```

[Federal Register Volume 89, Number 232 (Tuesday, December 3, 2024)]
[Notices]
[Pages 95834-95842]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28341]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101773; File No. SR-BOX-2024-29]

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 Options Trading on Bitcoin Funds

November 27, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4thereunder,\2\ notice is hereby given that 
on November 25, 2024, BOX Exchange LLC (``Exchange'') 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.
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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 proposes to amend Rules 3120 
(Position Limits), 5020 (Criteria for Underlying Securities), and 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 options trading on 
the Fidelity Wise Origin Bitcoin Fund (the ``Fidelity Fund'') and the 
ARK 21Shares Bitcoin ETF (the ``ARK 21 Fund'' and, with the Fidelity 
Fund, the ``Bitcoin Funds'').\3\ Additionally, the Exchange proposes to 
amend Rule 5055 (FLEX Equity Options). Specifically, the Exchange 
proposes to amend Rule 5020(h) to allow the Exchange to list and trade 
options on the Bitcoin Funds.\4\ This is a competitive filing that is 
based on a proposal recently submitted by Cboe Exchange, Inc. 
(``CBOE'') and approved by the Commission.\5\
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    \3\ See Securities Exchange Act Release No. 99306 (January 10, 
2024), 89 FR 3008, 3009 (January 17, 2024) (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) 
(``Bitcoin ETP Approval Order'').
    \4\ See proposed Rule 5020(h).
    \5\ See Securities Exchange Act Release No. 101387 (October 18, 
2024), 89 FR 84948 (October 24, 2024) (Notice of Filing of Amendment 
Nos. 2 and 3 and Order Granting Accelerated Approval of a Proposed 
Rule Change, as Modified by Amendment Nos. 2 and 3, to Permit the 
Listing and Trading of Options on Bitcoin Exchange-Traded Funds) 
(SR-CBOE-2024-035, as amended) (``CBOE Approval Order'').
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    As discussed herein and as provided in the CBOE Approval Order, the 
Exchange believes options on the Bitcoin Funds would permit hedging, 
and allow for more liquidity, better price efficiency, and less 
volatility with respect to the underlying Funds. Further, permitting 
the listing of such options would enhance the transparency and 
efficiency of markets in these and correlated products. Rule 5020(h) 
provides that, subject to certain other criteria set forth in the Rule, 
securities deemed appropriate for options trading include Exchange-
Traded Fund Shares (or ETFs), that represent certain types of interests 
\6\ and exchange-traded products (``ETPs'')

[[Page 95835]]

structured as trusts that hold precious metals (which are deemed 
commodities).\7\ Like ETPs backed by precious metals (i.e., 
commodities), the Exchange proposes to allow options trading on the 
Bitcoin Funds that hold Bitcoin--which is also deemed a commodity.\8\ 
The Bitcoin Funds are structured as trusts that hold Bitcoin. Like ETFs 
and ETPs currently deemed appropriate for options trading, the 
investment objective of each Bitcoin Fund trust is for its shares to 
reflect the performance of Bitcoin (less the expenses of the trust's 
operations), offering investors an opportunity to gain exposure to 
Bitcoin without the complexities of Bitcoin delivery. Each Bitcoin 
Fund's shares represent units of fractional undivided beneficial 
interest in the trust, the assets of which consist principally of 
Bitcoin and are designed to track Bitcoin or the performance of the 
price of Bitcoin and offer access to the Bitcoin market.\9\ The Bitcoin 
Funds provide investors with cost-efficient alternatives that allow a 
level of participation in the Bitcoin market through the securities 
market. The Exchange believes each Bitcoin Fund satisfies the 
Exchange's initial listing standards set forth in Rule 5020(a).\10\ The 
Exchange notes that the Bitcoin Funds also satisfy the listing standard 
applied to ETFs traded on the Exchange that they be available for 
creation and redemption each business day as set forth in Rule 
5020(h).\11\ First, each of the Bitcoin Funds satisfy the criteria and 
guidelines set forth in Rule 5020(a). Pursuant to Rule 5020(a), a 
security on which options may be listed and traded on the Exchange must 
be duly registered (with the Commission) and be an NMS stock (as 
defined in Rule 600 of Regulation NMS under the Act) and be 
characterized by a substantial number of outstanding shares that are 
widely held and actively traded.\12\ Each of the Bitcoin Funds is an 
NMS Stock as defined in Rule 600 of Regulation NMS under the Act.\13\
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    \6\ See Rule 5020(h), which permits options trading on ETFs that 
are traded on a national securities exchange and are defined as an 
``NMS stock'' in 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 abrdn 
Gold ETF Trust, the abrdn Silver ETF Trust, the abrdn Palladium ETF 
Trust, the abrdn Platinum ETF Trust, the Sprott Physical Gold Trust, 
the iShares Bitcoin Trust, the Grayscale Bitcoin Trust, the 
Grayscale Bitcoin Mini Trust or the Bitwise Bitcoin ETF; provided 
that all of the conditions in Rules 5020(h)(1) and (2) are met.
    \7\ See Rule 5020(h) (permitting the listing and trading of 
options on certain ETPs backed by precious metals).
    \8\ See proposed Rule 5020(h).
    \9\ The trust may include minimal cash.
    \10\ Rule 5020(a) provides for guidelines to be used by the 
Exchange when evaluating potential underlying securities for 
Exchange option transactions.
    \11\ Rule 5020(h)(1) requires that ETFs must be available for 
creation or redemption each business day from or through the issuer 
in cash or in kind at a price related to net asset value, and the 
issuer must be obligated to issue ETFs in a specified aggregate 
number even if some or all of the investment assets required to be 
deposited have not been received by the issuer, subject to the 
condition that the person obligated to deposit the investments has 
undertaken to deliver the investment assets 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, as provided in the respective prospectus.
    \12\ The criteria and guidelines for a security to be considered 
widely held and actively traded are set forth in Rule 5020(b), 
subject to exceptions.
    \13\ An ``NMS stock'' means any NMS security other than an 
option, and an ``NMS security'' means any security or class of 
securities for which transaction reports are collected, processed, 
and made available pursuant to an effective transaction reporting 
plan (or an effective national market system plan for reporting 
transaction in listed options). See 17 CFR 242.600(b)(64) 
(definition of ``NMS security'') and (65) (definition of ``NMS 
stock'').
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    As provided in the CBOE Approval Order, each Bitcoin Fund is 
characterized by a substantial number of outstanding shares that are 
widely held and actively traded. Specifically, as shown in the CBOE 
Approval Order, each of the Bitcoin Funds had significantly more than 
7,000,000 shares outstanding (approximately 29 and 6.5 times that 
amount, respectively), which is the minimum number of shares of a 
corporate stock that the Exchange generally requires to list options on 
that stock pursuant to Rule 5020(b). The Exchange believes this 
demonstrates that each Bitcoin Fund is characterized by a substantial 
number of outstanding shares.
    Further, as provided in the CBOE Approval Order, each Bitcoin Fund 
has significantly more than 2,000 beneficial holders (approximately 140 
and 35 times more, respectively), which is the minimum number of 
holders the Exchange generally requires for corporate stock in order to 
list options on that stock pursuant to Rule 5020(b)(2). Therefore, the 
Exchange believes the shares of each Bitcoin Fund are widely held.
    The Exchange also believes the shares of each Bitcoin Fund are 
actively traded. As provided in the CBOE Approval Order, even though 
these Bitcoin Funds have been trading for less than one year, the 
trading volume for each is substantially higher than 2,400,000 shares 
(between roughly 464 and 124 times that amount), which is the minimum 
12-month volume the Exchange generally requires for a security in order 
to list options on that security as set forth in Rule 5020(b).
    In addition to satisfying the Exchange's initial listing standards, 
options on Bitcoin Funds will be subject to the Exchange's continued 
listing standards as set forth in Rule 5030(h). Pursuant to Rule 
5030(b), the Exchange will not open for trading any additional series 
of option contracts covering a fund traded on the Exchange if such fund 
ceases to be an ``NMS stock'' as provided for in Rule 5030(a) or the 
fund is halted from trading on its primary market.\14\ Additionally, 
options on funds traded on the Exchange may be subject to the 
suspension of opening transactions as follows: (1) the fund no longer 
meets the terms of Rule 5030(b); (2) following the initial twelve-month 
period beginning upon the commencement of trading of the fund, there 
are fewer than 50 record and/or beneficial holders of the fund for 30 
or more consecutive trading days; (3) the value of the underlying 
commodity 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 on BOX inadvisable.
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    \14\ See Rule 5030(h).
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    Options on each Bitcoin Fund will be physically settled contracts 
with American-style exercise.\15\ Consistent with Rule 5050, which 
governs the opening of options series on a specific underlying security 
(including ETFs and ETPs), BOX will open at least one expiration month 
for options on each Bitcoin Fund \16\ at the commencement of trading on 
the Exchange and may also list series of options on Bitcoin Funds for 
trading on a weekly,\17\ monthly,\18\ or

[[Page 95836]]

quarterly \19\ basis. BOX may also list long-term equity option series 
(``LEAPS'') that expire from twelve to one-hundred eighty months from 
the time they are listed.\20\ Pursuant to IM-5050-1(b), which governs 
strike prices of series of options on ETFs, the interval between strike 
prices of series of options on Bitcoin Funds will be $1 or greater when 
the strike price is $200 or less and $5 or greater where the strike 
price is over $200.\21\ Additionally, BOX may list series of options 
pursuant to the $1 Strike Price Interval Program,\22\ the $0.50 Strike 
Program,\23\ and the $2.50 Strike Price Program.\24\ Pursuant to Rule 
7050, where the price of a series of a Bitcoin Fund option 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.\25\ Any and all 
new series of Bitcoin Fund 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. Further, the Exchange 
notes that Rule Series 10100, which governs margin requirements 
applicable to the trading of all options on BOX, including options on 
ETFs and ETPs, will also apply to the trading of Bitcoin Fund options. 
Other examples of the Exchange Rules that currently apply to all 
options traded on BOX, include Rules that govern listing criteria, 
customer accounts, and trading halt procedures.
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    \15\ See Rule 5010 (Rights and Obligations of Holders and 
Writers), which provides that the rights and obligations of holders 
and writers of option contracts of any class of options dealt in on 
the Exchange 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/occrules.pdf.
    \16\ See Rule 5050(b). The standard expirations are subject to 
certain listing criteria for underlying securities described within 
Rule 5020. Standard listings expire the third Friday of the month. 
The term ``expiration date'' (unless separately defined elsewhere in 
the OCC By-Laws), when used in respect of an option contract 
(subject to certain exceptions), means the third Friday of the 
expiration month of such option contract, or if such Friday is a day 
on which the exchange on which such option is listed is not open for 
business, the preceding day on which such exchange is open for 
business. See OCC By-Laws Article I, Section 1. Pursuant to Rule 
5050(c), additional series of options of the same class may be 
opened for trading on the Exchange when the Exchange deems it 
necessary to maintain an orderly market, to meet customer demand or 
when the market price of the underlying stock moves more than five 
strike prices from the initial exercise price or prices. New series 
of options on an individual stock may be added until the beginning 
of the month in which the options contract will expire. Due to 
unusual market conditions, the Exchange, in its discretion, may add 
a new series of options on an individual stock until the close of 
trading on the business day prior to expiration.
    \17\ See IM-5050-6.
    \18\ See IM-5050-13.
    \19\ See IM-5050-4.
    \20\ See Rule 5070.
    \21\ The Exchange notes that for options listed pursuant to the 
Short Term Option Series Program, the Monthly Options Series 
Program, and the Quarterly Options Series Program, IM-5050-6, IM-
5050-13, and IM-5050-4, specifically set forth intervals between 
strike prices on Quarterly Options Series, Short Term Option Series, 
and Monthly Options Series, respectively.
    \22\ See IM-5050-2.
    \23\ See IM-5050-5.
    \24\ See IM-5050-3.
    \25\ If options on a Bitcoin Fund are eligible to participate in 
the Penny Interval Program, the minimum increment of $0.01 below 
$3.00 and $0.05 above $3.00 would apply. See Rule 7050(a)(3). See 
also Rule 7260 (which describes the requirements for the Penny 
Interval Program).
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    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.\26\ At this time, the Exchange is not proposing to permit 
Bitcoin Fund options to trade as FLEX Equity Options.\27\ The Exchange 
therefore proposes to modify Rule 5055(e)(2)(i) to specify this 
exception, which will add clarity and transparency to Exchange 
Rules.\28\
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    \26\ See Rule 5055(e)(2)(i).
    \27\ The Exchange would be required to submit a separate rule 
filing to permit the Exchange to authorize for trading FLEX Equity 
Options on the Bitcoin Funds (which filing may propose changes to 
existing FLEX Equity Option position limits for such options if 
appropriate).
    \28\ See proposed Rule 5055(e)(2)(i).
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Position and Exercise Limits
    CBOE's Approval Order stated that the position and exercise limits 
for Bitcoin Funds shall be 25,000 contracts. At this time, the Exchange 
proposes to amend IM-3120-2 to similarly note that Bitcoin Fund options 
position limits shall be 25,000 contracts to mirror CBOE's Approval 
Order. Rule 3140 provides that the exercise limits shall be determined 
in the manner described in Rule 3120, therefore the exercise limits 
would also be 25,000 contracts.
    As provided in the CBOE Approval Order, these proposed position and 
exercise limits were determined considering, among other things, the 
approximate six-month average daily volume (``ADV'') and outstanding 
shares of each underlying Bitcoin Fund (which as discussed above 
demonstrate that each Bitcoin Fund is widely held and actively traded 
and thus justify these conservatively proposed position limits).
    As provided in the CBOE Approval Order, comparing current position 
and exercise limits of options on ETFs with outstanding shares 
comparable to those of each Bitcoin Fund, demonstrates the proposed 
limit to be significantly lower (between two and ten times lower) than 
the average limits of the options on the other ETFs. As discussed 
above, the Bitcoin Funds are actively held and widely traded: (1) each 
Bitcoin Fund (as of August 7, 2024) had significantly more than 
7,000,000 shares outstanding, which is the minimum number of shares of 
a corporate stock that the Exchange generally requires to list options 
on that stock pursuant to Rule 5020(b)(1); (2) each Bitcoin Fund (as of 
the dates listed above) had significantly more than 2,000 beneficial 
holders, which is the minimum number of holders the Exchange generally 
requires for corporate stock in order to list options on that stock 
pursuant to Rule 5020(b)(2); and (3) each Bitcoin Fund had a six-month 
trading volume substantially higher than 2,400,000 shares, which is the 
minimum 12-month volume the Exchange generally requires for a security 
in order to list options on that security as set forth in Rule 
5020(b)(4).
    As provided in the CBOE Approval Order, if a market participant 
held the maximum permissible options positions in one of the Bitcoin 
Fund options and exercised all of them at the same time, that market 
participant would control a small percentage of the outstanding shares 
of the underlying Bitcoin Fund.
    Rule 3120(d) provides two methods of qualifying for a position 
limit tier above 25,000 option contracts. The first method is based on 
six-month trading volume in the underlying security, and the second 
method is based on slightly lower six-month trading volume and number 
of shares outstanding in the underlying security. As provided in the 
CBOE Approval Order, the equivalent shares represented by the proposed 
position and exercise limits for each Bitcoin Fund as a percentage of 
outstanding shares of the underlying Bitcoin Fund is significantly 
lower than the percentage for the lowest possible position limit for 
equity options of 25,000 (under 6% compared to 40%) and is lower than 
that percentage for each current position limit bucket.\29\
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    \29\ As these percentages are based on the minimum number of 
outstanding shares an underlying security must have to qualify for 
the applicable position limit, these are the highest possible 
percentages that would apply to any option subject to that position 
and exercise limit.
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    Further, the proposed position and exercise limits for each Bitcoin 
Fund option are significantly below the limits that would otherwise 
apply pursuant to current Rule 3120. 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 market capitalization, average daily volume, and high number of 
outstanding shares of the Bitcoin Funds.
    All of the above information demonstrates that the proposed 
position and exercise limits for the Bitcoin Fund options are more than 
reasonable and appropriate. The trading volume, ADV, and outstanding 
shares of each Bitcoin Fund demonstrate that these funds are actively 
traded and widely held, and proposed position and exercise limits are 
well below those of other ETFs with similar market characteristics. The 
proposed position and exercise limits are the lowest position and 
exercise limits available for equity options in the industry, are 
extremely conservative, and are more than appropriate given each 
Bitcoin Fund's market capitalization, ADV, and high number of 
outstanding shares.
    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 Bitcoin Funds that it applies to the 
Exchange's other options

[[Page 95837]]

products.\30\ 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 Bitcoin Funds from Cboe BZX Exchange, Inc. 
(``BZX'') and other markets that trade shares of the Bitcoin Funds 
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'') for 
certain market surveillance, investigation and examinations functions. 
Pursuant to a multi-party 17d-2 joint plan, all options exchanges 
allocate amongst themselves and FINRA responsibilities to conduct 
certain options-related market surveillance that are common to rules of 
all options exchanges.\31\
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    \30\ The surveillance program includes surveillance patterns for 
price and volume movements as well as patterns for potential 
manipulation (e.g., spoofing and marking the close).
    \31\ Section 19(g)(1) of the Act, among other things, requires 
every self-regulatory organization (``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.
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    The underlying shares of spot bitcoin exchange-traded products 
(``ETPs''), including the Bitcoin Funds, are also subject to safeguards 
related to addressing market abuse and manipulation. As the Commission 
stated in its order approving proposals of several exchanges to list 
and trade shares of spot bitcoin-based ETPs, ``[e]ach 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.\32\ 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].'' \33\ In light of surveillance 
measures related to both options and futures as well as the underlying 
Bitcoin Funds,\34\ 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 Bitcoin Funds. Further, the Exchange will 
implement any new surveillance procedures it deems necessary to 
effectively monitor the trading of options on Bitcoin ETPs.
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    \32\ See Bitcoin ETP Approval Order.
    \33\ See Bitcoin ETP Approval Order, 89 FR 3010-11.
    \34\ See Securities Exchange Act Release Nos. 99290 (January 8, 
2024), 89 FR 2338, 2343, 2347--2348 (January 12, 2024) (SR-CboeBZX-
2023-044) (Notice of Filing of Amendment No. 3 to a Proposed Rule 
Change to List and Trade Shares of the Fidelity Wise Origin Bitcoin 
Fund Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares); and 
99288 (January 8, 2024), 89 FR 2387, 2392, 2399--2400 (January 12, 
2024) (SR-CboeBZX-2023-028) (Notice of Filing of Amendment No. 5 to 
a Proposed Rule Change To List and Trade Shares of the ARK 21Shares 
Bitcoin ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust 
Shares). See also Securities Exchange Act Release No. 99306 (January 
10, 2024), 89 FR 3008, 3009 (January 17, 2024) (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) 
(``Bitcoin ETP Approval Order'').
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    The Exchange has also analyzed its capacity and represents that it 
believes the Exchange and 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 Bitcoin Funds up to 
the number of expirations currently permissible under the Rules. 
Because the proposal is limited to two classes, the Exchange believes 
any additional traffic that may be generated from the introduction of 
Bitcoin Fund options will be manageable.
    The Exchange believes that offering options on Bitcoin Funds will 
benefit investors by providing them with an additional, relatively 
lower cost investing tool to gain exposure to the price of Bitcoin and 
hedging vehicle to meet their investment needs in connection with 
Bitcoin-related products and positions. The Exchange expects investors 
will transact in options on Bitcoin Funds in the unregulated over-the-
counter (``OTC'') options market,\35\ but may prefer to trade such 
options in a listed environment to receive the benefits of trading 
listing options, including (1) enhanced efficiency in initiating and 
closing out positions; (2) increased market transparency; and (3) 
heightened contra-party creditworthiness due to the role of OCC as 
issuer and guarantor of all listed options. The Exchange believes that 
listing Bitcoin Fund options may cause investors to bring this 
liquidity to the Exchange, would increase market transparency and 
enhance the process of price discovery conducted on BOX through 
increased order flow. The ETFs that hold financial instruments, money 
market instruments, or precious metal commodities on which the Exchange 
may already list and trade options are trusts structured in 
substantially the same manner as Bitcoin Funds and essentially offer 
the same objectives and benefits to investors, just with respect to 
different assets. The Exchange notes that it has not identified any 
issues with the continued listing and trading of any ETF options, 
including ETFs that hold commodities (i.e., precious metals) that it 
currently lists and trades on the Exchange.
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    \35\ The Exchange understands from customers that investors have 
historically transacted in options on ETFs in the OTC options market 
if such options were not available for trading in a listed 
environment.
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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''),\36\ in general, and Section 6(b)(5) of the Act,\37\ 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.
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    \36\ 15 U.S.C. 78f(b).
    \37\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes that the proposal to list and 
trade options on the Bitcoin Funds 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 Bitcoin Funds

[[Page 95838]]

will provide investors with an opportunity to realize the benefits of 
utilizing options on a Bitcoin Fund, including cost efficiencies and 
increased hedging strategies. The Exchange believes that offering 
Bitcoin Fund options will benefit investors by providing them with a 
relatively lower-cost risk management tool, which will allow them to 
manage their positions and associated risk in their portfolios more 
easily in connection with exposure to the price of Bitcoin and with 
Bitcoin-related products and positions. Additionally, the Exchange's 
offering of Bitcoin Fund options will provide investors with the 
ability to transact in such options in a listed market environment as 
opposed to in the unregulated OTC options market, which would increase 
market transparency and enhance the process of price discovery 
conducted on BOX through increased order flow to the benefit of all 
investors. The Exchange also notes that BOX already lists options on 
other commodity-based ETPs,\38\ which, as described above, are trusts 
structured in substantially the same manner as Bitcoin Funds and 
essentially offer the same objectives and benefits to investors, just 
with respect to a different commodity (i.e., Bitcoin rather than 
precious metals) and for which the Exchange has not identified any 
issues with the continued listing and trading of commodity-backed ETP 
options it currently lists for trading. The Exchange also believes the 
proposed rule change will remove impediments to and perfect the 
mechanism of a free and open market and a national market system, 
because it is consistent with current Exchange Rules previously filed 
with the Commission. Options on Bitcoin Funds satisfy the initial 
listing standards and continued listing standards currently in the 
Exchange Rules applicable to options on all ETFs and ETPs, including 
ETPs that hold other commodities already deemed appropriate for options 
trading on BOX. Additionally, as demonstrated above, each Bitcoin Fund 
is characterized by a substantial number of shares that are widely held 
and actively traded. Bitcoin Fund options will trade in the same manner 
as any other ETF or ETP options--the same Exchange Rules that currently 
govern the listing and trading of options, including permissible 
expirations, strike prices, minimum increments, customer accounts, 
trading halt procedures, and margin requirements, will govern the 
listing and trading of options on Bitcoin Funds in the same manner. The 
proposed position and exercise limit for options on the Bitcoin Funds 
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 Bitcoin 
Funds' market capitalization, average daily volume, number of 
beneficial holders, and high number of outstanding shares. The proposed 
position and exercise limits are consistent with the Act as they 
address concerns related to manipulation and protection of investors 
because the position and exercise limits are extremely conservative and 
more than appropriate given the Bitcoin Funds are actively traded. The 
CBOE Approval Order demonstrates that the average position and exercise 
limits of options on ETFs with comparable outstanding shares and 
trading volume to those of the Bitcoin Funds are significantly higher 
than the proposed position and exercise limits for Bitcoin Fund 
options. Therefore, the proposed position and exercise limits for the 
Bitcoin Fund options are conservative relative to options on ETFs with 
comparable market characteristics.
---------------------------------------------------------------------------

    \38\ See Rule 5020(h).
---------------------------------------------------------------------------

    Further, given that the issuer of each Bitcoin Fund may create and 
redeem shares that represent an interest in Bitcoin, the Exchange 
believes it is relevant to compare the size of a position limit to the 
market capitalization of the Bitcoin market. As of August 27, 2024, the 
global supply of Bitcoin was 19,745,940, and the price of one Bitcoin 
was approximately $59,466.82,\39\ which equates to a market 
capitalization of approximately $1.165 trillion. Consider the proposed 
position and exercise limit of 25,000 option contracts for each Bitcoin 
Fund option. A position and exercise limit of 25,000 same side 
contracts effectively restricts a market participant from holding 
positions that could result in the receipt of no more than 2,500,000 of 
Fidelity Fund shares or ARK 21 Fund shares, as applicable (if that 
market participant exercised all its options. As provided in the CBOE 
Approval Order, if a market participant with the maximum 25,000 same 
side contracts in either Fidelity Fund options or ARK 21 Fund options 
exercised all positions at one time, such an event would have no 
practical impact on the Bitcoin market.
---------------------------------------------------------------------------

    \39\ See Blockchain.com [verbar] Charts--Total Circulating 
Bitcoin.
---------------------------------------------------------------------------

    The Exchange also believes the proposed limits are appropriate 
given position limits for Bitcoin futures. For example, the Chicago 
Mercantile Exchange (``CME'') imposes a position limit of 2,000 futures 
(for the initial spot month) on its Bitcoin futures contract.\40\ On 
August 28, 2024, CME Aug 24 Bitcoin Futures settled at $58,950. A 
position of 2,000 CME Bitcoin futures, therefore, would have a notional 
value of $589,500,000. As provided in the CBOE Approval Order, the 
approximate number of option contracts for each Bitcoin Fund that 
equate to the notional value of CME Bitcoin futures is significantly 
higher than the proposed limit of 25,000 options contract for each 
Bitcoin Fund option. The fact that many options ultimately expire out-
of-the-money and thus are not exercised for shares of the underlying, 
while the delta of a Bitcoin Future is 1, further demonstrates how 
conservative the proposed limits of 25,000 options contracts are for 
the Bitcoin Fund options.
---------------------------------------------------------------------------

    \40\ See CME Rulebook Chapter 350 (description of CME Bitcoin 
Futures) and Chapter 5, Position Limit, Position Accountability and 
Reportable Level Table in the Interpretations & Special Notices. 
Each CME Bitcoin futures contract is valued at five Bitcoins as 
defined by the CME CF Bitcoin Reference Rate (``BRR''). See CME Rule 
35001.
---------------------------------------------------------------------------

    The Exchange notes, 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).\41\ 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.\42\ 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 same side position limits 
are more than appropriate for the Bitcoin Fund options.
---------------------------------------------------------------------------

    \41\ See CME Rulebook Chapter 5, Position Limit, Position 
Accountability and Reportable Level Table in the Interpretations & 
Special Notices.
    \42\ Id.
---------------------------------------------------------------------------

    As provided in the CBOE Approval Order, the proposed position and

[[Page 95839]]

exercise limits in this proposal will have no material impact to the 
supply of Bitcoin. For example, consider again the proposed position 
limit of 25,000 option contracts for each Bitcoin Fund option. As noted 
above, a position limit of 25,000 same side contracts effectively 
restricts a market participant from holding positions that could result 
in the receipt of no more than 2,500,000 shares of the applicable 
Bitcoin Fund (if that market participant exercised all of its options).
    As provided in the CBOE Approval Order, if 80 market participants 
had 25,000 same side positions in Fidelity Fund options, each of them 
would have to simultaneously exercise all of those options to create a 
scenario that may put the underlying security under stress. Similarly, 
if 18 market participants had 25,000 same side positions in ARK 21 Fund 
options, each of them would have to simultaneously exercise all of 
those options to create a scenario that may put the underlying security 
under stress. The Exchange believes it is highly unlikely for either 
such event to occur; however, even if either such event did occur, the 
Exchange would not expect either Bitcoin Fund to be under stress 
because such an event would merely induce the creation of more shares 
through the trust's creation and redemption process.
    As of August 7, 2024, the global supply of Bitcoin was 
approximately 19,736,528.\43\ Based on the $47.88 price of a Fidelity 
Fund share on August 7, 2024, a market participant could have redeemed 
one Bitcoin for approximately 1,149 Fidelity Fund shares. Another 
22,677,270,672 Fidelity Fund shares could be created before the supply 
of Bitcoin was exhausted. As a result, 9,070 market participants would 
have to simultaneously exercise 25,000 same side positions in Fidelity 
Fund options to receive shares of the Fidelity Fund holding the entire 
global supply of Bitcoin. Similarly, based on the $54.68 price of an 
ARK 21 Fund share on August 7, 2024, a market participant could have 
redeemed one Bitcoin for approximately 1,006 ARK 21 Fund Shares. 
Another 19,854,947,168 ARK 21 Fund shares could be created before the 
supply of Bitcoin were exhausted. As a result, 7,941 market 
participants would have to simultaneously exercise 25,000 same side 
positions in ARK 21 Fund options to receive shares of the ARK 21 Fund 
holding the entire global supply of Bitcoin. Unlike the Bitcoin Funds, 
the number of shares that corporations may issue is limited. However, 
like corporations, which authorize additional shares, repurchase 
shares, or split their shares, the Bitcoin Funds may create, redeem, or 
split shares in response to demand. While the supply of Bitcoin is 
limited to 21,000,000, it is believed that it will take more than 100 
years to fully mine the remaining Bitcoin.\44\ The supply of Bitcoin is 
larger than the available supply of most securities.\45\ Given the 
significant unlikelihood of any of these events ever occurring, the 
Exchange does not believe options on the Bitcoin Funds should be 
subject to position and exercise limits even lower than those proposed 
(which are already equal to the lowest available limit for equity 
options in the industry) to protect the supply of Bitcoin.\46\
---------------------------------------------------------------------------

    \43\ See Blockchain.com [verbar] Charts--Total Circulating 
Bitcoin (which also shows the price of one Bitcoin equal to 
$55,033.47).
    \44\ See Pre-Effective Amendment No. 5 to Form S-1 Registration 
Statement No. 333-254652, Fidelity Fund, filed January 9, 2024, at 
53--54; and Amendment No. 8 to Form S-1 Registration Statement No. 
333-257474, ARK 21 Fund, filed January 9, 2024, at 15.
    \45\ The market capitalization of Bitcoin would rank in the top 
10 among securities. See https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/.
    \46\ This would be even more unlikely with respect to the 
Bitcoin Funds for which the Exchange proposes lower position limits.
---------------------------------------------------------------------------

    The Exchange believes the available supply of Bitcoin is not 
relevant to the determination of position and exercise limits for 
options overlying the Bitcoin Funds.\47\ Position and exercise limits 
are not a tool that should be used to address a potential limited 
supply of an underlying. Position and exercise limits do not limit the 
total number of options that may be held, but rather they limit the 
number of positions a single customer may hold or exercise at one 
time.\48\ ``Since the inception of standardized options trading, the 
options exchanges have had rules imposing limits on the aggregate 
number of options contracts that a member or customer could hold or 
exercise.'' \49\ Position and exercise limit rules are intended ``to 
prevent the establishment of options positions that can be used or 
might create incentives to manipulate or disrupt the underlying market 
so as to benefit the options position. In particular, position and 
exercise limits are designed to minimize the potential for mini-
manipulations and for corners or squeezes of the underlying market. In 
addition, such limits serve to reduce the possibility for disruption of 
the options market itself, especially in illiquid options classes.'' 
\50\
---------------------------------------------------------------------------

    \47\ The Exchange is unaware of any proposed rule change related 
to position and exercise limits for any equity option (including 
commodity ETF options) for which the Commission required 
consideration of whether the available supply of an underlying 
(whether it be a corporate stock or an ETF) or the contents of an 
ETF (commodity or otherwise) should be considered when an exchange 
proposed to establish those limits. See, e.g., Securities Exchange 
Act Release No. 57894 (May 30, 2008), 73 FR 32061 (June 5, 2008) 
(SR-CBOE-2005-11) (approval order in which the Commission stated 
that the ``listing and trading of Gold Trust Options will be subject 
to the exchanges' rules pertaining to position and exercise limits 
and margin''). For reference, the current position and exercise 
limits for options on SPDR Gold Shares ETF (``GLD'') and options on 
iShares Silver Trust (``SLV'') are 250,000 contracts, or 10 times 
that proposed position and exercise limit for the Bitcoin Fund 
options.
    \48\ For example, suppose an option has a position limit of 
25,000 option contracts and there are a total of 10 investors 
trading that option. If all 10 investors max out their positions, 
that would result in 250,000 option contracts outstanding at that 
time. However, suppose 10 more investors decide to begin trading 
that option and also max out their positions. This would result in 
500,000 option contracts outstanding at that time. An increase in 
the number of investors could cause an increase in outstanding 
options even if position limits remain unchanged.
    \49\ See Securities Exchange Act Release No. 39489 (December 24, 
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
    \50\ See id.
---------------------------------------------------------------------------

    The Exchange notes that a Registration Statement on Form S-1 was 
filed with the Commission for each Bitcoin Fund, each of which 
described the supply of Bitcoin as being limited to 21,000,000 (of 
which approximately 90% had already been mined), and that the limit 
would be reached around the year 2140.\51\ Each Registration Statement 
permits an unlimited number of shares of the applicable Bitcoin ETF to 
be created. Further, the Commission approved proposed rule changes that 
permitted the listing and trading of shares of each Bitcoin Fund, which 
approval did not comment on the sufficient supply of Bitcoin or address 
whether there was a risk that permitting an unlimited number of shares 
for a Bitcoin Fund would impact the supply of Bitcoin.\52\ Therefore, 
the Exchange believes the Commission had ample time and opportunity to 
consider whether the supply of Bitcoin was sufficient to permit the 
creation of unlimited Bitcoin Fund shares, and does not believe 
considering this supply with respect to the establishment of position 
and exercise limits is appropriate given its lack of relevance to the 
purpose of position and exercise limits. However, given the significant 
size of the Bitcoin supply, the proposed

[[Page 95840]]

position limits are more than sufficient to protect investors and the 
market.
---------------------------------------------------------------------------

    \51\ See Pre-Effective Amendment No. 5 to Form S-1 Registration 
Statement No. 333-254652, Fidelity Fund, filed January 9, 2024, at 
53--54; and Amendment No. 8 to Form S-1 Registration Statement No. 
333-257474, ARK 21 Fund, filed January 9, 2024, at 15.
    \52\ See Bitcoin ETP Approval Order.
---------------------------------------------------------------------------

    Based on the above information demonstrating, among other things, 
that each Bitcoin Fund is characterized by a substantial number of 
outstanding shares that are actively traded and widely held, the 
Exchange believes the proposed position and exercise limits are 
extremely conservative compared to those of ETF options with similar 
market characteristics. 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.\53\
---------------------------------------------------------------------------

    \53\ 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 the 
Bitcoin Funds 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 Bitcoin Funds would otherwise establish 
different position and exercise limits than those proposed herein.\54\
---------------------------------------------------------------------------

    \54\ The Exchange would be required to submit a separate rule 
filing to permit the Exchange to authorize for trading FLEX Equity 
Options on the Bitcoin Funds (which filing may propose changes to 
existing FLEX Equity Option position limits for such options if 
appropriate).
---------------------------------------------------------------------------

    The Exchange represents that it has the necessary systems capacity 
to support the new Bitcoin Fund options. 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, including Bitcoin Fund options. The 
Exchange's existing surveillance and reporting safeguards are designed 
to deter and detect possible manipulative behavior which might arise 
from listing and trading options on ETFs and ETPs, such as (existing) 
precious metal-commodity backed ETP options as well as the proposed 
options on Bitcoin Funds. The Exchange believes that its surveillance 
procedures are adequate to properly monitor the trading of options on 
Bitcoin Funds and to deter and detect violations of Exchange rules. 
Additionally, the Exchange is a member of the ISG under the Intermarket 
Surveillance Group Agreement. The Exchange would be able to obtain 
information regarding trading in shares of the Bitcoin Funds from BZX 
and other markets that trade shares of the Bitcoin Funds 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 FINRA 
and, as noted herein, pursuant to a multi-party 17d-2 joint plan, all 
options exchanges allocate regulatory responsibilities to FINRA to 
conduct certain options-related market surveillances. Further, the 
Exchange will implement any new surveillance procedures it deems 
necessary to effectively monitor the trading of options on the Bitcoin 
Funds. The underlying shares of spot bitcoin ETPs, including the 
Bitcoin Funds, are also subject to safeguards related to addressing 
market abuse and manipulation. As the Commission stated in its order 
approving proposals of several exchanges to list and trade shares of 
spot bitcoin-based ETPs, ``[e]ach 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.'' \55\ 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].'' 
\56\ 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 
Bitcoin Funds. Further, the Exchange will implement any new 
surveillance procedures it deems necessary to effectively monitor the 
trading of options on Bitcoin ETPs. Finally, the Exchange notes that 
this proposal 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 applicable Exchange rules will require that 
customers receive appropriate disclosure before trading options in 
Bitcoin Funds \57\ and will require that brokers opening accounts and 
recommending options transactions comply with relevant customer 
suitability standards.\58\ The Exchange notes the proposed rule change 
is substantively the same as a rule change proposed by CBOE which the 
Commission recently approved.\59\
---------------------------------------------------------------------------

    \55\ 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).
    \56\ See Bitcoin ETP Order, 89 FR at 3010-11.
    \57\ See Rules 4020(b), (e) and 4100.
    \58\ See Rule 4040.
    \59\ See supra note 5.
---------------------------------------------------------------------------

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 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 CBOE that was recently 
approved by the Commission.\60\
---------------------------------------------------------------------------

    \60\ Id.
---------------------------------------------------------------------------

    Intramarket Competition: 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 Bitcoin Funds would need to satisfy the initial listing 
standards set forth in the Exchange Rules in the same manner as any 
other ETF before the Exchange could list options on them. Additionally, 
Bitcoin Fund options will be equally available to all market 
participants who wish to trade such options. The Exchange Rules 
currently applicable to the listing and trading of options on ETFs on 
BOX will apply in the same manner to the listing and trading of all 
options on Bitcoin Funds, including, for example, Rules that govern 
expirations, exercise prices, minimum increments, margin requirements, 
customer accounts, and trading halt procedures. Also, and as stated 
above, the Exchange already lists options on other commodity-based 
ETPs.\61\ Further, the Bitcoin Funds would need to satisfy the 
maintenance listing standards set forth in the Exchange Rules in the 
same manner as any other ETF for the Exchange to continue listing 
options on them.
---------------------------------------------------------------------------

    \61\ See Rule 5020(h).

---------------------------------------------------------------------------

[[Page 95841]]

    Intermarket Competition: The Exchange does not believe that the 
proposal to list and trade options on Bitcoin Funds 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 the 
advent of Bitcoin Fund options trading on BOX may make BOX a more 
attractive marketplace to market participants at other exchanges, such 
market participants are free to elect to become market participants on 
BOX. As noted herein, this is a competitive filing as the Commission 
recently approved the listing and trading of the Bitcoin Funds on 
another options exchange.\62\ Additionally, other options exchanges are 
free to amend their listing rules, as applicable, to permit them to 
list and trade options on Bitcoin Funds. The Exchange notes that 
listing and trading Bitcoin Fund options on BOX will subject such 
options to transparent exchange-based rules as well as price discovery 
and liquidity, as opposed to alternatively trading such options in the 
OTC market.
---------------------------------------------------------------------------

    \62\ See supra note 5.
---------------------------------------------------------------------------

    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 BOX 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 Bitcoin Fund options 
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 Bitcoin prices and 
Bitcoin-related products and positions on a listed options exchange.
    Finally, the proposed rule change to exclude Bitcoin Fund options 
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 Bitcoin Funds.

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 \63\ and Rule 19b-
4(f)(6) thereunder.\64\
---------------------------------------------------------------------------

    \63\ 15 U.S.C. 78s(b)(3)(A).
    \64\ 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.
---------------------------------------------------------------------------

    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) \65\ 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 asked 
the Commission to 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 Bitcoin Funds.\66\ 
The Exchange has provided information regarding the underlying Bitcoin 
Funds, including, among other things, information regarding trading 
volume, the number of beneficial holders, and the market capitalization 
of the Bitcoin Funds. The proposal also establishes position and 
exercise limits for options on the Bitcoin Funds and provides 
information regarding the surveillance procedures that will apply to 
options on the Bitcoin Funds. The Commission believes that waiver of 
the operative delay could benefit investors by providing an additional 
venue for trading Bitcoin Fund options. 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.\67\
---------------------------------------------------------------------------

    \65\ 17 CFR 240.19b-4(f)(6)(iii).
    \66\ See supra note 5.
    \67\ 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).
---------------------------------------------------------------------------

    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-2024-29 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-2024-29. 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 (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

[[Page 95842]]

submissions should refer to file number SR-BOX-2024-29 and should be 
submitted on or before December 24, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\68\
---------------------------------------------------------------------------

    \68\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------

Stephanie J. Fouse,
Assistant Secretary.
[FR Doc. 2024-28341 Filed 12-2-24; 8:45 am]
BILLING CODE 8011-01-P
```