44062 Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4Commentary .02 to NYSE Arca Rule 8.200–E 

applies to Trust Issued Receipts that invest in 

‘‘Financial Instruments.’’ The term ‘‘Financial 

Instruments,’’ as defined in Commentary .02(b)(4) to 

NYSE Arca Rule 8.200–E, means any combination 

of investments, including cash; securities; options 

on securities and indices; futures contracts; options 

on futures contracts; forward contracts; equity caps, 

collars, and floors; and swap agreements. 

5On May 20, 2021, the Trust filed with the 

Commission a registration statement on Form S–1 

under the Securities Act of 1933 (15 U.S.C. 77a) 

(‘‘Securities Act’’) relating to the Fund (File No. 

333–256339) (the ‘‘Registration Statement’’). The 

description of the operation of the Trust and the 

Fund herein is based, in part, on the Registration 

Statement. 

6The daily settlements in MBT are derived 

directly from the settlements in BTC for each 

contract listing. See https://www.cmegroup.com/ 

confluence/display/EPICSANDBOX/Bitcoin#

Bitcoin-NormalDailySettlementProcedure.1. 

7The term ‘‘normal market conditions’’ includes, 

but is not limited to, the absence of: Trading halts 

in the applicable financial markets generally; 

operational issues (e.g., systems failure) causing 

dissemination of inaccurate market information; or 

force majeure type events such as a natural or 

manmade disaster, act of God, armed conflict, act 

of terrorism, riot or labor disruption or any similar 

intervening circumstance. See NYSE Arca Rule 

8.600–E(c)(5). 

8The term ‘‘cash equivalents’’ includes short term 

Treasury bills, money market funds, demand 

deposit accounts and commercial paper. 

9As discussed in more detail below, the CME 

determines the daily settlements for Bitcoin futures 

based on trading activity on CME Globex between 

14:59:00 and 15:00:00 Central Time (CT), which is 

the ‘‘settlement period.’’ 

HISTORY: 

June 17, 2011, 76 FR 35483; April 29, 

2005, 70 FR 22516. 

Ruth B. Stevenson, 

Chief Counsel, Ethics and Legal Compliance. 

[FR Doc. 2021–17117 Filed 8–10–21; 8:45 am] 

BILLING CODE 7710–12–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92573; File No. SR– 

NYSEArca–2021–53)] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of a 

Proposed Rule Change To List and 

Trade Shares of Teucrium Bitcoin 

Futures Fund Under NYSE Arca Rule 

8.200–E 

August 5, 2021. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on July 23, 

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

the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

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 following under 

NYSE Arca Rule 8.200–E, Commentary 

.02 (‘‘Trust Issued Receipts’’): Teucrium 

Bitcoin Futures Fund.Teucrium Bitcoin 

Futures Fund [sic]. 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 shares (‘‘Shares’’) of the following 

under NYSE Arca Rule 8.200–E, 

Commentary .02, which governs the 

listing and trading of Trust Issued 

Receipts: Teucrium Bitcoin Futures 

Fund (the ‘‘Fund’’).4

The Fund is a series of Teucrium 

Commodity Trust (the ‘‘Trust’’), a 

Delaware statutory trust.5 The Fund is 

managed and controlled by Teucrium 

Trading, LLC (‘‘Sponsor’’). The Sponsor 

is registered as a commodity pool 

operator (‘‘CPO’’) and a commodity 

trading adviser (‘‘CTA’’) with the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) and is a member 

of the National Futures Association 

(‘‘NFA’’). 

The Fund’s Investment Objective and 

Strategy 

According to the Registration 

Statement, the CME currently offers two 

Bitcoin futures contracts, one contract 

representing 5 Bitcoin (‘‘BTC 

Contracts’’) and another contract 

representing 0.10 Bitcoin (‘‘MBT 

Contracts’’). BTC Contracts began 

trading on the CME Globex trading 

platform on December 15, 2017 under 

the ticker symbol ‘‘BTC’’ and are cashsettled in U.S. dollars. MBT Contracts 

began trading on the CME Globex 

trading platform on May 3, 2021 under 

the ticker symbol ‘‘MBT’’ and are also 

cash-settled in U.S. dollars.6

BTC Contracts and MBT Contracts 

each trade six consecutive monthly 

contracts plus two additional December 

contract months (if the 6 consecutive 

months include December, only one 

additional December contract month is 

listed). Because BTC Contracts and MBT 

Contracts are exchange-listed, they 

allow investors to gain exposure to 

Bitcoin without having to hold the 

underlying cryptocurrency. Like a 

futures contract on a commodity or 

stock index, BTC Contracts and MBT 

Contracts allow investors to hedge 

investment positions or speculate on the 

future price of Bitcoin. 

According to the Registration 

Statement, the investment objective of 

the Fund is to have the daily changes in 

the net asset value (‘‘NAV’’) of the 

Fund’s shares (‘‘Shares’’) reflect the 

daily changes in the price of a specified 

benchmark (the ‘‘Benchmark’’). The 

Benchmark is the average of the closing 

settlement prices for the first to expire 

and second to expire BTC Contracts 

listed on the Chicago Mercantile 

Exchange, Inc. (‘‘CME’’). The first to 

expire and second to expire BTC 

Contracts and MBT Contracts are 

referred to as the Bitcoin Futures 

Contracts. Under normal market 

conditions,7 the Fund will invest in 

Bitcoin Futures Contracts and in cash 

and cash equivalents.8

According to the Registration 

Statement, the Fund seeks to maintain 

its holdings in Bitcoin Futures Contracts 

with a roughly constant expiration 

profile. Therefore, the Fund’s positions 

will be changed or ‘‘rolled’’ on a regular 

basis in order to track the changing 

nature of the Benchmark by closing out 

first to expire contracts prior to 

settlement that are no longer part of the 

Benchmark, and then entering into 

second to expire contracts. Accordingly, 

the Fund will never carry futures 

positions all the way to cash 

settlement—the Fund will price only off 

of the daily settlement prices of the 

Bitcoin Futures Contracts.9 To achieve 

this, the Fund will roll its futures 


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10For additional information about Bitcoin and 

the Bitcoin Network, see https://bitcoin.org/en/ 

gettingstarted. 

11See Order Setting Aside Action by Delegated 

Authority and Disapproving a Proposed Rule 

Change, as Modified by Amendments No. 1 and 2, 

to List and Trade Shares of the Winklevoss Bitcoin 

Trust, Securities Exchange Act Release No. 83723 

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

‘‘Winklevoss II Order’’). This proposal was 

subsequently disapproved by the Commission. See 

id. 

12 Digital assets that are securities under U.S. law 

are referred to throughout this proposal as ‘‘digital 

asset securities.’’ All other digital assets, including 

Bitcoin, are referred to interchangeably as 

‘‘cryptocurrencies’’ or ‘‘virtual currencies.’’ The 

term ‘‘digital assets’’ refers to all digital assets, 

including both digital asset securities and 

cryptocurrencies, together. 

13See ‘‘In the Matter of Coinflip, Inc.’’ 

(‘‘Coinflip’’) (CFTC Docket 15–29 (September 17, 

2015)) (order instituting proceedings pursuant to 

Sections 6(c) and 6(d) of the CEA, making findings 

and imposing remedial sanctions), in which the 

CFTC stated: ‘‘Section 1a(9) of the CEA defines 

‘commodity’ to include, among other things, ‘all 

services, rights, and interests in which contracts for 

future delivery are presently or in the future dealt 

in.’ 7 U.S.C. 1a(9). The definition of a ‘commodity’ 

is broad. See, e.g., Board of Trade of City of Chicago 

v. SEC, 677 F.2d 1137, 1142 (7th Cir. 1982). Bitcoin 

and other virtual currencies are encompassed in the 

definition and properly defined as commodities.’’ 

holdings prior to cash settlement of the 

expiring contract. 

In seeking to achieve the Fund’s 

investment objective, the Sponsor will 

employ a ‘‘neutral’’ investment strategy 

that is intended to track the changes in 

the Benchmark regardless of whether 

the Benchmark goes up or goes down. 

The Fund will endeavor to trade in 

Bitcoin Futures Contracts so that the 

Fund’s average daily tracking error 

against the Benchmark will be less than 

10 percent over any period of 30 trading 

days. The Fund’s ‘‘neutral’’ investment 

strategy is designed to permit investors 

generally to purchase and sell the 

Fund’s Shares for the purpose of 

investing in the Bitcoin Futures 

Contracts (as discussed below). Such 

investors may include participants in 

the Bitcoin market seeking to hedge the 

risk of losses in their Bitcoin-related 

transactions, as well as investors 

seeking price exposure to the Bitcoin 

market. 

According to the Registration 

Statement, one factor determining the 

total return from investing in futures 

contracts is the price relationship 

between soon to expire contracts and 

later to expire contracts. If the futures 

market is in a state of backwardation 

(i.e., when the price of BTC Contracts 

and MBT Contracts in the future is 

expected to be less than the current 

price), the Fund will buy later to expire 

contracts for a lower price than the 

sooner to expire contracts that it sells. 

Hypothetically, and assuming no 

changes to either prevailing BTC 

Contracts and MBT Contracts’ prices or 

the price relationship between soon to 

expire contracts and later to expire 

contracts, the value of a contract will 

rise as it approaches expiration. Over 

time, if backwardation remained 

constant, the performance of a portfolio 

would continue to be affected. If the 

futures market is in contango, the Fund 

will buy later to expire contracts for a 

higher price than the sooner to expire 

contracts that it sells. Hypothetically, 

and assuming no other changes to either 

prevailing BTC Contracts and MBT 

Contracts’ prices or the price 

relationship between the spot price, 

soon to expire contracts and later to 

expire contracts, the value of a contract 

will fall as it approaches expiration. 

Over time, if contango remained 

constant, the performance of a portfolio 

would continue to be affected. 

Frequently, whether contango or 

backwardation exists is a function, 

among other factors, of the prevailing 

market conditions of the underlying 

market and government policy. 

Summary of the Application 

The CME is a regulated futures 

exchange with the requisite oversight, 

controls, and regulatory scrutiny 

necessary to maintain, promote, and 

effectuate fair and transparent trading of 

its listed products, including the BTC 

Contracts and MBT Contracts. The BTC 

Contracts and MBT Contracts are highly 

liquid, financially-settled instrument 

with no ownership interests of any kind 

in actual Bitcoin. The unique risks 

currently posed by the trading and/or 

storage of Bitcoins are not posed by BTC 

Contracts and MBT Contracts. As 

proposed, the Fund would solely hold 

BTC Contracts and MBT Contracts, and 

as such, would be an investment 

product similar to any other exchangetraded product (‘‘ETP’’) whose 

component holdings are futures 

contracts traded on a regulated 

exchange. The Sponsor believes that 

investors would be afforded all of the 

protections that exchanges provide, 

including bilateral surveillance 

agreements between the listing 

exchange of the ETP and the listing 

exchange of the ETP’s futures-based 

components. 

According to the Registration 

Statement, the Fund will be a liquid, 

transparent investment product separate 

and apart from any other Bitcoin related 

product, including actual Bitcoin traded 

in any other venue. An ETP whose 

holdings consists exclusively of BTC 

Contracts and MBT Contracts would 

have all the benefits enjoyed by 

investors currently holding approved 

and listed futures-based ETPs without 

the risks associated with ETPs that hold 

actual Bitcoin. A futures-based Bitcoin 

ETP will fulfill investor demand for a 

highly regulated product that provides 

exposure to the price of Bitcoin without 

certain risks associated with holding 

actual Bitcoin. 

The Bitcoin and Bitcoin Futures 

Markets Have Progressed and Matured 

Significantly 

According to the Registration 

Statement, and as discussed in further 

detail below, Bitcoin is a digital asset 

based on the decentralized, open source 

protocol of the peer-to-peer computer 

network launched in 2009 that governs 

the creation, movement, and ownership 

of Bitcoin and hosts the public ledger, 

or ‘‘blockchain,’’ on which all Bitcoin 

transactions are recorded (the ‘‘Bitcoin 

Network’’ or ‘‘Bitcoin’’). The 

decentralized nature of the Bitcoin 

Network allows parties to transact 

directly with one another based on 

cryptographic proof instead of relying 

on a trusted third party. The protocol 

also lays out the rate of issuance of new 

Bitcoin within the Bitcoin Network, a 

rate that is reduced by half 

approximately every four years with an 

eventual hard cap of 21 million. It is 

generally understood that the 

combination of these two features—a 

systemic hard cap of 21 million Bitcoin 

and the ability to transact with anyone 

connected to the Bitcoin Network— 

gives Bitcoin its value.10

The first rule filing proposing to list 

an exchange-traded product to provide 

exposure to Bitcoin in the U.S. was 

submitted by the Cboe BZX Exchange, 

Inc. on June 30, 2016.11 At that time, 

blockchain technology, and digital 

assets that utilized it, were relatively 

new to the broader public. The market 

cap of all Bitcoin in existence at that 

time was approximately $10 billion. No 

registered offering of digital asset 

securities or shares in an investment 

vehicle with exposure to Bitcoin or any 

other cryptocurrency had yet been 

conducted, and the regulated 

infrastructure for conducting a digital 

asset securities offering had not begun 

to develop.12 Similarly, regulated U.S. 

Bitcoin futures contracts did not exist. 

The Commodity Futures Trading 

Commission (the ‘‘CFTC’’) had 

determined that Bitcoin is a 

commodity,13 but had not engaged in 

significant enforcement actions in the 

space. The New York Department of 

Financial Services (‘‘NYDFS’’) adopted 

its final BitLicense regulatory 

framework in 2015, but had only 

approved four entities to engage in 


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44064 Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 

14A list of virtual currency businesses that are 

entities regulated by the NYDFS is available on the 

NYDFS website. See https://www.dfs.ny.gov/apps_

and_licensing/virtual_currency_businesses/ 

regulated_entities. 15See Bitcoin Investment Trust Form S–1, dated 

May 27, 2016, available at: https://www.sec.gov/ 

Archives/edgar/data/1588489/000095012

316017801/filename1.htm (data as of March 31, 

2016 according to publicly available filings). 

16See Letter from Dalia Blass, Director, Division 

of Investment Management, U.S. Securities and 

Exchange Commission to Paul Schott Stevens, 

President & CEO, Investment Company Institute 

and Timothy W. Cameron, Asset Management 

Group—Head, Securities Industry and Financial 

Markets Association (January 18, 2018), available 

at: https://www.sec.gov/divisions/investment/ 

noaction/2018/cryptocurrency-011818.htm. 

17See Prospectus Supplement filed pursuant to 

Rule 424(b)(1) for INX Tokens (Registration No. 

333–233363), available at: https://www.sec.gov/ 

Archives/edgar/data/1725882/0001213

90020023202/ea125858-424b1_inxlimited.htm. 

18See Prospectus filed by Stone Ridge Trust VI 

on behalf of NYDIG Bitcoin Strategy Fund 

Registration, available at: https://www.sec.gov/ 

Archives/edgar/data/1764894/0001193125193

09942/d693146d497.htm. 

19See Securities Exchange Act Release No. 90788, 

86 FR 11627 (February 26, 2021) (File Number S7– 

25–20) (Custody of Digital Asset Securities by 

Special Purpose Broker-Dealers). 

20See Letter from Elizabeth Baird, Deputy 

Director, Division of Trading and Markets, U.S. 

Securities and Exchange Commission to Kris 

Dailey, Vice President, Risk Oversight & 

Operational Regulation, Financial Industry 

Regulatory Authority (September 25, 2020), 

available at: https://www.sec.gov/divisions/ 

marketreg/mr-noaction/2020/finra-ats-role-insettlement-of-digital-asset-security-trades09252020.pdf. 

21See Letter from Jeffrey S. Mooney, Associate 

Director, Division of Trading and Markets, U.S. 

Securities and Exchange Commission to Charles G. 

Cascarilla & Daniel M. Burstein, Paxos Trust 

Company, LLC (October 28, 2019), available at: 

https://www.sec.gov/divisions/marketreg/mrnoaction/2019/paxos-trust-company-102819- 

17a.pdf. 

22See, e.g., Form TA–1/A filed by Tokensoft 

Transfer Agent LLC (CIK: 0001794142) on January 

8, 2021, available at: https://www.sec.gov/Archives/ 

edgar/data/1794142/000179414219000001/ 

xslFTA1X01/primary_doc.xml. 

23See, e.g., ‘‘Riding Bitcoin Surge, Coinbase 

Active Users Grew by 117% in Q1 2021; Revenue 

Tops $1.8B’’ (April 6, 2021), available at: https:// 

www.coindesk.com/coinbase-q1-earnings-reportmonthly-active-users. 

24All statistics and charts included in this 

proposal with respect to the CME are sourced from 

https://www.cmegroup.com/trading/bitcoinfutures.html. In addition, as further discussed 

below, the Sponsor believes the CME represents a 

regulated market of significant size for purposes of 

addressing the Commission’s concerns about 

potential manipulation of the Bitcoin market. 25The CFTC’s annual report for Fiscal Year 2020 

(which ended on September 30, 2020) noted that 

the CFTC ‘‘continued to aggressively prosecute 

misconduct involving digital assets that fit within 

the CEA’s definition of commodity’’ and ‘‘brought 

a record setting seven cases involving digital 

assets.’’ See CFTC FY2020 Division of Enforcement 

Annual Report, available at: https://www.cftc.gov/ 

media/5321/DOE_FY2020_AnnualReport_120120/ 

download. Additionally, the CFTC filed on October 

1, 2020, a civil enforcement action against the 

owner/operators of the BitMEX trading platform, 

which was one of the largest Bitcoin derivative 

exchanges. See CFTC Release No. 8270–20 (October 

1, 2020), available at: https://www.cftc.gov/ 

PressRoom/PressReleases/8270-20. 

26See OCC News Release 2021–2 (January 4, 

2021), available at: https://www.occ.gov/newsissuances/news-releases/2021/nr-occ-2021-2.html. 27See OCC News Release 2021–6 (January 13, 

2021), available at: https://www.occ.gov/newsissuances/news-releases/2021/nr-occ-2021-6.html 

and OCC News Release 2021–19 (February 5, 2021), 

available at: https://www.occ.gov/news-issuances/ 

news-releases/2021/nr-occ-2021-19.html. 28See FinCEN Guidance FIN–2019–G001 (May 9, 

2019) (Application of FinCEN’s Regulations to 

Certain Business Models Involving Convertible 

Virtual Currencies), available at: https://

www.fincen.gov/sites/default/files/2019-05/ 

FinCEN%20Guidance%20CVC%20

FINAL%20508.pdf. 

29See U.S. Department of the Treasury Press 

Release: ‘‘The Financial Crimes Enforcement 

Network Proposes Rule Aimed at Closing AntiMoney Laundering Regulatory Gaps for Certain 

Convertible Virtual Currency and Digital Asset 

Transactions’’ (December 18, 2020), available at: 

https://home.treasury.gov/news/press-releases/ 

sm1216. 

activities relating to virtual currencies 

(whether through granting a BitLicense 

or a limited-purpose trust charter) as of 

June 30, 2016.14 While the first over-thecounter Bitcoin fund launched in 2013, 

public trading was limited and the fund 

had only $60 million in assets.15 There 

were very few, if any, traditional 

financial institutions engaged in the 

space, whether through investment or 

providing services to digital asset 

companies. In January 2018, the Staff of 

the Commission noted in a letter to the 

Investment Company Institute and 

SIFMA that it was not aware, at that 

time, of a single custodian providing 

fund custodial services for digital 

assets.16

As of the first quarter of 2021, the 

digital assets financial ecosystem, 

including Bitcoin, has progressed and 

matured significantly. The development 

of a regulated market for digital asset 

securities has significantly evolved, 

with market participants having 

conducted registered public offerings of 

both digital asset securities 17 and shares 

in investment vehicles holding Bitcoin 

futures.18 Additionally, licensed and 

regulated service providers have 

emerged to provide fund custodial 

services for digital assets, among other 

services. For example, in December 

2020, the Commission adopted a 

conditional no-action position 

permitting certain special purpose 

broker-dealers to custody digital asset 

securities under Rule 15c3–3 under the 

Exchange Act.19 In September 2020, the 

Staff of the Commission released a noaction letter permitting certain brokerdealers to operate a non-custodial 

Alternative Trading System (‘‘ATS’’) for 

digital asset securities, subject to 

specified conditions.20 In October 2019, 

the Staff of the Commission granted 

temporary relief from the clearing 

agency registration requirement to an 

entity seeking to establish a securities 

clearance and settlement system based 

on distributed ledger technology; 21 and 

multiple transfer agents who provide 

services for digital asset securities have 

registered with the Commission.22

Beyond the Commission’s purview, 

the regulatory landscape has also 

changed significantly since 2016, and 

cryptocurrency markets have grown and 

evolved as well. The market for Bitcoin 

is approximately 100 times larger, 

having recently reached a market cap of 

over $1 trillion. On February 27, 2021, 

Bitcoin’s market cap was greater than 

companies such as Facebook, Inc., 

Berkshire Hathaway Inc., and JP Morgan 

Chase & Co. The number of verified 

users at Coinbase, the largest U.S.-based 

Bitcoin exchange, has grown to over 56 

million.23 CFTC-regulated Bitcoin 

futures (‘‘Bitcoin Futures’’) represented 

approximately $28 billion in notional 

trading volume on the CME in 

December 2020 compared to $737 

million, $1.4 billion, and $3.9 billion in 

total trading in December 2017, 

December 2018, and December 2019, 

respectively. Bitcoin Futures traded 

over $1.2 billion per day in December 

2020 and represented $1.6 billion in 

open interest compared to $115 million 

in December 2019.24 The CFTC has 

exercised its regulatory jurisdiction in 

bringing a number of enforcement 

actions related to Bitcoin and against 

trading platforms that offer 

cryptocurrency trading.25 The U.S. 

Office of the Comptroller of the 

Currency (the ‘‘OCC’’) has made clear 

that federally-chartered banks are able 

to provide custody services for 

cryptocurrencies and other digital 

assets.26 The OCC recently granted 

conditional approval of two charter 

conversions by state-chartered trust 

companies to national banks, both of 

which provide cryptocurrency custody 

services.27 NYDFS has granted no fewer 

than twenty-five BitLicenses, including 

to established public payment 

companies like PayPal Holdings, Inc. 

and Square, Inc., and limited purpose 

trust charters to entities providing 

cryptocurrency custody services. The 

U.S. Treasury Financial Crimes 

Enforcement Network (‘‘FinCEN’’) has 

released extensive guidance regarding 

the applicability of the Bank Secrecy 

Act (‘‘BSA’’) and implementing 

regulations to virtual currency 

businesses,28 and has proposed rules 

imposing requirements on entities 

subject to the BSA that are specific to 

the technological context of virtual 

currencies.29 In addition, the Treasury’s 

Office of Foreign Assets Control 


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30See U.S. Department of the Treasury 

Enforcement Release: ‘‘OFAC Enters Into $98,830 

Settlement with BitGo, Inc. for Apparent Violations 

of Multiple Sanctions Programs Related to Digital 

Currency Transactions’’ (December 30, 2020), 

available at: https://home.treasury.gov/system/files/ 

126/20201230_bitgo.pdf. 

31On December 10, 2020, Massachusetts Mutual 

Life Insurance Company (MassMutual) announced 

that it had purchased $100 million in Bitcoin for 

its general investment account. See MassMutual 

Press Release ‘‘Institutional Bitcoin provider NYDIG 

announces minority stake purchase by 

MassMutual’’ (December 10, 2020), available at: 

https://www.massmutual.com/about-us/news-andpress-releases/press-releases/2020/12/institutionalbitcoin-provider-nydig-announces-minority-stakepurchase-by-massmutual. 

32See, e.g., ‘‘Morgan Stanley to Offer Rich Clients 

Access to Bitcoin Funds’’ (March 17, 2021) 

available at: https://www.bloomberg.com/news/ 

articles/2021-03-17/morgan-stanley-to-offer-richclients-access-to-bitcoin-funds. 

33See, e.g., ‘‘BlackRock’s Rick Rieder says the 

world’s largest asset manager has ‘started to dabble’ 

in Bitcoin’’ (February 17, 2021), available at: 

https://www.cnbc.com/2021/02/17/blackrock-hasstarted-to-dabble-in-bitcoin-says-rick-rieder.html 

and ‘‘Guggenheim’s Scott Minerd Says Bitcoin 

Should Be Worth $400,000’’ (December 16, 2020), 

available at: https://www.bloomberg.com/news/ 

articles/2020-12-16/guggenheim-s-scott-minerdsays-bitcoin-should-be-worth-400-000. 

34See, e.g., ‘‘Visa Moves to Allow Payment 

Settlements Using Cryptocurrency’’ (March 29, 

2021), available at: https://www.reuters.com/ 

business/autos-transportation/exclusive-visamoves-allow-payment-settlements-usingcryptocurrency-2021-03-29/. 

35See, e.g., ‘‘Harvard and Yale Endowments 

Among Those Reportedly Buying Crypto’’ (January 

25, 2021), available at: https://

www.bloomberg.com/news/articles/2021-01-26/ 

harvard-and-yale-endowments-among-thosereportedly-buying-crypto. 

36See, e.g., ‘‘Virginia Police Department Reveals 

Why its Pension Fund is Betting on Bitcoin’’ 

(February 14, 2019), available at: https://

finance.yahoo.com/news/virginia-policedepartment-reveals-why-194558505.html. 

37See, e.g., ‘‘Bridgewater: Our Thoughts on 

Bitcoin’’ (January 28, 2021) available at: https://

www.bridgewater.com/research-and-insights/ourthoughts-on-bitcoin and ‘‘Paul Tudor Jones says he 

likes bitcoin even more now, rally still in the ‘first 

inning’ ’’ (October 22, 2020), available at: https://

www.cnbc.com/2020/10/22/-paul-tudor-jones-sayshe-likes-bitcoin-even-more-now-rally-still-in-thefirst-inning.html. 

38See Letter from Division of Corporation 

Finance, Office of Real Estate & Construction to 

Barry E. Silbert, Chief Executive Officer, Grayscale 

Bitcoin Trust (January 31, 2020), available at: 

https://www.sec.gov/Archives/edgar/data/1588489/ 

000000000020000953/filename1.pdf. 

39See Form 10–K submitted by Tesla, Inc. for the 

fiscal year ended December 31, 2020 at 23: https:// 

www.sec.gov/ix?doc=/Archives/edgar/data/ 

1318605/000156459021004599/tsla-10k_

20201231.htm. 

40See Form 10–Q submitted by MicroStrategy 

Incorporated for the quarterly period ended 

September 30, 2020 at 8: https://www.sec.gov/ 

ix?doc=/Archives/edgar/data/1050446/000156459

020047995/mstr-10q_20200930.htm. 

41See Form 10–Q submitted by Square, Inc. for 

the quarterly period ended September 30, 2020 at 

51: https://www.sec.gov/ix?doc=/Archives/edgar/ 

data/1512673/000151267320000012/sq20200930.htm. 

42Securities regulators in a number of other 

countries have either approved or otherwise 

allowed the listing and trading of Bitcoin ETPs. 

Specifically, these funds (with their respective 

approximate AUMs as of April 14, 2021) include 

the Purpose Bitcoin ETF ($993,000,000), VanEck 

Vectors Bitcoin ETN ($209,000,000), WisdomTree 

Bitcoin ETP ($407,000,000), Bitcoin Tracker One 

($1,380,000,000), BTCetc Bitcoin ETP 

($1,410,000,000), 21Shares Bitcoin ETP 

($362,000,000), 21Shares Bitcoin Suisse ETP 

($30,000,000), CoinShares Physical Bitcoin ETP 

($396,000,000). 

43See, e.g., Stone Ridge Trust VI (File No. 333– 

234055); BlackRock Global Allocation Fund, Inc. 

(File No. 33–22462); and BlackRock Funds V (File 

No. 333–224371). 

44See, e.g., Amplify Transformational Data 

Sharing ETF (File No. 333–207937); and ARK 

Innovation ETF (File No. 333–191019). 

45See Stone Ridge Trust, Post-Effective 

Amendment No. 74 to Registration Statement on 

Form N–1A (File No. 333–184477), available at: 

https://www.sec.gov/Archives/edgar/data/1559992/ 

000119312521072856/d129263d485apos.htm. 

(‘‘OFAC’’) has brought enforcement 

actions over apparent violations of the 

sanctions laws in connection with the 

provision of wallet management 

services for digital assets.30

In addition to the regulatory 

developments noted above, more 

traditional financial market participants 

appear to be embracing cryptocurrency: 

large insurance companies,31

investment banks,32 asset managers,33

credit card companies,34 university 

endowments,35 pension funds,36 and 

even historically Bitcoin skeptical fund 

managers 37 are allocating to Bitcoin. 

The largest over-the-counter Bitcoin 

fund previously filed a Form 10 

registration statement, which the Staff of 

the Commission reviewed and which 

took effect automatically, and is now a 

reporting company.38 Established 

companies like Tesla, Inc.,39

MicroStrategy Incorporated,40 and 

Square, Inc.,41 among others, have 

recently announced substantial 

investments in Bitcoin in amounts as 

large as $1.5 billion (Tesla) and $425 

million (MicroStrategy). 

The Sponsor maintains that despite 

these developments, access for U.S. 

retail investors to gain exposure to 

Bitcoin via a transparent and regulated 

exchange-traded vehicle remains 

limited. As investors and advisors 

increasingly utilize ETPs to manage 

diversified portfolios (including 

equities, fixed income securities, 

commodities, and currencies) quickly, 

easily, relatively inexpensively, taxefficiently, and without having to hold 

directly any of the underlying assets; 

options for Bitcoin exposure for U.S. 

investors remain limited to: (i) Investing 

in over-the-counter Bitcoin funds (‘‘OTC 

Bitcoin Funds’’) that are subject to high 

premium/discount volatility (and high 

management fees) to the advantage of 

more sophisticated investors that are 

able to purchase shares at NAV directly 

with the issuing trust; (ii) facing the 

technical risk, complexity, and 

generally high fees associated with 

buying and storing Bitcoin directly; or 

(iii) purchasing shares of operating 

companies that they believe will 

provide proxy exposure to Bitcoin with 

limited disclosure about the associated 

risks. Meanwhile, investors in many 

other countries, including Canada, are 

able to use more traditional exchange 

listed and traded products to gain 

exposure to Bitcoin.42

For example, the Purpose Bitcoin 

ETF, a retail physical Bitcoin ETP 

recently launched in Canada, reportedly 

reached $421.8 million in assets under 

management (‘‘AUM’’) in two days, and 

has achieved $993 million in assets as 

of April 14, 2021, demonstrating the 

demand for a North American market 

listed Bitcoin ETP. The Sponsor 

believes that the demand for the 

Purpose Bitcoin ETF is driven primarily 

by investors’ desire to have a regulated 

and accessible means of exposure to 

[sic]. The Purpose Bitcoin ETF also 

offers a class of units that is U.S. dollar 

Bitcoin denominated, which could 

appeal to U.S. investors. Without an 

approved Bitcoin ETP in the U.S. as a 

viable alternative, the Sponsor believes 

U.S. investors will seek to purchase 

these shares in order to get access to 

Bitcoin exposure, leaving them without 

the protections of U.S. securities laws. 

Given the separate regulatory regime 

and the potential difficulties associated 

with any international litigation, such 

an arrangement would create more risk 

exposure for U.S. investors than they 

would otherwise have with a U.S. 

exchange listed ETP. With the addition 

of more Bitcoin ETPs in non-U.S. 

jurisdictions expected to grow, the 

Sponsor anticipates that such risks will 

only continue to grow. 

In addition, several funds registered 

under the Investment Company Act of 

1940 (the ‘‘1940 Act’’) have effective 

registration statements that contemplate 

Bitcoin exposure through a variety of 

means, including through investments 

in Bitcoin futures contracts 43 and 

through OTC Bitcoin Funds.44 As of the 

date of this filing, it is anticipated that 

other 1940 Act funds will soon begin to 

pursue Bitcoin through other means, 

including through options on Bitcoin 

futures contracts and investments in 

privately offered pooled investment 

vehicles that invest in Bitcoin.45 In 

previous statements, the Staff of the 

Commission has acknowledged how 

such funds can satisfy their concerns 

regarding custody, valuation, and 


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44066 Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 

46See Dalia Blass, ‘‘Keynote Address—2019 ICI 

Securities Law Developments Conference’’ 

(December 3, 2019), available at: https://

www.sec.gov/news/speech/blass-keynote-address2019-ici-securities-law-developments-conference. 

47Because OTC Bitcoin Funds are not listed on 

an exchange, they are also not subject to the same 

transparency and regulatory oversight by a listing 

exchange as the Shares would be. In the case of the 

Fund, the existence of an information sharing 

agreement between the Exchange and the CME 

results in increased investor protections as 

compared to OTC Bitcoin Funds. 

48The inability to trade in line with NAV may at 

some point result in OTC Bitcoin Funds trading at 

a discount to their NAV, which has occurred more 

recently with respect to one prominent OTC Bitcoin 

Fund. While that has not historically been the case, 

and it is not clear whether such discounts will 

continue, such a prolonged, significant discount 

scenario would give rise to nearly identical 

potential issues related to trading at a premium. 

49Compare to an AUM of approximately $2.6 

billion on February 26, 2020, the date on which the 

Commission issued the most recent disapproval 

order for a Bitcoin ETP. See Order Disapproving a 

Proposed Rule Change, as Modified by Amendment 

No. 1, to Amend NYSE Arca Rule 8.201–E 

(Commodity-Based Trust Shares) and to List and 

Trade Shares of the United States Bitcoin and 

Treasury Investment Trust Under NYSE Arca Rule 

8.201–E, Securities Exchange Act Release No. 88284 

(February 26, 2020), 85 FR 12595 (March 3, 2020) 

(SR–NYSE Arca-2019–39) (the ‘‘Wilshire Phoenix 

Order’’). While the price of one Bitcoin has 

increased approximately 400% in the intervening 

period, the total AUM has increased by 

approximately 1240%, indicating that the increase 

in AUM is attributable to more than just price 

appreciation in Bitcoin. 

50See ‘‘Traders Piling Into Overvalued Crypto 

Funds Risk a Painful Exit’’ (February 4, 2021), 

available at: https://www.bloomberg.com/news/ 

articles/2021-02-04/bitcoin-one-big-risk-wheninvesting-in-crypto-funds. 

51This discount is compared to another OTC 

Bitcoin Product which had a premium of over 60% 

on the same day, with a premium of over 200% a 

few days earlier. 

manipulation.46 The funds that have 

already invested in Bitcoin instruments 

have no reported issues regarding 

custody, valuation, or manipulation of 

the instruments held by these funds. 

While these funds do offer investors 

some means of exposure to Bitcoin, the 

Sponsor believes the current offerings 

fall short of giving investors an 

accessible, regulated product that 

provides concentrated exposure to 

Bitcoin and Bitcoin prices. 

OTC Bitcoin Funds and Investor 

Protection 

The Sponsor notes that U.S. investor 

exposure to Bitcoin through OTC 

Bitcoin Funds has grown into the tens 

of billions of dollars. With that growth, 

so too has grown the potential risk to 

U.S. investors. As described below, 

premium and discount volatility, high 

fees, insufficient disclosures, and 

technical hurdles are exposing U.S. 

investors to risks that could potentially 

be eliminated through access to a 

Bitcoin futures-based ETP. Investor 

protection concerns remain and are 

growing related to OTC Bitcoin Funds. 

The Sponsor understands the 

Commission’s previous focus in prior 

disapproval orders on potential 

manipulation of a Bitcoin ETP holding 

actual Bitcoin, but believes that such 

concerns have been sufficiently 

mitigated by the use of futures contracts 

in the proposed ETP. Accordingly, the 

Sponsor believes that the Fund 

represents an opportunity for U.S. 

investors to gain price exposure to 

Bitcoin futures contracts in a regulated 

and transparent exchange-traded vehicle 

that limits risks by: (i) Reducing 

premium and discount volatility; (ii) 

reducing management fees through 

meaningful competition; (iii) reducing 

risks associated with investing in 

operating companies that are imperfect 

proxies for Bitcoin exposure; and (iv) 

avoiding regulatory concerns regarding 

custody and valuation posed by ETFs 

and ETPs that invest directly in Bitcoin 

rather than in Bitcoin futures contracts. 

OTC Bitcoin Funds and Premium/ 

Discount Volatility 

According to the Sponsor, OTC 

Bitcoin Funds are generally designed to 

provide exposure to Bitcoin in a manner 

similar to the Shares. However, unlike 

the Shares, OTC Bitcoin Funds are 

unable to freely offer creation and 

redemption in a way that incentivizes 

market participants to keep their shares 

trading in line with their NAV 47 and, as 

a result, shares of OTC Bitcoin Funds 

frequently trade at a price that is out of 

line with the value of their assets held. 

Historically, OTC Bitcoin Funds have 

traded at a significant premium to 

NAV.48

Trading at a premium or a discount is 

not unique to OTC Bitcoin Funds and is 

not in itself problematic, but the size of 

such premiums/discounts and volatility 

thereof highlight the key differences in 

operations and market structure of OTC 

Bitcoin Funds as compared to ETPs. 

Combined with the significant 

increase in AUM for OTC Bitcoin Funds 

over the past year, the size and volatility 

of premiums and discounts for OTC 

Bitcoin Funds have given rise to 

significant and quantifiable investor 

protection issues, as further described 

below. In fact, the largest OTC Bitcoin 

Fund has grown to $35.0 billion in 

AUM as of February 19, 2021 49 and has 

historically traded at a premium of 

between roughly five and forty percent, 

though it has seen premiums at times 

above one hundred percent.50 Recently, 

however, it has traded at a discount. As 

of March 24, 2021, the discount was 

approximately 14%,51 representing 

around $4.9 billion less in market value 

than the Bitcoin actually held by the 

fund. If premium/discount numbers 

move back to the middle of its historical 

range to a 20% premium (which 

historically could occur at any time and 

overnight), it would represent a swing of 

approximately $11.9 billion in value 

unrelated to the value of Bitcoin held by 

the fund and if the premium returns to 

the upper end of its typical range, that 

number increases to $18.9 billion. These 

numbers are only associated with a 

single OTC Bitcoin Fund—as more and 

more OTC Bitcoin Funds come to 

market and more investor assets flood 

into them to get access to Bitcoin 

exposure, the potential dollars at risk 

will only increase. 

The Sponsor believes that the risks 

associated with volatile premiums/ 

discounts for OTC Bitcoin Funds raise 

significant investor protection issues in 

several ways. First, investors may be 

buying shares of a fund for a price that 

is not reflective of the per share value 

of the fund’s underlying assets. Even 

operating within the normal premium 

range, it is possible for an investor to 

buy shares of an OTC Bitcoin Fund only 

to have those shares quickly lose 10% 

or more in dollar value without any 

movement of the price of Bitcoin. That 

is to say—the price of Bitcoin could 

have stayed exactly the same from 

market close on one day to market open 

the next, yet the value of the shares held 

by the investor decreased only because 

of the fluctuation of the premium/ 

discount. As more investment vehicles, 

including mutual funds and ETFs, seek 

to gain exposure to Bitcoin, the easiest 

option for a buy and hold strategy is 

often an OTC Bitcoin Fund, meaning 

that even investors that do not directly 

buy OTC Bitcoin Funds can be 

disadvantaged by extreme premiums (or 

discounts) and premium volatility. 

The second issue is related to the first 

and explains how the premium in OTC 

Bitcoin Funds essentially creates a 

transfer of value from retail investors to 

more sophisticated investors. Generally 

speaking, only accredited investors are 

able to purchase shares from the issuing 

fund, which means that they are able to 

purchase shares directly with the fund 

at NAV (in exchange for either cash or 

Bitcoin) without having to pay the 

premium or sell into the discount. 

While there are often minimum holding 

periods for shares required by law, an 

investor that is allowed to purchase 

directly from the fund is able to hedge 

their Bitcoin exposure as needed to 

satisfy the holding requirements and 

collect on the premium or discount 

opportunity. 

As noted above, the existence of a 

premium or discount and the premium/ 


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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 44067 

52For example, similar premiums/discounts and 

premium/discount volatility exist for other nonBitcoin cryptocurrency related over-the-counter 

funds, but the size and investor interest in those 

funds does not give rise to the same investor 

protection concerns that exist for OTC Bitcoin 

Funds. 

53At $35 billion in AUM, the largest OTC Bitcoin 

Fund would be among the top 40 largest out of 

roughly 2,400 U.S. listed ETPs. 

54 In two recent incidents, the premium dropped 

from 28.28% to 12.29% from the close on 3/19/20 

to the close on 3/20/20 and from 38.40% to 21.05% 

from the close on 5/13/19 to the close on 5/14/19. 

Similarly, over the period of 12/21/20 to 1/21/20, 

the premium went from 40.18% to 2.79%. While 

the price of Bitcoin appreciated significantly during 

this period and NAV per share increased by 

41.25%, the price per share increased by only 

3.58%. 

55See notes 39–41, supra. MicroStrategy recently 

completed a $900 million convertible note offering 

for the purpose of acquiring Bitcoin. See https://

www.microstrategy.com/en/investor-relations/ 

press/microstrategy-announces-pricing-of-offeringof-convertible-senior-notes02-17-2021. 

56 In August 2017, the Commission’s Office of 

Investor Education and Advocacy warned investors 

about situations where companies were publicly 

announcing events relating to digital coins or 

tokens in an effort to affect the price of the 

company’s publicly traded common stock. See 

https://www.sec.gov/oiea/investor-alerts-andbulletins/ia_icorelatedclaims. 

57See, e.g., ‘‘7 public companies with exposure to 

bitcoin’’ (February 8, 2021) available at: https://

finance.yahoo.com/news/7-public-companies-withexposure-to-bitcoin-154201525.html; and ‘‘Want to 

get in the crypto trade without holding bitcoin 

yourself? Here are some investing ideas’’ (February 

19, 2021) available at: https://www.cnbc.com/2021/ 

02/19/ways-to-invest-in-bitcoin-without-holdingthe-cryptocurrency-yourself-.html. 

58See, e.g., Tesla 10–K for the year ended 

December 31, 2020, which mentions Bitcoin just 

nine times: https://www.sec.gov/ix?doc=/Archives/ 

edgar/data/1318605/000156459021004599/tsla10k_20201231.htm. 

59According to the CME, the CME CF BRR 

aggregates the trade flow of major Bitcoin spot 

exchanges during a specific calculation window 

into a once-a-day reference rate of the U.S. dollar 

price of Bitcoin. Calculation rules are geared toward 

maximum transparency and real-time replicability 

in underlying spot markets, including Bitstamp, 

Coinbase, Gemini, itBit, and Kraken. For additional 

information, refer to https://www.cmegroup.com/ 

trading/cryptocurrency-indices/cf-bitcoin-referencerate.html?redirect=/trading/cf-bitcoin-referencerate.html. 

discount collection opportunity is not 

unique to OTC Bitcoin Funds and does 

not in itself warrant the approval of an 

exchange traded product.52 What is 

unique is that such significant and 

persistent premiums and discounts can 

exist in a product with over $35 billion 

in assets under management,53 that 

billions of retail investor dollars are 

constantly under threat of premium/ 

discount volatility,54 and that premium/ 

discount volatility is generally captured 

by more sophisticated investors on a 

riskless basis. While the Sponsor 

appreciates the Commission’s focus on 

potential manipulation of a Bitcoin ETP 

in prior disapproval orders and believes 

those concerns are adequately addressed 

in this filing, the Sponsor believes that 

the Commission should also consider 

the direct, quantifiable investor 

protection issue in determining whether 

to approve this proposal, particularly 

when the Trust, as a Bitcoin ETP, is 

designed to reduce the likelihood of 

significant and prolonged premiums 

and discounts with its open-ended 

nature as well as the ability of market 

participants (i.e., market makers and 

authorized participants) to create and 

redeem on a daily basis. 

Spot and Proxy Exposure 

According to the Sponsor, exposure to 

Bitcoin through a Bitcoin futures-based 

ETP like the Fund also presents certain 

advantages for retail investors compared 

to buying spot Bitcoin directly. The 

most notable advantage is that, as 

discussed below, the BTC Contracts and 

MBT Contracts in which the Fund will 

invest do not require special, potentially 

complex and untested, custody 

procedures. Unlike physical Bitcoin 

ETPs, the Fund will not be required to 

use a Bitcoin custodian because it will 

not be holding Bitcoin. By contrast, an 

individual retail investor holding 

Bitcoin through a cryptocurrency 

exchange lacks these protections. 

Meanwhile, a retail investor holding 

spot Bitcoin directly in a self-hosted 

wallet may suffer from inexperience in 

private key management (e.g., 

insufficient password protection, lost 

key, etc.), which could cause them to 

lose some or all of their Bitcoin 

holdings. In addition, retail investors 

will be able to hold the Shares in 

traditional brokerage accounts which 

provide SIPC protection if a brokerage 

firm fails. 

Finally, as described above, a number 

of operating companies engaged in 

unrelated businesses—such as Tesla (a 

car manufacturer) and MicroStrategy (an 

enterprise software company)—have 

recently announced investments as large 

as $1.5 billion in Bitcoin.55 Without 

access to a Bitcoin ETP, retail investors 

seeking investment exposure to Bitcoin 

may end up purchasing shares in these 

companies in order to gain the exposure 

to Bitcoin that they seek.56 In fact, 

mainstream financial news networks 

have written a number of articles 

providing investors with guidance for 

obtaining Bitcoin exposure through 

publicly traded companies (such as 

MicroStrategy, Tesla, and Bitcoin 

mining companies, among others) 

instead of dealing with the 

complications associated with buying 

spot Bitcoin in the absence of a Bitcoin 

ETP.57 Such operating companies, 

however, are imperfect Bitcoin proxies 

and provide investors with partial 

Bitcoin exposure paired with a host of 

additional risks associated with 

whichever operating company they 

decide to purchase. Additionally, the 

disclosures provided by the 

aforementioned operating companies 

with respect to risks relating to their 

Bitcoin holdings are generally 

substantially smaller than the 

registration statement of a Bitcoin ETP, 

including the Sponsor’s Registration 

Statement, typically amounting to a few 

sentences of narrative description and a 

handful of risk factors.58 In other words, 

investors seeking Bitcoin exposure 

through publicly traded companies are 

gaining only partial exposure to Bitcoin, 

without the full benefit of the risk 

disclosures and associated investor 

protections that come from the 

securities registration process. 

The Bitcoin Futures Market Has 

Developed Alongside the Bitcoin Spot 

Market Into a Strong and Viable 

Marketplace That Stands On Its Own 

As noted above, CME began offering 

trading in BTC Contracts in 2017, and 

in MBT Contracts in 2021. Each of the 

contract’s final cash settlement is based 

on the CME CF Bitcoin Reference Rate 

(the ‘‘CME CF BRR’’).59 The contracts 

trade and settle like other cash-settled 

commodity futures contracts. According 

to the Sponsor, trading in CME Bitcoin 

futures contracts has increased 

significantly, in particular with respect 

to BTC Contracts. Nearly every 

measurable metric related to BTC 

Contracts has trended consistently up 

since launch and/or accelerated upward 

in the past year. For example, there was 

approximately $28 billion in trading in 

BTC Contracts in December 2020 

compared to $737 million, $1.4 billion, 

and $3.9 billion in total trading in 

December 2017, December 2018, and 

December 2019, respectively. BTC 

Contracts traded over $1.2 billion per 

day in December 2020 and represented 

$1.6 billion in open interest compared 

to $115 million in December 2019. This 

general upward trend in trading volume 

and open interest is captured in the 

following chart. 

BILLING CODE 8011–01–P 


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44068 Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 

60A large open interest holder in BTC Contracts 

is an entity that holds at least 25 contracts, which 

is the equivalent of 125 Bitcoin. At a price of 

approximately $30,000 per Bitcoin on 12/31/20, 

more than 80 firms had outstanding positions of 

greater than $3.8 million in BTC Contracts. 

Similarly, the number of large open 

interest holders 60 has continued to 

increase even as the price of Bitcoin has 

risen, as have the number of unique 

accounts trading Bitcoin Futures. 

As it pertains specifically to the 

Bitcoin Futures Contracts in which the 

Fund will invest, the statistics are 

equally as profound. The following table 

and chart, calculated by the Sponsor, 

sets forth the approximate daily 

notional average volume for the Bitcoin 

Futures Contracts together, followed by 

the daily average volume (in number of 

contracts) for each of the Bitcoin 

Futures Contracts, the first to expire and 

the second to expire. 

DAILY NOTIONAL AVERAGE

Volume for Bitcoin 

Futures Contracts 

(in $) 

First-to-expire 

Bitcoin Futures 

Contract 

Second-to 

expire Bitcoin 

Futures 

Contract 

2018 ..................................................................................................................................... $126,000,000 3,200 400 

2019 ..................................................................................................................................... 234,000,000 5,400 700 

2020 ..................................................................................................................................... 500,000,000 7,100 1,300 

2021 ..................................................................................................................................... 2,640,000,000 8,800 2,400 


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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 44069 

BILLING CODE 8011–01–C 

The Bitcoin Industry and Market 

Transactions 

According to the Registration 

Statement, Bitcoin is the digital asset 

that is native to, and created and 

transmitted through the operations of, 

the peer-to-peer Bitcoin Network, a 

decentralized network of computers that 

operates on cryptographic protocols. No 

single entity owns or operates the 

Bitcoin Network, the infrastructure of 

which is collectively maintained by a 

decentralized user base. The Bitcoin 

Network allows people to exchange 

tokens of value, called Bitcoin, which 

are recorded on a public transaction 

ledger known as the Blockchain. Bitcoin 

can be used to pay for goods and 

services, or it can be converted to fiat 

currencies, such as the U.S. dollar, at 

rates determined on Bitcoin trading 

platforms or in individual end-user-toend-user transactions under a barter 

system. Although nascent in use, 

Bitcoin may be used as a medium of 

exchange, unit of account or store of 

value. 

The Bitcoin Network is decentralized 

and does not require governmental 

authorities or financial institution 

intermediaries to create, transmit, or 

determine the value of Bitcoin. In 

addition, no party may easily censor 

transactions on the Bitcoin Network. As 

a result, the Bitcoin Network is often 

referred to as decentralized and 

censorship resistant. 

According to the Registration 

Statement, the value of Bitcoin is 

determined by the supply of and 

demand for Bitcoin. New Bitcoin are 

created and rewarded to the parties 

providing the Bitcoin Network’s 

infrastructure (‘‘miners’’) in exchange 

for their expending computational 

power to verify transactions and add 

them to the Blockchain. The Blockchain 

is effectively a decentralized database 

that includes all blocks that have been 

solved by miners, and it is updated to 

include new blocks as they are solved. 

Each Bitcoin transaction is broadcast to 

the Bitcoin Network and, when 

included in a block, recorded in the 

Blockchain. As each new block records 

outstanding Bitcoin transactions, and 

outstanding transactions are settled and 

validated through such recording, the 

Blockchain represents a complete, 

transparent, and unbroken history of all 

transactions of the Bitcoin Network. 

The Fund Will Not Transact in Bitcoin 

and Will Not Be Required To Retain a 

Bitcoin Custodian 

The Sponsor notes that individual 

users, institutional investors and 

investment funds that want to provide 

exposure to Bitcoin by investing directly 

in Bitcoin, and therefore must transact 

in Bitcoin, must use the Bitcoin 

Network to download specialized 

software referred to as a ‘‘Bitcoin 

wallet.’’ This wallet may be used to 

send and receive Bitcoin through users’ 

unique ‘‘Bitcoin addresses.’’ The 

amount of Bitcoin associated with each 

Bitcoin address, as well as each Bitcoin 

transaction to or from such address, is 

captured on the Blockchain. Bitcoin 

transactions are secured by 

cryptography known as public-private 

key cryptography, represented by the 

Bitcoin addresses and digital signature 

in a transaction’s data file. Each Bitcoin 

Network address, or wallet, is associated 

with a unique ‘‘public key’’ and ‘‘private 

key’’ pair, both of which are lengthy 

alphanumeric codes, derived together 

and possessing a unique relationship. 

The private key is a secret and must be 

kept in accordance with appropriate 

controls and procedures to ensure it is 

used only for legitimate and intended 

transactions. If an unauthorized third 

person learns of a user’s private key, 

that third person could forge the user’s 

digital signature and send the user’s 

Bitcoin to any arbitrary Bitcoin address, 

thereby stealing the user’s Bitcoin. 

Similarly, if a user loses his private key 

and cannot restore such access (e.g., 

through a backup), the user may 

permanently lose access to the Bitcoin 

contained in the associated address. 

According to the Registration 

Statement, institutional purchasers of 

Bitcoin, including other Bitcoin funds 

that provide exposure to Bitcoin by 

investing directly in Bitcoin, generally 

maintain their Bitcoin account with a 

Bitcoin custodian. Bitcoin custodians 

are financial institutions that have 

implemented a series of specialized 

security precautions, including holding 

Bitcoin in ‘‘cold storage,’’ to try to 

ensure the safety of an account holder’s 

Bitcoin. These Bitcoin custodians must 

carefully consider the design of the 

physical, operational, and cryptographic 

systems for secure storage of private 

keys in an effort to lower the risk of loss 

or theft, and many use 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 exclusive ownership. 

The nature of the Bitcoin Futures 

Contracts that the Fund will hold is 


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Notional Value of CME Bitcoin Futures Contracts 

Year 

Note: The 2021 daily average notional value is for the period from January 1. 2021 through June 1. 2021. 
44070 Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 

61See, e.g., Order Disapproving a Proposed Rule 

Change, as Modified by Amendments No. 1 and 2, 

to BZX Rule 14.11(e)(4), Commodity-Based Trust 

Shares, To List and Trade Shares Issued by the 

Winklevoss Bitcoin Trust, Securities Exchange Act 

Release No. 80206 (March 10, 2017), 82 FR 14076 

(March 16, 2017) (SR–BatsBZX–2016–30) (the 

‘‘Winklevoss I Order’’); the Winklevoss II Order; 

Order Disapproving a Proposed Rule Change, as 

Modified by Amendment No. 1, Relating to the 

Listing and Trading of Shares of the Bitwise Bitcoin 

ETF Trust Under NYSE Arca Rule 8.201–E, 

Securities Exchange Act Release No. 87267 (October 

9, 2019), 84 FR 55382 (October 16, 2019) (SR– 

NYSEArca–2019–01) (the ‘‘Bitwise Order’’); the 

Wilshire Phoenix Order; Order Disapproving a 

Proposed Rule Change to List and Trade the Shares 

of the ProShares Bitcoin ETF and the ProShares 

Short Bitcoin ETF, Securities Exchange Act Release 

No. 83904 (August 22, 2018), 83 FR 43934 (August 

28, 2018) (SR–NYSEArca–2017–139); Order 

Disapproving a Proposed Rule Change Relating to 

Listing and Trading of the Direxion Daily Bitcoin 

Bear 1X Shares, Direxion Daily Bitcoin 1.25X Bull 

Shares, Direxion Daily Bitcoin 1.5X Bull Shares, 

Direxion Daily Bitcoin 2X Bull Shares, and Direxion 

Daily Bitcoin 2X Bear Shares Under NYSE Arca 

Rule 8.200–E, Securities Exchange Act Release No. 

83912 (August 22, 2018), 83 FR 43912 (August 28, 

2018) (SR–NYSEArca–2018–02); Order 

Disapproving a Proposed Rule Change to List and 

Trade the Shares of the GraniteShares Bitcoin ETF 

and the GraniteShares Short Bitcoin ETF, Securities 

Exchange Act Release No. 83913 (August 22, 2018), 

83 FR 43923 (August 28, 2018) (SR–CboeBZX– 

2018–01) (the ‘‘GraniteShares Order’’). 

62See Winklevoss II Order, 83 FR at 37582. 

63See Wilshire Phoenix Order, 85 FR at 12596– 

97. 

64See Winklevoss II Order, 83 FR at 37580, 

37582–91; Bitwise Order, 84 FR at 55383, 55385– 

406; Wilshire Phoenix Order, 85 FR at 12597. 

65See GraniteShares Order, 83 FR at 43931. See 

also Hester M. Peirce, U.S. Sec. Exch. Comm’n, 

Dissent of Commissioner Hester M. Peirce to 

Release No. 34–83723 (July 26, 2018), available at: 

https://www.sec.gov/news/public-statement/peircedissent-34-83723 (‘‘An ETP based on bitcoin would 

offer investors indirect exposure to bitcoin through 

a product that trades on a regulated securities 

market and in a manner that eliminates some of the 

frictions and worries of buying and holding bitcoin 

directly. If we were to approve the ETP at issue 

here, investors could choose whether to buy it or 

avoid it.’’). 

66See Winklevoss I Order and Winklevoss II 

Order. The Sponsor represents that some of the 

concerns raised are that a significant portion of 

Bitcoin trading occurs on unregulated platforms 

and that there is a concentration of a significant 

number of Bitcoin in the hands of a small number 

of holders. However, these facts are not unique to 

Bitcoin and are true of a number of commodity and 

other markets. For instance, some gold bullion 

trading takes place on unregulated OTC markets 

and a significant percentage of gold is held by a 

relative few (according to estimates of the World 

Gold Council, approximately 22% of total above 

ground gold stocks are held by private investors and 

17% are held by foreign governments; by 

comparison, 13.61% of Bitcoin are held by the 86 

largest Bitcoin addresses, some of which are known 

to be cold storage addresses of large centralized 

cryptocurrency trading platforms). See https://

www.gold.org/goldhub/data/above-ground-stocks 

for gold data cited in this note and https://

bitinfocharts.com/top-100-richest-bitcoinaddresses.html for Bitcoin data. 

67For an extensive listing of such precedents, see 

Winklevoss I Order, 82 FR at 14083 n. 96. 

68The Exchange to date has not entered into 

surveillance sharing agreements with any 

cryptocurrency platform. However, the CME, which 

calculates the CME CF BRR, and which has offered 

contracts for Bitcoin futures products since 2017, is, 

as noted below, a member of the ISG. In addition, 

each Constituent Platform has entered into a data 

sharing agreement with CME. See https://docscfbenchmarks.s3.amazonaws.com/CME+CF+

Constituent+Exchanges+Criteria.pdf. 

69See Winklevoss II Order, 83 FR at 37594. 

70The CME is regulated by the CFTC, which has 

broad reaching anti-fraud and anti-manipulation 

authority including with respect to the Bitcoin 

market since Bitcoin has been designated as a 

commodity by the CFTC. See A CFTC Primer on 

Virtual Currencies (October 17, 2017), available at: 

https://www.cftc.gov/sites/default/files/idc/groups/ 

public/documents/file/labcftc_primercurrencies

100417.pdf (the ‘‘CFTC Primer on Virtual 

such that the Fund will not be required 

to use a Bitcoin custodian. According to 

the Registration Statement, the Fund 

will deposit an initial margin amount to 

initiate an open position in futures 

contracts. A margin deposit is like a 

cash performance bond. It helps assure 

the trader’s performance of the futures 

contracts that he or she purchases or 

sells. Futures contracts are marked to 

market at the end of each trading day 

and the margin required with respect to 

such contracts is adjusted accordingly. 

The remainder of the Fund’s assets will 

be held in cash and cash equivalents at 

the Fund custodian or other financial 

institutions. The Fund will only hold 

Bitcoin Futures Contracts described 

above. Accordingly, the Fund will not 

need a Bitcoin custodian because it will 

never hold actual Bitcoin and the risks 

posed by transacting and holding actual 

Bitcoin will be irrelevant to Fund 

investors. 

The Structure and Operation of the 

Trust Satisfies Commission 

Requirements for Bitcoin-Based 

Exchange Traded Products 

In disapproving prior proposals to list 

and trade shares of various Bitcoin 

trusts and Bitcoin-based trust issued 

receipts, the Commission noted that 

such proposals did not adequately 

demonstrate that they were designed to 

prevent fraudulent and manipulative 

acts and practices and to protect 

investors and the public interest, 

consistent with Section 6(b)(5) of the 

Act.61 The Commission does not apply 

a ‘‘cannot be manipulated’’ standard, 

but instead seeks to examine whether a 

proposal meets the requirements of the 

Act.62 The Commission has explained 

that a proposal could satisfy the 

requirements of the Act in the first 

instance by demonstrating that the 

listing exchange has entered into a 

comprehensive surveillance-sharing 

agreement (‘‘CSSA’’) with a regulated 

‘‘market of significant size’’ relating to 

the underlying assets.63 The 

Commission has also recognized that a 

listing exchange would not necessarily 

need to enter into a CSSA with a 

regulated significant market if the 

underlying commodity market 

inherently possessed a unique 

resistance to manipulation beyond the 

protections that are utilized by 

traditional commodity or securities 

markets or if the listing exchange could 

demonstrate that there were sufficient 

‘‘other means to prevent fraudulent and 

manipulative acts and practices.’’ 64

As described below, the Sponsor 

believes the structure and operation of 

the Trust are designed to prevent 

fraudulent and manipulative acts and 

practices, to protect investors and the 

public interest, and to respond to the 

specific concerns that the Commission 

has identified with respect to potential 

fraud and manipulation in the context 

of a Bitcoin or Bitcoin futures ETP. 

Further, as the Commission has 

previously acknowledged, trading in a 

Bitcoin-based ETP on a national 

securities exchange, as compared to 

trading in an unregulated Bitcoin spot 

market, may provide additional 

protection to investors.65 The Sponsor 

also believes that listing of the Trust’s 

Shares on the Exchange will provide 

investors with such an opportunity to 

obtain exposure to Bitcoin within a 

regulated environment. 

Surveillance Sharing Agreements With a 

Market of Significant Size 

1. The Presence of Surveillance Sharing 

Agreements 

In previous orders rejecting the listing 

of Bitcoin ETFs, the Commission noted 

its concerns that the Bitcoin market 

could be subject to manipulation.66 In 

these orders, the Commission cited 

numerous precedents 67 in which listing 

proposals were approved based on 

findings that the particular market was 

either inherently resistant to 

manipulation or that the listing 

exchange had entered into a 

surveillance sharing agreement with a 

market of significant size.68 The 

Commission noted that, for commoditytrust ETPs ‘‘there has been in every case 

at least one significant, regulated market 

for trading futures in the underlying 

commodity—whether gold, silver, 

platinum, palladium or copper—and the 

ETP listing exchange has entered into 

surveillance-sharing agreements with, or 

held Intermarket Surveillance Group 

(the ‘‘ISG’’) membership in common 

with, that market.’’ 69

The CME 70 is a member of the ISG, 

the purpose of which is ‘‘to provide a 


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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 44071 

Currencies’’) (‘‘The CFTC’s jurisdiction is 

implicated when a virtual currency is used in a 

derivatives contract or if there is fraud or 

manipulation involving a virtual currency traded in 

interstate commerce.’’). See also 7 U.S.C. 7(d)(3) 

(‘‘The board of trade shall list on the contract 

market only contracts that are not readily 

susceptible to manipulation.’’). 

71See https://isgportal.org/overview. 

72See, e.g., Winklevoss II Order, 83 FR at 37594. 

73See, e.g., id. at 37589–90. 

74 Id. at 37594; see also GraniteShares Order, 83 

FR at 43930 n. 85 and accompanying text. 

75See Wilshire Phoenix Order, 85 FR at 12612. 

76See https://www.wilshirephoenix.com/efficientprice-discovery-in-the-bitcoin-markets/ 

?email=giovanni.vicioso@cmegroup.com. See also 

https://www.sciencedirect.com/science/article/abs/ 

pii/S0165176518304440?via%3Dihub. 

77 ‘‘The OTC market has no formal structure and 

no open-outcry meeting place.’’ See Securities 

Exchange Act Release No. 50603 (October 28, 2004), 

69 FR 64614 (November 5, 2004) (SR–NYSE–2004– 

22) (Order Granting Approval of Proposed Rule 

Change and Notice of Filing and Order Granting 

Accelerated Approval to Amendments No. 1 and 

No. 2 Thereto to the Proposed Rule Change by the 

New York Stock Exchange, Inc. Regarding Listing 

and Trading of streetTRACKS® Gold Shares) (the 

‘‘streetTRACKS Order’’). 

78 ‘‘It is not possible, however, to enter into an 

information sharing agreement with the OTC gold 

market.’’ streetTRACKS Order, 69 FR at 64619. See 

also Order Granting Approval of Proposed Rule 

Change and Amendment Nos. 2, 3 and 4 and Notice 

of Filing and Order Granting Accelerated Approval 

to Amendment No. 5 by the American Stock 

Exchange LLC Relating to the Listing and Trading 

of the iShares® COMEX Gold Trust, Securities 

Exchange Act Release No. 51058 (January 19, 2005), 

70 FR 3749 (January 26, 2005) (SR–Amex–2004–38); 

Notice of Filing of Proposed Rule Change Relating 

to Listing and Trading of Shares of ETFS Palladium 

Trust, Securities Exchange Act Release No. 60971 

(November 9, 2009), 74 FR 59283 (November 17, 

2009) (SR–NYSEArca–2009–94). 

79See Winklevoss II Order, 83 FR at 37591. 

80See, e.g., Frank Easterbrook, Monopoly, 

Manipulation, and the Regulation of Futures 

Markets, 59 J. of Bus. S103, S103–S127 (1986); 

William D. Harrington, The Manipulation of 

Commodity Futures Prices, 55 St. Johns L. Rev. 240, 

240–275 (2012); Robert C. Lower, Disruptions of the 

Futures Market: A Comment on Dealing With 

Market Manipulation, 8 Yale J. on Reg. 391, 391– 

402 (1991). 

81See e.g., Notice of Filing of Proposed Rule 

Change to List and Trade Shares of the First Trust 

SkyBridge Bitcoin ETF Trust under NYSE Arca 

Rule 8.201–E, Securities Exchange Act Release No. 

91962 (May 21, 2021, 86 FR 28646 (May 27, 2021) 

(SR–NYSEArca–2021–37). 

82For an explanation of how the CME VWAP 

closing price for Bitcoin futures contracts is 

calculated, see https://www.cmegroup.com/ 

confluence/display/EPICSANDBOX/Bitcoin. 

framework for the sharing of 

information and the coordination of 

regulatory efforts among exchanges 

trading securities and related products 

to address potential intermarket 

manipulations and trading abuses.’’ 71

Membership of a relevant futures 

exchange in ISG is sufficient to meet the 

surveillance-sharing requirement.72

The Commission has previously noted 

that the existence of a surveillancesharing agreement by itself is not 

sufficient for purposes of meeting the 

requirements of Section 6(b)(5); the 

surveillance-sharing agreement must be 

with a market of significant size.73 The 

Commission has also provided an 

example of how it interprets the terms 

‘‘significant market’’ and ‘‘market of 

significant size,’’ though that definition 

is meant to be illustrative and not 

exclusive: ‘‘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 the ETP listing market in 

detecting and deterring misconduct and 

it is unlikely that trading in the ETP 

would be the predominant influence on 

prices in that market.’’ 74

For the following reasons, the 

Sponsor maintains that the CME, as the 

leading market for Bitcoin futures is a 

‘‘market of significant size’’ that satisfies 

both elements of the example provided 

by the Commission. 

(a) Reasonable Likelihood That a Person 

Manipulating the ETP Would Have To 

Trade on the Bitcoin Futures Market 

The first element of a ‘‘significant 

market’’ or ‘‘market of significant size’’ 

is a reasonable likelihood that a person 

attempting to manipulate the ETP 

would also have to trade on that market 

(or group of markets) to successfully 

manipulate the ETP, such that a 

surveillance sharing agreement would 

assist the ETP listing market in 

detecting and deterring misconduct. The 

Commission has stated that establishing 

a lead-lag relationship between the 

Bitcoin futures market and the spot 

market is central to understanding 

whether it is reasonably likely that a 

would-be manipulator of the ETP would 

need to trade on the Bitcoin futures 

market to successfully manipulate 

prices on those spot platforms that feed 

into the proposed ETP’s pricing 

mechanism.75

The Sponsor believes that the CME 

meets the first element in several ways. 

First, the CME Bitcoin futures is the 

primary Bitcoin price discovery market, 

and compares favorably with other 

markets that were deemed to be markets 

of significant size in precedents.76 There 

are various prior orders approving the 

listing of commodity and commodity 

futures-based ETPs whose OTC markets 

and futures markets exhibit a number of 

similarities with Bitcoin markets. The 

Sponsor maintains that, like Bitcoin, the 

primary price discovery mechanism for 

other commodities are the futures 

markets in those commodities.77

Specifically, the Sponsor notes that as 

with many OTC commodities markets, it 

is not possible to enter into an 

information sharing agreement with the 

OTC Bitcoin market.78 When the 

Commission has approved the listing of 

other commodity-trust ETPs, rather than 

requiring surveillance sharing 

agreements with the relevant OTC 

markets, it has recognized surveillance 

sharing agreements between the listing 

exchange and ‘‘regulated markets for 

trading futures on the underlying 

commodity,’’ 79 given the understanding 

that the manipulation of the market for 

a commodity often involves the futures 

market for that commodity.80

The Sponsor also believes that the 

CME meets the first element because, 

due to the unique structure of the Fund, 

it is unlikely that price manipulation or 

fraud on the trading platforms for 

Bitcoin will have a measurable impact 

on the NAV of the Fund. In this regard, 

the Sponsor notes that the Fund will 

only hold first and second to expire 

Bitcoin Futures Contacts along with 

cash and cash equivalents and will not 

hold Bitcoin. Unlike other exchange 

traded products that propose to 

calculate daily NAV based on the CME 

CF Bitcoin Real-Time Index (BRTI),81

which is in turn based on price feeds 

from certain designated spot market 

exchanges, the Fund will never directly 

price off of the CME CF BRR. This is 

because the Fund will roll its futures 

holdings prior to settlement of the 

expiring contract and intends to never 

carry futures positions all the way to 

cash settlement (the only date that the 

BTC Contracts and MBT Contracts settle 

to the CME CF BRR). The Fund will 

only price off of Bitcoin Futures 

Contracts VWAP daily settlement 

price.82

Because the Fund calculates daily 

NAV based on Bitcoin Futures 

Contracts’ settlement prices and does 

not calculate NAV based directly on the 

underlying spot Bitcoin market, the 

Sponsor believes that the only 

practicable way for a bad actor to 

manipulate the NAV of the Fund is 

through manipulating the first and 

second to expire Bitcoin Futures 

Contracts; there is simply no material 

connection between those two futures 

contracts and the underlying Bitcoin 

spot market. The Sponsor believes that 

the market for BTC Contracts and MBT 

Contracts stands alone within the 

overall global Bitcoin ecosphere; BTC 

Contracts and MBT Contracts are now of 

such size and scale that Bitcoin futures 

prices are not specifically materially 

influenced by other Bitcoin markets. 


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44072 Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 

83See Winklevoss II Order, 83 FR at 37580 (citing 

to Amendment to Rule Filing Requirements for SelfRegulatory Organizations Regarding New Derivative 

Securities Products, Exchange Act Release No. 

40761 (Dec. 8, 1998), 63 FR 70952, 70954, 70959 

(Dec. 22, 1998) (File No. S7–13–98) (‘‘NDSP 

Adopting Release’’). 

84See Winklevoss II Order, 83 FR at 37594 

(emphasis added); NDSP Adopting Release. 

85CME’s Department of Market Regulation 

comprehensively surveils futures market conditions 

and price movements on a real-time and ongoing 

basis in order to detect and prevent price 

distortions, including price distortions caused by 

manipulative efforts. 

To reduce the potential threat of price distortions 

and manipulation, CME’s Market Regulation 

Department also implements trader position limits 

and accountability limits that are linked to the size 

of the futures contract’s underlying market during 

the expiration month of trading. 

Position limits supplement the reporting of large 

trader positions (25 contracts or more) to CME’s 

Market Regulation Department and the Commodity 

Futures Trading Commission (‘‘CFTC’’) on a daily 

basis. 

CME’s market surveillance program and its 

related self-regulatory responsibilities are 

implemented pursuant to the Commodity Exchange 

Act and CFTC regulations thereunder. 

The relevant requirements require CME to (i) only 

list contracts that are not readily susceptible to 

manipulation, (ii) prevent market disruptions, and 

(iii) establish tailored position limits or position 

accountability rules for each futures contract. 

The above self-regulatory framework is 

administered under the CFTC’s market oversight 

mandate which also includes direct enforcement 

jurisdiction over manipulative activity in a futures 

contract’s underlying market. 

The Sponsor notes that this lack of 

connection between the Bitcoin Futures 

Contracts and underlying spot trading 

platforms makes it unnecessary and not 

beneficial to try to establish a ‘‘lead-lag’’ 

relationship between the two. The 

Sponsor respectfully notes that while 

thousands of pages of studies have been 

devoted to trying to demonstrate 

whether the Bitcoin spot market ‘‘leads’’ 

the Bitcoin futures market, or vice versa, 

no listing exchanges to date have been 

able to bear the burden of proof of 

satisfactorily establishing through such 

a ‘‘lead-lag’’ analysis that it is 

‘‘reasonably likely’’ that a person who is 

attempting to manipulate the price of a 

Bitcoin fund’s shares would need to 

trade in the underlying spot market. As 

discussed above, the structure of the 

Fund makes such an exercise 

unnecessary and irrelevant. 

The Sponsor also notes in this regard 

that in the Winklevoss II Order, the SEC 

stated that ‘‘[c]onsistent with the 

discussion of ‘significant market’ 

described above, the Commission has 

not previously, and does not now, 

require that an ETP listing exchange be 

able to enter into a surveillance-sharing 

agreement with each regulated spot or 

derivatives market relating to an 

underlying asset, provided that the 

market or markets with which there is 

such an agreement constitute a 

‘‘significant market.’’ As discussed 

above, the Sponsor believes that the 

Bitcoin futures market is a ‘‘significant 

market’’ and that any bad actor trying to 

manipulate the price of the Fund would 

necessarily have to manipulate the 

Bitcoin futures market. 

Additionally, the SEC stated in the 

Winklevoss II Order that ‘‘[a]nd where, 

as here, a listing exchange fails to 

establish that other means to prevent 

fraudulent and manipulative acts and 

practices will be sufficient, the listing 

exchange must enter into a surveillancesharing agreement with a regulated 

market of significant size because 

‘[s]uch agreements provide a necessary 

deterrent to manipulation because they 

facilitate the availability of information 

needed to fully investigate a 

manipulation if it were to occur.’ ’’ 83

The SEC attributed the quote to a 1998 

release, but nowhere does that release 

say that the surveillance agreement has 

to be with a ‘‘market of significant size.’’ 

The release merely states that ‘‘[t]he 

SRO also must have a surveillance 

program adequate to monitor for abuses 

in the trading of the new derivative 

securities product, including trading in 

the underlying security or securities.’’ 

For the reasons discussed, the 

Sponsor believes that the surveillance 

agreement already in place between the 

Exchange and the CME is ‘‘adequate to 

monitor’’ for abuses in the trading of the 

Fund’s shares, given the significant 

likelihood that a person attempting to 

manipulate the price of the shares of the 

Fund would have to manipulate the 

prices of the Bitcoin Futures Contracts. 

In short, in the context of the Sponsor’s 

unique product design and particularly 

in light of the profound growth in the 

CME futures market since inception, 

and in particular over the past 6–9 

months, the Sponsor believes it is 

entirely appropriate to apply the initial 

standard from the 1998 release. 

Importantly, however, to the extent the 

SEC believes it is necessary to hew to 

the ‘‘markets of significant size’’ 

standard, that standard does not 

necessarily lead to the two-part 

‘‘reasonably likely’’ standard. In this 

regard, the Winklevoss II Order stated 

that ‘‘[i]n light of the history and 

purpose of looking to surveillancesharing agreements, with respect to 

markets for assets underlying an ETP or 

for derivatives on those assets, the 

Commission interprets the terms 

‘significant market’ and ‘market of 

significant size’ to 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 the ETP listing market 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. This definition is 

illustrative and not exclusive. There 

could be other types of ‘‘significant 

markets’’ and ‘‘markets of significant 

size,’’ but this definition is an example 

that will provide guidance to market 

participants.’’ 84

The Sponsor notes that, as discussed 

above, it sees no difference between 

gold futures (or wheat or other futures) 

versus Bitcoin futures as acceptable 

stand-alone components of a futuresbased ETP. Stated another way: Bitcoin 

futures have grown in size to such a 

degree that they cannot be effectively or 

precisely manipulated by trading in 

other Bitcoin interests; neither can gold, 

or wheat, or other futures. The Sponsor 

believes that data discussed above 

regarding the recent growth in the 

Bitcoin futures market clearly 

establishes that the CME Bitcoin futures 

markets generally are a market of 

significant size and there is a clear trend 

in year-over-year growth. Indeed, the 

current size and volume of the CME 

Bitcoin futures market is already more 

than adequate—and still growing in 

size—to make its own trading activity 

the primary, if not the lone determinant, 

of its valuation. The CME has its own 

surveillance systems in place to combat 

manipulation of all futures contracts, 

and the CME must follow rules and 

other protective protocols applicable as 

a ‘‘Designated Contracts Market’’ or 

‘‘DCM,’’ which are designed to detect 

anomalies and prevent fraudulent and/ 

or manipulative activities.85 In short, if 

manipulation is going to happen, it will 

fall under one of two regulated 

exchanges (CME and NYSE Arca). 

The Sponsor also maintains that any 

would-be manipulator of Bitcoin prices 

would be reasonably likely to have to do 

so through the CME Bitcoin futures 

market in order to take advantage of the 

leverage inherent in trading futures 

contracts. The inherent leverage in 

Bitcoin futures would allow a potential 

manipulator to attempt a manipulation 

scheme with far less upfront capital 

than it would need to achieve the same 

results in the spot market. As the spot 

Bitcoin market has grown tremendously 

since the issuance of the Wilshire 

Phoenix Order, it would be critical for 

a would-be manipulator to efficiently 

use its capital to have the desired effect, 

and a would-be manipulator would 

certainly recognize that the chances of 


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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 44073 

86As of April 12, 2021, the initial margin required 

in connection with CME Bitcoin Futures for the 

April 2021 contract ranges from 42% to 38%. 

87A 12,500 share CU create or redeem at $50 per 

share and CME contract value of $200,000 only 

prompts buying of a little over 3 contracts. 10 CU 

= 31 contracts, 100 Cu create 310 contracts 

compared to YTD avg daily trade volume of 8800 

1st to expire and 2450 2nd to expire. 

88These statistics are based on samples of Bitcoin 

liquidity in USD (excluding stablecoins or Euro 

liquidity) based on executable quotes on Coinbase 

Pro, Gemini, Bitstamp, Kraken, LMAX Exchange, 

BinanceUS, and OKCoin during February 2021. 

89 VWAP is calculated based first on Tier 1 (if 

there are trades during the settlement period); then 

Tier 2 (if there are no trades during the settlement 

period); and then Tier 3 (in the absence of any trade 

activity or bid/ask in a given contract month during 

the current trading day, as follows: 

Tier 1: Each contract month settles to its VWAP 

of all trades that occur between 14:59:00 and 

15:00:00 CT, the settlement period, rounded to the 

nearest tradable tick. If the VWAP is exactly in the 

middle of two tradable ticks, then the settlement 

will be the tradable price that is closer to the 

contract’s prior day settlement price. 

Tier 2: If no trades occur on CME Globex between 

14:59:00 and 15:00:00 CT, the settlement period, 

then the last trade (or the contract’s settlement price 

from the previous day in the absence of a last trade 

price) is used to determine whether to settle to the 

bid or the ask during this period. 

a. If the last trade price is outside of the bid/ask 

spread, then the contract month settles to the 

nearest bid or ask price. 

b. If the last trade price is within the bid/ask 

spread, or if a bid/ask spread is not available, then 

the contract month settles to the last trade price. 

Tier 3: In the absence of any trade activity or bid/ 

ask in a given contract month during the current 

trading day, the daily settlement price will be 

determined by applying the net change from the 

preceding contract month to the given contract 

month’s prior daily settlement price. 

successfully deploying its scheme are 

increased materially if it can affect the 

Bitcoin futures market (and thus the 

Bitcoin spot market) by utilizing the 

inherent leverage in futures markets.86

Accordingly, it is highly likely such 

manipulators would attempt to do so in 

the CME Bitcoin Futures market rather 

than any spot market. 

Finally, the Sponsor maintains that a 

would-be manipulator of Bitcoin would 

be required to execute trades on 

multiple exchanges simultaneously in 

order to successfully impact the global 

price of Bitcoin due to the decentralized 

nature of the Bitcoin Network. The 

Sponsor thus believes that Bitcoin 

manipulators would be much more 

likely to attempt to manipulate a limited 

number of futures markets rather than 

attempt simultaneous executions on 

potentially dozens of different 

exchanges. Even if a would-be 

manipulator does attempt to manipulate 

Bitcoin prices across platforms, such a 

scheme would also necessarily include 

some attempt to manipulate the price of 

Bitcoin futures, including the CME. 

(b) Predominant Influence on Prices in 

Spot and Bitcoin Futures 

The second feature of a ‘‘significant 

market’’ or ‘‘market of significant size’’ 

in the Commission’s example is that the 

market is one in which it is unlikely 

that trading in the ETP would be the 

predominant influence on prices in that 

market. The Sponsor believes that 

trading in the Shares would not be the 

predominant force on prices in the 

Bitcoin Futures market (or spot market) 

for a number of reasons, including the 

significant volume in and size of the 

CME Bitcoin futures market and the 

significant liquidity available in the spot 

market.87

Since the Wilshire Phoenix Order was 

issued, there has been significant 

growth in Bitcoin Futures across each of 

trading volumes and open interest as 

reflected in the chart below: 

CHICAGO MERCANTILE EXCHANGE BITCOIN FUTURES

February 26, 

2020 April 7, 2021 

Trading Volume ........................................................................................................................................... $433,000,000 $4,321,000,000 

Open Interest ............................................................................................................................................... 238,000,000 2,582,000,000 

The Sponsor believes that the growth 

of CME Bitcoin Futures market has 

coincided with similar growth in the 

Bitcoin spot market. The market for 

Bitcoin futures is rapidly approaching 

the size of markets for other commodity 

interests, including interests in metals, 

agricultural and petroleum products. 

Accordingly, as the Bitcoin futures 

market continues to develop and more 

closely resemble other commodity 

futures markets, it can be reasonably 

expected that the relationship between 

the Bitcoin futures market and Bitcoin 

spot market will behave similarly to 

other future/spot market relationships, 

where the spot market may have no 

relationship to the futures market. 

The Sponsor believes that the 

significant liquidity in the spot market 

and the impact of market orders on the 

overall price of Bitcoin have made 

attempts to move the price of Bitcoin 

increasingly expensive over the past 

year. In January 2020, for example, the 

cost to buy or sell $5 million worth of 

Bitcoin averaged roughly 30 basis points 

(compared to 10 basis points in 

February 2021) with a market impact of 

50 basis points (compared to 30 basis 

points in February 2021).88 For a $10 

million market order, the cost to buy or 

sell was roughly 50 basis points 

(compared to 20 basis points in 

February 2021) with a market impact of 

80 basis points (compared to 50 basis 

points in February 2021). As the 

liquidity in the Bitcoin spot market 

increases, it follows that the impact of 

$5 million and $10 million orders will 

continue to decrease the overall impact 

in spot price. Accordingly, to the extent 

that the spot market can be used to 

move the CME Bitcoin futures market 

(which the Sponsor does not believe is 

the case), this would make it even more 

likely that a person attempting to 

manipulate the price of the shares of the 

Fund would have to do so by 

manipulating the CME Bitcoin futures 

market. 

Settlement of BTC Contracts and MBT 

Contracts 

According to the Registration 

Statement, each BTC Contract and MBT 

Contract settles daily to the BTC 

Contract volume-weighted average price 

(‘‘VWAP’’) of all trades that occur 

between 2:59 p.m. and 3:00 p.m. Central 

Time, the settlement period, rounded to 

the nearest tradable tick.89

BTC Contracts and MBT Contracts 

each expire on the last Friday of the 

contract month and are settled with 

cash. The final settlement value is based 

on the CME CF BRR at 4:00 p.m. 

London time on the expiration day of 

the futures contract. 

As proposed, the Fund will rollover 

its soon to expire Bitcoin Futures 

Contracts to extend the expiration or 

maturity of its position forward by 

closing the initial contract holdings and 

opening a new longer-term contract 

holding for the same underlying asset at 

the then-current market price. The Fund 

does not intend to hold any Bitcoin 

futures positions into cash settlement. 

Net Asset Value 

According to the Registration 

Statement, the Fund’s NAV per Share 

will be calculated by taking the current 


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44074 Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 

90Several major market data vendors display and/ 

or make widely available IFVs taken from the 

Consolidated Tape Association (‘‘CTA’’) or other 

data feeds. 

market value of its total assets, 

subtracting any liabilities, and dividing 

that total by the number of Shares. 

The Administrator of the Fund will 

calculate the NAV once each trading 

day, as of the earlier of the close of the 

New York Stock Exchange or 4:00 p.m. 

Eastern Standard Time (EST). 

According to the Registration 

Statement, to determine the value of 

Bitcoin Futures Contracts, the Fund’s 

Administrator will use the Bitcoin 

Futures Contract settlement price on the 

exchange on which the contract is 

traded, except that the ‘‘fair value’’ of 

Bitcoin Futures Contracts (as described 

in more detail below) may be used when 

Bitcoin Futures Contracts close at their 

price fluctuation limit for the day. The 

Fund’s Administrator will determine 

the value of Fund investments as of the 

earlier of the close of the New York 

Stock Exchange or 4:00 p.m. EST. The 

Fund’s NAV will include any 

unrealized profit or loss on open Bitcoin 

futures contacts and any other credit or 

debit accruing to the Fund but unpaid 

or not received by the Fund. 

According to the Registration 

Statement, the fair value of the Fund’s 

holdings will be determined by the 

Fund’s Sponsor in good faith and in a 

manner that assesses the future Bitcoin 

market value based on a consideration 

of all available facts and all available 

information on the valuation date. 

When a Bitcoin Futures Contract has 

closed at its price fluctuation limit, the 

fair value determination will attempt to 

estimate the price at which such Bitcoin 

Futures Contract would be trading in 

the absence of the price fluctuation limit 

(either above such limit when an 

upward limit has been reached or below 

such limit when a downward limit has 

been reached). Typically, this estimate 

will be made primarily by reference to 

exchange traded instruments at 4:00 

p.m. EST on settlement day. The fair 

value of BTC Contracts and MBT 

Contracts may not reflect such security’s 

market value or the amount that the 

Fund might reasonably expect to receive 

for the BTC Contracts and MBT 

Contracts upon its current sale. 

Indicative Fund Value 

According to the Registration 

Statement, in order to provide updated 

information relating to the Fund for use 

by investors and market professionals, 

ICE Data Indices, LLC will calculate an 

updated Indicative Fund Value (‘‘IFV’’). 

The IFV will be calculated by using the 

prior day’s closing NAV per Share of the 

Fund as a base and will be updated 

throughout the Core Trading Session of 

9:30 a.m. E.T. to 4:00 p.m. E.T. to reflect 

changes in the value of the Fund’s 

holdings during the trading day. 

The IFV will be disseminated on a per 

Share basis every 15 seconds during the 

Exchange’s Core Trading Session and be 

widely disseminated by one or more 

major market data vendors during the 

Exchange’s Core Trading Session.90

Creation and Redemption of Shares 

According to the Registration 

Statement, the Shares issued by the 

Fund may only be purchased by 

Authorized Purchasers and only in 

blocks of 12,500 Shares called ‘‘Creation 

Baskets.’’ The amount of the purchase 

payment for a Creation Basket is equal 

to the total NAV of Shares in the 

Creation Basket. Similarly, only 

Authorized Purchasers may redeem 

Shares and only in blocks of 12,500 

Shares called ‘‘Redemption Baskets.’’ 

The amount of the redemption proceeds 

for a Redemption Basket is equal to the 

total NAV of Shares in the Redemption 

Basket. The purchase price for Creation 

Baskets and the redemption price for 

Redemption Baskets are the actual NAV 

calculated at the end of the business day 

when a request for a purchase or 

redemption is received by the Fund. 

‘‘Authorized Purchasers’’ will be the 

only persons that may place orders to 

create and redeem Creation Baskets. 

Authorized Purchasers must be (1) 

either registered broker-dealers or other 

securities market participants, such as 

banks and other financial institutions, 

that are not required to register as 

broker-dealers to engage in securities 

transactions, and (2) DTC Participants. 

An Authorized Purchaser is an entity 

that has entered into an Authorized 

Purchaser Agreement with the Sponsor. 

Creation Procedures 

According to the Registration 

Statement, on any ‘‘Business Day,’’ an 

Authorized Purchaser may place an 

order with the Transfer Agent to create 

one or more Creation Baskets. For 

purposes of processing both purchase 

and redemption orders, a ‘‘Business 

Day’’ means any day other than a day 

when the CME or the New York Stock 

Exchange is closed for regular trading. 

Purchase orders for Creation Baskets 

must be placed by 3:00 p.m. EST or one 

hour prior to the close of trading on the 

New York Stock Exchange, whichever is 

earlier. The day on which the 

Distributor receives a valid purchase 

order is referred to as the purchase order 

date. If the purchase order is received 

after the applicable cut-off time, the 

purchase order date will be the next 

Business Day. Purchase orders are 

irrevocable. 

By placing a purchase order, an 

Authorized Purchaser agrees to deposit 

cash with the Custodian. 

Redemption Procedures 

According to the Registration 

Statement, the procedures by which an 

Authorized Purchaser can redeem one 

or more Creation Baskets will mirror the 

procedures for the creation of Creation 

Baskets. On any Business Day, an 

Authorized Purchaser may place an 

order with the Transfer Agent to redeem 

one or more Creation Baskets. 

The redemption procedures allow 

Authorized Purchasers to redeem 

Creation Baskets. Individual 

shareholders may not redeem directly 

from the Fund. By placing a redemption 

order, an Authorized Purchaser agrees 

to deliver the Creation Baskets to be 

redeemed through DTC’s book entry 

system to the Fund by the end of the 

next Business Day following the 

effective date of the redemption order or 

by the end of such later business day. 

Determination of Redemption 

Distribution 

According to the Registration 

Statement, the redemption distribution 

from the Fund will consist of an amount 

of cash, cash equivalents and/or 

exchange listed Bitcoin futures that is in 

the same proportion to the total assets 

of the Fund on the date that the order 

to redeem is properly received as the 

number of Shares to be redeemed under 

the redemption order is in proportion to 

the total number of Shares outstanding 

on the date the order is received. 

Delivery of Redemption Distribution 

According to the Registration 

Statement, an Authorized Purchaser 

who places a purchase order will 

transfer to the Custodian the required 

amount of cash, cash equivalents and/or 

Bitcoin futures by the end of the next 

business day following the purchase 

order date or by the end of such later 

business day, not to exceed three 

business days after the purchase order 

date, as agreed to between the 

Authorized Purchaser and the 

Custodian when the purchase order is 

placed (the ‘‘Purchase Settlement 

Date’’). Upon receipt of the deposit 

amount, the Custodian will direct DTC 

to credit the number of Creation Baskets 

ordered to the Authorized Purchaser’s 

DTC account on the Purchase 

Settlement Date. 


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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 44075 

91See NYSE Arca Rule 7.12–E. 

92 17 CFR 240.10A–3. 

93See Rule 10A–3(c)(7), 17 CFR 240.10A–3(c)(7) 

(stating that a listed issuer is not subject to the 

requirements of Rule 10A–3 if the issuer is 

organized as an unincorporated association that 

does not have a board of directors and the activities 

of the issuer are limited to passively owning or 

holding securities or other assets on behalf of or for 

the benefit of the holders of the listed securities). 

94FINRA 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. 

Availability of Information 

The NAV for the Fund’s Shares will 

be disseminated daily to all market 

participants at the same time. The 

intraday, closing prices, and settlement 

prices of the Bitcoin Futures Contracts 

will be readily available from the 

applicable futures exchange websites, 

automated quotation systems, published 

or other public sources, or major market 

data vendors. 

Complete real-time data for the 

Bitcoin Futures Contracts will be 

available by subscription through online information services. ICE Futures 

U.S. and CME also provide delayed 

futures and options on futures 

information on current and past trading 

sessions and market news free of charge 

on their respective websites. The 

specific contract specifications for 

Bitcoin Futures Contracts will also be 

available on such websites, as well as 

other financial informational sources. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the CTA. Quotation information for cash 

equivalents and commodity futures may 

be obtained from brokers and dealers 

who make markets in such instruments. 

Intra-day price and closing price level 

information for the Benchmark will be 

available from major market data 

vendors. The Benchmark value will be 

disseminated once every 15 seconds. 

The IFV will be available through online information services. 

In addition, the Fund’s website, 

www.teucrium.com, will display the 

applicable end of day closing NAV. The 

daily holdings of the Fund will be 

available on the Fund’s website. The 

Fund’s website will also include a form 

of the prospectus for the Fund that may 

be downloaded. The website will 

include the Shares’ ticker and CUSIP 

information along with additional 

quantitative information updated on a 

daily basis, including: (1) 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 (the 

‘‘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 

website disclosure of portfolio holdings 

will be made daily and will include, as 

applicable, (i) the name, quantity, price, 

and market value of the Fund’s 

holdings, (ii) the counterparty to and 

value of forward contracts and any other 

financial instruments tracking the 

Benchmark, and (iii) the total cash and 

cash equivalents held in the Fund’s 

portfolio, if applicable. 

The Fund’s website will be publicly 

available at the time of the public 

offering of the 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 Fund.91 Trading in Shares of the 

Fund 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. 

The Exchange may halt trading during 

the day in which an interruption to the 

dissemination of the IFV or the value of 

the Benchmark occurs. The Benchmark 

value will be disseminated once every 

15 seconds. If the interruption to the 

dissemination of the IFV, or to the value 

of the Benchmark 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. 

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 a.m. 

to 8 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 8.200–E. The trading of 

the Shares will be subject to NYSE Arca 

Rule 8.200–E, Commentary .02(e), 

which sets forth certain restrictions on 

Equity Trading Permit (‘‘ETP’’) Holders 

acting as registered Market Makers in 

Trust Issued Receipts to facilitate 

surveillance. With respect to the 

application of Rule 10A–3 92 under the 

Act, the Trust will rely on the exception 

contained in Rule 10A–3(c)(7).93 A 

minimum of 50,000 Shares of the Fund 

will be outstanding at the 

commencement of trading on the 

Exchange. 

Surveillance 

The Exchange represents that trading 

in the Shares of the Fund will be subject 

to the existing trading surveillances 

administered by the Exchange, as well 

as cross-market surveillances 

administered by the Financial Industry 

Regulatory Authority (‘‘FINRA’’) on 

behalf of the Exchange, which are 

designed to detect violations of 

Exchange rules and applicable federal 

securities laws.94 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 and the Fund’s 

holdings 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 the Fund’s holdings from 

such markets and other entities. In 

addition, the Exchange may obtain 

information regarding trading in the 

Shares and the Fund’s holdings from 


jbell on DSKJLSW7X2PROD with NOTICES
44076 Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 

95For a list of the current members of ISG, see 

www.isgportal.org. The Exchange notes that not all 

components of the Fund may trade on markets that 

are members of ISG or with which the Exchange has 

in place a CSSA. 

96 15 U.S.C. 78f(b)(5). 

markets and other entities that are 

members of ISG or with which the 

Exchange has in place a CSSA. The 

Exchange is also able to obtain 

information regarding trading in the 

Shares, the physical commodities 

underlying the futures contracts through 

ETP Holders, in connection with such 

ETP Holders’ proprietary or customer 

trades which they effect through ETP 

Holders on any relevant market. The 

Exchange can obtain market 

surveillance information, including 

customer identity information, with 

respect to transactions (including 

transactions in futures contracts) 

occurring on U.S. futures exchanges, 

which are members of the ISG. In 

addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

The Fund will only hold Bitcoin 

Futures Contracts that are listed on an 

exchange that is a member of the ISG or 

is a market with which the Exchange 

has a CSSA.95

All statements and representations 

made in this filing regarding (a) the 

description of the portfolios of the 

Funds or Benchmark, (b) limitations on 

portfolio holdings or the Benchmark, 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 Fund 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 Fund is not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

NYSE Arca Rule 5.5–E(m). 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 96 that an 

exchange have rules that are designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to remove 

impediments to, and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest. 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices and to protect 

investors and the public interest in that 

the Shares will be listed and traded on 

the Exchange pursuant to the initial and 

continued listing criteria in NYSE Arca 

Rule 8.200–E. The Exchange has in 

place surveillance procedures that are 

adequate to properly monitor trading in 

the Shares in all trading sessions and to 

deter and detect violations of Exchange 

rules and applicable federal securities 

laws. The Exchange or FINRA, on behalf 

of the Exchange, or both, will 

communicate as needed regarding 

trading in the Shares and the Fund’s 

holdings 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 the Fund’s holdings from 

such markets and other entities. In 

addition, the Exchange may obtain 

information regarding trading in the 

Shares and the Fund’s holdings from 

markets and other entities that are 

members of ISG or with which the 

Exchange has in place a CSSA. The 

Exchange is also able to obtain 

information regarding trading in the 

Shares and the Fund’s holdings through 

ETP Holders, in connection with such 

ETP Holders’ proprietary or customer 

trades which they effect through ETP 

Holders on any relevant market. The 

Exchange can obtain market 

surveillance information, including 

customer identity information, with 

respect to transactions (including 

transactions in Bitcoin Futures 

Contracts) occurring on U.S. futures 

exchanges, which are members of the 

ISG. The intraday, closing prices, and 

settlement prices of the Bitcoin Futures 

Contracts will be readily available from 

the applicable futures exchange 

websites, automated quotation systems, 

published or other public sources, or 

major market data vendors website or 

on-line information services. 

Complete real-time data for the 

Bitcoin Futures Contracts will be 

available by subscription from on-line 

information services. ICE Futures U.S. 

and CME also provide delayed futures 

information on current and past trading 

sessions and market news free of charge 

on the Fund’s website. The specific 

contract specifications for Bitcoin 

Futures Contracts will also be available 

on such websites, as well as other 

financial informational sources. 

Information regarding options will be 

available from the applicable exchanges 

or major market data vendors. Quotation 

and last-sale information regarding the 

Shares will be disseminated through the 

facilities of the CTA. The IFV will be 

disseminated on a per Share basis every 

15 seconds during the Exchange’s Core 

Trading Session and be widely 

disseminated by one or more major 

market data vendors during the NYSE 

Arca Core Trading Session. The Fund’s 

website will also include a form of the 

prospectus for the Fund that may be 

downloaded. The website will include 

the Share’s ticker and CUSIP 

information along with additional 

quantitative information updated on a 

daily basis, including, for the Fund: (1) 

The prior business day’s reported NAV 

and closing price and a calculation of 

the premium and discount of the closing 

price or mid-point of the Bid/Ask Price 

against the NAV; and (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 

website disclosure of portfolio holdings 

will be made daily and will include, as 

applicable, (i) the name, quantity, price, 

and market value of Bitcoin Futures 

Contracts, (ii) the counterparty to and 

value of forward contracts, and (iii) 

other financial instruments, if any, and 

the characteristics of such instruments 

and cash equivalents, and amount of 

cash held in the Fund’s portfolio, if 

applicable. 

Trading in Shares of the Fund will be 

halted if the circuit breaker parameters 

in NYSE Arca Rule 7.12–E have been 

reached or because of market conditions 

or for reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of Trust Issued Receipts based on 

Bitcoin that will enhance competition 

among market participants, to the 

benefit of investors and the marketplace. 

As noted above, the Exchange has in 

place surveillance procedures that are 

adequate to properly monitor trading in 

the Shares in all trading sessions and to 

deter and detect violations of Exchange 

rules and applicable federal securities 

laws. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 


jbell on DSKJLSW7X2PROD with NOTICES
Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Notices 44077 

97 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Each capitalized term not otherwise defined 

herein has its respective meaning as set forth in 

DTC’s rules, including, but not limited to, the 

Rules, By-Laws and Organization Certificate of DTC 

(‘‘Rules’’), the DTC Settlement Service Guide 

(‘‘Settlement Guide’’), and the Guide to the 2020 

DTC Fee Schedule (‘‘Fee Guide’’), available at 

http://www.dtcc.com/legal/rules-andprocedures.aspx. 

4On July 22, 2021, NSCC filed a proposed rule 

change and an advance notice to establish the NSCC 

SFT Service (‘‘NSCC Proposed Rules’’). See SR– 

NSCC–2021–010 and SR–NSCC–2021–803, which 

were filed with Commission and the Board of 

Governors of the Federal Reserve System, 

respectively, but have not been published in the 

Federal Register. Copies of the proposed rule 

Continued 

of the purpose of the Act. The Exchange 

notes that the proposed rule change will 

facilitate the listing and trading of Trust 

Issued Receipts based on Bitcoin and 

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–2021–53 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–2021–53. 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–2021–53 and 

should be submitted on or before 

September 1, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.97

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2021–17078 Filed 8–10–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92572; File No. SR–DTC– 

2021–014] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing of a Proposed Rule Change To 

Provide Settlement Services for 

Transactions Entered Into Under the 

Proposed Securities Financing 

Transaction Clearing Service of the 

National Securities Clearing 

Corporation 

August 5, 2021. 

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 July 22, 

2021, The Depository Trust Company 

(‘‘DTC’’) 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 clearing 

agency. The Commission is publishing 

this notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change of DTC 

would amend the Rules, the Settlement 

Guide, and the Fee Guide 3 in order to 

provide Participants that are also 

members of the National Securities 

Clearing Corporation (‘‘NSCC’’) with 

settlement services in connection with a 

proposed optional securities financing 

transaction clearing service of NSCC 

(‘‘NSCC SFT Service’’). 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency 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 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

The proposed rule change would 

amend the Rules, the Settlement Guide, 

and the Fee Guide in order to provide 

Participants that are also members of 

NSCC with settlement services in 

connection the NSCC SFT Service. The 

proposed NSCC SFT Service would 

provide central clearing for equity 

securities financing transactions, which 

are, broadly speaking, transactions 

where the parties exchange equity 

securities against cash and 

simultaneously agree to exchange the 

same securities and cash, plus or minus 

a rate payment, on a future date (each, 

an ‘‘SFT’’).4 SFTs between 


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