```

[Federal Register Volume 89, Number 236 (Monday, December 9, 2024)]
[Notices]
[Pages 97678-97691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28763]

[[Page 97678]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101806; File No. SR-NYSEARCA-2024-70]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Instituting Proceedings To Determine 
Whether To Approve or Disapprove a Proposed Rule Change, as Modified by 
Amendment No. 1, To List and Trade Shares of the COtwo Advisors 
Physical European Carbon Allowance Trust Under NYSE Arca Rule 8.201-E 
(Commodity-Based Trust Shares)

December 3, 2024.

I. Introduction

    On August 19, 2024, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares of the COtwo Advisors Physical European Carbon 
Allowance Trust. The proposed rule change was published for comment in 
the Federal Register on September 5, 2024.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 100877 (Aug. 29, 
2024), 89 FR 72524. The Commission has not received any comments.
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    On October 16, 2024, pursuant to Section 19(b)(2) of the Act,\4\ 
the Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\5\ On November 22, 2024, the Exchange filed Amendment No. 1 to 
the proposed rule change, described in Item II below, which Item has 
been prepared by the Exchange.\6\
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 101360, 89 FR 84406 
(Oct. 22, 2024). The Commission designated December 4, 2024, as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \6\ The full text of Amendment No. 1 is available on the 
Commission's website at: https://www.sec.gov/comments/sr-nysearca-2024-70/srnysearca202470.htm.
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    The Commission is publishing this notice and order to solicit 
comments on the proposed rule change, as modified by Amendment No. 1, 
from interested persons and to institute proceedings pursuant to 
Section 19(b)(2)(B) of the Act \7\ to determine whether to approve or 
disapprove the proposed rule change, as modified by Amendment No. 1.
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    \7\ 15 U.S.C. 78s(b)(2)(B).
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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 self-regulatory organization 
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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
COtwo Advisors Physical European Carbon Allowance Trust (the 
``Trust''), under NYSE Arca Rule 8.201-E, which governs the listing and 
trading of Commodity-Based Trust Shares.\8\
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    \8\ Commodity-Based Trust Shares are securities issued by a 
trust that represent investors' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
trust.
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    The Trust was formed as a Delaware statutory trust on January 12, 
2023.\9\ The Trust has no fixed termination date. The Trust will not be 
registered as an investment company under the Investment Company Act of 
1940, as amended,\10\ and is not required to register under such act. 
The Trust is not a commodity pool for purposes of the Commodity 
Exchange Act, as amended.\11\
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    \9\ On May 12, 2023, the Trust filed with the Commission a 
registration statement on Form S-1, as amended on January 16, 2024 
and April 4, 2024 (File No. 333-271910) (the ``Registration 
Statement'') under the Securities Act of 1933 (15 U.S.C. 77a) (the 
``Securities Act''). The description of the operation of the Trust 
herein is based, in part, on the Registration Statement. The 
Registration Statement in not yet effective and the Shares will not 
trade on the Exchange until such time that the Registration 
Statement is effective.
    \10\ 15 U.S.C. 80a-1.
    \11\ 17 U.S.C. 1.
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    The sponsor of the Trust is COtwo Advisors LLC, a Delaware limited 
liability company (``Sponsor''). State Street Bank and Trust Company 
serves as the Trust's administrator (the ``Administrator'') to perform 
various administrative, accounting and recordkeeping functions on 
behalf of the Trust. Wilmington Trust serves as trustee of the Trust 
(the ``Trustee''). State Street Bank and Trust Company serves as the 
Trust's transfer agent (the ``Transfer Agent'') and as custodian of the 
Trust's cash, if any (``Cash Custodian'').\12\
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    \12\ The Cash Custodian is responsible for holding the Trust's 
cash as well as receiving and dispensing cash on behalf of the 
Trust. Deposits of cash held by the Cash Custodian will be used in 
connection with the purchase of an applicable amount of EUAs for 
creations and redemptions of Creation Units and in connection with 
the payment of Trust expenses.
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    The Exchange represents that the Shares will satisfy the 
requirements of NYSE Arca Rule 8.201-E and thereby will qualify for 
listing on the Exchange.
Operation of the Trust \13\
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    \13\ The description of the operation of the Trust, the Shares, 
and the carbon credit industry contained herein are based, in part, 
on the Registration Statement. See note 9, supra.
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    The investment objective of the Trust will be for the Shares to 
reflect the performance of the price of EU Carbon Emission Allowances 
for stationary installations (``EUAs''), less the Trust's expenses. The 
Trust intends to achieve its objective by investing all of its assets 
in EUAs on a non-discretionary basis (i.e., without regard to whether 
the value of EUAs is rising or falling over any particular period). 
Shares of the Trust will represent units of fractional undivided 
beneficial interest in and ownership of the Trust. The Trust's only 
ordinary recurring expense will be the Sponsor's annual fee. The Trust 
will not hold any assets other than EUAs and cash. The Trust may 
purchase or sell EUAs in connection with the creation or redemption of 
Shares by Authorized Participants (as defined below). In addition to 
selling EUAs to distribute cash to Authorized Participants redeeming 
Shares, the Trust may sell EUAs to pay the Sponsor's annual fee. All 
EUAs will be held in the Union Registry (defined below).
    The Trust will not invest in futures, options, options on futures, 
or swap contracts. The Trust will not hold or trade in commodity 
futures contracts, ``commodity interests,'' or any other instruments 
regulated by the Commodity Exchange Act.
    The Trust is not a proxy for investing in EUAs. Rather, the Shares 
are intended to provide a cost-effective means of obtaining investment 
exposure through the securities markets that is similar to an 
investment in EUAs. Specifically, the Shares are intended to constitute 
a simple and cost-efficient means of gaining investment benefits 
similar to those of holding EUAs directly, by providing investors an 
opportunity to participate in the EUA market through an investment in 
the Shares, instead of the traditional means

[[Page 97679]]

of purchasing and storing EUAs. Trust shareholders will be exposed to 
the risks of investing in EUAs, as well as to additional risks that are 
unrelated to EUAs. For example, the public trading price at which an 
investor buys or sells Shares during the day from their broker may be 
different from the value of the Trust's holdings. Price differences may 
relate primarily to supply and demand forces at work in the secondary 
trading market for the Trust's Shares that are closely related to, but 
not identical to, the same forces influencing the prices of EUAs, cash 
and cash equivalents that constitute the Trust's assets. In addition, 
EUAs will have to be sold to pay Trust expenses that would not be 
associated with an investment in EUAs. Additional risks related to the 
Trust's structure, the Sponsor's management of the Trust, and the tax 
treatment of an investment in Shares are further in the Registration 
Statement.
EUAs and the EUA Industry
Description of EU Emissions Trading Scheme
    According to the Registration Statement, the European Union 
Emissions Trading System (``EU ETS'') is a ``cap and trade'' system 
that caps the total volume of greenhouse gas (``GHG'') emissions from 
installations and aircraft operators responsible for around 40% of 
European Union (``EU'') GHG emissions.\14\ The EU ETS is the largest 
cap and trade system in the world and covers more than 11,000 power 
stations and industrial plants in 31 countries, and flights between 
airports of participating countries. The EU ETS is administered by the 
EU Commission, which issues a predefined amount of EUAs through 
auctions or free allocation. An EUA represents the right to emit one 
metric ton of carbon dioxide equivalent into the atmosphere by 
operators of stationary installations (``Covered Entities''). By the 
end of April each year, all Covered Entities are required to surrender 
EUAs equal to the total volume of actual emissions from their 
installation for the last calendar year. EU ETS operators can buy or 
sell EUAs to achieve EU ETS compliance.
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    \14\ There are two types of EU emissions allowance: (i) general 
allowances for stationary installations, or EUA; and (ii) allowances 
for the aviation sector (``EUAA''). The Trust will hold EUAs only.
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    In 2012, EU ETS operations were centralized into a single EU 
registry operated by the EU Commission (the ``Union Registry''), which 
covers all countries participating in the EU ETS. According to the 
Registration Statement, the Union Registry is an online database that 
holds accounts for all entities covered by the EU ETS as well as for 
participants (such as the Trust) not covered under the EU ETS. The 
Union Registry can be accessed online in a similar manner to online 
banking systems. An account must be opened in the Union Registry by a 
legal or natural person before being able to participate in the EU ETS 
and transact in EUAs. The European Union Transaction Log (``EUTL'') 
\15\ checks, records and authorizes all transactions that take place 
between accounts in the Union Registry to ensure that transfers are in 
accordance with the EU ETS rules. The Union Registry is at all times 
responsible for holding the EUAs. All EUAs are held in the Union 
Registry, regardless of whether the EUAs are acquired through 
transactions on an exchange or in over-the-counter (``OTC'') 
transactions.
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    \15\ The EUTL is a central transaction log that checks and 
records all transactions taking place within the EU ETS. It is run 
by the European Commission and provides an easy access to emission 
trading data contained in the EUTL. See https://www.eea.europa.eu/data-and-maps/dashboards/emissions-trading-viewer-1.
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Major Holders and Allowance Use Cases
    According to the Registration Statement, while there is limited 
publicly available data on individuals or individual organizations' 
holdings in physical carbon allowances, carbon allowances are primarily 
held for three different use cases:
    (a) Complying with the EU ETS: Companies that need to surrender 
allowances under the EU ETS hold allowances to surrender them annually. 
These positions are typically built over time and ultimately 
surrendered at time of compliance. Therefore, the largest emitters in 
the EU ETS hold a significant amount of allowances, which include 
entities such as large utilities with a substantial share of fossil 
fuel fired power plants, cement companies, steel producers, chemical 
producers, oil and gas majors and airlines.
    (b) Providing financial services for hedging purposes or 
speculation, such as clearing houses for the European Energy Exchange 
or the Intercontinental Exchange, or banks holding allowances for their 
clients.
    (c) Trading on and speculating around price moves, using physical 
emission allowances. This can take many forms, including ``yield 
trades'', which includes holding a physical allowance and selling an 
EUA future at a premium to gain the yield in the forward curve; or 
outright positions for short term or long term speculation.
    In addition to holding physical allowances, there is a liquid 
secondary futures and options market that is primarily used for hedging 
future emissions or speculating.
Trading Location
    According to the Registration Statement, the EU ETS is linked to 
small emissions trading systems in Europe (Norway, Switzerland, Iceland 
and Liechtenstein), but not to any other major cap and trade markets. 
Therefore, allowances handed out in the EU ETS are not transferable to 
any registry outside of the EU ETS and cannot be used for compliance in 
any other cap and trade market.
    There are a number of other trading systems globally, and like the 
EU ETS, no allowances of any of these systems can be used in any other 
system:
    (a) Western Climate Initiative (WCI): The State of California and 
the Canadian province Quebec created a linked cap and trade market, 
that covers >80% of emissions.
    (b) Regional Greenhouse Gas Initiative (RGGI): a group of US east 
coast states created a linked market that covers power generators only.

[[Page 97680]]

    (c) The China National ETS: Technically not a cap and trade scheme 
(as the amount of allowances is not fixed but calculated according to 
historic production of units).
    (d) South Korea ETS: A comprehensive market covering the majority 
of Korean emissions.
Pricing of Allowances and Trading Volume
    According to the Registration Statement, there are currently two 
primary avenues for trading EUAs: a primary market and a secondary 
market. The primary market involves participation in a regularly 
scheduled auction. The secondary market involves transactions between 
buyers and sellers on regulated markets. The instruments offered for 
trading are the following (1) instruments with a daily expiry, 
including spot EUAs and the Daily EUA Future (as defined below), (2) 
futures contracts with various maturities; and (3) options on futures 
contracts. There are also over-the-counter transactions, but they 
comprise a negligible percentage of transactions.
    The spot and futures markets for EUAs have existed since 2005 after 
the formal launch of the EU ETS on January 1, 2005. Spot EUAs are 
traded exclusively on the European Energy Exchange AG (``EEX''),\16\ 
and futures contracts and options on futures contracts are traded on 
EEX, ICE Endex Markets B.V. (``ICE Endex'') \17\ and Nasdaq Oslo, 
although the latter's market share is marginal.
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    \16\ EEX is an exchange under the German Exchange Act and a 
Regulated Market (``RM''), as defined in the Markets in Financial 
Instruments Directive (Directive 2014/65/EC) (``MIFID II''). As a RM 
for spot and derivatives transactions, EEX is supervised by the 
Saxon State Ministry for Economic Affairs, Labour and Transport (the 
``Exchange Supervisory Authority''). The Exchange Supervisory 
Authority is in charge of the legal supervision of EEX and of market 
supervision of the trading participants according to the German 
Exchange Act. The members of EEX are supervised by the Federal 
Financial Supervisory Authority (BaFin). All trading participants 
are required to comply with the market abuse regulations within the 
German Securities Trading Act. Beside this supervision, the market 
behavior at the spot and derivatives markets of all exchange 
participants is supervised on a daily basis by the Market 
Surveillance Office, an independent body of the exchange according 
to Section 7 of the German Exchange Act. See https://www.esma.europa.eu/sites/default/files/EEX_1.pdf. See also Rules and 
Regulations at https://www.eex.com/en/markets/trading-ressources/rules-and-regulations. EEX is also recognized by the CFTC as an 
authorized Foreign Board of Trade. See https://www.cftc.gov/sites/default/files/filings/documents/2019/orgeexregistrationorder11519.pdf.
    \17\ ICE Endex is regulated in the Netherlands by the Dutch 
Authority for the Financial Markets (``AFM'') as a RM, as defined in 
MIFID II, which is implemented in Dutch Act on Financial Supervision 
(``DFSA''). The license as a RM is obtained under Section 5:26(1) of 
the DFSA, resulting in an authorization by the Minister of Dutch 
Ministry of Finance to operate a RM and supervised by the AFM. In 
the UK, ICE Endex is a Recognized Overseas Investment Exchange by 
the Financial Conduct Authority. See https://www.ice.com/endex/
regulation#:~:text=The%20Dutch%20Authority%20for%20Consumers,energy%2
0industry%20and%20wholesale%20trading. ICE Endex is also recognized 
by the CFTC as an authorized Foreign Board of Trade. See https://www.cftc.gov/sites/default/files/idc/groups/public/@otherif/documents/ifdocs/orgiceeregorder170110.pdf.
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    According to the Registration Statement, the EUA markets are 
generally liquid. The classifications for market participants include 
five basic categories--(1) investment firms or credit institutions, (2) 
investment funds, (3) other financial institutions, (4) operators with 
compliance obligations and (5) commercial undertakings which are non-
financial firms without compliance obligations under the EU ETS.\18\ 
According to the European Union Transaction Log, there are over 18,773 
registry accounts.\19\ The number of participants in the market have a 
direct bearing on the quality of trading. An Oxera report indicates 
that as the number of participants trading EUA futures has increased 
consistently since January 2017, relative spreads, calculated as the 
average quoted spread divided by the closing price, have decreased 
significantly--from just under 0.4% in January 2017 to roughly 0.06% in 
October 2021.\20\ In an October 2024 publication, the European 
Securities Markets Authority (``ESMA'') estimated that approximately 
10.75 billion EUAs were traded across all markets in 2023, amounting to 
approximately [euro]764.1 billion.\21\ Out of the total EUA market, 
approximately 523 million EUAs (amounting to [euro]43.6 billion) were 
attributable to the EUA primary (auction) market, 9.3 billion EUAs 
([euro]648 billion) were attributable to the EUA on-exchange secondary 
market,\22\ and 900 million EUAs ([euro]72.5 billion) were attributable 
to OTC transactions. In this context, the ``on-exchange secondary 
market'' includes (1) the EEX spot EUA market, (2) the Daily EUA 
Futures market, (3) the markets for other EUA futures contracts 
(together with Daily EUA Futures, ``EUA Futures''), and (4) options 
contracts on EUA Futures. Data regarding each of the trading of each of 
these instruments is provided below. During 2023, approximately 99% of 
on-exchange secondary market transactions in EUAs, representing 81% of 
total trading volumes, occurred through futures contracts.\23\
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    \18\ See esma70-445-
38_final_report_on_emission_allowances_and_associated_derivatives.pdf
 (europa.eu).
    \19\ See https://ec.europa.eu/clima/ets/.
    \20\ Carbon trading in the European Union: An economic 
assessment of market functioning in 2021, Oxera, p. 42 (February 15, 
2022); available at https://www.oxera.com/wp-content/uploads/2022/02/Oxera-EU-carbon-trading-report-3.pdf.
    \21\ See ``ESMA Market Report: EU carbon markets 2024'' (October 
2024): available at https://www.esma.europa.eu/sites/default/files/2024-10/ESMA50-43599798-10379_Carbon_markets_report_2024.pdf.
    \22\ The EUA on-exchange secondary market in 2023 included 7.6 
billion EUAs traded through EUA Futures (as defined below), 1.7 
billion EUAs traded through options of EUA Futures, and 30 million 
EUAs traded through other instruments, including spot EUAs. Id.
    \23\ Id.

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[[Page 97681]]

    EUA auctions are held on a near-daily basis throughout the year, 
other than between mid-December to mid-January, when auctions are 
paused. Twenty-eight countries (25 EU member states plus Liechtenstein, 
Norway, and Iceland) have agreed to use EEX to conduct their regularly 
scheduled auctions. Germany and Poland have opted out of the common 
auction but also utilize the EEX for auctions. Hence, EUA auctions take 
place exclusively on EEX. These auctions take place on a regularly 
scheduled basis; the number of allowances being auctioned is disclosed 
on a schedule prior to auction. Prices achieved in these auctions are 
published on various publicly-accessible websites, including the 
European Commission's primary website. For the year-to-date period 
ended September 30, 2024, the year ended December 31, 2023 and year 
ended December 31, 2022, the number of EUAs auctioned off on the EEX 
was 453,034,000, 523,307,500 and 491,194,000, respectively. The 
auctions cleared at an average discount to the current EUA on-exchange 
secondary market price of [euro]0.04, [euro]0.08 and [euro]0.11, 
respectively, for the same time periods, based on the prevailing best 
bid and offer for EUA instruments with daily expiry (as discussed 
below) at the time the auction clears. These narrowing discounts as the 
auction volumes increase is indicative of a maturing marketplace that 
can provide accurate price discovery.
    Below is a discussion of the secondary markets for EUAs and 
associated derivatives. The Trust will only hold EUAs and possibly 
cash, and will not hold any of the EUA derivatives.
Exchange-Traded Instruments With a Daily Expiry
    Exchange-traded instruments with daily expiry traded on an exchange 
include spot EUAs traded on the EEX and the Daily EUA Future traded on 
ICE Endex. The Exchange notes that the settlement and economic outcome 
for a spot purchase on the EEX and a same day futures purchase on the 
ICE Endex are identical (as further detailed below). In fact, ESMA, in 
its ``Final Report: Emission Allowances and Associated Derivatives,'' 
uses the term ``spot'' EUAs to include both spot EUAs traded on EEX and 
the Daily EUA Future traded on ICE Endex.\24\
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    \24\ See esma70-445-
38_final_report_on_emission_allowances_and_associated_derivatives.pdf
 (europa.eu).
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Secondary Spot EUA Market
    As noted above, exchange-traded spot EUAs are traded exclusively on 
the EEX. The current value (spot price) for an EUA is greatly 
influenced by a number of factors, including regulatory changes, world 
events and general levels of economic activity. The trading hours for 
spot EUAs on EEX are 8:00 a.m. to 6:00 p.m. Central European Time 
(``C.E.T.''), and trade registrations are possible until 6:45 p.m. 
C.E.T. Trades concluded before 4:00 p.m. C.E.T. are settled on the next 
business day, or T+1, while trades after 4:00 p.m. C.E.T. are settled 
on the day after the first business day, or T+2. In the twelve-month 
period ended September 30, 2024, the average daily, monthly and annual 
trading volumes of spot EUAs on the EEX was 146, 2,917 and 35,009 round 
lots of 1000 EUAs, respectively. Over the same period, spot EUAs traded 
in the secondary market on EEX at their highest volume of 5,010 round 
lots of EUAs on December 1, 2023, and their lowest volume of 0 EUAs on 
five different occasions. The EEX calculates and publishes each trading 
day an index (the ``EUA End of Day Index'') reflecting the end of day 
price of EUAs traded in the secondary market on EEX.\25\
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    \25\ The EUA End of Day Index methodology is available at 
https://www.eex.com/fileadmin/EEX/Downloads/Trading/Specifications/Indeces/DE/20211005_Index_Description_v010.pdf.
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Daily EUA Futures
    Most liquidity in the secondary market is achieved by trading 
futures contracts. These contracts have expiration going out as far as 
2030. A single day futures contract on EUAs is exclusively traded on 
the ICE Endex (the ``Daily EUA Future''), which settles each day at the 
close of trading.\26\ The Daily EUA Future is a deliverable contract 
where each person with a position open at cessation of trading is 
obliged to make or take physical delivery of EUAs upon the expiration 
of the contract at the end of each trading day. Settlement of the Daily 
EUA Future does not occur through cash transactions. Each Daily EUA 
Future represents one lot of 1,000 EUAs, with each EUA providing an 
entitlement to emit one ton of carbon dioxide equivalent gas. 
Generally, Daily EUA Futures trade on ICE Endex from approximately 2:00 
a.m. Eastern Time (``E.T.'') to approximately 12:00 p.m. E.T. The 
settlement price is fixed each business day and is published by the 
exchange at approximately 12:15 E.T. Final settlement of the requisite 
number of EUAs versus cash occurs the first business day following the 
expiry day (T+1). In the twelve-month period ended September 30, 2024, 
the average daily, monthly and annual trading volumes of Daily EUA 
Futures was approximately 3,829, 78,189 and 938,279, respectively, 
which represents trading volumes of 3,829,000, 78,189,000 and 
938,279,000 EUAs, respectively. Over the same period, Daily EUA Futures 
traded at their highest volume of 27,749 on April 17, 2024, 
representing 27,749,000 EUAs, and their lowest volume of 174 on July 
26, 2024, representing 174,000 EUAs.
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    \26\ All references to the ``Daily EUA Future'' refer to the 
single day EUA futures contract traded on ICE Endex. NASDAQ Oslo 
also offers a single day futures contract on EUAs, but the contract 
is not traded.
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Comparison of Spot EUA Market and Daily EUA Futures Market
    The daily EUA End of Day Index value can be expected to be 
substantially identical to the daily settlement price of the Daily EUA 
Future. The comparison below shows a 99.8% correlation between the 
movements of the two values over the five years from May 23, 2019 
through May 23, 2024.

[[Page 97682]]

[GRAPHIC] [TIFF OMITTED] TN09DE24.685

    Additionally, the chart below illustrates how closely the Daily EUA 
Future, in fact, reflects the EUA spot price during the trading day. 
This chart shows the prices of EUAs on the EEX and the Daily EUA 
Futures on ICE Endex, in EUR/tCO2 from January 2018 to January 2022. No 
major differences can be observed, with an average absolute difference 
of [euro]0.015 between the daily settlement prices for EUAs on the EEX 
and ICE Endex.
[GRAPHIC] [TIFF OMITTED] TN09DE24.686

Other EUA Futures Contracts
    EEX offers monthly EUA futures contracts for the current and next 
two months unless a quarterly or December future expires at that 
month's maturity date; quarterly futures for the current and next 11 
quarters unless a December future expires at that quarter's maturity 
date; and yearly, or December, futures for the next 8 years which 
mature in December of each respective year. ICE Endex offers up to 
seven December futures contracts, nine quarterly futures contracts, 
three August futures contracts and two monthly futures contracts. 
Nasdaq Oslo offers quarterly futures contracts over a rolling six year 
period. There is only de minimis trading volume in EUA Futures on 
Nasdaq Oslo.\27\ The EUA Futures are fungible, meaning any EUA Futures 
contract acquired on one exchange can be sold on the other exchange.
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    \27\ For 2023, Nasdaq Oslo reported only 64 transactions in EUA 
Futures, for a total volume of 417 EUA Futures contracts. See 
https://www.nasdaq.com/path-file/11506.
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    During 2023, approximately 7.6 billion EUAs, amounting to [euro]643 
billion, were traded through EUA Futures (including the Daily EUA 
Future). The trading volumes of the EUA Futures, including Daily EUA 
Futures, with expiration dates through

[[Page 97683]]

the end of 2026 on EEX and ICE Endex for the period from January 1, 
2024, through September 30, 2024, were as follows:

                        Year-to-Date Trading Volumes, January 1, 2024--September 30, 2024
----------------------------------------------------------------------------------------------------------------
                                                                               ICE Endex (in round lots of 1,000
                                           EEX (in round lots of 1,000 EUAs)                 EUAs)
----------------------------------------------------------------------------------------------------------------
Spot EUAs/Daily EUA Future..............  22,239 (Spot).....................  741,416 (Daily EUA Futures).
October 2024 EUA Future.................  ..................................  38,816.
November 2024 EUA Future................  ..................................  4.
December 2024 EUA Future................  222,168...........................  5,482,537.
March 2025 EUA Future...................  1,228.............................  57,386.
June 2025 EUA Future....................  2.................................  5,535.
August 2025 EUA Future..................  ..................................  17,471.
September 2025 EUA Future...............  602...............................  25,726.
December 2025 EUA Future................  55,075............................  558,240.
March 2026 EUA Future...................  ..................................  14,348.
June 2026 EUA Future....................
August 2026 EUA Future..................  ..................................  5,873.
September 2026 EUA Future...............
December 2026 EUA Future................  7,027.............................  120,807.
                                         -----------------------------------------------------------------------
    Total...............................  308,341...........................  7,068,159.
----------------------------------------------------------------------------------------------------------------

Options on EUA Futures Contracts
    Options on EUA futures contracts are also traded on EEX and ICE 
Endex for many of the available EUA Futures. In 2023, approximately 1.7 
billion EUAs, amounting to [euro]900 million, were traded through 
options on EUA Futures. The options on EUA Futures, like the EUA 
Futures, are fungible and can be traded on any of the participating 
exchanges, regardless of the exchange on which a particular contract is 
acquired.
Section 6(b)(5) and the Applicable Standards
    The Commission has approved numerous Commodity-Based Trust Shares, 
to be listed on U.S. national securities exchanges. In order for any 
proposed rule change from an exchange to be approved, the Commission 
must determine that, among other things, the proposal is consistent 
with the requirements of Section 6(b)(5) of the Act, specifically 
including: (i) the requirement that a national securities exchange's 
rules are designed to prevent fraudulent and manipulative acts and 
practices; and (ii) the requirement that an exchange proposal be 
designed, in general, to protect investors and the public interest. The 
Exchange believes that this proposal is consistent with the 
requirements of Section 6(b)(5) of the Act and that this filing 
sufficiently demonstrates that ICE Endex is a regulated market of 
significant size for trading EUAs.
Designed To Prevent Fraudulent and Manipulative Acts and Practices
    The Exchange believes that the proposal is designed to prevent 
fraudulent and manipulative acts and practices and to protect investors 
and the public interest, consistent with Section 6(b)(5) of the Act 
because (1) the Exchange has entered into a comprehensive surveillance-
sharing agreement (``CSSA'') with ICE Endex, a regulated market of 
``significant size'' and (2) there are sufficient ``other means to 
prevent fraudulent and manipulative acts and practices.''
Comprehensive Surveillance-Sharing Agreement
    The Commission has explained that a proposal could satisfy the 
requirements of the Act in the first instance by demonstrating that the 
listing exchange has entered into a CSSA with a regulated ``market of 
significant size'' relating to the underlying assets.\28\ With respect 
to the Trust, the underlying assets are EUAs. The relevant analysis, 
therefore, is whether the Exchange has a CSSA with a regulated market 
of significant size related to EUAs. The Commission has further stated 
that ``[c]onsistent with the discussion of `significant market' . . . , 
the Commission has not previously, and does not now, require that [a] 
listing exchange be able to enter into a surveillance-sharing agreement 
with each regulated spot or derivatives market relating to an 
underlying asset, provided that the market or markets with which there 
is such an agreement constitute a `significant market.' '' \29\
---------------------------------------------------------------------------

    \28\ See Securities Exchange Act Release No. 88284 (February 26, 
2020), 85 FR 12595 (March 3, 2020) (SR-NYSEArca-2019-39) (Order 
Disapproving a Proposed Rule Change, as Modified by Amendment No. 1, 
to Amend NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares) and 
to List and Trade Shares of the United States Bitcoin and Treasury 
Investment Trust Under NYSE Arca Rule 8.201-E).
    \29\ See Securities Exchange Act Release No. 83723 (July 26, 
2018), 83 FR 37579 (August 1, 2018) (Order Setting Aside Action by 
Delegated Authority and Disapproving a Proposed Rule Change, as 
Modified by Amendments No. 1 and 2, to List and Trade Shares of the 
Winklevoss Bitcoin Trust) (the ``Winklevoss Order'').
---------------------------------------------------------------------------

    The Commission has emphasized that it is essential for an exchange 
listing a derivative securities product to enter into a surveillance-
sharing agreement with markets trading the underlying assets for the 
listing exchange to have the ability to obtain information necessary to 
detect, investigate, and deter fraud and market manipulation, as well 
as violations of exchange rules and applicable federal securities laws 
and rules.\30\ Comprehensive surveillance-sharing agreements ``provide 
a necessary deterrent to manipulation because they facilitate the 
availability of information needed to fully investigate a manipulation 
if it were to occur.'' \31\ The hallmarks of a surveillance-sharing 
agreement are that the agreement provides for the sharing of 
information about market trading activity, clearing activity, and 
customer identity; that the parties to the agreement have reasonable

[[Page 97684]]

ability to obtain access to and produce requested information; and that 
no existing rules, laws, or practices would impede one party to the 
agreement from obtaining this information from, or producing it to, the 
other party.\32\
---------------------------------------------------------------------------

    \30\ See Amendment to Rule Filing Requirements for Self-
Regulatory Organizations Regarding New Derivative Securities 
Products, Securities Exchange Act Release No. 40761 (Dec. 8, 1998), 
63 FR 70952, 70959 (Dec. 22, 1998).
    \31\ Id. See also Winklevoss Order, 83 FR 37594.
    \32\ See Winklevoss Order, 83 FR 37592-93 (discussing Letter 
from Brandon Becker, Director, Division of Market Regulation, 
Commission, to Gerard D. O'Connell, Chairman, Intermarket 
Surveillance Group (June 3, 1994), available at https://www.sec.gov/divisions/marketreg/mr-noaction/isg060394.htm).
---------------------------------------------------------------------------

The ICE Endex Futures Market is a Regulated Market
    As discussed more below, ICE Endex is subject to the EU regulatory 
framework for EUAs and EUA derivatives.\33\ The EU regulatory framework 
includes the Markets in Financial Instruments Directive and Regulation 
(``MiFID II'' and ``MiFIR''), the Market Abuse Regulation (``MAR'') and 
the European Market Infrastructure Regulation (``EMIR''). MiFID II and 
MiFIR together is a framework governing investment firms, trading 
venues, data reporting service providers and non-EU investment firms 
that provide investment services in the EU. The MAR prohibits insider 
dealing, unlawful disclosure of inside information and market 
manipulation and provides broad powers to the national competent 
authorities (``NCAs'') for detection and prosecution of violations. 
EMIR regulates OTC derivatives transactions, central counterparties and 
trade repositories. It is critical for ICE Endex to maintain fair and 
orderly markets. A fair and orderly market is necessary to maintain a 
level playing field for trading participants, to attract new 
participants, and to attract trading activity. ICE Endex has an 
extensive framework in place to facilitate the existence of such fair 
and orderly markets, including the performance of market surveillance 
activities that allow for the monitoring of market activity, including 
intra-day activity, and the detection of irregular trading behavior 
that could negatively impact the integrity of ICE Endex or constitute 
breaches of statutory law or regulations in the form of market abuse by 
market participants.
---------------------------------------------------------------------------

    \33\ See supra, note 17.
---------------------------------------------------------------------------

The ICE Endex Futures Market is a Market of Significant Size
    In the Winklevoss Order, the Commission stated that the term 
``significant market'' or ``market of significant size'' includes a 
market (or group of markets) as to which (1) there is a reasonable 
likelihood that a person attempting to manipulate the Trust would also 
have to trade on that market to successfully manipulate the Trust, so 
that a surveillance-sharing agreement would assist in detecting and 
deterring misconduct, and (2) it is unlikely that trading in the Trust 
would be the predominant influence on prices in that market.\34\ The 
Commission explained that this definition is illustrative and not 
exclusive, and that there could be other types of ``significant 
markets'' and ``markets of significant size.'' \35\
---------------------------------------------------------------------------

    \34\ See Winklevoss Order, 83 FR 37594.
    \35\ Id.
---------------------------------------------------------------------------

Any Manipulator Would Have To Trade on ICE Endex
    The first prong of the analysis addresses whether the surveillance-
sharing agreement on which the fund's listing exchange proposes to rely 
would assist in detecting and deterring fraudulent or manipulative 
misconduct related to the assets held by the fund. In the present 
proposal, the Trust's only non-cash holdings will be EUAs. The 
predominant market for trading EUA instruments with daily expiry is the 
ICE Endex Daily EUA Futures market, with de minimis secondary market 
trading taking place on EEX or over-the-counter. The EEX's primary role 
in the EUA ecosystem is to serve as the venue for the daily auctions of 
EUAs.
    The regulated market of significant size test does not require that 
the spot EUA market be subject to direct surveillance by the Exchange 
in order for the Commission to approve this proposal, and precedent 
makes clear that an underlying market for a spot commodity or currency 
being a surveilled market would actually be an exception to the norm. 
These largely un-surveilled currency and commodity markets do not 
provide the same protections as the markets that are subject to the 
Commission's oversight, but the Commission has consistently looked to 
surveillance sharing agreements with the underlying futures market in 
order to determine whether such products were consistent with the Act. 
With this in mind, the ICE Endex EUA Futures market is an appropriate 
market to consider in determining whether there is a related regulated 
market of significant size.
    ICE Endex is the only market for trading Daily EUA Futures and, as 
noted above, for the twelve-months ended September 30, 2024, the 
average daily trading volume of Daily EUA Futures on the ICE Endex was 
3,829 contracts, representing 3,829,000 EUAs, whereas the average daily 
trading volume on the EEX was 146 round lots, representing 146,000 
EUAs. Therefore, over that one year period, over 96% of all on-exchange 
secondary market trading of EUA spot instruments with daily expiry 
(which, as described above, includes spot EUAs and Daily EUA Futures) 
occurred on the ICE Endex. With respect to EUAs and EUA based 
derivatives more broadly, the chart above shows that, year-to-date 
through September 30, 2024, approximately 96% of all trades in EUAs and 
EUA Futures dated through December 2026 occurred on ICE Endex.\36\
---------------------------------------------------------------------------

    \36\ See esma70-445-
38_final_report_on_emission_allowances_and_associated_derivatives.pdf
 (europa.eu).
---------------------------------------------------------------------------

    Given the size of the ICE Endex futures markets, especially the 
Daily EUA Futures market, the Sponsor believes such markets meet the 
Commission's definition of ``significant market'' because there is a 
reasonable likelihood that a person attempting to manipulate the Trust 
would also have to trade on that market to successfully manipulate the 
Trust, since arbitrage between the derivative and spot markets would 
tend to counter an attempt to manipulate the spot market alone. Of the 
256 members of ICE Endex, 151 are also members of EEX. Each of these 
exchange members acts on behalf of their clients, each member in common 
between the exchanges represents potentially hundreds of accounts that 
can and do act on both markets to effect arbitrage transactions. 
Therefore, a sufficient number of arbitrageurs have access to both the 
EEX and ICE Endex such that any attempt to manipulate one market that 
causes a difference between the EUA spot price and the Daily EUA 
Futures price will quickly be exploited. This will serve to maintain 
the EUA price correlation between EEX and ICE Endex. Any attempt to 
manipulate the spot EUA market alone would be impossible because 
arbitrage would correct any movements in the spot market to bring the 
prices of spot EUAs back in line with the settlement price of the Daily 
EUA Future. Therefore, any person attempting to manipulate the Trust 
Shares would also have to trade in the Daily EUA Futures market (ICE 
Endex) to manipulate the spot and futures markets in tandem.\37\
---------------------------------------------------------------------------

    \37\ The Commission has granted several prior proposals to list 
and trade shares of physical commodity-based exchange-traded 
products, noting in every case that there was at least one regulated 
market of significant size for trading futures in the underlying 
commodity--whether gold, silver, platinum, palladium or copper--and 
the product's listing exchange has entered into surveillance-sharing 
agreements with, or held Intermarket Surveillance Group (``ISG'') 
membership in common with, that market. See Securities Exchange Act 
Release Nos. 61220 (December 22, 2009), 74 FR 68895, 68896 (December 
29, 2009) (SR-NYSEArca-2009-94) (notice of proposed rule change 
included NYSE Arca's representation that ``[t]he most significant 
palladium futures exchanges are the NYMEX and the Tokyo Commodity 
Exchange,'' that ``NYMEX is the largest exchange in the world for 
trading precious metals futures and options,'' and that NYSE Arca 
``may obtain trading information via the Intermarket Surveillance 
Group,'' of which NYMEX is a member; 61219 (December 22, 2009), 74 
FR 68886, 68887-88 (December 29, 2009) (SR-NYSEArca-2009-95) (notice 
of proposed rule change included NYSE Arca's representation that 
``[t]he most significant platinum futures exchanges are the NYMEX 
and the Tokyo Commodity Exchange,'' that ``NYMEX is the largest 
exchange in the world for trading precious metals futures and 
options,'' and that NYSE Arca ``may obtain trading information via 
the Intermarket Surveillance Group,'' of which NYMEX is a member; 
62692 (August 11, 2010), 75 FR 50789, 50790 (August 17, 2010) (SR-
NYSEArca-2010-56) (notice of proposed rule change included NYSE 
Arca's representation that ``the most significant gold, silver, 
platinum and palladium futures exchanges are the COMEX and the 
TOCOM'' and that NYSE Arca ``may obtain trading information via the 
Intermarket Surveillance Group,'' of which COMEX is a member; 62875 
(September 9, 2010), 75 FR 56156, 56158 (September 15, 2010) (SR-
NYSEArca-2010-71) (notice of proposed rule change included NYSE 
Arca's representation that ``the most significant silver, platinum 
and palladium futures exchanges are the COMEX and the TOCOM'' and 
that NYSE Arca ``may obtain trading information via the Intermarket 
Surveillance Group,'' of which COMEX is a member; 63464 (December 8, 
2010), 75 FR 77926, 77928 (December 14, 2010) (SR-NYSEArca-2010-95) 
(notice of proposed rule change included NYSE Arca's representation 
that ``the most significant gold futures exchanges are the COMEX and 
the Tokyo Commodity Exchange,'' that ``COMEX is the largest exchange 
in the world for trading precious metals futures and options,'' and 
that NYSE Arca ``may obtain trading information via the Intermarket 
Surveillance Group,'' of which COMEX is a member; 68430 (December 
13, 2012), 77 FR 75239, 75240-41 (December 19, 2012) (SR-NYSEArca-
2012-111) (notice of proposed rule change included NYSE Arca's 
representation that ``[f]utures on platinum and palladium are traded 
on two major exchanges: The New York Mercantile Exchange . . . and 
Tokyo Commodities Exchange'' and that NYSE Arca ``may obtain trading 
information via the Intermarket Surveillance Group,'' of which COMEX 
is a member; 71378 (January 23, 2014), 79 FR 4786, 4786-87 (January 
29, 2014) (SR-NYSEArca-2013-137) (notice of proposed rule change 
included NYSE Arca's representation that ``COMEX is the largest gold 
futures and options exchange'' and that NYSE Arca ``may obtain 
trading information via the Intermarket Surveillance Group,'' 
including with respect to transactions occurring on COMEX pursuant 
to CME and NYMEX's membership, or from exchanges ``with which [NYSE 
Arca] has in place a comprehensive surveillance sharing 
agreement.'')

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

[[Page 97685]]

    Similarly, it is impossible to manipulate the prices of EUAs by 
trading the other EUA based derivatives on the EEX alone. With respect 
to EUA Futures other than the Daily EUA Future, the size and 
predominance of ICE Endex would make it impossible to manipulate the 
price of EUAs through trading EUA Futures on the EEX alone. The 
fungibility of EUA Futures and the significant overlap in exchange 
membership would cause arbitrage activity to bring the settlement 
prices of EUA Futures traded on EEX in line with the settlement price 
of EUA Futures traded on ICE Endex. In addition, because the options on 
EUA Futures reference EUA Futures, the prices of EUA Futures would 
reflect any attempt by a would-be manipulator to manipulate the price 
of the Fund's Shares through the use of options. Therefore, any would-
be manipulator would have to manipulate the prices of EUA Futures 
Contracts in order to manipulate the price of the Fund's Shares, and 
the size of predominance of the ICE Endex would require that would-be 
manipulator to trade on ICE Endex.
The Trust Is Unlikely To Be the Predominant Influence on Price
    It is unlikely that trading in the Trust Shares would be the 
predominant influence on Daily EUA Futures prices traded on ICE Endex 
for a number of reasons, including the significant volume in and size 
of the EUA daily expiry market (meaning the Daily EUA Futures market, 
in effect). In 2023, the total EUA market size was approximately 
[euro]764.1 billion with approximately [euro]67.1 billion of that 
attributable to the Daily EUA Futures market and [euro]3.4 billion 
attributable to spot EUAs. The daily average trading volume in 2023 for 
EUAs across the on-exchange secondary market was approximately 
[euro]2.6 billion, with approximately [euro]266.3 million attributable 
to trading in the Daily EUA Futures market and [euro]13.5 million 
attributable to trading in spot EUAs. The Trust has not yet launched 
and cannot predict its future inflows; however, given the size of the 
Daily EUA Futures market and the EUA market, as a whole, the Sponsor 
does not anticipate that the Trust will have available capital to buy 
and sell EUAs in an amount that would move the EUA market or that 
investors would be able to trade Trust Shares at such a volume as to 
influence Daily EUA Futures prices on ICE Endex. Additionally, the 
trading hours for the ICE Endex (i.e., EUA Futures market) are 
approximately 2:00 a.m. E.T. to approximately 12:00 p.m. E.T. The 
majority of this time period (7.5 hours) is outside of the Trust's 
trading hours of 9:30 a.m. E.T. to 4:00 p.m. E.T. As such, it is 
unlikely that trading in the Trust's Shares would be the primary 
influencer of the EUA Futures prices traded on ICE Endex, because the 
ICE Endex is actively traded for 7.5 hours during which the Trust 
Shares cannot be traded.
Other Means To Prevent Fraudulent and Manipulative Acts and Practices
The Exchange has a CSSA With the Market on Which the Trust's Sole Asset 
Trades
    In the present proposal, the Trust's only non-cash holdings will be 
EUAs. Moreover, the proposed ``significant'' regulated market (i.e., 
the ICE Endex) with which the listing exchange has a surveillance-
sharing agreement is the principal market on which these assets trade.
    The Daily EUA Futures market functions as the ``spot'' market for 
EUAs. The purchase and sale of Daily EUA Futures is the functional and 
economic equivalent of transactions in spot EUAs. The settlement, 
functionality and economic outcome for a spot purchase on the EEX and a 
Daily EUA Future purchase on the ICE Endex are identical. Because the 
Daily EUA Future is physically settled through the delivery of one lot 
of EUAs to the purchaser of the Daily EUA Future, whether the Trust 
acquires an EUA through a transaction on the EEX or through the 
acquisition of a Daily EUA Future on ICE Endex, the Trust will acquire 
the same EUA on a T+1 basis. It is not possible for an acquirer to roll 
a same day futures contract to a later dated future, as each day it 
would expire and the market participant would end up holding physical 
EUAs. Therefore, the Daily EUA Futures market functions as a spot 
market.
    The EEX's primary role in the EUA ecosystem is to serve as the 
venue for the daily auctions of EUAs. The predominant market for 
trading EUA instruments with daily expiry is the ICE Endex Daily EUA 
Futures market, with de minimis secondary market trading taking place 
on EEX or in the OTC market. As noted above, for the twelve-month 
period ended September 30, 2024, the average daily trading volume of 
Daily EUA Futures on ICE Endex was approximately 3,829 contracts, 
representing 3,829,000 EUAs, whereas the average daily trading volume 
of spot EUAs on the EEX was 146 lots, representing 146,000 EUAs. 
Therefore, over that one year period, approximately 96% of all 
secondary market trading of EUA spot instruments with daily expiry 
occurred on the ICE Endex. Therefore, because a Daily EUA Future is 
functionally identical to a physical EUA, and the ICE Endex serves as 
the predominant market for the trading of ``spot'' EUAs, the Exchange's 
CSSA with ICE Endex will serve to detect and deter fraudulent and 
manipulative acts and practices in the EUA market.

[[Page 97686]]

EU's Oversight and Monitoring of EUA Markets Serves To Prevent 
Fraudulent and Manipulative Acts and Practices
    In addition to Exchange's CSSA with ICE Endex, there are other 
mechanisms in place to deter and detect misconduct across both the EUA 
spot and derivatives markets. Both EEX and ICE Endex are subject to the 
EU regulatory framework for EUAs and EUA derivatives. The EU regulatory 
framework includes the Markets in Financial Instruments Directive and 
Regulation (``MiFID II'' and ``MiFIR''), the Market Abuse Regulation 
(``MAR'') and the European Market Infrastructure Regulation 
(``EMIR'').\38\ MiFID II and MiFIR together is a framework governing 
investment firms, trading venues, data reporting service providers and 
non-EU investment firms that provide investment services in the EU.\39\ 
The MAR prohibits insider dealing, unlawful disclosure of inside 
information and market manipulation and provides broad powers to the 
national competent authorities (``NCAs'') for detection and prosecution 
of violations.\40\ EMIR regulates OTC derivatives transactions, central 
counterparties and trade repositories.\41\ ESMA is the EU's overall 
financial markets regulator that has supervisory authority over the 
NCAs.\42\ Under the EU regulatory framework, there are three lines of 
defense against market abuse.\43\ At the firm level (first line), firms 
are required to have systems and procedures in place to ensure that 
abusive trading is detected and reported to NCAs. At the market 
operator, investment firm and trading venue level (second line), these 
entities are required to identify and report suspicious transactions 
and maintain policies and procedures to prevent market abuse. 
Additionally, exchanges such as EEX and ICE Endex are required to 
report information to the relevant authorities on a daily basis. At the 
NCA level (third line), NCAs have market surveillance systems in place 
to monitor markets and identify and investigate suspicious 
transactions. NCAs have broad enforcement power and cooperate with each 
other and ESMA to obtain the information needed for optimal 
surveillance and in order to prosecute violations.\44\ Exchanges (such 
as EEX and ICE Endex) and governmental authorities share information 
and communicate frequently regarding monitoring activities.\45\
---------------------------------------------------------------------------

    \38\ Carbon trading in the European Union: An economic 
assessment of market functioning in 2021, Oxera, p. 26 (February 15, 
2022); available at https://www.oxera.com/wp-content/uploads/2022/02/Oxera-EU-carbon-trading-report-3.pdf.
    \39\ MiFID II Overview, Practical Law Financial Services.
    \40\ See esma70-445-
38_final_report_on_emission_allowances_and_associated_derivatives.pdf
 (europa.eu).
    \41\ Carbon trading in the European Union: An economic 
assessment of market functioning in 2021, Oxera, p. 61 (February 15, 
2022); available at https://www.oxera.com/wp-content/uploads/2022/02/Oxera-EU-carbon-trading-report-3.pdf.
    \42\ https://www.esma.europa.eu/about-esma.
    \43\ See esma70-445-
38_final_report_on_emission_allowances_and_associated_derivatives.pdf
 (europa.eu).
    \44\ Id.
    \45\ Carbon trading in the European Union: An economic 
assessment of market functioning in 2021, Oxera, p. 26-27 (February 
15, 2022); available at https://www.oxera.com/wp-content/uploads/2022/02/Oxera-EU-carbon-trading-report-3.pdf.
---------------------------------------------------------------------------

    While the Exchange is not a participant in the EU regulatory 
framework, the Exchange believes that the EU's robust oversight and 
monitoring regime, in addition to the Exchange's CSSA with ICE Endex 
which would allow for the sharing of information and thus provide 
sufficient means to prevent fraudulent and manipulative acts and 
practices.
Designed To Protect Investors and the Public Interest
    The Exchange believes that the proposal is designed to protect 
investors and the public interest. The Exchange believes that the 
concerns related to the prevention of fraudulent and manipulative acts 
and practices have been sufficiently addressed for this proposal to be 
consistent with the Act. As such, the Exchange believes that approving 
this proposal provides the Commission with the opportunity to allow 
U.S. investors to access EUAs in a regulated and transparent exchange-
traded vehicle that would act to limit risk and benefit U.S. investors 
by: (i) reducing premium and discount volatility as compared to OTC 
investment vehicles; (ii) increasing competitive pressure on management 
fees resulting in fee compression/reductions; (iii) reducing risks and 
costs as compared to those associated with investing in EUAs; and (iv) 
providing an alternative to maintaining custody of EUAs.
Creation and Redemption of Shares
    According to the Registration Statement, the Trust will create and 
redeem Shares on a continuous basis in one or more Creation Units. A 
``Creation Unit'' equals a block of 50,000 Shares, which amount may be 
revised from time-to-time. The Trust will issue Shares in Creation 
Units to certain authorized participants (``Authorized Participants'') 
on an ongoing basis. Each Authorized Participant must be a registered 
broker-dealer or other securities market participant such as a bank or 
other financial institution which is not required to register as a 
broker-dealer to engage in securities transactions, a participant in 
The Depository Trust Company (``DTC'') and have entered into an 
agreement with the Sponsor and the Transfer Agent (the ``Participant 
Agreement'').
    Creation Units may be created or redeemed only by Authorized 
Participants. The creation and redemption of Creation Units is made in 
exchange for the delivery to the Trust or the distribution by the Trust 
of the amount of EUAs, or the amount of cash sufficient to purchase the 
amount of EUAs, represented by the Creation Units being created or 
redeemed. The amount of EUAs or cash required to be delivered to the 
Trust in connection with any creation, or paid out upon redemption, is 
based on the combined net asset value of the number of Shares included 
in the Creation Units being created or redeemed as determined on the 
day the order to create or redeem Creation Units is properly received 
and accepted. Orders must be placed by 11:00 a.m. New York time. The 
day on which the Administrator receives a valid purchase or redemption 
order is the order date. Creation Units may only be issued or redeemed 
on a day that the Exchange is open for regular trading.
    For a cash creation, an Authorized Participant will deliver the 
cash to the Trust's account at the Cash Custodian, which the Sponsor 
will then use to purchase EUAs from a third party selected by the 
Sponsor who (1) is not an Authorized Participant and (2) will not be 
acting as an agent, nor at the discretion, of the Authorized 
Participant with respect to the delivery of EUAs to the Trust (such 
third party, a ``Liquidity Provider''). For a cash redemption, the 
Sponsor shall arrange for the EUAs represented by the Creation Units to 
be sold to a Liquidity Provider selected by the Sponsor and the cash 
proceeds distributed from the Trust's account at the Cash Custodian to 
the Authorized Participant in exchange for its Shares. In the case of 
``in-kind'' creation or redemption orders for Shares, an Authorized 
Participant may deliver or direct the delivery of EUAs by third 
parties, or take delivery or direct the taking of delivery of EUAs by 
third parties.
    For cash creations, an Authorized Participant who places a purchase 
order is responsible for arranging for the delivery to the Trust's 
account with the Cash Custodian of the required cash deposit by 2:00 
p.m. New York time on the first business day following the

[[Page 97687]]

purchase order date. The Liquidity Provider delivers EUAs to the 
Trust's Union Registry account in exchange for the cash purchase price. 
Upon settlement of the EUA purchase from the Liquidity Provider into 
the Trust's Union Registry account, the Trust instructs the Transfer 
Agent to release the Shares to the Authorized Participant, and the 
Transfer Agent directs DTC to credit the number of Shares ordered to 
the applicable DTC account, by close of business on the purchase 
settlement date.
    For in-kind creation orders, an Authorized Participant who places a 
purchase order is responsible for arranging for the delivery to the 
Trust's Union Registry account the required EUA deposit by 2:00 p.m. 
New York time on the first business day following the order date. Upon 
receipt of the EUA deposit amount in the Trust's Union Registry 
account, the Union Registry will notify the Sponsor that the EUAs have 
been deposited. Upon receipt of confirmation from the Union Registry 
that the EUA deposit amount has been received, the Administrator will 
direct DTC to credit the number of Shares created to the Authorized 
Participant's DTC account.
    According to the Registration Statement, the redemption 
distribution due from the Trust will be delivered once the 
Administrator notifies the Sponsor that the Authorized Participant has 
delivered the Shares to be redeemed to the Trust's DTC account. The 
redemption distribution will be delivered to the Authorized Participant 
on the first business day following the order date.
    For cash redemptions, on the redemption settlement date, the 
Liquidity Provider delivers cash to the Trust's account with the Cash 
Custodian in exchange for the redemption EUAs amount. Upon settlement 
of the EUA sale by the Trust to the Liquidity Provider and the receipt 
of the Liquidity Provider's cash in the Trust's Cash Custodian account, 
the Trust instructs the Transfer Agent to deliver the Authorized 
Participant's Shares to be redeemed back to the Trust, in exchange for 
which the Trust instructs the Cash Custodian to transfer the requisite 
cash to the Authorized Participant's designated bank account and the 
redemption order is settled.
    For in-kind redemptions, once the Administrator notifies the 
Sponsor that the Shares have been received in the Trust's DTC account, 
the Sponsor instructs the Union Registry to transfer the redemption EUA 
amount from the Trust's Union Registry account to the Union Registry 
account of the Authorized Participant or its agent.
    The Sponsor is the only entity that may initiate a withdrawal of 
EUAs from the Trust's Union Registry account, and the only accounts 
that may receive EUAs from the Trust's Union Registry account are the 
Union Registry accounts of the Authorized Participants and Liquidity 
Providers, their agents or the Sponsor.
Net Asset Value (``NAV'')
    The Trust's NAV is calculated by taking the current market value of 
its total assets, less any liabilities of the Trust, and dividing that 
total by the total number of outstanding Shares.
    The Administrator will calculate the NAV of the Trust once each 
Exchange trading day. The NAV for a normal trading day will be released 
after the end of the Core Trading Session, which is typically 4 p.m. 
New York time. The NAV for the Trust's Shares will be disseminated 
daily to all market participants at the same time. The Administrator 
will use the settlement price for the Daily EUA Futures established by 
ICE Endex to calculate the NAV. The Administrator also converts the 
value of Euro denominated assets into US Dollar equivalent using 
published foreign currency exchange prices by an independent pricing 
vendor. Third parties supplying quotations or market data may include, 
without limitation, dealers in the relevant markets, end-users of the 
relevant product, information vendors, brokers and other sources of 
market information.
Indicative Fund Value (``IFV'')
    In order to provide updated information relating to the Trust for 
use by investors and market professionals, an updated IFV will be made 
available through on-line information services throughout the Exchange 
Core Trading Session (normally 9:30 a.m. to 4:00 p.m. E.T.) on each 
trading day. The IFV will be calculated by using the prior day's 
closing NAV per Share of the Trust as a base and updating that value 
throughout the trading day to reflect changes in the most recently 
reported mid-point of the bid-ask spread of the Daily EUA Future. The 
IFV disseminated during NYSE Arca Core Trading Session hours should not 
be viewed as an actual real time update of the NAV, because the NAV 
will be calculated only once at the end of each trading day based upon 
the relevant end of day values of the Trust's investments. Although the 
IFV will be disseminated throughout the Core Trading Session, the 
customary trading hours for EUAs are 2 a.m. to 12 p.m. Eastern Time. 
During the gap in time at the end of each trading day during which the 
Shares are traded on the Exchange, but real-time trading prices for 
EUAs are not available, the IFV will be calculated based on the last 
reported mid-point of the bid-ask spread of the Daily EUA Future in the 
immediately preceding trading session until the day's settlement price 
is reported, in which case the day's settlement price will be used.
    The IFV will be disseminated on a per Share basis every 15 seconds 
during regular NYSE Arca Core Trading Session.
Availability of Information
    The NAV for the Trust's Shares will be disseminated daily to all 
market participants at the same time. The intraday, closing prices, and 
settlement prices for EUAs will be readily available from the 
applicable futures exchange websites, automated quotation systems, 
published or other public sources, or major market data vendors. The 
IFV per Share for the Shares will be disseminated by one or more major 
market data vendors on at least a 15 second delayed basis as required 
by NYSE Arca Rule 8.201-E(e)(2)(v).
    Complete real-time data for EUAs and Daily EUA Futures is available 
by subscription through on-line information services. Quotation and 
last-sale information regarding the Shares will be disseminated through 
the facilities of the Consolidated Tape Association. The IFV will be 
available through on-line information services. The trading prices for 
EUAs and Daily EUA Futures will be disseminated by on-line subscription 
services or by one or more major market data vendors during the NYSE 
Arca Core Trading Session of 9:30 a.m. to 4:00 p.m. E.T.
    EEX also provides on its website, on a daily basis, transaction 
volumes and transaction prices for the EUA spot market. ICE Endex 
provides on its website, on a daily basis, transaction volumes, 
transaction prices, daily settlement prices and historical settlement 
prices for Daily EUA Futures that were traded outside of block trades 
by EUA futures brokers. In addition, transaction volumes, transaction 
prices, daily settlement prices and historical settlement prices for 
Daily EUA Futures traded in block trades by futures brokers are 
available on a daily basis through a subscription service to ICE Endex. 
However, ICE Endex provides the daily settlement price change of the 
Daily EUA Future on its website.
    In addition, the Trust's website (www.cotwoadvisors.com) will 
contain

[[Page 97688]]

the following information, on a per Share basis, for the Trust: (a) the 
prior business day's end of day closing NAV; (b) the Official Closing 
Price \46\ or the midpoint of the national best bid and the national 
best offer (``NBBO'') as of the time the NAV is calculated (``Bid-Ask 
Price''); (c) calculation of the premium or discount of the Official 
Closing Price against the NAV expressed as a percentage of such NAV; 
(d) the prospectus; and (e) other applicable quantitative information. 
The Trust will also provide website disclosure of its EUA holdings 
before 9:30 a.m. E.T. on each trading day.
---------------------------------------------------------------------------

    \46\ The term ``Official Closing Price'' is defined in NYSE Arca 
Rule 1.1(ll) as the reference price to determine the closing price 
in a security for purposes of Rule 7-E Equities Trading, and the 
procedures for determining the Official Closing Price are set forth 
in that rule.
---------------------------------------------------------------------------

    The Trust's website will be publicly available prior to the public 
offering of Shares and accessible at no charge. The website disclosure 
of the Trust's daily holdings will occur at the same time as the 
disclosure by the Trust of the daily holdings to Authorized 
Participants so that all market participants are provided daily 
holdings information at the same time. Therefore, the same holdings 
information will be provided on the public website as well as in 
electronic files provided to Authorized Participants. Accordingly, each 
investor will have access to the current daily holdings of the Trust 
through the Trust's website. In addition, information regarding market 
price and trading volume of the Shares will be continually available on 
a real-time basis throughout the day on brokers' computer screens and 
other electronic services. Information regarding the previous day's 
closing price and trading volume information for the Shares will be 
published daily in the financial section of newspapers.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Trading in the Shares 
on the Exchange will occur in accordance with NYSE Arca Rule 7.34-E 
(Early, Core, and Late Trading Sessions). The Exchange has appropriate 
rules to facilitate transactions in the Shares during all trading 
sessions. As provided in NYSE Arca Rule 7.6-E, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00, for which the 
MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.201-E. The trading of the Shares will 
be subject to NYSE Arca Rule 8.201-E(g), which sets forth certain 
restrictions on Equity Trading Permit (``ETP'') Holders acting as 
registered Market Makers in Commodity-Based Trust Shares to facilitate 
surveillance. The Exchange represents that, for initial and continued 
listing, the Trust will be in compliance with Rule 10A-3 \47\ under the 
Act, as provided by NYSE Arca Rule 5.3-E. A minimum of 50,000 Shares 
will be outstanding at the commencement of trading on the Exchange.
---------------------------------------------------------------------------

    \47\ With respect to the application of Rule 10A-3 (17 CFR 
240.10A-3) under the Act, the Trust relies on the exemption 
contained in Rule 10A-3(c)(7).
---------------------------------------------------------------------------

    As a general matter, the Exchange has regulatory jurisdiction over 
its ETP Holders and their associated persons, which include any person 
or entity controlling an ETP Holder. To the extent the Exchange may be 
found to lack jurisdiction over a subsidiary or affiliate of an ETP 
Holder that does business only in commodities or futures contracts, the 
Exchange could obtain information regarding the activities of such 
subsidiary or affiliate through surveillance sharing agreements with 
regulatory organizations of which such subsidiary or affiliate is a 
member.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading on the Exchange in the Shares may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. These may 
include: (1) the extent to which conditions in the underlying carbon 
credit market have caused disruptions and/or lack of trading, or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. In addition, 
trading in Shares will be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule.\48\
---------------------------------------------------------------------------

    \48\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    The Exchange may halt trading during the day in which an 
interruption occurs to the dissemination of the IFV, as described 
above. If the interruption to the dissemination of the IFV persists 
past the trading day in which it occurs, the Exchange will halt trading 
no later than the beginning of the trading day following the 
interruption. In addition, if the Exchange becomes aware that the NAV 
with respect to the Shares is not disseminated to all market 
participants at the same time, it will halt trading in the Shares until 
such time as the NAV is available to all market participants.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange, as 
well as cross-market surveillances administered by the Financial 
Industry Regulatory Authority Inc. (``FINRA''), on behalf of the 
Exchange, which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\49\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange.
---------------------------------------------------------------------------

    \49\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange has entered into a CSSA with ICE Endex. Pursuant to 
the CSSA, the Exchange will communicate as needed regarding trading in 
the Shares and Daily EUA Futures with ICE Endex, and the Exchange may 
obtain trading information regarding trading in the Shares and Daily 
EUA Futures from ICE Endex.
    The Exchange represents that all EUAs held by the Trust will be 
held and maintained in the Union Registry and that the Trust will not 
invest in futures, options, options on futures, or swap contracts. It 
is possible that EUAs and Daily EUA Futures may become listed on other 
exchanges that are members of ISG \50\ or with which the Exchange has 
in place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \50\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    Additionally, the Exchange is able to obtain information regarding 
trading in the Shares in connection with ETP Holders' proprietary or 
customer trades

[[Page 97689]]

which they effect through ETP Holders on any relevant market. 
Additionally, under NYSE Arca Rule 8.201-E(g), an ETP Holder acting as 
a registered Market Maker in the Shares is required to provide the 
Exchange with information relating to its accounts for trading in any 
underlying commodity, related futures or options on futures, or any 
other related derivatives. Commentary .04 of NYSE Arca Rule 11.3-E 
requires an ETP Holder acting as a registered Market Maker, and its 
affiliates, in the Shares to establish, maintain and enforce written 
policies and procedures reasonably designed to prevent the misuse of 
any material nonpublic information with respect to such products, any 
components of the related products, any physical asset or commodity 
underlying the product, applicable currencies, underlying indexes, 
related futures or options on futures, and any related derivative 
instruments (including the Shares). As a general matter, the Exchange 
has regulatory jurisdiction over its ETP Holders and their associated 
persons, which include any person or entity controlling an ETP Holder. 
To the extent the Exchange may be found to lack jurisdiction over a 
subsidiary or affiliate of an ETP Holder that does business only in 
commodities or futures contracts and that subsidiary or affiliate is a 
member of another regulatory organization, the Exchange could obtain 
information regarding the activities of such subsidiary or affiliate 
through a surveillance sharing agreement with that regulatory 
organization.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolio or reference assets, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange listing rules specified in this rule filing 
shall constitute continued listing requirements for listing the Shares 
on the Exchange.
    The Trust has represented to the Exchange that it will advise the 
Exchange of any failure by the Trust to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Trust is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Bulletin will discuss the following: (1) the procedures for 
purchases and redemptions of Shares in Creation Units (including noting 
that Shares are not individually redeemable); (2) NYSE Arca Rule 9.2-
E(a), which imposes a duty of due diligence on its ETP Holders to learn 
the essential facts relating to every customer prior to trading the 
Shares; (3) how information regarding the IFV is disseminated; (4) the 
requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; (5) the possibility that trading spreads 
and the premium or discount on the Shares may widen as a result of 
reduced liquidity of EUAs during the Core and Late Trading Sessions; 
and (6) trading information. For example, the Information Bulletin will 
advise ETP Holders, prior to the commencement of trading, of the 
prospectus delivery requirements applicable to the Trust. The Exchange 
notes that investors purchasing Shares directly from the Trust will 
receive a prospectus. ETP Holders purchasing Shares from the Trust for 
resale to investors will deliver a prospectus to such investors.
    In addition, the Information Bulletin will reference that the Trust 
is subject to various fees and expenses as will be described in the 
Registration Statement. The Information Bulletin will also reference 
the fact that last sale information regarding EUAs is subject to 
regulation by EEX and ICE Endex, that the Commission and the CFTC do 
not have jurisdiction over the trading of EUAs as a commodity, and that 
jurisdiction over the trading of EUAs is held by the relevant competent 
authority of the individual EU member states in which the trading takes 
place, namely the Bundesanstalt f[uuml]r Finanzdienstleistungsaufsicht 
(BaFIN) in Germany and the Autoriteit Financi[euml]le Markten (AFM) in 
the Netherlands.\51\ The Information Bulletin will also discuss any 
relief, if granted, by the Commission or the staff from any rules under 
the Act.
---------------------------------------------------------------------------

    \51\ Article 22 of Regulation (EU) No. 596/2014 on market abuse 
(market abuse regulation) (``MAR'') requires each EU member state to 
designate a single administrative competent authority to ensure that 
the provisions of MAR are applied on its territory. Commission 
Regulation 596/2014, 2014 O.J. (L 173) 42. For a list of the 
competent authorities for each EU Member State. See https://www.esma.europa.eu/sites/default/files/mar.pdf.
---------------------------------------------------------------------------

    The Information Bulletin will also disclose the trading hours of 
the Shares and that the NAV for the Shares will be calculated after 
4:00 p.m. E.T. each trading day. The Information Bulletin will disclose 
that information about the Shares will be publicly available on the 
Trust's website.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \52\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \52\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.201-E. 
Further, the Exchange has demonstrated that the proposed rule change 
satisfies Section 6(b)(5) of the Act by showing that the ICE Endex is a 
regulated market of significant size that shares surveillance with the 
Exchange. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws. The Exchange may obtain information 
regarding trading in the Shares and Daily EUA Futures from ICE Endex 
with which the Exchange has entered into a CSSA. Also, pursuant to NYSE 
Arca Rule 8.201-E(g), the Exchange is able to obtain information 
regarding trading in the Shares and the underlying commodity through 
ETP Holders acting as registered Market Makers, in connection with such 
ETP Holders' proprietary trades which they effect on any relevant 
market. The Exchange represents that all EUAs held by the Trust will be 
held and maintained in the Union Registry and that the Trust will not 
invest in futures, options, options on futures, or swap contracts. The 
Exchange further represents that ICE Endex is the principal market for 
EUAs in which the Trust may invest, and that

[[Page 97690]]

the Exchange can monitor those EUAs through its CSSA with ICE 
Endex.\53\
---------------------------------------------------------------------------

    \53\ See the discussion in the ``Section 6(b)(5) and the 
Applicable Standards'' section, supra.
---------------------------------------------------------------------------

    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that there is a considerable amount of information on EUAs and Daily 
EUA Futures available on public websites and through professional and 
subscription services. The trading prices for EUAs will be disseminated 
by on-line subscription services or by one or more major market data 
vendors during the NYSE Arca Core Trading Session. EEX also provides on 
its website, on a daily basis, transaction volumes and transaction 
prices for the EUA spot market. Additionally, ICE Endex provides on its 
website, on a daily basis, transaction volumes, transaction prices, 
daily settlement prices and historical settlement prices for Daily EUA 
Futures that were traded outside of block trades by EUA futures 
brokers. In addition, transaction volumes, transaction prices, daily 
settlement prices and historical settlement prices for Daily EUA 
Futures traded in block trades by futures brokers are available on a 
daily basis through a subscription service to ICE Endex. ICE Endex also 
provides the daily settlement price change of the Daily EUA Future on 
its website.
    In addition, the Trust's website (www.cotwoadvisors.com) will 
provide pricing information for EUAs and the Shares. Market prices for 
the Shares will be available from a variety of sources including 
brokerage firms, information websites and other information service 
providers. Quotation and last-sale information regarding the Shares 
will be disseminated through the facilities of the Consolidated Tape 
Association. The NAV of the Trust will be published on each day that 
NYSE Arca is open for regular trading and will also be posted on the 
Trust's website. The IFV relating to the Shares will be widely 
disseminated by one or more major market data vendors at least once 
every 15 seconds as required by NYSE Arca Rule 8.201-E(e)(2)(v). The 
Trust's website will also provide its prospectus and other relevant 
quantitative information regarding the Shares. The Trust will also 
provide website disclosure of its EUA holdings before 9:30 a.m. E.T. on 
each trading day. In addition, information regarding market price and 
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other 
electronic services. Information regarding the previous day's closing 
price and trading volume information for the Shares will be published 
daily in the financial section of newspapers.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of exchange-traded product that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
regarding trading in the Shares, EUAs and Daily EUA Futures from ICE 
Endex pursuant to the CSSA between the Exchange and ICE Endex. In 
addition, as noted above, investors will have ready access to 
information regarding the Trust's NAV, IFV, and quotation and last sale 
information for the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
proposed rule change will enhance competition by accommodating Exchange 
trading of an additional exchange-traded product, and the first such 
product relating to physical carbon credits, which will enhance 
competition among market participants, to the benefit of investors and 
the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEARCA-2024-70, as Modified by Amendment No. 1, and Grounds for 
Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \54\ to determine whether the proposed rule 
change, as modified by Amendment No. 1, should be approved or 
disapproved. Institution of such proceedings is appropriate at this 
time in view of the legal and policy issues raised by the proposed rule 
change, as modified by Amendment No. 1, as discussed below. Institution 
of proceedings does not indicate that the Commission has reached any 
conclusions with respect to any of the issues involved. Rather, as 
described below, the Commission seeks and encourages interested persons 
to provide comments on the proposed rule change, as modified by 
Amendment No. 1.
---------------------------------------------------------------------------

    \54\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\55\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposal's consistency with Section 6(b)(5) of the Act, 
which requires, among other things, that the rules of a national 
securities exchange be ``designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade,'' and ``to protect investors and the public 
interest.'' \56\
---------------------------------------------------------------------------

    \55\ Id.
    \56\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal, as modified by Amendment No. 1. In particular, the 
Commission invites the written views of interested persons concerning 
whether the proposal, as modified by Amendment No. 1, is consistent 
with Section 6(b)(5) or any other provision of the Act, or the rules 
and regulations thereunder. Although there do not appear to be any 
issues relevant to approval or disapproval that would be facilitated by 
an oral presentation of views, data, and arguments, the Commission will 
consider, pursuant to Rule 19b-4, any request for an opportunity to 
make an oral presentation.\57\
---------------------------------------------------------------------------

    \57\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Pub. L. 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change, as modified by 
Amendment No. 1, should be approved or disapproved by December 30, 
2024. Any person who wishes to file a rebuttal to any other person's 
submission must file that rebuttal by January 13, 2025.

[[Page 97691]]

The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of the proposal, which are set forth 
in Amendment No. 1,\58\ in addition to any other comments they may wish 
to submit about the proposed rule change. In particular, the Commission 
seeks comment on the following questions and asks commenters to submit 
data where appropriate to support their views:
---------------------------------------------------------------------------

    \58\ See supra Item II. See also supra note 6.
---------------------------------------------------------------------------

    1. Given the nature of the underlying assets held by the Trust, 
what are commenters' views on whether the proposed Trust and Shares 
would be susceptible to manipulation? What are commenters' views 
generally on whether the Exchange's proposal is designed to prevent 
fraudulent and manipulative acts and practices? What are commenters' 
views generally with respect to the liquidity and transparency of the 
EUA spot and futures markets and such markets' susceptibility to 
manipulation? Are there particular features related to the EUA markets 
and the EUA ecosystem that raise unique concerns about whether the 
proposed Trust, which would hold EUAs and, possibly, a very limited 
amount of cash, would be susceptible to fraud or manipulation?
    2. Based on data and analysis provided by the Exchange,\59\ do 
commenters agree with the Exchange that ICE Endex, on which EUA Futures 
(including Daily EUA Futures) trade, represents a regulated market of 
significant size related to spot EUAs? \60\ What are commenters' views 
on whether there is a reasonable likelihood that a person attempting to 
manipulate the Shares would also have to trade on ICE Endex to 
manipulate the Shares? \61\ Do commenters agree with the Exchange that 
trading in the Shares would not be the predominant influence on prices 
in the Daily EUA Futures market? \62\
---------------------------------------------------------------------------

    \59\ See supra Item II.A.1.
    \60\ See id.
    \61\ See supra note 37 and accompanying text.
    \62\ See supra Item II.A.1.
---------------------------------------------------------------------------

    3. The Exchange further states that the ``Daily EUA Futures market 
functions as the `spot' market for EUAs'' and that the ``purchase and 
sale of Daily EUA Futures is the functional and economic equivalent of 
transactions in spot EUAs.'' \63\ What are commenters' views on whether 
the Daily EUA Futures market functions as a spot EUA market? What are 
commenters' views on the extent to which a surveillance sharing 
agreement with ICE Endex would assist in detecting and deterring fraud 
and manipulation that impacts an ETP that holds spot EUAs, and on 
whether the Exchange's analysis provides evidence to this effect?
---------------------------------------------------------------------------

    \63\ Id.
---------------------------------------------------------------------------

    4. In addition to the Exchange's CSSA with ICE Endex, the Exchange 
asserts that there are other mechanisms in place to deter and detect 
misconduct across both the EUA spot and derivatives markets. 
Specifically, the Exchange states that both EEX and ICE Endex are 
subject to the EU regulatory framework \64\ and represents that both 
EEX and ICE Endex are recognized by the CFTC as authorized Foreign 
Boards of Trade.\65\ Do commenters agree with the Exchange that the 
EU's oversight and monitoring regime, combined with the Exchange's CSSA 
with ICE Endex, may provide other means to prevent fraudulent and 
manipulative acts and practices? \66\
---------------------------------------------------------------------------

    \64\ See supra notes 38-45 and accompanying text.
    \65\ See supra notes 16-17 and accompanying text.
    \66\ See supra note 64.
---------------------------------------------------------------------------

    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-NYSEARCA-2024-70 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-NYSEARCA-2024-70. 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 
submissions should refer to file number SR-NYSEARCA-2024-70 and should 
be submitted on or before December 30, 2024. Rebuttal comments should 
be submitted by January 13, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\67\
---------------------------------------------------------------------------

    \67\ 17 CFR 200.30-3(a)(12) and 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-28763 Filed 12-6-24; 8:45 am]
BILLING CODE 8011-01-P
```