context of the [Bitcoin ETPs].'' 
\66\
---------------------------------------------------------------------------

    \66\ See Bitcoin ETP Order, 89 FR at 3010-11.
---------------------------------------------------------------------------

    In light of surveillance measures related to both options and 
futures as well as the underlying Trust,\67\ the Exchange believes that 
existing surveillance procedures are designed to deter and detect 
possible manipulative behavior which might potentially arise from 
listing and trading the proposed options on the Trust. Further, the 
Exchange represents that it will implement any new surveillance 
procedures it deems necessary to effectively monitor the trading of 
options on the Trust.
---------------------------------------------------------------------------

    \67\ See Securities Exchange Act Release No. 99295 (January 8, 
2024), 89 FR 2321, 2334-35 (January 12, 2024) (SR-NASDAQ-2023-016) 
(Notice of Filing of Amendment No. 1 to a Proposed Rule Change To 
List and Trade Shares of the iShares Bitcoin Trust Under Nasdaq Rule 
5711(d)).
---------------------------------------------------------------------------

    Finally, the Commission has previously approved the listing and 
trading of options on other commodity ETFs structured as a trust, such 
as SPDR[supreg] Gold Trust,\68\ the iShares COMEX Gold Trust \69\ the 
iShares Silver Trust,\70\ the ETFS Gold Trust,\71\ and the ETFS Silver 
Trust.\72\
---------------------------------------------------------------------------

    \68\ See Securities Exchange Act Release No. 57897 (May 30, 
2008), 73 FR 32061 (June 5, 2008) (SR-Amex-2008-15; SR-CBOE-2005-11; 
SR-ISE-2008-12; SR-NYSEArca-2008-52; and SR-Phlx-2008-17) (Order 
Granting Approval of a Proposed Rule Change, as Modified, and Notice 
of Filing and Order Granting Accelerated Approval of Proposed Rule 
Changes, as Modified, Relating to Listing and Trading Options on the 
SPDR Gold Trust).
    \69\ See Securities Exchange Act Release No. 59055 (December 4, 
2008), 73 FR 75148 (December 10, 2008) (SR-Amex-2008-68; SR-BSE-
2008-51; SR-CBOE-2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and 
SR-Phlx-2008-58) (Notice of Filing and Order Granting Accelerated 
Approval of Proposed Rule Changes Relating to the Listing and 
Trading Options on Shares of the iShares COMEX Gold Trust and the 
iShares Silver Trust).
    \70\ Id.
    \71\ See Securities Exchange Act Release No. 61483 (February 3, 
2010), 75 FR 6753 (February 10, 2010) (SR-CBOE-2010-007; SR-ISE-
2009-106; SR-NYSEAmex-2009-86; and SR-NYSEArca-2009-110) (Order 
Granting Approval of Proposed Rule Changes and Notice of Filing and 
Order Granting Accelerated Approval of a Proposed Rule Change 
Relating to Listing and Trading Options on the ETFS Gold Trust and 
the ETFS Silver Trust).
    \72\ Id.
---------------------------------------------------------------------------

    Further, the Exchange's proposal to amend the names ``ETFS Gold 
Trust'' to ``abrdn Gold ETF Trust,'' ``ETFS Silver trust'' to ``abrdn 
Silver ETF Trust,'' ``ETFS Palladium Trust'' to ``abrdn Palladium ETF 
Trust,'' and ``ETFS Platinum Trust'' to ``abrdn Platinum ETF Trust'' in 
Rule 5020(h)(iv) is consistent with the Act and the protection of 
investors as this amendment reflects the current names of these 
products.
    The Exchange notes that the proposed rule change is substantively 
the same as a rule change proposed by Nasdaq ISE which the Commission 
recently approved.\73\
---------------------------------------------------------------------------

    \73\ See supra note 3.
---------------------------------------------------------------------------

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 not necessary or appropriate in 
furtherance

[[Page 95272]]

of the purposes of the Act. In this regard and as indicated above, the 
Exchange notes that the rule change is being proposed as a competitive 
response to a filing submitted by Nasdaq ISE that was recently approved 
by the Commission.\74\
---------------------------------------------------------------------------

    \74\ Id.
---------------------------------------------------------------------------

    The Exchange does not believe that the proposed rule change will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act as options on the 
Trust will be subject to initial listing standards and continued 
listing standards the same as other options on ETFs listed on BOX. 
Further, options on the Trust will be subject to Exchange Rules that 
currently govern the listing and trading of options on ETFs, including 
permissible expirations, strike prices, minimum increments, position 
and exercise limits (including as proposed to modify herein), and 
margin requirements. Options on the Trust will be equally available to 
all market participants who wish to trade such options. Also, and as 
stated above, the Exchange already lists options on other commodity 
ETFs structured as a trust. The Exchange does not believe that the 
proposal to list and trade options on the Trust will impose any burden 
on intermarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. To the extent that permitting 
options on the Trust to trade on BOX may make BOX a more attractive 
marketplace to market participants, such market participants are free 
to elect to become market participants on BOX. Additionally, other 
options exchanges are free to amend their listing rules, as applicable, 
to permit them to list and trade options on the Trust. The Exchange 
believes that the proposed rule change may relieve any burden on, or 
otherwise promote, competition as it is designed to increase 
competition for order flow on BOX in a manner that is beneficial to 
investors by providing them with a lower-cost option to hedge their 
investment portfolios. The Exchange notes that it operates in a highly 
competitive market in which market participants can readily direct 
order flow to competing venues that offer similar products. Ultimately, 
the Exchange believes that offering options on the Trust for trading on 
BOX will promote competition by providing investors with an additional, 
relatively low-cost means to hedge their portfolios and meet their 
investment needs in connection with spot Bitcoin prices and Bitcoin 
related products and positions.
    Additionally, the Exchange's proposal to amend the names ``ETFS 
Gold Trust'' to ``abrdn Gold ETF Trust,'' ``ETFS Silver trust'' to 
``abrdn Silver ETF Trust,'' ``ETFS Palladium Trust'' to ``abrdn 
Palladium ETF Trust,'' and ``ETFS Platinum Trust'' to ``abrdn Platinum 
ETF Trust'' in Rule 5020(h)(iv) does not impose an undue burden on 
competition as this amendment reflects the current names of these 
products.
    Finally, the proposed rule change to exclude options on the Trust 
from being eligible for trading as FLEX Equity Options does not impose 
an undue burden on competition as no BOX Participant will be able to 
transact a FLEX Equity Option on the Trust.

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 written comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \75\ and Rule 19b-
4(f)(6) thereunder.\76\
---------------------------------------------------------------------------

    \75\ 15 U.S.C. 78s(b)(3)(A).
    \76\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Commission waives this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) \77\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The 
Commission previously approved the listing of options on the shares of 
the Trust.\78\ The Exchange has provided information regarding the 
underlying Trust, including, among other things, information regarding 
trading volume, the number of beneficial holders, and the market 
capitalization of the Trust. The proposal also establishes position and 
exercise limits for options on the Trust and provides information 
regarding the surveillance procedures that will apply to options on the 
Trust. In addition, the proposal updates the names of certain 
commodity-based trusts, as described above, which will ensure that the 
Exchange's rules identify these trusts by their current names. The 
Commission believes that waiver of the operative delay could benefit 
investors by providing an additional venue for trading Bitcoin Fund 
options and helping to ensure that the accuracy of the Exchange's 
rules. Therefore, the Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Accordingly, the Commission hereby waives the 30-day 
operative delay and designates the proposed rule change operative upon 
filing.\79\
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    \77\ 17 CFR 240.19b-4(f)(6)(iii).
    \78\ See supra note 3.
    \79\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BOX-2024-27 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-BOX-2024-27. 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

[[Page 95273]]

only one method. The Commission will post all comments on the 
Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
p.m. Copies of the filing also will be available for inspection and 
copying at the principal office of the Exchange. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to file number SR-BOX-2024-27 and should be submitted on 
or before December 23, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\80\
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    \80\ 17 CFR 200.30-3(a)(12), (59).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-28105 Filed 11-29-24; 8:45 am]
BILLING CODE 8011-01-P`