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[Federal Register Volume 90, Number 23 (Wednesday, February 5, 2025)]
[Notices]
[Pages 9050-9052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-02223]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102310; File No. SR-NYSEARCA-2024-104]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade 
Shares of the Bitwise Bitcoin and Ethereum ETF Under NYSE Arca Rule 
8.201-E (Commodity-Based Trust Shares)

January 30, 2025.

I. Introduction

    On November 26, 2024, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to list and trade shares 
(``Shares'') of the Bitwise Bitcoin and Ethereum ETF (``Trust'') under 
NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares). The proposed 
rule change was published for comment in the Federal Register on 
December 16, 2024.\3\ On January 21, 2025, the Exchange filed Amendment 
No. 1 to the proposed rule change,\4\ which superseded the original 
proposed rule change in its entirety. The Commission is publishing this 
notice to solicit comments on Amendment No. 1 from interested persons 
and is approving the proposed rule change, as modified by Amendment No. 
1 (``Proposal''), on an accelerated basis.\5\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 101864 (Dec. 10, 
2024), 89 FR 101654. The Commission did not receive any comments on 
the proposal.
    \4\ In Amendment No. 1, the Exchange clarified the description 
of the Trust; further described the terms of the Trust; and 
conformed various representations in the amended filing to 
representations that exchanges have made for other exchange-traded 
products (``ETPs'') that the Commission has approved. The full text 
of Amendment No. 1 is available on the Commission's website at: 
https://www.sec.gov/comments/sr-nysearca-2024-104/srnysearca2024104-559475-1605482.pdf.
    \5\ See infra Item V.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    As described in more detail in Amendment No. 1,\6\ the Exchange 
proposes to list and trade Shares of the Trust under NYSE Arca Rule 
8.201-E (Commodity-Based Trust Shares). The Trust will hold both spot 
bitcoin \7\ and spot ether.\8\
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    \6\ See supra note 4.
    \7\ Bitcoins are digital assets that are issued and transferred 
via a distributed, open-source protocol used by a peer-to-peer 
computer network through which transactions are recorded on a public 
transaction ledger known as the ``Bitcoin blockchain.'' The Bitcoin 
protocol governs the creation of new bitcoins and the cryptographic 
system that secures and verifies bitcoin transactions.
    \8\ Ether is a digital asset that is native to, and minted and 
transferred via, a distributed, open-source protocol used by a peer-
to-peer computer network through which transactions are recorded on 
a public transaction ledger known as ``Ethereum.'' The Ethereum 
protocol governs the creation of new ether and the cryptographic 
system that secures and verifies transactions on Ethereum.
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    According to the Exchange, the investment objective of the Trust is 
to seek to provide exposure to the value of bitcoin and ether held by 
the Trust, less the expenses of the Trust's operations and other 
liabilities.\9\ The Trust's allocation of its assets to bitcoin and 
ether will approximate the relative market capitalization of bitcoin 
and ether to one another.\10\ The Trust's only assets will be bitcoin, 
ether, and cash.\11\ The Trust's net asset value (``NAV'') and NAV per 
Share will be determined by the Administrator once each Exchange 
trading day as of 4:00 p.m. E.T., or as soon thereafter as 
practicable.\12\ For purposes of calculating the Trust's NAV, the 
Administrator will determine the price of the Trust's bitcoin and ether 
by reference to the CME CF Bitcoin--New York Variant for its bitcoin 
holdings and to the CME CF Ether--Dollar Reference Rate--New York 
Variant for its ether holdings (the ``Pricing Benchmarks'').\13\ The 
Trust will create and redeem Shares from time to time, but only in one 
or more ``Creation Units,'' which will

[[Page 9051]]

initially consist of at least 10,000 Shares.\14\
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    \9\ See Amendment No. 1 at 4. The Trust is a Delaware statutory 
trust and will operate pursuant to a trust agreement between Bitwise 
Investment Advisers, LLC (``Sponsor'') and Delaware Trust Company, 
as trustee. Coinbase Custody Trust Company, LLC will maintain 
custody of the Trust's bitcoin and ether. Bank of New York Mellon 
will be the custodian for the Trust's cash holdings, the 
administrator of the Trust, and the transfer agent for the Trust. 
See id.
    \10\ See id. As of the date of the filing, the relative market 
capitalization of bitcoin and ether were 83% bitcoin and 17% ether. 
The Exchange states that the Trust will calculate the market 
capitalization of bitcoin and ether by multiplying the Pricing 
Benchmarks (as defined herein) by the current circulating supply of 
bitcoin and ether respectively, as determined by the Sponsor, and 
will calculate the relative market capitalization by dividing each 
of bitcoin and ether's market capitalization by the combined market 
capitalization of both. See id. at 4 n.8.
    \11\ See id. at 5.
    \12\ See id. at 7.
    \13\ See id. at 4-5, 7. The Pricing Benchmarks are calculated by 
CF Benchmarks Ltd. based on an aggregation of executed trade flow of 
major bitcoin and ether trading platforms and are designed to 
provide a daily, 4:00 p.m. E.T. reference rate of the U.S. dollar 
price of one bitcoin or one ether. See id. at 5 n.9.
    \14\ See id. at 8. Authorized participants will deliver only 
cash to create Shares and will receive only cash when redeeming 
Shares. See id. at 9.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Proposal is 
consistent with the Exchange Act and rules and regulations thereunder 
applicable to a national securities exchange.\15\ In particular, the 
Commission finds that the Proposal is consistent with Section 6(b)(5) 
of the Exchange Act,\16\ which requires, among other things, that the 
Exchange's rules be designed to ``prevent fraudulent and manipulative 
acts and practices'' and, ``in general, to protect investors and the 
public interest;'' and with Section 11A(a)(1)(C)(iii) of the Exchange 
Act,\17\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities.
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    \15\ In approving the Proposal, the Commission has considered 
the Proposal's impacts on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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A. Exchange Act Section 6(b)(5)

    The Trust will hold both spot bitcoin and spot ether weighted 
according to their relative market capitalizations.\18\ The structure 
of the Trust, the terms of its operation and the trading of its Shares, 
and the representations in the Exchange's amended filing are 
substantially similar to those of the spot bitcoin and spot ether ETP 
proposals approved in prior Commission orders.\19\ As such, based on 
the record before the Commission the Commission is able to conclude 
that the Proposal is consistent with Section 6(b)(5) of the Exchange 
Act.
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    \18\ See Amendment No. 1 at 4. The Trust could also hold cash. 
See id. at 5.
    \19\ See, e.g., Order Granting Approval of a Proposed Rule 
Change, as Modified by Amendment No. 1, to List and Trade Shares of 
the Hashdex Nasdaq Crypto Index US ETF and Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, 
to List and Trade Shares of the Franklin Crypto Index ETF, a Series 
of the Franklin Crypto Trust, Securities Exchange Act Release No. 
101998 (Dec. 19, 2024), 89 FR 106707 (Dec. 30, 2024) (SR-NASDAQ-
2024-028; SR-CBOEBZX-2024-091) (``Spot Bitcoin & Ether ETP Approval 
Order''). See also infra Item III.B.
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B. Exchange Act Section 11A(a)(1)(C)(iii)

    The Proposal sets forth aspects of the proposed ETP, including the 
availability of pricing information, transparency of portfolio 
holdings, and types of surveillance procedures, that are consistent 
with other ETPs that the Commission has approved.\20\ This includes 
commitments regarding: the availability of quotation and last-sale 
information for the Shares; the availability on the Trust's website of 
certain information related to the Trust, including NAV; the 
dissemination of an intra-day indicative value by one or more major 
market data vendors, updated every 15 seconds throughout the Exchange's 
core trading session; the Exchange's surveillance procedures and 
ability to obtain information regarding trading in the Shares; the 
conditions under which the Exchange would implement trading halts and 
suspensions; and the requirements of registered market makers in the 
Shares.\21\ In addition, 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.\22\ Further, the listing rules of the Exchange require that 
all statements and representations made in its filing regarding, among 
others, the description of the Trust's holdings, limitations on such 
holdings, and the applicability of the Exchange's listing rules 
specified in the filing, will constitute continued listing 
requirements.\23\ Moreover, the Proposal states that: the Trust's 
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; pursuant to obligations under Section 19(g)(1) of 
the Exchange Act, the Exchange will monitor for compliance with the 
continued listing requirements; and if the Trust is not in compliance 
with the applicable listing requirements, the Exchange will commence 
delisting procedures.\24\
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    \20\ See, e.g., Spot Bitcoin & Ether ETP Approval Order at 
106709.
    \21\ See Amendment No. 1 at 19-22.
    \22\ See id. at 20.
    \23\ See NYSE Arca Rule 8.201-E(e)(2)(vii).
    \24\ See Amendment No. 1 at 22.
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    The Commission therefore finds that the Proposal, as with other 
ETPs that the Commission has approved,\25\ is reasonably designed to 
promote fair disclosure of information that may be necessary to price 
the Shares appropriately, to prevent trading when a reasonable degree 
of transparency cannot be assured, to safeguard material non-public 
information relating to the Trust's portfolio, and to ensure fair and 
orderly markets for the Shares.
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    \25\ See Spot Bitcoin and Ether ETP Approval Order.
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2024-104 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-NYSEARCA-2024-104. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEARCA-2024-104 and should

[[Page 9052]]

be submitted on or before February 26, 2025.

V. Accelerated Approval

    The Commission finds good cause to approve the Proposal prior to 
the 30th day after the date of publication of notice of Amendment No. 1 
\26\ in the Federal Register. The amendment clarified the description 
of the Trust; further described the terms of the Trust; and conformed 
various representations in the amended filing to representations that 
exchanges have made for other ETPs that the Commission has 
approved.\27\ The amended filing is now substantially similar to 
filings for other spot bitcoin and spot ether ETPs that the Commission 
has approved.\28\ Accordingly, the Commission finds good cause, 
pursuant to Section 19(b)(2) of the Exchange Act,\29\ to approve the 
Proposal on an accelerated basis.
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    \26\ See supra note 4.
    \27\ See also supra Item III.B.
    \28\ See Spot Bitcoin and Ether ETP Approval Order.
    \29\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    This approval order is based on all of the Exchange's 
representations and descriptions in the Proposal, which the Commission 
has carefully evaluated as discussed above.\30\ For the reasons set 
forth above, the Commission finds, pursuant to Section 19(b)(2) of the 
Exchange Act,\31\ that the Proposal is consistent with the requirements 
of the Exchange Act and the rules and regulations thereunder applicable 
to a national securities exchange, and in particular, with Section 
6(b)(5) and Section 11A(a)(1)(C)(iii) of the Exchange Act.\32\
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    \30\ In addition, the Shares of the Trust must comply with the 
requirements of NYSE Arca Rule 8.201-E (Commodity-Based Trust 
Shares) to be listed and traded on the Exchange on an initial and 
continuing basis.
    \31\ 15 U.S.C. 78s(b)(2).
    \32\ 15 U.S.C. 78f(b)(5); 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\33\ that the Proposal (SR-NYSEARCA-2024-104) be, and 
hereby is, approved on an accelerated basis.
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    \33\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-02223 Filed 2-4-25; 8:45 am]
BILLING CODE 8011-01-P
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