Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices 38129 

1See Docket No. RM2018–3, Order Adopting 

Final Rules Relating to Non-Public Information, 

June 27, 2018, Attachment A at 19–22 (Order No. 

4679). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The Trust was formed as a Delaware statutory 

trust on January 22, 2021, and is operated as a 

grantor trust for U.S. federal tax purposes. The 

Trust has no fixed termination date. 

5On February 16, 2021, the Trust filed a draft 

Registration Statement on Form S–1 under the 

Securities Act of 1933 (the ‘‘Registration 

Statement’’). The description of the operation of the 

Trust herein is based, in part, on the Registration 

Statement. The Registration Statement is not yet 

effective, and the Shares will not trade on the 

Exchange until such time that the Registration 

Statement is effective. 

The public portions of the Postal 

Service’s request(s) can be accessed via 

the Commission’s website (http://

www.prc.gov). Non-public portions of 

the Postal Service’s request(s), if any, 

can be accessed through compliance 

with the requirements of 39 CFR 

3011.301.1

The Commission invites comments on 

whether the Postal Service’s request(s) 

in the captioned docket(s) are consistent 

with the policies of title 39. For 

request(s) that the Postal Service states 

concern market dominant product(s), 

applicable statutory and regulatory 

requirements include 39 U.S.C. 3622, 39 

U.S.C. 3642, 39 CFR part 3030, and 39 

CFR part 3040, subpart B. For request(s) 

that the Postal Service states concern 

competitive product(s), applicable 

statutory and regulatory requirements 

include 39 U.S.C. 3632, 39 U.S.C. 3633, 

39 U.S.C. 3642, 39 CFR part 3035, and 

39 CFR part 3040, subpart B. Comment 

deadline(s) for each request appear in 

section II. 

II. Docketed Proceeding(s) 

1. Docket No(s).: MC2021–113 and 

CP2021–115; Filing Title: USPS Request 

to Add Priority Mail Contract 712 to 

Competitive Product List and Notice of 

Filing Materials Under Seal; Filing 

Acceptance Date: July 13, 2021; Filing 

Authority: 39 U.S.C. 3642, 39 CFR 

3040.130 through 3040.135, and 39 CFR 

3035.105; Public Representative: 

Kenneth R. Moeller; Comments Due: 

July 21, 2021. 

This Notice will be published in the 

Federal Register. 

Erica A. Barker, 

Secretary. 

[FR Doc. 2021–15249 Filed 7–16–21; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92395; File No. SR– 

NYSEArca–2021–57] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change To List and Trade Shares 

of the NYDIG Bitcoin ETF Under NYSE 

Arca Rule 8.201–E 

July 13, 2021. 

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 June 30, 

2021, NYSE Arca, Inc. (‘‘NYSE Arca’’ or 

the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade the shares of the NYDIG Bitcoin 

ETF (the ‘‘Trust’’) 4 under NYSE Arca 

Rule 8.201–E. The common shares of 

beneficial interest of the Trust are 

referred to herein as the ‘‘Shares.’’ The 

proposed change is available on the 

Exchange’s website at www.nyse.com, at 

the principal office of the Exchange, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade the Shares of the Trust under 

NYSE Arca Rule 8.201–E, which 

governs the listing and trading of 

Commodity-Based Trust Shares. 

Description of the Trust 

The Shares will be issued by the 

Trust, a Delaware statutory trust. 

According to the Registration Statement, 

the Trust’s investment objective is to 

reflect the performance of the price of 

bitcoin less the expenses of the Trust’s 

operations. The Trust will not seek to 

reflect the performance of any 

benchmark or index.5

In seeking to achieve its investment 

objective, the Trust will only hold 

bitcoin. The Trust will value its assets 

daily in accordance with Generally 

Accepted Accounting Principles 

(‘‘GAAP’’), which, according to the 

Registration Statement, generally value 

bitcoin by reference to orderly 

transactions in the principal active 

market for bitcoin, as described below. 

NYDIG Asset Management LLC (the 

‘‘Sponsor’’) is the Sponsor of the Trust. 

Delaware Trust Company (the 

‘‘Trustee’’) is the trustee of the Trust and 

NYDIG Trust Company LLC (the 

‘‘Bitcoin Custodian’’) will hold all of the 

Trust’s bitcoin on the Trust’s behalf as 

custodian. Both the Sponsor and the 

Bitcoin Custodian are indirect whollyowned subsidiaries of New York Digital 

Investment Group LLC (‘‘NYDIG’’). 

Pursuant to the custodial agreement, 

the Bitcoin Custodian will be 

responsible for (1) safekeeping all of the 

bitcoin owned by the Trust, (2) opening 

an account that holds the Trust’s bitcoin 

and (3) facilitating the transfer of bitcoin 

required for the operation of the Trust, 

as directed by the Sponsor. The Bitcoin 

Custodian is chartered as a limited 

purpose trust company by the New York 

State Department of Financial Services 

(‘‘NYDFS’’) and is authorized by NYDFS 

to provide digital asset custody services. 

U.S. Bancorp Fund Services, LLC will 

act as the transfer agent for the Trust 

(the ‘‘Transfer Agent’’) and as the 

administrator of the Trust (the 

‘‘Administrator’’) to perform various 

administrative, tax, accounting and 

recordkeeping functions on behalf of the 

Trust. The Transfer Agent and the 

Administrator will also be responsible 

for issuing and redeeming Shares and 

calculating the net asset value (‘‘NAV’’) 

of the Shares, respectively. 

According to the Registration 

Statement, the Trust will process all 

creations and redemptions of Shares in 

transactions with financial firms that are 

authorized to do so (known as 

‘‘Authorized Participants’’). When the 

Trust issues or redeems its Shares, it 

will do so only in ‘‘in-kind’’ 

transactions in blocks of 10,000 Shares 


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(a ‘‘Creation Basket’’) based on the 

quantity of bitcoin attributable to each 

Share of the Trust (net of accrued but 

unpaid Sponsor fees and any accrued 

but unpaid extraordinary expenses or 

liabilities). Because the creation and 

redemption of Creation Baskets will be 

effected via in-kind transactions based 

on the quantity of bitcoin attributable to 

each Share, the quantity of Creation 

Baskets so created or redeemed will 

generally not be affected by fluctuations 

in the value of bitcoin. When 

purchasing Creation Baskets, 

Authorized Participants or their agents 

will deliver bitcoin to the Trust’s 

account with the Bitcoin Custodian in 

exchange for Creation Baskets. When 

redeeming Creation Baskets, Authorized 

Participants or their agents will receive 

bitcoin from the Trust through the 

Bitcoin Custodian. The Trust will not 

purchase or, barring a liquidation or 

extraordinary circumstances, sell 

bitcoin directly. 

According to the Registration 

Statement, to support the ability of 

Authorized Participants to provide 

liquidity at prices that reflect the value 

of the Trust’s assets and to facilitate 

orderly transactions in the Shares, the 

Trust will ordinarily process 

redemptions of Shares on the next day 

when the Exchange is open for regular 

trading (a ‘‘Business Day’’) following 

receipt of a redemption request by an 

Authorized Participant. 

The Sponsor believes that the design 

of the Trust will enable investors to 

effectively and efficiently implement 

strategic and tactical asset allocation 

strategies that use bitcoin by investing 

in the Shares rather than directly in 

bitcoin. 

Custody of the Trust’s Bitcoin 

According to the Registration 

Statement, and as described above, the 

Trust’s Bitcoin Custodian will custody 

of all of the Trust’s bitcoin. Custody of 

bitcoin typically involves the 

generation, storage and utilization of 

private keys. These private keys are 

used to effect transfer transactions—i.e., 

transfers of bitcoin from an address 

associated with the private key to 

another address. While private keys 

must be used to send bitcoin, private 

keys do not need to be used or shared 

in order to receive a bitcoin transfer; 

every private key has an associated 

public key and an address derived from 

that public key that can be freely shared, 

to which counterparties can transfer 

bitcoin. The Bitcoin network has a 

public ledger, meaning that anybody 

with access to the address can see the 

balance of digital assets in that address. 

The Bitcoin Custodian carefully 

considers 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. According to the Registration 

Statement, no such system is perfectly 

secure and loss or theft due to 

operational or other failure is always 

possible. The Bitcoin Custodian uses a 

multi-factor security system under 

which actions by multiple individuals 

working together are required to access 

the private keys necessary to transfer 

such digital assets and ensure the 

Trust’s exclusive ownership. The multifactor security system generates private 

keys using a Federal Information 

Processing Standards Publication 140–2 

(‘‘FIPS 140–2’’)-certified random 

number generator to ensure the keys’ 

uniqueness. Before these keys are used, 

the Bitcoin Custodian validates that the 

public addresses associated with these 

keys have no associated digital asset 

balances. The software used for key 

generation and verification is tested by 

the Bitcoin Custodian and is reviewed 

by third-party advisors from the security 

community with specific expertise in 

computer security and applied 

cryptography. The private keys are 

stored in an encrypted manner using a 

FIPS 140–2-certified security module 

held in redundant secure, 

geographically dispersed locations with 

high levels of physical security, 

including robust physical barriers to 

entry, electronic surveillance and 

continuously roving patrols. The 

operational procedures of these facilities 

and of the Bitcoin Custodian 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 bitcoin. 

The Trust generally does not intend to 

hold cash or cash equivalents. However, 

the Trust may hold cash and cash 

equivalents on a temporary basis to pay 

extraordinary expenses. The Trust will 

enter into a cash custody agreement 

with U.S. Bank N.A. under which U.S. 

Bank N.A. will act as custodian of the 

Trust’s cash and cash equivalents. 

Overview of Bitcoin and the Bitcoin 

Network 

According to the Registration 

Statement, Bitcoin is a digital asset, the 

ownership and behavior of which are 

determined by participants in an online, 

peer-to-peer network that connects 

computers that run publicly accessible, 

or ‘‘open source,’’ software that follows 

the rules and procedures governing the 

Bitcoin network, commonly referred to 

as the Bitcoin protocol. The value of 

bitcoin, like the value of other digital 

assets, is not backed by any government, 

corporation or other identified body. 

Ownership and the ability to transfer or 

take other actions with respect to 

bitcoin is protected through public-key 

cryptography. The supply of bitcoin is 

constrained formulaically by the Bitcoin 

protocol instead of being explicitly 

delegated to an identified body (e.g., a 

central bank or corporate treasury) to 

control. Units of bitcoin are treated as 

fungible. Bitcoin and certain other types 

of digital assets are sometimes referred 

to as digital currencies or 

cryptocurrencies. No single entity owns 

or operates the Bitcoin network, the 

infrastructure of which is collectively 

maintained by (1) a decentralized group 

of participants who run computer 

software that results in the recording 

and validation of transactions 

(commonly referred to as ‘‘miners’’), (2) 

developers who propose improvements 

to the Bitcoin protocol and the software 

that enforces the protocol and (3) users 

who choose what Bitcoin software to 

run. Bitcoin was released in 2009 and, 

as a result, there is little data on its longterm investment potential. Bitcoin is not 

backed by a government-issued legal 

tender or other assets or currency. 

Bitcoin is ‘‘stored’’ or reflected on a 

digital transaction ledger commonly 

known as a ‘‘blockchain.’’ A blockchain 

is a type of shared and continually 

reconciled database, stored in a 

decentralized manner on the computers 

of certain users of the digital asset. A 

blockchain is a canonical record of 

every digital asset: The blockchain 

records every ‘‘coin’’ or ‘‘token,’’ 

balances of digital assets, every 

transaction and every address associated 

with a quantity of a particular digital 

asset. Bitcoin utilizes the blockchain to 

record transactions into and out of 

different addresses, facilitating a 

determination of how much bitcoin is in 

each address. 

Bitcoin is created by ‘‘mining.’’ 

Mining involves miners using a 

sophisticated computer program to 

repeatedly solve complex mathematical 

problems on specialized computer 

hardware. The mathematical problem 


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involves a computation involving all or 

some bitcoin transactions that have been 

proposed by the Bitcoin network’s 

participants. When this problem is 

solved, the computer creates a ‘‘block’’ 

consisting of these transactions. As each 

newly solved block refers back to and 

‘‘connects’’ with the immediately prior 

solved block, the addition of a new 

block adds to the blockchain in a 

manner similar to a new link being 

added to a chain. A miner’s proposed 

block is added to the blockchain once a 

majority of the nodes on the network 

confirm the miner’s work. A miner that 

is successful in adding a block to the 

blockchain is automatically awarded a 

fixed amount of bitcoin for its efforts 

plus any transaction fees paid by 

transferors whose transactions are 

recorded in the block. This reward 

system is the means by which new 

bitcoin enter circulation. This reward 

system, called proof of work, also 

ensures that the local copies of the 

Bitcoin blockchain maintained by 

participants in the Bitcoin network are 

kept in consensus with one another. 

The Bitcoin Market 

According to the Registration 

Statement, Bitcoin is the oldest, bestknown and largest market-capitalization 

digital asset. Since the advent of bitcoin, 

numerous other digital assets have been 

created. The website 

CoinMarketCap.com tracks the U.S. 

dollar price and total market 

capitalization for each of more than 

5,000 traded digital assets. As of April 

30, 2021, bitcoin had a total market 

capitalization in excess of $1 trillion 

and represented more than 45% of the 

entire digital asset market. 

The first trading venues for bitcoin 

were informal exchange services 

marketed primarily in public online 

forums. Transactions on these services 

were effected via anonymous email, and 

the fiat currency portions of these 

transactions were effected through 

payment services such as PayPal. These 

services required their operators to 

manually match buyers and sellers in 

order to process transactions. Later, 

automated exchanges that matched 

buyers and sellers began to form. Many 

such exchanges have been created in the 

U.S. and abroad. In the U.S., a number 

of exchanges now operate under 

licensing from the NYDFS. 

Beginning in 2016, more institutional 

investors entered the bitcoin market. As 

a result, an increasing number of 

transactions have occurred in over-thecounter (‘‘OTC’’) markets instead of 

exchanges. This type of trading allows 

for bespoke trading arrangements that 

may ease of the burden of trade 

operations or reduce different types of 

risks (e.g., counterparty risk). 

As a result, there is not a single source 

for pricing bitcoin. According to the 

Registration Statement, the Trust 

believes that prices on the bitcoin 

trading venues are generally formed by 

the levels of demand on either side of 

the exchange’s order book, and arbitrage 

between exchanges typically prevents 

larger and/or more persistent differences 

in prices between bitcoin trading 

venues. Factors that the Trust believes 

may influence the relative balance of 

buyers and sellers on the bitcoin trading 

venues include trading activity in the 

OTC markets, global or regional 

economic conditions, expected levels of 

inflation, growth or reversal in the 

adoption and use of bitcoin, 

developments in the regulation of 

bitcoin, changes in the preference of 

market participants between bitcoin and 

other digital assets, maintenance and 

development of the open-source 

software protocol of the Bitcoin 

network, and negative consumer or 

public perception of bitcoin specifically 

or digital assets generally. 

Bitcoin spot trading occurs on venues 

in the U.S. that are licensed to conduct 

that business by the NYDFS, other 

venues in the U.S. and non-U.S. venues. 

In addition, bitcoin futures and options 

trading occurs on exchanges in the U.S. 

regulated by the Commodity Futures 

Trading Commission (the ‘‘CFTC’’). The 

market for NYDFS-licensed and CFTCregulated trading of bitcoin and bitcoin 

derivatives has developed substantially. 

Bitcoin market conditions in the three 

months ending on April 30, 2021 are 

briefly summarized as follows: 

• Bitcoin: Six NYDFS-licensed 

entities operate trading venues with 

order books for spot trading of bitcoin, 

with a total average daily trading 

volume of approximately $2.5 billion. 

Across these venues, the average daily 

deviation of prices was less than 0.08%. 

The largest NYDFS-licensed trading 

venue by volume had an average bid-ask 

spread during the period of less than 

0.05% for trades of $250,000. 

• Futures: Two CFTC-regulated 

exchanges facilitate trading of bitcoin 

futures, with a total average daily 

trading volume of approximately $2.9 

billion. 

• Options: One CFTC-regulated 

exchange facilitates trading of options 

on bitcoin futures, with average 

monthly trading volume of 

approximately $380 million. 

The following table shows the average 

daily trading volume for bitcoin across 

the three largest NYDFS-licensed 

exchanges, as well as the average daily 

trading volume and average daily open 

interest (i.e., the average total bitcoin 

exposure of futures contracts held by 

market participants at the end of each 

trading day) for bitcoin futures contracts 

on the Chicago Mercantile Exchange 

(‘‘CME’’) and the Intercontinental 

Exchange. The bitcoin data shown is for 

trading volumes of bitcoin against U.S. 

dollars and exclude trading transactions 

of bitcoin against other digital assets 

(e.g., Tether) or other fiat currencies 

(e.g., euros). 

Year 

Bitcoin 

daily volume 

(USD 

millions) 

Futures 

daily volume 

(USD 

millions) 

Futures 

average open 

interest 

(USD 

millions) 

2016 ............................................................................................................................................. 7.95 

2017 ............................................................................................................................................. 215.44 41.10 81.87 

2018 ............................................................................................................................................. 267.19 86.68 126.90 

2019 ............................................................................................................................................. 216.97 172.60 246.62 

2020 ............................................................................................................................................. 708.39 561.78 535.13 

2021 (through 4/30) ..................................................................................................................... 2,564.30 2,507.96 2,934.98 

Calculation of Net Asset Value 

The Trust’s NAV is determined in 

accordance with GAAP as the total 

value of bitcoin held by the Trust, plus 

any cash or other assets, less any 

liabilities including accrued but unpaid 

expenses. The NAV per Share is 

determined by dividing the NAV of the 

Trust by the number of Shares 

outstanding. The NAV of the Trust is 

typically determined as of 4:00 p.m. 

Eastern Time (ET) on each Business 


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Day. The Administrator will calculate 

the NAV of the Trust once each 

Exchange trading day. The Exchange’s 

Core Trading Session closes at 4:00 p.m. 

ET. The Trust’s daily activities are 

generally not reflected in the NAV 

determined for the Business Day on 

which the transactions are effected (the 

trade date), but rather on the following 

Business Day. The NAV for the Trust’s 

Shares will be disseminated daily to all 

market participants at the same time. 

Intraday Indicative Value 

In order to provide updated 

information relating to the Trust for use 

by shareholders and market 

professionals, the Trust will disseminate 

an intraday indicative value (‘‘IIV’’) per 

Share updated every 15 seconds. The 

IIV will be calculated by using the same 

methodology that the Trust uses to 

determine NAV, which, as described 

above, is to follow GAAP. Generally, 

GAAP requires the fair value of an asset 

that is traded on a market to be 

measured by reference to orderly 

transactions on an active market. 

Among all active markets with orderly 

transactions, the market that is used to 

determine the fair value of an asset is 

the principal market. The Sponsor 

expects that the principal market will 

initially generally be the NYDFSregulated trading venue with the highest 

trading volume and level of activity. 

The IIV disseminated during the 

Exchange’s Core Trading Session 

between 9:30 a.m. to 4:00 p.m. ET 

should not be viewed as an actual realtime update of the NAV, 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 Exchange’s Core 

Trading Session by one or more major 

market data vendors. 

Creation and Redemption of Shares 

According to the Registration 

Statement, the Trust will create and 

redeem Shares from time to time, but 

only in one or more blocks of 10,000 

Shares (known as ‘‘Creation Baskets’’). 

Creation Baskets will only be made in 

exchange for delivery to the Trust or the 

distribution by the Trust of the amount 

of bitcoin represented by the Shares 

being created or redeemed, the amount 

of which will be based on the quantity 

of bitcoin attributable to each Share of 

the Trust (net of accrued but unpaid 

Sponsor fees, extraordinary expenses or 

liabilities) being created or redeemed 

determined as of 4:00 p.m. ET on the 

day the order is properly received. 

Because creation and redemption of 

Creation Baskets will be effected via inkind transactions based on the quantity 

of bitcoin attributable to each Share, the 

quantity of Creation Baskets so created 

or redeemed will generally not be 

affected by fluctuations in the value of 

bitcoin. 

According to the Registration 

Statement, Authorized Participants are 

the only persons that may place orders 

to create and redeem Creation Baskets. 

Authorized Participants must be (1) 

registered broker-dealers or other 

securities market participants, such as 

banks or other financial institutions, 

that are not required to register as 

broker-dealers to engage in securities 

transactions, and (2) entities that have 

an account with The Depository Trust 

Company (‘‘DTC’’) such as banks, 

brokers, dealers and trust companies. To 

become an Authorized Participant, a 

person must enter into an authorized 

participant agreement with the Trust 

and the Sponsor (the ‘‘Authorized 

Participant Agreement’’). The 

Authorized Participant Agreement 

provides the procedures for the creation 

and redemption of Shares and for the 

delivery of the bitcoin required for such 

creation and redemptions. 

According to the Registration 

Statement, Authorized Participants will 

place orders through the Transfer Agent. 

The Transfer Agent will coordinate with 

the Trust’s Bitcoin Custodian in order to 

facilitate settlement of the Shares and 

bitcoin. 

Creation Procedures 

According to the Registration 

Statement, on any Business Day, an 

Authorized Participant may place an 

order with the Transfer Agent to create 

one or more Creation Baskets. Purchase 

orders must be placed by 4:00 p.m. ET 

or the close of regular trading on the 

Exchange, whichever is earlier. The day 

on which a valid order is received by 

the Transfer Agent is considered the 

purchase order date. 

By placing a purchase order, an 

Authorized Participant agrees to 

facilitate the deposit of bitcoin with the 

Trust. If required by the Sponsor and 

the Trust, prior to the delivery of 

Creation Baskets for a purchase order, 

the Authorized Participant must also 

have wired to the Transfer Agent the 

non-refundable transaction fee due for 

the purchase order. Authorized 

Participants may not withdraw a 

purchase order. 

The manner by which Creation 

Baskets are made is dictated by the 

terms of the Authorized Participant 

Agreement. By placing a purchase order, 

an Authorized Participant agrees to 

facilitate the deposit of bitcoin with the 

Bitcoin Custodian. If an Authorized 

Participant fails to consummate the 

foregoing, the order will be cancelled. 

The total deposit of bitcoin required 

to create each Creation Basket is an 

amount of bitcoin that is in the same 

proportion to the total amount of bitcoin 

held by of the Trust (net of accrued but 

unpaid Sponsor fees, extraordinary 

expenses or liabilities) on the date the 

purchase order is properly received as 

the number of Shares to be created 

under the purchase order is to the total 

number of Shares outstanding on the 

date the order is received. 

Following an Authorized Participant’s 

purchase order, the Trust’s bitcoin 

account with the Bitcoin Custodian (the 

‘‘Bitcoin Account’’) is credited with the 

required bitcoin by the end of the 

second Business Day following the 

purchase order date. Upon receipt of the 

bitcoin deposit amount in the Trust’s 

Bitcoin Account, the Bitcoin Custodian 

will notify the Transfer Agent, the 

Authorized Participant and the Sponsor 

that the bitcoin has been deposited. The 

Transfer Agent will then direct DTC to 

credit the number of Shares created to 

the Authorized Participant’s DTC 

account. 

Redemption Procedures 

According to the Registration 

Statement, the procedures by which an 

Authorized Participant can redeem one 

or more Creation Baskets mirror the 

procedures for the creation of Creation 

Baskets. Accordingly, on any Business 

Day, an Authorized Participant may 

place an order with the Transfer Agent 

to redeem one or more Creation Baskets. 

Redemption orders must be placed by 

4:00 p.m. ET or the close of regular 

trading on the Exchange, whichever is 

earlier. A redemption order will be 

effective on the date it is received by the 

Transfer Agent. 

The redemption distribution from the 

Trust consists of a transfer of bitcoin to 

the redeeming Authorized Participant 

corresponding to the number of Shares 

being redeemed. The redemption 

distribution due from the Trust will be 

delivered once the Transfer Agent 

notifies the Bitcoin Custodian and the 

Sponsor that the Authorized Participant 

has delivered the Shares represented by 

the Creation Baskets to be redeemed to 

the Transfer Agent’s DTC account. If the 

Transfer Agent’s DTC account has not 

been credited with all of the Shares of 

the Creation Baskets to be redeemed, the 

redemption distribution will be delayed 

until such time as the Transfer Agent 

confirms receipt of all such Shares. 

Once the Transfer Agent notifies the 

Bitcoin Custodian and the Sponsor that 

the Shares have been received in the 

Transfer Agent’s DTC account, the 


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6See NYSE Arca Rule 7.12–E. 

7 17 CFR 240.10A–3. 

8FINRA 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. 

9For 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. 

Sponsor will instruct the Bitcoin 

Custodian to transfer the redemption 

distribution from the Trust’s Bitcoin 

Account to the Authorized Participant. 

Availability of Information 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the Consolidated Tape Association 

(‘‘CTA’’). 

In addition, the Trust’s website will 

display the applicable end of day 

closing NAV. The daily holdings of the 

Trust will be available on the Trust’s 

website before 9:30 a.m. E.T. The Trust’s 

website will also include a form of the 

prospectus for the Trust that may be 

downloaded. The website will include 

the Shares’ ticker and CUSIP 

information, along with additional 

quantitative information updated on a 

daily basis for the Trust. The Trust’s 

website will include (1) the prior 

Business Day’s trading volume, the prior 

Business Day’s reported NAV and 

closing price, and a calculation of the 

premium and discount of the closing 

price or mid-point of the bid/ask spread 

at the time of NAV calculation (‘‘Bid/ 

Ask Price’’) against the NAV; and (2) 

data in chart format displaying the 

frequency distribution of discounts and 

premiums of the daily closing price or 

Bid/Ask Price against the NAV, within 

appropriate ranges, for at least each of 

the four previous calendar quarters. The 

Trust’s website will be publicly 

available prior to the public offering of 

Shares and accessible at no charge. 

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.6 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. 

If the Exchange becomes aware that 

the NAV with respect to the Shares is 

not disseminated to all market 

participants at the same time, it will halt 

trading in the Shares until such time as 

the NAV is available to all market 

participants. 

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 firms that have been 

issued an Equity Trading Permit (‘‘ETP 

Holders’’) to act 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 7 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. 

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.8 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. 

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 Intermarket Surveillance Group 

(‘‘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 

and other entities. In addition, the 

Exchange may obtain information 

regarding trading in the Shares from 

markets and other entities that are 

members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement 

(‘‘CSSA’’).9 The Exchange is also able to 

obtain information regarding trading in 

the Shares in connection with ETP 

Holders’ proprietary or customer trades 

which they effect through ETP Holders 

on any relevant market. 

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 portfolios of the 

Trust, (b) limitations on portfolio 

holdings or reference assets, or (c) the 

applicability of Exchange listing rules 

specified in this rule filing shall 

constitute continued listing 

requirements for listing the Shares on 

the Exchange. 

The issuer 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 

(the ‘‘Information Bulletin’’) of the 

special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Bulletin 

will discuss the following: (1) The 

procedures for purchases and 

redemptions of Shares; (2) NYSE Arca 

Rule 9.2–E(a), which imposes a duty of 

due diligence on its ETP Holders to 


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10 15 U.S.C. 78f(b)(5). 

11See Exchange Rule 8.200–E. 

12Commodity-Based Trust Shares, as described in 

Exchange Rule 8.201–E, are a type of Trust Issued 

Receipt. 

13See https://isgportal.org/overview. 

14As previously articulated by the Commission, 

‘‘The standard requires such surveillance-sharing 

agreements since ‘they provide a necessary 

deterrent to manipulation because they facilitate the 

availability of information needed to fully 

investigate a manipulation if it were to occur.’ The 

Commission has emphasized that it is essential for 

an exchange listing a derivative securities product 

to enter into a surveillance-sharing agreement with 

markets trading underlying securities for the listing 

exchange to have the ability to obtain information 

necessary to detect, investigate, and deter fraud and 

market manipulation, as well as violations of 

exchange rules and applicable federal securities 

laws and rules. The hallmarks of a surveillancesharing agreement are that the agreement provides 

for the sharing of information about market trading 

activity, clearing activity, and customer identity; 

that the parties to the agreement have reasonable 

learn the essential facts relating to every 

customer prior to trading the Shares; (3) 

how information regarding portfolio 

holdings is disseminated; (4) the 

requirement that ETP Holders deliver a 

prospectus to investors purchasing 

newly issued Shares prior to or 

concurrently with the confirmation of a 

transaction; and (5) trading information. 

Prior to the commencement of 

trading, the Exchange will inform its 

ETP Holders of the suitability 

requirements of NYSE Arca Rule 9.2– 

E(a) in an Information Bulletin. 

Specifically, ETP Holders will be 

reminded in the Information Bulletin 

that, in recommending transactions in 

the Shares, they must have a reasonable 

basis to believe that (1) the 

recommendation is suitable for a 

customer given reasonable inquiry 

concerning the customer’s investment 

objectives, financial situation, needs, 

and any other information known by 

such ETP Holder, and (2) the customer 

can evaluate the special characteristics, 

and is able to bear the financial risks, of 

an investment in the Shares. In 

connection with the suitability 

obligation, the Information Bulletin will 

also provide that ETP Holders must 

make reasonable efforts to obtain the 

following information: (1) The 

customer’s financial status; (2) the 

customer’s tax status; (3) the customer’s 

investment objectives; and (4) such 

other information used or considered to 

be reasonable by such ETP Holder or 

registered representative in making 

recommendations to the customer. 

In addition, the Information Bulletin 

will advise ETP Holders, prior to the 

commencement of trading, of the 

prospectus delivery requirements 

applicable to the Trust. The Information 

Bulletin will also discuss any 

exemptive, no-action, and interpretive 

relief granted by the Commission from 

any rules under the Act. In addition, the 

Information Bulletin will reference that 

the Trust is subject to various fees and 

expenses described in the Registration 

Statement. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 10 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 foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest. The Exchange 

believes that the proposed rule change 

satisfies the requirements of Section 

6(b)(5), as discussed in more detail 

below. 

The Commission has approved 

numerous series of Trust Issued 

Receipts,11 including Commodity-Based 

Trust Shares,12 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, and, in 

particular, the requirement that (i) a 

national securities exchange’s rules are 

designed to prevent fraudulent and 

manipulative acts and practices; and (ii) 

an exchange proposal be designed, in 

general, to protect investors and the 

public interest. 

As discussed below, the Exchange, as 

the listing exchange for the Shares, and 

the CME, a regulated market of 

significant size relating to bitcoin, are 

both members of ISG, the purpose of 

which is ‘‘to provide a framework for 

the sharing of information and the 

coordination of regulatory efforts among 

exchanges trading securities and related 

products to address potential 

intermarket manipulation and trading 

abuses.’’ 13 In addition, the Sponsor 

believes that, on the whole, the 

manipulation concerns previously 

articulated by the Commission have 

since been significantly mitigated, and 

do not exceed those that exist in the 

markets for other commodities that 

underly securities listed on U.S. 

national securities exchanges. 

Specifically, significant increase in 

trading volume and open interest in the 

bitcoin futures market, growth of 

liquidity in the spot market for bitcoin, 

and certain features of the Shares 

mitigate the manipulation concerns 

expressed by the Commission when it 

last reviewed exchange proposals to list 

a bitcoin exchange-traded product 

(‘‘ETP’’). 

The proposed rule change is designed 

to protect investors and the public 

interest as an investment in the Trust 

would provide investors with exposure 

to bitcoin in a manner that may be more 

efficient, more convenient and more 

regulated than the purchase of bitcoin or 

other investment products that provide 

exposure to bitcoin. 

For example, the Sponsor notes that 

OTC bitcoin funds, which have attracted 

significant investor interest, offer 

exposure to bitcoin in a similar manner 

as the Trust. However, OTC bitcoin 

funds do not offer a creation or 

redemption mechanism that would keep 

their shares trading in line with their 

NAVs and, as a result, OTC bitcoin 

funds have historically traded at 

significant premiums or discounts 

compared to their NAVs. In contrast, 

when the Trust’s Shares trade at a 

premium or discount compared to their 

NAV, creation or redemption can be 

facilitated by the Authorized 

Participants to drive the value of the 

Shares towards their NAV. Notably, 

investors in OTC bitcoin funds also 

have historically borne significantly 

higher fees and expenses than those that 

would be borne by investors in the 

Trust. 

Additionally, the Sponsor notes that 

investors holding bitcoin through a 

cryptocurrency ‘‘exchange’’ often face 

credit risk to the exchange for cash 

balances, and often face risk of loss or 

theft of their bitcoin as a result of the 

exchange using internet-connected 

storage (commonly known as ‘‘hot’’ 

wallets) and/or having poor private key 

management (e.g., insufficient password 

protection, lost key, etc.). In the Bitcoin 

Custodian, the Trust is holding bitcoin 

in 100% ‘‘cold’’ storage, meaning the 

entire storage process is done 

completely offline, with a regulated and 

licensed entity applying industry best 

practices. 

(i) Designed To Prevent Fraudulent and 

Manipulative Acts and Practices 

When considering whether an 

exchange’s proposal to list bitcoin-based 

ETPs is designed to prevent fraudulent 

and manipulative acts and practices, the 

Commission requires that an exchange 

demonstrate that there is a CSSA in 

place with a regulated market of 

significant size relating to the 

underlying assets.14


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Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices 38135 

ability to obtain access to and produce requested 

information; and that no existing rules, laws, or 

practices would impede one party to the agreement 

from obtaining this information from, or producing 

it to, the other party.’’ See Securities Exchange Act 

Release No. 88284 (Feb. 26, 2020), 85 FR 12595 

(Mar. 3, 2020) (the ‘‘Wilshire Phoenix Order’’) at 

12596. 

15See Securities Exchange Act Release No. 83723 

(July 26, 2018), 83 FR 37579 (August 1, 2018) (the 

‘‘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 [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 [Act] have been met.’’ Id. at 37582. 

16See Winklevoss Order, 83 FR at 37580, 37582– 

91; see also Securities Exchange Act Release No. 

87267 (Oct. 9, 2019), 84 FR 55382 (Oct. 16, 2019) 

(the ‘‘Bitwise Order’’) at 55383, 55385–406. The 

Commission noted that ‘‘the Winklevoss Order 

addressed an assertion that ‘bitcoin and bitcoin 

[spot] markets’ generally, as well as one bitcoin 

trading platform specifically, have unique 

resistance to fraud and manipulation; and the 

Bitwise Order addressed the assertion that prices 

from at least certain bitcoin trading platforms (‘the 

‘real’ bitcoin spot market as opposed to the ‘fake’ 

and non-economic bitcoin spot market’) possessed 

such unique resistance.’’ See Wilshire Phoenix 

Order at 12597. 

17See Wilshire Phoenix Order at 12596. 

18See Hu, Y., Hou, Y. and Oxley, L. (2019). 

‘‘What role do futures markets play in Bitcoin 

pricing? Causality, cointegration and price 

discovery from a time-varying perspective’’ 

(available at: https://www.ncbi.nlm.nih.gov/pmc/ 

articles/PMC7481826/). This academic research 

paper concludes that ‘‘There exist no episodes 

where the Bitcoin spot markets dominates the price 

discovery processes with regard to Bitcoin futures. 

This points to a conclusion that the price formation 

originates solely in the Bitcoin futures market. We 

can, therefore, conclude that the Bitcoin futures 

markets dominate the dynamic price discovery 

process based upon time-varying information share 

measures. Overall, price discovery seems to occur 

in the Bitcoin futures markets rather than the 

underlying spot market based upon a time-varying 

perspective.’’ 

19See Wilshire Phoenix Order at 12613. 

The Commission has also 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.15 Sponsors of proposed 

bitcoin-based ETPs in particular have 

attempted to demonstrate that other 

means besides surveillance-sharing 

agreements are sufficient to prevent 

fraudulent and manipulative acts and 

practices, and in particular have 

attempted to demonstrate that the 

bitcoin market is ‘‘uniquely’’ and 

‘‘inherently’’ resistant to fraud and 

manipulation.16 Such resistance to 

fraud and manipulation must 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. To date, exchanges proposing 

rule changes to list bitcoin ETFs have 

not been able to establish that the 

relevant bitcoin market possesses a 

resistance to manipulation that is 

unique beyond that of traditional 

security or commodity markets such 

that it is inherently resistant to 

manipulation. 

The Exchange understands the 

Commission’s focus on potential 

manipulation of a bitcoin-based ETP in 

prior disapproval orders, including the 

Wilshire Phoenix Order, and believes 

that such concerns have since been 

largely mitigated. The Exchange 

believes that increases in investor 

participation in and institutional 

adoption of bitcoin have facilitated the 

maturation of the bitcoin trading 

ecosystem. 

However, the Exchange is not 

required to demonstrate ‘‘other means to 

prevent fraudulent and manipulative 

acts and practices,’’ such as the 

assertion that the relevant underlying 

bitcoin market is ‘‘unique’’ or 

‘‘inherently’’ resistant to manipulation, 

if it can establish that it has a CSSA 

with a regulated bitcoin market of 

significant size, or that both the 

Exchange and the relevant futures 

market, in this case, the CME, hold 

common membership in ISG. To this 

end, the Exchange represents that both 

the Exchange and CME are members of 

the ISG. The remaining determination to 

be made is whether the CME bitcoin 

futures market constitutes a market of 

significant size, which the Exchange 

contends that it does, unlike at the time 

of the Wilshire Phoenix Order. In the 

context of this standard, the terms 

‘‘significant market’’ and ‘‘market of 

significant size’’ include a market (or 

group of markets) as to which (a) there 

is a reasonable likelihood that a person 

attempting to manipulate the ETP 

would also have to trade on that market 

to successfully manipulate the ETP, so 

that a surveillance-sharing agreement 

would assist in detecting and deterring 

misconduct, and (b) it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in that 

market.17

(a) Manipulation of the ETP 

The significant growth in trading 

volumes, open interest, large open 

interest holders, and total market 

participants in the bitcoin futures 

market since the Wilshire Phoenix 

Order was issued is reflective of that 

market’s growing influence on the spot 

price of bitcoin. 

Some academic research 18 suggests 

that the bitcoin futures market has been 

leading bitcoin spot market price 

discovery since as early as 2018. 

However, in the Wilshire Phoenix 

Order, the Commission noted that 

academic research was, at the time, 

inconclusive as to the influence of the 

bitcoin futures market on price 

discovery in bitcoin spot markets, and 

noted specifically that existing research 

did not focus appropriately on lead-lag 

analyses, or on the influence of non-U.S. 

bitcoin spot market.19 To this end, 

NYDIG has developed more recent 

proprietary research, including lead-lag 

analyses, that demonstrates that prices 

in the CME bitcoin futures market do 

indeed lead prices in the bitcoin spot 

market, including non-U.S. bitcoin spot 

markets. This finding supports the 

thesis that a market participant 

attempting to manipulate the Shares 

would have to trade on that market to 

manipulate the ETP. 

Because Shares can only be created or 

redeemed in kind, and further because 

the Sponsor fee is accrued with respect 

to the quantity of bitcoin held by the 

Trust and paid in kind by the Trust, the 

Trust receives and holds only bitcoin. 

This substantially reduces the potential 

for manipulation of the number of 

Shares created or redeemed, which 

therefore substantially reduces the 

potential for shareholders to be harmed 

by manipulation. 

NYDIG’s research shows that the 

bitcoin futures market is one of the 

primary venues that market participants 

use to transact large exposures to 

bitcoin. This can be attributed to 

multiple factors, such as institutional 

familiarity with futures margining and 

settlement processes, the simplicity of 

cash settlement instead of physical 

settlement in a novel asset, and the 

efficient leverage offered by exchange 

margining. 

In contrast to the efficient leverage 

offered through the futures market, 

many bitcoin spot trading venues 

require full pre-funding of trading, 

which means it would be highly capital 

intensive to ‘‘spoof’’ or ‘‘layer’’ order 

books on spot trading venues. This 

further supports NYDIG’s conclusion 

that if a market participant intended to 

manipulate the price of bitcoin, and 

thereby the Shares, the bitcoin futures 

market is the one that would be 

manipulated first. 

As such, part (a) of the significant 

market test outlined above is satisfied 

and that common membership in ISG 


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38136 Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices 

20These statistics are based on three random 

daily samples of bitcoin liquidity in USD 

(excluding stablecoins or Euro liquidity) based on 

executable quotes on Coinbase Pro, Bitstamp and 

Itbit from January 1, 2021 to April 30, 2021. 

between the Exchange and CME would 

assist the Exchange in detecting and 

deterring misconduct in the Shares. 

(b) Predominant Influence on Prices in 

Spot and Bitcoin Futures 

According to the Sponsor, trading in 

the Shares would not be the 

predominant force on prices in the 

bitcoin futures market (or spot market) 

given the significant volume in the 

bitcoin futures market (in excess of $2.5 

billion in average daily volume), the 

size of bitcoin’s market cap (in excess of 

$1 trillion), and the significant liquidity 

available in the spot market (in excess 

of $2.5 billion in average daily volume, 

in each case as of April 30, 2021). 

In addition, NYDIG performed a 

conservative analysis, considering only 

a small subset of spot trading venues, 

that concludes that the cost to buy or 

sell $5 million worth of bitcoin averages 

roughly 20 basis points.20 For a $10 

million market order, the cost to buy or 

sell is roughly 40 basis points. This is 

comparable to the liquidity of existing 

commodity ETPs. Using more 

sophisticated execution strategies and 

additional liquidity sources would 

likely result in a lower cost to trade. 

As such, the overall size of the bitcoin 

market and the ability for market 

participants, including authorized 

participants creating and redeeming inkind with the Trust, to buy or sell large 

amounts of bitcoin without significant 

market impact supports the Sponsor’s 

belief that the Shares are unlikely to 

become a predominant force on pricing 

in either the bitcoin spot or bitcoin 

futures markets, satisfying part (b) of the 

test outlined above. 

The proposed rule change is also 

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, which involve the 

maintenance of surveillance procedures 

by the Exchange for the Shares. The 

Exchange has in place surveillance 

procedures that are sufficiently robust 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 information 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 

information regarding trading in the 

Shares from such markets and other 

entities. 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 through ETP Holders acting as 

registered Market Makers, in connection 

with such ETP Holders’ proprietary or 

customer trades through ETP Holders 

which they effect on any relevant 

market. 

(ii) Designed To Protect Investors and 

the Public Interest 

The Exchange believes the proposed 

rule change is designed to protect 

investors and the public interest. 

With the growth of OTC bitcoin 

funds, so too has grown the potential 

risk to U.S. investors. Significant and 

prolonged premiums and discounts, 

significant premium/discount volatility, 

high fees, insufficient disclosures, 

limited liquidity to trade or borrow 

shares, and the lack of surveillance and 

oversight through a listed exchange are 

putting U.S. investor money at risk in 

ways that could potentially be 

eliminated through access to the Shares. 

For example, the OTC bitcoin fund with 

the largest assets under management in 

the United States returned 46.41% yearto-date through April 30, 2021 while 

spot bitcoin returned 95.61% over the 

same period. The deviation in price 

performance can be attributed to the 

fluctuation in NAV of this fund. 

As such, the Sponsor believes that 

this proposed rule change would act to 

limit the risk to U.S. investors that are 

increasingly seeking exposure to 

bitcoin, with benefits such as the 

elimination of significant and prolonged 

premiums and discounts, the reduction 

of significant premium/discount 

volatility, the reduction of management 

fees through meaningful competition, 

the avoidance of risks associated with 

investing in operating companies that 

are imperfect proxies for bitcoin 

exposure, and substantially greater 

surveillance and regulatory oversight. 

The Exchange also notes there is a 

considerable amount of bitcoin price 

and market information available on 

public websites and through 

professional and subscription services. 

Investors may obtain, on a 24-hour 

basis, bitcoin pricing information based 

on the spot price for bitcoin from 

various financial information service 

providers. The closing price and 

settlement prices of bitcoin are readily 

available from the Bitcoin exchanges 

and other publicly available websites. In 

addition, such prices are published in 

public sources, or on-line information 

services such as Bloomberg. The Trust 

will provide daily website disclosure of 

its bitcoin holdings, net asset value, and 

closing price daily. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the CTA. Trading in Shares of the Trust 

will be halted if the circuit breaker 

parameters in NYSE Arca Rule 7.12–E 

have been reached or because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable. Additionally, 

the Exchange represents that the 

Exchange may halt trading during the 

day in which an interruption to the 

dissemination of the IIV occurs. If the 

interruption to the dissemination of the 

IIV 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 

with respect to the Shares is not 

disseminated to all market participants 

at the same time, it will halt trading in 

the Shares until such time as the NAV 

is available to all market participants. 

Moreover, 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 and 

of the suitability requirements of NYSE 

Arca Rule 9.2–E(a). The Information 

Bulletin will advise ETP Holders, prior 

to the commencement of trading, of the 

prospectus delivery requirements 

applicable to the Trust. The Information 

Bulletin will also discuss any 

exemptive, no-action, and interpretive 

relief granted by the Commission from 

any rules under the Act. In addition, the 

Information Bulletin will reference that 

the Trust is subject to various fees and 

expenses described in the Registration 

Statement. The Information Bulletin 

will disclose that information about the 

Shares will be publicly available on the 

Trust’s website. 

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. 


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Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices 38137 

21 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

As noted above, the Exchange has in 

place surveillance procedures that are 

adequate to properly monitor trading in 

the Shares in all trading sessions and 

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 

bitcoin holdings, and quotation and last 

sale information for the Shares. 

For the above reasons, the Exchange 

believes that the proposed rule change 

is consistent with the requirements of 

Section 6(b)(5) of the Act, and in the 

best interest of investors and the public 

at large. 

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 will 

facilitate the listing and trading of a new 

type of Commodity-Based Trust Share 

based on the price of bitcoin that 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 up to 90 days (i) as the 

Commission may designate if it finds 

such longer period to be appropriate 

and publishes its reasons for so finding 

or (ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEArca–2021–57 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–2021–57. 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 (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NYSEArca–2021–57 and 

should be submitted on or before 

August 9, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–15197 Filed 7–16–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92389; File No. SR–CBOE– 

2021–039] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the Fees 

Schedule With Respect to Certain Fees 

Related to Qualified Contingent Cross 

Orders and the Clearing Trading 

Permit Holder Fee Cap 

July 13, 2021. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on July 1, 

2021, Cboe Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘Cboe Options’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe Exchange, Inc. (the ‘‘Exchange’’ 

or ‘‘Cboe Options’’) proposes to amend 

the Fees Schedule with respect to 

certain fees related to Qualified 

Contingent Cross orders and the 

Clearing Trading Permit Holder (‘‘TPH’’) 

Fee Cap. The text of the proposed rule 

change is provided in Exhibit 5. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://www.cboe.com/ 

AboutCBOE/CBOELegal

RegulatoryHome.aspx), at the 

Exchange’s Office of the Secretary, 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 


lotter on DSK11XQN23PROD with NOTICES1