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 iShares Bitcoin Trust Under Nasdaq Rule 5711(d), Commodity-Based Trust Shares, 68768-68770 [2023-21948]
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68768
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
All submissions should refer to file
number SR–MEMX–2023–26. 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–MEMX–2023–26 and should be
submitted on or before October 25,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–22011 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98610; File No. SR–
NASDAQ–2023–016]
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 iShares Bitcoin
Trust Under Nasdaq Rule 5711(d),
Commodity-Based Trust Shares
September 28, 2023.
On June 29, 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 iShares Bitcoin Trust
(‘‘Trust’’) under Nasdaq Rule 5711(d),
Commodity-Based Trust Shares. The
proposed rule change was published for
comment in the Federal Register on July
19, 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
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 to reflect generally the performance of
the price of bitcoin before payment of
the Trust’s expenses and liabilities.8
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 97905
(July 13, 2023), 88 FR 46342 (‘‘Notice’’). Comments
on the proposed rule change are available at:
https://www.sec.gov/comments/sr-nasdaq-2023016/srnasdaq2023016.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 98267,
88 FR 61652 (Sept. 7, 2023). The Commission
designated October 17, 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 46342. iShares Delaware Trust
Sponsor LLC (‘‘Sponsor’’), a Delaware limited
lotter on DSK11XQN23PROD with NOTICES1
2 17
36 17
CFR 200.30–3(a)(12).
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The assets of the Trust will consist
primarily of bitcoin held by a custodian
on behalf of the Trust.9 On each
Business Day, as soon as practicable
after 4:00 p.m. Eastern Time, the
administrator of the Trust will evaluate
the bitcoin held by the Trust as reflected
by the CF Benchmarks Index and
determine the net asset value of the
Trust.10 The Trust will issue and
redeem baskets of Shares on a
continuous basis only in exchange for
an amount of bitcoin determined by the
trustee of the Trust.11
II. Proceedings To Determine Whether
To Approve or Disapprove SR–
NASDAQ–2023–016 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.
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
liability company and an indirect subsidiary of
BlackRock, Inc., is the sponsor of the Trust.
9 See id.
10 See id. at 46343.
11 See id.
12 15 U.S.C. 78s(b)(2)(B).
13 Id.
14 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
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 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
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?
15 See
Notice, 88 FR at 46349–53.
id. at 46352.
17 See id. at 46352–53.
18 See id. at 46353.
19 See id. at 46352 n.23.
20 See id.
21 See id. at 46353.
16 See
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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
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
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
22 See
id.
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.
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).
23 See
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68769
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.
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–
NASDAQ–2023–016 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–2023–016. 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
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).
E:\FR\FM\04OCN1.SGM
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68770
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
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–2023–016 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. 2023–21948 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98658; File No. SR–
PEARL–2023–35]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Suspension of and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove
Proposed Rule Change To Amend the
Fee Schedule To Modify Certain
Connectivity and Port Fees
September 29, 2023.
lotter on DSK11XQN23PROD with NOTICES1
I. Introduction
On August 8, 2023, MIAX PEARL LLC
(‘‘MIAX Pearl Options’’ 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 (File No. SR–PEARL–2023–35)
to amend certain connectivity and port
fees. The proposed rule change was
immediately effective upon filing with
the Commission pursuant to Section
19(b)(3)(A) of the Act.3 The proposed
27 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
1 15
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20:21 Oct 03, 2023
Jkt 262001
rule change was published for comment
in the Federal Register on August 25,
2023.4 Pursuant to Section 19(b)(3)(C) of
the Act,5 the Commission is hereby: (1)
temporarily suspending the proposed
rule change; and (2) instituting
proceedings to determine whether to
approve or disapprove the proposed
rule change.
II. Background and Description of the
Proposed Rule Change
As described in more detail in the
Notice, the Exchange proposes to: (1)
increase fees for a 10 gigabit (‘‘Gb’’)
ultra-low latency (‘‘ULL’’) fiber
connection for Members 6 and nonMembers from $10,000 to $13,500 per
month; 7 (2) remove provisions in the
Exchange’s Fee Schedule that provide
for a shared 10Gb ULL network with the
Exchange’s affiliate Miami International
Securities Exchange, LLC (‘‘MIAX’’); 8
and (3) amend the calculation method
and increase the amount of fees for
MIAX Express Network Full Service 9
(‘‘MEO’’) Ports.10
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
4 See Securities Exchange Act Release No. 98180
(August 21, 2023), 88 FR 58404 (SR–PEARL–2023–
35) (‘‘Notice’’). Comment on the proposed rule
change can be found at: https://www.sec.gov/
comments/sr-pearl-2023-35/srpearl202335.htm.
5 15 U.S.C. 78s(b)(3)(C).
6 The term ‘‘Member’’ means an individual or
organization approved to exercise the trading rights
associated with a Trading Permit. Members are
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100.
7 See Notice, supra note 4, at 58408.
8 On January 23, 2023, the Exchange bifurcated
the Exchange and MIAX’s 10Gb ULL network and
stated that this bifurcation was due to everincreasing capacity constraints and anticipated
access needs for Members and market participants.
See Securities Exchange Act Release Nos. 96545
(December 20, 2022), 87 FR 79393 (December 27,
2022) (SR–MIAX–2022–48); and 96553 (December
20, 2022), 87 FR 79379 (December 27, 2022) (SR–
PEARL–2022–60). The instant filing would amend
provisions in the Fee Schedule to reflect the
bifurcation of the 10Gb ULL network and specify
that only the 1Gb network provides access to both
the Exchange and MIAX. See Notice, supra note 4,
at 58408.
9 The term ‘‘MEO Interface’’ or ‘‘MEO’’ means a
binary order interface for certain order types as set
forth in Rule 516 into the MIAX Pearl System. See
the Definitions Section of the Exchange Fee
Schedule and Exchange Rule 100.
10 See Notice, supra note 4, at 58409–10. The
Exchange initially filed the proposed fee change on
December 30, 2022, with an effective date of
January 1, 2023. See Securities Exchange Act
Release No. 96632 (January 10, 2023), 88 FR 2707
(January 17, 2023) (SR–PEARL–2022–62). That
filing was withdrawn by the Exchange and the
Exchange filed a new proposed fee change with
additional justification (SR–PEARL–2023–05) on
February 23, 2023. See Securities Exchange Act
Release No. 97082 (March 8, 2023), 88 FR 15825
(March 14, 2023). The Exchange subsequently
withdrew that filing and replaced it with SR–
PEARL–2023–19 on April 20, 2023. See Securities
Exchange Act Release No. 97420 (May 2, 2023), 88
FR 29701 (May 8, 2023). The Exchange
PO 00000
Frm 00212
Fmt 4703
Sfmt 4703
The Exchange currently offers two
types of Full Service MEO Ports—
Bulk 11 and Single 12—and, for one
monthly price, a Member may be
allocated two Full-Service MEO Ports of
either type per Matching Engine.13 The
Exchange now proposes to modify both
the calculation method and amount of
fees for each type of Full Service MEO
Port.14 Notwithstanding these changes
to the calculation method and amount
of fees, all Members will continue to be
entitled to two Full Service MEO Ports
(Bulk or Single) for each Matching
Engine for the applicable fee.15
With respect to the Full Service MEO
Ports (Bulk), prior to the proposed fee
change, all Members were charged a
monthly fee pursuant to a volume tierbased fee structure with fees ranging
from $3,000 to $5,000.16 The Exchange
now proposes to amend the calculation
and amount of Full Service MEO Port
(Bulk) fees for all Members, with
different fee structures depending on
whether the Member is a Market
Maker 17 or an Electronic Exchange
Member (‘‘EEM’’).18 The Exchange
proposes to charge all EEMs that utilize
MIAX Pearl Full Service MEO Ports
(Bulk) a flat monthly fee of $7,500.19 For
Market Makers, the Exchange proposes
subsequently withdrew that filing and replaced it
with SR–PEARL–2023–27 on June 16, 2023. See
Securities Exchange Act Release No. 97815 (June
27, 2023), 88 FR 42759 (July 3, 2023). The Exchange
subsequently withdrew that filing and replaced it
with the instant filing to provide additional
information and a revised justification for the
proposal, which is discussed herein. See Notice,
supra note 4, at 58405.
11 Full Service MEO Port (Bulk) means an MEO
port that supports all MEO input message types and
binary bulk order entry. See the Definitions Section
of the Exchange Fee Schedule.
12 Full Service MEO Port (Single) means an MEO
port that supports all MEO input message types and
binary order entry on a single order-by-order basis,
but not bulk orders. See the Definitions Section of
the Exchange Fee Schedule.
13 See Notice, supra note 4, at 58409. A
‘‘Matching Engine’’ is a part of the Exchange’s
electronic system that processes options orders and
trades on a symbol-by-symbol basis. See the
Definitions Section of the Fee Schedule.
14 See id.
15 See id. at 58409, 58411.
16 See id. at 58409.
17 The term ‘‘Market Maker’’ means a Member
registered with the Exchange for the purpose of
making markets in options contracts traded on the
Exchange and that is vested with the rights and
responsibilities specified in Chapter VI of Exchange
Rules. See the Definitions Section of the Exchange
Fee Schedule and Exchange Rule 100.
18 See Notice, supra note 4, at 58409. The term
‘‘Electronic Exchange Member’’ or ‘‘EEM’’ means
the holder of a Trading Permit who is a Member
representing as agent Public Customer Orders or
Non-Customer Orders on the Exchange and those
non-Market Maker Members conducting proprietary
trading. Electronic Exchange Members are deemed
‘‘members’’ under the Exchange Act. See the
Definitions Section of the Exchange Fee Schedule
and Exchange Rule 100.
19 See Notice, supra note 4, at 58409.
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]]>Agencies
[Federal Register Volume 88, Number 191 (Wednesday, October 4, 2023)]
[Notices]
[Pages 68768-68770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21948]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98610; File No. SR-NASDAQ-2023-016]
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 iShares Bitcoin
Trust Under Nasdaq Rule 5711(d), Commodity-Based Trust Shares
September 28, 2023.
On June 29, 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
iShares Bitcoin Trust (``Trust'') under Nasdaq Rule 5711(d), Commodity-
Based Trust Shares. The proposed rule change was published for comment
in the Federal Register on July 19, 2023.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 97905 (July 13,
2023), 88 FR 46342 (``Notice''). Comments on the proposed rule
change are available at: https://www.sec.gov/comments/sr-nasdaq-2023-016/srnasdaq2023016.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 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. 98267, 88 FR 61652
(Sept. 7, 2023). The Commission designated October 17, 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 to reflect generally the
performance of the price of bitcoin before payment of the Trust's
expenses and liabilities.\8\ The assets of the Trust will consist
primarily of bitcoin held by a custodian on behalf of the Trust.\9\ On
each Business Day, as soon as practicable after 4:00 p.m. Eastern Time,
the administrator of the Trust will evaluate the bitcoin held by the
Trust as reflected by the CF Benchmarks Index and determine the net
asset value of the Trust.\10\ The Trust will issue and redeem baskets
of Shares on a continuous basis only in exchange for an amount of
bitcoin determined by the trustee of the Trust.\11\
---------------------------------------------------------------------------
\8\ See id. at 46342. iShares Delaware Trust Sponsor LLC
(``Sponsor''), a Delaware limited liability company and an indirect
subsidiary of BlackRock, Inc., is the sponsor of the Trust.
\9\ See id.
\10\ See id. at 46343.
\11\ See id.
---------------------------------------------------------------------------
II. Proceedings To Determine Whether To Approve or Disapprove SR-
NASDAQ-2023-016 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.
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\12\ 15 U.S.C. 78s(b)(2)(B).
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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\
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\13\ Id.
\14\ 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, 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
[[Page 68769]]
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 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 46349-53.
\16\ See id. at 46352.
\17\ See id. at 46352-53.
\18\ See id. at 46353.
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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 46352 n.23.
\20\ See id.
\21\ See id. at 46353.
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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.
\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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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-2023-016 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-2023-016. 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
[[Page 68770]]
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-2023-016 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. 2023-21948 Filed 10-3-23; 8:45 am]
BILLING CODE 8011-01-P
