Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade Shares of the Valkyrie Bitcoin Fund Under Nasdaq Rule 5711(d), Commodity-Based Trust Shares, 68894-68896 [2023-21946]
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lotter on DSK11XQN23PROD with NOTICES1
68894
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
A proposed rule change filed under
Rule 19b–4(f)(6) 22 normally does not
become operative prior to 30 days after
the date of the filing. However, Rule
19b–4(f)(6)(iii) 23 permits the
Commission to 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 immediately upon
filing. The Exchange states that waiver
of the 30-day operative delay will allow
the Exchange to include the proposed
functionality when it re-introduces the
stock-tied functionality on the
Exchange. As discussed above, the
proposed functionality will allow
auction responses, unrelated Limit
Complex Orders on the Complex Order
Book, and Improvement Orders that
include a short sale order to participate
in the Complex Facilitation Mechanism,
Complex SOM, and Complex PIM
auctions, as applicable. Although the
potential execution price of the auction
response or Limit Complex Order will
vary depending on whether the contra
order submitted to the auction with the
agency order also includes a short sale
order, the Exchange states that the
alternative would be to exclude
responses and unrelated Limit Complex
Orders that include a short sale order
from the Complex Facilitation
Mechanism, Complex SOM, and
Complex PIM auctions altogether. The
Commission finds that it is consistent
with the protection of investors and the
public interest to waive the 30-day
operative delay. The Commission
believes that the proposal will benefit
investors by allowing auction responses,
Improvement Orders, and unrelated
Limit Complex Orders that include a
short sale order to participate in the
Complex Facilitation Mechanism,
Complex SOM, and Complex PIM
auctions, which could increase
competition in the auctions and
potentially result in better prices for
agency orders executed in the auctions.
In addition, the proposal will make
clear to market participants that submit
auction responses that include a short
sale order, or that enter Limit Complex
Orders that include a short sale order,
of the prices that their orders may
receive when they execute in a Complex
Facilitation Mechanism, Complex SOM,
or Complex PIM auction. Therefore, the
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.
22 Id.
23 17 CFR 240.19b–4(f)(6)(iii).
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Commission waives the 30-day
operative delay and designates the
proposal operative upon filing.24
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.
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–MRX–2023–18 and should be
submitted on or before October 25,
2023.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Sherry R. Haywood,
Assistant Secretary.
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–
MRX–2023–18 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
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–MRX–2023–18. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
24 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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[FR Doc. 2023–21942 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–98606; File No. SR–
NASDAQ–2023–019]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To List and
Trade Shares of the Valkyrie Bitcoin
Fund Under Nasdaq Rule 5711(d),
Commodity-Based Trust Shares
September 28, 2023.
On July 3, 2023, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ 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 Valkyrie Bitcoin Fund
(‘‘Trust’’) under Nasdaq Rule 5711(d),
Commodity-Based Trust Shares. The
proposed rule change was published for
comment in the Federal Register on July
21, 2023.3
On August 31, 2023, 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
25 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 97922
(July 17, 2023), 88 FR 47214 (‘‘Notice’’). Comments
on the proposed rule change are available at:
https://www.sec.gov/comments/sr-nasdaq-2023019/srnasdaq2023019.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 98262,
88 FR 61658 (Sept. 7, 2023). The Commission
1 15
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Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
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
Nasdaq Rule 5711(d), which governs the
listing and trading of Commodity-Based
Trust Shares on the Exchange.
The investment objective of the Trust
is for the Shares to reflect the
performance of the value of a bitcoin as
represented by the CME CF Bitcoin
Reference Rate—New York Variant
(‘‘Index’’), less the Trust’s liabilities and
expenses.8 The Trust will only hold
bitcoin, which will be held by a
custodian on behalf of the Trust.9 The
bitcoin held by the Trust will be valued
based on the price set by the Index and
the administrator of the Trust will
calculate the net asset value of the Trust
once each Exchange trading day.10 The
Trust will issue and redeem baskets of
Shares on an ongoing basis only in
exchange for delivery to the Trust, or
the distribution by the Trust, of the
number of whole and fractional bitcoins
represented by each basket being
created or redeemed.11
II. Proceedings To Determine Whether
To Approve or Disapprove SR–
NASDAQ–2023–019 and Grounds for
Disapproval Under Consideration
lotter on DSK11XQN23PROD with NOTICES1
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 12 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
designated October 19, 2023, as the date by which
the Commission shall approve or 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 47214. Valkyrie Digital Assets, LLC
(‘‘Sponsor’’) is the sponsor of the Trust.
9 See id.
10 See id. at 47215.
11 See id.
12 15 U.S.C. 78s(b)(2)(B).
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provide comments on the proposed rule
change.
Pursuant to Section 19(b)(2)(B) of the
Act,13 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.’’ 14
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, 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 and the bitcoin
markets’ susceptibility to manipulation?
2. Based on data and analysis
provided and the academic research
cited by the Exchange,15 do commenters
agree with the Exchange that the
Chicago Mercantile Exchange (‘‘CME’’),
on which CME bitcoin futures trade,
represents a regulated market of
significant size related to spot bitcoin? 16
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? 17 Do
commenters agree with the Exchange
that trading in the Shares would not be
the predominant influence on prices in
the CME bitcoin futures market? 18
3. The Exchange states that bitcoin is
resistant to price manipulation and that
other means to prevent fraudulent and
manipulative acts and practices ‘‘exist
13 Id.
14 15
U.S.C. 78f(b)(5).
Notice, 88 FR at 47222–24.
16 See id. at 47223.
17 See id. at 47223–24.
18 See id. at 47224.
15 See
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68895
to justify dispensing with the requisite
surveillance sharing agreement’’ with a
regulated market of significant size
related to spot bitcoin.19 In support, the
Exchange states, among other things,
that the geographically diverse and
continuous nature of bitcoin trading
make it difficult and prohibitively costly
to manipulate the price of bitcoin, and
that the fragmentation across bitcoin
platforms, the relatively slow speed of
transactions, and the capital necessary
to maintain a significant presence on
each trading platform make
manipulation of bitcoin prices through
continuous trading activity
challenging.20 The Exchange also states
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.’’ 21 Do commenters agree
with the Exchange’s statements
regarding the bitcoin market’s resistance
to price manipulation?
4. The Exchange also states that it will
execute a surveillance-sharing
agreement with Coinbase, Inc.
(‘‘Coinbase’’) that is intended to
supplement the Exchange’s market
surveillance program.22 According to
the Exchange, the agreement is
‘‘expected to have the hallmarks of a
surveillance-sharing agreement between
two members of the [Intermarket
Surveillance Group], which would give
the Exchange supplemental access to
data regarding spot [b]itcoin trades on
Coinbase where the Exchange
determines it is necessary as part of its
surveillance program for the
Commodity-Based Trust Shares.’’ 23
Based on the description of the
surveillance-sharing agreement as
provided by the Exchange, what are
commenters’ views of such an
agreement if finalized and executed? Do
commenters agree with the Exchange
that such an agreement with Coinbase
would be ‘‘helpful in detecting,
investigating, and deterring fraud and
manipulation in the Commodity-Based
Trust Shares’’? 24
19 See
id. at 47223 n.24.
id.
21 See id. at 47224–25.
22 See id. at 47224.
23 See id. The Exchange states that ‘‘[t]his means
that the Exchange expects to receive market data for
orders and trades from Coinbase, which it will
utilize in surveillance of the trading of CommodityBased Trust Shares.’’ Id.
24 See id.
20 See
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68896
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
5. Some sponsors of proposed spot
bitcoin exchange-traded products have
also provided data regarding the
correlation between certain bitcoin spot
markets and the CME bitcoin futures
market.25 What are commenters’ views
on the correlation between the bitcoin
spot market and the CME bitcoin futures
market? What are commenters’ views on
the extent to which that correlation
provides evidence that the CME bitcoin
futures market is ‘‘significant’’ related to
spot bitcoin?
III. Procedure: Request for Written
Comments
lotter on DSK11XQN23PROD with NOTICES1
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.26
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposed rule change should be
approved or disapproved by October 25,
2023. Any person who wishes to file a
rebuttal to any other person’s
submission must file that rebuttal by
November 8, 2023.
25 See, e.g. Notice of Filing of Amendment No. 3
to, and 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, Securities
Exchange Act Release No. 98112 (Aug. 11, 2023),
88 FR 55743 (Aug. 16, 2023) (including data from
sponsor 21Shares US LLC that purports to show
correlations of returns across the two-year period
from January 20, 2021, to February 1, 2023, of no
less than 92% among certain spot bitcoin platforms
and between the CME bitcoin futures market and
such spot bitcoin platforms on an hourly basis, and
no less than 78% on a minutely basis).
26 Section 19(b)(2) of the Act, as amended by the
Securities Acts 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 Acts Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
VerDate Sep<11>2014
20:21 Oct 03, 2023
Jkt 262001
Comments may be submitted by any
of the following methods:
SECURITIES AND EXCHANGE
COMMISSION
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–NASDAQ–2023–019 on the
subject line.
[Release No. 34–98621; File No. SR–CBOE–
2023–054]
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–NASDAQ–2023–019. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NASDAQ–2023–019 and should be
submitted on or before October 25,
2023. Rebuttal comments should be
submitted by November 8, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21946 Filed 10–3–23; 8:45 am]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing of a
Proposed Rule Change To Amend Rule
4.13
September 28, 2023.
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
September 28, 2023, Cboe Exchange,
Inc. (‘‘Exchange’’ or ‘‘Cboe Options’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the 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
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
Rule 4.13. The text of the proposed rule
change is provided below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
*
*
*
*
*
*
*
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*
(e) Nonstandard Expirations Program.
(1) Weekly Expirations. The Exchange may
open for trading Weekly Expirations on any
broad-based index eligible for standard
options trading to expire on any Monday,
Tuesday, Wednesday, Thursday, or Friday
(other than the third Friday-of-the-month or
days that coincide with an EOM expiration).
[In addition, the Exchange may also open for
trading Weekly Expirations on S&P 500 Index
and Mini-S&P 500 Index options to expire on
any Tuesday or Thursday (other than days
that coincide with an EOM expiration).]
Weekly Expirations shall be subject to all
provisions of this Rule and treated the same
as options on the same underlying index that
expire on the third Friday of the expiration
month; provided, however, that Weekly
Expirations shall be P.M.-settled and new
series in Weekly Expirations may be added
up to and including on the expiration date
for an expiring Weekly Expiration.
The maximum number of expirations that
may be listed for each Weekly Expiration
(i.e., a Monday expiration, Tuesday
expiration, Wednesday expiration, Thursday
1 15
CFR 200.30–3(a)(57).
*
Rule 4.13. Series of Index Options
BILLING CODE 8011–01–P
27 17
*
Rules of Cboe Exchange, Inc.
2 17
E:\FR\FM\04OCN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
04OCN1
]]>Agencies
[Federal Register Volume 88, Number 191 (Wednesday, October 4, 2023)]
[Notices]
[Pages 68894-68896]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21946]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98606; File No. SR-NASDAQ-2023-019]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To List and Trade Shares of the Valkyrie Bitcoin
Fund Under Nasdaq Rule 5711(d), Commodity-Based Trust Shares
September 28, 2023.
On July 3, 2023, The Nasdaq Stock Market LLC (``Nasdaq'' 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
Valkyrie Bitcoin Fund (``Trust'') under Nasdaq Rule 5711(d), Commodity-
Based Trust Shares. The proposed rule change was published for comment
in the Federal Register on July 21, 2023.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 97922 (July 17,
2023), 88 FR 47214 (``Notice''). Comments on the proposed rule
change are available at: https://www.sec.gov/comments/sr-nasdaq-2023-019/srnasdaq2023019.htm.
---------------------------------------------------------------------------
On August 31, 2023, 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
[[Page 68895]]
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. 98262, 88 FR 61658
(Sept. 7, 2023). The Commission designated October 19, 2023, as the
date by which the Commission shall approve or 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 Nasdaq Rule 5711(d),
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 for the Shares to reflect
the performance of the value of a bitcoin as represented by the CME CF
Bitcoin Reference Rate--New York Variant (``Index''), less the Trust's
liabilities and expenses.\8\ The Trust will only hold bitcoin, which
will be held by a custodian on behalf of the Trust.\9\ The bitcoin held
by the Trust will be valued based on the price set by the Index and the
administrator of the Trust will calculate the net asset value of the
Trust once each Exchange trading day.\10\ The Trust will issue and
redeem baskets of Shares on an ongoing basis only in exchange for
delivery to the Trust, or the distribution by the Trust, of the number
of whole and fractional bitcoins represented by each basket being
created or redeemed.\11\
---------------------------------------------------------------------------
\8\ See id. at 47214. Valkyrie Digital Assets, LLC (``Sponsor'')
is the sponsor of the Trust.
\9\ See id.
\10\ See id. at 47215.
\11\ See id.
---------------------------------------------------------------------------
II. Proceedings To Determine Whether To Approve or Disapprove SR-
NASDAQ-2023-019 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \12\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\13\ 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.'' \14\
---------------------------------------------------------------------------
\13\ Id.
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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, 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 and the bitcoin markets' susceptibility to
manipulation?
2. Based on data and analysis provided and the academic research
cited by the Exchange,\15\ do commenters agree with the Exchange that
the Chicago Mercantile Exchange (``CME''), on which CME bitcoin futures
trade, represents a regulated market of significant size related to
spot bitcoin? \16\ 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? \17\ Do
commenters agree with the Exchange that trading in the Shares would not
be the predominant influence on prices in the CME bitcoin futures
market? \18\
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\15\ See Notice, 88 FR at 47222-24.
\16\ See id. at 47223.
\17\ See id. at 47223-24.
\18\ See id. at 47224.
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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
requisite surveillance sharing agreement'' with a regulated market of
significant size related to spot bitcoin.\19\ In support, the Exchange
states, among other things, that the geographically diverse and
continuous nature of bitcoin trading make it difficult and
prohibitively costly to manipulate the price of bitcoin, and that the
fragmentation across bitcoin platforms, the relatively slow speed of
transactions, and the capital necessary to maintain a significant
presence on each trading platform make manipulation of bitcoin prices
through continuous trading activity challenging.\20\ The Exchange also
states 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.'' \21\ Do commenters agree
with the Exchange's statements regarding the bitcoin market's
resistance to price manipulation?
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\19\ See id. at 47223 n.24.
\20\ See id.
\21\ See id. at 47224-25.
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4. The Exchange also states that it will execute a surveillance-
sharing agreement with Coinbase, Inc. (``Coinbase'') that is intended
to supplement the Exchange's market surveillance program.\22\ According
to the Exchange, the agreement is ``expected to have the hallmarks of a
surveillance-sharing agreement between two members of the [Intermarket
Surveillance Group], which would give the Exchange supplemental access
to data regarding spot [b]itcoin trades on Coinbase where the Exchange
determines it is necessary as part of its surveillance program for the
Commodity-Based Trust Shares.'' \23\ Based on the description of the
surveillance-sharing agreement as provided by the Exchange, what are
commenters' views of such an agreement if finalized and executed? Do
commenters agree with the Exchange that such an agreement with Coinbase
would be ``helpful in detecting, investigating, and deterring fraud and
manipulation in the Commodity-Based Trust Shares''? \24\
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\22\ See id. at 47224.
\23\ See id. The Exchange states that ``[t]his means that the
Exchange expects to receive market data for orders and trades from
Coinbase, which it will utilize in surveillance of the trading of
Commodity-Based Trust Shares.'' Id.
\24\ See id.
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[[Page 68896]]
5. Some sponsors of proposed spot bitcoin exchange-traded products have
also provided data regarding the correlation between certain bitcoin
spot markets and the CME bitcoin futures market.\25\ What are
commenters' views on the correlation between the bitcoin spot market
and the CME bitcoin futures market? What are commenters' views on the
extent to which that correlation provides evidence that the CME bitcoin
futures market is ``significant'' related to spot bitcoin?
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\25\ See, e.g. Notice of Filing of Amendment No. 3 to, and 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, Securities Exchange Act Release No. 98112 (Aug. 11,
2023), 88 FR 55743 (Aug. 16, 2023) (including data from sponsor
21Shares US LLC that purports to show correlations of returns across
the two-year period from January 20, 2021, to February 1, 2023, of
no less than 92% among certain spot bitcoin platforms and between
the CME bitcoin futures market and such spot bitcoin platforms on an
hourly basis, and no less than 78% on a minutely basis).
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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.\26\
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\26\ Section 19(b)(2) of the Act, as amended by the Securities
Acts 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 Acts 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 proposed rule change should be approved
or disapproved by October 25, 2023. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
November 8, 2023.
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-NASDAQ-2023-019 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NASDAQ-2023-019. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NASDAQ-2023-019 and should
be submitted on or before October 25, 2023. Rebuttal comments should be
submitted by November 8, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21946 Filed 10-3-23; 8:45 am]
BILLING CODE 8011-01-P
