Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Shares of the WisdomTree Bitcoin Trust Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, 68758-68760 [2023-21954]
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68758
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
Commission, 100 F Street NE,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to file
number SR–PEARL–2023–51. 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–PEARL–2023–51 and should be
submitted on or before October 25,
2023.
[Release No. 34–98623; File No. SR–
CboeBZX–2023–042]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.121
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21933 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change, as Modified by
Amendment No. 1, To List and Trade
Shares of the WisdomTree Bitcoin
Trust Under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares
September 28, 2023.
On June 30, 2023, Cboe BZX
Exchange, Inc. (‘‘BZX’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the WisdomTree Bitcoin
Trust (‘‘Trust’’) under BZX Rule
14.11(e)(4), Commodity-Based Trust
Shares. On July 11, 2023, the Exchange
filed Amendment No. 1 to the proposed
rule change, which amended and
replaced the proposed rule change in its
entirety. The proposed rule change, as
modified by Amendment No. 1, 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, as modified by
Amendment No. 1.5 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, as modified by
Amendment No. 1.
I. Summary of the Proposal, as
Modified by Amendment No. 1
As described in more detail in the
Notice,7 the Exchange proposes to list
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 97904
(July 13, 2023), 88 FR 46207 (‘‘Notice’’). Comments
on the proposed rule change, as modified by
Amendment No. 1, are available at: https://
www.sec.gov/comments/sr-cboebzx-2023-042/
srcboebzx2023042.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 98264,
88 FR 61657 (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.
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2 17
121 17
CFR 200.30–3(a)(12).
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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 gain exposure to the price of
bitcoin, less expenses and liabilities of
the Trust’s operations.8 The Trust’s
assets will consist of bitcoin held by the
Trust’s custodian on behalf of the
Trust.9 The Trust will value its Shares
daily based on the value of bitcoin as
reflected by the CF Bitcoin US
Settlement Price (‘‘Reference Rate’’).10
The administrator of the Trust will
determine the net asset value (‘‘NAV’’)
of the Trust on each day that the
Exchange is open for regular trading, as
promptly as practical after 4:00 p.m.
ET.11 In determining the Trust’s NAV,
the administrator will value the bitcoin
held by the Trust based on the price set
by the Reference Rate as of 4:00 p.m.
ET.12 When the Trust sells or redeems
its Shares, it will do so in ‘‘in-kind’’
transactions with authorized
participants in blocks of Shares.13
II. Proceedings To Determine Whether
To Approve or Disapprove SR–
CboeBZX–2023–042 and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 14 to determine
whether the proposed rule change
should be approved or disapproved.
Institution of proceedings is appropriate
at this time in view of the legal and
policy issues raised by the proposed
rule change, as discussed below.
Institution of proceedings does not
indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, as
described below, the Commission seeks
and encourages interested persons to
provide comments on the proposed rule
change.
Pursuant to Section 19(b)(2)(B) of the
Act,15 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of the proposed rule
change’s consistency with Section
6(b)(5) of the Act, which requires,
8 See id. at 46215. WisdomTree Digital
Commodity Services, LLC (‘‘Sponsor’’) is the
sponsor of the Trust.
9 See id. The Trust generally does not intend to
hold cash or cash equivalents; however, there may
be situations where the Trust would unexpectedly
hold cash on a temporary basis. See id.
10 See id.
11 See id. at 46216.
12 See id.
13 See id. at 46215.
14 15 U.S.C. 78s(b)(2)(B).
15 Id.
E:\FR\FM\04OCN1.SGM
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lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
among other things, that the rules of a
national securities exchange be
‘‘designed to prevent fraudulent and
manipulative acts and practices’’ and
‘‘to protect investors and the public
interest.’’ 16
The Commission asks that
commenters address the sufficiency of
the Exchange’s statements in support of
the proposal, which are set forth in the
Notice, 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,17 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? 18
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? 19 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? 20
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.21 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
16 15
U.S.C. 78f(b)(5).
Notice, 88 FR at 46212–15.
18 See id. at 46213.
19 See id. at 46213–14.
20 See id. at 46214.
21 See id. at 46213 n.49.
17 See
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20:21 Oct 03, 2023
Jkt 262001
to maintain a significant presence on
each trading platform make
manipulation of bitcoin prices through
continuous trading activity
challenging.22 The Exchange also states
that offering only in-kind creations and
redemptions provides ‘‘unique
protections against potential attempts to
manipulate the price of the Shares’’ and
that the price the Sponsor uses to value
the Trust’s bitcoin ‘‘is not particularly
important.’’ 23 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.24 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.’’ 25
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
market manipulation in the CommodityBased Trust Shares’’? 26
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.27 What are commenters’ views
22 See
id.
id. at 46219.
24 See id. at 46214.
25 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.
26 See id. at 46214.
27 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
23 See
PO 00000
Frm 00201
Fmt 4703
Sfmt 4703
68759
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
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.28
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–
CboeBZX–2023–042 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.
market and such spot bitcoin platforms on an
hourly basis, and no less than 78% on a minutely
basis).
28 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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68760
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
All submissions should refer to file
number SR–CboeBZX–2023–042. 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–CboeBZX–2023–042 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.29
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21954 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
lotter on DSK11XQN23PROD with NOTICES1
[Release No. 34–98582; File No. SR–
NASDAQ–2023–038]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Related to
Equity 7, Section 115
CFR 200.30–3(a)(57).
VerDate Sep<11>2014
20:21 Oct 03, 2023
The Exchange proposes to clarify the
migration timeline and billing related to
the Exchange’s enhanced connectivity,
surveillance and risk management
services under Equity 7, Section 115
(Ports and Services).
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Nasdaq is filing this proposal to
clarify the migration timeline and
billing related to the Exchange’s
enhanced connectivity, surveillance and
risk management services. In April
2021, Nasdaq launched three replatformed products: (i) WorkX, (ii)
Real-Time Stats and (iii) Post-Trade Risk
Management.3 These changes were filed
by Nasdaq on April 20, 2021 and
1 15
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
29 17
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
September 28, 2023.
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 22, 2023, The Nasdaq Stock
Market LLC (the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II, below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
Jkt 262001
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The corresponding non-re-platformed products
are (1) ACT Workstation; (2) Nasdaq InterACT; and
(3) Nasdaq Risk Management, respectively
(collectively, ‘‘legacy products’’).
2 17
PO 00000
Frm 00202
Fmt 4703
Sfmt 4703
published in the Federal Register on
May 7, 2021.4 The Exchange noted in
the Proposal that as it rolls out the
enhanced products, the fees for the replatformed products would be the same
as the fees for the corresponding legacy
products. Additionally, the Exchange
noted that after the first month of
service on each of the re-platformed
products, a customer will be expected to
fully migrate to the enhanced product
and will be charged for any fees
incurred for using the new products
thereafter. On January 31, 2022, the
Exchange increased the fees for the
enhanced products and continued to
offer the waiver for the first month of
service.5
Although the Exchange expected to
fully migrate customers within one
month from initiating migration, the
process has taken longer due to the
Exchange having to make additional
system updates that were needed to
support the enhanced products. As a
result, the Exchange continues to assist
its customers in migrating to the
enhanced products. To date, customers
continue to utilize the legacy products
and have not fully migrated over to the
enhanced products.6 To date, the
Exchange has only charged customers
for their use of the legacy products even
if the customer has access to both the
legacy and enhanced products. Due to
the Exchange’s delay in facilitating the
full migration, customers will not be
charged for utilizing the enhanced
products until the full migration process
is completed. The Exchange is now at a
point where it can facilitate customer
migration to the enhanced products.
Customers will be expected to
complete the migration process for all
enhanced products by November 30,
2023. For customers using both the
legacy and re-platformed products, fees
for the re-platformed product will be
waived for December 2023. The
Exchange will announce the migration
deadline of November 30, 2023 in an
Equity Trader Alert at least 30 days in
advance of the deadline. Any customer
who continue to utilize the legacy
products after the migration deadline
(i.e., December 1, 2023 or thereafter)
will be charged for both the legacy and
enhanced products until the Exchange
retires the legacy products. If a customer
4 See Securities Exchange Act Release No. 91744
(May 3, 2021), 86 FR 24685 (May 7, 2021)
(NASDAQ–2021–025) (‘‘Proposal’’).
5 See Securities Exchange Act Release No. 91744
(Jan. 31, 2022), 87 FR 9096 (Feb. 17, 2022)
(NASDAQ–2022–012).
6 Most customers have begun migrating to Nasdaq
WorkX and Real-Time Stats, and the Exchange
intends to start migrating customers to Post-Trade
Risk Management in the upcoming weeks.
E:\FR\FM\04OCN1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 191 (Wednesday, October 4, 2023)]
[Notices]
[Pages 68758-68760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21954]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98623; File No. SR-CboeBZX-2023-042]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade
Shares of the WisdomTree Bitcoin Trust Under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares
September 28, 2023.
On June 30, 2023, Cboe BZX Exchange, Inc. (``BZX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
list and trade shares (``Shares'') of the WisdomTree Bitcoin Trust
(``Trust'') under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares.
On July 11, 2023, the Exchange filed Amendment No. 1 to the proposed
rule change, which amended and replaced the proposed rule change in its
entirety. The proposed rule change, as modified by Amendment No. 1, 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. 97904 (July 13,
2023), 88 FR 46207 (``Notice''). Comments on the proposed rule
change, as modified by Amendment No. 1, are available at: https://www.sec.gov/comments/sr-cboebzx-2023-042/srcboebzx2023042.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, as modified by Amendment No. 1.\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, as modified
by Amendment No. 1.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 98264, 88 FR 61657
(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 Modified by Amendment No. 1
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 gain exposure to the
price of bitcoin, less expenses and liabilities of the Trust's
operations.\8\ The Trust's assets will consist of bitcoin held by the
Trust's custodian on behalf of the Trust.\9\ The Trust will value its
Shares daily based on the value of bitcoin as reflected by the CF
Bitcoin US Settlement Price (``Reference Rate'').\10\ The administrator
of the Trust will determine the net asset value (``NAV'') of the Trust
on each day that the Exchange is open for regular trading, as promptly
as practical after 4:00 p.m. ET.\11\ In determining the Trust's NAV,
the administrator will value the bitcoin held by the Trust based on the
price set by the Reference Rate as of 4:00 p.m. ET.\12\ When the Trust
sells or redeems its Shares, it will do so in ``in-kind'' transactions
with authorized participants in blocks of Shares.\13\
---------------------------------------------------------------------------
\8\ See id. at 46215. WisdomTree Digital Commodity Services, LLC
(``Sponsor'') is the sponsor of the Trust.
\9\ See id. The Trust generally does not intend to hold cash or
cash equivalents; however, there may be situations where the Trust
would unexpectedly hold cash on a temporary basis. See id.
\10\ See id.
\11\ See id. at 46216.
\12\ See id.
\13\ See id. at 46215.
---------------------------------------------------------------------------
II. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2023-042 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \14\ to determine whether the proposed rule
change should be approved or disapproved. Institution of proceedings is
appropriate at this time in view of the legal and policy issues raised
by the proposed rule change, as discussed below. Institution of
proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, as
described below, the Commission seeks and encourages interested persons
to provide comments on the proposed rule change.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\15\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act, which requires,
[[Page 68759]]
among other things, that the rules of a national securities exchange be
``designed to prevent fraudulent and manipulative acts and practices''
and ``to protect investors and the public interest.'' \16\
---------------------------------------------------------------------------
\15\ Id.
\16\ 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,\17\ 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? \18\ 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? \19\ 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? \20\
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\17\ See Notice, 88 FR at 46212-15.
\18\ See id. at 46213.
\19\ See id. at 46213-14.
\20\ See id. at 46214.
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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.\21\ 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.\22\ The Exchange also
states that offering only in-kind creations and redemptions provides
``unique protections against potential attempts to manipulate the price
of the Shares'' and that the price the Sponsor uses to value the
Trust's bitcoin ``is not particularly important.'' \23\ Do commenters
agree with the Exchange's statements regarding the bitcoin market's
resistance to price manipulation?
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\21\ See id. at 46213 n.49.
\22\ See id.
\23\ See id. at 46219.
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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.\24\ 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.'' \25\ 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
market manipulation in the Commodity-Based Trust Shares''? \26\
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\24\ See id. at 46214.
\25\ 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.
\26\ See id. at 46214.
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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.\27\ 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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\27\ 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.\28\
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\28\ 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-CboeBZX-2023-042 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.
[[Page 68760]]
All submissions should refer to file number SR-CboeBZX-2023-042. 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-CboeBZX-2023-042 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.\29\
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\29\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21954 Filed 10-3-23; 8:45 am]
BILLING CODE 8011-01-P
