Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28043 

12See notes 7 & 8, supra. 

13See note 8, supra. 14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 93504 

(Nov. 2, 2021), 86 FR 61804. Comments on the 

proposed rule change can be found at: https://

www.sec.gov/comments/sr-nysearca-2021-90/ 

srnysearca202190.htm. 

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

5See Securities Exchange Act Release No. 93788, 

86 FR 72291 (Dec. 21, 2021). 

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

7See Securities Exchange Act Release No. 94151, 

87 FR 7889 (Feb. 10, 2022). 

8 In Amendment No. 1, the Exchange, among 

other things, provided updates to: (1) Certain 

statistical data, (2) information on the Index Price 

(as defined herein), and (3) information on the 

creation and redemption of Shares (as defined 

herein). 

ETP Holders are able to leverage 

existing protocols and specifications. 

Finally, the Exchange notes that the 

proposed functionality is not novel, as 

both the Exchange and other exchanges 

offer their members functionality 

whereby an exchange routes orders on 

behalf of a member to a specified 

trading center without such order 

interacting with the exchange’s book.12

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange believes that the proposed 

rules governing Directed Orders would 

promote competition because they 

would provide for an order type on the 

Exchange that would facilitate 

additional trading opportunities for 

market participants. The Exchange 

further believes that the proposed rules 

would allow it to offer its ETP Holders 

functionality similar to order types and 

routing options that exist on other 

equities exchanges, thereby enabling the 

Exchange to compete with such 

exchanges.13

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– 

NYSENAT–2022–06 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–NYSENAT–2022–06. 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–NYSENAT–2022–06 and 

should be submitted on or before May 

31, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–09955 Filed 5–9–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94844; File No. SR– 

NYSEArca–2021–90] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of 

Amendment No. 1 to, and Designation 

of a Longer Period for Commission 

Action on Proceedings To Determine 

Whether To Approve or Disapprove, a 

Proposed Rule Change To List and 

Trade Shares of Grayscale Bitcoin 

Trust (BTC) Under NYSE Arca Rule 

8.201–E 

May 4, 2022. 

On October 19, 2021, NYSE Arca, Inc. 

(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

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

19b–4 thereunder,2 a proposed rule 

change to list and trade shares of 

Grayscale Bitcoin Trust (BTC) under 

NYSE Arca Rule 8.201–E (CommodityBased Trust Shares). The proposed rule 

change was published for comment in 

the Federal Register on November 8, 

2021.3 On December 15, 2021, pursuant 

to Section 19(b)(2) of the 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 February 4, 

2022, the Commission instituted 

proceedings under Section 19(b)(2)(B) of 

the Act 6 to determine whether to 

approve or disapprove the proposed 

rule change.7

On April 21, 2022, the Exchange filed 

Amendment No. 1 to the proposed rule 

change, which supersedes the original 

filing in its entirety, and is described in 

Items I and II below, which Items have 

been prepared by the Exchange.8 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, as modified by Amendment No. 


lotter on DSK11XQN23PROD with NOTICES1
28044 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

9The Trust was previously named Bitcoin 

Investment Trust, whose name was changed 

pursuant to a Certificate of Amendment to the 

Certificate of Trust of Bitcoin Investment Trust filed 

with the Delaware Secretary of State on January 11, 

2019. 

10Commodity-Based Trust Shares are securities 

issued by a trust that represent investors’ discrete 

identifiable and undivided beneficial ownership 

interest in the commodities deposited into the 

Trust. 

11The Shares are expected to be listed under the 

ticker symbol ‘‘BTC.’’ 

12On March 22, 2016, the Trust confidentially 

filed its draft registration statement on Form 10 

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

‘‘Securities Act’’ or ‘‘’33 Act’’) (File No. 377–01289) 

(the ‘‘Draft Registration Statement on Form S–1’’). 

On May 31, 2016, the Trust confidentially filed 

Amendment No. 1 to the Draft Registration 

Statement on Form S–1. On July 29, 2016, the Trust 

confidentially filed Amendment No. 2 to the Draft 

Registration Statement on Form S–1. On November 

2, 2016, the Trust confidentially filed Amendment 

No. 3 to the Draft Registration Statement on Form 

S–1. The Jumpstart Our Business Startups Act (the 

‘‘JOBS Act’’), enacted on April 5, 2012, added 

Section 6(e) to the Securities Act. Section 6(e) of the 

Securities Act provides that an ‘‘emerging growth 

company’’ may confidentially submit to the 

Commission a draft registration statement for 

confidential, non-public review by the Commission 

staff prior to public filing, provided that the initial 

confidential submission and all amendments 

thereto shall be publicly filed not later than 21 days 

before the date on which the issuer conducts a road 

show, as such term is defined in Securities Act Rule 

433(h)(4). An emerging growth company is defined 

in Section 2(a)(19) of the Securities Act as an issuer 

with less than $1,000,000,000 total annual gross 

revenues during its most recently completed fiscal 

year. The Trust meets the definition of an emerging 

growth company and consequently submitted its 

Draft Registration Statement on Form S–1 to the 

Commission on a confidential basis. 

On January 20, 2017, the Trust filed its 

registration statement on Form S–1 under the 

Securities Act (File No. 333–215627) (the 

‘‘Registration Statement on Form S–1’’). On March 

24, 2017, the Trust filed Amendment No. 1 to the 

Registration Statement on Form S–1. On May 4, 

2017, the Trust filed Amendment No. 2 to the 

Registration Statement on Form S–1. On October 

25, 2017, the Trust requested the withdrawal of the 

Registration Statement on Form S–1. 

On October 3, 2018, the Trust confidentially filed 

its draft registration statement on Form 10 under 

the Securities Act (File No. 377–02297) (the ‘‘Draft 

Registration Statement on Form 10’’). On December 

6, 2018, the Trust confidentially filed Amendment 

No. 1 to the Draft Registration Statement on Form 

10. On February 25, 2019, the Trust confidentially 

filed Amendment No. 2 to the Draft Registration 

Statement on Form 10. On April 15, 2019, the Trust 

confidentially filed Amendment No. 3 to the Draft 

Registration Statement on Form 10. On September 

9, 2019, the Trust confidentially filed Amendment 

No. 4 to the Draft Registration Statement on Form 

10. As noted above, the Trust meets the definition 

of an emerging growth company under the JOBS 

Act and consequently submitted its Draft 

Registration Statement on Form 10 to the 

Commission on a confidential basis. 

On November 19, 2019, the Trust filed its 

registration statement on Form 10 under the 

Securities Act (File No. 000–56121) (the 

‘‘Registration Statement on Form 10’’). On 

December 31, 2019, the Trust filed Amendment No. 

1 to the Registration Statement on Form 10. On 

January 21, 2020, the Registration Statement on 

Form 10 was automatically deemed effective. 

On March 20, 2020, the Trust filed its annual 

report on Form 10–K under the Securities Act (File 

No. 000–56121). On May 8, 2020, August 7, 2020 

and November 6, 2020, the Trust filed its quarterly 

reports on Form 10–Q under the Securities Act (File 

No. 000–56121). On March 5, 2021 and February 

25, 2022, the Trust filed its annual report on Form 

10–K under the Securities Act (File No. 000–56121) 

(the ‘‘Annual Report’’). On May 7, 2021, August 6, 

2021 and November 5, 2021, the Trust filed its 

quarterly reports on Form 10–Q under the 

Securities Act (File No. 000–56121) (the ‘‘Quarterly 

Reports’’). The descriptions of the Trust, the Shares, 

and Bitcoin contained herein are based, in part, on 

the Annual Report and Quarterly Reports. 

On January 17, 2019, the Trust submitted to the 

Commission an amended Form D as a business 

trust. Shares of the Trust have been quoted on OTC 

Market’s OTCQX Best Marketplace under the 

symbol ‘‘GBTC’’ since March 26, 2015. On February 

22, 2019 and March 20, 2020, the Trust published 

annual reports for GBTC for the periods ended 

December 31, 2018 and December 31, 2019, 

respectively. On May 14, 2019, August 8, 2019, 

November 14, 2019, May 8, 2020, August 7, 2020 

and November 6, 2020, the Trust published 

quarterly reports for GBTC for the periods ended 

March 31, 2019, June 30, 2019, September 30, 2019, 

March 31, 2020, June 30, 2020 and September 30, 

2020 respectively. Reports published before January 

11, 2020, the date on which the Trust’s Shares 

became registered pursuant to Section 12(g) of the 

Act, can be found on OTC Market’s website (http:// 

www.otcmarkets.com/stock/GBTC/disclosure), and 

reports published on or after January 11, 2020 can 

be found on OTC Market’s website (http://

www.otcmarkets.com/stock/GBTC/disclosure) and 

the Commission’s website (https://www.sec.gov/cgibin/browse-edgar?CIK=gbtc&owner=exclude&

action=getcompany). The Shares will be of the same 

class and will have the same rights as shares of 

GBTC. Effective October 28, 2014, the Trust 

suspended its redemption program for shares of 

GBTC, in which shareholders were permitted to 

request the redemption of their shares through 

Genesis Global Trading, Inc. (formerly known as 

SecondMarket, Inc.), an affiliate of the Sponsor and 

the Trust (‘‘Genesis’’). According to the Sponsor, 

freely tradeable shares of GBTC will remain freely 

tradeable Shares on the date of the listing of the 

Shares that are unregistered under the Securities 

Act. Restricted shares of GBTC will remain subject 

to private placement restrictions and the holders of 

such restricted shares will continue to hold those 

Shares subject to those restrictions until they 

become freely tradable Shares. 

13According to the Annual Report, Digital 

Currency Group owns a minority interest in 

Coinbase, Inc., which is the parent company of the 

Custodian, representing less than 1.0% of its equity. 

14 ‘‘Incidental Rights’’ are rights to acquire, or 

otherwise establish dominion and control over, any 

virtual currency or other asset or right, which rights 

are incident to the Trust’s ownership of Bitcoins 

and arise without any action of the Trust, or of the 

Sponsor or Trustee on behalf of the Trust. 

1, from interested persons, and is 

designating a longer period within 

which to approve or disapprove the 

proposed rule change, as modified by 

Amendment No. 1. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade shares of the following under 

NYSE Arca Rule 8.201–E: Grayscale 

Bitcoin Trust (BTC) (the ‘‘Trust’’).9 This 

Amendment No. 1 to SR–NYSEArca– 

2021–90 replaces SR–NYSEArca–2021– 

90 as originally filed and supersedes 

such filing in its entirety. 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 

Under NYSE Arca Rule 8.201–E, the 

Exchange may propose to list and/or 

trade pursuant to unlisted trading 

privileges ‘‘Commodity-Based Trust 

Shares.’’ 10 The Exchange proposes to 

list and trade shares (‘‘Shares’’) 11 of the 

Trust pursuant to NYSE Arca Rule 

8.201–E.12

The sponsor of the Trust is Grayscale 

Investments, LLC (‘‘Sponsor’’), a 

Delaware limited liability company. The 

Sponsor is a wholly-owned subsidiary 

of Digital Currency Group, Inc. (‘‘Digital 

Currency Group’’). The trustee for the 

Trust is Delaware Trust Company 

(‘‘Trustee’’). The custodian for the Trust 

is Coinbase Custody Trust Company, 

LLC (‘‘Custodian’’).13 The administrator 

of the Trust is BNY Mellon Asset 

Servicing, a division of The Bank of 

New York Mellon (the 

‘‘Administrator’’). The distribution and 

marketing agent for the Trust is Genesis 

(the ‘‘Marketing Agent’’). The index 

provider for the Trust is CoinDesk 

Indices, Inc., formerly known as 

TradeBlock, Inc. (the ‘‘Index Provider’’). 

The Trust is a Delaware statutory 

trust, organized on September 13, 2013, 

that operates pursuant to a trust 

agreement between the Sponsor and the 

Trustee (‘‘Trust Agreement’’). The Trust 

has no fixed termination date. 

Operation of the Trust 

According to the Annual Report, the 

Trust’s assets consist solely of Bitcoins, 

Incidental Rights,14 IR Virtual 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28045 

15 ‘‘IR Virtual Currency’’ is any virtual currency 

tokens, or other asset or right, acquired by the Trust 

through the exercise (subject to the applicable 

provisions of the Trust Agreement) of any 

Incidental Right. 

16 ‘‘Additional Trust Expenses’’ are any expenses 

incurred by the Trust in addition to the Sponsor’s 

Fee that are not Sponsor-paid Expenses, including, 

but not limited to, (i) taxes and governmental 

charges, (ii) expenses and costs of any extraordinary 

services performed by the Sponsor (or any other 

service provider) on behalf of the Trust to protect 

the Trust or the interests of shareholders (including 

in connection with any Incidental Rights and any 

IR Virtual Currency), (iii) any indemnification of 

the Custodian or other agents, service providers or 

counterparties of the Trust, (iv) the fees and 

expenses related to the listing, quotation or trading 

of the Shares on any Secondary Market (including 

legal, marketing and audit fees and expenses) to the 

extent exceeding $600,000 in any given fiscal year 

and (v) extraordinary legal fees and expenses, 

including any legal fees and expenses incurred in 

connection with litigation, regulatory enforcement 

or investigation matters. 

17The ‘‘Index Price’’ means the U.S. dollar value 

of a Bitcoin derived from the Digital Asset 

Exchanges that are reflected in the Index, calculated 

at 4:00 p.m., New York time, on each business day. 

For purposes of the Trust Agreement, the term 

Bitcoin Index Price has the same meaning as the 

Index Price as defined herein. 

18A ‘‘Digital Asset Market’’ is a ‘‘Brokered 

Market,’’ ‘‘Dealer Market,’’ ‘‘Principal-to-Principal 

Market’’ or ‘‘Exchange Market,’’ as each such term 

is defined in the Financial Accounting Standards 

Board Accounting Standards Codification Master 

Glossary. The ‘‘Digital Asset Exchange Market’’ is 

the global exchange market for the trading of 

Bitcoins, which consists of transactions on 

electronic Digital Asset Exchanges. A ‘‘Digital Asset 

Exchange’’ is an electronic marketplace where 

exchange participants may trade, buy and sell 

Bitcoins based on bid-ask trading. The largest 

Digital Asset Exchanges are online and typically 

trade on a 24-hour basis, publishing transaction 

price and volume data. 

Currency,15 proceeds from the sale of 

Bitcoins, Incidental Rights, and IR 

Virtual Currency pending use of such 

cash for payment of Additional Trust 

Expenses 16 or distribution to 

shareholders, and any rights of the Trust 

pursuant to any agreements, other than 

the Trust Agreement, to which the Trust 

is a party. Each Share represents a 

proportional interest, based on the total 

number of Shares outstanding, in each 

of the Trust’s assets as determined by 

reference to the Index Price,17 less the 

Trust’s expenses and other liabilities 

(which include accrued but unpaid fees 

and expenses). The Sponsor expects that 

the market price of the Shares will 

fluctuate over time in response to the 

market prices of Bitcoin. In addition, 

because the Shares reflect the estimated 

accrued but unpaid expenses of the 

Trust, the number of Bitcoins 

represented by a Share will gradually 

decrease over time as the Trust’s 

Bitcoins are used to pay the Trust’s 

expenses. The Trust does not expect to 

take any Incidental Rights or IR Virtual 

Currency it may hold into account for 

purposes of determining the Trust’s 

‘‘Digital Asset Holdings’’ (as described 

below) or the Digital Asset Holdings per 

Share. 

The activities of the Trust are limited 

to (i) issuing ‘‘Baskets’’ (as defined 

below) in exchange for Bitcoins 

transferred to the Trust as consideration 

in connection with the creations, (ii) 

transferring or selling Bitcoins, 

Incidental Rights, and IR Virtual 

Currency as necessary to cover the 

‘‘Sponsor’s Fee’’ and/or certain Trust 

expenses, (iii) transferring Bitcoins in 

exchange for Baskets surrendered for 

redemption (subject to obtaining 

regulatory approval from the SEC and 

approval of the Sponsor), (iv) causing 

the Sponsor to sell Bitcoins, Incidental 

Rights, and IR Virtual Currency on the 

termination of the Trust, (v) making 

distributions of Incidental Rights and/or 

IR Virtual Currency or cash from the 

sale thereof, and (vi) engaging in all 

administrative and security procedures 

necessary to accomplish such activities 

in accordance with the provisions of the 

Trust Agreement, the Custodian 

Agreement, the Index License 

Agreement and the Participant 

Agreements. 

In addition, the Trust may engage in 

any lawful activity necessary or 

desirable in order to facilitate 

shareholders’ access to Incidental Rights 

or IR Virtual Currency, provided that 

such activities do not conflict with the 

terms of the Trust Agreement. The Trust 

will not be actively managed. It will not 

engage in any activities designed to 

obtain a profit from, or to ameliorate 

losses caused by, changes in the market 

prices of Bitcoins. 

Investment Objective 

According to the Annual Report, and 

as further described below, the Trust’s 

investment objective is for the value of 

the Shares (based on Bitcoin per Share) 

to reflect the value of the Bitcoins held 

by the Trust, as determined by reference 

to the Index Price, less the Trust’s 

expenses and other liabilities. While an 

investment in the Shares is not a direct 

investment in Bitcoin, the Shares are 

designed to provide investors with a 

cost-effective and convenient way to 

gain investment exposure to Bitcoin. A 

substantial direct investment in Bitcoin 

may require expensive and sometimes 

complicated arrangements in 

connection with the acquisition, 

security and safekeeping of the Bitcoin 

and may involve the payment of 

substantial fees to acquire such Bitcoin 

from third-party facilitators through 

cash payments of U.S. dollars. Because 

the value of the Shares is correlated 

with the value of Bitcoin held by the 

Trust, it is important to understand the 

investment attributes of, and the market 

for, Bitcoin. 

Bitcoin and the Bitcoin Network 

According to the Annual Report, 

Bitcoin is a digital asset that is 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 a 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 ‘‘Digital Asset 

Markets’’ 18 that trade Bitcoin or in 

individual end-user-to-end-user 

transactions under a barter system. 

The Bitcoin Network is decentralized 

and does not require governmental 

authorities or financial institution 

intermediaries to create, transmit, or 

determine the value of Bitcoin. Rather, 

Bitcoin is created and allocated by the 

Bitcoin Network protocol through a 

‘‘mining’’ process. The value of Bitcoin 

is determined by the supply of and 

demand for Bitcoin on the Digital Asset 

Markets or in private end-user-to-enduser transactions. 

New Bitcoin are created and rewarded 

to the miners of a block in the 

Blockchain for verifying transactions. 

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. 

Summary of a Bitcoin Transaction 

Prior to engaging in Bitcoin 

transactions directly on the Bitcoin 

Network, a user generally must first 

install on its computer or mobile device 

a Bitcoin Network software program that 

will allow the user to generate a private 

and public key pair associated with a 

Bitcoin address, commonly referred to 

as a ‘‘wallet.’’ The Bitcoin Network 

software program and the Bitcoin 

address also enable the user to connect 

to the Bitcoin Network and transfer 


lotter on DSK11XQN23PROD with NOTICES1
28046 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

19The Digital Asset Account is a segregated 

custody account controlled and secured by the 

Custodian to store private keys, which allows for 

the transfer of ownership or control of the Trust’s 

Bitcoins on the Trust’s behalf. 

Bitcoin to, and receive Bitcoin from, 

other users. 

Each Bitcoin Network address, or 

wallet, is associated with a unique 

‘‘public key’’ and ‘‘private key’’ pair. To 

receive Bitcoin, the Bitcoin recipient 

must provide its public key to the party 

initiating the transfer. This activity is 

analogous to a recipient for a transaction 

in U.S. dollars providing a routing 

address in wire instructions to the payor 

so that cash may be wired to the 

recipient’s account. The payor approves 

the transfer to the address provided by 

the recipient by ‘‘signing’’ a transaction 

that consists of the recipient’s public 

key with the private key of the address 

from where the payor is transferring the 

Bitcoin. The recipient, however, does 

not make public or provide to the 

sender its related private key. 

Neither the recipient nor the sender 

reveal their private keys in a 

transaction, because the private key 

authorizes transfer of the funds in that 

address to other users. Therefore, if a 

user loses his private key, the user may 

permanently lose access to the Bitcoin 

contained in the associated address. 

Likewise, Bitcoin is irretrievably lost if 

the private key associated with them is 

deleted and no backup has been made. 

When sending Bitcoin, a user’s Bitcoin 

Network software program must 

validate the transaction with the 

associated private key. In addition, 

since every computation on the Bitcoin 

Network requires processing power, 

there is a transaction fee involved with 

the transfer that is paid by the payor. 

The resulting digitally validated 

transaction is sent by the user’s Bitcoin 

Network software program to the 

Bitcoin Network miners to allow 

transaction confirmation. 

Bitcoin Network miners record and 

confirm transactions when they mine 

and add blocks of information to the 

Blockchain. When a miner mines a 

block, it creates that block, which 

includes data relating to (i) the 

satisfaction of the consensus mechanism 

to mine the block, (ii) a reference to the 

prior block in the Blockchain to which 

the new block is being added and (iii) 

transactions that have submitted to the 

Bitcoin Network but have not yet been 

added to the Blockchain. The miner 

becomes aware of outstanding, 

unrecorded transactions through the 

data packet transmission and 

distribution discussed above. 

Upon the addition of a block included 

in the Blockchain, the Bitcoin Network 

software program of both the spending 

party and the receiving party will show 

confirmation of the transaction on the 

Blockchain and reflect an adjustment to 

the Bitcoin balance in each party’s 

Bitcoin Network public key, completing 

the Bitcoin transaction. Once a 

transaction is confirmed on the 

Blockchain, it is irreversible. 

Some Bitcoin transactions are 

conducted ‘‘off-blockchain’’ and are 

therefore not recorded in the 

Blockchain. Some ‘‘off-blockchain 

transactions’’ involve the transfer of 

control over, or ownership of, a specific 

digital wallet holding Bitcoin or the 

reallocation of ownership of certain 

Bitcoin in a pooled-ownership digital 

wallet, such as a digital wallet owned by 

a Digital Asset Exchange. In contrast to 

on-blockchain transactions, which are 

publicly recorded on the Blockchain, 

information and data regarding offblockchain transactions are generally 

not publicly available. Therefore, offblockchain transactions are not truly 

Bitcoin transactions in that they do not 

involve the transfer of transaction data 

on the Bitcoin Network and do not 

reflect a movement of Bitcoin between 

addresses recorded in the Blockchain. 

For these reasons, off-blockchain 

transactions are subject to risks, as any 

such transfer of Bitcoin ownership is 

not protected by the protocol behind the 

Bitcoin Network or recorded in, and 

validated through, the blockchain 

mechanism. 

Custody of the Trust’s Bitcoins 

Digital assets and digital asset 

transactions are recorded and validated 

on blockchains, the public transaction 

ledgers of a digital asset network. Each 

digital asset blockchain serves as a 

record of ownership for all of the units 

of such digital asset, even in the case of 

certain privacy-focused digital assets, 

where the transactions themselves are 

not publicly viewable. All digital assets 

recorded on a blockchain are associated 

with a public blockchain address, also 

referred to as a digital wallet. Digital 

assets held at a particular public 

blockchain address may be accessed and 

transferred using a corresponding 

private key. 

Key Generation 

Public addresses and their 

corresponding private keys are 

generated by the Custodian in secret key 

generation ceremonies at secure 

locations inside faraday cages, which 

are enclosures used to block 

electromagnetic fields and mitigate 

attacks. The Custodian uses quantum 

random number generators to generate 

the public and private key pairs. 

Once generated, private keys are 

encrypted, separated into ‘‘shards,’’ and 

then further encrypted. After the key 

generation ceremony, all materials used 

to generate private keys, including 

computers, are destroyed. All key 

generation ceremonies are performed 

offline. No party other than the 

Custodian has access to the private key 

shards of the Trust. 

Key Storage 

Private key shards are distributed 

geographically in secure vaults around 

the world, including in the United 

States. The locations of the secure vaults 

may change regularly and are kept 

confidential by the Custodian for 

security purposes. 

The Digital Asset Account 19 uses 

offline storage, or ‘‘cold storage’’, 

mechanisms to secure the Trust’s 

private keys. The term cold storage 

refers to a safeguarding method by 

which the private keys corresponding to 

digital assets are disconnected and/or 

deleted entirely from the internet. Cold 

storage of private keys may involve 

keeping such keys on a non-networked 

(or ‘‘airgapped’’) computer or electronic 

device or storing the private keys on a 

storage device (for example, a USB 

thumb drive) or printed medium (for 

example, papyrus, paper, or a metallic 

object). A digital wallet may receive 

deposits of digital assets but may not 

send digital assets without use of the 

digital assets’ corresponding private 

keys. In order to send digital assets from 

a digital wallet in which the private 

keys are kept in cold storage, either the 

private keys must be retrieved from cold 

storage and entered into an online, or 

‘‘hot,’’ digital asset software program to 

sign the transaction, or the unsigned 

transaction must be transferred to the 

cold server in which the private keys are 

held for signature by the private keys 

and then transferred back to the online 

digital asset software program. At that 

point, the user of the digital wallet can 

transfer its digital assets. 

Security Procedures 

The Custodian is the custodian of the 

Trust’s private keys in accordance with 

the terms and provisions of the 

Custodian Agreement. Transfers from 

the Digital Asset Account require 

certain security procedures, including, 

but not limited to, multiple encrypted 

private key shards, usernames, 

passwords and 2-step verification. 

Multiple private key shards held by the 

Custodian must be combined to 

reconstitute the private key to sign any 

transaction in order to transfer the 

Trust’s assets. Private key shards are 

distributed geographically in secure 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28047 

20 ‘‘Baskets’’ and ‘‘Basket Amount’’ have the 

meanings set forth in ‘‘Creation of Shares’’ below. 

vaults around the world, including in 

the United States. 

As a result, if any one secure vault is 

ever compromised, this event will have 

no impact on the ability of the Trust to 

access its assets, other than a possible 

delay in operations, while one or more 

of the other secure vaults is used 

instead. These security procedures are 

intended to remove single points of 

failure in the protection of the Trust’s 

assets. 

Transfers of Bitcoins to the Digital 

Asset Account will be available to the 

Trust once processed on the Blockchain. 

Subject to obtaining regulatory 

approval to operate a redemption 

program and authorization of the 

Sponsor, the process of accessing and 

withdrawing Bitcoin from the Trust to 

redeem a Basket by an Authorized 

Participant will follow the same general 

procedure as transferring Bitcoins to the 

Trust to create a Basket by an 

Authorized Participant, only in reverse. 

Digital Asset Holdings 

According to the Annual Report, the 

Trust’s assets consist solely of Bitcoins, 

Incidental Rights, IR Virtual Currency, 

proceeds from the sale of Bitcoins, 

Incidental Rights, and IR Virtual 

Currency pending use of such cash for 

payment of Additional Trust Expenses 

or distribution to the shareholders, and 

any rights of the Trust pursuant to any 

agreements, other than the Trust 

Agreement, to which the Trust is a 

party. Each Share represents a 

proportional interest, based on the total 

number of Shares outstanding, in each 

of the Trust’s assets as determined in 

the case of Bitcoin by reference to the 

Index Price, less the Trust’s expenses 

and other liabilities (which include 

accrued but unpaid fees and expenses). 

The Sponsor expects that the market 

price of the Shares will fluctuate over 

time in response to the market prices of 

Bitcoin. In addition, because the Shares 

reflect the estimated accrued but unpaid 

expenses of the Trust, the number of 

Bitcoin represented by a Share will 

gradually decrease over time as the 

Trust’s Bitcoin is used to pay the Trust’s 

expenses. The Trust does not expect to 

take any Incidental Rights or IR Virtual 

Currency it may hold into account for 

purposes of determining the Trust’s 

Digital Asset Holdings or the Digital 

Asset Holdings per Share. 

The Sponsor will evaluate the Bitcoin 

held by the Trust and determine the 

Digital Asset Holdings of the Trust in 

accordance with the relevant provisions 

of the Trust Documents. The following 

is a description of the material terms of 

the Trust Documents as they relate to 

valuation of the Trust’s Bitcoin and the 

Digital Asset Holdings calculations. 

On each business day at 4:00 p.m., 

New York time, or as soon thereafter as 

practicable (the ‘‘Evaluation Time’’), the 

Sponsor will evaluate the Bitcoin held 

by the Trust and calculate and publish 

the Digital Asset Holdings of the Trust. 

To calculate the Digital Asset Holdings, 

the Sponsor will: 

1. Determine the Index Price as of 

such business day. 

2. Multiply the Index Price by the 

Trust’s aggregate number of Bitcoins 

owned by the Trust as of 4:00 p.m., E.T. 

on the immediately preceding day, less 

the aggregate number of Bitcoins 

payable as the accrued and unpaid 

Sponsor’s Fee as of 4:00 p.m., E.T. on 

the immediately preceding day. 

3. Add the U.S. dollar value of 

Bitcoins, calculated using the Index 

Price, receivable under pending creation 

orders, if any, determined by 

multiplying the number of the Baskets 

represented by such creation orders by 

the Basket Amount and then 

multiplying such product by the Index 

Price.20

4. Subtract the U.S. dollar amount of 

accrued and unpaid Additional Trust 

Expenses, if any. 

5. Subtract the U.S. dollar value of the 

Bitcoins, calculated using the Index 

Price, to be distributed under pending 

redemption orders, if any, determined 

by multiplying the number of Baskets to 

be redeemed represented by such 

redemption orders by the Basket 

Amount and then multiplying such 

product by the Index Price (the amount 

derived from steps 1 through 5 above, 

the ‘‘Digital Asset Holdings Fee Basis 

Amount’’). 

6. Subtract the U.S. dollar amount of 

the Sponsor’s Fee that accrues for such 

business day, as calculated based on the 

Digital Asset Holdings Fee Basis 

Amount for such business day. 

In the event that the Sponsor 

determines that the primary 

methodology used to determine the 

Index Price is not an appropriate basis 

for valuation of the Trust’s Bitcoins, the 

Sponsor will utilize the cascading set of 

rules as described in ‘‘Trust Valuation of 

Bitcoin’’ below. In addition, in the event 

that the Trust holds any Incidental 

Rights and/or IR Virtual Currency, the 

Sponsor may, at its discretion, include 

the value of such Incidental Rights and/ 

or IR Virtual Currency in the 

determination of the Digital Asset 

Holdings, provided that the Sponsor has 

determined in good faith a method for 

assigning an objective value to such 

Incidental Rights and/or IR Virtual 

Currency. At this time, the Trust does 

not expect to take any Incidental Rights 

or IR Virtual Currency it may hold into 

account for the purposes of determining 

the Digital Asset Holdings or the Digital 

Asset Holdings per Share. 

Limits on Bitcoin Supply 

The supply of new Bitcoin is 

mathematically controlled so that the 

number of Bitcoin grows at a limited 

rate pursuant to a pre-set schedule. The 

number of Bitcoin awarded for solving 

a new block is automatically halved 

after every 210,000 blocks are added to 

the Blockchain. Currently, the fixed 

reward for solving a new block is 6.25 

Bitcoin per block and this is expected to 

decrease by half to become 3.125 

Bitcoin after the next 210,000 blocks 

have entered the Bitcoin Network, 

which is expected to be mid-2024. This 

deliberately controlled rate of Bitcoin 

creation means that the number of 

Bitcoin in existence will increase at a 

controlled rate until the number of 

Bitcoin in existence reaches the predetermined 21 million Bitcoin. As of 

December 31, 2021, approximately 18.9 

million Bitcoins were outstanding and 

the date when the 21 million Bitcoin 

limitation will be reached is estimated 

to be the year 2140. 

Bitcoin Value 

Digital Asset Exchange Valuation 

According to the Annual Report, the 

value of Bitcoin is determined by the 

value that various market participants 

place on Bitcoin through their 

transactions. The most common means 

of determining the value of a Bitcoin is 

by surveying one or more Digital Asset 

Exchanges where Bitcoin is traded 

publicly (e.g., Coinbase Pro, Bitstamp, 

Kraken, and LMAX Digital). 

Additionally, there are over-the-counter 

dealers or market makers that transact in 

Bitcoin. 

Digital Asset Exchange Public Market 

Data 

On each online Digital Asset 

Exchange, Bitcoin is traded with 

publicly disclosed valuations for each 

executed trade, measured by one or 

more fiat currencies such as the U.S. 

dollar or Euro. Over-the-counter dealers 

or market makers do not typically 

disclose their trade data. 

As of December 31, 2021, the Digital 

Asset Exchanges included in the Index 

are Coinbase Pro, Bitstamp, Kraken and 

LMAX Digital. As further described 

below, each of these Digital Asset 

Exchanges are in compliance with 

applicable U.S. federal and state 


lotter on DSK11XQN23PROD with NOTICES1
28048 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

21On January 19, 2020, the Index Provider 

removed Bittrex due to a lack of trading volume and 

added LMAX Digital based on the exchange 

meeting the liquidity thresholds for inclusion in the 

Index. On April 6, 2020, the Index Provider 

removed itBit due to a lack of trading volume and 

did not add any constituents as part of its 

scheduled quarterly review. 

22Market share is calculated using trading 

volume data (in Bitcoins) provided by the Index 

Provider for certain Digital Asset Exchanges, 

including Coinbase Pro, Bitstamp, Kraken, and 

LMAX Digital, as well as certain other large U.S.- 

dollar denominated Digital Asset Exchanges that are 

not currently included in the Index, including 

Binance. US (data included from April 1, 2020), 

Bitfinex, Bitflyer (data included from December 24, 

2018), Bittrex (data included from July 31, 2018), 

ErisX (data included from October 1, 2020), Gemini, 

itBit, LakeBTC (data included from May 1, 2015 to 

June 1, 2018 and from January 27, 2019), HitBTC 

(data included from April 1, 2019 to March 31, 

2020) and OKCoin. 

23Exchanges with programmatic trading offer 

traders an application programming interface that 

permits trading by sending programmed commands 

to the exchange. 

24This includes additional due diligence 

conducted by the Index Provider’s analysts. 

licensing requirements and practices 

regarding AML and KYC regulations. 

Coinbase Pro: A U.S.-based exchange 

registered as a money services business 

(‘‘MSB’’) with FinCen and licensed as a 

virtual currency business under the 

NYDFS BitLicense as well as money 

transmitter in various U.S. states. 

Bitstamp: A U.K.-based exchange 

registered as an MSB with FinCen and 

licensed as a virtual currency business 

under the NYDFS BitLicense as well as 

money transmitter in various U.S. states. 

Kraken: A U.S.-based exchange 

registered as an MSB with FinCen and 

licensed as money transmitter in various 

U.S. states. Kraken does not hold a 

BitLicense. 

LMAX Digital: A U.K.-based exchange 

registered as a broker with FCA. LMAX 

Digital does not hold a BitLicense. 

Currently, there are several Digital 

Asset Exchanges operating worldwide, 

and online Digital Asset Exchanges 

represent a substantial percentage of 

Bitcoin buying and selling activity and 

provide the most data with respect to 

prevailing valuations of Bitcoins. These 

exchanges include established 

exchanges such as exchanges included 

in the Index, which provide a number 

of options for buying and selling 

Bitcoins. The below table reflects the 

trading volume in Bitcoins and market 

share of the BTC–U.S. dollar trading 

pair of each of the Digital Asset 

Exchanges included in the Index as of 

December 31, 2021 using data reported 

by the Index Provider from May 1, 2015 

to December 31, 2021: 

Digital Asset Exchanges included in the Index as of December 31, 2021 21 Volume 

(BTC) 

Market 

share 22

(%) 

Coinbase Pro ........................................................................................................................................................... 32,019,298 20.76 

Bitstamp ................................................................................................................................................................... 22,030,291 14.28 

Kraken ...................................................................................................................................................................... 11,009,299 7.14 

LMAX Digital ............................................................................................................................................................ 6,329,133 4.10 

Total BTC–U.S. dollar trading pair ................................................................................................................... 71,388,021 46.28 

The domicile, regulation, and legal 

compliance of the Digital Asset 

Exchanges included in the Index varies. 

Information regarding each Digital Asset 

Exchange may be found, where 

available, on the websites for such 

Digital Asset Exchanges, among other 

places. 

The Index and the Index Price 

The Index is a U.S. dollardenominated composite reference rate 

for the price of Bitcoin. The Index is 

designed to (i) mitigate the effects of 

fraud, manipulation and other 

anomalous trading activity from 

impacting the Bitcoin reference rate, (ii) 

provide a real-time, volume-weighted 

fair value of Bitcoin and (iii) 

appropriately handle and adjust for nonmarket related events. 

The Index Price is determined by the 

Index Provider through a process in 

which trade data is cleansed and 

compiled in such a manner as to 

algorithmically reduce the impact of 

anomalistic or manipulative trading. 

This is accomplished by adjusting the 

weight of each data input based on price 

deviation relative to the observable set, 

as well as recent and long-term trading 

volume at each venue relative to the 

observable set. 

Constituent Exchange Selection 

According to the Annual Report, the 

Digital Asset Exchanges that are 

included in the Index are selected by 

the Index Provider utilizing a 

methodology that is guided by the 

International Organization of Securities 

Commissions (‘‘IOSCO’’) principles for 

financial benchmarks. For an exchange 

to become a Digital Asset Exchange 

included in the Index (a ‘‘Constituent 

Exchange’’), it must satisfy the criteria 

listed below (the ‘‘Inclusion Criteria’’): 

• Compliance with applicable U.S. 

federal and state licensing requirements 

and practices regarding anti-money 

laundering (‘‘AML’’) and know-yourcustomer (‘‘KYC’’) regulations; 

• Publicly known ownership; 

• No restrictions on deposits and/or 

withdrawals of Bitcoin; 

• No restrictions on deposits and/or 

withdrawals of U.S. dollars; 

• Reliably displays new trade prices 

and volumes on a real-time basis 

through APIs; 

• Programmatic trading 23 of the 

Bitcoin/U.S. dollar spot price; 

• Liquid market in the Bitcoin/U.S. 

dollar spot price; 

• Trading volume must represent a 

minimum of total Bitcoin/U.S. dollar 

trading volumes (5% for U.S. exchanges 

and 10% non-U.S. exchanges); and 

• Discretion of the Index Provider’s 

analysts 24

A Digital Asset Exchange is removed 

from the Index when it no longer 

satisfies the Inclusion Criteria. The 

Index Provider does not currently 

include data from over-the-counter 

markets or derivatives platforms among 

the Constituent Exchanges. According to 

the Annual Report, over-the-counter 

data is not currently included because 

of the potential for trades to include a 

significant premium or discount paid 

for larger liquidity, which creates an 

uneven comparison relative to more 

active markets. There is also a higher 

potential for over-the-counter 

transactions to not be arms-length, and 

thus not be representative of a true 

market price. Bitcoin derivative markets 

are also not currently included as the 

markets remain relatively thin. The 

Index Provider will consider IOSCO 

principles for financial benchmarks and 

the management of trading venues of 

Bitcoin derivatives when considering 

inclusion of over-the-counter or 

derivative platform data in the future. 

The Index Provider and the Sponsor 

have entered into an index license 

agreement, dated as of February 1, 2022 

(the ‘‘Index License Agreement’’), 

governing the Sponsor’s use of the Index 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28049 

25Upon entering into the Index License 

Agreement, the Sponsor and the Index Provider 

terminated the license agreement between the 

parties dated as of February 28, 2019. 

Price.25 Pursuant to the terms of the 

Index License Agreement, the Index 

Provider may adjust the calculation 

methodology for the Index Price without 

notice to, or consent of, the Trust or its 

shareholders. The Index Provider may 

decide to change the calculation 

methodology to maintain the integrity of 

the Index Price calculation should it 

identify or become aware of previously 

unknown variables or issues with the 

existing methodology that it believes 

could materially impact its performance 

and/or reliability. The Index Provider 

has sole discretion over the 

determination of Index Price and may 

change the methodologies for 

determining the Index Price from time 

to time. Shareholders will be notified of 

any material changes to the calculation 

methodology or the Index Price in the 

Trust’s current reports and will be 

notified of all other changes that the 

Sponsor considers significant in the 

Trust’s periodic reports. The Trust will 

determine the materiality of any 

changes to the Index Price on a case-bycase basis, in consultation with external 

counsel. 

The Index Provider may change the 

trading venues that are used to calculate 

the Index or otherwise change the way 

in which the Index is calculated at any 

time. For example, the Index Provider 

has scheduled quarterly reviews in 

which it may add or remove Constituent 

Exchanges that satisfy or fail the 

Inclusion Criteria. The Index Provider 

does not have any obligation to consider 

the interests of the Sponsor, the Trust, 

the shareholders, or anyone else in 

connection with such changes. The 

Index Provider is not required to 

publicize or explain the changes or to 

alert the Sponsor to such changes. 

Although the Index methodology is 

designed to operate without any manual 

intervention, rare events would justify 

manual intervention. Intervention of 

this kind would be in response to nonmarket-related events, such as the 

halting of deposits or withdrawals of 

funds on a Digital Asset Exchange, the 

unannounced closure of operations on a 

Digital Asset Exchange, insolvency or 

the compromise of user funds. In the 

event that such an intervention is 

necessary, the Index Provider would 

issue a public announcement through 

its website, API and other established 

communication channels with its 

clients. 

Determination of the Index Price 

The Index applies an algorithm to the 

price of Bitcoin on the Constituent 

Exchanges calculated on a per second 

basis over a 24-hour period. The Index’s 

algorithm is expected to reflect a fourpronged methodology to calculate the 

Index Price from the Constituent 

Exchanges: 

• Volume Weighting: Constituent 

Exchanges with greater liquidity receive 

a higher weighting in the Index Price, 

increasing the ability to execute against 

(i.e., replicate) the Index in the 

underlying spot markets. 

• Price-Variance Weighting: The 

Index Price reflects data points that are 

discretely weighted in proportion to 

their variance from the rest of the other 

Constituent Exchanges. As the price at 

a particular exchange diverges from the 

prices at the rest of the Constituent 

Exchanges, its weight in the Index Price 

consequently decreases. 

• Inactivity Adjustment: The Index 

Price algorithm penalizes stale activity 

from any given Constituent Exchange. 

When a Constituent Exchange does not 

have recent trading data, its weighting 

in the Index Price is gradually reduced 

until it is de-weighted entirely. 

Similarly, once trading activity at a 

Constituent Exchange resumes, the 

corresponding weighting for that 

Constituent Exchange is gradually 

increased until it reaches the 

appropriate level. 

• Manipulation Resistance: In order 

to mitigate the effects of wash trading 

and order book spoofing, the Index Price 

only includes executed trades in its 

calculation. Additionally, the Index 

Price only includes Constituent 

Exchanges that charge trading fees to its 

users in order to attach a real, 

quantifiable cost to any manipulation 

attempts. 

The Index Provider formally reevaluates the weighting algorithm 

quarterly, but maintains discretion to 

change the way in which an Index Price 

is calculated based on its periodic 

review or in extreme circumstances. The 

Index is designed to limit exposure to 

trading or price distortion of any 

individual Digital Asset Exchange that 

experiences periods of unusual activity 

or limited liquidity by discounting, in 

real-time, anomalous price movements 

at individual Digital Asset Exchanges. 

The Sponsor believes the Index 

Provider’s selection process for 

Constituent Exchanges as well as the 

methodology of the Index Price’s 

algorithm provides a more accurate 

picture of Bitcoin price movements than 

a simple average of Digital Asset 

Exchange spot prices, and that the 

weighting of Bitcoin prices on the 

Constituent Exchanges limits the 

inclusion of data that is influenced by 

temporary price dislocations that may 

result from technical problems, limited 

liquidity or fraudulent activity 

elsewhere in the Bitcoin spot market. By 

referencing multiple trading venues and 

weighting them based on trade activity, 

the Sponsor believes that the impact of 

any potential fraud, manipulation or 

anomalous trading activity occurring on 

any single venue is reduced. 

If the Index Price becomes 

unavailable, or if the Sponsor 

determines in good faith that such Index 

Price does not reflect an accurate price 

for Bitcoin, then the Sponsor will, on a 

best efforts basis, contact the Index 

Provider to obtain the Index Price 

directly from the Index Provider. If after 

such contact such Index Price remains 

unavailable or the Sponsor continues to 

believe in good faith that such Index 

Price does not reflect an accurate price 

for the relevant digital asset, then the 

Sponsor will employ a cascading set of 

rules to determine the Index Price, as 

described below in ‘‘Determination of 

the Index Price When Index Prices are 

Unavailable.’’ 

The Trust values its Bitcoin for 

operational purposes by reference to the 

Index Price. The Index Price is the value 

of a Bitcoin as represented by the Index, 

calculated at 4:00 p.m., New York time, 

on each business day. The Index 

Provider develops, calculates and 

publishes the Index on a continuous 

basis using the price at the Digital Asset 

Benchmark Exchanges, as selected by 

the Index Provider. 

Illustrative Example 

For the purposes of illustration, 

outlined below are examples of how the 

attributes that impact weighting and 

adjustments in the aforementioned 

methodology may be utilized to generate 

the Index Price for a digital asset. For 

example, the Constituent Exchanges for 

the Index Price of the digital asset are 

Coinbase Pro, Kraken, LMAX Digital 

and Bitstamp. 

The Index Price algorithm, as 

described above, accounts for 

manipulation at the outset by only 

including data from executed trades on 

Constituent Exchanges that charge 

trading fees. Then, the below-listed 

elements may impact the weighting of 

the Constituent Exchanges on the Index 

price as follows: 

• Volume Weighting: Each 

Constituent Exchange will be weighted 

to appropriately reflect the trading 

volume share of the Constituent 

Exchange relative to all the Constituent 

Exchanges during this same period. For 


lotter on DSK11XQN23PROD with NOTICES1
28050 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

26The Sponsor updated these rules on January 11, 

2022. 

27According to the Annual Report, when a 

modification is introduced and a substantial 

majority of users and miners consent to the 

modification, the change is implemented and the 

network remains uninterrupted. However, if less 

than a substantial majority of users and miners 

consent to the proposed modification, and the 

modification is not compatible with the software 

prior to its modification, the consequence would be 

what is known as a ‘‘hard fork’’ of the Bitcoin 

Network, with one group running the pre-modified 

software and the other running the modified 

software. The effect of such a fork would be the 

existence of two versions of Bitcoin running in 

parallel, yet lacking interchangeability. For 

example, in August 2017, Bitcoin ‘‘forked’’ into 

Bitcoin and a new digital asset, Bitcoin Cash, as a 

result of a several-year dispute over how to increase 

the rate of transactions that the Bitcoin Network can 

process. In the event of a hard fork of the Bitcoin 

Network, the Sponsor will, if permitted by the 

terms of the Trust Agreement, use its discretion to 

determine, in good faith, which peer-to-peer 

network, among a group of incompatible forks of 

the Bitcoin Network, is generally accepted as the 

Bitcoin Network and should therefore be 

considered the appropriate network for the Trust’s 

purposes. The Sponsor will base its determination 

on a variety of then relevant factors, including, but 

not limited to, the Sponsor’s beliefs regarding 

expectations of the core developers of Bitcoin, 

users, services, businesses, miners, and other 

constituencies, as well as the actual continued 

acceptance of, mining power on, and community 

engagement with, the Bitcoin Network. There is no 

guarantee that the Sponsor will choose the digital 

asset that is ultimately the most valuable fork, and 

the Sponsor’s decision may adversely affect the 

value of the Shares as a result. The Sponsor may 

also disagree with shareholders, security vendors, 

and the Index Provider on what is generally 

accepted as Bitcoin and should therefore be 

considered ‘‘Bitcoin’’ for the Trust’s purposes, 

which may also adversely affect the value of the 

Shares as a result. 

example, an average hourly weighting of 

52.17%, 11.88%, 24.46% and 11.49% 

for Coinbase Pro, Kraken, LMAX Digital 

and Bitstamp, respectively, would 

represent each Constituent Exchange’s 

share of trading volume during the same 

period. 

• Inactivity Adjustment: Assume that 

a Constituent Exchange’s trading engine 

represented a 14% influence on the 

trading price of the digital asset and 

then went offline for approximately two 

hours. The index algorithm 

automatically recognizes inactivity and 

de-weights that Constituent Exchange’s 

influence in the Index Price—for 

example, from 14% to 0%—until 

trading activity resumes. At which point 

it would re-weight the Constituent 

Exchange activity to a weight lower than 

its original weighting—for example, to 

12%. 

• Price-Variance Weighting: Assume 

that for a one-hour period, the digital 

asset’s execution prices on one 

Constituent Exchange were trading more 

than 7% higher than the average 

execution prices on another Constituent 

Exchange. The algorithm will 

automatically detect the anomaly and 

reduce that specific Constituent 

Exchange’s weighting to 0% for that 

one-hour period, ensuring a reliable 

spot reference unaffected by the 

localized event. 

Determination of the Index Price When 

Index Price is Unavailable 

The Sponsor will use the following 

cascading set of rules to calculate the 

Index Price.26 For the avoidance of 

doubt, the Sponsor will employ the 

below rules sequentially and in the 

order as presented below, should one or 

more specific rule(s) fail. 

1. Index Price = The price set by the 

Index as of 4:00 p.m., New York time, 

on the valuation date. If the Index 

becomes unavailable, or if the Sponsor 

determines in good faith that the Index 

does not reflect an accurate price, then 

the Sponsor will, on a best efforts basis, 

contact the Index Provider to obtain the 

Index Price directly from the Index 

Provider. If after such contact the Index 

remains unavailable or the Sponsor 

continues to believe in good faith that 

the Index does not reflect an accurate 

price, then the Sponsor will employ the 

next rule to determine the Index Price. 

There are no predefined criteria to make 

a good faith assessment and it will be 

made by the Sponsor in its sole 

discretion. 

2. Index Price = The price set by Coin 

Metrics Real-Time Rate (the ‘‘Secondary 

Index’’) as of 4:00 p.m., New York time, 

on the valuation date (the ‘‘Secondary 

Index Price’’). The Secondary Index 

Price is a real-time reference rate price, 

calculated using trade data from 

constituent markets selected by Coin 

Metrics (the ‘‘Secondary Index 

Provider’’). The Secondary Index Price 

is calculated by applying weightedmedian techniques to such trade data 

where half the weight is derived from 

the trading volume on each constituent 

market and half is derived from inverse 

price variance, where a constituent 

market with high price variance as a 

result of outliers or market anomalies 

compared to other constituent markets 

is assigned a smaller weight. If the 

Secondary Index becomes unavailable, 

or if the Sponsor determines in good 

faith that the Secondary Index does not 

reflect an accurate price, then the 

Sponsor will, on a best efforts basis, 

contact the Secondary Index Provider to 

obtain the Secondary Index Price 

directly from the Secondary Index 

Provider. If after such contact the 

Secondary Index remains unavailable or 

the Sponsor continues to believe in 

good faith that the Secondary Index 

does not reflect an accurate price, then 

the Sponsor will employ the next rule 

to determine the Index Price. There are 

no predefined criteria to make a good 

faith assessment and it will be made by 

the Sponsor in its sole discretion. 

3. Index Price = The price set by the 

Trust’s principal market (the ‘‘Tertiary 

Pricing Option’’) as of 4:00 p.m., New 

York time, on the valuation date. The 

Tertiary Pricing Option is a spot price 

derived from the principal market’s 

public data feed that is believed to be 

consistently publishing pricing 

information as of 4:00 p.m., New York 

time, and is provided to the Sponsor via 

an application programming interface. If 

the Tertiary Pricing Option becomes 

unavailable, or if the Sponsor 

determines in good faith that the 

Tertiary Pricing Option does not reflect 

an accurate price, then the Sponsor will, 

on a best efforts basis, contact the 

Tertiary Pricing Provider to obtain the 

Tertiary Pricing Option directly from 

the Tertiary Pricing Provider. If after 

such contact the Tertiary Pricing Option 

remains unavailable after such contact 

or the Sponsor continues to believe in 

good faith that the Tertiary Pricing 

Option does not reflect an accurate 

price, then the Sponsor will employ the 

next rule to determine the Index Price. 

There are no predefined criteria to make 

a good faith assessment and it will be 

made by the Sponsor in its sole 

discretion. 

4. Index Price = The Sponsor will use 

its best judgment to determine a good 

faith estimate of the Index Price. There 

are no predefined criteria to make a 

good faith assessment and it will be 

made by the Sponsor in its sole 

discretion. 

In the event of a fork, the Index 

Provider may calculate the Index Price 

based on a virtual currency that the 

Sponsor does not believe to be the 

appropriate asset that is held by the 

Trust.27 In this event, the Sponsor has 

full discretion to use a different index 

provider or calculate the Index Price 

itself using its best judgment. 

The Structure and Operation of the 

Trust Protects Investors and Satisfies 

Commission Requirements for BitcoinBased Exchange Traded Products 

The Commission has expressed 

legitimate concerns about the 

underlying Digital Asset Market due to 

the potential for fraud and manipulation 

and has clearly outlined the reasons 

why prior Bitcoin-based ETP proposals 

have been unable to satisfy these 

concerns in orders disapproving the 

proposed listing and trading of the 

Winklevoss Bitcoin Trust, Bitwise 

Bitcoin ETF Trust, United States Bitcoin 

and Treasury Investment Trust, and 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28051 

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) (the ‘‘Winklevoss 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 (Oct. 9, 

2019), 84 FR 55382 (Oct. 16, 2019) (SR–NYSEArca– 

2019–01) (the ‘‘Bitwise Order’’); 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–NYSEArca–2019–39) (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 (Aug. 22, 2018), 83 FR 43934 (Aug. 28, 2018) 

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

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 (Aug. 22, 2018), 

83 FR 43912 (Aug. 28, 2018) (SR–NYSEArca–2018– 

02) (the ‘‘Direxion 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– 

01) (the ‘‘GraniteShares Order’’). 

29See Bitwise Order, 84 FR at 55383 (discussing 

analysis of the Bitcoin spot market that asserts that 

95% of the spot market is dominated by fake and 

non-economic activity, such as wash trades), 55391 

(discussing possible sources of fraud and 

manipulation in the bitcoin spot market). See also 

Winklevoss Order, 83 FR at 37585–86 (discussing 

pending litigation against a Bitcoin trading platform 

for fraudulent conduct relating to Tether); Bitwise 

Order, 84 FR at 55391 n.140, 55402 & n.331 (same); 

Winklevoss Order, 83 FR at 37584–86 (discussing 

potential types of manipulation in the Bitcoin spot 

market). The Commission has also noted that fraud 

and manipulation in the Bitcoin spot market could 

persist for a significant duration. See, e.g., Bitwise 

Order, 84 FR at 55405 & n.379. 

30See generally Bitwise Order. 

31See Winklevoss Order, 84 FR at 37580, 37582– 

91; Bitwise Order, 84 FR at 55383, 55385–406; 

Wilshire Phoenix Order, 85 FR at 12597. 

32See Winklevoss Order, 84 FR at 37582; 

Wilshire Phoenix Order, 85 FR at 12597. 

33SEC, ‘‘Investor Bulletin: Exchange-Traded 

Funds (ETFs),’’ August 2012, https://www.sec.gov/ 

investor/alerts/etfs.pdf. 

34CFTC, ‘‘History of the CFTC,’’ https://

www.cftc.gov/About/HistoryoftheCFTC/history_

precftc.html. 

various Bitcoin-based trust issued 

receipts.28

In these disapproval orders, the 

Commission outlined that a proposal 

relating to a Bitcoin-based ETP could 

satisfy its concerns regarding potential 

for fraud and manipulation by 

demonstrating: 

(1) Inherent Resistance to Fraud and 

Manipulation: That the underlying 

commodity market is inherently 

resistant to fraud and manipulation; 

(2) Other Means to Prevent Fraud and 

Manipulation: That there are other 

means to prevent fraudulent and 

manipulative acts and practices that are 

sufficient; or 

(3) Surveillance Sharing: That the 

listing exchange has entered into a 

surveillance sharing agreement with a 

regulated market of significant size 

relating to the underlying or reference 

assets. 

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-based ETP. 

How the Trust Meets Standards in the 

Winklevoss Order, Bitwise Order and 

Wilshire Phoenix Order 

1. Resistance to or Prevention of Fraud 

and Manipulation 

In the Bitwise Order, the Commission 

disagreed with the proposition that 

Bitcoin’s fungibility, transportability 

and exchange tradability combine to 

provide unique protections against, and 

allow Bitcoin to be uniquely resistant to, 

attempts at price manipulation. The 

Commission reached its conclusion 

based on concessions by Bitwise that 

95% of the reported trading in Bitcoin 

is ‘‘fake’’ or non-economic, effectively 

admitting that the properties of Bitcoin 

do not make it inherently resistant to 

manipulation. Bitwise’s concessions 

were further compounded by evidence 

of potential and actual fraud and 

manipulation in the historical trading of 

Bitcoin on certain marketplaces such as 

(1) ‘‘wash’’ trading, (2) trading based on 

material, non-public information, 

including the dissemination of false and 

misleading information, (3) 

manipulative activity involving Tether, 

and (4) fraud and manipulation.29

The Sponsor acknowledges the 

possibility that fraud and manipulation 

may exist and that Bitcoin trading on 

any given exchange may be no more 

uniquely resistant to fraud and 

manipulation than other commodity 

markets.30 However, the Sponsor 

believes that the fundamental features of 

Bitcoin’s fungibility, transportability 

and exchange tradability offer novel 

protections beyond those that exist in 

traditional commodity markets or equity 

markets when combined with other 

means, as discussed further below. 

2. Other Means To Prevent Fraud and 

Manipulation 

The Commission has recognized that 

a listing exchange could demonstrate 

that other means to prevent fraudulent 

and manipulative acts and practices are 

sufficient to justify dispensing with the 

requisite surveillance-sharing 

agreement.31 In evaluating the 

effectiveness of this type of resistance, 

the Commission does not apply a 

‘‘cannot be manipulated’’ standard. 

Instead, the Commission requires that 

such resistance to fraud and 

manipulation be novel and beyond 

those protections that exist in 

traditional commodity markets or equity 

markets for which the Commission has 

long required surveillance-sharing 

agreements in the context of listing 

derivative securities products.32

The Sponsor believes the Index 

represents a novel means to prevent 

fraud and manipulation from impacting 

a reference price for Bitcoin and that it 

offers protections beyond those that 

exist in traditional commodity markets 

or equity markets. Specifically, Bitcoin 

is novel and exists outside traditional 

commodity markets. It therefore stands 

to reason that the methods in which it 

trades will be novel and that the market 

for Bitcoin will have different attributes 

than traditional commodity markets. 

Bitcoin was only introduced within the 

past decade, twenty years after the first 

U.S. ETFs were offered 33 and 150 years 

after the first futures were offered.34 In 

contrast to older commodities such as 

gold, silver, platinum, palladium or 

copper, which the Commission has 

noted all had at least one significant, 

regulated market for trading futures on 

the underlying commodity at the time 

commodity trust ETPs were approved 

for listing and trading, the first trading 

in Bitcoin took place entirely in an 

open, transparent and online setting 

where other commodities cannot trade. 

The Trust has priced its Shares 

consistently for more than six years 

based on the Index. The Sponsor 

believes the Trust’s use of the Index 

specifically addresses the Commission’s 

concerns in that the Index serves as an 

alternative means to prevent fraud and 

manipulation. Specifically, the Index 

can (i) mitigate the effects of fraud, 

manipulation and other anomalous 

trading activity on the Bitcoin reference 

rate, (ii) provide a real-time, volumeweighted fair value of Bitcoin and (iii) 

appropriately handle and adjust for nonmarket related events. 

As described in more detail below, 

the Sponsor believes that the Index 


lotter on DSK11XQN23PROD with NOTICES1
28052 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

35 ‘‘U.S.-Compliant Exchanges’’ are exchanges in 

the Digital Asset Exchange Market that are 

compliant with applicable U.S. federal and state 

licensing requirements and practices regarding 

AML and KYC regulations. All Constituent 

Exchanges are U.S.-Compliant Exchanges. ‘‘NonU.S.-Compliant Exchanges’’ are all other exchanges 

in the Digital Asset Exchange Market. As of 

December 31, 2021, the U.S.-Compliant Exchanges 

that the Index Provider considered for inclusion in 

the Index were Bitstamp, Coinbase Pro, Kraken and 

LMAX Digital. From these U.S.-Compliant 

Exchanges, the Index Provider then applies 

additional Inclusion Criteria to determine the 

Constituent Exchange. As of December 31, 2021, the 

Constituent Exchanges were Bitstamp, Coinbase 

Pro, Kraken, and LMAX Digital. 

36According to the Sponsor, the more exchanges 

included in the Index, the more ability there is for 

traders and market makers to trade against the 

Index by arbitraging price differences. For example, 

in the event of variances between Bitcoin prices on 

Constituent Exchanges and non-Constituent 

Exchanges, arbitrage trading opportunities would 

exist. These discrepancies generally consolidate 

over time, as price differences across exchanges are 

realized and capitalized upon by traders and market 

makers. 

37See, e.g., ‘‘DFS Takes Action to Deter Fraud and 

Manipulation in Virtual Currency Markets,’’ 

available at: https://www.dfs.ny.gov/about/press/ 

pr1802071.htm. 

38See ‘‘New York’s Final ‘‘BitLicense’’ Rule: 

Overview and Changes from July 2014 Proposal,’’ 

June 5, 2015, Davis Polk, available at: https://

www.davispolk.com/files/new_yorks_final_

bitlicense_rule_overview_changes_july_2014_

proposal.pdf. 

39As of the date of filing, two of the four 

Constituent Exchanges, Bitstamp and Coinbase Pro, 

are regulated by NYDFS. 

40See BSA Requirements for MSBs, FinCEN 

website: https://www.fincen.gov/bsarequirementsmsbs. 

41See Bitwise Order, 84 FR at 55392; Wilshire 

Phoenix Order, 85 FR at 12603. 

accomplishes those objectives in the 

following ways: 

1. The Index tracks the Digital Asset 

Exchange Market Price through trading 

activity at ‘‘U.S.-Compliant 

Exchanges’’; 35

2. The Index mitigates the impact of 

instances of fraud, manipulation and 

other anomalous trading activity in realtime through systematic adjustments; 

3. The Index is constructed and 

maintained by an expert third-party 

index provider, allowing for prudent 

handling of non-market-related events; 

and 

4. The Index mitigates the impact of 

instances of fraud, manipulation and 

other anomalous trading activity 

concentrated on any one specific 

exchange through a cross-exchange 

composite index rate. 

1. The Index tracks the Digital Asset 

Exchange Market Price through trading 

activity at ‘‘U.S.-Compliant Exchanges’’. 

To reduce the risk of fraud, 

manipulation, and other anomalous 

trading activity from impacting the 

Index, only U.S.-Compliant Exchanges 

are eligible to be included in the Index. 

The Index maintains a minimum 

number of three exchanges and a 

maximum number of five exchanges to 

track the Digital Asset Exchange Market 

while offering replicability for traders 

and market makers.36

U.S.-Compliant Exchanges possess 

safeguards that protect against fraud and 

manipulation. For example, U.S.- 

Compliant Exchanges regulated by the 

New York State Department of Financial 

Services (‘‘NYDFS’’) under the 

BitLicense program have regulatory 

requirements to implement measures 

designed to effectively detect, prevent, 

and respond to fraud, attempted fraud, 

market manipulation, and similar 

wrongdoing, and to monitor, control, 

investigate and report back to the 

NYDFS regarding any wrongdoing.37

These exchanges also have the following 

obligations:38

• Submission of audited financial 

statements including income 

statements, statement of assets/ 

liabilities, insurance, and banking; 

• Compliance with capitalization 

requirements set at NYDFS’s discretion; 

• Prohibitions against the sale or 

encumbrance to protect full reserves of 

custodian assets; 

• Fingerprints and photographs of 

employees with access to customer 

funds; 

• Retention of a qualified Chief 

Information Security Officer and annual 

penetration testing/audits; 

• Documented business continuity 

and disaster recovery plan, 

independently tested annually; and 

• Participation in an independent 

exam by NYDFS. 

Other U.S.-Compliant Exchanges have 

voluntarily implemented measures to 

protect against common forms of market 

manipulation.39

Furthermore, all U.S.-Compliant 

Exchanges are considered Money 

Services Businesses (‘‘MSBs’’) that are 

subject to federal and state reporting 

requirements of the U.S Department of 

Treasury’s FinCEN division that provide 

additional safeguards. For example, 

unscrupulous traders may be less likely 

to engage in fraudulent or manipulative 

acts and practices on exchanges that (1) 

report suspicious activity to FinCEN as 

money services businesses, (2) report to 

state regulators as money transmitters, 

and/or (3) require customer 

identification through KYC procedures. 

U.S.-Compliant Exchanges are required 

to: 40

• Identify people with ownership 

stakes or controlling roles in the MSB; 

• Establish a formal Anti-Money 

Laundering (AML) policy in place with 

documentation, training, independent 

review, and a named compliance officer; 

• Implement strict customer 

identification and verification policies 

and procedures; 

• File Suspicious Activity Reports 

(SARs) for suspicious customer 

transactions; 

• File Currency Transaction Reports 

(CTRs) for cash-in or cash-out 

transactions greater than $10,000; and 

• Maintain a five-year record of 

currency exchanges greater than $1,000 

and money transfers greater than $3,000. 

Lastly, because of Bitcoin’s 

classification as a commodity, the CFTC 

has authority to police fraud and 

manipulation on U.S.-Compliant 

Exchanges. 

The Sponsor acknowledges that there 

are substantial differences between 

FinCEN and New York state regulations 

and the Commission’s regulation of the 

national securities exchanges.41 The 

Sponsor does not believe the inclusion 

of U.S.-Compliant Exchanges is in and 

of itself sufficient to prove that the 

Index is an alternative means to prevent 

fraud and manipulation such that 

surveillance sharing agreements are not 

required, but does believe that the 

inclusion of only U.S.-Compliant 

Exchanges in the Index is one 

significant way in which the Index is 

protected from the potential impacts of 

fraud and manipulation. 

2. The Index mitigates the impact of 

instances of fraud, manipulation and 

other anomalous trading activity in realtime through systematic adjustments. 

The Index is calculated once every 

second according to a systematic 

methodology that relies on observed 

trading activity on the Constituent 

Exchanges. While the precise 

methodology underlying the Index is 

currently proprietary, the key elements 

of the Index are outlined below: 

• Volume Weighting: Constituent 

Exchanges with greater liquidity receive 

a higher weighting in the Index, 

increasing the ability to execute against 

(i.e., replicate) the Index in the 

underlying spot markets. 

• Price-Variance Weighting: The 

Index reflects data points that are 

discretely weighted in proportion to 

their variance from the rest of the 

Constituent Exchanges. As the price at 

a Constituent Exchange diverges from 

the prices at the rest of the Constituent 

Exchanges, its weight in the Index 

consequently decreases. 

• Inactivity Adjustment: The Index 

algorithm penalizes stale activity from 

any given Constituent Exchange. When 

a Constituent Exchange does not have 

recent trading data, its weighting in the 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28053 

42To the extent any such intervention has a 

material impact on the Trust, the Sponsor will also 

issue a public announcement. 

43All Digital Asset Exchanges that were included 

in the Index throughout the period were considered 

in this analysis. 

44Prior to February 1, 2022, the Trust valued its 

Bitcoins for operational purposes by reference to 

the volume-weighted average Index Price (the ‘‘Old 

Index Price’’). The Old Index Price was calculated 

by applying a weighting algorithm to the price and 

trading volume data for the immediately preceding 

24-hour period as of 4:00 p.m., New York time, 

derived from the Constituent Exchanges reflected in 

the Index on such trade date, and overlaying an 

averaging mechanism to the price produced. Thus, 

whereas the Old Index Price reflected the price of 

a Bitcoin at 4:00 p.m., New York time, calculated 

by taking the average of each price of a Bitcoin 

produced by the Index over the preceding 24-hour 

period, the Index Price now is the price of a Bitcoin 

at 4:00 p.m., New York time, calculated based on 

the price and trading volume data of the Digital 

Asset Exchanges included in the Index over the 

preceding 24-hour period. The Index Price differs 

from the Old Index Price only in that it does not 

use an additional averaging mechanism; the Index 

Price otherwise uses the same methodology as the 

Old Index Price, and there has been no change to 

the Index used to determine the Index Price or the 

criteria used to select the Constituent Exchanges. 

45See Winklevoss Order, 83 FR at 37593–94; 

Bitwise Order, 84 FR at 55383, 55410; Wilshire 

Phoenix Order, 85 FR at 12609. 

46See Winklevoss Order, 83 FR at 37594. 

Index is gradually reduced, until it is 

de-weighted entirely. Similarly, once 

trading activity at the Constituent 

Exchange resumes, the corresponding 

weighting for that Constituent Exchange 

is gradually increased until it reaches 

the appropriate level. 

• Manipulation Resistance: In order 

to mitigate the effects of wash trading 

and order book spoofing, the Index only 

includes executed trades in its 

calculation. Additionally, the Index 

only includes Constituent Exchanges 

that charge trading fees to its users in 

order to attach a real, quantifiable cost 

to any manipulation attempts. 

The Index Provider reviews and 

periodically updates the exchanges 

included in the Index by utilizing a 

methodology that is guided by the 

IOSCO principles for financial 

benchmarks. 

3. The Index is constructed and 

maintained by an expert third-party 

index provider, allowing for prudent 

handling of non-market-related events. 

The Index Provider reviews and 

periodically updates which exchanges 

are included in the Index by utilizing a 

methodology that is guided by the 

IOSCO principles for financial 

benchmarks. 

For an exchange to become a 

Constituent Exchange, it must satisfy 

the following Inclusion Criteria: 

• Compliance with any applicable 

U.S. federal and state licensing 

requirements and practices regarding 

AML and KYC regulations (i.e., the 

Constituent Exchange must be a U.S.- 

Compliant Exchange); 

• Publicly known ownership entity; 

• No restrictions on deposits and/or 

withdrawals of Bitcoin; 

• No restrictions on deposits and/or 

withdrawals of USD; 

• Reliably publish trade prices and 

volumes on a real-time basis through 

APIs; 

• Charges trading fees to its users in 

order to attach a real, quantifiable cost 

to any manipulation attempts; 

• Offer programmatic trading of the 

Bitcoin/USD spot price; 

• Liquid market in the Bitcoin/USD 

pair; 

• Trading volume that represents a 

minimum of total Bitcoin/USD trading 

volumes (5% for U.S. exchanges and 

10% non-U.S. exchanges); and 

• Discretion of the Index Provider’s 

analysts. 

Although the Index methodology is 

designed to operate without any human 

interference, rare events would justify 

manual intervention. Manual 

intervention would only be in response 

to ‘‘non-market-related events’’ (e.g., 

halting of deposits or withdrawals of 

funds, unannounced closure of 

exchange operations, insolvency, 

compromise of user funds, etc.). In the 

event that such an intervention is 

necessary, the Index Provider would 

issue a public announcement through 

its website, API and other established 

communication channels with its 

clients.42

4. The Index mitigates the impact of 

instances of fraud, manipulation and 

other anomalous trading activity 

concentrated on any one specific 

exchange through a cross-exchange 

composite index rate. 

The Index is based on the price and 

volume data of multiple U.S.-Compliant 

Exchanges that satisfy the Index 

Provider’s Inclusion Criteria. By 

referencing multiple trading venues and 

weighting them based on trade activity, 

the impact of any potential fraud, 

manipulation, or anomalous trading 

activity occurring on any single venue is 

reduced. Specifically, the effects of 

fraud, manipulation, or anomalous 

trading activity occurring on any single 

venue are de-weighted and 

consequently diluted by non-anomalous 

trading activity from other Constituent 

Exchanges. 

Although the Index is designed to 

accurately capture the market price of 

Bitcoin, third parties may be able to 

purchase and sell Bitcoin on public or 

private markets included or not 

included among the Constituent 

Exchanges, and such transactions may 

take place at prices materially higher or 

lower than the Index Price. For 

example, based on data provided by the 

Index Provider, on any given day during 

the year ended December 31, 2021, the 

maximum differential between the 4:00 

p.m., New York time spot price of any 

single Digital Asset Exchange included 

in the Index and the Index Price was 

0.64% and the average of the maximum 

differentials of the 4:00 p.m., New York 

time spot price of each Digital Asset 

Exchange included in the Index and the 

Index Price was 0.32%. During this 

same period, the average differential 

between the 4:00 p.m., New York time 

spot prices of all the Digital Asset 

Exchanges included in the Index and 

the Index Price was 0.0003%.43

Since November 1, 2014, the Trust 

has consistently priced its Shares at 4:00 

p.m., E.T. based on the Index Price.44

While that pricing would be known to 

the market, the Sponsor believes that, 

even if efforts to manipulate the price of 

Bitcoin at 4:00 p.m., E.T. were 

successful on any exchange, such 

activity would have had a negligible 

effect on the pricing of the Trust, due to 

the controls embedded in the structure 

of the Index. 

Accordingly, the Sponsor believes 

that the Index has proven its ability to 

(i) mitigate the effects of fraud, 

manipulation and other anomalous 

trading activity on the Bitcoin reference 

rate, (ii) provide a real-time, volumeweighted fair value of Bitcoin and (iii) 

appropriately handle and adjust for nonmarket related events. For these reasons, 

the Sponsor believes that the Index 

represents an effective alternative means 

to prevent fraud and manipulation and 

the Trust’s reliance on the Index 

addresses the Commission’s concerns 

with respect to potential fraud and 

manipulation. 

3. A Significant, Regulated and 

Surveilled Market Exists and Is Closely 

Connected With Spot Market for Bitcoin 

In the Winklevoss Order, Bitwise 

Order and Wilshire Phoenix Order, the 

Commission described both the need for 

and the definition of a surveilled market 

of significant size for commodity-trust 

ETPs like the Trust to date.45

Specifically, the Commission explained 

that: 

for the commodity-trust ETPs approved to 

date for listing and trading, there has been in 

every case at least one significant, regulated 

market for trading futures on the underlying 

commodity—whether gold, silver, platinum, 

palladium, or copper—and the ETP listing 

exchange has entered into surveillancesharing agreements with, or held Intermarket 

Surveillance Group membership in common 

with, that market.46


lotter on DSK11XQN23PROD with NOTICES1
28054 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

47See Winklevoss Order, 83 FR at 37594; Bitwise 

Order, 84 FR at 55410; ProShares Order, 83 FR at 

43936; GraniteShares Order, 83 FR at 43925; 

Direxion Order, 83 FR at 43914; Wilshire Phoenix 

Order, 85 FR at 12609. 

48See Winklevoss Order, 83 FR at 37594. 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. 

49See Bitwise Order, 84 FR at 55411; Wilshire 

Phoenix Order, 85 FR at 12612. 

50See Memorandum to File from Neel Maitra, 

Senior Special Counsel (Fintech & Crypto 

Specialist), Division of Trading and Markets, U.S. 

Securities and Exchange Commission re: Meeting 

with Representatives from Fidelity Digital Assets, et 

al. and attachment (SR-CboeBZX–2021–039) 

(September 8, 2021), available at: https://

www.sec.gov/comments/sr-cboebzx-2021-039/ 

srcboebzx2021039-250110.pdf; Letter from Bitwise 

Asset Management, Inc. re: File Number SR– 

NYSEArca–2021–89 (February 25, 2022), available 

at: https://www.sec.gov/comments/sr-nysearca2021-89/srnysearca202189-20117902-270822.pdf; 

Letter from Wilson Sonsini Goodrich and Rosati, 

P.C. and Chapman and Cutler LLP, on behalf of 

Bitwise Asset Management, Inc. re: File No. SR– 

NYSEArca–2021–89 (March 7, 2022), available at: 

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

89/srnysearca202189-20118794-271630.pdf. 

51These Bitcoin spot markets include Binance, 

Coinbase Pro, Bitfinex, Kraken, Bitstamp, BitFlyer, 

Poloniex, Bittrex and itBit. 

52To further illustrate the size and liquidity of the 

Trust, as of October 31, 2020, compared with global 

commodity ETPs, the Trust would rank fourth in 

assets under management and seventh in notional 

trading volume from November 1, 2019 to October 

31, 2020. 

Further, the Commission stated that 

its interpretation of the term ‘‘market of 

significant size’’ depends on the 

interrelationship between the market 

with which the listing exchange has a 

surveillance-sharing agreement and the 

proposed ETP.47 Accordingly, the terms 

‘‘significant market’’ and ‘‘market of 

significant size’’ could mean: 

a market (or group of markets) as to which 

(a) there is a reasonable likelihood that a 

person attempting to manipulate the ETP 

would also have to trade on that market to 

successfully manipulate the ETP, so that a 

surveillance-sharing agreement would assist 

in detecting and deterring misconduct, and 

(b) it is unlikely that trading in the ETP 

would be the predominant influence on 

prices in that market.48

In the context of Bitcoin-based ETPs 

specifically, 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 such that a 

surveillance-sharing agreement would 

assist the ETP listing market in 

detecting and deterring misconduct.49

In particular, if the spot market leads 

the futures market, this would indicate 

that it would not be necessary to trade 

on the futures market to manipulate the 

proposed ETP, even if arbitrage worked 

efficiently, because the futures price 

would move to meet the spot price. 

The Sponsor has conducted a lead/lag 

analysis of per minute data comparing 

the Bitcoin futures market, as 

represented by the CME futures market, 

to the Bitcoin spot market, as 

represented by the Index. Based on this 

analysis, the Sponsor has concluded 

that there does not appear to be a 

significant lead/lag relationship 

between the two instruments for the 

period of November 1, 2019 to August 

31, 2021. However, the Sponsor notes 

that other studies prior to and since 

such date have found that the CME 

futures market does lead the Bitcoin 

spot market.50

Although there have been mixed 

findings regarding the lead/lag 

relationship between the CME futures 

and Bitcoin spot markets, the Sponsor 

believes that the CME futures market 

represents a large, surveilled and 

regulated market. For example, from 

November 1, 2019 to August 31, 2021, 

the CME futures market trading volume 

was over $432 billion, compared to $624 

billion in trading volume across the 

Constituent Exchanges included in the 

Index. With over 69% of the Index 

trading volume, the CME futures market 

represents significant coverage of U.S.- 

Compliant Exchanges in the Bitcoin 

market. In addition, the CME futures 

market trading volume from November 

1, 2019 to August 31, 2021 was 

approximately 50% of the trading 

volume of the U.S. dollar-denominated 

Bitcoin spot markets referenced in the 

Bitwise Order.51

Given the significant size of the CME 

futures markets, the Sponsor believes 

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, since arbitrage between the 

derivative and spot markets would tend 

to counter an attempt to manipulate the 

spot market alone. As a result, the 

Exchange’s ability to obtain information 

regarding trading in the Shares and 

futures from markets and other entities 

that are members of the Intermarket 

Trading Group (‘‘ISG’’), including the 

CME, would assist the Exchange in 

detecting and deterring misconduct. 

The Sponsor also believes it is 

unlikely that the ETP would become the 

predominant influence on prices in the 

market. 

While future inflows to the proposed 

Trust cannot be predicted, to provide 

comparable data, the Sponsor examined 

the change in market capitalization of 

Bitcoin with net inflows into the Trust, 

which currently trades on OTC Markets 

and is largest and most liquid Bitcoin 

investment product in the world.52

From November 1, 2019 to August 31, 

2021, the market capitalization of 

Bitcoin grew from $166 billion to $888 

billion, a $721 billion increase. Over the 

same period, the Trust experienced $6.6 

billion of inflows. The cumulative 

inflow into the Trust over the stated 

time period was only 0.9% of the 

aggregate growth of Bitcoin’s market 

capitalization. 

Additionally, the Trust experienced 

approximately $98.5 billion of trading 

volume from November 1, 2019 to 

August 31, 2021, only 23% of the CME 

futures market and 16% of the Index 

over the same period. 

* * * * * 

In summary, the Sponsor believes that 

the foregoing responds to the 

Commission’s articulated concerns with 

respect to potential fraud and 

manipulation in Bitcoin-based ETPs. 

Specifically, the Sponsor believes that, 

although Bitcoin is not itself inherently 

resistant to fraud and manipulation, the 

Index represents an effective means to 

prevent fraudulent and manipulative 

acts and practices. As discussed above, 

the Trust has used the Index to price the 

Shares for more than six years, and the 

Index has proven its ability to (i) 

mitigate the effects of fraud, 

manipulation and other anomalous 

trading activity on the Bitcoin reference 

rate, (ii) provide a real-time, volumeweighted fair value of bitcoin and (iii) 

appropriately handle and adjusts for 

non-market related events. The Sponsor 

also believes that the CME futures 

market is a significant, surveilled and 

regulated market that is closely 

connected with the spot market for 

Bitcoin and may fulfill the requirements 

for surveillance sharing given the 

Exchange’s ability to obtain information 

from markets and other entities that are 

members of the ISG to assist in detecting 

and deterring misconduct. 

The Approval of Bitcoin-Based ETFs 

Registered Under the Investment 

Company Act of 1940 and Bitcoin Based 

ETPs Registered Under the Securities 

Act of 1933 and Securities Exchange Act 

1934 

In an August 3, 2021 speech at the 

Aspen Security Forum, the Chair stated 

that he looked forward to the 

Commission’s review of Bitcoin-based 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28055 

53Chair Gary Gensler Public Statement, ‘‘Remarks 

Before the Aspen Security Forum,’’ (August 3, 

2021), https://www.sec.gov/news/public-statement/ 

gensler-aspen-security-forum-2021-08-03. 54 Id. 55ProShares Bitcoin Strategy ETF (BITO); VanEck 

Bitcoin Strategy ETF (XBTF); Valkyrie Bitcoin 

Strategy ETF (BTF). 56See, e.g., Securities Exchange Act Release Nos. 

93559 (November 12, 2021), 86 FR 64539 

(November 18, 2021) (SR-CboeBZX–2021–019) 

(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); 94080 (January 27, 2022), 87 FR 5527 

(February 1, 2022) (SR-CboeBZX–2021–029) (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); 94571 (March 31, 2022), 87 FR 20014 

(April 6, 2022) (SR-CboeBZX–2021–051) (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). 

57See Securities Exchange Act Release No. 94620 

(April 6, 2022), 87 FR 21676 (April 12, 2022) (SR– 

NYSEArca–2021–53) (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)). 58See id. 

ETF proposals registered under the 

Investment Company Act of 1940 (the 

‘‘’40 Act’’), ‘‘particularly if those are 

limited to [the] CME-traded Bitcoin 

futures,’’ noting the ‘‘significant investor 

protection’’ offered by the ’40 Act.53 In 

this same speech, the Chair specifically 

identified the Trust in the context of 

existing investment vehicles that 

provide exposure to Bitcoin, noting that 

the Trust, which is a Bitcoin-based ETP 

proposal that would be registered under 

the ’33 Act and ’34 Act, rather than the 

’40 Act, is ‘‘the largest among them 

having been around for eight years and 

worth more than $20 billion.’’ 54 Since 

that speech, the first Bitcoin-based ETFs 

registered under the ’40 Act were 

approved for trading,55 subsequent 

Bitcoin-based ETPs that would be 

registered under the ’33 Act and ’34 Act 

were disapproved 56 and a subsequent 

Bitcoin-based ETP that will be 

registered under the ’33 Act and ’34 Act 

was approved for trading.57

As described above, the Commission 

has outlined the reasons why prior 

Bitcoin-based ETF and ETP proposals 

registered under both the ’40 Act and 

’33 Act and ’34 Act, respectively, have 

been unable to satisfy its concerns about 

pricing in the underlying Digital Asset 

Market due to the potential for fraud 

and manipulation and described how 

such concerns could be addressed. It 

has been the Sponsor’s understanding 

that none of the stated requirements 

have indicated a preference for Bitcoinbased ETF and ETP proposals registered 

under the ’40 Act versus the ’33 Act and 

’34 Act, respectively. Nor does the 

Sponsor believe that such requirements 

can be addressed by gaining exposure to 

Bitcoin through Bitcoin futures in an 

ETF registered under the ’40 Act rather 

than physical Bitcoin in an ETP 

registered under the ’33 Act because 

both products would be reliant on 

Bitcoin’s underlying price in the spot 

markets. 

For instance, Bitcoin-based ETFs 

registered under the ’40 Act that hold 

Bitcoin futures are priced by referencing 

the CME CF Bitcoin Reference Rate 

(‘‘BRR’’), which itself references the 

Digital Asset Markets: Bitstamp, 

Coinbase, Gemini, itBit, and Kraken. 

Similarly, Bitcoin-based ETPs that 

would be registered under the ’33 Act 

and ’34 Act, like the Trust, would be 

priced by referencing Digital Asset 

Markets included in the BRR, such as 

through the Index. As a result, the 

Sponsor believes that any potential 

fraud or manipulation in the underlying 

Digital Asset Market would impact both 

types of ETP proposals. Thus, in light of 

the Commission’s recent approval of a 

futures-based ETP registered under the 

’33 Act and ’34 Act,58 which suggests 

that the Commission believes that both 

Bitcoin-based ETFs registered under the 

’40 Act and Bitcoin-based ETPs 

registered under the ’33 Act and ’34 Act 

could meet the requirements of the 

Exchange Act, the Sponsor believes that 

the Commission should take the same 

view towards both types of proposals 

and that differences between the ’40 Act 

on the one hand, and the ’33 Act and 

’34 Act on the other, should not form 

the basis for denial of proposed Bitcoinbased ETPs registered under the ’33 Act 

and ’34 Act, like the Trust. 

Creation of Shares 

According to the Annual Report, the 

Trust will issue Shares to Authorized 

Participants from time to time, but only 

in one or more Baskets (with a Basket 

being a block of 100 Shares). The Trust 

will not issue fractions of a Basket. The 

creation of Baskets will be made only in 

exchange for the delivery to the Trust, 

or the distribution by the Trust, of the 

number of whole and fractional Bitcoins 

represented by each Basket being 

created, which is determined by 

dividing (x) the number of Bitcoins 

owned by the Trust at 4:00 p.m., E.T., 

on the trade date of a creation order, 

after deducting the number of Bitcoins 

representing the U.S. dollar value of 

accrued but unpaid fees and expenses of 

the Trust (converted using the Index 

Price at such time, and carried to the 

eighth decimal place), by (y) the number 

of Shares outstanding at such time (with 

the quotient so obtained calculated to 

one one-hundred-millionth of one 

Bitcoin (i.e., carried to the eighth 

decimal place)), and multiplying such 

quotient by 100 (the ‘‘Basket Amount’’). 

All questions as to the calculation of the 

Basket Amount will be conclusively 

determined by the Sponsor and will be 

final and binding on all persons 

interested in the Trust. The Basket 

Amount multiplied by the number of 

Baskets being created is the ‘‘Total 

Basket Amount.’’ The number of 

Bitcoins represented by a Share will 

gradually decrease over time as the 

Trust’s Bitcoins are used to pay the 

Trust’s expenses. As of December 31, 

2021, each Share represented 

approximately 0.0009 of one Bitcoin. 

Authorized Participants are the only 

persons that may place orders to create 

Baskets. Each Authorized Participant 

must (i) be a registered broker-dealer, 

(ii) enter into an agreement with the 

Sponsor and the Liquidity Provider (as 

defined below), if applicable, that 

provides the procedures for the creation 

and redemption of Baskets and for the 

delivery of Bitcoins required for 

Creation Baskets and Redemption 

Baskets (each, a ‘‘Participant 

Agreement’’) and (iii) in the case of 

creation or redemption in-kind, own a 

Bitcoin wallet address that is known to 

the Custodian as belonging to the 

Authorized Participant. An Authorized 

Participant may act for its own account 

or as agent for broker-dealers, 

custodians and other securities market 

participants that wish to create or 

redeem Baskets. Shareholders who are 

not Authorized Participants will only be 

able to redeem their Shares through an 

Authorized Participant. 

Although the creation of Baskets 

requires the delivery to the Trust of the 

Total Basket Amount, an Authorized 

Participant may deposit cash with the 

Administrator, which will facilitate the 

purchase or sale of Bitcoins on behalf of 

the Authorized Participant through one 

or more eligible companies (each, a 

‘‘Liquidity Provider’’) that have entered 

into a Participant Agreement with the 

Sponsor, the Administrator, the 

Marketing Agent and the relevant 

Authorized Participant. 

The Participant Agreement provides 

the procedures for the creation of 

Baskets and for the delivery of the 

whole and fractional Bitcoins required 

for such creations. The Participant 

Agreement and the related procedures 

attached thereto may be amended by the 

Sponsor and the relevant Authorized 

Participant. Under the Participant 

Agreement, the Sponsor has agreed to 

indemnify each Authorized Participant 

against certain liabilities, including 

liabilities under the Securities Act. 


lotter on DSK11XQN23PROD with NOTICES1
28056 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

Authorized Participants do not pay a 

transaction fee to the Trust in 

connection with the creation of Baskets, 

but there may be transaction fees 

associated with the validation of the 

transfer of Bitcoins by the Bitcoin 

Network. Authorized Participants who 

deposit Bitcoins with the Trust in 

exchange for Baskets will receive no 

fees, commissions or other form of 

compensation or inducement of any 

kind from either the Sponsor or the 

Trust, and no such person has any 

obligation or responsibility to the 

Sponsor or the Trust to effect any sale 

or resale of Shares. 

Creation Procedures 

On any business day, an Authorized 

Participant may place an order with the 

Administrator to create one or more 

Baskets. Orders for creations may be 

placed either ‘‘in-kind’’ or ‘‘in-cash.’’ 

Orders for creation in-kind must be 

placed with the Administrator no later 

than 3:59:59 p.m., New York time, and 

no later than 4:59:59 p.m., New York 

time, for creations in-cash (in each case, 

the ‘‘Order Cutoff Time’’). 

In-kind creations will take place as 

follows, where ‘‘T’’ is the trade date and 

each day in the sequence must be a 

business day: 

T T+1 

• The Authorized Participant places a creation 

order with the Administrator. 

• The Marketing Agent accepts (or rejects) the creation order, which is communicated to the Authorized Participant by the 

Administrator. 

• The Total Basket Amount 

is determined as soon as 

practicable after 4:00 

p.m., New York time. 

• The Authorized Participant transfers the Total Basket Amount to the Custodian no later than 4:00 p.m., New 

York time. 

• Once the Total Basket Amount is received by the Custodian, the Administrator directs the Transfer Agent to 

credit the number of Baskets created to the Authorized Participant’s DTC account. 

In-cash creations will take place as 

follows, where ‘‘T’’ is the trade date and 

each day in the sequence must be a 

business day: 

T–1 T T+1 

• The Authorized Participant 

places a creation order 

with the Administrator. 

• The Marketing Agent accepts (or rejects) the creation order, which is communicated to the Authorized Participant by the Administrator. 

• The Authorized Participant 

sends 110% of the U.S. 

dollar value of the number 

of baskets ordered pursuant to such creation order, 

as calculated using the 

Index Price as of the order 

date (the ‘‘Cash Collateral 

Amount’’) to the Administrator. 

• The Sponsor notifies the Liquidity Provider of the creation order and the Liquidity Provider may begin purchasing Bitcoin to deliver the Total Basket Amount.

• The Total Basket Amount is determined as soon as 

practicable after 4:00 p.m., New York time.

• The Liquidity Provider delivers the Total Basket 

Amount to the Custodian no later than 4:00 p.m., 

New York time. 

• Once the Total Basket Amount is received by the 

Custodian, the Administrator directs the Transfer 

Agent to credit the number of Baskets created to the 

Authorized Participant’s DTC account. 

• The Administrator sends the Liquidity Provider cash 

equal to the U.S. dollar value of the Total Basket 

Amount, as determined on the trade date, plus the 

Variable Fee, and returns the remaining amount of 

the Cash Collateral Amount (if any) to the Authorized 

Participant. 

Redemption of Shares 

The Trust may redeem Shares from 

time to time but only in Baskets. A 

Basket equals a block of 100 Shares. The 

number of outstanding Shares is 

expected to decrease from time to time 

as a result of the redemption of Baskets. 

The redemption of Baskets requires the 

distribution by the Trust of the number 

of Bitcoins represented by the Baskets 

being redeemed. The redemption of a 

Basket will be made only in exchange 

for the distribution by the Trust of the 

number of whole and fractional Bitcoins 

represented by each Basket being 

redeemed, the number of which is 

determined by dividing (x) the number 

of Bitcoins owned by the Trust at 4:00 

p.m., New York time, on the relevant 

trade date of a redemption order, after 

deducting the number of Bitcoins 

representing the U.S. dollar value of 

accrued but unpaid fees and expenses of 

the Trust (converted using the Index 

Price at such time, and carried to the 

eighth decimal place) by (y) the number 

of Shares outstanding at such time (with 

the quotient so obtained calculated to 

one one-hundred-millionth of one 

Bitcoin (i.e., carried to the eighth 

decimal place)), and multiplying such 

quotient by 100. 

Authorized Participants are the only 

persons that may place orders to redeem 

Baskets. Shareholders who are not 

Authorized Participants will be able to 

redeem their Shares only through an 

Authorized Participant. 

Each Participant Agreement provides 

the procedures for the redemption of 

Baskets and for the delivery of the 

whole and fractional Bitcoins required 

for such redemption. The Participant 

Agreement and the related procedures 

attached thereto may be amended by the 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28057 

59The bid-ask price of the Trust is determined 

using the highest bid and lowest offer on the 

Consolidated Tape as of the time of calculation of 

the closing day Digital Asset Holdings. 

Sponsor and the relevant Authorized 

Participant. 

Authorized Participants do not pay a 

transaction fee to the Trust in 

connection with the redemption of 

Baskets, but there may be transaction 

fees associated with the validation of 

the transfer of Bitcoins by the Bitcoin 

Network. 

Redemption Procedures 

The Trust will also redeem Shares on 

a continuous basis but only in Baskets 

of 100 Shares. The procedures by which 

an Authorized Participant can redeem 

one or more Baskets mirror the 

procedures for the creation of Baskets. 

On any business day, an Authorized 

Participant may place an order with the 

Administrator to redeem one or more 

Baskets. Redemption orders must be 

placed with the Administrator no later 

than the Order Cutoff Time. 

In-kind redemptions will take place as 

follows, where ‘‘T’’ is the trade date and 

each day in the sequence must be a 

business day: 

T T+2 

• The Authorized Participant places a redemption 

order with the Administrator. 

• The Marketing Agent accepts (or rejects) the redemption order, which is 

communicated to the Authorized Participant by 

the Administrator. 

• The Total Basket Amount 

is determined as soon as 

practicable after 4:00 

p.m., New York time. 

• The Authorized Participant delivers Baskets from its DTC account to the Transfer Agent no later than 4:00 p.m., 

New York time. 

• Once the Baskets are received by the Transfer Agent, the Custodian transfers the Total Basket Amount to the 

Authorized Participant and the Transfer Agent cancels the Shares. 

In-cash redemptions will take place as 

follows, where ‘‘T’’ is the trade date and 

each day in the sequence must be a 

business day: 

T–1 T T+2 

• The Authorized Participant 

places a redemption order 

with the Administrator. 

• The Marketing Agent accepts (or rejects) the redemption order, which is 

communicated to the Authorized Participant by the 

Administrator. 

• The Sponsor notifies the Liquidity Provider of the redemption order and the Liquidity Provider may begin 

selling Bitcoin to deliver the Total Basket Amount.

• The Total Basket Amount is determined as soon as 

practicable after 4:00 p.m., New York time.

• The Authorized Participant delivers Baskets to be redeemed to the Transfer Agent no later than 4:00 

p.m., New York time. 

• The Liquidity Provider deposits with the Administrator 

cash equal to the U.S. dollar value of the Total Basket Amount, as determined on the trade date. 

• Once the Baskets are received by the Transfer Agent 

and the Administrator sends the above-mentioned 

cash equal to the U.S. dollar value of the Total Basket Amount less the Transaction Fee, the Variable 

Fee and all other charges and fees payable in connection with the redemption order to the Authorized 

Participant, the Transfer Agent cancels the Shares. 

• The Custodian sends the Liquidity Provider the number of Bitcoins equal to the Total Basket Amount and 

the Administrator sends the Variable Fee to the Liquidity Provider. 

Suspension of Orders 

The creation or redemption of Shares 

may be suspended generally, or refused 

with respect to particular requested 

creations or redemptions, during any 

period when the transfer books of the 

Transfer Agent are closed or if 

circumstances outside the control of the 

Sponsor or its delegates make it for all 

practical purposes not feasible to 

process creation orders or redemption 

orders. The Administrator may reject an 

order or, after accepting an order, may 

cancel such order by rejecting the Total 

Basket Amount if: (i) Such order is not 

presented in proper form as described in 

the Participant Agreement, (ii) the 

transfer of the Total Basket Amount 

comes from an account other than a 

Bitcoin wallet address that is known to 

the Custodian as belonging to the 

Authorized Participant or (iii) the 

fulfillment of the order, in the opinion 

of counsel, might be unlawful, among 

other reasons. None of the Sponsor or its 

delegates will be liable for the 

suspension, rejection or acceptance of 

any creation order or redemption order. 

In particular, upon the Trust’s receipt 

of any Incidental Rights and/or IR 

Virtual Currency in connection with a 

fork, airdrop or similar event, the 

Sponsor may suspend redemptions until 

it is able to cause the Trust to sell or 

distribute such Incidental Rights and/or 

IR Virtual Currency. 

Availability of Information 

The Trust’s website (https://

grayscale.com/products/grayscalebitcoin-trust/) will include quantitative 

information on a per Share basis 

updated on a daily basis, including, (i) 

the current Digital Asset Holdings per 

Share daily and the prior business day’s 

Digital Asset Holdings and the reported 

closing price; (ii) the mid-point of the 

bid-ask price 59 in relation to the Digital 

Asset Holdings as of the time the Digital 

Asset Holdings is calculated (‘‘Bid-Ask 

Price’’) and a calculation of the 


lotter on DSK11XQN23PROD with NOTICES1
28058 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

60The IIV on a per Share basis disseminated 

during the Core Trading Session should not be 

viewed as a real-time update of the Digital Asset 

Holdings, which is calculated once a day. 

61 17 CFR 240.10A–3. 

62See NYSE Arca Rule 7.12–E. 

63FINRA 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. 

premium or discount of such price 

against such Digital Asset Holdings; and 

(iii) data in chart format displaying the 

frequency distribution of discounts and 

premiums of the daily Bid-Ask Price 

against the Digital Asset Holdings, 

within appropriate ranges, for each of 

the four previous calendar quarters (or 

for the life of the Trust, if shorter). In 

addition, on each business day the 

Trust’s website will provide pricing 

information for the Shares. 

The Trust’s website, as well as one or 

more major market data vendors, will 

provide an intra-day indicative value 

(‘‘IIV’’) per Share updated every 15 

seconds, as calculated by the Exchange 

or a third party financial data provider 

during the Exchange’s Core Trading 

Session (9:30 a.m. to 4:00 p.m., E.T.).60

The IIV will be calculated using the 

same methodology as the Digital Asset 

Holdings of the Trust (as described 

above), specifically by using the prior 

day’s closing Digital Asset Holdings per 

Share as a base and updating that value 

during the NYSE Arca Core Trading 

Session to reflect changes in the value 

of the Trust’s Digital Asset Holdings 

during the trading day. 

The IIV disseminated during the 

NYSE Arca Core Trading Session should 

not be viewed as an actual real-time 

update of the Digital Asset Holdings, 

which will be calculated only once at 

the end of each trading day. The IIV will 

be widely disseminated on a per Share 

basis every 15 seconds during the NYSE 

Arca Core Trading Session by one or 

more major market data vendors. In 

addition, the IIV will be available 

through on-line information services. 

The Digital Asset Holdings for the 

Trust will be calculated by the Sponsor 

once a day and will be disseminated 

daily to all market participants at the 

same time. To the extent that the 

Sponsor has utilized the cascading set of 

rules described in ‘‘Index Price’’ above, 

the Trust’s website will note the 

valuation methodology used and the 

price per Bitcoin resulting from such 

calculation. Quotation and last-sale 

information regarding the Shares will be 

disseminated through the facilities of 

the Consolidated Tape Association 

(‘‘CTA’’). 

Quotation and last sale information 

for Bitcoin will be widely disseminated 

through a variety of major market data 

vendors, including Bloomberg and 

Reuters. In addition, the complete realtime price (and volume) data for Bitcoin 

is available by subscription from 

Reuters and Bloomberg. The spot price 

of Bitcoin is available on a 24-hour basis 

from major market data vendors, 

including Bloomberg and Reuters. 

Information relating to trading, 

including price and volume 

information, in Bitcoin will be available 

from major market data vendors and 

from the exchanges on which Bitcoin 

are traded. The normal trading hours for 

Digital Asset Exchanges are 24-hours 

per day, 365-days per year. 

The Sponsor will publish the Index 

Price, the Trust’s Digital Asset Holdings, 

and the Digital Asset Holdings per Share 

on the Trust’s website as soon as 

practicable after its determination. If the 

Digital Asset Holdings and Digital Asset 

Holdings per Share have been 

calculated using a price per Bitcoin 

other than the Index Price for such 

Evaluation Time, the publication on the 

Trust’s website will note the valuation 

methodology used and the price per 

Bitcoin resulting from such calculation. 

The Trust will provide website 

disclosure of its Digital Asset Holdings 

daily. The website disclosure of the 

Trust’s Digital Asset Holdings will occur 

at the same time as the disclosure by the 

Sponsor of the Digital Asset Holdings to 

Authorized Participants so that all 

market participants are provided such 

portfolio information at the same time. 

Therefore, the same portfolio 

information will be provided on the 

public website as well as in electronic 

files provided to Authorized 

Participants. Accordingly, each investor 

will have access to the current Digital 

Asset Holdings of the Trust through the 

Trust’s website, as well as from one or 

more major market data vendors. 

The value of the Index, as well as 

additional information regarding the 

Index, may be found at https://

tradeblock.com/markets/index/xbx. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. Shares will trade on 

the NYSE Arca Marketplace from 4:00 

a.m. to 8:00 p.m., E.T. in accordance 

with NYSE Arca Rule 7.34–E (Early, 

Core, and Late Trading Sessions). The 

Exchange has appropriate rules to 

facilitate transactions in the Shares 

during all trading sessions. As provided 

in NYSE Arca Rule 7.6–E, the minimum 

price variation (‘‘MPV’’) for quoting and 

entry of orders in equity securities 

traded on the NYSE Arca Marketplace is 

$0.01, with the exception of securities 

that are priced less than $1.00, for 

which the MPV for order entry is 

$0.0001. 

The Shares will conform to the initial 

and continued listing criteria under 

NYSE Arca Rule 8.201–E. The trading of 

the Shares will be subject to NYSE Arca 

Rule 8.201–E(g), which sets forth certain 

restrictions on Equity Trading Permit 

(‘‘ETP’’) Holders acting as registered 

Market Makers in Commodity-Based 

Trust Shares to facilitate surveillance. 

The Exchange represents that, for initial 

and continued listing, the Trust will be 

in compliance with Rule 10A–3 61 under 

the Act, as provided by NYSE Arca Rule 

5.3–E. A minimum of 100,000 Shares of 

the Trust will be outstanding at the 

commencement of trading on the 

Exchange. 

Trading Halts 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares of 

the Trust.62 Trading in Shares of the 

Trust will be halted if the circuit breaker 

parameters in NYSE Arca Rule 7.12–E 

have been reached. Trading also may be 

halted because of market conditions or 

for reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable. 

The Exchange may halt trading during 

the day in which an interruption to the 

dissemination of the IIV or the value of 

the Index occurs. If the interruption to 

the dissemination of the IIV or the value 

of the Index persists past the trading day 

in which it occurred, the Exchange will 

halt trading no later than the beginning 

of the trading day following the 

interruption. In addition, if the 

Exchange becomes aware that the 

Digital Asset Holdings per Share is not 

disseminated to all market participants 

at the same time, it will halt trading in 

the Shares until such time as the Digital 

Asset Holdings per Share is available to 

all market participants. 

Surveillance 

The Exchange represents that trading 

in the Shares of the Trust will be subject 

to the existing trading surveillances 

administered by the Exchange, as well 

as cross-market surveillances 

administered by FINRA on behalf of the 

Exchange, which are designed to detect 

violations of Exchange rules and 

applicable federal securities laws.63 The 

Exchange represents that these 

procedures are adequate to properly 

monitor Exchange trading of the Shares 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28059 

64For a list of the current members of ISG, see 

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

components of the Trust may trade on markets that 

are members of ISG or with which the Exchange has 

in place a CSSA. 65 15 U.S.C. 78f(b)(5). 

in all trading sessions and to deter and 

detect violations of Exchange rules and 

federal securities laws applicable to 

trading on the Exchange. 

The surveillances referred to above 

generally focus on detecting securities 

trading outside their normal patterns, 

which could be indicative of 

manipulative or other violative activity. 

When such situations are detected, 

surveillance analysis follows and 

investigations are opened, where 

appropriate, to review the behavior of 

all relevant parties for all relevant 

trading violations. 

The Exchange or FINRA, on behalf of 

the Exchange, or both, will 

communicate as needed regarding 

trading in the Shares with other markets 

and other entities that are members of 

the ISG, and the Exchange or FINRA, on 

behalf of the Exchange, or both, may 

obtain trading information regarding 

trading in the Shares from such markets 

and other entities. In addition, the 

Exchange may obtain information 

regarding trading in the Shares from 

markets and other entities that are 

members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement 

(‘‘CSSA’’).64 The Exchange is also able 

to obtain information regarding trading 

in the Shares in connection with such 

ETP Holders’ proprietary or customer 

trades which they effect through ETP 

Holders on any relevant market. 

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

All statements and representations 

made in this filing regarding (a) the 

description of the portfolios of the 

Trust, (b) limitations on portfolio 

holdings or reference assets, or (c) the 

applicability of Exchange listing rules 

specified in this rule filing shall 

constitute continued listing 

requirements for listing the Shares on 

the Exchange. 

The Sponsor has represented to the 

Exchange that it will advise the 

Exchange of any failure by the Trust to 

comply with the continued listing 

requirements, and, pursuant to its 

obligations under Section 19(g)(1) of the 

Act, the Exchange will monitor for 

compliance with the continued listing 

requirements. If the Trust is not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

NYSE Arca Rule 5.5–E(m). 

Information Bulletin 

Prior to the commencement of 

trading, the Exchange will inform its 

ETP Holders in an ‘‘Information 

Bulletin’’ of the special characteristics 

and risks associated with trading the 

Shares. Specifically, the Information 

Bulletin will discuss the following: (1) 

The procedures for creations of Shares 

in Baskets; (2) 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; (3) information 

regarding how the value of the Index 

and the IIV are disseminated; (4) the 

possibility that trading spreads and the 

resulting premium or discount on the 

Shares may widen during the Opening 

and Late Trading Sessions, when an 

updated IIV will not be calculated or 

publicly disseminated; and (5) trading 

information. The Exchange notes that 

investors purchasing Shares directly 

from the Trust will receive a prospectus. 

In addition, the Information Bulletin 

will reference that the Trust is subject 

to various fees and expenses as 

described in the Annual Report. The 

Information Bulletin will disclose that 

information about the Shares of the 

Trust is publicly available on the Trust’s 

website. 

The Information Bulletin will also 

discuss any relief, if granted, by the 

Commission or the staff from any rules 

under the Act. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 65 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 in that the Shares will 

be listed and traded on the Exchange 

pursuant to the initial and continued 

listing criteria in NYSE Arca Rule 

8.201–E. 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 with other markets 

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 from such markets. In addition, 

the Exchange may obtain information 

regarding trading in the Shares from 

markets that are members of ISG or with 

which the Exchange has in place a 

CSSA. Also, pursuant to NYSE Arca 

Rule 8.201–E(g), the Exchange is able to 

obtain information regarding trading in 

the Shares and the underlying Bitcoin or 

any Bitcoin derivative through ETP 

Holders acting as registered Market 

Makers, in connection with such ETP 

Holders’ proprietary or customer trades 

through ETP Holders which they effect 

on any relevant market. 

The proposed rule change is also 

designed to prevent fraudulent and 

manipulative acts and practices 

because, although the Digital Asset 

Exchange Market is not inherently 

resistant to fraud and manipulation, the 

Index serves as a means sufficient to 

mitigate the impact of instances of fraud 

and manipulation on a reference price 

for Bitcoin. Specifically, the Index 

provides a better benchmark for the 

price of Bitcoin than the Digital Asset 

Exchange Market Price because it (1) 

tracks the Digital Asset Exchange 

Market Price through trading activity at 

U.S.-Compliant Exchanges; (2) mitigates 

the impact of instances of fraud, 

manipulation and other anomalous 

trading activity in real-time through 

systematic adjustments; (3) is 

constructed and maintained by an 

expert third-party index provider, 

allowing for prudent handling of nonmarket-related events; and (4) mitigates 

the impact of instances of fraud, 

manipulation and other anomalous 

trading activity concentrated on any one 

specific exchange through a crossexchange composite index rate. The 

Trust has used the Index to price the 

Shares for more than six years, and the 

Index has proven its ability to (i) 

mitigate the effects of fraud, 

manipulation and other anomalous 

trading activity from impacting the 

Bitcoin reference rate, (ii) provide a realtime, volume-weighted fair value of 

bitcoin and (iii) appropriately handle 

and adjusts for non-market related 

events, such that efforts to manipulate 

the price of Bitcoin would have had a 

negligible effect on the pricing of the 

Trust, due to the controls embedded in 

the structure of the Index. In addition, 

certain of the Index’s Constituent 

Exchanges also have or have begun to 

implement market surveillance 

infrastructure to further detect, prevent, 


lotter on DSK11XQN23PROD with NOTICES1
28060 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

66 15 U.S.C. 78s(b)(2). 

67See supra note 3. 

68 15 U.S.C. 78s(b)(2). 

and respond to fraud, attempted fraud, 

and similar wrongdoing, including 

market manipulation. The proposed rule 

change is also designed to prevent 

fraudulent and manipulative acts and 

practices based on the existence of the 

CME futures market as a large, 

surveilled and regulated market that is 

closely connected with the spot market 

for Bitcoin and through which the 

Exchange could obtain information to 

assist in detecting and deterring 

potential fraud or manipulation. 

The proposed rule change is designed 

to promote just and equitable principles 

of trade and to protect investors and the 

public interest in that there is a 

considerable amount of Bitcoin price 

and market information available on 

public websites and through 

professional and subscription services. 

Investors may obtain, on a 24-hour 

basis, Bitcoin pricing information based 

on the spot price for Bitcoin from 

various financial information service 

providers. The closing price and 

settlement prices of Bitcoin are readily 

available from the Digital Asset 

Exchanges and other publicly available 

websites. In addition, such prices are 

published in public sources, or on-line 

information services such as Bloomberg 

and Reuters. The Digital Asset Holdings 

per Share will be calculated daily and 

made available to all market 

participants at the same time. The Trust 

will provide website disclosure of its 

Digital Asset Holdings daily. One or 

more major market data vendors will 

disseminate for the Trust on a daily 

basis information with respect to the 

most recent Digital Asset Holdings per 

Share and Shares outstanding. In 

addition, if the Exchange becomes 

aware that the Digital Asset Holdings 

per Share is not disseminated to all 

market participants at the same time, it 

will halt trading in the Shares until such 

time as the Digital Asset Holdings is 

available to all market participants. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the CTA. The IIV will be widely 

disseminated on a per Share basis every 

15 seconds during the NYSE Arca Core 

Trading Session (normally 9:30 a.m., 

E.T., to 4:00 p.m., E.T.) by one or more 

major market data vendors. In addition, 

the IIV will be available on the Trust’s 

website through on-line information 

services. The Exchange represents that 

the Exchange may halt trading during 

the day in which an interruption to the 

dissemination of the IIV or the value of 

the Index occurs. If the interruption to 

the dissemination of the IIV or the value 

of the Index persists past the trading day 

in which it occurred, the Exchange will 

halt trading no later than the beginning 

of the trading day following the 

interruption. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of an additional type of exchange-traded 

product that will enhance competition 

among market participants, to the 

benefit of investors and the marketplace. 

As noted above, the Exchange has in 

place surveillance procedures relating to 

trading in the Shares and may obtain 

information via ISG from other 

exchanges that are members of ISG or 

with which the Exchange has entered 

into a CSSA. In addition, as noted 

above, investors will have ready access 

to information regarding the Trust’s 

Digital Asset Holdings, IIV, and 

quotation and last sale information for 

the Shares. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange notes that the proposed rule 

change will facilitate the listing and 

trading of an additional type of 

exchange-traded product, and the first 

such product based on Bitcoin, which 

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. Notice of Designation of a Longer 

Period for Commission Action on 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change, as Modified by 

Amendment No. 1 

Section 19(b)(2) of the Act 66 provides 

that, after initiating proceedings, the 

Commission shall issue an order 

approving or disapproving the proposed 

rule change not later than 180 days after 

the date of publication of notice of filing 

of the proposed rule change. The 

Commission may extend the period for 

issuing an order approving or 

disapproving the proposed rule change, 

however, by not more than 60 days if 

the Commission determines that a 

longer period is appropriate and 

publishes the reasons for such 

determination. The proposed rule 

change was published for comment in 

the Federal Register on November 8, 

2021.67 The 180th day after publication 

of the proposed rule change is May 7, 

2022. The Commission is extending the 

time period for approving or 

disapproving the proposed rule change 

for an additional 60 days. 

The Commission finds that it is 

appropriate to designate a longer period 

within which to issue an order 

approving or disapproving the proposed 

rule change so that it has sufficient time 

to consider the proposed rule change, as 

modified by Amendment No. 1, and the 

issues raised in the comments that have 

been submitted in connection therewith. 

Accordingly, the Commission, pursuant 

to Section 19(b)(2) of the Act,68

designates July 6, 2022, as the date by 

which the Commission shall either 

approve or disapprove the proposed 

rule change, as modified by Amendment 

No. 1 (File No. SR–NYSEArca–2021– 

90). 

IV. Solicitation of Comments on 

Amendment No. 1 to the Proposed Rule 

Change 

Interested persons are invited to 

submit written data, views, and 

arguments concerning whether the 

proposed rule change, as modified by 

Amendment No. 1, 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 No. SR– 

NYSEArca–2021–90 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 No. 

SR–NYSEArca–2021–90. 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 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28061 

69 17 CFR 200.30–3(a)(12) and (57). 

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

2 17 CFR 240.19b–4. 

3 RTH for transactions in equity options 

(including options on individual stocks, ETFs, 

ETNs, and other securities) are the normal business 

days and hours set forth in the rules of the primary 

market currently trading the securities underlying 

the options, except for options on ETFs, ETNs, 

Index Portfolio Shares, Index Portfolio Receipts, 

and Trust Issued Receipts the Exchange designates 

to remain open for trading beyond 4:00 p.m. Eastern 

Time (ET) but in no case later than 4:15 p.m. ET. 

RTH for transactions in index options are from 9:30 

a.m. to 4:15 p.m. ET, subject to certain exceptions. 

4 The GTH session currently begins at 8:15 p.m. 

(previous day) and goes until 9:15 a.m. ET on 

Monday through Friday. 

5 See Cboe Options Fees Schedule, Rate Table— 

Underlying Symbol List A (including all 

surcharges), Electronic Trading Permit Fees, Trade 

Processing Services fee and Regulatory Fees. 

6 See Cboe Options Fees Schedule, SPX/SPXW 

and SPESG Liquidity Provider Sliding Scale, Cboe 

Options Clearing Trading Permit Holder Proprietary 

Products Sliding Scale, Cboe Options Clearing 

Trading Permit Holder VIX Sliding Scale, Select 

Customer Options Reduction (‘‘SCORe’’) Program, 

Customer Large Trade Discount, Large Trade 

Discount, Trading Permit Holder Transaction Fee 

Policies and Rebate Programs, and Frequent Trader 

Program. 

7 Only applicable RTH fees, surcharges and 

programs will apply during Curb. For example, 

since Curb will operate as an all-electronic trading 

session, no floor related fees such as floor brokerage 

fees will apply during Curb. 

8 The Exchange notes that although its rulebook 

references time in Eastern Time, its Fees Schedule 

uses Central Standard Time (‘‘CST’’). 

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 No. 

SR–NYSEArca–2021–90 and should be 

submitted on or before May 31, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.69

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–09957 Filed 5–9–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94848; File No. SR–CBOE– 

2022–022] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Update Its Fees 

Schedule in Connection With the 

Launch of the Curb Trading Hours 

Session 

May 4, 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 25, 

2022, Cboe Exchange, Inc. (the 

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

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

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

or ‘‘Cboe Options’’) proposes to update 

its Fees Schedule in connection with 

the launch of the Curb Trading Hours 

Session. The text of the proposed rule 

change is provided in Exhibit 5. 

The text of the proposed rule change 

is also available on the Exchange’s 

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

AboutCBOE/CBOELegal

RegulatoryHome.aspx), at the 

Exchange’s Office of the Secretary, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects 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 amend its 

Fees Schedule in connection with its 

plans to launch the Curb Trading Hours 

(‘‘Curb’’) session, effective April 25, 

2022. 

By way of background, the Exchange 

currently offers two trading sessions, the 

Regular Trading Hours session 

(‘‘RTH’’) 3 and the Global Trading Hours 

session (‘‘GTH’’).4 Beginning Monday, 

April 25, 2022, the Exchange will 

operate an additional trading session 

following RTH called the ‘‘Curb Trading 

Hours’’ or ‘‘Curb’’ session. The Curb 

session will provide an extra forty-fiveminute electronic only session for 

trading between 4:15 p.m. and 5:00 p.m. 

ET for designated classes, which will be 

added Monday through Friday. 

Currently, only SPX (including SPXW) 

and VIX options will be available for 

trading on the Exchange during the Curb 

session. FLEX Options with the same 

underlying index will also be deemed 

eligible for trading during the Curb 

session. Transactions effected during 

the Curb session will have the same 

trade date as the immediately preceding 

RTH session (i.e., the day on which the 

transactions were effected), whereas 

transactions effected during a GTH 

session have a different trade date than 

the immediately preceding RTH session 

(i.e., the trading day following the RTH 

session that immediately preceded it). 

In connection with the launch of the 

Curb session, the Exchange proposes to 

update its Fees Schedule to reflect and 

incorporate references to the Curb 

session and make clear which fees, 

surcharges and programs also apply 

during Curb. Specifically, the fees 

(including surcharges) 5 and programs 6

applicable during RTH for SPX, SPXW 

and VIX will apply in the same manner 

during Curb. To make clear that such 

fees, surcharges and programs also 

apply during Curb, the Exchange 

proposes to adopt and append Footnote 

42 to all applicable fees, surcharges and 

programs.7 Footnote 42 would also 

make clear that Curb is a separate 

trading session from RTH and GTH for 

VIX, SPX and SPW and commences at 

3:15PM CST and terminates at 4:00PM 

CST,8 and is conducted on an allelectronic trading model with no open 

outcry capability. 

The Exchange also proposes to update 

the notes sections of certain tables in the 

Fees Schedule to incorporate references 

to the Curb session. First, the Exchange 


lotter on DSK11XQN23PROD with NOTICES1