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 ARK 21Shares Bitcoin ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, 54270-54272 [2022-18966]

Download as PDF lotter on DSK11XQN23PROD with NOTICES1 54270 Federal Register / Vol. 87, No. 170 / Friday, September 2, 2022 / Notices the research community around the production and use of equitable data, and (2) tools that allow civil society organizations and communities to use and visualize Federal data and chart government’s progress toward equitable outcomes in order to strengthen accountability and credibility. Responses to this RFI will also inform development of the United States’ Open Government Partnership National Action Plan that furthers the principles of open government. We invite members of the public to share perspectives on how the Federal government can better realize the objectives of collaboration between all levels of government, engagement of communities that access or participate in Federal programs in data collection and research, and create broader public access to equitable data. Responses may help inform the development of case studies, best practices, strategies, plans, and other tools for Federal agencies to pursue equitable data partnerships and collaboration, including Federal government plans around open government. OSTP seeks responses to one, some, or all of the following questions: 1. What are examples of successful collaborations involving equitable data between the Federal government and (a) Tribal, territorial, local, and State governments, or (b) local communities? 2. Among examples of existing Federal collaborations with (a) Tribal, territorial, local, and State governments or (b) local communities involving equitable data, what lessons or best practices have been learned from such collaborations? 3. What resources, programs, training, or other tools can facilitate increased data sharing between different levels of government (Tribal, territorial, local, State, or Federal) related to equitable data? 4. What resources, programs, training, or other tools can expand opportunities for historically underrepresented scholars and research institutions to access and use equitable data across levels of government? 5. What resources, programs, training, or tools can increase opportunities for community-based organizations to use equitable data to hold government accountable to the American public? 6. What resources, programs, training, or tools can make equitable data more accessible and useable for members of the public? 7. In which agencies, programs, regions, or communities are there unmet needs, broken processes, or problems related to participation and VerDate Sep<11>2014 16:40 Sep 01, 2022 Jkt 256001 accountability that could be remedied through stronger collaborations and transparency around equitable data? Dated: August 30, 2022. Stacy Murphy, Operations Manager. [FR Doc. 2022–19007 Filed 9–1–22; 8:45 am] BILLING CODE 3270–F2–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–405, OMB Control No. 3235–0462] Submission for OMB Review; Comment Request; Extension: Display of Customer Limit Orders (17 CFR 242.604) Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (‘‘PRA’’), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for approval of extension of the previously approved collection of information provided for in Rule 604 (17 CFR 242.604) under the Securities Exchange Act of 1934 (17 U.S.C. 78a et seq.) (‘‘Exchange Act’’). Rule 604 requires specialists and market makers to publish customer limit orders that are priced superior to the bids or offers being displayed by each such specialist or market maker.1 Customer limit orders that match the bid or offer being displayed by a specialist or market maker must be published if the limit price also matches the national best bid or offer (‘‘NBBO’’) and the size of the customer limit order is more than de minimis (i.e., more than 10% of the specialist’s or market maker’s displayed size). The information collected pursuant to Rule 604 is necessary to facilitate the establishment of a national market system for securities. The publication of trading interests that improve specialists’ and market makers’ quotes presents investors with improved execution opportunities and improved access to the best available prices when they buy or sell securities. The Commission estimates that approximately 318 respondents will respond to the collection of information 1 See Securities Exchange Act Release No. 37619A (September 6, 1996), 61 FR 48290 (September 12, 1996). PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 requirements each time they receive a displayable customer limit order. The Commission further estimates that a respondent will receive a customer limit order, on average, 15,136.767 times per trading day with an estimate average time of 0.1 second per quote update. Accordingly, assuming 252 days in a trading year, an average 105.957 hours per year per respondent, the Commission estimates that the total annual burden for all respondents is 33,694 hours. The collection of information in Rule 604 is mandatory for all respondents, but does not require the collection of confidential information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. The public may view background documentation for this information collection at the following website: >www.reginfo.gov<. Find this particular information collection by selecting ‘‘Currently under 30-day Review—Open for Public Comments’’ or by using the search function. Written comments and recommendations for the proposed information collection should be sent by October 3, 2022 to (i) >MBX.OMB.OIRA.SEC_desk_officer@ omb.eop.gov < and (ii) David Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 20549, or by sending an email to: PRA_Mailbox@sec.gov. Dated: August 29, 2022. J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–18981 Filed 9–1–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–95622; File No. SR– CboeBZX–2022–031] 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 ARK 21Shares Bitcoin ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares August 29, 2022. On May 13, 2022, Cboe BZX Exchange, Inc. (‘‘BZX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities E:\FR\FM\02SEN1.SGM 02SEN1 Federal Register / Vol. 87, No. 170 / Friday, September 2, 2022 / Notices Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the ARK 21Shares 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 June 1, 2022.3 The Commission has received no comments on the proposed rule change. On July 12, 2022, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 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 is to seek to track the performance of bitcoin, as measured by the performance of the S&P Bitcoin Index (‘‘Index’’), adjusted for the Trust’s expenses and other liabilities.8 Each Share will represent a fractional undivided beneficial interest in the bitcoin held by the Trust. 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 94982 (May 25, 2022), 87 FR 33250 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 95257, 87 FR 42530 (July 15, 2022). The Commission designated August 30, 2022, 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 See id. at 33269. 21Shares US LLC (‘‘Sponsor’’) is the sponsor of the Trust, Delaware Trust Company is the trustee, and The Bank of New York Mellon will be the administrator (‘‘Administrator’’) and transfer agent. Foreside Global Services, LLC will be the marketing agent in connection with the creation and redemption of Shares. ARK Investment Management LLC will provide assistance in the marketing of the Shares. Coinbase Custody Trust Company, LLC (‘‘Custodian’’), will be responsible for custody of the Trust’s bitcoin. See id. at 33250, 33268. lotter on DSK11XQN23PROD with NOTICES1 2 17 VerDate Sep<11>2014 16:40 Sep 01, 2022 Jkt 256001 unexpectedly hold cash on a temporary basis.9 In seeking to achieve its investment objective, the Trust will hold bitcoin and will value the Shares daily based on the Index. The Index is a U.S. dollardenominated composite reference rate for the price of bitcoin. The Index price is currently sourced from the following platforms: Binance, Bitfinex, Bitflyer, Bittrex, Bitstamp, Coinbase Pro, Gemini, HitBTC, Huobi, Kraken, KuCoin, and Poloniex.10 The Index methodology is intended to determine the fair market value for bitcoin by determining the principal market for bitcoin as of 4:00 p.m. E.T. daily.11 The Net Asset Value (‘‘NAV’’) of the Trust means the total assets of the Trust including, but not limited to, all bitcoin and cash, if any, less total liabilities of the Trust, each determined on the basis of generally accepted accounting principles. 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 Index as of 4:00 p.m. E.T. The Administrator determines the NAV 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.12 The Trust will provide information regarding the Trust’s bitcoin holdings, 9 See id. at 33268–69. underlying platforms are sourced by Lukka Inc. (‘‘Data Provider’’), an independent third-party digital asset data company engaged by the Sponsor, based on a combination of qualitative and quantitative metrics to analyze a comprehensive data set and evaluate factors including legal/ regulation, Know-Your-Customer/transaction risk, data provision, security, team/exchange, asset quality/diversity, market quality, and negative events. As the digital ecosystem continues to evolve, the Data Provider can add or remove platforms based on the processes established by Lukka’s Pricing Integrity Oversight Board. See id. at 33269 and n.72. 11 The Index methodology uses a ranking approach that considers several characteristics of the trading platforms, including oversight and intraday trading volume. Specifically, to rank the credibility and quality of each trading platform, the Data Provider dynamically assigns a Base Exchange Score (‘‘BES’’) to the key characteristics for each platform. The BES reflects the fundamentals of a platform and determines which platform should be designated as the principal market at a given point of time. This score is determined by computing a weighted average of the values assigned to four different trading platform characteristics: (i) oversight; (ii) microstructure efficiency; (iii) data transparency; and (iv) data integrity. The methodology then applies a five-step weighting process for identifying a principal trading platform and the last price on that platform. Following this weighting process, an executed trading platform price is assigned for bitcoin as of 4:00 p.m. E.T. See id. at 33269. 12 See id. at 33271. 10 The PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 54271 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. E.T. 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.13 When the Trust sells or redeems its Shares, it will do so in ‘‘in-kind’’ transactions in blocks of 5,000 Shares. 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.14 II. Proceedings To Determine Whether To Approve or Disapprove SR– CboeBZX–2022–031 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 15 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,16 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.’’ 17 The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of 13 See id. at 33270. id. at 33269. 15 15 U.S.C. 78s(b)(2)(B). 16 Id. 17 15 U.S.C. 78f(b)(5). 14 See E:\FR\FM\02SEN1.SGM 02SEN1 lotter on DSK11XQN23PROD with NOTICES1 54272 Federal Register / Vol. 87, No. 170 / Friday, September 2, 2022 / Notices the proposal, which are set forth in the Notice,18 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. Based on data and analysis provided and the academic research cited by the Exchange,19 do commenters agree with the Exchange that the Chicago Mercantile Exchange (‘‘CME’’) on which bitcoin futures contracts trade (‘‘CME Bitcoin Futures’’) represents a regulated market of significant size related to spot bitcoin? 20 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 the CME to manipulate the Shares? Do commenters agree with 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 spot bitcoin or CME Bitcoin Futures markets? 21 3. The Exchange states 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 requirement to enter into a comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot bitcoin.22 In support of its assertion, the Exchange provides data and analysis 23 to indicate that the spot bitcoin market is ‘‘increasingly efficient,’’ with ‘‘higher liquidity’’ and a ‘‘higher degree of consensus among 18 See Notice, supra note 3. id. at 33256–61, 33261 n.59. 20 See id. at 33262. 21 See id. 22 See id. at 33261 n.62. 23 See id. at 33262–68. 19 See VerDate Sep<11>2014 16:40 Sep 01, 2022 Jkt 256001 investors regarding the price of [b]itcoin,’’ making it ‘‘less susceptible to manipulation.’’ 24 Do commenters believe the Exchange has shown that the bitcoin market is resistant to price manipulation? 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.25 Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by September 23, 2022. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by October 7, 2022. 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–2022–031 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–2022–031. This file number should be included on the subject line if email is used. To help the 24 See id. at 33264–66. 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). 25 Section PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 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–2022–031 and should be submitted by September 23, 2022. Rebuttal comments should be submitted by October 7, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–18966 Filed 9–1–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–652, OMB Control No. 3235–0699] Submission for OMB Review; Comment Request; Extension: Rule 18a–2 Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the 26 17 E:\FR\FM\02SEN1.SGM CFR 200.30–3(a)(57). 02SEN1

Agencies

[Federal Register Volume 87, Number 170 (Friday, September 2, 2022)]
[Notices]
[Pages 54270-54272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18966]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95622; File No. SR-CboeBZX-2022-031]


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 ARK 21Shares 
Bitcoin ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares

August 29, 2022.
    On May 13, 2022, Cboe BZX Exchange, Inc. (``BZX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities

[[Page 54271]]

Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the ARK 
21Shares 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 June 1, 2022.\3\ The Commission has received 
no comments on the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 94982 (May 25, 
2022), 87 FR 33250 (``Notice'').
---------------------------------------------------------------------------

    On July 12, 2022, pursuant to Section 19(b)(2) of the Act,\4\ the 
Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\5\ 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. 95257, 87 FR 42530 
(July 15, 2022). The Commission designated August 30, 2022, 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 is to seek to track the 
performance of bitcoin, as measured by the performance of the S&P 
Bitcoin Index (``Index''), adjusted for the Trust's expenses and other 
liabilities.\8\ Each Share will represent a fractional undivided 
beneficial interest in the bitcoin held by the Trust. 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.\9\
---------------------------------------------------------------------------

    \8\ See id. at 33269. 21Shares US LLC (``Sponsor'') is the 
sponsor of the Trust, Delaware Trust Company is the trustee, and The 
Bank of New York Mellon will be the administrator 
(``Administrator'') and transfer agent. Foreside Global Services, 
LLC will be the marketing agent in connection with the creation and 
redemption of Shares. ARK Investment Management LLC will provide 
assistance in the marketing of the Shares. Coinbase Custody Trust 
Company, LLC (``Custodian''), will be responsible for custody of the 
Trust's bitcoin. See id. at 33250, 33268.
    \9\ See id. at 33268-69.
---------------------------------------------------------------------------

    In seeking to achieve its investment objective, the Trust will hold 
bitcoin and will value the Shares daily based on the Index. The Index 
is a U.S. dollar-denominated composite reference rate for the price of 
bitcoin. The Index price is currently sourced from the following 
platforms: Binance, Bitfinex, Bitflyer, Bittrex, Bitstamp, Coinbase 
Pro, Gemini, HitBTC, Huobi, Kraken, KuCoin, and Poloniex.\10\ The Index 
methodology is intended to determine the fair market value for bitcoin 
by determining the principal market for bitcoin as of 4:00 p.m. E.T. 
daily.\11\
---------------------------------------------------------------------------

    \10\ The underlying platforms are sourced by Lukka Inc. (``Data 
Provider''), an independent third-party digital asset data company 
engaged by the Sponsor, based on a combination of qualitative and 
quantitative metrics to analyze a comprehensive data set and 
evaluate factors including legal/regulation, Know-Your-Customer/
transaction risk, data provision, security, team/exchange, asset 
quality/diversity, market quality, and negative events. As the 
digital ecosystem continues to evolve, the Data Provider can add or 
remove platforms based on the processes established by Lukka's 
Pricing Integrity Oversight Board. See id. at 33269 and n.72.
    \11\ The Index methodology uses a ranking approach that 
considers several characteristics of the trading platforms, 
including oversight and intra-day trading volume. Specifically, to 
rank the credibility and quality of each trading platform, the Data 
Provider dynamically assigns a Base Exchange Score (``BES'') to the 
key characteristics for each platform. The BES reflects the 
fundamentals of a platform and determines which platform should be 
designated as the principal market at a given point of time. This 
score is determined by computing a weighted average of the values 
assigned to four different trading platform characteristics: (i) 
oversight; (ii) microstructure efficiency; (iii) data transparency; 
and (iv) data integrity. The methodology then applies a five-step 
weighting process for identifying a principal trading platform and 
the last price on that platform. Following this weighting process, 
an executed trading platform price is assigned for bitcoin as of 
4:00 p.m. E.T. See id. at 33269.
---------------------------------------------------------------------------

    The Net Asset Value (``NAV'') of the Trust means the total assets 
of the Trust including, but not limited to, all bitcoin and cash, if 
any, less total liabilities of the Trust, each determined on the basis 
of generally accepted accounting principles. 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 Index as of 4:00 p.m. E.T. The 
Administrator determines the NAV 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.\12\
---------------------------------------------------------------------------

    \12\ See id. at 33271.
---------------------------------------------------------------------------

    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. E.T. 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.\13\
---------------------------------------------------------------------------

    \13\ See id. at 33270.
---------------------------------------------------------------------------

    When the Trust sells or redeems its Shares, it will do so in ``in-
kind'' transactions in blocks of 5,000 Shares. 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.\14\
---------------------------------------------------------------------------

    \14\ See id. at 33269.
---------------------------------------------------------------------------

II. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2022-031 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \15\ 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.
---------------------------------------------------------------------------

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

    Pursuant to Section 19(b)(2)(B) of the Act,\16\ 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.'' \17\
---------------------------------------------------------------------------

    \16\ Id.
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of

[[Page 54272]]

the proposal, which are set forth in the Notice,\18\ 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:
---------------------------------------------------------------------------

    \18\ See Notice, supra note 3.
---------------------------------------------------------------------------

    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. Based on data and analysis provided and the academic research 
cited by the Exchange,\19\ do commenters agree with the Exchange that 
the Chicago Mercantile Exchange (``CME'') on which bitcoin futures 
contracts trade (``CME Bitcoin Futures'') represents a regulated market 
of significant size related to spot bitcoin? \20\ 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 the CME 
to manipulate the Shares? Do commenters agree with 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 spot bitcoin or 
CME Bitcoin Futures markets? \21\
---------------------------------------------------------------------------

    \19\ See id. at 33256-61, 33261 n.59.
    \20\ See id. at 33262.
    \21\ See id.
---------------------------------------------------------------------------

    3. The Exchange states 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 
requirement to enter into a comprehensive surveillance-sharing 
agreement with a regulated market of significant size related to spot 
bitcoin.\22\ In support of its assertion, the Exchange provides data 
and analysis \23\ to indicate that the spot bitcoin market is 
``increasingly efficient,'' with ``higher liquidity'' and a ``higher 
degree of consensus among investors regarding the price of [b]itcoin,'' 
making it ``less susceptible to manipulation.'' \24\ Do commenters 
believe the Exchange has shown that the bitcoin market is resistant to 
price manipulation?
---------------------------------------------------------------------------

    \22\ See id. at 33261 n.62.
    \23\ See id. at 33262-68.
    \24\ See id. at 33264-66.
---------------------------------------------------------------------------

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.\25\
---------------------------------------------------------------------------

    \25\ 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).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by September 23, 2022. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
October 7, 2022.
    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-2022-031 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-2022-031. 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-2022-031 and should be submitted 
by September 23, 2022. Rebuttal comments should be submitted by October 
7, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-18966 Filed 9-1-22; 8:45 am]
BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.