Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To List and Trade Option Contracts on the Grayscale Fund, the Grayscale Bitcoin Mini Trust BTC, and the Bitwise Bitcoin ETF, 94839-94846 [2024-27996]
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Federal Register / Vol. 89, No. 230 / Friday, November 29, 2024 / Notices
approximately $12,371,310 per year; 5
and
• 10 percent (8,070) are spent by the
funds’ board of directors at an hourly
cost of $4,770, for a total of
approximately $38,493,900 per year.6
Based on these estimated wage rates,
the total cost to the industry of the hour
burden for complying with the review
and recordkeeping requirements of rule
17e–1 is approximately $63,744,930.7
The Commission staff estimates that
there is no cost burden associated with
the information collection requirement
of rule 17e–1 other than this cost.
Estimates of the average burden hours
are made solely for the purposes of the
Paperwork Reduction Act and are not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules and forms.
The collection of information under rule
17e-1 is required to obtain the benefits
of the rule. The information provided
under rule 17e-1 will not be kept
confidential. An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a
currently valid OMB control number.
The 30-day public comment period
for this information collection request
opens on December 2, 2024 and ends on
December 30, 2024. View the full
information request and submit
comments at https://www.reginfo.gov/
public/do/PRAViewICR?ref_
nbr=202409-3235-009 or email
comments to MBX.OMB.OIRA.SEC_
desk_officer@omb.eop.gov.
Dated: November 22, 2024.
Sherry R. Haywood,
Assistant Secretary.
khammond on DSK9W7S144PROD with NOTICES
BILLING CODE 8011–01–P
hours × $511 per hour = $12,371,310.
hours × $4,770 per hour = $38,493,900;
the estimate for the cost of board time as a whole
is derived from estimates made by the staff
regarding typical board size and compensation that
is based on information received from fund
representatives and publicly available sources.
7 $12,879,720 + $12,371,310 + $38,493,900 =
$63,744,930.
6 8,070
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[Release No. 34–101713; File No. SR–
NYSEARCA–2024–101]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To List and Trade Option
Contracts on the Grayscale Fund, the
Grayscale Bitcoin Mini Trust BTC, and
the Bitwise Bitcoin ETF
November 22, 2024.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 20, 2024, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘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 self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade option contracts on the Grayscale
Fund, (BTC), the Grayscale Bitcoin Mini
Trust BTC, and the Bitwise Bitcoin ETF.
The proposed rule change is available
on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2024–27980 Filed 11–27–24; 8:45 am]
5 24,210
SECURITIES AND EXCHANGE
COMMISSION
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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94839
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 5.3–O (Criteria for Underlying
Securities), Rule 5.4–O (Withdrawal of
Approval of Underlying Securities),
Rule 5.32–O (Terms of FLEX Options),
and Rule 6.8–O (Position Limits),) to
allow the Exchange to list and trade
options on the following exchangetraded 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 This proposal would align
the Exchange’s rules with that of its
affiliated exchange, NYSE American
LLC.5 As such this proposal does not
raise any new or novel issues not
previously considered by the
Commission.
As discussed herein, the Exchange
believes 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.
Rule 5.3–O provides that, subject to
certain other criteria set forth in the
Rule,6 securities deemed appropriate for
4 See proposed Rule 5–3–O, Commentary .010.
On January 11, 2024, GBTC and BITB began trading
on the Exchange after the Commission approved
rule changes to list and trade shares of ‘‘BitcoinBased Commodity-Based Trust Shares’’ pursuant to
Rule 8.201–E(c)(1) (Commodity-Based Trust
Shares), including GBTC and BITB. See Securities
Exchange Act Release No. 99306 (January 10, 2024)
(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), 89
FR 3008 (January 17, 2024) (SR–NYSEARCA–2023–
44; SR–NYSEARCA–2021–90).
On July 13, 2024, after receiving approval of the
Commission, BTC began trading on the Exchange.
See Securities Exchange Act Release No. 100610
(July 26, 2024) (Order Granting Approval of
Proposed Rule Changes, as Modified by
Amendment No. 1, to List and Trade Share of BTC
pursuant to NYSE Arca Rule 8.201–E (CommodityBased Trust Shares)), 89 FR 62821 (August 1, 2024)
(SR–NYSEARCA–2023–45).
5 See Securities Exchange Act Release No. 101386
(October 18, 2024), 89 FR 84960 (October 24, 2024)
(SR–NYSEAMER–2024–49) (Order approving the
listing and trading of options on the Bitcoin Funds)
(the ‘‘American Bitcoin Options Approval Order’’).
See also NYSE American Rule 915, Commentary
.10(a).
6 To be eligible for options trading, ETFs and
ETPs must satisfy the initial listing criteria set forth
in Rule 5.3–O(g)(1) through (2).
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options trading include ExchangeTraded Fund Shares (or ETFs) that
represent certain types of interests 7 and
exchange-traded products (‘‘ETPs’’)
structured as trusts that hold precious
metals (which are deemed
commodities).8 Like ETPs backed by
precious metals (i.e., commodities), the
Exchange proposes to allow options
trading on the Bitcoin Funds that hold
Bitcoin—which is also deemed a
commodity.9
The Bitcoin Funds are structured as
trusts that hold bitcoin. Like ETFs and
ETPs currently deemed appropriate for
options trading, the investment
objective of each Bitcoin Fund trust 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. Each 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.10 The
Bitcoin Funds provide investors with
cost-efficient alternatives that allow a
level of participation in the Bitcoin
market through the securities market.
The Exchange believes each Bitcoin
Fund satisfies the Exchange’s initial
listing standards set forth in Rule 5.3–
O(a).11 The Exchange notes that the
Bitcoin Funds also satisfy the listing
standard applied to ETFs traded on the
Exchange that they be available for
creation and redemption each business
day as set forth in Rule 5.3–O(g)(1)(B).12
First, each of the Bitcoin Funds satisfy
the criteria and guidelines set forth in
Rule 5.3–O. Pursuant to Rule 5.3–O(b),
a security 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.13 Each of the Bitcoin Funds is an
NMS Stock as defined in Rule 600 of
Regulation NMS under the Act.14 The
Exchange believes each Bitcoin Fund is
characterized by a substantial number of
outstanding shares that are widely held
and actively traded.
As of August 30, 2024, the Bitcoin
Funds had the following number of
shares outstanding (and corresponding
market capitalization):
Shares
outstanding
Bitcoin Fund
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GBTC .................................................................................................................................................................
BTC ....................................................................................................................................................................
BITB ...................................................................................................................................................................
As shown above, each of the Bitcoin
Funds had significantly more than
7,000,000 shares outstanding, which is
the minimum number of shares of a
corporate stock that the Exchange
generally requires to list options on that
stock pursuant to the Exchange’s rules.
The Exchange believes this
demonstrates that each Bitcoin Fund is
characterized by a substantial number of
outstanding shares.
Further, the below table contains
information regarding the number of
beneficial holders of the Bitcoin Funds
as of August 14, 2024.
7 Rule 5.3–O(g) permits options trading on ETFs
that are traded on a national securities exchange
and are defined as an ‘‘NMS stock’’ in Rule
600(b)(55) of Regulation NMS, that 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 including, but not
limited to, stock index futures contracts, options on
futures, options on securities and indexes, equity
caps, collars and floors, swap agreements, forward
contracts, repurchase agreements and reverse
purchase 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 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); interests in a trust or similar entity
that holds a specified non-U.S. currency deposited
with the trust or similar entity when aggregated in
some specified minimum number may be
surrendered to the trust by the beneficial owner to
receive the specified non-U.S. currency and pays
the beneficial owner interest and other distributions
on deposited non-U.S. currency, if any, declared
and paid by the trust (‘‘Currency Trust Shares’’);
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 Units’’); or represents an interest
in a registered investment company (‘‘Investment
Company’’) organized as an open-end management
investment 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 Rules
5.3–O and 5.4–O are met. See Rule 5.3–O(g)(i)-(iii)
and (vii)
8 Rule 5.3–O(g) permits the listing and trading of
options on shares of the following trusts: SPDR
Gold Trust, the iShares COMEX Gold Trust, the
iShares Silver Trust, the ETFS Silver Trust, the
ETFS Gold Trust, ETFS Palladium Trust, or ETFS
Platinum Trust. See Rule 5.3–O(g)(iv)-(vi) and (viii)(ix)
9 See proposed Rule 5.3–O, Commentary .01 (The
Exchange may list and trade options on shares of
GBTC, BTC, and BITB, pursuant to Rules 5.3–O and
5.4–O’’).
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284,570,100
366,950,100
68,690,000
Bitcoin Fund
GBTC ....................................
BTC .......................................
BITB ......................................
10 Each
Market value
(8/30/2024)
$13,443,091,524
1,930,157,526
2,221,640,670
Beneficial
holders
(8/14/24)
464,364
13,403
75,437
trust may include minimal cash.
5.3–O(a) provides for guidelines to be
used by the Exchange when evaluating potential
underlying securities for Exchange option
transactions.
12 Rule 5.3–O(g)(1)(B) requires that ETFs must 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 ETFs 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.
13 The criteria and guidelines for a security to be
considered widely held and actively traded are set
forth in Rule 5.3–O(a), subject to exceptions.
14 See Rule 5.3–O(b). 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’’).
11 Rule
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khammond on DSK9W7S144PROD with NOTICES
As this table shows, each Bitcoin
Fund has significantly more than 2,000
beneficial holders (approximately 232,
7, and 38 times 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
pursuant to the Exchange’s rules.
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
94841
traded. Further, as of September 30,
2024, the total trading volume (by
shares and notional) for these funds
since they began trading 15 and the
average daily volume (‘‘ADV’’) over the
30-day period of September 1 through
September 30, 2024, was as follows:16
Bitcoin Fund
Trading
volume
(Shares)
GBTC .....................................................................................................................................
BTC ........................................................................................................................................
BITB .......................................................................................................................................
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
As demonstrated above, even though
these Bitcoin Funds have been trading
for less than one year (and in the case
of the BTC, for several months), 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. 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 Bitcoin Funds will be subject
to the Exchange’s continued listing
standards as set forth in Rule 5.4–O.17
Pursuant to Rule 5.4–O(b)(5), 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’’ or the fund is halted from trading
on its primary market.18 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 Rule 5.4–O(b)(1)–(4); (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
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.19 Consistent
with Rule 6.4–O, 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 20 at the
commencement of trading on the
Exchange and may also list series of
options on Bitcoin Funds for trading on
a weekly,21 monthly,22 or quarterly 23
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.24
Pursuant to Rule 6.4–O, Commentary
.05(a), 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 $200.25 Additionally, the Exchange
may list series of options pursuant to
the $1 Strike Price Interval Program,26
the $0.50 Strike Program,27 the $2.50
Strike Price Program,28 and the $5 Strike
Program.29 Pursuant to Rule 6.72–O,
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 Rules 6.4–O and
6.72–O, as applicable. Further, the
Exchange notes that Rule 4.16–O, which
governs margin requirements applicable
15 As noted supra, GBTC and BITB began trading
on January 11th and BTC began trading on July
31st. 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 31through September 20, 2024,
for BTC (i.e., two months).
16 See FactSet, 9/30/2024, https://
www.factset.com/data-attribution.
17 The Exchange proposes to adopt Commentary
.02 to Rule 5.4–O to specify that for purposes of the
continued listing standards set forth in Rule 5.3–
O(k), the Bitcoin Funds will be deemed ‘‘ExchangeTraded Fund Shares.’’ See proposed Commentary
.02 to Rule 5.4–O.
18 See Rule 5.4–O(k).
19 See Rule 6.5–O (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
Clearing Corporation. 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.
20 See Rule 6.4–O(d). The monthly expirations are
subject to certain listing criteria for underlying
securities described within Rule 5.3–O. 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 Rule 6.4–O(a), 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. 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.
21 See Rule 6.4–O, Commentary .07.
22 See Rule 6.4–O, Commentary .09.
23 See Rule 6.4–O, Commentary .08.
24 See Rule 6.4–O(d).
25 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, Rule 6.4–O,
Commentary .07 through .09, specifically set forth
intervals between strike prices on Quarterly
Options Series, Short Term Option Series, and
Monthly Options Series, respectively.
26 See Rule 6.4–O, Commentary .04.
27 See Rule 6.4–O, Commentary .13.
28 See Rule 6.4–O, Commentary .03.
29 See Rule 6.4–O, Commentary .10.
30 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 Rule 6.4–
O(a)(3). See also Rule 6.72A–O (which describes the
requirements for the Penny Interval Program).
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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.
Rule 5.32(f)(1) permits the Exchange
to authorize for trading a FLEX option
class on any equity security if it may
authorize for trading a non-FLEX option
class on that equity security pursuant to
Rule 5.3–O.31 At this time, the Exchange
is not proposing to permit Bitcoin Fund
options to trade as FLEX options.32 The
Exchange therefore proposes to modify
Rule 5.32(f)(1) to specify this exception,
which will add clarity and transparency
to Exchange Rules.33
khammond on DSK9W7S144PROD with NOTICES
Position and Exercise Limits
Position and exercise limits for
options, including options on Bitcoin
Funds, are determined pursuant to
Rules 6.8–O and 6.9–O, 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, recapitalizations, 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.34
31 See Rule 5.32–O(f)(1). See generally Section 4
(Flexible Exchange (‘‘FLEX’’) Options).
32 The Exchange will continue ongoing
discussions with the Commission regarding
appropriate position limits for the Bitcoin Funds
and plans to submit a separate rule filing that
would permit the Exchange to authorize for trading
FLEX options on the Funds (which filing may
propose changes to existing FLEX option position
limits for such options if appropriate).
33 See proposed Rule 5.32(f)(1) (providing, in
relevant part, that the Exchange may approve and
open for trading any FLEX Equity Options series on
any equity security that is eligible for Non-FLEX
Options trading under Rule 5.3–O ‘‘except those set
forth in Commentary .01 to Rule 5.3–O,’’ i.e., the
Bitcoin Funds).
34 See Commentary .06(a)–(e) to Rule 6.8–O. 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 sixmonth 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
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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 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.
Accordingly, 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, which limits are already in
place for the Bitcoin Funds on NYSE
American LLC.35
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. The
Exchange believes that the proposed
25,000-contract position limit is
conservative for options on the Bitcoin
Funds.36
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
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
Commentary .07(c) to Rule 6.8–O. In addition,
Commentary .07(f) to Rule 6.8–O establishes higher
position limits for options on certain ETFs.
35 See proposed 6.8–O, Commentary .07(f). See
NYSE American Rule 904, Commentary .07(f).
36 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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from establishing options positions that
could be used to manipulate the market
of the underlying Bitcoin Funds as well
as the Bitcoin market.37
As described herein, options on the
Bitcoin Funds will trade in the same
manner as any other ETF or ETP options
on the Exchange, except that the Bitcoin
Funds will not be eligible for FLEX
options trading. 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. Further, as described
above, Exchange Rules regarding
position and exercise limits will
likewise apply to options on the Bitcoin
Funds except 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 will
not have a capacity issue as a result of
this proposed rule change.
The Exchange represents that the
same surveillance procedures 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-backed
ETP options, as well as the proposed
options on Bitcoin Funds. The Exchange
37 See Securities Exchange Act Release No. 39489
(December 24, 1997), 63 FR 276 (January 5, 1998)
(SR–CBOE–1997–11).
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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 also conducts
surveillances with respect to the Bitcoin
Funds and, as appropriate, would
review activity in the underlying Funds
when conducting surveillances for
market abuse or manipulation in the
options on each Trust. Additionally, the
Exchange is a member of the
Intermarket Surveillance Group (‘‘ISG’’)
under the ISG Agreement. ISG members
work together to coordinate surveillance
and investigative information sharing in
the stock, options, and futures markets.
The Exchange will be able to obtain
information regarding trading in the
shares of the underlying Trusts from
Nasdaq, LLC, Cboe Exchange, Inc., and
other markets on which the Trusts trade
through the ISG. In addition, the
Exchange has a Regulatory Services
Agreement (‘‘RSA’’) 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 optionsrelated market surveillances.38 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’’): 39
38 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.
39 See Securities Exchange Act Release No. 99306
(January 10, 2024), 89 FR 3008 (January 17, 2024)
(File Nos. SR–NYSEArca–2021–90; SR–NYSEArca–
2023–44; SR–NYSEArca–2023–58; SR–NASDAQ–
2023–016; SR–NASDAQ–2023–019; SR–CboeBZX–
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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.40
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, and given that the ‘‘CME’s
surveillance can assist in detecting [the
impact of fraud or manipulation] on
CME bitcoin future prices,’’ 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].’’ 41
In light of surveillance measures
related to both options and futures as
well as the underlying Bitcoin Funds,42
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.
2023–028; SR–CboeBZX–2023–038; SR–CboeBZX–
2023–040; 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) (‘‘Bitcoin ETP
Order’’).
40 See Bitcoin ETP Order, 89 FR at 3009.
41 See Bitcoin ETP Order, 89 FR at 3010–11.
42 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-202190/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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94843
The Exchange believes that offering
options on the 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,43 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 options on the
Bitcoin Funds may cause investors to
bring 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.
2. Statutory Basis
The Exchange believes that its
proposed rule change is consistent with
Section 6(b) of the Act 44 in general and
furthers the objectives of Section 6(b)(5)
of the Act 45 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 the Bitcoin Funds will
remove impediments to and perfect the
43 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.
44 15 U.S.C. 78f(b).
45 15 U.S.C. 78f(b)(5).
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mechanism of a free and open market
and a national market system and, in
general, protect investors because
offering options on the 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 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,46 which, as described above, are
trusts structured in substantially the
same manner as the 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 the 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, 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
46 See
Rule 5.3–O(g).
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prices, minimum increments, and
margin requirements, will govern the
listing and trading of options on Bitcoin
Funds in the same manner.
The Exchange believes the proposed
rule change to exclude the Bitcoin
Funds from being eligible for trading as
FLEX options is consistent with the Act,
because it will permit the Exchange to
continue to participate in ongoing
discussions with the Commission
regarding appropriate position limits for
options on the Bitcoin Funds.47
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.48 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 also believes the
proposed rule change to Rule 5.32–O, to
make clear that options on the Bitcoin
Funds are not eligible for FLEX trading,
will remove impediments to and perfect
the mechanism of a free and open
market and a national market system
because it adds clarity and transparency
to Exchange Rules making them easier
to navigate and understand to the
benefit of investors and the public
interest.
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
47 The Exchange will submit a separate rule filing
that would permit the Exchange to authorize for
trading FLEX options on the Bitcoin Funds (which
filing may propose changes to existing FLEX option
position limits for such options if appropriate).
48 The Exchange notes that the Bitcoin Funds
have are approved for options trading on NYSE
American. See supra note 5.
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Sfmt 4703
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 also conducts
surveillances with respect to the Bitcoin
Funds and, as appropriate, would
review activity in the underlying Funds
when conducting surveillances for
market abuse or manipulation in the
options on each Trust. Additionally, the
Exchange is a member of the
Intermarket Surveillance Group
Agreement (‘‘ISG’’) under the ISG
Agreement. ISG members work together
to coordinate surveillance and
investigative information sharing in the
stock, options, and futures markets. In
addition, the Exchange is a party to an
RSA with FINRA and 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
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.’’ 49 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, and given that the ‘‘CME’s
surveillance can assist in detecting [the
impact of fraud or manipulation] on
CME bitcoin future prices,’’ 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].’’ 50 In light of surveillance
measures related to both options and
49 See
50 See
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Bitcoin ETP Order, 89 FR at 3010–11.
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futures as well as the underlying Bitcoin
Funds,51 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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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 options on the Bitcoin Funds would
need to satisfy the initial listing
standards set forth in the Exchange
Rules in the same manner as any other
option on an ETF before the Exchange
could list these options. 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 the Bitcoin Funds.
Also, and as stated above, the Exchange
already lists options on other
commodity-based ETPs.52
Intermarket Competition: The
Exchange does not believe that the
proposal to list and trade options on
51 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-202190/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).
52 Rule 5.3–O(g) permits the listing and trading of
options on shares of the following trusts: SPDR
Gold Trust, the iShares COMEX Gold Trust, the
iShares Silver Trust, the ETFS Silver Trust, the
ETFS Gold Trust, ETFS Palladium Trust, or ETFS
Platinum Trust). See Rule 5.3–O(g)(iv)–(vi) and
(viii)–(ix).
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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 on NYSE American
LLC.53
Additionally, other options exchanges
are free to amend their listing rules, as
applicable, to permit them to list and
trade options on the 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
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 54 and Rule
53 See supra note 4 (regarding the American
Bitcoin Options Approval Order). See also NYSE
American Rule 915, Commentary .10(a).
54 15 U.S.C. 78s(b)(3)(A)(iii).
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94845
19b–4(f)(6) thereunder.55 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 56 and
subparagraph (f)(6) of Rule 19b–4
thereunder.57
A proposed rule change filed under
Rule 19b–4(f)(6) 58 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),59 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 BTC, and the Bitwise Bitcoin
ETF.60 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
55 17
CFR 240.19b–4(f)(6).
U.S.C. 78s(b)(3)(A)(iii).
57 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.
58 17 CFR 240.19b–4(f)(6).
59 17 CFR 240.19b–4(f)(6)(iii).
60 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).
56 15
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Commission hereby waives the 30-day
operative delay and designates the
proposed rule change as operative upon
filing.61
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:
khammond on DSK9W7S144PROD with NOTICES
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
NYSEARCA–2024–101 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 NYSEARCA–2024–101. 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
61 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).
VerDate Sep<11>2014
21:22 Nov 27, 2024
Jkt 265001
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
NYSEARCA–2024–101 and should be
submitted on or before December 20,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.62
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–27996 Filed 11–27–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101711; File No. SR–
CBOE–2024–051]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Exchange
Rules 4.3, 4.20, and 8.30
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, Cboe Exchange, Inc.
(‘‘Exchange’’ or ‘‘Cboe Options’’) 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
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
Rules 4.3, 4.20, and 8.30. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
62 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00146
Fmt 4703
Sfmt 4703
AboutCBOE/CBOELegalRegulatory
Home.aspx), at the Exchange’s Office of
the Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rules 4.3 regarding the criteria for
underlying securities. Specifically, the
Exchange proposes to amend Rule 4.3,
Interpretation and Policy .06(a)(4) to
allow the Exchange to list and trade
options on Units 3 that represent
interests in the iShares Bitcoin Trust
(the ‘‘iShares Fund’’), the Grayscale
Bitcoin Trust (the ‘‘Grayscale Fund’’),
the Grayscale Bitcoin Mini Trust (the
‘‘Grayscale Mini Fund’’), or the Bitwise
Bitcoin ETF (the ‘‘Bitwise Fund’’ and,
together with the iShares Fund, the
Grayscale Fund, and the Grayscale Mini
Fund, the ‘‘Bitcoin Funds’’),4
designating them as ‘‘Units’’ deemed
appropriate for options trading on the
Exchange. This is a competitive filing
based on similar proposals submitted by
Nasdaq ISE, LLC (‘‘ISE’’) (with respect
to the iShares Fund) and NYSE
American, LLC (‘‘NYSE American’’)
(with respect to the Grayscale Fund, the
Grayscale Mini Fund, and the Bitwise
Fund), which were recently approved
by the Securities and Exchange
3 Rule 1.1 defines a ‘‘Unit’’ (which may also be
referred to as an ETF) as a share or other security
traded on a national securities exchange and
defined as an NMS stock as set forth in Rule 4.3.
4 See Securities Exchange Act Release No. 99306
(January 10, 2024), 89 FR 3008, 3009 (January 17,
2024) (SR–NYSEArca–2021–90; SR–NYSEArca–
2023–44; SR–NYSEArca–2023–58; SR–NASDAQ–
2023–016; SR–NASDAQ–2023–019; SR–CboeBZX–
2023–028; SR–CboeBZX–2023–038; SR–CboeBZX–
2023–040; SR–CboeBZX–2023–042; SR–CboeBZX–
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) (‘‘Bitcoin ETP
Approval Order’’).
E:\FR\FM\29NON1.SGM
29NON1
]]>Agencies
[Federal Register Volume 89, Number 230 (Friday, November 29, 2024)]
[Notices]
[Pages 94839-94846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27996]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101713; File No. SR-NYSEARCA-2024-101]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To List and Trade
Option Contracts on the Grayscale Fund, the Grayscale Bitcoin Mini
Trust BTC, and the Bitwise Bitcoin ETF
November 22, 2024.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on November 20, 2024, NYSE Arca, Inc. (``NYSE Arca'' or the
``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 self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade option contracts on the
Grayscale Fund, (BTC), the Grayscale Bitcoin Mini Trust BTC, and the
Bitwise Bitcoin ETF. The proposed rule change is available on the
Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 5.3-O (Criteria for Underlying
Securities), Rule 5.4-O (Withdrawal of Approval of Underlying
Securities), Rule 5.32-O (Terms of FLEX Options), and Rule 6.8-O
(Position Limits),) 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\ This proposal would align the
Exchange's rules with that of its affiliated exchange, NYSE American
LLC.\5\ As such this proposal does not raise any new or novel issues
not previously considered by the Commission.
---------------------------------------------------------------------------
\4\ See proposed Rule 5-3-O, Commentary .010. On January 11,
2024, GBTC and BITB began trading on the Exchange after the
Commission approved rule changes to list and trade shares of
``Bitcoin-Based Commodity-Based Trust Shares'' pursuant to Rule
8.201-E(c)(1) (Commodity-Based Trust Shares), including GBTC and
BITB. See Securities Exchange Act Release No. 99306 (January 10,
2024) (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), 89 FR 3008 (January
17, 2024) (SR-NYSEARCA-2023-44; SR-NYSEARCA-2021-90).
On July 13, 2024, after receiving approval of the Commission,
BTC began trading on the Exchange. See Securities Exchange Act
Release No. 100610 (July 26, 2024) (Order Granting Approval of
Proposed Rule Changes, as Modified by Amendment No. 1, to List and
Trade Share of BTC pursuant to NYSE Arca Rule 8.201-E (Commodity-
Based Trust Shares)), 89 FR 62821 (August 1, 2024) (SR-NYSEARCA-
2023-45).
\5\ See Securities Exchange Act Release No. 101386 (October 18,
2024), 89 FR 84960 (October 24, 2024) (SR-NYSEAMER-2024-49) (Order
approving the listing and trading of options on the Bitcoin Funds)
(the ``American Bitcoin Options Approval Order''). See also NYSE
American Rule 915, Commentary .10(a).
---------------------------------------------------------------------------
As discussed herein, the Exchange believes 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.
Rule 5.3-O provides that, subject to certain other criteria set
forth in the Rule,\6\ securities deemed appropriate for
[[Page 94840]]
options trading include Exchange-Traded Fund Shares (or ETFs) that
represent certain types of interests \7\ and exchange-traded products
(``ETPs'') structured as trusts that hold precious metals (which are
deemed commodities).\8\ Like ETPs backed by precious metals (i.e.,
commodities), the Exchange proposes to allow options trading on the
Bitcoin Funds that hold Bitcoin--which is also deemed a commodity.\9\
---------------------------------------------------------------------------
\6\ To be eligible for options trading, ETFs and ETPs must
satisfy the initial listing criteria set forth in Rule 5.3-O(g)(1)
through (2).
\7\ Rule 5.3-O(g) permits options trading on ETFs that are
traded on a national securities exchange and are defined as an ``NMS
stock'' in Rule 600(b)(55) of Regulation NMS, that 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 including, but not limited
to, stock index futures contracts, options on futures, options on
securities and indexes, equity caps, collars and floors, swap
agreements, forward contracts, repurchase agreements and reverse
purchase 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 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); interests in a trust or similar entity
that holds a specified non-U.S. currency deposited with the trust or
similar entity when aggregated in some specified minimum number may
be surrendered to the trust by the beneficial owner to receive the
specified non-U.S. currency and pays the beneficial owner interest
and other distributions on deposited non-U.S. currency, if any,
declared and paid by the trust (``Currency Trust Shares'');
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
Units''); or represents an interest in a registered investment
company (``Investment Company'') organized as an open-end management
investment 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 Rules 5.3-O and 5.4-O are met.
See Rule 5.3-O(g)(i)-(iii) and (vii)
\8\ Rule 5.3-O(g) permits the listing and trading of options on
shares of the following trusts: SPDR Gold Trust, the iShares COMEX
Gold Trust, the iShares Silver Trust, the ETFS Silver Trust, the
ETFS Gold Trust, ETFS Palladium Trust, or ETFS Platinum Trust. See
Rule 5.3-O(g)(iv)-(vi) and (viii)-(ix)
\9\ See proposed Rule 5.3-O, Commentary .01 (The Exchange may
list and trade options on shares of GBTC, BTC, and BITB, pursuant to
Rules 5.3-O and 5.4-O'').
---------------------------------------------------------------------------
The Bitcoin Funds are structured as trusts that hold bitcoin. Like
ETFs and ETPs currently deemed appropriate for options trading, the
investment objective of each Bitcoin Fund trust 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. Each 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.\10\ The
Bitcoin Funds provide investors with cost-efficient alternatives that
allow a level of participation in the Bitcoin market through the
securities market.
---------------------------------------------------------------------------
\10\ Each trust may include minimal cash.
---------------------------------------------------------------------------
The Exchange believes each Bitcoin Fund satisfies the Exchange's
initial listing standards set forth in Rule 5.3-O(a).\11\ The Exchange
notes that the Bitcoin Funds also satisfy the listing standard applied
to ETFs traded on the Exchange that they be available for creation and
redemption each business day as set forth in Rule 5.3-O(g)(1)(B).\12\
---------------------------------------------------------------------------
\11\ Rule 5.3-O(a) provides for guidelines to be used by the
Exchange when evaluating potential underlying securities for
Exchange option transactions.
\12\ Rule 5.3-O(g)(1)(B) requires that ETFs must 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 ETFs 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.
---------------------------------------------------------------------------
First, each of the Bitcoin Funds satisfy the criteria and
guidelines set forth in Rule 5.3-O. Pursuant to Rule 5.3-O(b), a
security 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.\13\ Each of the Bitcoin Funds is an
NMS Stock as defined in Rule 600 of Regulation NMS under the Act.\14\
The Exchange believes each Bitcoin Fund is characterized by a
substantial number of outstanding shares that are widely held and
actively traded.
---------------------------------------------------------------------------
\13\ The criteria and guidelines for a security to be considered
widely held and actively traded are set forth in Rule 5.3-O(a),
subject to exceptions.
\14\ See Rule 5.3-O(b). 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'').
---------------------------------------------------------------------------
As of August 30, 2024, the Bitcoin Funds had the following number
of shares outstanding (and corresponding market capitalization):
------------------------------------------------------------------------
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 of the Bitcoin Funds had significantly more
than 7,000,000 shares outstanding, which is the minimum number of
shares of a corporate stock that the Exchange generally requires to
list options on that stock pursuant to the Exchange's rules. The
Exchange believes this demonstrates that each Bitcoin Fund is
characterized by a substantial number of outstanding shares.
Further, the below table contains information regarding the number
of beneficial holders of the Bitcoin Funds as of August 14, 2024.
------------------------------------------------------------------------
Beneficial
Bitcoin Fund holders (8/14/
24)
------------------------------------------------------------------------
GBTC.................................................... 464,364
BTC..................................................... 13,403
BITB.................................................... 75,437
------------------------------------------------------------------------
[[Page 94841]]
As this table shows, each Bitcoin Fund has significantly more than
2,000 beneficial holders (approximately 232, 7, and 38 times 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 pursuant to the Exchange's rules. 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, as of September 30, 2024, the total
trading volume (by shares and notional) for these funds since they
began trading \15\ and the average daily volume (``ADV'') over the 30-
day period of September 1 through September 30, 2024, was as
follows:\16\
---------------------------------------------------------------------------
\15\ As noted supra, GBTC and BITB began trading on January 11th
and BTC began trading on July 31st. 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 31through
September 20, 2024, for BTC (i.e., two months).
\16\ See FactSet, 9/30/2024, https://www.factset.com/data-attribution.
----------------------------------------------------------------------------------------------------------------
Trading
Bitcoin Fund volume Trading volume ADV (shares)
(Shares) (Notional $)
----------------------------------------------------------------------------------------------------------------
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 (and in the case of the BTC, for several
months), 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. 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 Bitcoin Funds will be subject to the Exchange's continued
listing standards as set forth in Rule 5.4-O.\17\
---------------------------------------------------------------------------
\17\ The Exchange proposes to adopt Commentary .02 to Rule 5.4-O
to specify that for purposes of the continued listing standards set
forth in Rule 5.3-O(k), the Bitcoin Funds will be deemed ``Exchange-
Traded Fund Shares.'' See proposed Commentary .02 to Rule 5.4-O.
---------------------------------------------------------------------------
Pursuant to Rule 5.4-O(b)(5), 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'' or
the fund is halted from trading on its primary market.\18\
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 Rule 5.4-O(b)(1)-(4); (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 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.
---------------------------------------------------------------------------
\18\ See Rule 5.4-O(k).
---------------------------------------------------------------------------
Options on each Bitcoin Fund will be physically settled contracts
with American-style exercise.\19\ Consistent with Rule 6.4-O, 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 \20\ at the
commencement of trading on the Exchange and may also list series of
options on Bitcoin Funds for trading on a weekly,\21\ monthly,\22\ or
quarterly \23\ 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.\24\
---------------------------------------------------------------------------
\19\ See Rule 6.5-O (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 Clearing
Corporation. 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.
\20\ See Rule 6.4-O(d). The monthly expirations are subject to
certain listing criteria for underlying securities described within
Rule 5.3-O. 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 Rule
6.4-O(a), 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. 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.
\21\ See Rule 6.4-O, Commentary .07.
\22\ See Rule 6.4-O, Commentary .09.
\23\ See Rule 6.4-O, Commentary .08.
\24\ See Rule 6.4-O(d).
---------------------------------------------------------------------------
Pursuant to Rule 6.4-O, Commentary .05(a), 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.\25\ Additionally, the Exchange may list series of options
pursuant to the $1 Strike Price Interval Program,\26\ the $0.50 Strike
Program,\27\ the $2.50 Strike Price Program,\28\ and the $5 Strike
Program.\29\ Pursuant to Rule 6.72-O, 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 Rules 6.4-O and
6.72-O, as applicable. Further, the Exchange notes that Rule 4.16-O,
which governs margin requirements applicable
[[Page 94842]]
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.
---------------------------------------------------------------------------
\25\ 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, Rule 6.4-O,
Commentary .07 through .09, specifically set forth intervals between
strike prices on Quarterly Options Series, Short Term Option Series,
and Monthly Options Series, respectively.
\26\ See Rule 6.4-O, Commentary .04.
\27\ See Rule 6.4-O, Commentary .13.
\28\ See Rule 6.4-O, Commentary .03.
\29\ See Rule 6.4-O, Commentary .10.
\30\ 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 Rule 6.4-O(a)(3). See
also Rule 6.72A-O (which describes the requirements for the Penny
Interval Program).
---------------------------------------------------------------------------
Rule 5.32(f)(1) permits the Exchange to authorize for trading a
FLEX option class on any equity security if it may authorize for
trading a non-FLEX option class on that equity security pursuant to
Rule 5.3-O.\31\ At this time, the Exchange is not proposing to permit
Bitcoin Fund options to trade as FLEX options.\32\ The Exchange
therefore proposes to modify Rule 5.32(f)(1) to specify this exception,
which will add clarity and transparency to Exchange Rules.\33\
---------------------------------------------------------------------------
\31\ See Rule 5.32-O(f)(1). See generally Section 4 (Flexible
Exchange (``FLEX'') Options).
\32\ The Exchange will continue ongoing discussions with the
Commission regarding appropriate position limits for the Bitcoin
Funds and plans to submit a separate rule filing that would permit
the Exchange to authorize for trading FLEX options on the Funds
(which filing may propose changes to existing FLEX option position
limits for such options if appropriate).
\33\ See proposed Rule 5.32(f)(1) (providing, in relevant part,
that the Exchange may approve and open for trading any FLEX Equity
Options series on any equity security that is eligible for Non-FLEX
Options trading under Rule 5.3-O ``except those set forth in
Commentary .01 to Rule 5.3-O,'' i.e., the Bitcoin Funds).
---------------------------------------------------------------------------
Position and Exercise Limits
Position and exercise limits for options, including options on
Bitcoin Funds, are determined pursuant to Rules 6.8-O and 6.9-O,
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.\34\
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\34\ See Commentary .06(a)-(e) to Rule 6.8-O. 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 Commentary .07(c) to Rule 6.8-O. In
addition, Commentary .07(f) to Rule 6.8-O 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 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. Accordingly, 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, which limits are already in place
for the Bitcoin Funds on NYSE American LLC.\35\
---------------------------------------------------------------------------
\35\ See proposed 6.8-O, Commentary .07(f). See NYSE American
Rule 904, Commentary .07(f).
---------------------------------------------------------------------------
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. The
Exchange believes that the proposed 25,000-contract position limit is
conservative for options on the Bitcoin Funds.\36\
---------------------------------------------------------------------------
\36\ 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.
---------------------------------------------------------------------------
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.\37\
---------------------------------------------------------------------------
\37\ 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, except
that the Bitcoin Funds will not be eligible for FLEX options trading.
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. Further, as described above, Exchange Rules regarding
position and exercise limits will likewise apply to options on the
Bitcoin Funds except 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 will not have a capacity issue as a
result of this proposed rule change.
The Exchange represents that the same surveillance procedures
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-backed ETP options, as well as the proposed options on
Bitcoin Funds. The Exchange
[[Page 94843]]
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 also
conducts surveillances with respect to the Bitcoin Funds and, as
appropriate, would review activity in the underlying Funds when
conducting surveillances for market abuse or manipulation in the
options on each Trust. Additionally, the Exchange is a member of the
Intermarket Surveillance Group (``ISG'') under the ISG Agreement. ISG
members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets. The
Exchange will be able to obtain information regarding trading in the
shares of the underlying Trusts from Nasdaq, LLC, Cboe Exchange, Inc.,
and other markets on which the Trusts trade through the ISG. In
addition, the Exchange has a Regulatory Services Agreement (``RSA'')
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.\38\ Further, the Exchange will implement any new
surveillance procedures it deems necessary to effectively monitor the
trading of options on the Bitcoin Funds.
---------------------------------------------------------------------------
\38\ 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''): \39\
---------------------------------------------------------------------------
\39\ See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008 (January 17, 2024) (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; 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)
(``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.\40\
---------------------------------------------------------------------------
\40\ See Bitcoin ETP Order, 89 FR at 3009.
---------------------------------------------------------------------------
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, and given that the
``CME's surveillance can assist in detecting [the impact of fraud or
manipulation] on CME bitcoin future prices,'' 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].''
\41\
---------------------------------------------------------------------------
\41\ 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,\42\ 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.
---------------------------------------------------------------------------
\42\ 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 the 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,\43\ 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 options on the Bitcoin Funds may cause investors to bring 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.
---------------------------------------------------------------------------
\43\ 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.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \44\ in general and furthers the
objectives of Section 6(b)(5) of the Act \45\ 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.
---------------------------------------------------------------------------
\44\ 15 U.S.C. 78f(b).
\45\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposal to list and
trade options on the Bitcoin Funds will remove impediments to and
perfect the
[[Page 94844]]
mechanism of a free and open market and a national market system and,
in general, protect investors because offering options on the 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 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,\46\ which,
as described above, are trusts structured in substantially the same
manner as the 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.
---------------------------------------------------------------------------
\46\ See Rule 5.3-O(g).
---------------------------------------------------------------------------
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 the
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, 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 Exchange believes the proposed rule change to exclude the
Bitcoin Funds from being eligible for trading as FLEX options is
consistent with the Act, because it will permit the Exchange to
continue to participate in ongoing discussions with the Commission
regarding appropriate position limits for options on the Bitcoin
Funds.\47\
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\47\ The Exchange will submit a separate rule filing that would
permit the Exchange to authorize for trading FLEX options on the
Bitcoin Funds (which filing may propose changes to existing FLEX
option position limits for such options if appropriate).
---------------------------------------------------------------------------
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.\48\ 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.
---------------------------------------------------------------------------
\48\ The Exchange notes that the Bitcoin Funds have are approved
for options trading on NYSE American. See supra note 5.
---------------------------------------------------------------------------
The Exchange also believes the proposed rule change to Rule 5.32-O,
to make clear that options on the Bitcoin Funds are not eligible for
FLEX trading, will remove impediments to and perfect the mechanism of a
free and open market and a national market system because it adds
clarity and transparency to Exchange Rules making them easier to
navigate and understand to the benefit of investors and the public
interest.
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 also
conducts surveillances with respect to the Bitcoin Funds and, as
appropriate, would review activity in the underlying Funds when
conducting surveillances for market abuse or manipulation in the
options on each Trust. Additionally, the Exchange is a member of the
Intermarket Surveillance Group Agreement (``ISG'') under the ISG
Agreement. ISG members work together to coordinate surveillance and
investigative information sharing in the stock, options, and futures
markets. In addition, the Exchange is a party to an RSA with FINRA and
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
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.'' \49\ 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, and given that the
``CME's surveillance can assist in detecting [the impact of fraud or
manipulation] on CME bitcoin future prices,'' 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].''
\50\ In light of surveillance measures related to both options and
[[Page 94845]]
futures as well as the underlying Bitcoin Funds,\51\ 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.
---------------------------------------------------------------------------
\49\ See Bitcoin ETP Order, 89 FR at 3009.
\50\ See Bitcoin ETP Order, 89 FR at 3010-11.
\51\ 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).
---------------------------------------------------------------------------
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 options on the Bitcoin Funds would need to satisfy the
initial listing standards set forth in the Exchange Rules in the same
manner as any other option on an ETF before the Exchange could list
these options. 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 the Bitcoin Funds. Also, and as
stated above, the Exchange already lists options on other commodity-
based ETPs.\52\
---------------------------------------------------------------------------
\52\ Rule 5.3-O(g) permits the listing and trading of options on
shares of the following trusts: SPDR Gold Trust, the iShares COMEX
Gold Trust, the iShares Silver Trust, the ETFS Silver Trust, the
ETFS Gold Trust, ETFS Palladium Trust, or ETFS Platinum Trust). See
Rule 5.3-O(g)(iv)-(vi) and (viii)-(ix).
---------------------------------------------------------------------------
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 on NYSE American LLC.\53\
---------------------------------------------------------------------------
\53\ See supra note 4 (regarding the American Bitcoin Options
Approval Order). See also NYSE American Rule 915, Commentary .10(a).
---------------------------------------------------------------------------
Additionally, other options exchanges are free to amend their
listing rules, as applicable, to permit them to list and trade options
on the 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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \54\ and Rule 19b-4(f)(6) thereunder.\55\
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 \56\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\57\
---------------------------------------------------------------------------
\54\ 15 U.S.C. 78s(b)(3)(A)(iii).
\55\ 17 CFR 240.19b-4(f)(6).
\56\ 15 U.S.C. 78s(b)(3)(A)(iii).
\57\ 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.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \58\ 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),\59\ 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 BTC, and the Bitwise
Bitcoin ETF.\60\ 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
[[Page 94846]]
Commission hereby waives the 30-day operative delay and designates the
proposed rule change as operative upon filing.\61\
---------------------------------------------------------------------------
\58\ 17 CFR 240.19b-4(f)(6).
\59\ 17 CFR 240.19b-4(f)(6)(iii).
\60\ 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).
\61\ 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).
---------------------------------------------------------------------------
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 NYSEARCA-2024-101 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 NYSEARCA-2024-101. 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 NYSEARCA-2024-101 and should be
submitted on or before December 20, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\62\
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\62\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-27996 Filed 11-27-24; 8:45 am]
BILLING CODE 8011-01-P
