```

[Federal Register Volume 90, Number 28 (Wednesday, February 12, 2025)]
[Notices]
[Pages 9452-9469]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-02497]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102367; File No. SR-NYSEARCA-2025-05]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1, To List and 
Trade Shares of the Grayscale Litecoin Trust Under NYSE Arca Rule 
8.201-E (Commodity-Based Trust Shares)

February 6, 2025.
    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 January 24, 2025, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') a proposed rule change to list and trade shares of the 
Grayscale Litecoin Trust under NYSE Arca Rule 8.201-E (Commodity-Based 
Trust Shares). On February 3, 2025, the Exchange filed Amendment No. 1 
to the proposed rule change, which replaced and superseded the original 
filing in its entirety. The proposed rule change, as modified by 
Amendment No 1, is described in Items I, II, and III below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change, as modified by 
Amendment No. 1, 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, as Modified by Amendment No. 1

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Rule 8.201-E: Grayscale Litecoin Trust (LTC) (the 
``Trust''). This Amendment No. 1 to SR-NYSEARCA-2025-05 replaces SR-
NYSEARCA-2025-05 as originally filed and supersedes such filing in its 
entirety. 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, as Modified by Amendment 
No. 1

    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
    Under NYSE Arca Rule 8.201-E, the Exchange may propose to list and/
or trade pursuant to unlisted trading privileges ``Commodity-Based 
Trust Shares.'' \4\ The Exchange proposes to list and trade shares 
(``Shares'') \5\ of the Trust pursuant to NYSE Arca Rule 8.201-E.\6\
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    \4\ 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.
    \5\ The Shares are expected to be listed under the ticker symbol 
``LTCN.''
    \6\ On July 12, 2021, the Trust filed its registration statement 
on Form 10 under the Securities Act (File No. 000-56310) (the 
``Registration Statement on Form 10''). On September 3, 2021, the 
Trust filed Amendment No. 1 to the Registration Statement on Form 
10. On September 22, 2021, the Trust filed Amendment No. 2 to the 
Registration Statement on Form 10. On November 4, 2021, the Trust 
filed Amendment No. 3 to the Registration Statement on Form 10. On 
February 4, 2022, the Trust filed Amendment No. 4 to the 
Registration Statement on Form 10. On September 10, 2021, the 
Registration Statement on Form 10 was automatically deemed 
effective. On September 1, 2022, September 1, 2023, and September 6, 
2024, the Trust filed its annual reports on Form 10-K under the 
Securities Act (File No. 000-56310) (the ``Annual Reports''). On 
November 5, 2021, February 10, 2022, May 6, 2022, November 4, 2022, 
February 8, 2023, May 5, 2023, November 3, 2023, February 7, 2024, 
May 3, 2024, and November 1, 2024, the Trust filed its quarterly 
reports on Form 10-Q under the Securities Act (File No. 000-56310) 
(the ``Quarterly Reports''). The descriptions of the Trust, the 
Shares, and LTC contained herein are based, in part, on the Annual 
Report, Quarterly Reports and Registration Statement. On January 3, 
2025, the Trust submitted to the Commission an amended Form D as a 
business trust. Shares of the Trust have been quoted on OTC Market's 
OTCQX Marketplace under the symbol ``LTCN'' since August 18, 2020. 
On July 24, 2020 and September 23, 2020, the Trust published annual 
reports for LTCN for the periods ended December 31, 2019 and 
December 31, 2020, respectively. On July 24, 2020, November 6, 2020, 
February 12, 2021, and May 7, 2021, the Trust published quarterly 
reports for LTCN for the periods ended March 31, 2020, September 30, 
2020, December 31, 2020, and March 31, 2021, respectively. Reports 
can be found on OTC Market's website (https://www.otcmarkets.com/stock/LTCN/disclosure). The Shares will be of the same class and 
will have the same rights as shares of LTCN. According to the 
Sponsors, freely tradeable shares of LTCN will remain freely 
tradeable Shares on the date of the listing of the Shares that are 
unregistered under the Securities Act. Restricted shares of LTCN 
will remain subject to private placement restrictions on such date, 
and the holders of such restricted shares will continue to hold 
those Shares subject to those restrictions until they become freely 
tradable Shares.
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    The Trust is the world's largest Litecoin (``LTC'') investment fund 
by assets under management as of the date of this filing. The Trust has 
approximately $215.4 million in assets under management \7\ 
(representing 2.7% of all LTC in circulation), its Shares trade 
millions of dollars in daily volume and are held by more than a quarter 
of a million American investor accounts seeking exposure to LTC without 
the cost and complexity of purchasing the asset directly. However, 
because the Trust is not currently listed as an exchange-traded product 
(``ETP''), the value of the Shares has not been able to closely track 
the value of the Trust's underlying LTC. The Sponsors (as defined 
below) thus believe that allowing Shares of the Trust to list and trade 
on the Exchange as an ETP (i.e., converting the Trust to a spot LTC 
ETP) would provide other investors with a safe and secure way to invest 
in LTC on a regulated national securities exchange.
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    \7\ As of January 15, 2025.
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    The sponsors of the Trust are Grayscale Operating, LLC and 
Grayscale Investments Sponsors, LLC (each, a ``Sponsor'' and, 
collectively, the ``Sponsors''),\8\ each a Delaware limited liability 
company. The Sponsors are indirect wholly owned subsidiaries of Digital 
Currency Group, Inc. (``Digital Currency Group''). The trustee for the 
Trust is Delaware Trust Company (``Trustee''). The custodian for the 
Trust is Coinbase Custody Trust Company, LLC (``Custodian'').\9\ The 
administrator and transfer agent of the Trust is expected to be BNY 
Mellon Asset Servicing, a division of The Bank of New York Mellon (the 
``Transfer Agent''). The distribution and marketing agent for the Trust 
is expected to be Foreside Fund Services, LLC (the

[[Page 9453]]

``Marketing Agent''). The index provider for the Trust is CoinDesk 
Indices, Inc. (the ``Index Provider'').
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    \8\ As of May 3, 2025, Grayscale Operating, LLC will cease to 
act as Sponsor of the Trust and Grayscale Investment Sponsors, LLC 
will be sole Sponsor of the Trust.
    \9\ According to the Annual Report, Digital Currency Group owns 
a minority interest in Coinbase, Inc., which is the parent company 
of the Custodian, representing less than 1.0% of its equity.
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    The Trust is a Delaware statutory trust, formed on January 26, 
2018, that operates pursuant to a trust agreement between the Sponsor 
and the Trustee (``Trust Agreement''). The Trust has no fixed 
termination date.
Operation of the Trust
    According to the Annual Report, the Trust's assets consist solely 
of LTC.\10\
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    \10\ The Trust may from time to time come into possession of 
Incidental Rights and/or IR Virtual Currency by virtue of its 
ownership of LTC, generally through a fork in the Litecoin 
Blockchain, an airdrop offered to holders of LTC or other similar 
event. ``Incidental Rights'' are rights to acquire, or otherwise 
establish dominion and control over, any virtual currency or other 
asset or right, which rights are incident to the Trust's ownership 
of LTC and arise without any action of the Trust, or of the Sponsor 
or Trustee on behalf of the Trust. ``IR Virtual Currency'' is any 
virtual currency tokens, or other asset or right, acquired by the 
Trust through the exercise (subject to the applicable provisions of 
the Trust Agreement) of any Incidental Right. Although the Trust is 
permitted to take certain actions with respect to Incidental Rights 
and IR Virtual Currency in accordance with its Trust Agreement, at 
this time the Trust will prospectively irrevocably abandon any 
Incidental Rights and IR Virtual Currency. In the event the Trust 
seeks to change this position, the Exchange would file a subsequent 
proposed rule change with the Commission.
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    Each Share represents a proportional interest, based on the total 
number of Shares outstanding, in the Trust's assets as determined by 
reference to the Index Price,\11\ less the Trust's expenses and other 
liabilities (which include accrued but unpaid fees and expenses). The 
Sponsors expect that the market price of the Shares will fluctuate over 
time in response to the market prices of LTC. In addition, because the 
Shares reflect the estimated accrued but unpaid expenses of the Trust, 
the number of LTC represented by a Share will gradually decrease over 
time as the Trust's LTC are used to pay the Trust's expenses.
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    \11\ The ``Index Price'' means the U.S. dollar value of a LTC 
derived from the Digital Asset Trading Platforms (as defined below) 
that are reflected in the CoinDesk Litecoin Price Index (LTX) (the 
``Index''), calculated at 4:00 p.m., New York time, on each business 
day. For purposes of the Trust Agreement, the term Litecoin Index 
Price has the same meaning as the Index Price as defined herein.
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    The activities of the Trust are limited to (i) issuing ``Baskets'' 
(as defined below) in exchange for LTC transferred to the Trust as 
consideration in connection with creations, (ii) transferring or 
selling LTC as necessary to cover the ``Sponsor's Fee'' \12\ and/or 
certain Trust expenses, (iii) transferring LTC in exchange for Baskets 
surrendered for redemption (subject to obtaining regulatory approval 
from the Commission and approval of the Sponsor), (iv) causing the 
Sponsor to sell LTC on the termination of the Trust, and (v) engaging 
in all administrative and security procedures necessary to accomplish 
such activities in accordance with the provisions of the Trust 
Agreement, the Custodian Agreement, the Index License Agreement, and 
the Participant Agreements (each as defined below).
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    \12\ The Sponsor's Fee means a fee, payable in LTC, which 
accrues daily in U.S. dollars at an annual rate of currently 2.5%, 
but which will be lowered in connection with the Trust becoming an 
ETP, of the NAV Fee Basis Amount of the Trust as of 4:00 p.m., New 
York time, on each day, provided that for a day that is not a 
business day, the calculation of the Sponsor's Fee will be based on 
the NAV Fee Basis Amount from the most recent business day, reduced 
by the accrued and unpaid Sponsor's Fee for such most recent 
business day and for each day after such most recent business day 
and prior to the relevant calculation date. The ``NAV Fee Basis 
Amount'' is calculated in the manner set forth under ``Valuation of 
LTC and Determination of NAV'' below.
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    The Trust will not be actively managed. It will not engage in any 
activities designed to obtain a profit from, or to ameliorate losses 
caused by, changes in the market prices of LTC.
    The Trust is not a registered investment company under the 
Investment Company Act and the Sponsors believe that the Trust is not 
required to register under the Investment Company Act.
Investment Objective
    According to the Annual Report, and as further described below, the 
Trust's investment objective is for the value of the Shares (based on 
LTC per Share) to reflect the value of the LTC held by the Trust, 
determined by reference to the Index Price, less the Trust's expenses 
and other liabilities. While an investment in the Shares is not a 
direct investment in LTC, the Shares are designed to provide investors 
with a cost-effective and convenient way to gain investment exposure to 
LTC. Generally speaking, a substantial direct investment in LTC may 
require expensive and sometimes complicated arrangements in connection 
with the acquisition, security and safekeeping of the LTC and may 
involve the payment of substantial fees to acquire such LTC from third-
party facilitators through cash payments of U.S. dollars. Because the 
value of the Shares is correlated with the value of LTC held by the 
Trust, it is important to understand the investment attributes of, and 
the market for, LTC.
    The Trust uses the Index Price to calculate its ``NAV,'' which is 
the aggregate value, expressed in U.S. dollars, of the Trust's assets 
(other than U.S. dollars or other fiat currency), less the U.S. dollar 
value of the Trust's expenses and other liabilities calculated in the 
manner set forth under ``Valuation of LTC and Determination of NAV.'' 
``NAV per Share'' is calculated by dividing NAV by the number of Shares 
then outstanding.
Valuation of LTC and Determination of NAV
    The following is a description of the material terms of the Trust 
Agreement as they relate to valuation of the Trust's LTC and the NAV 
calculations.\13\
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    \13\ While this filing uses the terminology ``NAV,'' the term 
used in the Trust Agreement is ``Digital Asset Holdings.''
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    On each business day at 4:00 p.m., New York time, or as soon 
thereafter as practicable (the ``Evaluation Time''), the Sponsor will 
evaluate the LTC held by the Trust and calculate and publish the NAV of 
the Trust. To calculate the NAV, the Sponsor will:
    1. Determine the Index Price as of such business day.
    2. Multiply the Index Price by the Trust's aggregate number of LTC 
owned by the Trust as of 4:00 p.m., New York time, on the immediately 
preceding day, less the aggregate number of LTC payable as the accrued 
and unpaid Sponsor's Fee as of 4:00 p.m., New York time, on the 
immediately preceding day.
    3. Add the U.S. dollar value of LTC, calculated using the Index 
Price, receivable under pending creation orders, if any, determined by 
multiplying the number of the Baskets represented by such creation 
orders by the Basket Amount and then multiplying such product by the 
Index Price.\14\
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    \14\ ``Baskets'' and ``Basket Amount'' have the meanings set 
forth in ``Creation and Redemption of Shares'' below.
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    4. Subtract the U.S. dollar amount of accrued and unpaid Additional 
Trust Expenses, if any.\15\
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    \15\ A ``Digital Asset Market'' is a ``Brokered Market,'' 
``Dealer Market,'' ``Principal-to-Principal Market'' or ``Exchange 
Market,'' as each such term is defined in the Financial Accounting 
Standards Board Accounting Standards Codification Master Glossary. 
The ``Digital Asset Trading Platform Market'' is the global trading 
platform market for the trading of LTC, which consists of 
transactions on electronic Digital Asset Trading Platforms. A 
``Digital Asset Trading Platform'' is an electronic marketplace 
where trading participants may trade, buy and sell LTC based on bid-
ask trading. The largest Digital Asset Trading Platforms are online 
and typically trade on a 24-hour basis, publishing transaction price 
and volume data.
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    5. Subtract the U.S. dollar value of the LTC, calculated using the 
Index Price, to be distributed under pending redemption orders, if any, 
determined by multiplying the number of Baskets to be redeemed 
represented by such redemption orders by the Basket Amount and then 
multiplying such

[[Page 9454]]

product by the Index Price (the amount derived from steps 1 through 5 
above, the ``NAV Fee Basis Amount'').
    6. Subtract the U.S. dollar amount of the Sponsor's Fee that 
accrues for such business day, as calculated based on the NAV Fee Basis 
Amount for such business day.
    In the event that the Sponsor determines that the primary 
methodology used to determine the Index Price is not an appropriate 
basis for valuation of the Trust's LTC, the Sponsor will utilize the 
cascading set of rules as described in ``Determination of the Index 
Price When Index Price is Unavailable'' below.
LTC and the Litecoin Network \16\
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    \16\ The description of LTC and the Litecoin Network in this 
section was provided by the Sponsors and is based on the Annual 
Report.
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    According to the Annual Report, LTC is a digital asset that is 
created and transmitted through the operations of the peer-to-peer 
Litecoin Network, a decentralized network of computers that operates on 
cryptographic protocols. No single entity owns or operates the Litecoin 
Network, the infrastructure of which is collectively maintained by a 
decentralized user base. The Litecoin Network allows people to exchange 
tokens of value, called LTC, which are recorded on a public transaction 
ledger known as a blockchain. LTC can be used to pay for goods and 
services, including computational power on the Litecoin Network, 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.
    Litecoin is an alternative software implementation of Bitcoin that 
was created in late 2011 by Charlie Lee, a former Google employee, who 
set out to create a proof-of-work currency that could be an alternative 
to Bitcoin. Ultimately, this resulted in a clone of Bitcoin. Although 
Litecoin is thus very similar to Bitcoin, there are several key 
differences between the Litecoin Network and the Bitcoin Network. These 
differences include a block generation time of approximately two and a 
half minutes for LTC as compared to ten minutes for Bitcoin, and a cap 
on the number of coins that will be created of 84 million LTC, as 
compared to 21 million for Bitcoin. As a result of these differences, 
transactions using LTC occur four times faster than transactions using 
Bitcoin and at a lower cost. Litecoin also implemented crypt, a 
distinct hashing algorithm different from Bitcoin's SHA-256 hashing 
algorithm, which does not require ASICs and therefore results in less 
centralized mining hash power.
    The Litecoin Network is decentralized and does not require 
governmental authorities or financial institution intermediaries to 
create, transmit or determine the value of LTC. Rather, LTC is created 
and allocated by the Litecoin Network protocol through a ``mining'' 
process. The value of LTC is determined by the supply of and demand for 
LTC on the Digital Asset Trading Platforms or in private end-user-to-
end-user transactions.
    Similar to the Bitcoin Network, the Litecoin Network operates on a 
proof-of-work model. New LTC is created and rewarded to the miners of a 
block in the Litecoin Blockchain for verifying transactions. The 
Litecoin Blockchain is effectively a decentralized database that 
includes all blocks that have been mined by miners and it is updated to 
include new blocks as they are solved. Each LTC transaction is 
broadcast to the Litecoin Network and, when included in a block, 
recorded in the Litecoin Blockchain. As each new block records 
outstanding LTC transactions, and outstanding transactions are settled 
and validated through such recording, the Litecoin
    The Litecoin Blockchain represents a complete, transparent and 
unbroken history of all transactions of the Litecoin Network. The 
current miner reward of 6.25 LTC per block was reduced from 12.5 LTC 
per block by 50% in August 2023, and will be further reduced by another 
50% every 840,000 blocks, or approximately four years, thereafter. A 
block of transactions is confirmed on the Litecoin Network 
approximately every 2.5 minutes. As of September 30, 2024, 
approximately 75.0 million LTC were outstanding.
    Similar to Bitcoin, LTC can be used to pay for goods and services 
or 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. Additionally, 
LTC is used to pay for transaction fees to miners for verifying 
transactions on the Litecoin Network.
Overview of the Litecoin Network's Operations
    In order to own, transfer or use LTC directly on the Litecoin 
Network (as opposed to through an intermediary, such as a custodian), a 
person generally must have internet access to connect to the Litecoin 
Network. LTC transactions may be made directly between end-users 
without the need for a third-party intermediary. To prevent the 
possibility of double-spending LTC, a user must notify the Litecoin 
Network of the transaction by broadcasting the transaction data to its 
network peers. The Litecoin Network provides confirmation against 
double-spending by memorializing every transaction in the Litecoin 
Blockchain, which is publicly accessible and transparent. This 
memorialization and verification against double-spending is 
accomplished through the Litecoin Network mining process, which adds 
``blocks'' of data, including recent transaction information, to the 
Litecoin Blockchain.
Summary of a LTC Transaction
    Prior to engaging in LTC transactions directly on the Litecoin 
Network, a user generally must first install on its computer or mobile 
device a Litecoin Network software program that will allow the user to 
generate a private and public key pair associated with a LTC address. 
Each Litecoin Network address, or wallet, is associated with a unique 
``public key'' and ``private key'' pair. To receive LTC, the LTC 
recipient must provide its public key to the party initiating the 
transfer. This activity is analogous to a recipient for a transaction 
in U.S. dollars providing a routing address in wire instructions to the 
payor so that cash may be wired to the recipient's account. The payor 
approves the transfer to the address provided by the recipient by 
``signing'' a transaction that consists of the recipient's public key 
with the private key of the address from where the payor is 
transferring the LTC. The recipient, however, does not make public or 
provide to the sender its related private key.
    Neither the recipient nor the sender reveals their private keys in 
a transaction, because the private key authorizes transfer of the funds 
in that address to other users. Therefore, if a user loses his or her 
private key, the user may permanently lose access to the LTC contained 
in the associated address. Likewise, LTC is irretrievably lost if the 
private key associated with them is deleted and no backup has been 
made. When sending LTC, a user's Litecoin Network software program must 
validate the transaction with the associated private key. In addition, 
since every computation on the Litecoin Network requires processing 
power, there is a transaction fee involved with the transfer that is 
paid by the payor. The resulting digitally validated transaction is 
sent by the user's Litecoin Network software program to the Litecoin 
Network validators to allow transaction confirmation.

[[Page 9455]]

    Litecoin Network validators record and confirm transactions when 
they validate and add blocks of information to the Litecoin Blockchain. 
When a validator is selected to validate a block, it creates that 
block, which includes data relating to (i) the verification of newly 
submitted and accepted transactions and (ii) a reference to the prior 
block in the Litecoin Blockchain to which the new block is being added. 
The validator becomes aware of outstanding, unrecorded transactions 
through the data packet transmission and distribution discussed above.
    Upon the addition of a block of LTC transactions, the Litecoin 
Network software program of both the spending party and the receiving 
party will show confirmation of the transaction on the Litecoin 
Blockchain and reflect an adjustment to the LTC balance in each party's 
Litecoin Network public key, completing the LTC transaction. Once a 
transaction is confirmed on the Litecoin Blockchain, it is 
irreversible.
    Some LTC transactions are conducted ``off-blockchain'' and are 
therefore not recorded in the Litecoin Blockchain. These ``off-
blockchain transactions'' involve the transfer of control over, or 
ownership of, a specific digital wallet holding LTC or the reallocation 
of ownership of certain LTC in a pooled-ownership digital wallet, such 
as a digital wallet owned by a Digital Asset Trading Platform. In 
contrast to on-blockchain transactions, which are publicly recorded on 
the Litecoin Blockchain, information and data regarding off-blockchain 
transactions are generally not publicly available. Therefore, off-
blockchain transactions are not truly LTC transactions in that they do 
not involve the transfer of transaction data on the Litecoin Network 
and do not reflect a movement of LTC between addresses recorded in the 
Litecoin Blockchain. For these reasons, off-blockchain transactions are 
subject to risks as any such transfer of LTC ownership is not protected 
by the protocol behind the Litecoin Network or recorded in, and 
validated through, the blockchain mechanism.
Creation of LTC
Initial Creation of LTC
    The initial creation of LTC was in connection with a clone of the 
Bitcoin blockchain in 2011. All additional LTC have been created 
through the mining process.
Mining Process
    The Litecoin Network is kept running by computers all over the 
world. In order to incentivize those who incur the computational costs 
of securing the network by validating transactions, there is a reward 
that is given to the computer that was able to create the latest block 
on the chain. Every two and a half minutes, on average, a new block is 
added to the Litecoin Blockchain with the latest transactions processed 
by the network, and the computer that generated this block is currently 
awarded 6.25 LTC, which was reduced by 50%, from 12.5 LTC, in August 
2023. Due to the nature of the algorithm for block generation, this 
process (generating a ``proof-of-work'') is guaranteed to be random. 
Over time, rewards are expected to be proportionate to the 
computational power of each machine.
    The process by which LTC is ``mined'' results in new blocks being 
added to the Litecoin Blockchain and new LTC tokens being issued to the 
miners. Computers on the Litecoin Network engage in a set of prescribed 
complex mathematical calculations in order to add a block to the 
Litecoin Blockchain and thereby confirm LTC transactions included in 
that block's data.
    To begin mining, a user can download and run Litecoin Network 
mining software, which turns the user's computer into a ``node'' on the 
Litecoin Network that validates blocks. Each block contains the details 
of some or all of the most recent transactions that are not 
memorialized in prior blocks, as well as a record of the award of LTC 
to the miner who added the new block. Each unique block can be solved 
and added to the Litecoin Blockchain by only one miner. Therefore, all 
individual miners and mining pools on the Litecoin Network are engaged 
in a competitive process of constantly increasing their computing power 
to improve their likelihood of solving for new blocks. As more miners 
join the Litecoin Network and its processing power increases, the 
Litecoin Network adjusts the complexity of the block-solving equation 
to maintain a predetermined pace of adding a new block to the Litecoin 
Blockchain approximately every two and a half minutes. A miner's 
proposed block is added to the Litecoin Blockchain once a majority of 
the nodes on the Litecoin Network confirms the miner's work. Miners 
that are successful in adding a block to the Litecoin Blockchain are 
automatically awarded LTC for their effort and may also receive 
transaction fees paid by transferors whose transactions are recorded in 
the block. This reward system is the method by which new LTC enter into 
circulation to the public.
    The Litecoin Network is designed in such a way that the reward for 
adding new blocks to the Litecoin Blockchain decreases over time. Once 
new LTC tokens are no longer awarded for adding a new block, miners 
will only have transaction fees to incentivize them, and as a result, 
it is expected that miners will need to be better compensated with 
higher transaction fees to ensure that there is adequate incentive for 
them to continue mining.
Limits on LTC Supply
    The Litecoin Network is structured to allow a maximum of 84 million 
LTC to be created, which are mined over time with the creation of each 
new block. The supply of new LTC is mathematically controlled so that 
the number of LTC grows at a limited rate pursuant to a pre-set 
schedule. The number of LTC awarded for solving a new block is 
automatically halved after every 840,000 blocks are added to the 
Litecoin Blockchain. Currently, the fixed reward for solving a new 
block is 6.25 LTC per block, and this is expected to decrease by half 
to become 3.125 LTC after the next 840,000 blocks since the last reward 
reduction have entered the Litecoin Network, which is expected to be 
approximately July 2027. This deliberately controlled rate of LTC 
creation means that the number of LTC in existence will increase at a 
controlled rate until the number of LTC in existence reaches 84 million 
LTC.
    As of September 30, 2024, approximately 75.0 million LTC were 
outstanding, and estimates of when the 84 million LTC limitation will 
be reached range from at or near the year 2140.
Modifications to the LTC Protocol
    The Litecoin Network is an open source project with no official 
developer or group of developers that controls it. However, the 
Litecoin Network's development has historically been overseen by a core 
group of developers. The core developers are able to access, and can 
alter, the Litecoin Network source code and, as a result, they are 
responsible for quasi-official releases of updates and other changes to 
the Litecoin Network's source code.
    The release of updates to the Litecoin Network's source code does 
not guarantee that the updates will be automatically adopted. Users and 
miners must accept any changes made to the Litecoin source code by 
downloading the proposed modification of the Litecoin Network's source 
code. A modification of the Litecoin Network's source code is effective 
only with respect to the Litecoin users and

[[Page 9456]]

miners that download it. If a modification is accepted by only a 
percentage of users and miners, a division in the Litecoin Network will 
occur such that one network will run the pre-modification source code 
and the other network will run the modified source code. Such a 
division is known as a ``fork.'' Consequently, as a practical matter, a 
modification to the source code becomes part of the Litecoin Network 
only if accepted by participants collectively having most of the 
processing power on the Litecoin Network.
    Core development of the Litecoin Network source code has 
increasingly focused on modifications of the Litecoin Network protocol 
to increase speed and scalability and also allow for non-financial, 
next generation uses. The Trust's activities will not directly relate 
to such projects, though such projects may utilize LTC as tokens for 
the facilitation of their non-financial uses, thereby potentially 
increasing demand for LTC and the utility of the Litecoin Network as a 
whole. Conversely, projects that operate and are built within the 
Litecoin Blockchain may increase the data flow on the Litecoin Network 
and could either ``bloat'' the size of the Litecoin Blockchain or slow 
confirmation times. At this time, such projects remain in early stages 
and have not been materially integrated into the Litecoin Blockchain or 
the Litecoin Network.
    In May 2022, a Litecoin Network upgrade incorporated MimbleWimble, 
an additional encryption feature. MimbleWimble serves two purposes: (i) 
concealing the transacted amount of Litecoin and (ii) detecting 
fraudulent activity if the transaction amount were changed while being 
processed.
Custody of the Trust's LTC
    Digital assets and digital asset transactions are recorded and 
validated on blockchains, the public transaction ledgers of a digital 
asset network. Each digital asset blockchain serves as a record of 
ownership for all of the units of such digital asset, even in the case 
of certain privacy-preserving digital assets, where the transactions 
themselves are not publicly viewable. All digital assets recorded on a 
blockchain are associated with a public blockchain address, also 
referred to as a digital wallet. Digital assets held at a particular 
public blockchain address may be accessed and transferred using a 
corresponding private key.
Key Generation
    Public addresses and their corresponding private keys are generated 
by the Custodian in secret key generation ceremonies at secure 
locations inside faraday cages, which are enclosures used to block 
electromagnetic fields and thus mitigate against attacks. The Custodian 
uses quantum random number generators to generate the public and 
private key pairs.
    Once generated, private keys are encrypted, separated into 
``shards,'' and then further encrypted. After the key generation 
ceremony, all materials used to generate private keys, including 
computers, are destroyed. All key generation ceremonies are performed 
offline. No party other than the Custodian (including the Trust itself) 
has access to the private key shards of the Trust.
Key Storage
    Private key shards are distributed geographically in secure vaults 
around the world, including in the United States. The locations of the 
secure vaults may change regularly and are kept confidential by the 
Custodian for security purposes.
    The ``Digital Asset Account'' is a segregated custody account 
controlled and secured by the Custodian to store private keys, which 
allows for the transfer of ownership or control of the Trust's LTC on 
the Trust's behalf. The Digital Asset Account uses offline storage, or 
``cold,'' mechanisms to secure the Trust's private keys. The term cold 
storage refers to a safeguarding method by which the private keys 
corresponding to digital assets are disconnected and/or deleted 
entirely from the internet. Cold storage of private keys may involve 
keeping such keys on a non-networked (or ``air-gapped'') computer or 
electronic device or storing the private keys on a storage device (for 
example, a USB thumb drive) or printed medium (for example, papyrus, 
paper, or a metallic object). A digital wallet may receive deposits of 
digital assets but may not send digital assets without use of the 
digital assets' corresponding private keys. In order to send digital 
assets from a digital wallet in which the private keys are kept in cold 
storage, either the private keys must be retrieved from cold storage 
and entered into an online, or ``hot,'' digital asset software program 
to sign the transaction, or the unsigned transaction must be 
transferred to the cold server in which the private keys are held for 
signature by the private keys and then transferred back to the online 
digital asset software program. At that point, the user of the digital 
wallet can transfer its digital assets.
Security Procedures
    The Custodian is the custodian of the Trust's private keys (which, 
as noted above, facilitate the transfer of ownership or control of the 
Trust's LTC) in accordance with the terms and provisions of the 
custodian agreement by and between the Custodian, the Sponsor and the 
Trust (the ``Custodian Agreement''). Transfers from the Digital Asset 
Account require certain security procedures, including, but not limited 
to, multiple encrypted private key shards, usernames, passwords and 2-
step verification. Multiple private key shards held by the Custodian 
must be combined to reconstitute the private key to sign any 
transaction in order to transfer the Trust's assets. Private key shards 
are distributed geographically in secure vaults around the world, 
including in the United States.
    As a result, if any one secure vault is ever compromised, this 
event will have no impact on the ability of the Trust to access its 
assets, other than a possible delay in operations, while one or more of 
the other secure vaults is used instead. These security procedures are 
intended to remove single points of failure in the protection of the 
Trust's assets.
    Transfers of LTC to the Digital Asset Account will be available to 
the Trust once processed on the Blockchain.
    Subject to obtaining regulatory approval to operate a redemption 
program and authorization of the Sponsor, the process of accessing and 
withdrawing LTC from the Trust to redeem a Basket by an Authorized 
Participant will follow the same general procedure as transferring LTC 
to the Trust to create a Basket by an Authorized Participant, only in 
reverse.
    The Sponsor will maintain ownership and control of the Trust's LTC 
in a manner consistent with good delivery requirements for spot 
commodity transactions.
LTC Value
Digital Asset Trading Platform Valuation
    The value of LTC is determined by the value that various market 
participants place on LTC through their transactions. The most common 
means of determining the value of a LTC is by surveying one or more 
Digital Asset Trading Platforms where LTC is traded publicly and 
transparently (e.g., Coinbase, Crypto.com, LMAX Digital, and Kraken).

[[Page 9457]]

Digital Asset Trading Platform Public Market Data
    On each online Digital Asset Trading Platform, LTC is traded with 
publicly disclosed valuations for each executed trade, measured by one 
or more fiat currencies such as the U.S. dollar or euro or by the 
widely used cryptocurrency Bitcoin. Over-the-counter dealers or market 
makers do not typically disclose their trade data.
    As of September 30, 2024, the Digital Asset Trading Platforms 
included in the Index were Coinbase, Crypto.com, LMAX Digital, and 
Kraken. As further described below, the Sponsors and the Trust 
reasonably believe each of these Digital Asset Trading Platforms are in 
material compliance with applicable U.S. federal and state licensing 
requirements and maintain practices and policies designed to comply 
with anti-money laundering (``AML'') and know-your-customer (``KYC'') 
regulations.
    Coinbase: A U.S.-based trading platform registered as a money 
services business (``MSB'') with the Financial Crimes Enforcement 
Network (``FinCEN'') and licensed as a virtual currency business under 
the New York State Department of Financial Services (``NYDFS'') 
BitLicense as well as a money transmitter in various U.S. states.
    Crypto.com: A Singapore-based trading platform registered as an MSB 
with FinCEN and licensed as a money transmitter in various U.S. states. 
Crypto.com does not hold a BitLicense.
    LMAX Digital: A U.K.-based trading platform registered as a broker 
with the Financial Conduct Authority. LMAX Digital does not hold a 
BitLicense.
    Kraken: A U.S.-based trading platform registered as an MSB with 
FinCEN and licensed as a money transmitter in various U.S. states. 
Kraken does not hold a BitLicense.
    Currently, there are several Digital Asset Trading Platforms 
operating worldwide and online Digital Asset Trading Platforms 
represent a substantial percentage of LTC buying and selling activity 
and provide the most data with respect to prevailing valuations of LTC. 
These trading platforms include established trading platforms such as 
trading platforms included in the Index which provide a number of 
options for buying and selling LTC. The below table reflects the 
trading volume in LTC and market share of the LTC-U.S. dollar trading 
pairs of each of the Digital Asset Trading Platforms included in the 
Index as of September 30, 2024, (collectively, ``Constituent Trading 
Platforms'') using data since the inception of the Trust's operations:

------------------------------------------------------------------------
 LTC trading platforms included in
the Index as of September 30, 2024     Volume (LTC)     Market share \2\
                \1\                                           (%)
------------------------------------------------------------------------
Coinbase..........................        653,863,151              46.53
Kraken............................         90,333,438               6.43
LMAX Digital......................         82,976,222               5.90
Crypto.com........................          7,902,904               0.56
                                   -------------------------------------
    Total U.S. Dollar-LTC trading         835,075,715              59.42
     pair.........................
------------------------------------------------------------------------
\1\ Effective October 27, 2024, the Index Provider added Bitstamp to the
  Index due to the trading platform meeting the Index Provider's minimum
  liquidity requirement, and did not remove any Constituent Trading
  Platforms as part of its scheduled quarterly review. Effective
  December 22, 2024, the Index Provider added Bitfinex to the Index due
  to the trading platform meeting the Index Provider's minimum liquidity
  requirement, and did not remove any Constituent Trading Platforms as
  part of its scheduled quarterly review.
\2\ Market share is calculated using trading volume (in LTC) for certain
  Digital Asset Trading Platforms including, Coinbase, Crypto.com, LMAX
  Digital and Kraken, as well as certain other large U.S.-dollar
  denominated Digital Asset Trading Platforms that were not included in
  the Index as of September 30, 2024, including Binance.US, Bitfinex,
  Bitstamp, Bittrex, Cboe Digital, FTX.US, Gemini, HitBTC, itBit, and
  OKCoin.

Forms of Attack Against the Litecoin Network
    All networked systems are vulnerable to various kinds of attacks. 
As with any computer network, the Litecoin Network contains certain 
flaws. For example, the Litecoin Network is currently vulnerable to a 
``51% attack'' where, if a mining pool were to gain control of more 
than 50% of the hash rate for a digital asset, a malicious actor would 
be able to gain full control of the network and the ability to 
manipulate the Litecoin Blockchain. As of September 30, 2024, the top 
three largest mining pools controlled over 50% of the hash rate of the 
Litecoin Network.
    In addition, many digital asset networks have been subjected to a 
number of denial of service attacks, which has led to temporary delays 
in block creation and in the transfer of LTC. Any similar attacks on 
the Litecoin Network that impact the ability to transfer LTC could have 
a material adverse effect on the price of LTC and the value of the 
Shares.
The Index and the Index Price
    The Index is a U.S. dollar-denominated composite reference rate for 
the price of LTC. The Index is designed to (1) mitigate the effects of 
fraud, manipulation and other anomalous trading activity from impacting 
the LTC reference rate, (2) provide a real-time, volume-weighted fair 
value of LTC and (3) appropriately handle and adjust for non-market 
related events.
    The Index Price is determined by the Index Provider through a 
process in which trade data is cleansed and compiled in such a manner 
as to algorithmically reduce the impact of anomalistic or manipulative 
trading. This is accomplished by adjusting the weight of each data 
input based on price deviation relative to the observable set, as well 
as recent and long-term trading volume at each venue relative to the 
observable set.
    The value of the Index is calculated and disseminated on a 24-hour 
basis and will be available on a continuous basis.
Constituent Trading Platform Selection
    According to the Annual Report, the Digital Asset Trading Platforms 
that are included in the Index are selected by the Index Provider 
utilizing a methodology that is guided by the International 
Organization of Securities Commissions (``IOSCO'') principles for 
financial benchmarks. For a trading platform to become a Constituent 
Trading Platform, it must satisfy each of the criteria listed below 
(the ``Inclusion Criteria''):
     Sufficient USD or USDC liquidity relative to the size of 
the listed assets;
     No evidence in the past 12 months of trading restrictions 
on individuals or entities that would otherwise meet the trading 
platform's eligibility requirements to trade;
     No evidence in the past 12 months of undisclosed 
restrictions on deposits or withdrawals from user accounts;
     Real-time price discovery;

[[Page 9458]]

     Limited or no capital controls; \17\
---------------------------------------------------------------------------

    \17\ ``Capital controls'' in this context means governmental 
sanctions that would limit the movement of capital into, or out of, 
the jurisdiction in which such Digital Asset Trading Platforms 
operate.
---------------------------------------------------------------------------

     Transparent ownership including a publicly-known ownership 
entity;
     Publicly available language and policies addressing legal 
and regulatory compliance in the U.S., including KYC, AML and other 
policies designed to comply with relevant regulations that might apply 
to it;
     Be a trading platform that is licensed and able to service 
investors in one or more of the following jurisdictions:
    [cir] United States
    [cir] United Kingdom
    [cir] European Union
    [cir] Hong Kong
    [cir] Singapore; and
     Offer programmatic spot trading of the trading pair \18\ 
and reliably publish trade prices and volumes on a real-time basis 
through Rest and Websocket APIs.
---------------------------------------------------------------------------

    \18\ Trading platforms with programmatic trading offer traders 
an application programming interface that permits trading by sending 
programmed commands to the trading platform.
---------------------------------------------------------------------------

    A Digital Asset Trading Platform is removed as a Constituent 
Trading Platform when it no longer satisfies the Inclusion Criteria. 
The Index Provider does not currently include data from over-the-
counter markets or derivatives platforms among the Constituent Trading 
Platforms. According to the Annual Report, over-the-counter data is not 
currently included because of the potential for trades to include a 
significant premium or discount paid for larger liquidity, which 
creates an uneven comparison relative to more active markets. There is 
also a higher potential for over-the-counter transactions to not be 
arms-length, and thus not be representative of a true market price.
    The Index Provider and the Sponsor have entered into the index 
license agreement, dated as of February 1, 2022 (as amended, the 
``Index License Agreement''), governing the Sponsor's use of the Index 
Price.\19\ Pursuant to the terms of the Index License Agreement, the 
Index Provider may adjust the calculation methodology for the Index 
Price without notice to, or consent of, the Trust or its shareholders. 
The Index Provider may decide to change the calculation methodology to 
maintain the integrity of the Index Price calculation should it 
identify or become aware of previously unknown variables or issues with 
the existing methodology that it believes could materially impact its 
performance and/or reliability. The Index Provider has sole discretion 
over the determination of Index Price and may change the methodologies 
for determining the Index Price from time to time. Shareholders will be 
notified of any material changes to the calculation methodology or the 
Index Price in the Trust's current reports and will be notified of all 
other changes that the Sponsor considers significant in the Trust's 
periodic or current reports. The Sponsor will determine the materiality 
of any changes to the Index Price on a case-by-case basis, in 
consultation with external counsel.
---------------------------------------------------------------------------

    \19\ Upon entering into the Index License Agreement, the Sponsor 
and the Index Provider terminated the license agreement between the 
parties dated as of February 28, 2019.
---------------------------------------------------------------------------

    The Index Provider may change the trading venues that are used to 
calculate the Index or otherwise change the way in which the Index is 
calculated at any time. For example, the Index Provider has scheduled 
quarterly reviews in which it may add or remove Constituent Trading 
Platforms that satisfy or fail the Inclusion Criteria. The Index 
Provider does not have any obligation to consider the interests of the 
Sponsor, the Trust, the shareholders, or anyone else in connection with 
such changes. While the Index Provider is not required to publicize or 
explain the changes or to alert the Sponsor to such changes, it has 
historically notified the Trust (and other subscribers to the Index) of 
any material changes to the Constituent Trading Platforms, including 
any additions or removals, contemporaneous with its issuance of press 
releases in connection with the same. The Sponsor will notify investors 
of any such material event by filing a current report on Form 8-K. 
Although the Index methodology is designed to operate without any 
manual intervention, rare events would justify manual intervention. 
Intervention of this kind would be in response to non-market-related 
events, such as the halting of deposits or withdrawals of funds on a 
Digital Asset Trading Platform, the unannounced closure of operations 
on a Digital Asset Trading Platform, insolvency or the compromise of 
user funds. In the event that such an intervention is necessary, the 
Index Provider would issue a public announcement through its website, 
API and other established communication channels with its clients.
Determination of the Index Price
    The Index applies an algorithm to the price of LTC on the 
Constituent Trading Platforms calculated on a per second basis over a 
24-hour period. The Index's algorithm is expected to reflect a four-
pronged methodology to calculate the Index Price from the Constituent 
Trading Platforms:
     Volume Weighting: Constituent Trading Platforms with 
greater liquidity receive a higher weighting in the Index, increasing 
the ability to execute against (i.e., replicate) the Index in the 
underlying spot markets.
     Price-Variance Weighting: The Index Price reflects data 
points that are discretely weighted in proportion to their variance 
from the rest of the Constituent Trading Platforms. As the price at a 
particular trading platform diverges from the prices at the rest of the 
Constituent Trading Platforms, its weight in the Index Price 
consequently decreases.
     Inactivity Adjustment: The Index Price algorithm penalizes 
stale activity from any given Constituent Trading Platform. When a 
Constituent Trading Platform does not have recent trading data, its 
weighting in the Index Price is gradually reduced until it is de-
weighted entirely. Similarly, once trading activity at a Constituent 
Trading Platform resumes, the corresponding weighting for that 
Constituent Trading Platform is gradually increased until it reaches 
the appropriate level.
     Manipulation Resistance: In order to mitigate the effects 
of wash trading and order book spoofing, the Index only includes 
executed trades in its calculation. Additionally, the Index only 
includes Constituent Trading Platforms that charge trading fees to its 
users in order to attach a real, quantifiable cost to any manipulation 
attempts.
    The Index Provider re-evaluates the weighting algorithm on a 
periodic basis, but maintains discretion to change the way in which an 
Index Price is calculated based on its periodic review or in extreme 
circumstances and does not make the exact methodology to calculate the 
Index Price publicly available. Nonetheless, the Sponsors believe that 
the Index is designed to limit exposure to trading or price distortion 
of any individual Digital Asset Trading Platform that experiences 
periods of unusual activity or limited liquidity by discounting, in 
real-time, anomalous price movements at individual Digital Asset 
Trading Platforms.
    The Sponsors believe the Index Provider's selection process for 
Constituent Trading Platforms as well as the methodology of the Index 
Price's algorithm provides a more accurate picture of LTC price 
movements than a simple average of Digital Asset Trading Platform spot 
prices, and that the weighting of LTC prices on the Constituent Trading 
Platforms limits the

[[Page 9459]]

inclusion of data that is influenced by temporary price dislocations 
that may result from technical problems, limited liquidity or 
fraudulent activity elsewhere in the LTC spot market. By referencing 
multiple trading venues and weighting them based on trade activity, the 
Sponsors believe that the impact of any potential fraud, manipulation 
or anomalous trading activity occurring on any single venue is reduced.
    If the Index Price becomes unavailable, or if the Sponsor 
determines in good faith that such Index Price does not reflect an 
accurate price for LTC, then the Sponsor will, on a best efforts basis, 
contact the Index Provider to obtain the Index Price directly from the 
Index Provider. If after such contact such Index Price remains 
unavailable or the Sponsor continues to believe in good faith that such 
Index Price does not reflect an accurate price for LTC, then the 
Sponsor will employ a cascading set of rules to determine the Index 
Price, as described below in ``Determination of the Index Price When 
Index Price is Unavailable.''
    The Trust values its LTC for operational purposes by reference to 
the Index Price. The Index Price is the value of LTC as represented by 
the Index, calculated at 4:00 p.m., New York time, on each business 
day.
Illustrative Example
    For the purposes of illustration, outlined below are examples of 
how the attributes that impact weighting and adjustments in the 
aforementioned methodology may be utilized to generate the Index Price 
for a digital asset. For example, Constituent Trading Platforms used to 
calculate the Index Price of the digital asset may include trading 
platforms such as Coinbase, Kraken, LMAX Digital, and Crypto.com.
    The Index Price algorithm, as described above, accounts for 
manipulation at the outset by only including data from executed trades 
on Constituent Trading Platforms that charge trading fees. Then, the 
below-listed elements may impact the weighting of the Constituent 
Trading Platforms on the Index Price as follows:
     Volume Weighting: Each Constituent Trading Platform will 
be weighted to appropriately reflect the trading volume share of the 
Constituent Trading Platform relative to all the Constituent Trading 
Platforms during this same period. For example, an average hourly 
weighting of 67.06%, 14.57%, 11.88%, and 6.49% for Coinbase, Kraken, 
LMAX Digital, and Crypto.com, respectively, would represent each 
Constituent Trading Platform's share of trading volume during the same 
period.
     Inactivity Adjustment: Assume that a Constituent Trading 
Platform represented a 14% weighting on the Index Price of the digital 
asset, which is based on the per-second calculations of its trading 
volume and price-variance relative to the cohort of Constituent Trading 
Platforms included in such Index, and then went offline for 
approximately two hours. The index algorithm would automatically 
recognize inactivity and start de-weighting the Constituent Trading 
Platform at the 3-minute mark and continue to do so over a 7-minute 
period until its influence was effectively zero, 10 minutes after 
becoming inactive. As soon as trading activity resumed at the 
Constituent Trading Platform, the index algorithm would re-weight it to 
the appropriate weighting based on trading volume and price-variance 
relative to the cohort of Constituent Trading Platforms included in the 
Index. Due to the period of inactivity, it would re-weight the 
Constituent Trading Platform activity to a weight lower than its 
original weighting--for example, to 12%.
     Price-Variance Weighting: The price-variance weighting 
adjustment is a relative measure of each Constituent Trading Platform 
versus the cohort of Constituent Trading Platforms. The further the 
price at a Constituent Trading Platform is from the mean price of the 
cohort, the less influence that trading platform's price will have on 
the algorithm that produces the Index Price, as the trading platform 
data is discretely weighted in proportion to their variance from the 
rest of the trading platforms on a per-second basis and there is no 
minimum threshold the variance must meet for this adjustment to take 
place. For example, assume that for a one-hour period, the digital 
asset's execution prices on one Constituent Trading Platform were 
trading more than 7% higher than the average execution prices on 
another Constituent Trading Platform. The algorithm will automatically 
detect the anomaly (price variance) and reduce that specific 
Constituent Trading Platform's weighting during that one-hour period, 
ensuring a reliable spot reference price that is unaffected by the 
localized event and that is reflective of broader market activity.
Determination of the Index Price When Index Price Is Unavailable
    The Sponsor uses the following cascading set of rules to calculate 
the Index Price when the Index Price is unavailable.\20\ For the 
avoidance of doubt, the Sponsor will employ the below rules 
sequentially and in the order as presented below, should one or more 
specific rule(s) fail:
---------------------------------------------------------------------------

    \20\ The Sponsor updated these rules on January 11, 2022.
---------------------------------------------------------------------------

    1. Index Price = The price set by the Index as of 4:00 p.m., New 
York time, on the valuation date.\21\ If the Index becomes unavailable, 
or if the Sponsor determines in good faith that the Index does not 
reflect an accurate price, then the Sponsor will, on a best efforts 
basis, contact the Index Provider to obtain the Index Price directly 
from the Index Provider. If after such contact the Index remains 
unavailable or the Sponsor continues to believe in good faith that the 
Index does not reflect an accurate price, then the Sponsor will employ 
the next rule to determine the Index Price. There are no predefined 
criteria to make a good faith assessment and it will be made by the 
Sponsor in its sole discretion.
---------------------------------------------------------------------------

    \21\ The valuation date is any day for which the value of the 
LTC in the Trust may be calculated utilizing the Index Price.
---------------------------------------------------------------------------

    2. Index Price = The price set by Coin Metrics Real-Time Rate (the 
``Secondary Index'') as of 4:00 p.m., New York time, on the valuation 
date (the ``Secondary Index Price''). The Secondary Index Price is a 
real-time reference rate price, calculated using trade data from 
constituent markets selected by Coin Metrics, Inc. (the ``Secondary 
Index Provider''). The Secondary Index Price is calculated by applying 
weighted-median techniques to such trade data where half the weight is 
derived from the trading volume on each constituent market and half is 
derived from inverse price variance, where a constituent market with 
high price variance as a result of outliers or market anomalies 
compared to other constituent markets is assigned a smaller weight. If 
the Secondary Index becomes unavailable, or if the Sponsor determines 
in good faith that the Secondary Index does not reflect an accurate 
price, then the Sponsor will, on a best efforts basis, contact the 
Secondary Index Provider to obtain the Secondary Index Price directly 
from the Secondary Index Provider. If after such contact the Secondary 
Index remains unavailable or the Sponsor continues to believe in good 
faith that the Secondary Index does not reflect an accurate price, then 
the Sponsor will employ the next rule to determine the Index Price. 
There are no predefined criteria to make a good faith assessment and it 
will be made by the Sponsor in its sole discretion.

[[Page 9460]]

    3. Index Price = The price set by the Trust's principal market (as 
defined in the Annual Report) (the ``Tertiary Pricing Option'') as of 
4:00 p.m., New York time, on the valuation date. The Tertiary Pricing 
Option is a spot price derived from the principal market's public data 
feed that is believed to be consistently publishing pricing information 
as of 4:00 p.m., New York time, and is provided to the Sponsor via an 
application programming interface. If the Tertiary Pricing Option 
becomes unavailable, or if the Sponsor determines in good faith that 
the Tertiary Pricing Option does not reflect an accurate price, then 
the Sponsor will, on a best efforts basis, contact the Tertiary Pricing 
Provider to obtain the Tertiary Pricing Option directly from the 
Tertiary Pricing Provider. If after such contact the Tertiary Pricing 
Option remains unavailable after such contact or the Sponsor continues 
to believe in good faith that the Tertiary Pricing Option does not 
reflect an accurate price, then the Sponsor will employ the next rule 
to determine the Index Price. There are no predefined criteria to make 
a good faith assessment and it will be made by the Sponsor in its sole 
discretion.
    4. Index Price = The Sponsor will use its best judgment to 
determine a good faith estimate of the Index Price. There are no 
predefined criteria to make a good faith assessment and it will be made 
by the Sponsor in its sole discretion.
    In the event of a fork, the Index Provider may calculate the Index 
Price based on a digital asset that the Sponsor does not believe to be 
an appropriate asset of the Trust (i.e., a digital asset other than 
LTC).\22\ In this event, the Sponsor has full discretion to use a 
different index provider or calculate the Index Price itself using its 
best judgment. In such an event, the Exchange will submit a proposed 
rule filing to contemplate the assets that would subsequently be held 
by the Trust.
---------------------------------------------------------------------------

    \22\ According to the Annual Report, the Litecoin Network 
operates using open-source protocols, meaning that any user can 
download the software, modify it and then propose that the users and 
validators of LTC adopt the modification. When a modification is 
introduced and a substantial majority of users and validators' 
consent to the modification, the change is implemented and the 
network remains uninterrupted. However, if less than a substantial 
majority of users and validators' consent to the proposed 
modification, and the modification is not compatible with the 
software prior to its modification, the consequence would be what is 
known as a ``hard fork'' of the Litecoin Network, with one group 
running the pre-modified software and the other running the modified 
software. The effect of such a fork would be the existence of two 
versions of LTC running in parallel, yet lacking interchangeability.
---------------------------------------------------------------------------

    The Sponsor may, in its sole discretion, select a different index 
provider, select a different index price provided by the Index 
Provider, calculate the Index Price by using the cascading set of rules 
set forth above, or change the cascading set of rules set forth above 
at any time.\23\
---------------------------------------------------------------------------

    \23\ 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.
---------------------------------------------------------------------------

The Structure and Operation of the Trust Protects Investors and 
Satisfies Commission Requirements for LTC-Based Exchange Traded 
Products
    The Sponsors believe the Commission should approve the listing and 
trading of Shares of the Trust. In the context of prior spot digital 
asset ETP proposal disapproval orders for Bitcoin and Ethereum, the 
Commission expressed concerns about the underlying Digital Asset Market 
due to the potential for fraud and manipulation and has outlined the 
reasons why such ETP proposals have been unable to satisfy these 
concerns.\24\ For purposes of the Trust's LTC-based ETP proposal, the 
Sponsors anticipate that the Commission may have the same concerns and 
addresses each of these in turn below.
---------------------------------------------------------------------------

    \24\ See Securities Exchange Act Release Nos. 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) (the ``Winklevoss 
Order''); 87267 (October 9, 2019), 84 FR 55382 (October 16, 2019) 
(SR-NYSEArca-2019-01) (Order Disapproving a Proposed Rule Change, as 
Modified by Amendment No. 1, Relating to the Listing and Trading of 
Shares of the Bitwise Bitcoin ETF Trust Under NYSE Arca Rule 8.201-
E) (the ``Bitwise Order''); 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) (the ``Wilshire Phoenix Order''); 83904 
(August 22, 2018), 83 FR 43934 (August 28, 2018) (SR-NYSEArca-2017-
139) (Order Disapproving a Proposed Rule Change to List and Trade 
the Shares of the ProShares Bitcoin ETF and the ProShares Short 
Bitcoin ETF); 83912 (August 22, 2018), 83 FR 43912 (August 28, 2018) 
(SR-NYSEArca-2018-02) (Order Disapproving a Proposed Rule Change 
Relating to Listing and Trading of the Direxion Daily Bitcoin Bear 
1X Shares, Direxion Daily Bitcoin 1.25X Bull Shares, Direxion Daily 
Bitcoin 1.5X Bull Shares, Direxion Daily Bitcoin 2X Bull Shares, and 
Direxion Daily Bitcoin 2X Bear Shares Under NYSE Arca Rule 8.200-E); 
83913 (August 22, 2018), 83 FR 43923 (August 28, 2018) (SR-CboeBZX-
2018-01) (Order Disapproving a Proposed Rule Change to List and 
Trade the Shares of the GraniteShares Bitcoin ETF and the 
GraniteShares Short Bitcoin ETF) (together, the ``Prior Spot Digital 
Asset ETP Disapproval Orders'').
---------------------------------------------------------------------------

    In the Prior Spot Digital Asset ETP Disapproval Orders, the 
Commission outlined that a proposal relating to a digital asset-based 
ETP could satisfy its concerns regarding potential for fraud and 
manipulation by demonstrating:
    (1) Inherent Resistance to Fraud and Manipulation: that the 
underlying commodity market is inherently resistant to fraud and 
manipulation;
    (2) Other Means to Prevent Fraud and Manipulation: that there are 
other means to prevent fraudulent and manipulative acts and practices 
that are sufficient; or
    (3) Surveillance Sharing: that the listing exchange has entered 
into a surveillance sharing agreement with a regulated market of 
significant size relating to the underlying or reference assets.
    As described below, the Sponsors believe the structure and 
operation of the Trust are designed to prevent fraudulent and 
manipulative acts and practices, to protect investors and the public 
interest, and to respond to the specific concerns that the Commission 
may have with respect to potential fraud and manipulation in the 
context of an LTC-based ETP.
How the Trust Meets Standards in the Prior Spot Digital Asset ETP 
Disapproval Orders
1. Resistance to or Prevention of Fraud and Manipulation
    In the Prior Spot Digital Asset ETP Disapproval Orders, the 
Commission disagreed with the proposition that a digital asset's 
fungibility, transportability and exchange tradability combine to 
provide unique protections against, and allow such digital asset to be 
uniquely resistant to, attempts at price manipulation. The Commission 
reached its conclusion based on concessions by one issuer that 95% of 
the reported trading in the underlying digital asset at issue, Bitcoin, 
is ``fake'' or non-economic, effectively admitting that the properties 
of Bitcoin do not make it inherently resistant to manipulation. Such 
issuer's concessions were further compounded by evidence of potential 
and actual fraud and manipulation in the historical trading of Bitcoin 
on certain marketplaces such as (1) ``wash'' trading, (2) trading based 
on material, non-public information, including the dissemination of 
false and misleading information, (3) manipulative activity involving 
Tether, and (4) fraud and manipulation.\25\
---------------------------------------------------------------------------

    \25\ See Bitwise Order, 84 FR at 55383 (discussing analysis of 
the Bitcoin spot market that asserts that 95% of the spot market is 
dominated by fake and non-economic activity, such as wash trades), 
55391 (discussing possible sources of fraud and manipulation in the 
bitcoin spot market). See also Winklevoss Order, 83 FR at 37585-86 
(discussing pending litigation against a Bitcoin trading platform 
for fraudulent conduct relating to Tether); Bitwise Order, 84 FR at 
55391 n.140, 55402 & n.331 (same); Winklevoss Order, 83 FR at 37584-
86 (discussing potential types of manipulation in the Bitcoin spot 
market). The Commission has also noted that fraud and manipulation 
in the Bitcoin spot market could persist for a significant duration. 
See, e.g., Bitwise Order, 84 FR at 55405 & n.379.

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[[Page 9461]]

    The Sponsors acknowledge the possibility that fraud and 
manipulation may exist in commodity markets and that digital asset 
trading on any given trading platform may be no more uniquely resistant 
to fraud and manipulation than other commodity markets.\26\ However, 
the Sponsors believe that the fundamental features of digital assets, 
including fungibility, transportability and exchange tradability offer 
novel protections beyond those that exist in traditional commodity 
markets or equity markets when combined with other means, as discussed 
further below.
---------------------------------------------------------------------------

    \26\ See generally Bitwise Order.
---------------------------------------------------------------------------

    Further, the Sponsors believe that LTC in particular is arguably 
less susceptible to manipulation than other commodities that underlie 
ETPs; there may be inside information relating to the supply of the 
physical commodity such as the discovery of new sources of supply or 
significant disruptions at mining facilities that supply the commodity 
that simply are inapplicable to LTC. The Sponsors also believe that the 
fragmentation across LTC trading platforms, the relatively slow speed 
of transactions, and the capital necessary to maintain a significant 
presence on each trading platform make manipulation of LTC prices 
through continuous trading activity unlikely. Moreover, the linkage 
between the LTC markets and the presence of arbitrageurs in those 
markets means that the manipulation of the price of LTC price on any 
single venue would require manipulation of the global LTC price in 
order to be effective. Arbitrageurs must have funds distributed across 
multiple LTC trading platforms in order to take advantage of temporary 
price dislocations, thereby making it unlikely that there will be 
strong concentration of funds on any particular LTC trading platform. 
As a result, the potential for manipulation on a particular LTC trading 
platform would require overcoming the liquidity supply of such 
arbitrageurs who are effectively eliminating any cross-market pricing 
differences. For all of these reasons, the Sponsors believe that LTC is 
not particularly susceptible to manipulation, especially as compared to 
other approved ETP reference assets.
2. Other Means To Prevent Fraud and Manipulation
    The Commission has recognized that a listing exchange could 
demonstrate that other means to prevent fraudulent and manipulative 
acts and practices are sufficient to justify dispensing with the 
requisite surveillance-sharing agreement.\27\ In evaluating the 
effectiveness of this type of resistance, the Commission does not apply 
a ``cannot be manipulated'' standard. Instead, the Commission requires 
that such resistance to fraud and manipulation be novel and beyond 
those protections that exist in traditional commodity markets or equity 
markets for which the Commission has long required surveillance-sharing 
agreements in the context of listing derivative securities 
products.\28\
---------------------------------------------------------------------------

    \27\ See Winklevoss Order, 84 FR at 37580, 37582-91; Bitwise 
Order, 84 FR at 55383, 55385-406; Wilshire Phoenix Order, 85 FR at 
12597.
    \28\ See Winklevoss Order, 84 FR at 37582; Wilshire Phoenix 
Order, 85 FR at 12597.
---------------------------------------------------------------------------

    The Sponsors believe the Index represents a novel means to prevent 
fraud and manipulation from impacting a reference price for LTC and 
that it offers protections beyond those that exist in traditional 
commodity markets or equity markets. The Index operates materially 
similarly to CoinDesk Bitcoin Price Index (XBX). Specifically, digital 
assets, such as LTC, are novel and exist outside traditional commodity 
markets. It therefore stands to reason that the methods by which they 
trade will be novel and that the market for digital assets like LTC 
will have different attributes than traditional commodity markets. 
Digital assets like LTC were only introduced within the past decade, 
twenty years after the first U.S. ETFs were offered \29\ and 150 years 
after the first futures were offered.\30\ In contrast to older 
commodities such as gold, silver, platinum, palladium or copper, which 
the Commission has noted all had at least one significant, regulated 
market for trading futures on the underlying commodity at the time 
commodity trust ETPs were approved for listing and trading, the first 
trading in digital assets like LTC took place entirely in an open, 
transparent and online setting where other commodities cannot trade.
---------------------------------------------------------------------------

    \29\ SEC, ``Investor Bulletin: Exchange-Traded Funds (ETFs),'' 
August 2012, https://www.sec.gov/investor/alerts/etfs.pdf.
    \30\ Commodity Futures Trading Commission (``CFTC''), ``History 
of the CFTC,'' https://www.cftc.gov/About/HistoryoftheCFTC/history_precftc.html.
---------------------------------------------------------------------------

    The Trust has priced its Shares consistently for more than six 
years based on the Index. The Sponsors believe the Trust's use of the 
Index specifically addresses the Commission's concerns in that the 
Index serves as an alternative means to prevent fraud and manipulation. 
Specifically, the Index can (i) mitigate the effects of fraud, 
manipulation and other anomalous trading activity on the LTC reference 
rate, (ii) provide a real-time, volume-weighted fair value of LTC and 
(iii) appropriately handle and adjust for non-market related events.
    As described in more detail below, the Sponsors believe that the 
Index accomplishes those objectives in the following ways:
    1. The Index tracks the Digital Asset Trading Platform Market price 
through trading activity at ``U.S.-Compliant Trading Platforms''; \31\
---------------------------------------------------------------------------

    \31\ ``U.S.-Compliant Trading Platforms'' are trading platforms 
in the Digital Asset Trading Platform Market that are compliant with 
applicable U.S. federal and state licensing requirements and 
practices regarding AML and KYC regulations. All Constituent Trading 
Platforms are U.S.-Compliant Trading Platforms.
    ``Non-U.S.-Compliant Trading Platforms'' are all other trading 
platforms in the Digital Asset Trading Platform Market.
    As of the date of this filing, the U.S.-Compliant Trading 
Platforms that the Index Provider considered for inclusion in the 
Index were Bitfinex, Bitstamp, Coinbase, Crypto.com, Kraken and LMAX 
Digital.
    From these U.S.-Compliant Trading Platforms, the Index Provider 
then applies additional Inclusion Criteria to determine the 
Constituent Trading Platforms.
---------------------------------------------------------------------------

    2. The Index mitigates the impact of instances of fraud, 
manipulation and other anomalous trading activity in real-time through 
systematic adjustments;
    3. The Index is constructed and maintained by an expert third-party 
index provider, allowing for prudent handling of non-market-related 
events; and
    4. The Index mitigates the impact of instances of fraud, 
manipulation and other anomalous trading activity concentrated on any 
one specific trading platform through a cross-trading platform 
composite index rate.
    1. The Index tracks the Digital Asset Trading Platform Market price 
through trading activity at ``U.S.-Compliant Trading Platforms.''
    To reduce the risk of fraud, manipulation, and other anomalous 
trading activity from impacting the Index, only U.S.-Compliant Trading 
Platforms are eligible to be included in the Index.
    The Index maintains a minimum number of three trading platforms and 
a

[[Page 9462]]

maximum number of five trading platforms to track the Digital Asset 
Trading Platform Market while offering replicability for traders and 
market makers.\32\
---------------------------------------------------------------------------

    \32\ According to the Sponsors, the more trading platforms 
included in the Index, the more ability there is for traders and 
market makers to trade against the Index by arbitraging price 
differences. For example, in the event of variances between LTC 
prices on Constituent Trading Platforms and non-Constituent Trading 
Platforms, arbitrage trading opportunities would exist. These 
discrepancies generally consolidate over time, as price differences 
across trading platforms are realized and capitalized upon by 
traders and market makers.
---------------------------------------------------------------------------

    U.S.-Compliant Trading Platforms possess safeguards that protect 
against fraud and manipulation. For example, U.S.-Compliant Trading 
Platforms regulated by the NYDFS under the BitLicense program have 
regulatory requirements to implement measures designed to effectively 
detect, prevent, and respond to fraud, attempted fraud, market 
manipulation, and similar wrongdoing, and to monitor, control, 
investigate and report back to the NYDFS regarding any wrongdoing.\33\ 
These trading platforms also have the following obligations: \34\
---------------------------------------------------------------------------

    \33\ See, e.g., ``DFS Takes Action to Deter Fraud and 
Manipulation in Virtual Currency Markets,'' available at: https://www.dfs.ny.gov/about/press/pr1802071.htm.
    \34\ See ``New York's Final ``BitLicense'' Rule: Overview and 
Changes from July 2014 Proposal,'' June 5, 2015, Davis Polk, 
available at: https://www.davispolk.com/files/new_yorks_final_bitlicense_rule_overview_changes_july_2014_proposal.pdf.
---------------------------------------------------------------------------

     Submission of audited financial statements including 
income statements, statements of assets/liabilities, insurance, and 
banking;
     Compliance with capitalization requirements set at NYDFS's 
discretion;
     Prohibitions against the sale or encumbrance to protect 
full reserves of custodian assets;
     Fingerprints and photographs of employees with access to 
customer funds;
     Retention of a qualified Chief Information Security 
Officer and annual penetration testing/audits;
     Documented business continuity and disaster recovery plan, 
independently tested annually; and
     Participation in an independent exam by NYDFS.
    Other U.S.-Compliant Trading Platforms have voluntarily implemented 
measures to protect against common forms of market manipulation.\35\
---------------------------------------------------------------------------

    \35\ As of the date of this filing, two of the six Constituent 
Trading Platforms, Bitstamp and Coinbase, are regulated by NYDFS.
---------------------------------------------------------------------------

    Furthermore, all U.S.-Compliant Trading Platforms are considered 
MSBs that are subject to FinCEN's federal and state reporting 
requirements that provide additional safeguards. For example, 
unscrupulous traders may be less likely to engage in fraudulent or 
manipulative acts and practices on trading platforms that (1) report 
suspicious activity to FinCEN as money services businesses, (2) report 
to state regulators as money transmitters, and/or (3) require customer 
identification through KYC procedures. U.S.-Compliant Trading Platforms 
are required to: \36\
---------------------------------------------------------------------------

    \36\ See BSA Requirements for MSBs, FinCEN website: https://www.fincen.gov/bsarequirements-msbs.
---------------------------------------------------------------------------

     Identify people with ownership stakes or controlling roles 
in the MSB;
     Establish a formal Anti-Money Laundering (AML) policy in 
place with documentation, training, independent review, and a named 
compliance officer;
     Implement strict customer identification and verification 
policies and procedures;
     File Suspicious Activity Reports (SARs) for suspicious 
customer transactions;
     File Currency Transaction Reports (CTRs) for cash-in or 
cash-out transactions greater than $10,000; and
     Maintain a five-year record of currency exchanges greater 
than $1,000 and money transfers greater than $3,000.
    The Sponsors acknowledge that there are substantial differences 
between FinCEN and New York state regulations and the Commission's 
regulation of the national securities exchanges.\37\ The Sponsors do 
not believe the inclusion of U.S.-Compliant Trading Platforms is in and 
of itself sufficient to prove that the Index is an alternative means to 
prevent fraud and manipulation such that surveillance sharing 
agreements are not required, but do believe that the inclusion of only 
U.S.-Compliant Trading Platforms in the Index is one significant way in 
which the Index is protected from the potential impacts of fraud and 
manipulation.
---------------------------------------------------------------------------

    \37\ See Bitwise Order, 84 FR at 55392; Wilshire Phoenix Order, 
85 FR at 12603.
---------------------------------------------------------------------------

    2. The Index mitigates the impact of instances of fraud, 
manipulation, and other anomalous trading activity in real-time through 
systematic adjustments.
    The Index is calculated once every second according to a systematic 
methodology that relies on observed trading activity on the Constituent 
Trading Platforms. While the precise methodology underlying the Index 
is currently proprietary, the key elements of the Index are outlined 
below:
     Volume Weighting: Constituent Trading Platforms with 
greater liquidity receive a higher weighting in the Index, increasing 
the ability to execute against (i.e., replicate) the Index in the 
underlying spot markets.
     Price-Variance Weighting: The Index reflects data points 
that are discretely weighted in proportion to their variance from the 
rest of the Constituent Trading Platforms. As the price at a 
Constituent Trading Platform diverges from the prices at the rest of 
the Constituent Trading Platforms, its weight in the Index consequently 
decreases.
     Inactivity Adjustment: The Index algorithm penalizes stale 
activity from any given Constituent Trading Platform. When a 
Constituent Trading Platform does not have recent trading data, its 
weighting in the Index is gradually reduced, until it is de-weighted 
entirely. Similarly, once trading activity at the Constituent Trading 
Platform resumes, the corresponding weighting for that Constituent 
Trading Platform is gradually increased until it reaches the 
appropriate level.
     Manipulation Resistance: In order to mitigate the effects 
of wash trading and order book spoofing, the Index only includes 
executed trades in its calculation. Additionally, the Index only 
includes Constituent Trading Platforms that charge trading fees to its 
users in order to attach a real, quantifiable cost to any manipulation 
attempts.
    The Index Provider reviews and periodically updates the Constituent 
Trading Platforms included in the Index by utilizing a methodology that 
is guided by the IOSCO principles for financial benchmarks.
    3. The Index is constructed and maintained by an expert third-party 
index provider, allowing for prudent handling of non-market-related 
events.
    The Index Provider reviews and periodically updates which trading 
platforms are included in the Index by utilizing a methodology that is 
guided by the IOSCO principles for financial benchmarks.
    According to the Index methodology, for a trading platform to 
become a Constituent Trading Platform, it must satisfy each of the 
following Inclusion Criteria:
     Sufficient USD or USDC liquidity relative to the size of 
the listed assets;
     No evidence in the past 12 months of trading restrictions 
on individuals or entities that would otherwise meet the trading 
platform's eligibility requirements to trade;
     No evidence in the past 12 months of undisclosed 
restrictions on deposits or withdrawals from user accounts;
     Real-time price discovery;
     Limited or no capital controls;

[[Page 9463]]

     Transparent ownership including a publicly-known ownership 
entity;
     Publicly available language and policies addressing legal 
and regulatory compliance in the U.S., including KYC, AML and other 
policies designed to comply with relevant regulations that might apply 
to it;
     Be a trading platform that is licensed and able to service 
investors in one or more of the following jurisdictions:
    [cir] United States,
    [cir] United Kingdom,
    [cir] European Union,
    [cir] Hong Kong,
    [cir] Singapore; and
     Offer programmatic spot trading of the trading pair and 
reliably publish trade prices and volumes on a real-time basis through 
Rest and Websocket APIs.
    Although the Index methodology is designed to operate without any 
human interference, rare events would justify manual intervention. 
Manual intervention would only be in response to ``non-market-related 
events'' (e.g., halting of deposits or withdrawals of funds, 
unannounced closure of trading platform operations, insolvency, 
compromise of user funds, etc.). In the event that such an intervention 
is necessary, the Index Provider would issue a public announcement 
through its website, API and other established communication channels 
with its clients.\38\
---------------------------------------------------------------------------

    \38\ To the extent any such intervention has a material impact 
on the Trust, the Sponsor will also issue a public announcement.
---------------------------------------------------------------------------

    4. The Index mitigates the impact of instances of fraud, 
manipulation and other anomalous trading activity concentrated on any 
one specific trading platform through a cross-trading platform 
composite index rate.
    The Index is based on the price and volume data of multiple U.S.-
Compliant Trading Platforms that satisfy the Index Provider's Inclusion 
Criteria. By referencing multiple trading venues and weighting them 
based on trade activity, the impact of any potential fraud, 
manipulation, or anomalous trading activity occurring on any single 
venue is reduced. Specifically, the effects of fraud, manipulation, or 
anomalous trading activity occurring on any single venue are de-
weighted and consequently diluted by non-anomalous trading activity 
from other Constituent Trading Platforms.
    Although the Index is designed to accurately capture the market 
price of LTC, third parties may be able to purchase and sell LTC on 
public or private markets not included among the constituent Digital 
Asset Trading Platforms of the Index, and such transactions may take 
place at prices materially higher or lower than the Index Price. 
Moreover, there may be variances in the prices of LTC on the various 
Digital Asset Trading Platforms, including as a result of differences 
in fee structures or administrative procedures on different Digital 
Asset Trading Platforms. For example, based on data provided by the 
Index Provider, on any given day during the twelve months ended 
September 30, 2024, the maximum differential between the 4:00 p.m., New 
York time spot price of any single Digital Asset Trading Platform 
included in the Index and the Index Price was 2.27% and the average of 
the maximum differentials of the 4:00 p.m., New York time spot price of 
each Digital Asset Trading Platform included in the Index and the Index 
Price was 0.85%. During this same period, the average differential 
between the 4:00 p.m., New York time spot prices of all the Digital 
Asset Trading Platforms included in the Index and the Index Price was 
0.004%. All Digital Asset Trading Platforms that were included in the 
Index throughout the period were considered in this analysis.
    Since March 1, 2018, the Trust has consistently priced its Shares 
at 4:00 p.m., E.T. based on the Index Price. While that pricing would 
be known to the market, the Sponsors believe that, even if efforts to 
manipulate the price of LTC at 4:00 p.m., E.T. were successful on any 
trading platform, such activity would have had a negligible effect on 
the pricing of the Trust, due to the controls embedded in the structure 
of the Index.
    Accordingly, the Sponsors believe that the Index has proven its 
ability to (i) mitigate the effects of fraud, manipulation and other 
anomalous trading activity on the LTC reference rate, (ii) provide a 
real-time, volume-weighted fair value of LTC and (iii) appropriately 
handle and adjust for non-market related events. For these reasons, the 
Sponsors believe that the Index represents an effective alternative 
means to prevent fraud and manipulation and the Trust's reliance on the 
Index addresses the Commission's concerns with respect to potential 
fraud and manipulation.
* * * * *
    In summary, the Sponsors believe that the foregoing addresses 
concerns the Commission may have with respect to LTC-based ETPs, based 
on the Commission's articulated concerns with respect to potential 
fraud and manipulation in Bitcoin-based ETPs. Specifically, the 
Sponsors believe that, although LTC is not itself inherently resistant 
to fraud and manipulation, the Index represents an effective means to 
prevent fraudulent and manipulative acts and practices. As discussed 
above, the Trust has used the Index to price the Shares for more than 
six years, and the Index has proven its ability to (i) mitigate the 
effects of fraud, manipulation and other anomalous trading activity on 
the LTC reference rate, (ii) provide a real-time, volume-weighted fair 
value of LTC and (iii) appropriately handle and adjust for non-market 
related events.
Creation and Redemption of Shares
    Authorized Participants may submit orders to create or redeem 
Shares under procedures for ``Cash Orders.''
    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 LTC 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 LTC as part of the creation or 
redemption process.
    The Trust will create Shares by receiving LTC from a third party 
that is not the Authorized Participant, and the Trust, or an affiliate 
of the Trust (and in any event not the Authorized Participant), is 
responsible for selecting the third party to deliver the LTC. Further, 
the third party will not be acting as an agent of the Authorized 
Participant with respect to the delivery of the LTC to the Trust nor 
acting at the direction of the Authorized Participant with respect to 
the delivery of the LTC to the Trust. The Trust will redeem Shares by 
delivering LTC to a third party that is not the Authorized Participant, 
and the Trust, or an affiliate of the Trust (and in any event not the 
Authorized Participant), is responsible for selecting the third party 
to receive the LTC. Further, the third party will not be acting as an 
agent of the Authorized Participant with respect to the receipt of the 
LTC from the Trust nor acting at the direction of the Authorized 
Participant with respect to the receipt of the LTC from the Trust.
    Cash Orders are made through the participation of a Liquidity 
Provider \39\

[[Page 9464]]

who obtains or receives LTC in exchange for cash, and are facilitated 
by the Transfer Agent and Grayscale Investments Sponsors, LLC, acting 
in its capacity as the Liquidity Engager. Liquidity Providers are not 
party to the Participant Agreements (as defined below) and are engaged 
separately by the Liquidity Engager.
---------------------------------------------------------------------------

    \39\ A ``Liquidity Provider'' means one or more eligible 
companies that facilitate the purchase and sale of LTC in connection 
with creations or redemptions pursuant to Cash Orders. The Liquidity 
Providers with which Grayscale Investments Sponsors, LLC, acting 
other than in its capacity as the Sponsor (in such other capacity, 
the ``Liquidity Engager'') will engage in LTC transactions are third 
parties that are not affiliated with the Sponsor or the Trust and 
are not acting as agents of the Trust, the Sponsor, or any 
Authorized Participant, and all transactions will be done on an 
arms-length basis. Except for the contractual relationships between 
each Liquidity Provider and Grayscale Investments Sponsors, LLC in 
its capacity as the Liquidity Engager, there is no contractual 
relationship between each Liquidity Provider and the Trust, the 
Sponsor, or any Authorized Participant. When seeking to buy LTC in 
connection with creations or sell LTC in connection with 
redemptions, the Liquidity Engager will seek to obtain commercially 
reasonable prices and terms from the approved Liquidity Providers. 
Once agreed upon, the transaction will generally occur on an ``over-
the-counter'' basis.
---------------------------------------------------------------------------

    According to the Registration Statement, the Trust creates Baskets 
(as described below) of Shares only upon receipt of LTC and redeems 
Shares only by distributing LTC. ``Authorized Participants'' are the 
only persons that may place orders to create and redeem Baskets. Each 
Authorized Participant must (i) be a registered broker-dealer and (ii) 
enter into an agreement with the Sponsor and Transfer Agent that 
provides the procedures for the creation and redemption of Baskets and 
for the delivery of LTC required for the creation and redemption of 
Baskets via a Liquidity Provider (each, a ``Participant Agreement''). 
An Authorized Participant may act for its own account or as agent for 
broker-dealers, custodians and other securities market participants 
that wish to create or redeem Baskets. Shareholders who are not 
Authorized Participants will only be able to create or redeem their 
Shares through an Authorized Participant.
    The Trust issues Shares to and redeems Shares from Authorized 
Participants on an ongoing basis, but only in one or more ``Baskets'' 
(with a Basket being a block of 10,000 Shares). The Trust will not 
issue fractions of a Basket.
    The creation and redemption of Baskets will be made only in 
exchange for the delivery to the Trust, or the distribution by the 
Trust, of the number of whole and fractional LTC represented by each 
Basket being created or redeemed, which is determined by dividing (x) 
the number of LTC owned by the Trust at 4:00 p.m., New York time, on 
the trade date of a creation or redemption order, after deducting the 
number of LTC representing the U.S. dollar value of accrued but unpaid 
fees and expenses of the Trust (converted using the Index Price at such 
time, and carried to the eighth decimal place), by (y) the number of 
Shares outstanding at such time (with the quotient so obtained 
calculated to one one-hundred-millionth of one LTC (i.e., carried to 
the eighth decimal place)), and multiplying such quotient by 10,000 
(the ``Basket Amount''). The U.S. dollar value of a Basket is 
calculated by multiplying the Basket Amount by the Index Price as of 
the trade date (the ``Basket NAV''). The Basket NAV multiplied by the 
number of Baskets being created or redeemed is referred to as the 
``Total Basket NAV.'' All questions as to the calculation of the Basket 
Amount will be conclusively determined by the Sponsor and will be final 
and binding on all persons interested in the Trust. The number of LTC 
represented by a Share will gradually decrease over time as the Trust's 
LTC are used to pay the Trust's expenses. As of September 30, 2024, 
each Share represented approximately 0.0848 of one LTC.
    The creation of Baskets requires the delivery by the Authorized 
Participant of a cash amount equivalent to the Total Basket Amount and 
the redemption of Baskets requires the distribution to the Authorized 
Participant of a cash amount equivalent to the Total Basket Amount.
    Although the Trust creates Baskets only upon the receipt of LTC, 
and redeems Baskets only by distributing LTC, an Authorized Participant 
will submit Cash Orders, pursuant to which the Authorized Participant 
will deposit cash with, or accept cash from, the Transfer Agent in 
connection with the creation and redemption of Baskets.
    Cash Orders will be facilitated by the Transfer Agent and Liquidity 
Engager, acting other than in its capacity as Sponsor. On an order-by-
order basis, the Liquidity Engager will engage one or more Liquidity 
Providers to obtain or receive LTC in exchange for cash in connection 
with such order, as described in more detail below.
    Unless the Sponsor requires that a Cash Order be effected at actual 
execution prices (an ``Actual Execution Cash Order''),\40\ each 
Authorized Participant that submits a Cash Order to create or redeem 
Baskets (a ``Variable Fee Cash Order'') \41\ will pay a fee (the 
``Variable Fee'') based on the Total Basket NAV, and any price 
differential of LTC between the trade date and the settlement date will 
be borne solely by the Liquidity Provider until such LTC have been 
received or liquidated by the Trust. The Variable Fee is intended to 
cover all of a Liquidity Provider's expenses in connection with the 
creation or redemption order, including any LTC trading platform fees 
that the Liquidity Provider incurs in connection with buying or selling 
LTC. The amount may be changed by the Sponsor in its sole discretion at 
any time, and Liquidity Providers will communicate to the Sponsor in 
advance the Variable Fee they would be willing to accept in connection 
with a Variable Fee Cash Order, based on market conditions and other 
factors existing at the time of such Variable Fee Cash Order.
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    \40\ With respect to a creation or redemption pursuant to an 
Actual Execution Cash Order, as between the Trust and an Authorized 
Participant, the Authorized Participant is responsible for the 
dollar cost of the difference between the LTC price utilized in 
calculating Total Basket NAV on the trade date and the price at 
which the Trust acquires or disposes of the LTC on the settlement 
date. If the price realized in acquiring or disposing of the 
corresponding Total Basket Amount is higher than the Total Basket 
NAV, the Authorized Participant will bear the dollar cost of such 
difference, in the case of a creation, by delivering cash in the 
amount of such shortfall (the ``Additional Creation Cash'') to the 
Cash Account or, in the case of a redemption, with the amount of 
cash to be delivered to the Authorized Participant being reduced by 
the amount of such difference (the ``Redemption Cash Shortfall''). 
If the price realized in acquiring the corresponding Total Basket 
Amount is lower than the Total Basket NAV, the Authorized 
Participant will benefit from such difference, with the Trust 
promptly returning cash in the amount of such excess (the ``Excess 
Creation Cash'') to the Authorized Participant.
    \41\ Unless the Sponsor determines otherwise in its sole 
discretion based on market conditions and other factors existing at 
the time of such Cash Order, all creations and redemptions pursuant 
to Cash Orders are expected to be executed as Variable Fee Cash 
Orders, and any price differential of LTC between the trade date and 
the settlement date will be borne solely by the Liquidity Provider 
until such LTC have been received by the Trust.
---------------------------------------------------------------------------

    Alternatively, the Sponsor may require that a Cash Order be 
effected as an Actual Execution Cash Order, in its sole discretion 
based on market conditions and other factors existing at the time of 
such Cash Order, and under such circumstances, any price differential 
of LTC between the trade date and the settlement date will be borne 
solely by the Authorized Participant until such LTC have been received 
or liquidated by the Trust.
    In the case of creations, to transfer the Total Basket Amount to 
the Trust's Digital Asset Account, the Liquidity Provider will transfer 
LTC to one of the public key addresses associated with the Digital 
Asset Account and as provided by the Sponsor. In the case of 
redemptions, the same procedure is conducted, but in reverse, using the 
public key addresses associated with the wallet of the Liquidity 
Provider and as provided by such party. All such transactions will be 
conducted on the Litecoin Blockchain and parties

[[Page 9465]]

acknowledge and agree that such transfers may be irreversible if done 
incorrectly.
    Authorized Participants do not pay a transaction fee to the Trust 
in connection with the creation or redemption of Baskets, but there may 
be transaction fees associated with the validation of the transfer of 
LTC by the Litecoin Network, which will be paid by the Custodian in the 
case of redemptions and the Authorized Participant or the Liquidity 
Provider in the case of creations. Service providers may charge 
Authorized Participants administrative fees for order placement and 
other services related to creation of Baskets. As discussed above, 
Authorized Participants will also pay the Variable Fee in connection 
with Variable Fee Cash Orders. Under certain circumstances, Authorized 
Participants may also be required to deposit additional cash in the 
Cash Account, or be entitled to receive excess cash from the Cash 
Account, in connection with creations and redemptions pursuant to 
Actual Execution Cash Orders. Authorized Participants will receive no 
fees, commissions or other form of compensation or inducement of any 
kind from either the Sponsor or the Trust and no such person has any 
obligation or responsibility to the Sponsor or the Trust to effect any 
sale or resale of Shares.
    The following is a summary of the procedures for the creation and 
redemption of Baskets.
Creation Procedures
    On any business day, an Authorized Participant may place an order 
with the Transfer Agent to create one or more Baskets.
    Cash Orders for creation must be placed with the Transfer Agent no 
later than 1:59:59 p.m., New York time.
    The Sponsor may in its sole discretion limit the number of Shares 
created pursuant to Cash Orders on any specified day without notice to 
the Authorized Participants and may direct the Marketing Agent to 
reject any Cash Orders in excess of such capped amount. In exercising 
its discretion to limit the number of Shares created pursuant to Cash 
Orders, the Sponsor expects to take into consideration a number of 
factors, including the availability of Liquidity Providers to 
facilitate Cash Orders and the cost of processing Cash Orders.
    Creations under Cash Orders will take place as follows, where ``T'' 
is the trade date and each day in the sequence must be a business day. 
Before a creation order is placed, the Sponsor determines if such 
creation order will be a Variable Fee Cash Order or an Actual Execution 
Cash Order, which determination is communicated to the Authorized 
Participant.

------------------------------------------------------------------------
                                          Settlement date (T+1, or T+2,
             Trade date (T)               as established at the time of
                                                 order placement)
------------------------------------------------------------------------
 The Authorized Participant       The Authorized
 places a creation order with the         Participant delivers to the
 Transfer Agent.                          Cash Account: \1\
 The Marketing Agent accepts     (x) in the case of a Variable
 (or rejects) the creation order, which   Fee Cash Order, the Total
 is communicated to the Authorized        Basket NAV, plus any Variable
 Participant by the Transfer Agent.       Fee; or
 The Sponsor notifies the        (y) in the case of an Actual
 Liquidity Provider of the creation       Execution Cash Order, the
 order..                                  Total Basket NAV, plus any
 The Sponsor determines the       Additional Creation Cash, less
 Total Basket NAV and any Variable Fee    any Excess Creation Cash, if
 and Additional Creation Cash as soon     applicable (such amount, as
 as practicable after 4:00 p.m., New      applicable, the ``Required
 York time.                               Creation Cash'').
                                          The Liquidity Provider
                                          transfers the Total Basket
                                          Amount to the Trust's Digital
                                          Asset Account.
                                          Once the Trust is in
                                          simultaneous possession of (x)
                                          the Total Basket Amount and
                                          (y) the Required Creation
                                          Cash, the Trust issues the
                                          aggregate number of Shares
                                          corresponding to the Baskets
                                          ordered by the Authorized
                                          Participant, which the
                                          Transfer Agent holds for the
                                          benefit of the Authorized
                                          Participant.
                                          Cash equal to the
                                          Required Creation Cash is
                                          delivered to the Liquidity
                                          Provider from the Cash
                                          Account.
                                          The Transfer Agent
                                          delivers Shares to the
                                          Authorized Participant by
                                          crediting the number of
                                          Baskets created to the
                                          Authorized Participant's DTC
                                          account.
------------------------------------------------------------------------
\1\ The ``Cash Account'' means the account maintained by the Transfer
  Agent for purposes of receiving cash from, and distributing cash to,
  Authorized Participants in connection with creations and redemptions
  pursuant to Cash Orders. For the avoidance of doubt, the Trust shall
  have no interest (beneficial, equitable or otherwise) in the Cash
  Account or any cash held therein.

Redemption Procedures
    The procedures by which an Authorized Participant can redeem one or 
more Baskets mirror the procedures for the creation of Baskets. On any 
business day, an Authorized Participant may place a redemption order 
specifying the number of Baskets to be redeemed.
    The redemption of Shares pursuant to Cash Orders will only take 
place if approved by the Sponsor in writing, in its sole discretion and 
on a case-by-case basis. In exercising its discretion to approve the 
redemption of Shares pursuant to Cash Orders, the Sponsor expects to 
take into consideration a number of factors, including the availability 
of Liquidity Providers to facilitate Cash Orders and the cost of 
processing Cash Orders.
    Cash Orders for redemption must be placed no later than 1:59:59 
p.m., New York time on each business day. The Authorized Participants 
may only redeem Baskets and cannot redeem any Shares in an amount less 
than a Basket.
    Redemptions under Cash Orders will take place as follows, where 
``T'' is the trade date and each day in the sequence must be a business 
day. Before a redemption order is placed, the Sponsor determines if 
such redemption order will be a Variable Fee Cash Order or an Actual 
Execution Cash Order, which determination is communicated to the 
Authorized Participant.

[[Page 9466]]

------------------------------------------------------------------------
                                         Settlement date (T+1 (or T+2 on
             Trade date (T)              case by case basis, as approved
                                                   by Sponsor))
------------------------------------------------------------------------
 The Authorized Participant       The Authorized
 places a redemption order with the       Participant delivers Baskets
 Transfer Agent.                          to be redeemed from its DTC
 The Marketing Agent accepts      account to the Transfer Agent.
 (or rejects) the redemption order,       The Liquidity Provider
 which is communicated to the             delivers to the Cash Account:
 Authorized Participant by the Transfer  (x) in the case of a Variable
 Agent.                                   Fee Cash Order, the Total
 The Sponsor notifies the         Basket NAV less any Variable
 Liquidity Provider of the redemption     Fee; or
 order..                                 (y) in the case of an Actual
 The Sponsor determines the       Execution Cash Order, the
 Total Basket NAV and, in the case of a   actual proceeds to the Trust
 Variable Fee Cash Order, any Variable    from the liquidation of the
 Fee, as soon as practicable after 4:00   Total Basket Amount (such
 p.m., New York time.                     amount, as applicable, the
                                          ``Required Redemption Cash'').
                                          Once the Trust is in
                                          simultaneous possession of (x)
                                          the Total Basket Amount and
                                          (y) the Required Redemption
                                          Cash, the Transfer Agent
                                          cancels the Shares comprising
                                          the number of Baskets redeemed
                                          by the Authorized Participant.
                                          The Custodian sends
                                          the Liquidity Provider the
                                          Total Basket Amount, and cash
                                          equal to the Required
                                          Redemption Cash is delivered
                                          to the Authorized Participant
                                          from the Cash Account.
------------------------------------------------------------------------

Suspension or Rejection of Orders and Total Basket Amount
    The creation or redemption of Shares may be suspended generally, or 
refused with respect to particular requested creations or redemptions, 
during any period when the transfer books of the Transfer Agent are 
closed or if circumstances outside the control of the Sponsor or its 
delegates make it for all practicable purposes not feasible to process 
creation orders or redemption orders or for any other reason at any 
time or from time to time.\42\ The Transfer Agent may reject an order 
or, after accepting an order, may cancel such order if: (i) such order 
is not presented in proper form as described in the Participant 
Agreement, (ii) the transfer of the Total Basket Amount comes from an 
account other than a LTC wallet address that is known to the Custodian 
as belonging to a Liquidity Provider or (iii) the fulfillment of the 
order, in the opinion of counsel, might be unlawful, among other 
reasons. None of the Sponsor or its delegates will be liable for the 
suspension, rejection or acceptance of any creation order or redemption 
order.
---------------------------------------------------------------------------

    \42\ Extenuating circumstances outside of the control of the 
Sponsor and its delegates or that could cause the transfer books of 
the Transfer Agent to be closed are outlined in the Participant 
Agreement and include, for example, public service or utility 
problems, power outages resulting in telephone, telecopy and 
computer failures, acts of God such as fires, floods or extreme 
weather conditions, market conditions or activities causing trading 
halts, systems failures involving computer or other information 
systems, including any failures or outages of the Litecoin Network, 
affecting the Authorized Participant, the Sponsor, the Trust, the 
Transfer Agent, the Marketing Agent and the Custodian and similar 
extraordinary events.
---------------------------------------------------------------------------

Availability of Information
    The Trust's website (https://grayscale.com/crypto-products/grayscale-litecoin-trust/) will include quantitative information on a 
per Share basis updated on a daily basis, including, (i) the current 
NAV per Share daily and the prior business day's NAV per Share and the 
reported closing price of the Shares; (ii) the mid-point of the bid-ask 
price \43\ as of the time the NAV per Share is calculated (``Bid-Ask 
Price'') and a calculation of the premium or discount of such price 
against such NAV per Share; and (iii) data in chart format displaying 
the frequency distribution of discounts and premiums of the daily Bid-
Ask Price against the NAV per Share, within appropriate ranges, for 
each of the four previous calendar quarters (or for as long as the 
Trust has been trading as an ETP if shorter). In addition, on each 
business day the Trust's website will provide pricing information for 
the Shares.
---------------------------------------------------------------------------

    \43\ The bid-ask price of the Trust is determined using the 
highest bid and lowest offer on the Consolidated Tape as of the time 
of calculation of the closing day NAV.
---------------------------------------------------------------------------

    One or more major market data vendors, will provide an intra-day 
indicative value (``IIV'') per Share updated every 15 seconds, 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 IIV will be calculated using the same methodology as the NAV 
per Share of the Trust (as described above), specifically by using the 
prior day's closing NAV per Share as a base and updating that value 
during the NYSE Arca Core Trading Session to reflect changes in the 
value of the Index during the trading day.
    The IIV disseminated during the NYSE Arca Core Trading Session 
should not be viewed as an actual real-time update of the NAV per 
Share, which will be calculated only once at the end of each trading 
day. The IIV will be widely disseminated on a per Share basis every 15 
seconds during the NYSE Arca Core Trading Session by one or more major 
market data vendors. In addition, the IIV will be available through on-
line information services.
    The NAV for the Trust will be calculated by the Sponsor once a day 
and will be disseminated daily to all market participants at the same 
time. To the extent that the Sponsor has utilized the cascading set of 
rules described in ``Index Price'' above, the Trust's website will note 
the valuation methodology used and the price per LTC resulting from 
such calculation. Quotation and last-sale information regarding the 
Shares will be disseminated through the facilities of the Consolidated 
Tape Association (``CTA'').
    Quotation and last sale information for LTC will be widely 
disseminated through a variety of major market data vendors, including 
Bloomberg and Reuters. In addition, real-time price (and volume) data 
for LTC is available by subscription from Reuters and Bloomberg. The 
spot price of LTC is available on a 24-hour basis from major market 
data vendors, including Bloomberg and Reuters. Information relating to 
trading, including price and volume information, in LTC will be 
available from major market data vendors and from the trading platforms 
on which LTC are traded. The normal trading hours for Digital Asset 
Trading Platforms are 24-hours per day, 365-days per year.
    On each business day, the Sponsor will publish the Index Price, the 
Trust's NAV, and the NAV per Share on the Trust's website as soon as 
practicable after its determination. If the NAV and NAV per Share have 
been calculated using a price per LTC other than the Index Price for 
such Evaluation Time, the publication on the Trust's website will note 
the valuation methodology used and the price per LTC resulting from 
such calculation.
    The Trust will provide website disclosure of its NAV daily. The 
website

[[Page 9467]]

disclosure of the Trust's NAV will occur at the same time as the 
disclosure by the Sponsor of the NAV to Authorized Participants so that 
all market participants are provided such portfolio information at the 
same time. Therefore, the same portfolio 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 NAV of the Trust through the Trust's website, as well as 
from one or more major market data vendors.
    The value of the Index, as well as additional information regarding 
the Index, will be available on a continuous basis.
    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. 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 Holders (``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 \44\ 
under the Act, 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.
---------------------------------------------------------------------------

    \44\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

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.\45\ 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.
---------------------------------------------------------------------------

    \45\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    The Exchange may halt trading during the day in which an 
interruption to the dissemination of the IIV or the value of the Index 
occurs. If the interruption to the dissemination of the IIV or the 
value of the Index persists past the trading day in which it occurred, 
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 per Share is not disseminated to all market 
participants at the same time, it will halt trading in the Shares until 
such time as the NAV per Share is available to all market participants.
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.\46\ 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.
---------------------------------------------------------------------------

    \46\ 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 and LTC derivatives 
from such markets and other entities. In addition, the Exchange may 
obtain information regarding trading in the Shares and LTC derivatives 
from markets and other entities that are members of ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement (``CSSA'').\47\ The Exchange is also able to obtain 
information regarding trading in the Shares and any underlying LTC, 
options on LTC futures, or any other LTC 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

[[Page 9468]]

agreement with that regulatory organization.
---------------------------------------------------------------------------

    \47\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Trust may trade on markets that are members of ISG or with which the 
Exchange has in place a CSSA.
---------------------------------------------------------------------------

    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 assets 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 Baskets; (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 Index and 
NAV are 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 IIV will not be 
calculated or publicly disseminated; (5) the requirement that members 
deliver a prospectus to investors purchasing newly issues Shares prior 
to or concurrently with the confirmation of a transaction; and (6) 
trading information. The Exchange notes that investors purchasing 
Shares directly from the Trust will receive a prospectus.
    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) \48\ 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.
---------------------------------------------------------------------------

    \48\ 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. 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 or FINRA, on behalf of the Exchange, or 
both, will communicate as needed regarding trading in the Shares 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 from such markets. In addition, the 
Exchange may obtain information regarding trading in the Shares from 
markets that are members of ISG or with which the Exchange has in place 
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 LTC or any LTC derivative through 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, although the Digital Asset 
Trading Platform Market is not inherently resistant to fraud and 
manipulation, the Index serves as a means sufficient to mitigate the 
impact of instances of fraud and manipulation on a reference price for 
LTC. Specifically, the Index provides a better benchmark for the price 
of LTC than the Digital Asset Trading Platform Market price because it 
(1) tracks the Digital Asset Trading Platform Market price through 
trading activity at U.S.-Compliant Trading Platforms; (2) mitigates the 
impact of instances of fraud, manipulation and other anomalous trading 
activity in real-time through systematic adjustments; (3) is 
constructed and maintained by an expert third-party index provider, 
allowing for prudent handling of non-market-related events; and (4) 
mitigates the impact of instances of fraud, manipulation and other 
anomalous trading activity concentrated on any one specific trading 
platform through a cross-trading platform composite index rate. The 
Trust has used the Index to price the Shares for more than six years, 
and the Index has proven its ability to (i) mitigate the effects of 
fraud, manipulation and other anomalous trading activity from impacting 
the LTC reference rate, (ii) provide a real-time, volume-weighted fair 
value of LTC and (iii) appropriately handle and adjust for non-market 
related events, such that efforts to manipulate the price of LTC would 
have had a negligible effect on the pricing of the Trust, due to the 
controls embedded in the structure of the Index. In addition, certain 
of the Index's Constituent Trading Platforms also have or have begun to 
implement market surveillance infrastructure to further detect, 
prevent, and respond to fraud, attempted fraud, and similar wrongdoing, 
including market manipulation.
    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 LTC price and market information 
available on public websites and through professional and subscription 
services. Investors may obtain, on a 24-hour basis, LTC pricing 
information based on the spot price for LTC from various financial 
information service providers. The closing price and settlement prices 
of LTC are readily available from the Digital Asset Trading Platforms 
and other publicly available websites. In addition, such prices are 
published in public sources, or on-line information services such as 
Bloomberg and Reuters. The NAV per Share will be calculated daily and 
made available to all market participants at the same time. The Trust 
will provide website disclosure of its NAV daily. One or more major 
market data vendors will disseminate for the Trust on a daily basis 
information with respect to the most recent NAV per Share and Shares 
outstanding. In addition, if the Exchange becomes aware that the NAV 
per Share is not disseminated to all market participants at the same 
time, it will halt trading in the Shares until such

[[Page 9469]]

time as the NAV is available to all market participants. Quotation and 
last-sale information regarding the Shares will be disseminated through 
the facilities of the CTA. The IIV will be widely disseminated on a per 
Share basis every 15 seconds during the NYSE Arca Core Trading Session 
(normally 9:30 a.m., E.T., to 4:00 p.m., E.T.) by one or more major 
market data vendors. The Exchange represents that the Exchange may halt 
trading during the day in which an interruption to the dissemination of 
the IIV or the value of the Index occurs. If the interruption to the 
dissemination of the IIV or the value of the Index persists past the 
trading day in which it occurred, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption.
    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 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a CSSA. In addition, as noted above, 
investors will have ready access to information regarding the Trust's 
NAV, IIV, 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 notes that the 
proposed rule change will facilitate the listing and trading of an 
additional type of exchange-traded product, and the first such product 
based on LTC, 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. 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, as modified by Amendment No. 1, 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-2025-05 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-2025-05. 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-2025-05 and should 
be submitted on or before March 5, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
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    \49\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-02497 Filed 2-11-25; 8:45 am]
BILLING CODE 8011-01-P
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