Federal Register / Vol. 87, No. 128 / Wednesday, July 6, 2022 / Notices 40299 

39 See Options 2, Section 4. 

40 See Options 2, Section 5 and Options 3, 

Section 8. 

41 15 U.S.C. 78s(b)(3)(A)(ii). 42 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 93504 

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

the proposed rule change are available at: https:// 

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

srnysearca202190.htm. 

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

5See Securities Exchange Act Release No. 93788, 

86 FR 72291 (Dec. 21, 2021). 

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

7See Securities Exchange Act Release No. 94151, 

87 FR 7889 (Feb. 10, 2022). 

8See Securities Exchange Act Release No. 94844, 

87 FR 28043 (May 10, 2022) (‘‘Amendment No. 1’’). 

Amendment No. 1 to the proposed rule change can 

Continued 

Market Makers a $0.40 per contract 

rebate when adding liquidity in VOLQ 

does not impose an undue burden on 

competition. Maker Makers take on a 

number of obligations,39 including 

quoting obligations,40 unlike other 

market participants. Further, the 

proposed pricing for Lead Market 

Makers and Market Makers in VOLQ is 

intended to incentivize them to quote 

and trade more on the Exchange, 

thereby providing more trading 

opportunities for all market 

participants. As noted above, the $0.40 

per contract rebate when adding 

liquidity in VOLQ is intended to offset 

the $0.40 per contract VOLQ transaction 

fee. The Exchange believes the proposed 

pricing will incentivize Lead Market 

Makers and Market Makers to provide 

liquidity in the new product. 

Additionally, the proposed VOLQ rebate 

will be applied equally to all Lead 

Market Makers and Market Makers. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.41

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is: (i) necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

Phlx–2022–27 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2022–27. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–Phlx–2022–27, and should 

be submitted on or before July 27, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.42

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2022–14293 Filed 7–5–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95180; File No. SR– 

NYSEArca–2021–90] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Disapproving a 

Proposed Rule Change, as Modified by 

Amendment No. 1, to List and Trade 

Shares of Grayscale Bitcoin Trust 

Under NYSE Arca Rule 8.201–E 

(Commodity-Based Trust Shares) 

June 29, 2022. 

I. Introduction 

On October 19, 2021, NYSE Arca, Inc. 

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

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Exchange 

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

proposed rule change to list and trade 

shares (‘‘Shares’’) of Grayscale Bitcoin 

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 8, 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 4, 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 21, 2022, the Exchange filed 

Amendment No. 1, which replaced and 

superseded the proposed rule change in 

its entirety, and on May 4, 2022, the 

Commission provided notice of 

Amendment No. 1 to the proposed rule 

change and designated a longer period 

for Commission action on the proposed 

rule change, as modified by Amendment 

No. 1.8


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40300 Federal Register / Vol. 87, No. 128 / Wednesday, July 6, 2022 / Notices 

be found at: https://www.sec.gov/comments/srnysearca-2021-90/srnysearca202190-20125938- 

286383.pdf. 

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., Amendment No. 1, 87 FR at 

28045. 

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’’). 12As used in this order, the term ‘‘ETFs’’ refers 

to open-end funds that register the offer and sale of 

their shares under the Securities Act of 1933 

(‘‘Securities Act’’) and are regulated as investment 

companies under the Investment Company Act of 

1940 (‘‘1940 Act’’). The term ‘‘ETPs’’ refers to 

exchange-traded products that register the offer and 

sale of their shares under the Securities Act but are 

not regulated under the 1940 Act, such as 

commodity trusts and trust issued receipts. 

Commenters have sometimes used these terms 

interchangeably, and it is not always clear which 

type of product a commenter is referring to. 

Accordingly, unless clear from the context, the 

Commission interprets statements from the 

Exchange or a commenter to refer to an ETP. 

13See 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). 

14See Winklevoss Order, 83 FR at 37594. See also 

USBT Order, 85 FR at 12596–97; WisdomTree 

Order, 86 FR at 69322. 

15See USBT Order, 85 FR at 12597. 

16See Amendment to Rule Filing Requirements 

for Self-Regulatory Organizations Regarding New 

Derivative Securities Products, Securities Exchange 

This order disapproves the proposed 

rule change, as modified by Amendment 

No. 1. 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 

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 12 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.13

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.14 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.’’ 15

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 fails to establish that 

other means to prevent fraudulent and 

manipulative acts and practices will be 

sufficient, 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


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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 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.’’). 

18See NDSP Adopting Release, 63 FR at 70959. 

19See 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). 

20Securities Exchange Act Release No. 27877 

(Apr. 4, 1990), 55 FR 13344 (Apr. 10, 1990) (Notice 

of Filing and Order Granting Accelerated Approval 

to Proposed Rule Change Regarding Cooperative 

Agreements With Domestic and Foreign SelfRegulatory Organizations) (SR–NYSE–90–14). 

21Securities 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. 

22Securities 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. 

23See 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). 

24See 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). 

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.’’ 17 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.18 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.19

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.’’ 20 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.’’ 21

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.’’ 22

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.23

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 

Commission’s direct regulatory 

authority.24

Listing exchanges have also attempted 

to demonstrate that other means besides 

surveillance-sharing 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 


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25See USBT Order, 85 FR at 12597. 

26See Winklevoss Order, 83 FR at 37580, 37582– 

91 (addressing assertions that ‘‘bitcoin and [spot] 

bitcoin markets’’ generally, as well as one bitcoin 

trading platform specifically, have unique 

resistance to fraud and manipulation). See also 

USBT Order, 85 FR at 12597. 

27See USBT Order, 85 FR at 12597, 12599. 

28See Amendment No. 1, 87 FR at 28051–54, 

28059–60. 

29See infra note 35 and accompanying text. 

30See Amendment No. 1, 87 FR at 28051–53, 

28059–60. 

31See id. at 28054; 28060. 32See id. at 28060. 

33See supra note 8. See also Amendment No. 1 

to Registration Statement on Form 10, dated 

December 31, 2019, filed with the Commission on 

behalf of the Trust (‘‘Registration Statement’’); 

Annual Report on Form 10–K for the fiscal year 

ended December 31, 2021, filed with the 

Commission on the behalf of the Trust (‘‘2021 10– 

K’’). 

34See Amendment No. 1, 87 FR at 28045. 

Grayscale Investments, LLC (‘‘Sponsor’’) is the 

sponsor of the Trust and is a wholly-owned 

subsidiary of Digital Currency Group, Inc. Delaware 

Trust Company (‘‘Trustee’’) is the trustee of the 

Trust. The custodian for the Trust is Coinbase 

Custody Trust Company, LLC (‘‘Custodian’’). The 

administrator of the Trust is BNY Mellon Asset 

Servicing (‘‘Administrator’’). The distribution and 

marketing agent for the Trust is Genesis. The Trust 

operates pursuant to a trust agreement (‘‘Trust 

Agreement’’) between the Sponsor and the Trustee. 

See id. at 28044. 

35See id. at 28049. According to the Exchange, 

the index provider for the Trust is CoinDesk 

Indices, Inc., formerly known as TradeBlock, Inc. 

(‘‘Index Provider’’). See id. at 28044. While the 

Exchange, in the proposal, does not name the Index 

that the Trust would use to value the bitcoins held 

by the Trust, the Exchange does provide that the 

value of the Index, as well as additional information 

regarding the Index, may be found at: https://

tradeblock.com/markets/index/xbx. See id. at 

28058. Further, in its letter to the Commission, the 

Sponsor states that the Trust values its bitcoin 

holdings based on the CoinDesk Bitcoin Price Index 

(XBX) (formerly known as the Tradeblock XBX 

Index). See Letter from Davis Polk & Wardwell LLP, 

on behalf of the Sponsor, dated Nov. 29, 2021 

(‘‘Grayscale Letter I’’), at 5. 

36See Amendment No. 1, 87 FR at 28049. 

37See id. at 28047, 28049, 28052 n.35. In its 

proposal, NYSE Arca uses the term ‘‘U.S.- 

market is ‘‘uniquely’’ and ‘‘inherently’’ 

resistant to fraud and manipulation.25 In 

response, the Commission has stated 

that, if a listing exchange could 

establish that the underlying market 

inherently possesses a unique resistance 

to manipulation beyond the protections 

that are utilized by traditional 

commodity or securities markets, the 

listing market would not necessarily 

need to enter into a surveillance-sharing 

agreement with a regulated significant 

market.26 Such resistance to fraud and 

manipulation, however, must be novel 

and beyond those protections that exist 

in traditional commodity markets or 

securities markets for which 

surveillance-sharing agreements in the 

context of listing derivative securities 

products have been consistently 

present.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 bitcoin offers 

novel protections beyond those that 

exist in traditional commodity markets 

or equity markets and the proposal’s use 

of the Index (as described below) 29

represents an effective means to prevent 

fraudulent and manipulative acts and 

practices.30 In addition, NYSE Arca 

asserts that the Chicago Mercantile 

Exchange (‘‘CME’’) bitcoin futures 

market is a significant, surveilled, and 

regulated market that is ‘‘closely 

connected’’ to the spot bitcoin market, 

and that the Exchange may obtain 

information from the CME bitcoin 

futures market and other entities that 

are members of the ISG to assist in 

detecting and deterring potential fraud 

and manipulation with respect to the 

Trust and the Shares.31 In addition, 

NYSE Arca argues that the proposal 

would protect investors and the public 

interest because, among other things, 

the Exchange has in place surveillance 

procedures relating to trading in the 

Shares and the proposal would promote 

competition.32

In the analysis that follows, the 

Commission examines whether the 

proposed rule change, as modified by 

Amendment No. 1, is consistent with 

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

addressing: in Section III.B.1 assertions 

that other means besides surveillancesharing agreements will be sufficient to 

prevent fraudulent and manipulative 

acts and practices; in Section III.B.2 

assertions that NYSE Arca has entered 

into a comprehensive surveillancesharing agreement with a regulated 

market of significant size related to spot 

bitcoin; in Section III.B.3 assertions that 

the Commission must approve the 

proposal because the Commission has 

approved the listing and trading of ETFs 

and ETPs that hold CME bitcoin futures; 

in Section III.C assertions that the 

proposal is consistent with the 

protection of investors and the public 

interest; and in Section III.D other 

arguments raised by commenters. 

Based on its analysis, the Commission 

concludes that NYSE Arca has not 

established that other means to prevent 

fraudulent and manipulative acts and 

practices are sufficient to justify 

dispensing with the detection and 

deterrence of fraud and manipulation 

provided by a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to spot bitcoin. The Commission 

further 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. As a result, the 

Commission is unable to find 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, as modified by Amendment No. 

1, 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, as modified by Amendment No. 

1, 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 Modified by Amendment 

No. 1 

As described in more detail in 

Amendment No. 1,33 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 for the value of the Shares (based on 

bitcoin per Share) to reflect the value of 

the bitcoins held by the Trust, as 

determined by reference to the ‘‘Index 

Price,’’ less the Trust’s expenses and 

other liabilities.34 The ‘‘Index Price’’ is 

the U.S. dollar value of a bitcoin 

represented by the ‘‘Index,’’ calculated 

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

business day.35 According to the 

Exchange, the Index Provider develops, 

calculates, and publishes the Index on 

a continuous basis using the price at 

certain spot bitcoin trading platforms 

selected by the Index Provider.36 As of 

December 31, 2021, the spot bitcoin 

trading platforms included in the Index 

were: Coinbase Pro, Bitstamp, Kraken, 

and LMAX Digital (‘‘Constituent 

Platforms’’).37 The Index applies an 


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Compliant Exchanges’’ to describe Constituent 

Platforms that are ‘‘compliant with applicable U.S. 

federal and state licensing requirements and 

practices regarding AML and KYC regulations.’’ Id. 

at 28052 n.35. According to NYSE Arca, ‘‘[a]ll 

Constituent [Platforms] are U.S.-Compliant 

Exchanges.’’ Id. 

38See id. at 28049. According to the Exchange, 

prior to February 1, 2022, the Trust valued its 

bitcoins for operational purposes by reference to the 

volume-weighted average Index Price (‘‘Old Index 

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

applying a weighting algorithm to the price and 

trading volume data for the immediately preceding 

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

derived from the Constituent Platforms reflected in 

the Index on such trade date, and overlaying an 

averaging mechanism to the price produced. Thus, 

whereas the Old Index Price reflected the price of 

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

by taking the average of each price of a bitcoin 

produced by the Index over the preceding 24-hour 

period, as of February 1, 2022, the Index Price 

reflects the price of a bitcoin at 4:00 p.m., New York 

time, calculated based on the price and trading 

volume data of the Constituent Platforms over the 

preceding 24-hour period. According to the 

Exchange, the Index Price differs from the Old 

Index Price only in that it does not use an 

additional averaging mechanism; the Index Price 

otherwise uses the same methodology as the Old 

Index Price, and there has been no change to the 

Index used to determine the Index Price or the 

criteria used to select the Constituent Platforms. See 

id. at 28053 n.44. 

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

otherwise establish dominion and control over, any 

virtual currency or other asset or right, which rights 

are incident to the Trust’s ownership of bitcoins 

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

Sponsor or Trustee on behalf of the Trust. See id. 

at 28044 n.14. 

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

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

through the exercise (subject to the applicable 

provisions of the Trust Agreement) of any 

Incidental Right. See id. at 28045 n.15. 

41 ‘‘Additional Trust Expenses’’ are any expenses 

incurred by the Trust in addition to the Sponsor’s 

fee that are not Sponsor-paid expenses. See id. at 

28045 n.16. 

42See id. at 28045, 28047. 

43The Exchange does not define the term ‘‘Digital 

Asset Holdings’’ in the proposed rule change. 

Additional information about the calculation of the 

Digital Asset Holdings can be found in Amendment 

No. 1. See id. at 28047. The Trust does not expect 

to take any Incidental Rights or IR Virtual Currency 

it may hold into account for purposes of 

determining the Trust’s Digital Asset Holdings. Id. 

44See id. at 28058. 

45 Id. 

46See id. at 28055. 

47See id. at 28056. 

48See id. at 28056–57. 

49See id. at 28055–57. 

50See Grayscale Letter I, at 2. 

51See id. 

52See id. 

53See id. at 4. 

54 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 

Continued 

algorithm to the price of bitcoin on the 

Constituent Platforms calculated on a 

per second basis over a 24-hour 

period.38

The Trust’s assets will consist solely 

of bitcoins; Incidental Rights; 39 IR 

Virtual Currency; 40 proceeds from the 

sale of bitcoins, Incidental Rights, and 

IR Virtual Currency pending use of such 

cash for payment of Additional Trust 

Expenses 41 or distribution to the 

shareholders; and any rights of the Trust 

pursuant to any agreements, other than 

the Trust Agreement, to which the Trust 

is a party. Each Share represents a 

proportional interest, based on the total 

number of Shares outstanding, in each 

of the Trust’s assets as determined in 

the case of bitcoin by reference to the 

Index Price, less the Trust’s expenses 

and other liabilities (which include 

accrued but unpaid fees and 

expenses).42

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

New York time, or as soon thereafter as 

practicable, the Sponsor will evaluate 

the bitcoin held by the Trust and 

calculate and publish the ‘‘Digital Asset 

Holdings’’ of the Trust using the Index 

Price.43 The Trust’s website, as well as 

one or more major market data vendors, 

will provide an intra-day indicative 

value (‘‘IIV’’) per Share updated every 

15 seconds, as calculated by the 

Exchange or a third party financial data 

provider during the Exchange’s Core 

Trading Session (9:30 a.m. to 4:00 p.m., 

E.T.). The IIV will be calculated using 

the same methodology as the Digital 

Asset Holdings of the Trust, specifically 

by using the prior day’s closing Digital 

Asset Holdings per Share as a base and 

updating that value during the 

Exchange’s Core Trading Session to 

reflect changes in the value of the 

Trust’s Digital Asset Holdings during 

the trading day.44 In addition, according 

to the Exchange, ‘‘each investor will 

have access to the current Digital Asset 

Holdings of the Trust through the 

Trust’s website, as well as from one or 

more major market data vendors.’’ 45

The Trust will issue Shares to 

authorized participants from time to 

time, but only in one or more Baskets 

(each ‘‘Basket’’ being a block of 100 

Shares). The creation of Baskets will be 

made only in exchange for the delivery 

to the Trust of the number of whole and 

fractional bitcoins represented by each 

Basket being created.46 The Trust may 

redeem Shares from time to time, but 

only in Baskets. The redemption of 

Baskets requires the distribution by the 

Trust of the number of bitcoins 

represented by the Baskets being 

redeemed. The redemption of a Basket 

will be made only in exchange for the 

distribution by the Trust of the number 

of whole and fractional bitcoins 

represented by each Basket being 

redeemed.47 Creation and redemption 

orders may be placed either ‘‘in-kind’’ 

or ‘‘in-cash.’’ 48 Although the Trust will 

create Baskets only upon the receipt of 

bitcoins, and will redeem Baskets only 

by distributing bitcoins, an authorized 

participant may deposit cash with or 

receive cash from the Administrator, 

which will facilitate the purchase or 

sale of bitcoins through a liquidity 

provider on behalf of an authorized 

participant.49

According to the Sponsor, shares of 

the Trust are currently offered to 

accredited investors within the meaning 

of Regulation D under the Securities 

Act, and, once such investors have held 

their shares for the requisite holding 

period pursuant to Rule 144 under the 

Securities Act, they have the ability to 

resell them through transactions on the 

OTCQX Best Market (‘‘OTCQX’’), an 

over-the-counter (‘‘OTC’’) marketplace 

operated by OTC Markets Group that is 

not registered with the Commission as 

a national securities exchange.50 The 

Sponsor states that these shares have 

been quoted on OTCQX since March 

2015 and are available to investors 

through broker transactions.51 The 

Sponsor also states that, in the twelve 

months ended October 31, 2021, trading 

in these shares accounted for the most 

transactions by dollar volume of any 

security traded on OTCQX.52 The 

Sponsor further states that the Trust is 

the largest and most liquid bitcoin 

investment fund in the world and that 

the Sponsor is the world’s largest digital 

currency asset manager, with more than 

$55 billion in assets under management 

as of October 29, 2021.53

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.’’ 54 Under the Commission’s 


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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). 

55Rule 700(b)(3), Commission Rules of Practice, 

17 CFR 201.700(b)(3). 

56See id. 

57See id. 

58Susquehanna Int’l Group, LLP v. Securities and 

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

2017) (‘‘Susquehanna’’). 

59See USBT Order, 85 FR at 12597 n.23. The 

Commission is not applying a ‘‘cannot be 

manipulated’’ standard. Instead, the Commission is 

examining whether the proposal meets the 

requirements of the Exchange Act and, pursuant to 

its Rules of Practice, places the burden on the 

listing exchange to demonstrate the validity of its 

contentions and to establish that the requirements 

of the Exchange Act have been met. See id. 

60See id. at 12597. 

61Amendment No. 1, 87 FR at 28051. 

62See, e.g., Letter from Paul Grewal, Chief Legal 

Officer, Coinbase, dated Mar. 3, 2022 (‘‘Coinbase 

Letter II’’), at 2 (‘‘the [b]itcoin markets exhibit 

characteristics and maturity commensurate with 

some of the deeply traded markets in commodities 

and U.S. equities. The liquidity and transparency of 

the [b]itcoin markets limits its susceptibility to 

manipulation . . . .’’); Letter from Cassandra 

Lentchner, President and Chairman, BitGo Trust 

Company, Inc., dated Apr. 18, 2022 (‘‘BitGo 

Letter’’), at 2 (‘‘Bitcoin is a widely-traded asset with 

a market capital of over $750B and trading volumes 

of tens of billions daily. The sheer size of this 

widely held market demonstrates the difficulty of 

manipulation.’’); Letter from Mike Cammarata, 

dated Mar. 31, 2022 (‘‘Cammarata Letter’’) (‘‘the size 

of the [b]itcoin market (around $1 Trillion USD) has 

now reached a level where price manipulation 

concerns are minor as any attempt at manipulation 

will simply be arbitraged away by the deep pool of 

robust market participants’’); Letter from Kate 

McAllister and James Toes, Security Traders 

Association, dated Apr. 20, 2022 (‘‘STA Letter’’), at 

2 (‘‘the combination of liquid markets for [b]itcoin 

and the features within the ETF structure mitigate 

potential price manipulation’’); Letter from Michael 

D. Moffitt, dated Feb. 7, 2022 (‘‘Moffitt Letter I’’) 

(stating that ‘‘the [b]itcoin as of 2021/2022 are 

indeed sufficiently liquid and transparent for the 

purposes of an ETF’’ and ‘‘it is my belief that 

widespread manipulation is simply not possible in 

the same way that it might have been several years 

ago’’). 

63See Coinbase Letter II, at 3. 

64See id. at 3, 8. See also, e.g., Letter from 

Douglas Shultz (Feb. 14, 2022) (‘‘Shultz Letter’’) 

(‘‘The cryptocurrency market has passed silver in 

terms of total market capitalization at various times. 

If silver can’t be manipulated at these levels, neither 

can [b]itcoin.’’). 

65Coinbase Letter II, at 3. 

66See id. at 3. 

67See, e.g., Coinbase Letter II, at 2; Letter from 

Douglas A. Cifu, Chief Executive Officer, Virtu 

Financial, Inc., dated Apr. 4, 2022 (‘‘Virtu Letter’’), 

at 3 (‘‘we believe that the active participation by 

market makers across all of these linked markets— 

spot, futures, derivatives and ETP—can mitigate the 

risk of manipulation through competitive liquidity 

provision, arbitrage and creation/redemption 

transactions’’); Letter from W. Graham Harper, Head 

of Public Policy and Market Structure, Cumberland, 

a subsidiary of DRW Trading Group, dated Apr. 1, 

2022 (‘‘Cumberland Letter’’), at 2 (‘‘[a]ny narrowly 

scoped attempt to manipulate the spot [b]itcoin 

market would be quickly counteracted by the 

collective activity of arbitrageurs and liquidity 

providers, ultimately facilitating orderly price 

discovery potentially causing artificial prices to be 

perpetuated across all [b]itcoin related products, 

but in any case, forcing the arbitrage relationships 

to remain intact’’). 

68See Coinbase Letter II, at 4. 

69See id. According to this commenter, while 

there were instances where prices across 

Constituent Platforms experienced higher 

deviations than 20 bps, the vast majority (e.g., 90% 

of deviations greater than 1%) were driven by a 

single platform’s pricing with less than 5% of the 

trading volume. In the remaining instances, price 

differences quickly closed by intermarket trading, 

typically within one hour, with the exception of 

two price deviations that lasted three hours during 

the onset of the Covid–19 pandemic. See id. 

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.’’ 55

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,56 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.57

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.58

B. Whether NYSE Arca Has Met Its 

Burden to Demonstrate That the 

Proposal Is Designed to Prevent 

Fraudulent and Manipulative Acts and 

Practices 

(1) Assertions That Other Means Besides 

Surveillance-Sharing Agreements Will 

Be Sufficient to Prevent Fraudulent and 

Manipulative Acts and Practices 

(i) Assertions Regarding the Bitcoin 

Market 

As stated above, the Commission has 

recognized that a listing exchange could 

demonstrate that other means to prevent 

fraudulent and manipulative acts and 

practices are sufficient to justify 

dispensing with the detection and 

deterrence of fraud and manipulation 

provided by a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to the underlying bitcoin assets, 

including by demonstrating that the 

bitcoin market as a whole or the 

relevant underlying bitcoin market is 

uniquely and inherently resistant to 

fraud and manipulation.59 Such 

resistance to fraud and manipulation, 

however, must be novel and beyond 

those protections that exist in 

traditional commodities or securities 

markets.60

(a) Representations Made and 

Comments Received 

NYSE Arca asserts that ‘‘the 

fundamental features of [b]itcoin’s 

fungibility, transportability[,] and 

exchange tradability offer novel 

protections beyond those that exist in 

traditional commodity markets or equity 

markets when combined with other 

means.’’ 61

In addition, some commenters claim 

that the spot bitcoin market’s size and 

depth of liquidity, as well as the 

diversity of market participants, limits 

its susceptibility to manipulation.62 An 

affiliate of the Custodian, for example, 

states that bitcoin’s average daily 

trading volume in 2021 was 

approximately $45 billion, which, 

according to this commenter, is 

significantly higher than that of the 

largest equity stocks.63 This commenter 

also states that the spot bitcoin market 

is comparably as large and transparent 

as the silver, palladium, and platinum 

markets, for which the Commission has 

approved spot ETPs.64 According to this 

commenter, ‘‘[w]hen compared across 

key market dimensions—trading 

volume, capitalization, and number of 

active trading venues—the [b]itcoin spot 

market is more robust, a sign of lower 

likelihood of successful market 

manipulation.’’ 65 Lastly, this 

commenter states that asset managers, 

hedge funds, and public companies 

participate in the bitcoin market and 

that interest from institutional investors 

continues to increase.66

Some commenters state that active 

participation by market makers and 

arbitrageurs across bitcoin-related 

markets serves to quickly close arbitrage 

opportunities, including any that may 

be due to attempted price 

manipulation.67 In support of this claim, 

the affiliate of the Custodian states that 

it has undertaken empirical research 

that shows that spot bitcoin prices do 

not deviate significantly across digital 

asset platforms.68 According to this 

commenter, in a comparison of hourend prices for bitcoin across the 

Constituent Platforms, the platforms 

showed less than 20 basis point 

deviation 97% of the time over a 

roughly three-year time horizon.69 This 

commenter states that its observations 

and interpretations are consistent with 

those expressed previously by the 

Commission—that a strong convergence 


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70See id. (citing to Securities Exchange Act 

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

(Nov. 5, 2004) (SR–NYSE–2004–22) (Order Granting 

Approval of Proposed Rule Change by the New 

York Stock Exchange, Inc. Regarding Listing and 

Trading of streetTRACKS® Gold Shares). 

71See id. at 4–5. 

72See, e.g., Letters from David Rosenthal (Apr. 20, 

2022); David Golumbia (Apr. 18, 2022); Elliot 

Kleinfelder (Apr. 19, 2022) (‘‘Kleinfelder Letter’’); 

Scott S. (Feb. 20, 2022); John Carvalho (Feb. 22, 

2022); JRL Innovations (Feb. 14, 2022); Anonymous 

(Feb. 17, 2022); Adan (Feb. 8, 2022). Some 

commenters that support approval of the proposal 

nevertheless state that the spot bitcoin market is 

subject to manipulation. See, e.g., Letter from Noah 

Dreyfuss, CIO, Dreyfuss Capital Management, dated 

Feb. 21, 2022 (‘‘Dreyfuss Letter’’), at 1 (‘‘Frankly, 

one would find great difficulty in claiming that the 

spot [b]itcoin market is free of manipulation.’’); 

Letter from Jonas M. Grant (Feb. 6, 2022) (‘‘the 

[b]itcoin market is no doubt susceptible to some 

manipulation’’). 

73See 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). 

74See USBT Order, 85 FR at 12600–01 & nn.66– 

67 (discussing J. Griffin & A. Shams, Is Bitcoin 

Really Untethered? (Oct. 28, 2019), available at 

https://ssrn.com/abstract=3195066 and published 

in 75 J. Finance 1913 (2020)); Winklevoss Order, 83 

FR at 37585–86; WisdomTree Order, 86 FR at 

69326; Global X Order, 87 FR at 14916; ARK 

21Shares Order, 87 FR at 20019; One River Order, 

87 FR at 33554. 

75See Amendment No. 1, 87 FR at 28050–51 

(where the Exchange states that ‘‘[t]he Commission 

has expressed legitimate concerns about the 

underlying [spot bitcoin market] due to the 

potential for fraud and manipulation’’ and 

discusses previous Commission orders finding 

‘‘evidence of potential and actual fraud and 

manipulation in the historical trading of [b]itcoin 

on certain marketplaces such as (1) ‘wash’ trading, 

(2) trading based on material, non-public 

information, including the dissemination of false 

and misleading information, (3) manipulative 

activity involving Tether, and (4) fraud and 

manipulation’’). See also id. at 28049 (where the 

Exchange asserts that the proposal’s use of the 

Index mitigates the effects of wash trading and 

order book spoofing). 

76 Id. at 28051. 

77 Id. at 28054. 

78 Id. at 28059 (the ‘‘Digital Asset Exchange 

Market is not inherently resistant to fraud and 

manipulation’’). In its filing, the Exchange uses the 

term ‘‘Digital Asset Exchange Market’’ as ‘‘the 

global exchange market for the trading of [b]itcoins, 

which consists of transactions on electronic Digital 

Asset Exchanges.’’ A ‘‘Digital Asset Exchange’’ is 

defined by NYSE Arca as ‘‘an electronic 

marketplace where exchange participants may 

trade, buy and sell [b]itcoins based on bid-ask 

trading.’’ Id. at 28045 n.18. 

79See Exhibit 99.1 of the Registration Statement, 

at 13–14, 17–18. See also 2021 10–K, at 13, 50; 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.website-files.com/ 

5fd11235b3950c2c1a3b6df4/ 

62af6c641a672b3329b9a480_Unintended_

Centralities_in_Distributed_Ledgers.pdf. 

80See Amendment No. 1, 87 FR at 28051. The 

Exchange does not explicitly tie the asserted novel 

aspects of bitcoin to an argument that such market 

provides sufficient means besides surveillancesharing agreements to prevent fraud and 

manipulation. 

of pricing across a broad market is 

present where spot markets are deep 

and liquid.70 This commenter concludes 

that, given the spot bitcoin market’s 

significant volume and efficiency of 

intermarket price correction, 

manipulating the price of the Shares by 

manipulating the spot bitcoin market 

would require a prohibitively large 

trading volume and coordination across 

several large trading platforms, and that 

activity on this scale would be readily 

detected via surveillance.71

A number of commenters, however, 

take the opposite view, arguing, among 

other things, that the price of bitcoin is 

subject to manipulation on the 

unregulated platforms, and approval of 

the proposal would invite additional 

manipulation.72

(b) Analysis 

As with the previous proposals, the 

Commission here concludes that 

information in the record regarding the 

bitcoin market does not support a 

finding that the Exchange has 

established other means to prevent 

fraudulent and manipulative acts and 

practices sufficient to justify dispensing 

with the detection and deterrence of 

fraud and manipulation that is provided 

by a comprehensive surveillancesharing agreement with a regulated 

market of significant size related to spot 

bitcoin. Likewise, the record does not 

support a finding that the Exchange has 

demonstrated that the bitcoin market as 

a whole or the relevant underlying 

bitcoin market is uniquely and 

inherently resistant to fraud and 

manipulation. 

The Commission has identified in 

previous orders possible sources of 

fraud and manipulation in the spot 

bitcoin market, including: (1) ‘‘wash’’ 

trading; 73 (2) persons with a dominant 

position in bitcoin manipulating bitcoin 

pricing; (3) hacking of the bitcoin 

network and trading platforms; (4) 

malicious control of the bitcoin 

network; (5) trading based on material, 

non-public information (for example, 

plans of market participants to 

significantly increase or decrease their 

holdings in bitcoin, new sources of 

demand for bitcoin, or the decision of a 

bitcoin-based investment vehicle on 

how to respond to a ‘‘fork’’ in the 

bitcoin blockchain, which would create 

two different, non-interchangeable types 

of bitcoin) or based on 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.74

NYSE Arca concedes that neither 

bitcoin itself nor the global bitcoin 

markets are inherently resistant to fraud 

or manipulation.75 NYSE Arca 

acknowledges in its proposal that ‘‘fraud 

and manipulation may exist and that 

[b]itcoin trading on any given exchange 

may be no more uniquely resistant to 

fraud and manipulation than other 

commodity markets.’’ 76 NYSE Arca also 

states that ‘‘[b]itcoin is not itself 

inherently resistant to fraud and 

manipulation’’ 77 and concedes that ‘‘the 

global exchange market for the trading 

of [b]itcoins’’—which NYSE Arca says 

consists of transactions on the 

‘‘electronic marketplace where exchange 

participants may trade, buy and sell 

[b]itcoins based on bid-ask trading’’— 

also ‘‘is not inherently resistant to fraud 

and manipulation.’’ 78

Moreover, the Trust’s Registration 

Statement acknowledges that ‘‘[d]ue to 

the unregulated nature and lack of 

transparency surrounding the 

operations of [bitcoin trading platforms], 

they may experience fraud, security 

failures or operational problems, which 

may adversely affect the value of 

[b]itcoin and, consequently, the value of 

the Shares’’; that the bitcoin network is 

currently vulnerable to a ‘‘51% attack,’’ 

in which a bad actor or botnet that 

controls a majority of the processing 

power dedicated to mining on the 

bitcoin network may be able to gain full 

control of the network and the ability to 

manipulate the bitcoin blockchain; that 

‘‘in 2019 there were reports claiming 

that 80–95% of [b]itcoin trading volume 

on [bitcoin platforms] was false or noneconomic in nature’’; and that ‘‘[o]ver 

the past several years, some [bitcoin 

trading platforms] have been closed due 

to fraud and manipulative activity, 

business failure or security breaches.’’ 79

NYSE Arca asserts that bitcoin’s 

fungibility, transportability, and 

exchange tradability, ‘‘when combined 

with other means,’’ offer novel 

protections beyond those that exist in 

traditional commodity markets or equity 

markets.80 The Exchange, however, does 

not explain how bitcoin is fungible, 

transportable, or tradable; or how 

bitcoin’s fungibility, transportability, 

and tradability offer novel protections or 

help to detect and deter potential fraud 

and manipulation. As stated above, 

‘‘unquestioning reliance’’ on an SRO’s 

representations in a proposed rule 

change is not sufficient to justify the 


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81See supra note 58. 

82See Winklevoss Order, 83 FR at 37585. 

83Further, transportation and storage costs for 

bitcoin are not zero, as bitcoin mining and 

recording transactions to the blockchain have costs. 

Bitcoin mining involves significant costs for 

electrical power and computer hardware. Moreover, 

bitcoin trading is subject to transaction fees charged 

by trading platforms, withdrawal fees, expenses for 

custody arrangements, and other factors that impose 

frictions on trading. 

84Although a commenter claims that 

‘‘transparency’’ of the bitcoin market assists 

arbitrage and limits bitcoin’s susceptibility to 

manipulation, the commenter does not explain 

what is meant by ‘‘transparency,’’ how the bitcoin 

markets are transparent, or why such transparency 

limits manipulation. See Coinbase Letter II, at 2–4. 

85See USBT Order, 85 FR at 12601; Kryptoin 

Order, 86 FR at 74171; Global X Order, 87 FR at 

14916; Wise Origin Order, 87 FR at 5531. 

86See, e.g., Winklevoss Order, 83 FR at 37584; 

USBT Order, 85 FR at 12600–01; WisdomTree 

Order, 86 FR at 69325; Valkyrie Order, 86 FR at 

74160; Kryptoin Order, 86 FR at 74170; SkyBridge 

Order, 87 FR at 3783–84; Wise Origin Order, 87 FR 

at 5531; ARK 21Shares Order, 87 FR at 20019. 

87 2021 10–K, at 46. 

88See supra note 23 and accompanying text. 

89See Coinbase Letter II, at 4–5. In addition, the 

Registration Statement states: ‘‘As corresponding 

increases in throughput lag behind growth in the 

use of digital asset networks, average fees and 

settlement times may increase considerably. For 

example, the Bitcoin Network has been, at times, at 

capacity, which has led to increased transaction 

fees . . . . Increased fees and decreased settlement 

speeds could . . . adversely impact the value of the 

Shares.’’ Exhibit 99.1 of the Registration Statement, 

at 13. See also 2021 10–K, at 46. The affiliate of the 

Custodian does not provide data or analysis to 

address, among other things, whether such risks of 

increased fees and bitcoin transaction settlement 

times may affect whether arbitrage is as effective as 

the commenter asserts. And without such data or 

analysis, the Commission cannot agree with this 

commenter’s assertions. See Susquehanna, 866 F.3d 

at 447. See also ARK 21Shares Order, 87 FR at 

20019 n.68. 

90See Winklevoss Order, 83 FR at 37586; SolidX 

Order, 82 FR at 16256–57; USBT Order, 85 FR at 

12601; WisdomTree Order, 86 FR at 69325; Valkyrie 

Order, 86 FR at 74159–60; Kryptoin Order, 86 FR 

at 74170; Wise Origin Order, 87 FR at 5531; ARK 

21Shares Order, 87 FR at 20019. 

Commission’s approval of a proposed 

rule change.81

Further, contrary to the Exchange’s 

assertion, fungibility, transportability, 

and tradability are not a novel 

protection beyond those that exist in 

traditional commodity or equity 

markets. Fungible, ‘‘transportable,’’ 

exchange-traded assets, such as 

securities and exchange-traded 

derivatives, trade subject to substantial 

regulatory oversight and surveillancesharing agreements that would be 

unnecessary if fungibility, 

transportability, and tradability were 

sufficient protection against fraud and 

manipulation. Moreover, manipulation 

of asset prices can occur through trading 

activity, including activity that creates a 

false impression of supply and 

demand.82 Therefore, the Exchange’s 

assertions about fungibility, 

transportability, and tradability do not 

inform the Commission’s view with 

respect to the necessity that a listing 

exchange have the abilities to detect and 

deter fraud and manipulation that are 

provided by entering into a 

comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size related to spot bitcoin.83

Likewise, the Commission is not 

persuaded by commenters’ assertions 

that the bitcoin market’s size, liquidity, 

market participation, or arbitrage, either 

individually or together, sufficiently 

address concerns regarding fraud and 

manipulation.84 Although commenters 

recite various metrics, including market 

capitalization and average daily trading 

volume, or make observations 

concerning the growth of the bitcoin 

market, including increasing 

institutional participation, they offer no 

evidence or analysis of how these 

metrics or observations serve to detect 

and deter potential fraud and 

manipulation. Further, even if the 

record demonstrates that the bitcoin 

market’s size, liquidity, market 

participation, or arbitrage makes 

manipulation more difficult or costly, as 

the Commission has stated in prior 

orders with respect to similar 

arguments, these attributes speak to 

providing some resistance to 

manipulation, rather than establishing a 

unique resistance to manipulation that 

would justify dispensing with the 

detection and deterrence of fraud and 

manipulation provided by a 

comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size related to spot bitcoin.85

Moreover, commenters do not explain 

how the bitcoin market’s diversity of 

market participants, widely held nature, 

or increase in institutional participation 

help mitigate concerns about fraud and 

manipulation such that a surveillancesharing agreement is unnecessary. In 

addition, commenters’ assertions about 

the diverse, broad, and institutional 

nature of bitcoin’s investor base do not 

provide any information on the 

concentration of bitcoin ownership 

within or among market participants, or 

take into account that a market 

participant with a dominant ownership 

position may not find it prohibitively 

expensive to overcome the liquidity 

supplied by arbitrageurs and could use 

dominant market share to engage in 

manipulation.86 Indeed, the Sponsor’s 

own statements cast doubt on assertions 

that the bitcoin market’s attributes 

sufficiently address concerns about 

fraud and manipulation. According to 

the Sponsor, ‘‘[a]s of December 31, 2021, 

the largest 100 [b]itcoin wallets held 

approximately 15% of the [b]itcoins in 

circulation. Moreover, it is possible that 

other persons or entities control 

multiple wallets that collectively hold a 

significant number of [b]itcoins, even if 

they individually only hold a small 

amount, and it is possible that some of 

these wallets are controlled by the same 

person or entity. As a result of this 

concentration of ownership, large sales 

or distributions by such holders could 

have an adverse effect on the market 

price of [b]itcoin.’’ 87

The Custodian affiliate’s comparison 

of the spot bitcoin market to the silver, 

palladium, and platinum markets also 

does not support the finding that other 

means to prevent fraudulent and 

manipulative acts and practices are 

sufficient to justify dispensing with the 

detection and deterrence of fraud and 

manipulation provided by a 

comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size related to spot bitcoin. 

As discussed above,88 for the 

commodity-trust ETPs approved to date 

for listing and trading, including where 

the underlying commodity is silver, 

palladium, or platinum, 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 ISG membership in common with, 

that market. 

The Commission is also not 

persuaded by commenters’ assertion 

that efficiency of intermarket price 

correction in the spot bitcoin markets 

would make manipulating the spot 

market prohibitively expensive and 

readily detectable. The affiliate of the 

Custodian provides various statistics 

which purport to show that bitcoin 

prices are closely and increasingly 

aligned across markets and that any 

price disparities are quickly arbitraged 

away. However, such statistics are based 

on hour-end bitcoin prices and do not 

capture intra-hour price disparities or 

provide intra-hour information on how 

long price disparities persist. Nor do 

this commenter’s statistics or its 

assertions provide any insight into what 

size or duration of price disparities 

would be needed for a would-be 

manipulator to have an opportunity to 

make a profit.89

In any event, as the Commission has 

explained, efficient price arbitrage is not 

sufficient to support the finding that a 

market is uniquely or inherently 

resistant to manipulation such that the 

Commission can dispense with 

surveillance-sharing agreements.90 The 

Commission has stated, for example, 


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91See, e.g., USBT Order, 85 FR at 12601; 

WisdomTree Order, 86 FR at 69329; Valkyrie Order, 

86 FR at 74160; Kryptoin Order, 86 FR at 74170; 

Wise Origin Order, 87 FR at 5531; ARK 21Shares 

Order, 87 FR at 20019. 

92See SEC Staff Report on Algorithmic Trading in 

U.S. Capital Markets (Aug. 5, 2020), available at: 

https://www.sec.gov/files/Algo_Trading_Report_

2020.pdf; Market Data Infrastructure Proposing 

Release, Securities Exchange Act Release No. 88216 

(Feb. 14, 2020), 85 FR 16726, 16728 (Mar. 24, 2020). 

See also ARK 21Shares Order, 87 FR at 20019 n.70. 

93See WisdomTree Order, 86 FR at 69325–26; 

Kryptoin Order, 86 FR at 74170; SkyBridge Order, 

87 FR at 3783–84; Wise Origin Order, 87 FR at 

5531; ARK 21Shares Order, 87 FR at 20019. 

94See Winklevoss Order, 83 FR at 37585; ARK 

21Shares Order, 87 FR at 20019. 

95Amendment No. 1, 87 FR at 28053. A 

commenter also states that the ‘‘Index is designed 

to (i) mitigate the effects of fraud, manipulation and 

other anomalous trading activity from impacting the 

bitcoin reference rate, (ii) provide a real-time, 

volume-weighted fair value of bitcoin and (iii) 

appropriately handle and adjust for non-market 

related events.’’ Letter from Campbell R. Harvey, 

Professor of Finance, Duke University, dated Mar. 

26, 2022 (‘‘Harvey Letter’’), at 3. Another 

commenter agrees with the Exchange that ‘‘[h]aving 

the Index Price determined through a process in 

which trade data is cleansed and compiled will 

sufficiently mitigate the impact of manipulation.’’ 

Letter from Robert Citrone, Founder, Discovery 

Capital Management, dated Feb. 23, 2022 

(‘‘Discovery Letter’’), at 1. See also, e.g., Moffitt 

Letter I (‘‘the structure of this Index is robust 

enough to protect investors’’). 

96Amendment No. 1, 87 FR at 28059. See also id. 

at 28053 (‘‘Since November 1, 2014, the Trust has 

consistently priced its Shares at 4:00 p.m., E.T. 

based on the Index Price. . . . While that pricing 

would be known to the market, the Sponsor 

believes that, even if efforts to manipulate the price 

of [b]itcoin at 4:00 p.m., E.T. were successful on any 

exchange, such activity would have had a negligible 

effect on the pricing of the Trust, due to the controls 

embedded in the structure of the Index.’’). 

97See id. at 28052. 

98See id. The Exchange also states that these 

platforms have the following obligations: 

submission of audited financial statements; 

compliance with NYSDFS’s capitalization 

requirements; prohibitions against the ‘‘sale or 

encumbrance to protect the full reserves of 

custodian assets’’; fingerprints and photographs of 

employees with access to customer funds; retention 

of a qualified Chief Information Security Officer 

and annual penetration testing/audits; documented 

business continuity and disaster recovery plan; and 

participation in an independent exam by NYSDFS. 

See id. 

99See id. The Exchange states that, as of the date 

of the filing, two of the four Constituent Platforms 

(Bitstamp and Coinbase Pro) are regulated by 

NYSDFS. See id. at 28052 n.39. 

100See id. at 28052. A commenter states that the 

CFTC has exercised its anti-manipulation and antifraud enforcement authority over spot bitcoin 

markets since 2014, which is three years longer 

than the CFTC has overseen bitcoin futures markets. 

See Letter from Kristin Smith, Executive Director, 

and Jake Chervinsky, Head of Policy, Blockchain 

Association, dated Nov. 29, 2021 (‘‘Blockchain 

Association Letter’’), at 3. Another commenter 

states that the Commission should rely on the CFTC 

to exercise its fraud authority to ensure the 

underlying bitcoin market is free of manipulation. 

See Letter from Michelle Bond, Chief Executive 

Officer, Association for Digital Asset Markets, dated 

Apr. 19, 2022 (‘‘ADAM Letter’’), at 6. 

101Amendment No. 1, 87 FR at 28059–60. The 

affiliate of the Custodian that operates one of the 

Constituent Platforms states in a comment letter 

that it applies surveillance and monitoring 

measures for its spot digital asset trading platform 

that are designed to identify and address potential 

manipulative or fraudulent trading activity, and 

that it believes that the other Constituent Platforms 

also employ measures to counter potential 

fraudulent or manipulative trading. See Coinbase 

Letter II, at 5. This commenter states that, in 

Continued 

that even for equity options based on 

securities listed on national securities 

exchanges, the Commission relies on 

surveillance-sharing agreements to 

detect and deter fraud and 

manipulation.91 Equities that underlie 

such options trade on U.S. equity 

markets that are deep, liquid, highly 

interconnected, and almost entirely 

automated and operate at high speeds 

measured in microseconds and even 

nanoseconds.92 Here, the affiliate of the 

Custodian and other commenters 

provide insufficient evidence to support 

their assertion of efficient price arbitrage 

across bitcoin-related platforms, let 

alone any evidence that price arbitrage 

in the bitcoin market is novel and 

beyond those protections that exist in 

traditional commodity markets or 

securities markets so as to warrant the 

Commission dispensing with the 

detection and deterrence of fraud and 

manipulation provided by a 

comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size related to spot bitcoin. 

Additionally, even assuming that 

efficiency of intermarket price 

correction in the spot bitcoin markets 

results in bitcoin prices increasingly 

aligned across markets, such alignment 

is not sufficient to support the finding 

that a market is uniquely or inherently 

resistant to manipulation such that the 

Commission can dispense with 

surveillance-sharing agreements.93 As 

stated above, as a general matter, the 

manipulation of asset prices can occur 

simply through trading activity that 

creates a false impression of supply and 

demand, notwithstanding the presence 

of linkages among markets, whether 

these linkages be formal (such as those 

with consolidated quotations or routing 

requirements) or informal (such as in 

the context of the global bitcoin 

markets).94

(ii) Assertions Regarding the Index 

(a) Representations Made and 

Comments Received 

NYSE Arca asserts that the Index used 

by the Trust to determine the value of 

its bitcoin assets ‘‘represents an effective 

alternative means to prevent fraud and 

manipulation[,] and the Trust’s reliance 

on the Index addresses the 

Commission’s concerns with respect to 

potential fraud and manipulation.’’ 95 It 

states that the Trust ‘‘has used the Index 

to price the Shares for more than six 

years, and the Index has proven its 

ability to (i) mitigate the effects of fraud, 

manipulation and other anomalous 

trading activity from impacting the 

[b]itcoin reference rate, (ii) provide a 

real-time, volume-weighted fair value of 

bitcoin and (iii) appropriately handle 

and adjust[ ] for non-market related 

events, such that efforts to manipulate 

the price of [b]itcoin would have had a 

negligible effect on the pricing of the 

Trust, due to the controls embedded in 

the structure of the Index.’’ 96

First, NYSE Arca argues that the 

Index’s use of Constituent Platforms that 

are compliant with applicable U.S. 

federal and state licensing requirements 

and practices regarding anti-money 

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

the risk of fraud, manipulation, and 

other anomalous trading activity from 

impacting the Index. NYSE Arca also 

states that Constituent Platforms are 

considered to be Money Services 

Businesses (‘‘MSBs’’) and thus subject to 

certain requirements such as reporting 

suspicious activities to the U.S. 

Department of the Treasury’s FinCEN 

division, having customer identification 

through KYC procedures, and 

establishing a formal AML policy.97 In 

addition, the Constituent Platforms that 

are regulated by the New York State 

Department of Financial Services 

(‘‘NYSDFS’’) under the BitLicense 

program have regulatory requirements 

(1) to implement measures designed to 

effectively detect, prevent, and respond 

to fraud, attempted fraud, market 

manipulation, and similar wrongdoing; 

and (2) to monitor, control, investigate, 

and report back to the NYSDFS 

regarding any wrongdoing.98 And 

according to NYSE Arca, the other nonNYSDFS regulated Constituent 

Platforms have voluntarily implemented 

measures to protect against common 

forms of market manipulation.99

Moreover, according to NYSE Arca, the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) has the authority 

to police fraud and manipulation on 

Constituent Platforms.100 In addition, 

certain of the Index’s Constituent 

Platforms ‘‘have or have begun to 

implement market surveillance 

infrastructure to further detect, prevent, 

and respond to fraud, attempted fraud, 

and similar wrongdoing, including 

market manipulation.’’ 101


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addition to its surveillance program, it employs 

measures similar to circuit breakers and trading 

limits used in traditional financial markets and 

participates in industry initiatives meant to 

facilitate cross-platform surveillance and bolster the 

integrity and efficiency of digital asset markets. See 

id. at 6. 

102See Amendment No. 1, 87 FR at 28052–53; 

28059. A commenter states that the Index Provider 

has published empirical evidence identifying a 

number of cases in which the Index methodology 

has successfully shielded the Index from 

anomalistic or manipulative pricing. See Harvey 

Letter, at 4 (citing to https://tradeblock.com/blog/ 

analysis-of-bitfinex-anomalies-and-xbxperformance; https://tradeblock.com/blog/bitfinexflash-crash-analysis; https://tradeblock.com/blog/ 

xbx-update-adding-okcoin-removing-btc-e-andbtcchina; https://tradeblock.com/blog/xbx-updateadding-coinbase-removing-kraken; https://

tradeblock.com/blog/xbx-index-update-removingokcoin; https://tradeblock.com/blog/updates-totradeblocks-ecx-and-xbx-indices-2; https://

tradeblock.com/blog/bitfinex-bitcoin-premiumreaches-widest-level-in-two-years; https://

tradeblock.com/blog/bitcoin-futures-flash-crashoccurs-as-exchanges-show-irregular-tradingactivity, https://tradeblock.com/blog/updates-to-alltradeblock-indices). This commenter also states that 

‘‘this is the highest quality benchmark being used 

in a bitcoin ETP proposal and one that can 

substantially mitigate price manipulation to ensure 

a fair, orderly, and efficient market.’’ Id. 

103See Amendment No. 1, 87 FR at 28052–53. 

104See id. at 28053. A commenter states that the 

Trust has ‘‘created a robust approach to managing 

the risk of manipulation by relying on an index of 

[b]itcoin prices from various exchanges’’ and that 

the Index’s ‘‘use of a 24-hour VWAP should make 

any attempt at manipulation prohibitively 

expensive.’’ Letter from Peter L. Briger, Jr., Chief 

Executive Officer, Fortress Investment Group LLC, 

dated Apr. 25, 2022 (‘‘Fortress Letter’’), at 2–3. The 

Exchange states that the Index no longer utilizes a 

24-hour VWAP in its methodology. See supra note 

38. 

105See Amendment No. 1, 87 FR at 28053. 

106See id. at 28053, 28059. 

107See id. at 28053. 

108See id. 

109 Id. at 28052. 

110See USBT Order, 85 FR at 12603–05 and 

n.101; VanEck Order, 86 FR at 64545 and n.89; 

WisdomTree Order, 86 FR at 69328 and n.95; 

Kryptoin Order, 86 FR at 74173 and n.98; ARK 

21Shares Order, 87 FR at 20021–22 and n.107. 

111FinCEN and NYSDFS regulation have been 

referenced in other bitcoin-based ETP proposals as 

a purportedly alternative means by which such 

ETPs would be uniquely resistant to manipulation. 

See USBT Order, 85 FR at 12603 n.101 and 

accompanying text. See also, e.g., WisdomTree 

Order, 86 FR at 69328 n.95; Kryptoin Order, 86 FR 

at 74173 n.98; ARK 21Shares Order, 87 FR at 20022 

n.107. 

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

Second, NYSE Arca asserts that other 

aspects of the methodology employed in 

constructing the Index mitigate the 

impact of fraud, manipulation, and 

other anomalous trading activity.102 The 

Exchange states that the Index is 

calculated once every second according 

to a systematic methodology that relies 

on observed trading activity on the 

Constituent Platforms. The key elements 

of this proprietary methodology are as 

follows: (i) volume weighting— 

Constituent Platforms with greater 

liquidity receive a higher weighting in 

the Index; (ii) price variance 

weighting—the Index reflects data 

points that are weighted in proportion 

to their variance from the rest of the 

Constituent Platforms (i.e., as the price 

at a particular platform diverges from 

the prices at the rest of the Constituent 

Platforms, its weight in the Index Price 

decreases.); (iii) inactivity adjustment— 

the Index algorithm penalizes stale 

activity from any given Constituent 

Platform; and (iv) manipulation 

resistance—the Index only includes 

executed trades in its calculation in 

order to mitigate the effects of wash 

trade and spoofing, and only includes 

Constituent Platforms that charge 

trading fees to its users in order to 

attach a real, quantifiable cost to any 

manipulation attempts.103 In addition, 

the Exchange states that, by referencing 

multiple trading venues and weighting 

them based on trade activity, the Index 

mitigates the impact of any potential 

fraud, manipulation, or anomalous 

trading activity occurring on any single 

venue.104 In other words, the effects of 

fraud, manipulation, or anomalous 

trading activity occurring on any single 

venue are de-weighted and 

consequently diluted by non-anomalous 

trading activity of other Constituent 

Platforms.105

Third, NYSE Arca asserts that the 

Index is constructed and maintained by 

an expert third-party index provider, 

which would allow for prudent 

handling of non-market-related 

events.106 The Exchange states that in 

the event that a manual intervention 

with respect to the Index calculation is 

necessary in response to ‘‘non-marketrelated events’’ (e.g., halting of deposits 

or withdrawals of funds, unannounced 

closure of platform operations, 

insolvency, compromise of user funds, 

etc.), the Index Provider would issue a 

public announcement.107 NYSE Arca 

also asserts that the Index Provider 

reviews and periodically updates which 

bitcoin platforms are included in the 

Index by utilizing a methodology that is 

guided by the IOSCO principles for 

financial benchmarks.108

(b) Analysis 

Based on the assertions made and the 

information provided with respect to 

the Index, the record is inadequate to 

conclude that NYSE Arca has 

articulated other means to prevent fraud 

and manipulation that are sufficient to 

justify dispensing with the detection 

and deterrence of fraud and 

manipulation provided by a 

comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size related to spot bitcoin. 

First, NYSE Arca argues that the 

Index’s exclusive use of prices from 

particular spot bitcoin trading platforms 

(the Constituent Platforms), which are 

subject to FinCEN’s AML/KYC 

regulations, as well as NYSDFS’s 

BitLicense program for two Constituent 

Platforms, helps to reduce the impact of 

fraud and manipulation on the Index 

Price. The Exchange acknowledges, 

however, that it ‘‘does not believe the 

inclusion’’ of these platforms is ‘‘in and 

of itself sufficient to prove that the 

Index is an alternative means to prevent 

fraud and manipulation such that 

surveillance sharing agreements are not 

required’’ but rather that including only 

such platforms ‘‘in the Index is one 

significant way in which the Index is 

protected from the potential impacts of 

fraud and manipulation.’’ 109

The Commission does not agree that 

the inclusion of only certain Constituent 

Platforms as described provides a 

significant protection against fraud and 

manipulation. Any oversight afforded 

by FinCEN and NYSDFS, including 

AML/KYC or BitLicense regulation, is 

not a substitute for a surveillancesharing agreement between the 

Exchange and a regulated market of 

significant size related to the underlying 

bitcoin assets. AML and KYC regulation, 

for example, do not substitute for the 

sharing of information about market 

trading activity or clearing activity that 

a surveillance-sharing agreement would 

afford. And although some of the 

Constituent Platforms may be registered 

with FinCEN or NYSDFS, these spot 

bitcoin trading platforms are not 

comparable to a national securities 

exchange or futures exchange.110 As the 

Commission has explained, there are 

substantial differences between 

NYSDFS and FinCEN regulation and the 

Commission’s regulation of national 

securities exchanges.111 The 

Commission’s market oversight of 

national securities exchanges includes 

substantial requirements, including the 

requirement 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.’’ 112 Moreover, national 

securities exchanges must file proposed 


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113 17 CFR 240.19b–4(a)(6)(i). 

114Section 6 of the Exchange Act, 15 U.S.C. 78f, 

requires national securities exchanges to register 

with the Commission and requires an exchange’s 

registration to be approved by the Commission, and 

Section 19(b) of the Exchange Act, 15 U.S.C. 78s(b), 

requires national securities exchanges to file 

proposed rule changes with the Commission and 

provides the Commission with the authority to 

disapprove proposed rule changes that are not 

consistent with the Exchange Act. Designated 

contract markets (‘‘DCMs’’) (commonly called 

‘‘futures markets’’) registered with and regulated by 

the CFTC must comply with, among other things, 

a similarly comprehensive range of regulatory 

principles and must file rule changes with the 

CFTC. See, e.g., Designated Contract Markets 

(DCMs), CFTC, available at http://www.cftc.gov/ 

IndustryOversight/TradingOrganizations/DCMs/ 

index.htm. 

115See Winklevoss Order, 83 FR at 37597. 

116Maria T. Vullo, Superintendent of Financial 

Services, NYSDFS, Guidance on Prevention of 

Market Manipulation and Other Wrongful Activity 

(Feb. 7, 2018), available at https://www.dfs.ny.gov/ 

system/files/documents/2020/03/il180207.pdf. See 

also, e.g., WisdomTree Order, 86 FR at 69328 n.95; 

Kryptoin Order, 86 FR at 74173 n.98; ARK 21Shares 

Order, 87 FR at 20022 n.107. 

117See 15 U.S.C. 78e, 78f. 

118See Valkyrie Order, 86 FR at 74162. 

119See USBT Order, 85 FR at 12604. 

120See Winklevoss Order, 83 FR at 37599 (‘‘Spot 

bitcoin markets are not required to register with the 

CFTC, unless they offer leveraged, margined, or 

financed trading to retail customers.’’). See 

Commodity Exchange Act Sections 2(c)(2)(D), 7 

U.S.C. 2(c)(2)(D), and 2(c)(2)(A)(i), 7 U.S.C. 

2(c)(2)(A)(i) (defining CFTC jurisdiction to 

specifically cover contracts of sale of a commodity 

for future delivery (or options on such contracts), 

or an option on a commodity (other than foreign 

currency or a security or a group or index of 

securities), that is executed or traded on an 

organized exchange). See also Winklevoss Order, 83 

FR at 37599 n.286. 

121See USBT Order, 85 FR at 12604; SolidX 

Order, 82 FR at 16256 (concluding that there is 

nothing in the record to indicate that there is 

currently a regulatory framework in the United 

States for detecting and deterring manipulation in 

the spot bitcoin markets and that ‘‘[a]lthough the 

CFTC can bring enforcement actions against 

manipulative conduct in spot markets for a 

commodity, spot markets are not required to 

register with the CFTC unless they offer leveraged, 

margined, or financed trading to retail 

customers. . . . In all other cases, the CFTC does 

not set standards for, approve the rules of, examine, 

or otherwise regulate bitcoin spot markets.’’). 

122Winklevoss Order, 83 FR at 37599 (quoting 

CFTC Backgrounder on Oversight of and Approach 

to Virtual Currency Futures Markets (Jan. 4, 2018), 

at 1, available at: http://www.cftc.gov/idc/groups/ 

public/@newsroom/documents/file/backgrounder_

virtualcurrency01.pdf). See also Testimony of 

Rostin Behnam, Chair, CFTC, Before the Senate 

Committee on Agriculture, Nutrition, and Forestry 

(Feb. 9, 2022), available at: https://

www.agriculture.senate.gov/imo/media/doc/ 

Testimony_Behnam_020920225.pdf (‘‘[W]hile the 

crystallization of our enforcement authority through 

judicial interpretation has proven an effective 

means of uncovering and addressing some of the 

regulatory gaps presented by innovation and 

evolution in the financial markets with respect to 

digital and related assets, it cannot be viewed as a 

viable substitute for a functional regulatory 

oversight regime for the cash digital asset 

market. . . . In fact, there is no one regulator, 

either state or federal, with sufficient visibility into 

digital asset commodity trading activity to fully 

police conflicts of interest and deceptive trading 

practices impacting retail customers.’’). 

123See supra notes 75–78 and accompanying text. 

124See USBT Order, 85 FR at 12601; WisdomTree 

Order, 86 FR at 69327; Kryptoin Order, 86 FR at 

74172; Valkyrie Order, 86 FR at 74161; SkyBridge 

Order, 87 FR at 3873. 

rules with the Commission regarding 

certain material aspects of their 

operations,113 and the Commission has 

the authority to disapprove any such 

rule that is not consistent with the 

requirements of the Exchange Act.114

Thus, national securities exchanges are 

subject to Commission oversight of, 

among other things, their governance, 

membership qualifications, trading 

rules, disciplinary procedures, 

recordkeeping, and fees.115 The 

Constituent Platforms have none of 

these requirements—none are registered 

as a national securities exchange. In 

addition, NYSDFS’s BitLicense program 

is ‘‘guidance’’ that is ‘‘not intended to 

limit the scope or applicability of any 

law or regulation,’’ including the 

Exchange Act.116

Further, neither the Constituent 

Platforms’ voluntary adherence to the 

BitLicense program, nor the Custodian 

affiliate’s adoption of various 

surveillance, monitoring, and other 

measures to address potential 

manipulative or fraudulent trading 

activity on its trading platform, is 

material to the Commission’s analysis. 

The Exchange provides no supporting 

evidence to substantiate its claims that 

the Constituent Platforms have 

voluntarily implemented measures to 

protect against common forms of market 

manipulation and that some of the 

Constituent Platforms have begun to 

implement market surveillance 

infrastructure to further detect, prevent, 

and respond to fraud, attempted fraud, 

and similar wrongdoing. Moreover, even 

taken at face value, these measures, 

unlike the Exchange Act’s requirements 

for national securities exchanges,117 are 

entirely voluntary and therefore have no 

binding force. The Constituent 

Platforms, including the platform 

operated by an affiliate of the Custodian, 

could change or cease to administer 

such measures at any time. 

NYSE Arca’s assertions regarding the 

CFTC’s authority with respect to the 

Constituent Platforms and the 

underlying bitcoin market also do not 

establish a level of oversight sufficient 

to dispense with the detection and 

deterrence of fraud and manipulation 

provided by a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to spot bitcoin.118 While the 

Commission recognizes that the CFTC 

maintains some jurisdiction over the 

spot bitcoin market, under the 

Commodity Exchange Act, the CFTC 

does not have regulatory authority over 

spot bitcoin trading platforms, including 

the Constituent Platforms.119 Except in 

certain limited circumstances, spot 

bitcoin trading platforms are not 

required to register with the CFTC,120

and the CFTC does not set standards for, 

approve the rules of, examine, or 

otherwise regulate spot bitcoin 

markets.121 As the CFTC itself stated, 

while the CFTC ‘‘has an important role 

to play,’’ U.S. law ‘‘does not provide for 

direct, comprehensive Federal oversight 

of underlying Bitcoin or virtual 

currency spot markets.’’ 122

Second, the record does not 

demonstrate that the proposed 

methodology for calculating the Index 

would make the proposed ETP resistant 

to fraud or manipulation such that the 

ability to detect and deter fraud that is 

provided by a comprehensive 

surveillance-sharing agreement with a 

regulated market of significant size 

related to spot bitcoin is unnecessary. 

Specifically, NYSE Arca has not 

assessed the possible influence that spot 

platforms not included among the 

Constituent Platforms would have on 

bitcoin prices used to calculate the 

Index Price. As discussed above, NYSE 

Arca does not contest the presence of 

possible sources of fraud and 

manipulation in the spot bitcoin market 

generally.123 Instead, NYSE Arca 

focuses its analysis on the attributes of 

the Constituent Platforms, as well as the 

Index methodology that calibrates the 

pricing input generated by the 

Constituent Platforms (such as volume 

and price-variance weighting and 

inactivity adjustment). What the 

Exchange ignores, however, is that to 

the extent that trading on spot bitcoin 

platforms not directly used to calculate 

the Index Price affects prices on the 

Constituent Platforms, the activities on 

those other platforms—where various 

kinds of fraud and manipulation from a 

variety of sources may be present and 

persist—may affect whether the Index is 

resistant to manipulation. Importantly, 

the record does not demonstrate that 

these possible sources of fraud and 

manipulation in the broader spot bitcoin 

market do not affect the Constituent 

Platforms that represent a slice of the 

spot bitcoin market. To the extent that 

fraudulent and manipulative trading on 

the broader bitcoin market could 

influence prices or trading activity on 

the Constituent Platforms, the 

Constituent Platforms (and thus the 

Index) would not be inherently resistant 

to manipulation.124


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125See SolidX Order, 82 FR at 16257. 

126Exhibit 99.1 of the Registration Statement, at 

16–17. See also 2021 10–K, at 50. 

127See Exhibit 99.1 of the Registration Statement, 

at 42–43. See also 2021 10–K, at 10. 

128Exhibit 99.1 of the Registration Statement, at 

18. See also 2021 10–K, at 51. 

129See, e.g., Valkyrie Order, 86 FR at 74162. 130See WisdomTree Order, 86 FR at 69329; One 

River Order, 87 FR at 33556. 

131See, e.g., Securities Exchange Act Release Nos. 

80840 (June 1, 2017) 82 FR 26534 (June 7, 2017) 

(SR–NYSEArca–2017–33) (approving the listing and 

trading of shares of certain trusts seeking to track 

the Solactive GLD EUR Gold Index, Solactive GLD 

GBP Gold Index, and the Solactive GLD JPY Gold 

Index). 

132The Commission has previously considered 

and rejected similar arguments about the valuation 

of bitcoin according to a benchmark or reference 

price. See, e.g., SolidX Order, 82 FR at 16258; 

Winklevoss Order, 83 FR at 37587–90; USBT Order, 

85 FR at 12599–601; Valkyrie Order, 86 FR at 

74162; ARK 21Shares Order, 87 FR at 20022. 

133For example, as currently traded OTC, the 

Shares do not reflect the value of the Index but 

rather trade at a significant discount (or at other 

times, a significant premium). See Exhibit 99.1 of 

the Registration Statement, at 23 (‘‘the value of the 

Shares of the Trust may not approximate, and the 

Shares may trade at a substantial premium over, or 

substantial discount to, the value of the Trust’s 

Bitcoin Holdings per Share’’); 2021 10–K, at 2 

(‘‘from May 5, 2015 to December 31, 2021, the 

maximum premium of the closing price of the 

Shares quoted on OTCQX over the value of the 

Trust’s Digital Asset Holdings per Share was 142% 

. . . and the average premium was 37% . . ., and 

the maximum discount of the closing price of the 

Shares quoted on OTCQX below the value of the 

Trust’s Digital Asset Holdings was 21% . . . and 

the average discount was 13% . . . . As of 

December 31, 2021, the Trust’s Shares were quoted 

on OTCQX at a discount of 20% . . . to the Trust’s 

Digital Asset Holdings per Share.’’); Grayscale 

Letter I, at 2 n.11 (‘‘From May 5, 2015 to October 

31, 2021, the maximum single-day premium of the 

closing price of BTC shares quoted on OTCQX over 

the value of its Bitcoin holdings was 142% and the 

average of all daily premiums was 37%; the 

maximum single-day discount below the value of 

its Bitcoin holdings was 21% and the average of all 

daily discounts was 12%; and the average of all 

single-day premiums and discounts was a premium 

of 32%.’’); Coinbase Letter I, at 2 (‘‘GBTC has traded 

over-the-counter at a premium to its net-asset value 

that has ranged as high as 142% and a discount to 

its net-asset value of 21%’’). 

134See WisdomTree Order, 86 FR at 69329 and 

n.108; Valkyrie Order, 86 FR at 74162; ARK 

21Shares Order, 87 FR at 20022. 

In addition, while NYSE Arca asserts 

that aspects of the Index methodology 

mitigate the impact of fraud and 

manipulation on the Shares, the 

Commission can find no basis to 

conclude that the Index methodology 

constitutes a novel means beyond the 

protections utilized by traditional 

commodity or securities markets to 

prevent fraud and manipulation that is 

sufficient to justify dispensing with the 

detection and deterrence of fraud and 

manipulation provided by a 

comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size related to spot bitcoin. 

For example, while the Index 

methodology uses an algorithm to 

discount prices that deviate from the 

average (i.e., price variance weighting), 

this automatic discounting could 

attenuate, but would not eliminate, the 

effect of manipulative activity on one of 

the Constituent Platforms—just as it 

could attenuate, but would not 

eliminate, the effect of bona fide 

liquidity demand on one of those 

platforms.125

Moreover, NYSE Arca’s assertions 

that the Trust’s use of the Index helps 

make the Shares resistant to 

manipulation conflict with the 

Registration Statement. Specifically, the 

Registration Statement represents, 

among other things, that the market 

price of bitcoin may be subject to 

‘‘[m]anipulative trading activity on 

bitcoin [trading platforms], which are 

largely unregulated,’’ and that, ‘‘[d]ue to 

the unregulated nature and lack of 

transparency surrounding the 

operations of bitcoin [trading platforms], 

they may experience fraud, security 

failures or operational problems, which 

may adversely affect the value of 

[b]itcoin and, consequently, the value of 

the Shares.’’ 126 Constituent Platforms 

are a subset of the bitcoin trading 

platforms that the Registration 

Statement describes.127 The Registration 

Statement also states, specifically with 

respect to the Index, that ‘‘[t]he Index 

has a limited history and a failure of the 

[Index Price] could adversely affect the 

value of the Shares.’’ 128 Although the 

Sponsor raises concerns regarding fraud 

on and the security of bitcoin platforms, 

as well as concerns specific to the 

Index, the Exchange does not explain 

how or why such concerns are 

consistent with its assertion that the 

Index is resistant to fraud and 

manipulation. 

Third, although NYSE Arca asserts 

that the Index Provider’s oversight of 

the Index, which includes updating the 

Constituent Platforms from time to time 

and handling non-market-related events, 

mitigates fraud and manipulation in 

calculation of the Index, the record does 

not suggest that the purported oversight 

represents a unique measure to resist or 

prevent fraud or manipulation beyond 

protections that exist in traditional 

securities or commodities markets.129

Rather, the oversight performed by the 

Index Provider appears to be for the 

purpose of ensuring the accuracy and 

integrity of the Index. Such Index 

accuracy and integrity oversight serves 

a fundamentally different purpose as 

compared to the regulation of national 

securities exchanges and the 

requirements of the Exchange Act. 

While the Commission recognizes that 

this may be an important function in 

ensuring the integrity of the Index, such 

requirements do not imbue the Index 

Provider with regulatory authority 

similar to that which the Exchange Act 

confers upon SROs such as national 

securities exchanges.130 Furthermore, 

other commodity-based ETPs approved 

by the Commission for listing and 

trading utilize reference rates or indices 

administered by similar benchmark 

administrators,131 and the Commission 

has not, in those instances, dispensed 

with the need for a surveillance-sharing 

agreement with a significant regulated 

market. 

Finally, NYSE Arca does not explain 

the significance of the Index’s purported 

resistance to manipulation to the overall 

analysis of whether the proposal to list 

and trade the Shares is designed to 

prevent fraud and manipulation.132

Even assuming that NYSE Arca’s 

argument is that the price of the Trust’s 

Shares would be resistant to 

manipulation if the Index is resistant to 

manipulation, NYSE Arca has not 

established in the record a basis for this 

conclusion because NYSE Arca has not 

established a link between the price of 

the Shares and the Index Price, either in 

the primary or secondary market. While 

the Index is used by the Trust to value 

its bitcoin, the Trust will create or 

redeem Baskets only upon the receipt or 

distribution of bitcoins from/to 

authorized participants, and only for the 

amount of bitcoin represented by the 

Shares in such Baskets, without 

reference to the value of such bitcoin as 

determined by the Index or otherwise. 

Furthermore, the Shares would trade in 

the secondary market at market-based 

prices, not the Index Price. The 

Exchange provides no information on 

the relationship between the Index and 

secondary market prices generally,133 or 

how the use of the Index would mitigate 

fraud and manipulation of the Shares in 

the secondary market.134

(2) Assertions That NYSE Arca Has 

Entered Into a Comprehensive 

Surveillance-Sharing Agreement With a 

Regulated Market of Significant Size 

Related to the Underlying Bitcoin Assets 

As NYSE Arca has not demonstrated 

that other means besides surveillancesharing agreements will be sufficient to 

prevent fraudulent and manipulative 

acts and practices, the Commission next 

examines whether the record supports 

the conclusion that NYSE Arca has 

entered into 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 


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135See Winklevoss Order, 83 FR at 37594. 

136See id. at 37580 n.19. 

137See Amendment No. 1, 87 FR at 28054. 

138While 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; ARK 

21Shares Order, 87 FR at 20023 n.121. 

139See, 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 

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. 

140Amendment No. 1, 87 FR at 28060. A 

commenter also states its belief that the Trust ‘‘has 

strong links to a regulated market of significant size 

(i.e., the CME).’’ Fortress Letter, at 2. Based on 

arguments articulated in the proposal, the 

Commission understands that the Exchange is 

arguing that CME is the regulated market of 

significant size with which it has the relevant 

surveillance-sharing agreement. 

141Amendment No. 1, 87 FR at 28054. 

142 Id. at 28054 and n.50 (citing Memorandum to 

File from Neel Maitra, Senior Special Counsel 

(Fintech & Crypto Specialist), Division of Trading 

and Markets, U.S. Securities and Exchange 

Commission re: Meeting with Representatives from 

Fidelity Digital Assets, et al. and attachment (SR– 

CboeBZX–2021–039) (Sept. 8, 2021), available at: 

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

039/srcboebzx2021039-250110.pdf; Letter from 

Bitwise Asset Management, Inc. re: File Number 

SR–NYSEArca–2021–89 (Feb. 25, 2022), available 

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

Letter from Wilson Sonsini Goodrich and Rosati, 

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

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

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

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

89/srnysearca202189-20118794-271630.pdf). See 

also Submission by the Sponsor to the Commission 

in connection with a meeting between 

representatives of the Sponsor, the Sponsor’s 

counsel, Davis Polk & Wardwell LLP, and 

Commission staff on April 26, 2022 (‘‘Grayscale 

Submission’’), at 21–22, available at: https://

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

srnysearca202190-20128860-294707.pdf). A 

commenter states that ‘‘there is ample historical 

data to demonstrate how closely the CME futures 

contracts track the spot market (and in fact as 

BitWise’s research has shown, lead the spot market 

a majority of the time.).’’ Letter from Ben 

Davenport, dated Feb. 10, 2022 (‘‘Davenport 

Letter’’). 

143Amendment No. 1, 87 FR at 28054. 

144See id. 

145See id. at 28054 and n.51. See also Grayscale 

Submission, at 16, citing to https://

www.bitcointradingvolume.com/ (‘‘CME represents 

>50% of all [b]itcoin trading volume’’). But see 

Letter from Robert E. Whaley, Professor of 

Management (Finance), Director, Financial Markets 

Research Center, Vanderbilt University Owen 

Graduate School of Management, dated May 25, 

2022 (‘‘Whaley Letter’’), at 2 (‘‘In terms of USD 

value, the market cap in the CME’s bitcoin futures 

market averages less than one-quarter of one 

percent of the bitcoin spot market.’’). This 

commenter nonetheless concludes that, ‘‘[s]ince the 

Commission is comfortable with the viability of 

futures-based ETF investing in an environment in 

which the spot market dominates (in terms of both 

dollar value and trading volume), it follows 

logically that spot-based ETPs are warranted.’’ 

Whaley Letter, at 2. 

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.135

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.136 Accordingly, based on the 

common membership of NYSE Arca and 

the CME in the ISG,137 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,138 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. 

(i) 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 this first prong.139

(a) Assertions Made and Comments 

Received 

The Exchange asserts in its proposal 

that the CME bitcoin futures market is 

a ‘‘large, surveilled and regulated 

market that is closely connected with 

the spot market for [b]itcoin and 

through which the Exchange could 

obtain information to assist in detecting 

and deterring potential fraud or 

manipulation.’’ 140 The Exchange, 

however, concedes that the Sponsor did 

not find a significant lead/lag 

relationship between the spot and the 

CME bitcoin futures markets. 

Specifically, according to NYSE Arca, 

the Sponsor ‘‘conducted a lead/lag 

analysis of per minute data comparing 

the [b]itcoin futures market, as 

represented by the CME futures market, 

to the [b]itcoin spot market, as 

represented by the Index.’’ However, for 

the period of November 1, 2019, to 

August 31, 2021, the analysis showed 

that ‘‘there does not appear to be a 

significant lead/lag relationship 

between the two instruments.’’ 141 The 

Sponsor’s analysis notwithstanding, 

NYSE Arca states that ‘‘other studies 

prior to and since such date have found 

that the CME futures market does lead 

the [b]itcoin spot market.’’ 142

NYSE Arca goes on to assert that, 

‘‘[a]lthough there have been mixed 

findings regarding the lead/lag 

relationship between the CME futures 

and [b]itcoin spot markets, . . . the 

CME futures market represents a large, 

surveilled[,] and regulated market.’’ 143

As evidence of its assertion that the 

CME constitutes a market of significant 

size related to spot bitcoin, the 

Exchange states that, from November 1, 

2019, to August 31, 2021, the CME 

futures market trading volume was over 

$432 billion, compared to $624 billion 

in trading volume across the Constituent 

Platforms included in the Index.144 The 

Exchange also points to the CME futures 

market trading volume from November 

1, 2019, to August 31, 2021, which it 

states was approximately 50% of the 

trading volume of certain U.S. dollardenominated spot bitcoin platforms, 

including Binance, Coinbase Pro, 

Bitfinex, Kraken, Bitstamp, BitFlyer, 

Poloniex, Bittrex, and itBit.145 The 

Exchange, therefore, concludes that, 

‘‘[g]iven the significant size of the CME 

futures markets, . . . there is a 


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146Amendment No. 1, 87 FR at 28054. A 

commenter also states its belief that ‘‘any attempt 

to manipulate the price of [the Trust] would likely 

also require manipulation of the CME futures 

markets’’; that ‘‘arbitrage between the spot and 

derivative markets would quickly counteract the 

attempted manipulation’’; and that ‘‘the CME would 

undoubtedly assist in monitoring and stopping the 

misconduct.’’ Fortress Letter, at 3. 

147Letter from Hunting Hill Global Capital, LLC, 

dated Mar. 3, 2022 (‘‘Hunting Hill Letter’’), at 2. The 

commenter makes this conclusion based on its own 

lead/lag analysis, ‘‘using minute-by-minute lastprice data over the [365 days ended February 4, 

2022], converted to percentage price changes, based 

on the first lagged term for both markets.’’ Id. 

148 Id. 

149 Id. at 3. 

150See id. at 1–2. Although the observed time 

periods are different, the Commission observes that 

the relative trading volume data provided by this 

commenter is significantly different than the 

relative trading volume data provided by the 

Exchange. See supra notes 144–145 and 

accompanying text. 

151Hunting Hill Letter, at 2–3. To the extent some 

offshore trading venues allow for bitcoin to be 

exchanged to Tether, the commenter states that ‘‘it 

would not be economically practical for a bad actor 

to manipulate the [proposed] ETP using Tetherdenominated bitcoin prices’’ because 

‘‘manipulation in the bitcoin/USD exchange pair 

would likely result in a widening of Tether 

premiums and discounts.’’ Id. 

152 Id. at 3. 

153See USBT Order, 85 FR at 12611. 

154See id. at 12612; Wise Origin Order, 87 FR at 

5534–35. 

155Amendment No. 1, 87 FR at 28054. 

156See also supra note 89 and accompanying text. 

157See WisdomTree Order, 86 FR at 69332; 

NYDIG Order, 87 FR at 14939. 

158See supra notes 151–152 and accompanying 

text. 

159See USBT Order, 85 FR at 12611; Wise Origin 

Order, 87 FR at 5535; NYDIG Order, 87 FR at 14938; 

reasonable likelihood that a person 

attempting to manipulate the ETP 

would also have to trade on that market 

to successfully manipulate the ETP, 

since arbitrage between the derivative 

and spot markets would tend to counter 

an attempt to manipulate the spot 

market alone.’’ 146

Similar to the Sponsor’s analysis, a 

commenter concludes that the 

relationship between spot and futures 

prices is ‘‘complex and interrelated with 

no clear winner.’’ 147 According to the 

commenter, the ‘‘results of the test of 

which market is leading depends on the 

time period of testing.’’ 148 Despite the 

commenter’s lead/lag conclusion, the 

commenter argues that a would-be 

manipulator would be unable to 

manipulate the proposed ETP without 

also trading in the CME bitcoin futures 

market, ‘‘[g]iven the relative size of 

trading volumes of bitcoin futures 

relative to spot, the strong dependence 

of spot prices on futures prices and vice 

versa, and the inefficiency of attempting 

to manipulate the [proposed] ETP 

through offshore trading.’’ 149 Regarding 

the relative size of trading volumes, the 

commenter states that it examined 

Bloomberg trading data for the 365 days 

ended February 4, 2022, across all spot 

bitcoin trading venues and all CME 

bitcoin futures contract maturities, and 

found that the aggregate futures volume 

($579 billion) was 31% higher than 

aggregate spot volume ($442 billion), a 

result that the commenter found to be 

statistically significant.150 Regarding 

offshore trading, the commenter states 

that they believe it unlikely ‘‘a bad actor 

would attempt to manipulate the 

[proposed] ETP through trading on 

offshore cryptocurrency trading venues’’ 

because ‘‘offshore trading venues 

generally do not support fiat trading and 

instead only support trading between 

different cryptocurrencies.’’ 151 The 

commenter further states that ‘‘offshore 

trading venues generally offer trading in 

bitcoin derivatives such as quarterly 

futures and perpetual futures; however, 

both would be poor choices for a bad 

actor seeking to manipulate the 

[proposed] ETP because both are known 

to deviate from the bitcoin spot price 

much more than CME futures,’’ and thus 

any actor seeking to manipulate the 

proposed ETP ‘‘would risk expanding or 

contracting the premium of the 

derivative being used as a manipulation 

tool rather than influencing bitcoin spot 

prices.’’ 152

(b) Analysis 

The record does not demonstrate that 

there is a reasonable likelihood 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. The Exchange’s and commenters’ 

assertions about the size of the CME 

bitcoin futures market in comparison to 

the Constituent Platforms in particular 

and/or spot bitcoin markets in general 

do not establish that the CME bitcoin 

futures market is of significant size 

related to spot bitcoin. As the 

Commission has previously stated, the 

interpretation of the term ‘‘market of 

significant size’’ or ‘‘significant market’’ 

depends on the interrelationship 

between the market with which the 

listing exchange has a surveillancesharing agreement and the proposed 

ETP.153 Recitations of data reflecting the 

size of the CME bitcoin futures market 

and the size of the spot bitcoin market 

are not sufficient to establish an 

interrelationship between the CME 

bitcoin futures market and the proposed 

ETP.154

NYSE Arca asserts that there is a 

reasonable likelihood that a person 

would have to trade on the CME bitcoin 

futures market to successfully 

manipulate the proposed ETP, because 

‘‘arbitrage between the derivative and 

spot markets would tend to counter an 

attempt to manipulate the spot market 

alone.’’ 155 However, the record does not 

demonstrate the existence of efficient 

price arbitrage across bitcoin-related 

platforms, either generally or 

specifically as it relates to the bitcoin 

derivative and spot markets.156 The 

Exchange also does not provide any 

additional data or analysis to support its 

conclusion that the arbitrage that may 

exist between the bitcoin derivatives 

markets and spot markets would 

counter an attempt to manipulate the 

spot market alone, or to demonstrate 

that such arbitrage would occur quickly 

enough to prevent a would-be 

manipulator of the proposed ETP from 

profiting off of movements in the spot 

price. Moreover, even assuming that the 

Commission concurred with the 

Exchange’s premise that efficient 

arbitrage exists between the bitcoin 

derivatives markets and spot markets, 

the Exchange does not explain why the 

presence of efficient arbitrage implies 

that a would-be manipulator would be 

reasonably likely to trade specifically on 

the CME bitcoin futures market rather 

than on unregulated bitcoin futures 

markets or other bitcoin derivatives 

markets.157

In addition, while a commenter 

asserts that it is unlikely a would-be 

manipulator would use offshore bitcoin 

futures as their manipulation tool,158

this commenter has not sufficiently 

explained or supported its assertions. 

The commenter provides no data or 

other evidence to support its assertions 

that, because Tether often trades at a 

premium or discount to USD, it is not 

‘‘economically practical’’—and therefore 

‘‘unlikely’’—for a bad actor to 

manipulate the proposed ETP using 

Tether-denominated bitcoin prices. The 

commenter also does not provide any 

data regarding the deviation of offshore 

futures prices from spot bitcoin prices, 

or on how much (or how long) 

attempted manipulation of offshore 

futures affects this deviation, that would 

allow for assessment of whether 

offshore futures would be a ‘‘poor 

choice’’ for a manipulation tool. 

Finally, the econometric evidence in 

the record for the proposal does not 

support the conclusion 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 

also have to trade on the CME bitcoin 

futures market.159 As the Commission 


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Global X Order, 87 FR at 14920; ARK 21Shares, 87 

FR at 20024. 

160See, e.g., USBT Order, 85 FR at 12612. 

161See Amendment No. 1, 87 FR at 28054. 

162 Id. 

163See Hunting Hill Letter, at 2. The Commission 

considers the lead/lag relationship between the 

CME bitcoin futures market and the spot bitcoin 

market to be central to understanding whether it is 

reasonably likely that a would-be manipulator of a 

spot bitcoin ETP would need to trade on the CME 

bitcoin futures market to successfully manipulate 

the proposed ETP. See USBT Order, 85 FR at 12612. 

This commenter, however, does not explain its 

data, methodology (such as why using only the first 

lag for each time series was the appropriate model 

specification), or results to an extent that can be 

assessed and/or verified. The commenter also 

argues that the Commission should not require that 

the CME bitcoin futures market ‘‘always’’ lead the 

spot market, as the commenter believes that would 

be ‘‘tantamount to requiring that an obvious 

statistical arbitrage opportunity exists between two 

highly liquid and automated markets’’ from which 

any trader could ‘‘profit immensely,’’ and would 

‘‘be the same as a declaration that bitcoin ETPs will 

never be approved in the United States.’’ See 

Hunting Hill Letter, at 2. The Commission 

disagrees. A lead/lag statistical result that CME 

bitcoin futures prices ‘‘lead’’ spot prices does not 

mean that CME bitcoin futures prices ‘‘always’’ 

move before spot prices—which would be the 

‘‘obvious’’ and exploitable arbitrage opportunity— 

or that there would never be a situation where the 

spot price moves before the CME bitcoin futures 

price. 

164See supra note 142. 

165As 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. 

166See Winklevoss Order, 83 FR at 37594; USBT 

Order, 85 FR at 12596–97. 

167Amendment No. 1, 87 FR at 28054. 

168The Exchange states that, compared with 

global commodity ETPs, the Trust would rank 

fourth among global commodity ETPs in assets 

under management and seventh in notional trading 

volume for the period from November 1, 2019, to 

October 31, 2020. See id. at 28054 n.52. 

169See id. at 28054. 

170See id. 

171 Id. 

has stated in previous orders, 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.160 But 

as NYSE Arca concedes, there have been 

‘‘mixed’’ findings regarding the lead/lag 

relationship between the CME futures 

and spot bitcoin markets.161 Moreover, 

based on the Sponsor’s own analysis— 

the data, methodology, results, and 

statistical significance of which were 

not described in the filing—‘‘there does 

not appear to be a significant lead/lag 

relationship between’’ the CME bitcoin 

futures market and the spot bitcoin 

market.162 In addition, a commenter’s 

lead/lag analysis purportedly finds ‘‘no 

clear winner’’ and a bi-directional 

relationship between spot bitcoin prices 

and CME futures prices.163 And while 

the Exchange and the Sponsor highlight 

previous papers and analyses submitted 

to the Commission in connection with 

other proposals to list and trade spot 

bitcoin ETPs to support the premise that 

the CME bitcoin futures market leads 

the spot bitcoin market,164 the 

Commission disapproved the proposals 

related to these submissions, and the 

Commission raised issues and criticisms 

with respect to these submissions that 

the Exchange does not address. The 

Exchange does not provide any 

additional evidence of an 

interrelationship between the CME 

bitcoin futures market, which is the 

regulated market, and spot bitcoin 

platforms, which are the markets on 

which the assets held by the proposed 

ETP would trade. As in previous 

disapprovals, because the lead/lag 

analysis regarding whether the CME 

bitcoin futures market leads the spot 

market remains inconclusive,165 the 

Commission determines that the 

evidence in the record 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 

ETP would have to trade on the CME 

bitcoin futures market to successfully 

manipulate the proposed ETP. 

The Commission thus concludes that 

the information that NYSE Arca 

provides is not sufficient 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. Therefore, the information in the 

record also does not establish that the 

CME bitcoin futures market is a ‘‘market 

of significant size’’ related to the assets 

to be held by the proposed ETP. 

(ii) Whether It Is Unlikely That Trading 

in the Proposed ETP Would Be the 

Predominant Influence on Prices in the 

CME Bitcoin Futures Market 

The second prong in establishing 

whether the CME bitcoin futures market 

constitutes a ‘‘market of significant size’’ 

related to spot bitcoin is the 

determination that it is unlikely that 

trading in the proposed ETP would be 

the predominant influence on prices in 

the CME bitcoin futures market.166

(a) Assertions Made and Comments 

Received 

NYSE Arca asserts that ‘‘it is unlikely 

that the ETP would become the 

predominant influence on prices in the 

market.’’ 167 In support, NYSE Arca 

states that the Sponsor examined the 

change in ‘‘market capitalization of 

bitcoin’’ with net inflows into the Trust, 

which currently trades OTC,168 and 

found that from November 1, 2019, to 

August 31, 2021, the market 

capitalization of bitcoin grew by $721 

billion, while the Trust experienced 

$6.6 billion of inflows over the same 

period.169 The Exchange states that the 

cumulative inflow into the Trust over 

the stated time period was only 0.9% of 

the aggregate growth of bitcoin’s market 

capitalization.170 The Exchange also 

states that ‘‘the Trust experienced 

approximately $98.5 billion of trading 

volume from November 1, 2019[,] to 

August 31, 2021, only 23% of the CME 

futures market and 16% of the Index 

over the same period.’’ 171

(b) Analysis 

The record does not demonstrate that 

it is unlikely that trading in the 

proposed ETP would be the 

predominant influence on prices in the 

CME bitcoin futures market. First, the 

Sponsor’s comparison of the Trust’s 

historical inflows to the growth of 

bitcoin’s market capitalization 

misapplies the second prong of the 

Commission’s analysis. As stated above, 

the second prong in establishing 

whether the CME bitcoin futures market 

constitutes a ‘‘market of significant size’’ 

is the determination that it is unlikely 

that trading in the proposed ETP would 

be the predominant influence on prices 

in the CME bitcoin futures market. The 

Sponsor’s analysis of the Trust’s 

historical inflows vis-a`-vis the 

capitalization of the spot bitcoin market 

considers neither the CME bitcoin 

futures market nor the CME bitcoin 

futures market’s prices. Accordingly, 

such statistics, without more, are not 

relevant to the Commission’s 

consideration of whether trading in the 

ETP would be the predominant 

influence on prices in the CME bitcoin 

futures market. 

Second, putting aside the question of 

the spot bitcoin market’s relevance to 

the second prong of the analysis, neither 

the Sponsor nor the Exchange has 

adequately explained why historical 

inflows into the OTC Trust is an 

appropriate proxy for trading in what 

would be exchange-listed Shares. There 

is no limit on the amount of mined 

bitcoins that the Trust may hold. Yet the 

Sponsor relies on the Trust’s historical 

inflows and does not provide any 

information on the expected growth in 

the size of the Trust if the proposal is 

approved and the resultant increase in 


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172 In addition, neither the Exchange nor the 

Sponsor addresses the likely impact, if any, of the 

conversion itself on CME bitcoin futures prices, 

such as whether there may be rapid inflows into, 

or outflows from, the Trust upon conversion, and 

how long any such impacts are expected to last. 

173See infra note 237. 

174See infra note 245 and accompanying text. 

175See infra notes 245–246 and accompanying 

text. 

176See Amendment No. 1, 87 FR at 28054. 

177See Grayscale Submission, at 2. 

178As 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). 

179See VanEck Order, 86 FR at 64548–59; 

WisdomTree Order, 86 FR at 69332–33; Kryptoin 

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

3879; Wise Origin Order, 87 FR at 5537; ARK 

21Shares Order, 87 FR at 20025. 

180See Amendment No. 1, 87 FR at 28055; 

Grayscale Letter I, at 7–13; Letter from Davis Polk 

& Wardwell LLP, on behalf of the Sponsor, dated 

Apr. 18, 2022 (‘‘Grayscale Letter II’’). 

181 Grayscale Letter I, at 4. 

182 Id. at 7. See also Amendment No. 1, 87 FR at 

28055; Grayscale Letter II, at 2; Grayscale 

Submission, at 13–14; STA Letter, at 2 (‘‘both types 

of products use similar processes for determining 

price on the underlying spot cash [b]itcoin 

markets’’). 

183Amendment No. 1, 87 FR at 28055. See also 

Grayscale Letter I, at 7; Grayscale Letter II, at 2; 

Grayscale Submission, at 13; Fortress Letter, at 2; 

Virtu Letter, at 3; Letter from Adam Kornfield, 

dated Feb. 15, 2022 (‘‘Kornfield Letter’’), at 1; Letter 

from Hashem Dezhbakhsh, Narasimhan Jegadeesh, 

and Juan Rubio-Ramirez, Emory University, dated 

April 24, 2022, at 2 (‘‘Emory Letter’’). The Sponsor 

states that the BRR and the Index have significant 

overlap in constituents, resulting in prices that 

track each other closely, with an average daily price 

difference over trailing 12 months of 0.04%. See 

Grayscale Submission, at 13. See also Whaley 

Letter, at 2–3 (presenting summary data relating to 

the Index and the BRR and concluding that ‘‘XBX 

and BRR are near perfect substitutes’’). 

184See Grayscale Letter I, at 7. See also, e.g., 

Letter from Paul Grewal, Chief Legal Officer, 

Coinbase, dated Dec. 14, 2021 (‘‘Coinbase Letter I’’), 

at 4 (‘‘the reference rate used to price [b]itcoin 

contracts underlying futures-based ETPs is subject 

to the same pricing quality risks as the index used 

to price spot [b]itcoin and calculate net-asset value 

in spot ETPs.’’); Letter from James J. Angel, 

Associate Professor of Finance, Georgetown 

University, dated Apr. 17, 2022 (‘‘Angel Letter I’’), 

at 6; Blockchain Association Letter, at 3. 

185 Grayscale Letter I, at 9. 

the amount of bitcoin that may be held 

by the Trust over time, or on the overall 

expected number, size, and frequency of 

creations and redemptions—or how any 

of the foregoing could (if at all) 

influence prices in the CME bitcoin 

futures market. Moreover, the Trust’s 

trading volume cited by the Exchange 

only relates to the Trust as it trades OTC 

and does not contemplate what may 

happen if the Trust converts to an 

ETP.172 Commenters state that approval 

of a spot bitcoin ETP would provide a 

simpler, safer, and more efficient way to 

obtain exposure to bitcoin than the 

products that are currently available to 

retail investors; 173 and converting the 

Trust into an ETP would allow for daily 

creations and redemptions.174 Further, 

the Sponsor itself acknowledges that 

converting the Trust into an ETP would 

allow the Shares to better track the 

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

reduce discounts and premiums.175

Therefore, the Sponsor’s use of 

historical inflow data is questionable as 

a way to approximate trading that may 

ensue in the proposed ETP. 

Third, NYSE Arca’s assertions are 

general and conclusory. While NYSE 

Arca recites data relating to the market 

capitalization of bitcoin and inflows to 

the Trust, and trading volume of the 

Trust as compared to the CME bitcoin 

futures market and the Constituent 

Platforms, NYSE Arca provides no 

meaningful analysis of such data to 

support its conclusion. For example, 

setting aside the issues with the 

relevance of the data that the Sponsor 

chose to consider, the analysis 

performed on such data is merely a 

comparison of the size of one data point 

(e.g., change in market capitalization) to 

the size of another (e.g., net inflows). 

Such an analysis is, at best, a simple 

correlation between the two data points; 

it provides no information relating to 

the impact of one on the other—e.g., no 

information on the impact of the Trust’s 

historical inflows on market 

capitalization, or of the Trust’s trading 

volume on the CME bitcoin futures 

market (let alone, on the CME bitcoin 

futures market’s prices). In short, the 

analysis performed provides no 

information on the influence that is 

central to the second prong. 

Fourth, the data that NYSE Arca 

provides indicate that the Trust’s 

trading volume from November 1, 2019, 

to August 31, 2021, was ‘‘only’’ 23% of 

that of the CME bitcoin futures 

market.176 Even assuming that this 

historical data is an accurate predictor 

of the future percentage, neither the 

Sponsor nor the Exchange directly 

addresses why a single bitcoin ETP with 

trading volume close to one-quarter that 

of the CME bitcoin futures market is not 

likely to be the predominant influence 

on prices in that market. Moreover, the 

Sponsor describes the Trust, as of April 

26, 2022, as holding approximately $30 

billion in bitcoin, an amount that 

constitutes 3.4% of all outstanding 

bitcoin 177 and that far exceeds the value 

of all open interest in CME bitcoin 

futures contracts.178 Yet neither the 

Sponsor nor the Exchange directly 

addresses why a spot bitcoin ETP whose 

assets under management would 

similarly exceed the value of all open 

interest in CME bitcoin futures contracts 

is not likely to be the predominant 

influence on prices in that market. 

Thus, the Commission cannot 

conclude, based on the assertions in the 

filing and absent sufficient evidence or 

analysis in support of these assertions, 

that it is unlikely that trading in the 

proposed ETP would be the 

predominant influence on prices in the 

CME bitcoin futures market.179

Therefore, because NYSE Arca has not 

provided sufficient information to 

establish both prongs of the ‘‘market of 

significant size’’ determination, 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. 

(3) Assertions That the Proposed Spot 

Bitcoin ETP Is Comparable to Bitcoin 

Futures-Based ETFs and ETPs 

(i) Assertions Made and Comments 

Received 

The Exchange and the Sponsor argue 

that it would be inconsistent for the 

Commission to allow the listing and 

trading of ETFs and ETPs that provide 

exposure to bitcoin through CME 

bitcoin futures while disapproving the 

current proposal.180

The Sponsor asserts that CME bitcoin 

futures ETFs and ETPs and spot bitcoin 

ETPs ‘‘are the same in all relevant 

respects.’’ 181 In support of this 

assertion, the Sponsor claims that CME 

bitcoin futures ETFs and ETPs are 

‘‘priced according to the CME CF 

Bitcoin Reference Rate’’ (‘‘BRR’’), 

which, ‘‘in turn, is determined 

according to pricing data collected from 

digital asset trading platforms that 

include all but one of those currently 

incorporated into [the Index].’’ 182 NYSE 

Arca also states that spot bitcoin ETPs, 

including the Trust, ‘‘would be priced 

by referencing [spot bitcoin platforms] 

included in the BRR, such as through 

the Index.’’ 183

The Sponsor further asserts that, 

because the BRR is based upon 

‘‘substantially the same [b]itcoin pricing 

data’’ as the Index, both CME bitcoin 

futures ETFs and ETPs and spot bitcoin 

ETPs are exposed to the ‘‘same risks 

relating to pricing data quality’’ (‘‘same 

data, same risks’’).184 Moreover, because 

of the ‘‘almost complete overlap’’ in the 

platforms underlying the BRR and the 

Index, the Sponsor claims that ‘‘the 

risks of fraud and manipulation in the 

[b]itcoin market impacting spot [b]itcoin 

ETPs are indistinguishable from those 

same risks impacting futures [b]itcoin 

ETPs.’’ 185 The Exchange also asserts 


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186See Amendment No. 1, 87 FR at 28055. See 

also Grayscale Submission, at 14. Some 

commenters agree that bitcoin futures ETFs and 

ETPs pose identical risks of fraud and manipulation 

as spot bitcoin ETPs given their views that both 

products are priced based on the spot bitcoin price. 

See, e.g., Blockchain Association Letter, at 2; 

Coinbase Letter I, at 3; Coinbase Letter II, at 7; Virtu 

Letter, at 3; Angel Letter I, at 5; BitGo Letter, at 2; 

Cumberland Letter, at 2; Letter from Carol R. 

Goforth, University Professor and Clayton N. Little 

Professor of Law, University of Arkansas, dated 

May 3, 2022 (‘‘Goforth Letter’’), at 1; Kornfield 

Letter, at 2; Letters from Brandon Gunderson (Feb. 

4, 2022) (‘‘Gunderson Letter’’), at 2; Kenneth L. 

Keiffer, dated May 3, 2022 (‘‘Keiffer Letter’’), at 1; 

Robert L. DiLonardo and Donna S. DiLonardo, 

dated May 3, 2022 (‘‘DiLonardo Letter’’); Bridget 

Metzger (May 9, 2022) (‘‘Metzger Letter’’); Emory 

Letter, at 2; Letter from Sigal Mandelker and Jessi 

Brooks, Ribbit Capital, dated June 20, 2022 (‘‘Ribbit 

Capital Letter’’), at 5. An affiliate of the Custodian 

also states that prices and volumes in the bitcoin 

futures and spot bitcoin markets ‘‘are highly 

correlated, indicating very similar market dynamics 

between the futures market, for which the 

Commission has approved a [CME bitcoin futures 

ETF], and the spot market.’’ Coinbase Letter II, at 

3. 

187 Grayscale Letter II, at 2. 

188 Id. (referring to the Teucrium Order, supra 

note 11). See also Grayscale Submission, at 14. 

189See Grayscale Letter I, at 11. Some 

commenters make similar arguments. For example, 

a commenter states that ‘‘spot markets may be less 

prone to manipulation given their daily notional 

volumes in the range of $35 billion, with futures 

volumes in the range of $1 billion daily notional.’’ 

Virtu Letter, at 3. Another commenter states that an 

ETP that actually holds bitcoin would be less 

vulnerable to manipulation than an ETP that holds 

futures contracts because, with respect to bitcoin 

futures, there is the possibility of manipulation on 

the CME itself in addition to the spot bitcoin 

trading platforms. See Angel Letter I, at 6. Another 

commenter states that having a bitcoin futures ETF 

actually makes the derivatives markets more liquid 

and easy to manipulate than the spot market. See 

Dreyfuss Letter, at 2. See also, e.g., Letter from Mary 

L. Holsinger, dated May 8, 2022. 

190See Grayscale Letter I, at 11–12; Grayscale 

Letter II, at 2 (‘‘The Commission’s prior 

disapprovals of spot bitcoin ETPs have not 

identified any distinct and significant additional 

risk of fraud and manipulation that is somehow 

specific to spot [b]itcoin ETPs, and none exists.’’). 

See also, e.g., Blockchain Association Letter, at 3. 

191 Grayscale Letter I, at 11. See also, e.g., 

Blockchain Association Letter, at 3; Coinbase Letter 

I, at 3; Ribbit Capital Letter, at 5. 

192See Grayscale Letter I, at 8–9; 12–13; Grayscale 

Submission, at 23; Grayscale Letter II, at 2–4 

(stating, among other things, that if the proposal 

‘‘were disapproved based on the ‘significant market’ 

test, without an independent evaluation of the 

proposal’s compliance with Section 6(b)(5) in light 

of the [Teucrium Order], we believe the action 

would be inconsistent with the requirements of 

both the Exchange Act and the [APA]’’). Some 

commenters agree that the Commission’s disparate 

treatment of bitcoin futures ETFs and ETPs and spot 

bitcoin ETPs results in unfair discrimination 

amongst issuers in contravention of the Exchange 

Act and/or is arbitrary and capricious in violation 

of the APA. See, e.g., Blockchain Association Letter, 

at 3–4, Coinbase Letter I, at 4; Virtu Letter, at 3; 

Angel Letter I, at 5; Fortress Letter, at 3; Kornfield 

Letter; Keiffer Letter; Metzger Letter; Goforth Letter, 

at 2; DiLonardo Letter; Letter from Michael D. 

Moffitt, dated Mar. 13, 2022 (‘‘Moffitt Letter II) 

(citing transcript of Joseph Grundfest, former SEC 

Commissioner); Davenport Letter; Letter from John 

Carlson, dated Feb. 22, 2022; Ribbit Capital Letter, 

at 6; Letter from Alan J. Lane, Chief Executive 

Officer, Silvergate Capital Corporation, dated June 

21, 2022. See also, e.g., ADAM Letter, at 6 (‘‘a 

disapproval of Arca’s proposal would lead to the 

Commission picking winners based on its 

preferential treatment of one product over 

another’’). A commenter asserts that ‘‘it is not 

within [the Commission’s mandate to regulate the 

spot commodity markets upon which ETPs are 

based[,]’’ that ‘‘Section 6(b)(5) neither mentions 

underlying markets, nor an exchange’s obligations 

with respect to fraud within them[,]’’ and ‘‘[t]he 

Commission’s apparent position that an exchange 

must mitigate fraud and manipulation in an 

underlying market, or be prohibited from listing a 

product based on a commodity in an underlying 

market subject to fraud and manipulation not in the 

exchange’s control, stretches the Commission’s 

authority beyond existing statutory language.’’ See 

Ribbit Capital Letter, at 5. 

193 Grayscale Letter I, at 8. Some commenters 

agree that the Commission has not articulated a 

valid justification for treating bitcoin futures ETFs 

and ETPs and spot bitcoin ETPs differently. See, 

e.g., Blockchain Association Letter, at 3–4; Coinbase 

Letter I, at 4; Cumberland Letter, at 2; STA Letter, 

at 2; Moffitt Letter II (citing transcript of Joseph 

Grundfest, former SEC Commissioner); Kornfield 

Letter; Goforth Letter; Chilson Letter, at 4. 

194See Grayscale Letter I, at 9–11; Grayscale 

Submission, at 14. See also, e.g., Blockchain 

Association Letter, at 3; Coinbase Letter I, at 5 n.11. 

The Sponsor states that the Commission’s recent 

approval of bitcoin futures ETPs registered under 

the Securities Act ‘‘confirms that 1940 Act 

registration is not a basis for the Commission to 

approve one product and reject another.’’ See 

Grayscale Letter II, at 1 (referring to the Teucrium 

Order, supra note 11). See also Amendment No. 1, 

87 FR at 28055; Goforth Letter, at 1–2. 

195See Grayscale Letter I, at 12–13. 

196See id. at 12. For a summary of the 

Commission’s approach to considering proposals to 

list bitcoin-based ETPs, see supra notes 11–27 and 

accompanying text. Some commenters agree that 

the Commission’s evaluation of spot bitcoin ETPs 

and bitcoin futures ETFs and ETPs is ambiguous 

and inconsistent. See, e.g., Coinbase Letter I, at 4 

(‘‘when market participants compare the 

Commission’s evaluation and approval of a futuresbased [b]itcoin ETP to its treatment of spot [bitcoin] 

ETP proposals, they will see a lack of well-defined 

criteria and inconsistent application of the 

criteria’’); Fortress Letter, at 2 (‘‘While the 

Commission has stated that it considered each [spot 

bitcoin ETP] rule application ‘on its own merits and 

under the standards applicable to it’, the 

Commission has itself devised those standards 

ambiguously and inconsistently.’’). 

197 Grayscale Letter I, at 12. See also Grayscale 

Letter II, at 3 (‘‘the Commission’s reluctance to 

quantify the size a market must achieve to be 

‘significant,’ and its reluctance to articulate 

discernible standards for determining whether the 

market has the requisite linkage to the ETP’s assets, 

renders this test subjective, arbitrary and effectively 

unachievable’’). 

that, because of this overlap, any 

potential fraud or manipulation in the 

underlying spot bitcoin market would 

impact both CME bitcoin futures ETFs 

and ETPs and spot bitcoin ETPs.186 The 

Sponsor goes further, asserting that 

‘‘any’’ fraud or manipulation in the 

underlying market ‘‘will affect both 

products in the same way.’’ 187

Moreover, the Sponsor states that the 

Commission itself has recognized that 

‘‘the CME bitcoin futures market is not 

insulated from potential risks of fraud 

and manipulation in the underlying 

[b]itcoin market.’’ 188 The Sponsor even 

asserts that, ‘‘[i]f anything, derivatives 

markets present additional 

opportunities for manipulation on top of 

spot markets—which is why the 

derivatives markets have an additional 

layer of federal regulation to begin 

with.’’ 189 According to the Sponsor, the 

Commission has never found there to be 

any meaningful difference in the risk of 

fraud or manipulation between spot 

bitcoin and bitcoin futures markets.190

The Sponsor further asserts that, ‘‘[e]ven 

with regulation by the CFTC, limiting 

ETP exposure to [b]itcoin futures does 

not address the risk of manipulation of 

underlying [b]itcoin spot market 

prices—unless the Commission’s view 

is that CFTC regulation is adequate for 

all [b]itcoin spot markets, including 

those in which [the Trust] invests.’’ 191

Given that CME bitcoin futures ETFs 

currently trade, the Sponsor believes 

that the Commission’s disapproval of 

the proposal would violate Section 

6(b)(5) of the Exchange Act’s prohibition 

against unfair discrimination among 

issuers, and would constitute an 

arbitrary and capricious administrative 

action in violation of the Administrative 

Procedure Act (‘‘APA’’).192 According to 

the Sponsor, ‘‘[t]he Commission has not 

offered any meaningful explanation for 

its differential treatment of these 

competing products.’’ 193 The Sponsor 

argues that regulation of bitcoin futures 

ETFs under the 1940 Act offers no 

protections against fraudulent and 

manipulative trading in the underlying 

bitcoin market and provides no basis for 

treating bitcoin futures ETFs and spot 

bitcoin ETPs registered under the 

Securities Act differently.194

The Sponsor also argues that the 

Commission’s standard violates the 

APA because it is illusory and cannot be 

satisfied.195 According to the Sponsor, 

the framework that the Commission has 

articulated for assessing whether a 

proposal to list and trade any bitcoinbased ETP complies with the 

requirements of Exchange Act Section 

6(b)(5) is ‘‘so ill-defined and 

unachievable as to be arbitrary.’’ 196 The 

Sponsor continues to state that ‘‘[t]he 

Commission has never quantified a 

‘significant market’ or ‘market of 

significant size.’ ’’ 197 Moreover, 

according to the Sponsor, the 

Commission ‘‘has never defined or 

specified what would actually 

constitute ‘unique resistance to 

manipulation’ that is ‘beyond the 

protections of the traditional 

commodities and equities markets,’ nor 

has the Commission explained what it 


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198 Grayscale Letter I, at 13. 199See supra note 11 and accompanying text. The 

Sponsor also mischaracterizes the Teucrium Order. 

For example, the Sponsor states that the Teucrium 

Order ‘‘reflects plainly the Commission’s 

recognition that the CME bitcoin futures market is 

not insulated from potential risks of fraud and 

manipulation in the underlying [b]itcoin market,’’ 

and that ‘‘the Commission took pains to ‘disagree[ ] 

with much of [NYSE] Arca’s reasoning’ about the 

[b]itcoin futures market’s separation from the 

underlying [b]itcoin market.’’ Grayscale Letter II, at 

2. However, this discussion in the Teucrium Order 

addresses whether NYSE Arca had supported its 

claim that it is reasonably likely that a would-be 

manipulator of the CME bitcoin futures ETP that 

was the subject of the Teucrium Order would have 

to trade on the CME to manipulate that ETP. See 

Teucrium Order, 87 FR at 21679. In that context, 

NYSE Arca had not sufficiently supported its 

statements that the CME bitcoin futures market 

‘‘stands alone’’ or that ‘‘[b]itcoin futures prices are 

not specifically materially influenced by other 

[b]itcoin markets’’ for the Commission to be 

persuaded by such statements. See id. at 21680. 

200See supra note 60 and accompanying text. 

201Although the Sponsor claims that the 

Commission has never defined or specified what 

would constitute ‘‘unique resistance to 

manipulation’’ that is ‘‘beyond the protections of 

the traditional commodities and equities markets,’’ 

or explained what it means for resistance to be 

‘‘inherent’’ or ‘‘novel,’’ the Sponsor 

mischaracterizes the premise of its own argument. 

Listing exchanges, not the Commission, have 

argued that other means besides surveillancesharing agreements may be sufficient to prevent 

fraudulent and manipulative acts and practices, 

including by asserting that the bitcoin market as a 

whole or the relevant underlying bitcoin market is 

‘‘uniquely’’ and ‘‘inherently’’ resistant to fraud and 

manipulation. In response, the Commission has 

agreed with listing exchanges’ posited hypothetical: 

that, if a listing exchange could establish that the 

underlying market inherently possesses a unique 

resistance to manipulation beyond the protections 

that are utilized by traditional commodity or 

securities markets—for which surveillance-sharing 

agreements in the context of listing derivative 

securities products have been consistently 

present—the exchange would not necessarily need 

to enter into a surveillance-sharing agreement with 

a regulated significant market related to the 

underlying bitcoin assets. See Winklevoss Order, 83 

FR at 37580, 37582–91 (addressing assertions that 

‘‘bitcoin and bitcoin [spot] markets’’ generally, as 

well as one bitcoin trading platform specifically, 

have unique resistance to fraud and manipulation). 

See also USBT Order, 85 FR at 12597. Furthermore, 

a listing exchange need not substantiate its claim 

that the underlying bitcoin market is uniquely and 

inherently resistant to fraud in addition to 

demonstrating that the listing exchange has a 

surveillance-sharing agreement with a regulated 

significant market related to the underlying bitcoin 

assets. 

202The Commission’s general discussion on the 

risk of fraud and manipulation in the spot bitcoin 

or futures markets is only in response to arguments 

raised by the proposing listing exchanges (or 

commenters) that mitigating factors against fraud 

and manipulation in the spot bitcoin or futures 

markets should compel the Commission to dispense 

with the detection and deterrence of fraud and 

manipulation provided by a comprehensive 

surveillance-sharing agreement with a regulated 

market of significant size related to the underlying 

bitcoin assets. But even in such instance, the central 

issue is about the necessity of such a surveillancesharing agreement, not the overall risk of fraud and 

manipulation in the spot bitcoin or futures markets, 

or the extent to which such risks are similar. 

203See Teucrium Order, 87 FR at 21678–81; 

Valkyrie XBTO Order, 87 FR at 28850–53. 

204See Teucrium Order, 87 FR at 21679; Valkyrie 

XBTO Order, 87 FR at 28851. 

205See Teucrium Order, 87 FR at 21679. 

means for resistance to be ‘inherent’ or 

‘novel’ in this context.’’ 198

(ii) Analysis 

The Commission disagrees with these 

assertions and conclusions. The 

proposed rule change does not relate to 

the same underlying holdings as either 

ETFs regulated under the 1940 Act that 

provide exposure to bitcoin through 

CME bitcoin futures, or CME bitcoin 

futures-based ETPs registered under the 

Securities Act 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.199

In asserting that, for purposes of 

making a determination to approve or 

disapprove proposals to list and trade 

bitcoin futures and spot bitcoin ETPs, 

the Commission is drawing a distinction 

about the potential for fraud and 

manipulation in the CME bitcoin futures 

market vis-a`-vis the spot bitcoin 

markets, the Exchange, Sponsor, and 

commenters mischaracterize the 

framework that the Commission has 

articulated in the Winklevoss Order. As 

stated in the Winklevoss Order, the 

Commission is not applying a ‘‘cannot 

be manipulated’’ standard—either on 

the CME bitcoin futures market or the 

spot bitcoin markets. Rather, as the 

Commission has repeatedly 

emphasized, and also summarized 

above, the Commission is examining 

whether the proposal meets the 

requirements of the Exchange Act and, 

pursuant to its Rules of Practice, is 

placing the burden on NYSE Arca to 

demonstrate the validity of its 

contentions that bitcoin markets ‘‘offer 

novel protections beyond those that 

exist in traditional commodity markets 

or equity markets’’ such that the 

detection and deterrence of fraud and 

manipulation provided by a 

comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size related to spot bitcoin is 

unnecessary,200 or to establish that it 

has entered into such a surveillancesharing agreement.201

Consistent with this approach, 

contrary to the Exchange’s, the 

Sponsor’s, and some commenters’ 

assertions, the Commission’s 

consideration (and approval) of 

proposals to list and trade CME bitcoin 

futures ETPs, as well as the 

Commission’s consideration (and thus 

far, disapproval) of proposals to list and 

trade spot bitcoin ETPs, does not focus 

on an assessment of the overall risk of 

fraud and manipulation in the spot 

bitcoin or futures markets, or on the 

extent to which such risks are 

similar.202 Rather, the Commission’s 

focus has been consistently on whether 

the listing exchange has a 

comprehensive surveillance-sharing 

agreement with a regulated market of 

significant size related to the underlying 

bitcoin assets of the ETP under 

consideration, so that it would have the 

necessary ability to detect and deter 

manipulative activity. For reasons 

articulated in the orders approving 

proposals to list and trade CME bitcoin 

futures-based ETPs (i.e., the Teucrium 

Order and the Valkyrie XBTO Order), 

the Commission found that in each such 

case the listing exchange has entered 

into such a surveillance-sharing 

agreement.203 Making the same 

assessment with respect to this 

proposed spot bitcoin ETP, however, as 

discussed and explained above, the 

Commission finds that NYSE Arca has 

not. 

Specifically, for the CME bitcoin 

futures ETPs under consideration in the 

Teucrium Order and the Valkyrie XBTO 

Order, the proposed ‘‘significant’’ 

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

which the listing exchange has a 

surveillance-sharing agreement is the 

same market on which the underlying 

bitcoin assets (i.e., CME bitcoin futures 

contracts) trade. As explained in those 

Orders, the CME’s surveillance can 

reasonably be relied upon to capture the 

effects on the CME bitcoin futures 

market caused by a person attempting to 

manipulate the CME bitcoin futures ETP 

by manipulating the price of CME 

bitcoin futures contracts, whether that 

attempt is made by directly trading on 

the CME bitcoin futures market or 

indirectly by trading outside of the CME 

bitcoin futures market.204 Regarding the 

approved Teucrium Bitcoin Futures 

Fund in the Teucrium Order (‘‘Fund’’), 

for example, when the CME shares its 

surveillance information with NYSE 

Arca (the listing exchange for the Fund), 

the information would assist in 

detecting and deterring fraudulent or 

manipulative misconduct related to the 

non-cash assets held by the Fund.205

Accordingly, the Commission explains 

in the Teucrium Order and the Valkyrie 

XBTO Order that it is unnecessary for a 

listing exchange to establish a 


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206See id. 

207See 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. 

208See Teucrium Order, 87 FR at 21679 n.46; 

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

209See 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. As 

discussed further below, see infra notes 224–225 

and accompanying text, the information in the 

record for this filing does not sufficiently 

demonstrate that attempted manipulation of spot 

bitcoin would also similarly impact CME bitcoin 

futures contracts. 

210See Teucrium Order, 87 FR at 21679 n.46; 

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

211See Section III.B.2.i, supra. 

212 Grayscale Letter II, at 2. 

213See id. at 7, 9. 

214See https://docscfbenchmarks.s3.amazonaws.com/ 

CME+CF+Reference+Rates+Methodology.pdf. 

215See https://docscfbenchmarks.s3.amazonaws.com/ 

CME+CF+Constituent+Exchanges.pdf. 

216See https://www.cmegroup.com/education/ 

courses/introduction-to-bitcoin/introduction-tobitcoin-reference-rate.html. This one-hour window 

is partitioned into 12, five-minute intervals, where 

the BRR is calculated as the equally-weighted 

average of the volume-weighted medians of all 12 

partitions. See id. 

217Under normal procedures, daily cash 

settlements are generally based on the volumeweighted average price of trading activity on CME 

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

Time). See https://www.cmegroup.com/confluence/ 

display/EPICSANDBOX/Bitcoin for a description of 

CME bitcoin futures daily settlement procedures. 

218See Amendment No. 1, 87 FR at 28047. 

219See id. at 28047, 28049. 

220See supra notes 132–133 and accompanying 

text. 

221As discussed above, the use of the Index by 

the Trust to determine the value of its bitcoin does 

not support the finding that the Exchange has 

established other means to prevent fraud and 

manipulation that are sufficient to justify 

Continued 

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.206

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.’’ 207 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. 

Because of this significant 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.208

Because, here, NYSE Arca is seeking 

to list a spot bitcoin ETP that relies on 

the CME as the purported ‘‘significant’’ 

regulated market with which it has a 

comprehensive surveillance-sharing 

agreement, the assets held by the 

proposed ETP would not be traded on 

the CME. Thus there is 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 the proposed 

ETP.209 The Exchange could have 

overcome this concern by demonstrating 

that there is a reasonable likelihood that 

a person attempting to manipulate the 

proposed 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 proposed ETP.210 As 

discussed and explained above,211 the 

Commission finds that NYSE Arca has 

not made such demonstration. 

To the extent that the Sponsor—by 

way of claiming that, ‘‘[b]ecause both 

spot and futures-based [b]itcoin 

products face exposure to the same 

underlying [b]itcoin market, any fraud 

or manipulation in the underlying 

market will affect both products in the 

same way’’ 212—is arguing that the 

CME’s surveillance would, in fact, assist 

in detecting and deterring fraudulent 

and manipulative misconduct that 

impacts spot bitcoin ETPs in the same 

way as it would for misconduct that 

impacts the CME bitcoin futures ETFs/ 

ETPs, the information in the record for 

this filing does not support such a 

claim. Specifically, the Sponsor claims 

that (i) CME bitcoin futures ETFs/ETPs 

are ‘‘priced according to the [BRR];’’ (ii) 

the proposed spot bitcoin ETP would be 

priced based on the Index; and (iii) 

because of the ‘‘almost complete 

overlap’’ between the spot platforms 

whose prices are used to calculate the 

BRR and the Index, bitcoin futures 

ETFs/ETPs and the proposed ETP are 

subject to the ‘‘same risks relating to 

pricing data quality.’’ 213 This logic, 

however, is flawed for the following 

reasons. 

First, there is no evidence in the 

record that CME bitcoin futures ETFs/ 

ETPs are ‘‘priced according to the 

[BRR].’’ The BRR is a once-a-day 

reference rate of the U.S. dollar price of 

one bitcoin as of 4 p.m., London 

time.214 The BRR aggregates the trade 

flow of its constituent spot bitcoin 

platforms—Coinbase, Gemini, LMAX 

Digital, itBit, Kraken, and Bitstamp 215— 

during a specific one-hour calculation 

window.216 While the BRR is used to 

value the final cash settlement of CME 

bitcoin futures contracts, it is not 

generally used for daily cash settlement 

of such contracts,217 nor is it claimed to 

be used for any intra-day trading of such 

contracts. In addition, CME bitcoin 

futures ETFs/ETPs do not hold their 

CME bitcoin futures contracts to final 

cash settlement; rather, the contracts are 

rolled prior to their settlement dates. 

Moreover, the shares of CME bitcoin 

futures ETFs/ETPs trade in secondary 

markets, and there is no evidence in the 

record for this filing that such intra-day, 

secondary market trading prices are 

determined by the BRR. 

Second, there is no evidence in the 

record that the Shares’ prices would be 

determined by the Index. The Index is 

a U.S. dollar-denominated composite 

reference rate for the price of bitcoin 

calculated at 4:00 p.m. New York 

time.218 As described above, the Index 

applies an algorithm to the price of 

bitcoin on the Constituent Platforms— 

Coinbase Pro, LMAX Digital, Kraken, 

and Bitstamp—calculated on a per 

second basis over a 24-hour period. 

While the Index is used daily to value 

the bitcoins held by the Trust,219 as 

discussed above,220 the Index would not 

be used for the creation or redemption 

of Shares, nor is the Index claimed to be 

used for any intra-day secondary market 

trading of the Shares, either currently on 

the OTC market or in the future on the 

Exchange. Rather, the Share price is 

discovered through continuous intraday, secondary market interactions of 

buy and sell interests.221


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dispensing with the detection and deterrence of 

fraud and manipulation provided by a 

comprehensive surveillance-sharing agreement with 

a regulated market of significant size related to spot 

bitcoin. See Section III.B.1.ii, supra. Likewise, the 

Commission has previously rejected arguments by 

listing exchanges that the use of a reference rate 

similar to the BRR to value bitcoin held by 

proposed spot bitcoin ETPs provides other means 

to prevent fraud and manipulation that are 

sufficient to justify dispensing with the detection 

and deterrence of fraud and manipulation provided 

by a comprehensive surveillance-sharing agreement 

with a regulated market of significant size related 

to spot bitcoin. See Wise Origin Order, 87 FR at 

5532–33; SkyBridge Order, 87 FR at 3877. 

Accordingly, the Index and the BRR, and the 

similarities between the BRR and the Index, are not 

informative in the Commission’s determination of 

whether the Exchange has established other means 

to prevent fraud and manipulation. 

222Although the Sponsor states that the BRR is 

‘‘determined according to pricing data collected 

from digital asset trading platforms that include all 

but one of those currently incorporated into [the 

Index]’’ (Grayscale Letter I, at 7), based on 

information provided on the CME’s website, the 

Sponsor’s statement does not appear to be correct. 

See https://www.cmegroup.com/markets/ 

cryptocurrencies/cme-cf-cryptocurrencybenchmarks.html?redirect=/trading/cryptocurrencyindices/cf-bitcoin-reference-rate.html. It is also 

unclear from the record whether Coinbase (used by 

the BRR) and Coinbase Pro (used by the Index) are 

the same platform. Based on recent press articles, 

it appears that Coinbase Pro will be discontinued. 

See, e.g., https://cointelegraph.com/news/coinbaseto-shut-down-coinbase-pro-to-merge-tradingservices; https://www.forbesindia.com/article/ 

crypto-made-easy/coinbase-to-shut-down-coinbasepro-to-merge-trading-services/77585/ 

1#:∼:text=Coinbase

%20Pro%2C%20the%20professional,

them%20into%20a%20single%20platform. 

223A commenter provides a correlation analysis, 

using daily price information between November 

2021 and February 2022, which purports to show 

high correlation (99.9%) between the price of CME 

bitcoin futures contracts and a Coinbase spot price. 

See Coinbase Letter II, at 7 and Figure 6. The same 

commenter also provides correlation analysis, using 

daily price information between December 2021 

and February 2022, which purports to show high 

correlation between the prices of various non-U.S. 

spot bitcoin ETPs and a Coinbase spot price. See id. 

at 8–9 and Figures 11–16. The commenter, 

however, does not provide evidence with respect to 

price correlation between shares of CME bitcoin 

futures ETFs and the BRR or between the prices of 

various non-U.S. spot bitcoin ETPs and the Index. 

Nor does correlation analysis, at daily intervals, 

provide evidence of the causal economic 

relationship of interest: namely, whether fraud or 

manipulation that impacts spot bitcoin would also 

similarly impact CME bitcoin futures contracts. See 

infra notes 224–225 and accompanying text. 224See also supra note 209. 225See Amendment No. 1, 87 FR at 28054. 

226 15 U.S.C. 78f(b)(5). 

227The Sponsor argues that disapproval of the 

proposal would constitute merit regulation, which 

is not authorized under the Exchange Act. See 

Grayscale Letter I at 14–15. In addition, the affiliate 

of the Custodian states that ‘‘the Commission’s role 

is not to evaluate the characteristics and quality of 

the underlying [b]itcoin market but instead to 

evaluate the [proposed] ETP, and the role that 

[NYSE] Arca would play in monitoring trading in 

[the Shares].’’ Coinbase Letter I, at 5. See also, e.g., 

ADAM Letter, at 6; Ribbit Capital Letter, at 5. As 

previously stated, the Commission is disapproving 

this proposed rule change because NYSE Arca has 

not met its burden to demonstrate that its proposal 

is consistent with the requirements of Exchange Act 

Section 6(b)(5). The Commission’s 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. See, e.g., Winklevoss Order, 83 FR 

at 37580; USBT Order, 85 FR at 12597; One River 

Order, 87 FR at 33550. 

228See supra notes 208–209 and accompanying 

text. 

Third, despite the Sponsor’s claim of 

‘‘almost complete overlap’’ between the 

spot platforms whose prices are used to 

calculate the BRR and those platforms 

whose prices are used for the Index, the 

BRR includes trade flow from Gemini 

and itBit, neither of which are included 

as Constituent Platforms of the Index.222

In short, and importantly, although 

the Exchange and the Sponsor focus 

heavily on the similarities between the 

BRR and the Index, there is no evidence 

in the record that the shares of any CME 

bitcoin futures ETF/ETP, or the Shares 

of the proposed spot bitcoin ETP, would 

trade in the secondary market at a price 

related to (or informed by) the BRR or 

the Index.223

Fourth, 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, 

as discussed above, 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. 

Fifth, even if the Exchange or the 

Sponsor had demonstrated a link 

between the BRR and/or the Index and 

the prices of CME bitcoin futures ETFs/ 

ETPs and/or the proposed ETP, which 

they have not, it does not necessarily 

follow that the CME’s surveillance 

would, in fact, assist in detecting and 

deterring fraudulent and manipulative 

misconduct that impacts spot bitcoin 

ETPs in the same way as it would for 

misconduct that impacts the CME 

bitcoin futures ETFs/ETPs—particularly 

when such misconduct occurs off of the 

CME itself.224 For example, even 

assuming, for the sake of argument, that 

the BRR and/or the Index 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 

any manipulation that impacts spot 

bitcoin also similarly impacts CME 

bitcoin futures contracts. Neither the 

Sponsor nor the Exchange has provided 

any analysis or data that assesses the 

reaction (if any) of CME bitcoin futures 

contracts to instances of fraud and 

manipulation in spot bitcoin markets. 

Indeed, the only analysis that the 

Sponsor itself provides is a summary of 

its lead/lag analysis comparing CME 

bitcoin futures prices with the Index, 

from which the Sponsor concludes that 

‘‘there does not appear to be a 

significant lead/lag relationship 

between the two instruments.’’ 225

In addition, the disapproval of the 

proposal would not violate the 

requirement in Section 6(b)(5) of the 

Exchange Act 226 that the rules of an 

exchange not be designed to permit 

unfair discrimination between issuers, 

nor would it constitute an arbitrary and 

capricious administrative action in 

violation of the APA.227 Importantly, 

the issuers are not similarly situated. 

The issuers of CME bitcoin futuresbased ETPs propose to hold only CME 

bitcoin futures contracts (which are 

traded on the CME itself) as their only 

non-cash holdings, and the Trust 

proposes to hold only spot bitcoin 

(which is not traded on the CME). As 

explained in detail above and in the 

Teucrium Order and the Valkyrie XBTO 

Order, because of this important 

difference, for a spot bitcoin ETP, there 

is 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.228 And as discussed above, neither 

the Exchange, nor the Sponsor, nor any 

other evidence in the record for this 

filing, sufficiently demonstrates that the 

CME’s surveillance can be reasonably 

relied upon to capture the effects of 

manipulation of the spot bitcoin assets 

underlying the proposed ETP when 

such manipulation is not attempted on 

the CME itself. 

Moreover, the analytical framework 

for assessing compliance with the 

requirements of Exchange Act Section 

6(b)(5) that the Commission applies here 

(i.e., comprehensive surveillancesharing agreement with a regulated 

market of significant size related to the 

underlying bitcoin assets) is the same 

one that the Commission has applied in 

each of its orders considering previous 

proposals to list bitcoin-based 


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229See supra notes 11–24 and accompanying text. 

230See supra note 11. 

231See Teucrium Order and Valkyrie XBTO 

Order, supra note 11. 

232See supra note 208 and accompanying text. 

233See, e.g., USBT Order, 85 FR at 12612–13; 

VanEck Order, 86 FR at 64547–48; WisdomTree 

Order, 86 FR at 69330–32; Kryptoin Order, 86 FR 

at 74175–76; NYDIG Order, 87 FR at 14938–39; 

Wise Origin Order, 87 FR at 5534–36; Global X 

Order, 87 FR at 14919–20; ARK 21Shares Order, 87 

FR at 20023–24. 

234See Sections III.B.1 & III.B.2, supra. 

235See 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; WisdomTree Order, 86 FR at 69333; 

Valkyrie Order, 86 FR at 74163; Kryptoin Order, 86 

FR at 74178; SkyBridge Order, 87 FR at 3880; Wise 

Origin Order, 87 FR at 5537. 

236See, e.g., Blockchain Association Letter, at 1– 

2; Virtu Letter, at 2–4; BitGo Letter, at 1–2; STA 

Letter, at 2–3; ADAM Letter, at 3–4; Harvey Letter, 

at 1–3; Shultz Letter; Letter from Neil Chilson and 

Jonathan M. Zalewski, dated May 31, 2022 

(‘‘Chilson Letter’’), at 3; Letter from Jody Cryder, 

dated Apr. 25, 2022; Letter from Rich Seils, dated 

Apr. 25, 2022 (‘‘Seils Letter’’); Letter from Grant 

Johnson, dated Mar. 4, 2022 (‘‘Johnson Letter’’); 

Letter from Evelyne Dandurand, dated Feb. 18, 

2022; Letter from David Brown, dated Apr. 19, 

2022; Letter from Mark Reid, dated Feb. 28, 2022; 

Letter from William McPherson, dated Mar. 1, 2022; 

Letter from Jalen Rose, dated Mar. 2, 2022; Letter 

from Brandon Gillet, dated Feb. 22, 2022; Letter 

from Clint Jasperson, dated Feb. 18, 2022; Letter 

from Jason Miller, dated Feb. 17, 2022 (‘‘Miller 

Letter’’); Letter from Michael Bielik, dated Feb. 18, 

2022; Letter from Joseph DeFilippis, dated Feb. 15, 

2022; Letter from Peter C., dated Feb. 15, 2022; 

Letter from James P. Scofield, dated Feb. 14, 2022; 

Letter from Chris Smalley, dated Feb. 10, 2022; 

Letter from Nico Peruzzi, dated Feb. 5, 2022; Letter 

from Matt Robins, dated May 10, 2022. See also 

Grayscale Submission, at 10. 

237See, e.g., ADAM Letter, at 3–4; Harvey Letter, 

at 1–3; BitGo Letter, at 1–2; Discovery Letter, at 2; 

Angel Letter, at 6–7; Johnson Letter; Letter from 

Logan Kane, Writer, Seeking Alpha, dated Feb. 19, 

2022 (‘‘Kane Letter’’); Letter from Michael Falk, 

dated Feb. 15, 2022; Letter from Andrew Farinelli, 

dated Feb. 10, 2022 (‘‘Farinelli Letter’’); Letter from 

Boris Hristov, dated May 18, 2022; Letter from Paul 

Smith, dated Feb. 28, 2022; Letter from Luke 

Groom, dated Feb. 22, 2022; Emory Letter, at 2. In 

addition, some commenters state that a spot bitcoin 

ETP would be just as, or less risky than, other 

investments already trading in the U.S. See, e.g., 

Dreyfuss Letter; Miller Letter; Letter from Derek 

Serlet, dated Apr. 27, 2022; Letter from Monty 

Henry, dated Feb. 7, 2022 (‘‘Henry Letter’’); Letter 

from Alexander, dated Feb. 22, 2022; Letter from 

Martin Baer, dated Feb. 15, 2022; Letter from Gage 

Gorda, dated Feb. 14, 2022; Letter from Branon 

White, dated Feb. 10, 2022; Letter from Nikolas 

Garcia, dated Mar. 4, 2022 (‘‘Garcia Letter’’). 

238See, e.g., Angel Letter I, at 8; ADAM Letter; 

Kane Letter; Henry Letter; Letter from Tim Crick, 

dated Mar. 21, 2022; Letter from Michael David 

Spadaccini, dated Feb. 7, 2022; Letter from Michael 

A. Rheintgen, dated Feb. 24, 2022; Letter from 

Richard Arrett, dated Feb. 22, 2022 (‘‘Arrett 

Letter’’); Letter from Brian Boerner, dated Feb. 14, 

2022; Letter from William Perez, dated Feb. 12, 

2022 (‘‘Perez Letter’’); Letter from Henry Chen, 

dated Feb. 26, 2022 (‘‘Chen Letter’’). 

239See, e.g., Blockchain Association Letter, at 2 

(‘‘while bitcoin futures ETPs have certain useful 

features, they are inferior investment products for 

many Americans due to their relatively higher cost 

and risk profile’’); Angel Letter I, at 6–7 (stating that 

‘‘[a] physical-based product in which the fund 

actually holds the bitcoin is far less vulnerable to 

manipulation than the futures contracts’’ and that 

CME futures contracts experience roll costs, lack 

liquidity, and have wide bid-ask spreads); Letter 

from Murray Stahl, Chief Investment Officer, 

Horizon Kinetics Asset Management LLC, dated 

Apr. 8, 2022 (‘‘Horizon Kinetics Letter’’), at 1–2 

(stating that a futures-based bitcoin ETP is not 

suitable for long-term investors since the 

performance deviates greatly from the underlying 

asset and that a spot bitcoin ETP would eliminate 

such a tracking error); Fortress Letter, at 2–3 

(‘‘Futures ETFs present investors with a more costly 

and complex means of gaining exposure to [b]itcoin 

while reflecting only a small portion of the actual 

market for the digital asset’’); Letter from Benjamin 

Continued 

commodity trusts and trust issued 

receipts.229 The Commission has 

applied this framework to each proposal 

by analyzing the evidence presented by 

the listing exchange and statements 

made by commenters.230 Although the 

Sponsor states that the Commission’s 

approach to assessing compliance with 

Section 6(b)(5) has created a standard 

that cannot be satisfied and therefore 

violates the APA, the Commission has 

in fact recently approved proposals by 

the Exchange and the Nasdaq Stock 

Market to list and trade shares of ETPs 

holding CME bitcoin futures as their 

only non-cash holdings.231 And in the 

orders approving these CME bitcoin 

futures-based ETPs, the Commission 

explicitly discussed how an exchange 

seeking to list and trade a spot bitcoin 

ETP could overcome the lack of a oneto-one relationship between the 

regulated market with which it has a 

surveillance-sharing agreement and the 

market(s) on which the assets held by a 

spot bitcoin ETP could be traded: by 

demonstrating that there is a reasonable 

likelihood that a person attempting to 

manipulate the spot bitcoin ETP would 

have to trade on the regulated market 

(i.e., on the CME) to manipulate the spot 

bitcoin ETP.232

When considering past proposals for 

spot bitcoin ETPs, the Commission has, 

in particular, reviewed the econometric 

and/or statistical evidence in the record 

to determine whether the listing 

exchange’s proposal has met the 

applicable standard.233 The 

Commission’s assessment 

fundamentally presents quantitative, 

empirical questions, but, as discussed 

above, the Exchange has not provided 

evidence sufficient to support its 

arguments. Instead, the Exchange and 

the Sponsor make various assertions 

that are not supported by the limited 

data in the record regarding, among 

other things, trading volume and bitcoin 

market capitalization, or the 

relationship between spot bitcoin prices 

and CME bitcoin futures prices 

(including the lead/lag relationship 

between the spot market and the CME 

bitcoin futures market), and the record 

contains insufficient empirical analysis 

or quantitative evidence of any such 

data to support the Exchange’s 

conclusions.234

The requirements of Section 6(b)(5) of 

the Exchange Act apply to the rules of 

national securities exchanges. 

Accordingly, the relevant obligation to 

have a comprehensive surveillancesharing agreement with a regulated 

market of significant size related to spot 

bitcoin, or other means to prevent 

fraudulent and manipulative acts and 

practices that are sufficient to justify 

dispensing with such a surveillancesharing agreement, resides with the 

listing exchange. Because there is 

insufficient evidence in the record 

demonstrating that NYSE Arca has 

satisfied this obligation, the 

Commission cannot approve the 

proposed ETP for listing and trading on 

NYSE Arca. 

C. Whether NYSE Arca Has Met Its 

Burden to Demonstrate That the 

Proposal Is Designed to Protect Investors 

and the Public Interest 

NYSE Arca contends that, if 

approved, the proposed ETP would 

protect investors and the public interest. 

However, the Commission must 

consider these potential benefits in the 

broader context of whether the proposal 

meets each of the applicable 

requirements of the Exchange Act.235

Because NYSE Arca has not 

demonstrated that its proposed rule 

change is designed to prevent 

fraudulent and manipulative acts and 

practices, the Commission must 

disapprove the proposal. 

(1) Assertions Made and Comments 

Received 

Commenters argue that the 

Commission should approve the 

proposal because doing so would satisfy 

investor demand for a U.S. regulated 

investment vehicle with direct exposure 

to bitcoin.236 Commenters state that 

approval of a spot bitcoin ETP would 

provide a simpler, safer, and more 

efficient way to obtain exposure to 

bitcoin than the products that are 

currently available to retail investors, 

such as holding spot bitcoin, OTC 

bitcoin funds, bitcoin futures funds, or 

foreign bitcoin funds.237 Some 

commenters state that approving a spot 

bitcoin ETP would reduce the custody 

and cybersecurity risks to investors of 

holding physical bitcoin.238

Several commenters argue that a spot 

bitcoin ETP would provide lower costs 

and less risk than bitcoin futures 

ETPs.239 The Sponsor and some 


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40320 Federal Register / Vol. 87, No. 128 / Wednesday, July 6, 2022 / Notices 

T. Fulton, CEO, Elkhorn Consulting, LLC, dated 

Apr. 27, 2022 (‘‘Elkhorn Letter’’), at 2–3; Harvey 

Letter, at 3; Whaley Letter, at 3–7; Letter from 

Charles Hwang, Jason Albanese, Jock Percy, General 

Partners, Lightning Capital, dated Mar. 21, 2022 

(‘‘Lightning Capital Letter’’), at 2–3; Discovery 

Letter, at 2 (‘‘a spot [b]itcoin ETP would provide a 

much better vehicle for investors due to the vast 

liquidity, lower cost, and transparent Index pricing 

than the current [f]utures based ETPs’’); Kane 

Letter; Letter from Ryan Wilday, dated Feb. 17, 

2022; Letter from Michael Douglas Magee, dated 

Apr. 19, 2022; Letter from Bryan Kelley, dated May 

10, 2022. 

240See, e.g., Grayscale Letter I, at 13–14 

(‘‘Continued disparate treatment of [b]itcoin futures 

ETPs and spot [b]itcoin ETPs would harm—rather 

than protect—investors by limiting their choices 

without a reasoned basis.’’); Cumberland Letter, at 

1–2; Harvey Letter, at 2–3; Lightning Capital Letter, 

at 1–3; ADAM Letter, at 6; Fortress Letter, at 2; 

Letter from Justin Valdata, dated Apr. 22, 2022 

(‘‘Valdata Letter’’). A commenter argues that such 

disparate treatment may undermine confidence in 

the Commission and stifle innovation in the bitcoin 

and securities markets. See Coinbase Letter I, at 4. 

241See Grayscale Letter I, at 14. The Sponsor 

states that one analysis showed that over the last 

year, a bitcoin futures ETP would have lost 28% of 

its value just on roll costs (effectively, fees and 

expenses being equal, a spot ETP would have 

performed around 28% better). See id. (citing 

Michael J. Casey, Why a Bitcoin Futures ETF is Bad 

for Investors, CoinDesk (last updated Oct. 22, 2021 

at 4:29 p.m.), https://www.coindesk.com/policy/ 

2021/10/22/why-a-bitcoin-futures-etf-is-bad-forinvestors/). See also, e.g., Blockchain Association 

Letter, at 2; Angel Letter I, at 7; Harvey Letter, at 

3; Elkhorn Letter, at 2; Fortress Letter, at 1–2; BitGo 

Letter, at 1–2; Horizon Kinetics Letter, at 1–2. 

242See Grayscale Letter I, at 14. According to the 

Sponsor, position limits can cause a bitcoin futures 

ETP to experience liquidity problems or losses, or 

have to halt new creations or increase its fixedincome portfolio, thereby introducing tracking error 

by diluting its exposure to bitcoin. The Sponsor 

states that, alternatively, the CME may have to raise 

position limits to accommodate increased demand 

in the absence of a spot bitcoin ETP alternative, 

potentially increasing the concentration of 

economic power of a few large market participants 

in the bitcoin futures markets and reducing the 

resiliency of those markets against manipulation. 

The Sponsor states that ‘‘[t]hese risks—that [b]itcoin 

futures ETPs could be constrained by position 

limits and that the CME may raise those limits—are 

not purely speculative; indeed, both have already 

occurred since the first [b]itcoin futures ETP began 

trading.’’ Id. See also, e.g., Blockchain Association 

Letter, at 2 (‘‘Futures ETPs are also subject to 

additional, unique risks related to position limits, 

limited liquidity, dilution and other factors.’’). 

243See Grayscale Submission, at 2. 

244 Id. at 17. 

245See id. at 9. The Sponsor states that, because 

the Shares are not currently listed on a national 

securities exchange and the Trust is therefore not 

permitted to operate an ongoing creation and 

redemption program, arbitrage opportunities 

resulting from differences between the price of the 

Shares and the price of bitcoin are not available to 

keep the price of the Shares closely linked to the 

Index Price for bitcoin. As a result, the Shares are 

usually quoted at a premium over, or discount to, 

the value of the Trust’s bitcoin holdings. See 

Grayscale Letter I, at 5. See also Coinbase Letter I, 

at 2. 

246See, e.g., Coinbase Letter I, at 2–3; Virtu Letter, 

at 2; Angel Letter I, at 7–8; BitGo Letter, at 1; ADAM 

Letter, at 4–5; Cumberland Letter, at 1; Lightning 

Capital Letter, at 1–2; Gunderson Letter; Discovery 

Letter, at 1; Henry Letter; Keiffer Letter; Perez 

Letter; DiLonardo Letter; Kornfield Letter; Garcia 

Letter; Johnson Letter; Arrett Letter; Emory Letter, 

at 2; Letter from Richard Leo, dated Apr. 22, 2022; 

Letter from Joseph McDevitt, dated Apr. 22, 2022; 

Letter from Mitchell J. Brodie, dated Apr. 22, 2022; 

Letter from Steve Axel, dated Feb. 18, 2022; Letter 

from Brent Zeigler, dated Feb. 19, 2022; Letter from 

Jonas Lippuner, dated Apr. 21, 2022; Letter from 

David Lynch, dated Mar. 3, 2022; Letter from David 

New, dated Feb. 23, 2022; Letter from Roger A. 

Rector, dated Feb. 22, 2022; Letter from Michael 

Charles, dated Feb. 19, 2022; Letter from Scott Egon 

Roge, dated Feb. 15, 2022; Letter from Ozeir 

Nassery, dated Feb. 11, 2022; Letter from Raj 

Lakkundi, dated Feb. 11, 2022. The affiliate of the 

Custodian states that the performance of spot 

bitcoin ETPs in other countries confirms the ability 

of a spot bitcoin ETP to appropriately reflect the 

underlying bitcoin market. See Coinbase Letter II, 

at 3, 8. See also Virtu Letter, at 2 (‘‘In our 

experience as a market maker and AP in spot 

cryptocurrency ETPs in Canada, we have observed 

the positive impact of these dynamics—as spot 

cryptocurrency ETP spreads to NAV are 

compressed to levels observed for non-crypto 

ETPs.’’). 

247See, e.g., Angel Letter I, at 7–8; Horizon 

Kinetics Letter, at 2–3; Shultz Letter; Johnson 

Letter; Arret Letter; Roge Letter; Perez Letter; Letter 

from Keith Arvidson, dated Apr. 5, 2022; Letter 

from Rick Parker, dated Feb. 22, 2022; Letter from 

Michael J. Sheslow, dated Feb. 22, 2022; Letter from 

Omid Jafari, dated Feb. 18, 2022; Letter from 

Richard Payne, dated Feb. 19, 2022; Letter from 

Sunjeev Konduru, dated Mar. 16, 2022 (‘‘Konduru 

Letter’’). 248See, e.g., Cammarata Letter, Coinbase Letter I, 

at 3; Coinbase Letter II, at 7; Fortress Letter, at 3; 

Harvey Letter, at 5 (stating ‘‘financial derivatives, 

including ETPs, can generally serve to enhance the 

liquidity and efficiency of the markets for many 

asset classes and currencies, including bitcoins’’ 

and ‘‘[i]t is difficult to imagine a scenario in which 

approval of [the Trust] as a bona fide ETP on the 

NYSE Arca would not increase the number of 

market participants, dollar-denominated liquidity, 

and other competitive forces that would lead to 

more efficient price discovery than currently exists 

in a semi-fragmented, global bitcoin spot market 

that lacks a regulated, centralized trading venue or 

order book’’); Fortress Letter, at 3 (stating that the 

Trust can serve an important price discovery 

purpose and that, because of its size, the Trust will 

create additional liquidity and will allow for greater 

transparency and efficiency in the bitcoin market); 

Dreyfuss Letter, at 2 (stating that ‘‘increasing the 

liquidity of [the spot bitcoin] markets would 

actually reduce the influence of predatory forces by 

encouraging long term ownership across a broader 

spectrum of investors’’). 

249See Coinbase Letter I, at 3. 

250Coinbase Letter II, at 7. 

251See, e.g., Blockchain Association Letter, at 1; 

Letter from David Noble, Director, The Werth 

Institute, University of Connecticut, dated Apr. 26, 

2022 (‘‘Noble Letter’’); Letter from John Shinkunas, 

dated Apr. 10, 2022; Letter from Karl J. Randall, 

dated Feb. 28, 2022; Letter from Reginald M. 

Browne, Principal, GTS Securities, LLC, dated June 

10, 2022 (‘‘GTS Letter’’), at 2. 

252See, e.g., BitGo Letter, at 1;Virtu Letter, at 3– 

4; Groom Letter; Egan Letter; Angel Letter I; Chilson 

Letter; GTS Letter, at 2. 

253See, e.g., Harvey Letter, at 5 (‘‘as an ETP on 

the NYSE Arca, [the Trust] would continue to serve 

as a liquid, but even more regulated conduit for 

capital formation within the bitcoin ecosystem’’); 

ADAM Letter, at 5 (stating that approval of the 

proposal would facilitate the Commission’s mission 

of promoting capital formation); GTS Letter, at 2; 

Emory Letter, at 1–2 (stating that disapproval of the 

proposal would be ‘‘contrary to the goal of equitable 

access to means of wealth generation’’). 

commenters assert that disapproving 

spot bitcoin ETPs after approving 

bitcoin futures ETFs and ETPs harms 

investors.240 In addition, the Sponsor 

states that bitcoin futures ETPs present 

certain structural disadvantages over 

spot bitcoin ETPs, such as monthly rollcosts 241 and risks due to position 

limits.242

Commenters also emphasize that 

conversion of the existing Trust to an 

ETP structure would be beneficial to its 

investors. The Sponsor, for example, 

states that the Trust has grown to 

become the largest publicly-traded 

digital asset fund in the world 243 and 

that approving the Trust to operate as an 

ETP traded on a national securities 

exchange ‘‘will provide investors with 

the additional protections of [the 

Commission] and [NYSE Arca] while 

unlocking billions of value for 

investors.’’ 244 Moreover, according to 

the Sponsor, converting the Trust into 

an ETP would allow the Shares to better 

track the Trust’s NAV and reduce 

discounts and premiums, thereby 

unlocking approximately $8 billion in 

value for investors.245 Similarly, 

commenters state that the proposal 

would protect investors and help 

maintain fair and orderly markets by 

reducing premium and discount 

volatility with respect to the Shares, 

thereby allowing investors to gain 

access to bitcoin through an ETP 

structure at trading prices that are more 

closely aligned with spot bitcoin trading 

prices.246 Moreover, other commenters 

state that approving the proposal and 

allowing the Trust to convert into an 

ETP would protect investors by, among 

other things, lowering fees and 

providing heightened regulation of the 

Shares.247

Several commenters further state that 

approval of a spot bitcoin ETP would 

enhance the liquidity, price discovery, 

and efficiency of the underlying bitcoin 

markets.248 The affiliate of the 

Custodian states that the introduction of 

a spot bitcoin ETP with a robust create 

and redeem arbitrage process can 

improve the price efficiency of an 

underlying asset and thus further 

increase the resilience of bitcoin trading 

in the spot market.249 This commenter 

believes the presence of a spot bitcoin 

ETP ‘‘may bolster and stabilize the 

broader [b]itcoin derivatives market by 

encouraging a . . . greater volume of 

activity and easier arbitrage between the 

two markets.’’ 250

Finally, some commenters argue that 

the proposal should be approved 

because doing so would enhance 

investor choice,251 improve market 

structure and competition for the benefit 

of investors,252 and facilitate capital 

formation.253


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254See supra note 235. 

255See 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.). 

256See SolidX Order, 82 FR at 16259; VanEck 

Order, 86 FR at 54550–51; WisdomTree Order, 86 

FR at 69344; Kryptoin Order, 86 FR at 74179; 

Valkyrie Order, 86 FR at 74163; SkyBridge Order, 

87 FR at 3881; Wise Origin Order, 87 FR at 5538; 

ARK 21Shares Order, 87 FR at 20026–27. 

257 15 U.S.C. 78f(b)(5). 

258 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). Some commenters state that 

approval of the proposal would enhance market 

efficiency and facilitate competition and capital 

formation. See supra notes 248–253 and 

accompanying text. For the reasons discussed 

throughout, however (see supra notes 56–57), the 

Commission is disapproving the proposed rule 

change because it does not find that the proposed 

rule change is consistent with the Exchange Act. 

See also USBT Order, 85 FR at 12615. 

259See, e.g., Angel Letter I, at 2–4, Letter from 

Thomas M. Wynne, dated Apr. 9, 2022 (‘‘Wynne 

Letter’’); Chilson Letter, at 1. 

260See, e.g., Moffitt Letter I; Letter from Patric 

Berger, dated Feb. 23, 2022; Letter from Sundeep 

Bollineni, dated Feb. 22, 2022; Chilson Letter; 

Letter from James McClave, Jane Street Capital, 

LLC, dated June 16, 2022. 

261See, e.g., Chen Letter; Letter from John 

Berggren, dated Feb. 14, 2022. 

262See, e.g., Seils Letter; Konduru Letter; Emory 

Letter. 

263See, e.g., Letters from David Bush, dated Feb. 

22, 2022 (‘‘Bush Letter’’); Joseph D. Camp, Ph.D., 

Professor, Southern Methodist University, dated 

Feb. 14, 2022. 

264See, e.g., Elkhorn Letter; Johnson Letter; 

Valdata Letter; Bush Letter; Letter from Milton W., 

dated Feb. 23, 2022; Letter from Aaron Fenker, 

dated Feb. 23, 2022; Letter from Anil Gorania, dated 

Feb. 18, 2022; Letter from Nirav Trivedi, dated Feb. 

11, 2022; Letter from Enrique Rea, Jr., dated Apr. 

22, 2022; Chilson Letter, at 3; GTS Letter, at 2; 

Emory Letter, at 2. The Sponsor states that the U.S. 

lags global markets with respect to providing 

bitcoin and other digital asset ETPs and argues that 

approval of the proposal would support the White 

House Executive Order on Ensuring Responsible 

Development of Digital Assets by further bringing 

bitcoin into the regulatory perimeter. See Grayscale 

Submission, at 11–12. A commenter states that, ‘‘as 

a global firm, it is concerning to observe the U.S. 

lagging far behind such foreign capital market 

competitors in offering regulated products for an 

emerging technology like Blockchain.’’ Fortress 

Letter, at 3. 

265See, e.g., Angel Letter I, at 9–40; ADAM Letter, 

at 5; Dreyfuss Letter; Kane Letter; Boyer Letter; 

Letter from James J. Angel, Associate Professor of 

Finance, Georgetown University, dated May 6, 2022 

(‘‘Angel Letter II’’); Chilson Letter, at 1–2. 

266See, e.g., Noble Letter; Letter from Julian 

Rogers, dated Apr. 7, 2022. 

267See, e.g., Wynne Letter; Henry Letter. 

268See, e.g., Letter from David B. Hennes, Ropes 

& Gray LLP, dated March 3, 2022 (expressing 

concern, on behalf of an unnamed ‘‘interested 

investor,’’ about the Sponsor’s potential windfall if 

the Trust were to be allowed to convert to an ETP); 

Kleinfelder Letter. 

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

2 17 CFR 240.19b–4. 

(2) Analysis 

The Commission disagrees. Here, 

even if it were true that, compared to 

trading in unregulated spot bitcoin 

markets or OTC bitcoin funds, trading a 

spot bitcoin-based ETP on a national 

securities exchange could provide some 

additional protection to investors, or 

that the Shares would provide more 

efficient exposure to bitcoin than other 

products on the market such as bitcoin 

futures ETPs, or that approval of a spot 

bitcoin ETP could enhance competition 

or strengthen the underlying spot 

bitcoin and derivatives markets, 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.254 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.255 Thus, even if a 

proposed rule change purports to 

protect investors from a particular type 

of investment risk—such as 

experiencing a potentially high 

premium/discount by investing in an 

OTC bitcoin fund or roll costs by 

investing in bitcoin futures ETPs—or 

purports to provide benefits to investors 

and the public interest—such as 

enhancing competition and bolstering 

resiliency in the underlying commodity 

or futures markets—the proposed rule 

change may still fail to meet the 

requirements under the Exchange 

Act.256

For the reasons discussed above, 

NYSE Arca has not met its burden of 

demonstrating an adequate basis in the 

record for the Commission to find that 

the proposal is consistent with 

Exchange Act Section 6(b)(5),257 and, 

accordingly, the Commission must 

disapprove the proposal.258

D. Other Comments 

Comment letters also address, among 

other things, the general nature and uses 

of bitcoin and blockchain 

technology; 259 the state of development 

of bitcoin as an investment asset; 260

beneficial tax consequences of approval 

of a spot bitcoin ETP; 261 the merits of 

an investment in bitcoin; 262 the nature 

and state of the bitcoin mining 

network; 263 the current failure, and 

potential promotion of, U.S. 

competitiveness in the global 

marketplace relating to bitcoin; 264

suggestions for improving regulation of 

bitcoin and other digital assets markets 

and related market participants and 

criticisms of the current regulatory 

approach; 265 increasing education 

relating to, and accessibility of, 

bitcoin; 266 the merits of the Sponsor; 267

and specific concerns relating to the 

Sponsor and its management of the 

Trust.268 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, as 

modified by Amendment No. 1, 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-2021–90, as modified by 

Amendment No. 1, be, and hereby is, 

disapproved. 

By the Commission. 

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2022–14310 Filed 7–5–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95174; File No. SR–BOX– 

2022–19] 

Self-Regulatory Organizations; BOX 

Exchange LLC; Notice of Filing of 

Proposed Rule Change To Amend 

Article 4 of the Exchange’s Bylaws To 

Establish a Staggered Board 

June 29, 2022. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on June 17, 

2022, BOX Exchange LLC (the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 


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