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 Invesco Galaxy Bitcoin ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, 68849-68851 [2023-21968]
Download as PDF
<![CDATA[
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
investors with desirable products with
which to trade. Furthermore, as stated
above, the Exchange maintains that it
has not experienced any adverse market
effects or regulatory concerns with
respect to the Pilot Programs. The
Exchange further does not believe that
the proposed extension of the Pilot
Programs will impose any burden on
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act because it
only applies to trading on EDGX
Options. To the extent that the
continued trading of the Pilot Products
may make EDGX Options a more
attractive marketplace to market
participants at other exchanges, such
market participants may elect to become
EDGX Options market participants.
IV. Solicitation of Comments
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
The Exchange neither solicited nor
received comments on the proposed
rule change.
All submissions should refer to file
number SR–CboeEDGX–2023–061. 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–CboeEDGX–2023–061 and should be
submitted on or before October 25,
2023.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not: (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 16 and
subparagraph (f)(6) of Rule 19b–4
thereunder.17 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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
lotter on DSK11XQN23PROD with NOTICES1
16 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description 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.
17 17
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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:
• 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–
CboeEDGX–2023–061 on the subject
line.
Paper Comments
Frm 00291
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21960 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
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68849
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[Release No. 34–98613; File No. SR–
CboeBZX–2023–038]
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 Invesco Galaxy Bitcoin
ETF 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 Invesco Galaxy Bitcoin
ETF (‘‘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
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 97900
(July 13, 2023), 88 FR 46235 (‘‘Notice’’). Comments
on the proposed rule change are available at:
https://www.sec.gov/comments/sr-cboebzx-2023038/srcboebzx2023038.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 98266,
88 FR 61658 (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.
1 15
E:\FR\FM\04OCN1.SGM
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68850
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
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
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 reflect the performance of the
Bloomberg Galaxy Bitcoin Index
(‘‘Index’’), less the Trust’s expenses and
other liabilities.8 In seeking to achieve
its investment objective, the Trust will
hold bitcoin.9 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.10 In determining the Trust’s NAV,
the administrator will value the bitcoin
held by the Trust based on the price set
by the Index as of 4:00 p.m. ET.11 When
the Trust sells or redeems its Shares, it
will do so in ‘‘in-kind’’ transactions
with authorized participants in large
blocks of Shares.12
II. Proceedings To Determine Whether
To Approve or Disapprove SR–
CboeBZX–2023–038 and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 13 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,14 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
6 15
U.S.C. 78s(b)(2)(B).
Notice, supra note 3.
8 See id. at 46244. Invesco Capital Management
LLC (‘‘Sponsor’’) is the sponsor of the Trust.
9 See id.
10 See id. at 46245.
11 See id.
12 See id. at 46244.
13 15 U.S.C. 78s(b)(2)(B).
14 Id.
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7 See
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20:21 Oct 03, 2023
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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.’’ 15
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,16 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? 17
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? 18 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? 19
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.20 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
15 15
U.S.C. 78f(b)(5).
Notice, 88 FR at 46240–43.
17 See id. at 46242.
18 See id. at 46242–43.
19 See id. at 46243.
20 See id. at 46242 n.49.
16 See
PO 00000
Frm 00292
Fmt 4703
Sfmt 4703
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.21 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.’’ 22 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.23 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.’’ 24
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’’? 25
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.26 What are commenters’ views
21 See
id.
id. at 46243.
23 See id.
24 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.
25 See id.
26 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
22 See
E:\FR\FM\04OCN1.SGM
04OCN1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
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.27
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–2023–038 on the subject line.
lotter on DSK11XQN23PROD with NOTICES1
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
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).
27 Section 19(b)(2) of the Act, as amended by the
Securities Acts Amendments of 1975, Pub. L. 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
All submissions should refer to file
number SR–CboeBZX–2023–038. 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–2023–038 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.28
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21968 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–457, OMB Control No.
3235–0518]
Proposed Collection; Comment
Request; Extension: Form CB, Tender
Offer/Rights Offering Notification Form
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
68851
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Form CB (17 CFR 239.800) is a
Document filed in connection with a
tender offer for a foreign private issuer.
This form is used to report an issuer
tender offer conducted in compliance
with Exchange Act Rule 13e–4(h)(8) (17
CFR 240.13e–4(h)(8)) and a third-party
tender offer conducted in compliance
with Exchange Act Rule 14d–1(c) (17
CFR 240.14d–1(c)). Form CB takes
approximately 0.5 hours per response to
prepare and is filed by approximately 58
respondents annually. We estimate that
25% of the 0.5 hours per response
(0.125 hours) is prepared by the
respondent for an annual reporting
burden of 7 hours (0.125 hours per
response × 58 responses).
Written comments are invited on: (a)
whether this proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden imposed by the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication by December 4, 2023.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
Please direct your written comment to
David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: September 28, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21926 Filed 10–3–23; 8:45 am]
28 17
PO 00000
CFR 200.30–3(a)(57).
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BILLING CODE 8011–01–P
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]]>Agencies
[Federal Register Volume 88, Number 191 (Wednesday, October 4, 2023)]
[Notices]
[Pages 68849-68851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21968]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98613; File No. SR-CboeBZX-2023-038]
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 Invesco Galaxy Bitcoin ETF 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 Invesco Galaxy Bitcoin ETF
(``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. 97900 (July 13,
2023), 88 FR 46235 (``Notice''). Comments on the proposed rule
change are available at: https://www.sec.gov/comments/sr-cboebzx-2023-038/srcboebzx2023038.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
[[Page 68850]]
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. 98266, 88 FR 61658
(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 reflect the performance
of the Bloomberg Galaxy Bitcoin Index (``Index''), less the Trust's
expenses and other liabilities.\8\ In seeking to achieve its investment
objective, the Trust will hold bitcoin.\9\ 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.\10\ In determining the Trust's NAV, the
administrator will value the bitcoin held by the Trust based on the
price set by the Index as of 4:00 p.m. ET.\11\ When the Trust sells or
redeems its Shares, it will do so in ``in-kind'' transactions with
authorized participants in large blocks of Shares.\12\
---------------------------------------------------------------------------
\8\ See id. at 46244. Invesco Capital Management LLC
(``Sponsor'') is the sponsor of the Trust.
\9\ See id.
\10\ See id. at 46245.
\11\ See id.
\12\ See id. at 46244.
---------------------------------------------------------------------------
II. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2023-038 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \13\ 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.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\14\ 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.'' \15\
---------------------------------------------------------------------------
\14\ Id.
\15\ 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,\16\ 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? \17\ 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? \18\ 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? \19\
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\16\ See Notice, 88 FR at 46240-43.
\17\ See id. at 46242.
\18\ See id. at 46242-43.
\19\ See id. at 46243.
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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.\20\ 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.\21\ 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.'' \22\ Do commenters
agree with the Exchange's statements regarding the bitcoin market's
resistance to price manipulation?
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\20\ See id. at 46242 n.49.
\21\ See id.
\22\ See id. at 46243.
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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.\23\ 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.'' \24\ 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''? \25\
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\23\ See id.
\24\ 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.
\25\ 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.\26\ What are
commenters' views
[[Page 68851]]
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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\26\ 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.\27\
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\27\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Pub. L. 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-2023-038 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-CboeBZX-2023-038. 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-2023-038 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.\28\
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\28\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21968 Filed 10-3-23; 8:45 am]
BILLING CODE 8011-01-P
