Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade Shares of the NYDIG Bitcoin ETF Under NYSE Arca Rule 8.201-E, 55090-55092 [2021-21622]
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55090
Federal Register / Vol. 86, No. 190 / Tuesday, October 5, 2021 / Notices
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2021–40 on the subject line.
Paper Comments
lotter on DSK11XQN23PROD with NOTICES1
• 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–MIAX–2021–40. 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–MIAX–2021–40, and
should be submitted on or before
October 26, 2021.
VerDate Sep<11>2014
18:56 Oct 04, 2021
Jkt 256001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–21749 Filed 10–4–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93191; File No. SR–
NYSEArca–2021–57]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To List and Trade Shares
of the NYDIG Bitcoin ETF Under NYSE
Arca Rule 8.201–E
September 29, 2021.
On June 30, 2021, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the NYDIG Bitcoin ETF
(‘‘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 July
19, 2021.3
On August 23, 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
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 92395
(July 13, 2021), 86 FR 38129 (July 19, 2021)
(‘‘Notice’’). Comments on the proposed rule change
can be found at: https://www.sec.gov/comments/srnysearca-2021-57/srnysearca202157.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 92722
(Aug. 23, 2021), 86 FR 48268 (Aug. 27, 2021). The
Commission designated October 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.
1 15
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and trade the Shares of the Trust under
NYSE Arca Rule 8.201–E, which
governs the listing and trading of
Commodity-Based Trust Shares on the
Exchange.
The investment objective of the Trust
is to reflect the performance of the price
of bitcoin less the expenses of the
Trust’s operations.8 The Trust will not
seek to reflect the performance of any
benchmark or index. In seeking to
achieve its investment objective, the
Trust will only hold bitcoin.9 The Trust
generally does not intend to hold cash
or cash equivalents. However, the Trust
may hold cash and cash equivalents on
a temporary basis to pay extraordinary
expenses.10
The net asset value (‘‘NAV’’) of the
Trust will be determined in accordance
with Generally Accepted Accounting
Principles (‘‘GAAP’’) as the total value
of bitcoin held by the Trust, plus any
cash or other assets, less any liabilities
including accrued but unpaid expenses.
The NAV of the Trust will typically be
determined as of 4:00 p.m. E.T. on each
day that the Exchange is open for
regular trading (‘‘Business Day’’). The
Administrator will calculate the NAV of
the Trust once each Exchange trading
day. The Exchange’s Core Trading
Session closes at 4:00 p.m. E.T. The
Trust’s daily activities will generally not
be reflected in the NAV determined for
the Business Day on which the
transactions are effected (the trade date),
but rather on the following Business
Day. The NAV for the Trust’s Shares
will be disseminated daily to all market
participants at the same time.11
The Trust will disseminate an
intraday indicative value (‘‘IIV’’) per
Share updated every 15 seconds. The
IIV will be calculated by using the same
methodology that the Trust uses to
determine NAV, which is to follow
GAAP. Generally, GAAP requires the
fair value of an asset that is traded on
a market to be measured by reference to
orderly transactions on an active
8 See id. at 38129. NYDIG Asset Management LLC
(‘‘Sponsor’’) is the sponsor of the Trust, and
Delaware Trust Company is the trustee. U.S.
Bancorp Fund Services, LLC (‘‘Administrator’’) is
the transfer agent and the administrator of the
Trust. The bitcoin custodian for the Trust is NYDIG
Trust Company LLC (‘‘Bitcoin Custodian’’). The
Bitcoin Custodian is chartered as a limited purpose
trust company by the New York State Department
of Financial Services (‘‘NYDFS’’) and is authorized
by NYDFS to provide digital asset custody services.
Both the Sponsor and the Bitcoin Custodian are
indirect wholly-owned subsidiaries of New York
Digital Investment Group LLC. See id.
9 See id.
10 See id. at 38130. The Trust will enter into a
cash custody agreement with U.S. Bank N.A. under
which U.S. Bank N.A. will act as custodian of the
Trust’s cash and cash equivalents. See id.
11 See id. at 38130–32.
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Federal Register / Vol. 86, No. 190 / Tuesday, October 5, 2021 / Notices
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market. Among all active markets with
orderly transactions, the market that is
used to determine the fair value of an
asset is the principal market. The
Sponsor expects that the principal
market will initially generally be the
NYDFS-regulated trading venue with
the highest trading volume and level of
activity.12
The Trust will create and redeem
Shares from time to time, but only in
one or more blocks of 10,000 Shares
(‘‘Creation Baskets’’). Creation Baskets
will only be made in exchange for
delivery to the Trust or the distribution
by the Trust of the amount of bitcoin
represented by the Shares being created
or redeemed, the amount of which will
be based on the quantity of bitcoin
attributable to each Share of the Trust
(net of accrued but unpaid Sponsor fees,
extraordinary expenses or liabilities)
being created or redeemed determined
as of 4:00 p.m. E.T. on the day the order
is properly received.13
II. Proceedings To Determine Whether
To Approve or Disapprove SR–
NYSEArca–2021–57 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
id. at 38132.
13 See id.
14 15 U.S.C. 78s(b)(2)(B).
15 Id.
16 15 U.S.C. 78f(b)(5).
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?
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. The Exchange asserts that the
‘‘significant increase in trading volume
and open interest in the bitcoin futures
market, growth of liquidity in the spot
market for bitcoin, and certain features
of the Shares mitigate the manipulation
concerns expressed by the Commission
when it last reviewed exchange
proposals to list a bitcoin exchangetraded product.’’ 18 The Exchange
concludes ‘‘that, on the whole, the
manipulation concerns previously
articulated by the Commission have
since been significantly mitigated, and
do not exceed those that exist in the
markets for other commodities that
underly [sic] securities listed on U.S.
national securities exchanges.’’ 19 Do
commenters agree or disagree? Are the
changes that the Exchange identifies
sufficient to support the determination
that the proposal to list and trade the
Shares is designed to protect investors
and the public interest and is consistent
with the other applicable requirements
of Section 6(b)(5) of the Act?
3. The Exchange states that the ‘‘Trust
would provide investors with exposure
to bitcoin in a manner that may be more
efficient, more convenient and more
regulated than the purchase of bitcoin or
other investment products that provide
exposure to bitcoin.’’ 20 The Exchange
asserts that ‘‘investors in [over-thecounter] bitcoin funds . . . have
historically borne significantly higher
fees and expenses than those that would
be borne by investors in the Trust’’ and
that investors holding bitcoin often face
‘‘credit risk’’ and ‘‘risk of loss or theft
12 See
VerDate Sep<11>2014
18:56 Oct 04, 2021
of their bitcoin.’’ 21 What are
commenters’ views regarding the
Exchange’s assertions? Do these reasons
provide an appropriate basis for the
determination that the proposal is
consistent with the applicable
requirements of Section 6(b)(5) of the
Act?
4. The Exchange asserts that the
Chicago Mercantile Exchange (‘‘CME’’)
represents a regulated market of
significant size relating to bitcoin.22 The
Exchange states that ‘‘proprietary
research, including lead-lag analyses,
. . . demonstrates that prices in the
CME bitcoin futures market . . . lead
prices in the bitcoin spot market,
including non-U.S. bitcoin spot
markets.’’ According to the Exchange,
‘‘[t]his finding supports the thesis that a
market participant attempting to
manipulate the Shares would have to
trade on that market.’’ 23 The Exchange,
however, does not provide any
information regarding the proprietary
research. What are commenters’ views
regarding these assertions?
5. According to the Exchange, ‘‘the
bitcoin futures market is one of the
primary venues that market participants
use to transact large exposures to
bitcoin,’’ and, ‘‘[i]n contrast to the
efficient leverage offered through the
futures market, many bitcoin spot
trading venues require full pre-funding
of trading, which means it would be
highly capital intensive to ‘spoof’ or
‘layer’ order books on spot trading
venues.’’ 24 The Exchange therefore
concludes that if a market participant
intended to manipulate the price of
bitcoin, and thereby the Shares, the
bitcoin futures market is the one that
would be manipulated first.25 Do
commenters agree with the Exchange’s
analysis and conclusion?
6. What are commenters’ views of the
Exchange’s assertion that (a) the
significant volume in the bitcoin futures
market; (b) the overall size of the bitcoin
market; (c) the significant liquidity
available in the bitcoin spot markets;
and (d) the ability of market participants
to buy or sell large amounts of bitcoin
without significant market impact
demonstrate that the Shares would not
become the predominant force on
pricing in either the bitcoin spot or
futures markets? 26
7. What are commenters’ views on the
Exchange’s statements that ‘‘the cost to
buy or sell $5 million worth of bitcoin
21 See
id.
id.
23 See id. at 38135.
24 See id.
25 See id.
26 See id. at 38136.
22 See
17 See
Notice, supra note 3.
id. at 38134.
19 See id.
20 See id.
18 See
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55091
E:\FR\FM\05OCN1.SGM
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Federal Register / Vol. 86, No. 190 / Tuesday, October 5, 2021 / Notices
averages roughly 20 basis points’’ and
that, ‘‘[f]or a $10 million market order,
the cost to buy or sell is roughly 40 basis
points.’’ 27 What are commenters’ views
of the Exchange’s assertion that these
metrics are comparable to the liquidity
of existing commodity exchange-traded
products? 28 What are commenters’
views on the Exchange’s assertion that
the fact that ‘‘the Trust receives and
holds only bitcoin . . . substantially
reduces the potential for manipulation
of the number of Shares created or
redeemed, which therefore substantially
reduces the potential for shareholders to
be harmed by manipulation.’’? 29
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.30
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal should be approved or
disapproved by October 26, 2021. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by November 9, 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
27 See
id.
id.
29 See id. at 38135.
30 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
28 See
VerDate Sep<11>2014
18:56 Oct 04, 2021
Jkt 256001
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2021–57 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–NYSEArca–2021–57. 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–NYSEArca–2021–57 and
should be submitted by October 26,
2021. Rebuttal comments should be
submitted by November 9, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–21622 Filed 10–4–21; 8:45 am]
BILLING CODE 8011–01–P
31 17
PO 00000
CFR 200.30–3(a)(57).
Frm 00177
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93175; File No. SR–
CboeBZX–2021–029]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of
Designation of a Longer Period for
Commission Action on Proceedings To
Determine Whether To Approve or
Disapprove a Proposed Rule Change
To List and Trade Shares of the
Kryptoin Bitcoin ETF Trust Under BZX
Rule 14.11(e)(4), Commodity-Based
Trust Shares
September 29, 2021.
On April 9, 2021, Cboe BZX
Exchange, Inc. (‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade shares of the Kryptoin
Bitcoin ETF 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 28, 2021.3
On June 9, 2021, pursuant to Section
19(b)(2) of the Act,4 the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to disapprove the proposed
rule change.5 On July 23, 2021, the
Commission instituted proceedings
under Section 19(b)(2)(B) of the Act 6 to
determine whether to approve or
disapprove the proposed rule change.7
Section 19(b)(2) of the Act 8 provides
that, after initiating proceedings, the
Commission shall issue an order
approving or disapproving the proposed
rule change not later than 180 days after
the date of publication of notice of filing
of the proposed rule change. The
Commission may extend the period for
issuing an order approving or
disapproving the proposed rule change,
however, by not more than 60 days if
the Commission determines that a
longer period is appropriate and
publishes the reasons for such
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 91646
(April 22, 2021), 86 FR 22485 (April 28, 2021).
Comments on the proposed rule change can be
found at: https://www.sec.gov/comments/srcboebzx-2021-029/srcboebzx2021029.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 92131
(June 9, 2021), 86 FR 31772 (June 15, 2021).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 92476
(July 23, 2021), 86 FR 40883 (July 29, 2021).
8 15 U.S.C. 78s(b)(2).
2 17
E:\FR\FM\05OCN1.SGM
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]]>Agencies
[Federal Register Volume 86, Number 190 (Tuesday, October 5, 2021)]
[Notices]
[Pages 55090-55092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21622]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93191; File No. SR-NYSEArca-2021-57]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove a Proposed
Rule Change To List and Trade Shares of the NYDIG Bitcoin ETF Under
NYSE Arca Rule 8.201-E
September 29, 2021.
On June 30, 2021, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
list and trade shares (``Shares'') of the NYDIG Bitcoin ETF (``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 July 19, 2021.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 92395 (July 13,
2021), 86 FR 38129 (July 19, 2021) (``Notice''). Comments on the
proposed rule change can be found at: https://www.sec.gov/comments/sr-nysearca-2021-57/srnysearca202157.htm.
---------------------------------------------------------------------------
On August 23, 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. 92722 (Aug. 23,
2021), 86 FR 48268 (Aug. 27, 2021). The Commission designated
October 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 NYSE Arca Rule 8.201-E,
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 is to reflect the performance
of the price of bitcoin less the expenses of the Trust's operations.\8\
The Trust will not seek to reflect the performance of any benchmark or
index. In seeking to achieve its investment objective, the Trust will
only hold bitcoin.\9\ The Trust generally does not intend to hold cash
or cash equivalents. However, the Trust may hold cash and cash
equivalents on a temporary basis to pay extraordinary expenses.\10\
---------------------------------------------------------------------------
\8\ See id. at 38129. NYDIG Asset Management LLC (``Sponsor'')
is the sponsor of the Trust, and Delaware Trust Company is the
trustee. U.S. Bancorp Fund Services, LLC (``Administrator'') is the
transfer agent and the administrator of the Trust. The bitcoin
custodian for the Trust is NYDIG Trust Company LLC (``Bitcoin
Custodian''). The Bitcoin Custodian is chartered as a limited
purpose trust company by the New York State Department of Financial
Services (``NYDFS'') and is authorized by NYDFS to provide digital
asset custody services. Both the Sponsor and the Bitcoin Custodian
are indirect wholly-owned subsidiaries of New York Digital
Investment Group LLC. See id.
\9\ See id.
\10\ See id. at 38130. The Trust will enter into a cash custody
agreement with U.S. Bank N.A. under which U.S. Bank N.A. will act as
custodian of the Trust's cash and cash equivalents. See id.
---------------------------------------------------------------------------
The net asset value (``NAV'') of the Trust will be determined in
accordance with Generally Accepted Accounting Principles (``GAAP'') as
the total value of bitcoin held by the Trust, plus any cash or other
assets, less any liabilities including accrued but unpaid expenses. The
NAV of the Trust will typically be determined as of 4:00 p.m. E.T. on
each day that the Exchange is open for regular trading (``Business
Day''). The Administrator will calculate the NAV of the Trust once each
Exchange trading day. The Exchange's Core Trading Session closes at
4:00 p.m. E.T. The Trust's daily activities will generally not be
reflected in the NAV determined for the Business Day on which the
transactions are effected (the trade date), but rather on the following
Business Day. The NAV for the Trust's Shares will be disseminated daily
to all market participants at the same time.\11\
---------------------------------------------------------------------------
\11\ See id. at 38130-32.
---------------------------------------------------------------------------
The Trust will disseminate an intraday indicative value (``IIV'')
per Share updated every 15 seconds. The IIV will be calculated by using
the same methodology that the Trust uses to determine NAV, which is to
follow GAAP. Generally, GAAP requires the fair value of an asset that
is traded on a market to be measured by reference to orderly
transactions on an active
[[Page 55091]]
market. Among all active markets with orderly transactions, the market
that is used to determine the fair value of an asset is the principal
market. The Sponsor expects that the principal market will initially
generally be the NYDFS-regulated trading venue with the highest trading
volume and level of activity.\12\
---------------------------------------------------------------------------
\12\ See id. at 38132.
---------------------------------------------------------------------------
The Trust will create and redeem Shares from time to time, but only
in one or more blocks of 10,000 Shares (``Creation Baskets''). Creation
Baskets will only be made in exchange for delivery to the Trust or the
distribution by the Trust of the amount of bitcoin represented by the
Shares being created or redeemed, the amount of which will be based on
the quantity of bitcoin attributable to each Share of the Trust (net of
accrued but unpaid Sponsor fees, extraordinary expenses or liabilities)
being created or redeemed determined as of 4:00 p.m. E.T. on the day
the order is properly received.\13\
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\13\ See id.
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II. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2021-57 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. The Exchange asserts that the ``significant increase in trading
volume and open interest in the bitcoin futures market, growth of
liquidity in the spot market for bitcoin, and certain features of the
Shares mitigate the manipulation concerns expressed by the Commission
when it last reviewed exchange proposals to list a bitcoin exchange-
traded product.'' \18\ The Exchange concludes ``that, on the whole, the
manipulation concerns previously articulated by the Commission have
since been significantly mitigated, and do not exceed those that exist
in the markets for other commodities that underly [sic] securities
listed on U.S. national securities exchanges.'' \19\ Do commenters
agree or disagree? Are the changes that the Exchange identifies
sufficient to support the determination that the proposal to list and
trade the Shares is designed to protect investors and the public
interest and is consistent with the other applicable requirements of
Section 6(b)(5) of the Act?
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\18\ See id. at 38134.
\19\ See id.
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3. The Exchange states that the ``Trust would provide investors
with exposure to bitcoin in a manner that may be more efficient, more
convenient and more regulated than the purchase of bitcoin or other
investment products that provide exposure to bitcoin.'' \20\ The
Exchange asserts that ``investors in [over-the-counter] bitcoin funds .
. . have historically borne significantly higher fees and expenses than
those that would be borne by investors in the Trust'' and that
investors holding bitcoin often face ``credit risk'' and ``risk of loss
or theft of their bitcoin.'' \21\ What are commenters' views regarding
the Exchange's assertions? Do these reasons provide an appropriate
basis for the determination that the proposal is consistent with the
applicable requirements of Section 6(b)(5) of the Act?
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\20\ See id.
\21\ See id.
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4. The Exchange asserts that the Chicago Mercantile Exchange
(``CME'') represents a regulated market of significant size relating to
bitcoin.\22\ The Exchange states that ``proprietary research, including
lead-lag analyses, . . . demonstrates that prices in the CME bitcoin
futures market . . . lead prices in the bitcoin spot market, including
non-U.S. bitcoin spot markets.'' According to the Exchange, ``[t]his
finding supports the thesis that a market participant attempting to
manipulate the Shares would have to trade on that market.'' \23\ The
Exchange, however, does not provide any information regarding the
proprietary research. What are commenters' views regarding these
assertions?
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\22\ See id.
\23\ See id. at 38135.
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5. According to the Exchange, ``the bitcoin futures market is one
of the primary venues that market participants use to transact large
exposures to bitcoin,'' and, ``[i]n contrast to the efficient leverage
offered through the futures market, many bitcoin spot trading venues
require full pre-funding of trading, which means it would be highly
capital intensive to `spoof' or `layer' order books on spot trading
venues.'' \24\ The Exchange therefore concludes that if a market
participant intended to manipulate the price of bitcoin, and thereby
the Shares, the bitcoin futures market is the one that would be
manipulated first.\25\ Do commenters agree with the Exchange's analysis
and conclusion?
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\24\ See id.
\25\ See id.
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6. What are commenters' views of the Exchange's assertion that (a)
the significant volume in the bitcoin futures market; (b) the overall
size of the bitcoin market; (c) the significant liquidity available in
the bitcoin spot markets; and (d) the ability of market participants to
buy or sell large amounts of bitcoin without significant market impact
demonstrate that the Shares would not become the predominant force on
pricing in either the bitcoin spot or futures markets? \26\
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\26\ See id. at 38136.
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7. What are commenters' views on the Exchange's statements that
``the cost to buy or sell $5 million worth of bitcoin
[[Page 55092]]
averages roughly 20 basis points'' and that, ``[f]or a $10 million
market order, the cost to buy or sell is roughly 40 basis points.''
\27\ What are commenters' views of the Exchange's assertion that these
metrics are comparable to the liquidity of existing commodity exchange-
traded products? \28\ What are commenters' views on the Exchange's
assertion that the fact that ``the Trust receives and holds only
bitcoin . . . substantially reduces the potential for manipulation of
the number of Shares created or redeemed, which therefore substantially
reduces the potential for shareholders to be harmed by manipulation.''?
\29\
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\27\ See id.
\28\ See id.
\29\ See id. at 38135.
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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.\30\
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\30\ 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 October 26, 2021. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
November 9, 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-NYSEArca-2021-57 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-NYSEArca-2021-57. 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-NYSEArca-2021-57 and should be submitted
by October 26, 2021. Rebuttal comments should be submitted by November
9, 2021.
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\31\ 17 CFR 200.30-3(a)(57).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21622 Filed 10-4-21; 8:45 am]
BILLING CODE 8011-01-P
