21676 Federal Register / Vol. 87, No. 70 / Tuesday, April 12, 2022 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 92573 

(Aug. 5, 2021), 86 FR 44062 (‘‘Notice’’). Comments 

on the proposed rule change can be found at: 

https://www.sec.gov/comments/sr-nysearca-2021- 

53/srnysearca202153.htm. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 92999, 

86 FR 52539 (Sept. 21, 2021). 

6 15 U.S.C. 78s(b)(2)(B). 

7See Securities Exchange Act Release No. 93534, 

86 FR 63082 (Nov. 15, 2021). 

8See Securities Exchange Act Release No. 94054, 

87 FR 4974 (Jan. 31, 2022). 

9The Exchange filed partial Amendment No. 1 to 

the proposed rule change on March 4, 2022, and 

withdrew partial Amendment No. 1 on March 7, 

2022. In Amendment No. 2, the Exchange clarified, 

among others things, that under no circumstances 

will the Fund hold and/or invest in any assets other 

than BTC Contracts and MBT Contracts (each as 

defined below), cash, and cash equivalents; and 

provided additional representations that are 

commonly made by and/or required for futuresbased exchange-traded products listed under NYSE 

Arca Rule 8.200–E, Commentary .02 (Trust Issued 

Receipts). Because Amendment No. 2 does not 

materially alter the substance of the proposed rule 

change, Amendment No. 2 is not subject to notice 

and comment. The full text of Amendment No. 2 

is available on the Commission’s website at: https:// 

www.sec.gov/comments/sr-nysearca-2021-53/ 

srnysearca202153-20118884-271701.pdf 

(‘‘Amendment No. 2’’). 

10Such filings are made under Section 19(b)(1) of 

the Exchange Act, 15 U.S.C. 78s(b)(1), and 

Exchange Act Rule 19b–4, 17 CFR 240.19b–4. 

11See Exchange Act Section 19(b)(2)(C), 15 U.S.C. 

78s(b)(2)(C). 

12See, e.g., Order Disapproving a Proposed Rule 

Change, as Modified by Amendment No. 1, To 

Amend NYSE Arca Rule 8.201–E (CommodityBased 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 (Feb. 26, 

2020), 85 FR 12595, 12597 (Mar. 3, 2020) (SR– 

NYSEArca–2019–39) (‘‘USBT Order’’); Order 

Disapproving a Proposed Rule Change To List and 

Trade Shares of the NYDIG Bitcoin ETF Under 

NYSE Arca Rule 8.201–E (Commodity-Based Trust 

Shares), Securities Exchange Act Release No. 94395 

(Mar. 10, 2022), 87 FR 14932, 14934 (Mar. 16, 2022) 

(SR–NYSEArca–2021–57) (‘‘NYDIG Order’’). 

13See Notice, supra note 3; Amendment No. 2, 

supra note 9. 

14Bitcoins are digital assets that are issued and 

transferred via a decentralized, open-source 

protocol used by a peer-to-peer computer network 

through which transactions are recorded on a 

public transaction ledger known as the ‘‘bitcoin 

blockchain.’’ The bitcoin protocol governs the 

creation of new bitcoins and the cryptographic 

system that secures and verifies bitcoin 

transactions. See, e.g., Notice, 86 FR at 44063. 

15BTC Contracts began trading on the CME 

Globex trading platform on December 15, 2017, and 

are cash-settled 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. See id. at 

44062. 

16See id. at 44073. 

17See id. The CME CF BRR aggregates the trade 

flow of major bitcoin spot platforms during a 

specific calculation window into a once-a-day 

reference rate of the U.S. dollar price of bitcoin. See 

id. at 44067 n.59. 

18The Fund is a series of Teucrium Commodity 

Trust (‘‘Trust’’). The Fund is managed and 

controlled by Teucrium Trading, LLC (‘‘Sponsor’’). 

See id. at 44062. 

19See id. at 44062–63. 

20See Amendment No. 2, supra note 9, at 3. 

21See Notice, 86 FR at 44062. 

22See id. at 44073–74. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94620; File No. SR– 

NYSEArca–2021–53] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Approval of 

a Proposed Rule Change, as Modified 

by Amendment No. 2, To List and 

Trade Shares of the Teucrium Bitcoin 

Futures Fund Under NYSE Arca Rule 

8.200–E, Commentary .02 (Trust Issued 

Receipts) 

April 6, 2022. 

I. Introduction 

On July 23, 2021, NYSE Arca, Inc. 

(‘‘Arca’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Exchange Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to list and trade shares 

(‘‘Shares’’) of the Teucrium Bitcoin 

Futures Fund (‘‘Fund’’) under NYSE 

Arca Rule 8.200–E, Commentary .02 

(Trust Issued Receipts). The proposed 

rule change was published for comment 

in the Federal Register on August 11, 

2021.3

On September 15, 2021, pursuant to 

Section 19(b)(2) of the Exchange Act,4

the Commission designated a longer 

period within which to approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change.5

On November 8, 2021, the Commission 

instituted proceedings under Section 

19(b)(2)(B) of the Exchange Act 6 to 

determine whether to approve or 

disapprove the proposed rule change.7

On January 25, 2022, the Commission 

designated a longer period for 

Commission action on the proposed rule 

change.8 On March 7, 2022, the 

Exchange filed partial Amendment No. 

2 to the proposed rule change.9

When an exchange files a proposed 

rule change,10 the Commission must 

determine whether the proposed rule 

change is consistent with the statutory 

provisions, and the rules and 

regulations, that apply to national 

securities exchanges.11 As discussed 

further below, the Commission is 

approving the proposed rule change, as 

modified by Amendment No. 2. In 

approving this proposed rule change, 

however, the Commission emphasizes— 

as it has with previous disapprovals of 

bitcoin-related ETPs 12—that its action 

does not rest on an evaluation of 

whether bitcoin, or blockchain 

technology more generally, has utility or 

value as an innovation or an investment. 

II. Description of the Proposed Rule 

Change, as Modified by Amendment 

No. 2 

As described in more detail in the 

Notice and Amendment No. 2,13 the 

Exchange proposes to list and trade the 

Shares of the Fund under NYSE Arca 

Rule 8.200–E, Commentary .02, which 

governs the listing and trading of Trust 

Issued Receipts on the Exchange. 

According to the Exchange, the 

Chicago Mercantile Exchange, Inc. 

(‘‘CME’’) currently offers two bitcoin 

futures contracts, one contract 

representing five (5) bitcoins 14 (‘‘BTC 

Contract’’) and another contract 

representing one-tenth of one (0.10) 

bitcoin (‘‘MBT Contract’’).15 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.16 BTC Contracts and MBT 

Contracts each expire on the last Friday 

of the contract month, and the final 

settlement value for each contract is 

based on the CME CF Bitcoin Reference 

Rate (‘‘CME CF BRR’’).17

The investment objective of the Fund 

is to have the daily changes in the net 

asset value (‘‘NAV’’) of the Shares 

reflect the daily changes in the price of 

a specified benchmark 

(‘‘Benchmark’’).18 The Benchmark will 

be calculated using the closing 

settlement prices of BTC Contracts 

listed on the CME. 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.19

The Fund will only invest in BTC 

Contracts and MBT Contracts (‘‘Bitcoin 

Futures Contracts’’) and in cash and 

cash equivalents.20 The Fund will roll 

its futures positions on a regular basis 

and will never carry futures positions 

all the way to cash settlement.21

The NAV per Share of the Fund will 

be calculated by taking the current 

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 

Time.22


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23See id. at 44074. 

24See Amendment No. 2, supra note 9, at 3. 

25 In approving this proposed rule change, as 

modified by Amendment No. 2, the Commission 

notes that it has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

26 15 U.S.C. 78f(b)(5). 

27 15 U.S.C. 78k–1(a)(1)(C)(iii). 

28See 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 (Aug. 1, 2018) (SR– 

BatsBZX–2016–30) (‘‘Winklevoss Order’’); USBT 

Order, 85 FR 12595; Order Disapproving a Proposed 

Rule Change To List and Trade Shares of the 

WisdomTree Bitcoin Trust Under BZX Rule 

14.11(e)(4), Commodity-Based Trust Shares, 

Securities Exchange Act Release No. 93700 (Dec. 1, 

2021), 86 FR 69322 (Dec. 7, 2021) (SR–CboeBZX– 

2021–024) (‘‘WisdomTree Order’’); Order 

Disapproving a Proposed Rule Change To List and 

Trade Shares of the Kryptoin Bitcoin ETF Trust 

Under BZX Rule 14.11(e)(4), Commodity-Based 

Trust Shares, Securities Exchange Act Release No. 

93860 (Dec. 22, 2021), 86 FR 74166 (Dec. 29, 2021) 

(SR–CboeBZX–2021–029) (‘‘Kryptoin Order’’); 

Order Disapproving a Proposed Rule Change To List 

and Trade Shares of the Valkyrie Bitcoin Fund 

Under NYSE Arca Rule 8.201–E (Commodity-Based 

Trust Shares), Securities Exchange Act Release No. 

93859 (Dec. 22, 2021), 86 FR 74156 (Dec. 29, 2021) 

(SR–NYSEArca–2021–31) (‘‘Valkyrie Order’’); Order 

Disapproving a 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. 94006 (Jan. 20, 

2022), 87 FR 3869 (Jan. 25, 2022) (SR–NYSEArca– 

2021–37) (‘‘Skybridge Order’’); Order Disapproving 

a Proposed Rule Change To List and Trade Shares 

of the Wise Origin Bitcoin Trust Under BZX Rule 

14.11(e)(4), Commodity-Based Trust Shares, 

Securities Exchange Act Release No. 94080 (Jan. 27, 

2022), 87 FR 5527 (Feb. 1, 2022) (SR–CboeBZX– 

2021–029) (‘‘Wise Origin Order’’); NYDIG Order, 87 

FR 14932; Order Disapproving a Proposed Rule 

Change To List and Trade Shares of the Global X 

Bitcoin Trust Under BZX Rule 14.11(e)(4), 

Commodity-Based Trust Shares, Securities 

Exchange Act Release No. 94396 (Mar. 10, 2022), 87 

FR 14912 (Mar. 16, 2022) (SR–CboeBZX–2021–052) 

(‘‘Global X Order’’); Order Disapproving a Proposed 

Rule Change, as Modified by Amendment No. 1, To 

List and Trade Shares of the ARK 21Shares Bitcoin 

ETF Under BZX Rule 14.11(e)(4), Commodity-Based 

Trust Shares, Securities Exchange Act Release No. 

94571 (Mar. 31, 2022), 87 FR 20014 (Apr. 6, 2022) 

(SR–CboeBZX–2021–051). See also Order 

Disapproving a Proposed Rule Change, as Modified 

by Amendment No. 1, Relating to the Listing and 

Trading of Shares of the SolidX Bitcoin Trust Under 

NYSE Arca Equities Rule 8.201, Securities 

Exchange Act Release No. 80319 (Mar. 28, 2017), 82 

FR 16247 (Apr. 3, 2017) (SR–NYSEArca–2016–101) 

(‘‘SolidX Order’’). The Commission also notes that 

orders were issued by delegated authority on the 

following matters: 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 (Aug. 22, 2018), 83 FR 43934 (Aug. 28, 2018) 

(SR–NYSEArca–2017–139) (‘‘ProShares Order’’); 

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 (Aug. 

22, 2018), 83 FR 43923 (Aug. 28, 2018) (SR– 

CboeBZX–2018–001) (‘‘GraniteShares Order’’); 

Order Disapproving a Proposed Rule Change To List 

and Trade Shares of the VanEck Bitcoin Trust 

Under BZX Rule 14.11(e)(4), Commodity-Based 

Trust Shares, Securities Exchange Act Release No. 

93559 (Nov. 12, 2021), 86 FR 64539 (Nov. 18, 2021) 

(SR–CboeBZX–2021–019) (‘‘VanEck Order’’). 

29See USBT Order, 85 FR at 12596. In the context 

of derivative securities products such as 

commodity-trust ETPs, the Commission has long 

recognized the importance of comprehensive 

surveillance-sharing agreements to detect and deter 

fraudulent and manipulative activity. See, e.g., 

streetTRACKS Gold Shares, Securities Exchange 

Act Release No. 50603 (Oct. 28, 2004), 69 FR 64614, 

64618–19 (Nov. 5, 2004) (SR–NYSE–2004–22); 

iShares Silver Trust, Securities Exchange Act 

Release No. 53521 (Mar. 20, 2006), 71 FR 14967, 

14968, 14973–74 (Jan 26, 2005) (SR–Amex–2004– 

38); JPM XF Physical Copper Trust, Securities 

Exchange Act Release No. 68440 (Dec. 14, 2012), 77 

FR 75468, 75469–70, 75272, 75485–86 (Dec. 20, 

2012) (SR–NYSEArca–2012–28). See also 

Winklevoss Order, 83 FR at 37592 n.202 and 

accompanying text (discussing previous 

Commission approvals of commodity-trust ETPs). 

And the Commission’s approval orders for 

commodity-futures ETPs consistently note the 

ability of an ETP listing exchange to share 

surveillance information either through 

surveillance-sharing agreements or through 

membership by the listing exchange and the 

relevant futures exchange in the Intermarket 

Surveillance Group. See, e.g., Securities Exchange 

Act Release No. 53105 (Jan. 11 2006), 71 FR 3129, 

3136 (Jan. 19, 2006) (SR–Amex–2005–059); 

Securities Exchange Act Release No. 53582 (Mar. 

31, 2006), 71 FR 17510, 17518 (Apr. 6, 2006) (SR– 

Amex–2005–127); Securities Exchange Act Release 

No. 54013 (June 16, 2006), 71 FR 36372, 36378–79 

(June 26, 2006) (SR–NYSE–2006–17). See also 

GraniteShares Order, 83 FR at 43925–27 nn.35–39 

and accompanying text (discussing previous 

Commission approvals of commodity-futures ETPs). 

Listing exchanges have also attempted to 

demonstrate that other means besides surveillancesharing agreements will be sufficient to prevent 

fraudulent and manipulative acts and practices, 

including that the bitcoin market as a whole or the 

relevant underlying bitcoin market is ‘‘uniquely’’ 

and ‘‘inherently’’ resistant to fraud and 

manipulation. See USBT Order, 85 FR at 12597. 

The Exchange, however, does not make any such 

arguments with respect to this proposal. 

30See ProShares Order, 83 FR at 43936; 

GraniteShares Order, 83 FR at 43925. 

The Fund will create and redeem 

Shares from time to time, but only in 

one or more blocks of 12,500 Shares 

(‘‘Creation Baskets’’). The purchase and 

redemption price for Creation Baskets 

will be based on the NAV calculated at 

the end of the business day when a 

request for a purchase or redemption is 

received by the Fund.23 Shares will 

generally be created and redeemed in 

cash.24

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change, as 

modified by Amendment No. 2, is 

consistent with the Exchange Act and 

rules and regulations thereunder 

applicable to a national securities 

exchange.25 In particular, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 2, is consistent with Section 6(b)(5) 

of the Exchange Act,26 which requires, 

among other things, that the Exchange’s 

rules be 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 a national market 

system,’’ and, ‘‘in general, to protect 

investors and the public interest.’’ The 

Commission also finds, with respect to 

the dissemination of quotation and lasttrade information for the proposed ETP, 

that the proposed rule change, as 

modified by Amendment No. 2, is 

consistent with Section 11A(a)(1)(C)(iii) 

of the Exchange Act,27 which sets forth 

Congress’ finding that it is in the public 

interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure the availability to brokers, 

dealers, and investors of information 

with respect to quotations for and 

transactions in securities. 

When considering whether Arca’s 

proposal to list and trade the Shares is 

designed to prevent fraudulent and 

manipulative acts and practices, the 

Commission applies the same standard 

it used in orders considering previous 

proposals to list bitcoin-based 

commodity trusts and bitcoin-based 

trust issued receipts.28 As the 

Commission has explained, an exchange 

that lists bitcoin-based exchange-traded 

products (‘‘ETPs’’) can meet its 

obligations under Exchange Act Section 

6(b)(5) by demonstrating that the 

exchange has a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to the underlying or reference 

bitcoin assets.29 The Winklevoss Order 

applied this standard to a commoditytrust ETP based on spot bitcoin, and the 

Commission has found that this 

standard is also appropriate for, and has 

applied the standard to, proposed ETPs 

based on bitcoin futures.30

In the analysis below, the 

Commission examines whether the 

proposed rule change, as modified by 

Amendment No. 2, is consistent with 

Section 6(b)(5) of the Exchange Act by 

addressing: In Section III.A whether 

Arca has entered into a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to the underlying bitcoin assets 

(here, CME bitcoin futures contracts); in 

Section III.B assertions that allowing 

investors to obtain exposure to bitcoin 

futures contracts through a bitcoin 

futures-based ETP would be beneficial; 

in Section III.C other assertions rasied 

by commenters; and in Section III.D 

whether the proposed ETP is consistent 

with other standards for commodityfutures ETPs. Based on its analysis, the 


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21678 Federal Register / Vol. 87, No. 70 / Tuesday, April 12, 2022 / Notices 

31The Commission is not suggesting that either 

the development of the CME bitcoin futures market 

or the approval of this proposal would require the 

Commission to approve a proposed rule change 

seeking to list and trade shares of an ETP holding 

spot bitcoin as an asset or ETPs related to other 

digital assets. See, e.g., GraniteShares Order, 83 FR 

at 43931. Other proposed ETPs will continue to be 

assessed on their particular facts and circumstances 

and on whether those proposals are consistent with 

the requirements of the Exchange Act. 

32See supra note 29 and accompanying text. 

33See Winklevoss Order, 83 FR at 37580. 

34See id.; USBT Order, 85 FR at 12598. 

35See ProShares Order, 83 FR at 43941; 

GraniteShares Order, 83 FR at 43931. 

36See Amendment to Rule Filing Requirements 

for Self-Regulatory Organizations Regarding New 

Derivative Securities Products, Securities Exchange 

Act Release No. 40761 (Dec. 8, 1998), 63 FR 70952, 

70959 (Dec. 22, 1998). 

37 Id. See also Winklevoss Order, 83 FR at 37594; 

ProShares Order, 83 FR at 43936; GraniteShares 

Order, 83 FR at 43924; USBT Order, 85 FR at 12596. 

38See Winklevoss Order, 83 FR at 37592–93 

(discussing Letter from Brandon Becker, Director, 

Division of Market Regulation, Commission, to 

Gerard D. O’Connell, Chairman, Intermarket 

Surveillance Group (June 3, 1994), available at 

https://www.sec.gov/divisions/marketreg/mrnoaction/isg060394.htm). 

39See id. at 37580 n.19. 

40See Notice, 86 FR at 44070–71. 

41See, e.g., WisdomTree Order, 86 FR at 69330; 

Wise Origin Order, 87 FR at 5534. 

42See Winklevoss Order, 83 FR at 37594. 

43See id. 

Commission concludes that the 

proposed rule change, as modified by 

Amendment No. 2, is consistent with 

the statutory requirements of Exchange 

Act Sections 6(b)(5) and 

11A(a)(1)(C)(iii). 

As discussed in more detail below, 

the approval is based on a finding that 

the CME is a ‘‘significant market’’ 

related to CME bitcoin futures contracts, 

which would be the exclusive non-cash 

holdings of the proposed ETP. The 

Commission emphasizes that its 

approval of this proposal is based on the 

specific facts and circumstances of the 

proposal.31

A. Comprehensive Surveillance-Sharing 

Agreement With a Regulated Market of 

Significant Size Related to CME Bitcoin 

Futures Contracts 

As stated above, an exchange that lists 

a bitcoin-based ETP can meet its 

obligations under Exchange Act Section 

6(b)(5) by demonstrating that the 

exchange has a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to the underlying bitcoin 

assets.32 When disapproving the earliest 

proposals for bitcoin-based ETPs, the 

Commission recognized that ‘‘regulated 

bitcoin-related markets are in the early 

stages of their development,’’ but that 

‘‘[o]ver time, regulated bitcoin-related 

markets may continue to grow and 

develop’’ in a way that would make it 

possible for a bitcoin-based ETP to 

satisfy the requirements of the Exchange 

Act.33 The Commission previously 

stated that, for example, ‘‘existing or 

newly created bitcoin futures markets’’ 

that are regulated may achieve 

significant size, and an ETP listing 

exchange may be able to demonstrate in 

a proposed rule change that it will be 

able to address the risk of fraud and 

manipulation by entering into a 

surveillance-sharing agreement with a 

regulated market of significant size.34

Since the early stages of bitcoin futures 

trading on a regulated market, however, 

the Commission has not had the 

opportunity to consider whether a 

proposal for a bitcoin futures-based ETP 

is consistent with the Exchange Act.35

With respect to the proposed ETP, the 

underlying bitcoin assets are CME 

bitcoin futures contracts. The relevant 

analysis, therefore, is whether Arca has 

a comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size related to CME bitcoin 

futures contracts. As discussed below, 

taking into consideration the direct 

relationship between the regulated 

market with which Arca has a 

surveillance-sharing agreement and the 

assets held by the proposed ETP, as well 

as developments with respect to the 

CME bitcoin futures market—including 

the launch of exchange-traded funds 

registered under the Investment 

Company Act of 1940 (‘‘1940 Act’’) that 

hold CME bitcoin futures (‘‘Bitcoin 

Futures ETFs’’)—the Commission 

concludes that the Exchange has the 

requisite surveillance-sharing 

agreement. 

Comprehensive Surveillance-Sharing 

Agreements With the CME, a Regulated 

Market 

The Commission has emphasized that 

it is essential for an exchange listing a 

derivative securities product to enter 

into a surveillance-sharing agreement 

with markets trading the underlying 

assets for the listing exchange to have 

the ability to obtain information 

necessary to detect, investigate, and 

deter fraud and market manipulation, as 

well as violations of exchange rules and 

applicable federal securities laws and 

rules.36 Comprehensive surveillancesharing 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.’’ 37

The hallmarks of a surveillance-sharing 

agreement are that the agreement 

provides for the sharing of information 

about market trading activity, clearing 

activity, and customer identity; that the 

parties to the agreement have reasonable 

ability to obtain access to and produce 

requested information; and that no 

existing rules, laws, or practices would 

impede one party to the agreement from 

obtaining this information from, or 

producing it to, the other party.38

As the Commission has stated, it 

considers two markets to have a 

comprehensive surveillance-sharing 

agreement with one another if they are 

both members of the Intermarket 

Surveillance Group (‘‘ISG’’), even if they 

do not have a separate bilateral 

surveillance-sharing agreement.39

Accordingly, based on the common 

membership of Arca and the CME in the 

ISG,40 Arca has the equivalent of a 

comprehensive surveillance-sharing 

agreement with the CME. Moreover, as 

the Commission has previously 

recognized, the Commodity Futures 

Trading Commission (‘‘CFTC’’) regulates 

the CME futures market, including the 

CME bitcoin futures market, and thus 

that market is ‘‘regulated.’’ 41

Whether the CME Is a Market of 

Significant Size Related to CME Bitcoin 

Futures Contracts 

In the Winklevoss Order, the 

Commission stated that the term 

‘‘significant market’’ or ‘‘market of 

significant size’’ includes a market (or 

group of markets) as to which (1) there 

is a reasonable likelihood that a person 

attempting to manipulate the ETP 

would also have to trade on that market 

to successfully manipulate the ETP, so 

that a surveillance-sharing agreement 

would assist in detecting and deterring 

misconduct, and (2) it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in that 

market.42 The Commission explained 

that this definition is illustrative and 

not exclusive, and that there could be 

other types of ‘‘significant markets’’ and 

‘‘markets of significant size.’’ 43

(1) Prong 1 

The first prong of the analysis 

addresses whether the surveillancesharing agreement on which the ETPlisting exchange proposes to rely would 

assist in detecting and deterring 

fraudulent or manipulative misconduct 

related to the assets held by the ETP. 

In the present proposal, the proposed 

ETP’s only non-cash holdings will be 

CME bitcoin futures contracts. 

Moreover, the proposed ‘‘significant’’ 

regulated market (i.e., the CME) with 

which the listing exchange has a 

surveillance-sharing agreement is the 


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44Notice, 86 FR at 44063. 

45 Id. at 44072 & n.85. 

46This reasoning, however, does not extend to 

spot bitcoin ETPs. Spot bitcoin markets are not 

currently ‘‘regulated.’’ See, e.g., USBT Order, 85 FR 

at 12604; NYDIG Order, 87 FR at 14936 nn.65–67. 

If an exchange seeking to list a spot bitcoin ETP 

relies on the CME as the regulated market with 

which it has a comprehensive surveillance-sharing 

agreement, because the assets held by a spot bitcoin 

ETP would not be traded on the CME, that proposal 

would be significantly different from the current 

proposal. Because of this important difference, with 

respect to a spot bitcoin ETP, there would be reason 

to question whether a surveillance-sharing 

agreement with the CME would, in fact, assist in 

detecting and deterring fraudulent and 

manipulative misconduct affecting the price of the 

spot bitcoin held by that ETP. If, however, an 

exchange proposing to list and trade a spot bitcoin 

ETP identifies the CME as the regulated market 

with which it has a comprehensive surveillancesharing agreement, the exchange could overcome 

the Commission’s concern by demonstrating that 

there is a reasonable likelihood that a person 

attempting to manipulate the spot bitcoin ETP 

would have to trade on the CME in order to 

manipulate the ETP, because such demonstration 

would help establish that the exchange’s 

surveillance-sharing agreement with the CME 

would have the intended effect of aiding in the 

detection and deterrence of fraudulent and 

manipulative misconduct related to the spot bitcoin 

held by the ETP. 

47 In addition, when considering past proposals 

for spot bitcoin ETPs, the Commission has 

discussed whether there is a lead-lag relationship 

between the regulated market (e.g., the CME) and 

the market on which the assets held by the ETP 

would have traded (i.e., spot bitcoin platforms), as 

part of an analysis of whether a would-be 

manipulator of the spot bitcoin ETP would need to 

trade on the regulated market to effect such 

manipulation. See, e.g., USBT Order, 85 FR at 

12612. For the present proposal, because of the 

direct relationship between the regulated market 

(i.e., the CME) and the only non-cash assets held 

by the proposed ETP (i.e., CME bitcoin futures 

contracts), establishing a ‘‘lead-lag’’ relationship 

between the CME and non-CME markets is also 

unnecessary. 

48See Notice, 86 FR at 44071–73. 

49See id. at 44071. 

50See id. 

51See id. at 44072. 

52See id. at 44071. 

53 Id. 

54 Id. 

55See id. at 44072. 

56See id. 

57See id. at 44072–73. 

58See id. at 44072. 

59See also USBT Order, 85 FR at 12612; 

WisdomTree Order, 86 FR at 69331; Wise Origin 

Order, 87 FR at 5535. 

60See Notice, 86 FR at 44071 n.76. The Exchange 

includes weblinks to papers by: B. Kapar & J. Olmo, 

An analysis of price discovery between Bitcoin 

futures and spot markets, 174 Econ. Letters 62 

(2019) (‘‘Kapar & Olmo’’); and A. Chang, W. 

Herrmann & W. Cai, Efficient Price Discovery in the 

Bitcoin Markets, Wilshire Phoenix, Oct. 14, 2020 

(‘‘Wilshire Phoenix’’). 

61See, e.g., USBT Order, 85 FR at 12613 n. 244 

(discussing that studies such as Kapar & Olmo that 

use daily price data, as opposed to intraday prices, 

may not be able to distinguish which market 

incorporates new information faster); WisdomTree 

Order, 86 FR at 69331 n.143 (concluding that the 

papers cited by a commenter, including the 

Continued 

same market on which these assets 

trade. The Commission agrees with Arca 

that the CME, as a CFTC-regulated 

futures exchange, has ‘‘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.’’ 44 As Arca states, 

as a Designated Contracts Market 

(‘‘DCM’’), the CME ‘‘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.’’ 45 Thus the 

CME’s surveillance can reasonably be 

relied upon to capture the effects on the 

CME bitcoin futures market caused by a 

person attempting to manipulate the 

proposed futures ETP by manipulating 

the price of CME bitcoin futures 

contracts, whether that attempt is made 

by directly trading on the CME bitcoin 

futures market or indirectly by trading 

outside of the CME bitcoin futures 

market. As such, when the CME shares 

its surveillance information with Arca, 

the information would assist in 

detecting and deterring fraudulent or 

manipulative misconduct related to the 

non-cash assets held by the proposed 

ETP.46 Accordingly, for the present 

proposal, it is unnecessary for Arca to 

establish a reasonable likelihood that 

the would-be manipulator would have 

to trade on the CME itself to manipulate 

the proposed ETP.47

Arca makes several arguments in 

support of its assertion that a person 

manipulating the proposed ETP would 

be reasonably likely to trade on the CME 

bitcoin futures market.48 First, Arca 

argues that the CME bitcoin futures 

market is the ‘‘primary [b]itcoin price 

discovery’’ market.49 Second, Arca 

asserts that the CME bitcoin futures 

market ‘‘compares favorably with other 

markets that were deemed to be markets 

of significant size’’ in various prior 

Commission approval orders for the 

listing of commodity and commodity 

futures-based ETPs.50 Arca asserts that, 

like gold, wheat, and other futures, 

bitcoin futures have grown in size to 

such a degree that they cannot be 

effectively or precisely manipulated by 

trading in other bitcoin interests.51

Third, Arca argues that, ‘‘due to the 

unique structure of the Fund,’’ it is 

unlikely that price manipulation or 

fraud on spot bitcoin trading platforms 

will have a measurable impact on the 

NAV of the Fund.52 Arca reasons that, 

‘‘[b]ecause the Fund calculates daily 

NAV based on Bitcoin Futures 

Contracts’ settlement prices and does 

not calculate NAV based directly on the 

underlying spot [b]itcoin market . . . 

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 [b]itcoin 

spot market.’’ 53 Arca further states that 

‘‘the market for BTC Contracts and MBT 

Contracts stands alone within the 

overall global [b]itcoin ecosphere,’’ and 

is now of such size and scale that 

‘‘[b]itcoin futures prices are not 

specifically materially influenced by 

other [b]itcoin markets.’’ 54 Fourth, Arca 

asserts that because of this ‘‘lack of 

connection’’ between the CME bitcoin 

futures contracts and spot bitcoin 

trading platforms, establishing a ‘‘leadlag’’ relationship between the two is 

‘‘unnecessary and irrelevant.’’ 55 Fifth, 

Arca states that recent—and 

continuing—growth in the CME bitcoin 

futures market (discussed further below) 

establishes that CME is a market of 

significant size and ‘‘the primary, if not 

the lone determinant, of its 

valuation.’’ 56 Sixth, Arca asserts that a 

would-be manipulator of bitcoin prices 

would be reasonably likely to do so 

through the CME bitcoin futures market, 

rather than any spot market, in order to 

take advantage of the ‘‘inherent 

leverage’’ in bitcoin futures; and that a 

would-be manipulator 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 platforms.57 Finally, Arca 

states that, based on an analysis of past 

Commission orders, the Sponsor 

believes that the relevant standard for a 

surveillance-sharing argreement should 

be whether it is ‘‘adequate to monitor’’ 

for abuses in the trading of the Fund’s 

Shares, and Arca emphasizes that the 

Commission’s two-pronged definition 

for a ‘‘significant’’ market in the 

Winklevoss Order was illustrative and 

not exclusive.58

The Commission disagrees with much 

of Arca’s reasoning. The evidence in the 

record does not support a finding that 

the CME leads bitcoin price discovery.59

Rather, the Commission has found that 

the ‘‘mixed results’’ of price discovery 

analyses, including the two studies 

cited by Arca in its filing,60 fail to 

demonstrate that the CME bitcoin 

futures market constitutes a market of 

significant size vis-a`-vis the bitcoin spot 

market.61 As the Commission has also 


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Wilshire Phoenix working paper, evidence the 

unsettled nature of the academic literature). 62See USBT Order, 85 FR at 12613; Wise Origin 

Order, 87 FR at 5540. 63See supra note 16 and accompanying text. 64See NYDIG Order, 87 FR at 14939 n.105. 

65See Winklevoss Order, 83 FR at 37594; USBT 

Order, 85 FR at 12596–97. 66See Notice, 86 FR at 44073. 67See id. 68See id. 69 Id. 70See id. 71See id. 

72See id. 

73See VanEck Order, 86 FR at 64548–49; 

WisdomTree Order, 86 FR at 69332–33; Kryptoin 

Order, 86 FR at 74177; Skybridge Order, 87 FR at 

3878–79; Wise Origin Order, 87 FR at 5536–37; 

NYDIG Order, 87 FR at 14939–40; Global X Order, 

87 FR at 14920–21. 

74See, e.g., GraniteShares Order, 83 FR at 43925– 

27 & nn.36–37. And where the Commission has 

considered a proposed ETP based on futures that 

had only recently begun trading, the Commission 

specifically addressed whether the futures on 

which the ETP was based—which were futures on 

an index of well-established commodity futures— 

were illiquid or susceptible to manipulation. See id. 

at 43927 & nn.38–39. 

75See Notice, 86 FR at 44064. 

76See id. at 44067. 

77See id. 

previously stated, citations to academic 

studies about the interrelationship of 

spot and futures markets for other asset 

classes (such as gold) are not persuasive, 

and do not help the Exchange to meet 

its burden with respect to a bitcoinbased ETP.62 In addition, the 

Commission is not persuaded that the 

market for CME bitcoin futures contracts 

‘‘stands alone;’’ has a ‘‘lack of 

connection’’ with, and is ‘‘not 

specifically materially influenced’’ by, 

other bitcoin markets; nor that it is ‘‘the 

primary, if not the lone determinant, of 

its valuation.’’ Nor is the Commission 

persuaded that the Fund’s calculation of 

NAV based on the daily settlement price 

insulates the NAV from activity in other 

bitcoin markets, given that there is 

nothing that prevents the trade prices 

that contribute to the daily settlement 

price 63 from themselves being 

influenced by activity in other bitcoin 

markets. Moreover, while it may be 

plausible that a would-be manipulator 

may attempt their scheme through a 

leveraged position on a ‘‘limited number 

of futures markets,’’ it is not clear from 

the record why, as Arca asserts, such a 

would-be manipulator would choose to 

use a regulated futures market with 

limited leverage, such as the CME, to 

perpetrate its fraud or manipulation, 

rather than unregulated futures 

platforms that permit higher leverage.64

However, none of these deficiencies 

in Arca’s arguments concerning whether 

there is a reasonable likelihood that a 

would-be manipulator of the proposed 

ETP would have to trade on the CME 

conflicts with the Commission’s 

determination that, because the only 

non-cash assets held by the proposed 

ETP (i.e., CME bitcoin futures contracts) 

are traded on the CME itself, Arca’s 

surveillance-sharing agreement with the 

CME can reasonably be relied upon to 

assist in detecting and deterring 

fraudulent or manipulative misconduct 

related to those assets. Thus the first 

prong of the standard for ‘‘market of 

significant size’’ has been established. 

(2) Prong 2 

As discussed above, in determining 

whether the CME bitcoin futures market 

constitutes a ‘‘market of significant size’’ 

related to CME bitcoin futures contracts, 

the Commission has also considered as 

a second prong of the analysis whether 

trading in the proposed ETP would be 

unlikely to be the predominant 

influence on prices in the CME bitcoin 

futures market.65 Based on the facts and 

circumstances here, the Commission 

finds that this second prong has been 

satisfied. 

Arca asserts that trading in the Shares 

would not be the predominant force on 

prices in the CME bitcoin futures market 

(or spot market) because of the 

significant volume in and size of the 

CME bitcoin futures market, and the 

significant liquidity available in the spot 

market.66 Arca states that, since the 

USBT Order was issued, there has been 

significant growth in CME bitcoin 

futures across each of trading volumes 

($433 million on February 26, 2020, 

compared to $4.321 billion on April 7, 

2021) and open interest ($238 million 

on February 26, 2020, compared to 

$2.582 billion on April 7, 2021).67

Arca also states that the growth of the 

CME bitcoin futures market has 

coincided with similar growth in the 

bitcoin spot market, and that the market 

for bitcoin futures is rapidly 

approaching the size of markets for 

other commodity interests.68 Arca states 

that, 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 

[b]itcoin futures market and [b]itcoin 

spot market will behave similarly to 

other future/spot market relationships, 

where the spot market may have no 

relationship to the futures market.’’ 69

Arca also argues that the significant 

liquidity in the bitcoin 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.70 According to Arca, 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). 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). Arca contends that 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.71 Arca concludes 

that, to the extent that the bitcoin spot 

market can be used to move the CME 

bitcoin futures market (which it does 

not believe is the case), this would make 

it even more likely that a person 

attempting to manipulate the price of 

the Shares would have to do so by 

manipulating the CME bitcoin futures 

market.72

The Commission has considered and 

rejected nearly identical arguments in 

past disapproval orders of spot bitcoin 

ETPs.73 Moreover, the Commission 

finds arguments centered around the 

relationship between the bitcoin spot 

market and the CME bitcoin futures 

market to be inapposite where, as here, 

the proposed ‘‘significant’’ market (i.e., 

the CME bitcoin futures market) is the 

same as the market on which the 

proposed ETP’s only non-cash assets 

(i.e., CME bitcoin futures contracts) 

trade. 

Nonetheless, for the reasons discussed 

below, the Commission concludes that 

it is unlikely that trading in the 

proposed ETP would be the 

predominant influence on prices in the 

CME bitcoin futures market. In past 

orders approving commodity-futures 

ETPs, the Commission relied on the 

proposing exchanges’ representations 

regarding the trading volume of the 

underlying futures markets, and the 

Commission was in each of those cases 

dealing with a large futures market that 

had been trading for a number of years 

before an exchange proposed an ETP 

based on those futures.74

With respect to the present proposal, 

the Commission observes that the CME 

bitcoin futures market has ‘‘progressed 

and matured significantly.’’ 75 CME 

began offering trading in BTC Contracts 

in 2017 and in MBT Contracts in 2021.76

As Arca states, nearly every measurable 

metric related to BTC Contracts has 

trended consistently up since launch 

and/or accelerated upward in the past 

year.77 As Arca notes, trading in BTC 

Contracts has increased from $737 

million in December 2017, to $1.4 


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78See id. 

79 In March 2022, trading in BTC Contracts was 

$38.9 billion. Source: Bloomberg. At the time the 

Commission last considered bitcoin-futures based 

ETPs (August 2018), publicly available data showed 

that the median daily notional trading volume, from 

inception of the CME bitcoin futures market 

through August 10, 2018, had been 14,185 bitcoins; 

and that the median daily notional value of open 

interest in CME during the same period had been 

10,145 bitcoins. See, e.g., GraniteShares Order, 83 

FR at 43930 & n.88. In addition, the CFTC Chairman 

at that time characterized the volume of the bitcoin 

futures markets as ‘‘quite small.’’ See id. at 43930 

& n.90. 

80See Notice, 86 FR at 44063. 

81See id. at 44067. 

82See id. at 44072. The Commission notes that 

Arca provided only data showing absolute growth 

in the size of the CME bitcoin futures market, but 

provides no data relative to the concomitant growth 

in either the bitcoin spot markets or other bitcoin 

derivative markets (including unregulated futures 

markets). However, given the direct relationship 

between the CME and the proposed ETP’s bitcoinrelated holdings (CME bitcoin futures contracts), 

such comparisons are unnecessary. 

83Source: Bloomberg. 

84Source: Bloomberg. 

85Source: Bloomberg. 

86Source: CME Globex MDP 3.0 (Market Data 

Platform). 

87By contrast, at the time the Commission last 

considered bitcoin-futures based ETPs (August 

2018), the President and COO of Cboe Global 

Markets had acknowledged in a letter to 

Commission staff that ‘‘the current bitcoin futures 

trading volumes on Cboe Futures Exchange and 

CME may not currently be sufficient to support 

ETPs seeking 100% long or short exposure to 

bitcoin.’’ See, e.g., GraniteShares Order, 83 FR at 

43930 & n.91. 

88See Notice, 86 FR at 44066. 

89See id. Arca states that while it understands the 

Commission’s previous focus in prior disapproval 

orders on potential manipulation of a bitcoin ETP 

holding actual bitcoin, Arca believes that ‘‘such 

concerns have been sufficiently mitigated by the 

use of futures contracts in the proposed ETP.’’ Id. 

90See id. 

91See id. Arca also states that, unlike the Shares, 

because OTC bitcoin funds are not listed on an 

exchange, they are not subject to the same 

transparency and regulatory oversight by a listing 

exchange. Arca further asserts that the existence of 

a surveillance-sharing agreement between Arca and 

the CME results in increased investor protections 

for the Shares compared to OTC bitcoin funds. See 

id. at 44066 n.47. 

92See id. at 44066. Arca further represents that 

the inability to trade in line with NAV may at some 

point result in OTC bitcoin funds trading at a 

discount to their NAV. According to Arca, while 

that has not historically been the case, prolonged, 

significant trading at a discount would give rise to 

nearly identical potential issues related to trading 

at a premium. See id. at 44066 n.48. 

93See id. at 44066. 

billion in December 2018, $3.9 billion in 

December 2019, and $28 billion in 

December 2020.78 In December 2021, 

trading in BTC Contracts was $44.6 

billion.79 Arca also notes that the BTC 

Contracts and MBT Contracts are highly 

liquid,80 and that BTC Contracts traded 

more than $1.2 billion per day in 

December 2020 and represented $1.6 

billion in open interest, compared to 

$115 million in December 2019.81 Arca 

states that there is a ‘‘clear trend in yearover-year growth’’ in the CME bitcoin 

futures market, which is ‘‘still growing 

in size.’’ 82

Significantly, evidence from the 

recent introduction of 1940 Actregistered Bitcoin Futures ETFs also 

supports the Commission’s conclusion 

that it is unlikely that trading in the 

proposed ETP would be the 

predominant influence on prices in the 

CME bitcoin futures market. Since 

October 2021, three such ETFs have 

launched holding exclusively CME 

bitcoin futures contracts: ProShares 

Bitcoin Strategy ETF (‘‘BITO’’), Valkyrie 

Bitcoin Strategy ETF (‘‘BTF’’), and 

VanEck Bitcoin Strategy ETF (‘‘XBTF’’). 

BITO, which launched first on October 

19, 2021, obtained $1.21 billion in 

assets under management (‘‘AUM’’) 

within three days of launch.83 As of 

March 31, 2022, BITO had AUM of 

approximately $1.31 billion, 

constituting approximately 49.6 percent 

of open interest in the front two month 

BTC Contracts.84 BTF and XBTF, which 

launched second and third, had AUM as 

of March 31, 2022, of approximately 

$47.8 million and $29.1 million, 

respectively.85

Since the launch of Bitcoin Futures 

ETFs, the Commission has neither 

observed any disruption to the CME 

bitcoin futures market, nor any evidence 

that the Bitcoin Futures ETFs have 

exerted a dominant influence on CME 

bitcoin futures prices. For example, 

based on CME data,86 the Commission 

has not observed any disruption to, or 

dominant influence from the Bitcoin 

Futures ETFs on, settlement prices, 

spreads, or roll costs of CME bitcoin 

futures contracts. The Commission thus 

concludes that the CME bitcoin futures 

market has sufficiently developed to 

support ETPs seeking exposure to 

bitcoin by holding CME bitcoin futures 

contracts.87

Taken together, the maturation of the 

CME bitcoin futures market since its 

inception in 2017—including, but not 

limited to, the overall size, volume, 

liquidity, and number of years of trading 

in the CME bitcoin futures market—and 

evidence from the 1940 Act-registered 

Bitcoin Futures ETFs persuade the 

Commission that trading in the 

proposed ETP is not likely to be the 

predominant influence on prices in the 

CME bitcoin futures market. Thus the 

second prong of the standard for 

‘‘market of significant size’’ has been 

established. 

Therefore, the Commission concludes 

that the CME is a ‘‘significant market’’ 

related to CME bitcoin futures contracts, 

and thus that the Exchange has entered 

into the requisite surveillance-sharing 

agreement. 

B. Exposure to Bitcoin Futures Contracts 

Through a Bitcoin Futures-Based ETP 

Arca contends that, if approved, the 

proposed ETP would protect investors 

and the public interest. Arca asserts 

that, with the growth of U.S. investor 

exposure to bitcoin through over-thecounter (‘‘OTC’’) bitcoin funds, so too 

has grown the potential risk to U.S. 

investors.88 Specifically, Arca argues 

that 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.89 The 

Exchange 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.90

According to Arca, OTC bitcoin funds 

are generally designed to provide 

exposure to bitcoin in a manner similar 

to the Shares. However, unlike the 

Shares, Arca states that 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 and, as such, frequently trade at a 

price that is out-of-line with the value 

of their assets held.91 Arca represents 

that, historically, OTC bitcoin funds 

have traded at a significant premium to 

NAV.92 Although the Exchange 

concedes that trading at a premium or 

a discount is not unique to OTC bitcoin 

funds and not itself problematic, Arca 

believes that it raises certain investor 

protections issues. First, according to 

Arca, 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.93 Second, according 

to Arca, because only accredited 

investors, generally, are able to purchase 

shares from the issuing fund and can 

buy such shares directly from the fund 

at NAV (in exchange for either cash or 


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94See id. 95See id. at 44067. 96See id. 97See id. 98See id. at 44065. Arca represents that the 

Purpose Bitcoin ETF, a retail bitcoin-based ETP 

launched in Canada, reportedly reached $421.8 

million in AUM in two days, and $993 million in 

AUM as of April 2021, demonstrating the demand 

for a North American market-listed bitcoin ETP. 

Arca contends that the Purpose Bitcoin ETF also 

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

denominated, which could appeal to U.S. investors. 

Arca also argues that without an approved bitcoin 

ETP in the U.S. as a viable alternative, 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. Arca 

believes that, 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. exchangelisted ETP. See id. Arca also states that regulators 

in other countries have either approved or 

otherwise allowed the listing and trading of bitcoinbased ETPs. See id. at 44065 n.42. Arca further 

asserts that, with the addition of more bitcoin ETPs 

in non-U.S. jurisdictions expected to grow, such 

risks will only continue to grow. See id. at 44065. 

99See id. at 44067. 

100See id. at 44063. 

101See id. at 44067. 

102See id. at 44063. 

103See id. at 44067. 

104The Commission has disagreed with similar 

arguments made in the context of spot bitcoin ETPs. 

See, e.g., WisdomTree Order, 86 FR at 69333–34; 

Wise Origin Order, 87 FR at 5537–38. 

105See Exchange Act Section 19(b)(2)(C), 15 

U.S.C. 78s(b)(2)(C). 

106See SolidX Order, 82 FR at 16259; 

WisdomTree Order, 86 FR at 69334; Wise Origin 

Order, 87 FR at 5538. 

107See supra Section III.A. 

108See infra Section III.D. 

109The Commission acknowledges that, 

compared to trading in unregulated spot bitcoin 

markets, trading a CME bitcoin futures-based ETP 

on a national securities exchange may provide some 

additional protection to investors. See 

GraniteShares Order, 83 FR at 43931; USBT Order, 

85 FR at 12615. 

110See letter from W. Thomas Conner, 

Shareholder, VedderPrice, dated September 1, 2021 

(‘‘Sponsor Letter’’), at 6–9. 

111See Sponsor Letter at 4–6. 

112 15 U.S.C. 78f(b)(5); 15 U.S.C. 78k– 

1(a)(1)(C)(iii). 

113See letter from Donna Jean Ryder, dated 

November 8, 2021. 

bitcoin) without having to pay the 

premium or sell into the discount, these 

investors that are able to hedge their 

bitcoin exposure as needed to satisfy 

holding requirements and collect on the 

premium or discount opportunity. Arca 

argues, therefore, that the premium in 

OTC bitcoin funds essentially creates a 

transfer of value from retail investors to 

more sophisticated investors.94

Arca also asserts that a number of 

operating companies engaged in 

unrelated businesses have announced 

investments as large as $1.5 billion in 

bitcoin.95 Arca argues that, without 

access to bitcoin ETPs, retail investors 

seeking investment exposure to bitcoin 

may purchase shares in these companies 

in order to gain the exposure to bitcoin 

that they seek.96 Arca contends that 

such operating companies, however, are 

imperfect bitcoin proxies and provide 

investors with partial bitcoin exposure 

paired with additional risks associated 

with whichever operating company they 

decide to purchase. Arca concludes that 

investors seeking bitcoin exposure 

through publicly traded companies are 

gaining only partial exposure to bitcoin 

and are not fully benefitting from the 

risk disclosures and associated investor 

protections that come from the 

securities registration process.97

Arca also states that investors in many 

other countries, including Canada, are 

able to use more traditional exchangelisted and traded products to gain 

exposure to bitcoin.98

Arca further asserts that exposure to 

bitcoin through a bitcoin futures-based 

ETP like the Fund also presents 

advantages for retail investors compared 

to buying spot bitcoin directly.99 Arca 

asserts that the most notable advantage 

is that the BTC Contracts and MBT 

Contracts in which the Fund will invest 

do not require special, potentially 

complex and untested, custody 

procedures. Arca states that the Fund 

will have no ownership interests of any 

kind in actual bitcoin 100 and, unlike 

physical bitcoin ETPs, the Fund will not 

be required to use a bitcoin custodian 

because it will not be holding bitcoin.101

Arca asserts that an ETP whose holdings 

consist exclusively of BTC Contracts 

and MBT Contracts would have all the 

benefits enjoyed by investors currently 

holding approved and listed futuresbased ETPs without the risks associated 

with ETPs that hold actual bitcoin.102

Arca asserts that, by contrast, an 

individual retail investor holding 

bitcoin through a cryptocurrency 

exchange lacks these protections; and 

that 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. Arca states 

that, in addition, retail investors will be 

able to hold the Shares in traditional 

brokerage accounts which provide SIPC 

protection if the brokerage firm fails.103

In essence, Arca asserts that the risky 

nature of direct investment in spot 

bitcoin or a spot bitcoin ETP and the 

unregulated markets on which bitcoin 

and OTC bitcoin funds trade compels 

approval of the proposed ETP. The 

Commission disagrees.104 Pursuant to 

Section 19(b)(2) of the Exchange Act, 

the Commission must approve a 

proposed rule change filed by a national 

securities exchange if it finds that the 

proposed rule change is consistent with 

the applicable requirements of the 

Exchange Act, and it must disapprove 

the filing if it does not make such a 

finding.105 Thus, even if a proposed rule 

change purports to protect investors 

from a particular type of investment 

risk—such as the susceptibility of an 

asset to loss or theft—the proposed rule 

change may still fail to meet the 

requirements under the Exchange 

Act.106

Regardless of Arca’s assertions and for 

the reasons discussed herein—including 

that Arca has demonstrated that it has 

a comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size related to CME bitcoin 

futures contracts that will help prevent 

fraudulent and manipulative acts and 

practices,107 and that core aspects of the 

proposed ETP will be consistent with 

other commodity-futures ETPs that the 

Commission has approved, including 

with respect to the availability of 

pricing information, transparency of 

portfolio holdings, and types of 

surveillance procedures 108—the 

Commission finds that the proposal is 

also consistent with the requirement 

under Section 6(b)(5) that the 

Exchange’s rules be designed to protect 

investors and the public interest.109

C. Other Comments Related to Bitcoin 

ETPs 

Counsel for the Sponsor submitted a 

letter that argues that the Commission 

should be equally receptive to 1940 Actregistered Bitcoin Futures ETFs and the 

proposed ETP.110 The Sponsor Letter 

also argues that there are ‘‘compelling 

equitable bases’’ to put the review and 

approval process for the proposed ETP 

‘‘on parity’’ with Bitcoin Futures 

ETFs.111 The Commission has 

considered and, for the reasons 

discussed above, is approving the 

proposed rule change, as modified by 

Amendment No. 2, on its own merits 

and under the standards applicable to it; 

namely, the standards provided by 

Section 6(b)(5) and Section 

11A(a)(1)(C)(iii) of the Exchange Act.112

One comment letter also mentions 

risks of bitcoin adoption and the bitcoin 

network’s effect on the environment.113

Ultimately, however, additional 

discussion of these topics is 

unnecessary, as they do not bear on the 

basis for the Commission’s decision to 

approve the proposal. 


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Federal Register / Vol. 87, No. 70 / Tuesday, April 12, 2022 / Notices 21683 

114See, e.g., ProShares UltraPro 3X Natural Gas 

ETF and ProShares UltraPro 3X Short Natural Gas 

ETF, Securities Exchange Act Release No. 86532 

(July 31, 2019), 84 FR 38312 (Aug. 6, 2019) (SR– 

NYSEArca–2019–02). 115See Notice, 86 FR at 44075. 116The Fund’s website will include: (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 the NAV calculation (‘‘Bid/Ask Price’’) 

against the NAV; and (2) data in chart format 

displaying the frequency distribution of discounts 

and premiums of the daily closing price or Bid/Ask 

Price against the NAV, within appropriate ranges, 

for at least each of the four previous calendar 

quarters. See id. 117See id. at 44074–75. 

118See id. at 44075. 

119See id. at 44076. 

120See id. at 44075. 

121For a list of the current members of ISG, see 

www.isgportal.org. According to the Exchange, not 

all components of the Fund may trade on markets 

that are members of the ISG or with which the 

Exchange has in place a CSSA. See Notice, 86 FR 

at 44076 n.95. 

122See id. at 44076. For additional discussion of 

the CME bitcoin futures market and how 

surveillance-sharing between the Exchange and the 

CME via common membership in the ISG would 

assist in detecting and deterring manipulative 

conduct related to the Shares, see Section III.A 

above. 

123See Notice, 86 FR at 44075. 

D. Other Standards for CommodityFutures ETPs 

Arca’s proposal sets forth aspects of 

the proposed ETP, including the 

availability of pricing information, 

transparency of portfolio holdings, and 

types of surveillance procedures, that 

are consistent with the other 

commodity-futures ETPs that the 

Commission has approved.114

According to Arca,115 quotation and 

last-sale information regarding the 

Shares will be disseminated through the 

facilities of the Consolidated Tape 

Association. Quotation information for 

cash equivalents and the Bitcoin 

Futures Contracts may be obtained from 

brokers and dealers who make markets 

in such instruments. The intra-day, 

closing, and settlement prices of the 

Bitcoin Futures Contracts will be readily 

available from the applicable futures 

exchange websites, automatic 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 the 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 information sources. 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 Fund’s website 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 Fund’s prospectus that may be 

downloaded. The website will include 

the Shares’ ticker and CUSIP 

information, along with additional 

quantitative information updated on a 

daily basis.116 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 publicy available at the time of the 

public offering of the Shares and 

accessible at no charge. 

The Fund’s NAV will be calculated 

once each trading day, as of the earlier 

of the close of the New York Stock 

Exchange or 4:00 p.m. Eastern Time 

(‘‘ET’’). 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’’), 

which will be calculated by using the 

prior day’s closing NAV per Share of the 

Fund as a base and updated throughout 

the Core Trading Session of 9:30 a.m. ET 

to 4:00 p.m. ET to reflect changes in the 

value of the Fund’s holdings during the 

trading day. During the Exchange’s Core 

Trading Session, the IFV will be 

disseminated on a per Share basis every 

15 seconds and will be widely 

disseminated by one or more major 

market data vendors. The NAV for the 

Shares will be disseminated daily to all 

market participants at the same time.117

The proposal also is reasonably 

designed to promote fair disclosure of 

information that may be necessary to 

price the Shares appropriately and to 

prevent trading in the Shares when a 

reasonable degree of transparency 

cannot be assured. 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. 

Further, 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. 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. 

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.118 The Exchange states that 

it has a general policy prohibiting the 

distribution of material, non-public 

information by its employees.119

Moreover, 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 Holders (‘‘ETP Holders’’) acting 

as registered Market Makers in Trust 

Issued Receipts to facilitate 

surveillance.120

The Commission notes that the 

Exchange or the Financial Industry 

Regulatory Authority (‘‘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 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 entities. In addition, 

the Exchange may obtain information 

regarding trading in the Shares and the 

Fund’s holdings from markets and 

entities that are members of the ISG or 

with which the Exchange has in place 

a comprehensive surveillance-sharing 

agreement (‘‘CSSA’’).121 The Exchange 

is also able to obtain information 

regarding trading in the Shares and 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.122

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.123 In support of this 


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21684 Federal Register / Vol. 87, No. 70 / Tuesday, April 12, 2022 / Notices 

124See id. at 44075–76 and Amendment No. 2. 

125 17 CFR 240.10A–3. 

126The Commission notes that certain other 

proposals for the listing and trading of exchangetraded products include a representation that the 

exchange will ‘‘surveil’’ for compliance with the 

continued listing requirements. See, e.g., Securities 

Exchange Act Release No. 77499 (Apr. 1, 2016), 81 

FR 20428 (Apr. 7, 2016) (Notice of Filing of 

Amendment No. 2 and Order Granting Accelerated 

Approval of a Proposed Rule Change, as Modified 

by Amendment No. 2, to List and Trade Shares of 

the SPDR DoubleLine Short Duration Total Return 

Tactical ETF of the SSgA Active Trust). In the 

context of this representation, it is the 

Commission’s view that ‘‘monitor’’ and ‘‘surveil’’ 

both mean ongoing oversight of the Fund’s 

compliance with the continued listing 

requirements. Therefore, the Commission does not 

view ‘‘monitor’’ as a more or less stringent 

obligation than ‘‘surveil’’ with respect to the 

continued listing requirements. 

127 15 U.S.C. 78f(b)(2). 

128 15 U.S.C. 78f(b)(5); 15 U.S.C. 78k– 

1(a)(1)(C)(iii). 

129 15 U.S.C. 78f(b)(2). 

130 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

proposal, the Exchange represented 

that:124

(1) The Shares will conform to the 

initial and continued listing criteria 

under NYSE Arca Rule 8.200–E. 

(2) The Exchange has appropriate 

rules to facilitate transactions in the 

Shares during all trading sessions. 

(3) Trading in the Shares will be 

subject to the existing trading 

surveillances administered by the 

Exchange, as well as cross-market 

surveillances administered by FINRA on 

behalf of the Exchange, which are 

designed to detect violations of 

Exchange rules and applicable federal 

securities laws, and 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 the 

Exchange. 

(4) Prior to the commencement of 

trading, the Exchange will inform its 

ETP Holders in an information bulletin 

(‘‘Information Bulletin’’) of the special 

characteristics and risks associated with 

trading in the Shares. Specifically, the 

Information Bulletin will discuss the 

following: (a) The risks involved in 

trading the Shares during the Early and 

Late Trading Sessions when an updated 

IFV will not be calculated or publicly 

disseminated; (b) the procedures for 

purchases and redemptions of Shares in 

Creation Baskets and Redemption 

Baskets (and that Shares are not 

individually redeemable); (c) NYSE 

Arca Rule 9.2–E(a), which imposes a 

duty of due diligence on its ETP Holders 

to learn the essential facts relating to 

every customer prior to trading the 

Shares; (d) how information regarding 

the IFV is disseminated; (e) how 

information regarding portfolio holdings 

is disseminated; (f) the requirement that 

ETP Holders deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction; and (g) 

trading information. 

(5) For initial and continued listing, 

the Fund will be in compliance with 

Rule 10A–3 under the Exchange Act,125

and the Trust will rely on the exception 

contained in Rule 10A–3(c)(7). 

(6) Under no circumstances will the 

Fund hold and/or invest in any assets 

other than BTC Contracts and MBT 

Contracts, cash and cash equivalents. 

The Fund will not invest in or hold spot 

bitcoin. Cash equivalents only include 

short-term Treasury bills, money market 

funds, demand deposit accounts and 

commercial paper. 

(7) The Fund’s investments will be 

consistent with the Fund’s investment 

objective and will not be used to 

enhance leverage, and therefore the 

Fund’s investments will not be used to 

seek performance that is the multiple or 

inverse multiple (e.g., 2Xs, 3Xs, –2Xs, 

and –3Xs) of the Fund’s Benchmark. 

(8) 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. 

(9) A minimum of 50,000 Shares of 

the Fund will be outstanding at the 

commencement of trading on the 

Exchange. 

(10) The Exchange represents that all 

statements and representations made in 

the filing regarding (a) the description of 

the Benchmark, portfolio, or reference 

asset; (b) limitations on Benchmark or 

portfolio holdings or reference assets; or 

(c) applicablilty of Exchange listing 

rules specified in the filing will 

constitute continued listing 

requirements for the Shares. 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 Exchange Act, the 

Exchange will monitor for compliance 

with the continued listing 

requirements.126 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). 

IV. Conclusion 

This approval order is based on all of 

the Exchange’s representations and 

description of the Fund, including those 

set forth above and in Amendment No. 

2. The Commission notes that the 

Shares must comply with the 

requirements of NYSE Arca Rule 8.200– 

E and Commentary .02 thereto to be 

listed and traded on the Exchange on an 

initial and continuing basis. 

For the reasons set forth above, the 

Commission finds, pursuant to Section 

19(b)(2) of the Exchange Act,127 that the 

proposed rule change, as modified by 

Amendment No. 2, is consistent with 

the requirements of the Exchange Act 

and the rules and regulations 

thereunder applicable to a national 

securities exchange, and in particular, 

with Section 6(b)(5) and Section 

11A(a)(1)(C)(iii) of the Exchange Act.128

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act,129

that proposed rule change SR– 

NYSEArca–2021–53, as modified by 

Amendment No. 2, be, and hereby is, 

approved. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.130

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–07748 Filed 4–11–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94617; File No. SR– 

CboeEDGX–2022–022] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend Its 

Fee Schedule 

April 6, 2022. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on April 1, 

2022, Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) proposes to 

amend its Fee Schedule. The text of the 

proposed rule change is provided in 

Exhibit 5. 


khammond on DSKJM1Z7X2PROD with NOTICES