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 WisdomTree Bitcoin Trust Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, 38154-38156 [2021-15194]
Download as PDF
<![CDATA[
38154
Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices
19(b)(3)(A) of the Act 29 and Rule 19b–
4(f)(6) thereunder.30
A proposed rule change filed under
Rule 19b–4(f)(6) 31 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),32 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
upon filing. Waiving the operative delay
will allow the Exchange to amend,
without delay, its rules regarding
Market Maker quoting obligations to
ensure that member organizations
assigned in an options series as both the
Lead Market Maker and Market Maker
would have the same quoting
obligations as member organizations
who are assigned solely as either Lead
Market Maker or Market Maker in an
option series. The Commission believes
that waiving the 30-day operative delay
is consistent with the protection of
investors and the public interest and
hereby designates the proposed rule
change to be operative upon filing.33
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 necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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 (https://www.sec.gov/
rules/sro.shtml); or
lotter on DSK11XQN23PROD with NOTICES1
29 15
U.S.C. 78s(b)(3)(A).
30 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of its intent to file the
proposed rule change, along with a brief description
and text of the proposed rule change, at least five
business days prior to the date of filing of the
proposed rule change, or such shorter time as
designated by the Commission. The Exchange has
satisfied this requirement.
31 17 CFR 240.19b–4(f)(6).
32 17 CFR 240.19b–4(f)(6)(iii).
33 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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18:23 Jul 16, 2021
Jkt 253001
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
Phlx–2021–38 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–2021–38. 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 20549–1090, 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–2021–38 and should
be submitted on or before August 9,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15195 Filed 7–16–21; 8:45 am]
BILLING CODE 8011–01–P
PO 00000
34 17
CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92392; File No. SR–
CboeBZX–2021–024]
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 WisdomTree Bitcoin Trust Under
BZX Rule 14.11(e)(4), CommodityBased Trust Shares
July 13, 2021.
On March 26, 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 WisdomTree 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 April 15, 2021.3
On May 26, 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 to gain exposure to the price
of bitcoin, less expenses and liabilities
of the Trust’s operation.8 The Trust
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 91521
(April 9, 2021), 86 FR 19917 (April 15, 2021)
(‘‘Notice’’). Comments on the proposed rule change
can be found at: https://www.sec.gov/comments/srcboebzx-2021-024/srcboebzx2021024.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 92032,
86 FR 29611 (June 2, 2021). The Commission
designated July 14, 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.
8 WisdomTree Digital Commodity Services, LLC
(‘‘Sponsor’’) is the sponsor of the Trust, and
2 17
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19JYN1
Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices
lotter on DSK11XQN23PROD with NOTICES1
would hold bitcoin and it would
calculate the Trust’s net asset value
(‘‘NAV’’) daily based on the value of
bitcoin as reflected by the CF Bitcoin
U.S. Settlement Price (‘‘Reference
Rate’’). The Reference Rate was created,
and is administered, by CF Benchmarks
Ltd., an independent entity. The
Reference Rate aggregates the trade flow
of several bitcoin platforms. The current
platform composition of the Reference
Rate is Bitstamp, Coinbase, Gemini, itBit
and Kraken. In calculating the Reference
Rate, the methodology creates a joint list
of the trade prices and sizes from the
constituent platforms between 3:00 p.m.
E.T. and 4:00 p.m. E.T. The
methodology then divides this list into
12 equally-sized time intervals of 5
minutes and it calculates the volumeweighted median trade price for each of
those time intervals. The Reference Rate
is the arithmetic mean of these 12
volume-weighted median trade 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 Bitcoin
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, after 4:00 p.m. E.T.
(often by 5:30 p.m. E.T. and almost
always by 8:00 p.m. E.T.). The NAV of
the Trust is the aggregate value of the
Trust’s assets less total liabilities of the
Trust. In determining the Trust’s NAV,
the administrator values the bitcoin
held by the Trust based on the price set
by the Reference Rate 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
Delaware Trust Company is the trustee. A thirdparty regulated custodian (‘‘Bitcoin Custodian’’)
will be responsible for custody of the Trust’s
bitcoin. The Sponsor is responsible for selecting the
Bitcoin Custodian as well as an administrator, a
transfer agent, a marketing agent, and an auditor for
the Trust. See id. at 19925–26.
9 See id. at 19926.
10 See id. at 19925.
11 See id. at 19927.
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18:23 Jul 16, 2021
Jkt 253001
value of the Trust’s bitcoin holdings
during the trading day.12
When the Trust sells or redeems its
Shares, it will do so in ‘‘in-kind’’
transactions in large blocks of
aggregations of Shares. Authorized
participants will deliver, or facilitate the
delivery of, bitcoin to the Trust’s
account with the Bitcoin Custodian in
exchange for Shares when they
purchase Shares, and the Trust, through
the Bitcoin 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–2021–024 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
PO 00000
id. at 19926.
id. at 19925–26.
14 15 U.S.C. 78s(b)(2)(B).
15 Id.
16 15 U.S.C. 78f(b)(5).
17 See Notice, supra note 3.
where appropriate to support their
views:
1. What are commenters’ views on
whether the proposed Trust and Shares
would be susceptible to manipulation?
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 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’ views
regarding such assertions?
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
12 See
13 See
Frm 00169
Fmt 4703
Sfmt 4703
38155
18 See
id. at 19919.
id. at 19920.
20 See id. at 19924.
21 See id. at 19922.
22 See id. at 19924.
19 See
E:\FR\FM\19JYN1.SGM
19JYN1
38156
Federal Register / Vol. 86, No. 135 / Monday, July 19, 2021 / Notices
prevent the Shares from becoming the
predominant force on pricing in either
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 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
23 See
id. at 19930.
id. at 19924 n.58.
25 See id. at 19925.
26 See id.
27 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
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).
lotter on DSK11XQN23PROD with NOTICES1
24 See
VerDate Sep<11>2014
18:23 Jul 16, 2021
Jkt 253001
disapproved by August 9, 2021. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by August 23, 2021.
Comments may be submitted by any
of the following methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15194 Filed 7–16–21; 8:45 am]
BILLING CODE 8011–01–P
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–2021–024 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–2021–024. 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–2021–024 and
should be submitted by August 9, 2021.
Rebuttal comments should be submitted
by August 23, 2021.
PO 00000
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92394; File No. SR–ISE–
2021–15]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 2,
Section 5, Market Maker Quotations
July 13, 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 30,
2021, Nasdaq ISE, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Options 2, Section 5, Market Maker
Quotations.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/ise/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
28 17
CFR 200.30–3(a)(57).
Frm 00170
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Sfmt 4703
2 17
E:\FR\FM\19JYN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
19JYN1
]]>Agencies
[Federal Register Volume 86, Number 135 (Monday, July 19, 2021)]
[Notices]
[Pages 38154-38156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15194]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92392; File No. SR-CboeBZX-2021-024]
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 WisdomTree Bitcoin
Trust Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares
July 13, 2021.
On March 26, 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
WisdomTree 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 April 15, 2021.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 91521 (April 9,
2021), 86 FR 19917 (April 15, 2021) (``Notice''). Comments on the
proposed rule change can be found at: https://www.sec.gov/comments/sr-cboebzx-2021-024/srcboebzx2021024.htm.
---------------------------------------------------------------------------
On May 26, 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. 92032, 86 FR 29611
(June 2, 2021). The Commission designated July 14, 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 to gain exposure to
the price of bitcoin, less expenses and liabilities of the Trust's
operation.\8\ The Trust
[[Page 38155]]
would hold bitcoin and it would calculate the Trust's net asset value
(``NAV'') daily based on the value of bitcoin as reflected by the CF
Bitcoin U.S. Settlement Price (``Reference Rate''). The Reference Rate
was created, and is administered, by CF Benchmarks Ltd., an independent
entity. The Reference Rate aggregates the trade flow of several bitcoin
platforms. The current platform composition of the Reference Rate is
Bitstamp, Coinbase, Gemini, itBit and Kraken. In calculating the
Reference Rate, the methodology creates a joint list of the trade
prices and sizes from the constituent platforms between 3:00 p.m. E.T.
and 4:00 p.m. E.T. The methodology then divides this list into 12
equally-sized time intervals of 5 minutes and it calculates the volume-
weighted median trade price for each of those time intervals. The
Reference Rate is the arithmetic mean of these 12 volume-weighted
median trade prices.\9\
---------------------------------------------------------------------------
\8\ WisdomTree Digital Commodity Services, LLC (``Sponsor'') is
the sponsor of the Trust, and Delaware Trust Company is the trustee.
A third-party regulated custodian (``Bitcoin Custodian'') will be
responsible for custody of the Trust's bitcoin. The Sponsor is
responsible for selecting the Bitcoin Custodian as well as an
administrator, a transfer agent, a marketing agent, and an auditor
for the Trust. See id. at 19925-26.
\9\ See id. at 19926.
---------------------------------------------------------------------------
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 Bitcoin 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 19925.
---------------------------------------------------------------------------
The administrator will determine the NAV and NAV per Share of the
Trust, on each day that the Exchange is open for regular trading, after
4:00 p.m. E.T. (often by 5:30 p.m. E.T. and almost always by 8:00 p.m.
E.T.). The NAV of the Trust is the aggregate value of the Trust's
assets less total liabilities of the Trust. In determining the Trust's
NAV, the administrator values the bitcoin held by the Trust based on
the price set by the Reference Rate as of 4:00 p.m. E.T.\11\
---------------------------------------------------------------------------
\11\ See id. at 19927.
---------------------------------------------------------------------------
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. at 19926.
---------------------------------------------------------------------------
When the Trust sells or redeems its Shares, it will do so in ``in-
kind'' transactions in large blocks of aggregations of Shares.
Authorized participants will deliver, or facilitate the delivery of,
bitcoin to the Trust's account with the Bitcoin Custodian in exchange
for Shares when they purchase Shares, and the Trust, through the
Bitcoin Custodian, will deliver bitcoin to such authorized participants
when they redeem Shares with the Trust.\13\
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\13\ See id. at 19925-26.
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II. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2021-024 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? 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 19919.
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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 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' views regarding such assertions?
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\19\ See id. at 19920.
\20\ See id. at 19924.
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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
[[Page 38156]]
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 19922.
\22\ See id. at 19924.
\23\ See id. at 19930.
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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 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 19924 n.58.
\25\ See id. at 19925.
\26\ See id.
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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, Public Law 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 August 9, 2021. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by August 23,
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-2021-024 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-2021-024. 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-2021-024 and should be submitted
by August 9, 2021. Rebuttal comments should be submitted by August 23,
2021.
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\28\ 17 CFR 200.30-3(a)(57).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15194 Filed 7-16-21; 8:45 am]
BILLING CODE 8011-01-P
