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[Federal Register Volume 90, Number 22 (Tuesday, February 4, 2025)]
[Notices]
[Pages 8949-8955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-02152]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102303; File No. SR-NASDAQ-2025-005]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change To List and Trade Shares of 
the Canary Litecoin ETF Under Nasdaq Rule 5711(d)

January 29, 2025.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 15, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II, below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the Canary 
Litecoin ETF (the ``Trust'') under Nasdaq Rule 5711(d) (``Commodity-
Based Trust Shares''). The shares of the Trust are referred to herein 
as the ``Shares.''
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to list and trade the Shares under Nasdaq 
Rule 5711(d),\3\ which governs the listing and trading of Commodity-
Based Trust Shares on the Exchange. Canary Capital Group LLC is the 
sponsor of the Trust (the ``Sponsor''). The Shares will be registered 
with the SEC by means of the Trust's registration statement on Form S-1 
(the ``Registration Statement'').\4\ Any statements or representations 
included in this proposal regarding: (a) the description of the 
reference assets or trust holdings; (b) limitations on the reference 
assets or trust holdings; (c) dissemination and availability of the 
reference asset or intraday indicative value; or (d) the applicability 
of Nasdaq listing rules specified in this proposal shall constitute 
continued listing standards for the Shares listed on the Exchange.
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    \3\ The Commission approved Nasdaq Rule 5711 in Securities 
Exchange Act Release No. 66648 (March 23, 2012), 77 FR 19428 (March 
30, 2012) (SR-NASDAQ-2012-013).
    \4\ See Registration Statement on Form S-1, dated October 15, 
2024, filed with the Commission by the Sponsor on behalf of the 
Trust. The descriptions of the Trust, the Shares, the Index (as 
defined below), and LTC contained herein are based, in part, on 
information in the Registration Statement. The Registration 
Statement in not yet effective and the Shares will not trade on the 
Exchange until such time that the Registration Statement is 
effective.
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    The Commission has historically approved or disapproved exchange 
filings to list and trade series of Trust Issued Receipts, including 
spot-based Commodity-Based Trust Shares, on the basis of whether the 
listing exchange has in place a comprehensive surveillance sharing 
agreement with a regulated market of significant size related to the 
underlying commodity to be held.\5\ The Commission has also

[[Page 8950]]

consistently recognized, however, that this is not the exclusive means 
by which an ETP listing exchange can meet this statutory obligation.\6\ 
A listing exchange could, alternatively, demonstrate that ``other means 
to prevent fraudulent and manipulative acts and practices will be 
sufficient'' to justify dispensing with a surveillance-sharing 
agreement with a regulated market of significant size.
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    \5\ See Securities Exchange Act Release Nos. 78262 (July 8, 
2016), 81 FR 78262 (July 14. 2016) (the ``Winklevoss Proposal''). 
The Winklevoss Proposal was subsequently disapproved by the 
Commission. See Securities Exchange Act Release No. 83723 (July 26, 
2018), 83 FR 37579 (August 1, 2018) (the ``Winklevoss Order''). 
Prior orders from the Commission have pointed out that in every 
prior approval order for Commodity-Based Trust Shares, there has 
been a derivatives market that represents the regulated market of 
significant size, generally a Commodity Futures Trading Commission 
(the ``CFTC'') regulated futures market. Further to this point, the 
Commission's prior orders have noted that the spot commodities and 
currency markets for which it has previously approved spot ETPs are 
generally unregulated and that the Commission relied on the 
underlying futures market as the regulated market of significant 
size that formed the basis for approving the series of Currency and 
Commodity-Based Trust Shares, including gold, silver, platinum, 
palladium, copper, and other commodities and currencies. The 
Commission specifically noted in the Winklevoss Order that the 
approval order issued related to the first spot gold ETP ``was based 
on an assumption that the currency market and the spot gold market 
were largely unregulated.'' See Winklevoss Order at 37592. As such, 
the regulated market of significant size test does not require that 
the spot market be regulated in order for the Commission to approve 
this proposal, and precedent makes clear that an underlying market 
for a spot commodity or currency being a regulated market would 
actually be an exception to the norm. These largely unregulated 
currency and commodity markets do not provide the same protections 
as the markets that are subject to the Commission's oversight, but 
the Commission has consistently looked to surveillance sharing 
agreements with the underlying futures market in order to determine 
whether such products were consistent with the Act. See Securities 
Exchange Act No. 99306 (January 10, 2024), 89 FR 3008 (January 17, 
2024) (Self-Regulatory Organizations; NYSE Arca, Inc.; The Nasdaq 
Stock Market LLC; Cboe BZX Exchange, Inc.; Order Granting 
Accelerated Approval of Proposed Rule Changes, as Modified by 
Amendments Thereto, To List and Trade Bitcoin-Based Commodity-Based 
Trust Shares and Trust Units) (the ``Spot Bitcoin ETP Approval 
Order''); 100224 (May 23, 2024), 89 FR 46937 (May 30, 2024) (Self-
Regulatory Organizations; NYSE Arca, Inc.; The Nasdaq Stock Market 
LLC; Cboe BZX Exchange, Inc.; Order Granting Accelerated Approval of 
Proposed Rule Changes, as Modified by Amendments Thereto, To List 
and Trade Shares of Ether-Based Exchange-Traded Products) (the 
``Spot ETH ETP Approval Order'').
    \6\ See Winklevoss Order, 83 FR at 37580; see Spot Bitcoin ETP 
Approval Order, 89 FR at 3009; see Spot ETH ETP Approval Order 89 FR 
at 46938.
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    The Commission recently issued orders granting approval for 
proposals to list bitcoin- and ether-based commodity trust shares and 
bitcoin- and ether-based trust issued receipts (these proposed funds 
are nearly identical to the Trust, but proposed to hold bitcoin and 
ether, respectively, instead of Litecoin) (``Spot Bitcoin ETPs'' and 
``Spot ETH ETPs''). In both the Spot Bitcoin ETP Approval Order and 
Spot ETH ETP Approval Order, the Commission found that sufficient 
``other means'' of preventing fraud and manipulation had been 
demonstrated that justified dispensing with a surveillance-sharing 
agreement with a market of significant size. Specifically, the 
Commission found that while the Chicago Mercantile Exchange (``CME'') 
futures market for both bitcoin and ether were not of ``significant 
size'' with respect to the spot market, the Exchange demonstrated that 
other means could be reasonably expected to assist in surveilling for 
fraudulent and manipulative acts and practices in the specific context 
of the proposals.
    As further discussed below, both the Exchange and the Sponsor 
believe that this proposal and the analysis to be included are 
sufficient to establish that there are sufficient ``other means'' of 
preventing fraud and manipulation that warrant dispensing of the 
surveillance-sharing agreement with a regulated market of significant 
size, as was done with both Spot Bitcoin ETPs and Spot ETH ETPs, and 
that this proposal should be approved.
Description of the Trust
    The Shares will be issued by the Trust, a Delaware statutory trust. 
The Trust will operate pursuant to a trust agreement (the ``Trust 
Agreement''), as amended and/or restated from time to time. CSC 
Delaware Trust Company, a Delaware corporation, is the trustee of the 
Trust (the ``Trustee''). The Trust is managed and controlled by the 
Sponsor. U.S. Bancorp Fund Services, LLC will be the administrator (the 
``Administrator''), U.S. Bancorp Fund Services, LLC will be the 
transfer agent (the ``Transfer Agent''), and U.S. Bank, N.A. will be 
responsible for the custody of the Trust's cash (the ``Cash 
Custodian''). BitGo Trust Company, Inc. and Coinbase Custody Trust 
Company, LLC, (the ``Custodians'') will be responsible for custody of 
the Trust's Litecoin (``LTC'').\7\
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    \7\ The Trust may engage additional custodians for its LTC in 
the future, each of whom may be referred to as a Custodian.
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    According to the Registration Statement, each Share will represent 
a fractional undivided beneficial interest in and ownership of the 
Trust. The Trust's assets will consist only of LTC and cash.
    According to the Registration Statement, the Trust is not a fund 
registered under the Investment Company Act of 1940, as amended.\8\ 
Further, the Trust is not a commodity pool for purposes of the 
Commodity Exchange Act of 1936, as amended (the ``CEA''), and the 
Sponsor is not subject to regulation by the Commodity Futures Trading 
Commission (the ``CFTC'') as a commodity pool operator or a commodity 
trading advisor in connection with the Shares.
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    \8\ 15 U.S.C. 80a-1.
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    Neither the Trust, nor the Sponsor, nor the Custodian, nor any 
other person associated with the Trust will, directly or indirectly, 
engage in action where any portion of the Trust's LTC is used to earn 
additional LTC or generate rewards or other income. The Trust will not 
acquire and will disclaim any incidental right (``IR'') or IR asset 
received, for example as a result of forks or airdrops, and such assets 
will not be taken into account for purposes of determining the Trust's 
net asset value (``NAV'').
    When the Trust sells or redeems its Shares, it will do so in blocks 
of 10,000 Shares (a ``Basket'') based on the quantity of LTC 
attributable to each Share of the Trust (net of accrued but unpaid 
expenses and liabilities). For a creation of Shares, the creation shall 
be in the amount of cash needed to purchase the amount of LTC 
represented by the Basket being created, as calculated by the 
Administrator. For a redemption of Shares, the Sponsor shall arrange 
for the LTC represented by the Basket to be sold and the cash proceeds 
distributed. Authorized participants will deliver, or facilitate the 
delivery of, cash to the Trust's account with the Cash Custodian in 
exchange for Shares when they purchase Shares, and the Trust will 
deliver cash to such Authorized Participants when they redeem Shares 
with the Trust. Authorized Participants may then offer Shares to the 
public at prices that depend on various factors, including the supply 
and demand for Shares, the value of the Trust's assets, and market 
conditions at the time of a transaction. Owners of the beneficial 
interests of the Shares (the ``Shareholders'') who buy or sell Shares 
during the day from their broker may do so at a premium or discount 
relative to the per Share NAV of the Trust.
Investment Objective
    According to the Registration Statement and as further described 
below, the Trust's investment objective is to seek to track the 
performance of LTC, as measured by the Index (as defined below), 
adjusted for the Trust's expenses and other liabilities. In seeking to 
achieve its investment objective, the Trust will hold LTC and will 
value its Shares daily as of 4:00 p.m. Eastern time (``ET'') using the 
same methodology used to calculate the Index. All of the Trust's LTC 
will be held by the Custodians.
LTC Background
    LTC is a digital asset that is created and transmitted through the 
operations of the peer-to-peer, decentralized network of computers that 
operates on cryptographic protocols (the ``Litecoin Network''). 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

[[Page 8951]]

exchange LTC, which are recorded on a public transaction ledger known 
as a blockchain (the ``Litecoin Blockchain''). LTC can be used to pay 
for goods and services 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 application-specific integrated 
circuits (``ASICs'') to mine LTC 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 on the Litecoin Blockchain. As each new block records 
outstanding LTC transactions, and outstanding transactions are settled 
and validated through such recording, 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.
    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 exchanges 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.
Index
    The Trust will use the CoinDesk Litecoin Price Index (LTX) (the 
``Index'') to calculate the Trust's NAV. The Index is calculated by 
applying a weighting algorithm to the price and trading volume data for 
the immediately preceding 24-hour period as of 4:00 p.m., New York 
time, derived from the selected digital asset trading platforms. 
CoinDesk Indices, Inc. publishes the Index.
Net Asset Value
    As set forth in the Registration Statement, NAV means the total 
assets of the Trust including, but not limited to, all LTC and cash 
less total liabilities of the Trust. The Administrator determines the 
NAV of the Trust on each day that the Exchange is open for regular 
trading, as promptly as practical after 4:00 p.m. ET. The NAV of the 
Trust is the aggregate value of the Trust's assets less its accrued but 
unpaid liabilities (which include accrued expenses). In determining the 
Trust's NAV, the Administrator values the LTC held by the Trust based 
on the price set by the Index as of 4:00 p.m. ET. The Administrator 
also determines the NAV per Share. The NAV for the Trust will be 
calculated by the Administrator once a day and will be disseminated 
daily to all market participants at the same time.
Availability of Information and Intraday Indicative Value
    In addition to the price transparency of the Index, the Trust will 
provide information regarding the Trust's LTC holdings as well as 
additional data regarding the Trust. The website for the Trust, which 
will be publicly accessible at no charge, will contain the following 
information: (a) the prior business day's NAV per Share; (b) the prior 
business day's Nasdaq official closing price; (c) calculation of the 
premium or discount of such Exchange official closing price against 
such NAV per Share; (d) data in chart form displaying the frequency 
distribution of discounts and premiums of the Exchange's official 
closing price against the NAV, within appropriate ranges for each of 
the four previous calendar quarters (or for the life of the Trust, if 
shorter); (e) the prospectus; and (f) other applicable quantitative 
information. The Trust will also disseminate the Trust's holdings on a 
daily basis on the Trust's website. Quotation and last sale information 
regarding the Shares will be disseminated through the facilities of the 
relevant securities information processor.
    The intraday indicative value (``IIV'') will be calculated by using 
the prior day's closing NAV per Share as a base and updating that value 
during the Exchange's regular market session of 9:30 a.m. to 4:00 p.m. 
ET (the ``Regular Market Session'') to reflect changes in the value of 
the Trust's LTC holdings during the trading day. The IIV disseminated 
during the Regular Market Session should not be viewed as an actual 
real-time update of the NAV, because NAV per Share is calculated only 
once at the end of each trading day based upon the relevant end-of-day 
values of the Trust's investments. The IIV will be widely disseminated 
on a per-Share basis every 15 seconds during the Regular Market Session 
through the facilities of the relevant securities information processor 
by market data vendors. In addition, the IIV will be available through 
online information services, such as Bloomberg and Reuters.
    Quotation and last sale information for LTC is disseminated through 
a variety of major market data vendors. Information related to trading, 
including price and volume information, in LTC is available from major 
market data vendors and from the trading platforms on which LTC are 
traded. Depth of book information is also available from LTC trading 
platforms. The normal trading hours for LTC trading platforms are 24 
hours per day, 365 days per year.
    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 Nasdaq official closing price and trading 
volume information for the Shares will be published daily in the 
financial section of newspapers.
Custody of the Trust's LTC
    The Custodians will be responsible for custody of the Trust's LTC. 
The Custodians are qualified custodians

[[Page 8952]]

under Rule 206-4 of the Investment Adviser Act. The Custodians will 
custody the Trust's LTC pursuant to custody agreements. The custody 
agreements require the Custodians to maintain the Trust's LTC in 
segregated accounts that clearly identify the Trust as owner of the 
respective accounts and assets held in those accounts; the segregation 
will be both from the proprietary property of the Custodians and the 
assets of any other customer. Such arrangements are generally deemed to 
be ``bankruptcy remote,'' that is, in the event of an insolvency of a 
Custodian, assets held in such segregated accounts would not become 
property of the Custodian's estate and would not be available to 
satisfy claims of creditors of the Custodian. In addition, the 
Custodians carry fidelity insurance, which covers assets held by the 
Custodians in custody from risks such as theft of funds. LTC owned by 
the Trust will at all times be held by, and in the control of, the 
Custodians, and transfer of such LTC to or from the Custodians will 
occur only in connection with creation and redemptions of Shares or 
allocations among the Custodians.
    The Custodians carefully consider the design of the physical, 
operational and cryptographic systems for secure storage of the Trust's 
private keys in an effort to lower the risk of loss or theft. The 
Custodians utilizes a variety of security measures to ensure that 
private keys necessary to transfer digital assets remain uncompromised 
and that the Trust maintains exclusive ownership of its assets. The 
operational procedures of the Custodians are reviewed by third-party 
advisors with specific expertise in physical security. The devices that 
store the keys will never be connected to the internet or any other 
public or private distributed network--this is colloquially known as 
``cold storage.'' Only specific individuals are authorized to 
participate in the custody process, and no individual acting alone will 
be able to access or use any of the private keys. In addition, no 
combination of the executive officers of the Sponsor or the investment 
professionals managing the Trust, acting alone or together, will be 
able to access or use any of the private keys that hold the Trust's 
LTC.
Creation and Redemption of Shares
    The Trust will issue Shares on an ongoing basis, but only in one or 
more Baskets. The creation and redemption of a Basket requires the 
delivery to the Trust, or the distribution by the Trust, of the cash 
value of the amount of LTC represented by each Basket being created or 
redeemed, which is calculated pursuant to the same procedures used to 
calculate the Trust's NAV (the ``Basket Amount''). The amount of 
bitcoin the Trust, by the number of Shares outstanding at such time 
(the quotient so obtained represented by each Basket is determined by 
dividing the number of LTC owned by the Trust at 4:00 p.m. ET, on the 
trade date of a creation or redemption order, as adjusted for the 
number of whole and fractional LTC constituting accrued but unpaid fees 
and expenses of the Trust, by the number of Shares outstanding at such 
time and multiplying such quotient by 10,000. The Basket Amount 
multiplied by the number of Baskets being created or redeemed is the 
``Total Basket Amount.'' The only persons that may place orders to 
create or redeem Baskets are authorized participants (``Authorized 
Participants''). Each Authorized Participant must (i) be a registered 
broker-dealer or similar exempt financial institution and (ii) enter 
into a participant agreement with the Sponsor, the Administrator, and 
the Trust's marketing agent. Authorized Participants may act for their 
own accounts or as agents 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 
redeem their Shares through an Authorized Participant. 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 
Sponsor will maintain ownership and control of the LTC in a manner 
consistent with good delivery requirements for spot commodity 
transactions.
Applicable Standard
    The Commission has approved numerous series of Trust Issued 
Receipts,\9\ including Commodity-Based Trust Shares,\10\ to be listed 
on U.S. national securities exchanges. In order for any proposed rule 
change from an exchange to be approved, the Commission must determine 
that, among other things, the proposal is consistent with the 
requirements of Section 6(b)(5) of the Act, specifically including: (i) 
the requirement that a national securities exchange's rules are 
designed to prevent fraudulent and manipulative acts and practices; and 
(ii) the requirement that an exchange proposal be designed, in general, 
to protect investors and the public interest. The Exchange believes 
that this proposal is consistent with the requirements of Section 
6(b)(5) of the Act.
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    \9\ Pursuant to Nasdaq Rule 5720(a), the term ``Trust Issued 
Receipt'' means a security (a) that is issued by a trust which holds 
specified securities deposited with the trust; (b) that, when 
aggregated in some specified minimum number, may be surrendered to 
the trust by the beneficial owner to receive the securities; and (c) 
that pays beneficial owners dividends and other distributions on the 
deposited securities, if any are declared and paid to the trustee by 
an issuer of the deposited securities
    \10\ Pursuant to Nasdaq Rule 5711(d)(iv), the term ``Commodity-
Based Trust Shares'' means a security (1) that is issued by a trust 
that holds (a) a specified commodity deposited with the trust, or 
(b) a specified commodity and, in addition to such specified 
commodity, cash; (2) that is issued by such trust in a specified 
aggregate minimum number in return for a deposit of a quantity of 
the underlying commodity and/or cash; and (3) that, when aggregated 
in the same specified minimum number, may be redeemed at a holder's 
request by such trust which will deliver to the redeeming holder the 
quantity of the underlying commodity and/or cash.
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    As noted above, the Commission has recognized that the ``regulated 
market of significant size'' standard is not the only means for 
satisfying Section 6(b)(5) of the Act, specifically providing 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.\11\ For example, in approving the Spot Bitcoin ETPs, the 
Commission found that there were ``sufficient `other means' of 
preventing fraud and manipulation,'' including that:
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    \11\ See Winklevoss Order at 37580. The Commission has also 
specifically noted that it ``is not applying a `cannot be 
manipulated' standard; instead, the Commission is examining whether 
the proposal meets the requirements of the Exchange Act and, 
pursuant to its Rules of Practice, places the burden on the listing 
exchange to demonstrate the validity of its contentions and to 
establish that the requirements of the Exchange Act have been met.'' 
Id. at 37582.

    [B]ased on the record before the Commission and the improved 
quality of the correlation analysis in the record, including the 
Commission's own analysis, the Commission is able to conclude that 
fraud or manipulation that impacts prices in spot bitcoin markets 
would likely similarly impact CME bitcoin futures prices. And 
because the CME's surveillance can assist in detecting those impacts 
on CME bitcoin futures prices, the Exchanges' comprehensive 
surveillance-sharing agreement with the CME--a U.S. regulated market 
whose bitcoin futures market is consistently highly correlated to 
spot bitcoin, albeit not of

[[Page 8953]]

``significant size'' related to spot bitcoin--can be reasonably 
expected to assist in surveilling for fraudulent and manipulative 
acts and practices in the specific context of the [Spot Bitcoin 
ETPs].\12\
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    \12\ See Securities Exchange Act Release No. 99306 (January 10, 
2024), 89 FR 3008 (January 17, 2024) (Order Granting Accelerated 
Approval of Proposed Rule Changes, as Modified by Amendments 
Thereto, To List and Trade Shares of Bitcoin-Based Commodity-Based 
Trust Shares and Trust Units). The SEC made substantially similar 
findings in the approval order for Spot ETH ETPs. See Securities 
Exchange Act Release No. 100224 (May 23, 2024), 89 FR 46937 (May 30, 
2024) (Order Granting Accelerated Approval of Proposed Rule Changes, 
as Modified by Amendments Thereto, To List and Trade Shares of 
Ether-Based Exchange-Traded Products).

    Today, Coinbase Derivatives, LLC (``Coinbase Derivatives'') offers 
trading in LTC futures.\13\ Nasdaq has a comprehensive surveillance-
sharing agreement with Coinbase Derivatives via its common membership 
in the Intermarket Surveillance Group (``ISG'').\14\ This facilitates 
the sharing of information that is available to Coinbase Derivatives 
through its surveillance of its markets, including its surveillance of 
Coinbase Derivatives' LTC futures market. Similar to the Spot Bitcoin 
and Spot ETH ETPs previously approved by the SEC, Nasdaq's ability to 
obtain information regarding trading in the LTC futures from other 
markets that are members of the ISG (specifically Coinbase Derivatives) 
would assist Nasdaq in detecting and deterring misconduct.\15\
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    \13\ See https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf.
    \14\ For a list of the current members and affiliate members of 
ISG, see https://www.isgportal.com/.
    \15\ The Exchange will provide the relevant correlation analysis 
through an amendment of this filing.
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Initial and Continued Listing
    The Shares will be subject to Nasdaq Rule 5711(d)(vi), which sets 
forth the initial and continued listing criteria applicable to 
Commodity-Based Trust Shares. The Exchange will obtain a representation 
that the Trust's NAV per Share will be calculated daily and will be 
made available to all market participants at the same time. A minimum 
of 40,000 Shares will be required to be outstanding at the time of 
commencement of trading on the Exchange. Upon termination of the Trust, 
the Shares will be removed from listing. The Trustee will be a trust 
company having substantial capital and surplus and the experience and 
facilities for handling corporate trust business, as required under 
Nasdaq Rule 5711(d)(vi)(D) and no change will be made to the Trustee 
without prior notice to and approval of the Exchange.
    As required in Nasdaq Rule 5711(d)(viii), the Exchange notes that 
any registered market maker (``Market Maker'') in the Shares must file 
with the Exchange, in a manner prescribed by the Exchange, and keep 
current a list identifying all accounts for trading the underlying 
commodity, related futures or options on futures, or any other related 
derivatives, which the registered Market Maker may have or over which 
it may exercise investment discretion. No registered Market Maker in 
the Shares shall trade in the underlying commodity, related futures or 
options on futures, or any other related derivatives, in an account in 
which a registered Market Maker, directly or indirectly, controls 
trading activities, or has a direct interest in the profits or losses 
thereof, which has not been reported to the Exchange as required by 
Nasdaq Rule 5711(d). In addition to the existing obligations under 
Exchange rules regarding the production of books and records, the 
registered Market Maker in the Shares shall make available to the 
Exchange such books, records or other information pertaining to 
transactions by such entity or any limited partner, officer or approved 
person thereof, registered or non-registered employee affiliated with 
such entity for its or their own accounts in the underlying commodity, 
related futures or options on futures, or any other related 
derivatives, as may be requested by the Exchange.
    The Exchange is able to obtain information regarding trading in the 
Shares and the underlying LTC, LTC futures contracts, or any other LTC 
derivative through members acting as registered Market Makers, in 
connection with their proprietary or customer trades.
    As a general matter, the Exchange has regulatory jurisdiction over 
its members, and their associated persons. The Exchange also has 
regulatory jurisdiction over any person or entity controlling a member, 
as well as a subsidiary or affiliate of a member that is in the 
securities business. A subsidiary or affiliate of a member organization 
that does business only in commodities would not be subject to Exchange 
jurisdiction, but the Exchange could obtain information regarding the 
activities of such subsidiary or affiliate through surveillance sharing 
agreements with regulatory organizations of which such subsidiary or 
affiliate is a member.
Trading 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. The Exchange will 
allow trading in the Shares from 4:00 a.m. to 8:00 p.m. ET. The 
Exchange has appropriate rules to facilitate transactions in the Shares 
during all trading sessions. The Shares of the Trust will conform to 
the initial and continued listing criteria set forth in Nasdaq Rule 
5711(d) and will comply with the requirements of Rule 10A-3 of the Act.
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. The Exchange will halt trading in the Shares 
under the conditions specified in Nasdaq Rules 4120 and 4121, including 
without limitation the conditions specified in Nasdaq Rule 4120(a)(9) 
and (10) and the trading pauses under Nasdaq Rules 4120(a)(11) and 
(12).
    Trading may be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) the extent to which trading is not 
occurring in the LTC underlying the Shares; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present.
    If the IIV or the value of the Index is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
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 
with respect to the Shares is not disseminated to all market 
participants at the same time, it will halt trading in the Shares until 
such time as the NAV per Share is available to all market participants.
Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. The surveillance 
program includes real-time patterns for price and volume movements and 
post-trade surveillance patterns (e.g., spoofing, marking the

[[Page 8954]]

close, pinging, phishing). Trading of Shares on the Exchange will be 
subject to the Exchange's surveillance program for derivative products, 
as well as cross-market surveillances administered by FINRA, on behalf 
of the Exchange pursuant to a regulatory services agreement, which are 
also designed to detect violations of Exchange rules and applicable 
federal securities laws. The Exchange is responsible for FINRA's 
performance under this regulatory services agreement.
    The Exchange will require the Trust to represent 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 Exchange Act, the Exchange 
will surveil 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 the 
Nasdaq 5800 Series. In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
    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 listed LTC 
futures from such markets and other entities. The Exchange also may 
obtain information regarding trading in the Shares and listed LTC 
futures via the ISG, from other exchanges who are members or affiliates 
of the ISG, or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an information circular (``Information Circular'') of the 
special characteristics and risks associated with trading the Shares. 
Specifically, the Information Circular will discuss the following: (1) 
the procedures for creations and redemptions of Shares in Baskets (and 
that Shares are not individually redeemable); (2) Section 10 of Nasdaq 
General Rule 9, which imposes suitability obligations on Nasdaq members 
with respect to recommending transactions in the Shares to customers; 
(3) how information regarding the IIV and NAV is disseminated; (4) the 
risks involved in trading the Shares during the pre-market and post-
market sessions when an updated IIV will not be calculated or publicly 
disseminated; (5) the requirement that members deliver a prospectus to 
investors purchasing newly issued Shares prior to or concurrently with 
the confirmation of a transaction; and (6) trading information. The 
Information Circular will also discuss any exemptive, no action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    The Information Circular will also reference the fact that there is 
no regulated source of last sale information regarding LTC, that the 
Commission has no jurisdiction over the trading of LTC as a commodity.
    Additionally, the Information Circular will reference that the 
Trust is subject to various fees and expenses described in the 
Registration Statement. The Information Circular will also disclose the 
trading hours of the Shares. The Information Circular will disclose 
that information about the Shares will be publicly available on the 
Trust's website.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\16\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\17\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Commission has approved numerous series of Trust Issued 
Receipts, including Commodity-Based Trust Shares, to be listed on U.S. 
national securities exchanges. In order for any proposed rule change 
from an exchange to be approved, the Commission must determine that, 
among other things, the proposal is consistent with the requirements of 
Section 6(b)(5) of the Act, specifically including: (i) the requirement 
that a national securities exchange's rules are designed to prevent 
fraudulent and manipulative acts and practices; and (ii) the 
requirement that an exchange proposal be designed, in general, to 
protect investors and the public interest. The Exchange believes that 
this proposal is consistent with the requirements of Section 6(b)(5) of 
the Act.
    As noted above, the Commission has recognized that the ``regulated 
market of significant size'' standard is not the only means for 
satisfying Section 6(b)(5) of the act, specifically providing 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 
with the underlying spot market. The Exchange and Sponsor believe that 
such conditions are present. As discussed above, in approving the Spot 
Bitcoin ETPs, the Commission found that there were ``sufficient `other 
means' of preventing fraud and manipulation,'' including that:

    [B]ased on the record before the Commission and the improved 
quality of the correlation analysis in the record, including the 
Commission's own analysis, the Commission is able to conclude that 
fraud or manipulation that impacts prices in spot bitcoin markets 
would likely similarly impact CME bitcoin futures prices. And 
because the CME's surveillance can assist in detecting those impacts 
on CME bitcoin futures prices, the Exchanges' comprehensive 
surveillance-sharing agreement with the CME--a U.S. regulated market 
whose bitcoin futures market is consistently highly correlated to 
spot bitcoin, albeit not of ``significant size'' related to spot 
bitcoin--can be reasonably expected to assist in surveilling for 
fraudulent and manipulative acts and practices in the specific 
context of the [Spot Bitcoin ETPs].\18\
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    \18\ See Securities Exchange Act Release No. 99306 (January 10, 
2024), 89 FR 3008 (January 17, 2024) (Order Granting Accelerated 
Approval of Proposed Rule Changes, as Modified by Amendments 
Thereto, To List and Trade Shares of Bitcoin-Based Commodity-Based 
Trust Shares and Trust Units). The SEC made substantially similar 
findings in the approval order for spot ether ETPs. See Securities 
Exchange Act Release No. 100224 (May 23, 2024), 89 FR 46937 (May 30, 
2024) (Order Granting Accelerated Approval of Proposed Rule Changes, 
as Modified by Amendments Thereto, To List and Trade Shares of 
Ether-Based Exchange-Traded Products).

    As discussed above, Coinbase Derivatives offers trading in LTC 
futures.\19\ Nasdaq has a comprehensive surveillance-sharing agreement 
with Coinbase Derivatives via its common membership in ISG, which 
facilitates the sharing of information that is available to Coinbase 
Derivatives through its surveillance of its markets, including its 
surveillance of Coinbase Derivatives' LTC futures market. Similar to 
the Spot Bitcoin and Spot ETH ETPs previously approved by the SEC, 
Nasdaq's ability to obtain information regarding trading in the LTC 
futures from other markets that are members of the ISG (specifically 
Coinbase

[[Page 8955]]

Derivatives) would assist Nasdaq in detecting and deterring 
misconduct.\20\
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    \19\ See https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf.
    \20\ The Exchange will provide the relevant correlation analysis 
through an amendment of this filing.
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    The Exchange further believes that the proposed rule change is 
designed to prevent fraudulent and manipulative acts and practices and 
to protect investors and the public interest in that the Shares will be 
listed and traded on the Exchange pursuant to the initial and continued 
listing criteria set forth in Nasdaq Rule 5711(d). 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. As 
discussed above, the surveillance program includes real-time patterns 
for price and volume movements and post-trade surveillance patterns 
(e.g., spoofing, marking the close, pinging, phishing). Trading of 
Shares on the Exchange will be subject to the Exchange's surveillance 
program for derivative products, as well as cross-market surveillances 
administered by FINRA, on behalf of the Exchange pursuant to a 
regulatory services agreement, which are also designed to detect 
violations of Exchange rules and applicable federal securities laws. 
The Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
    The Exchange will require the Trust to represent 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 Exchange Act, the Exchange 
will surveil 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 the 
Nasdaq 5800 Series. In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
    The Exchange will communicate as needed regarding trading in the 
Shares with other markets and other entities that are members of the 
ISG, and the Exchange may obtain trading information regarding trading 
in the Shares and listed LTC futures from such markets and other 
entities.
    Trading in Shares of the Trust will be halted if the circuit 
breaker parameters have been reached or because of market conditions or 
for reasons that, in the view of the Exchange, make trading in the 
Shares inadvisable. These may include unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market.
    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 
Shares that will enhance competition among market participants, to the 
benefit of investors and the marketplace.
    For all the above reasons, the Exchange believes that the proposed 
rule change is consistent with the requirements of Section 6(b)(5) of 
the Act.

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 purpose of the Act. The Exchange notes that the 
proposed rule change rather will facilitate the listing and trading of 
additional exchange-traded product that will enhance competition among 
both market participants and listing venues, 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 either solicited or received.

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 Exchange consents, the Commission shall: (a) by order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2025-005 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-NASDAQ-2025-005. 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-NASDAQ-2025-005 and 
should be submitted on or before February 25, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-02152 Filed 2-3-25; 8:45 am]
BILLING CODE 8011-01-P
```