Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rules 3120 (Position Limits) and 5020 (Criteria for Underlying Securities) To Permit Trading of iShares Bitcoin ETF Options, 95264-95273 [2024-28105]
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Federal Register / Vol. 89, No. 231 / Monday, December 2, 2024 / Notices
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 51 and Rule
19b–4(f)(6) thereunder.52 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 53 and
subparagraph (f)(6) of Rule 19b–4
thereunder.54
A proposed rule change filed under
Rule 19b–4(f)(6) 55 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),56 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 iShares Bitcoin
Trust, the Fidelity Wise Origin Bitcoin
Fund, and the ARK21Shares Bitcoin
ETF.57 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
51 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
53 15 U.S.C. 78s(b)(3)(A)(iii).
54 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.
55 17 CFR 240.19b–4(f)(6).
56 17 CFR 240.19b–4(f)(6)(iii).
57 See Securities Exchange Act Release No.
101128 (September 20, 2024), 89 FR 78942
(September 26, 2024) (SR–ISE–2024–03) (SelfRegulatory Organizations; Nasdaq ISE, LLC; Notice
of Filing of Amendment Nos. 4 and 5 and Order
Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment Nos. 1, 4, and
5, to Permit the Listing and Trading of Options on
the iShares Bitcoin Trust). See also Securities
Exchange Act Release No. 101387 (October 18,
2024), 89 FR 84948 (October 24, 2024) (SR–Cboe–
2024–035) (Notice of Filing of Amendment Nos. 2
and 3 and Order Granting Accelerated Approval of
a Proposed Rule Change, as Modified by
Amendment Nos. 2 and 3, To Permit the Listing and
Trading of Options on Bitcoin Exchange-Traded
Funds).
ddrumheller on DSK120RN23PROD with NOTICES1
52 17
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the Bitcoin Funds. The proposal also
establishes position and exercise limits
for options on the Bitcoin Funds and
provides information regarding the
surveillance procedures that will apply
to Bitcoin Fund options. The
Commission believes that waiver of the
operative delay could benefit investors
by providing an additional venue for
trading Bitcoin Fund options. Therefore,
the Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change as operative upon
filing.58
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 rule-comments@
sec.gov. Please include file number SR–
NYSEAMER–2024–73 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NYSEAMER–2024–73. 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/
58 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).
PO 00000
Frm 00097
Fmt 4703
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rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSEAMER–2024–73 and should
be submitted on or before December 23,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.59
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–28107 Filed 11–29–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101735; File No. SR–BOX–
2024–27]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Rules 3120
(Position Limits) and 5020 (Criteria for
Underlying Securities) To Permit
Trading of iShares Bitcoin ETF Options
November 25, 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, BOX Exchange LLC
(‘‘Exchange’’ or ‘‘BOX Options’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
59 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 89, No. 231 / Monday, December 2, 2024 / Notices
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rules 3120 (Position Limits), 5020
(Criteria for Underlying Securities) to
permit trading of iShares Bitcoin ETF
options. Additionally, the Exchange
proposes to amend Rule 5055 (FLEX
Equity Options). The text of the
proposed rule change is available from
the principal office of the Exchange, at
the Commission’s Public Reference
Room and also on the Exchange’s
internet website at https://
rules.boxexchange.com/rulefilings.
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
ddrumheller on DSK120RN23PROD with NOTICES1
1. Purpose
The Exchange proposes to amend
Rules 3120 (Position Limits) and 5020
(Criteria for Underlying Securities) to
permit trading of iShares Bitcoin ETF
options on BOX. Additionally, the
Exchange proposes to amend Rule 5055
(FLEX Equity Options). This is a
competitive filing that is based on a
proposal recently submitted by Nasdaq
ISE, LLC (‘‘Nasdaq ISE’’) and approved
by the Commission.3
The Exchange proposes to amend
Rule 5020, Criteria for Underlying
Securities, to allow the Exchange to list
and trade options on iShares Bitcoin
3 See Securities Exchange Act Release No. 101128
(September 20, 2024) (Notice of Filing of
Amendment Nos. 4 and 5 and Order Granting
Accelerated Approval of a Proposed Rule Change,
as Modified by Amendment Nos. 1, 4, and 5, to
Permit the Listing and Trading of Options on the
iShares Bitcoin Trust), 89 FR 78942 (September 26,
2024) (‘‘ISE Approval Order’’).
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Trust (the ‘‘Trust’’) 4 as an ETF deemed
appropriate for options trading on BOX.
Specifically, the Exchange proposes to
amend Rule 5020(h) to allow BOX to list
and trade options on the Trust.
Currently, Rule 5020(h) provides that
securities deemed appropriate for
options trading shall include shares or
other securities (‘‘Exchange-Traded
Fund Shares’’) that are traded on a
national securities exchange and are
defined as an ‘‘NMS stock’’ under Rule
600 of Regulation NMS and that (i)
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
indices, equity caps, collars and floors,
swap agreements, forward contracts,
repurchase agreements and reverse
repurchase agreements (the ‘‘Financial
Instruments’’) and money market
instruments, including, but not limited
to, U.S. government securities and
repurchase agreements (the ‘‘Money
Market Instruments’’) comprising or
otherwise based on or representing
investments in broad-based indexes or
portfolios of securities and/or Financial
Instruments and Money Market
Instruments (or that hold securities in
one or more other registered investment
companies that themselves hold such
portfolios of securities and/or Financial
Instruments and Money Market
Instruments); or (ii) represent interests
in a trust 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 or currencies and
pays the beneficial owner interest and
other distributions on the deposited
non-U.S. currency or currencies, if any,
declared and paid by the trust
(‘‘Currency Trust Shares’’); or (iii)
represent commodity pool interests
4 On January 10, 2024, the Commission approved
proposals by NYSE Arca, Inc., The Nasdaq Stock
Market LLC, and Cboe BZX Exchange, Inc. to list
and trade the shares of 11 bitcoin-based
commodity-based trust shares and trust units,
including the iShares Bitcoin Trust. See Securities
Exchange Act Release No. 99306 (January 10, 2024),
89 FR 3008 (Jan. 17, 2024) (order approving File
Nos. SR–NYSEARCA–2021–90; SR–NYSEARCA–
2023–44; SR–NYSEARCA–2023–58; SR–NASDAQ–
2023–016; SR–NASDAQ–2023–019; SR–CboeBZX–
2023–028; SR–CboeBZX–2023–038; SR–CboeBZX–
2023–040; SR–CboeBZX–2023–042; SR–CboeBZX–
2023–044; SR–CboeBZX–2023–072) (‘‘Bitcoin ETP
Order’’). The Exchange represents it would not list
options on the Trust unless it satisfied all
applicable criteria in Rule 5020.
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principally engaged, directly or
indirectly, in holding and/or managing
portfolios or baskets of securities,
commodity futures contracts, options on
commodity futures contracts, swaps,
forward contracts and/or options on
physical commodities and/or non-U.S.
currency (‘‘Commodity Pool ETFs’’); or
(iv) represent interests in the SPDR®
Gold Trust, the iShares COMEX Gold
Trust, the iShares Silver Trust, the ETFS
Gold Trust, the ETFS Silver trust, the
ETFS Palladium Trust, the ETFS
Platinum Trust or the Sprott Physical
Gold Trust. In addition to the
aforementioned requirements, Rules
5020(h)(1) and (2) must be met to list
options on ETFs.5
Proposal
The Exchange proposes to expand the
list of ETFs that are appropriate for
options trading on the Exchange in Rule
5020(h) to include the Trust.6
Description of the Trust 7
The Shares are issued by the Trust, a
Delaware statutory trust. The Trust
operates pursuant to a trust agreement
(the ‘‘Trust Agreement’’) between the
Sponsor, BlackRock Fund Advisors (the
‘‘Trustee’’) as the trustee of the Trust
and Wilmington Trust, National
Association, as Delaware trustee (the
‘‘Delaware Trustee’’). The Trust issues
Shares representing fractional
undivided beneficial interests in its net
assets. The assets of the Trust consist
only of Bitcoin, held by a custodian on
behalf of the Trust except under limited
circumstances when transferred through
the Trust’s prime broker temporarily
(described below), and cash. Coinbase
Custody Trust Company, LLC (the
‘‘Bitcoin Custodian’’) is the custodian
for the Trust’s Bitcoin holdings, and
5 Rule 5020(h)(1) states that the Exchange-Traded
Fund Shares either (i) meet the criteria and
guidelines set forth in paragraphs (a) and (b) of this
Rule 5020 above; or (ii) the Exchange-Traded Fund
Shares are available for creation or redemption each
business day from or through the issuing trust,
investment company, commodity pool or other
entity in cash or in kind at a price related to net
asset value, and the issuer is obligated to issue
Exchange-Traded Fund Shares in a specified
aggregate number even if some or all of the
investment assets and/or cash required to be
deposited have not been received by the issuer,
subject to the condition that the person obligated
to deposit the investment assets has undertaken to
deliver them 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 of the
Exchange-Traded Fund Shares, all as described in
the Exchange-Traded Fund Shares’ prospectus; and
meet other criteria.
6 Specifically, the Exchange proposes to amend
Rule 5020(h) to include the name of the Trust to
enable options to be listed on the Trust on BOX.
7 See SR–NASDAQ–2023–016 for a complete
description of the Trust.
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Federal Register / Vol. 89, No. 231 / Monday, December 2, 2024 / Notices
maintains a custody account for the
Trust (‘‘Custody Account’’); Coinbase,
Inc. (the ‘‘Prime Execution Agent’’), an
affiliate of the Bitcoin Custodian, is the
prime broker for the Trust and
maintains a trading account for the
Trust (‘‘Trading Account’’); and Bank of
New York Mellon is the custodian for
the Trust’s cash holdings (the ‘‘Cash
Custodian’’ and together with the
Bitcoin Custodian, the ‘‘Custodians’’)
and the administrator of the Trust (the
‘‘Trust Administrator’’). Under the Trust
Agreement, the Trustee may delegate all
or a portion of its duties to any agent,
and has delegated the bulk of the dayto-day responsibilities to the Trust
Administrator and certain other
administrative and record-keeping
functions to its affiliates and other
agents. The Trust is not an investment
company registered under the
Investment Company Act of 1940, as
amended, (the ‘‘1940 Act’’).
The investment objective of the Trust
is to reflect generally the performance of
the price of Bitcoin. The Trust seeks to
reflect such performance before
payment of the Trust’s expenses and
liabilities. The Shares are intended to
constitute a simple means of making an
investment similar to an investment in
Bitcoin through the public securities
market rather than by acquiring, holding
and trading Bitcoin directly on a peerto-peer or other basis or via a digital
asset exchange. The Shares have been
designed to remove the obstacles
represented by the complexities and
operational burdens involved in a direct
investment in Bitcoin, while at the same
time having an intrinsic value that
reflects, at any given time, the
investment exposure to the Bitcoin
owned by the Trust at such time, less
the Trust’s expenses and liabilities.
Although the Shares are not the exact
equivalent of a direct investment in
Bitcoin, they provide investors with an
alternative method of achieving
investment exposure to Bitcoin through
the public securities market, which may
be more familiar to them.
ddrumheller on DSK120RN23PROD with NOTICES1
Custody of the Trust’s Bitcoin
An investment in the Shares is backed
by Bitcoin held by the Bitcoin
Custodian on behalf of the Trust. All of
the Trust’s Bitcoin will be held in the
Custody Account, other than the Trust’s
Bitcoin which is temporarily
maintained in the Trading Account
under limited circumstances, i.e., in
connection with creation and
redemption Basket 8 activity or sales of
8 The Trust issues and redeems Shares only in
blocks of 40,000 or integral multiples thereof. A
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Bitcoin deducted from the Trust’s
holdings in payment of Trust expenses
or the Sponsor’s fee (or, in extraordinary
circumstances, upon liquidation of the
Trust). The Custody Account includes
all of the Trust’s Bitcoin held at the
Bitcoin Custodian, but does not include
the Trust’s Bitcoin temporarily
maintained at the Prime Execution
Agent in the Trading Account from time
to time. The Bitcoin Custodian will keep
all of the private keys associated with
the Trust’s Bitcoin held in the Custody
Account in ‘‘cold storage.’’ 9 The
hardware, software, systems, and
procedures of the Bitcoin Custodian
may not be available or cost-effective for
many investors to access directly. As
provided in the ISE Approval Order, the
Exchange believes that offering options
on the Trust will benefit investors by
providing them with an additional,
relatively lower cost investing tool to
gain exposure to spot Bitcoin as well as
a hedging vehicle to meet their
investment needs in connection with
Bitcoin products and positions. Similar
to other commodity ETFs in which
options may be listed on BOX (e.g.,
SPDR® Gold Trust, the iShares COMEX
Gold Trust, the iShares Silver Trust, the
ETFS Gold Trust, the ETFS Silver trust,
the ETFS Palladium Trust, the ETFS
Platinum Trust or the Sprott Physical
Gold Trust),10 the proposed ETF is a
trust that essentially offers the same
objectives and benefits to investors.
Options on the Trust will trade in the
same manner as options on other ETFs
on BOX. Exchange Rules that currently
apply to the listing and trading of all
options on ETFs on BOX, including, for
example, rules that govern listing
criteria, expirations, exercise prices,
minimum increments, position and
exercise limits (including as proposed
herein), margin requirements, customer
accounts, and trading halt procedures
will apply to the listing and trading of
options on the Trust on BOX. Today,
these rules apply to options on the
various commodities ETFs deemed
appropriate for options trading on BOX
pursuant to Rule 5020(h)(iv). The
Exchange’s initial listing standards for
ETFs on which options may be listed
and traded on BOX will apply to the
Trust. The initial listing standard as set
block of 40,000 Shares is called a ‘‘Basket.’’ These
transactions take place in exchange for Bitcoin.
9 The term ‘‘cold storage’’ refers to a safeguarding
method by which the private keys corresponding to
the Trust’s Bitcoin are generated and stored in an
offline manner, subject to layers of procedures
designed to enhance security. Private keys are
generated by the Bitcoin Custodian in offline
computers that are not connected to the internet so
that they are more resistant to being hacked.
10 See Rule 5020(h)(iv).
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forth in Rule 5020(a) provides that:
Underlying securities with respect to
which put or call options contracts are
approved for listing and trading on the
Exchange must meet the following
criteria: (1) the security must be
registered and be an ‘‘NMS stock’’ as
defined in Rule 600 of Regulation NMS
under the Exchange Act; and (2) the
security shall be characterized by a
substantial number of outstanding
shares that are widely held and actively
traded. Pursuant to Rule 5020, ETFs on
which options may be listed and traded
must satisfy the listing standards set
forth in Rule 5020(h). Specifically, the
Trust must meet either: (1) the criteria
and guidelines for underlying securities
set forth in Rules 5020(a) and (b), or (2)
it must be available for creation or
redemption each business day from or
through the issuing trust, investment
company, commodity pool or other
entity in cash or in kind at a price
related to net asset value, and the issuer
is obligated to issue Exchange-Traded
Fund Shares in a specified aggregate
number even if some or all of the
investment assets and/or cash required
to be deposited have not been received
by the issuer, subject to the condition
that the person obligated to deposit the
investment assets has undertaken to
deliver them 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 of the
Exchange-Traded Fund Shares, all as
described in the Exchange-Traded Fund
Shares’ prospectus, and meet other
criteria. Options on the Trust will also
be subject to the Exchange’s continued
listing standards for options on ETFs set
forth in Rule 5030(h). Specifically,
options approved for trading pursuant
to Rule 5020(h) will not be deemed to
meet the requirements for continued
approval, and the Exchange shall not
open for trading any additional series of
option contracts of the class covering
such ETFs if the ETFs are delisted from
trading as provided in Rule 5030(b)(6) 11
or the ETFs are halted or suspended
from trading on their primary market.12
In addition, the Exchange shall consider
the suspension of opening transactions
in any series of options of the class
covering ETFs in any of the following
circumstances: (1) in the case of options
covering Exchange-Traded Fund Shares
approved pursuant to Rule 5020(h)(1)(i),
in accordance with the terms of
11 Rule 5030(b)(6) provides, ‘‘The underlying
security ceases to be an ‘‘NMS stock’’ as defined in
Rule 600 of Regulation NMS under the Exchange
Act.’’
12 See Rule 5030(h).
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ddrumheller on DSK120RN23PROD with NOTICES1
subparagraphs (b)(1), (2), (3) and (6) of
Rule 5030; 13 (2) in the case of options
covering Fund Shares approved
pursuant to Rule 5020(h)(1)(ii),
following the initial twelve-month
period beginning upon the
commencement of trading in the
Exchange-Traded Fund Shares on a
national securities exchange and are
defined as an ‘‘NMS stock’’ under Rule
600 of Regulation NMS, there were
fewer than 50 record and/or beneficial
holders of such Exchange-Traded Fund
Shares for 30 or more consecutive
trading days; (3) the value of the index
or portfolio of securities or non-U.S.
currency, portfolio of commodities
including commodity futures contracts,
options on commodity futures contracts,
swaps, forward contracts, options on
physical commodities and/or Financial
Instruments and Money Market
Instruments, on which the ExchangeTraded Fund Shares are based 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 in such
options on BOX inadvisable. Options on
the Trust would be physically settled
contracts with American-style
exercise.14 Consistent with current Rule
5050, which governs the opening of
options series on a specific underlying
security (including ETFs), the Exchange
will open at least one expiration month
for options on the Trust and may also
list series of options on the Trust for
trading on a weekly,15 monthly,16 or
quarterly 17 basis. The Exchange may
also list long-term equity option series
(‘‘LEAPS’’) 18 that expire from twelve to
one hundred eighty months from the
time they are listed.
13 Rules 5030(b)(1)–(3) and (6) provide, if: (1)
there are fewer than 6,300,000 shares of the
underlying security held by persons other than
those who are required to report their security
holdings under Section 16(a) of the Act, (2) there
are fewer than 1,600 holders of the underlying
security, (3) the trading volume (in all markets in
which the underlying security is traded) has been
less than 1,800,000 shares in the preceding twelve
(12) months, or (6) the underlying security ceases
to be an ‘NMS stock’ as defined in Rule 600 of
Regulation NMS under the Exchange Act.
14 See Rule 5010, Rights and Obligations of
Holders and Writers, which provides that the rights
and obligations of holders and writers 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/occ_
rules.pdf.
15 See IM–5050–6.
16 See IM–5050–13.
17 See IM–5050–4.
18 See Rule 5070.
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Pursuant to Rule 5050(d)(4), which
governs strike prices of series of options
on ETFs, the interval between strike
prices of series of options on ETFs
approved for options trading pursuant
to Rule 5020(h) shall be fixed at a price
per share which is reasonably close to
the price per share at which the
underlying security is traded in the
primary market at or about the same
time such series of options is first open
for trading on the Exchange, or at such
intervals as may have been established
on another options exchange prior to the
initiation of trading on BOX. With
respect to the Short Term Options Series
or Weekly Program, during the month
prior to expiration of an option class
that is selected for the Short Term
Option Series Program, the strike price
intervals for the related non-Short Term
Option (‘‘Related non-Short Term
Option’’) shall be the same as the strike
price intervals for the Short Term
Option.19 Specifically, the Exchange
may open for trading Short Term Option
Series at strike price intervals of (i)
$0.50 or greater where the strike price
is less than $100, and $1 or greater
where the strike price is between $100
and $150 for all option classes that
participate in the Short Term Options
Series Program; (ii) $0.50 for option
classes that trade in one dollar
increments and are in the Short Term
Option Series Program; or (iii) $2.50 or
greater where the strike price is above
$150.20 Additionally, the Exchange may
list series of options pursuant to the $1
Strike Price Interval Program,21 the
$0.50 Strike Program,22 and the $2.50
Strike Price Program.23 Rule 7050
governs the minimum increment for
bids and offers for options traded on
BOX. Pursuant to Rule 7050, where the
price of a series of options for the Trust
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 24 consistent
with the minimum increments for
options on other ETFs listed on BOX.
Any and all new series of Trust options
that BOX lists will be consistent and
comply with the expirations, strike
prices, and minimum increments set
forth in Rules 5050 and 7050, as
applicable. Position and exercise limits
for options on ETFs, including options
on the Trust, are determined pursuant to
19 See
Rule 5050(d)(6).
20 See IM–5050–6.
21 See IM–5050–2.
22 See IM–5050–5.
23 See IM–5050–3.
24 Options that are eligible to participate in the
Penny Interval Program have a minimum increment
of $0.01 below $3.00 and $0.05 above $3.00. See
Rule 7260.
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95267
Rules 3120 and 3140, respectively.
Position and exercise limits for ETFs
options vary according to the number of
outstanding shares and the trading
volumes of the underlying ETF over the
past six months, where the largest in
capitalization and the most frequently
traded ETFs 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
ETFs 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. Notwithstanding the
position limits in Rule 3120 and
exercise limits in Rule 3140, the
Exchange proposes the position and
exercise limits for the options on the
Trust to be 25,000 contracts on the same
side pursuant to proposed IM–3120–2.
Capping the position and exercise limits
at 25,000 contracts, the lowest limits
available in options, would address
concerns related to manipulation and
protection of investors as this number is
extremely conservative for the Trust and
is more than appropriate given its
liquidity.
For purposes of addressing position
and exercise limits, the Exchange
applies position and exercise limits for
options for each underlying security and
does not aggregate position and exercise
limits. In considering the appropriate
position and exercise limits for the
Trust, the Exchange reviewed the data
presented by ISE in its filing,
specifically in Exhibit 3 of the filing,25
where ISE measured the Trust’s market
capitalization and ADV against other
industry data as explained further
below. The Commission should
consider the position and exercise limits
for options on the Trust exclusive of
other options on Bitcoin. In its filing,
ISE considered the Trust’s market
capitalization and ADV, and prospective
position limit in relation to other
securities. In measuring the Trust
against other securities, ISE aggregated
market capitalization and volume data
for securities that have defined position
limits utilizing data from The Options
25 See Securities Exchange Act Release No.
101128 (September 20, 2024), 89 FR 78942
(September 26, 2024) (SR–ISE–2024–03) (Order
Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment Nos. 1, 4, and
5, to Permit the Listing and Trading of Options on
the iShares Bitcoin Trust) (Exhibit 3) (‘‘IBIT
Approval Order’’) (letter from Angela Dunn, Nasdaq
ISE, LLC, to Vanessa Countryman, Secretary,
Commission, dated August 21, 2024) (‘‘ISE Letter’’).
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ddrumheller on DSK120RN23PROD with NOTICES1
Clearing Corporations (‘‘OCC’’).26 This
pool of data took into consideration
3,984 options on single stock securities,
excluding broad based ETFs.27 Next, ISE
aggregated the data based on market
capitalization and ADV and grouped
option symbols by position limit
utilizing statistical thresholds for ADV
and market capitalization that were one
standard deviation above the mean for
each position limit category (i.e., 25,000,
50,000 to 65,000, 75,000, 100,000 to less
than 250,000, 250,000 to 400,000,
450,000 to 1,000,000, and greater than
or equal to 1,000,000) (sic).28 Rule
3120(d) sets out position limits for
various contracts. For example, on the
Exchange like on ISE, a 25,000 contract
limit applies to those options having an
underlying security that does not meet
the requirements for a higher options
contract limit. ISE performed an
exercise to demonstrate the Trust’s
position limit relative to other options
symbols in terms of market
capitalization and ADV. For reference
the market capitalization for the Trust
was 19,789,068 billion 29 with an ADV,
for the preceding three months prior to
August 7, 2024, of greater than 26
million shares.30 Today, by comparison,
other options symbols with similar
market capitalization and ADV have a
position limit in excess of 400,000.31
Therefore, the proposed 25,000 same
side position limit for options on the
Trust is extremely conservative relative
to these options symbols which are a
full standard deviation above the mean
in comparison. Second, ISE reviewed
the Trust’s data relative to the market
capitalization of the entire Bitcoin
market in terms of exercise risk and
availability of deliverables. Utilizing
data as of August 3, 2024, there were
19,737,193 Bitcoins in circulation.32 ISE
took a price of $57,000 that equates to
a market capitalization of greater than
1.125 trillion US dollars, and applied
that to a position limit of 400,000 for
26 The computations are based on OCC data from
August 6, 2024. Data displaying zero values in
market capitalization or ADV were removed.
27 The Trust has one asset and therefore is not
comparable to a broad based ETF where there are
typically multiple components.
28 See ISE Letter at 10.
29 ISE acquired this figure as of August 13, 2024.
See https://www.ishares.com/us/products/333011/
ishares-bitcoin-trust. The global supply of Bitcoin
grows each day Bitcoin are minted.
30 See ISE Letter at 10.
31 See, e.g., iShares® iBoxx® $ High Yield
Corporate Bond ETF (‘‘HYG’’) with a market
capitalization of 13,859,235,000 dollars as of
November 4, 2024. See https://www.ishares.com/
us/products/239565/ishares-iboxx-high-yieldcorporate-bond-etf. The Exchange notes that HYG
has a position limit of 500,000 contracts.
32 See ISE Letter at 10.
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Jkt 265001
options on the Trust.33 If a position
limit of 400,000 options were
considered (the position limit that
would be typically assigned based upon
data) the exercisable risk would
represent only 6.6% of the outstanding
shares of the Trust. The 25,000 position
limit being sought only represents 0.4%
of the outstanding shares of the Trust.
Since the Trust has a creation and
redemption process managed through
the issuer, additionally it can be
compared the position limit sought to
the total market capitalization of the
entire Bitcoin market. In this case, the
exercisable risk for options on the Trust
would be less than 0.01% of the market
capitalization of all outstanding Bitcoin.
Assuming a scenario where all options
on the Trust’s shares were exercised
given the proposed 25,000 per same side
position limit, this would have a
virtually unnoticed impact on the entire
Bitcoin market. This analysis
demonstrates that the proposed 25,000
per same side position limit is also
extremely conservative and more than
appropriate for options on the Trust.
Third, ISE reviewed the proposed
position limit by comparing it to
position limits for derivative products
regulated by the Commodity Futures
Trading Commission (‘‘CFTC’’). While
the CFTC, through the relevant
Designated Contract Markets, only
regulates options positions based upon
delta equivalents (creating a less
stringent standard), ISE examined
equivalent Bitcoin futures position
limits. In particular, ISE looked at the
CME Bitcoin futures contract 34 that has
a position limit of 2,000 futures.35 On
August 7, 2024, CME Bitcoin futures
settled at $55,000.36 Taking the position
limit of 2,000 futures at a $5
multiplier 37 equates to $550 million of
notional value for Bitcoin futures. By
way of comparison, on August 7, 2024,
the Trust settled at $31.19 per share,
which would equate to 17,633,857
shares of the Trust 38 if the CME
notional position limit were utilized.
33 Id.
34 CME Bitcoin Futures are described in Chapter
350 of CME’s Rulebook.
35 See the Position Accountability and Reportable
Level Table in the Interpretations & Special Notices
Section of Chapter 5 of CME’s Rulebook.
36 See https://finance.yahoo.com/quote/
BTC%3DF/history/?guccounter=1&guce_
referrer=aHR0cHM6Ly93d3cuZ29
vZ2xlLmNvbS8&guce_referrer_
sig=AQAAAM7ngaS6ZQS9c2Wzx7JW2IUe-_-_
1FnLyr8T-Qw4jjkleHyCENfSMIEpPPt2hCzPDEry
TVyB78NIwxkwFB5Fuw-jA-YiuSmYJHBri
WbV6dYn91VQfzQNt3p0I2RkYLD3HhzXP
wu4AP5as-_WzHNpEBon4sk5sUZXgkapMrZR--CS.
37 Each bitcoin futures contract is valued at 5
bitcoins as defined by the CME CF Bitcoin
Reference Rate (‘‘BRR’’). See CME Rule 35001.
38 See ISE Letter at 11.
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Since substantial portions of any
distributed options portfolio are likely
to be out of the money on expiration, an
options position limit equivalent to the
CME position limit for Bitcoin futures
(considering that all options deltas are
<=1.00) should be a bit higher than the
CME implied 176,338 limit. Of note,
unlike options contracts, CME position
limits are calculated on a net futures
equivalent basis by contract and include
contracts that aggregate into one or more
base contracts according to an
aggregation ratio(s).39 Therefore, if a
portfolio includes positions in options
on futures, CME would aggregate those
positions into the underlying futures
contracts in accordance with a table
published by CME on a delta equivalent
value for the relevant spot month,
subsequent spot month, single month
and all month position limits.40 If a
position exceeds position limits because
of an option assignment, CME permits
market participants to liquidate the
excess position within one business day
without being considered in violation of
its rules. Additionally, if at the close of
trading, a position that includes options
exceeds position limits for futures
contracts, when evaluated using the
delta factors as of that day’s close of
trading, but does not exceed the limits
when evaluated using the previous
day’s delta factors, then the position
shall not constitute a position limit
violation. Considering CME’s position
limits on futures for bitcoin, the
Exchange believes that that the
proposed 25,000 per same side position
limit is conservative and more than
appropriate for options on the Trust.
In analyzing the proposed position
limit for options on the Trust, ISE also
considered the supply of Bitcoin.
Specifically, ISE examined the number
of market participants with position
limits that would need to exercise in
unison to put the underlying asset
under stress. In the case of options on
the Trust, the proposed 25,000 same
side position limit effectively restricts a
market participant from holding
positions that could be exercised in
excess of 2,500,000 shares of the Trust.
Utilizing data from August 12, 2024, the
Trust had 611,040,000 shares
outstanding, therefore 244 market
participants would have to
simultaneously exercise position limits
in order to create a scenario that may
put the underlying asset (the Trust)
39 See https://www.cmegroup.com/education/
courses/market-regulation/position-limits/
positionlimits-aggregation-of-contracts-andtable.htm.
40 Id.
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under stress.41 As unlikely an
occurrence as all market participants
exercising their position limits in
unison would be, if it were to occur, it
should be noted that even such an
occurrence would not likely put the
Trust under stress as economic
incentives, would induce the creation of
more shares through the ETF creation
and redemption process. By way of
example, given that the current global
supply of Bitcoin, the underlying asset
of the Trust, is 19,789,068 42 and that
each Bitcoin can currently be redeemed
for 1,755 shares of the Trust, another
34,729,814,340 shares of the Trust could
be created. To exhaust this supply of the
Trust, 13,891 market participants would
have to simultaneously exercise their
position limit. Comparing the Trust to
the SPDR® Gold Shares (‘‘GLD’’) ETF or
the iShares Silver Trust (‘‘SLV’’) ETF,
which have position limits of 250,000 or
ten times the proposed position limit for
the Trust as well as lower shares
outstanding in both products,43 it is
unjustified to mandate a different level
of stringency with respect to a position
limit for options on the Trust. The
supply of Bitcoin does have a limit,
which will take years to fully mint.44
The Exchange notes that Bitcoin is a
viable economic alternative to
traditional assets. The price of goods
denominated by Bitcoin has actually
declined. This dynamic not only makes
a fixed supply desirable, but a necessary
condition of the value added by this
asset in the broader economy. Further,
the Exchange notes that corporations
have a limited number of outstanding
shares. Corporations may authorize
additional shares, repurchase shares or
split their shares. Similarly, ETFs, like
the Trust, may also create, redeem, or
split shares to suit the demand of the
marketplace. Importantly, because the
supply of Bitcoin is much larger than
the available supply of most securities
and the proposed 25,000 contract
position limit is so conservative, the
Exchange believes that evaluating the
available supply of Bitcoin in
41 See https://www.ishares.com/us/products/
333011/ishares-bitcoin-trust.
42 This figure was acquired as of August 13, 2024.
See https://www.ishares.com/us/products/333011/
ishares-bitcoin-trust. The global supply of bitcoin
grows each day bitcoin are minted.
43 As of August 13, 2024, GLD had 294,000,000
shares outstanding and SLV had 510,200,000 shares
outstanding. See https://www.ssga.com/us/en/
intermediary/etfs/funds/spdr-gold-shares-gld and
https://www.ishares.com/us/products/239855/
ishares-silver-trust-fund.
44 A recent article suggested that the remaining
supply will take over 100 years to fully mint. See
Sen, Vivek. ‘‘94% of Bitcoin’s Supply Has Now
Been Issued.’’ Bitcoin Magazine, https://bitcoin
magazine.com/business/94-of-bitcoins-supply-hasnow-been-issued. August 19, 2024.
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establishing a position limit for options
on the Trust would demonstrate that the
proposed limit is safe for investors and
the market.45 The Trust constitutes less
than 2% of the entire Bitcoin supply.
When comparing the market
capitalization of Bitcoin against the
largest securities, Bitcoin would rank
7th among those securities.46 Further,
the Exchange believes that its proposal
to list options on the Trust with a
position limit of 25,000 on the same
side is a conservative position limit that
does not lend itself to manipulation in
the market given the ample market
capitalization and liquidity in the Trust.
If we look to the liquidity statistics of
similar instruments and their
concomitant position limits, we are able
to extrapolate a reasonable standard for
arriving at a position limit for a new
product. In this case we can look to
GLD, SLV, and the ProShares Bitcoin
Strategy ETF (‘‘BITO’’). These products
have volume statistics and ‘‘float’’
statistics, which gauge liquidity, which
are in line, yet slightly lower than the
Trust. All three of these reference
products have position limits of 250,000
contracts. These reference products are
remarkably similar in nature to the
Trust; they are exchange-traded
products (‘‘ETPs’’) holding one asset in
a trust.
Further, Rule Series 10100, which
governs margin requirements applicable
to the trading of all options on BOX
including options on ETFs, will also
apply to the trading of the Trust options.
Lastly, Rule 5055(e)(2)(i) permits the
Exchange to authorize for trading a
FLEX Equity Option class on any equity
security if it may authorize for trading
a Non-FLEX Equity Option class on that
equity security pursuant to Rule 5020.47
At this time, the Exchange is not
proposing to permit Trust options to
trade as FLEX Equity Options.48 The
Exchange therefore proposes to modify
Rule 5055(e)(2)(i) to specify this
exception, which will add clarity and
transparency to the Exchange Rules.49
The Exchange represents that the
same surveillance procedures applicable
to all other options on other ETFs
currently listed and traded on the
Exchange will apply to options on the
45 A supply consideration would likely be
valuable for an option symbol that had far less
liquidity than the Trust.
46 See https://companiesmarketcap.com/usa/
largest-companies-in-the-usa-by-market-cap/.
47 See Rule 5055(e)(2)(i).
48 The Exchange would be required to submit a
separate rule filing to permit the Exchange to
authorize for trading FLEX Equity Options on the
Trust (which filing may propose changes to existing
FLEX Equity Option position limits for such
options if appropriate).
49 See proposed Rule 5055(e)(2)(i).
PO 00000
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95269
Trust. Also, the Exchange represents
that it has the necessary systems
capacity to support the new option
series. The Exchange believes that its
existing surveillance and reporting
safeguards are designed to deter and
detect possible manipulative behavior
which might potentially arise from
listing and trading options on ETFs,
including the proposed Trust options.
Today, the Exchange has an adequate
surveillance program in place for
options. The Exchange intends to apply
those same program procedures to
options on the Trust that it applies to
the Exchange’s other options
products.50 The Exchange would review
activity in the underlying Trust when
conducting surveillances for market
abuse or manipulation in the options on
the Trust. Additionally, the Exchange is
a member of the Intermarket
Surveillance Group (‘‘ISG’’) under the
Intermarket Surveillance Group
Agreement. The Exchange would be
able to obtain information regarding
trading in shares of the Trust from
Nasdaq and other markets that trade
shares of the Trust through ISG. ISG
members work together to coordinate
surveillance and investigative
information sharing in the stock,
options, and futures markets. In
addition, the Exchange has a Regulatory
Services Agreement with the 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 surveillance that are
common to rules of all options
exchanges.51
The underlying shares of spot Bitcoin
ETPs, including the Trust, are also
subject to safeguards related to
addressing market abuse and
manipulation. As the Commission
50 The surveillance program includes real-time
patterns for price and volume movements and posttrade surveillance patterns (e.g., spoofing, marking
the close, phishing).
51 Section 19(g)(1) of the Act, among other things,
requires every SRO registered as a national
securities exchange or 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
(‘‘common members’’). 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.
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stated in its orders approving proposals
of several exchanges to list and trade
shares of spot bitcoin-based exchangetraded products (‘‘Bitcoin ETP Order’’):
Each Exchange has a comprehensive
surveillance-sharing agreement with the
CME via their common membership in
the Intermarket Surveillance Group.
This facilitates the sharing of
information that is available to the CME
through its surveillance of its markets,
including its surveillance of the CME
bitcoin futures market.52 Given the
consistently high correlation between
the CME Bitcoin futures market and the
spot Bitcoin market, as confirmed by the
Commission through robust correlation
analysis, the Commission was able to
conclude that such surveillance sharing
agreements could reasonably be
‘‘expected to assist in surveilling for
fraudulent and manipulative acts and
practices in the specific context of the
[Bitcoin ETPs].’’ 53 In light of
surveillance measures related to both
options and futures as well as the
underlying Trust,54 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 Trust.
The Exchange has also analyzed its
capacity and represents that it believes
the Exchange and the Options Price
Reporting Authority or ‘‘OPRA’’ have
the necessary systems capacity to
handle the additional traffic associated
with the listing of new series that may
result from the introduction of options
on the Trust up to the number of
expirations currently permissible under
the Exchange Rules. Because the
proposal is limited to one class, the
Exchange believes any additional traffic
that may be generated from the
introduction of the Trust options will be
manageable.
Finally, the Exchange proposes a
technical amendment to Rule
52 See Securities Exchange Act Release No. 99306
(January 10, 2024), 89 FR 3008, 3009 (January 17,
2024) (File Nos. SR–NYSEArca–2021–90; SR–
NYSEArca–2023–44; SR–NYSEArca–2023–58; SR–
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 BitcoinBased Commodity-Based Trust Shares and Trust
Units).
53 See Bitcoin ETP Order, 89 FR at 3010–11.
54 See Securities Exchange Act Release No. 99295
(January 8, 2024), 89 FR 2321, 2334–35 (January 12,
2024) (SR–NASDAQ–2023–016) (Notice of Filing of
Amendment No. 1 to a Proposed Rule Change To
List and Trade Shares of the iShares Bitcoin Trust
Under Nasdaq Rule 5711(d)).
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5020(h)(iv) to amend the names ‘‘ETFS
Gold Trust’’ to ‘‘abrdn Gold ETF
Trust,’’ 55 ‘‘ETFS Silver trust’’ to ‘‘abrdn
Silver ETF Trust,’’ 56 ‘‘ETFS Palladium
Trust’’ to ‘‘abrdn Palladium ETF
Trust,’’ 57 and ‘‘ETFS Platinum Trust’’ to
‘‘abrdn Platinum ETF Trust.’’ 58 In 2018
and again in 2022 these trusts were
renamed. As such, the Exchange
proposes to amend the names of the
ETFs to reflect their current names.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),59 in general, and Section 6(b)(5)
of the Act,60 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism 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 Trust will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, protect investors because
offering options on the Trust will
55 Effective October 1, 2018, ETFS Gold Trust was
renamed Aberdeen Standard Gold ETF Trust. See
https://www.sec.gov/Archives/edgar/data/1450923/
000138713118005292/ex10-2.htm. Effective March
31, 2022, Aberdeen Standard Gold ETF Trust was
renamed abrdn Gold ETF Trust. See https://
www.sec.gov/Archives/edgar/data/1450923/
000138713122003628/ex10-2.htm.
56 Effective October 1, 2018 ETFS Silver Trust
was renamed Aberdeen Standard Silver ETF Trust.
See https://www.sec.gov/Archives/edgar/data/
1450922/000138713118005294/ex10-2.htm.
Effective March 31, 2022 Aberdeen Standard Silver
ETF Trust was renamed abrdn Silver ETF Trust. See
https://www.sec.gov/Archives/edgar/data/1450922/
000138713122003632/ex10-2.htm.
57 Effective October 1, 2018 ETFS Palladium
Trust was renamed Aberdeen Standard Palladium
ETF Trust. https://www.sec.gov/Archives/edgar/
data/1459862/000138713118005304/ex10-2.htm.
Effective March 31, 2022 Aberdeen Standard
Palladium ETF Trust was renamed abrdn Palladium
ETF Trust. See https://www.sec.gov/Archives/
edgar/data/1459862/000138713122003629/ex102.htm.
58 Effective October 1, 2018 ETFS Platinum Trust
was renamed Aberdeen Standard Platinum ETF
Trust. See https://www.sec.gov/Archives/edgar/
data/1460235/000138713118005301/ex10-2.htm.
Effective March 31, 2022 Aberdeen Standard
Platinum ETF Trust was renamed abrdn Platinum
ETF Trust. See https://www.sec.gov/Archives/
edgar/data/1460235/000138713122003633/ex102.htm.
59 15 U.S.C. 78f(b).
60 15 U.S.C. 78f(b)(5).
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provide investors with a greater
opportunity to realize the benefits of
utilizing options on an ETF based on
spot Bitcoin, including cost efficiencies
and increased hedging strategies. The
Exchange believes that offering options
on a competitively priced ETF based on
spot Bitcoin will benefit investors by
providing them with an additional,
relatively lower cost risk management
tool allowing them to manage, more
easily, their positions, and associated
risks, in their portfolios in connection
with exposure to spot Bitcoin. Today,
BOX lists options on other commodity
ETFs structured as a trust, which
essentially offer the same objectives and
benefits to investors, and for which the
Exchange has not identified any issues
with the continued listing and trading of
options on those ETFs. The Exchange
also believes the proposal to permit
options on the Trust will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because
options on the Trust will comply with
current Exchange Rules. As discussed
above, options on the Trust must satisfy
the initial listing standards and
continued listing standards currently in
the Exchange Rules, applicable to
options on all ETFs, including options
on other commodity ETFs already
deemed appropriate for options trading
on BOX pursuant to Rule 5020(h).
Further, Exchange Rules that currently
govern the listing and trading of options
on ETFs, including permissible
expirations, strike prices, minimum
increments, position and exercise limits
(including as proposed herein), and
margin requirements will govern the
listing and trading of options on the
Trust. The proposed position and
exercise limits for options on the Trust
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 Trust’s market capitalization,
average daily volume, and high number
of outstanding shares. The proposed
position limit, and exercise limit, is
consistent with the Act as it addresses
concerns related to manipulation and
protection of investors because the
position limit (and exercise limit) is
extremely conservative and more than
appropriate given the Trust is actively
traded. In support of the proposed
position and exercise limits for options
on the Trust of 25,000 contracts, the
Exchange is citing the in depth analysis
ISE did in its filing. As noted above, in
the IBIT Approval Order, ISE
considered the: (i) Trust’s market
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capitalization and ADV, and prospective
position limit in relation to other
securities; (ii) market capitalization of
the entire Bitcoin market in terms of
exercise risk and availability of
deliverables; (iii) proposed position
limit by comparing it to position limits
for derivative products regulated by the
CFTC; and (iv) supply of Bitcoin. Based
on the Exchange’s review of IBIT
Approval Order, the Exchange believes
that setting position and exercise limits
for options on the Trust of 25,000
contracts is more than appropriate for
the Trust. 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 as well as the Bitcoin
market.61
The Exchange believes the proposed
rule change to exclude options on the
Trust from being eligible for trading as
FLEX Equity Options is consistent with
the Act because, without this
prohibition, trading a FLEX Equity
Option in the Trust would otherwise
establish different position and exercise
limits than those proposed herein.62
The Exchange represents that BOX
has the necessary systems capacity to
support options on the Trust. 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 on
ETFs, including the Trust options.
Today, the Exchange has an adequate
surveillance program in place for
options. The Exchange intends to apply
those same program procedures to
options on the Trust that it applies to
the Exchange’s other options
products.63 The Exchange will review
activity in the underlying Trust when
conducting surveillances for market
abuse or manipulation in the options on
the Trust. Additionally, the Exchange is
a member of the ISG under the
Intermarket Surveillance Group
61 See Securities Exchange Act Release No. 39489
(December 24, 1997), 63 FR 276 (January 5, 1998)
(SR–CBOE–1997–11).
62 The Exchange would need to submit a separate
rule filing to permit the Exchange to authorize for
trading FLEX Equity Options on the Trust (which
filing may propose changes to existing FLEX Equity
Option position limits for such options if
appropriate).
63 The surveillance program includes real-time
patterns for price and volume movements and posttrade surveillance patterns (e.g., spoofing, marking
the close, phishing).
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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 from Nasdaq, LLC and other
markets through ISG. In addition, the
Exchange has a Regulatory Services
Agreement with FINRA. Pursuant to a
multi-party 17d–2 joint plan, all options
exchanges allocate regulatory
responsibilities to FINRA to conduct
certain options-related market
surveillance that are common to rules of
all options exchanges.64
The underlying shares of spot bitcoin
ETPs, including the Trust, are also
subject to safeguards related to
addressing market abuse and
manipulation. As the Commission
stated in 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.65
Given the consistently high
correlation between the CME Bitcoin
futures market and the spot Bitcoin
market, as confirmed by the
Commission through robust correlation
analysis, the Commission was able to
conclude that such surveillance sharing
agreements could reasonably be
‘‘expected to assist in surveilling for
fraudulent and manipulative acts and
practices in the specific context of the
[Bitcoin ETPs].’’ 66
In light of surveillance measures
related to both options and futures as
well as the underlying Trust,67 the
64 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
(‘‘common members’’). 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.
65 See supra note 4.
66 See Bitcoin ETP Order, 89 FR at 3010–11.
67 See Securities Exchange Act Release No. 99295
(January 8, 2024), 89 FR 2321, 2334–35 (January 12,
2024) (SR–NASDAQ–2023–016) (Notice of Filing of
Amendment No. 1 to a Proposed Rule Change To
List and Trade Shares of the iShares Bitcoin Trust
Under Nasdaq Rule 5711(d)).
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95271
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 Trust. Further, the
Exchange represents that it will
implement any new surveillance
procedures it deems necessary to
effectively monitor the trading of
options on the Trust.
Finally, the Commission has
previously approved the listing and
trading of options on other commodity
ETFs structured as a trust, such as
SPDR® Gold Trust,68 the iShares
COMEX Gold Trust 69 the iShares Silver
Trust,70 the ETFS Gold Trust,71 and the
ETFS Silver Trust.72
Further, the Exchange’s proposal to
amend the names ‘‘ETFS Gold Trust’’ to
‘‘abrdn Gold ETF Trust,’’ ‘‘ETFS Silver
trust’’ to ‘‘abrdn Silver ETF Trust,’’
‘‘ETFS Palladium Trust’’ to ‘‘abrdn
Palladium ETF Trust,’’ and ‘‘ETFS
Platinum Trust’’ to ‘‘abrdn Platinum
ETF Trust’’ in Rule 5020(h)(iv) is
consistent with the Act and the
protection of investors as this
amendment reflects the current names
of these products.
The Exchange notes that the proposed
rule change is substantively the same as
a rule change proposed by Nasdaq ISE
which the Commission recently
approved.73
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 not
necessary or appropriate in furtherance
68 See Securities Exchange Act Release No. 57897
(May 30, 2008), 73 FR 32061 (June 5, 2008) (SR–
Amex–2008–15; SR–CBOE–2005–11; SR–ISE–2008–
12; SR–NYSEArca–2008–52; and SR–Phlx–2008–
17) (Order Granting Approval of a Proposed Rule
Change, as Modified, and Notice of Filing and
Order Granting Accelerated Approval of Proposed
Rule Changes, as Modified, Relating to Listing and
Trading Options on the SPDR Gold Trust).
69 See Securities Exchange Act Release No. 59055
(December 4, 2008), 73 FR 75148 (December 10,
2008) (SR–Amex–2008–68; SR–BSE–2008–51; SR–
CBOE–2008–72; SR–ISE–2008–58; SR–NYSEArca–
2008–66; and SR–Phlx–2008–58) (Notice of Filing
and Order Granting Accelerated Approval of
Proposed Rule Changes Relating to the Listing and
Trading Options on Shares of the iShares COMEX
Gold Trust and the iShares Silver Trust).
70 Id.
71 See Securities Exchange Act Release No. 61483
(February 3, 2010), 75 FR 6753 (February 10, 2010)
(SR–CBOE–2010–007; SR–ISE–2009–106; SR–
NYSEAmex–2009–86; and SR–NYSEArca–2009–
110) (Order Granting Approval of Proposed Rule
Changes and Notice of Filing and Order Granting
Accelerated Approval of a Proposed Rule Change
Relating to Listing and Trading Options on the
ETFS Gold Trust and the ETFS Silver Trust).
72 Id.
73 See supra note 3.
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of the purposes of the Act. In this regard
and as indicated above, the Exchange
notes that the rule change is being
proposed as a competitive response to a
filing submitted by Nasdaq ISE that was
recently approved by the Commission.74
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 Trust will be subject
to initial listing standards and
continued listing standards the same as
other options on ETFs listed on BOX.
Further, options on the Trust will be
subject to Exchange Rules that currently
govern the listing and trading of options
on ETFs, including permissible
expirations, strike prices, minimum
increments, position and exercise limits
(including as proposed to modify
herein), and margin requirements.
Options on the Trust will be equally
available to all market participants who
wish to trade such options. Also, and as
stated above, the Exchange already lists
options on other commodity ETFs
structured as a trust. The Exchange does
not believe that the proposal to list and
trade options on the Trust 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 permitting options on
the Trust to trade on BOX may make
BOX a more attractive marketplace to
market participants, such market
participants are free to elect to become
market participants on BOX.
Additionally, other options exchanges
are free to amend their listing rules, as
applicable, to permit them to list and
trade options on the Trust. 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 BOX 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 options
on the Trust for trading on BOX 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 spot Bitcoin prices and
Bitcoin related products and positions.
Additionally, the Exchange’s proposal
to amend the names ‘‘ETFS Gold Trust’’
74 Id.
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18:25 Nov 29, 2024
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to ‘‘abrdn Gold ETF Trust,’’ ‘‘ETFS
Silver trust’’ to ‘‘abrdn Silver ETF
Trust,’’ ‘‘ETFS Palladium Trust’’ to
‘‘abrdn Palladium ETF Trust,’’ and
‘‘ETFS Platinum Trust’’ to ‘‘abrdn
Platinum ETF Trust’’ in Rule 5020(h)(iv)
does not impose an undue burden on
competition as this amendment reflects
the current names of these products.
Finally, the proposed rule change to
exclude options on the Trust from being
eligible for trading as FLEX Equity
Options does not impose an undue
burden on competition as no BOX
Participant will be able to transact a
FLEX Equity Option on the Trust.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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) of the Act 75 and Rule 19b–
4(f)(6) thereunder.76
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act normally does not become operative
for 30 days after the date of its filing.
However, Rule 19b–4(f)(6)(iii) 77 permits
the Commission to 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
shares of the Trust.78 The Exchange has
provided information regarding the
underlying Trust, including, among
other things, information regarding
trading volume, the number of
75 15
U.S.C. 78s(b)(3)(A).
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.
77 17 CFR 240.19b–4(f)(6)(iii).
78 See supra note 3.
76 17
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Sfmt 4703
beneficial holders, and the market
capitalization of the Trust. The proposal
also establishes position and exercise
limits for options on the Trust and
provides information regarding the
surveillance procedures that will apply
to options on the Trust. In addition, the
proposal updates the names of certain
commodity-based trusts, as described
above, which will ensure that the
Exchange’s rules identify these trusts by
their current names. The Commission
believes that waiver of the operative
delay could benefit investors by
providing an additional venue for
trading Bitcoin Fund options and
helping to ensure that the accuracy of
the Exchange’s rules. Therefore, the
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change operative upon
filing.79
At any time within 60 days of the
filing of such 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.
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 rule-comments@
sec.gov. Please include file number SR–
BOX–2024–27 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–BOX–2024–27. 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
79 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–BOX–2024–27 and should be
submitted on or before December 23,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.80
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–28105 Filed 11–29–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101740; File No. SR–
CboeBZX–2024–121]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To List Options
on Certain Bitcoin ETFs
ddrumheller on DSK120RN23PROD with NOTICES1
November 25, 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 BZX Exchange, Inc.
(‘‘Exchange’’ or ‘‘BZX Options’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
CFR 200.30–3(a)(12), (59).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
18:25 Nov 29, 2024
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX Options’’)
proposes to amend Rule 19.3. 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://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
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
Rule 19.3 regarding the criteria for
underlying securities. Specifically, the
Exchange proposes to amend Rule
19.3(i)(4) to allow the Exchange to list
and trade options on shares or other
securities (‘‘Fund Shares’’) that are
principally traded on a national
securities exchange and are defined as
an ‘‘NMS stock’’ under Rule 600 of
Regulation NMS and that represent
interests 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’’).3 This is a
3 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–
80 17
VerDate Sep<11>2014
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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95273
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 Commission
(the ‘‘Commission’’).4 Current Rule
19.3(i) provides that, subject to certain
other criteria set forth in that Rule,
securities deemed appropriate for
options trading include Fund Shares
that represent certain types of interests,5
including interests in certain specific
trusts that hold financial instruments,
money market instruments, precious
metals (which are deemed
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’’).
4 See Securities Exchange Act Release Nos.
101128 (September 20, 2024), 89 FR 78942
(September 26, 2024) (SR–ISE–2024–03) (‘‘ISE
Approval’’); and 101386 (October 18, 2024), 89 FR
84960 (October 24, 2024) (SR–NYSEAMER–2024–
49) (‘‘NYSE American Approval’’).
5 See Rule 19.3(i) which permits options trading
on Fund Shares that (1) represent interests in
registered investment companies (or series thereof)
organized as open-end management investment
companies, unit investment trusts or similar
entities, and that hold portfolios of securities
comprising or otherwise based on or representing
investments in indexes or portfolios of securities (or
that hold securities in one or more other registered
investment companies that themselves hold such
portfolios of securities) (‘‘Funds ’’) 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 repurchase
agreements (the ‘‘Financial Instruments’’), and
money market instruments, including, but not
limited to, U.S. government securities and
repurchase agreements (the ‘‘Money Market
Instruments’’) constituting or otherwise based on or
representing an investment in an index or portfolio
of securities and/or Financial Instruments and
Money Market Instruments, or (2) represent
commodity pool interests principally engaged,
directly or indirectly, in holding and/or managing
portfolios or baskets of securities, commodity
futures contracts, options on commodity futures
contracts, swaps, forward 477 contracts and/or
options on physical commodities and/or non-U.S.
currency (‘‘Commodity Pool ETFs’’) or (3) represent
interests in a trust or similar entity that holds a
specified non-U.S. currency or currencies 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 or
currencies and pays the beneficial owner interest
and other distributions on the deposited non-U.S.
currency or currencies, if any, declared and paid by
the trust (‘‘Currency Trust Shares’’), or (4) represent
interests in the SPDR Gold Trust or are issued by
the iShares COMEX Gold Trust, iShares Silver
Trust, the Fidelity Wise Origin Bitcoin Fund (the
‘‘Fidelity Fund’’), or the ARK 21Shares Bitcoin ETF
(the ‘‘Ark 21 Fund’’).
E:\FR\FM\02DEN1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 231 (Monday, December 2, 2024)]
[Notices]
[Pages 95264-95273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28105]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101735; File No. SR-BOX-2024-27]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend Rules
3120 (Position Limits) and 5020 (Criteria for Underlying Securities) To
Permit Trading of iShares Bitcoin ETF Options
November 25, 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, BOX Exchange LLC (``Exchange'' or ``BOX
Options'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have
[[Page 95265]]
been prepared by the Exchange. 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\ 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 amend Rules 3120 (Position Limits), 5020
(Criteria for Underlying Securities) to permit trading of iShares
Bitcoin ETF options. Additionally, the Exchange proposes to amend Rule
5055 (FLEX Equity Options). The text of the proposed rule change is
available from the principal office of the Exchange, at the
Commission's Public Reference Room and also on the Exchange's internet
website at https://rules.boxexchange.com/rulefilings.
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 3120 (Position Limits) and
5020 (Criteria for Underlying Securities) to permit trading of iShares
Bitcoin ETF options on BOX. Additionally, the Exchange proposes to
amend Rule 5055 (FLEX Equity Options). This is a competitive filing
that is based on a proposal recently submitted by Nasdaq ISE, LLC
(``Nasdaq ISE'') and approved by the Commission.\3\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 101128 (September
20, 2024) (Notice of Filing of Amendment Nos. 4 and 5 and Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified
by Amendment Nos. 1, 4, and 5, to Permit the Listing and Trading of
Options on the iShares Bitcoin Trust), 89 FR 78942 (September 26,
2024) (``ISE Approval Order'').
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The Exchange proposes to amend Rule 5020, Criteria for Underlying
Securities, to allow the Exchange to list and trade options on iShares
Bitcoin Trust (the ``Trust'') \4\ as an ETF deemed appropriate for
options trading on BOX. Specifically, the Exchange proposes to amend
Rule 5020(h) to allow BOX to list and trade options on the Trust.
Currently, Rule 5020(h) provides that securities deemed appropriate for
options trading shall include shares or other securities (``Exchange-
Traded Fund Shares'') that are traded on a national securities exchange
and are defined as an ``NMS stock'' under Rule 600 of Regulation NMS
and that (i) 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 indices, equity caps, collars and floors, swap
agreements, forward contracts, repurchase agreements and reverse
repurchase agreements (the ``Financial Instruments'') and money market
instruments, including, but not limited to, U.S. government securities
and repurchase agreements (the ``Money Market Instruments'') comprising
or otherwise based on or representing investments in broad-based
indexes or portfolios of securities and/or Financial Instruments and
Money Market Instruments (or that hold securities in one or more other
registered investment companies that themselves hold such portfolios of
securities and/or Financial Instruments and Money Market Instruments);
or (ii) represent interests in a trust 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 or
currencies and pays the beneficial owner interest and other
distributions on the deposited non-U.S. currency or currencies, if any,
declared and paid by the trust (``Currency Trust Shares''); or (iii)
represent commodity pool interests principally engaged, directly or
indirectly, in holding and/or managing portfolios or baskets of
securities, commodity futures contracts, options on commodity futures
contracts, swaps, forward contracts and/or options on physical
commodities and/or non-U.S. currency (``Commodity Pool ETFs''); or (iv)
represent interests in the SPDR[supreg] Gold Trust, the iShares COMEX
Gold Trust, the iShares Silver Trust, the ETFS Gold Trust, the ETFS
Silver trust, the ETFS Palladium Trust, the ETFS Platinum Trust or the
Sprott Physical Gold Trust. In addition to the aforementioned
requirements, Rules 5020(h)(1) and (2) must be met to list options on
ETFs.\5\
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\4\ On January 10, 2024, the Commission approved proposals by
NYSE Arca, Inc., The Nasdaq Stock Market LLC, and Cboe BZX Exchange,
Inc. to list and trade the shares of 11 bitcoin-based commodity-
based trust shares and trust units, including the iShares Bitcoin
Trust. See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008 (Jan. 17, 2024) (order approving File Nos. SR-
NYSEARCA-2021-90; SR-NYSEARCA-2023-44; SR-NYSEARCA-2023-58; SR-
NASDAQ-2023-016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-
CboeBZX-2023-038; SR-CboeBZX-2023-040; SR-CboeBZX-2023-042; SR-
CboeBZX-2023-044; SR-CboeBZX-2023-072) (``Bitcoin ETP Order''). The
Exchange represents it would not list options on the Trust unless it
satisfied all applicable criteria in Rule 5020.
\5\ Rule 5020(h)(1) states that the Exchange-Traded Fund Shares
either (i) meet the criteria and guidelines set forth in paragraphs
(a) and (b) of this Rule 5020 above; or (ii) the Exchange-Traded
Fund Shares are available for creation or redemption each business
day from or through the issuing trust, investment company, commodity
pool or other entity in cash or in kind at a price related to net
asset value, and the issuer is obligated to issue Exchange-Traded
Fund Shares in a specified aggregate number even if some or all of
the investment assets and/or cash required to be deposited have not
been received by the issuer, subject to the condition that the
person obligated to deposit the investment assets has undertaken to
deliver them 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 of the Exchange-Traded
Fund Shares, all as described in the Exchange-Traded Fund Shares'
prospectus; and meet other criteria.
---------------------------------------------------------------------------
Proposal
The Exchange proposes to expand the list of ETFs that are
appropriate for options trading on the Exchange in Rule 5020(h) to
include the Trust.\6\
---------------------------------------------------------------------------
\6\ Specifically, the Exchange proposes to amend Rule 5020(h) to
include the name of the Trust to enable options to be listed on the
Trust on BOX.
---------------------------------------------------------------------------
Description of the Trust 7
---------------------------------------------------------------------------
\7\ See SR-NASDAQ-2023-016 for a complete description of the
Trust.
---------------------------------------------------------------------------
The Shares are issued by the Trust, a Delaware statutory trust. The
Trust operates pursuant to a trust agreement (the ``Trust Agreement'')
between the Sponsor, BlackRock Fund Advisors (the ``Trustee'') as the
trustee of the Trust and Wilmington Trust, National Association, as
Delaware trustee (the ``Delaware Trustee''). The Trust issues Shares
representing fractional undivided beneficial interests in its net
assets. The assets of the Trust consist only of Bitcoin, held by a
custodian on behalf of the Trust except under limited circumstances
when transferred through the Trust's prime broker temporarily
(described below), and cash. Coinbase Custody Trust Company, LLC (the
``Bitcoin Custodian'') is the custodian for the Trust's Bitcoin
holdings, and
[[Page 95266]]
maintains a custody account for the Trust (``Custody Account'');
Coinbase, Inc. (the ``Prime Execution Agent''), an affiliate of the
Bitcoin Custodian, is the prime broker for the Trust and maintains a
trading account for the Trust (``Trading Account''); and Bank of New
York Mellon is the custodian for the Trust's cash holdings (the ``Cash
Custodian'' and together with the Bitcoin Custodian, the
``Custodians'') and the administrator of the Trust (the ``Trust
Administrator''). Under the Trust Agreement, the Trustee may delegate
all or a portion of its duties to any agent, and has delegated the bulk
of the day-to-day responsibilities to the Trust Administrator and
certain other administrative and record-keeping functions to its
affiliates and other agents. The Trust is not an investment company
registered under the Investment Company Act of 1940, as amended, (the
``1940 Act'').
The investment objective of the Trust is to reflect generally the
performance of the price of Bitcoin. The Trust seeks to reflect such
performance before payment of the Trust's expenses and liabilities. The
Shares are intended to constitute a simple means of making an
investment similar to an investment in Bitcoin through the public
securities market rather than by acquiring, holding and trading Bitcoin
directly on a peer-to-peer or other basis or via a digital asset
exchange. The Shares have been designed to remove the obstacles
represented by the complexities and operational burdens involved in a
direct investment in Bitcoin, while at the same time having an
intrinsic value that reflects, at any given time, the investment
exposure to the Bitcoin owned by the Trust at such time, less the
Trust's expenses and liabilities. Although the Shares are not the exact
equivalent of a direct investment in Bitcoin, they provide investors
with an alternative method of achieving investment exposure to Bitcoin
through the public securities market, which may be more familiar to
them.
Custody of the Trust's Bitcoin
An investment in the Shares is backed by Bitcoin held by the
Bitcoin Custodian on behalf of the Trust. All of the Trust's Bitcoin
will be held in the Custody Account, other than the Trust's Bitcoin
which is temporarily maintained in the Trading Account under limited
circumstances, i.e., in connection with creation and redemption Basket
\8\ activity or sales of Bitcoin deducted from the Trust's holdings in
payment of Trust expenses or the Sponsor's fee (or, in extraordinary
circumstances, upon liquidation of the Trust). The Custody Account
includes all of the Trust's Bitcoin held at the Bitcoin Custodian, but
does not include the Trust's Bitcoin temporarily maintained at the
Prime Execution Agent in the Trading Account from time to time. The
Bitcoin Custodian will keep all of the private keys associated with the
Trust's Bitcoin held in the Custody Account in ``cold storage.'' \9\
The hardware, software, systems, and procedures of the Bitcoin
Custodian may not be available or cost-effective for many investors to
access directly. As provided in the ISE Approval Order, the Exchange
believes that offering options on the Trust will benefit investors by
providing them with an additional, relatively lower cost investing tool
to gain exposure to spot Bitcoin as well as a hedging vehicle to meet
their investment needs in connection with Bitcoin products and
positions. Similar to other commodity ETFs in which options may be
listed on BOX (e.g., SPDR[supreg] Gold Trust, the iShares COMEX Gold
Trust, the iShares Silver Trust, the ETFS Gold Trust, the ETFS Silver
trust, the ETFS Palladium Trust, the ETFS Platinum Trust or the Sprott
Physical Gold Trust),\10\ the proposed ETF is a trust that essentially
offers the same objectives and benefits to investors. Options on the
Trust will trade in the same manner as options on other ETFs on BOX.
Exchange Rules that currently apply to the listing and trading of all
options on ETFs on BOX, including, for example, rules that govern
listing criteria, expirations, exercise prices, minimum increments,
position and exercise limits (including as proposed herein), margin
requirements, customer accounts, and trading halt procedures will apply
to the listing and trading of options on the Trust on BOX. Today, these
rules apply to options on the various commodities ETFs deemed
appropriate for options trading on BOX pursuant to Rule 5020(h)(iv).
The Exchange's initial listing standards for ETFs on which options may
be listed and traded on BOX will apply to the Trust. The initial
listing standard as set forth in Rule 5020(a) provides that: Underlying
securities with respect to which put or call options contracts are
approved for listing and trading on the Exchange must meet the
following criteria: (1) the security must be registered and be an ``NMS
stock'' as defined in Rule 600 of Regulation NMS under the Exchange
Act; and (2) the security shall be characterized by a substantial
number of outstanding shares that are widely held and actively traded.
Pursuant to Rule 5020, ETFs on which options may be listed and traded
must satisfy the listing standards set forth in Rule 5020(h).
Specifically, the Trust must meet either: (1) the criteria and
guidelines for underlying securities set forth in Rules 5020(a) and
(b), or (2) it must be available for creation or redemption each
business day from or through the issuing trust, investment company,
commodity pool or other entity in cash or in kind at a price related to
net asset value, and the issuer is obligated to issue Exchange-Traded
Fund Shares in a specified aggregate number even if some or all of the
investment assets and/or cash required to be deposited have not been
received by the issuer, subject to the condition that the person
obligated to deposit the investment assets has undertaken to deliver
them 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 of the Exchange-Traded Fund
Shares, all as described in the Exchange-Traded Fund Shares'
prospectus, and meet other criteria. Options on the Trust will also be
subject to the Exchange's continued listing standards for options on
ETFs set forth in Rule 5030(h). Specifically, options approved for
trading pursuant to Rule 5020(h) will not be deemed to meet the
requirements for continued approval, and the Exchange shall not open
for trading any additional series of option contracts of the class
covering such ETFs if the ETFs are delisted from trading as provided in
Rule 5030(b)(6) \11\ or the ETFs are halted or suspended from trading
on their primary market.\12\ In addition, the Exchange shall consider
the suspension of opening transactions in any series of options of the
class covering ETFs in any of the following circumstances: (1) in the
case of options covering Exchange-Traded Fund Shares approved pursuant
to Rule 5020(h)(1)(i), in accordance with the terms of
[[Page 95267]]
subparagraphs (b)(1), (2), (3) and (6) of Rule 5030; \13\ (2) in the
case of options covering Fund Shares approved pursuant to Rule
5020(h)(1)(ii), following the initial twelve-month period beginning
upon the commencement of trading in the Exchange-Traded Fund Shares on
a national securities exchange and are defined as an ``NMS stock''
under Rule 600 of Regulation NMS, there were fewer than 50 record and/
or beneficial holders of such Exchange-Traded Fund Shares for 30 or
more consecutive trading days; (3) the value of the index or portfolio
of securities or non-U.S. currency, portfolio of commodities including
commodity futures contracts, options on commodity futures contracts,
swaps, forward contracts, options on physical commodities and/or
Financial Instruments and Money Market Instruments, on which the
Exchange-Traded Fund Shares are based 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 in such options on
BOX inadvisable. Options on the Trust would be physically settled
contracts with American-style exercise.\14\ Consistent with current
Rule 5050, which governs the opening of options series on a specific
underlying security (including ETFs), the Exchange will open at least
one expiration month for options on the Trust and may also list series
of options on the Trust for trading on a weekly,\15\ monthly,\16\ or
quarterly \17\ basis. The Exchange may also list long-term equity
option series (``LEAPS'') \18\ that expire from twelve to one hundred
eighty months from the time they are listed.
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\8\ The Trust issues and redeems Shares only in blocks of 40,000
or integral multiples thereof. A block of 40,000 Shares is called a
``Basket.'' These transactions take place in exchange for Bitcoin.
\9\ The term ``cold storage'' refers to a safeguarding method by
which the private keys corresponding to the Trust's Bitcoin are
generated and stored in an offline manner, subject to layers of
procedures designed to enhance security. Private keys are generated
by the Bitcoin Custodian in offline computers that are not connected
to the internet so that they are more resistant to being hacked.
\10\ See Rule 5020(h)(iv).
\11\ Rule 5030(b)(6) provides, ``The underlying security ceases
to be an ``NMS stock'' as defined in Rule 600 of Regulation NMS
under the Exchange Act.''
\12\ See Rule 5030(h).
\13\ Rules 5030(b)(1)-(3) and (6) provide, if: (1) there are
fewer than 6,300,000 shares of the underlying security held by
persons other than those who are required to report their security
holdings under Section 16(a) of the Act, (2) there are fewer than
1,600 holders of the underlying security, (3) the trading volume (in
all markets in which the underlying security is traded) has been
less than 1,800,000 shares in the preceding twelve (12) months, or
(6) the underlying security ceases to be an `NMS stock' as defined
in Rule 600 of Regulation NMS under the Exchange Act.
\14\ See Rule 5010, Rights and Obligations of Holders and
Writers, which provides that the rights and obligations of holders
and writers 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/occ_rules.pdf.
\15\ See IM-5050-6.
\16\ See IM-5050-13.
\17\ See IM-5050-4.
\18\ See Rule 5070.
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Pursuant to Rule 5050(d)(4), which governs strike prices of series
of options on ETFs, the interval between strike prices of series of
options on ETFs approved for options trading pursuant to Rule 5020(h)
shall be fixed at a price per share which is reasonably close to the
price per share at which the underlying security is traded in the
primary market at or about the same time such series of options is
first open for trading on the Exchange, or at such intervals as may
have been established on another options exchange prior to the
initiation of trading on BOX. With respect to the Short Term Options
Series or Weekly Program, during the month prior to expiration of an
option class that is selected for the Short Term Option Series Program,
the strike price intervals for the related non-Short Term Option
(``Related non-Short Term Option'') shall be the same as the strike
price intervals for the Short Term Option.\19\ Specifically, the
Exchange may open for trading Short Term Option Series at strike price
intervals of (i) $0.50 or greater where the strike price is less than
$100, and $1 or greater where the strike price is between $100 and $150
for all option classes that participate in the Short Term Options
Series Program; (ii) $0.50 for option classes that trade in one dollar
increments and are in the Short Term Option Series Program; or (iii)
$2.50 or greater where the strike price is above $150.\20\
Additionally, the Exchange may list series of options pursuant to the
$1 Strike Price Interval Program,\21\ the $0.50 Strike Program,\22\ and
the $2.50 Strike Price Program.\23\ Rule 7050 governs the minimum
increment for bids and offers for options traded on BOX. Pursuant to
Rule 7050, where the price of a series of options for the Trust 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 \24\ consistent
with the minimum increments for options on other ETFs listed on BOX.
Any and all new series of Trust options that BOX lists will be
consistent and comply with the expirations, strike prices, and minimum
increments set forth in Rules 5050 and 7050, as applicable. Position
and exercise limits for options on ETFs, including options on the
Trust, are determined pursuant to Rules 3120 and 3140, respectively.
Position and exercise limits for ETFs options vary according to the
number of outstanding shares and the trading volumes of the underlying
ETF over the past six months, where the largest in capitalization and
the most frequently traded ETFs 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 ETFs 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. Notwithstanding
the position limits in Rule 3120 and exercise limits in Rule 3140, the
Exchange proposes the position and exercise limits for the options on
the Trust to be 25,000 contracts on the same side pursuant to proposed
IM-3120-2. Capping the position and exercise limits at 25,000
contracts, the lowest limits available in options, would address
concerns related to manipulation and protection of investors as this
number is extremely conservative for the Trust and is more than
appropriate given its liquidity.
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\19\ See Rule 5050(d)(6).
\20\ See IM-5050-6.
\21\ See IM-5050-2.
\22\ See IM-5050-5.
\23\ See IM-5050-3.
\24\ Options that are eligible to participate in the Penny
Interval Program have a minimum increment of $0.01 below $3.00 and
$0.05 above $3.00. See Rule 7260.
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For purposes of addressing position and exercise limits, the
Exchange applies position and exercise limits for options for each
underlying security and does not aggregate position and exercise
limits. In considering the appropriate position and exercise limits for
the Trust, the Exchange reviewed the data presented by ISE in its
filing, specifically in Exhibit 3 of the filing,\25\ where ISE measured
the Trust's market capitalization and ADV against other industry data
as explained further below. The Commission should consider the position
and exercise limits for options on the Trust exclusive of other options
on Bitcoin. In its filing, ISE considered the Trust's market
capitalization and ADV, and prospective position limit in relation to
other securities. In measuring the Trust against other securities, ISE
aggregated market capitalization and volume data for securities that
have defined position limits utilizing data from The Options
[[Page 95268]]
Clearing Corporations (``OCC'').\26\ This pool of data took into
consideration 3,984 options on single stock securities, excluding broad
based ETFs.\27\ Next, ISE aggregated the data based on market
capitalization and ADV and grouped option symbols by position limit
utilizing statistical thresholds for ADV and market capitalization that
were one standard deviation above the mean for each position limit
category (i.e., 25,000, 50,000 to 65,000, 75,000, 100,000 to less than
250,000, 250,000 to 400,000, 450,000 to 1,000,000, and greater than or
equal to 1,000,000) (sic).\28\ Rule 3120(d) sets out position limits
for various contracts. For example, on the Exchange like on ISE, a
25,000 contract limit applies to those options having an underlying
security that does not meet the requirements for a higher options
contract limit. ISE performed an exercise to demonstrate the Trust's
position limit relative to other options symbols in terms of market
capitalization and ADV. For reference the market capitalization for the
Trust was 19,789,068 billion \29\ with an ADV, for the preceding three
months prior to August 7, 2024, of greater than 26 million shares.\30\
Today, by comparison, other options symbols with similar market
capitalization and ADV have a position limit in excess of 400,000.\31\
Therefore, the proposed 25,000 same side position limit for options on
the Trust is extremely conservative relative to these options symbols
which are a full standard deviation above the mean in comparison.
Second, ISE reviewed the Trust's data relative to the market
capitalization of the entire Bitcoin market in terms of exercise risk
and availability of deliverables. Utilizing data as of August 3, 2024,
there were 19,737,193 Bitcoins in circulation.\32\ ISE took a price of
$57,000 that equates to a market capitalization of greater than 1.125
trillion US dollars, and applied that to a position limit of 400,000
for options on the Trust.\33\ If a position limit of 400,000 options
were considered (the position limit that would be typically assigned
based upon data) the exercisable risk would represent only 6.6% of the
outstanding shares of the Trust. The 25,000 position limit being sought
only represents 0.4% of the outstanding shares of the Trust. Since the
Trust has a creation and redemption process managed through the issuer,
additionally it can be compared the position limit sought to the total
market capitalization of the entire Bitcoin market. In this case, the
exercisable risk for options on the Trust would be less than 0.01% of
the market capitalization of all outstanding Bitcoin. Assuming a
scenario where all options on the Trust's shares were exercised given
the proposed 25,000 per same side position limit, this would have a
virtually unnoticed impact on the entire Bitcoin market. This analysis
demonstrates that the proposed 25,000 per same side position limit is
also extremely conservative and more than appropriate for options on
the Trust. Third, ISE reviewed the proposed position limit by comparing
it to position limits for derivative products regulated by the
Commodity Futures Trading Commission (``CFTC''). While the CFTC,
through the relevant Designated Contract Markets, only regulates
options positions based upon delta equivalents (creating a less
stringent standard), ISE examined equivalent Bitcoin futures position
limits. In particular, ISE looked at the CME Bitcoin futures contract
\34\ that has a position limit of 2,000 futures.\35\ On August 7, 2024,
CME Bitcoin futures settled at $55,000.\36\ Taking the position limit
of 2,000 futures at a $5 multiplier \37\ equates to $550 million of
notional value for Bitcoin futures. By way of comparison, on August 7,
2024, the Trust settled at $31.19 per share, which would equate to
17,633,857 shares of the Trust \38\ if the CME notional position limit
were utilized. Since substantial portions of any distributed options
portfolio are likely to be out of the money on expiration, an options
position limit equivalent to the CME position limit for Bitcoin futures
(considering that all options deltas are <=1.00) should be a bit higher
than the CME implied 176,338 limit. Of note, unlike options contracts,
CME position limits are calculated on a net futures equivalent basis by
contract and include contracts that aggregate into one or more base
contracts according to an aggregation ratio(s).\39\ Therefore, if a
portfolio includes positions in options on futures, CME would aggregate
those positions into the underlying futures contracts in accordance
with a table published by CME on a delta equivalent value for the
relevant spot month, subsequent spot month, single month and all month
position limits.\40\ If a position exceeds position limits because of
an option assignment, CME permits market participants to liquidate the
excess position within one business day without being considered in
violation of its rules. Additionally, if at the close of trading, a
position that includes options exceeds position limits for futures
contracts, when evaluated using the delta factors as of that day's
close of trading, but does not exceed the limits when evaluated using
the previous day's delta factors, then the position shall not
constitute a position limit violation. Considering CME's position
limits on futures for bitcoin, the Exchange believes that that the
proposed 25,000 per same side position limit is conservative and more
than appropriate for options on the Trust.
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\25\ See Securities Exchange Act Release No. 101128 (September
20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified
by Amendment Nos. 1, 4, and 5, to Permit the Listing and Trading of
Options on the iShares Bitcoin Trust) (Exhibit 3) (``IBIT Approval
Order'') (letter from Angela Dunn, Nasdaq ISE, LLC, to Vanessa
Countryman, Secretary, Commission, dated August 21, 2024) (``ISE
Letter'').
\26\ The computations are based on OCC data from August 6, 2024.
Data displaying zero values in market capitalization or ADV were
removed.
\27\ The Trust has one asset and therefore is not comparable to
a broad based ETF where there are typically multiple components.
\28\ See ISE Letter at 10.
\29\ ISE acquired this figure as of August 13, 2024. See https://www.ishares.com/us/products/333011/ishares-bitcoin-trust. The
global supply of Bitcoin grows each day Bitcoin are minted.
\30\ See ISE Letter at 10.
\31\ See, e.g., iShares[supreg] iBoxx[supreg] $ High Yield
Corporate Bond ETF (``HYG'') with a market capitalization of
13,859,235,000 dollars as of November 4, 2024. See https://www.ishares.com/us/products/239565/ishares-iboxx-high-yield-corporate-bond-etf. The Exchange notes that HYG has a position limit
of 500,000 contracts.
\32\ See ISE Letter at 10.
\33\ Id.
\34\ CME Bitcoin Futures are described in Chapter 350 of CME's
Rulebook.
\35\ See the Position Accountability and Reportable Level Table
in the Interpretations & Special Notices Section of Chapter 5 of
CME's Rulebook.
\36\ See https://finance.yahoo.com/quote/BTC%3DF/history/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAM7ngaS6ZQS9c2Wzx7JW2IUe-_-_1FnLyr8T-Qw4jjkleHyCENfSMIEpPPt2hCzPDEryTVyB78NIwxkwFB5Fuw-jA-YiuSmYJHBriWbV6dYn91VQfzQNt3p0I2RkYLD3HhzXPwu4AP5as-_WzHNpEBon4sk5sUZXgkapMrZR--CS.
\37\ Each bitcoin futures contract is valued at 5 bitcoins as
defined by the CME CF Bitcoin Reference Rate (``BRR''). See CME Rule
35001.
\38\ See ISE Letter at 11.
\39\ See https://www.cmegroup.com/education/courses/market-regulation/position-limits/positionlimits-aggregation-of-contracts-and-table.htm.
\40\ Id.
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In analyzing the proposed position limit for options on the Trust,
ISE also considered the supply of Bitcoin. Specifically, ISE examined
the number of market participants with position limits that would need
to exercise in unison to put the underlying asset under stress. In the
case of options on the Trust, the proposed 25,000 same side position
limit effectively restricts a market participant from holding positions
that could be exercised in excess of 2,500,000 shares of the Trust.
Utilizing data from August 12, 2024, the Trust had 611,040,000 shares
outstanding, therefore 244 market participants would have to
simultaneously exercise position limits in order to create a scenario
that may put the underlying asset (the Trust)
[[Page 95269]]
under stress.\41\ As unlikely an occurrence as all market participants
exercising their position limits in unison would be, if it were to
occur, it should be noted that even such an occurrence would not likely
put the Trust under stress as economic incentives, would induce the
creation of more shares through the ETF creation and redemption
process. By way of example, given that the current global supply of
Bitcoin, the underlying asset of the Trust, is 19,789,068 \42\ and that
each Bitcoin can currently be redeemed for 1,755 shares of the Trust,
another 34,729,814,340 shares of the Trust could be created. To exhaust
this supply of the Trust, 13,891 market participants would have to
simultaneously exercise their position limit. Comparing the Trust to
the SPDR[supreg] Gold Shares (``GLD'') ETF or the iShares Silver Trust
(``SLV'') ETF, which have position limits of 250,000 or ten times the
proposed position limit for the Trust as well as lower shares
outstanding in both products,\43\ it is unjustified to mandate a
different level of stringency with respect to a position limit for
options on the Trust. The supply of Bitcoin does have a limit, which
will take years to fully mint.\44\ The Exchange notes that Bitcoin is a
viable economic alternative to traditional assets. The price of goods
denominated by Bitcoin has actually declined. This dynamic not only
makes a fixed supply desirable, but a necessary condition of the value
added by this asset in the broader economy. Further, the Exchange notes
that corporations have a limited number of outstanding shares.
Corporations may authorize additional shares, repurchase shares or
split their shares. Similarly, ETFs, like the Trust, may also create,
redeem, or split shares to suit the demand of the marketplace.
Importantly, because the supply of Bitcoin is much larger than the
available supply of most securities and the proposed 25,000 contract
position limit is so conservative, the Exchange believes that
evaluating the available supply of Bitcoin in establishing a position
limit for options on the Trust would demonstrate that the proposed
limit is safe for investors and the market.\45\ The Trust constitutes
less than 2% of the entire Bitcoin supply. When comparing the market
capitalization of Bitcoin against the largest securities, Bitcoin would
rank 7th among those securities.\46\ Further, the Exchange believes
that its proposal to list options on the Trust with a position limit of
25,000 on the same side is a conservative position limit that does not
lend itself to manipulation in the market given the ample market
capitalization and liquidity in the Trust. If we look to the liquidity
statistics of similar instruments and their concomitant position
limits, we are able to extrapolate a reasonable standard for arriving
at a position limit for a new product. In this case we can look to GLD,
SLV, and the ProShares Bitcoin Strategy ETF (``BITO''). These products
have volume statistics and ``float'' statistics, which gauge liquidity,
which are in line, yet slightly lower than the Trust. All three of
these reference products have position limits of 250,000 contracts.
These reference products are remarkably similar in nature to the Trust;
they are exchange-traded products (``ETPs'') holding one asset in a
trust.
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\41\ See https://www.ishares.com/us/products/333011/ishares-bitcoin-trust.
\42\ This figure was acquired as of August 13, 2024. See https://www.ishares.com/us/products/333011/ishares-bitcoin-trust. The
global supply of bitcoin grows each day bitcoin are minted.
\43\ As of August 13, 2024, GLD had 294,000,000 shares
outstanding and SLV had 510,200,000 shares outstanding. See https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-gold-shares-gld and
https://www.ishares.com/us/products/239855/ishares-silver-trust-fund.
\44\ A recent article suggested that the remaining supply will
take over 100 years to fully mint. See Sen, Vivek. ``94% of
Bitcoin's Supply Has Now Been Issued.'' Bitcoin Magazine, https://bitcoinmagazine.com/business/94-of-bitcoins-supply-has-now-been-issued. August 19, 2024.
\45\ A supply consideration would likely be valuable for an
option symbol that had far less liquidity than the Trust.
\46\ See https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/.
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Further, Rule Series 10100, which governs margin requirements
applicable to the trading of all options on BOX including options on
ETFs, will also apply to the trading of the Trust options.
Lastly, Rule 5055(e)(2)(i) permits the Exchange to authorize for
trading a FLEX Equity Option class on any equity security if it may
authorize for trading a Non-FLEX Equity Option class on that equity
security pursuant to Rule 5020.\47\ At this time, the Exchange is not
proposing to permit Trust options to trade as FLEX Equity Options.\48\
The Exchange therefore proposes to modify Rule 5055(e)(2)(i) to specify
this exception, which will add clarity and transparency to the Exchange
Rules.\49\
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\47\ See Rule 5055(e)(2)(i).
\48\ The Exchange would be required to submit a separate rule
filing to permit the Exchange to authorize for trading FLEX Equity
Options on the Trust (which filing may propose changes to existing
FLEX Equity Option position limits for such options if appropriate).
\49\ See proposed Rule 5055(e)(2)(i).
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The Exchange represents that the same surveillance procedures
applicable to all other options on other ETFs currently listed and
traded on the Exchange will apply to options on the Trust. Also, the
Exchange represents that it has the necessary systems capacity to
support the new option series. The Exchange believes that its existing
surveillance and reporting safeguards are designed to deter and detect
possible manipulative behavior which might potentially arise from
listing and trading options on ETFs, including the proposed Trust
options.
Today, the Exchange has an adequate surveillance program in place
for options. The Exchange intends to apply those same program
procedures to options on the Trust that it applies to the Exchange's
other options products.\50\ The Exchange would review activity in the
underlying Trust when conducting surveillances for market abuse or
manipulation in the options on the Trust. Additionally, the Exchange is
a member of the Intermarket Surveillance Group (``ISG'') under the
Intermarket Surveillance Group Agreement. The Exchange would be able to
obtain information regarding trading in shares of the Trust from Nasdaq
and other markets that trade shares of the Trust through ISG. ISG
members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets. In
addition, the Exchange has a Regulatory Services Agreement with the
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
surveillance that are common to rules of all options exchanges.\51\
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\50\ The surveillance program includes real-time patterns for
price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, phishing).
\51\ Section 19(g)(1) of the Act, among other things, requires
every SRO registered as a national securities exchange or 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
(``common members''). 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.
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The underlying shares of spot Bitcoin ETPs, including the Trust,
are also subject to safeguards related to addressing market abuse and
manipulation. As the Commission
[[Page 95270]]
stated in its orders approving proposals of several exchanges to list
and trade shares of spot bitcoin-based exchange-traded products
(``Bitcoin ETP Order''): Each Exchange has a comprehensive
surveillance-sharing agreement with the CME via their common membership
in the Intermarket Surveillance Group. This facilitates the sharing of
information that is available to the CME through its surveillance of
its markets, including its surveillance of the CME bitcoin futures
market.\52\ Given the consistently high correlation between the CME
Bitcoin futures market and the spot Bitcoin market, as confirmed by the
Commission through robust correlation analysis, the Commission was able
to conclude that such surveillance sharing agreements could reasonably
be ``expected to assist in surveilling for fraudulent and manipulative
acts and practices in the specific context of the [Bitcoin ETPs].''
\53\ In light of surveillance measures related to both options and
futures as well as the underlying Trust,\54\ 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 Trust.
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\52\ See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008, 3009 (January 17, 2024) (File Nos. SR-NYSEArca-
2021-90; SR-NYSEArca-2023-44; SR-NYSEArca-2023-58; SR-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).
\53\ See Bitcoin ETP Order, 89 FR at 3010-11.
\54\ See Securities Exchange Act Release No. 99295 (January 8,
2024), 89 FR 2321, 2334-35 (January 12, 2024) (SR-NASDAQ-2023-016)
(Notice of Filing of Amendment No. 1 to a Proposed Rule Change To
List and Trade Shares of the iShares Bitcoin Trust Under Nasdaq Rule
5711(d)).
---------------------------------------------------------------------------
The Exchange has also analyzed its capacity and represents that it
believes the Exchange and the Options Price Reporting Authority or
``OPRA'' have the necessary systems capacity to handle the additional
traffic associated with the listing of new series that may result from
the introduction of options on the Trust up to the number of
expirations currently permissible under the Exchange Rules. Because the
proposal is limited to one class, the Exchange believes any additional
traffic that may be generated from the introduction of the Trust
options will be manageable.
Finally, the Exchange proposes a technical amendment to Rule
5020(h)(iv) to amend the names ``ETFS Gold Trust'' to ``abrdn Gold ETF
Trust,'' \55\ ``ETFS Silver trust'' to ``abrdn Silver ETF Trust,'' \56\
``ETFS Palladium Trust'' to ``abrdn Palladium ETF Trust,'' \57\ and
``ETFS Platinum Trust'' to ``abrdn Platinum ETF Trust.'' \58\ In 2018
and again in 2022 these trusts were renamed. As such, the Exchange
proposes to amend the names of the ETFs to reflect their current names.
---------------------------------------------------------------------------
\55\ Effective October 1, 2018, ETFS Gold Trust was renamed
Aberdeen Standard Gold ETF Trust. See https://www.sec.gov/Archives/edgar/data/1450923/000138713118005292/ex10-2.htm. Effective March
31, 2022, Aberdeen Standard Gold ETF Trust was renamed abrdn Gold
ETF Trust. See https://www.sec.gov/Archives/edgar/data/1450923/000138713122003628/ex10-2.htm.
\56\ Effective October 1, 2018 ETFS Silver Trust was renamed
Aberdeen Standard Silver ETF Trust. See https://www.sec.gov/Archives/edgar/data/1450922/000138713118005294/ex10-2.htm. Effective
March 31, 2022 Aberdeen Standard Silver ETF Trust was renamed abrdn
Silver ETF Trust. See https://www.sec.gov/Archives/edgar/data/1450922/000138713122003632/ex10-2.htm.
\57\ Effective October 1, 2018 ETFS Palladium Trust was renamed
Aberdeen Standard Palladium ETF Trust. https://www.sec.gov/Archives/edgar/data/1459862/000138713118005304/ex10-2.htm. Effective March
31, 2022 Aberdeen Standard Palladium ETF Trust was renamed abrdn
Palladium ETF Trust. See https://www.sec.gov/Archives/edgar/data/1459862/000138713122003629/ex10-2.htm.
\58\ Effective October 1, 2018 ETFS Platinum Trust was renamed
Aberdeen Standard Platinum ETF Trust. See https://www.sec.gov/Archives/edgar/data/1460235/000138713118005301/ex10-2.htm. Effective
March 31, 2022 Aberdeen Standard Platinum ETF Trust was renamed
abrdn Platinum ETF Trust. See https://www.sec.gov/Archives/edgar/data/1460235/000138713122003633/ex10-2.htm.
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2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\59\ in general, and Section 6(b)(5) of the Act,\60\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general to protect investors and the
public interest.
---------------------------------------------------------------------------
\59\ 15 U.S.C. 78f(b).
\60\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposal to list and
trade options on the Trust will remove impediments to and perfect the
mechanism of a free and open market and a national market system and,
in general, protect investors because offering options on the Trust
will provide investors with a greater opportunity to realize the
benefits of utilizing options on an ETF based on spot Bitcoin,
including cost efficiencies and increased hedging strategies. The
Exchange believes that offering options on a competitively priced ETF
based on spot Bitcoin will benefit investors by providing them with an
additional, relatively lower cost risk management tool allowing them to
manage, more easily, their positions, and associated risks, in their
portfolios in connection with exposure to spot Bitcoin. Today, BOX
lists options on other commodity ETFs structured as a trust, which
essentially offer the same objectives and benefits to investors, and
for which the Exchange has not identified any issues with the continued
listing and trading of options on those ETFs. The Exchange also
believes the proposal to permit options on the Trust will remove
impediments to and perfect the mechanism of a free and open market and
a national market system because options on the Trust will comply with
current Exchange Rules. As discussed above, options on the Trust must
satisfy the initial listing standards and continued listing standards
currently in the Exchange Rules, applicable to options on all ETFs,
including options on other commodity ETFs already deemed appropriate
for options trading on BOX pursuant to Rule 5020(h). Further, Exchange
Rules that currently govern the listing and trading of options on ETFs,
including permissible expirations, strike prices, minimum increments,
position and exercise limits (including as proposed herein), and margin
requirements will govern the listing and trading of options on the
Trust. The proposed position and exercise limits for options on the
Trust 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 Trust's
market capitalization, average daily volume, and high number of
outstanding shares. The proposed position limit, and exercise limit, is
consistent with the Act as it addresses concerns related to
manipulation and protection of investors because the position limit
(and exercise limit) is extremely conservative and more than
appropriate given the Trust is actively traded. In support of the
proposed position and exercise limits for options on the Trust of
25,000 contracts, the Exchange is citing the in depth analysis ISE did
in its filing. As noted above, in the IBIT Approval Order, ISE
considered the: (i) Trust's market
[[Page 95271]]
capitalization and ADV, and prospective position limit in relation to
other securities; (ii) market capitalization of the entire Bitcoin
market in terms of exercise risk and availability of deliverables;
(iii) proposed position limit by comparing it to position limits for
derivative products regulated by the CFTC; and (iv) supply of Bitcoin.
Based on the Exchange's review of IBIT Approval Order, the Exchange
believes that setting position and exercise limits for options on the
Trust of 25,000 contracts is more than appropriate for the Trust. 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 as well as the Bitcoin market.\61\
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\61\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
---------------------------------------------------------------------------
The Exchange believes the proposed rule change to exclude options
on the Trust from being eligible for trading as FLEX Equity Options is
consistent with the Act because, without this prohibition, trading a
FLEX Equity Option in the Trust would otherwise establish different
position and exercise limits than those proposed herein.\62\
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\62\ The Exchange would need to submit a separate rule filing to
permit the Exchange to authorize for trading FLEX Equity Options on
the Trust (which filing may propose changes to existing FLEX Equity
Option position limits for such options if appropriate).
---------------------------------------------------------------------------
The Exchange represents that BOX has the necessary systems capacity
to support options on the Trust. 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 on ETFs, including the Trust options.
Today, the Exchange has an adequate surveillance program in place
for options. The Exchange intends to apply those same program
procedures to options on the Trust that it applies to the Exchange's
other options products.\63\ The Exchange will review activity in the
underlying Trust when conducting surveillances for market abuse or
manipulation in the options on the Trust. Additionally, the Exchange is
a member of the ISG under the Intermarket Surveillance Group Agreement.
ISG members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets. The
Exchange will be able to obtain information from Nasdaq, LLC and other
markets through ISG. In addition, the Exchange has a Regulatory
Services Agreement with FINRA. Pursuant to a multi-party 17d-2 joint
plan, all options exchanges allocate regulatory responsibilities to
FINRA to conduct certain options-related market surveillance that are
common to rules of all options exchanges.\64\
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\63\ The surveillance program includes real-time patterns for
price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, phishing).
\64\ 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
(``common members''). 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 Trust,
are also subject to safeguards related to addressing market abuse and
manipulation. As the Commission stated in 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.\65\
---------------------------------------------------------------------------
\65\ See supra note 4.
---------------------------------------------------------------------------
Given the consistently high correlation between the CME Bitcoin
futures market and the spot Bitcoin market, as confirmed by the
Commission through robust correlation analysis, the Commission was able
to conclude that such surveillance sharing agreements could reasonably
be ``expected to assist in surveilling for fraudulent and manipulative
acts and practices in the specific context of the [Bitcoin ETPs].''
\66\
---------------------------------------------------------------------------
\66\ 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 Trust,\67\ 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 Trust. Further, the
Exchange represents that it will implement any new surveillance
procedures it deems necessary to effectively monitor the trading of
options on the Trust.
---------------------------------------------------------------------------
\67\ See Securities Exchange Act Release No. 99295 (January 8,
2024), 89 FR 2321, 2334-35 (January 12, 2024) (SR-NASDAQ-2023-016)
(Notice of Filing of Amendment No. 1 to a Proposed Rule Change To
List and Trade Shares of the iShares Bitcoin Trust Under Nasdaq Rule
5711(d)).
---------------------------------------------------------------------------
Finally, the Commission has previously approved the listing and
trading of options on other commodity ETFs structured as a trust, such
as SPDR[supreg] Gold Trust,\68\ the iShares COMEX Gold Trust \69\ the
iShares Silver Trust,\70\ the ETFS Gold Trust,\71\ and the ETFS Silver
Trust.\72\
---------------------------------------------------------------------------
\68\ See Securities Exchange Act Release No. 57897 (May 30,
2008), 73 FR 32061 (June 5, 2008) (SR-Amex-2008-15; SR-CBOE-2005-11;
SR-ISE-2008-12; SR-NYSEArca-2008-52; and SR-Phlx-2008-17) (Order
Granting Approval of a Proposed Rule Change, as Modified, and Notice
of Filing and Order Granting Accelerated Approval of Proposed Rule
Changes, as Modified, Relating to Listing and Trading Options on the
SPDR Gold Trust).
\69\ See Securities Exchange Act Release No. 59055 (December 4,
2008), 73 FR 75148 (December 10, 2008) (SR-Amex-2008-68; SR-BSE-
2008-51; SR-CBOE-2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and
SR-Phlx-2008-58) (Notice of Filing and Order Granting Accelerated
Approval of Proposed Rule Changes Relating to the Listing and
Trading Options on Shares of the iShares COMEX Gold Trust and the
iShares Silver Trust).
\70\ Id.
\71\ See Securities Exchange Act Release No. 61483 (February 3,
2010), 75 FR 6753 (February 10, 2010) (SR-CBOE-2010-007; SR-ISE-
2009-106; SR-NYSEAmex-2009-86; and SR-NYSEArca-2009-110) (Order
Granting Approval of Proposed Rule Changes and Notice of Filing and
Order Granting Accelerated Approval of a Proposed Rule Change
Relating to Listing and Trading Options on the ETFS Gold Trust and
the ETFS Silver Trust).
\72\ Id.
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Further, the Exchange's proposal to amend the names ``ETFS Gold
Trust'' to ``abrdn Gold ETF Trust,'' ``ETFS Silver trust'' to ``abrdn
Silver ETF Trust,'' ``ETFS Palladium Trust'' to ``abrdn Palladium ETF
Trust,'' and ``ETFS Platinum Trust'' to ``abrdn Platinum ETF Trust'' in
Rule 5020(h)(iv) is consistent with the Act and the protection of
investors as this amendment reflects the current names of these
products.
The Exchange notes that the proposed rule change is substantively
the same as a rule change proposed by Nasdaq ISE which the Commission
recently approved.\73\
---------------------------------------------------------------------------
\73\ See supra note 3.
---------------------------------------------------------------------------
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 not necessary or appropriate in
furtherance
[[Page 95272]]
of the purposes of the Act. In this regard and as indicated above, the
Exchange notes that the rule change is being proposed as a competitive
response to a filing submitted by Nasdaq ISE that was recently approved
by the Commission.\74\
---------------------------------------------------------------------------
\74\ Id.
---------------------------------------------------------------------------
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
Trust will be subject to initial listing standards and continued
listing standards the same as other options on ETFs listed on BOX.
Further, options on the Trust will be subject to Exchange Rules that
currently govern the listing and trading of options on ETFs, including
permissible expirations, strike prices, minimum increments, position
and exercise limits (including as proposed to modify herein), and
margin requirements. Options on the Trust will be equally available to
all market participants who wish to trade such options. Also, and as
stated above, the Exchange already lists options on other commodity
ETFs structured as a trust. The Exchange does not believe that the
proposal to list and trade options on the Trust 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 permitting
options on the Trust to trade on BOX may make BOX a more attractive
marketplace to market participants, such market participants are free
to elect to become market participants on BOX. Additionally, other
options exchanges are free to amend their listing rules, as applicable,
to permit them to list and trade options on the Trust. 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 BOX 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 options on the Trust for trading on
BOX 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 spot Bitcoin prices and Bitcoin
related products and positions.
Additionally, the Exchange's proposal to amend the names ``ETFS
Gold Trust'' to ``abrdn Gold ETF Trust,'' ``ETFS Silver trust'' to
``abrdn Silver ETF Trust,'' ``ETFS Palladium Trust'' to ``abrdn
Palladium ETF Trust,'' and ``ETFS Platinum Trust'' to ``abrdn Platinum
ETF Trust'' in Rule 5020(h)(iv) does not impose an undue burden on
competition as this amendment reflects the current names of these
products.
Finally, the proposed rule change to exclude options on the Trust
from being eligible for trading as FLEX Equity Options does not impose
an undue burden on competition as no BOX Participant will be able to
transact a FLEX Equity Option on the Trust.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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) of the Act \75\ and Rule 19b-
4(f)(6) thereunder.\76\
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\75\ 15 U.S.C. 78s(b)(3)(A).
\76\ 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 pursuant to Rule 19b-4(f)(6) under the
Act normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \77\ permits the Commission
to 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 shares of
the Trust.\78\ The Exchange has provided information regarding the
underlying Trust, including, among other things, information regarding
trading volume, the number of beneficial holders, and the market
capitalization of the Trust. The proposal also establishes position and
exercise limits for options on the Trust and provides information
regarding the surveillance procedures that will apply to options on the
Trust. In addition, the proposal updates the names of certain
commodity-based trusts, as described above, which will ensure that the
Exchange's rules identify these trusts by their current names. The
Commission believes that waiver of the operative delay could benefit
investors by providing an additional venue for trading Bitcoin Fund
options and helping to ensure that the accuracy of the Exchange's
rules. Therefore, the Commission believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest. Accordingly, the Commission hereby waives the 30-day
operative delay and designates the proposed rule change operative upon
filing.\79\
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\77\ 17 CFR 240.19b-4(f)(6)(iii).
\78\ See supra note 3.
\79\ 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 such 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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-BOX-2024-27 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-BOX-2024-27. 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
[[Page 95273]]
only one method. The Commission will post all comments on the
Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of the filing also will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-BOX-2024-27 and should be submitted on
or before December 23, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\80\
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\80\ 17 CFR 200.30-3(a)(12), (59).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-28105 Filed 11-29-24; 8:45 am]
BILLING CODE 8011-01-P
