40282 Federal Register / Vol. 87, No. 128 / Wednesday, July 6, 2022 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 93445 

(Oct. 28, 2021), 86 FR 60695 (‘‘Notice’’). Comments 

on the proposed rule change are available at: 

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

89/srnysearca202189.htm. 

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

5See Securities Exchange Act Release No. 93790, 

86 FR 72300 (Dec. 21, 2021). 

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

7See Securities Exchange Act Release No. 94126, 

87 FR 6903 (Feb. 7, 2022). 

8See Securities Exchange Act Release No. 94781, 

87 FR 25327 (Apr. 28, 2022). 

OFFICE OF SCIENCE AND 

TECHNOLOGY POLICY 

Request for Information; Cislunar 

Science and Technology 

Subcommittee 

AGENCY: Office of Science and 

Technology Policy (OSTP). 

ACTION: Notice of request for 

information. 

SUMMARY: The White House Office of 

Science and Technology Policy 

(OSTP)—on behalf of the Cislunar 

Science and Technology Subcommittee 

of the National Science and Technology 

Council (NSTC)—requests input to help 

inform development of a national 

science and technology strategy on U.S. 

activities in cislunar space. For the 

purposes of this RFI, cislunar space is 

defined as the entire region beyond 

Earth’s geostationary orbit still subject 

to the Earth’s and/or Moon’s gravity, 

including orbits around the Moon and 

the lunar surface. The strategy will 

include key U.S. government research 

and development (R&D) priorities and 

proposed technical standards to enable 

a robust, cooperative, and sustainable 

ecosystem in cislunar space. 

DATES: Responses must be received by 

July 20, 2022 to be considered. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Email: cislunar@ostp.eop.gov, 

include Cislunar RFI in the subject line 

of the message. 

• Mail: Attn: NSTC Cislunar Science 

& Technology Subcommittee, Office of 

Science and Technology Policy, 

Eisenhower Executive Office Building, 

1650 Pennsylvania Ave. NW, 

Washington, DC 20504. 

Instructions: Response to this RFI is 

voluntary. Respondents need not reply 

to all questions listed. Each individual 

or institution is requested to submit 

only one response. Electronic responses 

must be provided as attachments to an 

email. It is recommended that 

attachments with file sizes exceeding 

25MB be compressed (i.e. zipped) to 

ensure message delivery. Please identify 

your answers by responding to a 

specific question or topic if possible. 

Respondents may answer as many or as 

few questions as they wish. Comments 

of seven pages or fewer (3,500 words) 

are requested; longer responses will not 

be considered. 

Any information obtained from this 

RFI is intended to be used by the 

Government on a non-attribution basis 

for planning and strategy development. 

OSTP will not respond to individual 

submissions. A response to this RFI will 

not be viewed as a binding commitment 

to develop or pursue the project or ideas 

discussed. This RFI is not accepting 

applications for financial assistance or 

financial incentives. Responses to this 

RFI may be posted without change 

online. OSTP therefore requests that no 

proprietary information, copyrighted 

information, or personally identifiable 

information be submitted in response to 

this RFI. Please note that the United 

States Government will not pay for 

response preparation, or for the use of 

any information contained in a 

response. 

FOR FURTHER INFORMATION CONTACT: 

cislunar@ostp.eop.gov or Matt Daniels at 

202–456–4444. 

SUPPLEMENTARY INFORMATION: Pursuant 

to 42 U.S.C. 6617, OSTP is soliciting 

public input through an RFI to obtain 

feedback from a wide variety of 

stakeholders, including individuals, 

industry, academia, research 

laboratories, nonprofits, and think 

tanks. OSTP is specifically interested in 

public input to inform a national 

science and technology strategy for U.S. 

activities in cislunar space, referring to 

the entire region beyond Earth’s 

geostationary orbit still subject to the 

Earth’s and/or Moon’s gravity, including 

orbits around the Moon and the lunar 

surface. OSTP seeks response to either 

or both of the following questions: 

1. What research and development 

should the U.S. government prioritize to 

help advance a robust, cooperative, and 

sustainable ecosystem in cislunar space 

in the next 10 years? And over the next 

50 years? 

2. What key technical standards are 

most useful to develop in support of 

activities in cislunar space, and how 

could these standards enable and 

support a vibrant and sustainable 

cislunar ecosystem? 

Dated: June 29, 2022. 

Stacy Murphy, 

Operations Manager. 

[FR Doc. 2022–14316 Filed 7–5–22; 8:45 am] 

BILLING CODE 3270–F2–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95179; File No. SR– 

NYSEArca–2021–89] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Disapproving a 

Proposed Rule Change To List and 

Trade Shares of the Bitwise Bitcoin 

ETP Trust Under NYSE Arca Rule 

8.201–E (Commodity-Based Trust 

Shares) 

June 29, 2022. 

I. Introduction 

On October 14, 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 (‘‘Exchange 

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

proposed rule change to list and trade 

shares (‘‘Shares’’) of the Bitwise Bitcoin 

ETP Trust (‘‘Trust’’) under NYSE Arca 

Rule 8.201–E (Commodity-Based Trust 

Shares). The proposed rule change was 

published for comment in the Federal 

Register on November 3, 2021.3

On December 15, 2021, pursuant to 

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

the Commission designated a longer 

period within which to approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change.5

On February 1, 2022, the Commission 

instituted proceedings under Section 

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

determine whether to approve or 

disapprove the proposed rule change.7

On April 22, 2022, the Commission 

designated a longer period for 

Commission action on the proposed rule 

change.8

This order disapproves the proposed 

rule change. The Commission concludes 

that NYSE Arca has not met its burden 

under the Exchange Act and the 

Commission’s Rules of Practice to 

demonstrate that its proposal is 

consistent with the requirements of 

Exchange Act Section 6(b)(5), which 


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9 15 U.S.C. 78f(b)(5). 

10Bitcoins are digital assets that are issued and 

transferred via a decentralized, open-source 

protocol used by a peer-to-peer computer network 

through which transactions are recorded on a 

public transaction ledger known as the ‘‘bitcoin 

blockchain.’’ The bitcoin protocol governs the 

creation of new bitcoins and the cryptographic 

system that secures and verifies bitcoin 

transactions. See, e.g., Notice, 86 FR at 60696. 

11See Order Setting Aside Action by Delegated 

Authority and Disapproving a Proposed Rule 

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

To List and Trade Shares of the Winklevoss Bitcoin 

Trust, Securities Exchange Act Release No. 83723 

(July 26, 2018), 83 FR 37579 (Aug. 1, 2018) (SR– 

BatsBZX–2016–30) (‘‘Winklevoss 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 (Feb. 26, 2020), 85 FR 12595 (Mar. 3, 2020) 

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

Disapproving a Proposed Rule Change To List and 

Trade Shares of the WisdomTree Bitcoin Trust 

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

Trust Shares, Securities Exchange Act Release No. 

93700 (Dec. 1, 2021), 86 FR 69322 (Dec. 7, 2021) 

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

Order Disapproving a Proposed Rule Change To List 

and Trade Shares of the Valkyrie Bitcoin Fund 

Under NYSE Arca Rule 8.201–E (Commodity-Based 

Trust Shares), Securities Exchange Act Release No. 

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

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

Disapproving a Proposed Rule Change To List and 

Trade Shares of the Kryptoin Bitcoin ETF Trust 

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

Trust Shares, Securities Exchange Act Release No. 

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

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

Order Disapproving a Proposed Rule Change To List 

and Trade Shares of the First Trust SkyBridge 

Bitcoin ETF Trust Under NYSE Arca Rule 8.201– 

E, Securities Exchange Act Release No. 94006 (Jan. 

20, 2022), 87 FR 3869 (Jan. 25, 2022) (SR– 

NYSEArca–2021–37) (‘‘SkyBridge Order’’); Order 

Disapproving a Proposed Rule Change To List and 

Trade Shares of the Wise Origin Bitcoin Trust 

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

Trust Shares, Securities Exchange Act Release No. 

94080 (Jan. 27, 2022), 87 FR 5527 (Feb. 1, 2022) 

(SR–CboeBZX–2021–039) (‘‘Wise Origin Order’’); 

Order Disapproving a Proposed Rule Change To List 

and Trade Shares of the NYDIG Bitcoin ETF Under 

NYSE Arca Rule 8.201–E (Commodity-Based Trust 

Shares), Securities Exchange Act Release No. 94395 

(Mar. 10, 2022), 87 FR 14932 (Mar. 16, 2022) (SR– 

NYSEArca–2021–57) (‘‘NYDIG Order’’); Order 

Disapproving a Proposed Rule Change To List and 

Trade Shares of the Global X Bitcoin Trust Under 

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

Shares, Securities Exchange Act Release No. 94396 

(Mar. 10, 2022), 87 FR 14912 (Mar. 16, 2022) (SR– 

CboeBZX–2021–052) (‘‘Global X Order’’); Order 

Disapproving a Proposed Rule Change, as Modified 

by Amendment No. 1, To List and Trade Shares of 

the ARK 21Shares Bitcoin ETF Under BZX Rule 

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

Securities Exchange Act Release No. 94571 (Mar. 

31, 2022), 87 FR 20014 (Apr. 6, 2022) (SR– 

CboeBZX–2021–051) (‘‘ARK 21Shares Order’’); 

Order Disapproving a Proposed Rule Change To List 

and Trade Shares of the One River Carbon Neutral 

Bitcoin Trust Under NYSE Arca Rule 8.201–E 

(Commodity-Based Trust Shares), Securities 

Exchange Act Release No. 94999 (May 27, 2022), 87 

FR 33548 (June 2, 2022) (SR–NYSEArca–2021–67) 

(‘‘One River Order’’). In addition, orders were 

issued by delegated authority on the following 

matters: Order Disapproving a Proposed Rule 

Change, as Modified by Amendment No. 1, Relating 

to the Listing and Trading of Shares of the SolidX 

Bitcoin Trust Under NYSE Arca Equities Rule 

8.201, Securities Exchange Act Release No. 80319 

(Mar. 28, 2017), 82 FR 16247 (Apr. 3, 2017) (SR– 

NYSEArca–2016–101) (‘‘SolidX Order’’); Order 

Disapproving a Proposed Rule Change To List and 

Trade the Shares of the ProShares Bitcoin ETF and 

the ProShares Short Bitcoin ETF, Securities 

Exchange Act Release No. 83904 (Aug. 22, 2018), 

83 FR 43934 (Aug. 28, 2018) (SR–NYSEArca–2017– 

139) (‘‘ProShares Order’’); Order Disapproving a 

Proposed Rule Change To List and Trade the Shares 

of the GraniteShares Bitcoin ETF and the 

GraniteShares Short Bitcoin ETF, Securities 

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

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

001) (‘‘GraniteShares Order’’); Order Disapproving a 

Proposed Rule Change To List and Trade Shares of 

the VanEck Bitcoin Trust Under BZX Rule 

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

Securities Exchange Act Release No. 93559 (Nov. 

12, 2021), 86 FR 64539 (Nov. 18, 2021) (SR– 

CboeBZX–2021–019) (‘‘VanEck Order’’); 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), Securities Exchange Act Release 

No. 94620 (Apr. 6, 2022), 87 FR 21676 (Apr. 12, 

2022) (SR–NYSEArca–2021–53) (‘‘Teucrium 

Order’’); Order Granting Approval of a Proposed 

Rule Change, as Modified by Amendment Nos. 1 

and 2, To List and Trade Shares of the Valkyrie 

XBTO Bitcoin Futures Fund Under Nasdaq Rule 

5711(g), Securities Exchange Act Release No. 94853 

(May 5, 2022), 87 FR 28848 (May 11, 2022) (SR– 

NASDAQ–2021–066) (‘‘Valkyrie XBTO Order’’). 

12See USBT Order, 85 FR at 12596. See also 

Winklevoss Order, 83 FR at 37592 n.202 and 

accompanying text (discussing previous 

Commission approvals of commodity-trust ETPs); 

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

and accompanying text (discussing previous 

Commission approvals of commodity-futures ETPs). 

13See Winklevoss Order, 83 FR at 37594. See also 

USBT Order, 85 FR at 12596–97; WisdomTree 

Order, 86 FR at 69322. 

14See USBT Order, 85 FR at 12597. 

15Listing exchanges have also attempted to 

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

fraudulent and manipulative acts and practices, 

including that the bitcoin market as a whole or the 

relevant underlying bitcoin market is ‘‘uniquely’’ 

and ‘‘inherently’’ resistant to fraud and 

manipulation. See USBT Order, 85 FR at 12597. 

The Exchange, however, does not make any such 

arguments with respect to this proposal. 

16See Amendment to Rule Filing Requirements 

for Self-Regulatory Organizations Regarding New 

Derivative Securities Products, Securities Exchange 

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

70954, 70959 (Dec. 22, 1998) (File No. S7–13–98) 

(‘‘NDSP Adopting Release’’). See also Winklevoss 

Order, 83 FR at 37593–94; ProShares Order, 83 FR 

at 43936; GraniteShares Order, 83 FR at 43924; 

USBT Order, 85 FR at 12596. 

17See, e.g., One River Order, 87 FR at 33554. 

18See also CFTC v. Gemini Trust Co., LLC, No. 

22–cv–4563 (S.D.N.Y. filed June 2, 2022) (alleging, 

among other things, failure by Gemini personnel to 

disclose to the CFTC that Gemini customers could 

and did engage in collusive or wash trading). 

requires, in relevant part, that the rules 

of a national securities exchange be 

‘‘designed to prevent fraudulent and 

manipulative acts and practices’’ and 

‘‘to protect investors and the public 

interest.’’ 9

When considering whether NYSE 

Arca’s proposal to list and trade the 

Shares is designed to prevent fraudulent 

and manipulative acts and practices, the 

Commission applies the same analytical 

framework used in its orders 

considering previous proposals to list 

bitcoin 10-based commodity trusts and 

bitcoin-based trust issued receipts to 

assess whether a listing exchange of an 

exchange-traded product (‘‘ETP’’) can 

meet its obligations under Exchange Act 

Section 6(b)(5).11 As the Commission 

has explained, an exchange that lists 

bitcoin-based ETPs can meet its 

obligations under Exchange Act Section 

6(b)(5) by demonstrating that the 

exchange has a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to the underlying or reference 

bitcoin assets.12

In this context, the terms ‘‘significant 

market’’ and ‘‘market of significant size’’ 

include a market (or group of markets) 

as to which (a) there is a reasonable 

likelihood that a person attempting to 

manipulate the ETP would also have to 

trade on that market to successfully 

manipulate the ETP, so that a 

surveillance-sharing agreement would 

assist in detecting and deterring 

misconduct, and (b) it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in that 

market.13 A surveillance-sharing 

agreement must be entered into with a 

‘‘significant market’’ to assist in 

detecting and deterring manipulation of 

the ETP, because a person attempting to 

manipulate the ETP is reasonably likely 

to also engage in trading activity on that 

‘‘significant market.’’ 14

Although surveillance-sharing 

agreements are not the exclusive means 

by which a listing exchange of a 

commodity-trust ETP can meet its 

obligations under Exchange Act Section 

6(b)(5), such agreements have 

previously provided the basis for the 

exchanges that list commodity-trust 

ETPs to meet those obligations, and the 

Commission has historically recognized 

their importance. And where, as here, a 

listing exchange does not establish that 

other means to prevent fraudulent and 

manipulative acts and practices will be 

sufficient,15 the listing exchange must 

enter into a surveillance-sharing 

agreement with a regulated market of 

significant size because such agreements 

detect and deter fraudulent and 

manipulative activity.16

In previous orders,17 the Commission 

has identified possible sources of fraud 

and manipulation in the spot bitcoin 

market, including (1) ‘‘wash’’ trading,18

(2) persons with a dominant position in 

bitcoin manipulating bitcoin pricing, (3) 

hacking of the bitcoin network and 


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19The Trust’s Registration Statement also 

acknowledges that ‘‘[o]ver the past several years, a 

number of digital asset trading platforms have been 

closed or faced issues due to fraud, failure, security 

breaches or governmental regulations’’; that ‘‘[t]he 

platforms on which users trade bitcoin are 

relatively new and, in some cases, largely 

unregulated, and, therefore, may be more exposed 

to fraud and security breaches than established, 

regulated exchanges for other financial assets or 

instruments’’; that ‘‘[t]he nature of the assets held 

at digital asset trading platforms makes them 

appealing targets for hackers and a number of 

digital asset trading platforms have been victims of 

cybercrimes’’; that bitcoin networks are susceptible 

to a ‘‘51% attack,’’ in which ‘‘[i]f a malicious actor 

or botnet obtains control of more than 50% of the 

processing power on the [b]itcoin network, or 

otherwise obtains control over the [b]itcoin network 

through its influence over core developers or 

otherwise, such actor or botnet could manipulate 

how data is recorded [on] the [bitcoin blockchain]’’; 

that ‘‘it is believed that certain mining pools may 

have exceeded the 50% threshold on the [b]itcoin 

network on a temporary basis’’; that the inputs to 

the CME US Reference Rate ‘‘may be subject to 

technological error, manipulative activity, or 

fraudulent reporting from their initial source’’; and 

that ‘‘in the past, flaws in the source code for digital 

assets have been exposed and exploited.’’ See 

Registration Statement on Form S–1, filed by the 

Trust on October 14, 2021, at 11–12, 17–18. See also 

Are Blockchains Decentralized? Unintended 

Centralities in Distributed Ledgers, prepared by 

Trail of Bits based upon work supported by the 

Defense Advanced Research Projects Agency, June 

2022, available at: https://assets-global.websitefiles.com/5fd11235b3950c2c1a3b6df4/ 

62af6c641a672b3329b9a480_Unintended_

Centralities_in_Distributed_Ledgers.pdf. 

20See NDSP Adopting Release, 63 FR at 70954, 

70959. See also id. at 70959 (‘‘It is essential that the 

SRO [self-regulatory organization] have the ability 

to obtain the information necessary to detect and 

deter market manipulation, illegal trading and other 

abuses involving the new derivative securities 

product. Specifically, there should be a 

comprehensive ISA [information-sharing 

agreement] that covers trading in the new derivative 

securities product and its underlying securities in 

place between the SRO listing or trading a 

derivative product and the markets trading the 

securities underlying the new derivative securities 

product.’’). 

21See NDSP Adopting Release, 63 FR at 70959. 

22See Winklevoss Order, 83 FR at 37592–93 

(discussing Letter from Brandon Becker, Director, 

Division of Market Regulation, Commission, to 

Gerard D. O’Connell, Chairman, Intermarket 

Surveillance Group (June 3, 1994), available at 

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

23Securities Exchange Act Release No. 27877 

(Apr. 4, 1990), 55 FR 13344 (Apr. 10, 1990) (SR– 

NYSE–90–14). 

24Securities Exchange Act Release No. 33555 

(Jan. 31, 1994), 59 FR 5619, 5621 (Feb. 7, 1994) (SR– 

Amex–93–28) (order approving listing of options on 

American Depositary Receipts (‘‘ADR’’)) (‘‘ADR 

Option Order’’). The Commission further stated that 

it ‘‘generally believes that having a comprehensive 

surveillance sharing agreement in place, between 

the exchange where the ADR option trades and the 

exchange where the foreign security underlying the 

ADR primarily trades, will ensure the integrity of 

the marketplace. The Commission further believes 

that the ability to obtain relevant surveillance 

information, including, among other things, the 

identity of the ultimate purchasers and sellers of 

securities, is an essential and necessary component 

of a comprehensive surveillance sharing 

agreement.’’ Id. 

25Securities Exchange Act Release No. 35518 

(Mar. 21, 1995), 60 FR 15804, 15807 (Mar. 27, 1995) 

(SR–Amex–94–30). See also Winklevoss Order, 83 

FR at 37593 n.206. 

26See Winklevoss Order, 83 FR at 37594. 

Furthermore, the Commission notes that those cases 

dealt with a futures market that had been trading 

for a long period of time before an exchange 

proposed a commodity-trust ETP based on the asset 

underlying those futures. For example, silver 

futures and gold futures began trading in 1933 and 

1974, respectively, see https://www.cmegroup.com/ 

media-room/historical-first-trade-dates.html, and 

the first ETPs based on spot silver and gold were 

approved for listing and trading in 2006 and 2004. 

See Securities Exchange Act Release No. 53521 

(Mar. 20, 2006), 71 FR 14967 (Mar. 24, 2006) (SR– 

Amex–2005–072) (order approving iShares Silver 

Trust); Securities Exchange Act Release No. 50603 

(Oct. 28, 2004), 69 FR 64614 (Nov. 5, 2004) (SR– 

NYSE–2004–22) (order approving streetTRACKS 

Gold Shares). Platinum futures and palladium 

futures began trading in 1956 and 1968, 

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

media-room/historical-first-trade-dates.html, and 

the first ETPs based on spot platinum and 

palladium were approved for listing and trading in 

2009. See Securities Exchange Act Release No. 

61220 (Dec. 22, 2009), 74 FR 68895 (Dec. 29, 2009) 

(SR–NYSEArca–2009–94) (order approving ETFS 

Palladium Trust); Securities Exchange Act Release 

No. 61219 (Dec. 22, 2009), 74 FR 68886 (Dec. 29, 

2009) (SR–NYSEArca–2009–95) (order approving 

ETFS Platinum Trust). 

trading platforms, (4) malicious control 

of the bitcoin network, (5) trading based 

on material, non-public information, 

including the dissemination of false and 

misleading information, (6) 

manipulative activity involving 

purported ‘‘stablecoins,’’ including 

Tether (USDT), and (7) fraud and 

manipulation at bitcoin trading 

platforms. The Exchange does not refute 

the presence of these possible sources of 

fraud and manipulation.19

The Commission has long recognized 

that surveillance-sharing agreements 

‘‘provide a necessary deterrent to 

manipulation because they facilitate the 

availability of information needed to 

fully investigate a manipulation if it 

were to occur’’ and thus ‘‘enable the 

Commission to continue to effectively 

protect investors and promote the 

public interest.’’ 20 As the Commission 

has emphasized, it is essential for an 

exchange listing a derivative securities 

product to have the ability that 

surveillance-sharing agreements provide 

to obtain information necessary to 

detect, investigate, and deter fraud and 

market manipulation, as well as 

violations of exchange rules and 

applicable federal securities laws and 

rules.21 The hallmarks of a surveillancesharing agreement are that the 

agreement provides for the sharing of 

information about market trading 

activity, clearing activity, and customer 

identity; that the parties to the 

agreement have reasonable ability to 

obtain access to and produce requested 

information; and that no existing rules, 

laws, or practices would impede one 

party to the agreement from obtaining 

this information from, or producing it 

to, the other party.22

The Commission has explained that 

the ability of a national securities 

exchange to enter into surveillancesharing agreements ‘‘furthers the 

protection of investors and the public 

interest because it will enable the 

[e]xchange to conduct prompt 

investigations into possible trading 

violations and other regulatory 

improprieties.’’ 23 The Commission has 

also long taken the position that 

surveillance-sharing agreements are 

important in the context of exchange 

listing of derivative security products, 

such as equity options, because a 

surveillance-sharing agreement ‘‘permits 

the sharing of information’’ that is 

‘‘necessary to detect’’ manipulation and 

‘‘provide[s] an important deterrent to 

manipulation because [it] facilitate[s] 

the availability of information needed to 

fully investigate a potential 

manipulation if it were to occur.’’ 24

With respect to ETPs, when approving 

the listing and trading of one of the first 

commodity-linked ETPs—a commoditylinked exchange-traded note—on a 

national securities exchange, the 

Commission continued to emphasize 

the importance of surveillance-sharing 

agreements, stating that the listing 

exchange had entered into surveillancesharing agreements with each of the 

futures markets on which pricing of the 

ETP would be based and stating that 

‘‘[t]hese agreements should help to 

ensure the availability of information 

necessary to detect and deter potential 

manipulations and other trading abuses, 

thereby making [the commodity-linked 

notes] less readily susceptible to 

manipulation.’’ 25

Consistent with these statements, 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 

and the ETP listing exchange has 

entered into surveillance-sharing 

agreements with, or held Intermarket 

Surveillance Group (‘‘ISG’’) membership 

in common with, that market.26

Moreover, the surveillance-sharing 

agreements have been consistently 

present whenever the Commission has 

approved the listing and trading of 

derivative securities, even where the 

underlying securities were also listed on 

national securities exchanges—such as 

options based on an index of stocks 

traded on a national securities 

exchange—and were thus subject to the 


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27See USBT Order, 85 FR at 12597; ADR Option 

Order, 59 FR at 5621. The Commission has also 

recognized that surveillance-sharing agreements 

provide a necessary deterrent to fraud and 

manipulation in the context of index options even 

when (i) all of the underlying index component 

stocks were either registered with the Commission 

or exempt from registration under the Exchange 

Act; (ii) all of the underlying index component 

stocks were traded in the U.S. either directly or as 

ADRs on a national securities exchange; and (iii) 

effective international ADR arbitrage alleviated 

concerns over the relatively smaller ADR trading 

volume, helped to ensure that ADR prices reflected 

the pricing on the home market, and helped to 

ensure more reliable price determinations for 

settlement purposes, due to the unique composition 

of the index and reliance on ADR prices. See 

Securities Exchange Act Release No. 26653 (Mar. 

21, 1989), 54 FR 12705, 12708 (Mar. 28, 1989) (SR– 

Amex–87–25) (stating that ‘‘surveillance-sharing 

agreements between the exchange on which the 

index option trades and the markets that trade the 

underlying securities are necessary’’ and that ‘‘[t]he 

exchange of surveillance data by the exchange 

trading a stock index option and the markets for the 

securities comprising the index is important to the 

detection and deterrence of intermarket 

manipulation’’). And the Commission has 

explained that surveillance-sharing agreements 

‘‘ensure the availability of information necessary to 

detect and deter potential manipulations and other 

trading abuses’’ even when approving options based 

on an index of stocks traded on a national securities 

exchange. See Securities Exchange Act Release No. 

30830 (June 18, 1992), 57 FR 28221, 28224 (June 24, 

1992) (SR–Amex–91–22). 

28See Notice, 86 FR at 60700–15. 29See id. 

30See Notice, supra note 3. 31See id. at 60696. Bitwise Investment Advisers, 

LLC (‘‘Sponsor’’) is the sponsor of the Trust, and 

Delaware Trust Company is the trustee. The Trust 

would engage a third party custodian to maintain 

custody of the Trust’s bitcoin assets. The Trust also 

would engage a third party service provider to serve 

as the administrator (‘‘Administrator’’) and transfer 

agent of the Trust. See id. 

32See id. 

33See id. The Trust may sell bitcoin and 

temporarily hold cash as part of a liquidation of the 

Trust or to pay certain extraordinary expenses not 

assumed by the Sponsor. According to the 

Exchange, the Trust also may, from time to time, 

passively receive, by virtue of holding bitcoin, 

certain additional digital assets or rights to receive 

such digital assets through a fork of the bitcoin 

blockchain or an airdrop of assets. See id. at 60696 

n.12. 

34See id. at 60696. 

35See id. at 60696, 60699. 

36See id. at 60699. 

37The Exchange states that the CME US Reference 

Rate utilizes the same methodology as the CME CF 

Bitcoin Reference Rate, which is calculated at 4:00 

p.m., London time, and is used to settle bitcoin 

futures on the CME. See id. at 60696 n.11, 60698– 

99. 

38See id. at 60699. None of these platforms are 

‘‘regulated’’ as a national securities exchange. 

National securities exchanges are required to have 

rules that are ‘‘designed to prevent fraudulent and 

manipulative acts and practices, to promote just 

and equitable principles of trade, to foster 

cooperation and coordination with persons engaged 

in regulating, clearing, settling, processing 

information with respect to, and facilitating 

transactions in securities, to remove impediments 

to and perfect the mechanism of a free and open 

market and a national market system, and, in 

general, to protect investors and the public 

interest.’’ 15 U.S.C. 78f(b)(5). Moreover, national 

securities exchanges must file proposed rules with 

the Commission regarding certain material aspects 

of their operations (17 CFR 240.19b–4(a)(6)(i)), and 

the Commission has the authority to disapprove any 

such rule that is not consistent with the 

requirements of the Exchange Act (15 U.S.C. 

78s(b)). Thus, national securities exchanges are 

subject to Commission oversight of, among other 

things, their governance, membership 

qualifications, trading rules, disciplinary 

procedures, recordkeeping, and fees. See 

Winklevoss Order, 83 FR at 37597. The Constituent 

Platforms have none of these requirements (none 

are registered as a national securities exchange). 

39See Notice, 86 FR at 60699. 

40See id. at 60715. 

41See id. at 60699. The ITV would also be widely 

disseminated by one or more major market data 

vendors during the NYSE Arca Core Trading 

Session. See id. 

Commission’s direct regulatory 

authority.27

Here, NYSE Arca contends that 

approval of the proposal is consistent 

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

Act, and, in particular, Section 6(b)(5)’s 

requirement that the rules of a national 

securities exchange be designed to 

prevent fraudulent and manipulative 

acts and practices and to protect 

investors and the public interest.28 As 

discussed in more detail below, NYSE 

Arca asserts that the proposal is 

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

Exchange Act because the Exchange has 

a comprehensive surveillance-sharing 

agreement with the Chicago Mercantile 

Exchange (‘‘CME’’), which the Exchange 

argues is a regulated market of 

significant size in the context of the 

proposed spot bitcoin ETP.29

Based on its analysis, as discussed 

below in Section III.B, the Commission 

concludes that NYSE Arca has not 

established that it has a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to spot bitcoin, the underlying 

bitcoin assets that would be held by the 

Trust. In addition, the Commission 

examines in Section III.C other 

arguments raised by NYSE Arca and 

commenters, and concludes that NYSE 

Arca has not demonstrated that the 

proposed rule change is consistent with 

the statutory requirements of Exchange 

Act Section 6(b)(5). 

The Commission emphasizes that its 

disapproval of this proposed rule 

change does not rest on an evaluation of 

the relative investment quality of a 

product holding spot bitcoin versus a 

product holding CME bitcoin futures, or 

an assessment of whether bitcoin, or 

blockchain technology more generally, 

has utility or value as an innovation or 

an investment. Rather, the Commission 

is disapproving this proposed rule 

change because, as discussed below, 

NYSE Arca has not met its burden to 

demonstrate that its proposal is 

consistent with the requirements of 

Exchange Act Section 6(b)(5). 

II. Description of the Proposed Rule 

Change 

As described in more detail in the 

Notice,30 the Exchange proposes to list 

and trade the Shares of the Trust under 

NYSE Arca Rule 8.201–E, which 

governs the listing and trading of 

Commodity-Based Trust Shares on the 

Exchange. 

The investment objective of the Trust 

is to seek to provide exposure to the 

value of bitcoin held by the Trust, less 

the expenses of the Trust’s operations.31

The Shares would represent units of 

undivided beneficial ownership of the 

Trust.32 Under normal circumstances, 

the Trust’s only asset would be bitcoin, 

and, under limited circumstances, 

cash.33 The Trust would not use 

derivatives that may subject the Trust to 

counterparty and credit risks.34

The Trust’s net asset value (‘‘NAV’’) 

and NAV per Share would be 

determined by the Administrator once 

each Exchange trading day as of 4:00 

p.m. E.T., or as soon thereafter as 

practicable, by reference to the CF 

Bitcoin-Dollar US Settlement Price 

(‘‘CME US Reference Rate’’).35 The 

Administrator would calculate the NAV 

by multiplying the number of bitcoins 

held by the Trust by the CME US 

Reference Rate for such day, and 

subtracting the accrued but unpaid 

expenses and liabilities of the Trust.36

The CME US Reference Rate is a daily 

reference rate of the U.S. dollar price of 

one bitcoin, calculated at 4:00 p.m. 

E.T.37

The CME US Reference Rate 

aggregates during a calculation window 

the trade flow of several spot bitcoin 

trading platforms into the U.S. dollar 

price of one bitcoin as of its calculation 

time. The current constituent bitcoin 

platforms of the CME US Reference Rate 

are Bitstamp, Coinbase, Gemini, itBit, 

and Kraken (‘‘Constituent Platforms’’).38

In calculating the CME US Reference 

Rate, the methodology creates a joint list 

of certain trade prices and sizes from the 

Constituent Platforms. The methodology 

then divides this list into a number of 

equally sized time intervals, and it 

calculates the volume-weighted median 

trade price for each of those intervals. 

The CME US Reference Rate is the 

equally weighted average of the volumeweighted medians of all intervals.39

The Trust would provide website 

disclosure of its holdings daily.40 In 

addition, each trading day, the 

Exchange would calculate and 

disseminate an intraday trust value 

(‘‘ITV’’) every 15 seconds during the 

NYSE Arca Core Trading Session.41 The 

ITV would be calculated throughout the 


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42The CME Bitcoin Real Time Price is a 

continuous real-time bitcoin price index published 

by the CME Group and Crypto Facilities Ltd. using 

data from the Constituent Platforms. See id. 

43See id. 

44See id. 

45See id. at 60696. 

46 15 U.S.C. 78f(b)(5). Pursuant to Section 19(b)(2) 

of the Exchange Act, 15 U.S.C. 78s(b)(2), the 

Commission must disapprove a proposed rule 

change filed by a national securities exchange if it 

does not find that the proposed rule change is 

consistent with the applicable requirements of the 

Exchange Act. Exchange Act Section 6(b)(5) states 

that an exchange shall not be registered as a 

national securities exchange unless the Commission 

determines that ‘‘[t]he rules of the exchange are 

designed to prevent fraudulent and manipulative 

acts and practices, to promote just and equitable 

principles of trade, to foster cooperation and 

coordination with persons engaged in regulating, 

clearing, settling, processing information with 

respect to, and facilitating transactions in securities, 

to remove impediments to and perfect the 

mechanism of a free and open market and a 

national market system, and, in general, to protect 

investors and the public interest; and are not 

designed to permit unfair discrimination between 

customers, issuers, brokers, or dealers, or to regulate 

by virtue of any authority conferred by this title 

matters not related to the purposes of this title or 

the administration of the exchange.’’ 15 U.S.C. 

78f(b)(5). 

47Rule 700(b)(3), Commission Rules of Practice, 

17 CFR 201.700(b)(3). 

48See id. 

49See id. 

50Susquehanna Int’l Group, LLP v. Securities and 

Exchange Commission, 866 F.3d 442, 447 (D.C. Cir. 

2017). 

51See Winklevoss Order, 83 FR at 37594. See also 

supra note 13. 

52See Winklevoss Order, 83 FR at 37580 n.19. 

53See Notice, 86 FR at 60703. 

54While the Commission recognizes that the 

CFTC regulates the CME, the CFTC is not 

responsible for direct, comprehensive regulation of 

the underlying spot bitcoin market. See Winklevoss 

Order, 83 FR at 37587, 37599. See also WisdomTree 

Order, 86 FR at 69330 n.118; Kryptoin Order, 86 FR 

at 74174 n.119; SkyBridge Order, 87 FR at 3874 

n.80; Wise Origin Order, 87 FR at 5534 n.93. 

55See, e.g., USBT Order, 85 FR at 12612 

(‘‘[E]stablishing 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. 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.’’). When 

considering past proposals for spot bitcoin ETPs, 

the Commission has discussed whether there is a 

lead-lag relationship between the regulated market 

(e.g., the CME) and the market on which the assets 

held by the ETP would have traded (i.e., spot 

bitcoin platforms), as part of an analysis of whether 

a would-be manipulator of the spot bitcoin ETP 

would need to trade on the regulated market to 

trading day by using the prior day’s 

holdings at close of business and the 

most recently reported price level of the 

CME Bitcoin Real Time Price 42 as 

reported by Bloomberg, L.P., or another 

reporting service, or another price of 

bitcoin derived from updated bids and 

offers indicative of the spot price of 

bitcoin.43

The Trust would create and redeem 

Shares from time to time, but only in 

one or more Creation Units. A Creation 

Unit would initially consist of at least 

25,000 Shares, but may be subject to 

change.44 The Trust would process all 

creations and redemptions in-kind, and 

accrue all ordinary fees in bitcoin 

(rather than cash), as a way of seeking 

to ensure that the Trust holds the 

desired amount of bitcoin-per-share. 

The Trust would not purchase or sell 

bitcoins, other than if the Trust 

liquidates or must pay expenses not 

contractually assumed by the Sponsor. 

Instead, financial institutions 

authorized to create and redeem Shares 

(‘‘Authorized Participants’’) would 

deliver, or cause to be delivered, 

bitcoins to the Trust in exchange for 

Shares of the Trust, and the Trust would 

deliver bitcoins to Authorized 

Participants when those Authorized 

Participants redeem Shares of the 

Trust.45

III. Discussion 

A. The Applicable Standard for Review 

The Commission must consider 

whether NYSE Arca’s proposal is 

consistent with the Exchange Act. 

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

requires, in relevant part, that the rules 

of a national securities exchange be 

designed ‘‘to prevent fraudulent and 

manipulative acts and practices’’ and 

‘‘to protect investors and the public 

interest.’’ 46 Under the Commission’s 

Rules of Practice, the ‘‘burden to 

demonstrate that a proposed rule change 

is consistent with the Exchange Act and 

the rules and regulations issued 

thereunder . . . is on the self-regulatory 

organization [‘SRO’] that proposed the 

rule change.’’ 47

The description of a proposed rule 

change, its purpose and operation, its 

effect, and a legal analysis of its 

consistency with applicable 

requirements must all be sufficiently 

detailed and specific to support an 

affirmative Commission finding,48 and 

any failure of an SRO to provide this 

information may result in the 

Commission not having a sufficient 

basis to make an affirmative finding that 

a proposed rule change is consistent 

with the Exchange Act and the 

applicable rules and regulations.49

Moreover, ‘‘unquestioning reliance’’ on 

an SRO’s representations in a proposed 

rule change is not sufficient to justify 

Commission approval of a proposed rule 

change.50

B. Whether NYSE Arca Has Met Its 

Burden To Demonstrate That the 

Proposal Is Designed To Prevent 

Fraudulent and Manipulative Acts and 

Practices 

As stated above, an exchange can 

meet its obligations under Exchange Act 

Section 6(b)(5) by demonstrating that 

the exchange has a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to the underlying bitcoin assets. 

In this context, the term ‘‘market of 

significant size’’ includes a market (or 

group of markets) as to which (i) 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 (ii) it is unlikely that 

trading in the ETP would be the 

predominant influence on prices in that 

market.51

As the Commission has explained, it 

considers two markets that are members 

of the ISG to have a comprehensive 

surveillance-sharing agreement with one 

another, even if they do not have a 

separate bilateral surveillance-sharing 

agreement.52 Accordingly, based on the 

common membership of NYSE Arca and 

the CME in the ISG,53 NYSE Arca has 

the equivalent of a comprehensive 

surveillance-sharing agreement with the 

CME. However, while the Commission 

recognizes that the CFTC regulates the 

CME futures market,54 including the 

CME bitcoin futures market, and thus 

such market is ‘‘regulated,’’ in the 

context of the proposed ETP, the record 

does not, as explained further below, 

establish that the CME bitcoin futures 

market is a ‘‘market of significant size’’ 

related to spot bitcoin, the underlying 

bitcoin assets that would be held by the 

Trust. 

(1) Whether There is a Reasonable 

Likelihood That a Person 

Attempting to Manipulate the ETP 

Would Also Have to Trade on the 

CME Bitcoin Futures Market to 

Successfully Manipulate the ETP 

The first prong in establishing 

whether the CME bitcoin futures market 

constitutes a ‘‘market of significant size’’ 

related to spot bitcoin is the 

determination that there is a reasonable 

likelihood that a person attempting to 

manipulate the ETP would have to trade 

on the CME bitcoin futures market to 

successfully manipulate the ETP. 

In previous Commission orders, the 

Commission explained that the lead-lag 

relationship between the bitcoin futures 

market and the spot market is ‘‘central 

to understanding’’ the first prong.55 In 


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effect such manipulation. See, e.g., USBT Order, 85 

FR at 12612. See also VanEck Order, 86 FR at 

64547; WisdomTree Order, 86 FR at 69330–31; 

Kryptoin Order, 86 FR at 74176 n.144; SkyBridge 

Order, 87 FR at 3876 n.101; Wise Origin Order, 87 

FR at 5535 n.107; ARK 21Shares Order, 87 FR at 

20024 n.138. 

56Exhibit 3A is available at: https://www.sec.gov/ 

rules/sro/nysearca/2021/34-93445-ex3a.pdf. 

57See Notice, 86 FR at 60703–04. 

58The 10 unregulated spot bitcoin platforms are 

Bitstamp, Coinbase, Gemini, itBit, and Kraken, 

which the Exchange states are the trading platforms 

represented in the CME US Reference Rate (see id. 

at 60707); as well as Binance, Bitfinex, Huobi, 

LBank, and OKEx. The Exchange states that these 

trading platforms include both the largest USD–BTC 

pair trading platform by reported volume (Coinbase) 

and the largest tether-BTC pair trading platform by 

reported volume (Binance). See id. 

59The seven unregulated bitcoin futures 

platforms are Binance, BitMEX, Bybit, Deribit, FTX, 

Huobi, and OKEx. See id. at 60709. 

60See Exhibit 3A, supra note 56, at 143–44. 

61See id. 

62See id. at 143, 157. 

63See id. at 152, 159. 

64See id. at 152, 168. 

65See id. at 154–156. Exhibit 3A does not provide 

corresponding averages with respect to the seven 

unregulated futures platforms. The month-bymonth results for each unregulated futures platform 

indicate that the CME has led IS/CS price discovery 

in a majority of months for each such platform. See 

id. at 170. 

66See id. at 160, 170–171. 

67See id. at 161, 173. 

68See id. at 161. 

69Bitwise considered the following papers in 

Exhibit 3A (see id. at 145–151): S. Corbet, B. Lucey, 

M. Peat & S. Vigne, Bitcoin Futures—What use are 

they?, 172 Econ. Letters 23 (2018); D. Baur & T. 

Dimpfl, Price discovery in bitcoin spot or futures?, 

39 J. Futures Mkts. 803 (2019); B. Kapar & J. Olmo, 

An analysis of price discovery between Bitcoin 

futures and spot markets, 174 Econ. Letters 62 

(2019) (‘‘Kapar & Olmo); C. Alexander & D. Heck, 

Price Discovery, High-Frequency Trading and 

Jumps in Bitcoin Markets (2019), working paper 

available at: https://papers.ssrn.com/sol3/ 

papers.cfm?abstract_id=3383147 (‘‘Alexander & 

Heck 2019’’); Y. Hu, Y. Hou & L. Oxley, What role 

do futures markets play in Bitcoin pricing? 

Causality, cointegration and price discovery from a 

time-varying perspective, 72 Int’l Rev. of Fin. 

Analysis 101569 (2020) (‘‘Hu, Hou & Oxley’’); E. 

Akyildirim, S. Corbet, P. Katsiampa, N. Kellard & 

A. Sensoy, The development of Bitcoin futures: 

Exploring the interactions between cryptocurrency 

derivatives, 34 Fin. Res. Letters 101234 (2020); A. 

Fassas, S. Papadamou, & A. Koulis, Price discovery 

in bitcoin futures, 52 Res. Int’l Bus. Fin. 101116 

(2020); O. Entrop, B. Frijns & M. Seruset, The 

determinants of price discovery on bitcoin markets, 

40 J. Futures Mkts. 816 (2020); S. Aleti & B. 

Mizrach, Bitcoin spot and futures market 

microstructure, 41 J. Futures Mkts. 194 (2021); A. 

Chang, W. Herrmann & W. Cai, Efficient Price 

Discovery in the Bitcoin Markets, Wilshire Phoenix, 

Oct. 14, 2020, working paper available at: https:// 

papers.ssrn.com/sol3/papers.cfm?abstract_

id=3733924. Bitwise also submitted a comment 

letter that discusses K. Robertson & J. Zhang, 

Suitable Price Discovery Measurement of Bitcoin 

Spot and Futures Markets, Fidelity Investments 

Inc., Jan. 12, 2022, working paper available at: 

https://papers.ssrn.com/sol3/papers.cfm?abstract_

id=4012165 (‘‘Fidelity Paper’’). See letter from 

Katherine Dowling, Matt Hougan, and Paul Fusaro, 

Bitwise, dated Feb. 25, 2022 (‘‘Bitwise Letter 1’’). 70See Exhibit 3A, supra note 56, at 151. Bitwise 

states that an eighth paper has aggregate results in 

favor of the CME leading; and that of the two 

remaining papers that conclude that the spot market 

leads, one was an early paper that potentially 

studied a very limited time period, and the other 

has an important methodological flaw. See id. 

Bitwise also references C. Alexander & D. Heck, 

Price discovery in Bitcoin: The impact of 

unregulated markets, 50 J. Financial Stability 

100776 (2020) (‘‘Alexander & Heck 2020’’). See id. 

at 148. This published paper is a later version of 

the working paper Alexander & Heck 2019, and 

finds, employing a multidimensional approach to 

price discovery, including the main price leaders 

within futures, perpetuals, and spot markets, that 

CME bitcoin futures have a very minor effect on 

price discovery; and that faster speed of adjustment 

and information absorption occurs on the 

unregulated spot and derivatives platforms than on 

the CME bitcoin futures market. See also infra notes 

91–94 and accompanying text. With respect to the 

Commission’s citation of the ‘‘mixed’’ literature in 

its prior disapproval orders for spot bitcoin ETPs, 

the Exchange asserts that ‘‘[o]f course, the existence 

of variable results in IS/CS analysis, either within 

one study or a group of studies, is not in isolation 

sufficient to determine that a commodity futures 

market does not satisfy the concerns of the 

[Exchange] Act,’’ and that there have been multiple 

commodity markets where the Commission has 

approved ETPs where ‘‘select IS/CS studies find 

that the related derivatives market is not the main 

source of price discovery.’’ See Notice, 86 FR at 

60706 n.52. 

response, the Exchange’s Notice and 

Exhibit 3A thereto 56 describe the 

methodology and results of statistical 

analysis undertaken by Bitwise Asset 

Management, Inc. (‘‘Bitwise’’), the 

parent of the Sponsor, which, according 

to the Exchange, shows that prices on 

the CME bitcoin futures market 

‘‘consistently lead prices on the bitcoin 

spot market and the unregulated bitcoin 

futures market.’’ 57 As explained in more 

detail in the Notice and Exhibit 3A, 

Bitwise used data from Coin Metrics, 

CoinAPI, CoinGecko, and the CME for 

its analysis of the relationship between 

CME bitcoin futures prices and prices 

on 10 unregulated spot bitcoin 

platforms 58 and seven unregulated 

bitcoin futures platforms.59 For each of 

these 17 unregulated platforms, Bitwise 

performed three types of analysis: (1) 

information share (‘‘IS’’) price discovery 

analysis, which Bitwise describes as 

measuring ‘‘who moves first’’ to 

incorporate new information into a 

common ‘‘efficient’’ price for an asset 

being traded on multiple platforms; 60

(2) component share (‘‘CS’’) price 

discovery analysis, which Bitwise 

describes as measuring the ‘‘component 

weight’’ or contribution to the common 

‘‘efficient’’ price; 61 and (3) time-shift 

lead-lag (‘‘TSLL’’) analysis, which 

Bitwise describes as off-setting (or 

‘‘shifting’’) two time series against each 

other to find the direction and length of 

the lead-lag relationship between the 

two series that maximizes the predictive 

strength of one series against the 

other.62

As described in more detail in the 

Notice and Exhibit 3A, Bitwise removed 

trades that occurred during non-CME 

trading hours and made certain other 

adjustments to the data. Bitwise then 

performed each type of analysis (IS, CS, 

and TSLL) on each of the 17 

unregulated platforms for each day in its 

sample period. For each type of analysis 

(IS, CS, and TSLL) and each platform, 

Bitwise then averaged the daily results 

both by month (to evaluate the potential 

for time variation in price discovery 

leadership) and across the full sample 

period. Bitwise ran statistical 

significance tests with a 95% 

confidence interval on the resulting 

monthly and full-sample averages.63

According to Bitwise, with respect to 

its IS/CS analysis, the full-sample 

average results demonstrate that the 

CME bitcoin futures market leads all 

evaluated bitcoin spot and futures 

trading platforms and that the results 

are statistically significant for all 

platforms from an IS perspective, and 

for 16 of the 17 platforms from a CS 

perspective.64 According to Bitwise, on 

a month-by-month basis, each trading 

platform generates a slightly different 

profile and has slightly different results; 

but on average, the CME led the 10 spot 

trading platforms from an IS perspective 

in 89% of evaluated months, and from 

a CS perspective in 80% of evaluated 

months.65

According to Bitwise, with respect to 

its TSLL analysis, the full-sample 

average results indicate that CME leads, 

and all such results are statistically 

significant.66 According to Bitwise, on a 

month-by-month basis, each trading 

platform generates a slightly different 

profile and has slightly different results; 

but the CME led consistently throughout 

the study period in a statistically 

significant manner.67 Bitwise also states 

that, with respect to the 10 unregulated 

spot platforms, the monthly TSLL 

results display a ‘‘general trend’’ where 

the CME’s ‘‘lead’’ starts out long, with 

wide confidence bands, and then 

‘‘tightens’’ over time ‘‘and becomes 

more consistent.’’ 68

In addition, Bitwise performed a 

review of academic and industry 

literature pertaining to the relationship 

between the CME bitcoin futures market 

and unregulated bitcoin markets.69

Bitwise states that a majority (7 of 10) 

of the papers that it reviewed that use 

IS and/or CS support the view that the 

CME bitcoin futures market leads price 

discovery as compared with the spot 

bitcoin market; 70 and that one paper 

that uses a similar TSLL approach as 

Bitwise arrives at nearly identical 

conclusions: that the CME bitcoin 

futures market leads all other markets 


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71See Bitwise Letter 1 at 4. 72See Notice, 86 FR at 60711. 73See USBT Order, 85 FR at 12611. 74See Bitwise Letter 1 at 3. 75See supra note 69. 

76See Exhibit 3A, supra note 56, at 151. 

77See, e.g., USBT Order, 85 FR at 12613 n.244 

(discussing that the use of daily price data, as 

opposed to intraday prices, by Kapar & Olmo and 

Hu, Hou & Oxley (in an unpublished version of the 

paper) may not be able to distinguish which market 

incorporates new information faster; and discussing 

that the (unpublished version of the) Hu, Hou & 

Oxley paper found inconclusive evidence that 

futures prices lead spot bitcoin prices—in 

particular, that the months at the end of the paper’s 

sample period showed, using Granger causality 

methodology, that the spot market was the leading 

market—and that the record did not include 

evidence to explain why this would not indicate a 

shift towards prices in the spot market leading the 

futures market that would be expected to persist 

into the future). 

78See Bitwise Letter 1 at 3. 79See, e.g., J. Hung, H. Liu & J. Yang, Trading 

activity and price discovery in Bitcoin futures 

markets, 62 J. Empirical Finance 107 (2021). 80See, e.g., J. Wu, K. Xu, X. Zheng & J. Chen, 

Fractional cointegration in bitcoin spot and futures 

markets, 41 J. Futures Mkts. 1478 (2021). In 

addition, the Exchange claims that, based on its 

review of past commodity-trust ETP approvals and 

‘‘select’’ IS/CS studies, a mixed result ‘‘is not in 

isolation sufficient to determine that a commodity 

futures market does not satisfy the concerns of the 

[Exchange] Act.’’ Notice, 86 FR at 60706 n.52 

(emphasis added). However, the applicable 

standard of review is whether a listing exchange has 

provided sufficient evidence to demonstrate that its 

proposal is consistent with the Exchange Act. See 

supra notes 46–50 and accompanying text. For each 

proposal, the Commission considers the totality of 

the evidence provided by the listing exchange and 

on its own merits. 

81As the academic literature and listing 

exchanges’ analyses pertaining to the pricing 

relationship between the CME bitcoin futures 

market and spot bitcoin market have developed, the 

Commission has critically reviewed those materials. 

See ARK 21Shares Order, 87 FR at 20024; Global 

X Order, 87 FR at 14920; Wise Origin Order, 87 FR 

at 5535–36, 5539–40; Kryptoin Order, 86 FR at 

74176; WisdomTree Order, 86 FR at 69330–32; 

VanEck Order, 86 FR at 64547–48; USBT Order, 85 

FR at 12613. 

82Bitwise Letter 1 at 3, quoting Fidelity Paper at 

12–13. 

83 G. Buccheri, G. Bormetti, F. Corsi & F. Lillo, 

Comment on: Price discovery in high resolution, 19 

J. Financial Econometrics 439 (2021). 

84Bitwise Letter 1 at 3, quoting Fidelity Paper at 

13. 

85Bitwise Letter 1 at 3. 

86 Id. 

87See Exhibit 3A, supra note 56, at 152, 159. 

considered in the paper’s pairwise TSLL 

analysis, and that the CME’s lead has 

tightened over time.71

The Exchange concludes from 

Bitwise’s consideration of the literature 

and Bitwise’s own IS, CS, and TSLL 

analysis that ‘‘the Sponsor has 

demonstrated that the CME [bitcoin 

futures market] leads the bitcoin spot 

market and the unregulated bitcoin 

futures market, such that it is reasonably 

likely that a person attempting to 

manipulate the ETP would also have to 

trade on the CME [bitcoin futures 

market].’’ 72

The Commission disagrees. The 

evidence in the record for the proposal 

is inadequate to conclude that an 

interrelationship exists between the 

CME bitcoin futures market and the spot 

bitcoin market such that it is reasonably 

likely that a person attempting to 

manipulate the proposed spot bitcoin 

ETP would have to trade on the CME 

bitcoin futures market to successfully 

manipulate the proposed ETP.73

The Commission raises particular 

disagreements with the Sponsor’s 

assertions regarding its analysis below, 

but even accepting at face value the 

results of Bitwise’s statistical analysis of 

the relationship between the CME 

bitcoin futures market and the spot 

market, such results are only part of the 

‘‘mixed’’ record on the topic of bitcoin 

price discovery.74 Bitwise’s literature 

review considered 10 papers that 

undertook IS/CS analysis, each using 

different methodologies, time periods, 

data, and data aggregation techniques.75

Bitwise states that 7 of these 10 studies 

find that the CME bitcoin futures market 

leads price discovery.76 Bitwise does 

not, however, address issues that the 

Commission has raised with respect to 

two of these papers purportedly 

supporting the CME bitcoin futures 

market’s lead in past disapproval 

orders.77 Nor does Bitwise discuss these 

10 IS/CS studies in light of Bitwise’s 

acknowledgment that ‘‘classic’’ price 

discovery metrics like IS/CS could be 

misspecified, with potentially biased 

results, when price data have a high 

level of sparsity.78 Further, beyond the 

10 studies considered by Bitwise, 

subsequent bitcoin price discovery 

literature likewise includes some 

studies finding that the spot bitcoin 

market dominates price discovery 79 and 

other studies finding that the CME 

bitcoin futures market dominates.80 As 

in previous disapprovals, because the 

evidence regarding whether the CME 

bitcoin futures market leads the spot 

market remains inconclusive,81 the 

Commission is unable to find that an 

interrelationship exists between the 

CME bitcoin futures market and the spot 

bitcoin market such that it is reasonably 

likely that a person attempting to 

manipulate the proposed ETP would 

have to trade on the CME bitcoin futures 

market to successfully manipulate the 

proposed ETP. Accordingly, the 

Commission concludes that the Sponsor 

has not demonstrated that the CME 

bitcoin futures market constitutes a 

market of significant size related to spot 

bitcoin. 

Beyond the Commission’s overarching 

concern about the divergent conclusions 

of the econometric evidence about the 

lead-lag relationship between the CME 

bitcoin futures market and spot market, 

the Commission also has particular 

disagreements with the Sponsor’s 

assertions regarding its analysis. Those 

disagreements support the 

Commission’s determination that NYSE 

Arca has not provided a sufficient basis 

to conclude that it is reasonably likely 

that a would-be manipulator of the 

proposed ETP would have to trade on 

the CME bitcoin futures market to 

successfully manipulate the proposed 

ETP. 

First, Bitwise’s first comment letter 

casts doubt on its own IS/CS results. 

Bitwise’s first comment letter 

acknowledges that ‘‘classic’’ price 

discovery metrics like IS and CS ‘‘face 

difficulties based on the model 

assumptions of VECM [the Vector Error 

Correction Model] when the prices 

under consideration are asynchronous 

and/or infrequent,’’ 82 citing an 

academic study by Buccheri et al.83 that 

investigates the difficulties to 

identifying price discovery with VECM 

models due to the high sparsity of data 

in markets that record trades at the submillisecond level. Bitwise also 

acknowledges that, ‘‘when prices have a 

high level of sparsity, the VECM is 

clearly misspecified and the estimates 

are potentially biased.’’ 84 However, 

while Bitwise claims that ‘‘[t]he 

limitations of classic IS and CS analysis 

informed Bitwise’s specific 

methodological approach to IS and CS 

analysis,’’ 85 Bitwise neither explains 

how its IS/CS approach was ‘‘informed’’ 

by such limitations, nor provides any 

information on whether the price data 

that Bitwise used in its IS/CS analysis 

have a high level of sparsity. Moreover, 

Bitwise’s acknowledgement of the 

Fidelity Paper’s finding that ‘‘there is a 

high level of sparsity in bitcoin data’’ 86

suggests that, by its own admission, 

Bitwise’s IS/CS approach is 

misspecified and its estimates 

potentially biased. 

Second, Bitwise performed its IS, CS, 

and TSLL analysis for each of the 17 

unregulated platforms per day and then 

averaged the daily results both by 

month and across the full sample 

period.87 However, neither the 

Exchange nor Bitwise explains why 

Bitwise chose a daily basis to compute 

its IS, CS, and TSLL estimates; provides 

any information about how variable the 

daily estimates are, before the monthly 

and/or full-sample averaging was 

applied; or provides any information on 

the robustness of the estimates—that is, 

whether these daily estimates or the 

statistical significance of the monthly 


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88See id. at 153. 

89See id. at 161. 

90See Fidelity Paper at 17. 

91See Alexander & Heck 2020 at 1–2. 

92See id. at 13. Alexander & Heck attribute these 

findings to: (i) the trading volume of each 

individual unregulated derivatives in their data set 

being much larger than that of CME bitcoin futures; 

(ii) many smaller players in bitcoin markets (such 

as miners or crypto-specialized hedge funds), who 

have easy access to unregulated platforms and ultrahigh-frequency trading platforms, may be 

considered as more informed bitcoin investors than 

the CME’s clients; and (iii) investors who want to 

manipulate the price of bitcoin ‘‘may do so much 

more easily on an unregulated [platform] rather 

than on the CME, which is heavily regulated by the 

CFTC.’’ See id. 

93See Exhibit 3A, supra note 56, at 148. 

94Alexander & Heck 2020 at 2. 

95 In the Teucrium Order and Valkyrie XBTO 

Order, the Commission determined that it is 

unnecessary for the listing exchanges to establish a 

reasonable likelihood that a would-be manipulator 

would have to trade on the CME itself to 

manipulate a proposed ETP whose only non-cash 

holdings would be CME bitcoin futures contracts. 

As the Commission explains in those Orders, in 

each such case, the proposed ‘‘significant’’ 

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

listing exchange has a surveillance-sharing 

agreement would be the same market on which the 

underlying bitcoin assets (i.e., CME bitcoin futures 

contracts) trade. Consequently, in the circumstances 

under consideration in the Teucrium Order and 

Valkyrie XBTO Order, the CME’s surveillance can 

reasonably be relied upon to capture the effects on 

the CME bitcoin futures market caused by a person 

attempting to manipulate a CME bitcoin futuresbased ETP by manipulating the price of CME 

bitcoin futures contracts, whether that attempt is 

made by directly trading on the CME bitcoin futures 

market or indirectly by trading outside of the CME 

bitcoin futures market. See Teucrium Order, 87 FR 

at 21679; Valkyrie XBTO Order, 87 FR at 28851. 

However, as the Commission also states in those 

Orders, this reasoning does not extend to spot 

bitcoin ETPs. Spot bitcoin markets are not currently 

‘‘regulated.’’ See Teucrium Order, 87 FR at 21679 

n.46 (citing USBT Order, 85 FR at 12604; NYDIG 

Order, 87 FR at 14936 nn.65–67). See also Valkyrie 

XBTO Order, 87 FR at 28851 n.42. Thus if an 

exchange seeking to list a spot bitcoin ETP relies 

on the CME as the regulated market with which it 

has a comprehensive surveillance-sharing 

agreement, the assets held by the spot bitcoin ETP 

would not be traded on the CME; and because of 

this important difference, with respect to a spot 

bitcoin ETP, there would be reason to question 

whether a surveillance-sharing agreement with the 

CME would, in fact, assist in detecting and 

deterring fraudulent and manipulative misconduct 

affecting the price of the spot bitcoin held by that 

ETP. If, however, an exchange proposing to list and 

trade a spot bitcoin ETP identifies the CME as the 

regulated market with which it has a 

comprehensive surveillance-sharing agreement, the 

exchange could overcome the Commission’s 

concern by demonstrating that there is a reasonable 

likelihood that a person attempting to manipulate 

the spot bitcoin ETP would have to trade on the 

CME in order to manipulate the ETP, because such 

demonstration would help establish that the 

exchange’s surveillance-sharing agreement with the 

CME would have the intended effect of aiding in 

the detection and deterrence of fraudulent and 

manipulative misconduct related to the spot bitcoin 

held by the ETP. See Teucrium Order, 87 FR at 

21679 n.46; Valkyrie XBTO Order, 87 FR at 28851 

n.42. 

and/or full-sample averages of such 

daily estimates are sensitive to different 

choices that Bitwise could have made 

for the analysis (e.g., to compute 

intraday estimates). 

Third, the pairwise IS/CS full-sample 

average results for CME compared to 

each of the 10 spot platforms ranged 

between 52.97% (the CS result versus 

itBit) to 68.03% (the CS result versus 

Bitstamp).88 Even accepting these 

results and their statistical significance 

at face value, these results suggest that 

spot bitcoin markets still account for 

approximately 32%–47% of price 

discovery. Yet neither Bitwise nor the 

Exchange has explained why, 

notwithstanding this amount of price 

discovery occurring on spot platforms, it 

is reasonably likely that a would-be 

manipulator would nonetheless have to 

trade on the CME bitcoin futures market 

to successfully manipulate the proposed 

ETP. 

Fourth, taking Bitwise’s TSLL results 

at face value, as Bitwise acknowledges, 

the extent to which the CME bitcoin 

futures market ‘‘leads’’ the 10 

unregulated spot platforms has 

decreased since 2019 to the end of 

Bitwise’s sample period in September 

2020.89 This general trend is also 

observed in the Fidelity Paper’s TSLL 

analysis, which uses a longer sample 

period (to Q1 2021) and finds that the 

CME’s average ‘‘lead’’ time has ‘‘steadily 

decreased’’ among all evaluated markets 

to about one second in Q4 2020 and Q1 

2021.90 The record, however, does not 

explain the implication of the CME’s 

decreasing lead over the identified spot 

platforms, nor why the CME’s ‘‘lead’’ 

time against spot platforms would not 

be expected to continue to decrease 

throughout 2021 and 2022 until it 

‘‘lags’’ spot platforms. Moreover, neither 

Bitwise nor the Exchange has explained 

why, notwithstanding such decreasing 

‘‘lead’’ times against spot platforms, it is 

nonetheless reasonably likely that a 

would-be manipulator would have to 

trade on the CME to successfully 

manipulate the proposed ETP. 

Fifth, all of Bitwise’s statistical 

results—IS, CS, and TSLL—are based on 

pairwise, two-dimensional analysis 

(e.g., CME compared to Coinbase; CME 

compared to Gemini; etc.). At least one 

multidimensional approach to price 

discovery (Alexander & Heck 2020) 

finds that CME bitcoin futures ‘‘have a 

very minor effect on price discovery,’’ 

and that ‘‘a faster speed of adjustment 

and information absorption [occurs] on 

the unregulated spot and derivatives 

[platforms] than on CME bitcoin 

futures.’’ 91 Specifically, Alexander & 

Heck’s multidimensional analysis— 

which simultaneously includes 

unregulated futures, regulated futures, 

perpetual futures, and spot markets— 

finds that CME bitcoin futures have 

never accounted for more than 9% of 

price discovery (and unregulated 

markets collectively account for more 

than 91% of price discovery), and have 

always contributed the least to price 

discovery among all venues considered, 

except during July 2019.92 While 

Bitwise acknowledges the Alexander & 

Heck 2020 paper, Bitwise merely states 

that the paper ‘‘involves a complex, 

multidimensional approach to price 

discovery analysis conducted across 

eight different markets and four 

different exposure types (unregulated 

futures, regulated futures, perpetual 

futures, and spot markets), each with 

different levels of microstructure 

friction and data integrity,’’ and that 

‘‘these complications make it difficult to 

draw a direct comparison’’ to the 10 IS/ 

CS papers that Bitwise considered.93

Bitwise neither critiques the 

multidimensional Alexander & Heck 

2020 approach; nor attempts to apply 

the approach to Bitwise’s own data; nor 

discusses the robustness of Bitwise’s 

two-dimensional methodology in 

response to the critique in Alexander & 

Heck 2020 that: ‘‘omitting substantial 

information flows from other markets 

can produce misleading results. . . . 

[I]n a two-dimensional model one or 

other of the instruments must 

necessarily be identified as price 

leader.’’ 94 In other words, a twodimensional model might erroneously 

attribute information share or 

component share of omitted platforms 

to one of the two platforms included in 

the pairwise estimate, because the two 

shares must necessarily sum up to 

100%. As such, the Exchange has not 

adequately addressed whether Bitwise’s 

conclusion that the CME bitcoin futures 

market ‘‘leads’’ price discovery 

continues to hold up when the entirety 

of the bitcoin-related market (spot and 

futures) is simultaneously considered. 

The Commission thus concludes that 

the information that NYSE Arca 

provides is not a sufficient basis to 

support a determination that it is 

reasonably likely that a would-be 

manipulator of the proposed ETP would 

have to trade on the CME bitcoin futures 

market to successfully manipulate the 

proposed ETP.95 Therefore, the 

information in the record also does not 

establish that the CME bitcoin futures 

market is a ‘‘market of significant size’’ 

related to spot bitcoin. 

(2) Whether It is Unlikely that Trading 

in the Proposed ETP Would Be the 

Predominant Influence on Prices in 

the CME Bitcoin Futures Market 


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96See Winklevoss Order, 83 FR at 37594; USBT 

Order, 85 FR at 12596–97. 97Exhibit 3B is available at: https://www.sec.gov/ 

rules/sro/nysearca/2021/34-93445-ex3b.pdf. 98See Notice, 86 FR at 60711–15. 99See Exhibit 3B, supra note 97, at 249–50. 100See id. at 250–51. Bitwise states that first-year 

flows range from $3.01 billion for the SPDR Gold 

Shares (‘‘GLD’’) to negative $1 million for the iPath 

Bloomberg Lead Subindex Total Return ETN. See 

id. at 250. 

101See id. at 251–252. 

102See id. at 252. 

103See id. 

104 Daily or weekly percentage price changes of 

bitcoin were calculated using the 4 p.m. E.T. bitcoin 

reference rate from Coin Metrics. See id. at 253. 

105See id. at 254. 

106See id. at 254–55. 

107See id. at 255. 

108Bitwise asserts that, although the absolute size 

of the ADV for GBTC ranges widely across 2020, the 

monthly ADV/AUM ratio stays fairly consistent, 

ranging from 1.10% to 2.21%. See id. at 256. 

Bitwise does not, however, indicate whether a 

consistent ADV/AUM ratio is common among 

commodity-based products, or why a consistent 

ratio would otherwise be expected to persist into 

future months/years. In addition, ultimately, 

Bitwise uses GLD’s average 2020 ADV/AUM ratio 

for its estimate, not the GBTC ratio. The 2020 

monthly ADV/AUM for GLD varies more widely, 

ranging from 1.65% to 5.93%. See id. at 257. 

109See id. at 256–58. 

110See id. at 258. 

111See id. at 259. 

112See id. at 259–60. 

113According to Bitwise, GLD gained 

approximately $1.26 billion in flows in its first 

week. See id. at 262. 

114See id. at 262–64. 

The second prong in establishing 

whether the CME bitcoin futures market 

constitutes a ‘‘market of significant size’’ 

related to spot bitcoin is whether it is 

unlikely that trading in the proposed 

ETP would be the predominant 

influence on prices in the CME bitcoin 

futures market.96

As described in more detail in the 

Notice and Exhibit 3B thereto,97 the 

Exchange asserts that trading in the 

Trust is unlikely to become the 

predominant influence on prices in the 

CME bitcoin futures market based on 

Bitwise’s estimates for the maximum 

likely first-year flows into, and average 

daily trading volume of, the Trust, and 

Bitwise’s analysis of whether such flows 

and trading volume would be likely to 

impact CME bitcoin futures prices.98

To estimate the likely first-year flows 

into the proposed ETP, Bitwise first 

examined first-year flows into all ETPs 

currently listed on the market. Bitwise 

concluded that it is unlikely that a 

bitcoin ETP will attract more first-year 

flow than the ETP with the highest firstyear flows in history (Invesco QQQ 

Trust, $5.35 billion), particularly given 

the relative size of the bitcoin market 

compared to the markets captured by 

the most successful ETPs in the past, 

which target parts or all of the equity, 

bond, real estate, and gold markets.99

Bitwise also examined first-year flows 

into first-to-market single-commodity 

ETPs, which Bitwise considers to 

provide additional context on the likely 

‘‘upper bound’’ of potential flows into a 

bitcoin ETP.100 Finally, Bitwise 

examined the Grayscale Bitcoin Trust 

(‘‘GBTC’’), which Bitwise describes as a 

publicly traded grantor trust that holds 

bitcoin directly with a third-party 

custodian and that has been accessible 

to U.S. investors since 2015.101 Bitwise 

states that, according to Grayscale 

Investments, GBTC attracted a record 

$4.7 billion in inflows in 2020.102

Extrapolating from this historical 

information, Bitwise uses $4.7 billion as 

its estimate for first-year flows into a 

new bitcoin ETP. Bitwise asserts that its 

$4.7 billion estimate is ‘‘aggressive’’ 

because it assumes that a bitcoin ETP 

would ‘‘[b]e the third-fastest-growing 

ETP in history,’’ would ‘‘[s]ignificantly 

surpass (by more than 50%) the firstyear flows into GLD,’’ and would 

‘‘[m]atch the highest annual flow in 

GBTC’s history, achieved during a 

strong bull market, all while the new 

ETP is forced to compete for market 

share with GBTC itself.’’ 103

As described in more detail in Exhibit 

3B, to evaluate the potential impact of 

ETP inflows on prices in the CME 

bitcoin futures market, Bitwise 

conducted a correlation analysis 

examining the relationship of daily and 

weekly flows into GBTC in 2020 and 

changes in a spot bitcoin-based 

reference price.104 According to Bitwise, 

the data show there is no meaningful 

relationship between daily and weekly 

flows into GBTC and changes in that 

spot bitcoin price, despite the aggregate 

yearly flows being $4.7 billion.105

According to Bitwise, its analysis of 

outlier days and weeks with large flows 

also supports this conclusion.106

Bitwise thus concludes that it is 

unlikely that $4.7 billion in flows into 

a bitcoin ETP in a single year will cause 

it to become the predominant influence 

on prices in the CME bitcoin futures 

market.107

Bitwise also considered whether 

secondary market trading in the Shares 

would be likely to become the 

predominant influence on prices in the 

CME bitcoin futures market. To do so, 

as described in more detail in Exhibit 

3B, Bitwise applied the 2020 ratio of 

average daily volume (‘‘ADV’’) to assets 

under management (‘‘AUM’’) (‘‘ADV/ 

AUM’’) for both GBTC and GLD to the 

$4.7 billion estimate of first-year flows 

into a new bitcoin ETP.108 In so doing, 

for the Shares, Bitwise calculated an 

estimated $72 million ADV and $143 

million ADV, corresponding to the 

ADV/AUM ratio of GBTC and GLD, 

respectively.109 And for the purposes of 

its analysis, Bitwise uses the higher 

figure—$143 million—as its estimate for 

a new bitcoin ETP’s average daily 

trading volume after a year on the 

market. Bitwise asserts that this estimate 

is ‘‘aggressive’’ because it assumes that 

a bitcoin ETP would ‘‘[b]e the thirdfastest-growing ETP in history’’ and 

would ‘‘[h]ave an ADV/AUM ratio two 

times higher than that of GBTC, which 

competes in the same market.’’ 110

Bitwise ‘‘believe[s] it is unlikely that 

trading in the ETP will become the 

predominant influence on prices in the 

CME [bitcoin futures market] if such 

trading activity is substantially smaller 

than the trading activity on the CME 

bitcoin futures market,’’ which Bitwise 

states it has demonstrated to be the 

leading source of price discovery in the 

bitcoin market.111 As described in 

Exhibit 3B, Bitwise estimated CME 

bitcoin futures’ average daily trading 

volume in 2020 to be $392 million, 

which Bitwise states is 174% higher 

than its $143 million estimate of a new 

bitcoin ETP’s likely average daily 

trading volume. Bitwise thus concludes 

that it is unlikely that trading in a new 

bitcoin ETP will cause it to become the 

predominant influence on prices in the 

CME bitcoin futures market.112

Bitwise makes three additional 

arguments in support of its conclusion. 

First, Bitwise argues that a new bitcoin 

ETP is unlikely to experience a GLD-like 

rapid start.113 Bitwise states that, 

‘‘[w]hile there is interest in a bitcoin 

ETP,’’ it is unlikely to match the level 

of demand experienced by GLD after its 

2004 launch because (1) bitcoin is a 

substantially smaller market 

(approximately 74% smaller) than gold 

was at its launch; (2) unlike GLD, U.S. 

retail investors already have ‘‘multiple 

easy ways’’ to directly purchase bitcoin; 

and (3) unlike GLD, a bitcoin ETP will 

‘‘face stiff competition from GBTC, a 

$20 billion product with high levels of 

liquidity that can be easily accessed 

through a brokerage setting.’’ 114

Second, Bitwise considered 

internationally listed spot bitcoin ETPs, 

specifically the German ETC Group 

Physical Bitcoin ETP (‘‘BTCE’’) and the 

Canadian Purpose Bitcoin ETF 

(‘‘BTCC’’). Using the same correlation 

assessment as it used for GBTC inflows, 

Bitwise finds that there is no 

meaningful relationship between daily 

or weekly flows into BTCE (over the 

period June 2020 to March 2021) or 

BTCC (over a six-week period in 

February–March 2021) and daily or 


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115See id. at 265–69. 

116See Bitwise Letter 1 at 5–6. 

117See Notice, 86 FR at 60715. 

118Exhibit 3B, supra note 97, at 264. 

119Bitwise Letter 1 at 6. 

120 Id. 

121Exhibit 3B, supra note 97, at 263–64. 122See letter from Robert H. Rosenblum, Wilson 

Sonsini Goodrich & Rosati, P.C., and Kathleen H. 

Moriarty, Chapman and Cutler LLP, on behalf of 

Bitwise, dated Mar. 7, 2022 (‘‘Bitwise Letter 2’’), at 

4. 123See id. at 3–4. 124Bitwise Letter 1 at 6. 125See Exhibit 3B, supra note 97, at 251 (‘‘GBTC 

is different from an ETP is certain ways, including 

that the structure does not allow for redemptions 

. . .’’) and 253 (‘‘While GBTC allows for daily 

creations, unlike an ETF, those shares are not 

immediately available to be sold in the secondary 

market. After purchasing shares, an investor must 

hold the shares for 6-months before they are 

permitted to be traded on the secondary market.’’). 

126See Exhibit 3B, supra note 97, at 262–64. 

127See id. at 269. 

128See Bitwise Letter 1 at 5. 

129See Teucrium Order, 87 FR at 21681. 

130See Exhibit 3B, supra note 97, at 253–55, 266– 

69. 

131 Id. at 259. 

weekly changes in the spot bitcoin 

price.115

Third, Bitwise argues that evidence 

from the 2021 launch of CME bitcoin 

futures-based exchange traded funds 

(‘‘ETFs’’)—ProShares Bitcoin Strategy 

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

ETF (‘‘BTF’’), and VanEck Bitcoin 

Strategy ETF (‘‘XBTF’’)—strengthens its 

arguments. Bitwise states that the fact 

that these ETFs took in $1.55 billion in 

their first month on the market, and 

have taken in just $216 million since, 

strengthens its belief that the estimate of 

$4.7 billion in first-year flows into a 

spot bitcoin ETP is an aggressive 

estimate. Bitwise also asserts that the 

bitcoin market is ‘‘incredibly and 

increasingly crowded’’ with options for 

investors, and a spot bitcoin ETP would 

‘‘face steep competition.’’ 116

Based on Bitwise’s analysis, the 

Exchange concludes that trading in the 

Trust is unlikely to become the 

predominant influence on prices in the 

CME bitcoin futures market.117

The Commission disagrees. The 

evidence in the record for the proposal 

does not support the conclusion that it 

is unlikely that trading in the proposed 

ETP would be the predominant 

influence on prices in the CME bitcoin 

futures market. 

First, Bitwise’s conflicting claims 

with respect to the demand for a spot 

bitcoin ETP undermine Bitwise’s 

expectations for the likely size of such 

an ETP and the rapidity of inflows into 

it. On the one hand, Bitwise downplays 

potential investor demand, stating that 

‘‘[w]hile there is interest in a bitcoin 

ETP,’’ 118 the bitcoin market is 

‘‘incredibly and increasingly crowded’’ 

with options for investors, noting that 

investors today can buy bitcoin on 

crypto trading apps, finance apps, 

through over-the-counter trusts, via 

bitcoin futures ETFs, and ‘‘in many 

other ways.’’ 119 Bitwise states that a 

spot bitcoin ETP ‘‘would now be the 

fourth bitcoin-linked ETP to come to 

market,’’ and ‘‘would face steep 

competition from the already liquid and 

highly correlated bitcoin futures-based 

competitors.’’ 120 Bitwise describes 

GBTC in particular as competition for a 

new bitcoin ETP, asserting that GBTC 

has ‘‘high levels of liquidity’’ and can be 

‘‘easily accessed through a brokerage 

setting,’’ and thus that ‘‘a good portion 

of the brokerage-access demand that 

would otherwise be waiting for an ETP 

is already being met by GBTC.’’ 121 On 

the other hand, when asserting public 

interest and investor protection 

arguments in favor of its proposal (see 

also Section III.C, below), Bitwise 

highlights that ‘‘a great many (and an 

ever-increasing number of) investors 

already’’ directly invest in bitcoin.122

Bitwise also highlights that, unlike 

GBTC, the proposed ETP would allow 

for daily creations and redemptions; can 

be expected to ‘‘closely track the value 

of [b]itcoin, and not periodically trade at 

substantial premiums to and discounts 

from the value of [b]itcoin’’; and would 

be ‘‘professionally managed, SECregulated, highly-liquid, fully 

transparent, and listed on the NYSE 

Arca’’; and that ‘‘at least some segment’’ 

of retail and other investors would 

benefit from such characteristics and 

would be ‘‘affirmatively disadvantaged’’ 

by not having access to it.123 Bitwise 

also states that the proposed ETP 

‘‘would add material protections for the 

millions of U.S. investors who currently 

use other less protected and transparent 

avenues to access the bitcoin market, as 

well as for any future investors who 

may choose to do so.’’ 124 If, as Bitwise 

claims, U.S. investors have been and are 

ever-increasingly investing in bitcoin, 

and the proposed ETP ‘‘would add 

material protections’’ that are not 

currently available through GBTC or 

otherwise for some segment of investors, 

and would, unlike GBTC, be available to 

trade immediately on a national 

securities exchange with daily creations 

and redemptions,125 it is not clear that 

Bitwise’s use of the GBTC historical 

record of $4.7 billion in inflows is a 

likely, let alone ‘‘aggressive,’’ estimate 

for first-year inflows into a new spot 

bitcoin ETP. 

Likewise, on the one hand, Bitwise 

claims that it is unlikely that a new 

bitcoin ETP would experience rapid 

one-week inflows similar to GLD, which 

had first-week inflows of approximately 

$1.26 billion.126 On the other hand, 

Bitwise highlights that BTCC—the first 

bitcoin ETP launched in Canada— 

‘‘experienced three days of very high 

inflows shortly after its launch’’; 127 and 

that the three CME bitcoin futures-based 

ETFs took in $1.55 billion in their first 

month on the market, with just $216 

million since.128 BITO—the first such 

ETF to launch—took in $1.21 billion 

AUM within three days of its launch.129

Second, it is not clear from Bitwise’s 

correlation analysis what would be the 

likely impact of inflows into a new 

bitcoin ETP on CME bitcoin futures 

prices. Bitwise assessed correlations of 

inflows (into GBTC in 2020; into BTCE 

in 2020–21; and into BTCC in 2021) 

using a spot bitcoin-based reference 

price.130 Bitwise does not explain why 

it chose to use bitcoin spot prices 

instead of CME bitcoin futures prices 

themselves, despite the CME bitcoin 

futures market having been operating 

since 2017 and its price data being 

readily available to Bitwise. Bitwise’s 

decision to run its correlations against 

spot prices is particularly puzzling, 

given its claims (discussed above) that 

CME bitcoin futures prices lead price 

discovery. Put in another way, given 

that Bitwise identifies the CME bitcoin 

futures market as the relevant regulated 

market of significant size, the use of a 

spot bitcoin price for its correlation 

analysis could render the analysis 

immaterial. 

Moreover, Bitwise’s correlation 

analysis does not control for any other 

factors that may have been affecting spot 

bitcoin prices during the daily or 

weekly aggregation periods. Thus, the 

results do not isolate the statistical 

relationship between spot bitcoin prices 

and the factor of interest (i.e., flows into 

GBTC, BTCE, or BTCC). 

Third, Bitwise’s analysis regarding the 

potential effects of trading in the Shares 

on CME bitcoin futures prices is vague 

and conclusory. Bitwise states that it 

‘‘believes’’ that it is unlikely that trading 

in a new bitcoin ETP will become the 

predominant influence on prices in the 

CME bitcoin futures market ‘‘if such 

trading activity is substantially smaller 

than the trading activity on the CME 

bitcoin futures market.’’ 131 Bitwise, 

however, does not provide any 

explanation or basis for its ‘‘belief.’’ 

With this ‘‘belief’’ in hand, Bitwise then 

calculates that CME bitcoin futures’ 

average daily trading volume in 2020 

($392 million) is 174% higher than its 

estimate of a new bitcoin ETP’s likely 

average daily trading volume ($143 


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132See id. 

133As of May 31, 2022, the value of open interest 

in the front two month CME BTC contracts was 

approximately $1.7 billion (source: CME Group). 

134See 15 U.S.C. 78s(b)(2)(C). 

135 15 U.S.C. 78f(b)(5). 

136 In disapproving the proposed rule change, the 

Commission has considered its impact on 

efficiency, competition, and capital formation. See 

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

137See Bitwise Letter 2. 

138See id. at 2. 

139See id. at 3–4. Similarly, one commenter also 

states that approval of a spot bitcoin ETP would 

protect investors by, among other things, imposing 

less transaction costs than CME bitcoin futures 

ETFs, reducing risks associated with custodying 

spot bitcoin, and ‘‘[c]hanneling investor interest 

into a regulated space.’’ See Letter from James J. 

Angel, Associate Professor of Finance, Georgetown 

University, dated April 17, 2022 (‘‘Angel Letter’’), 

at 7–9. 

140See Bitwise Letter 2 at 4. 

141 15 U.S.C. 78f(b)(5). 

142See Bitwise Letter 2 at 4. Bitwise also argues 

that the Commission ‘‘must be able to work with the 

digital asset community to find a way to approve 

more digital asset products for investors’’ (see id. at 

5) and states that it ‘‘was willing to change the 

structure or operation of the Trust as needed to 

resolve good faith legal and regulatory concerns’’ 

(see id. at 6). The Commission assesses each 

proposed rule change—as proposed—on its 

particular facts and on whether it is consistent with 

the requirements of the Exchange Act. Pursuant to 

the Commission’s Rules of Practice, the SRO must 

provide all information elicited by Form 19b–4, and 

the description of the proposed rule change, its 

purpose and operation, its effect, and a legal 

analysis of its consistency with applicable 

requirements must all be sufficiently detailed and 

specific to support an affirmative Commission 

finding. See Rule 700(b)(3), Commission Rules of 

Practice, 17 CFR 201.700(b)(3). 

143See Winklevoss Order, 83 FR at 37602. See 

also GraniteShares Order, 83 FR at 43931; 

ProShares Order, 83 FR at 43941; USBT Order, 85 

FR at 12615. 

144See Exchange Act Section 19(b)(2)(C), 15 

U.S.C. 78s(b)(2)(C). See also Affiliated Ute Citizens 

of Utah v. United States, 406 U.S. 128, 151 (1972) 

(Congress enacted the Exchange Act largely ‘‘for the 

purpose of avoiding frauds’’); Gabelli v. SEC, 568 

U.S. 442, 451 (2013) (The ‘‘SEC’s very purpose’’ is 

to detect and mitigate fraud.). 

145See SolidX Order, 82 FR at 16259; 

WisdomTree Order, 86 FR at 69334. 

million), which then is the sole premise 

for Bitwise to conclude that trading in 

the Shares would not likely be the 

predominant influence on CME bitcoin 

futures prices.132

However, an alternative calculation 

using Bitwise’s statistics is that a single 

bitcoin ETP’s average daily trading 

volume could be approximately 36.5% 

($143 million divided by $392 

million)—more than one-third—of the 

size of CME bitcoin futures’ average 

daily trading volume. On top of that, 

assuming, as Bitwise does, potentially 

$4.7 billion in first-year inflows, such a 

spot bitcoin ETP could have AUM that 

exceeds the value of all open interest in 

CME bitcoin futures contracts.133

Bitwise has not directly addressed why, 

given this relative size of estimated 

daily trading in the Shares compared 

with daily trading in CME bitcoin 

futures contracts, and the relative size of 

the Trust’s estimated AUM itself 

compared with all open interest in CME 

bitcoin futures contracts, it is 

nonetheless unlikely that trading in the 

proposed ETP would be the 

predominant influence on prices in the 

CME bitcoin futures market. 

Pursuant to Section 19(b)(2) of the 

Exchange Act, the Commission must 

disapprove a proposed rule change filed 

by a national securities exchange if it 

does not find that the proposed rule 

change is consistent with the applicable 

requirements of the Exchange Act— 

including the requirement under 

Section 6(b)(5) that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices.134 For 

all of the reasons discussed above, 

NYSE Arca has not provided sufficient 

information to establish both prongs of 

the ‘‘market of significant size’’ 

determination, and thus the 

Commission cannot conclude that the 

CME bitcoin futures market is a ‘‘market 

of significant size’’ related to spot 

bitcoin such that NYSE Arca would be 

able to rely on a surveillance-sharing 

agreement with the CME to provide 

sufficient protection against fraudulent 

and manipulative acts and practices. 

Therefore, NYSE Arca has not met its 

burden of demonstrating that the 

proposal is consistent with Exchange 

Act Section 6(b)(5),135 and, accordingly, 

the Commission must disapprove the 

proposal.136

C. Other Arguments and Comments 

In a second comment letter,137

Bitwise argues that the Commission, 

‘‘when analyzing the applicable legal 

standards for approving the [proposed 

ETP], should consider—and should 

interpret those standards in recognition 

of—the wide-spread use and adoption of 

[b]itcoin among retail investors, 

merchants, public and private 

companies, payment processors, and 

others in the U.S. business and 

investment community.’’ 138 Bitwise 

argues that the fundamental question 

before the Commission should be 

‘‘whether, in light of the wide-spread 

retail holdings, investment in, and use 

of [b]itcoin, at least some segment of 

retail (and other) investors would 

benefit from having access to an 

investment product that provides 

exposure to [b]itcoin’’ and that is traded 

on a regulated national securities 

exchange, that is reasonably expected to 

closely track the value of bitcoin 

without substantial premiums or 

discounts, and that would relieve 

investors from custodial and other 

transactional burdens of bitcoin.139

Bitwise asserts that ‘‘the public 

interest is best served by giving retail 

(and other) investors access to a 

publicly-traded [b]itcoin ETP like the 

Trust, that at least some segment of the 

investing public would be affirmatively 

disadvantaged by not having access to 

the Trust, and that no part of the 

investing public would be harmed by 

having access to the Trust.’’ 140 Bitwise 

concludes that, for these reasons, the 

proposal ‘‘overwhelmingly’’ meets 

Exchange Act Section 6(b)(5)’s 

requirement that a proposed rule change 

‘‘protect investors and the public 

interest.’’ 141 Bitwise also asserts that 

Exchange Act Section 6(b)(5)’s 

requirement that the rules of a national 

securities exchange be designed to 

prevent fraudulent and manipulative 

acts and practices should be considered 

‘‘in light of the large and increasing 

number of U.S. investors who directly 

invest in and trade [b]itcoin’’ and who 

‘‘may in fact be subject to increased 

risks of fraud and manipulation.’’ 142

In essence, Bitwise asserts that the 

risky nature of direct investment in 

bitcoin and the potential benefits of a 

spot bitcoin ETP compel approval of the 

proposed rule change. The Commission 

disagrees. Here, even if it were true that, 

compared to trading in unregulated spot 

bitcoin markets, trading a bitcoin-based 

ETP on a national securities exchange 

provides some additional protection to 

investors, the Commission must 

consider this potential benefit in the 

broader context of whether the proposal 

meets each of the applicable 

requirements of the Exchange Act.143

Pursuant to Section 19(b)(2) of the 

Exchange Act, the Commission must 

approve a proposed rule change filed by 

a national securities exchange if it finds 

that the proposed rule change is 

consistent with the applicable 

requirements of the Exchange Act— 

including the requirement under 

Section 6(b)(5) that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices—and it 

must disapprove the filing if it does not 

make such a finding.144 Thus, even if a 

proposed rule change purports to 

protect investors from a particular type 

of investment risk—such as the 

susceptibility of an asset to loss or theft, 

or premiums or discounts to underlying 

asset value—the proposed rule change 

may still fail to meet the requirements 

under the Exchange Act.145 For the 

reasons discussed above, NYSE Arca 

has not met its burden of demonstrating 


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146 15 U.S.C. 78f(b)(5). 

147See letter from Anonymous, dated Feb. 18, 

2022. 

148See supra note 12 and accompanying text. See 

also Wise Origin Order, 87 FR at 5539; ARK 

21Shares Order, 87 FR at 20027. 

149See USBT Order, 85 FR at 12613; Wise Origin 

Order, 87 FR at 5540; Teucrium Order, 87 FR at 

21679–80. 

150See letter from Brandon Gunderson, dated 

Feb. 4, 2022. 

151See Angel Letter at 5. 152See id. 153The Commission understands the 

commenter’s use of ‘‘BRR Bitcoin Reference Rate’’ 

to mean the CME CF Bitcoin Reference Rate. 154See Angel Letter at 6. 155See supra note 11. 

156See supra Section III.B.1 and III.B.2. 

157See Teucrium Order, 87 FR at 21679; Valkyrie 

XBTO Order, 87 FR at 28851. 

158See Teucrium Order, 87 FR at 21679 n.46; 

Valkyrie XBTO Order, 87 FR at 28851 n.42. There 

is reason to question whether the CME’s 

surveillance would capture manipulation of spot 

bitcoin that occurs off of the CME if, for example, 

off-CME manipulation of spot bitcoin does not also 

similarly impact CME bitcoin futures contracts. 

159See Angel Letter at 5. 

160A description of CME bitcoin futures daily 

settlement procedures is available at: https:// 

Continued 

an adequate basis in the record for the 

Commission to find that the proposal is 

consistent with Exchange Act Section 

6(b)(5),146 and, accordingly, the 

Commission must disapprove the 

proposal. 

In another commenter letter, a 

commenter questions why the 

Commission would disallow a spot 

bitcoin ETP when it has allowed a spot 

gold ETP.147 The commenter states that 

‘‘[t]he argument that a spot [b]itcoin 

[ETP] should not be allowed because the 

SEC doesn’t have the ability to regulate 

outside exchanges trading it doesn’t 

hold water.’’ The commenter states that 

‘‘[g]old trades around the world and 

around the clock in many areas 

unregulated by the SEC.’’ 

As the Commission has clearly and 

consistently stated, an exchange that 

lists bitcoin-based ETPs can meet its 

obligation under Exchange Act Section 

6(b)(5) that its rules be designed to 

prevent fraudulent and manipulative 

acts and practices by demonstrating that 

the exchange has a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to the underlying or reference 

bitcoin assets.148 As discussed in detail 

in Section III.B, the Commission has 

considered the Exchange’s arguments 

with respect to the CME bitcoin futures 

market, and the Commission concludes 

that the Exchange has failed to 

demonstrate that the CME bitcoin 

futures market is such a ‘‘market of 

significant size’’ related to spot bitcoin. 

As the Commission has also previously 

stated, comparisons to the markets for 

other asset classes (such as gold) are not 

persuasive, and do not help the 

Exchange to meet its burden with 

respect to a bitcoin-based ETP.149

Another commenter asserts that 

bitcoin futures-based ETFs ‘‘derive their 

price from the spot [bitcoin] market,’’ 

and questions why then a ‘‘generally 

more efficient investment vehicle’’ such 

as a spot bitcoin ETP ‘‘that tracks the 

same spot [bitcoin] market’’ would be 

disapproved.150 The commenter, 

however, provides no information on 

how prices of bitcoin futures-based 

ETFs relate to spot bitcoin prices; how 

such an assertion would be compatible 

with the claims of the Exchange in this 

filing that CME bitcoin futures prices 

‘‘lead’’ spot bitcoin prices; or why, even 

if such an assertion is true, it would 

necessitate the approval of this 

proposal. 

An additional commenter argues that 

it is inconsistent for the Commission to 

approve the listing and trading of CME 

bitcoin futures-based ETFs but not spotbased ETPs.151 Among other things, this 

commenter asserts that ‘‘[t]he spot and 

futures markets are so interconnected 

that actions on one instantly affect the 

other’’ and that ‘‘[a]ny manipulations in 

the spot market instantly affect the 

futures prices and vice versa.’’ 152 This 

commenter states that CME bitcoin 

futures contracts’ ‘‘ultimate cash 

settlement’’ is based on the ‘‘BRR 

Bitcoin Reference Rate Index’’ 

(‘‘BRR’’),153 which is calculated by 

aggregating the trade flow of major 

bitcoin spot platforms, and that a spot 

bitcoin ETP would be less vulnerable to 

manipulation than a CME bitcoin 

futures-based ETF because CME bitcoin 

futures contracts can be manipulated on 

both the CME and through the spot 

bitcoin platforms that are included in 

the BRR.154

The Commission disagrees with this 

commenter’s assertions. The proposed 

rule change does not relate to the same 

underlying holdings as either exchangetraded funds regulated under the 

Investment Company Act of 1940 

(‘‘1940 Act’’) that provide exposure to 

bitcoin through CME bitcoin futures or 

CME bitcoin futures-based ETPs 

registered under the Securities Act of 

1933 but not regulated under the 1940 

Act. The Commission considers the 

proposed rule change on its own merits 

and under the standards applicable to it. 

Namely, with respect to this proposed 

rule change, the Commission must 

apply the standards as provided by 

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

which it has applied in connection with 

its orders considering previous 

proposals to list bitcoin-based 

commodity trusts and bitcoin-based 

trust issued receipts.155

For this proposed rule change, the 

relevant analysis, as discussed above in 

Section III.B, is whether the Exchange 

has a comprehensive surveillancesharing agreement with a regulated 

market of significant size related to spot 

bitcoin. As discussed above, the record 

in the current proposal does not support 

a determination that the CME bitcoin 

futures market is a regulated market of 

significant size related to spot 

bitcoin.156

Moreover, the commenter argues that, 

because CME bitcoin futures contracts’ 

‘‘ultimate cash settlement’’ is based on 

the BRR, CME bitcoin futures face risks 

from both manipulation of the CME 

market itself, and manipulation of the 

spot bitcoin markets whose prices feed 

into the BRR. What is relevant for the 

‘‘significant market’’ analysis, however, 

is not the number of potential sources 

of manipulation, but rather, as 

discussed in the Teucrium Order and 

the Valkyrie XBTO Order, whether the 

CME’s surveillance can be reasonably 

relied upon to capture the effects of a 

person attempting to manipulate the 

assets underlying the proposed ETP.157

As explained in the Teucrium Order 

and the Valkyrie XBTO Order, if an 

exchange seeking to list a spot bitcoin 

ETP relies on the CME as the regulated 

market with which it has a 

comprehensive surveillance-sharing 

agreement, the assets held by the spot 

bitcoin ETP would not be traded on the 

CME; and thus there would be reason to 

question whether a surveillance-sharing 

agreement with the CME would, in fact, 

assist in detecting and deterring 

fraudulent and manipulative 

misconduct affecting the price of the 

spot bitcoin held by that ETP.158 While 

the commenter asserts that ‘‘[t]he spot 

and futures markets are so 

interconnected that actions on one 

instantly affect the other,’’ and that 

‘‘manipulations in the spot market 

instantly affect the futures prices and 

vice versa,’’ 159 the commenter provides 

no evidence in support of these 

assertions. Moreover, the commenter’s 

observation that CME bitcoin futures 

contracts’ ‘‘ultimate cash settlement’’ is 

based on the BRR is also insufficient to 

support these assertions. The BRR is 

used for a CME bitcoin futures 

contract’s final cash settlement; it is not 

generally used for daily cash settlements 

(which, under normal procedures, are 

generally based on the volume-weighted 

average price of trading activity on CME 

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

p.m., Central Time),160 nor is the BRR 


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www.cmegroup.com/confluence/display/ 

EPICSANDBOX/Bitcoin. 

161The commenter also has not explained how 

the assertions that ‘‘[t]he spot and futures markets 

are so interconnected that actions on one instantly 

affect the other,’’ and that ‘‘manipulations in the 

spot market instantly affect the futures prices and 

vice versa,’’ would be compatible with the claims 

of the Exchange in this filing that CME bitcoin 

futures prices lead spot bitcoin prices. 

162See Angel Letter at 2–4. 

163See, e.g., Angel Letter at 9–40. 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 93888 

(December 30, 2021), 87 FR 532. 

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

5See Securities Exchange Act Release No. 94238, 

87 FR 9399 (February 18, 2022). The Commission 

designated April 5, 2022, as the date by which the 

Commission shall approve or disapprove, or 

institute proceedings to determine whether to 

disapprove, the proposed rule change. 

6On March 31, 2022, the Exchange submitted 

Amendment No. 1 to the proposed rule change, and 

on April 1, 2022, the Exchange withdrew 

Amendment No. 1 to the proposed rule change. 

Amendment No. 2 is available on the Commission’s 

website at: https://www.sec.gov/comments/srcboebzx-2021-086/srcboebzx2021086-20122189- 

278229.pdf. 

7 15 U.S.C. 78s(b)(2)(B). 

8See Securities Exchange Act Release No. 94601, 

87 FR 20895 (April 8, 2022). 

9 15 U.S.C. 78s(b)(2). 

10See supra note 3 and accompanying text. 

11 15 U.S.C. 78s(b)(2). 

12 17 CFR 200.30–3(a)(57). 

claimed to be used for any intra-day 

trading of the contract. And even if the 

BRR is a potential link between prices 

on certain spot bitcoin platforms and 

CME bitcoin futures prices, it does not— 

absent supporting data—necessarily 

follow that manipulation that impacts 

spot bitcoin also similarly impacts CME 

bitcoin futures contracts.161

Moreover, the Commission’s 

determination in the Teucrium Order 

and the Valkyrie XBTO Order to 

approve the listing and trading of the 

relevant CME bitcoin futures ETPs was 

not based on the ETPs’ use—or lack of 

use—of the BRR (or any other similar 

pricing mechanism) for the calculation 

of NAV, or on the fact that the BRR is 

used for the final cash settlement of 

CME bitcoin futures contracts. Rather, 

the Commission approved the listing 

and trading of such CME bitcoin futures 

ETPs, not because of the BRR, but 

because the Commission found that the 

listing exchanges satisfy the 

requirement pertaining to a 

surveillance-sharing agreement with a 

regulated market of significant size 

related to the underlying bitcoin 

assets—which for such ETPs, are CME 

bitcoin futures contracts, not spot 

bitcoin. 

This commenter also addresses, 

among other things, the general nature 

and uses of bitcoin 162 and suggestions 

for improving regulation of bitcoin and 

other digital assets markets and related 

market participants.163 Ultimately, 

however, additional discussion of these 

topics is unnecessary, as they do not 

bear on the basis for the Commission’s 

decision to disapprove the proposal. 

IV. Conclusion 

For the reasons set forth above, the 

Commission does not find, pursuant to 

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

that the proposed rule change is 

consistent with the requirements of the 

Exchange Act and the rules and 

regulations thereunder applicable to a 

national securities exchange, and in 

particular, with Section 6(b)(5) of the 

Exchange Act. 

It is Therefore Ordered, pursuant to 

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

that proposed rule change SR– 

NYSEArca-2021–89 be, and hereby is, 

disapproved. 

By the Commission. 

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2022–14309 Filed 7–5–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95175; File No. SR– 

CboeBZX–2021–086] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; 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. 2, To 

Amend the Opening Auction Process 

Provided Under Rule 11.23(b)(2)(B) 

June 29, 2022. 

On December 21, 2021, Cboe BZX 

Exchange, Inc. (‘‘BZX’’ 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 to amend the Opening 

Auction process under BZX Rule 

11.23(b)(2)(B). The proposed rule 

change was published for comment in 

the Federal Register on January 5, 

2022.3 On February 14, 2022, 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 April 1, 

2022, the Exchange filed Amendment 

No. 2 to the proposed rule change, 

which amended and superseded the 

proposed rule change as originally 

filed.6 On April 4, 2022, the 

Commission noticed the filing of 

Amendment No. 2 and instituted 

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

the Act 7 to determine whether to 

approve or disapprove the proposed 

rule change.8

Section 19(b)(2) of the Act 9 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 the 

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 January 5, 

2022.10 The 180th day after publication 

of the proposed rule change is July 4, 

2022. The Commission is extending the 

time period for approving or 

disapproving the proposal 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. 2. 

Accordingly, the Commission, pursuant 

to Section 19(b)(2) of the Act,11

designates September 2, 2022, as the 

date by which the Commission should 

either approve or disapprove the 

proposed rule change (File No. SR– 

CboeBZX–2021–086), as modified by 

Amendment No. 2. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2022–14288 Filed 7–5–22; 8:45 am] 

BILLING CODE 8011–01–P 


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