```

[Federal Register Volume 89, Number 241 (Monday, December 16, 2024)]
[Notices]
[Pages 101654-101664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29469]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101864; File No. SR-NYSEARCA-2024-104]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change to List and Trade Shares of the Bitwise Bitcoin 
and Ethereum ETF under NYSE Arca Rule 8.201-E (Commodity-Based Trust 
Shares)

December 10, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on November 26, 2024, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the Bitwise 
Bitcoin and Ethereum ETF (the ``Trust'') under NYSE Arca Rule 8.201-E 
(Commodity-Based Trust Shares). The proposed rule change is available 
on the Exchange's website at www.nyse.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the 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 
Trust \4\ pursuant to NYSE Arca Rule 8.201-E, which governs the listing 
and trading of Commodity Based Trust Shares.\5\
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    \4\ The Trust is a Delaware statutory trust. On November 26, 
2024, the Trust filed with the Commission an initial registration 
statement (the ``Registration Statement'') on Form S-1 under the 
Securities Act of 1933 (15 U.S.C. 77a). The description of the 
operation of the Trust herein is based, in part, on the most recent 
Registration Statement. The Registration Statement is not yet 
effective, and the Shares will not trade on the Exchange until such 
time that the Registration Statement is effective.
    \5\ Commodity-Based Trust Shares are securities issued by a 
trust that represents investors' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
trust.
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    According to the Registration Statement, the Trust will not be 
registered as an investment company under the Investment Company Act of 
1940,\6\ and is not required to register thereunder. The Trust is not a 
commodity pool for purposes of the Commodity Exchange Act.\7\
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    \6\ 15 U.S.C. 80a-1.
    \7\ 17 U.S.C. 1.
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    The Exchange represents that the Shares satisfy the requirements of 
NYSE Arca Rule 8.201-E and thereby qualify for listing on the 
Exchange.\8\
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    \8\ 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).
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Operation of the Trust \9\
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    \9\ The description of the operation of the Trust, the Shares, 
and the ether market contained herein is based, in part, on the 
Registration Statement. See note 4, supra.
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    The Trust will issue the Shares which, according to the 
Registration Statement, represent units of undivided beneficial 
ownership of the Trust. The Trust is a Delaware statutory trust and 
will operate pursuant to a trust agreement (the ``Trust Agreement'') 
between Bitwise Investment Advisers, LLC (the ``Sponsor'' or 
``Bitwise'') and Delaware Trust Company, as the Trust's trustee (the 
``Trustee''). Coinbase Custody Trust Company, LLC will maintain custody 
of the Trust's bitcoin and ether (the ``Bitcoin and Ether Custodian''). 
Bank of New York Mellon will be the custodian for the Trust's cash 
holdings (in such role, the ``Cash Custodian''), the administrator of 
the Trust (in such role, the ``Administrator''), and the transfer agent 
for the Trust (in such role, the ``Transfer Agent'').
    According to the Registration Statement, the investment objective 
of the Trust is to seek to provide exposure to the value of bitcoin and 
ether held by the Trust, less the expenses of the Trust's operations 
and other liabilities. The Trust's allocation of its assets to bitcoin 
and ether will approximate the relative market capitalization of 
bitcoin and ether to one another.\10\ In seeking to achieve its 
investment objective, the Trust will hold bitcoin and ether and 
establish its Net Asset Value (``NAV'') at the end of every business 
day by reference to the CME CF Bitcoin--New York Variant for its 
bitcoin holdings (the ``Bitcoin Pricing Benchmark'') and to the CME CF 
Ether--Dollar Reference Rate--New York Variant for its ether holdings 
(the ``Ether Pricing Benchmark,'' and, with the Bitcoin Pricing 
Benchmark, the ``Pricing Benchmarks'').\11\
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    \10\ As of the date of this filing, the relative market 
capitalization of bitcoin and ether is 83% bitcoin and 17% ether. 
The Trust will calculate the market capitalization of bitcoin and 
ether by multiplying the Pricing Benchmarks by the current 
circulating supply of bitcoin and ether respectively, as determined 
by the Sponsor, and will calculate the relative market 
capitalization by dividing each of bitcoin and ether's market 
capitalization by the combined market capitalization of both.
    \11\ The Pricing Benchmarks are calculated by CF Benchmarks Ltd. 
(the ``Benchmark Provider'') based on an aggregation of executed 
trade flow of major bitcoin and ether trading platforms. As further 
discussed below, the Pricing Benchmarks are designed to provide a 
daily, 4:00 p.m. Eastern Time (``E.T.'') reference rate of the U.S. 
dollar price of one bitcoin or one ether that may be used to develop 
financial products.
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    The Trust's only assets will be bitcoin, ether, and cash.\12\ The 
Trust

[[Page 101655]]

does not seek to hold any non-bitcoin or non-ether crypto assets and 
has expressly disclaimed ownership of any such assets in the event the 
Trust ever involuntarily comes into possession of such assets.\13\ The 
Trust will not use derivatives that may subject the Trust to 
counterparty and credit risks. The Trust will process creations and 
redemptions in cash. The Trust's only recurring ordinary expense is 
expected to be the Sponsor's unitary management fee (the ``Sponsor 
Fee''), which will accrue daily and will be payable in bitcoin and 
ether monthly in arrears. The Administrator will calculate the Sponsor 
Fee on a daily basis by applying an annualized rate to the Trust's 
total bitcoin and ether holdings, and the amount of bitcoin and ether 
payable in respect of each daily accrual shall be determined by 
reference to the Pricing Benchmarks. Financial institutions authorized 
to create and redeem Shares (each, an ``Authorized Participant'') will 
deliver, or cause to be delivered, cash in exchange for Shares of the 
Trust, and the Trust will deliver cash to Authorized Participants when 
those Authorized Participants redeem Shares of the Trust.
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    \12\ The Trust conducts creations and redemptions of its Shares 
for cash. Authorized Participants (defined below) will deliver cash 
to the Cash Custodian pursuant to creation orders for Shares and the 
Cash Custodian will hold such cash until such time as it can be 
converted to bitcoin or ether, which the Trust intends to do on the 
same business day in which such cash is received by the Cash 
Custodian. Additionally, the Trust will sell bitcoin and ether in 
exchange for cash pursuant to redemption orders of its Shares. In 
connection with such sales, an approved Digital Asset Trading 
Counterparty (defined below) will send cash to the Cash Custodian. 
The Cash Custodian will hold such cash until it can be distributed 
to the redeeming Authorized Participant, which it intends to do on 
the same business day in which it is received. In connection with 
the purchases and sales of bitcoin and ether pursuant to its 
creation and redemption activity, it is possible that the Trust may 
retain de minimis amounts of cash as a result of rounding 
differences. The Trust may also initially hold small amounts of cash 
to initiate Trust operations in the immediate aftermath of its 
Registration Statement being declared effective. Lastly, the Trust 
may also sell bitcoin and ether and temporarily hold cash as part of 
a liquidation of the Trust or to pay certain extraordinary expenses 
not assumed by the Sponsor. Under the Trust Agreement, the Sponsor 
has agreed to assume the normal operating expenses of the Trust, 
subject to certain limitations. For example, the Trust will bear any 
indemnification or litigation liabilities as extraordinary expenses. 
In any event, in the ongoing course of business, the amounts of cash 
retained by the Trust are not expected to constitute a material 
portion of the Trust's holdings.
    \13\ The Trust may, from time to time, passively receive, by 
virtue of holding ether, certain additional digital assets (``IR 
Assets'') or rights to receive IR Assets (``Incidental Rights'') 
through a fork of the Bitcoin network or Ethereum network or an 
airdrop of assets. The Trust will not seek to acquire such IR Assets 
or Incidental Rights. Pursuant to the terms of the Trust Agreement, 
the Trust has disclaimed ownership in any such IR Assets and/or 
Incidental Rights to make clear that such assets are not and shall 
never be considered assets of the Trust and will not be taken into 
account for purposes of determining the Trust's NAV or NAV per 
Share. Neither the Trust, nor the Sponsor, nor the Bitcoin and Ether 
Custodian, nor any other person associated with the Trust will, 
directly or indirectly, engage in action where any portion of the 
Trust's ether becomes subject to the Ethereum proof-of-stake 
validation or is used to earn additional ether or generate income or 
other earnings.
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Custody of the Trust's Bitcoin and Ether
    The Trust's Bitcoin and Ether Custodian will maintain custody of 
all of the Trust's bitcoin and ether, other than that which is 
maintained in a trading account (the ``Trading Balance'') with 
Coinbase, Inc. (the ``Prime Execution Agent,'' which is an affiliate of 
the Bitcoin and Ether Custodian). The Bitcoin and Ether Custodian will 
maintain an account that holds the Trust's bitcoin (the ``Trust Bitcoin 
Account'') and an account that holds the Trust's ether (the ``Trust 
Ether Account,'' and together with the Trust Bitcoin Account, the 
``Trust Digital Asset Accounts''), and will facilitate the transfer of 
bitcoin and ether required for the operation of the Trust. The Trading 
Balance will only be used in the limited circumstances in which the 
Trust is using the Agent Execution Model (as defined below) to 
effectuate the purchases and sales of bitcoin or ether. The Bitcoin and 
Ether Custodian provides safekeeping of bitcoin and ether using a 
multi-layer cold storage security platform designed to provide offline 
security of the bitcoin and ether held by the Bitcoin and Ether 
Custodian.
Valuation of the Trust's Bitcoin and Ether
    The net assets of the Trust and its Shares are valued on a daily 
basis with reference to the Pricing Benchmarks, which are standardized 
reference rates published by the Benchmark Provider designed to reflect 
the performance of bitcoin and ether in U.S. dollars. The Bitcoin 
Pricing Benchmark and Ether Pricing Benchmark were created to 
facilitate financial products based on bitcoin and ether, respectively. 
The Bitcoin Pricing Benchmark serves as a once-a-day benchmark rate of 
the U.S. dollar price of bitcoin (USD/BTC), and the Ether Pricing 
Benchmark serves as a once-a-day benchmark rate of the U.S. dollar 
price of ether (USD/ETH), each calculated as of 4:00 p.m. E.T. The 
Bitcoin Pricing Benchmark aggregates the trade flow of several major 
bitcoin trading venues, and the Ether Pricing Benchmark aggregates the 
trade flow of several major ether trading venues, each during an 
observation window between 3:00 p.m. and 4:00 p.m. E.T. into the U.S. 
dollar price of one bitcoin or ether, as applicable, at 4:00 p.m. E.T.
    The Bitcoin Pricing Benchmark uses the same methodology as the CME 
CF Bitcoin Reference Rate (``BRR''), which was designed by the CME 
Group and the Benchmark Provider to facilitate the cash settlement of 
bitcoin futures contracts traded on the Chicago Mercantile Exchange 
(``CME'').\14\ The CME Group also publishes the CME CF Bitcoin Real 
Time Index (the ``CME Bitcoin Real Time Price''), which is a continuous 
measure of the U.S. dollar price of one bitcoin calculated once per 
second. Similarly, the Ether Pricing Benchmark uses the same 
methodology as the CME CF Ether-Dollar Reference Rate (``ERR''), which 
was designed by the CME Group and the Benchmark Provider to facilitate 
the cash settlement of ether futures contracts traded on the CME.\15\ 
The CME Group also publishes the CME CF Ether Real Time Index (the 
``CME Ether Real Time Price''), which is a continuous measure of the 
U.S. dollar price of one ether calculated once per second. Each of the 
Pricing Benchmarks, BRR, ERR, CME Bitcoin Real Time Price, and CME 
Ether Real Time Price are representative of the bitcoin or ether 
trading activity, as applicable, on the Constituent Platforms,\16\ 
which include, as of the date of this filing, Bitstamp, Coinbase, 
Gemini, itBit, LMAX, and Kraken.
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    \14\ The only material difference between the Bitcoin Pricing 
Benchmark and the BRR is that the BRR measures the U.S. dollar price 
of one bitcoin as of 4:00 p.m. London time and the Bitcoin Pricing 
Benchmark measures the U.S. dollar price of one bitcoin as of 4:00 
p.m. E.T.
    \15\ The only material difference between the Ether Pricing 
Benchmark and ERR is that the ERR measures the U.S. dollar price of 
one ether as of 4:00 p.m. London time, and the Pricing Index 
measures the U.S. dollar price of one ether as of 4:00 p.m. E.T.
    \16\ The ``Constituent Platforms'' are the bitcoin and ether 
trading venues included in the Pricing Benchmarks.
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    The Trust uses the Pricing Benchmarks to calculate its NAV, as 
described below in ``Net Asset Value.''
    The Sponsor, in its sole discretion, may cause the Trust to price 
its portfolio based upon an index, benchmark, or standard other than 
the Pricing Benchmarks at any time, with prior notice to the 
shareholders, if investment conditions change or the Sponsor believes 
that another index, benchmark, or standard better aligns with the 
Trust's investment objective and strategy. The Sponsor may make this 
decision for a number of reasons, including, but not limited to, a 
determination that the Pricing Benchmarks price of bitcoin or ether 
differs materially from the global market price of bitcoin or ether 
and/or that third parties are able to purchase and sell bitcoin or 
ether on public or private markets not included among the Constituent 
Platforms, and such transactions may take place at prices materially 
higher or lower than the Pricing Benchmarks price. The Sponsor, 
however, is under no obligation whatsoever to make such changes in any 
circumstance. In the event that the Sponsor intends to establish the 
Trust's NAV by reference to an index, benchmark, or standard other than 
the Pricing Benchmarks, it will provide shareholders with notice in a 
prospectus supplement and/or through a current

[[Page 101656]]

report on Form 8-K or in the Trust's annual or quarterly reports.\17\
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    \17\ The Sponsor will provide notice of any such changes in the 
Trust's periodic or current reports and, if the Sponsor makes such a 
change other than on an ad hoc or temporary basis, will file a 
proposed rule change with the Commission.
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Net Asset Value
    The Trust's only assets will be bitcoin and ether and, under 
limited circumstances, cash. The Trust's NAV and NAV per Share will be 
determined by the Administrator once each Exchange trading day as of 
4:00 p.m. E.T., or as soon thereafter as practicable. The Administrator 
will calculate the NAV by multiplying the number of bitcoin and ether 
held by the Trust by the Bitcoin Pricing Benchmark or Ether Pricing 
Benchmark, respectively, for such day, adding any additional 
receivables and subtracting the accrued but unpaid liabilities of the 
Trust. The NAV per Share is calculated by dividing the NAV by the 
number of Shares then outstanding. The Administrator will determine the 
price of the Trust's bitcoin and ether by reference to the Pricing 
Benchmarks, which are published and calculated as set forth above.
Intraday Trust Value
    The Trust uses the CME Bitcoin Real Time Price and CME Ether Real 
Time Price to calculate an Indicative Trust Value (``ITV''). One or 
more major market data vendors will disseminate the ITV, updated every 
15 seconds each trading day as calculated by the Exchange or a third-
party financial data provider during the Exchange's Core Trading 
Session (9:30 a.m. to 4:00 p.m., E.T.). The ITV will be calculated 
throughout the trading day by using the prior day's holdings at the 
close of business and the most recently reported price level of the CME 
Bitcoin Real Time Price and CME Ether Real Time Price. The ITV will be 
widely disseminated by one or more major market data vendors during the 
NYSE Arca Core Trading Session.
Creation and Redemption of Shares
    The Trust creates and redeems Shares from time to time, but only in 
one or more Creation Units, which will initially consist of at least 
10,000 Shares, but may be subject to change (``Creation Unit''). A 
Creation Unit is only made in exchange for delivery to the Trust or the 
distribution by the Trust of an amount of cash, equivalent to the value 
of ether represented by the Creation Unit being created or redeemed, 
the amount of which is representative of the combined NAV of the number 
of Shares included in the Creation Units being created or redeemed 
determined as of 4:00 p.m. E.T. on the day the order to create or 
redeem Creation Units is properly received. Except when aggregated in 
Creation Units or under extraordinary circumstances permitted under the 
Trust Agreement, the Shares are not redeemable securities.
    Authorized Participants are the only persons that may place orders 
to create and redeem Creation Units. Authorized Participants must be 
(1) registered broker-dealers or other securities market participants, 
such as banks and other financial institutions, that are not required 
to register as broker-dealers to engage in securities transactions 
described below, and (2) Depository Trust Company (``DTC'') 
participants. To become an Authorized Participant, a person must enter 
into an Authorized Participant Agreement with the Trust and/or the 
Trust's marketing agent (the ``Marketing Agent'').
    According to the Registration Statement, when purchasing or selling 
ether in response to the purchase of Creation Units or the redemption 
of Creation Units, which will be processed in cash, the Trust would do 
so pursuant to either (1) a ``Trust-Directed Trade Model,'' or (2) an 
``Agent Execution Model,'' which are each described in more detail 
below.
    The Trust intends to utilize the Trust-Directed Trade Model for all 
purchases and sales of bitcoin and ether and would only utilize the 
Agent Execution Model in the event that no digital asset trading 
counterparty approved by the Sponsor (a ``Digital Asset Trading 
Counterparty'') \18\ is able to effectuate the Trust's purchase or sale 
of bitcoin or ether. Under the Trust-Directed Trade Model, in 
connection with receipt of a purchase order or redemption order, the 
Sponsor, on behalf of the Trust, would be responsible for acquiring 
bitcoin and ether from an approved Digital Asset Trading Counterparty 
in an amount equal to the Basket Amount. When seeking to purchase 
bitcoin and ether on behalf of the Trust, the Sponsor will seek to 
purchase bitcoin and ether at commercially reasonable prices and terms 
from any of the approved Digital Asset Trading Counterparties.\19\ Once 
agreed upon, the transaction will generally occur on an ``over-the-
counter'' basis.
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    \18\ The Digital Asset Trading Counterparties with which the 
Sponsor will engage in ether transactions are unaffiliated third 
parties that are not acting as agents of the Trust, the Sponsor or 
the Authorized Participant, and all transactions will be done on an 
arms-length basis. There is no contractual relationship between the 
Trust, the Sponsor or the Digital Asset Trading Counterparty.
    \19\ The Sponsor will maintain ownership and control of bitcoin 
and ether in a manner consistent with good delivery requirements for 
spot commodity transactions.
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    Whether utilizing the Trust-Directed Trade Model or the Agent 
Execution Model, the Authorized Participants will deliver only cash to 
create shares and will receive only cash when redeeming Shares. 
Further, Authorized Participants will not directly or indirectly 
purchase, hold, deliver, or receive bitcoin or ether as part of the 
creation or redemption process or otherwise direct the Trust or a third 
party with respect to purchasing, holding, delivering, or receiving 
bitcoin or ether as part of the creation or redemption process. 
Additionally, under either the Trust-Directed Trade Model or the Agent 
Execution Model, the Trust will create Shares by receiving bitcoin and 
ether from a third party that is not the Authorized Participant and is 
not affiliated with the Sponsor or the Trust, and the Trust--not the 
Authorized Participant--is responsible for selecting the third party to 
deliver the bitcoin and ether. The third party will not be acting as an 
agent of the Authorized Participant with respect to the delivery of the 
bitcoin and ether to the Trust or acting at the direction of the 
Authorized Participant with respect to the delivery of the bitcoin and 
ether to the Trust. Additionally, the Trust will redeem Shares by 
delivering bitcoin and ether to a third party that is not the 
Authorized Participant and is not affiliated with the Sponsor or the 
Trust, and the Trust--not the Authorized Participant--is responsible 
for selecting the third party to receive the bitcoin and ether. 
Finally, the third party will not be acting as an agent of the 
Authorized Participant with respect to the receipt of the bitcoin or 
ether from the Trust or acting at the direction of the Authorized 
Participant with respect to the receipt of the bitcoin or ether from 
the Trust.
Acquiring and Selling Ether Pursuant to Creation and Redemption of 
Shares Under the Trust-Directed Trade Model
    Under the Trust-Directed Trade Model and as set forth in the 
Registration Statement, on any business day, an Authorized Participant 
may create Shares by placing an order to purchase one or more Creation 
Units with the Transfer Agent through the Marketing Agent. Such orders 
are subject to approval by the Marketing Agent and the Transfer Agent. 
For purposes of processing creation and redemption orders, a ``business 
day'' means any day other than a day when the Exchange is closed for 
regular

[[Page 101657]]

trading (``Business Day''). To be processed on the date submitted, 
creation orders must be placed before 4:00 p.m. E.T. or the close of 
regular trading on the Exchange, whichever is earlier, but may be 
required to be placed earlier at the discretion of the Sponsor. A 
purchase order will be effective on the date it is received by the 
Transfer Agent and approved by the Marketing Agent (``Purchase Order 
Date'').
    Creation Units are processed in cash. By placing a purchase order, 
an Authorized Participant agrees to deposit, or cause to be deposited, 
an amount of cash equal to the quantity of bitcoin and ether 
attributable to each Share of the Trust (net of accrued but unpaid 
expenses and liabilities) multiplied by the number of Shares (10,000) 
comprising a Creation Unit (the ``Basket Amount''). The Sponsor will 
cause to be published each Business Day, prior to the commencement of 
trading on the Exchange, the Basket Amount relating to a Creation Unit 
applicable for such Business Day. That amount is derived by multiplying 
the Basket Amount by the value of bitcoin and ether ascribed by the 
Pricing Index. However, the Authorized Participant is also responsible 
for any additional cash required to account for the price at which the 
Trust agrees to purchase the requisite amount of bitcoin and ether from 
a Digital Asset Trading Counterparty to the extent it is greater than 
the Pricing Index price on each Purchase Order Date.
    Prior to the delivery of Creation Units, the Authorized Participant 
must also have wired to the Transfer Agent the nonrefundable 
transaction fee due for the creation order. Authorized Participants may 
not withdraw a creation request. If an Authorized Participant fails to 
consummate the foregoing, the order may be cancelled.
    Following the acceptance of a purchase order, the Authorized 
Participant must wire the cash amount described above to the Cash 
Custodian, and the Digital Asset Trading Counterparty must deposit the 
required amount of bitcoin and ether with the Bitcoin and Ether 
Custodian by the end of the day E.T. on the Business Day following the 
Purchase Order Date. The bitcoin and ether will be purchased from 
Digital Asset Trading Counterparties that are not acting as agents of 
the Trust or agents of the Authorized Participant. These transactions 
will be done on an arms-length basis, and there is no contractual 
relationship between the Trust, the Sponsor, or the Digital Asset 
Trading Counterparty to acquire such bitcoin and ether. Prior to any 
movement of cash from the Cash Custodian to the Digital Asset Trading 
Counterparty or movement of Shares from the Transfer Agent to the 
Authorized Participant's DTC account to settle the transaction, the 
bitcoin and ether must be deposited at the Bitcoin and Ether Custodian.
    The Digital Asset Trading Counterparty must deposit the required 
amount of bitcoin and ether by end of day E.T. on the Business Day 
following the Purchase Order Date prior to any movement of cash from 
the Cash Custodian or Shares from the Transfer Agent. Upon receipt of 
the deposit amount of bitcoin and ether at the Bitcoin and Ether 
Custodian from the Digital Asset Trading Counterparty, the Bitcoin and 
Ether Custodian will notify the Sponsor that the bitcoin and ether have 
been received. The Sponsor will then notify the Transfer Agent that the 
bitcoin and ether have been received, and the Transfer Agent will 
direct DTC to credit the number of Shares ordered to the Authorized 
Participant's DTC account and will wire the cash previously sent by the 
Authorized Participant to the Digital Asset Trading Counterparty to 
complete settlement of the Purchase Order and the acquisition of the 
bitcoin and ether by the Trust, as described above.
    As between the Trust and the Authorized Participant, the expense 
and risk of the difference between the value of bitcoin and ether 
calculated by the Administrator for daily valuation using the Pricing 
Benchmarks and the price at which the Trust acquires the bitcoin and 
ether will be borne solely by the Authorized Participant to the extent 
that the Trust pays more for bitcoin and ether than the price used by 
the Trust for daily valuation. Any such additional cash amount will be 
included in the amount of cash calculated by the Administrator on the 
Purchase Order Date, communicated to the Authorized Participant on the 
Purchase Order Date, and wired by the Authorized Participant to the 
Cash Custodian on the day following the Purchase Order Date. If the 
Digital Asset Trading Counterparty fails to deliver the bitcoin and 
ether to the Bitcoin and Ether Custodian, no cash is sent from the Cash 
Custodian to the Digital Asset Trading Counterparty, no Shares are 
transferred to the Authorized Participant's DTC account, the cash is 
returned to the Authorized Participant, and the Purchase Order is 
cancelled.
    Under the Trust-Directed Trade Model and according to the 
Registration Statement, the procedures by which an Authorized 
Participant can redeem one or more Creation Units mirror the procedures 
for the creation of Creation Units. On any Business Day, an Authorized 
Participant may place an order with the Transfer Agent through the 
Marketing Agent to redeem one or more Creation Units. To be processed 
on the date submitted, redemption orders must be placed before 4:00 
p.m. E.T. or the close of regular trading on the Exchange, whichever is 
earlier, or earlier as determined by the Sponsor. A redemption order 
will be effective on the date it is received by the Transfer Agent and 
approved by the Marketing Agent (``Redemption Order Date''). The 
redemption procedures allow Authorized Participants to redeem Creation 
Units and do not entitle an individual shareholder to redeem any Shares 
in an amount less than a Creation Unit, or to redeem Creation Units 
other than through an Authorized Participant. In connection with 
receipt of a redemption order accepted by the Marketing Agent and 
Transfer Agent, the Sponsor, on behalf of the Trust, is responsible for 
selling the bitcoin and ether to an approved Digital Asset Trading 
Counterparty in an amount equal to the Basket Amount.
    The redemption distribution from the Trust will consist of a 
transfer to the redeeming Authorized Participant, or its agent, of the 
amount of cash the Trust received in connection with a sale of the 
Basket Amount of bitcoin and ether to a Digital Asset Trading 
Counterparty made pursuant to the redemption order. The Sponsor will 
cause to be published each Business Day, prior to the commencement of 
trading on the Exchange, the redemption distribution amount relating to 
a Creation Unit applicable for such Business Day. The redemption 
distribution amount is derived by multiplying the Basket Amount by the 
value of bitcoin and ether ascribed by the Pricing Benchmarks. However, 
as between the Trust and the Authorized Participant, the expense and 
risk of the difference between the value of bitcoin and ether ascribed 
by the Pricing Benchmarks and the price at which the Trust sells the 
bitcoin and ether will be borne solely by the Authorized Participant to 
the extent that the Trust receives less for bitcoin and ether than the 
value ascribed by the Pricing Benchmarks. Prior to the delivery of 
Creation Units, the Authorized Participant must also have wired to the 
Transfer Agent the nonrefundable transaction fee due for the redemption 
order.
    The redemption distribution due from the Trust will be delivered by 
the Transfer Agent to the Authorized Participant once the Cash 
Custodian has received the cash from the Digital Asset Trading 
Counterparty. The Bitcoin and

[[Page 101658]]

Ether Custodian will not send the Basket Amount of bitcoin and ether to 
the Digital Asset Trading Counterparty until the Cash Custodian has 
received the cash from the Digital Asset Trading Counterparty and is 
instructed by the Sponsor to make such transfer. Once the Digital Asset 
Trading Counterparty has sent the cash to the Cash Custodian in an 
agreed upon amount to settle the agreed upon sale of the Basket Amount 
of bitcoin and ether, the Transfer Agent will notify the Sponsor. The 
Sponsor will then notify the Bitcoin and Ether Custodian to transfer 
the bitcoin and ether to the Digital Asset Trading Counterparty, and 
the Transfer Agent will wire the cash proceeds to the Authorized 
Participant once the Trust's DTC account has been credited with the 
Shares represented by the Creation Unit from the redeeming Authorized 
Participant. Once the Authorized Participant has delivered the Shares 
represented by the Creation Unit to be redeemed to the Trust's DTC 
account, the Cash Custodian will wire the requisite amount of cash to 
the Authorized Participant. If the Trust's DTC account has not been 
credited with all of the Shares of the Creation Unit to be redeemed, 
the redemption distribution will be delayed until such time as the 
Transfer Agent confirms receipt of all such Shares. If the Digital 
Asset Trading Counterparty fails to deliver the cash to the Cash 
Custodian, the transaction will be cancelled, and no transfer of 
bitcoin or ether or Shares will occur.
Acquiring and Selling Ether Pursuant to Creation and Redemption of 
Shares Under the Agent Execution Model
    Under the Agent Execution Model, the Prime Execution Agent, acting 
in an agency capacity, would conduct bitcoin and ether purchases and 
sales on behalf of the Trust with third parties through its Coinbase 
Prime service pursuant to the Prime Execution Agent Agreement. To 
utilize the Agent Execution Model, the Trust may maintain some bitcoin, 
ether, or cash in the Trading Balance with the Prime Execution Agent. 
The Prime Execution Agent Agreement provides that the Trust does not 
have an identifiable claim to any particular bitcoin or ether (and 
cash); rather, the Trust's Trading Balance represents an entitlement to 
a pro rata share of the bitcoin or ether (and cash) the Prime Execution 
Agent holds on behalf of customers who hold similar entitlements 
against the Prime Execution Agent. In this way, the Trust's Trading 
Balance represents an omnibus claim on the Prime Execution Agent's 
bitcoin or ether (and cash) held on behalf of the Prime Execution 
Agent's customers.
    To avoid having to pre-fund purchases or sales of bitcoin or ether 
in connection with cash creations and redemptions and sales of bitcoin 
or ether to pay Trust expenses not assumed by the Sponsor, to the 
extent applicable, the Trust may borrow bitcoin, ether, or cash as 
trade credit (``Trade Credit'') from Coinbase Credit, Inc. (the ``Trade 
Credit Lender'') on a short-term basis pursuant to the Coinbase Credit 
Committed Trade Financing Agreement (the ``Trade Financing 
Agreement'').
    On the day of the Purchase Order Date, the Trust would enter into a 
transaction to buy bitcoin and ether through the Prime Execution Agent 
for cash. Because the Trust's Trading Balance may not be funded with 
cash on the Purchase Order Date for the purchase of bitcoin and ether 
in connection with the Purchase Order under the Agent Execution Model, 
the Trust may borrow Trade Credits in the form of cash from the Trade 
Credit Lender pursuant to the Trade Financing Agreement or may require 
the Authorized Participant to deliver the required cash for the 
Purchase Order on the Purchase Order Date. The extension of Trade 
Credits on the Purchase Order Date allows the Trust to purchase bitcoin 
and ether through the Prime Execution Agent on the Purchase Order Date, 
with such bitcoin and ether being deposited in the Trust's Trading 
Balance.
    On the day following the Purchase Order Date (the ``Purchase Order 
Settlement Date''), the Trust would deliver Shares to the Authorized 
Participant in exchange for cash received from the Authorized 
Participant. Where applicable, the Trust would use the cash to repay 
the Trade Credits borrowed from the Trade Credit Lender. On the 
Purchase Order Settlement Date for a Purchase Order utilizing the Agent 
Execution Model, the bitcoin and ether associated with the Purchase 
Order and purchased on the Purchase Order Date is swept from the 
Trust's Trading Balance with the Prime Execution Agent to the Trust 
Digital Asset Account with the Bitcoin and Ether Custodian pursuant to 
a regular end-of-day sweep process. Transfers of bitcoin and ether into 
the Trust's Trading Balance are off-chain transactions and transfers 
from the Trust's Trading Balance to the Trust Digital Asset Account are 
``on-chain'' transactions represented on the bitcoin and ether 
blockchains, as applicable. Any financing fee owed to the Trade Credit 
Lender is deemed part of trade execution costs and embedded in the 
trade price for each transaction.
    For a Redemption Order utilizing the Agent Execution Model, on the 
day of the Redemption Order Date the Trust would enter into a 
transaction to sell bitcoin and ether through the Prime Execution Agent 
for cash. The Trust's Trading Balance with the Prime Execution Agent 
may not be funded with bitcoin and ether on trade date for the sale of 
bitcoin and ether in connection with the redemption order under the 
Agent Execution Model, when bitcoin and ether remains in the Trust 
Digital Asset Account with the Bitcoin and Ether Custodian at the point 
of intended execution of a sale of bitcoin and ether. In those 
circumstances the Trust may borrow Trade Credits in the form of bitcoin 
and ether from the Trade Credit Lender, which allows the Trust to sell 
bitcoin and ether through the Prime Execution Agent on the Redemption 
Order Date, and the cash proceeds are deposited in the Trust's Trading 
Balance with the Prime Execution Agent. On the business day following 
the Redemption Order Date (the ``Redemption Order Settlement Date'') 
for a redemption order utilizing the Agent Execution Model where Trade 
Credits were utilized, the Trust delivers cash to the Authorized 
Participant in exchange for Shares received from the Authorized 
Participant. In the event Trade Credits were used, the Trust will use 
the bitcoin and ether that is moved from the Trust Digital Asset 
Account with the Bitcoin and Ether Custodian to the Trading Balance 
with the Prime Execution Agent to repay the Trade Credits borrowed from 
the Trade Credit Lender.
    For a redemption of Creation Units utilizing the Agent Execution 
Model, the Sponsor would instruct the Bitcoin and Ether Custodian to 
prepare to transfer the bitcoin and ether associated with the 
redemption order from the Trust Digital Asset Account with the Bitcoin 
and Ether Custodian to the Trust's Trading Balance with the Prime 
Execution Agent. On the Redemption Order Settlement Date, the Trust 
would enter into a transaction to sell bitcoin and ether through the 
Prime Execution Agent for cash, and the Prime Execution Agent credits 
the Trust's Trading Balance with the cash. On the same day, the 
Authorized Participant would deliver the necessary Shares to the Trust 
and the Trust delivers cash to the Authorized Participant.
Background on Bitcoin
    Bitcoin is the digital asset that is native to, and created and 
transmitted through the operations of, the peer-to-peer ``Bitcoin 
network,'' a decentralized

[[Page 101659]]

network of computers that operates on cryptographic protocols. No 
single entity owns or operates the Bitcoin network, the infrastructure 
of which is collectively maintained by a decentralized user base. The 
Bitcoin network allows people to exchange tokens of value, called 
bitcoin, which are recorded on a public transaction ledger known as the 
``Bitcoin blockchain.'' Bitcoin can be used to pay for goods and 
services, or it can be converted to fiat currencies, such as the U.S. 
dollar, at rates determined on digital asset trading platforms or in 
individual end-user-to-end-user transactions under a barter system. 
Although nascent in use, bitcoin may be used as a medium of exchange, 
unit of account or store of value.
    The Bitcoin network is decentralized and does not require 
governmental authorities or financial institution intermediaries to 
create, transmit or determine the value of bitcoin. In addition, no 
party may easily censor transactions on the Bitcoin network. As a 
result, the Bitcoin network is often referred to as decentralized and 
censorship resistant.
    The value of bitcoin is determined by the supply of and demand for 
bitcoin. New bitcoin are created and rewarded to the parties providing 
the Bitcoin network's infrastructure (``miners'') in exchange for their 
expending computational power to verifying transactions and add them to 
the Bitcoin blockchain. The Bitcoin blockchain is effectively a 
decentralized database that includes all blocks that have been solved 
by miners and it is updated to include new blocks as they are solved. 
Each bitcoin transaction is broadcast to the Bitcoin network and, when 
included in a block, recorded in the Bitcoin blockchain. As each new 
block records outstanding bitcoin transactions, and outstanding 
transactions are settled and validated through such recording, the 
Bitcoin blockchain represents a complete, transparent and unbroken 
history of all transactions of the Bitcoin network.
The CME Bitcoin Futures Market
    The CME Group announced the planned launch of bitcoin futures on 
October 31, 2017. Trading began on December 17, 2017.\20\ Each contract 
represents five bitcoin and is based on the CME CF Bitcoin Reference 
Rate. The contracts trade and settle like other cash settled commodity 
futures contracts.
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    \20\ See ``CME Group Announces Launch of Bitcoin Futures,'' 
October 31, 2017, available at https://www.cmegroup.com/media-room/press-releases/2017/10/31/cme_group_announceslaunchofbitcoinfutures.html. At the same time as 
the launch of the CME Market, the Cboe Futures Exchange, LLC 
announced and subsequently launched Cboe bitcoin futures. See ``CFE 
to Commence Trading in Cboe Bitcoin (USD) Futures Soon,'' December 
01, 2017, available at cdn.cboe.com/resources/release_notes/2017/Cboe-Bitcoin-USD-Futures-Launch-Notification.pdf. Each future was 
cash settled, with the CME Market tracking the CME UK Reference Rate 
and the Cboe bitcoin futures tracking a bitcoin trading platform 
daily auction price. The Cboe Futures Exchange, LLC subsequently 
discontinued its bitcoin futures market effective June 2019. ``Cboe 
put the brakes on bitcoin futures,'' March 15, 2019, available at 
https://www.reuters.com/article/us-cboe-bitcoin/cboe-puts-the-brakes-on-bitcoin-futures-idUSKCN1QW261. The Trust uses the CME US 
Reference Rate to calculate its NAV.
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    Nearly every measurable metric related to bitcoin futures has 
trended up since launch. For example, there were 348,635 bitcoin 
futures contracts traded in September 2024 (approximately $110.6 
billion) compared to 192,620 ($26.0 billion) contracts, 279,859 
contracts ($27.3 billion), 159,803 contracts ($34.8 billion), and 
201,893 contracts ($10.8 billion) traded in September 2023, September 
2022, September 2021, and September 2020, respectively.\21\
---------------------------------------------------------------------------

    \21\ Data from CME Volume and Average Daily Volume Reports, 
available at https://www.cmegroup.com/market-data/volume-open-interest.htmlvolumeTotals.
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    Open interest was 39,590 bitcoin futures contracts in September 
2024 (approximately $12.6 billion) compared to 15,014 contracts ($2.0 
billion), 14,867 contracts ($1.4 billion), 7,276 contracts ($1.6 
billion), and 7,487 contracts ($0.4 billion) traded in September 2023, 
September 2022, September 2021, and September 2020, respectively.\22\
---------------------------------------------------------------------------

    \22\ Data from CME Open Interest Reports, available at https://www.cmegroup.com/market-data/volume-open-interest.html#openInterestTools.
---------------------------------------------------------------------------

    The number of large open interest holders \23\ has increased as 
well, even in the face of heightened bitcoin price volatility, as 
demonstrated in the figure that follows.\24\
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    \23\ A large open interest holder in bitcoin futures is an 
entity that holds at least 25 contracts, which is the equivalent of 
125 bitcoin. At a price of approximately $64,300.87 per bitcoin on 
9/24/2024, more than 115 firms had outstanding positions of greater 
than $8.04 million in bitcoin futures. Data from The Block, 
available at https://www.theblock.co/data/crypto-markets/cme-cots/large-open-interest-holders-of-cme-bitcoin-futures.
    \24\ Data from 4/10/2018 to 10/22/24, from The Block.

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[[Page 101660]]

[GRAPHIC] [TIFF OMITTED] TN16DE24.014

    The Commodity Futures Trading Commission (``CFTC'') regulates the 
CME bitcoin futures market, and both the Exchange and CME are members 
of the Intermarket Surveillance Group (``ISG'').\25\
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    \25\ For a list of the current members and affiliate members of 
ISG, see https://www.isgportal.com/.
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Background on Ethereum
    Ethereum is free software that is hosted on computers distributed 
throughout the globe. Ethereum employs an array of computer code-based 
logic, called a protocol, to create a unified understanding of 
ownership, commercial activity, and economic logic. This allows users 
to engage in commerce without the need to trust any of its participants 
or counterparties. Ethereum code creates verifiable and unambiguous 
rules that assign clear, strong property rights to create a platform 
for unrestrained business formation and free exchange. No single 
intermediary or entity operates or controls the Ethereum network, the 
transaction validation and recordkeeping infrastructure of which is 
collectively maintained by a disparate user base. The Ethereum network 
allows people to exchange tokens of value, or ether, which are recorded 
on a distributed, public recordkeeping system or ledger known as a 
blockchain, and which can be used to pay for goods and services, 
including computational power on the Ethereum network, or converted to 
fiat currencies, such as the U.S. dollar, at rates determined on spot 
trading platforms or in individual peer-to-peer transactions. By 
combining the recordkeeping system of the Ethereum blockchain with a 
flexible scripting language that can be used to implement a wide 
variety of instructions, the Ethereum network is intended to act as a 
public computational layer on top of which users can build their own 
public software programs, as an alternative to centralized web 
services. On the Ethereum network, ether is the unit of account that 
users pay for the computational resources consumed by running programs 
of their choice.
CME Ether Futures Market
    CME began offering trading in ether futures on February 8, 
2021.\26\ Each contract represents fifty ether and is based on the ERR. 
The contracts trade and settle like other cash settled commodity 
futures contracts.
---------------------------------------------------------------------------

    \26\ See ``CME Group Announces Launch of Ether Futures,'' 
February 8, 2021, available at https://www.cmegroup.com/media-room/press-releases/2021/2/08/cme_group_announceslaunchofetherfutures.html.
---------------------------------------------------------------------------

    Most measurable metrics related to CME ether futures have trended 
up since launch. For example, there were 95,261 CME ether futures 
contracts traded in September 2024 (approximately $12.4 billion) 
compared to 78,571 contracts ($6.6 billion), 163,114 contracts ($10.9 
billion), and 130,546 contracts ($19.5 billion) traded in September 
2023, September 2022, and September 2021, respectively. In the first 
month of trading, there were 11,637 billion contracts ($0.8 billion) 
traded.\27\
---------------------------------------------------------------------------

    \27\ Data from CME Volume and Average Daily Volume Reports, 
available at https://www.cmegroup.com/market-data/volume-open-interest.html volumeTotals.
---------------------------------------------------------------------------

    Open interest was 6,746 CME ether futures contracts in September 
2024 (approximately $875.1 million) compared to 4,577 contracts ($384.3 
million), 5,035 contracts ($336.8 million), and 4,388 contracts ($656.8 
million) in September 2023, September 2022, and September 2021, 
respectively.\28\
---------------------------------------------------------------------------

    \28\ Data from CME Open Interest Reports, available at https://www.cmegroup.com/market-data/volume-openinterest.html#openInterestTools.
---------------------------------------------------------------------------

    The number of large open interest holders \29\ has increased as 
well, as demonstrated in the figure that follows.\30\
---------------------------------------------------------------------------

    \29\ A large open interest holder in ether futures is an entity 
that holds at least 25 contracts, which is the equivalent of 1250 
ether. Data from The Block, available at https://www.theblock.co/data/crypto-markets/cme-cots/large-open-interest-holders-of-cme-ether-futures.
    \30\ Data from 4/10/2018 to 10/22/2024, from The Block.

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[[Page 101661]]

[GRAPHIC] [TIFF OMITTED] TN16DE24.015

    The CFTC regulates the CME ether futures market, and both the 
Exchange and CME are members of the ISG.
Applicable Standard
    The Commission has historically approved or disapproved exchange 
filings to list and trade series of Trust Issued Receipts, including 
spot, Commodity-Based Trust Shares, on the basis of whether the listing 
exchange has in place a comprehensive surveillance sharing agreement 
with a regulated market of significant size related to the underlying 
commodity to be held.\31\ However, the Commission recently approved the 
listing and trading of shares of spot bitcoin exchange-traded products 
(``Spot Bitcoin ETPs'') and spot ether exchange-traded products (``Spot 
Ether ETPs''), finding that there were sufficient ``other means'' of 
preventing fraud and manipulation sufficient to satisfy the 
requirements of Section 6(b)(5) of the Exchange Act.\32\ In each of the 
Spot Bitcoin ETP Approval Order and Spot Ether Approval Order, the 
Commission concluded, through a robust correlation analysis, that fraud 
or manipulation that impacts prices in spot bitcoin markets or spot 
ether markets would likely similarly impact CME bitcoin futures prices 
and CME ether futures prices, respectively.\33\ The Commission further 
found that, because the CME's surveillance can assist in detecting 
those impacts on CME bitcoin futures prices and CME ether futures 
prices, a listing exchange's comprehensive surveillance sharing 
agreement (``CSSA'') with the CME can be reasonably expected to assist 
in surveilling for fraudulent and manipulative acts and practices in 
the context of the Spot Bitcoin ETPs and Spot Ether ETPs.\34\
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    \31\ See Securities Exchange Act Release No. 83723 (July 26, 
2018), 83 FR 37579 (August 1, 2018) (SR-BatsBZX-2016-30) (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) (``Winklevoss 
Order''). In the Winklevoss Order, the Commission set forth both the 
importance and definition of a surveilled, regulated market of 
significant size, explaining that, for approved commodity-trust 
ETPs, ``there has been in every case at least one significant, 
regulated market for trading futures on the underlying commodity-
whether gold, silver, platinum, palladium, or copper--and the ETP 
listing exchange has entered into surveillance-sharing agreements 
with, or held Intermarket Surveillance Group membership in common 
with, that market.'' Winklevoss Order, 83 FR at 37594.
    \32\ See Securities Exchange Act Release No. 34-99306 (January 
10, 2024), 89 FR 3008 (January 17, 2024) (SR-NYSEARCA-2021-90; SR-
NYSEARCA-2023-44; SRNYSEARCA-2023-58; SR-NASDAQ-2023-016; SR-NASDAQ-
2023-019; SR-CboeBZX-2023028; SR-CboeBZX-2023-038; SR-CboeBZX-2023-
040; SR-CboeBZX-2023-042; SRCboeBZX-2023-044; SR-CboeBZX-2023-072) 
(Order Granting Accelerated Approval of Proposed Rule Changes, as 
Modified by Amendments Thereto, to List and Trade Bitcoin-Based 
Commodity-Based Trust Shares and Trust Units) (the ``Spot Bitcoin 
ETP Approval Order''); Securities Exchange Act Release No. 100224 
(May 23, 2024), 89 FR 46937 (May 30, 2024) (SR-NYSEARCA-2023-70; SR-
NYSEARCA-2024-31; SR-NASDAQ-2023-045; SR-CboeBZX-2023-069; SR-
CboeBZX-2023-070; SR-CboeBZX-2023-087; SR-CboeBZX-2023-095; SR-
CboeBZX-2024-018) (Order Granting Accelerated Approval of Proposed 
Rule Changes, as Modified by Amendments Thereto, to List and Trade 
Shares of Ether-Based Exchange-Traded Products) (the ``Spot Ether 
ETP Approval Order'').
    \33\ See Spot Bitcoin ETP Approval Order, 89 FR at 3010; Spot 
Ether ETP Approval Order, 89 FR at 46938.
    \34\ See Spot Bitcoin ETP Approval Order, 89 FR at 3010; Spot 
Ether ETP Approval Order, 89 FR at 46938-39.
---------------------------------------------------------------------------

    The Trust is structured and will operate in a manner materially the 
same as the Spot Bitcoin ETPs and Spot Ether ETPs.\35\ The Sponsor 
believes that the Exchange's ability to obtain information regarding 
trading in bitcoin futures and ether futures from the CME, which, like 
the Exchange, is a member of the ISG, would assist the Exchange in 
detecting potential fraud or manipulation with respect to trading in 
the Shares. The Sponsor thus believes that, for reasons similar to 
those set forth in the Spot Bitcoin ETP Approval Order and Spot Ether 
ETP Approval Order, listing and trading Shares of the Fund would be 
consistent with the requirements of the Act.
---------------------------------------------------------------------------

    \35\ The Sponsor is also the sponsor of the Bitwise Bitcoin ETF 
and the Bitwise Ethereum ETF, which were approved pursuant to the 
Spot Bitcoin ETP Approval Order and Spot Ether ETP Approval, 
respectively, and which are both currently listed and traded on NYSE 
Arca.
---------------------------------------------------------------------------

Availability of Information
    The NAV per Share will be calculated and disseminated daily to all 
market participants at the same time. Quotation and last-sale 
information regarding the Shares will be disseminated through the 
facilities of the CTA. The ITV will be calculated every 15 seconds 
throughout the Core Trading Session each trading day.

[[Page 101662]]

    The Sponsor will cause information about the Shares to be posted to 
the Trust's website (https://www.bitwiseinvestments.com/): (1) the NAV 
and NAV per Share for each Exchange trading day, posted at end of day; 
(2) the daily holdings of the Trust, before 9:30 a.m. E.T. on each 
Exchange trading day; (3) the Trust's effective prospectus, in a form 
available for download; and (4) the Shares' ticker and CUSIP 
information, along with additional quantitative information updated on 
a daily basis for the Trust. For example, the Trust's website will 
include (1) the prior Business Day's trading volume, the prior Business 
Day's reported NAV and closing price, and a calculation of the premium 
and discount of the closing price or mid-point of the bid/ask spread at 
the time of NAV calculation (``Bid/Ask Price'') against the NAV; and 
(2) data in chart format displaying the frequency distribution of 
discounts and premiums of the daily closing price or Bid/Ask Price 
against the NAV, within appropriate ranges, for at least each of the 
four previous calendar quarters. The Trust's website will be publicly 
available prior to the public offering of Shares and accessible at no 
charge.
    Investors may obtain on a 24-hour basis ether pricing information 
based on the Pricing Benchmarks, BRR, ERR, CME Bitcoin Real Time Price, 
CME Ether Real Time Price, spot bitcoin market prices, bitcoin futures 
prices, spot ether market prices, and ether futures prices from various 
financial information service providers. Current bitcoin spot market 
prices and ether spot market prices are also available with bid/ask 
spreads from bitcoin and ether trading platforms, including the 
Constituent Platforms of the Pricing Benchmarks.
    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 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 of the Trust.\36\ Trading in Shares of the Trust 
will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable.
---------------------------------------------------------------------------

    \36\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    The Exchange may halt trading during the day in which an 
interruption to the dissemination of the ITV, CME Bitcoin Real Time 
Price, CME Ether Real Time Price, or Pricing Benchmarks (if the 
Exchange becomes aware that the Pricing Benchmarks are not being 
published) occurs.\37\ If the interruption to the dissemination of the 
ITV, CME Bitcoin Real Time Price, CME Ether Real Time Price, or Pricing 
Benchmarks persists past the trading day in which it occurred, the 
Exchange will halt trading no later than the beginning of the Core 
Trading Session 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.
---------------------------------------------------------------------------

    \37\ A limit up/limit down condition in the futures market would 
not be considered an interruption requiring the Trust to be halted.
---------------------------------------------------------------------------

Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. 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.\38\ The Exchange represents that, for initial and 
continued listing, the Trust will be in compliance with Rule 10A-3 
under the Act,\39\ as provided by NYSE Arca Rule 5.3-E. A minimum of 
100,000 Shares of the Trust will be outstanding at the commencement of 
trading on the Exchange.
---------------------------------------------------------------------------

    \38\ 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 
the 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, 
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.
    \39\ 17 CFR 240.10A-3. See note 8, supra.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares of the Trust 
will be subject to the existing trading surveillances administered by 
the Exchange, as well as cross-market surveillances administered by 
FINRA on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities 
laws.\40\ 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.
---------------------------------------------------------------------------

    \40\ 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 or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets and other entities that are members of the ISG, and the 
Exchange or FINRA, on behalf of the Exchange, or both, may obtain 
trading information regarding trading in the Shares, bitcoin 
derivatives, and ether derivatives from

[[Page 101663]]

such markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares, bitcoin derivatives, and 
ether derivatives from markets and other entities or with which the 
Exchange has in place a CSSA. The Exchange is also able to obtain 
information regarding trading in the Shares and any underlying bitcoin, 
bitcoin derivatives, ether, or ether derivatives in connection with ETP 
Holders' proprietary trades or customer trades effected through ETP 
Holders on any relevant market. 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 surveillance sharing agreements with 
regulatory organizations to the extent the Exchange has such an 
agreement with an organization of which the subsidiary or affiliate is 
a member.
    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 index, portfolio, or reference asset of the 
Trust, (b) limitations on index or 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 Sponsor 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 creations of Shares in Creation Units; (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) information regarding how the value of the ITV 
and NAV is disseminated; (4) the possibility that trading spreads and 
the resulting premium or discount on the Shares may widen during the 
Opening and Late Trading Sessions, when an updated ITV will not be 
calculated or publicly disseminated; (5) the requirement that members 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction and (6) 
trading information.
    In addition, the Information Bulletin will reference that the Trust 
is subject to various fees and expenses as described in the annual 
report. The Information Bulletin will disclose that information about 
the Shares of the Trust is publicly available on the Trust's website.
    The Information Bulletin will also discuss any relief, if granted, 
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \41\ 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.
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    \41\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices and to protect 
investors and the public interest 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. The Exchange has in place 
surveillance procedures that are adequate to properly monitor Exchange 
trading in the Shares in all trading sessions and to deter and detect 
attempted manipulation of the Shares or other violations of Exchange 
rules and applicable federal securities laws. The Exchange or FINRA, on 
behalf of the Exchange, or both, will communicate as needed regarding 
trading in the Shares, bitcoin derivatives, and ether derivatives with 
other markets that are members of the ISG, and the Exchange or FINRA, 
on behalf of the Exchange, or both, may obtain trading information 
regarding trading in the Shares, bitcoin derivatives, and ether 
derivatives from such markets. In addition, the Exchange may obtain 
information regarding trading in the Shares, bitcoin derivatives, and 
ether derivatives from markets that are members of ISG or with which 
the Exchange has in place a CSSA. The Exchange is also able to obtain 
information regarding trading in the Shares and any underlying bitcoin, 
bitcoin derivatives, ether, or ether derivatives through ETP Holders, 
in connection with such ETP Holders' proprietary trades or customer 
trades effected through ETP Holders on any relevant market.
    The proposed rule change is also designed to prevent fraudulent and 
manipulative acts and practices because the Trust is structured 
similarly to and will operate in materially the same manner as the Spot 
Bitcoin ETPs and Spot Ether ETPs previously approved by the Commission. 
The Exchange further believes that the proposed rule change is designed 
to prevent fraudulent and manipulative acts and practices because, as 
noted by the Commission in the Bitcoin ETP Approval Order and Ether ETP 
Approval Order, the Exchange's ability to obtain information regarding 
trading in the Shares and futures from other markets that are members 
of the ISG (including the CME) would assist the Exchange in detecting 
and deterring misconduct. In particular, the CME bitcoin futures market 
and CME ether futures market are large, surveilled, and regulated 
markets that are closely connected with the spot markets for bitcoin 
and ether, respectively, through which the

[[Page 101664]]

Exchange could obtain information to assist in detecting and deterring 
potential fraud or manipulation.
    Quotation and last-sale information regarding the Shares will be 
disseminated through the facilities of the CTA. The Trust's website 
will also include a form of the prospectus for the Trust that may be 
downloaded. The website will include the Shares' ticker and CUSIP 
information, along with additional quantitative information updated on 
a daily basis for the Trust. The Trust's website will include (1) daily 
trading volume, the prior Business Day's reported NAV and closing 
price, and a calculation of the premium and discount of the closing 
price or mid-point of the Bid/Ask Price against the NAV; and (ii) data 
in chart format displaying the frequency distribution of discounts and 
premiums of the daily closing price or Bid/Ask Price against the NAV, 
within appropriate ranges, for at least each of the four previous 
calendar quarters. The Trust's website will be publicly available prior 
to the public offering of Shares and accessible at no charge.
    Trading in Shares of the Trust will be halted if the circuit 
breaker parameters in NYSE Arca Rule 7.12-E have been reached or 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable.
    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 a 
new type of exchange-traded product based on the price of bitcoin and 
ether 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 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.

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 notes that the 
proposed rule change will facilitate the listing and trading of a new 
type of Commodity-Based Trust Share based on the price of bitcoin and 
ether that would 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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2024-104 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-2024-104. 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-2024-104 and should 
be submitted on or before January 6, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
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    \42\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-29469 Filed 12-13-24; 8:45 am]
BILLING CODE 8011-01-P
```