Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade Shares of the Franklin Bitcoin ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, 84004-84006 [2023-26488]
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84004
Federal Register / Vol. 88, No. 230 / Friday, December 1, 2023 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 12 and paragraph (f) of Rule
19b–4 13 thereunder. 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 will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
lotter on DSK11XQN23PROD with NOTICES1
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–
CBOE–2023–061 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–CBOE–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
12 15
13 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
VerDate Sep<11>2014
18:47 Nov 30, 2023
Jkt 262001
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–CBOE–2023–061 and should be
submitted on or before December 22,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–26492 Filed 11–30–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99030; File No. SR–
CboeBZX–2023–072]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To List and Trade Shares
of the Franklin Bitcoin ETF Under BZX
Rule 14.11(e)(4), Commodity-Based
Trust Shares
November 28, 2023.
On September 26, 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 Franklin Bitcoin ETF
(‘‘Fund’’) under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares. The
proposed rule change was published for
comment in the Federal Register on
October 3, 2023.3
On November 15, 2023, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
14 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. 98562
(Sept. 27, 2023), 88 FR 68240 (‘‘Notice’’). The
Commission has received no comments on the
proposal.
4 15 U.S.C. 78s(b)(2).
1 15
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
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 Fund, a
series of the Franklin Templeton Digital
Holdings Trust (‘‘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 Fund
is to generally reflect the performance of
the price of bitcoin before payment of
the Fund’s expenses.8 The Fund’s assets
will consist of bitcoin held by the
Fund’s bitcoin custodian on behalf of
the Fund and cash holdings, if any, held
by the Fund’s cash custodian.9 The
Fund will value its Shares daily based
on the value of bitcoin as reflected by
the CME CF Bitcoin Reference Rate
(‘‘Reference Rate’’).10 The administrator
for the Fund will determine the net
asset value (‘‘NAV’’) of the Fund on
each day that the Exchange is open for
regular trading, as promptly as
practicable after 4:00 p.m. ET.11 In
determining the Fund’s NAV, the
administrator for the Fund will value
the bitcoin held by the Fund based on
the price set by the Reference Rate as of
4:00 p.m. ET.12 When the Fund sells or
redeems its Shares, it will do so in ‘‘inkind’’ transactions with authorized
participants in large blocks of Shares.13
5 See Securities Exchange Act Release No. 98945,
88 FR 81150 (Nov. 21, 2023). The Commission
designated January 1, 2024, 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 68250. Franklin Holdings, LLC
(‘‘Sponsor’’) is the sponsor of the Fund. See id. at
68241.
9 See id. at 68249. In seeking to achieve its
investment objective, the Fund will hold bitcoin
and may hold cash or cash equivalents. Coinbase
Custody Trust Company, LLC will be responsible
for custody of the Fund’s bitcoin holdings and Bank
of New York Mellon will be the custodian for the
Fund’s cash holdings, if any. See id. at 68241,
68250.
10 See id. at 68250.
11 See id. at 68251.
12 See id.
13 See id. at 68249–50, 68251.
E:\FR\FM\01DEN1.SGM
01DEN1
lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 230 / Friday, December 1, 2023 / Notices
II. Proceedings To Determine Whether
To Approve or Disapprove SR–
CboeBZX–2023–072 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,
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 Fund 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, Inc.
(‘‘CME’’), on which CME bitcoin futures
14 15
U.S.C. 78s(b)(2)(B).
15 Id.
16 15
U.S.C. 78f(b)(5).
Notice, 88 FR at 68246–48.
17 See
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18:47 Nov 30, 2023
Jkt 262001
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
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 Fund’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 Shares.’’ 25
18 See
id. at 68248.
id. at 68253.
20 See id.
21 See id. at 68248 n.52.
22 See id.
23 See id. at 68253.
24 See id. at 68249.
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
19 See
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
84005
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 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
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
utilize in surveillance of the trading of the Shares.’’
Id.
26 See id.
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).
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
E:\FR\FM\01DEN1.SGM
Continued
01DEN1
84006
Federal Register / Vol. 88, No. 230 / Friday, December 1, 2023 / Notices
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposed rule change should be
approved or disapproved by December
22, 2023. Any person who wishes to file
a rebuttal to any other person’s
submission must file that rebuttal by
January 5, 2024.
Comments may be submitted by any
of the following methods:
SR–CboeBZX–2023–072 and should be
submitted on or before December 22,
2023. Rebuttal comments should be
submitted by January 5, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–26488 Filed 11–30–23; 8:45 am]
BILLING CODE 8011–01–P
lotter on DSK11XQN23PROD with NOTICES1
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–2023–072 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–2023–072. 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
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
18:47 Nov 30, 2023
Jkt 262001
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–813, OMB Control No.
3235–0765]
Submission for OMB Review;
Comment Request; Extension: Rule
498A
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(‘‘Paperwork Reduction Act’’) (44 U.S.C.
3501–3520), the Securities and
Exchange Commission (the
‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for extension of the
previously approved collection of
information discussed below.
Rule 498A under the Securities Act
permits a person to satisfy its
prospectus delivery obligations under
section 5(b)(2) of the Securities Act for
a contract by: (1) sending or giving to
new investors key information
contained in a variable contract
statutory prospectus in the form of an
initial summary prospectus; (2) sending
or giving to existing investors each year
a brief description of certain changes to
the contract, and a subset of the
information in the initial summary
prospectus, in the form of an updating
summary prospectus; and (3) providing
the statutory prospectus and other
materials online. Rule 498A considers a
person to have met its prospectus
delivery obligations for any portfolio
companies associated with a variable
contract if the portfolio company
prospectuses are posted online. Under
the rule, a registrant (or the financial
intermediary distributing the variable
contract) relying on the rule must send
the variable contract statutory
prospectus (that statutory prospectus
must be filed as part of registration
statement on Form N–3, N–4, or N–6, as
29 17
PO 00000
applicable) and other materials to an
investor in paper or electronic format
upon request.
Based on an analysis of fund filings,
we estimate that 82% of variable
contracts that filed annual updates to
their registration statements use at least
one summary prospectus under rule
498A. In the aggregate, the Commission
staff estimates the total annual hour
burden to comply with rule 498A to be
7,634 hours, at an internal time cost
equivalent of $2,337,471, and a total
annual external cost burden of
$9,094,866.
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act. The estimate
is based on communications with
industry representatives, and is not
derived from a comprehensive or even
a representative survey or study.
Responses will not be kept
confidential. 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 OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice by January 2, 2024 to (i)
MBX.OMB.OIRA.SEC_desk_officer@
omb.eop.gov and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission, c/
o John Pezzullo, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: November 27, 2023.
Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023–26405 Filed 11–30–23; 8:45 am]
BILLING CODE 8011–01–P
CFR 200.30–3(a)(57).
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E:\FR\FM\01DEN1.SGM
01DEN1
]]>Agencies
[Federal Register Volume 88, Number 230 (Friday, December 1, 2023)]
[Notices]
[Pages 84004-84006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26488]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99030; File No. SR-CboeBZX-2023-072]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To List and Trade Shares of the Franklin Bitcoin
ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares
November 28, 2023.
On September 26, 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
Franklin Bitcoin ETF (``Fund'') under BZX Rule 14.11(e)(4), Commodity-
Based Trust Shares. The proposed rule change was published for comment
in the Federal Register on October 3, 2023.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 98562 (Sept. 27,
2023), 88 FR 68240 (``Notice''). The Commission has received no
comments on the proposal.
---------------------------------------------------------------------------
On November 15, 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. 98945, 88 FR 81150
(Nov. 21, 2023). The Commission designated January 1, 2024, 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 Fund, a series of the Franklin
Templeton Digital Holdings Trust (``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 Fund is to generally reflect the
performance of the price of bitcoin before payment of the Fund's
expenses.\8\ The Fund's assets will consist of bitcoin held by the
Fund's bitcoin custodian on behalf of the Fund and cash holdings, if
any, held by the Fund's cash custodian.\9\ The Fund will value its
Shares daily based on the value of bitcoin as reflected by the CME CF
Bitcoin Reference Rate (``Reference Rate'').\10\ The administrator for
the Fund will determine the net asset value (``NAV'') of the Fund on
each day that the Exchange is open for regular trading, as promptly as
practicable after 4:00 p.m. ET.\11\ In determining the Fund's NAV, the
administrator for the Fund will value the bitcoin held by the Fund
based on the price set by the Reference Rate as of 4:00 p.m. ET.\12\
When the Fund sells or redeems its Shares, it will do so in ``in-kind''
transactions with authorized participants in large blocks of
Shares.\13\
---------------------------------------------------------------------------
\8\ See id. at 68250. Franklin Holdings, LLC (``Sponsor'') is
the sponsor of the Fund. See id. at 68241.
\9\ See id. at 68249. In seeking to achieve its investment
objective, the Fund will hold bitcoin and may hold cash or cash
equivalents. Coinbase Custody Trust Company, LLC will be responsible
for custody of the Fund's bitcoin holdings and Bank of New York
Mellon will be the custodian for the Fund's cash holdings, if any.
See id. at 68241, 68250.
\10\ See id. at 68250.
\11\ See id. at 68251.
\12\ See id.
\13\ See id. at 68249-50, 68251.
---------------------------------------------------------------------------
[[Page 84005]]
II. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2023-072 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, 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 Fund 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, Inc. (``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 68246-48.
\18\ See id. at 68248.
\19\ See id. at 68253.
\20\ See id.
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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 Fund'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 68248 n.52.
\22\ See id.
\23\ See id. at 68253.
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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
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 Shares''? \26\
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\24\ See id. at 68249.
\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
the Shares.'' Id.
\26\ 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.\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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[[Page 84006]]
Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by December 22, 2023. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
January 5, 2024.
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-2023-072 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-2023-072. 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-2023-072 and should
be submitted on or before December 22, 2023. Rebuttal comments should
be submitted by January 5, 2024.
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. 2023-26488 Filed 11-30-23; 8:45 am]
BILLING CODE 8011-01-P
