Self-Regulatory Organizations; MIAX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 402, Criteria for Underlying Securities, Exchange Rule 307, Position Limits, and Exchange Rule 309, Exercise Limits To Allow the Exchange To List and Trade Options on the Grayscale Bitcoin Trust, the Grayscale Bitcoin Mini Trust, and the Bitwise Bitcoin ETF, 94856-94866 [2024-27988]
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94856
Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices
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:
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
CBOE–2024–051 on the subject line.
Paper Comments
khammond on DSK9W7S144PROD with NOTICES
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–CBOE–2024–051. 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–CBOE–2024–051 and should be
submitted on or before December 20,
2024.
21:22 Nov 27, 2024
Jkt 265001
Dated: November 26, 2024.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–28159 Filed 11–26–24; 4:15 pm]
BILLING CODE 8011–01–P
[FR Doc. 2024–27994 Filed 11–27–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
VerDate Sep<11>2014
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.76
Sherry R. Haywood,
Assistant Secretary.
Sunshine Act Meetings
2:00 p.m. on Thursday,
December 5, 2024.
PLACE: The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or her designee, has
certified that, in her opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics: Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations
and enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information, please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
TIME AND DATE:
(Authority: 5 U.S.C. 552b.)
[Release No. 34–101716; File No. SR–MIAX–
2024–42]
Self-Regulatory Organizations; MIAX
Exchange LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Exchange
Rule 402, Criteria for Underlying
Securities, Exchange Rule 307,
Position Limits, and Exchange Rule
309, Exercise Limits To Allow the
Exchange To List and Trade Options
on the Grayscale Bitcoin Trust, the
Grayscale Bitcoin Mini Trust, and the
Bitwise Bitcoin ETF
November 22, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
21, 2024, Miami International Securities
Exchange, LLC (‘‘MIAX’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Exchange Rule 402, Criteria for
Underlying Securities, Exchange Rule
307, Position Limits, and Exchange Rule
309, Exercise Limits.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-options/miax-options/rule-filings, at
MIAX’s principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
1 15
76 17
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U.S.C. 78s(b)(1).
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Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes to amend
Exchange Rule 402, Criteria for
Underlying Securities, Exchange Rule
307, Position Limits, and Exchange Rule
309, Exercise Limits,3 to allow the
Exchange to list and trade options on
the following exchange-traded products:
the Grayscale Bitcoin Trust (BTC) (the
‘‘Grayscale Fund’’ or ‘‘GBTC’’), the
Grayscale Bitcoin Mini Trust BTC (the
‘‘Grayscale Mini Fund’’ or ‘‘BTC’’), and
the Bitwise Bitcoin ETF (the ‘‘Bitwise
Fund’’ or ‘‘BITB’’ and, collectively, the
‘‘Bitcoin Funds’’ or ‘‘Funds’’).4
The Exchange notes that this is a
competitive filing based on a similar
proposal submitted by NYSE American
LLC (‘‘NYSE American’’), which was
approved by the Commission.5 The
Commission also recently approved a
rule proposal by Nasdaq ISE, LLC
(‘‘ISE’’) to allow the listing and trading
of options on iShares Bitcoin Trust (or
3 The Exchange notes that its affiliate options
exchanges, MIAX PEARL, LLC (‘‘MIAX Pearl’’) and
MIAX Sapphire, LLC (‘‘MIAX Sapphire’’), plan to
submit (or have already submitted) substantively
identical proposals to list and trade options on the
Bitcoin Funds. The Exchange notes that all the rules
of Chapter III of MIAX, including Exchange Rules
307 and 309, are incorporated by reference to MIAX
Pearl and MIAX Sapphire. The Exchange also notes
that all of the rules of Chapter III of MIAX,
including Exchange Rules 307 and 309, and the
rules of Chapter IV of MIAX, including Exchange
Rule 402, are incorporated by reference into the
Exchange’s affiliate, MIAX Emerald, LLC (‘‘MIAX
Emerald’’).
4 On January 10, 2024, the Securities and
Exchange Commission (‘‘Commission’’) approved
proposals by NYSE Arca, Inc., The Nasdaq Stock
Market LLC, and Cboe BZX Exchange, Inc. to list
and trade the shares of 11 bitcoin-based
commodity-based trust shares and trust units,
including the iShares Bitcoin Trust. See Securities
Exchange Act Release No. 99306 (Jan. 10, 2024), 89
FR 3008 (Jan. 17, 2024) (order approving File Nos.
SR–NYSEARCA–2021–90; SR–NYSEARCA–2023–
44; SR–NYSEARCA–2023–58; SR–NASDAQ–2023–
016; SR–NASDAQ–2023–019; SR–CboeBZX–2023–
028; SR–CboeBZX–2023–038; SR–CboeBZX–2023–
040; SR–CboeBZX–2023–042; SR–CboeBZX–2023–
044; SR–CboeBZX–2023–072) (‘‘Bitcoin ETP
Order’’).
5 See Securities Exchange Act Release No. 101386
(October 18, 2024), 89 FR 84960 (October 24, 2024)
(SR–NYSEAMER–2024–49) (Self-Regulatory
Organizations; NYSE American LLC; Notice of
Filing of Amendment No. 3 and Order Granting
Accelerated Approval of a Proposed Rule Change,
as Modified by Amendment No. 3, To Permit the
Listing and Trading of Options on Bitcoin
Exchange-Traded Funds).
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21:22 Nov 27, 2024
Jkt 265001
IBIT), which is a trust that holds bitcoin
(referred to herein as the ‘‘ISE IBIT
Approval Order’’).6 As discussed herein,
the Exchange believes, like the recentlyapproved options on IBIT, options on
the Bitcoin Funds would permit
hedging, and allow for more liquidity,
better price efficiency, and less
volatility with respect to the underlying
Funds. Further, permitting the listing of
such options would enhance the
transparency and efficiency of markets
in these and correlated products.
Current Exchange Rule 402(i)(4)
provides that securities deemed
appropriate for options trading include
shares or other securities (‘‘Exchange
Traded Fund Shares’’ or ‘‘ETFs’’) that
represent certain types of interests,7
6 See Securities Exchange Act Release No. 101128
(September 20, 2024), 89 FR 78942 (September 26,
2024) (SR–ISE–2024–03) (Notice of Filing of
Amendment Nos. 4 and 5 and Order Granting
Accelerated Approval of a Proposed Rule Change,
as Modified by Amendment Nos. 1, 4, and 5, to
Permit the Listing and Trading of Options on the
iShares Bitcoin Trust (‘‘IBIT’’) (‘‘ISE IBIT Approval
Order’’).
7 See Exchange Rule 402(i), which permits
options trading on ETFS that: (1) represent interests
in registered investment companies (or series
thereof) organized as open-end management
investment companies, unit investment trusts or
similar entities that hold portfolios of securities
and/or financial instruments (‘‘Funds’’), including,
but not limited to, stock index futures contracts,
options on futures, options on securities and
indices, equity caps, collars and floors, swap
agreements, forward contracts, repurchase
agreements and reverse repurchase agreements (the
‘‘Financial Instruments’’), and money market
instruments, including, but not limited to, U.S.
government securities and repurchase agreements
(the ‘‘Money Market Instruments’’) comprising or
otherwise based on or representing investments in
broad-based indexes or portfolios of securities and/
or Financial Instruments and Money Market
Instruments (or that hold securities in one or more
other registered investment companies that
themselves hold such portfolios of securities and/
or Financial Instruments and Money Market
Instruments); (2) represent interests in a trust or
similar entity that holds a specified non-U.S.
currency or currencies deposited with the trust
which when aggregated in some specified minimum
number may be surrendered to the trust or similar
entity by the beneficial owner to receive the
specified non-U.S. currency or currencies and pays
the beneficial owner interest and other distributions
on the deposited non-U.S. currency or currencies,
if any, declared and paid by the trust (‘‘Currency
Trust Shares’’); (3) represent commodity pool
interests principally engaged, directly or indirectly,
in holding and/or managing portfolios or baskets of
securities, commodity futures contracts, options on
commodity futures contracts, swaps, forward
contracts and/or options on physical commodities
and/or non-U.S. currency (‘‘Commodity Pool
ETFs’’); (4) are issued by the are issued by the
SPDR® Gold Trust, the iShares COMEX Gold Trust,
the iShares Silver Trust, the ETFS Silver Trust, the
Aberdeen Standard Physical Gold Trust, the ETFS
Palladium Trust, the ETFS Platinum Trust, the
Sprott Physical Gold Trust, or the iShares Bitcoin
Trust; or (5) represent an interest in a registered
investment company (‘‘Investment Company’’)
organized as an open-end management company or
similar entity, that invests in a portfolio of
securities selected by the Investment Company’s
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94857
including interests in certain specific
trusts that hold financial instruments,
money market instruments, or precious
metals (which are deemed
commodities).
The Bitcoin Funds are Bitcoin-backed
commodity ETFs structured as trusts.
Similar to any ETFs currently deemed
appropriate for options trading under
Exchange Rule 402(i), the investment
objective of each Bitcoin Fund is for its
shares to reflect the performance of
Bitcoin (less the expenses of the trust’s
operations), offering investors an
opportunity to gain exposure to Bitcoin
without the complexities of Bitcoin
delivery. As is the case for ETFs
currently deemed appropriate for
options trading, a Bitcoin Fund’s shares
represent units of fractional undivided
beneficial interest in the trust, the assets
of which consist principally of Bitcoin
and are designed to track Bitcoin or the
performance of the price of Bitcoin and
offer access to the Bitcoin market.8 The
Bitcoin Funds provide investors with
cost-efficient alternatives that allow a
level of participation in the Bitcoin
market through the securities market.
The primary substantive difference
between Bitcoin Funds and ETFs
currently deemed appropriate for
options trading are that ETFs may hold
securities, certain financial instruments,
and specified precious metals (which
are deemed commodities), while Bitcoin
Funds hold Bitcoin (which is also
deemed a commodity).
The Exchange believes each Bitcoin
Fund satisfies the Exchange’s initial
listing standards for ETFs on which the
Exchange may list options.9
Specifically, each Bitcoin Fund satisfies
the initial listing standards set forth in
Exchange Rule 402(i)(5)(i), as is the case
for other ETFs on which the Exchange
lists options (including trusts that hold
commodities). Exchange Rule
402(i)(5)(i) requires that the ETFs must
either (1) meet the criteria and standards
set forth in Exchange Rule 402(a) or
investment adviser consistent with the Investment
Company’s investment objectives and policies,
which is issued in a specified aggregate minimum
number in return for a deposit of a specified
portfolio of securities and/or a cash amount with a
value equal to the next determined net asset value
(‘‘NAV’’), and when aggregated in the same
specified minimum number, may be redeemed at a
holder’s request, which holder will be paid a
specified portfolio of securities and/or cash with a
value equal to the next determined NAV (‘‘Managed
Fund Share’’); provided that all of the conditions
listed in subparagraphs (5)(i) and 5(ii) are met.
8 The trust may include minimal cash.
9 Subparagraphs (a) and (b) of Exchange Rule 402
provide for guidelines to be used by the Exchange
when evaluating potential underlying securities for
Exchange option transactions.
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Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices
402(b),10 or (2) be available for creation
or redemption each business day from
or through the issuer in cash or in kind
at a price related to net asset value, and
the issuer must be obligated to issue
units in a specified aggregate number
even if some or all of the investment
assets required to be deposited have not
been received by the issuer, subject to
the condition that the person obligated
to deposit the investments has
undertaken to deliver the investment
assets as soon as possible and such
undertaking is secured by the delivery
and maintenance of collateral consisting
of cash or cash equivalents satisfactory
to the issuer, as provided in the
respective prospectus. Each Bitcoin
Fund satisfies Exchange Rule
402(i)(5)(i)(B), as each is subject to this
creation and redemption process.
While not required by the Rules for
purposes of options listings, the
Exchange believes each Bitcoin Fund
satisfies the criteria and guidelines set
forth in Exchange Rule 402. Pursuant to
Exchange Rule 402, a security (which
includes ETFs) on which options may
be listed and traded on the Exchange
must be duly registered (with the
Commission) and be an NMS stock (as
defined in Rule 600 of Regulation NMS
under the Act, and be characterized by
a substantial number of outstanding
shares that are widely held and actively
traded.11 Each Bitcoin Fund is an NMS
Stock as defined in Rule 600 of
Regulation NMS under the Act.12 The
Exchange believes each Bitcoin Fund is
characterized by a substantial number of
outstanding shares that are widely held
and actively traded.
Pursuant to the data presented in the
NYSE American filing,13 as of August
30, 2024, the Bitcoin Funds had the
following number of shares outstanding
(and corresponding market
capitalization):
Exchange Rule 402(a)–(b).
criteria and guidelines for a security to be
considered widely held and actively traded are set
forth in Exchange Rule 402(b), subject to
exceptions.
12 An ‘‘NMS stock’’ means any NMS security
other than an option, and an ‘‘NMS security’’ means
any security or class of securities for which
transaction reports are collected, processed, and
made available pursuant to an effective transaction
reporting plan (or an effective national market
system plan for reporting transaction in listed
options). See 17 CFR 242.600(b)(64) (definition of
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11 The
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21:22 Nov 27, 2024
Jkt 265001
GBTC ....................................
BTC .......................................
BITB ......................................
Trading volume
(shares)
GBTC .....................................................................................................................................
BTC ........................................................................................................................................
BITB .......................................................................................................................................
10 See
Bitcoin fund
Beneficial
holders
(8/14/24)
464,364
13,403
75,437
As this table shows, each Bitcoin
Fund has significantly more than 2,000
Bitcoin
Shares
Market value
beneficial holders (approximately 232,
fund
outstanding
(8/30/2024)
7, and 38 time more, respectively),
GBTC ..
284,570,100
$13,443,091,524 which is the minimum number of
BTC .....
366,950,100
1,930,157,526 holders the Exchange generally requires
BITB ....
68,690,000
2,221,640,670 for corporate stock in order to list
options on that stock pursuant to
Exchange Rule 402(b)(2). Therefore, the
As shown above, each Bitcoin Fund
Exchange believes the shares of each
had significantly more than 7,000,000
Bitcoin Fund are widely held.
shares outstanding (approximately 29
In addition, the Exchange believes the
and 6.5 times that amount,
shares of each Bitcoin Fund are actively
respectively), which is the minimum
traded. Further, according to the NYSE
number of shares of a corporate stock
American filing,15 as of September 30,
that the Exchange generally requires to
list options on that stock pursuant to
2024, the total trading volume (by
Exchange Rule 402(b)(1). The Exchange
shares and notional) for these funds
believes this demonstrates that each
since they began trading 16 and the
Bitcoin Fund is characterized by a
average daily volume (‘‘ADV’’) over the
substantial number of outstanding
30-day period of September 1 through
shares.
September 30, 2024, was as follows: 17
Bitcoin fund
As demonstrated above, even though
these Bitcoin Funds have been trading
for less than one year, the trading
volume for each is substantially higher
than 2,400,000 shares (between roughly
165 and 700 times that amount), which
is the minimum 12-month volume the
Exchange generally requires for a
security in order to list options on that
security as set forth in Exchange Rule
402(b). The Exchange believes this data
demonstrates each Bitcoin Fund is
characterized by a substantial number of
Further, according to the NYSE
American filing,14 the below table
contains information regarding the
number of beneficial holders of the
Bitcoin Funds as of August 14, 2024:
1,803,567,700
335,492,930
434,815,840
Trading volume
(notional $)
93,472,544,497
1,792,866,521
14,433,361,384
ADV
(shares)
3,266,138
6,838,546
1,949,835
outstanding shares that are actively
traded.
In addition to satisfying the
Exchange’s initial listing standards,
options on the Bitcoin Funds will be
subject to the Exchange’s continued
listing standards as set forth in
Exchange Rule 403(g).18 Pursuant to
Exchange Rule 403(g), the Exchange will
not open for trading any additional
series of option contracts covering a
fund traded on the Exchange if such
fund ceases to be an ‘‘NMS stock’’ as
provided for Exchange Rule 402(b) or
the fund is halted from trading on its
primary market.19 Additionally, options
on funds traded on the Exchange may be
subject to the suspension of opening
transactions as follows: (1) the fund no
longer meets the terms of Exchange Rule
403(b); (2) following the initial twelvemonth period beginning upon the
commencement of trading of the fund,
there are fewer than 50 record and/or
beneficial holders of the fund for 30 or
more consecutive trading days; (3) the
‘‘NMS security’’) and (65) (definition of ‘‘NMS
stock’’).
13 See supra note 5.
14 See supra note 5.
15 See supra note 5.
16 As noted by NYSE American, GBTC and BITB
began trading on January 11th and BTC began
trading on July 31st. Thus, the measurement period
for the trading volume (shares/notional) is January
11 through September 20, 2024, for GBTC and BITB
(i.e., nine months) and July 31 through September
20, 2024, for BTC (i.e., two months). See supra note
5.
17 See FactSet, 9/30/2024, available at https://
www.factset.com/data-attribution.
18 The Exchange proposes to amend Exchange
Rule 402(i)(4) to include the Bitcoin Funds in the
list of ETPs deemed ‘‘Exchange-Traded Fund
Shares’’—of ETFs—for purposes of the continued
listing standards set forth in Exchange Rule 403(g).
See proposed Exchange Rule 402(i)(4). For
avoidance of doubt, the Exchange refers ‘‘funds’’
rather than ‘‘ETFs’’ to make clear that the Bitcoin
Funds are subject to these continued listing
standards.
19 See Exchange Rule 403(g).
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value of the underlying commodity is
no longer calculated or available; or (4)
such other event occurs or condition
exists that in the opinion of the
Exchange makes further dealing on the
Exchange inadvisable.
Options on each Bitcoin Fund will be
physically settled contracts with
American-style exercise.20 Consistent
with Exchange Rule 404, which governs
the opening of options series on a
specific underlying security (including
ETFs and ETPs), the Exchange will open
at least one expiration month for
options on each Bitcoin Fund 21 at the
commencement of trading on the
Exchange and may also list series of
options on Bitcoin Funds for trading on
a weekly,22 monthly,23 or quarterly 24
basis. The Exchange may also list longterm equity option series (‘‘LEAPS’’)
that expire from twelve to thirty-nine
months from the time they are listed.25
Pursuant to Exchange Rule 404(g),
which governs strike prices of series of
options on ETFs, the interval between
strike prices of series of options on
Bitcoin Funds will be $1 or greater
when the strike price is $200 or less and
20 See Exchange Rule 401 (Rights and Obligations
of Holders and Writers), which provides that the
rights and obligations of holders and writers of
option contracts of any class of options dealt in on
the Exchange shall be as set forth in the Rules of
the Options Clearing Corporation (‘‘OCC’’). See also
OCC Rules, Chapter VIII, which governs exercise
and assignment, and Chapter IX, which governs the
discharge of delivery and payment obligations
arising out of the exercise of physically settled stock
option contracts. OCC Rules can be located at:
https://www.theocc.com/getmedia/9d3854cd-b782450f-bcf7-33169b0576ce/occrules.pdf.
21 See Exchange Rule 404. The monthly
expirations are subject to certain listing criteria for
underlying securities described within Exchange
Rule 402. Monthly listings expire the third Friday
of the month. The term ‘‘expiration date’’ (unless
separately defined elsewhere in the OCC By-Laws),
when used in respect of an option contract (subject
to certain exceptions), means the third Friday of the
expiration month of such option contract, or if such
Friday is a day on which the exchange on which
such option is listed is not open for business, the
preceding day on which such exchange is open for
business. See OCC By-Laws Article I, Section 1.
Pursuant to Exchange Rule 404(c), additional series
of options of the same class may be opened for
trading on the Exchange when the Exchange deems
it necessary to maintain an orderly market, to meet
customer demand or when the market price of the
underlying stock moves more than five strike prices
from the initial exercise price or prices. Pursuant
to Exchange Rule 404(e), new series of options on
an individual stock may be added until the
beginning of the month in which the options
contract will expire. Due to unusual market
conditions, the Exchange, in its discretion, may add
a new series of options on an individual stock until
the close of trading on the business day prior to
expiration.
22 See Exchange Rule 404, Interpretation and
Policy .02.
23 See Exchange Rule 404, Interpretation and
Policy .13.
24 See Exchange Rule 404, Interpretation and
Policy .03.
25 See Exchange Rule 406.
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21:22 Nov 27, 2024
Jkt 265001
$5 or greater where the strike price is
over $200.26 Additionally, the Exchange
may list series of options pursuant to
the $1 Strike Price Interval Program,27
the $0.50 Strike Program,28 and the
$2.50 Strike Price Program.29 Pursuant
to Exchange Rule 510, where the price
of a series of a Bitcoin Fund option is
less than $3.00, the minimum increment
will be $0.05, and where the price is
$3.00 or higher, the minimum
increment will be $0.10.30 Any and all
new series of Bitcoin Fund options that
the Exchange lists will be consistent and
comply with the expirations, strike
prices, and minimum increments set
forth in Exchange Rules 404 and 510, as
applicable. Further, the Exchange notes
that Exchange Rule 1502, which governs
margin requirements applicable to the
trading of all options on the Exchange,
including options on ETFs and ETPs,
will also apply to the trading of Bitcoin
Fund options.
Position and Exercise Limits
Position and exercise limits for
options, including options on Bitcoin
Funds, are determined pursuant to
Exchange Rules 307 and 309,
respectively. Position and exercise
limits for options vary according to the
number of outstanding shares and the
trading volumes of the underlying
security over the past six months, where
the largest in capitalization and the
most frequently traded funds have an
option position and exercise limit of
250,000 contracts (with adjustments for
splits, re-capitalizations, etc.) on the
same side of the market; and smaller
capitalization funds have position and
exercise limits of 200,000, 75,000,
50,000 or 25,000 contracts (with
adjustments for splits, re-capitalizations,
etc.) on the same side of the market.31
26 The Exchange notes that for options listed
pursuant to the Short Term Option Series Program,
the Monthly Options Series Program, and the
Quarterly Options Series Program, Exchange Rules
404, Interpretation and Policies .02, .03, and .13,
specifically set forth intervals between strike prices
on Short Term Option Series, Quarterly Options
Series, and Monthly Options Series, respectively.
27 See Exchange Rule 404, Interpretation and
Policy .01.
28 See Exchange Rule 404, Interpretation and
Policy .04.
29 See Exchange Rule 404(f).
30 See Exchange Rule 510(a). If options on a
Bitcoin Fund are eligible to participate in the Penny
Interval Program, the minimum increment of $0.01
below $3.00 and $0.50 above $3.00 would apply.
See Exchange Rule 510(a)(3). See also Exchange
Rule 510(c) (which describes the requirements for
the Penny Interval Program).
31 See Exchange Rule 307. For an option to be
eligible for the 50,000-contract limit, the security
underlying the option must have most recent sixmonth trading volume of at least 20,000,000 shares,
or most recent six-month trading volume of at least
15,000,000 shares and at least 40,000,000 shares
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94859
Position limits are designed to limit
the number of options contracts traded
on the Exchange in an underlying
security that an investor, acting alone or
in concert with others directly or
indirectly, may control. The purpose of
position limits, which are set forth in
Exchange Rule 307, is to address
potential manipulative schemes and
adverse market impacts surrounding the
use of options, such as disrupting the
market in the security underlying the
options. As such, position limits must
balance concerns regarding mitigating
potential manipulation and the cost of
inhibiting potential hedging activity that
investors may use for legitimate
economic purposes. To achieve this
balance, the Exchange proposes to set
the position and exercise limits for the
options on the Bitcoin Funds at 25,000
contracts, a limit which has already
been approved for IBIT at a competing
exchange, an ETP that (like the Bitcoin
Funds) holds bitcoin.32 Capping the
position limit at 25,000 contracts, the
lowest limit available in options, would
address concerns related to
manipulation and protection of
investors as this number is conservative
for the Bitcoin Funds and therefore
appropriate given their liquidity. While
the Exchange believes that the proposed
25,000-contract position limit is
conservative for options on the Bitcoin
Funds, it nonetheless believes that, for
the reasons set forth below, evidence
exists to support a much higher position
limit.33
currently outstanding. For an option to be eligible
for the 75,000-contract limit, the underlying
security must have most recent six-month trading
volume of at least 40,000,000 shares, or most recent
six-month trading volume of at least 30,000,000
shares and at least 120,000,000 shares currently
outstanding. For an option to be eligible for the
200,000-contract limit, the underlying security must
have most recent six-month trading volume of at
least 80,000,000 shares, or most recent six-month
trading volume of at least 60,000,000 shares and at
least 240,000,000 shares currently outstanding. For
an option to be eligible for the 250,000-contract
limit, the security underlying the option must have
most recent six-month trading volume of at least
100,000,000 shares, or most recent six-month
trading volume of at least 75,000,000 shares and at
least 300,000,000 shares currently outstanding. The
25,000-contract limit applies to options on
underlying securities that do not qualify for a
higher contract limit. See Exchange Rule 307. In
addition, Interpretation and Policy .01 to Exchange
Rule 307 establishes higher position limits for
options on certain ETFs.
32 See Securities Exchange Act Release No.
101128 (September 20, 2024), 89 FR 78942
(September 26, 2024) (SR–ISE–2024–03) (Notice of
Filing of Amendment Nos. 4 and 5 and Order
Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment Nos. 1, 4, and
5, to Permit the Listing and Trading of Options on
the iShares Bitcoin Trust (‘‘IBIT’’) (‘‘ISE IBIT
Approval Order’’).
33 The Exchange may file a subsequent rule
change to amend the position and exercise limit for
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As shown in the table below,
provided in the NYSE American
filing 34, GBTC, BITB and BTC would
easily qualify for the 250,000-contract
position limit available to other ETFs
and ETPs pursuant to the criterion in
Exchange Rule 307, which requires that,
for the most recent six-month period,
trading volume for the underlying
security be at least 100,000,000 shares.35
As noted in the NYSE American filing,
BTC began trading on July 31, 2024, and
therefore had only two months of
trading data available at the time of the
NYSE American filing, as shown
below.36
Total volume
(9/30/2024)
Bitcoin fund
GBTC .............
BTC ...............
BITB ...............
723,758,100 (6-months).
335,492,930 (2-months).
263,965,870 (6-months).
Thus, based on the most-recent
trading volume, each Bitcoin Fund
exceeded the requisite minimum of
100,000,000 shares necessary to qualify
for the 250,000-contract position and
exercise limits. By comparison, other
options symbols with six-month trading
volume less than GBTC, BITB, and BTC
Proposed position/
exercise limits in
equivalent shares
Bitcoin
fund
GBTC .......................................................................................................
BTC ..........................................................................................................
BITB .........................................................................................................
As this table demonstrates, if a market
participant held the maximum
permissible options positions in one of
the Bitcoin Fund options and exercised
all of them at the same time, that market
participant would control a small
percentage of the outstanding shares of
the underlying Bitcoin Fund. For
example, as noted above, a position
are eligible for position and exercise
limits of at least 250,000.37
With respect to the outstanding shares
of each Bitcoin Fund, if a market
participant held the maximum number
of contracts possible pursuant to the
proposed position and exercise limits
(25,000 contracts), the equivalent shares
represented by the proposed position/
exercise limit (2,500,000 shares) would
represent the following approximate
percentage of current outstanding
shares, according to the data presented
in the NYSE American filing: 38
Outstanding shares
(8/30/24)
2,500,000
2,500,000
2,500,000
limit of 25,000 same side contracts
effectively restricts a market participant
from holding positions that could result
in the receipt of no more than 2,500,000
shares of the applicable Bitcoin Fund (if
that market participant exercised all its
options). Based on data presented in the
NYSE American filing regarding the
number of shares outstanding for each
Bitcoin fund
284,570,100
366,950,100
68,690,000
0.9
0.7
3.6
Bitcoin Fund as of August 30, 2024, the
table below sets forth the approximate
number of market participants that
could hold the maximum of 25,000
same side positions in each Bitcoin
Fund that would equate to the number
of shares outstanding of that Bitcoin
Fund: 39
Shares outstanding
GBTC .........................................................................................................................................
BTC ............................................................................................................................................
BITB ...........................................................................................................................................
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Percentage of
outstanding
shares
(%)
284,570,100
366,950,100
68,690,000
Number of
market participants
with 25,000
same side positions
114
147
27
This means if 114 market participants
had 25,000 same side positions in
options on GBTC, each of them would
have to simultaneously exercise all of
those options to create a scenario that
may put the underlying security under
stress. Similarly, this means if 147
market participants had 25,000 same
side positions in options on BTC, each
of them would have to simultaneously
exercise all of those options to create a
scenario that may put the underlying
security under stress. Finally, this
means if 27 market participants had
25,000 same side positions in options
on BITB, each of them would have to
simultaneously exercise all of those
options to create a scenario that may put
the underlying security under stress.
The Exchange believes it is highly
unlikely for this to occur; however, even
if such event did occur, the Exchange
would not expect any of the Bitcoin
Fund to be under stress because such an
event would merely induce the creation
of more shares through the trust’s
creation and redemption process.
Further, given that the issuer of each
Bitcoin Fund may create and redeem
shares that represent an interest in
Bitcoin, the Exchange believes it is
relevant to compare the size of a
position limit to the market
capitalization of the Bitcoin market. As
of August 30, 2024, the global supply of
Bitcoin was 19,747,066, and the price of
options on any or all the Bitcoin Funds based on
additional data regarding trading activity, to
continue to balance any concerns regarding
manipulation. A higher position limit would allow
institutional investors to utilize options on the
Bitcoin Funds for prudent risk management
purposes.
34 See supra note 5.
35 Per Exchange Rule 307, to qualify for the
250,000-contract position limit for options, the
underlying security must (i) have trading volume of
at least 100,000,000 shares during the most recent
six-month trading period; or (ii) have trading
volume of at least 75,000,000 shares during the
most recent six-month trading period and have at
least 300,000,000 shares currently outstanding.
36 See supra note 5. See FactSet, 9/30/2024,
https://www.factset.com/data-attribution. For
avoidance of doubt, the Exchange notes that this
chart depicts the most recent six months (at the
time the NYSE American filing was filed) of trading
data by shares for GBTC and BITB whereas the
earlier chart (that depicts volume by notional and
shares) covered the first nine months of trading. For
BTC, both charts depict the same two-month
trading volume by shares.
37 See https://www.theocc.com/Market-Data/
Market-Data-Reports/Series-and-Trading-Data/
Series-Search (including the following symbols that
have a position limit of 250,000: GLD, IAU, SLV,
SIVR, SGOL).
38 See supra note 5.
39 See supra note 5.
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one Bitcoin was approximately
$59,108.23, which equates to a market
capitalization of approximately $1.167
trillion.40 Consider the proposed
position and exercise limit of 25,000
option contracts for each Bitcoin Fund
option. A position and exercise limit of
25,000 same side contracts effectively
restricts a market participant from
holding positions that could result in
the receipt of no more than 2,500,000
shares of GBTC, BTC, or BITB, as
applicable (if that market participant
exercised all its options). The following
Value of 2,500,000
shares of
Bitcoin funds
($)
Aug. 30th
share price
($)
Bitcoin fund
GBTC .........................................................................................................................
BTC ............................................................................................................................
BITB ...........................................................................................................................
Therefore, if a market participant with
the maximum 25,000 same side
contracts in options on GBTC, BTC, or
BITB exercised all positions at one time,
table from the NYSE American filing
shows the share price of each Bitcoin
Fund on August 30, 2024, the value of
2,500,000 shares of the Bitcoin Fund at
that price, and the approximate
percentage of that value of the size of
the Bitcoin market: 41
46.75
5.20
31.95
such an event would have no practical
impact on the Bitcoin market. As
described in the NYSE American filing,
the below chart shows the market
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Bitcoin for approximately 1,850 BITB
shares. Another 36,532,522,591 BITB
shares could be created before the
supply of Bitcoin was exhausted. As a
result, 14,613 market participants would
have to simultaneously exercise 25,000
same side positions in BITB options to
receive shares of BITB holding the
entire global supply of Bitcoin. Unlike
the Bitcoin Funds, the number of shares
that corporations may issue is limited.
However, like corporations, which
authorize additional shares, repurchase
shares, or split their shares, the Bitcoin
Funds may create, redeem, or split
shares in response to demand. While the
supply of Bitcoin is limited to
21,000,000, it is believed that it will
take more than 100 years to fully mine
the remaining Bitcoin.44 The supply of
Bitcoin is larger than the available
supply of most securities.45 Given the
significant unlikelihood of any of these
events ever occurring, the Exchange
does not believe options on the Bitcoin
Funds should be subject to position and
exercise limits even lower than those
proposed (which are already equal to
the lowest available limit for equity
40 See https://www.blockchain.com/explorer/
charts/total-bitcoins.
41 See supra note 5.
42 See supra note 5.
43 See id.
44 See https://www.blockchain.com/explorer/
assets/btc (citing 21 million as the ‘‘total supply’’
of bitcoin).
45 The market capitalization of Bitcoin would
rank in the top 10 among securities. See https://
companiesmarketcap.com/usa/largest-companiesin-the-usa-by-market-cap/.
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Market value
(8/30/2024)
19,747,066
284,570,100
366,950,100
68,690,000
As shown above, the Bitcoin Funds
collectively represent approximately
1.51% of the global supply of Bitcoin
(19,747, 066). Based on the $46.75 price
of a GBTC share on August 30, 2024, a
market participant could have redeemed
one Bitcoin for approximately 1,264
GBTC shares. Another 24,967,146,455
GBTC shares could be created before the
supply of Bitcoin was exhausted. As a
result, 9,987 market participants would
have to simultaneously exercise 25,000
same side positions in GBTC options to
receive shares of the GBTC holding the
entire global supply of Bitcoin.
Similarly, based on the $5.20 price of a
BTC share on August 30, 2024, a market
participant could have redeemed one
Bitcoin for approximately 11,367 BTC
shares. Another 224,464,249,382 BTC
shares could be created before the
supply of Bitcoin was exhausted. As a
result, 89,786 market participants would
have to simultaneously exercise 25,000
same side positions in BTC options to
receive shares of BTC holding the entire
global supply of Bitcoin. Similarly,
based on the $31.95 price of a BITB
share on August 30, 2024, a market
participant could have redeemed one
0.010
0.001
0.007
capitalization of each Bitcoin Fund
relative to the market capitalization of
the entire bitcoin market, as of August
30, 2024.42
Bitcoin/shares
outstanding
Total Bitcoin Market 43 .........................................................................................
GBTC ...................................................................................................................
BTC ......................................................................................................................
BITB .....................................................................................................................
116,875,000
13,000,000
79,875,000
Percentage of
Bitcoin market
(%)
% of Total
Bitcoin market
1,167,214,096,788
13,443,091,524
1,930,157,526
2,221,640,670
100.00
1.15
0.17
0.19
options in the industry) to protect the
supply of Bitcoin.
The Exchange also believes the
proposed limits are appropriate given
position limits for Bitcoin futures. For
example, the Chicago Mercantile
Exchange (‘‘CME’’) imposes a position
limit of 2,000 futures (for the initial spot
month) on its Bitcoin futures contract.46
On August 28, 2024, CME Aug 24
Bitcoin Futures settled at $58,950. A
position of 2,000 CME Bitcoin futures,
therefore, would have a notional value
of $589,500,000. The following table
shows the share price of each Bitcoin
Fund on August 28, 2024, and the
approximate number of option contracts
that equates to that notional value: 47
Bitcoin fund
GBTC ........
BTC ...........
BITB ..........
Aug. 28th
share price
46.94
5.23
32.08
Number of
option
contracts
125,585
1,127,151
183,759
The approximate number of option
contracts for each Bitcoin Fund that
equate to the notional value of CME
Bitcoin futures is significantly higher
46 See CME Rulebook Chapter 350 (description of
CME Bitcoin Futures) and Chapter 5, Position
Limit, Position Accountability and Reportable Level
Table in the Interpretations & Special Notices. Each
CME Bitcoin futures contract is valued at five
Bitcoins as defined by the CME CF Bitcoin
Reference Rate (‘‘BRR’’). See CME Rule 35001.
47 See supra note 5.
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than the proposed limit of 25,000
options contract for each Bitcoin Fund
option. The fact that many options
ultimately expire out-of-the-money and
thus are not exercised for shares of the
underlying, while the delta of a Bitcoin
Future is 1, further demonstrates how
conservative the proposed limits of
25,000 options contracts are for the
Bitcoin Fund options.
The Exchange notes, unlike options
contracts, CME position limits are
calculated on a net futures-equivalent
basis by contract and include contracts
that aggregate into one or more base
contracts according to an aggregation
ratio(s).48 Therefore, if a portfolio
includes positions in options on futures,
CME would aggregate those positions
into the underlying futures contracts in
accordance with a table published by
CME on a delta equivalent value for the
relevant spot month, subsequent spot
month, single month and all month
position limits.49 If a position exceeds
position limits because of an option
assignment, CME permits market
participants to liquidate the excess
position within one business day
without being considered in violation of
its rules. Additionally, if at the close of
trading, a position that includes options
exceeds position limits for futures
contracts, when evaluated using the
delta factors as of that day’s close of
trading but does not exceed the limits
when evaluated using the previous
day’s delta factors, then the position
shall not constitute a position limit
violation. Considering CME’s position
limits on futures for Bitcoin, the
Exchange believes that that the
proposed same side position limits are
more than appropriate for the Bitcoin
Fund options.
The Exchange believes the available
supply of Bitcoin is not relevant to the
determination of position and exercise
limits for options overlying the Bitcoin
Funds.50 Position and exercise limits are
48 See CME Rulebook Chapter 5, Position Limit,
Position Accountability and Reportable Level Table
in the Interpretations & Special Notices.
49 Id.
50 The Exchange is unaware of any proposed rule
change related to position and exercise limits for
any equity option (including commodity ETF
options) for which the Commission required
consideration of whether the available supply of an
underlying (whether it be a corporate stock or an
ETF) or the contents of an ETF (commodity or
otherwise) should be considered when an exchange
proposed to establish those limits. See, e.g.,
Securities Exchange Act Release No. 57894 May 30,
2008), 73 FR 32061 (June 5, 2008) (SR–CBOE–2005–
11) (approval order in which the Commission stated
that the ‘‘listing and trading of Gold Trust Options
will be subject to the exchanges’ rules pertaining to
position and exercise limits and margin’’). The
Exchange notes the position limits in Exchange
Rule 307 are the same as when the Commission
approved this filing. For reference, the current
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not a tool that should be used to address
a potential limited supply of the
underlying of an underlying. Position
and exercise limits do not limit the total
number of options that may be held, but
rather they limit the number of
positions a single customer may hold or
exercise at one time.51 ‘‘Since the
inception of standardized options
trading, the options exchanges have had
rules imposing limits on the aggregate
number of options contracts that a
member or customer could hold or
exercise.’’ 52 Position and exercise limit
rules are intended ‘‘to prevent the
establishment of options positions that
can be used or might create incentives
to manipulate or disrupt the underlying
market so as to benefit the options
position. In particular, position and
exercise limits are designed to minimize
the potential for mini-manipulations
and for corners or squeezes of the
underlying market. In addition, such
limits serve to reduce the possibility for
disruption of the options market itself,
especially in illiquid options classes.’’ 53
The Exchange notes that a
Registration Statement on Form S–1 was
filed with the Commission for each
Bitcoin Fund, each of which described
the supply of Bitcoin as being limited to
21,000,000 (of which approximately
90% had already been mined), and that
the limit would be reached around the
year 2140.54 Each Registration
Statement permits an unlimited number
of shares of the applicable Bitcoin Fund
to be created. Further, the Commission
approved proposed rule changes that
permitted the listing and trading of
shares of each Bitcoin Fund, which
position and exercise limits for options on SPDR
Gold Shares ETF (‘‘GLD’’) and options on iShares
Silver Trust (‘‘SLV’’) are 250,000 contracts, or 10
times that proposed position and exercise limit for
the Bitcoin Fund options.
51 For example, suppose an option has a position
limit of 25,000 option contracts and there are a total
of 10 investors trading that option. If all 10
investors max out their positions, that would result
in 250,000 option contracts outstanding at that
time. However, suppose 10 more investors decide
to begin trading that option and also max out their
positions. This would result in 500,000 option
contracts outstanding at that time. An increase in
the number of investors could cause an increase in
outstanding options even if position limits remain
unchanged.
52 See Securities Exchange Act Release No. 39489
(December 24, 1997), 63 FR 276 (January 5, 1998)
(SR–CBOE–1997–11).
53 Id.
54 See, e.g., GBTC Form S–1 Registration
Statement, at p. 17, https://www.sec.gov/Archives/
edgar/data/1588489/000119312517013693/
d157414ds1.htm; BTC Form S–1 Registration
Statement, at p. 21, https://www.sec.gov/Archives/
edgar/data/2015034/000119312524065444/
d785023ds1.htm; and BITB Amendment No 2. to S–
1, at p. 47, https://www.sec.gov/Archives/edgar/
data/1763415/000199937123000735/bitwise-s1a_
120423.htm (‘‘Bitcoin Funds Reg. Stmts.’’).
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approval did not comment on the
sufficient supply of Bitcoin or address
whether there was a risk that permitting
an unlimited number of shares for a
Bitcoin Fund would impact the supply
of Bitcoin.55 Therefore, the Exchange
believes the Commission had ample
time and opportunity to consider
whether the supply of Bitcoin was
sufficient to permit the creation of
unlimited Bitcoin Fund shares, and
does not believe considering this supply
with respect to the establishment of
position and exercise limits is
appropriate given its lack of relevance to
the purpose of position and exercise
limits. However, given the significant
size of the Bitcoin supply, the proposed
positions limits are more than sufficient
to protect investors and the market.
Based on the foregoing, the Exchange
believes the proposal to list options on
the Bitcoin Funds with positions and
exercise limits of 25,000 on the same
side, the lowest position limit available
in the options industry, is conservative
and appropriate given the market
capitalization, average daily volume,
and high number of outstanding shares
for each of the Bitcoin Funds. The
proposed position and exercise limits
reasonably and appropriately balance
the liquidity provisioning in the market
against the prevention of manipulation.
The Exchange believes these proposed
limits are effectively designed to
prevent an individual customer or entity
from establishing options positions that
could be used to manipulate the market
of the underlying Bitcoin Funds as well
as the Bitcoin market.56
As described herein, options on the
Bitcoin Funds will trade in the same
manner as any other ETF or ETP options
on the Exchange. The Exchange Rules
that currently apply to the listing and
trading of options on the Exchange,
including, for example, Rules that
govern listing criteria, expiration and
exercise prices, minimum increments,
margin requirements, customer accounts
and trading halt procedures will apply
to the listing and trading of Bitcoin
Funds on the Exchange in the same
manner as they apply to all other ETFs
and ETPs that are listed and traded on
the Exchange, including the precious
metal-backed commodity ETPs already
deemed appropriate for options trading
on the Exchange pursuant to Exchange
Rule 404. Further, as described above,
Exchange Rules regarding position and
exercise limits will likewise apply to
options on the Bitcoin Funds except
55 See
Bitcoin ETP Approval Order.
Securities Exchange Act Release No. 39489
(December 24, 1997), 63 FR 276 (January 5, 1998)
(SR–CBOE–1997–11).
56 See
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that, as proposed, the position and
exercise limits will be set at 25,000 on
the same side.
*
*
*
*
*
The Exchange notes that options on
Bitcoin Funds would not be available
for trading until The Options Clearing
Corporation (‘‘OCC’’) represents to the
Exchange that it is fully able to clear
and settle such options. The Exchange
has also analyzed its capacity and
represents that it and The Options Price
Reporting Authority (‘‘OPRA’’) have the
necessary systems capacity to handle
the additional traffic associated with the
listing of options on Bitcoin Funds. The
Exchange believes any additional traffic
that would be generated from the
trading of options on Bitcoin Funds
would be manageable. The Exchange
represents that Exchange Members 57
will not have a capacity issue as a result
of this proposed rule change.
The Exchange represents that the
same surveillance procedures 58
applicable to all other options currently
listed and traded on the Exchange will
apply to options on Bitcoin Funds, and
that it has the necessary systems
capacity to support the new option
series. The Exchange’s existing
surveillance and reporting safeguards
are designed to deter and detect possible
manipulative behavior which might
arise from listing and trading options on
ETFs and ETPs, such as (existing)
precious metal-commodity backed ETP
options as well as the proposed options
on Bitcoin Funds. The Exchange
believes that its surveillance procedures
are adequate to properly monitor the
trading of options on Bitcoin Funds in
all trading sessions and to deter and
detect violations of Exchange rules. The
Exchange’s staff will have access to the
surveillance programs conducted by its
affiliate exchanges, MIAX Pearl and
MIAX Sapphire, with respect to trading
in the shares of the underlying trust for
each Fund when conducting
surveillances for market abuse or
manipulation in the options on the
Funds. Additionally, the Exchange is a
member of the Intermarket Surveillance
Group (‘‘ISG’’) under the Intermarket
Surveillance Group Agreement. ISG
members work together to coordinate
surveillance and investigative
information sharing in the stock,
options, and futures markets. In
addition to obtaining surveillance data
from MIAX Pearl and MIAX Sapphire,
the Exchange will be able to obtain
57 See
Exchange Rule 100.
surveillance program includes real-time
patterns for price and volume movements and posttrade surveillance patterns (e.g., spoofing, marking
the close, pinging, phishing).
58 The
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information regarding trading in the
shares of the underlying Bitcoin Funds
from NYSE American and other markets
through ISG. In addition, the Exchange
has a Regulatory Services Agreement
with the Financial Industry Regulatory
Authority (‘‘FINRA’’). Pursuant to a
multi-party 17d–2 joint plan, all options
exchanges allocate regulatory
responsibilities to FINRA to conduct
certain options-related market
surveillances.59 Further, the Exchange
will implement any new surveillance
procedures it deems necessary to
effectively monitor the trading of
options on the Bitcoin Funds.
The underlying shares of spot bitcoin
ETPs, including the Bitcoin Funds, are
also subject to safeguards related to
addressing market abuse and
manipulation. As the Commission
stated in its order approving proposals
of several exchanges to list and trade
shares of spot bitcoin-based exchangetraded products (‘‘Bitcoin ETP Order’’):
Each Exchange has a comprehensive
surveillance-sharing agreement with the CME
via their common membership in the
Intermarket Surveillance Group. This
facilitates the sharing of information that is
available to the CME through its surveillance
of its markets, including its surveillance of
the CME bitcoin futures market.60
The Exchange states that, given the
consistently high correlation between
the CME bitcoin futures market and the
spot bitcoin market, as confirmed by the
Commission through robust correlation
analysis, the Commission was able to
conclude that such surveillance sharing
agreements could reasonably be
59 Section 19(g)(1) of the Act, among other things,
requires every SRO registered as a national
securities exchange or national securities
association to comply with the Act, the rules and
regulations thereunder, and the SRO’s own rules,
and, absent reasonable justification or excuse,
enforce compliance by its members and persons
associated with its members. See 15 U.S.C.
78q(d)(1) and 17 CFR 240.17d–2. Section 17(d)(1)
of the Act allows the Commission to relieve an SRO
of certain responsibilities with respect to members
of the SRO who are also members of another SRO.
Specifically, Section 17(d)(1) allows the
Commission to relieve an SRO of its responsibilities
to: (i) receive regulatory reports from such
members; (ii) examine such members for
compliance with the Act and the rules and
regulations thereunder, and the rules of the SRO;
or (iii) carry out other specified regulatory
responsibilities with respect to such members.
60 See Securities Exchange Act Release No. 99306
(January 10, 2024), 89 FR 3008, 3009 (January 17,
2024) (File Nos. SR–NYSEArca–2021–90; SR–
NYSEArca–2023–44; SR–NYSEArca–2023–58; SR–
NASDAQ2023–016; SR–NASDAQ–2023–019; SR–
CboeBZX–2023–028; SR–CboeBZX–2023–038; SR–
CboeBZX2023–040; SR–CboeBZX–2023–042;
SRCboeBZX–2023–044; and SR–CboeBZX–2023–
072) (Order Granting Accelerated Approval of
Proposed Rule Changes, as Modified by
Amendments Thereto, to List and Trade BitcoinBased Commodity-Based Trust Shares and Trust
Units).
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94863
‘‘expected to assist in surveilling for
fraudulent and manipulative acts and
practices in the specific context of the
[Bitcoin ETPs].’’ 61
In light of surveillance measures
related to both options and futures as
well as the underlying Bitcoin Funds,62
the Exchange believes that existing
surveillance procedures are designed to
deter and detect possible manipulative
behavior which might potentially arise
from listing and trading the proposed
options on the Bitcoin Funds.
Finally, quotation and last sale
information for ETFs is available via the
Consolidated Tape Association (‘‘CTA’’)
high speed line. Quotation and last sale
information for such securities is also
available from the exchange on which
such securities are listed. Quotation and
last sale information for options on
Bitcoin Funds will be available via
OPRA and major market data vendors.
The Exchange believes that offering
options on Bitcoin Funds will benefit
investors by providing them with an
additional, relatively lower cost
investing tool to gain exposure to the
price of Bitcoin and hedging vehicle to
meet their investment needs in
connection with Bitcoin-related
products and positions. The Exchange
expects investors will transact in
options on Bitcoin Funds in the
unregulated over-the-counter (‘‘OTC’’)
options market,63 but may prefer to
trade such options in a listed
environment to receive the benefits of
trading listed options, including (1)
enhanced efficiency in initiating and
closing out position; (2) increased
market transparency; and (3) heightened
contra-party creditworthiness due to the
role of OCC as issuer and guarantor of
all listed options. The Exchange
believes that listing Bitcoin Fund
options may cause investors to bring
61 See
Bitcoin ETP Order, 89 FR at 3010–11.
Amendment No. 2 to Proposed Rule
Change to List and Trade Shares of the Grayscale
Bitcoin Trust (BTC) under NYSE Arca Rule 8.201–
E (Commodity-Based Trust Shares) (SR–
NYSEARCA–2021–90), filed Jan. 5, 2024, available
at https://www.sec.gov/comments/sr-nysearca2021-90/srnysearca202190-358659-884182.pdf;
Amendment No. 2 to Proposed Rule Change to List
and Trade Shares of the Bitwise Bitcoin ETF under
NYSE Arca Rule 8.201–E (Commodity-Based Trust
Shares) (SR–NYSEARCA–2023–44), filed Jan. 5,
2024, available at https://www.sec.gov/comments/
sr-nysearca-2023-44/srnysearca202344-358800884322.pdf; and Notice of Filing of Proposed Rule
Change, as Modified by Amendment No. 1, To List
and Trade Shares of the Grayscale Bitcoin Mini
Trust Under NYSE Arca Rule 8.201–E, CommodityBased Trust Shares, Securities Exchange Act
Release No. 100290 (June 6, 2024), 89 FR 49931
(June 12, 2024) (SR–NYSEARCA–2024–45).
63 The Exchange understands from customers that
investors have historically transacted in options on
ETFs in the OTC options market if such options
were not available for trading in a listed
environment.
62 See
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this liquidity to the Exchange, would
increase market transparency and
enhance the process of price discovery
conducted on the Exchange through
increased order flow. The Exchange
notes that the ETPs that hold precious
metal commodities on which the
Exchange may already list and trade
options are trusts structured in
substantially the same manner as
Bitcoin Funds and essentially offer the
same objectives and benefits to
investors, just with respect to different
assets. The Exchange notes that it has
not identified any issues with the
continued listing and trading of options
on any ETFs or ETPs that hold
commodities (i.e., precious metals) that
it currently lists and trades on the
Exchange.
Finally, the Exchange notes that
applicable Exchange rules will require
that customers receive appropriate
disclosure before trading options in
Bitcoin Funds.64 Further, brokers
opening accounts and recommending
options transactions must comply with
relevant customer suitability
standards.65
2. Statutory Basis
The Exchange believes that its
proposed rule change is consistent with
Section 6(b) of the Act 66 in general and
furthers the objectives of Section 6(b)(5)
of the Act 67 in particular, in that it is
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
In particular, the Exchange believes
that the proposal to list and trade
options on Bitcoin Funds will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, protect investors because
offering options on Bitcoin Funds will
provide investors with an opportunity
to realize the benefits of utilizing
options on a Bitcoin Fund, including
cost efficiencies and increased hedging
strategies.
The Exchange believes that offering
Bitcoin Fund options will benefit
investors by providing them with a
relatively lower-cost risk management
tool, which will allow them to manage
their positions and associated risk in
their portfolios more easily in
connection with exposure to the price of
64 See
Exchange Rules 1307(b) and (e).
Exchange Rule 1309.
66 15 U.S.C. 78f(b).
67 15 U.S.C. 78f(b)(5).
Bitcoin and with Bitcoin-related
products and positions. Additionally,
the Exchange’s offering of Bitcoin Fund
options will provide investors with the
ability to transact in such options in a
listed market environment as opposed
to in the unregulated OTC options
market, which would increase market
transparency and enhance the process of
price discovery conducted on the
Exchange through increased order flow
to the benefit of all investors. The
Exchange also notes that it already lists
options on other commodity-based
ETPs,68 which, as described above, are
trusts structured in substantially the
same manner as Bitcoin Funds and
essentially offer the same objectives and
benefits to investors, just with respect to
a different commodity (i.e., Bitcoin
rather than precious metals) and for
which the Exchange has not identified
any issues with the continued listing
and trading of commodity-backed ETP
options it currently lists for trading.
The Exchange also believes the
proposed rule change will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, because
it is consistent with current Exchange
Rules previously filed with the
Commission. Options on Bitcoin Funds
satisfy the initial listing standards and
continued listing standards currently in
the Exchange Rules applicable to
options on all ETFs and ETPs, including
ETPs that hold other commodities
already deemed appropriate for options
trading on the Exchange. Additionally,
as demonstrated above and in the NYSE
American filing,69 each Bitcoin Fund is
characterized by a substantial number of
shares that are widely held and actively
traded. Bitcoin Fund options will trade
in the same manner as any other ETF or
ETP options—the same Exchange Rules
that currently govern the listing and
trading of options, including
permissible expirations, strike prices,
minimum increments, and margin
requirements, will govern the listing
and trading of options on Bitcoin Funds
in the same manner.
The proposed position and exercise
limit for options on the Bitcoin Funds
is 25,000 contracts. These position and
exercise limits are the lowest position
and exercise limits available in the
options industry, are extremely
conservative and more than appropriate
given the Bitcoin Funds’ market
capitalization, average daily volume,
number of beneficial holders, and high
65 See
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68 See
69 See
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supra note 5.
Frm 00164
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number of outstanding shares.70 The
proposed position and exercise limits
are consistent with the Act as they
addresses concerns related to
manipulation and protection of
investors because the position and
exercise limits are extremely
conservative and more than appropriate
given the Bitcoin Funds are actively
traded.
The Exchange represents that it has
the necessary systems capacity to
support the new Bitcoin Fund options.
The Exchange believes that its existing
surveillance and reporting safeguards
are designed to deter and detect possible
manipulative behavior which might
arise from listing and trading options,
including Bitcoin Fund options. The
Exchange’s existing surveillance and
reporting safeguards are designed to
deter and detect possible manipulative
behavior which might arise from listing
and trading options on ETFs and ETPs,
such as (existing) precious metalcommodity backed ETP options as well
as the proposed options on Bitcoin
Funds. The Exchange believes that its
surveillance procedures are adequate to
properly monitor the trading of options
on Bitcoin Funds in all trading sessions
and to deter and detect violations of
Exchange rules. Specifically, the
Exchange’s market surveillance staff
will have access to the surveillances
conducted by its affiliates, MIAX Pearl
and MIAX Sapphire, with respect to the
Bitcoin Funds and would review
activity in the underlying Funds when
conducting surveillances for market
abuse or manipulation in the options on
the Trust. Additionally, the Exchange is
a member of the ISG under the
Intermarket Surveillance Group
Agreement. ISG members work together
to coordinate surveillance and
investigative information sharing in the
stock, options, and futures markets. In
addition, the Exchange has a Regulatory
Services Agreement with the FINRA
and, as noted herein, pursuant to a
multi-party 17d–2 joint plan, all options
exchanges allocate regulatory
responsibilities to FINRA to conduct
certain options-related market
surveillances. Further, the Exchange
will implement any new surveillance
procedures it deems necessary to
70 The Exchange notes that IBIT—which has been
approved for options trading—represents a larger
percentage of the bitcoin market than all three
Bitcoin Funds. See ISE IBIT Approval Order, supra
note 6. As noted herein, the Bitcoin Funds
collectively represent approximately 1.51% of the
bitcoin market. By comparison, IBIT options have
an approved position limit of 25,000 contracts per
side, which represents 4% of total underlying spot
BTC liquidity, and IBIT is the most liquid spot
Bitcoin ETF. See id.
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effectively monitor the trading of
options on the Bitcoin Funds.
The underlying shares of spot bitcoin
ETPs, including the Bitcoin Funds, are
also subject to safeguards related to
addressing market abuse and
manipulation. As the Commission
stated in its order approving proposals
of several exchanges to list and trade
shares of spot bitcoin-based ETPs,
‘‘[e]ach Exchange has a comprehensive
surveillance-sharing agreement with the
CME via their common membership in
the Intermarket Surveillance Group.
This facilitates the sharing of
information that is available to the CME
through its surveillance of its markets,
including its surveillance of the CME
bitcoin futures market.71 The Exchange
states that, given the consistently high
correlation between the CME bitcoin
futures market and the spot bitcoin
market, as confirmed by the
Commission through robust correlation
analysis, the Commission was able to
conclude that such surveillance sharing
agreements could reasonably be
‘‘expected to assist in surveilling for
fraudulent and manipulative acts and
practices in the specific context of the
[Bitcoin ETPs].’’ 72 In light of
surveillance measures related to both
options and futures as well as the
underlying Bitcoin Funds,73 the
Exchange believes that existing
surveillance procedures are designed to
deter and detect possible manipulative
behavior which might potentially arise
from listing and trading the proposed
options on the Bitcoin Funds. Further,
71 See Securities Exchange Act Release No. 99306
(January 10, 2024), 89 FR 3008, 3009 (January 17,
2024) (File Nos. SR–NYSEArca–2021–90; SR–
NYSEArca–2023–44; SR–NYSEArca–2023–58; SR–
NASDAQ2023–016; SR–NASDAQ–2023–019; SR–
CboeBZX–2023–028; SR–CboeBZX–2023–038; SR–
CboeBZX2023–040; SR–CboeBZX–2023–042;
SRCboeBZX–2023–044; and SR–CboeBZX–2023–
072) (Order Granting Accelerated Approval of
Proposed Rule Changes, as Modified by
Amendments Thereto, to List and Trade BitcoinBased Commodity-Based Trust Shares and Trust
Units).
72 See Bitcoin ETP Order, 89 FR at 3010–11.
73 See Amendment No. 2 to Proposed Rule
Change to List and Trade Shares of the Grayscale
Bitcoin Trust (BTC) under NYSE Arca Rule 8.201–
E (Commodity-Based Trust Shares) (SR–
NYSEARCA–2021–90), filed Jan. 5, 2024, available
at https://www.sec.gov/comments/sr-nysearca2021-90/srnysearca202190-358659-884182.pdf;
Amendment No. 2 to Proposed Rule Change to List
and Trade Shares of the Bitwise Bitcoin ETF under
NYSE Arca Rule 8.201–E (Commodity-Based Trust
Shares) (SR–NYSEARCA–2023–44), filed Jan. 5,
2024, available at https://www.sec.gov/comments/
sr-nysearca-2023-44/srnysearca202344-358800884322.pdf; and Notice of Filing of Proposed Rule
Change, as Modified by Amendment No. 1, To List
and Trade Shares of the Grayscale Bitcoin Mini
Trust Under NYSE Arca Rule 8.201–E, CommodityBased Trust Shares, Securities Exchange Act
Release No. 100290 (June 6, 2024), 89 FR 49931
(June 12, 2024) (SR–NYSEARCA–2024–45).
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the Exchange will implement any new
surveillance procedures it deems
necessary to effectively monitor the
trading of options on Bitcoin ETPs.
Finally, the Exchange notes that this
proposal will remove impediments to
and perfect the mechanism of a free and
open market and a national market
system and, in general, protect investors
because applicable Exchange rules will
require that customers receive
appropriate disclosure before trading
options in Bitcoin Funds 74 and will
require that brokers opening accounts
and recommending options transactions
comply with relevant customer
suitability standards.75
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intramarket Competition: The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
as Bitcoin Funds would need to satisfy
the initial listing standards set forth in
the Exchange Rules in the same manner
as any other ETF before the Exchange
could list options on them.
Additionally, Bitcoin Fund options will
be equally available to all market
participants who wish to trade such
options. The Exchange Rules currently
applicable to the listing and trading of
options on ETFs on the Exchange will
apply in the same manner to the listing
and trading of all options on Bitcoin
Funds. Also, and as stated above, the
Exchange already lists options on other
commodity-based ETPs.76
Intermarket Competition: The
Exchange does not believe that the
proposal to list and trade options on
Bitcoin Funds will impose any burden
on intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. To the extent
that the advent of Bitcoin Fund options
trading on the Exchange may make the
Exchange a more attractive marketplace
to market participants at other
exchanges, such market participants are
free to elect to become market
participants on the Exchange. As noted
herein, this is a competitive filing as the
Commission recently approved the
listing and trading of options on the
Bitcoin Funds,77 as well as another ETP
that, like the Bitcoin Funds, holds
bitcoin.78 Additionally, other options
exchanges are free to amend their listing
rules, as applicable, to permit them to
list and trade options on Bitcoin Funds.
The Exchange notes that listing and
trading Bitcoin Fund options on the
Exchange will subject such options to
transparent exchange-based rules as
well as price discovery and liquidity, as
opposed to alternatively trading such
options in the OTC market.
The Exchange believes that the
proposed rule change may relieve any
burden on, or otherwise promote,
competition as it is designed to increase
competition for order flow on the
Exchange in a manner that is beneficial
to investors by providing them with a
lower-cost option to hedge their
investment portfolios. The Exchange
notes that it operates in a highly
competitive market in which market
participants can readily direct order
flow to competing venues that offer
similar products. Ultimately, the
Exchange believes that offering Bitcoin
Fund options for trading on the
Exchange will promote competition by
providing investors with an additional,
relatively low-cost means to hedge their
portfolios and meet their investment
needs in connection with Bitcoin prices
and Bitcoin-related products and
positions on a listed options exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 79 and Rule
19b–4(f)(6) thereunder.80 Because the
foregoing proposed rule change does
not: (i) significantly affect the protection
of investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 81 and
77 See
supra note 5.
ISE IBIT Approval Order, supra note 6.
79 15 U.S.C. 78s(b)(3)(A)(iii).
80 17 CFR 240.19b–4(f)(6).
81 15 U.S.C. 78s(b)(3)(A)(iii).
78 See
74 See
Exchange Rules 1307(b) and (e).
Exchange Rule 1309.
76 See Exchange Rule 402(i).
75 See
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subparagraph (f)(6) of Rule 19b–4
thereunder.82
A proposed rule change filed under
Rule 19b–4(f)(6) 83 under the Act does
not normally become operative prior to
30 days after the date of the filing.
However, pursuant to Rule 19b–
4(f)(6)(iii),84 the Commission may
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay so that the proposal may become
operative immediately upon filing. The
Commission previously approved the
listing of options on the Grayscale
Bitcoin Trust, the Grayscale Bitcoin
Mini Trust, and the Bitwise Bitcoin
ETF.85 The Exchange has provided
information regarding the underlying
Bitcoin Funds, including, among other
things, information regarding trading
volume, the number of beneficial
holders, and the market capitalization of
the Bitcoin Funds. The proposal also
establishes position and exercise limits
for options on the Bitcoin Funds and
provides information regarding the
surveillance procedures that will apply
to Bitcoin Fund options. The
Commission believes that waiver of the
operative delay could benefit investors
by providing an additional venue for
trading Bitcoin Fund options. Therefore,
the Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change as operative upon
filing.86
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
82 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Commission
waives this requirement.
83 17 CFR 240.19b–4(f)(6).
84 17 CFR 240.19b–4(f)(6)(iii).
85 See Securities Exchange Act Release No.
101386 (October 18, 2024), 89 FR 84960 (October
24, 2024) (SR–NYSEAMER–2024–49) (Notice of
Filing of Amendment No. 3 and Order Granting
Accelerated Approval of a Proposed Rule Change,
as Modified by Amendment No. 3, To Permit the
Listing and Trading of Options on Bitcoin
Exchange-Traded Funds).
86 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
SR–MIAX–2024–42 and should be
submitted on or before December 20,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.87
Sherry R. Haywood,
Assistant 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. 2024–27988 Filed 11–27–24; 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–
MIAX–2024–42 on the subject line.
ACTION:
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–MIAX–2024–42. 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
PO 00000
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BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
Data Collection Available for Public
Comments
60-Day notice and request for
comments.
In accordance with the
Paperwork Reduction Act of 1995, this
notice announces the Small Business
Administration’s (SBA) intentions to
request approval for reinstatement with
modification of a previously approved
information collection.
DATES: Submit comments on or before
January 28, 2025.
ADDRESSES: Send all comments
regarding whether this information
collection is necessary for the proper
performance of the function of the
agency, whether the burden estimates
are accurate, and if there are ways to
minimize the estimated burden and
enhance the quality of the collections, to
Elden Hawkes, Jr., Small Business
Innovation Research and Technology
Transfer Office, Office of Investment
and Innovation, Small Business
Administration, 409 3rd Street, 6th
Floor, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT:
Elden Hawkes, Jr., Partnership and
Innovation Specialist, 202–731–8503,
FAST@sba.gov, or Curtis B. Rich,
Agency Clearance Officer, 202–205–
7030, curtis.rich@sba.gov.
SUPPLEMENTARY INFORMATION: The
Federal and State Technology
Partnership (FAST) Program is a
competitive grants program designed to
strengthen the technological
competitiveness of small businesses
seeking funding from the Small
Business Innovation Research (SBIR)
and Small Business Technology
Transfer (STTR) programs. FAST
provides funding to organizations to
execute state/regional programs that
increase the number of SBIR/STTR
proposals (through outreach and
financial support); increase the number
of SBIR/STTR awards (through
technical assistance and mentoring);
SUMMARY:
87 17
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Agencies
[Federal Register Volume 89, Number 230 (Friday, November 29, 2024)]
[Notices]
[Pages 94856-94866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27988]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101716; File No. SR-MIAX-2024-42]
Self-Regulatory Organizations; MIAX Exchange LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Exchange Rule 402, Criteria for Underlying Securities, Exchange Rule
307, Position Limits, and Exchange Rule 309, Exercise Limits To Allow
the Exchange To List and Trade Options on the Grayscale Bitcoin Trust,
the Grayscale Bitcoin Mini Trust, and the Bitwise Bitcoin ETF
November 22, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 21, 2024, Miami International Securities Exchange, LLC
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Exchange Rule 402, Criteria for
Underlying Securities, Exchange Rule 307, Position Limits, and Exchange
Rule 309, Exercise Limits.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxglobal.com/markets/us-options/miax-options/rule-filings, at MIAX's principal office, and at the Commission's
Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these
[[Page 94857]]
statements may be examined at the places specified in Item IV below.
The Exchange has prepared summaries, set forth in sections A, B, and C
below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Exchange Rule 402, Criteria for
Underlying Securities, Exchange Rule 307, Position Limits, and Exchange
Rule 309, Exercise Limits,\3\ to allow the Exchange to list and trade
options on the following exchange-traded products: the Grayscale
Bitcoin Trust (BTC) (the ``Grayscale Fund'' or ``GBTC''), the Grayscale
Bitcoin Mini Trust BTC (the ``Grayscale Mini Fund'' or ``BTC''), and
the Bitwise Bitcoin ETF (the ``Bitwise Fund'' or ``BITB'' and,
collectively, the ``Bitcoin Funds'' or ``Funds'').\4\
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\3\ The Exchange notes that its affiliate options exchanges,
MIAX PEARL, LLC (``MIAX Pearl'') and MIAX Sapphire, LLC (``MIAX
Sapphire''), plan to submit (or have already submitted)
substantively identical proposals to list and trade options on the
Bitcoin Funds. The Exchange notes that all the rules of Chapter III
of MIAX, including Exchange Rules 307 and 309, are incorporated by
reference to MIAX Pearl and MIAX Sapphire. The Exchange also notes
that all of the rules of Chapter III of MIAX, including Exchange
Rules 307 and 309, and the rules of Chapter IV of MIAX, including
Exchange Rule 402, are incorporated by reference into the Exchange's
affiliate, MIAX Emerald, LLC (``MIAX Emerald'').
\4\ On January 10, 2024, the Securities and Exchange Commission
(``Commission'') approved proposals by NYSE Arca, Inc., The Nasdaq
Stock Market LLC, and Cboe BZX Exchange, Inc. to list and trade the
shares of 11 bitcoin-based commodity-based trust shares and trust
units, including the iShares Bitcoin Trust. See Securities Exchange
Act Release No. 99306 (Jan. 10, 2024), 89 FR 3008 (Jan. 17, 2024)
(order approving File Nos. SR-NYSEARCA-2021-90; SR-NYSEARCA-2023-44;
SR-NYSEARCA-2023-58; SR-NASDAQ-2023-016; SR-NASDAQ-2023-019; SR-
CboeBZX-2023-028; SR-CboeBZX-2023-038; SR-CboeBZX-2023-040; SR-
CboeBZX-2023-042; SR-CboeBZX-2023-044; SR-CboeBZX-2023-072)
(``Bitcoin ETP Order'').
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The Exchange notes that this is a competitive filing based on a
similar proposal submitted by NYSE American LLC (``NYSE American''),
which was approved by the Commission.\5\ The Commission also recently
approved a rule proposal by Nasdaq ISE, LLC (``ISE'') to allow the
listing and trading of options on iShares Bitcoin Trust (or IBIT),
which is a trust that holds bitcoin (referred to herein as the ``ISE
IBIT Approval Order'').\6\ As discussed herein, the Exchange believes,
like the recently-approved options on IBIT, options on the Bitcoin
Funds would permit hedging, and allow for more liquidity, better price
efficiency, and less volatility with respect to the underlying Funds.
Further, permitting the listing of such options would enhance the
transparency and efficiency of markets in these and correlated
products.
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\5\ See Securities Exchange Act Release No. 101386 (October 18,
2024), 89 FR 84960 (October 24, 2024) (SR-NYSEAMER-2024-49) (Self-
Regulatory Organizations; NYSE American LLC; Notice of Filing of
Amendment No. 3 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 3, To Permit the
Listing and Trading of Options on Bitcoin Exchange-Traded Funds).
\6\ See Securities Exchange Act Release No. 101128 (September
20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (Notice
of Filing of Amendment Nos. 4 and 5 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1,
4, and 5, to Permit the Listing and Trading of Options on the
iShares Bitcoin Trust (``IBIT'') (``ISE IBIT Approval Order'').
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Current Exchange Rule 402(i)(4) provides that securities deemed
appropriate for options trading include shares or other securities
(``Exchange Traded Fund Shares'' or ``ETFs'') that represent certain
types of interests,\7\ including interests in certain specific trusts
that hold financial instruments, money market instruments, or precious
metals (which are deemed commodities).
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\7\ See Exchange Rule 402(i), which permits options trading on
ETFS that: (1) represent interests in registered investment
companies (or series thereof) organized as open-end management
investment companies, unit investment trusts or similar entities
that hold portfolios of securities and/or financial instruments
(``Funds''), including, but not limited to, stock index futures
contracts, options on futures, options on securities and indices,
equity caps, collars and floors, swap agreements, forward contracts,
repurchase agreements and reverse repurchase agreements (the
``Financial Instruments''), and money market instruments, including,
but not limited to, U.S. government securities and repurchase
agreements (the ``Money Market Instruments'') comprising or
otherwise based on or representing investments in broad-based
indexes or portfolios of securities and/or Financial Instruments and
Money Market Instruments (or that hold securities in one or more
other registered investment companies that themselves hold such
portfolios of securities and/or Financial Instruments and Money
Market Instruments); (2) represent interests in a trust or similar
entity that holds a specified non-U.S. currency or currencies
deposited with the trust which when aggregated in some specified
minimum number may be surrendered to the trust or similar entity by
the beneficial owner to receive the specified non-U.S. currency or
currencies and pays the beneficial owner interest and other
distributions on the deposited non-U.S. currency or currencies, if
any, declared and paid by the trust (``Currency Trust Shares''); (3)
represent commodity pool interests principally engaged, directly or
indirectly, in holding and/or managing portfolios or baskets of
securities, commodity futures contracts, options on commodity
futures contracts, swaps, forward contracts and/or options on
physical commodities and/or non-U.S. currency (``Commodity Pool
ETFs''); (4) are issued by the are issued by the SPDR[supreg] Gold
Trust, the iShares COMEX Gold Trust, the iShares Silver Trust, the
ETFS Silver Trust, the Aberdeen Standard Physical Gold Trust, the
ETFS Palladium Trust, the ETFS Platinum Trust, the Sprott Physical
Gold Trust, or the iShares Bitcoin Trust; or (5) represent an
interest in a registered investment company (``Investment Company'')
organized as an open-end management company or similar entity, that
invests in a portfolio of securities selected by the Investment
Company's investment adviser consistent with the Investment
Company's investment objectives and policies, which is issued in a
specified aggregate minimum number in return for a deposit of a
specified portfolio of securities and/or a cash amount with a value
equal to the next determined net asset value (``NAV''), and when
aggregated in the same specified minimum number, may be redeemed at
a holder's request, which holder will be paid a specified portfolio
of securities and/or cash with a value equal to the next determined
NAV (``Managed Fund Share''); provided that all of the conditions
listed in subparagraphs (5)(i) and 5(ii) are met.
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The Bitcoin Funds are Bitcoin-backed commodity ETFs structured as
trusts. Similar to any ETFs currently deemed appropriate for options
trading under Exchange Rule 402(i), the investment objective of each
Bitcoin Fund is for its shares to reflect the performance of Bitcoin
(less the expenses of the trust's operations), offering investors an
opportunity to gain exposure to Bitcoin without the complexities of
Bitcoin delivery. As is the case for ETFs currently deemed appropriate
for options trading, a Bitcoin Fund's shares represent units of
fractional undivided beneficial interest in the trust, the assets of
which consist principally of Bitcoin and are designed to track Bitcoin
or the performance of the price of Bitcoin and offer access to the
Bitcoin market.\8\ The Bitcoin Funds provide investors with cost-
efficient alternatives that allow a level of participation in the
Bitcoin market through the securities market. The primary substantive
difference between Bitcoin Funds and ETFs currently deemed appropriate
for options trading are that ETFs may hold securities, certain
financial instruments, and specified precious metals (which are deemed
commodities), while Bitcoin Funds hold Bitcoin (which is also deemed a
commodity).
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\8\ The trust may include minimal cash.
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The Exchange believes each Bitcoin Fund satisfies the Exchange's
initial listing standards for ETFs on which the Exchange may list
options.\9\ Specifically, each Bitcoin Fund satisfies the initial
listing standards set forth in Exchange Rule 402(i)(5)(i), as is the
case for other ETFs on which the Exchange lists options (including
trusts that hold commodities). Exchange Rule 402(i)(5)(i) requires that
the ETFs must either (1) meet the criteria and standards set forth in
Exchange Rule 402(a) or
[[Page 94858]]
402(b),\10\ or (2) be available for creation or redemption each
business day from or through the issuer in cash or in kind at a price
related to net asset value, and the issuer must be obligated to issue
units in a specified aggregate number even if some or all of the
investment assets required to be deposited have not been received by
the issuer, subject to the condition that the person obligated to
deposit the investments has undertaken to deliver the investment assets
as soon as possible and such undertaking is secured by the delivery and
maintenance of collateral consisting of cash or cash equivalents
satisfactory to the issuer, as provided in the respective prospectus.
Each Bitcoin Fund satisfies Exchange Rule 402(i)(5)(i)(B), as each is
subject to this creation and redemption process.
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\9\ Subparagraphs (a) and (b) of Exchange Rule 402 provide for
guidelines to be used by the Exchange when evaluating potential
underlying securities for Exchange option transactions.
\10\ See Exchange Rule 402(a)-(b).
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While not required by the Rules for purposes of options listings,
the Exchange believes each Bitcoin Fund satisfies the criteria and
guidelines set forth in Exchange Rule 402. Pursuant to Exchange Rule
402, a security (which includes ETFs) on which options may be listed
and traded on the Exchange must be duly registered (with the
Commission) and be an NMS stock (as defined in Rule 600 of Regulation
NMS under the Act, and be characterized by a substantial number of
outstanding shares that are widely held and actively traded.\11\ Each
Bitcoin Fund is an NMS Stock as defined in Rule 600 of Regulation NMS
under the Act.\12\ The Exchange believes each Bitcoin Fund is
characterized by a substantial number of outstanding shares that are
widely held and actively traded.
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\11\ The criteria and guidelines for a security to be considered
widely held and actively traded are set forth in Exchange Rule
402(b), subject to exceptions.
\12\ An ``NMS stock'' means any NMS security other than an
option, and an ``NMS security'' means any security or class of
securities for which transaction reports are collected, processed,
and made available pursuant to an effective transaction reporting
plan (or an effective national market system plan for reporting
transaction in listed options). See 17 CFR 242.600(b)(64)
(definition of ``NMS security'') and (65) (definition of ``NMS
stock'').
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Pursuant to the data presented in the NYSE American filing,\13\ as
of August 30, 2024, the Bitcoin Funds had the following number of
shares outstanding (and corresponding market capitalization):
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\13\ See supra note 5.
------------------------------------------------------------------------
Shares Market value (8/
Bitcoin fund outstanding 30/2024)
------------------------------------------------------------------------
GBTC................................. 284,570,100 $13,443,091,524
BTC.................................. 366,950,100 1,930,157,526
BITB................................. 68,690,000 2,221,640,670
------------------------------------------------------------------------
As shown above, each Bitcoin Fund had significantly more than
7,000,000 shares outstanding (approximately 29 and 6.5 times that
amount, respectively), which is the minimum number of shares of a
corporate stock that the Exchange generally requires to list options on
that stock pursuant to Exchange Rule 402(b)(1). The Exchange believes
this demonstrates that each Bitcoin Fund is characterized by a
substantial number of outstanding shares.
Further, according to the NYSE American filing,\14\ the below table
contains information regarding the number of beneficial holders of the
Bitcoin Funds as of August 14, 2024:
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\14\ See supra note 5.
------------------------------------------------------------------------
Beneficial
Bitcoin fund holders (8/14/
24)
------------------------------------------------------------------------
GBTC.................................................... 464,364
BTC..................................................... 13,403
BITB.................................................... 75,437
------------------------------------------------------------------------
As this table shows, each Bitcoin Fund has significantly more than
2,000 beneficial holders (approximately 232, 7, and 38 time more,
respectively), which is the minimum number of holders the Exchange
generally requires for corporate stock in order to list options on that
stock pursuant to Exchange Rule 402(b)(2). Therefore, the Exchange
believes the shares of each Bitcoin Fund are widely held.
In addition, the Exchange believes the shares of each Bitcoin Fund
are actively traded. Further, according to the NYSE American
filing,\15\ as of September 30, 2024, the total trading volume (by
shares and notional) for these funds since they began trading \16\ and
the average daily volume (``ADV'') over the 30-day period of September
1 through September 30, 2024, was as follows: \17\
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\15\ See supra note 5.
\16\ As noted by NYSE American, GBTC and BITB began trading on
January 11th and BTC began trading on July 31st. Thus, the
measurement period for the trading volume (shares/notional) is
January 11 through September 20, 2024, for GBTC and BITB (i.e., nine
months) and July 31 through September 20, 2024, for BTC (i.e., two
months). See supra note 5.
\17\ See FactSet, 9/30/2024, available at https://www.factset.com/data-attribution.
----------------------------------------------------------------------------------------------------------------
Trading volume Trading volume ADV
Bitcoin fund (shares) (notional $) (shares)
----------------------------------------------------------------------------------------------------------------
GBTC.......................................................... 1,803,567,700 93,472,544,497 3,266,138
BTC........................................................... 335,492,930 1,792,866,521 6,838,546
BITB.......................................................... 434,815,840 14,433,361,384 1,949,835
----------------------------------------------------------------------------------------------------------------
As demonstrated above, even though these Bitcoin Funds have been
trading for less than one year, the trading volume for each is
substantially higher than 2,400,000 shares (between roughly 165 and 700
times that amount), which is the minimum 12-month volume the Exchange
generally requires for a security in order to list options on that
security as set forth in Exchange Rule 402(b). The Exchange believes
this data demonstrates each Bitcoin Fund is characterized by a
substantial number of outstanding shares that are actively traded.
In addition to satisfying the Exchange's initial listing standards,
options on the Bitcoin Funds will be subject to the Exchange's
continued listing standards as set forth in Exchange Rule 403(g).\18\
Pursuant to Exchange Rule 403(g), the Exchange will not open for
trading any additional series of option contracts covering a fund
traded on the Exchange if such fund ceases to be an ``NMS stock'' as
provided for Exchange Rule 402(b) or the fund is halted from trading on
its primary market.\19\ Additionally, options on funds traded on the
Exchange may be subject to the suspension of opening transactions as
follows: (1) the fund no longer meets the terms of Exchange Rule
403(b); (2) following the initial twelve-month period beginning upon
the commencement of trading of the fund, there are fewer than 50 record
and/or beneficial holders of the fund for 30 or more consecutive
trading days; (3) the
[[Page 94859]]
value of the underlying commodity is no longer calculated or available;
or (4) such other event occurs or condition exists that in the opinion
of the Exchange makes further dealing on the Exchange inadvisable.
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\18\ The Exchange proposes to amend Exchange Rule 402(i)(4) to
include the Bitcoin Funds in the list of ETPs deemed ``Exchange-
Traded Fund Shares''--of ETFs--for purposes of the continued listing
standards set forth in Exchange Rule 403(g). See proposed Exchange
Rule 402(i)(4). For avoidance of doubt, the Exchange refers
``funds'' rather than ``ETFs'' to make clear that the Bitcoin Funds
are subject to these continued listing standards.
\19\ See Exchange Rule 403(g).
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Options on each Bitcoin Fund will be physically settled contracts
with American-style exercise.\20\ Consistent with Exchange Rule 404,
which governs the opening of options series on a specific underlying
security (including ETFs and ETPs), the Exchange will open at least one
expiration month for options on each Bitcoin Fund \21\ at the
commencement of trading on the Exchange and may also list series of
options on Bitcoin Funds for trading on a weekly,\22\ monthly,\23\ or
quarterly \24\ basis. The Exchange may also list long-term equity
option series (``LEAPS'') that expire from twelve to thirty-nine months
from the time they are listed.\25\
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\20\ See Exchange Rule 401 (Rights and Obligations of Holders
and Writers), which provides that the rights and obligations of
holders and writers of option contracts of any class of options
dealt in on the Exchange shall be as set forth in the Rules of the
Options Clearing Corporation (``OCC''). See also OCC Rules, Chapter
VIII, which governs exercise and assignment, and Chapter IX, which
governs the discharge of delivery and payment obligations arising
out of the exercise of physically settled stock option contracts.
OCC Rules can be located at: https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occrules.pdf.
\21\ See Exchange Rule 404. The monthly expirations are subject
to certain listing criteria for underlying securities described
within Exchange Rule 402. Monthly listings expire the third Friday
of the month. The term ``expiration date'' (unless separately
defined elsewhere in the OCC By-Laws), when used in respect of an
option contract (subject to certain exceptions), means the third
Friday of the expiration month of such option contract, or if such
Friday is a day on which the exchange on which such option is listed
is not open for business, the preceding day on which such exchange
is open for business. See OCC By-Laws Article I, Section 1. Pursuant
to Exchange Rule 404(c), additional series of options of the same
class may be opened for trading on the Exchange when the Exchange
deems it necessary to maintain an orderly market, to meet customer
demand or when the market price of the underlying stock moves more
than five strike prices from the initial exercise price or prices.
Pursuant to Exchange Rule 404(e), new series of options on an
individual stock may be added until the beginning of the month in
which the options contract will expire. Due to unusual market
conditions, the Exchange, in its discretion, may add a new series of
options on an individual stock until the close of trading on the
business day prior to expiration.
\22\ See Exchange Rule 404, Interpretation and Policy .02.
\23\ See Exchange Rule 404, Interpretation and Policy .13.
\24\ See Exchange Rule 404, Interpretation and Policy .03.
\25\ See Exchange Rule 406.
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Pursuant to Exchange Rule 404(g), which governs strike prices of
series of options on ETFs, the interval between strike prices of series
of options on Bitcoin Funds will be $1 or greater when the strike price
is $200 or less and $5 or greater where the strike price is over
$200.\26\ Additionally, the Exchange may list series of options
pursuant to the $1 Strike Price Interval Program,\27\ the $0.50 Strike
Program,\28\ and the $2.50 Strike Price Program.\29\ Pursuant to
Exchange Rule 510, where the price of a series of a Bitcoin Fund option
is less than $3.00, the minimum increment will be $0.05, and where the
price is $3.00 or higher, the minimum increment will be $0.10.\30\ Any
and all new series of Bitcoin Fund options that the Exchange lists will
be consistent and comply with the expirations, strike prices, and
minimum increments set forth in Exchange Rules 404 and 510, as
applicable. Further, the Exchange notes that Exchange Rule 1502, which
governs margin requirements applicable to the trading of all options on
the Exchange, including options on ETFs and ETPs, will also apply to
the trading of Bitcoin Fund options.
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\26\ The Exchange notes that for options listed pursuant to the
Short Term Option Series Program, the Monthly Options Series
Program, and the Quarterly Options Series Program, Exchange Rules
404, Interpretation and Policies .02, .03, and .13, specifically set
forth intervals between strike prices on Short Term Option Series,
Quarterly Options Series, and Monthly Options Series, respectively.
\27\ See Exchange Rule 404, Interpretation and Policy .01.
\28\ See Exchange Rule 404, Interpretation and Policy .04.
\29\ See Exchange Rule 404(f).
\30\ See Exchange Rule 510(a). If options on a Bitcoin Fund are
eligible to participate in the Penny Interval Program, the minimum
increment of $0.01 below $3.00 and $0.50 above $3.00 would apply.
See Exchange Rule 510(a)(3). See also Exchange Rule 510(c) (which
describes the requirements for the Penny Interval Program).
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Position and Exercise Limits
Position and exercise limits for options, including options on
Bitcoin Funds, are determined pursuant to Exchange Rules 307 and 309,
respectively. Position and exercise limits for options vary according
to the number of outstanding shares and the trading volumes of the
underlying security over the past six months, where the largest in
capitalization and the most frequently traded funds have an option
position and exercise limit of 250,000 contracts (with adjustments for
splits, re-capitalizations, etc.) on the same side of the market; and
smaller capitalization funds have position and exercise limits of
200,000, 75,000, 50,000 or 25,000 contracts (with adjustments for
splits, re-capitalizations, etc.) on the same side of the market.\31\
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\31\ See Exchange Rule 307. For an option to be eligible for the
50,000-contract limit, the security underlying the option must have
most recent six-month trading volume of at least 20,000,000 shares,
or most recent six-month trading volume of at least 15,000,000
shares and at least 40,000,000 shares currently outstanding. For an
option to be eligible for the 75,000-contract limit, the underlying
security must have most recent six-month trading volume of at least
40,000,000 shares, or most recent six-month trading volume of at
least 30,000,000 shares and at least 120,000,000 shares currently
outstanding. For an option to be eligible for the 200,000-contract
limit, the underlying security must have most recent six-month
trading volume of at least 80,000,000 shares, or most recent six-
month trading volume of at least 60,000,000 shares and at least
240,000,000 shares currently outstanding. For an option to be
eligible for the 250,000-contract limit, the security underlying the
option must have most recent six-month trading volume of at least
100,000,000 shares, or most recent six-month trading volume of at
least 75,000,000 shares and at least 300,000,000 shares currently
outstanding. The 25,000-contract limit applies to options on
underlying securities that do not qualify for a higher contract
limit. See Exchange Rule 307. In addition, Interpretation and Policy
.01 to Exchange Rule 307 establishes higher position limits for
options on certain ETFs.
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Position limits are designed to limit the number of options
contracts traded on the Exchange in an underlying security that an
investor, acting alone or in concert with others directly or
indirectly, may control. The purpose of position limits, which are set
forth in Exchange Rule 307, is to address potential manipulative
schemes and adverse market impacts surrounding the use of options, such
as disrupting the market in the security underlying the options. As
such, position limits must balance concerns regarding mitigating
potential manipulation and the cost of inhibiting potential hedging
activity that investors may use for legitimate economic purposes. To
achieve this balance, the Exchange proposes to set the position and
exercise limits for the options on the Bitcoin Funds at 25,000
contracts, a limit which has already been approved for IBIT at a
competing exchange, an ETP that (like the Bitcoin Funds) holds
bitcoin.\32\ Capping the position limit at 25,000 contracts, the lowest
limit available in options, would address concerns related to
manipulation and protection of investors as this number is conservative
for the Bitcoin Funds and therefore appropriate given their liquidity.
While the Exchange believes that the proposed 25,000-contract position
limit is conservative for options on the Bitcoin Funds, it nonetheless
believes that, for the reasons set forth below, evidence exists to
support a much higher position limit.\33\
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\32\ See Securities Exchange Act Release No. 101128 (September
20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (Notice
of Filing of Amendment Nos. 4 and 5 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1,
4, and 5, to Permit the Listing and Trading of Options on the
iShares Bitcoin Trust (``IBIT'') (``ISE IBIT Approval Order'').
\33\ The Exchange may file a subsequent rule change to amend the
position and exercise limit for options on any or all the Bitcoin
Funds based on additional data regarding trading activity, to
continue to balance any concerns regarding manipulation. A higher
position limit would allow institutional investors to utilize
options on the Bitcoin Funds for prudent risk management purposes.
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[[Page 94860]]
As shown in the table below, provided in the NYSE American filing
\34\, GBTC, BITB and BTC would easily qualify for the 250,000-contract
position limit available to other ETFs and ETPs pursuant to the
criterion in Exchange Rule 307, which requires that, for the most
recent six-month period, trading volume for the underlying security be
at least 100,000,000 shares.\35\ As noted in the NYSE American filing,
BTC began trading on July 31, 2024, and therefore had only two months
of trading data available at the time of the NYSE American filing, as
shown below.\36\
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\34\ See supra note 5.
\35\ Per Exchange Rule 307, to qualify for the 250,000-contract
position limit for options, the underlying security must (i) have
trading volume of at least 100,000,000 shares during the most recent
six-month trading period; or (ii) have trading volume of at least
75,000,000 shares during the most recent six-month trading period
and have at least 300,000,000 shares currently outstanding.
\36\ See supra note 5. See FactSet, 9/30/2024, https://www.factset.com/data-attribution. For avoidance of doubt, the
Exchange notes that this chart depicts the most recent six months
(at the time the NYSE American filing was filed) of trading data by
shares for GBTC and BITB whereas the earlier chart (that depicts
volume by notional and shares) covered the first nine months of
trading. For BTC, both charts depict the same two-month trading
volume by shares.
------------------------------------------------------------------------
Bitcoin fund Total volume (9/30/2024)
------------------------------------------------------------------------
GBTC...................................... 723,758,100 (6-months).
BTC....................................... 335,492,930 (2-months).
BITB...................................... 263,965,870 (6-months).
------------------------------------------------------------------------
Thus, based on the most-recent trading volume, each Bitcoin Fund
exceeded the requisite minimum of 100,000,000 shares necessary to
qualify for the 250,000-contract position and exercise limits. By
comparison, other options symbols with six-month trading volume less
than GBTC, BITB, and BTC are eligible for position and exercise limits
of at least 250,000.\37\
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\37\ See https://www.theocc.com/Market-Data/Market-Data-Reports/Series-and-Trading-Data/Series-Search (including the following
symbols that have a position limit of 250,000: GLD, IAU, SLV, SIVR,
SGOL).
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With respect to the outstanding shares of each Bitcoin Fund, if a
market participant held the maximum number of contracts possible
pursuant to the proposed position and exercise limits (25,000
contracts), the equivalent shares represented by the proposed position/
exercise limit (2,500,000 shares) would represent the following
approximate percentage of current outstanding shares, according to the
data presented in the NYSE American filing: \38\
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\38\ See supra note 5.
----------------------------------------------------------------------------------------------------------------
Proposed position/ Percentage of
Bitcoin fund exercise limits in Outstanding shares outstanding shares
equivalent shares (8/30/24) (%)
----------------------------------------------------------------------------------------------------------------
GBTC.......................................... 2,500,000 284,570,100 0.9
BTC........................................... 2,500,000 366,950,100 0.7
BITB.......................................... 2,500,000 68,690,000 3.6
----------------------------------------------------------------------------------------------------------------
As this table demonstrates, if a market participant held the
maximum permissible options positions in one of the Bitcoin Fund
options and exercised all of them at the same time, that market
participant would control a small percentage of the outstanding shares
of the underlying Bitcoin Fund. For example, as noted above, a position
limit of 25,000 same side contracts effectively restricts a market
participant from holding positions that could result in the receipt of
no more than 2,500,000 shares of the applicable Bitcoin Fund (if that
market participant exercised all its options). Based on data presented
in the NYSE American filing regarding the number of shares outstanding
for each Bitcoin Fund as of August 30, 2024, the table below sets forth
the approximate number of market participants that could hold the
maximum of 25,000 same side positions in each Bitcoin Fund that would
equate to the number of shares outstanding of that Bitcoin Fund: \39\
---------------------------------------------------------------------------
\39\ See supra note 5.
----------------------------------------------------------------------------------------------------------------
Number of market
Bitcoin fund Shares outstanding participants with 25,000
same side positions
----------------------------------------------------------------------------------------------------------------
GBTC............................................................ 284,570,100 114
BTC............................................................. 366,950,100 147
BITB............................................................ 68,690,000 27
----------------------------------------------------------------------------------------------------------------
This means if 114 market participants had 25,000 same side
positions in options on GBTC, each of them would have to simultaneously
exercise all of those options to create a scenario that may put the
underlying security under stress. Similarly, this means if 147 market
participants had 25,000 same side positions in options on BTC, each of
them would have to simultaneously exercise all of those options to
create a scenario that may put the underlying security under stress.
Finally, this means if 27 market participants had 25,000 same side
positions in options on BITB, each of them would have to simultaneously
exercise all of those options to create a scenario that may put the
underlying security under stress. The Exchange believes it is highly
unlikely for this to occur; however, even if such event did occur, the
Exchange would not expect any of the Bitcoin Fund to be under stress
because such an event would merely induce the creation of more shares
through the trust's creation and redemption process.
Further, given that the issuer of each Bitcoin Fund may create and
redeem shares that represent an interest in Bitcoin, the Exchange
believes it is relevant to compare the size of a position limit to the
market capitalization of the Bitcoin market. As of August 30, 2024, the
global supply of Bitcoin was 19,747,066, and the price of
[[Page 94861]]
one Bitcoin was approximately $59,108.23, which equates to a market
capitalization of approximately $1.167 trillion.\40\ Consider the
proposed position and exercise limit of 25,000 option contracts for
each Bitcoin Fund option. A position and exercise limit of 25,000 same
side contracts effectively restricts a market participant from holding
positions that could result in the receipt of no more than 2,500,000
shares of GBTC, BTC, or BITB, as applicable (if that market participant
exercised all its options). The following table from the NYSE American
filing shows the share price of each Bitcoin Fund on August 30, 2024,
the value of 2,500,000 shares of the Bitcoin Fund at that price, and
the approximate percentage of that value of the size of the Bitcoin
market: \41\
---------------------------------------------------------------------------
\40\ See https://www.blockchain.com/explorer/charts/total-bitcoins.
\41\ See supra note 5.
----------------------------------------------------------------------------------------------------------------
Aug. 30th Value of 2,500,000 Percentage of
Bitcoin fund share price shares of Bitcoin Bitcoin market
($) funds ($) (%)
----------------------------------------------------------------------------------------------------------------
GBTC................................................... 46.75 116,875,000 0.010
BTC.................................................... 5.20 13,000,000 0.001
BITB................................................... 31.95 79,875,000 0.007
----------------------------------------------------------------------------------------------------------------
Therefore, if a market participant with the maximum 25,000 same
side contracts in options on GBTC, BTC, or BITB exercised all positions
at one time, such an event would have no practical impact on the
Bitcoin market. As described in the NYSE American filing, the below
chart shows the market capitalization of each Bitcoin Fund relative to
the market capitalization of the entire bitcoin market, as of August
30, 2024.\42\
---------------------------------------------------------------------------
\42\ See supra note 5.
\43\ See id.
----------------------------------------------------------------------------------------------------------------
Bitcoin/shares Market value (8/30/ % of Total
outstanding 2024) Bitcoin market
----------------------------------------------------------------------------------------------------------------
Total Bitcoin Market \43\........................... 19,747,066 1,167,214,096,788 100.00
GBTC................................................ 284,570,100 13,443,091,524 1.15
BTC................................................. 366,950,100 1,930,157,526 0.17
BITB................................................ 68,690,000 2,221,640,670 0.19
----------------------------------------------------------------------------------------------------------------
As shown above, the Bitcoin Funds collectively represent
approximately 1.51% of the global supply of Bitcoin (19,747, 066).
Based on the $46.75 price of a GBTC share on August 30, 2024, a market
participant could have redeemed one Bitcoin for approximately 1,264
GBTC shares. Another 24,967,146,455 GBTC shares could be created before
the supply of Bitcoin was exhausted. As a result, 9,987 market
participants would have to simultaneously exercise 25,000 same side
positions in GBTC options to receive shares of the GBTC holding the
entire global supply of Bitcoin. Similarly, based on the $5.20 price of
a BTC share on August 30, 2024, a market participant could have
redeemed one Bitcoin for approximately 11,367 BTC shares. Another
224,464,249,382 BTC shares could be created before the supply of
Bitcoin was exhausted. As a result, 89,786 market participants would
have to simultaneously exercise 25,000 same side positions in BTC
options to receive shares of BTC holding the entire global supply of
Bitcoin. Similarly, based on the $31.95 price of a BITB share on August
30, 2024, a market participant could have redeemed one Bitcoin for
approximately 1,850 BITB shares. Another 36,532,522,591 BITB shares
could be created before the supply of Bitcoin was exhausted. As a
result, 14,613 market participants would have to simultaneously
exercise 25,000 same side positions in BITB options to receive shares
of BITB holding the entire global supply of Bitcoin. Unlike the Bitcoin
Funds, the number of shares that corporations may issue is limited.
However, like corporations, which authorize additional shares,
repurchase shares, or split their shares, the Bitcoin Funds may create,
redeem, or split shares in response to demand. While the supply of
Bitcoin is limited to 21,000,000, it is believed that it will take more
than 100 years to fully mine the remaining Bitcoin.\44\ The supply of
Bitcoin is larger than the available supply of most securities.\45\
Given the significant unlikelihood of any of these events ever
occurring, the Exchange does not believe options on the Bitcoin Funds
should be subject to position and exercise limits even lower than those
proposed (which are already equal to the lowest available limit for
equity options in the industry) to protect the supply of Bitcoin.
---------------------------------------------------------------------------
\44\ See https://www.blockchain.com/explorer/assets/btc (citing
21 million as the ``total supply'' of bitcoin).
\45\ The market capitalization of Bitcoin would rank in the top
10 among securities. See https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/.
---------------------------------------------------------------------------
The Exchange also believes the proposed limits are appropriate
given position limits for Bitcoin futures. For example, the Chicago
Mercantile Exchange (``CME'') imposes a position limit of 2,000 futures
(for the initial spot month) on its Bitcoin futures contract.\46\ On
August 28, 2024, CME Aug 24 Bitcoin Futures settled at $58,950. A
position of 2,000 CME Bitcoin futures, therefore, would have a notional
value of $589,500,000. The following table shows the share price of
each Bitcoin Fund on August 28, 2024, and the approximate number of
option contracts that equates to that notional value: \47\
---------------------------------------------------------------------------
\46\ See CME Rulebook Chapter 350 (description of CME Bitcoin
Futures) and Chapter 5, Position Limit, Position Accountability and
Reportable Level Table in the Interpretations & Special Notices.
Each CME Bitcoin futures contract is valued at five Bitcoins as
defined by the CME CF Bitcoin Reference Rate (``BRR''). See CME Rule
35001.
\47\ See supra note 5.
------------------------------------------------------------------------
Number of
Bitcoin fund Aug. 28th option
share price contracts
------------------------------------------------------------------------
GBTC.................................... 46.94 125,585
BTC..................................... 5.23 1,127,151
BITB.................................... 32.08 183,759
------------------------------------------------------------------------
The approximate number of option contracts for each Bitcoin Fund
that equate to the notional value of CME Bitcoin futures is
significantly higher
[[Page 94862]]
than the proposed limit of 25,000 options contract for each Bitcoin
Fund option. The fact that many options ultimately expire out-of-the-
money and thus are not exercised for shares of the underlying, while
the delta of a Bitcoin Future is 1, further demonstrates how
conservative the proposed limits of 25,000 options contracts are for
the Bitcoin Fund options.
The Exchange notes, unlike options contracts, CME position limits
are calculated on a net futures-equivalent basis by contract and
include contracts that aggregate into one or more base contracts
according to an aggregation ratio(s).\48\ Therefore, if a portfolio
includes positions in options on futures, CME would aggregate those
positions into the underlying futures contracts in accordance with a
table published by CME on a delta equivalent value for the relevant
spot month, subsequent spot month, single month and all month position
limits.\49\ If a position exceeds position limits because of an option
assignment, CME permits market participants to liquidate the excess
position within one business day without being considered in violation
of its rules. Additionally, if at the close of trading, a position that
includes options exceeds position limits for futures contracts, when
evaluated using the delta factors as of that day's close of trading but
does not exceed the limits when evaluated using the previous day's
delta factors, then the position shall not constitute a position limit
violation. Considering CME's position limits on futures for Bitcoin,
the Exchange believes that that the proposed same side position limits
are more than appropriate for the Bitcoin Fund options.
---------------------------------------------------------------------------
\48\ See CME Rulebook Chapter 5, Position Limit, Position
Accountability and Reportable Level Table in the Interpretations &
Special Notices.
\49\ Id.
---------------------------------------------------------------------------
The Exchange believes the available supply of Bitcoin is not
relevant to the determination of position and exercise limits for
options overlying the Bitcoin Funds.\50\ Position and exercise limits
are not a tool that should be used to address a potential limited
supply of the underlying of an underlying. Position and exercise limits
do not limit the total number of options that may be held, but rather
they limit the number of positions a single customer may hold or
exercise at one time.\51\ ``Since the inception of standardized options
trading, the options exchanges have had rules imposing limits on the
aggregate number of options contracts that a member or customer could
hold or exercise.'' \52\ Position and exercise limit rules are intended
``to prevent the establishment of options positions that can be used or
might create incentives to manipulate or disrupt the underlying market
so as to benefit the options position. In particular, position and
exercise limits are designed to minimize the potential for mini-
manipulations and for corners or squeezes of the underlying market. In
addition, such limits serve to reduce the possibility for disruption of
the options market itself, especially in illiquid options classes.''
\53\
---------------------------------------------------------------------------
\50\ The Exchange is unaware of any proposed rule change related
to position and exercise limits for any equity option (including
commodity ETF options) for which the Commission required
consideration of whether the available supply of an underlying
(whether it be a corporate stock or an ETF) or the contents of an
ETF (commodity or otherwise) should be considered when an exchange
proposed to establish those limits. See, e.g., Securities Exchange
Act Release No. 57894 May 30, 2008), 73 FR 32061 (June 5, 2008) (SR-
CBOE-2005-11) (approval order in which the Commission stated that
the ``listing and trading of Gold Trust Options will be subject to
the exchanges' rules pertaining to position and exercise limits and
margin''). The Exchange notes the position limits in Exchange Rule
307 are the same as when the Commission approved this filing. For
reference, the current position and exercise limits for options on
SPDR Gold Shares ETF (``GLD'') and options on iShares Silver Trust
(``SLV'') are 250,000 contracts, or 10 times that proposed position
and exercise limit for the Bitcoin Fund options.
\51\ For example, suppose an option has a position limit of
25,000 option contracts and there are a total of 10 investors
trading that option. If all 10 investors max out their positions,
that would result in 250,000 option contracts outstanding at that
time. However, suppose 10 more investors decide to begin trading
that option and also max out their positions. This would result in
500,000 option contracts outstanding at that time. An increase in
the number of investors could cause an increase in outstanding
options even if position limits remain unchanged.
\52\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
\53\ Id.
---------------------------------------------------------------------------
The Exchange notes that a Registration Statement on Form S-1 was
filed with the Commission for each Bitcoin Fund, each of which
described the supply of Bitcoin as being limited to 21,000,000 (of
which approximately 90% had already been mined), and that the limit
would be reached around the year 2140.\54\ Each Registration Statement
permits an unlimited number of shares of the applicable Bitcoin Fund to
be created. Further, the Commission approved proposed rule changes that
permitted the listing and trading of shares of each Bitcoin Fund, which
approval did not comment on the sufficient supply of Bitcoin or address
whether there was a risk that permitting an unlimited number of shares
for a Bitcoin Fund would impact the supply of Bitcoin.\55\ Therefore,
the Exchange believes the Commission had ample time and opportunity to
consider whether the supply of Bitcoin was sufficient to permit the
creation of unlimited Bitcoin Fund shares, and does not believe
considering this supply with respect to the establishment of position
and exercise limits is appropriate given its lack of relevance to the
purpose of position and exercise limits. However, given the significant
size of the Bitcoin supply, the proposed positions limits are more than
sufficient to protect investors and the market.
---------------------------------------------------------------------------
\54\ See, e.g., GBTC Form S-1 Registration Statement, at p. 17,
https://www.sec.gov/Archives/edgar/data/1588489/000119312517013693/d157414ds1.htm; BTC Form S-1 Registration Statement, at p. 21,
https://www.sec.gov/Archives/edgar/data/2015034/000119312524065444/d785023ds1.htm; and BITB Amendment No 2. to S-1, at p. 47, https://www.sec.gov/Archives/edgar/data/1763415/000199937123000735/bitwise-s1a_120423.htm (``Bitcoin Funds Reg. Stmts.'').
\55\ See Bitcoin ETP Approval Order.
---------------------------------------------------------------------------
Based on the foregoing, the Exchange believes the proposal to list
options on the Bitcoin Funds with positions and exercise limits of
25,000 on the same side, the lowest position limit available in the
options industry, is conservative and appropriate given the market
capitalization, average daily volume, and high number of outstanding
shares for each of the Bitcoin Funds. The proposed position and
exercise limits reasonably and appropriately balance the liquidity
provisioning in the market against the prevention of manipulation. The
Exchange believes these proposed limits are effectively designed to
prevent an individual customer or entity from establishing options
positions that could be used to manipulate the market of the underlying
Bitcoin Funds as well as the Bitcoin market.\56\
---------------------------------------------------------------------------
\56\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
---------------------------------------------------------------------------
As described herein, options on the Bitcoin Funds will trade in the
same manner as any other ETF or ETP options on the Exchange. The
Exchange Rules that currently apply to the listing and trading of
options on the Exchange, including, for example, Rules that govern
listing criteria, expiration and exercise prices, minimum increments,
margin requirements, customer accounts and trading halt procedures will
apply to the listing and trading of Bitcoin Funds on the Exchange in
the same manner as they apply to all other ETFs and ETPs that are
listed and traded on the Exchange, including the precious metal-backed
commodity ETPs already deemed appropriate for options trading on the
Exchange pursuant to Exchange Rule 404. Further, as described above,
Exchange Rules regarding position and exercise limits will likewise
apply to options on the Bitcoin Funds except
[[Page 94863]]
that, as proposed, the position and exercise limits will be set at
25,000 on the same side.
* * * * *
The Exchange notes that options on Bitcoin Funds would not be
available for trading until The Options Clearing Corporation (``OCC'')
represents to the Exchange that it is fully able to clear and settle
such options. The Exchange has also analyzed its capacity and
represents that it and The Options Price Reporting Authority (``OPRA'')
have the necessary systems capacity to handle the additional traffic
associated with the listing of options on Bitcoin Funds. The Exchange
believes any additional traffic that would be generated from the
trading of options on Bitcoin Funds would be manageable. The Exchange
represents that Exchange Members \57\ will not have a capacity issue as
a result of this proposed rule change.
---------------------------------------------------------------------------
\57\ See Exchange Rule 100.
---------------------------------------------------------------------------
The Exchange represents that the same surveillance procedures \58\
applicable to all other options currently listed and traded on the
Exchange will apply to options on Bitcoin Funds, and that it has the
necessary systems capacity to support the new option series. The
Exchange's existing surveillance and reporting safeguards are designed
to deter and detect possible manipulative behavior which might arise
from listing and trading options on ETFs and ETPs, such as (existing)
precious metal-commodity backed ETP options as well as the proposed
options on Bitcoin Funds. The Exchange believes that its surveillance
procedures are adequate to properly monitor the trading of options on
Bitcoin Funds in all trading sessions and to deter and detect
violations of Exchange rules. The Exchange's staff will have access to
the surveillance programs conducted by its affiliate exchanges, MIAX
Pearl and MIAX Sapphire, with respect to trading in the shares of the
underlying trust for each Fund when conducting surveillances for market
abuse or manipulation in the options on the Funds. Additionally, the
Exchange is a member of the Intermarket Surveillance Group (``ISG'')
under the Intermarket Surveillance Group Agreement. ISG members work
together to coordinate surveillance and investigative information
sharing in the stock, options, and futures markets. In addition to
obtaining surveillance data from MIAX Pearl and MIAX Sapphire, the
Exchange will be able to obtain information regarding trading in the
shares of the underlying Bitcoin Funds from NYSE American and other
markets through ISG. In addition, the Exchange has a Regulatory
Services Agreement with the Financial Industry Regulatory Authority
(``FINRA''). Pursuant to a multi-party 17d-2 joint plan, all options
exchanges allocate regulatory responsibilities to FINRA to conduct
certain options-related market surveillances.\59\ Further, the Exchange
will implement any new surveillance procedures it deems necessary to
effectively monitor the trading of options on the Bitcoin Funds.
---------------------------------------------------------------------------
\58\ The surveillance program includes real-time patterns for
price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, pinging, phishing).
\59\ Section 19(g)(1) of the Act, among other things, requires
every SRO registered as a national securities exchange or national
securities association to comply with the Act, the rules and
regulations thereunder, and the SRO's own rules, and, absent
reasonable justification or excuse, enforce compliance by its
members and persons associated with its members. See 15 U.S.C.
78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows
the Commission to relieve an SRO of certain responsibilities with
respect to members of the SRO who are also members of another SRO.
Specifically, Section 17(d)(1) allows the Commission to relieve an
SRO of its responsibilities to: (i) receive regulatory reports from
such members; (ii) examine such members for compliance with the Act
and the rules and regulations thereunder, and the rules of the SRO;
or (iii) carry out other specified regulatory responsibilities with
respect to such members.
---------------------------------------------------------------------------
The underlying shares of spot bitcoin ETPs, including the Bitcoin
Funds, are also subject to safeguards related to addressing market
abuse and manipulation. As the Commission stated in its order approving
proposals of several exchanges to list and trade shares of spot
bitcoin-based exchange-traded products (``Bitcoin ETP Order''):
Each Exchange has a comprehensive surveillance-sharing agreement
with the CME via their common membership in the Intermarket
Surveillance Group. This facilitates the sharing of information that
is available to the CME through its surveillance of its markets,
including its surveillance of the CME bitcoin futures market.\60\
---------------------------------------------------------------------------
\60\ See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008, 3009 (January 17, 2024) (File Nos. SR-NYSEArca-
2021-90; SR-NYSEArca-2023-44; SR-NYSEArca-2023-58; SR-NASDAQ2023-
016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-CboeBZX-2023-038;
SR-CboeBZX2023-040; SR-CboeBZX-2023-042; SRCboeBZX-2023-044; and SR-
CboeBZX-2023-072) (Order Granting Accelerated Approval of Proposed
Rule Changes, as Modified by Amendments Thereto, to List and Trade
Bitcoin-Based Commodity-Based Trust Shares and Trust Units).
The Exchange states that, given the consistently high correlation
between the CME bitcoin futures market and the spot bitcoin market, as
confirmed by the Commission through robust correlation analysis, the
Commission was able to conclude that such surveillance sharing
agreements could reasonably be ``expected to assist in surveilling for
fraudulent and manipulative acts and practices in the specific context
of the [Bitcoin ETPs].'' \61\
---------------------------------------------------------------------------
\61\ See Bitcoin ETP Order, 89 FR at 3010-11.
---------------------------------------------------------------------------
In light of surveillance measures related to both options and
futures as well as the underlying Bitcoin Funds,\62\ the Exchange
believes that existing surveillance procedures are designed to deter
and detect possible manipulative behavior which might potentially arise
from listing and trading the proposed options on the Bitcoin Funds.
---------------------------------------------------------------------------
\62\ See Amendment No. 2 to Proposed Rule Change to List and
Trade Shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca
Rule 8.201-E (Commodity-Based Trust Shares) (SR-NYSEARCA-2021-90),
filed Jan. 5, 2024, available at https://www.sec.gov/comments/sr-nysearca-2021-90/srnysearca202190-358659-884182.pdf; Amendment No. 2
to Proposed Rule Change to List and Trade Shares of the Bitwise
Bitcoin ETF under NYSE Arca Rule 8.201-E (Commodity-Based Trust
Shares) (SR-NYSEARCA-2023-44), filed Jan. 5, 2024, available at
https://www.sec.gov/comments/sr-nysearca-2023-44/srnysearca202344-358800-884322.pdf; and Notice of Filing of Proposed Rule Change, as
Modified by Amendment No. 1, To List and Trade Shares of the
Grayscale Bitcoin Mini Trust Under NYSE Arca Rule 8.201-E,
Commodity-Based Trust Shares, Securities Exchange Act Release No.
100290 (June 6, 2024), 89 FR 49931 (June 12, 2024) (SR-NYSEARCA-
2024-45).
---------------------------------------------------------------------------
Finally, quotation and last sale information for ETFs is available
via the Consolidated Tape Association (``CTA'') high speed line.
Quotation and last sale information for such securities is also
available from the exchange on which such securities are listed.
Quotation and last sale information for options on Bitcoin Funds will
be available via OPRA and major market data vendors.
The Exchange believes that offering options on Bitcoin Funds will
benefit investors by providing them with an additional, relatively
lower cost investing tool to gain exposure to the price of Bitcoin and
hedging vehicle to meet their investment needs in connection with
Bitcoin-related products and positions. The Exchange expects investors
will transact in options on Bitcoin Funds in the unregulated over-the-
counter (``OTC'') options market,\63\ but may prefer to trade such
options in a listed environment to receive the benefits of trading
listed options, including (1) enhanced efficiency in initiating and
closing out position; (2) increased market transparency; and (3)
heightened contra-party creditworthiness due to the role of OCC as
issuer and guarantor of all listed options. The Exchange believes that
listing Bitcoin Fund options may cause investors to bring
[[Page 94864]]
this liquidity to the Exchange, would increase market transparency and
enhance the process of price discovery conducted on the Exchange
through increased order flow. The Exchange notes that the ETPs that
hold precious metal commodities on which the Exchange may already list
and trade options are trusts structured in substantially the same
manner as Bitcoin Funds and essentially offer the same objectives and
benefits to investors, just with respect to different assets. The
Exchange notes that it has not identified any issues with the continued
listing and trading of options on any ETFs or ETPs that hold
commodities (i.e., precious metals) that it currently lists and trades
on the Exchange.
---------------------------------------------------------------------------
\63\ The Exchange understands from customers that investors have
historically transacted in options on ETFs in the OTC options market
if such options were not available for trading in a listed
environment.
---------------------------------------------------------------------------
Finally, the Exchange notes that applicable Exchange rules will
require that customers receive appropriate disclosure before trading
options in Bitcoin Funds.\64\ Further, brokers opening accounts and
recommending options transactions must comply with relevant customer
suitability standards.\65\
---------------------------------------------------------------------------
\64\ See Exchange Rules 1307(b) and (e).
\65\ See Exchange Rule 1309.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \66\ in general and furthers the
objectives of Section 6(b)(5) of the Act \67\ in particular, in that it
is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------
\66\ 15 U.S.C. 78f(b).
\67\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposal to list and
trade options on Bitcoin Funds will remove impediments to and perfect
the mechanism of a free and open market and a national market system
and, in general, protect investors because offering options on Bitcoin
Funds will provide investors with an opportunity to realize the
benefits of utilizing options on a Bitcoin Fund, including cost
efficiencies and increased hedging strategies.
The Exchange believes that offering Bitcoin Fund options will
benefit investors by providing them with a relatively lower-cost risk
management tool, which will allow them to manage their positions and
associated risk in their portfolios more easily in connection with
exposure to the price of Bitcoin and with Bitcoin-related products and
positions. Additionally, the Exchange's offering of Bitcoin Fund
options will provide investors with the ability to transact in such
options in a listed market environment as opposed to in the unregulated
OTC options market, which would increase market transparency and
enhance the process of price discovery conducted on the Exchange
through increased order flow to the benefit of all investors. The
Exchange also notes that it already lists options on other commodity-
based ETPs,\68\ which, as described above, are trusts structured in
substantially the same manner as Bitcoin Funds and essentially offer
the same objectives and benefits to investors, just with respect to a
different commodity (i.e., Bitcoin rather than precious metals) and for
which the Exchange has not identified any issues with the continued
listing and trading of commodity-backed ETP options it currently lists
for trading.
---------------------------------------------------------------------------
\68\ See Exchange Rule 402(i)(4).
---------------------------------------------------------------------------
The Exchange also believes the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system, because it is consistent with current
Exchange Rules previously filed with the Commission. Options on Bitcoin
Funds satisfy the initial listing standards and continued listing
standards currently in the Exchange Rules applicable to options on all
ETFs and ETPs, including ETPs that hold other commodities already
deemed appropriate for options trading on the Exchange. Additionally,
as demonstrated above and in the NYSE American filing,\69\ each Bitcoin
Fund is characterized by a substantial number of shares that are widely
held and actively traded. Bitcoin Fund options will trade in the same
manner as any other ETF or ETP options--the same Exchange Rules that
currently govern the listing and trading of options, including
permissible expirations, strike prices, minimum increments, and margin
requirements, will govern the listing and trading of options on Bitcoin
Funds in the same manner.
---------------------------------------------------------------------------
\69\ See supra note 5.
---------------------------------------------------------------------------
The proposed position and exercise limit for options on the Bitcoin
Funds is 25,000 contracts. These position and exercise limits are the
lowest position and exercise limits available in the options industry,
are extremely conservative and more than appropriate given the Bitcoin
Funds' market capitalization, average daily volume, number of
beneficial holders, and high number of outstanding shares.\70\ The
proposed position and exercise limits are consistent with the Act as
they addresses concerns related to manipulation and protection of
investors because the position and exercise limits are extremely
conservative and more than appropriate given the Bitcoin Funds are
actively traded.
---------------------------------------------------------------------------
\70\ The Exchange notes that IBIT--which has been approved for
options trading--represents a larger percentage of the bitcoin
market than all three Bitcoin Funds. See ISE IBIT Approval Order,
supra note 6. As noted herein, the Bitcoin Funds collectively
represent approximately 1.51% of the bitcoin market. By comparison,
IBIT options have an approved position limit of 25,000 contracts per
side, which represents 4% of total underlying spot BTC liquidity,
and IBIT is the most liquid spot Bitcoin ETF. See id.
---------------------------------------------------------------------------
The Exchange represents that it has the necessary systems capacity
to support the new Bitcoin Fund options. The Exchange believes that its
existing surveillance and reporting safeguards are designed to deter
and detect possible manipulative behavior which might arise from
listing and trading options, including Bitcoin Fund options. The
Exchange's existing surveillance and reporting safeguards are designed
to deter and detect possible manipulative behavior which might arise
from listing and trading options on ETFs and ETPs, such as (existing)
precious metal-commodity backed ETP options as well as the proposed
options on Bitcoin Funds. The Exchange believes that its surveillance
procedures are adequate to properly monitor the trading of options on
Bitcoin Funds in all trading sessions and to deter and detect
violations of Exchange rules. Specifically, the Exchange's market
surveillance staff will have access to the surveillances conducted by
its affiliates, MIAX Pearl and MIAX Sapphire, with respect to the
Bitcoin Funds and would review activity in the underlying Funds when
conducting surveillances for market abuse or manipulation in the
options on the Trust. Additionally, the Exchange is a member of the ISG
under the Intermarket Surveillance Group Agreement. ISG members work
together to coordinate surveillance and investigative information
sharing in the stock, options, and futures markets. In addition, the
Exchange has a Regulatory Services Agreement with the FINRA and, as
noted herein, pursuant to a multi-party 17d-2 joint plan, all options
exchanges allocate regulatory responsibilities to FINRA to conduct
certain options-related market surveillances. Further, the Exchange
will implement any new surveillance procedures it deems necessary to
[[Page 94865]]
effectively monitor the trading of options on the Bitcoin Funds.
The underlying shares of spot bitcoin ETPs, including the Bitcoin
Funds, are also subject to safeguards related to addressing market
abuse and manipulation. As the Commission stated in its order approving
proposals of several exchanges to list and trade shares of spot
bitcoin-based ETPs, ``[e]ach Exchange has a comprehensive surveillance-
sharing agreement with the CME via their common membership in the
Intermarket Surveillance Group. This facilitates the sharing of
information that is available to the CME through its surveillance of
its markets, including its surveillance of the CME bitcoin futures
market.\71\ The Exchange states that, given the consistently high
correlation between the CME bitcoin futures market and the spot bitcoin
market, as confirmed by the Commission through robust correlation
analysis, the Commission was able to conclude that such surveillance
sharing agreements could reasonably be ``expected to assist in
surveilling for fraudulent and manipulative acts and practices in the
specific context of the [Bitcoin ETPs].'' \72\ In light of surveillance
measures related to both options and futures as well as the underlying
Bitcoin Funds,\73\ the Exchange believes that existing surveillance
procedures are designed to deter and detect possible manipulative
behavior which might potentially arise from listing and trading the
proposed options on the Bitcoin Funds. Further, the Exchange will
implement any new surveillance procedures it deems necessary to
effectively monitor the trading of options on Bitcoin ETPs.
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\71\ See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008, 3009 (January 17, 2024) (File Nos. SR-NYSEArca-
2021-90; SR-NYSEArca-2023-44; SR-NYSEArca-2023-58; SR-NASDAQ2023-
016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-CboeBZX-2023-038;
SR-CboeBZX2023-040; SR-CboeBZX-2023-042; SRCboeBZX-2023-044; and SR-
CboeBZX-2023-072) (Order Granting Accelerated Approval of Proposed
Rule Changes, as Modified by Amendments Thereto, to List and Trade
Bitcoin-Based Commodity-Based Trust Shares and Trust Units).
\72\ See Bitcoin ETP Order, 89 FR at 3010-11.
\73\ See Amendment No. 2 to Proposed Rule Change to List and
Trade Shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca
Rule 8.201-E (Commodity-Based Trust Shares) (SR-NYSEARCA-2021-90),
filed Jan. 5, 2024, available at https://www.sec.gov/comments/sr-nysearca-2021-90/srnysearca202190-358659-884182.pdf; Amendment No. 2
to Proposed Rule Change to List and Trade Shares of the Bitwise
Bitcoin ETF under NYSE Arca Rule 8.201-E (Commodity-Based Trust
Shares) (SR-NYSEARCA-2023-44), filed Jan. 5, 2024, available at
https://www.sec.gov/comments/sr-nysearca-2023-44/srnysearca202344-358800-884322.pdf; and Notice of Filing of Proposed Rule Change, as
Modified by Amendment No. 1, To List and Trade Shares of the
Grayscale Bitcoin Mini Trust Under NYSE Arca Rule 8.201-E,
Commodity-Based Trust Shares, Securities Exchange Act Release No.
100290 (June 6, 2024), 89 FR 49931 (June 12, 2024) (SR-NYSEARCA-
2024-45).
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Finally, the Exchange notes that this proposal will remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, protect investors because
applicable Exchange rules will require that customers receive
appropriate disclosure before trading options in Bitcoin Funds \74\ and
will require that brokers opening accounts and recommending options
transactions comply with relevant customer suitability standards.\75\
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\74\ See Exchange Rules 1307(b) and (e).
\75\ See Exchange Rule 1309.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
Intramarket Competition: The Exchange does not believe that the
proposed rule change will impose any burden on intramarket competition
that is not necessary or appropriate in furtherance of the purposes of
the Act as Bitcoin Funds would need to satisfy the initial listing
standards set forth in the Exchange Rules in the same manner as any
other ETF before the Exchange could list options on them. Additionally,
Bitcoin Fund options will be equally available to all market
participants who wish to trade such options. The Exchange Rules
currently applicable to the listing and trading of options on ETFs on
the Exchange will apply in the same manner to the listing and trading
of all options on Bitcoin Funds. Also, and as stated above, the
Exchange already lists options on other commodity-based ETPs.\76\
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\76\ See Exchange Rule 402(i).
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Intermarket Competition: The Exchange does not believe that the
proposal to list and trade options on Bitcoin Funds will impose any
burden on intermarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. To the extent that the
advent of Bitcoin Fund options trading on the Exchange may make the
Exchange a more attractive marketplace to market participants at other
exchanges, such market participants are free to elect to become market
participants on the Exchange. As noted herein, this is a competitive
filing as the Commission recently approved the listing and trading of
options on the Bitcoin Funds,\77\ as well as another ETP that, like the
Bitcoin Funds, holds bitcoin.\78\ Additionally, other options exchanges
are free to amend their listing rules, as applicable, to permit them to
list and trade options on Bitcoin Funds. The Exchange notes that
listing and trading Bitcoin Fund options on the Exchange will subject
such options to transparent exchange-based rules as well as price
discovery and liquidity, as opposed to alternatively trading such
options in the OTC market.
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\77\ See supra note 5.
\78\ See ISE IBIT Approval Order, supra note 6.
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The Exchange believes that the proposed rule change may relieve any
burden on, or otherwise promote, competition as it is designed to
increase competition for order flow on the Exchange in a manner that is
beneficial to investors by providing them with a lower-cost option to
hedge their investment portfolios. The Exchange notes that it operates
in a highly competitive market in which market participants can readily
direct order flow to competing venues that offer similar products.
Ultimately, the Exchange believes that offering Bitcoin Fund options
for trading on the Exchange will promote competition by providing
investors with an additional, relatively low-cost means to hedge their
portfolios and meet their investment needs in connection with Bitcoin
prices and Bitcoin-related products and positions on a listed options
exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \79\ and Rule 19b-4(f)(6) thereunder.\80\
Because the foregoing proposed rule change does not: (i) significantly
affect the protection of investors or the public interest; (ii) impose
any significant burden on competition; and (iii) become operative for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A)(iii) of the Act \81\ and
[[Page 94866]]
subparagraph (f)(6) of Rule 19b-4 thereunder.\82\
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\79\ 15 U.S.C. 78s(b)(3)(A)(iii).
\80\ 17 CFR 240.19b-4(f)(6).
\81\ 15 U.S.C. 78s(b)(3)(A)(iii).
\82\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Commission waives this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \83\ under the
Act does not normally become operative prior to 30 days after the date
of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\84\ the
Commission may designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposal may become operative immediately upon filing. The
Commission previously approved the listing of options on the Grayscale
Bitcoin Trust, the Grayscale Bitcoin Mini Trust, and the Bitwise
Bitcoin ETF.\85\ The Exchange has provided information regarding the
underlying Bitcoin Funds, including, among other things, information
regarding trading volume, the number of beneficial holders, and the
market capitalization of the Bitcoin Funds. The proposal also
establishes position and exercise limits for options on the Bitcoin
Funds and provides information regarding the surveillance procedures
that will apply to Bitcoin Fund options. The Commission believes that
waiver of the operative delay could benefit investors by providing an
additional venue for trading Bitcoin Fund options. Therefore, the
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
Accordingly, the Commission hereby waives the 30-day operative delay
and designates the proposed rule change as operative upon filing.\86\
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\83\ 17 CFR 240.19b-4(f)(6).
\84\ 17 CFR 240.19b-4(f)(6)(iii).
\85\ See Securities Exchange Act Release No. 101386 (October 18,
2024), 89 FR 84960 (October 24, 2024) (SR-NYSEAMER-2024-49) (Notice
of Filing of Amendment No. 3 and Order Granting Accelerated Approval
of a Proposed Rule Change, as Modified by Amendment No. 3, To Permit
the Listing and Trading of Options on Bitcoin Exchange-Traded
Funds).
\86\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
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-MIAX-2024-42 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-MIAX-2024-42. 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-MIAX-2024-42 and should be
submitted on or before December 20, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\87\
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\87\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-27988 Filed 11-27-24; 8:45 am]
BILLING CODE 8011-01-P