Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the Bitwise Ethereum ETF, 24509-24519 [2024-07335]
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Federal Register / Vol. 89, No. 68 / Monday, April 8, 2024 / Notices
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s website (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3011.301.1
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern Market Dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3030, and 39
CFR part 3040, subpart B. For request(s)
that the Postal Service states concern
Competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3035, and
39 CFR part 3040, subpart B. Comment
deadline(s) for each request appear in
section II.
II. Docketed Proceeding(s)
1. Docket No(s).: MC2024–219 and
CP2024–225; Filing Title: USPS Request
to Add Priority Mail Express, Priority
Mail & USPS Ground Advantage
Contract 53 to Competitive Product List
and Notice of Filing Materials Under
Seal; Filing Acceptance Date: April 2,
2024; Filing Authority: 39 U.S.C. 3642,
39 CFR 3040.130 through 3040.135, and
39 CFR 3035.105; Public Representative:
Christopher C. Mohr; Comments Due:
April 10, 2024.
This Notice will be published in the
Federal Register.
Erica A. Barker,
Secretary.
[FR Doc. 2024–07382 Filed 4–5–24; 8:45 am]
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March
28, 2024, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade shares of the Bitwise Ethereum
ETF (the ‘‘Trust’’) under NYSE Arca
Rule 8.201–E (Commodity-Based Trust
Shares). The proposed rule change is
available on the Exchange’s website at
www.nyse.com, 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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade shares (‘‘Shares’’) of the Trust 4
pursuant to NYSE Arca Rule 8.201–E,
which governs the listing and trading of
Commodity Based Trust Shares.5
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99889; File No. SR–
NYSEARCA–2024–31]
2 15
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To List and Trade Shares
of the Bitwise Ethereum ETF
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April 2, 2024.
Pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934
1 See Docket No. RM2018–3, Order Adopting
Final Rules Relating to Non-Public Information,
June 27, 2018, Attachment A at 19–22 (Order No.
4679).
1 15 U.S.C. 78s(b)(1).
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U.S.C. 78a.
CFR 240.19b–4.
4 The Trust is a Delaware statutory trust. On
March 28, 2024, the Trust filed with the
Commission an initial registration statement (the
‘‘Registration Statement’’) on Form S–1 under the
Securities Act of 1933 (15 U.S. C. 77a). The
description of the operation of the Trust herein is
based, in part, on the most recent Registration
Statement. The Registration Statement is not yet
effective, and the Shares will not trade on the
Exchange until such time that the Registration
Statement is effective.
5 Commodity-Based Trust Shares are securities
issued by a trust that represents investors’ discrete
identifiable and undivided beneficial ownership
interest in the commodities deposited into the trust.
3 17
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24509
According to the Registration
Statement, the Trust will not be
registered as an investment company
under the Investment Company Act of
1940,6 and is not required to register
thereunder. The Trust is not a
commodity pool for purposes of the
Commodity Exchange Act.7
The Exchange represents that the
Shares satisfy the requirements of NYSE
Arca Rule 8.201–E and thereby qualify
for listing on the Exchange.8
Operation of the Trust 9
The Trust will issue the Shares
which, according to the Registration
Statement, represent units of undivided
beneficial ownership of the Trust. The
Trust is a Delaware statutory trust and
will operate pursuant to a trust
agreement (the ‘‘Trust Agreement’’)
between Bitwise Investment Advisers,
LLC (the ‘‘Sponsor’’ or ‘‘Bitwise’’) and
Delaware Trust Company, as the Trust’s
trustee (the ‘‘Trustee’’). Coinbase
Custody Trust Company, LLC will
maintain custody of the Trust’s ether
(the ‘‘Ether Custodian’’). Bank of New
York Mellon will be the custodian for
the Trust’s cash holdings (in such role,
the ‘‘Cash Custodian’’), the
administrator of the Trust (in such role,
the ‘‘Administrator’’), and the transfer
agent for the Trust (in such role, the
‘‘Transfer Agent’’).
According to the Registration
Statement, the investment objective of
the Trust is to seek to provide exposure
to the value of ether held by the Trust,
less the expenses of the Trust’s
operations. In seeking to achieve its
investment objective, the Trust will
hold ether and establish its Net Asset
Value (‘‘NAV’’) at the end of every
business day by reference to the CME
CF Ether Reference Rate—New York
Variant (the ‘‘Pricing Index’’).10
6 15
U.S.C. 80a–1.
U.S.C. 1.
8 With respect to the application of Rule 10A–3
(17 CFR 240.10A–3) under the act, the trust relies
on the exemption contained in Rule 10A–3(c)(7).
9 The description of the operation of the Trust,
the Shares, and the ether market contained herein
is based, in part, on the Registration Statement. See
note 4, supra.
10 The Pricing Index is designed to provide a
daily, 4:00 p.m. New York time reference rate of the
U.S. dollar price of one ether that may be used to
develop financial products. The Pricing Index uses
the same methodology as the CME CF Ether
Reference Rate (‘‘ERR’’), which was designed by the
CME Group and CF Benchmarks Ltd. (the
‘‘Benchmark Provider’’) to facilitate the cash
settlement of ether futures contracts traded on the
Chicago Mercantile Exchange (‘‘CME’’). The only
material difference between the Pricing Index and
ERR is that the ERR measures the U.S. dollar price
of one ether as 9f 4:00 p.m. Eastern time (‘‘E.T.’’).
The CME Group also publishes the CME CF Ether
Real Time Index (the ‘‘CME Ether Real Time
7 17
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The Trust’s only assets will be ether
and cash.11 The Trust does not seek to
hold any non-ether crypto assets and
has expressly disclaimed ownership of
any such assets in the event the Trust
ever involuntarily comes into
possession of such assets.12 The Trust
will not use derivatives that may subject
the Trust to counterparty and credit
risks. The Trust will process creations
and redemptions in cash. The Trust’s
only recurring ordinary expense is
expected to be the Sponsor’s unitary
management fee (the ‘‘Sponsor Fee’’),
which will accrue daily and will be
payable in ether monthly in arrears. The
Administrator will calculate the
Sponsor Fee on a daily basis by
applying an annualized rate to the
Trust’s total ether holdings, and the
amount of ether payable in respect of
each daily accrual shall be determined
by reference to the Pricing Index.
Financial institutions authorized to
create and redeem Shares (each, an
‘‘Authorized Participant’’) will deliver,
or cause to be delivered, cash in
exchange for Shares of the Trust, and
the Trust will deliver cash to
Authorized Participants when those
Authorized Participants redeem Shares
of the Trust.
Price’’), which is a continuous measure of the U.S.
dollar price of one ether calculated once per
second.
11 The Trust conducts creations and redemptions
of its Shares for cash. Authorized Participants will
deliver cash to the cash Custodian pursuant to
creation orders for Shares and the Cash Custodian
will hold such cash until such time as it can be
converted to ether, which the Trust intends to do
on the same business day in which such cash is
received by the Cash Custodian. Additionally, the
trust will sell ether in exchange for cash pursuant
to redemption orders of its Shares. In connection
with such sales, and approved Ether Trading
Counterparty (defined below) will send cash to the
Cash Custodian. The Cash custodian will hold such
cash until it can be distributed to the redeeming
Authorized Participant, which it intends to do on
the same business day in which it is received. In
connection with the purchases and sales of ether
pursuant to its creation and redemption activity, it
is possible that the Trust may retain de minimis
amounts of cash as a result of rounding differences.
The trust may also initially hold small amounts of
cash to initiate Trust operations in the immediate
aftermath of its Registration Statement being
declared effective. Lastly, the Trust may also sell
ether and temporarily hold cash as part of a
liquidation of the trust or to pay certain
extraordinary expenses not assumed by the
Sponsor. Under the Trust Agreement, the sponsor
has agreed to assume the normal operating expenses
of the Trust, subject to certain limitations. For
example, the Trust will bear any indemnification or
litigation liabilities as extraordinary expenses. In
any event, in the ongoing course of business, the
amounts of cash retained by the Trust are not
expected to constitute a material portion of the
Trust’s holdings.
12 The Trust may, from time to time, passively
receive, by virtue of holding ether, certain
additional digital assets (‘‘IR Assets’’) or rights to
receive IR Assets (‘‘Incidental Rights’’) through a
fork of the Ethereum network or an airdrop of
assets. The Trust will not seek to acquire such IR
Assets or Incidental Rights. Pursuant to the terms
of the Trust Agreement, the trust has disclaimed
ownership in any such IR Assets and/or Incidental
Rights to make clear that such assets are not and
shall never be considered assets of the Trust and
will not be taken into account for purposes of
determining the trust’s NAV or NAV per Share.
The net assets of the Trust and its
Shares are valued on a daily basis with
reference to the Pricing Index, a
standardized reference rate published
by CF Benchmarks Ltd. (the
‘‘Benchmark Provider’’) that is designed
to reflect the performance of ether in
U.S. dollars. The Pricing Index was
created to facilitate financial products
based on ether. It serves as a once-a-day
benchmark rate of the U.S. dollar price
of ether (USD/ETH), calculated as of
4:00 p.m. ET. The Pricing Index
aggregates the trade flow of several
major ether trading venues, during an
observation window between 3:00 p.m.
and 4:00 p.m. ET into the U.S. dollar
price of one ether at 4:00 p.m. ET. The
Pricing Index currently uses
substantially the same methodology as
the ERR, including utilizing the same
constituent ether exchanges, which is
the underlying rate to determine
settlement of CME ether futures
contracts, except that the Pricing Index
is calculated as of 4:00 p.m. ET, whereas
the ERR is calculated as of 4:00 p.m.
London time. The Pricing Index, which
was introduced on February 28, 2022, is
based on materially the same
methodology (except calculation time)
as the ERR, which was first introduced
on June 4, 2018. The CME Group also
publishes the CME CF Ether Real Time
Index (the ‘‘CME Ether Real Time
Price’’), which is a continuous measure
of the U.S. dollar price of one ether
calculated once per second. Each of the
Pricing Index, ERR, and the CME Ether
Real Time Price are representative of the
ether trading activity on the Constituent
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Custody of the Trust’s Ether
The Trust’s Ether Custodian will
maintain custody of all of the Trust’s
ether, other than that which is
maintained in a trading account (the
‘‘Trading Balance’’) with Coinbase, Inc.
(the ‘‘Prime Execution Agent,’’ which is
an affiliate of the Ether Custodian), in
the Trust Ether Account. The Trading
Balance will only be used in the limited
circumstances in which the Trust is
using the Agent Execution Model to
effectuate the purchases and sales of
ether. The Ether Custodian provides
safekeeping of ether using a multi-layer
cold storage security platform designed
to provide offline security of the ether
held by the Ether Custodian.
Valuation of the Trust’s Ether
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Platforms,13 which include, as of the
date of this filing, Bitstamp, Coinbase,
Gemini, itBit, LMAX, and Kraken.
The Pricing Index is designed based
on the IOSCO Principals for Financial
Benchmarks. The Trust uses the Pricing
Index to calculate its NAV, which is the
aggregate U.S. dollar value of ether in
the Trust, based on the Pricing Index,
less its liabilities and expenses. ‘‘NAV
per Share’’ is calculated by dividing
NAV by the number of Shares currently
outstanding.
The Sponsor, in its sole discretion,
may cause the Trust to price its portfolio
based upon an index, benchmark, or
standard other than the Pricing Index at
any time, with prior notice to the
shareholders, if investment conditions
change or the Sponsor believes that
another index, benchmark, or standard
better aligns with the Trust’s investment
objective and strategy. The Sponsor may
make this decision for a number of
reasons, including, but not limited to, a
determination that the Pricing Index
price of ether differs materially from the
global market price of ether and/or that
third parties are able to purchase and
sell ether on public or private markets
not included among the Constituent
Platforms, and such transactions may
take place at prices materially higher or
lower than the Pricing Index price. The
Sponsor, however, is under no
obligation whatsoever to make such
changes in any circumstance. In the
event that the Sponsor intends to
establish the Trust’s NAV by reference
to an index, benchmark, or standard
other than the Pricing Index, it will
provide shareholders with notice in a
prospectus supplement and/or through
a current report on Form 8–K or in the
Trust’s annual or quarterly reports.
Net Asset Value
Under normal circumstances, the
Trust’s only asset will be ether and,
under limited circumstances, cash. The
Trust’s NAV and NAV per Share will be
determined by the Administrator once
each Exchange trading day as of 4:00
p.m. E.T., or as soon thereafter as
practicable. The Administrator will
calculate the NAV by multiplying the
number of ether held by the Trust by the
Pricing Index for such day, adding any
additional receivables and subtracting
the accrued but unpaid liabilities of the
Trust. The NAV per Share is calculated
by dividing the NAV by the number of
Shares then outstanding. The
Administrator will determine the price
of the Trust’s ether by reference to the
13 The ‘‘Constituent Platforms’’ are the ether
trading venues included in the Pricing Index.
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Pricing Index, which is published and
calculated as set forth above.
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Intraday Trust Value
The Trust uses the CME Ether Real
Time Price to calculate an Indicative
Trust Value (‘‘ITV’’). One or more major
market data vendors will disseminate
the ITV, updated every 15 seconds each
trading day as calculated by the
Exchange or a third-party financial data
provider during the Exchange’s Core
Trading Session (9:30 a.m. to 4:00 p.m.,
E.T.). The ITV will be calculated
throughout the trading day by using the
prior day’s holdings at the close of
business and the most recently reported
price level of the CME Ether Real Time
Price as reported by Bloomberg, L.P. or
another reporting service. The ITV will
be widely disseminated by one or more
major market data vendors during the
NYSE Arca Core Trading Session.
Creation and Redemption of Shares
The Trust creates and redeems Shares
from time to time, but only in one or
more Creation Units, which will
initially consist of at least 10,000
Shares, but may be subject to change
(‘‘Creation Unit’’). A Creation Unit is
only made in exchange for delivery to
the Trust or the distribution by the Trust
of an amount of cash, equivalent to the
amount of ether represented by the
Creation Unit being created or
redeemed, the amount of which is
representative of the combined NAV of
the number of Shares included in the
Creation Units being created or
redeemed determined as of 4:00 p.m.
E.T. on the day the order to create or
redeem Creation Units is properly
received. Except when aggregated in
Creation Units or under extraordinary
circumstances permitted under the
Trust Agreement, the Shares are not
redeemable securities.
Authorized Participants are the only
persons that may place orders to create
and redeem Creation Units. Authorized
Participants must be (1) registered
broker-dealers or other securities market
participants, such as banks and other
financial institutions, that are not
required to register as broker-dealers to
engage in securities transactions
described below, and (2) Depository
Trust Company (‘‘DTC’’) participants.
To become an Authorized Participant, a
person must enter into an Authorized
Participant Agreement with the Trust
and/or the Trust’s marketing agent (the
‘‘Marketing Agent’’).
According to the Registration
Statement, when purchasing or selling
ether in response to the purchase of
Creation Units or the redemption of
Creation Units, which will be processed
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in cash, the Trust would do so pursuant
to either (1) a ‘‘Trust-Directed Trade
Model,’’ or (2) an ‘‘Agent Execution
Model,’’ which are each described in
more detail below.
The Trust intends to utilize the TrustDirected Trade Model for all purchases
and sales of ether and would only
utilize the Agent Execution Model in
the event that no ether trading
counterparty approved by the Sponsor
(an ‘‘Ether Trading Counterparty’’) 14 is
able to effectuate the Trust’s purchase or
sale of ether. Under the Trust-Directed
Trade Model, in connection with receipt
of a purchase order or redemption order,
the Sponsor, on behalf of the Trust,
would be responsible for acquiring ether
from an approved Ether Trading
Counterparty in an amount equal to the
Basket Amount. When seeking to
purchase ether on behalf of the Trust,
the Sponsor will seek to purchase ether
at commercially reasonable price and
terms from any of the approved Ether
Trading Counterparties.15 Once agreed
upon, the transaction will generally
occur on an ‘‘over-the-counter’’ basis.
Whether utilizing the Trust-Directed
Trade Model or the Agent Execution
Model, the Authorized Participants will
deliver only cash to create shares and
will receive only cash when redeeming
Shares. Further, Authorized Participants
will not directly or indirectly purchase,
hold, deliver, or receive ether as part of
the creation or redemption process or
otherwise direct the Trust or a third
party with respect to purchasing,
holding, delivering, or receiving ether as
part of the creation or redemption
process. Additionally, under either the
Trust-Directed Trade Model or the
Agent Execution Model, the Trust will
create Shares by receiving ether from a
third party that is not the Authorized
Participant and is not affiliated with the
Sponsor or the Trust, and the Trust—not
the Authorized Participant—is
responsible for selecting the third party
to deliver the ether. The third party will
not be acting as an agent of the
Authorized Participant with respect to
the delivery of the ether to the Trust or
14 The Ether Trading Counterparties with which
the Sponsor will engage in ether transactions are
unaffiliated third-parties that are not acting as
agents of the Trust, the Sponsor or the Authorized
Participant, and all transactions will be done on an
arms-length basis. There is no countractual
relationship between the Trust, the sponsor or the
Ether Trading Counterparty. When seeking to sell
ether on behalf of the Trust, the Sponsor will seek
to sell ether at commercially reasonable price and
terms to any of the spproved Ether Trading
Counterparties. Once agreed upon, the transaction
will generally occur on an ‘‘over-the-counter’’ basis.
15 The Sponsor will maintain ownership and
control of ether in a manner consistent with good
delivery requirements for spot commodity
transactions.
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acting at the direction of the Authorized
Participant with respect to the delivery
of the ether to the Trust. Additionally,
the Trust will redeem Shares by
delivering ether to a third party that is
not the Authorized Participant and is
not affiliated with the Sponsor or the
Trust, and the Trust—not the
Authorized Participant—is responsible
for selecting the third party to receive
the ether. Finally, the third party will
not be acting as an agent of the
Authorized Participant with respect to
the receipt of the ether from the Trust
or acting at the direction of the
Authorized Participant with respect to
the receipt of the ether from the Trust.
Acquiring and Selling Ether Pursuant to
Creation and Redemption of Shares
Under the Trust-Directed Trade Model
Under the Trust-Directed Trade
Model and as set forth in the
Registration Statement, on any business
day, an Authorized Participant may
create Shares by placing an order to
purchase one or more Creation Units
with the Transfer Agent through the
Marketing Agent. Such orders are
subject to approval by the Marketing
Agent and the Transfer Agent. For
purposes of processing creation and
redemption orders, a ‘‘business day’’
means any day other than a day when
the Exchange is closed for regular
trading (‘‘Business Day’’). To be
processed on the date submitted,
creation orders must be placed before
4:00 p.m. E.T. or the close of regular
trading on the Exchange, whichever is
earlier, but may be required to be placed
earlier at the discretion of the Sponsor.
A purchase order will be effective on
the date it is received by the Transfer
Agent and approved by the Marketing
Agent (‘‘Purchase Order Date’’).
Creation Units are processed in cash.
By placing a purchase order, an
Authorized Participant agrees to
deposit, or cause to be deposited, an
amount of cash equal to the quantity of
ether attributable to each Share of the
Trust (net of accrued but unpaid
expenses and liabilities) multiplied by
the number of Shares (10,000)
comprising a Creation Unit (the ‘‘Basket
Amount’’). The Sponsor will cause to be
published each Business Day, prior to
the commencement of trading on the
Exchange, the Basket Amount relating to
a Creation Unit applicable for such
Business Day. That amount is derived
by multiplying the Basket Amount by
the value of ether ascribed by the
Pricing Index. However, the Authorized
Participant is also responsible for any
additional cash required to account for
the price at which the Trust agrees to
purchase the requisite amount of ether
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from an Ether Trading Counterparty to
the extent it is greater than the Pricing
Index price on each Purchase Order
Date.
Prior to the delivery of Creation Units,
the Authorized Participant must also
have wired to the Transfer Agent the
nonrefundable transaction fee due for
the creation order. Authorized
Participants may not withdraw a
creation request. If an Authorized
Participant fails to consummate the
foregoing, the order may be cancelled.
Following the acceptance of a
purchase order, the Authorized
Participant must wire the cash amount
described above to the Cash Custodian,
and the Ether Trading Counterparty
must deposit the required amount of
ether with the Ether Custodian by the
end of the day E.T. on the Business Day
following the Purchase Order Date. The
ether will be purchased from Ether
Trading Counterparties that are not
acting as agents of the Trust or agents of
the Authorized Participant. These
transactions will be done on an armslength basis, and there is no contractual
relationship between the Trust, the
Sponsor, or the Ether Trading
Counterparty to acquire such ether.
Prior to any movement of cash from the
Cash Custodian to the Ether Trading
Counterparty or movement of Shares
from the Transfer Agent to the
Authorized Participant’s DTC account to
settle the transaction, the ether must be
deposited at the Ether Custodian.
The Ether Trading Counterparty must
deposit the required amount of ether by
end of day E.T. on the Business Day
following the Purchase Order Date prior
to any movement of cash from the Cash
Custodian or Shares from the Transfer
Agent. Upon receipt of the deposit
amount of ether at the Ether Custodian
from the Ether Trading Counterparty,
the Ether Custodian will notify the
Sponsor that the ether has been
received. The Sponsor will then notify
the Transfer Agent that the ether has
been received, and the Transfer Agent
will direct DTC to credit the number of
Shares ordered to the Authorized
Participant’s DTC account and will wire
the cash previously sent by the
Authorized Participant to the Ether
Trading Counterparty to complete
settlement of the Purchase Order and
the acquisition of the ether by the Trust,
as described above.
As between the Trust and the
Authorized Participant, the expense and
risk of the difference between the value
of ether calculated by the Administrator
for daily valuation using the Pricing
Index and the price at which the Trust
acquires the ether will be borne solely
by the Authorized Participant to the
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extent that the Trust pays more for ether
than the price used by the Trust for
daily valuation. Any such additional
cash amount will be included in the
amount of cash calculated by the
Administrator on the Purchase Order
Date, communicated to the Authorized
Participant on the Purchase Order Date,
and wired by the Authorized Participant
to the Cash Custodian on the day
following the Purchase Order Date. If
the Ether Trading Counterparty fails to
deliver the ether to the Ether Custodian,
no cash is sent from the Cash Custodian
to the Ether Trading Counterparty, no
Shares are transferred to the Authorized
Participant’s DTC account, the cash is
returned to the Authorized Participant,
and the Purchase Order is cancelled.
Under the Trust-Directed Trade
Model and according to the Registration
Statement, the procedures by which an
Authorized Participant can redeem one
or more Creation Units mirror the
procedures for the creation of Creation
Units. On any Business Day, an
Authorized Participant may place an
order with the Transfer Agent through
the Marketing Agent to redeem one or
more Creation Units. To be processed on
the date submitted, redemption orders
must be placed before 4:00 p.m. E.T. or
the close of regular trading on the
Exchange, whichever is earlier, or
earlier as determined by the Sponsor. A
redemption order will be effective on
the date it is received by the Transfer
Agent and approved by the Marketing
Agent (‘‘Redemption Order Date’’). The
redemption procedures allow
Authorized Participants to redeem
Creation Units and do not entitle an
individual shareholder to redeem any
Shares in an amount less than a
Creation Unit, or to redeem Creation
Units other than through an Authorized
Participant. In connection with receipt
of a redemption order accepted by the
Marketing Agent and Transfer Agent,
the Sponsor, on behalf of the Trust, is
responsible for selling the ether to an
approved Ether Trading Counterparty in
an amount equal to the Basket Amount.
The redemption distribution from the
Trust will consist of a transfer to the
redeeming Authorized Participant, or its
agent, of the amount of cash the Trust
received in connection with a sale of the
Basket Amount of ether to an Ether
Trading Counterparty made pursuant to
the redemption order. The Sponsor will
cause to be published each Business
Day, prior to the commencement of
trading on the Exchange, the
redemption distribution amount relating
to a Creation Unit applicable for such
Business Day. The redemption
distribution amount is derived by
multiplying the Basket Amount by the
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Sfmt 4703
value of ether ascribed by the Pricing
Index. However, as between the Trust
and the Authorized Participant, the
expense and risk of the difference
between the value of ether ascribed by
the Pricing Index and the price at which
the Trust sells the ether will be borne
solely by the Authorized Participant to
the extent that the Trust receives less for
ether than the value ascribed by Pricing
Index.
Prior to the delivery of Creation Units,
the Authorized Participant must also
have wired to the Transfer Agent the
nonrefundable transaction fee due for
the redemption order.
The redemption distribution due from
the Trust will be delivered by the
Transfer Agent to the Authorized
Participant once the Cash Custodian has
received the cash from the Ether
Trading Counterparty. The Ether
Custodian will not send the Basket
Amount of ether to the Ether Trading
Counterparty until the Cash Custodian
has received the cash from the Ether
Trading Counterparty and is instructed
by the Sponsor to make such transfer.
Once the Ether Trading Counterparty
has sent the cash to the Cash Custodian
in an agreed upon amount to settle the
agreed upon sale of the Basket Amount
of ether, the Transfer Agent will notify
Sponsor. The Sponsor will then notify
the Ether Custodian to transfer the ether
to the Ether Trading Counterparty, and
the Transfer Agent will wire the ether
proceeds to the Authorized Participant
once the Trust’s DTC account has been
credited with the Shares represented by
the Creation Unit from the redeeming
Authorized Participant. Once the
Authorized Participant has delivered
the Shares represented by the Creation
Unit to be redeemed to the Trust’s DTC
account, the Cash Custodian will wire
the requisite amount of cash to the
Authorized Participant. If the Trust’s
DTC account has not been credited with
all of the Shares of the Creation Unit to
be redeemed, the redemption
distribution will be delayed until such
time as the Transfer Agent confirms
receipt of all such Shares. If the Ether
Trading Counterparty fails to deliver the
cash to the Cash Custodian, the
transaction will be cancelled, and no
transfer of ether or Shares will occur.
Acquiring and Selling Ether Pursuant to
Creation and Redemption of Shares
Under the Agent Execution Model
Under the Agent Execution Model,
Coinbase, Inc. (‘‘Coinbase Inc.’’ or the
‘‘Prime Execution Agent,’’ an affiliate of
the Ether Custodian), acting in an
agency capacity, would conduct ether
purchases and sales on behalf of the
Trust with third parties through its
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Coinbase Prime service pursuant to the
Prime Execution Agent Agreement. To
utilize the Agent Execution Model, the
Trust may maintain some ether or cash
in a trading account (the ‘‘Trading
Balance’’) with the Prime Execution
Agent. The Prime Execution Agent
Agreement provides that the Trust does
not have an identifiable claim to any
particular ether (and cash); rather, the
Trust’s Trading Balance represents an
entitlement to a pro rata share of the
ether (and cash) the Prime Execution
Agent holds on behalf of customers who
hold similar entitlements against the
Prime Execution Agent. In this way, the
Trust’s Trading Balance represents an
omnibus claim on the Prime Execution
Agent’s ether (and cash) held on behalf
of the Prime Execution Agent’s
customers.
To avoid having to pre-fund
purchases or sales of ether in
connection with cash creations and
redemptions and sales of ether to pay
Trust expenses not assumed by the
Sponsor, to the extent applicable, the
Trust may borrow ether or cash as trade
credit (‘‘Trade Credit’’) from Coinbase
Credit, Inc. (the ‘‘Trade Credit Lender’’)
on a short-term basis pursuant to the
Coinbase Credit Committed Trade
Financing Agreement (the ‘‘Trade
Financing Agreement’’).
On the day of the Purchase Order
Date, the Trust would enter into a
transaction to buy ether through the
Prime Execution Agent for cash.
Because the Trust’s Trading Balance
may not be funded with cash on the
Purchase Order Date for the purchase of
ether in connection with the Purchase
Order under the Agent Execution
Model, the Trust may borrow Trade
Credits in the form of cash from the
Trade Credit Lender pursuant to the
Trade Financing Agreement or may
require the Authorized Participant to
deliver the required cash for the
Purchase Order on the Purchase Order
Date. The extension of Trade Credits on
the Purchase Order Date allows the
Trust to purchase ether through the
Prime Execution Agent on the Purchase
Order Date, with such ether being
deposited in the Trust’s Trading
Balance.
On the day following the Purchase
Order Date (the ‘‘Purchase Order
Settlement Date’’), the Trust would
deliver Shares to the Authorized
Participant in exchange for cash
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received from the Authorized
Participant. Where applicable, the Trust
would use the cash to repay the Trade
Credits borrowed from the Trade Credit
Lender. On the Purchase Order
Settlement Date for a Purchase Order
utilizing the Agent Execution Model,
the ether associated with the Purchase
Order and purchased on the Purchase
Order Date is swept from the Trust’s
Trading Balance with the Prime
Execution Agent to the Trust Ether
Account with the Ether Custodian
pursuant to a regular end-of-day sweep
process. Transfers of ether into the
Trust’s Trading Balance are off-chain
transactions and transfers from the
Trust’s Trading Balance to the Trust
Ether Account are ‘‘on-chain’’
transactions represented on the ether
blockchain. Any financing fee owed to
the Trade Credit Lender is deemed part
of trade execution costs and embedded
in the trade price for each transaction.
For a Redemption Order utilizing the
Agent Execution Model, on the day of
the Redemption Order Date the Trust
would enter into a transaction to sell
ether through the Prime Execution
Agent for cash. The Trust’s Trading
Balance with the Prime Execution Agent
may not be funded with ether on trade
date for the sale of ether in connection
with the redemption order under the
Agent Execution Model, when ether
remains in the Trust Ether Account with
the Ether Custodian at the point of
intended execution of a sale of ether. In
those circumstances the Trust may
borrow Trade Credits in the form of
ether from the Trade Credit Lender,
which allows the Trust to sell ether
through the Prime Execution Agent on
the Redemption Order Date, and the
cash proceeds are deposited in the
Trust’s Trading Balance with the Prime
Execution Agent. On the business day
following the Redemption Order Date
(the ‘‘Redemption Order Settlement
Date’’) for a redemption order utilizing
the Agent Execution Model where Trade
Credits were utilized, the Trust delivers
cash to the Authorized Participant in
exchange for Shares received from the
Authorized Participant. In the event
Trade Credits were used, the Trust will
use the ether that is moved from the
Trust Ether Account with the Ether
Custodian to the Trading Balance with
the Prime Execution Agent to repay the
Trade Credits borrowed from the Trade
Credit Lender.
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Fmt 4703
Sfmt 4703
24513
For a redemption of Creation Units
utilizing the Agent Execution Model,
the Sponsor would instruct the Ether
Custodian to prepare to transfer the
ether associated with the redemption
order from the Trust Ether Account with
the Ether Custodian to the Trust’s
Trading Balance with the Prime
Execution Agent. On the Redemption
Order Settlement Date, the Trust would
enter into a transaction to sell ether
through the Prime Execution Agent for
cash, and the Prime Execution Agent
credits the Trust’s Trading Balance with
the cash. On the same day, the
Authorized Participant would deliver
the necessary Shares to the Trust and
the Trust delivers cash to the
Authorized Participant.
Fee Accrual
According to the Registration
Statement, the Trust’s only recurring
ordinary expense is expected to be the
Sponsor Fee, which will accrue daily
and will be payable in ether monthly in
arrears. The Administrator will
calculate the Sponsor Fee on a daily
basis by applying an annualized rate to
the Trust’s total ether holdings, and the
amount of ether payable in respect of
each daily accrual shall be determined
by reference to the Pricing Index.
CME Ether Futures Market
CME began offering trading in ether
futures on February 8, 2021.16 Each
contract represents fifty ether and is
based on the ERR. The contracts trade
and settle like other cash settled
commodity futures contracts.
Most measurable metrics related to
ether futures have trended up since
launch. For example, there were
174,261 ether futures contracts traded in
February 2024 (approximately $24.3
billion) compared to 182,631 contracts
($14.9 billion), 160,108 contracts ($23.1
billion), and 17,149 contracts ($1.5
billion) traded in February 2023,
February 2022, and February 2021,
respectively.17
16 See ‘‘CME Group Announces Launch of Ether
Futures,’’ February 8, 2021, available at https://
www.cmegroup.com/media-room/press-releases/
2021/2/08/cme_group_announceslaunchofether
futures.html.
17 Data from CME Volume and average dAily
Volume Reports, available at https://
www.cmegroup.com/market-data/volume-openinterest.html#volumeTotals.
E:\FR\FM\08APN1.SGM
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24514
Federal Register / Vol. 89, No. 68 / Monday, April 8, 2024 / Notices
CME Ethereum FuturesAverage Daily Volume (ADV)
10K
9K
4llOK
8K
7K
fl:
~
8=
'6
~
8K
61<
4K.
3K
2K
1K
0
2021
Open interest was 3792 ether futures
contracts in February 2024
(approximately $529 million) compared
to 4919 contracts ($337 million), 4014
contracts ($578 million), and 877
contracts ($77 million) in February
2023, February 2022, and February 2021
respectively.18
CME Ethereum Futures Open Interest (01)
360K
7K
3.00K
51<
2501(
ill
....
~
=
u
'I!:
<U
itl
4l<
200K
0
~
...
.s::
0
"""
:;;:
C:
<U
3K
-·-
160K
1
$
2K
100K
1K
60K
1i
()
2023
2022
The number of large open interest
holders has increased as well, as
demonstrated in the figure that
follows.19
18 Data from CME Open Interest Reports, available
at https://www.cmegroup.com/market-data/volumeopeninterest.gtml#openInterestTools.
19 A large open interest holder in ether futures is
an entity that holds at least 25 contracts, which is
the equivalent of 1250 ether. Data fromThe Block,
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;2024
available at https://www.theblock.co/data/cryptomarkets/cme-cots/large-open-interest-holders-ofcme-ether-futures.
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2021
EN08AP24.015</GPH>
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24515
CMEEthereum Futures Large Open Interest Holders(LOIH)
90
80
70
60
l(I}.'2
::9
~
50
'a
'1:l::
3()
20
10
0
2021
2023
lotter on DSK11XQN23PROD with NOTICES1
Background
Ethereum is free software that is
hosted on computers distributed
throughout the globe. Ethereum
employs an array of computer codebased logic, called a protocol, to create
a unified understanding of ownership,
commercial activity, and economic
logic. This allows users to engage in
commerce without the need to trust any
of its participants or counterparties.
Ethereum code creates verifiable and
unambiguous rules that assign clear,
strong property rights to create a
platform for unrestrained business
formation and free exchange. No single
intermediary or entity operates or
controls the Ethereum network, the
transaction validation and
recordkeeping infrastructure of which is
collectively maintained by a disparate
user base. The Ethereum network allows
people to exchange tokens of value, or
ether, which are recorded on a
distributed, public recordkeeping
system or ledger known as a blockchain,
and which can be used to pay for goods
and services, including computational
power on the Ethereum network, or
converted to fiat currencies, such as the
U.S. dollar, at rates determined on spot
trading platforms or in individual peer20 For a list of the current members and affiliate
members of ISG, see https://www.isgportal.com/.
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to-peer transactions. By combining the
recordkeeping system of the Ethereum
blockchain with a flexible scripting
language that can be used to implement
a wide variety of instructions, the
Ethereum network is intended to act as
a public computational layer on top of
which users can build their own public
software programs, as an alternative to
centralized web services. On the
Ethereum network, ether is the unit of
account that users pay for the
computational resources consumed by
running programs of their choice.
Previously, U.S. retail investors have
lacked a U.S. regulated, U.S. exchangetraded vehicle to gain direct exposure to
ether. Instead, current options include:
(i) facing the counter-party risk, legal
uncertainty, technical risk, and
complexity associated with accessing
spot ether directly, or (ii) over-thecounter ether funds (‘‘OTC Ether
Funds’’) with high management fees and
potentially volatile premiums and
discounts. Meanwhile, investors in
other countries, including Germany,
Switzerland and France, are able to use
more traditional exchange listed and
traded products (including exchangetraded funds holding spot ether) to gain
exposure to ether.21
To this point, the lack of an ETP that
holds spot ether (a ‘‘Spot Ether ETP’’)
exposes U.S. investor assets to
significant risk because investors who
would otherwise seek exposure through
21 The exchange notes that the list of countries
above is not exhaustive and that securities
regulators in a number of additional countries have
either approved or otherwise allowd the listing and
trading of Spot ETH ETPs.
PO 00000
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Fmt 4703
Sfmt 4703
a Spot Ether ETP are forced to find
alternative exposure through generally
riskier means. For example, investors in
OTC Ether Funds are not afforded the
benefits and protections of regulated
Spot Ether ETPs, resulting in retail
investors potentially suffering losses
due to drastic movements in the
premium/discount of OTC Ether Funds.
Additionally, many U.S. investors who
held their digital assets in accounts at
FTX,22 Celsius Network LLC,23 BlockFi
Inc.,24 and Voyager Digital Holdings,
Inc.25 have become unsecured creditors
in the insolvencies of those entities. The
Sponsor believes that, if a Spot Ether
ETP had been available to U.S.
investors, it is likely that at least a
portion of the billions of dollars tied up
in those proceedings would still reside
in the brokerage accounts of U.S.
investors, having instead been invested
in the transparent, regulated, and wellunderstood structure of a Spot Ether
ETP. The Sponsor thus believes that the
approval of a Spot Ether ETP would
represent a major step towards
protection of U.S. investors.
Applicable Standard
The Commission has historically
approved or disapproved exchange
filings to list and trade series of Trust
Issued Receipts, including spot,
Commodity-Based Trust Shares, on the
22 See FTX Trading Ltd., et al., Case No. 22–
11068.
23 See Celsius Network LLC, et al., Case No. 22–
10964.
24 See BlockFi Inc., Case No. 22–19361.
25 See Voyager Digital Holdings, Inc., et al., Case
No. 22–10943.
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The Commodity Futures Trading
Commission (‘‘CFTC’’) regulates the
CME ether futures market, and both the
Exchange and CME are members of the
Intermarket Surveillance Group
(‘‘ISG’’).20
24516
Federal Register / Vol. 89, No. 68 / Monday, April 8, 2024 / Notices
basis of whether the listing exchange
has in place a comprehensive
surveillance sharing agreement with a
regulated market of significant size
related to the underlying commodity to
be held.26 However, the Commission
recently approved the listing and
trading of shares of spot bitcoin
exchange-traded products (‘‘Spot
Bitcoin ETP’’), finding that there were
‘‘other means’’ of preventing fraud and
manipulation sufficient to satisfy the
requirements of section 6(b)(5) of the
Exchange Act.27 In the Spot Bitcoin ETP
Approval Order, the Commission
concluded, through a robust correlation
analysis, that fraud or manipulation that
impacts prices in spot bitcoin markets
would likely similarly impact CME
bitcoin futures prices.28 The
Commission further found that, because
the CME’s surveillance can assist in
detecting those impacts on CME bitcoin
futures prices, a listing exchange’s
comprehensive surveillance sharing
agreement (‘‘CSSA’’) with the CME can
be reasonably expected to assist in
surveilling for fraudulent and
manipulative acts and practices in the
specific context of the Spot Bitcoin ETP.
In support of this proposed rule
change to permit the listing and trading
of a Spot Ether ETP, the Sponsor has
conducted a similarly robust correlation
analysis between the spot ether markets
and the CME ether futures market to
determine if fraud or manipulation that
impacts prices in spot ether markets
would be likely to similarly impact CME
ether futures prices. The Sponsor used
stationary time series of price returns
data at hourly, five-minute, and oneminute intervals for the spot ETH/USD
trading pair on Coinbase and Kraken, as
well as for the closest-to-maturity CME
ether futures contract, over a lengthy
sample period from August 1, 2021
through March 20, 2024. Pearson
correlation statistics were calculated for
the full sample period, as well as for
rolling three-month segments within the
sample period. The Sponsor’s
correlation analysis utilized frequent
intra-day trading data over the sample
period on this subset of spot ether
platforms and on the CME ether futures
market as well.
The results of the Sponsor’s analysis
support that the CME ether futures
market has been highly correlated with
this subset of the spot ether platforms
throughout the past two and a half
years. The correlation between the CME
ether futures market and this subset of
spot ether platforms for the full sample
period is no less than 98.6% using data
at an hourly interval; 90.0% using data
at a five-minute interval; and 70.9%
using data at a one-minute interval. The
rolling three-month correlation results
are similar, ranging between 95.7 and
99.3% using data at an hourly interval;
86.8 and 92.9% using data at a fiveminute interval; and 65.0 and 79.5%
using data at a one-minute interval.
CORRELATIONS BETWEEN CERTAIN SPOT ETHER MARKETS AND THE CME ETHER FUTURES MARKET
Coinbase
Hourly
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Full Sample: 08/01/21 to 03/20/24 ..........
Rolling Three-Month Correlations Over
the Full Sample Period:
Maximum ..........................................
Minimum ...........................................
Kraken
5 Minutes
1 Minute
Hourly
5 Minutes
1 Minute
98.6
90.0
70.9
98.6
90.3
72.6
99.3
95.7
92.7
86.8
78.7
65.0
99.3
95.7
92.9
87.2
79.5
67.3
The Sponsor believes that the results
of its robust correlation analysis
constitute empirical evidence that
prices generally move in close (although
not perfect) alignment between the spot
ether market and the CME ether futures
market. As a result, the Sponsor believes
that fraud or manipulation that impacts
prices in spot ether markets would
likely similarly impact CME ether
futures prices, and therefore, because
CME surveillance can assist in detecting
those impacts on CME ether futures
prices, the Exchange and CME’s
common membership in the ISG 29 can
be reasonably expected to assist the
Exchange in surveilling for fraudulent
and manipulative acts and practices in
the spot ether markets in satisfaction of
the requirement of section 6(b)(5) of the
Exchange Act that there are ‘‘other
means’’ of preventing fraud and
manipulation.
Availability of Information
26 See Securities Exchange Act Release No. 83723
(July 26, 2018), 83 FR 37579 (August 1, 2018) (SR–
BatsBZX–2016–30) (Order Setting Aside Action by
Delegated Authority and Disapproving a Proposed
Rule Change, as Modified by Amendments No. 1
and 2, to List and Trade Shares of the Winklevoss
Bitcoin Trust) (‘‘Winklevoss Order’’). In the
Winklevoss Order, the commission set forth both
the importance and definition of a surveilled,
regulated market of significant size, explaining that,
for approved commodity-trust ETPs, ‘‘there has
been in every case at least one significant, regulated
market for trading futures on the underlying
commodity—whether gold, silve, platinum,
palladium, or copper—and the ETP listing exchange
has entered into surveillance-sharing agreements
with, or hel Intermarket Surveillance Group
membership in common with, the market.’’
Winklevoss Order, 83 FR at 37594.
27 See Securities Exchange Act Release No. 34–
99306 (January 10, 2024), 89 FR 3008 (January 17,
2024) (SR–NYSEARCA–2021–90; SR–NYSEARCA–
2023–44; SR–NYSEARCA–2023–58; SR–NASDAQ–
2023–016; SR–NASDAQ–2023–019; SR–CboeBZX–
2023028; SR–CboeBZX–2023–038; SR–CboeBZX–
2023–040; SR–CboeBZX–2023–042; SR–CboeBZX–
2023–044; SR–CboeBZX–2023–072 (Order Granting
Accelerated Appproval of Proposed Rule Changes,
as Modified by Amendments Thereto, to List and
Trade Bitcoin-Based Commodity-Based Trust
Shares and Trust Units) (the ‘‘Sopt Bitcoing ETP
Approval Order’’).
28 In the Spot Bitcoin ETP Approval Order, the
Commission noted that ‘‘[t]he robustness of the
Commissions’s correlation analysis rests on the prerequisites of (1) the correlations being calculated
with repect to bitcoin futures that trade on the CME,
a U.S. market regulated by the CFTC, (2) the lengthy
sample period of price returns for both the CME
bitcoin futures market and the spot bitcoin market,
(3) the frequent intra-day trading data in both the
CME bitcoin futures market and the spot bitcoin
market over that lengthy sample period, and (4) the
consistency of the correlation results throughout the
lengthy sample period.’’ Spot Bitcoin ETP Approval
Order, 89 FR at 3010 n.38.
29 The Commission has previously recognized
that common membership between a listing
exchange and a futures market such as the cME in
the ISG functions as ‘‘the equivalent of a
comprehensive surveillance sharing agreement.’’
See Securities Exchange Act Release No. 87267
(October 9, 2019), 84 FR 55382 (October 16, 2019)
(SR–NYSEArca–2019–01) (Order Disapproving a
Proposed Rule Change, as Modified by Amendment
No. 1, Relating to the Listing and Trading of Shares
of the Bitwise Bitcoin ETF Trust Under NYSE Arca
Rule 8.201–E).
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The NAV per Share will be
disseminated daily to all market
participants at the same time. Quotation
and last-sale information regarding the
Shares will be disseminated through the
facilities of the CTA. The ITV will be
calculated every 15 seconds throughout
the core trading session each trading
day.
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The Sponsor will cause information
about the Shares to be posted to the
Trust’s website (https://www.bitwise
investments.com/): (1) the NAV and
NAV per Share for each Exchange
trading day, posted at end of day; (2) the
daily holdings of the Trust, before 9:30
a.m. E.T. on each Exchange trading day;
(3) the Trust’s effective prospectus, in a
form available for download; and (4) the
Shares’ ticker and CUSIP information,
along with additional quantitative
information updated on a daily basis for
the Trust. For example, the Trust’s
website will include (1) the prior
Business Day’s trading volume, the prior
Business Day’s reported NAV and
closing price, and a calculation of the
premium and discount of the closing
price or mid-point of the bid/ask spread
at the time of NAV calculation (‘‘Bid/
Ask Price’’) against the NAV; and (2)
data in chart format displaying the
frequency distribution of discounts and
premiums of the daily closing price or
Bid/Ask Price against the NAV, within
appropriate ranges, for at least each of
the four previous calendar quarters. The
Trust’s website will be publicly
available prior to the public offering of
Shares and accessible at no charge.
Investors may obtain on a 24-hour
basis ether pricing information based on
the Pricing Index, ERR, and CME Ether
Real Time Price, spot ether market
prices and ether futures price from
various financial information service
providers. Current ether spot market
prices are also available with bid/ask
spreads from ether trading platforms,
including the Constituent Platforms of
the Pricing Index.
Information regarding market price
and trading volume of the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services.
Information regarding the previous
day’s closing price and trading volume
information for the Shares will be
published daily in the financial section
of newspapers.
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Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Trust.30 Trading in Shares of the
Trust will be halted if the circuit breaker
parameters in NYSE Arca Rule 7.12–E
have been reached. Trading also may be
halted because of market conditions or
for reasons that, in the view of the
30 See
NYSE Arca Rule 7.12–E.
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Exchange, make trading in the Shares
inadvisable.
The Exchange may halt trading during
the day in which an interruption to the
dissemination of the ITV or the CME
Ether Real Time Index occurs.31 If the
interruption to the dissemination of the
ITV or the CME Ether Real Time Price
persists past the trading day in which it
occurred, the Exchange will halt trading
no later than the beginning of the
trading day following the interruption.
In addition, if the Exchange becomes
aware that the NAV with respect to the
Shares is not disseminated to all market
participants at the same time, it will halt
trading in the Shares until such time as
the NAV is available to all market
participants.
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00
a.m. to 8:00 p.m. E.T. in accordance
with NYSE Arca Rule 7.34–E (Early,
Core, and Late Trading Sessions). The
Exchange has appropriate rules to
facilitate transactions in the Shares
during all trading sessions. As provided
in NYSE Arca Rule 7.6–E, the minimum
price variation (‘‘MPV’’) for quoting and
entry of orders in equity securities
traded on the NYSE Arca Marketplace is
$0.01, with the exception of securities
that are priced less than $1.00 for which
the MPV for order entry is $0.0001.
The Shares will conform to the initial
and continued listing criteria under
NYSE Arca Rule 8.201–E. The trading of
the Shares will be subject to NYSE Arca
Rule 8.201–E(g), which sets forth certain
restrictions on Equity Trading Permit
(‘‘ETP’’) Holders acting as registered
Market Makers in Commodity-Based
Trust Shares to facilitate surveillance.32
31 A limit up/limit down condition in the futures
market would not be considered an interruption
requiring the Trust to be halted.
32 Under NYSE Arca Rule 8.201–E(g), and ETP
Holder as a registered Market Maker in the Shares
is required to provide the Exchange with
information relating to its accounts for trading in
the underlying commodity, related futures or
options on futures, or any other related derivatives.
Commentary .04 of NYSE Arca Rule 11.3–E.
requires an ETP Holder acting as a registered
Market Maker, and its affiliates, in the Shares to
establish, maintain and enforce written policies and
procedures reasonably designed to prevent the
misuse of any material nonpublic information with
respect to such products, an components of the
related products, any physical asset or commodity
underlying the product, applicable currencies,
underlying indexes, related futures or options on
futures, and any related derivative instruments
(including the Shares). As a general matter, the
Exchange has regulatory jurisdiction over its ETP
Holder and their associated persons, which include
PO 00000
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24517
The Exchange represents that, for initial
and continued listing, the Trust will be
in compliance with Rule 10A–3 under
the Act,33 as provided by NYSE Arca
Rule 5.3–E. A minimum of 100,000
Shares of the Trust will be outstanding
at the commencement of trading on the
Exchange.
Surveillance
The Exchange represents that trading
in the Shares of the Trust will be subject
to the existing trading surveillances
administered by the Exchange, as well
as cross-market surveillances
administered by FINRA on behalf of the
Exchange, which are designed to detect
violations of Exchange rules and
applicable federal securities laws.34 The
Exchange represents that these
procedures are adequate to properly
monitor Exchange trading of the Shares
in all trading sessions and to deter and
detect violations of Exchange rules and
federal securities laws applicable to
trading on the Exchange.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange or FINRA, on behalf of
the Exchange, or both, will
communicate as needed regarding
trading in the Shares with other markets
and other entities that are members of
the ISG, and the Exchange or FINRA, on
behalf of the Exchange, or both, may
obtain trading information regarding
trading in the Shares from such markets
and other entities. In addition, the
Exchange may obtain information
regarding trading in the Shares from
markets and other entities that are
members of ISG or with which the
Exchange has in place a CSSA. The
Exchange is also able to obtain
information regarding trading in the
Shares in connection with ETP Holders’
any person or entity controlling an ETP Holder. To
the extent the Exchange may be found to lack
jurisdiction over a subsidiary or affiliate of an ETP
Holder that does business only in commodities or
futures contracts, the Exchange could obtain
information regarding the activities of such
subsidiary or affiliate through surveillance sharing
agreements with regulatory organizations of which
such subsidiary or affiliate is a member.
33 17 CFR 240.10A–3. See note 8, supra.
34 FINRA conducts cross-market surveillance on
behalf of the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
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lotter on DSK11XQN23PROD with NOTICES1
proprietary or customer trades on any
relevant market.
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
All statements and representations
made in this filing regarding (a) the
description of the portfolios of the
Trust, (b) limitations on portfolio
holdings or reference assets, or (c) the
applicability of Exchange listing rules
specified in this rule filing shall
constitute continued listing
requirements for listing the Shares on
the Exchange.
The Sponsor has represented to the
Exchange that it will advise the
Exchange of any failure by the Trust to
comply with the continued listing
requirements, and, pursuant to its
obligations under section 19(g)(1) of the
Act, the Exchange will monitor for
compliance with the continued listing
requirements. If the Trust is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
NYSE Arca Rule 5.5–E(m).
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an ‘‘Information
Bulletin’’ of the special characteristics
and risks associated with trading the
Shares. Specifically, the Information
Bulletin will discuss the following: (1)
the procedures for creations of Shares in
Creation Units; (2) NYSE Arca Rule 9.2–
E(a), which imposes a duty of due
diligence on its ETP Holders to learn the
essential facts relating to every customer
prior to trading the Shares; (3)
information regarding how the value of
the ITV and the Pricing Index is
disseminated; (4) the possibility that
trading spreads and the resulting
premium or discount on the Shares may
widen during the Opening and Late
Trading Sessions, when an updated ITV
will not be calculated or publicly
disseminated; (5) the requirement that
members deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction and (6)
trading information.
In addition, the Information Bulletin
will reference that the Trust is subject
to various fees and expenses as
described in the annual report. The
Information Bulletin will disclose that
information about the Shares of the
Trust is publicly available on the Trust’s
website. The Information Bulletin will
also reference the fact that there is no
regulated source of last sale information
regarding ether, that the Commission
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has no jurisdiction over the trading of
ether as a commodity, and that the
CFTC has regulatory jurisdiction over
the trading of ether futures contracts
and options on ether futures contracts.
The Information Bulletin will also
discuss any relief, if granted, by the
Commission or the staff from any rules
under the Act.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under section 6(b)(5) 35 that an exchange
have rules that are designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to remove
impediments to, and perfect the
mechanism of a free and open market
and, in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices and to protect
investors and the public interest in that
the Shares will be listed and traded on
the Exchange pursuant to the initial and
continued listing criteria in NYSE Arca
Rule 8.201–E. Further, the Exchange has
demonstrated its ability to share
information with the CME, pursuant to
common ISG membership, can be
reasonably expected to assist the
Exchange in surveilling for fraudulent
and manipulative acts and practices
with respect to trading in the Shares,
such that there are sufficient means of
preventing fraud and manipulation
sufficient to satisfy the requirements of
section 6(b)(5) of the Exchange Act. As
discussed above, the results of the
Sponsor’s comprehensive correlation
analysis support that prices on the spot
ether and CME ether futures markets
generally move in close alignment;
accordingly, it is likely that fraud or
manipulation that impacts prices in spot
ether markets would likely similarly
impact CME ether futures prices.
The Exchange has in place
surveillance procedures that are
adequate to properly monitor Exchange
trading in the Shares in all trading
sessions and to deter and detect
attempted manipulation of the Shares or
other violations of Exchange rules and
applicable federal securities laws. The
Exchange or FINRA, on behalf of the
Exchange, or both, will communicate as
needed regarding trading in the Shares
and ether futures with the CME and
other markets and other entities that are
members of the ISG, and the Exchange
or FINRA, on behalf of the Exchange, or
both, may obtain trading information
35 15
PO 00000
U.S.C. 78f(b)(5).
Frm 00096
Fmt 4703
Sfmt 4703
regarding trading in the Shares from
such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares from markets and other entities
that are members of ISG or with which
the Exchange has in place a CSSA. The
Exchange is also able to obtain
information regarding trading in the
Shares and ether futures or the
underlying ether through ETP Holders,
in connection with such ETP Holders’
proprietary or customer trades which
they effect through ETP Holders on any
relevant market.
Quotation and last-sale information
regarding the Shares will be
disseminated through the facilities of
the CTA. The Trust’s website will also
include a form of the prospectus for the
Trust that may be downloaded. The
website will include the Shares’ ticker
and CUSIP information, along with
additional quantitative information
updated on a daily basis for the Trust.
The Trust’s website will include (1)
daily trading volume, the prior Business
Day’s reported NAV and closing price,
and a calculation of the premium and
discount of the closing price or midpoint of the Bid/Ask Price against the
NAV; and (ii) data in chart format
displaying the frequency distribution of
discounts and premiums of the daily
closing price or Bid/Ask Price against
the NAV, within appropriate ranges, for
at least each of the four previous
calendar quarters. The Trust’s website
will be publicly available prior to the
public offering of Shares and accessible
at no charge.
Trading in Shares of the Trust will be
halted if the circuit breaker parameters
in NYSE Arca Rule 7.12–E have been
reached or because of market conditions
or for reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of a new type of exchange-traded
product based on the price of ether that
will enhance competition among market
participants, to the benefit of investors
and the marketplace. As noted above,
the Exchange has in place surveillance
procedures that are adequate to properly
monitor trading in the Shares in all
trading sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
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Federal Register / Vol. 89, No. 68 / Monday, April 8, 2024 / Notices
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange notes that the proposed rule
change will facilitate the listing and
trading of a new type of CommodityBased Trust Share based on the price of
ether that would enhance competition
among market participants, to the
benefit of investors and the marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
lotter on DSK11XQN23PROD with NOTICES1
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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–NYSEARCA–2024–31 and should be
submitted on or before April 29, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
J. Matthew DeLesDernier,
Deputy Secretary.
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:
[FR Doc. 2024–07335 Filed 4–5–24; 8:45 am]
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–
NYSEARCA–2024–31 on the subject
line.
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing of
Amendment No. 1 to a Proposed Rule
Change To List and Trade Shares of
the Fidelity Ethereum Fund Under BZX
Rule 14.11(e)(4), Commodity-Based
Trust Shares
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–NYSEARCA–2024–31. 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/
On November 17, 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 of the
Fidelity Ethereum Fund under BZX
Rule 14.11(e)(4), Commodity-Based
Trust Shares. The proposed rule change
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16:37 Apr 05, 2024
Jkt 262001
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99888; File No. SR–
CboeBZX–2023–095]
April 2, 2024.
36 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00097
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24519
was published for comment in the
Federal Register on December 6, 2023.3
On January 18, 2024, 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 On March 4,
2024, the Commission instituted
proceedings under section 19(b)(2)(B) of
the Act 6 to determine whether to
approve or disapprove the proposed
rule change.7 On March 15, 2024, the
Exchange filed Amendment No. 1,
which replaced and superseded the
proposed rule change in its entirety.
Amendment No. 1 to the proposed rule
change is 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,
as modified by Amendment No. 1, from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (‘‘BZX’’ or
the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) a proposed
rule change to list and trade shares of
the Fidelity Ethereum Fund (the
‘‘Trust’’),8 under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
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
3 See Securities Exchange Act Release No. 99045
(Nov. 30, 2023), 88 FR 84840. Comments on the
proposed rule change are available at: https://
www.sec.gov/comments/sr-cboebzx-2023-095/
srcboebzx2023095.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 99390,
89 FR 4639 (Jan. 24, 2024).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 99667,
89 FR 16804 (Mar. 8, 2024).
8 The Trust was formed as a Delaware statutory
trust on October 31, 2023, and is operated as a
grantor trust for U.S. federal tax purposes. The
Trust has no fixed termination date.
E:\FR\FM\08APN1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 68 (Monday, April 8, 2024)]
[Notices]
[Pages 24509-24519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07335]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99889; File No. SR-NYSEARCA-2024-31]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Shares of the Bitwise
Ethereum ETF
April 2, 2024.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on March 28, 2024, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade shares of the Bitwise
Ethereum ETF (the ``Trust'') under NYSE Arca Rule 8.201-E (Commodity-
Based Trust Shares). The proposed rule change is available on the
Exchange's website at www.nyse.com, 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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade shares (``Shares'') of the
Trust \4\ pursuant to NYSE Arca Rule 8.201-E, which governs the listing
and trading of Commodity Based Trust Shares.\5\
---------------------------------------------------------------------------
\4\ The Trust is a Delaware statutory trust. On March 28, 2024,
the Trust filed with the Commission an initial registration
statement (the ``Registration Statement'') on Form S-1 under the
Securities Act of 1933 (15 U.S. C. 77a). The description of the
operation of the Trust herein is based, in part, on the most recent
Registration Statement. The Registration Statement is not yet
effective, and the Shares will not trade on the Exchange until such
time that the Registration Statement is effective.
\5\ Commodity-Based Trust Shares are securities issued by a
trust that represents investors' discrete identifiable and undivided
beneficial ownership interest in the commodities deposited into the
trust.
---------------------------------------------------------------------------
According to the Registration Statement, the Trust will not be
registered as an investment company under the Investment Company Act of
1940,\6\ and is not required to register thereunder. The Trust is not a
commodity pool for purposes of the Commodity Exchange Act.\7\
---------------------------------------------------------------------------
\6\ 15 U.S.C. 80a-1.
\7\ 17 U.S.C. 1.
---------------------------------------------------------------------------
The Exchange represents that the Shares satisfy the requirements of
NYSE Arca Rule 8.201-E and thereby qualify for listing on the
Exchange.\8\
---------------------------------------------------------------------------
\8\ With respect to the application of Rule 10A-3 (17 CFR
240.10A-3) under the act, the trust relies on the exemption
contained in Rule 10A-3(c)(7).
---------------------------------------------------------------------------
Operation of the Trust \9\
---------------------------------------------------------------------------
\9\ The description of the operation of the Trust, the Shares,
and the ether market contained herein is based, in part, on the
Registration Statement. See note 4, supra.
---------------------------------------------------------------------------
The Trust will issue the Shares which, according to the
Registration Statement, represent units of undivided beneficial
ownership of the Trust. The Trust is a Delaware statutory trust and
will operate pursuant to a trust agreement (the ``Trust Agreement'')
between Bitwise Investment Advisers, LLC (the ``Sponsor'' or
``Bitwise'') and Delaware Trust Company, as the Trust's trustee (the
``Trustee''). Coinbase Custody Trust Company, LLC will maintain custody
of the Trust's ether (the ``Ether Custodian''). Bank of New York Mellon
will be the custodian for the Trust's cash holdings (in such role, the
``Cash Custodian''), the administrator of the Trust (in such role, the
``Administrator''), and the transfer agent for the Trust (in such role,
the ``Transfer Agent'').
According to the Registration Statement, the investment objective
of the Trust is to seek to provide exposure to the value of ether held
by the Trust, less the expenses of the Trust's operations. In seeking
to achieve its investment objective, the Trust will hold ether and
establish its Net Asset Value (``NAV'') at the end of every business
day by reference to the CME CF Ether Reference Rate--New York Variant
(the ``Pricing Index'').\10\
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\10\ The Pricing Index is designed to provide a daily, 4:00 p.m.
New York time reference rate of the U.S. dollar price of one ether
that may be used to develop financial products. The Pricing Index
uses the same methodology as the CME CF Ether Reference Rate
(``ERR''), which was designed by the CME Group and CF Benchmarks
Ltd. (the ``Benchmark Provider'') to facilitate the cash settlement
of ether futures contracts traded on the Chicago Mercantile Exchange
(``CME''). The only material difference between the Pricing Index
and ERR is that the ERR measures the U.S. dollar price of one ether
as 9f 4:00 p.m. Eastern time (``E.T.''). The CME Group also
publishes the CME CF Ether Real Time Index (the ``CME Ether Real
Time Price''), which is a continuous measure of the U.S. dollar
price of one ether calculated once per second.
---------------------------------------------------------------------------
[[Page 24510]]
The Trust's only assets will be ether and cash.\11\ The Trust does
not seek to hold any non-ether crypto assets and has expressly
disclaimed ownership of any such assets in the event the Trust ever
involuntarily comes into possession of such assets.\12\ The Trust will
not use derivatives that may subject the Trust to counterparty and
credit risks. The Trust will process creations and redemptions in cash.
The Trust's only recurring ordinary expense is expected to be the
Sponsor's unitary management fee (the ``Sponsor Fee''), which will
accrue daily and will be payable in ether monthly in arrears. The
Administrator will calculate the Sponsor Fee on a daily basis by
applying an annualized rate to the Trust's total ether holdings, and
the amount of ether payable in respect of each daily accrual shall be
determined by reference to the Pricing Index. Financial institutions
authorized to create and redeem Shares (each, an ``Authorized
Participant'') will deliver, or cause to be delivered, cash in exchange
for Shares of the Trust, and the Trust will deliver cash to Authorized
Participants when those Authorized Participants redeem Shares of the
Trust.
---------------------------------------------------------------------------
\11\ The Trust conducts creations and redemptions of its Shares
for cash. Authorized Participants will deliver cash to the cash
Custodian pursuant to creation orders for Shares and the Cash
Custodian will hold such cash until such time as it can be converted
to ether, which the Trust intends to do on the same business day in
which such cash is received by the Cash Custodian. Additionally, the
trust will sell ether in exchange for cash pursuant to redemption
orders of its Shares. In connection with such sales, and approved
Ether Trading Counterparty (defined below) will send cash to the
Cash Custodian. The Cash custodian will hold such cash until it can
be distributed to the redeeming Authorized Participant, which it
intends to do on the same business day in which it is received. In
connection with the purchases and sales of ether pursuant to its
creation and redemption activity, it is possible that the Trust may
retain de minimis amounts of cash as a result of rounding
differences. The trust may also initially hold small amounts of cash
to initiate Trust operations in the immediate aftermath of its
Registration Statement being declared effective. Lastly, the Trust
may also sell ether and temporarily hold cash as part of a
liquidation of the trust or to pay certain extraordinary expenses
not assumed by the Sponsor. Under the Trust Agreement, the sponsor
has agreed to assume the normal operating expenses of the Trust,
subject to certain limitations. For example, the Trust will bear any
indemnification or litigation liabilities as extraordinary expenses.
In any event, in the ongoing course of business, the amounts of cash
retained by the Trust are not expected to constitute a material
portion of the Trust's holdings.
\12\ The Trust may, from time to time, passively receive, by
virtue of holding ether, certain additional digital assets (``IR
Assets'') or rights to receive IR Assets (``Incidental Rights'')
through a fork of the Ethereum network or an airdrop of assets. The
Trust will not seek to acquire such IR Assets or Incidental Rights.
Pursuant to the terms of the Trust Agreement, the trust has
disclaimed ownership in any such IR Assets and/or Incidental Rights
to make clear that such assets are not and shall never be considered
assets of the Trust and will not be taken into account for purposes
of determining the trust's NAV or NAV per Share.
---------------------------------------------------------------------------
Custody of the Trust's Ether
The Trust's Ether Custodian will maintain custody of all of the
Trust's ether, other than that which is maintained in a trading account
(the ``Trading Balance'') with Coinbase, Inc. (the ``Prime Execution
Agent,'' which is an affiliate of the Ether Custodian), in the Trust
Ether Account. The Trading Balance will only be used in the limited
circumstances in which the Trust is using the Agent Execution Model to
effectuate the purchases and sales of ether. The Ether Custodian
provides safekeeping of ether using a multi-layer cold storage security
platform designed to provide offline security of the ether held by the
Ether Custodian.
Valuation of the Trust's Ether
The net assets of the Trust and its Shares are valued on a daily
basis with reference to the Pricing Index, a standardized reference
rate published by CF Benchmarks Ltd. (the ``Benchmark Provider'') that
is designed to reflect the performance of ether in U.S. dollars. The
Pricing Index was created to facilitate financial products based on
ether. It serves as a once-a-day benchmark rate of the U.S. dollar
price of ether (USD/ETH), calculated as of 4:00 p.m. ET. The Pricing
Index aggregates the trade flow of several major ether trading venues,
during an observation window between 3:00 p.m. and 4:00 p.m. ET into
the U.S. dollar price of one ether at 4:00 p.m. ET. The Pricing Index
currently uses substantially the same methodology as the ERR, including
utilizing the same constituent ether exchanges, which is the underlying
rate to determine settlement of CME ether futures contracts, except
that the Pricing Index is calculated as of 4:00 p.m. ET, whereas the
ERR is calculated as of 4:00 p.m. London time. The Pricing Index, which
was introduced on February 28, 2022, is based on materially the same
methodology (except calculation time) as the ERR, which was first
introduced on June 4, 2018. The CME Group also publishes the CME CF
Ether Real Time Index (the ``CME Ether Real Time Price''), which is a
continuous measure of the U.S. dollar price of one ether calculated
once per second. Each of the Pricing Index, ERR, and the CME Ether Real
Time Price are representative of the ether trading activity on the
Constituent Platforms,\13\ which include, as of the date of this
filing, Bitstamp, Coinbase, Gemini, itBit, LMAX, and Kraken.
---------------------------------------------------------------------------
\13\ The ``Constituent Platforms'' are the ether trading venues
included in the Pricing Index.
---------------------------------------------------------------------------
The Pricing Index is designed based on the IOSCO Principals for
Financial Benchmarks. The Trust uses the Pricing Index to calculate its
NAV, which is the aggregate U.S. dollar value of ether in the Trust,
based on the Pricing Index, less its liabilities and expenses. ``NAV
per Share'' is calculated by dividing NAV by the number of Shares
currently outstanding.
The Sponsor, in its sole discretion, may cause the Trust to price
its portfolio based upon an index, benchmark, or standard other than
the Pricing Index at any time, with prior notice to the shareholders,
if investment conditions change or the Sponsor believes that another
index, benchmark, or standard better aligns with the Trust's investment
objective and strategy. The Sponsor may make this decision for a number
of reasons, including, but not limited to, a determination that the
Pricing Index price of ether differs materially from the global market
price of ether and/or that third parties are able to purchase and sell
ether on public or private markets not included among the Constituent
Platforms, and such transactions may take place at prices materially
higher or lower than the Pricing Index price. The Sponsor, however, is
under no obligation whatsoever to make such changes in any
circumstance. In the event that the Sponsor intends to establish the
Trust's NAV by reference to an index, benchmark, or standard other than
the Pricing Index, it will provide shareholders with notice in a
prospectus supplement and/or through a current report on Form 8-K or in
the Trust's annual or quarterly reports.
Net Asset Value
Under normal circumstances, the Trust's only asset will be ether
and, under limited circumstances, cash. The Trust's NAV and NAV per
Share will be determined by the Administrator once each Exchange
trading day as of 4:00 p.m. E.T., or as soon thereafter as practicable.
The Administrator will calculate the NAV by multiplying the number of
ether held by the Trust by the Pricing Index for such day, adding any
additional receivables and subtracting the accrued but unpaid
liabilities of the Trust. The NAV per Share is calculated by dividing
the NAV by the number of Shares then outstanding. The Administrator
will determine the price of the Trust's ether by reference to the
[[Page 24511]]
Pricing Index, which is published and calculated as set forth above.
Intraday Trust Value
The Trust uses the CME Ether Real Time Price to calculate an
Indicative Trust Value (``ITV''). One or more major market data vendors
will disseminate the ITV, updated every 15 seconds each trading day as
calculated by the Exchange or a third-party financial data provider
during the Exchange's Core Trading Session (9:30 a.m. to 4:00 p.m.,
E.T.). The ITV will be calculated throughout the trading day by using
the prior day's holdings at the close of business and the most recently
reported price level of the CME Ether Real Time Price as reported by
Bloomberg, L.P. or another reporting service. The ITV will be widely
disseminated by one or more major market data vendors during the NYSE
Arca Core Trading Session.
Creation and Redemption of Shares
The Trust creates and redeems Shares from time to time, but only in
one or more Creation Units, which will initially consist of at least
10,000 Shares, but may be subject to change (``Creation Unit''). A
Creation Unit is only made in exchange for delivery to the Trust or the
distribution by the Trust of an amount of cash, equivalent to the
amount of ether represented by the Creation Unit being created or
redeemed, the amount of which is representative of the combined NAV of
the number of Shares included in the Creation Units being created or
redeemed determined as of 4:00 p.m. E.T. on the day the order to create
or redeem Creation Units is properly received. Except when aggregated
in Creation Units or under extraordinary circumstances permitted under
the Trust Agreement, the Shares are not redeemable securities.
Authorized Participants are the only persons that may place orders
to create and redeem Creation Units. Authorized Participants must be
(1) registered broker-dealers or other securities market participants,
such as banks and other financial institutions, that are not required
to register as broker-dealers to engage in securities transactions
described below, and (2) Depository Trust Company (``DTC'')
participants. To become an Authorized Participant, a person must enter
into an Authorized Participant Agreement with the Trust and/or the
Trust's marketing agent (the ``Marketing Agent'').
According to the Registration Statement, when purchasing or selling
ether in response to the purchase of Creation Units or the redemption
of Creation Units, which will be processed in cash, the Trust would do
so pursuant to either (1) a ``Trust-Directed Trade Model,'' or (2) an
``Agent Execution Model,'' which are each described in more detail
below.
The Trust intends to utilize the Trust-Directed Trade Model for all
purchases and sales of ether and would only utilize the Agent Execution
Model in the event that no ether trading counterparty approved by the
Sponsor (an ``Ether Trading Counterparty'') \14\ is able to effectuate
the Trust's purchase or sale of ether. Under the Trust-Directed Trade
Model, in connection with receipt of a purchase order or redemption
order, the Sponsor, on behalf of the Trust, would be responsible for
acquiring ether from an approved Ether Trading Counterparty in an
amount equal to the Basket Amount. When seeking to purchase ether on
behalf of the Trust, the Sponsor will seek to purchase ether at
commercially reasonable price and terms from any of the approved Ether
Trading Counterparties.\15\ Once agreed upon, the transaction will
generally occur on an ``over-the-counter'' basis.
---------------------------------------------------------------------------
\14\ The Ether Trading Counterparties with which the Sponsor
will engage in ether transactions are unaffiliated third-parties
that are not acting as agents of the Trust, the Sponsor or the
Authorized Participant, and all transactions will be done on an
arms-length basis. There is no countractual relationship between the
Trust, the sponsor or the Ether Trading Counterparty. When seeking
to sell ether on behalf of the Trust, the Sponsor will seek to sell
ether at commercially reasonable price and terms to any of the
spproved Ether Trading Counterparties. Once agreed upon, the
transaction will generally occur on an ``over-the-counter'' basis.
\15\ The Sponsor will maintain ownership and control of ether in
a manner consistent with good delivery requirements for spot
commodity transactions.
---------------------------------------------------------------------------
Whether utilizing the Trust-Directed Trade Model or the Agent
Execution Model, the Authorized Participants will deliver only cash to
create shares and will receive only cash when redeeming Shares.
Further, Authorized Participants will not directly or indirectly
purchase, hold, deliver, or receive ether as part of the creation or
redemption process or otherwise direct the Trust or a third party with
respect to purchasing, holding, delivering, or receiving ether as part
of the creation or redemption process. Additionally, under either the
Trust-Directed Trade Model or the Agent Execution Model, the Trust will
create Shares by receiving ether from a third party that is not the
Authorized Participant and is not affiliated with the Sponsor or the
Trust, and the Trust--not the Authorized Participant--is responsible
for selecting the third party to deliver the ether. The third party
will not be acting as an agent of the Authorized Participant with
respect to the delivery of the ether to the Trust or acting at the
direction of the Authorized Participant with respect to the delivery of
the ether to the Trust. Additionally, the Trust will redeem Shares by
delivering ether to a third party that is not the Authorized
Participant and is not affiliated with the Sponsor or the Trust, and
the Trust--not the Authorized Participant--is responsible for selecting
the third party to receive the ether. Finally, the third party will not
be acting as an agent of the Authorized Participant with respect to the
receipt of the ether from the Trust or acting at the direction of the
Authorized Participant with respect to the receipt of the ether from
the Trust.
Acquiring and Selling Ether Pursuant to Creation and Redemption of
Shares Under the Trust-Directed Trade Model
Under the Trust-Directed Trade Model and as set forth in the
Registration Statement, on any business day, an Authorized Participant
may create Shares by placing an order to purchase one or more Creation
Units with the Transfer Agent through the Marketing Agent. Such orders
are subject to approval by the Marketing Agent and the Transfer Agent.
For purposes of processing creation and redemption orders, a ``business
day'' means any day other than a day when the Exchange is closed for
regular trading (``Business Day''). To be processed on the date
submitted, creation orders must be placed before 4:00 p.m. E.T. or the
close of regular trading on the Exchange, whichever is earlier, but may
be required to be placed earlier at the discretion of the Sponsor. A
purchase order will be effective on the date it is received by the
Transfer Agent and approved by the Marketing Agent (``Purchase Order
Date'').
Creation Units are processed in cash. By placing a purchase order,
an Authorized Participant agrees to deposit, or cause to be deposited,
an amount of cash equal to the quantity of ether attributable to each
Share of the Trust (net of accrued but unpaid expenses and liabilities)
multiplied by the number of Shares (10,000) comprising a Creation Unit
(the ``Basket Amount''). The Sponsor will cause to be published each
Business Day, prior to the commencement of trading on the Exchange, the
Basket Amount relating to a Creation Unit applicable for such Business
Day. That amount is derived by multiplying the Basket Amount by the
value of ether ascribed by the Pricing Index. However, the Authorized
Participant is also responsible for any additional cash required to
account for the price at which the Trust agrees to purchase the
requisite amount of ether
[[Page 24512]]
from an Ether Trading Counterparty to the extent it is greater than the
Pricing Index price on each Purchase Order Date.
Prior to the delivery of Creation Units, the Authorized Participant
must also have wired to the Transfer Agent the nonrefundable
transaction fee due for the creation order. Authorized Participants may
not withdraw a creation request. If an Authorized Participant fails to
consummate the foregoing, the order may be cancelled.
Following the acceptance of a purchase order, the Authorized
Participant must wire the cash amount described above to the Cash
Custodian, and the Ether Trading Counterparty must deposit the required
amount of ether with the Ether Custodian by the end of the day E.T. on
the Business Day following the Purchase Order Date. The ether will be
purchased from Ether Trading Counterparties that are not acting as
agents of the Trust or agents of the Authorized Participant. These
transactions will be done on an arms-length basis, and there is no
contractual relationship between the Trust, the Sponsor, or the Ether
Trading Counterparty to acquire such ether. Prior to any movement of
cash from the Cash Custodian to the Ether Trading Counterparty or
movement of Shares from the Transfer Agent to the Authorized
Participant's DTC account to settle the transaction, the ether must be
deposited at the Ether Custodian.
The Ether Trading Counterparty must deposit the required amount of
ether by end of day E.T. on the Business Day following the Purchase
Order Date prior to any movement of cash from the Cash Custodian or
Shares from the Transfer Agent. Upon receipt of the deposit amount of
ether at the Ether Custodian from the Ether Trading Counterparty, the
Ether Custodian will notify the Sponsor that the ether has been
received. The Sponsor will then notify the Transfer Agent that the
ether has been received, and the Transfer Agent will direct DTC to
credit the number of Shares ordered to the Authorized Participant's DTC
account and will wire the cash previously sent by the Authorized
Participant to the Ether Trading Counterparty to complete settlement of
the Purchase Order and the acquisition of the ether by the Trust, as
described above.
As between the Trust and the Authorized Participant, the expense
and risk of the difference between the value of ether calculated by the
Administrator for daily valuation using the Pricing Index and the price
at which the Trust acquires the ether will be borne solely by the
Authorized Participant to the extent that the Trust pays more for ether
than the price used by the Trust for daily valuation. Any such
additional cash amount will be included in the amount of cash
calculated by the Administrator on the Purchase Order Date,
communicated to the Authorized Participant on the Purchase Order Date,
and wired by the Authorized Participant to the Cash Custodian on the
day following the Purchase Order Date. If the Ether Trading
Counterparty fails to deliver the ether to the Ether Custodian, no cash
is sent from the Cash Custodian to the Ether Trading Counterparty, no
Shares are transferred to the Authorized Participant's DTC account, the
cash is returned to the Authorized Participant, and the Purchase Order
is cancelled.
Under the Trust-Directed Trade Model and according to the
Registration Statement, the procedures by which an Authorized
Participant can redeem one or more Creation Units mirror the procedures
for the creation of Creation Units. On any Business Day, an Authorized
Participant may place an order with the Transfer Agent through the
Marketing Agent to redeem one or more Creation Units. To be processed
on the date submitted, redemption orders must be placed before 4:00
p.m. E.T. or the close of regular trading on the Exchange, whichever is
earlier, or earlier as determined by the Sponsor. A redemption order
will be effective on the date it is received by the Transfer Agent and
approved by the Marketing Agent (``Redemption Order Date''). The
redemption procedures allow Authorized Participants to redeem Creation
Units and do not entitle an individual shareholder to redeem any Shares
in an amount less than a Creation Unit, or to redeem Creation Units
other than through an Authorized Participant. In connection with
receipt of a redemption order accepted by the Marketing Agent and
Transfer Agent, the Sponsor, on behalf of the Trust, is responsible for
selling the ether to an approved Ether Trading Counterparty in an
amount equal to the Basket Amount.
The redemption distribution from the Trust will consist of a
transfer to the redeeming Authorized Participant, or its agent, of the
amount of cash the Trust received in connection with a sale of the
Basket Amount of ether to an Ether Trading Counterparty made pursuant
to the redemption order. The Sponsor will cause to be published each
Business Day, prior to the commencement of trading on the Exchange, the
redemption distribution amount relating to a Creation Unit applicable
for such Business Day. The redemption distribution amount is derived by
multiplying the Basket Amount by the value of ether ascribed by the
Pricing Index. However, as between the Trust and the Authorized
Participant, the expense and risk of the difference between the value
of ether ascribed by the Pricing Index and the price at which the Trust
sells the ether will be borne solely by the Authorized Participant to
the extent that the Trust receives less for ether than the value
ascribed by Pricing Index.
Prior to the delivery of Creation Units, the Authorized Participant
must also have wired to the Transfer Agent the nonrefundable
transaction fee due for the redemption order.
The redemption distribution due from the Trust will be delivered by
the Transfer Agent to the Authorized Participant once the Cash
Custodian has received the cash from the Ether Trading Counterparty.
The Ether Custodian will not send the Basket Amount of ether to the
Ether Trading Counterparty until the Cash Custodian has received the
cash from the Ether Trading Counterparty and is instructed by the
Sponsor to make such transfer. Once the Ether Trading Counterparty has
sent the cash to the Cash Custodian in an agreed upon amount to settle
the agreed upon sale of the Basket Amount of ether, the Transfer Agent
will notify Sponsor. The Sponsor will then notify the Ether Custodian
to transfer the ether to the Ether Trading Counterparty, and the
Transfer Agent will wire the ether proceeds to the Authorized
Participant once the Trust's DTC account has been credited with the
Shares represented by the Creation Unit from the redeeming Authorized
Participant. Once the Authorized Participant has delivered the Shares
represented by the Creation Unit to be redeemed to the Trust's DTC
account, the Cash Custodian will wire the requisite amount of cash to
the Authorized Participant. If the Trust's DTC account has not been
credited with all of the Shares of the Creation Unit to be redeemed,
the redemption distribution will be delayed until such time as the
Transfer Agent confirms receipt of all such Shares. If the Ether
Trading Counterparty fails to deliver the cash to the Cash Custodian,
the transaction will be cancelled, and no transfer of ether or Shares
will occur.
Acquiring and Selling Ether Pursuant to Creation and Redemption of
Shares Under the Agent Execution Model
Under the Agent Execution Model, Coinbase, Inc. (``Coinbase Inc.''
or the ``Prime Execution Agent,'' an affiliate of the Ether Custodian),
acting in an agency capacity, would conduct ether purchases and sales
on behalf of the Trust with third parties through its
[[Page 24513]]
Coinbase Prime service pursuant to the Prime Execution Agent Agreement.
To utilize the Agent Execution Model, the Trust may maintain some ether
or cash in a trading account (the ``Trading Balance'') with the Prime
Execution Agent. The Prime Execution Agent Agreement provides that the
Trust does not have an identifiable claim to any particular ether (and
cash); rather, the Trust's Trading Balance represents an entitlement to
a pro rata share of the ether (and cash) the Prime Execution Agent
holds on behalf of customers who hold similar entitlements against the
Prime Execution Agent. In this way, the Trust's Trading Balance
represents an omnibus claim on the Prime Execution Agent's ether (and
cash) held on behalf of the Prime Execution Agent's customers.
To avoid having to pre-fund purchases or sales of ether in
connection with cash creations and redemptions and sales of ether to
pay Trust expenses not assumed by the Sponsor, to the extent
applicable, the Trust may borrow ether or cash as trade credit (``Trade
Credit'') from Coinbase Credit, Inc. (the ``Trade Credit Lender'') on a
short-term basis pursuant to the Coinbase Credit Committed Trade
Financing Agreement (the ``Trade Financing Agreement'').
On the day of the Purchase Order Date, the Trust would enter into a
transaction to buy ether through the Prime Execution Agent for cash.
Because the Trust's Trading Balance may not be funded with cash on the
Purchase Order Date for the purchase of ether in connection with the
Purchase Order under the Agent Execution Model, the Trust may borrow
Trade Credits in the form of cash from the Trade Credit Lender pursuant
to the Trade Financing Agreement or may require the Authorized
Participant to deliver the required cash for the Purchase Order on the
Purchase Order Date. The extension of Trade Credits on the Purchase
Order Date allows the Trust to purchase ether through the Prime
Execution Agent on the Purchase Order Date, with such ether being
deposited in the Trust's Trading Balance.
On the day following the Purchase Order Date (the ``Purchase Order
Settlement Date''), the Trust would deliver Shares to the Authorized
Participant in exchange for cash received from the Authorized
Participant. Where applicable, the Trust would use the cash to repay
the Trade Credits borrowed from the Trade Credit Lender. On the
Purchase Order Settlement Date for a Purchase Order utilizing the Agent
Execution Model, the ether associated with the Purchase Order and
purchased on the Purchase Order Date is swept from the Trust's Trading
Balance with the Prime Execution Agent to the Trust Ether Account with
the Ether Custodian pursuant to a regular end-of-day sweep process.
Transfers of ether into the Trust's Trading Balance are off-chain
transactions and transfers from the Trust's Trading Balance to the
Trust Ether Account are ``on-chain'' transactions represented on the
ether blockchain. Any financing fee owed to the Trade Credit Lender is
deemed part of trade execution costs and embedded in the trade price
for each transaction.
For a Redemption Order utilizing the Agent Execution Model, on the
day of the Redemption Order Date the Trust would enter into a
transaction to sell ether through the Prime Execution Agent for cash.
The Trust's Trading Balance with the Prime Execution Agent may not be
funded with ether on trade date for the sale of ether in connection
with the redemption order under the Agent Execution Model, when ether
remains in the Trust Ether Account with the Ether Custodian at the
point of intended execution of a sale of ether. In those circumstances
the Trust may borrow Trade Credits in the form of ether from the Trade
Credit Lender, which allows the Trust to sell ether through the Prime
Execution Agent on the Redemption Order Date, and the cash proceeds are
deposited in the Trust's Trading Balance with the Prime Execution
Agent. On the business day following the Redemption Order Date (the
``Redemption Order Settlement Date'') for a redemption order utilizing
the Agent Execution Model where Trade Credits were utilized, the Trust
delivers cash to the Authorized Participant in exchange for Shares
received from the Authorized Participant. In the event Trade Credits
were used, the Trust will use the ether that is moved from the Trust
Ether Account with the Ether Custodian to the Trading Balance with the
Prime Execution Agent to repay the Trade Credits borrowed from the
Trade Credit Lender.
For a redemption of Creation Units utilizing the Agent Execution
Model, the Sponsor would instruct the Ether Custodian to prepare to
transfer the ether associated with the redemption order from the Trust
Ether Account with the Ether Custodian to the Trust's Trading Balance
with the Prime Execution Agent. On the Redemption Order Settlement
Date, the Trust would enter into a transaction to sell ether through
the Prime Execution Agent for cash, and the Prime Execution Agent
credits the Trust's Trading Balance with the cash. On the same day, the
Authorized Participant would deliver the necessary Shares to the Trust
and the Trust delivers cash to the Authorized Participant.
Fee Accrual
According to the Registration Statement, the Trust's only recurring
ordinary expense is expected to be the Sponsor Fee, which will accrue
daily and will be payable in ether monthly in arrears. The
Administrator will calculate the Sponsor Fee on a daily basis by
applying an annualized rate to the Trust's total ether holdings, and
the amount of ether payable in respect of each daily accrual shall be
determined by reference to the Pricing Index.
CME Ether Futures Market
CME began offering trading in ether futures on February 8,
2021.\16\ Each contract represents fifty ether and is based on the ERR.
The contracts trade and settle like other cash settled commodity
futures contracts.
---------------------------------------------------------------------------
\16\ See ``CME Group Announces Launch of Ether Futures,''
February 8, 2021, available at https://www.cmegroup.com/media-room/press-releases/2021/2/08/cme_group_announceslaunchofetherfutures.html.
---------------------------------------------------------------------------
Most measurable metrics related to ether futures have trended up
since launch. For example, there were 174,261 ether futures contracts
traded in February 2024 (approximately $24.3 billion) compared to
182,631 contracts ($14.9 billion), 160,108 contracts ($23.1 billion),
and 17,149 contracts ($1.5 billion) traded in February 2023, February
2022, and February 2021, respectively.\17\
---------------------------------------------------------------------------
\17\ Data from CME Volume and average dAily Volume Reports,
available at https://www.cmegroup.com/market-data/volume-open-interest.html#volumeTotals.
---------------------------------------------------------------------------
[[Page 24514]]
[GRAPHIC] [TIFF OMITTED] TN08AP24.015
Open interest was 3792 ether futures contracts in February 2024
(approximately $529 million) compared to 4919 contracts ($337 million),
4014 contracts ($578 million), and 877 contracts ($77 million) in
February 2023, February 2022, and February 2021 respectively.\18\
---------------------------------------------------------------------------
\18\ Data from CME Open Interest Reports, available at https://www.cmegroup.com/market-data/volume-openinterest.gtml#openInterestTools.
[GRAPHIC] [TIFF OMITTED] TN08AP24.016
The number of large open interest holders has increased as well, as
demonstrated in the figure that follows.\19\
---------------------------------------------------------------------------
\19\ A large open interest holder in ether futures is an entity
that holds at least 25 contracts, which is the equivalent of 1250
ether. Data fromThe Block, available at https://www.theblock.co/data/crypto-markets/cme-cots/large-open-interest-holders-of-cme-ether-futures.
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[[Page 24515]]
[GRAPHIC] [TIFF OMITTED] TN08AP24.017
The Commodity Futures Trading Commission (``CFTC'') regulates the
CME ether futures market, and both the Exchange and CME are members of
the Intermarket Surveillance Group (``ISG'').\20\
---------------------------------------------------------------------------
\20\ For a list of the current members and affiliate members of
ISG, see https://www.isgportal.com/.
---------------------------------------------------------------------------
Background
Ethereum is free software that is hosted on computers distributed
throughout the globe. Ethereum employs an array of computer code-based
logic, called a protocol, to create a unified understanding of
ownership, commercial activity, and economic logic. This allows users
to engage in commerce without the need to trust any of its participants
or counterparties. Ethereum code creates verifiable and unambiguous
rules that assign clear, strong property rights to create a platform
for unrestrained business formation and free exchange. No single
intermediary or entity operates or controls the Ethereum network, the
transaction validation and recordkeeping infrastructure of which is
collectively maintained by a disparate user base. The Ethereum network
allows people to exchange tokens of value, or ether, which are recorded
on a distributed, public recordkeeping system or ledger known as a
blockchain, and which can be used to pay for goods and services,
including computational power on the Ethereum network, or converted to
fiat currencies, such as the U.S. dollar, at rates determined on spot
trading platforms or in individual peer-to-peer transactions. By
combining the recordkeeping system of the Ethereum blockchain with a
flexible scripting language that can be used to implement a wide
variety of instructions, the Ethereum network is intended to act as a
public computational layer on top of which users can build their own
public software programs, as an alternative to centralized web
services. On the Ethereum network, ether is the unit of account that
users pay for the computational resources consumed by running programs
of their choice.
Previously, U.S. retail investors have lacked a U.S. regulated,
U.S. exchange-traded vehicle to gain direct exposure to ether. Instead,
current options include: (i) facing the counter-party risk, legal
uncertainty, technical risk, and complexity associated with accessing
spot ether directly, or (ii) over-the-counter ether funds (``OTC Ether
Funds'') with high management fees and potentially volatile premiums
and discounts. Meanwhile, investors in other countries, including
Germany, Switzerland and France, are able to use more traditional
exchange listed and traded products (including exchange-traded funds
holding spot ether) to gain exposure to ether.\21\
---------------------------------------------------------------------------
\21\ The exchange notes that the list of countries above is not
exhaustive and that securities regulators in a number of additional
countries have either approved or otherwise allowd the listing and
trading of Spot ETH ETPs.
---------------------------------------------------------------------------
To this point, the lack of an ETP that holds spot ether (a ``Spot
Ether ETP'') exposes U.S. investor assets to significant risk because
investors who would otherwise seek exposure through a Spot Ether ETP
are forced to find alternative exposure through generally riskier
means. For example, investors in OTC Ether Funds are not afforded the
benefits and protections of regulated Spot Ether ETPs, resulting in
retail investors potentially suffering losses due to drastic movements
in the premium/discount of OTC Ether Funds. Additionally, many U.S.
investors who held their digital assets in accounts at FTX,\22\ Celsius
Network LLC,\23\ BlockFi Inc.,\24\ and Voyager Digital Holdings,
Inc.\25\ have become unsecured creditors in the insolvencies of those
entities. The Sponsor believes that, if a Spot Ether ETP had been
available to U.S. investors, it is likely that at least a portion of
the billions of dollars tied up in those proceedings would still reside
in the brokerage accounts of U.S. investors, having instead been
invested in the transparent, regulated, and well-understood structure
of a Spot Ether ETP. The Sponsor thus believes that the approval of a
Spot Ether ETP would represent a major step towards protection of U.S.
investors.
---------------------------------------------------------------------------
\22\ See FTX Trading Ltd., et al., Case No. 22-11068.
\23\ See Celsius Network LLC, et al., Case No. 22-10964.
\24\ See BlockFi Inc., Case No. 22-19361.
\25\ See Voyager Digital Holdings, Inc., et al., Case No. 22-
10943.
---------------------------------------------------------------------------
Applicable Standard
The Commission has historically approved or disapproved exchange
filings to list and trade series of Trust Issued Receipts, including
spot, Commodity-Based Trust Shares, on the
[[Page 24516]]
basis of whether the listing exchange has in place a comprehensive
surveillance sharing agreement with a regulated market of significant
size related to the underlying commodity to be held.\26\ However, the
Commission recently approved the listing and trading of shares of spot
bitcoin exchange-traded products (``Spot Bitcoin ETP''), finding that
there were ``other means'' of preventing fraud and manipulation
sufficient to satisfy the requirements of section 6(b)(5) of the
Exchange Act.\27\ In the Spot Bitcoin ETP Approval Order, the
Commission concluded, through a robust correlation analysis, that fraud
or manipulation that impacts prices in spot bitcoin markets would
likely similarly impact CME bitcoin futures prices.\28\ The Commission
further found that, because the CME's surveillance can assist in
detecting those impacts on CME bitcoin futures prices, a listing
exchange's comprehensive surveillance sharing agreement (``CSSA'') with
the CME can be reasonably expected to assist in surveilling for
fraudulent and manipulative acts and practices in the specific context
of the Spot Bitcoin ETP.
---------------------------------------------------------------------------
\26\ See Securities Exchange Act Release No. 83723 (July 26,
2018), 83 FR 37579 (August 1, 2018) (SR-BatsBZX-2016-30) (Order
Setting Aside Action by Delegated Authority and Disapproving a
Proposed Rule Change, as Modified by Amendments No. 1 and 2, to List
and Trade Shares of the Winklevoss Bitcoin Trust) (``Winklevoss
Order''). In the Winklevoss Order, the commission set forth both the
importance and definition of a surveilled, regulated market of
significant size, explaining that, for approved commodity-trust
ETPs, ``there has been in every case at least one significant,
regulated market for trading futures on the underlying commodity--
whether gold, silve, platinum, palladium, or copper--and the ETP
listing exchange has entered into surveillance-sharing agreements
with, or hel Intermarket Surveillance Group membership in common
with, the market.'' Winklevoss Order, 83 FR at 37594.
\27\ See Securities Exchange Act Release No. 34-99306 (January
10, 2024), 89 FR 3008 (January 17, 2024) (SR-NYSEARCA-2021-90; SR-
NYSEARCA-2023-44; SR-NYSEARCA-2023-58; SR-NASDAQ-2023-016; SR-
NASDAQ-2023-019; SR-CboeBZX-2023028; SR-CboeBZX-2023-038; SR-
CboeBZX-2023-040; SR-CboeBZX-2023-042; SR-CboeBZX-2023-044; SR-
CboeBZX-2023-072 (Order Granting Accelerated Appproval of Proposed
Rule Changes, as Modified by Amendments Thereto, to List and Trade
Bitcoin-Based Commodity-Based Trust Shares and Trust Units) (the
``Sopt Bitcoing ETP Approval Order'').
\28\ In the Spot Bitcoin ETP Approval Order, the Commission
noted that ``[lsqb]t[rsqb]he robustness of the Commissions's
correlation analysis rests on the pre-requisites of (1) the
correlations being calculated with repect to bitcoin futures that
trade on the CME, a U.S. market regulated by the CFTC, (2) the
lengthy sample period of price returns for both the CME bitcoin
futures market and the spot bitcoin market, (3) the frequent intra-
day trading data in both the CME bitcoin futures market and the spot
bitcoin market over that lengthy sample period, and (4) the
consistency of the correlation results throughout the lengthy sample
period.'' Spot Bitcoin ETP Approval Order, 89 FR at 3010 n.38.
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In support of this proposed rule change to permit the listing and
trading of a Spot Ether ETP, the Sponsor has conducted a similarly
robust correlation analysis between the spot ether markets and the CME
ether futures market to determine if fraud or manipulation that impacts
prices in spot ether markets would be likely to similarly impact CME
ether futures prices. The Sponsor used stationary time series of price
returns data at hourly, five-minute, and one-minute intervals for the
spot ETH/USD trading pair on Coinbase and Kraken, as well as for the
closest-to-maturity CME ether futures contract, over a lengthy sample
period from August 1, 2021 through March 20, 2024. Pearson correlation
statistics were calculated for the full sample period, as well as for
rolling three-month segments within the sample period. The Sponsor's
correlation analysis utilized frequent intra-day trading data over the
sample period on this subset of spot ether platforms and on the CME
ether futures market as well.
The results of the Sponsor's analysis support that the CME ether
futures market has been highly correlated with this subset of the spot
ether platforms throughout the past two and a half years. The
correlation between the CME ether futures market and this subset of
spot ether platforms for the full sample period is no less than 98.6%
using data at an hourly interval; 90.0% using data at a five-minute
interval; and 70.9% using data at a one-minute interval. The rolling
three-month correlation results are similar, ranging between 95.7 and
99.3% using data at an hourly interval; 86.8 and 92.9% using data at a
five-minute interval; and 65.0 and 79.5% using data at a one-minute
interval.
Correlations Between Certain Spot Ether Markets and the CME Ether Futures Market
--------------------------------------------------------------------------------------------------------------------------------------------------------
Coinbase Kraken
-----------------------------------------------------------------------------------------------
Hourly 5 Minutes 1 Minute Hourly 5 Minutes 1 Minute
--------------------------------------------------------------------------------------------------------------------------------------------------------
Full Sample: 08/01/21 to 03/20/24....................... 98.6 90.0 70.9 98.6 90.3 72.6
Rolling Three-Month Correlations Over the Full Sample
Period:
Maximum............................................. 99.3 92.7 78.7 99.3 92.9 79.5
Minimum............................................. 95.7 86.8 65.0 95.7 87.2 67.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Sponsor believes that the results of its robust correlation
analysis constitute empirical evidence that prices generally move in
close (although not perfect) alignment between the spot ether market
and the CME ether futures market. As a result, the Sponsor believes
that fraud or manipulation that impacts prices in spot ether markets
would likely similarly impact CME ether futures prices, and therefore,
because CME surveillance can assist in detecting those impacts on CME
ether futures prices, the Exchange and CME's common membership in the
ISG \29\ can be reasonably expected to assist the Exchange in
surveilling for fraudulent and manipulative acts and practices in the
spot ether markets in satisfaction of the requirement of section
6(b)(5) of the Exchange Act that there are ``other means'' of
preventing fraud and manipulation.
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\29\ The Commission has previously recognized that common
membership between a listing exchange and a futures market such as
the cME in the ISG functions as ``the equivalent of a comprehensive
surveillance sharing agreement.'' See Securities Exchange Act
Release No. 87267 (October 9, 2019), 84 FR 55382 (October 16, 2019)
(SR-NYSEArca-2019-01) (Order Disapproving a Proposed Rule Change, as
Modified by Amendment No. 1, Relating to the Listing and Trading of
Shares of the Bitwise Bitcoin ETF Trust Under NYSE Arca Rule 8.201-
E).
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Availability of Information
The NAV per Share will be disseminated daily to all market
participants at the same time. Quotation and last-sale information
regarding the Shares will be disseminated through the facilities of the
CTA. The ITV will be calculated every 15 seconds throughout the core
trading session each trading day.
[[Page 24517]]
The Sponsor will cause information about the Shares to be posted to
the Trust's website (https://www.bitwiseinvestments.com/): (1) the NAV
and NAV per Share for each Exchange trading day, posted at end of day;
(2) the daily holdings of the Trust, before 9:30 a.m. E.T. on each
Exchange trading day; (3) the Trust's effective prospectus, in a form
available for download; and (4) the Shares' ticker and CUSIP
information, along with additional quantitative information updated on
a daily basis for the Trust. For example, the Trust's website will
include (1) the prior Business Day's trading volume, the prior Business
Day's reported NAV and closing price, and a calculation of the premium
and discount of the closing price or mid-point of the bid/ask spread at
the time of NAV calculation (``Bid/Ask Price'') against the NAV; and
(2) data in chart format displaying the frequency distribution of
discounts and premiums of the daily closing price or Bid/Ask Price
against the NAV, within appropriate ranges, for at least each of the
four previous calendar quarters. The Trust's website will be publicly
available prior to the public offering of Shares and accessible at no
charge.
Investors may obtain on a 24-hour basis ether pricing information
based on the Pricing Index, ERR, and CME Ether Real Time Price, spot
ether market prices and ether futures price from various financial
information service providers. Current ether spot market prices are
also available with bid/ask spreads from ether trading platforms,
including the Constituent Platforms of the Pricing Index.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services.
Information regarding the previous day's closing price and trading
volume information for the Shares will be published daily in the
financial section of newspapers.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Trust.\30\ Trading in Shares of the Trust
will be halted if the circuit breaker parameters in NYSE Arca Rule
7.12-E have been reached. Trading also may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable.
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\30\ See NYSE Arca Rule 7.12-E.
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The Exchange may halt trading during the day in which an
interruption to the dissemination of the ITV or the CME Ether Real Time
Index occurs.\31\ If the interruption to the dissemination of the ITV
or the CME Ether Real Time Price persists past the trading day in which
it occurred, the Exchange will halt trading no later than the beginning
of the trading day following the interruption. In addition, if the
Exchange becomes aware that the NAV with respect to the Shares is not
disseminated to all market participants at the same time, it will halt
trading in the Shares until such time as the NAV is available to all
market participants.
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\31\ A limit up/limit down condition in the futures market would
not be considered an interruption requiring the Trust to be halted.
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Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in
accordance with NYSE Arca Rule 7.34-E (Early, Core, and Late Trading
Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Rule 7.6-E, the minimum price variation (``MPV'') for quoting
and entry of orders in equity securities traded on the NYSE Arca
Marketplace is $0.01, with the exception of securities that are priced
less than $1.00 for which the MPV for order entry is $0.0001.
The Shares will conform to the initial and continued listing
criteria under NYSE Arca Rule 8.201-E. The trading of the Shares will
be subject to NYSE Arca Rule 8.201-E(g), which sets forth certain
restrictions on Equity Trading Permit (``ETP'') Holders acting as
registered Market Makers in Commodity-Based Trust Shares to facilitate
surveillance.\32\ The Exchange represents that, for initial and
continued listing, the Trust will be in compliance with Rule 10A-3
under the Act,\33\ as provided by NYSE Arca Rule 5.3-E. A minimum of
100,000 Shares of the Trust will be outstanding at the commencement of
trading on the Exchange.
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\32\ Under NYSE Arca Rule 8.201-E(g), and ETP Holder as a
registered Market Maker in the Shares is required to provide the
Exchange with information relating to its accounts for trading in
the underlying commodity, related futures or options on futures, or
any other related derivatives. Commentary .04 of NYSE Arca Rule
11.3-E. requires an ETP Holder acting as a registered Market Maker,
and its affiliates, in the Shares to establish, maintain and enforce
written policies and procedures reasonably designed to prevent the
misuse of any material nonpublic information with respect to such
products, an components of the related products, any physical asset
or commodity underlying the product, applicable currencies,
underlying indexes, related futures or options on futures, and any
related derivative instruments (including the Shares). As a general
matter, the Exchange has regulatory jurisdiction over its ETP Holder
and their associated persons, which include any person or entity
controlling an ETP Holder. To the extent the Exchange may be found
to lack jurisdiction over a subsidiary or affiliate of an ETP Holder
that does business only in commodities or futures contracts, the
Exchange could obtain information regarding the activities of such
subsidiary or affiliate through surveillance sharing agreements with
regulatory organizations of which such subsidiary or affiliate is a
member.
\33\ 17 CFR 240.10A-3. See note 8, supra.
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Surveillance
The Exchange represents that trading in the Shares of the Trust
will be subject to the existing trading surveillances administered by
the Exchange, as well as cross-market surveillances administered by
FINRA on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities
laws.\34\ The Exchange represents that these procedures are adequate to
properly monitor Exchange trading of the Shares in all trading sessions
and to deter and detect violations of Exchange rules and federal
securities laws applicable to trading on the Exchange.
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\34\ FINRA conducts cross-market surveillance on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares with other
markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares from such markets
and other entities. In addition, the Exchange may obtain information
regarding trading in the Shares from markets and other entities that
are members of ISG or with which the Exchange has in place a CSSA. The
Exchange is also able to obtain information regarding trading in the
Shares in connection with ETP Holders'
[[Page 24518]]
proprietary or customer trades on any relevant market.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
All statements and representations made in this filing regarding
(a) the description of the portfolios of the Trust, (b) limitations on
portfolio holdings or reference assets, or (c) the applicability of
Exchange listing rules specified in this rule filing shall constitute
continued listing requirements for listing the Shares on the Exchange.
The Sponsor has represented to the Exchange that it will advise the
Exchange of any failure by the Trust to comply with the continued
listing requirements, and, pursuant to its obligations under section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Trust is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an ``Information Bulletin'' of the special
characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (1)
the procedures for creations of Shares in Creation Units; (2) NYSE Arca
Rule 9.2-E(a), which imposes a duty of due diligence on its ETP Holders
to learn the essential facts relating to every customer prior to
trading the Shares; (3) information regarding how the value of the ITV
and the Pricing Index is disseminated; (4) the possibility that trading
spreads and the resulting premium or discount on the Shares may widen
during the Opening and Late Trading Sessions, when an updated ITV will
not be calculated or publicly disseminated; (5) the requirement that
members deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction
and (6) trading information.
In addition, the Information Bulletin will reference that the Trust
is subject to various fees and expenses as described in the annual
report. The Information Bulletin will disclose that information about
the Shares of the Trust is publicly available on the Trust's website.
The Information Bulletin will also reference the fact that there is no
regulated source of last sale information regarding ether, that the
Commission has no jurisdiction over the trading of ether as a
commodity, and that the CFTC has regulatory jurisdiction over the
trading of ether futures contracts and options on ether futures
contracts.
The Information Bulletin will also discuss any relief, if granted,
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under section 6(b)(5) \35\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
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\35\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices and to protect
investors and the public interest in that the Shares will be listed and
traded on the Exchange pursuant to the initial and continued listing
criteria in NYSE Arca Rule 8.201-E. Further, the Exchange has
demonstrated its ability to share information with the CME, pursuant to
common ISG membership, can be reasonably expected to assist the
Exchange in surveilling for fraudulent and manipulative acts and
practices with respect to trading in the Shares, such that there are
sufficient means of preventing fraud and manipulation sufficient to
satisfy the requirements of section 6(b)(5) of the Exchange Act. As
discussed above, the results of the Sponsor's comprehensive correlation
analysis support that prices on the spot ether and CME ether futures
markets generally move in close alignment; accordingly, it is likely
that fraud or manipulation that impacts prices in spot ether markets
would likely similarly impact CME ether futures prices.
The Exchange has in place surveillance procedures that are adequate
to properly monitor Exchange trading in the Shares in all trading
sessions and to deter and detect attempted manipulation of the Shares
or other violations of Exchange rules and applicable federal securities
laws. The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares and ether futures
with the CME and other markets and other entities that are members of
the ISG, and the Exchange or FINRA, on behalf of the Exchange, or both,
may obtain trading information regarding trading in the Shares from
such markets and other entities. In addition, the Exchange may obtain
information regarding trading in the Shares from markets and other
entities that are members of ISG or with which the Exchange has in
place a CSSA. The Exchange is also able to obtain information regarding
trading in the Shares and ether futures or the underlying ether through
ETP Holders, in connection with such ETP Holders' proprietary or
customer trades which they effect through ETP Holders on any relevant
market.
Quotation and last-sale information regarding the Shares will be
disseminated through the facilities of the CTA. The Trust's website
will also include a form of the prospectus for the Trust that may be
downloaded. The website will include the Shares' ticker and CUSIP
information, along with additional quantitative information updated on
a daily basis for the Trust. The Trust's website will include (1) daily
trading volume, the prior Business Day's reported NAV and closing
price, and a calculation of the premium and discount of the closing
price or mid-point of the Bid/Ask Price against the NAV; and (ii) data
in chart format displaying the frequency distribution of discounts and
premiums of the daily closing price or Bid/Ask Price against the NAV,
within appropriate ranges, for at least each of the four previous
calendar quarters. The Trust's website will be publicly available prior
to the public offering of Shares and accessible at no charge.
Trading in Shares of the Trust will be halted if the circuit
breaker parameters in NYSE Arca Rule 7.12-E have been reached or
because of market conditions or for reasons that, in the view of the
Exchange, make trading in the Shares inadvisable.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of a
new type of exchange-traded product based on the price of ether that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Exchange has in
place surveillance procedures that are adequate to properly monitor
trading in the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose
[[Page 24519]]
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of a new
type of Commodity-Based Trust Share based on the price of ether that
would enhance competition among market participants, to the benefit of
investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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:
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-NYSEARCA-2024-31 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-NYSEARCA-2024-31. 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-NYSEARCA-2024-31 and should
be submitted on or before April 29, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-07335 Filed 4-5-24; 8:45 am]
BILLING CODE 8011-01-P
