Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove 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, 32985-32987 [2021-13101]
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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92196; File No. SR–
CboeBZX–2021–019]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove 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
June 16, 2021.
On March 1, 2021, Cboe BZX
Exchange, Inc. (‘‘BZX’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the VanEck Bitcoin Trust
(‘‘Trust’’) under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares. The
proposed rule change was published for
comment in the Federal Register on
March 19, 2021.3
On April 28, 2021, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 This order
institutes proceedings under Section
19(b)(2)(B) of the Act 6 to determine
whether to approve or disapprove the
proposed rule change.
I. Summary of the Proposal
As described in more detail in the
Notice,7 the Exchange proposes to list
and trade the Shares of the Trust under
BZX Rule 14.11(e)(4), which governs the
listing and trading of Commodity-Based
Trust Shares on the Exchange.
The investment objective of the Trust
would be for the Shares to reflect the
performance of the MVIS®
CryptoCompare Bitcoin Benchmark Rate
(‘‘Benchmark’’), less the expenses of the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 91326
(March 15, 2021), 86 FR 14987 (‘‘Notice’’).
Comments on the proposed rule change can be
found at: https://www.sec.gov/comments/srcboebzx-2021-019/srcboebzx2021019.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 91695,
86 FR 24066 (May 5, 2021). The Commission
designated June 17, 2021, as the date by which it
should approve, disapprove, or institute
proceedings to determine whether to disapprove the
proposed rule change.
6 15 U.S.C. 78s(b)(2)(B).
7 See Notice, supra note 3.
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Trust’s operations.8 The Benchmark will
be used to calculate the Trust’s net asset
value (‘‘NAV’’). The Benchmark is
designed to be a price for bitcoin in USD
and there is no component other than
bitcoin in the Benchmark. The current
platform composition of the Benchmark
is Bitstamp, Coinbase, Gemini, itBit and
Kraken. In calculating the Benchmark,
the methodology captures trade prices
and sizes from platforms and examines
twenty three-minute periods leading up
to 4:00 p.m. E.T. It then calculates an
equal-weighted average of the volumeweighted median price of these twenty
three-minute periods, removing the
highest and lowest contributed prices.9
Each Share will represent a fractional
undivided beneficial interest in the
Trust’s net assets. The Trust’s assets will
consist of bitcoin held by the Custodian
on behalf of the Trust. The Trust
generally does not intend to hold cash
or cash equivalents. However, there may
be situations where the Trust will
unexpectedly hold cash on a temporary
basis.10
The Administrator will determine the
NAV and NAV per Share of the Trust on
each day that the Exchange is open for
regular trading, as promptly as practical
after 4:00 p.m. E.T. The NAV of the
Trust is the aggregate value of the
Trust’s assets less its estimated accrued
but unpaid liabilities (which include
accrued expenses). In determining the
Trust’s NAV, the Administrator values
the bitcoin held by the Trust based on
the price set by the Benchmark as of
4:00 p.m. E.T.11
The Trust will provide information
regarding the Trust’s bitcoin holdings,
as well as an Intraday 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 Regular Trading
Hours (9:30 a.m. to 4:00 p.m. E.T.). The
IIV will be calculated by using the prior
day’s closing NAV per Share as a base
and updating that value during Regular
Trading Hours to reflect changes in the
value of the Trust’s bitcoin holdings
during the trading day.12
8 VanEck Digital Assets, LLC is the sponsor of the
Trust, and Delaware Trust Company is the trustee.
The State Street Bank and Trust Company will be
the administrator (‘‘Administrator’’) and transfer
agent. Van Eck Securities Corporation will be the
marketing agent in connection with the creation
and redemption of Shares. Van Eck Securities
Corporation provides assistance in the marketing of
the Shares. A third-party regulated custodian
(‘‘Custodian’’) will be responsible for custody of the
Trust’s bitcoin. See Notice, supra note 3, 86 FR at
14995.
9 See id. at 14995–996.
10 See id. at 14995.
11 See id. at 14996.
12 See id.
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32985
When the Trust sells or redeems its
Shares, it will do so in ‘‘in-kind’’
transactions in blocks of 50,000 Shares
at the Trust’s NAV. Authorized
participants will deliver, or facilitate the
delivery of, bitcoin to the Trust’s
account with the Custodian in exchange
for Shares when they purchase Shares,
and the Trust, through the Custodian,
will deliver bitcoin to such authorized
participants when they redeem Shares
with the Trust.13
II. Proceedings To Determine Whether
To Approve or Disapprove SR–
CboeBZX–2021–019 and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 14 to determine
whether the proposed rule change
should be approved or disapproved.
Institution of proceedings is appropriate
at this time in view of the legal and
policy issues raised by the proposed
rule change, as discussed below.
Institution of proceedings does not
indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, as
described below, the Commission seeks
and encourages interested persons to
provide comments on the proposed rule
change.
Pursuant to Section 19(b)(2)(B) of the
Act,15 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of the proposed rule
change’s consistency with Section
6(b)(5) of the Act, which requires,
among other things, 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.’’ 16
The Commission asks that
commenters address the sufficiency of
the Exchange’s statements in support of
the proposal, which are set forth in the
Notice,17 in addition to any other
comments they may wish to submit
about the proposed rule change. In
particular, the Commission seeks
comment on the following questions
and asks commenters to submit data
where appropriate to support their
views:
1. What are commenters’ views on
whether the proposed Trust and Shares
would be susceptible to manipulation?
13 See
14 15
id. at 14995.
U.S.C. 78s(b)(2)(B).
15 Id.
16 15
U.S.C. 78f(b)(5).
Notice, supra note 3.
17 See
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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Notices
What are commenters’ views generally
on whether the Exchange’s proposal is
designed to prevent fraudulent and
manipulative acts and practices? What
are commenters’ views generally with
respect to the liquidity and transparency
of the bitcoin markets, the bitcoin
markets’ susceptibility to manipulation,
and thus the suitability of bitcoin as an
underlying asset for an exchange-traded
product?
2. What are commenters’ views of the
Exchange’s assertion that regulatory and
financial landscapes relating to bitcoin
and other digital assets have changed
significantly since 2016? 18 Are the
changes that the Exchange identifies
sufficient to support the determination
that the proposed listing and trading of
the Shares are consistent with the Act?
3. The Exchange states that
‘‘approving this proposal . . . [would]
allow U.S. investors with access to
bitcoin in a regulated and transparent
exchange-traded vehicle that would act
to limit risk’’ associated with retail
exposure through other means.19
Further, the Exchange asserts that ‘‘the
manipulation concerns previously
articulated by the Commission are
sufficiently mitigated to the point that
they are outweighed by quantifiable
investor protection issues.’’ 20 What are
commenters’ view regarding such an
assertion?
4. According to the Exchange,
‘‘[n]early every measurable metric
related to [Chicago Mercantile
Exchange’s] Bitcoin Futures has trended
consistently up since launch and/or
accelerated upward in the past year.’’ 21
Based on data provided and the
academic research cited by the
Exchange, do commenters agree that the
Chicago Mercantile Exchange (‘‘CME’’)
now represents a regulated market of
significant size? 22 What are
commenters’ views on whether there is
a reasonable likelihood that a person
attempting to manipulate the Shares
would also have to trade on CME to
manipulate the Shares? What of the
Exchange’s assertion that the
combination of (a) CME bitcoin futures
leading price discovery; (b) the overall
size of the bitcoin market; and (c) the
ability for market participants to buy or
sell large amounts of bitcoin without
significant market impact helps to
prevent the Shares from becoming the
predominant force on pricing in either
18 See
id. at 14989.
id. at 14990.
20 See id. at 14994.
21 See id. at 14991.
22 See id. at 14989.
19 See
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the bitcoin spot or CME bitcoin futures
markets? 23
5. What are commenters’ views on the
Exchange’s statement, generally, that
bitcoin is resistant to price
manipulation and that other means to
prevent fraudulent and manipulative
acts and practices exist to justify
dispensing with the requisite
surveillance sharing agreement with a
regulated market of significant size
related to bitcoin? 24 What of the
Exchange’s assertion in support of such
statement that significant liquidity in
the spot market and the decreasing
impact of market orders on the overall
price of bitcoin mean that attempting to
move the price of bitcoin is costly? 25
What of the assertion that offering only
in-kind creations and redemptions
provides unique protections against
potential attempts to manipulate the
Shares and that the price the Sponsor
uses to value the Trust’s bitcoin ‘‘is not
particularly important’’? 26
III. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
proposal. In particular, the Commission
invites the written views of interested
persons concerning whether the
proposal is consistent with Section
6(b)(5) or any other provision of the Act,
and the rules and regulations
thereunder. Although there do not
appear to be any issues relevant to
approval or disapproval that would be
facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4, any request for an
opportunity to make an oral
presentation.27
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal should be approved or
disapproved by July 14, 2021. Any
person who wishes to file a rebuttal to
any other person’s submission must file
23 See
id. at 14995.
id. at 14994 n.54.
25 See id. at 14995.
26 See id. at 14999.
27 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Pub. L. 94–29
(June 4, 1975), grants the Commission flexibility to
determine what type of proceeding—either oral or
notice and opportunity for written comments—is
appropriate for consideration of a particular
proposal by a self-regulatory organization. See
Securities Act Amendments of 1975, Senate Comm.
on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
24 See
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that rebuttal by July 28, 2021.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2021–019 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–CboeBZX–2021–019. 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 (https://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–CboeBZX–2021–019 and
should be submitted by July 14, 2021.
Rebuttal comments should be submitted
by July 28, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
28 17
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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Notices
statements may be examined at the
places specified in Item IV below. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
[FR Doc. 2021–13101 Filed 6–22–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92198; File No. SR–DTC–
2021–009]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Provide
Enhanced Clarity for Deadlines and
Processing Times
June 16, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 8,
2021, The Depository Trust Company
(‘‘DTC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II and III below, which Items
have been prepared by the clearing
agency. DTC filed the proposed rule
change pursuant to Section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(4)
thereunder.4 The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change of DTC is
attached hereto as Exhibit 5,5 as
described in greater detail below.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(4).
5 Each capitalized term not otherwise defined
herein has its respective meaning as set forth in the
Rules, By-Laws and Organization Certificate of DTC
(the ‘‘Rules’’), the Canadian Link Service Guide,
ClaimConnect Service Guide, Custody Service
Guide, Deposits Service Guide, Distributions
Service Guide, Redemptions Service Guide,
Reorganizations Service Guide, Settlement Service
Guide, and Underwriting Service Guide
(collectively, the ‘‘Service Guides’’) and the DTC
Operational Arrangements (Necessary for Securities
to Become and Remain Eligible for DTC Services)
(‘‘Operational Arrangements’’ or ‘‘OA’’), available at
https://www.dtcc.com/legal/rules-andprocedures.aspx.
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(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The proposed rule change would
amend the Service Guides and the OA
to provide enhanced clarity around (i)
deadlines, timeframes, and cutoffs
established by DTC in connection with
DTC services (‘‘DTC-established
Stakeholder Deadlines’’), and (ii) the
times and timeframes for DTC actions
and processes relating to DTC services
(‘‘DTC Processing Times’’). In particular,
the proposed rule change would
enhance the transparency around the
ability of DTC to extend DTCestablished Stakeholder Deadlines, and
around DTC Processing Times, which
are standards, rather than deadlines, as
further described below.
(i) DTC-established Stakeholder
Deadlines
The Service Guides provide
Participants with procedures and
information pertaining to DTC
settlement and asset services. The
procedures and information include,
among other things, descriptions of
DTC-established Stakeholder Deadlines
for Participant and stakeholder 6 action
relating to DTC services. The OA is
designed to provide Participants and
other stakeholders with information and
procedures related to DTC eligibility for
securities, and to provide the
requirements for, among other things,
the orderly processing of securities,
corporate actions, and distributions. The
OA includes descriptions of DTCestablished Stakeholder Deadlines in
connection with the requirements and
services.7
The purpose of DTC-established
Stakeholder Deadlines is to help DTC
efficiently and effectively manage its
services and systems, in order to timely
process instructions and securities
transactions at DTC. However, there are
times when, due to the facts and
circumstances of a particular situation,
6 Stakeholders include issuers, agents (as defined
in the OA), underwriters (as defined in the OA),
and other parties, as context requires.
7 For example, the OA requires that, in order for
DTC to make a same day allocation of funds, the
agent must provide DTC with CUSIP-specific
details for the payment before 2:50 p.m. on payable
date, and that the details must match the amount
of funds that are received by DTC no later than 3:00
p.m. See OA, supra note 5, at 27.
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32987
DTC determines to extend a DTCestablished Stakeholder Deadline. The
situations can include, but are not
limited to, a Participant operational
issue or a change to a different deadline
(whether DTC or external) that could
affect the ability of one or more
Participants to meet the DTCestablished Stakeholder Deadline.
(ii) DTC Processing Times
The Service Guides and the OA also
describe DTC Processing Times in
connection with certain services.8 The
purpose of describing these DTC
Processing Times is to provide
Participants and other stakeholders with
information about the typical timing or
timeframe of a DTC action or process, in
order to help Participants and other
stakeholders to more efficiently and
effectively use and understand DTC’s
services and processes. For example, if
a Service Guide states that the
processing time for a particular service
is typically two business days, the
Participant will understand that it is
unlikely that it would get same-day
turnaround from DTC and can plan
accordingly, for instance, by ensuring
that it submits its transaction with
adequate lead-time.
(iii) Overview of Proposed Rule Change
DTC believes that Participants and
other stakeholders benefit from clear
information about their rights and
obligations relating to DTC-established
Stakeholder Deadlines and DTC
Processing Times so that they are able
to plan and conduct their business and
securities transactions more effectively.
Recent events, such as the COVID–19
pandemic and market volatility, have
emphasized the need for flexibility in
times of stress and the importance of
transparency with respect to deadlines
and timeframes. Accordingly, after
reviewing the Service Guides and the
OA, DTC is proposing to enhance the
transparency around the DTCestablished Stakeholder Deadlines and
DTC Processing Times that are
described in the Service Guides and the
OA.
Therefore, DTC is proposing to amend
the Service Guides and the OA to clarify
that (i) DTC may extend any DTCestablished Stakeholder Deadline,
including, without limitation, to (x)
address operational or other delays that
could reasonably affect the ability of
DTC, a Participant, or other stakeholder
from meeting the DTC-established
8 For example, the Settlement Service Guide
indicates that at 1:30 p.m. on a settlement day, DTC
releases all pending delivery account positions and
reverts to default recycle processing. See Settlement
Service Guide, supra note 5, at 26.
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]]>Agencies
[Federal Register Volume 86, Number 118 (Wednesday, June 23, 2021)]
[Notices]
[Pages 32985-32987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-13101]
[[Page 32985]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92196; File No. SR-CboeBZX-2021-019]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove 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
June 16, 2021.
On March 1, 2021, Cboe BZX Exchange, Inc. (``BZX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
list and trade shares (``Shares'') of the VanEck Bitcoin Trust
(``Trust'') under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares.
The proposed rule change was published for comment in the Federal
Register on March 19, 2021.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 91326 (March 15,
2021), 86 FR 14987 (``Notice''). Comments on the proposed rule
change can be found at: https://www.sec.gov/comments/sr-cboebzx-2021-019/srcboebzx2021019.htm.
---------------------------------------------------------------------------
On April 28, 2021, pursuant to Section 19(b)(2) of the Act,\4\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ This order institutes proceedings under Section 19(b)(2)(B)
of the Act \6\ to determine whether to approve or disapprove the
proposed rule change.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 91695, 86 FR 24066
(May 5, 2021). The Commission designated June 17, 2021, as the date
by which it should approve, disapprove, or institute proceedings to
determine whether to disapprove the proposed rule change.
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
I. Summary of the Proposal
As described in more detail in the Notice,\7\ the Exchange proposes
to list and trade the Shares of the Trust under BZX Rule 14.11(e)(4),
which governs the listing and trading of Commodity-Based Trust Shares
on the Exchange.
---------------------------------------------------------------------------
\7\ See Notice, supra note 3.
---------------------------------------------------------------------------
The investment objective of the Trust would be for the Shares to
reflect the performance of the MVIS[supreg] CryptoCompare Bitcoin
Benchmark Rate (``Benchmark''), less the expenses of the Trust's
operations.\8\ The Benchmark will be used to calculate the Trust's net
asset value (``NAV''). The Benchmark is designed to be a price for
bitcoin in USD and there is no component other than bitcoin in the
Benchmark. The current platform composition of the Benchmark is
Bitstamp, Coinbase, Gemini, itBit and Kraken. In calculating the
Benchmark, the methodology captures trade prices and sizes from
platforms and examines twenty three-minute periods leading up to 4:00
p.m. E.T. It then calculates an equal-weighted average of the volume-
weighted median price of these twenty three-minute periods, removing
the highest and lowest contributed prices.\9\
---------------------------------------------------------------------------
\8\ VanEck Digital Assets, LLC is the sponsor of the Trust, and
Delaware Trust Company is the trustee. The State Street Bank and
Trust Company will be the administrator (``Administrator'') and
transfer agent. Van Eck Securities Corporation will be the marketing
agent in connection with the creation and redemption of Shares. Van
Eck Securities Corporation provides assistance in the marketing of
the Shares. A third-party regulated custodian (``Custodian'') will
be responsible for custody of the Trust's bitcoin. See Notice, supra
note 3, 86 FR at 14995.
\9\ See id. at 14995-996.
---------------------------------------------------------------------------
Each Share will represent a fractional undivided beneficial
interest in the Trust's net assets. The Trust's assets will consist of
bitcoin held by the Custodian on behalf of the Trust. The Trust
generally does not intend to hold cash or cash equivalents. However,
there may be situations where the Trust will unexpectedly hold cash on
a temporary basis.\10\
---------------------------------------------------------------------------
\10\ See id. at 14995.
---------------------------------------------------------------------------
The Administrator will determine the NAV and NAV per Share of the
Trust on each day that the Exchange is open for regular trading, as
promptly as practical after 4:00 p.m. E.T. The NAV of the Trust is the
aggregate value of the Trust's assets less its estimated accrued but
unpaid liabilities (which include accrued expenses). In determining the
Trust's NAV, the Administrator values the bitcoin held by the Trust
based on the price set by the Benchmark as of 4:00 p.m. E.T.\11\
---------------------------------------------------------------------------
\11\ See id. at 14996.
---------------------------------------------------------------------------
The Trust will provide information regarding the Trust's bitcoin
holdings, as well as an Intraday 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 Regular Trading
Hours (9:30 a.m. to 4:00 p.m. E.T.). The IIV will be calculated by
using the prior day's closing NAV per Share as a base and updating that
value during Regular Trading Hours to reflect changes in the value of
the Trust's bitcoin holdings during the trading day.\12\
---------------------------------------------------------------------------
\12\ See id.
---------------------------------------------------------------------------
When the Trust sells or redeems its Shares, it will do so in ``in-
kind'' transactions in blocks of 50,000 Shares at the Trust's NAV.
Authorized participants will deliver, or facilitate the delivery of,
bitcoin to the Trust's account with the Custodian in exchange for
Shares when they purchase Shares, and the Trust, through the Custodian,
will deliver bitcoin to such authorized participants when they redeem
Shares with the Trust.\13\
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\13\ See id. at 14995.
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II. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2021-019 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \14\ to determine whether the proposed rule
change should be approved or disapproved. Institution of proceedings is
appropriate at this time in view of the legal and policy issues raised
by the proposed rule change, as discussed below. Institution of
proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, as
described below, the Commission seeks and encourages interested persons
to provide comments on the proposed rule change.
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\14\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\15\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act, which requires, among other things, 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.'' \16\
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\15\ Id.
\16\ 15 U.S.C. 78f(b)(5).
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The Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposal, which are set forth
in the Notice,\17\ in addition to any other comments they may wish to
submit about the proposed rule change. In particular, the Commission
seeks comment on the following questions and asks commenters to submit
data where appropriate to support their views:
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\17\ See Notice, supra note 3.
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1. What are commenters' views on whether the proposed Trust and
Shares would be susceptible to manipulation?
[[Page 32986]]
What are commenters' views generally on whether the Exchange's proposal
is designed to prevent fraudulent and manipulative acts and practices?
What are commenters' views generally with respect to the liquidity and
transparency of the bitcoin markets, the bitcoin markets'
susceptibility to manipulation, and thus the suitability of bitcoin as
an underlying asset for an exchange-traded product?
2. What are commenters' views of the Exchange's assertion that
regulatory and financial landscapes relating to bitcoin and other
digital assets have changed significantly since 2016? \18\ Are the
changes that the Exchange identifies sufficient to support the
determination that the proposed listing and trading of the Shares are
consistent with the Act?
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\18\ See id. at 14989.
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3. The Exchange states that ``approving this proposal . . . [would]
allow U.S. investors with access to bitcoin in a regulated and
transparent exchange-traded vehicle that would act to limit risk''
associated with retail exposure through other means.\19\ Further, the
Exchange asserts that ``the manipulation concerns previously
articulated by the Commission are sufficiently mitigated to the point
that they are outweighed by quantifiable investor protection issues.''
\20\ What are commenters' view regarding such an assertion?
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\19\ See id. at 14990.
\20\ See id. at 14994.
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4. According to the Exchange, ``[n]early every measurable metric
related to [Chicago Mercantile Exchange's] Bitcoin Futures has trended
consistently up since launch and/or accelerated upward in the past
year.'' \21\ Based on data provided and the academic research cited by
the Exchange, do commenters agree that the Chicago Mercantile Exchange
(``CME'') now represents a regulated market of significant size? \22\
What are commenters' views on whether there is a reasonable likelihood
that a person attempting to manipulate the Shares would also have to
trade on CME to manipulate the Shares? What of the Exchange's assertion
that the combination of (a) CME bitcoin futures leading price
discovery; (b) the overall size of the bitcoin market; and (c) the
ability for market participants to buy or sell large amounts of bitcoin
without significant market impact helps to prevent the Shares from
becoming the predominant force on pricing in either the bitcoin spot or
CME bitcoin futures markets? \23\
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\21\ See id. at 14991.
\22\ See id. at 14989.
\23\ See id. at 14995.
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5. What are commenters' views on the Exchange's statement,
generally, that bitcoin is resistant to price manipulation and that
other means to prevent fraudulent and manipulative acts and practices
exist to justify dispensing with the requisite surveillance sharing
agreement with a regulated market of significant size related to
bitcoin? \24\ What of the Exchange's assertion in support of such
statement that significant liquidity in the spot market and the
decreasing impact of market orders on the overall price of bitcoin mean
that attempting to move the price of bitcoin is costly? \25\ What of
the assertion that offering only in-kind creations and redemptions
provides unique protections against potential attempts to manipulate
the Shares and that the price the Sponsor uses to value the Trust's
bitcoin ``is not particularly important''? \26\
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\24\ See id. at 14994 n.54.
\25\ See id. at 14995.
\26\ See id. at 14999.
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III. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Section 6(b)(5) or any other provision of the Act, and
the rules and regulations thereunder. Although there do not appear to
be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\27\
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\27\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Pub. L. 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by July 14, 2021. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by July 28,
2021. Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBZX-2021-019 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-CboeBZX-2021-019. 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 (https://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-CboeBZX-2021-019 and should be submitted
by July 14, 2021. Rebuttal comments should be submitted by July 28,
2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
J. Matthew DeLesDernier,
Assistant Secretary.
[[Page 32987]]
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\28\ 17 CFR 200.30-3(a)(57).
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[FR Doc. 2021-13101 Filed 6-22-21; 8:45 am]
BILLING CODE 8011-01-P
