Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To List and Trade Option Contracts on the iShares Bitcoin Trust, the Fidelity Wise Origin Bitcoin Fund, and the ARK21Shares Bitcoin ETF, 95257-95264 [2024-28107]
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Federal Register / Vol. 89, No. 231 / Monday, December 2, 2024 / Notices
in the application) in shares of their
common stock.
Hamilton Lane Private
Assets Fund, Hamilton Lane Private
Infrastructure Fund, Hamilton Lane
Private Secondary Fund and Hamilton
Lane Advisors, L.L.C.
APPLICANTS:
The application was filed
on October 18, 2024, and amended on
November 8, 2024.
FILING DATES:
An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing on any application by
emailing the SEC’s Secretary at
Secretarys-Office@sec.gov and serving
the Applicants with a copy of the
request by email, if an email address is
listed for the relevant Applicant below,
or personally or by mail, if a physical
address is listed for the relevant
Applicant below. Hearing requests
should be received by the Commission
by 5:30 p.m. on December 20, 2024, and
should be accompanied by proof of
service on the Applicants, in the form
of an affidavit, or, for lawyers, a
certificate of service. Pursuant to rule 0–
5 under the Act, hearing requests should
state the nature of the writer’s interest,
any facts bearing upon the desirability
of a hearing on the matter, the reason for
the request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
emailing the Commission’s Secretary.
HEARING OR NOTIFICATION OF HEARING:
The Commission:
Secretarys-Office@sec.gov. Applicants:
Keith Kleinman, Esq., Hamilton Lane
Advisors, L.L.C., kkleinman@
hamiltonlane.com, with a copy to Ryan
P. Brizek, Esq., Simpson Thacher &
Bartlett LLP, Ryan.Brizek@stblaw.com.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Trace W. Rakestraw, Senior Special
Counsel, at (202) 551–6825 (Division of
Investment Management, Chief
Counsel’s Office).
For
Applicants’ representations, legal
analysis, and conditions, please refer to
Applicants’ application, dated
November 8, 2024, which may be
obtained via the Commission’s website
by searching for the file number at the
top of this document, or for an
Applicant using the Company name
search field on the SEC’s EDGAR
system. The SEC’s EDGAR system may
be searched at https://www.sec.gov/
edgar/searchedgar/legacy/
companysearch.html. You may also call
the SEC’s Public Reference Room at
(202) 551–8090.
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SUPPLEMENTARY INFORMATION:
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For the Commission, by the Division of
Investment Management, under delegated
authority.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–28194 Filed 11–29–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–421, OMB Control No.
3235–0481]
Submission for OMB Review;
Comment Request Extension: Rule
15c2–8
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the existing collection of
information provided for in the
following rule: Rule 15c2–8 (17 CFR
240.15c2–8), under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.).
Rule 15c2–8 requires broker-dealers to
deliver preliminary and/or final
prospectuses to certain people under
certain circumstances. In connection
with securities offerings generally,
including initial public offerings
(‘‘IPOs’’), the rule requires brokerdealers to take reasonable steps to
distribute copies of the preliminary or
final prospectus to anyone who makes
a written request, as well as any brokerdealer who is expected to solicit
purchases of the security and who
makes a request. In connection with
IPOs, the rule requires a broker-dealer to
send a copy of the preliminary
prospectus to any person who is
expected to receive a confirmation of
sale (generally, this means any person
who is expected to actually purchase
the security in the offering) at least 48
hours prior to the sending of such
confirmation. This requirement is
sometimes referred to as the ‘‘48-hour
rule.’’
Additionally, managing underwriters
are required to take reasonable steps to
ensure that all broker-dealers
participating in the distribution of or
trading in the security have sufficient
copies of the preliminary or final
prospectus, as requested by them, to
enable such broker-dealer to satisfy their
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95257
respective prospectus delivery
obligations pursuant to Rule 15c2–8, as
well as Section 5 of the Securities Act
of 1933.
Rule 15c2–8 implicitly requires that
broker-dealers collect information, as
such collection facilitates compliance
with the rule. There is no requirement
to submit collected information to the
Commission. In order to comply with
the rule, broker-dealers participating in
a securities offering must keep accurate
records of persons who have indicated
interest in an IPO or requested a
prospectus, so that they know to whom
they must send a prospectus.
The Commission estimates that the
time broker-dealers will spend
complying with the collection of
information required by the rule is 8,550
hours for equity IPOs and 23,970 hours
for other offerings. The Commission
estimates that the total annualized cost
burden (copying and postage costs) is
$17,100,000 for IPOs and $958,800 for
other offerings.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The 30-day public comment period
for this information collection request
opens on December 3, 2024 and ends on
January 2, 2025. View the full
information request and submit
comments at https://www.reginfo.gov/
public/do/PRAViewICR?ref_
nbr=202409-3235-013 or email
comments to MBX.OMB.OIRA.SEC_
desk_officer@omb.eop.gov.
Dated: November 26, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–28222 Filed 11–29–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101737; File No. SR–
NYSEAMER–2024–73]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change To List and Trade Option
Contracts on the iShares Bitcoin Trust,
the Fidelity Wise Origin Bitcoin Fund,
and the ARK21Shares Bitcoin ETF
November 25, 2024.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
1 15
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Federal Register / Vol. 89, No. 231 / Monday, December 2, 2024 / Notices
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 20, 2024, NYSE American
LLC (‘‘NYSE American’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade option contracts on the iShares
Bitcoin Trust, the Fidelity Wise Origin
Bitcoin Fund, and the ARK21Shares
Bitcoin ETF. The proposed rule change
is available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
ddrumheller on DSK120RN23PROD with NOTICES1
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 904 (Position Limits), Rule 915
(Criteria for Underlying Securities), and
Rule 916 (Withdrawal of Approval of
Underlying Securities) to allow the
Exchange to list and trade options on
the following exchange-traded products:
the iShares Bitcoin Trust (‘‘iShares
Bitcoin’’ or ‘‘IBIT’’), the Fidelity Wise
Origin Bitcoin Fund (‘‘Fidelity Wise’’ or
‘‘FBTC’’), and the ARK21Shares Bitcoin
ETF (‘‘ARK21’’ or ‘‘ARKB’’)
(collectively, the ‘‘Bitcoin Funds’’ or
‘‘Funds’’).
The Exchange notes that this is a
competitive filing as the Commission
recently approved rule proposals by
2 15
3 17
U.S.C. 78a.
CFR 240.19b–4.
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Nasdaq ISE, LLC (‘‘ISE’’) and Cboe
Exchange, Inc. (‘‘Cboe’’) to allow the
listing and trading of options on IBIT 4
and on FBTC and ARKB, respectively.5
As discussed below, the Exchange
believes options on the Bitcoin Funds
would permit hedging, and allow for
more liquidity, better price efficiency,
and less volatility with respect to the
underlying Funds. Further, permitting
the listing of such options would
enhance the transparency and efficiency
of markets in these and correlated
products.
Rule 915 provides that, subject to
certain other criteria set forth in the
Rule, securities deemed appropriate for
options trading include ExchangeTraded Fund Shares (or ETFs) as
defined in Commentary .06, that
represent certain types of interests 6 and
4 See Securities Exchange Act Release No. 101128
(September 20, 2024), 89 FR 78942 (September 26,
2024) (SR–ISE–2024–03) (Notice of Filing of
Amendment Nos. 4 and 5 and Order Granting
Accelerated Approval of a Proposed Rule Change,
as Modified by Amendment Nos. 1, 4, and 5, to
Permit the Listing and Trading of Options on the
iShares Bitcoin Trust) (‘‘IBIT Approval Order’’).
5 See Securities Exchange Act Release No. 101387
(October 18, 2024), 89 FR 84948 (October 24, 2024)
(SE–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) (‘‘FBTC and ARKB
Approval Order’’).
6 See Rule 915, Commentary .06, which permits
options trading on ETFs that are traded on a
national securities exchange and are defined as an
‘‘NMS stock’’ in Rule 600(b)(55) of Regulation NMS,
that represent interests in registered investment
companies (or series thereof) organized as open-end
management investment companies, unit
investment trusts or similar entities that hold
portfolios of securities and/or financial instruments
including, but not limited to, stock index futures
contracts, options on futures, options on securities
and indexes, equity caps, collars and floors, swap
agreements, forward contracts, repurchase
agreements and reverse purchase agreements (the
‘‘Financial Instruments’’), and money market
instruments, including, but not limited to, U.S.
government securities and repurchase agreements
(the ‘‘Money Market Instruments’’) comprising or
otherwise based on or representing investments in
indexes or portfolios of securities and/or Financial
Instruments and Money Market Instruments (or that
hold securities in one or more other registered
investment companies that themselves hold such
portfolios of securities and/or Financial Instruments
and Money Market Instruments); interests in a trust
or similar entity that holds a specified non-U.S.
currency deposited with the trust or similar entity
when aggregated in some specified minimum
number may be surrendered to the trust by the
beneficial owner to receive the specified non-U.S.
currency and pays the beneficial owner interest and
other distributions on deposited non-U.S. currency,
if any, declared and paid by the trust (‘‘Currency
Trust Shares’’); commodity pool interests
principally engaged, directly or indirectly, in
holding and/or managing portfolios or baskets of
securities, commodity futures contracts, options on
commodity futures contracts, swaps, forward
contracts and/or options on physical commodities
and/or non-U.S. currency (‘‘Commodity Pool
Units’’); or represents an interest in a registered
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exchange-traded products (‘‘ETPs’’)
structured as trusts that hold precious
metals (which are deemed
commodities) 7 and that hold bitcoin
(which is also deemed a commodity).8
The Exchange proposes to expand the
list of bitcoin-backed ETPs on which it
can list options to include the Bitcoin
Funds.9
The Bitcoin Funds are structured as
trusts that hold bitcoin. Like ETFs and
ETPs currently deemed appropriate for
options trading, the investment
objective of each Bitcoin Fund trust is
for its shares to reflect the performance
of Bitcoin (less the expenses of the
trust’s operations), offering investors an
opportunity to gain exposure to Bitcoin
without the complexities of Bitcoin
delivery. Each Bitcoin Fund’s shares
represent units of fractional undivided
beneficial interest in the trust, the assets
of which consist principally of Bitcoin
and are designed to track Bitcoin or the
performance of the price of Bitcoin and
offer access to the Bitcoin market.10 The
Bitcoin Funds provide investors with
cost-efficient alternatives that allow a
level of participation in the Bitcoin
market through the securities market.
The Exchange believes each Bitcoin
Fund satisfies the Exchange’s initial
listing standards set forth in
Commentary .01 to Rule 915.11 The
Exchange notes that the Bitcoin Funds
also satisfy the listing standard applied
to ETFs traded on the Exchange that
investment company (‘‘Investment Company’’)
organized as an open-end management investment
company or similar entity, that invests in a portfolio
of securities selected by the Investment Company’s
investment adviser consistent with the Investment
Company’s investment objectives and policies,
which is issued in a specified aggregate minimum
number in return for a deposit of a specified
portfolio of securities and/or a cash amount with a
value equal to the next determined net asset value
(‘‘NAV’’), and when aggregated in the same
specified minimum number, may be redeemed at a
holder’s request, which holder will be paid a
specified portfolio of securities and/or cash with a
value equal to the next determined NAV (‘‘Managed
Fund Share’’); provided that all of the conditions
listed in Rules 915 and 916 are met.
7 See Rule 915, Commentary .10 (permitting the
listing and trading of options on shares of the
following trusts: SPDR Gold Trust, the iShares
COMEX Gold Trust the iShares Silver Trust, the
ETFS Gold Trust, and the ETFS Silver Trust,
pursuant to Rule 915 and 916).
8 See Rule 915, Commentary .10a (permitting the
listing and trading of options on shares of the
following trusts: the Grayscale Bitcoin Trust (BTC),
the Grayscale Bitcoin Mini Trust (BTC), and the
Bitwise Bitcoin ETF, pursuant to Rule 915 and 916).
9 See proposed Rule 915, Commentary .10(a)
(expanded to permit the listing and trading of
options on shares of IBIT, FBTC, and ARKB,
pursuant to Rule 915 and 916).
10 The trust may include minimal cash.
11 Commentary .01 to Rule 915 provides for
guidelines to be by the Exchange when evaluating
potential underlying securities for Exchange option
transactions.
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Federal Register / Vol. 89, No. 231 / Monday, December 2, 2024 / Notices
they be available for creation and
redemption each business day as set
forth in Commentary .06(a)(ii).12
First, each of the Bitcoin Funds satisfy
the criteria and guidelines set forth in
Rule 915(a). Pursuant to Rule 915(a), a
security on which options may be listed
and traded on the Exchange must be
duly registered with the Commission
and be an NMS stock (as defined in Rule
600 of Regulation NMS under the Act)
and be characterized by a substantial
number of outstanding shares that are
widely held and actively traded.13 Each
of the Bitcoin Funds is an NMS Stock
as defined in Rule 600 of Regulation
NMS under the Act.14 The Exchange
believes each Bitcoin Fund is
characterized by a substantial number of
outstanding shares that are widely held
and actively traded.
The Bitcoin Funds had the following
number of shares outstanding:
IBIT (as of 8/12/24) ..............
FBTC (as of 8/7/24) ..............
ARKB (as of 8/7/24) .............
611,040,000
201,100,100
45,495,000
As shown above, each of the Bitcoin
Funds had significantly more than
7,000,000 shares outstanding, which is
the minimum number of shares of a
corporate stock that the Exchange
generally requires to list options on that
stock pursuant to Commentary .01(1) to
Rule 915. The Exchange believes this
demonstrates that each Bitcoin Fund is
characterized by a substantial number of
outstanding shares.
Further, the below table contains
information regarding the number of
beneficial holders of the Bitcoin Funds.
Trading volume
(shares)
Bitcoin Fund
IBIT (as of 5/13/24) ........................................
FBTC (as of 8/7/24) .......................................
ARKB (as of 8/7/24) ......................................
ddrumheller on DSK120RN23PROD with NOTICES1
Shares
outstanding
Bitcoin Fund
Bitcoin Fund
IBIT ...................
FBTC ................
ARKB ................
193,956 (as of 5/22/23).
279,656 (as of 6/27/24).
69,425 (as of 6/26/24).
Each Bitcoin Fund has significantly
more than 2,000 beneficial holders,
which is the minimum number of
holders the Exchange generally requires
for corporate stock in order to list
options on that stock pursuant to
pursuant to Commentary .01(2) to Rule
915. Therefore, the Exchange believes
the shares of each Bitcoin Fund are
widely held.
In addition, the Exchange believes the
shares of each Bitcoin Fund are actively
traded. The total trading volume (by
shares and notional) for these funds
since they began trading and the average
daily volume (‘‘ADV’’) over the 30-day
period of July 9 through August 7, 2024,
was as follows:
Trading volume
(notional $)
34,825,921
1,112,861,581
279,360,739
Number of beneficial
holders
ADV
(shares)
1,246,060,738
250,354,755
90,484,307
26,000,000
6,014,335
1,893,335
As demonstrated above, even though
these Bitcoin Funds have been trading
for less than one year, the trading
volume for each is substantially higher
than 2,400,000 shares, which is the
minimum 12-month volume the
Exchange generally requires for a
security in order to list options on that
security as set forth in Commentary .01
to Rule 915. The Exchange believes this
data demonstrates each Bitcoin Fund is
characterized by a substantial number of
outstanding shares that are actively
traded.
In addition to satisfying the
Exchange’s initial listing standards,
options on Bitcoin Funds will be subject
to the Exchange’s continued listing
standards as set forth in Commentary
.07 to Rule 916.15 Pursuant to
Commentary .07 to Rule 916, the
Exchange will not open for trading any
additional series of option contracts
covering a fund traded on the Exchange
if such fund ceases to be an ‘‘NMS
stock’’ as provided for Commentary
.01(5) to Rule 915 or the fund is halted
from trading on its primary market.16
Additionally, options on funds traded
on the Exchange may be subject to the
suspension of opening transactions as
follows: (1) the fund no longer meets the
terms of Commentary .01 to Rule 916;
(2) following the initial twelve-month
period beginning upon the
commencement of trading of the fund,
there are fewer than 50 record and/or
beneficial holders of the fund for 30 or
more consecutive trading days; (3) the
value of the underlying commodity is
no longer calculated or available; or (4)
such other event occurs or condition
exists that in the opinion of the
Exchange makes further dealing on the
Exchange inadvisable.
Options on each Bitcoin Fund will be
physically settled contracts with
American-style exercise.17 Consistent
with Rule 903, which governs the
opening of options series on a specific
underlying security (including ETFs and
12 Commentary .06(a)(ii) requires that ETFs must
be available for creation or redemption each
business day from or through the issuer in cash or
in kind at a price related to net asset value, and the
issuer must be obligated to issue ETFs in a specified
aggregate number even if some or all of the
investment assets required to be deposited have not
been received by the issuer, subject to the condition
that the person obligated to deposit the investments
has undertaken to deliver the investment assets as
soon as possible and such undertaking is secured
by the delivery and maintenance of collateral
consisting of cash or cash equivalents satisfactory
to the issuer, as provided in the respective
prospectus.
13 The criteria and guidelines for a security to be
considered widely held and actively traded are set
forth in Commentary .01 to Rule 915, subject to
exceptions.
14 An ‘‘NMS stock’’ means any NMS security
other than an option, and an ‘‘NMS security’’ means
any security or class of securities for which
transaction reports are collected, processed, and
made available pursuant to an effective transaction
reporting plan (or an effective national market
system plan for reporting transaction in listed
options). See 17 CFR 242.600(b)(64) (definition of
‘‘NMS security’’) and (65) (definition of ‘‘NMS
stock’’).
15 The Exchange proposes to amend Commentary
.11 to Rule 916 to include the Bitcoin Funds in the
list of ETPs deemed ‘‘Exchange-Traded Fund
Shares’’—of ETFs—for purposes of the continued
listing standards set forth in Commentary .07 to
Rule 916. See proposed Commentary .11 to Rule
916. For avoidance of doubt, the Exchange refers
‘‘funds’’ rather than ‘‘ETFs’’ to make clear that the
Bitcoin Funds are subject to these continued listing
standards.
16 See Commentary .07 to Rule 916.
17 See Rule 902 (Rights and Obligations of
Holders and Writers), which provides that the rights
and obligations of holders and writers of option
contracts of any class of options dealt in on the
Exchange shall be as set forth in the Rules of the
Clearing Corporation. See also OCC Rules, Chapter
VIII, which governs exercise and assignment, and
Chapter IX, which governs the discharge of delivery
and payment obligations arising out of the exercise
of physically settled stock option contracts. OCC
Rules can be located at: https://www.theocc.com/
getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/
occrules.pdf.
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ETPs), the Exchange will open at least
one expiration month for options on
each Bitcoin Fund 18 at the
commencement of trading on the
Exchange and may also list series of
options on Bitcoin Funds for trading on
a weekly,19 monthly,20 or quarterly 21
basis. The Exchange may also list longterm equity option series (‘‘LEAPS’’)
that expire from twelve to thirty-nine
months from the time they are listed.22
Pursuant to Rule 903, Commentary
.05(a), which governs strike prices of
series of options on ETFs, the interval
between strike prices of series of options
on Bitcoin Funds will be $1 or greater
when the strike price is $200 or less and
$5 or greater where the strike price is
over $200.23 Additionally, the Exchange
may list series of options pursuant to
the $1 Strike Price Interval Program,24
the $0.50 Strike Program,25 the $2.50
Strike Price Program,26 and the $5 Strike
Program.27 Pursuant to Rule 960NY,
where the price of a series of a Bitcoin
Fund option is less than $3.00, the
minimum increment will be $0.05, and
where the price is $3.00 or higher, the
minimum increment will be $0.10.28
18 See Rule 903(c), Commentary .03. The monthly
expirations are subject to certain listing criteria for
underlying securities described within Rule 915.
Monthly listings expire the third Friday of the
month. The term ‘‘expiration date’’ (unless
separately defined elsewhere in the OCC By-Laws),
when used in respect of an option contract (subject
to certain exceptions), means the third Friday of the
expiration month of such option contract, or if such
Friday is a day on which the exchange on which
such option is listed is not open for business, the
preceding day on which such exchange is open for
business. See OCC By-Laws Article I, Section 1.
Pursuant to Rule 903(d), additional series of options
of the same class may be opened for trading on the
Exchange when the Exchange deems it necessary to
maintain an orderly market, to meet customer
demand or when the market price of the underlying
stock moves more than five strike prices from the
initial exercise price or prices. New series of
options on an individual stock may be added until
the beginning of the month in which the options
contract will expire. Due to unusual market
conditions, the Exchange, in its discretion, may add
a new series of options on an individual stock until
the close of trading on the business day prior to
expiration.
19 See Rule 903(h).
20 See Rule 903, Commentary .11.
21 See Rule 903, Commentary .09.
22 See Rule 903, Commentary .03.
23 The Exchange notes that for options listed
pursuant to the Short Term Option Series Program,
the Monthly Options Series Program, and the
Quarterly Options Series Program, Rules 903(h) and
Commentaries .09 and .03 to Rule 903, specifically
set forth intervals between strike prices on
Quarterly Options Series, Short Term Option Series,
and Monthly Options Series, respectively.
24 See Rule 903, Commentary .06.
25 See Rule 903, Commentary .13.
26 See Rule 903, Commentary .07(a).
27 See Rule 903, Commentary .12.
28 If options on a Bitcoin Fund are eligible to
participate in the Penny Interval Program, the
minimum increment of $0.01 below $3.00 and
$0.50 above $3.00 would apply. See Rule
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Any and all new series of Bitcoin Fund
options that the Exchange lists will be
consistent and comply with the
expirations, strike prices, and minimum
increments set forth in Rules 903 and
960NY, as applicable. Further, the
Exchange notes that Rule 462, which
governs margin requirements applicable
to the trading of all options on the
Exchange, including options on ETFs
and ETPs, will also apply to the trading
of Bitcoin Fund options.
Rule 903G(a)(1) permits the Exchange
to authorize for trading a FLEX option
class on any equity security if it may
authorize for trading a non-FLEX option
class on that equity security pursuant to
Rule 915.29 Consistent with the
Exchange’s treatment of bitcoin-backed
ETPs available for options trading on
the Exchange, the Bitcoin Fund options
would not be eligible to trade as FLEX
options.30
Position and Exercise Limits
Position and exercise limits for
options, including options on Bitcoin
Funds, are determined pursuant to
Rules 904 and 905. Position and
exercise limits for options vary
according to the number of outstanding
shares and the trading volumes of the
underlying security over the past six
months, where the largest in
capitalization and the most frequently
traded funds have an option position
and exercise limit of 250,000 contracts
(with adjustments for splits, recapitalizations, etc.) on the same side of
the market; and smaller capitalization
funds have position and exercise limits
of 200,000, 75,000, 50,000 or 25,000
contracts (with adjustments for splits,
re-capitalizations, etc.) on the same side
of the market.31
960NY(a)(3). See also Rule 960.1NY (which
describes the requirements for the Penny Interval
Program).
29 See Rule 903G(a)(1). See generally Section 15
(Flexible Exchange (‘‘FLEX’’) Options).
30 See Rule 903G(a)(1) (which provides, in
relevant part, that the Exchange may approve and
open for trading any FLEX Equity Options series on
any equity security that is eligible for Non-FLEX
Options trading under Rule 915 ‘‘except those set
forth in Commentary .10(a) to Rule 915,’’ i.e., the
Bitcoin Funds). The Exchange will continue
ongoing discussions with the Commission regarding
appropriate position limits for the Bitcoin Funds
and plans to submit a separate rule filing that
would permit the Exchange to authorize for trading
FLEX options on the Funds (which filing may
propose changes to existing FLEX option position
limits for such options if appropriate).
31 See Commentary .07(a)–(d) to Rule 904. For an
option to be eligible for the 50,000-contract limit,
the security underlying the option must have most
recent six-month trading volume of at least
20,000,000 shares, or most recent six-month trading
volume of at least 15,000,000 shares and at least
40,000,000 shares currently outstanding. For an
option to be eligible for the 75,000-contract limit,
the underlying security must have most recent six-
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Position limits are designed to limit
the number of options contracts traded
on the Exchange in an underlying
security that an investor, acting alone or
in concert with others directly or
indirectly, may control. The purpose of
position limits, which are set forth in
Rule 904, is to address potential
manipulative schemes and adverse
market impacts surrounding the use of
options, such as disrupting the market
in the security underlying the options.
Accordingly, position limits must
balance concerns regarding mitigating
potential manipulation and the cost of
inhibiting potential hedging activity that
investors may use for legitimate
economic purposes. To achieve this
balance, the Exchange proposes to set
the position and exercise limits for the
options on the Bitcoin Funds at 25,000
contracts, which limits are already in
place for the Bitcoin Funds as traded on
other options exchanges and the bitcoinbacked ETPs available for options
trading on the Exchange.32 Capping the
position limit at 25,000 contracts, the
lowest limit available in options, would
address concerns related to
manipulation and protection of
investors as this number is conservative
for the Bitcoin Funds and therefore
appropriate given their liquidity. While
the Exchange believes that the proposed
25,000-contract position limit is
conservative for options on the Bitcoin
Funds.33
month trading volume of at least 40,000,000 shares,
or most recent six-month trading volume of at least
30,000,000 shares and at least 120,000,000 shares
currently outstanding. For an option to be eligible
for the 200,000-contract limit, the underlying
security must have most recent six-month trading
volume of at least 80,000,000 shares, or most recent
six-month trading volume of at least 60,000,000
shares and at least 240,000,000 shares currently
outstanding. For an option to be eligible for the
250,000-contract limit, the security underlying the
option must have most recent six-month trading
volume of at least 100,000,000 shares, or most
recent six-month trading volume of at least
75,000,000 shares and at least 300,000,000 shares
currently outstanding. The 25,000-contract limit
applies to options on underlying securities that do
not qualify for a higher contract limit. See
Commentary .07(e) to Rule 904. In addition,
Commentary .07(f) to Rule 904 establishes higher
position limits for options on certain ETFs.
32 See proposed 6.8–O, Commentary .07(f) See
supra notes 4 and 5 (regarding the IBIT Approval
Order and the FBTC and ARKB Approval Order).
See also NYSE American Rule 904, Commentary
.07(f) (setting 25,000 position limits for the
Grayscale Bitcoin Trust (BTC) (symbol: GBTC), the
Grayscale Bitcoin Mini Trust (BTC) (symbol: BTC),
and the Bitwise Bitcoin ETF (symbol: BITB)).
33 The Exchange may file a subsequent rule
change to amend the position and exercise limit for
options on any or all the Bitcoin Funds based on
additional data regarding trading activity, to
continue to balance any concerns regarding
manipulation. A higher position limit would allow
institutional investors to utilize options on the
Bitcoin Funds for prudent risk management
purposes.
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Based on the foregoing, the Exchange
believes the proposal to list options on
the Bitcoin Funds with positions and
exercise limits of 25,000 on the same
side, the lowest position limit available
in the options industry, is conservative
and appropriate given the market
capitalization, average daily volume,
and high number of outstanding shares
for each of the Bitcoin Funds. The
proposed position and exercise limits
reasonably and appropriately balance
the liquidity provisioning in the market
against the prevention of manipulation.
The Exchange believes these proposed
limits are effectively designed to
prevent an individual customer or entity
from establishing options positions that
could be used to manipulate the market
of the underlying Bitcoin Funds as well
as the Bitcoin market.34
As described herein, options on the
Bitcoin Funds will trade in the same
manner as any other ETF or ETP options
on the Exchange, except that the Bitcoin
Funds will not be eligible for FLEX
options trading. The Exchange Rules
that currently apply to the listing and
trading of options on the Exchange,
including, for example, Rules that
govern listing criteria, expiration and
exercise prices, minimum increments,
margin requirements, customer
accounts, and trading halt procedures
will apply to the listing and trading of
Bitcoin Funds on the Exchange in the
same manner as they apply to all other
ETFs and ETPs that are listed and
traded on the Exchange, including the
precious metal-backed commodity ETPs
already deemed appropriate for options
trading on the Exchange pursuant to
Commentary .10 to Rule 915. Further, as
described above, Exchange Rules
regarding position and exercise limits
will likewise apply to options on the
Bitcoin Funds except that, as proposed,
the position and exercise limits will be
set at 25,000 on the same side.
*
*
*
*
*
The Exchange notes that options on
Bitcoin Funds would not be available
for trading until The Options Clearing
Corporation (‘‘OCC’’) represents to the
Exchange that it is fully able to clear
and settle such options. The Exchange
has also analyzed its capacity and
represents that it and The Options Price
Reporting Authority (‘‘OPRA’’) have the
necessary systems capacity to handle
the additional traffic associated with the
listing of options on Bitcoin Funds. The
Exchange believes any additional traffic
that would be generated from the
trading of options on Bitcoin Funds
34 See Securities Exchange Act Release No. 39489
(December 24, 1997), 63 FR 276 (January 5, 1998)
(SR–CBOE–1997–11).
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would be manageable. The Exchange
represents that Exchange members will
not have a capacity issue as a result of
this proposed rule change.
The Exchange represents that the
same surveillance procedures applicable
to all other options currently listed and
traded on the Exchange will apply to
options on Bitcoin Funds, and that it
has the necessary systems capacity to
support the new option series. The
Exchange’s existing surveillance and
reporting safeguards are designed to
deter and detect possible manipulative
behavior which might arise from listing
and trading options on ETFs and ETPs,
such as (existing) precious metal- and
bitcoin-backed ETP options, as well as
the proposed options on Bitcoin Funds.
The Exchange believes that its
surveillance procedures are adequate to
properly monitor the trading of options
on Bitcoin Funds in all trading sessions
and to deter and detect violations of
Exchange rules.
Specifically, the Exchange’s market
surveillance staff also conducts
surveillances with respect to the Bitcoin
Funds and, as appropriate, would
review activity in the underlying Funds
when conducting surveillances for
market abuse or manipulation in the
options on each Trust. Additionally, the
Exchange is a member of the
Intermarket Surveillance Group (‘‘ISG’’)
under the ISG Agreement. ISG members
work together to coordinate surveillance
and investigative information sharing in
the stock, options, and futures markets.
The Exchange will be able to obtain
information regarding trading in the
shares of the underlying Trusts from
Nasdaq, LLC, Cboe Exchange, Inc., and
other markets on which the Trusts trade
through the ISG. In addition, the
Exchange has a Regulatory Services
Agreement (‘‘RSA’’) with the Financial
Industry Regulatory Authority
(‘‘FINRA’’). Pursuant to a multi-party
17d–2 joint plan, all options exchanges
allocate regulatory responsibilities to
FINRA to conduct certain optionsrelated market surveillances.35 Further,
35 Section 19(g)(1) of the Act, among other things,
requires every SRO registered as a national
securities exchange or national securities
association to comply with the Act, the rules and
regulations thereunder, and the SRO’s own rules,
and, absent reasonable justification or excuse,
enforce compliance by its members and persons
associated with its members. See 15 U.S.C.
78q(d)(1) and 17 CFR 240.17d–2. Section 17(d)(1)
of the Act allows the Commission to relieve an SRO
of certain responsibilities with respect to members
of the SRO who are also members of another SRO.
Specifically, Section 17(d)(1) allows the
Commission to relieve an SRO of its responsibilities
to: (i) receive regulatory reports from such
members; (ii) examine such members for
compliance with the Act and the rules and
regulations thereunder, and the rules of the SRO;
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95261
the Exchange will implement any new
surveillance procedures it deems
necessary to effectively monitor the
trading of options on the Bitcoin Funds.
The underlying shares of spot bitcoin
ETPs, including the Bitcoin Funds, are
also subject to safeguards related to
addressing market abuse and
manipulation. As the Commission
stated in its order approving proposals
of several exchanges to list and trade
shares of spot bitcoin-based exchangetraded products (‘‘Bitcoin ETP
Order’’ 36):
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.37
Given the consistently high
correlation between the CME bitcoin
futures market and the spot bitcoin
market, as confirmed by the
Commission through robust correlation
analysis, and given that the ‘‘CME’s
surveillance can assist in detecting [the
impact of fraud or manipulation] on
CME bitcoin future prices,’’ the
Commission was able to conclude that
such surveillance sharing agreements
could reasonably be ‘‘expected to assist
in surveilling for fraudulent and
manipulative acts and practices in the
specific context of the [Bitcoin
ETPs].’’ 38
In light of surveillance measures
related to both options and futures as
well as the underlying Bitcoin Funds,39
or (iii) carry out other specified regulatory
responsibilities with respect to such members.
36 See Securities Exchange Act Release No. 99306
(January 10, 2024), 89 FR 3008 (January 17, 2024)
(File Nos. SR–NYSEArca–2021–90; SR–NYSEArca–
2023–44; SR–NYSEArca–2023–58; SR–NASDAQ–
2023–016; SR–NASDAQ–2023–019; SR–CboeBZX–
2023–028; SR–CboeBZX–2023–038; SR–CboeBZX–
2023–040; SR–CboeBZX–2023–042; 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
Order’’).
37 See Bitcoin ETP Order, 89 FR at 3009.
38 See Bitcoin ETP Order, 89 FR at 3010–11.
39 See Amendment No. 1 to Proposed Rule
Change to List and Trade Shares of the iShares
Bitcoin Trust under Nasdaq Rule 5711(d),
Commodity-Based Trust Shares (SR–NASDAQ–
2023–016), filed Jan. 5, 2024, available at https://
www.sec.gov/comments/sr-nasdaq-2023-016/
srnasdaq2023016-357659-883042.pdf; Amendment
No. 5 to Proposed Rule Change to List and Trade
Shares of the ARK 21Shares Bitcoin ETF under BZX
Rule 14.11(e)(4), Commodity-Based Trust Shares
(SR–CboeBZX–2023–028), filed Jan. 5, 2024,
available at https://www.sec.gov/comments/srcboebzx-2023-028/srcboebzx2023028-358679884202.pdf; and Amendment No. 3 to Proposed
Rule Change to List and Trade Shares of the Fidelity
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the Exchange believes that existing
surveillance procedures are designed to
deter and detect possible manipulative
behavior which might potentially arise
from listing and trading the proposed
options on the Bitcoin Funds.
Finally, quotation and last sale
information for ETFs is available via the
Consolidated Tape Association (‘‘CTA’’)
high speed line. Quotation and last sale
information for such securities is also
available from the exchange on which
such securities are listed. Quotation and
last sale information for options on
Bitcoin Funds will be available via
OPRA and major market data vendors.
The Exchange believes that offering
options on the Bitcoin Funds will
benefit investors by providing them
with an additional, relatively lower cost
investing tool to gain exposure to the
price of Bitcoin and hedging vehicle to
meet their investment needs in
connection with Bitcoin-related
products and positions. The Exchange
expects investors will transact in
options on Bitcoin Funds in the
unregulated over-the-counter (‘‘OTC’’)
options market,40 but may prefer to
trade such options in a listed
environment to receive the benefits of
trading listed options, including (1)
enhanced efficiency in initiating and
closing out position; (2) increased
market transparency; and (3) heightened
contra-party creditworthiness due to the
role of OCC as issuer and guarantor of
all listed options. The Exchange
believes that listing options on the
Bitcoin Funds may cause investors to
bring this liquidity to the Exchange,
would increase market transparency and
enhance the process of price discovery
conducted on the Exchange through
increased order flow. The Exchange
notes that the ETPs that hold precious
metal commodities on which the
Exchange may already list and trade
options are trusts structured in
substantially the same manner as
Bitcoin Funds and essentially offer the
same objectives and benefits to
investors, just with respect to different
assets. The Exchange notes that it has
not identified any issues with the
continued listing and trading of options
on any ETFs or ETPs that hold
commodities (i.e., precious metals) that
Wise Origin Bitcoin Fund under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares (SR–
CboeBZX–2023–044), filed Jan. 5, 2024, available at
https://www.sec.gov/comments/sr-cboebzx-2023044/srcboebzx2023044-358759-884163.pdf.
40 The Exchange understands from customers that
investors have historically transacted in options on
ETFs in the OTC options market if such options
were not available for trading in a listed
environment.
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it currently lists and trades on the
Exchange.
2. Statutory Basis
The Exchange believes that its
proposed rule change is consistent with
Section 6(b) of the Act 41 in general and
furthers the objectives of Section 6(b)(5)
of the Act 42 in particular, in that it is
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
In particular, the Exchange believes
that the proposal to list and trade
options on the Bitcoin Funds will
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, protect investors because
offering options on the Bitcoin Funds
will provide investors with an
opportunity to realize the benefits of
utilizing options on a Bitcoin Fund,
including cost efficiencies and
increased hedging strategies.
The Exchange believes that offering
Bitcoin Fund options will benefit
investors by providing them with a
relatively lower-cost risk management
tool, which will allow them to manage
their positions and associated risk in
their portfolios more easily in
connection with exposure to the price of
Bitcoin and with Bitcoin-related
products and positions. Additionally,
the Exchange’s offering of Bitcoin Fund
options will provide investors with the
ability to transact in such options in a
listed market environment as opposed
to in the unregulated OTC market,
which would increase market
transparency and enhance the process of
price discovery conducted on the
Exchange through increased order flow
to the benefit of all investors. The
Exchange also notes that it already lists
options on other commodity-based
ETPs,43 including on bitcoin-backed
ETPs already trading on the Exchange,
which, as described above, are trusts
structured in substantially the same
manner as the Bitcoin Funds and
essentially offer the same objectives and
benefits to investors.44
The Exchange also believes the
proposed rule change will remove
impediments to and perfect the
41 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
43 See Rule 915, Commentary .10. The Exchange
has not identified any issues with the continued
listing and trading of precious metal commoditybacked ETP options that it currently lists for
trading.
44 See Rule 915, Commentary .10(a).
42 15
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mechanism of a free and open market
and a national market system, because
it is consistent with current Exchange
Rules previously filed with the
Commission. Options on the Bitcoin
Funds satisfy the initial listing
standards and continued listing
standards currently in the Exchange
Rules applicable to options on all ETFs
and ETPs, including ETPs that hold
other commodities already deemed
appropriate for options trading on the
Exchange. Additionally, as
demonstrated above, each Bitcoin Fund
is characterized by a substantial number
of shares that are widely held and
actively traded. Bitcoin Fund options
will trade in the same manner as any
other ETF or ETP options—the same
Exchange Rules that currently govern
the listing and trading of options,
including permissible expirations, strike
prices, minimum increments, and
margin requirements, will govern the
listing and trading of options on Bitcoin
Funds in the same manner.
The Exchange believes the proposed
exclusion of the Bitcoin Funds from
being eligible for trading as FLEX
options is consistent with the Act,
because it will permit the Exchange to
continue to participate in ongoing
discussions with the Commission
regarding appropriate position limits for
options on the Bitcoin Funds.45
The proposed position and exercise
limit for options on the Bitcoin Funds
is 25,000 contracts. These position and
exercise limits are the lowest position
and exercise limits available in the
options industry, are extremely
conservative and more than appropriate
given the Bitcoin Funds’ market
capitalization, average daily volume,
number of beneficial holders, and high
number of outstanding shares. The
proposed position and exercise limits
are consistent with the Act as they
addresses concerns related to
manipulation and protection of
investors because the position and
exercise limits are extremely
conservative and more than appropriate
given the Bitcoin Funds are actively
traded.
The Exchange represents that it has
the necessary systems capacity to
support the new Bitcoin Fund options.
The Exchange believes that its existing
surveillance and reporting safeguards
are designed to deter and detect possible
manipulative behavior which might
arise from listing and trading options,
including Bitcoin Fund options. The
45 The Exchange will submit a separate rule filing
that would permit the Exchange to authorize for
trading FLEX options on the Bitcoin Funds (which
filing may propose changes to existing FLEX option
position limits for such options if appropriate).
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Exchange’s existing surveillance and
reporting safeguards are designed to
deter and detect possible manipulative
behavior which might arise from listing
and trading options on ETFs and ETPs,
such as (existing) precious metalcommodity backed ETP options as well
as the proposed options on Bitcoin
Funds. The Exchange believes that its
surveillance procedures are adequate to
properly monitor the trading of options
on Bitcoin Funds in all trading sessions
and to deter and detect violations of
Exchange rules.
Specifically, the Exchange’s market
surveillance staff also conducts
surveillances with respect to the Bitcoin
Funds and, as appropriate, would
review activity in the underlying Funds
when conducting surveillances for
market abuse or manipulation in the
options on each Trust. Additionally, the
Exchange is a member of the
Intermarket Surveillance Group (‘‘ISG’’)
under the ISG Agreement. ISG members
work together to coordinate surveillance
and investigative information sharing in
the stock, options, and futures markets.
The Exchange will be able to obtain
information regarding trading in the
shares of the underlying Trusts from
Nasdaq, LLC, Cboe Exchange, Inc., and
other markets on which the Trusts trade
through the ISG. In addition, the
Exchange is a party to an RSA with
FINRA and pursuant to a multi-party
17d–2 joint plan, all options exchanges
allocate regulatory responsibilities to
FINRA to conduct certain optionsrelated market surveillances. Further,
the Exchange will implement any new
surveillance procedures it deems
necessary to effectively monitor the
trading of options on the Bitcoin Funds.
The underlying shares of spot bitcoin
ETPs, including the Bitcoin Funds, are
also subject to safeguards related to
addressing market abuse and
manipulation. As the Commission
stated in its order approving proposals
of several exchanges to list and trade
shares of spot bitcoin-based ETPs,
‘‘[e]ach Exchange has a comprehensive
surveillance-sharing agreement with the
CME via their common membership in
the Intermarket Surveillance Group.
This facilitates the sharing of
information that is available to the CME
through its surveillance of its markets,
including its surveillance of the CME
bitcoin futures market.’’ 46 Given the
consistently high correlation between
the CME bitcoin futures market and the
spot bitcoin market, as confirmed by the
Commission through robust correlation
analysis, and given that the ‘‘CME’s
surveillance can assist in detecting [the
46 See
Bitcoin ETP Order, 89 FR at 3009.
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impact of fraud or manipulation] on
CME bitcoin future prices,’’ the
Commission was able to conclude that
such surveillance sharing agreements
could reasonably be ‘‘expected to assist
in surveilling for fraudulent and
manipulative acts and practices in the
specific context of the [Bitcoin
ETPs].’’ 47 In light of surveillance
measures related to both options and
futures as well as the underlying Bitcoin
Funds,48 the Exchange believes that
existing surveillance procedures are
designed to deter and detect possible
manipulative behavior which might
potentially arise from listing and trading
the proposed options on the Bitcoin
Funds. Further, the Exchange will
implement any new surveillance
procedures it deems necessary to
effectively monitor the trading of
options on Bitcoin ETPs.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intramarket Competition: The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
as options on the Bitcoin Funds would
need to satisfy the initial listing
standards set forth in the Exchange
Rules in the same manner as any other
options on an ETF before the Exchange
could list these options. Additionally,
Bitcoin Fund options will be equally
available to all market participants who
wish to trade such options. The
Exchange Rules currently applicable to
the listing and trading of options on
ETFs on the Exchange will apply in the
same manner to the listing and trading
of all options on the Bitcoin Funds.
Also, and as stated above, the Exchange
47 See
Bitcoin ETP Order, 89 FR at 3010–11.
Amendment No. 1 to Proposed Rule
Change to List and Trade Shares of the iShares
Bitcoin Trust under Nasdaq Rule 5711(d),
Commodity-Based Trust Shares (SR–NASDAQ–
2023–016), filed Jan. 5, 2024, available at https://
www.sec.gov/comments/sr-nasdaq-2023-016/
srnasdaq2023016-357659-883042.pdf; Amendment
No. 5 to Proposed Rule Change to List and Trade
Shares of the ARK 21Shares Bitcoin ETF under BZX
Rule 14.11(e)(4), Commodity-Based Trust Shares
(SR–CboeBZX–2023–028), filed Jan. 5, 2024,
available at https://www.sec.gov/comments/srcboebzx-2023-028/srcboebzx2023028-358679884202.pdf; and Amendment No. 3 to Proposed
Rule Change to List and Trade Shares of the Fidelity
Wise Origin Bitcoin Fund under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares (SR–
CboeBZX–2023–044), filed Jan. 5, 2024, available at
https://www.sec.gov/comments/sr-cboebzx-2023044/srcboebzx2023044-358759-884163.pdf.
48 See
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95263
already lists options on other
commodity-based ETPs, including on
bitcoin-backed ETPs.49
Intermarket Competition: The
Exchange does not believe that the
proposal to list and trade options on
Bitcoin Funds will impose any burden
on intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. To the extent
that the advent of Bitcoin Fund options
trading on the Exchange may make the
Exchange a more attractive marketplace
to market participants at other
exchanges, such market participants are
free to elect to become market
participants on the Exchange. As noted
herein, this is a competitive filing as the
Commission recently approved the
listing and trading of options on an ETP
that, like the Bitcoin Funds, holds
bitcoin.50 Additionally, other options
exchanges are free to amend their listing
rules, as applicable, to permit them to
list and trade options on Bitcoin Funds.
The Exchange notes that listing and
trading Bitcoin Fund options on the
Exchange will subject such options to
transparent exchange-based rules as
well as price discovery and liquidity, as
opposed to alternatively trading such
options in the OTC market.
The Exchange believes that the
proposed rule change may relieve any
burden on, or otherwise promote,
competition as it is designed to increase
competition for order flow on the
Exchange in a manner that is beneficial
to investors by providing them with a
lower-cost option to hedge their
investment portfolios. The Exchange
notes that it operates in a highly
competitive market in which market
participants can readily direct order
flow to competing venues that offer
similar products. Ultimately, the
Exchange believes that offering Bitcoin
Fund options for trading on the
Exchange will promote competition by
providing investors with an additional,
relatively low-cost means to hedge their
portfolios and meet their investment
needs in connection with Bitcoin prices
and Bitcoin-related products and
positions on a listed options exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
49 See Rule 915, Commentary .10 and
Commentary .10(a).
50 See id. See also supra notes 4 and 5 (regarding
the IBIT Approval Order and the FBTC and ARKB
Approval Order).
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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
VerDate Sep<11>2014
18:25 Nov 29, 2024
Jkt 265001
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
Sfmt 4703
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
E:\FR\FM\02DEN1.SGM
02DEN1
]]>Agencies
[Federal Register Volume 89, Number 231 (Monday, December 2, 2024)]
[Notices]
[Pages 95257-95264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28107]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101737; File No. SR-NYSEAMER-2024-73]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To List and Trade
Option Contracts on the iShares Bitcoin Trust, the Fidelity Wise Origin
Bitcoin Fund, and the ARK21Shares Bitcoin ETF
November 25, 2024.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934
[[Page 95258]]
(``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on November 20, 2024, NYSE American LLC (``NYSE American'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade option contracts on the
iShares Bitcoin Trust, the Fidelity Wise Origin Bitcoin Fund, and the
ARK21Shares Bitcoin ETF. The proposed rule change is available on the
Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 904 (Position Limits), Rule 915
(Criteria for Underlying Securities), and Rule 916 (Withdrawal of
Approval of Underlying Securities) to allow the Exchange to list and
trade options on the following exchange-traded products: the iShares
Bitcoin Trust (``iShares Bitcoin'' or ``IBIT''), the Fidelity Wise
Origin Bitcoin Fund (``Fidelity Wise'' or ``FBTC''), and the
ARK21Shares Bitcoin ETF (``ARK21'' or ``ARKB'') (collectively, the
``Bitcoin Funds'' or ``Funds'').
The Exchange notes that this is a competitive filing as the
Commission recently approved rule proposals by Nasdaq ISE, LLC
(``ISE'') and Cboe Exchange, Inc. (``Cboe'') to allow the listing and
trading of options on IBIT \4\ and on FBTC and ARKB, respectively.\5\
As discussed below, the Exchange believes options on the Bitcoin Funds
would permit hedging, and allow for more liquidity, better price
efficiency, and less volatility with respect to the underlying Funds.
Further, permitting the listing of such options would enhance the
transparency and efficiency of markets in these and correlated
products.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 101128 (September
20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (Notice
of Filing of Amendment Nos. 4 and 5 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1,
4, and 5, to Permit the Listing and Trading of Options on the
iShares Bitcoin Trust) (``IBIT Approval Order'').
\5\ See Securities Exchange Act Release No. 101387 (October 18,
2024), 89 FR 84948 (October 24, 2024) (SE-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) (``FBTC and ARKB Approval Order'').
---------------------------------------------------------------------------
Rule 915 provides that, subject to certain other criteria set forth
in the Rule, securities deemed appropriate for options trading include
Exchange-Traded Fund Shares (or ETFs) as defined in Commentary .06,
that represent certain types of interests \6\ and exchange-traded
products (``ETPs'') structured as trusts that hold precious metals
(which are deemed commodities) \7\ and that hold bitcoin (which is also
deemed a commodity).\8\ The Exchange proposes to expand the list of
bitcoin-backed ETPs on which it can list options to include the Bitcoin
Funds.\9\
---------------------------------------------------------------------------
\6\ See Rule 915, Commentary .06, which permits options trading
on ETFs that are traded on a national securities exchange and are
defined as an ``NMS stock'' in Rule 600(b)(55) of Regulation NMS,
that represent interests in registered investment companies (or
series thereof) organized as open-end management investment
companies, unit investment trusts or similar entities that hold
portfolios of securities and/or financial instruments including, but
not limited to, stock index futures contracts, options on futures,
options on securities and indexes, equity caps, collars and floors,
swap agreements, forward contracts, repurchase agreements and
reverse purchase agreements (the ``Financial Instruments''), and
money market instruments, including, but not limited to, U.S.
government securities and repurchase agreements (the ``Money Market
Instruments'') comprising or otherwise based on or representing
investments in indexes or portfolios of securities and/or Financial
Instruments and Money Market Instruments (or that hold securities in
one or more other registered investment companies that themselves
hold such portfolios of securities and/or Financial Instruments and
Money Market Instruments); interests in a trust or similar entity
that holds a specified non-U.S. currency deposited with the trust or
similar entity when aggregated in some specified minimum number may
be surrendered to the trust by the beneficial owner to receive the
specified non-U.S. currency and pays the beneficial owner interest
and other distributions on deposited non-U.S. currency, if any,
declared and paid by the trust (``Currency Trust Shares'');
commodity pool interests principally engaged, directly or
indirectly, in holding and/or managing portfolios or baskets of
securities, commodity futures contracts, options on commodity
futures contracts, swaps, forward contracts and/or options on
physical commodities and/or non-U.S. currency (``Commodity Pool
Units''); or represents an interest in a registered investment
company (``Investment Company'') organized as an open-end management
investment company or similar entity, that invests in a portfolio of
securities selected by the Investment Company's investment adviser
consistent with the Investment Company's investment objectives and
policies, which is issued in a specified aggregate minimum number in
return for a deposit of a specified portfolio of securities and/or a
cash amount with a value equal to the next determined net asset
value (``NAV''), and when aggregated in the same specified minimum
number, may be redeemed at a holder's request, which holder will be
paid a specified portfolio of securities and/or cash with a value
equal to the next determined NAV (``Managed Fund Share''); provided
that all of the conditions listed in Rules 915 and 916 are met.
\7\ See Rule 915, Commentary .10 (permitting the listing and
trading of options on shares of the following trusts: SPDR Gold
Trust, the iShares COMEX Gold Trust the iShares Silver Trust, the
ETFS Gold Trust, and the ETFS Silver Trust, pursuant to Rule 915 and
916).
\8\ See Rule 915, Commentary .10a (permitting the listing and
trading of options on shares of the following trusts: the Grayscale
Bitcoin Trust (BTC), the Grayscale Bitcoin Mini Trust (BTC), and the
Bitwise Bitcoin ETF, pursuant to Rule 915 and 916).
\9\ See proposed Rule 915, Commentary .10(a) (expanded to permit
the listing and trading of options on shares of IBIT, FBTC, and
ARKB, pursuant to Rule 915 and 916).
---------------------------------------------------------------------------
The Bitcoin Funds are structured as trusts that hold bitcoin. Like
ETFs and ETPs currently deemed appropriate for options trading, the
investment objective of each Bitcoin Fund trust is for its shares to
reflect the performance of Bitcoin (less the expenses of the trust's
operations), offering investors an opportunity to gain exposure to
Bitcoin without the complexities of Bitcoin delivery. Each Bitcoin
Fund's shares represent units of fractional undivided beneficial
interest in the trust, the assets of which consist principally of
Bitcoin and are designed to track Bitcoin or the performance of the
price of Bitcoin and offer access to the Bitcoin market.\10\ The
Bitcoin Funds provide investors with cost-efficient alternatives that
allow a level of participation in the Bitcoin market through the
securities market.
---------------------------------------------------------------------------
\10\ The trust may include minimal cash.
---------------------------------------------------------------------------
The Exchange believes each Bitcoin Fund satisfies the Exchange's
initial listing standards set forth in Commentary .01 to Rule 915.\11\
The Exchange notes that the Bitcoin Funds also satisfy the listing
standard applied to ETFs traded on the Exchange that
[[Page 95259]]
they be available for creation and redemption each business day as set
forth in Commentary .06(a)(ii).\12\
---------------------------------------------------------------------------
\11\ Commentary .01 to Rule 915 provides for guidelines to be by
the Exchange when evaluating potential underlying securities for
Exchange option transactions.
\12\ Commentary .06(a)(ii) requires that ETFs must be available
for creation or redemption each business day from or through the
issuer in cash or in kind at a price related to net asset value, and
the issuer must be obligated to issue ETFs in a specified aggregate
number even if some or all of the investment assets required to be
deposited have not been received by the issuer, subject to the
condition that the person obligated to deposit the investments has
undertaken to deliver the investment assets as soon as possible and
such undertaking is secured by the delivery and maintenance of
collateral consisting of cash or cash equivalents satisfactory to
the issuer, as provided in the respective prospectus.
---------------------------------------------------------------------------
First, each of the Bitcoin Funds satisfy the criteria and
guidelines set forth in Rule 915(a). Pursuant to Rule 915(a), a
security on which options may be listed and traded on the Exchange must
be duly registered with the Commission and be an NMS stock (as defined
in Rule 600 of Regulation NMS under the Act) and be characterized by a
substantial number of outstanding shares that are widely held and
actively traded.\13\ Each of the Bitcoin Funds is an NMS Stock as
defined in Rule 600 of Regulation NMS under the Act.\14\ The Exchange
believes each Bitcoin Fund is characterized by a substantial number of
outstanding shares that are widely held and actively traded.
---------------------------------------------------------------------------
\13\ The criteria and guidelines for a security to be considered
widely held and actively traded are set forth in Commentary .01 to
Rule 915, subject to exceptions.
\14\ An ``NMS stock'' means any NMS security other than an
option, and an ``NMS security'' means any security or class of
securities for which transaction reports are collected, processed,
and made available pursuant to an effective transaction reporting
plan (or an effective national market system plan for reporting
transaction in listed options). See 17 CFR 242.600(b)(64)
(definition of ``NMS security'') and (65) (definition of ``NMS
stock'').
---------------------------------------------------------------------------
The Bitcoin Funds had the following number of shares outstanding:
------------------------------------------------------------------------
Shares
Bitcoin Fund outstanding
------------------------------------------------------------------------
IBIT (as of 8/12/24).................................... 611,040,000
FBTC (as of 8/7/24)..................................... 201,100,100
ARKB (as of 8/7/24)..................................... 45,495,000
------------------------------------------------------------------------
As shown above, each of the Bitcoin Funds had significantly more
than 7,000,000 shares outstanding, which is the minimum number of
shares of a corporate stock that the Exchange generally requires to
list options on that stock pursuant to Commentary .01(1) to Rule 915.
The Exchange believes this demonstrates that each Bitcoin Fund is
characterized by a substantial number of outstanding shares.
Further, the below table contains information regarding the number
of beneficial holders of the Bitcoin Funds.
------------------------------------------------------------------------
Bitcoin Fund Number of beneficial holders
------------------------------------------------------------------------
IBIT...................................... 193,956 (as of 5/22/23).
FBTC...................................... 279,656 (as of 6/27/24).
ARKB...................................... 69,425 (as of 6/26/24).
------------------------------------------------------------------------
Each Bitcoin Fund has significantly more than 2,000 beneficial
holders, which is the minimum number of holders the Exchange generally
requires for corporate stock in order to list options on that stock
pursuant to pursuant to Commentary .01(2) to Rule 915. Therefore, the
Exchange believes the shares of each Bitcoin Fund are widely held.
In addition, the Exchange believes the shares of each Bitcoin Fund
are actively traded. The total trading volume (by shares and notional)
for these funds since they began trading and the average daily volume
(``ADV'') over the 30-day period of July 9 through August 7, 2024, was
as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Bitcoin Fund Trading volume (shares) Trading volume (notional $) ADV (shares)
--------------------------------------------------------------------------------------------------------------------------------------------------------
IBIT (as of 5/13/24).......................................... 34,825,921 1,246,060,738 26,000,000
FBTC (as of 8/7/24)........................................... 1,112,861,581 250,354,755 6,014,335
ARKB (as of 8/7/24)........................................... 279,360,739 90,484,307 1,893,335
--------------------------------------------------------------------------------------------------------------------------------------------------------
As demonstrated above, even though these Bitcoin Funds have been
trading for less than one year, the trading volume for each is
substantially higher than 2,400,000 shares, which is the minimum 12-
month volume the Exchange generally requires for a security in order to
list options on that security as set forth in Commentary .01 to Rule
915. The Exchange believes this data demonstrates each Bitcoin Fund is
characterized by a substantial number of outstanding shares that are
actively traded.
In addition to satisfying the Exchange's initial listing standards,
options on Bitcoin Funds will be subject to the Exchange's continued
listing standards as set forth in Commentary .07 to Rule 916.\15\
Pursuant to Commentary .07 to Rule 916, the Exchange will not open for
trading any additional series of option contracts covering a fund
traded on the Exchange if such fund ceases to be an ``NMS stock'' as
provided for Commentary .01(5) to Rule 915 or the fund is halted from
trading on its primary market.\16\ Additionally, options on funds
traded on the Exchange may be subject to the suspension of opening
transactions as follows: (1) the fund no longer meets the terms of
Commentary .01 to Rule 916; (2) following the initial twelve-month
period beginning upon the commencement of trading of the fund, there
are fewer than 50 record and/or beneficial holders of the fund for 30
or more consecutive trading days; (3) the value of the underlying
commodity is no longer calculated or available; or (4) such other event
occurs or condition exists that in the opinion of the Exchange makes
further dealing on the Exchange inadvisable.
---------------------------------------------------------------------------
\15\ The Exchange proposes to amend Commentary .11 to Rule 916
to include the Bitcoin Funds in the list of ETPs deemed ``Exchange-
Traded Fund Shares''--of ETFs--for purposes of the continued listing
standards set forth in Commentary .07 to Rule 916. See proposed
Commentary .11 to Rule 916. For avoidance of doubt, the Exchange
refers ``funds'' rather than ``ETFs'' to make clear that the Bitcoin
Funds are subject to these continued listing standards.
\16\ See Commentary .07 to Rule 916.
---------------------------------------------------------------------------
Options on each Bitcoin Fund will be physically settled contracts
with American-style exercise.\17\ Consistent with Rule 903, which
governs the opening of options series on a specific underlying security
(including ETFs and
[[Page 95260]]
ETPs), the Exchange will open at least one expiration month for options
on each Bitcoin Fund \18\ at the commencement of trading on the
Exchange and may also list series of options on Bitcoin Funds for
trading on a weekly,\19\ monthly,\20\ or quarterly \21\ basis. The
Exchange may also list long-term equity option series (``LEAPS'') that
expire from twelve to thirty-nine months from the time they are
listed.\22\
---------------------------------------------------------------------------
\17\ See Rule 902 (Rights and Obligations of Holders and
Writers), which provides that the rights and obligations of holders
and writers of option contracts of any class of options dealt in on
the Exchange shall be as set forth in the Rules of the Clearing
Corporation. See also OCC Rules, Chapter VIII, which governs
exercise and assignment, and Chapter IX, which governs the discharge
of delivery and payment obligations arising out of the exercise of
physically settled stock option contracts. OCC Rules can be located
at: https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occrules.pdf.
\18\ See Rule 903(c), Commentary .03. The monthly expirations
are subject to certain listing criteria for underlying securities
described within Rule 915. Monthly listings expire the third Friday
of the month. The term ``expiration date'' (unless separately
defined elsewhere in the OCC By-Laws), when used in respect of an
option contract (subject to certain exceptions), means the third
Friday of the expiration month of such option contract, or if such
Friday is a day on which the exchange on which such option is listed
is not open for business, the preceding day on which such exchange
is open for business. See OCC By-Laws Article I, Section 1. Pursuant
to Rule 903(d), additional series of options of the same class may
be opened for trading on the Exchange when the Exchange deems it
necessary to maintain an orderly market, to meet customer demand or
when the market price of the underlying stock moves more than five
strike prices from the initial exercise price or prices. New series
of options on an individual stock may be added until the beginning
of the month in which the options contract will expire. Due to
unusual market conditions, the Exchange, in its discretion, may add
a new series of options on an individual stock until the close of
trading on the business day prior to expiration.
\19\ See Rule 903(h).
\20\ See Rule 903, Commentary .11.
\21\ See Rule 903, Commentary .09.
\22\ See Rule 903, Commentary .03.
---------------------------------------------------------------------------
Pursuant to Rule 903, Commentary .05(a), which governs strike
prices of series of options on ETFs, the interval between strike prices
of series of options on Bitcoin Funds will be $1 or greater when the
strike price is $200 or less and $5 or greater where the strike price
is over $200.\23\ Additionally, the Exchange may list series of options
pursuant to the $1 Strike Price Interval Program,\24\ the $0.50 Strike
Program,\25\ the $2.50 Strike Price Program,\26\ and the $5 Strike
Program.\27\ Pursuant to Rule 960NY, where the price of a series of a
Bitcoin Fund option is less than $3.00, the minimum increment will be
$0.05, and where the price is $3.00 or higher, the minimum increment
will be $0.10.\28\ Any and all new series of Bitcoin Fund options that
the Exchange lists will be consistent and comply with the expirations,
strike prices, and minimum increments set forth in Rules 903 and 960NY,
as applicable. Further, the Exchange notes that Rule 462, which governs
margin requirements applicable to the trading of all options on the
Exchange, including options on ETFs and ETPs, will also apply to the
trading of Bitcoin Fund options.
---------------------------------------------------------------------------
\23\ The Exchange notes that for options listed pursuant to the
Short Term Option Series Program, the Monthly Options Series
Program, and the Quarterly Options Series Program, Rules 903(h) and
Commentaries .09 and .03 to Rule 903, specifically set forth
intervals between strike prices on Quarterly Options Series, Short
Term Option Series, and Monthly Options Series, respectively.
\24\ See Rule 903, Commentary .06.
\25\ See Rule 903, Commentary .13.
\26\ See Rule 903, Commentary .07(a).
\27\ See Rule 903, Commentary .12.
\28\ If options on a Bitcoin Fund are eligible to participate in
the Penny Interval Program, the minimum increment of $0.01 below
$3.00 and $0.50 above $3.00 would apply. See Rule 960NY(a)(3). See
also Rule 960.1NY (which describes the requirements for the Penny
Interval Program).
---------------------------------------------------------------------------
Rule 903G(a)(1) permits the Exchange to authorize for trading a
FLEX option class on any equity security if it may authorize for
trading a non-FLEX option class on that equity security pursuant to
Rule 915.\29\ Consistent with the Exchange's treatment of bitcoin-
backed ETPs available for options trading on the Exchange, the Bitcoin
Fund options would not be eligible to trade as FLEX options.\30\
---------------------------------------------------------------------------
\29\ See Rule 903G(a)(1). See generally Section 15 (Flexible
Exchange (``FLEX'') Options).
\30\ See Rule 903G(a)(1) (which provides, in relevant part, that
the Exchange may approve and open for trading any FLEX Equity
Options series on any equity security that is eligible for Non-FLEX
Options trading under Rule 915 ``except those set forth in
Commentary .10(a) to Rule 915,'' i.e., the Bitcoin Funds). The
Exchange will continue ongoing discussions with the Commission
regarding appropriate position limits for the Bitcoin Funds and
plans to submit a separate rule filing that would permit the
Exchange to authorize for trading FLEX options on the Funds (which
filing may propose changes to existing FLEX option position limits
for such options if appropriate).
---------------------------------------------------------------------------
Position and Exercise Limits
Position and exercise limits for options, including options on
Bitcoin Funds, are determined pursuant to Rules 904 and 905. Position
and exercise limits for options vary according to the number of
outstanding shares and the trading volumes of the underlying security
over the past six months, where the largest in capitalization and the
most frequently traded funds have an option position and exercise limit
of 250,000 contracts (with adjustments for splits, re-capitalizations,
etc.) on the same side of the market; and smaller capitalization funds
have position and exercise limits of 200,000, 75,000, 50,000 or 25,000
contracts (with adjustments for splits, re-capitalizations, etc.) on
the same side of the market.\31\
---------------------------------------------------------------------------
\31\ See Commentary .07(a)-(d) to Rule 904. For an option to be
eligible for the 50,000-contract limit, the security underlying the
option must have most recent six-month trading volume of at least
20,000,000 shares, or most recent six-month trading volume of at
least 15,000,000 shares and at least 40,000,000 shares currently
outstanding. For an option to be eligible for the 75,000-contract
limit, the underlying security must have most recent six-month
trading volume of at least 40,000,000 shares, or most recent six-
month trading volume of at least 30,000,000 shares and at least
120,000,000 shares currently outstanding. For an option to be
eligible for the 200,000-contract limit, the underlying security
must have most recent six-month trading volume of at least
80,000,000 shares, or most recent six-month trading volume of at
least 60,000,000 shares and at least 240,000,000 shares currently
outstanding. For an option to be eligible for the 250,000-contract
limit, the security underlying the option must have most recent six-
month trading volume of at least 100,000,000 shares, or most recent
six-month trading volume of at least 75,000,000 shares and at least
300,000,000 shares currently outstanding. The 25,000-contract limit
applies to options on underlying securities that do not qualify for
a higher contract limit. See Commentary .07(e) to Rule 904. In
addition, Commentary .07(f) to Rule 904 establishes higher position
limits for options on certain ETFs.
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Position limits are designed to limit the number of options
contracts traded on the Exchange in an underlying security that an
investor, acting alone or in concert with others directly or
indirectly, may control. The purpose of position limits, which are set
forth in Rule 904, is to address potential manipulative schemes and
adverse market impacts surrounding the use of options, such as
disrupting the market in the security underlying the options.
Accordingly, position limits must balance concerns regarding mitigating
potential manipulation and the cost of inhibiting potential hedging
activity that investors may use for legitimate economic purposes. To
achieve this balance, the Exchange proposes to set the position and
exercise limits for the options on the Bitcoin Funds at 25,000
contracts, which limits are already in place for the Bitcoin Funds as
traded on other options exchanges and the bitcoin-backed ETPs available
for options trading on the Exchange.\32\ Capping the position limit at
25,000 contracts, the lowest limit available in options, would address
concerns related to manipulation and protection of investors as this
number is conservative for the Bitcoin Funds and therefore appropriate
given their liquidity. While the Exchange believes that the proposed
25,000-contract position limit is conservative for options on the
Bitcoin Funds.\33\
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\32\ See proposed 6.8-O, Commentary .07(f) See supra notes 4 and
5 (regarding the IBIT Approval Order and the FBTC and ARKB Approval
Order). See also NYSE American Rule 904, Commentary .07(f) (setting
25,000 position limits for the Grayscale Bitcoin Trust (BTC)
(symbol: GBTC), the Grayscale Bitcoin Mini Trust (BTC) (symbol:
BTC), and the Bitwise Bitcoin ETF (symbol: BITB)).
\33\ The Exchange may file a subsequent rule change to amend the
position and exercise limit for options on any or all the Bitcoin
Funds based on additional data regarding trading activity, to
continue to balance any concerns regarding manipulation. A higher
position limit would allow institutional investors to utilize
options on the Bitcoin Funds for prudent risk management purposes.
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[[Page 95261]]
Based on the foregoing, the Exchange believes the proposal to list
options on the Bitcoin Funds with positions and exercise limits of
25,000 on the same side, the lowest position limit available in the
options industry, is conservative and appropriate given the market
capitalization, average daily volume, and high number of outstanding
shares for each of the Bitcoin Funds. The proposed position and
exercise limits reasonably and appropriately balance the liquidity
provisioning in the market against the prevention of manipulation. The
Exchange believes these proposed limits are effectively designed to
prevent an individual customer or entity from establishing options
positions that could be used to manipulate the market of the underlying
Bitcoin Funds as well as the Bitcoin market.\34\
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\34\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
---------------------------------------------------------------------------
As described herein, options on the Bitcoin Funds will trade in the
same manner as any other ETF or ETP options on the Exchange, except
that the Bitcoin Funds will not be eligible for FLEX options trading.
The Exchange Rules that currently apply to the listing and trading of
options on the Exchange, including, for example, Rules that govern
listing criteria, expiration and exercise prices, minimum increments,
margin requirements, customer accounts, and trading halt procedures
will apply to the listing and trading of Bitcoin Funds on the Exchange
in the same manner as they apply to all other ETFs and ETPs that are
listed and traded on the Exchange, including the precious metal-backed
commodity ETPs already deemed appropriate for options trading on the
Exchange pursuant to Commentary .10 to Rule 915. Further, as described
above, Exchange Rules regarding position and exercise limits will
likewise apply to options on the Bitcoin Funds except that, as
proposed, the position and exercise limits will be set at 25,000 on the
same side.
* * * * *
The Exchange notes that options on Bitcoin Funds would not be
available for trading until The Options Clearing Corporation (``OCC'')
represents to the Exchange that it is fully able to clear and settle
such options. The Exchange has also analyzed its capacity and
represents that it and The Options Price Reporting Authority (``OPRA'')
have the necessary systems capacity to handle the additional traffic
associated with the listing of options on Bitcoin Funds. The Exchange
believes any additional traffic that would be generated from the
trading of options on Bitcoin Funds would be manageable. The Exchange
represents that Exchange members will not have a capacity issue as a
result of this proposed rule change.
The Exchange represents that the same surveillance procedures
applicable to all other options currently listed and traded on the
Exchange will apply to options on Bitcoin Funds, and that it has the
necessary systems capacity to support the new option series. The
Exchange's existing surveillance and reporting safeguards are designed
to deter and detect possible manipulative behavior which might arise
from listing and trading options on ETFs and ETPs, such as (existing)
precious metal- and bitcoin-backed ETP options, as well as the proposed
options on Bitcoin Funds. The Exchange believes that its surveillance
procedures are adequate to properly monitor the trading of options on
Bitcoin Funds in all trading sessions and to deter and detect
violations of Exchange rules.
Specifically, the Exchange's market surveillance staff also
conducts surveillances with respect to the Bitcoin Funds and, as
appropriate, would review activity in the underlying Funds when
conducting surveillances for market abuse or manipulation in the
options on each Trust. Additionally, the Exchange is a member of the
Intermarket Surveillance Group (``ISG'') under the ISG Agreement. ISG
members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets. The
Exchange will be able to obtain information regarding trading in the
shares of the underlying Trusts from Nasdaq, LLC, Cboe Exchange, Inc.,
and other markets on which the Trusts trade through the ISG. In
addition, the Exchange has a Regulatory Services Agreement (``RSA'')
with the Financial Industry Regulatory Authority (``FINRA''). Pursuant
to a multi-party 17d-2 joint plan, all options exchanges allocate
regulatory responsibilities to FINRA to conduct certain options-related
market surveillances.\35\ Further, the Exchange will implement any new
surveillance procedures it deems necessary to effectively monitor the
trading of options on the Bitcoin Funds.
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\35\ Section 19(g)(1) of the Act, among other things, requires
every SRO registered as a national securities exchange or national
securities association to comply with the Act, the rules and
regulations thereunder, and the SRO's own rules, and, absent
reasonable justification or excuse, enforce compliance by its
members and persons associated with its members. See 15 U.S.C.
78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows
the Commission to relieve an SRO of certain responsibilities with
respect to members of the SRO who are also members of another SRO.
Specifically, Section 17(d)(1) allows the Commission to relieve an
SRO of its responsibilities to: (i) receive regulatory reports from
such members; (ii) examine such members for compliance with the Act
and the rules and regulations thereunder, and the rules of the SRO;
or (iii) carry out other specified regulatory responsibilities with
respect to such members.
---------------------------------------------------------------------------
The underlying shares of spot bitcoin ETPs, including the Bitcoin
Funds, are also subject to safeguards related to addressing market
abuse and manipulation. As the Commission stated in its order approving
proposals of several exchanges to list and trade shares of spot
bitcoin-based exchange-traded products (``Bitcoin ETP Order'' \36\):
---------------------------------------------------------------------------
\36\ See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008 (January 17, 2024) (File Nos. SR-NYSEArca-2021-90;
SR-NYSEArca-2023-44; SR-NYSEArca-2023-58; SR-NASDAQ-2023-016; SR-
NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-CboeBZX-2023-038; SR-
CboeBZX-2023-040; SR-CboeBZX-2023-042; 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 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.\37\
---------------------------------------------------------------------------
\37\ See Bitcoin ETP Order, 89 FR at 3009.
Given the consistently high correlation between the CME bitcoin
futures market and the spot bitcoin market, as confirmed by the
Commission through robust correlation analysis, and given that the
``CME's surveillance can assist in detecting [the impact of fraud or
manipulation] on CME bitcoin future prices,'' the Commission was able
to conclude that such surveillance sharing agreements could reasonably
be ``expected to assist in surveilling for fraudulent and manipulative
acts and practices in the specific context of the [Bitcoin ETPs].''
\38\
---------------------------------------------------------------------------
\38\ See Bitcoin ETP Order, 89 FR at 3010-11.
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In light of surveillance measures related to both options and
futures as well as the underlying Bitcoin Funds,\39\
[[Page 95262]]
the Exchange believes that existing surveillance procedures are
designed to deter and detect possible manipulative behavior which might
potentially arise from listing and trading the proposed options on the
Bitcoin Funds.
---------------------------------------------------------------------------
\39\ See Amendment No. 1 to Proposed Rule Change to List and
Trade Shares of the iShares Bitcoin Trust under Nasdaq Rule 5711(d),
Commodity-Based Trust Shares (SR-NASDAQ-2023-016), filed Jan. 5,
2024, available at https://www.sec.gov/comments/sr-nasdaq-2023-016/srnasdaq2023016-357659-883042.pdf; Amendment No. 5 to Proposed Rule
Change to List and Trade Shares of the ARK 21Shares Bitcoin ETF
under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares (SR-
CboeBZX-2023-028), filed Jan. 5, 2024, available at https://www.sec.gov/comments/sr-cboebzx-2023-028/srcboebzx2023028-358679-884202.pdf; and Amendment No. 3 to Proposed Rule Change to List and
Trade Shares of the Fidelity Wise Origin Bitcoin Fund under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares (SR-CboeBZX-2023-044),
filed Jan. 5, 2024, available at https://www.sec.gov/comments/sr-cboebzx-2023-044/srcboebzx2023044-358759-884163.pdf.
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Finally, quotation and last sale information for ETFs is available
via the Consolidated Tape Association (``CTA'') high speed line.
Quotation and last sale information for such securities is also
available from the exchange on which such securities are listed.
Quotation and last sale information for options on Bitcoin Funds will
be available via OPRA and major market data vendors.
The Exchange believes that offering options on the Bitcoin Funds
will benefit investors by providing them with an additional, relatively
lower cost investing tool to gain exposure to the price of Bitcoin and
hedging vehicle to meet their investment needs in connection with
Bitcoin-related products and positions. The Exchange expects investors
will transact in options on Bitcoin Funds in the unregulated over-the-
counter (``OTC'') options market,\40\ but may prefer to trade such
options in a listed environment to receive the benefits of trading
listed options, including (1) enhanced efficiency in initiating and
closing out position; (2) increased market transparency; and (3)
heightened contra-party creditworthiness due to the role of OCC as
issuer and guarantor of all listed options. The Exchange believes that
listing options on the Bitcoin Funds may cause investors to bring this
liquidity to the Exchange, would increase market transparency and
enhance the process of price discovery conducted on the Exchange
through increased order flow. The Exchange notes that the ETPs that
hold precious metal commodities on which the Exchange may already list
and trade options are trusts structured in substantially the same
manner as Bitcoin Funds and essentially offer the same objectives and
benefits to investors, just with respect to different assets. The
Exchange notes that it has not identified any issues with the continued
listing and trading of options on any ETFs or ETPs that hold
commodities (i.e., precious metals) that it currently lists and trades
on the Exchange.
---------------------------------------------------------------------------
\40\ The Exchange understands from customers that investors have
historically transacted in options on ETFs in the OTC options market
if such options were not available for trading in a listed
environment.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \41\ in general and furthers the
objectives of Section 6(b)(5) of the Act \42\ in particular, in that it
is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78f(b).
\42\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposal to list and
trade options on the Bitcoin Funds will remove impediments to and
perfect the mechanism of a free and open market and a national market
system and, in general, protect investors because offering options on
the Bitcoin Funds will provide investors with an opportunity to realize
the benefits of utilizing options on a Bitcoin Fund, including cost
efficiencies and increased hedging strategies.
The Exchange believes that offering Bitcoin Fund options will
benefit investors by providing them with a relatively lower-cost risk
management tool, which will allow them to manage their positions and
associated risk in their portfolios more easily in connection with
exposure to the price of Bitcoin and with Bitcoin-related products and
positions. Additionally, the Exchange's offering of Bitcoin Fund
options will provide investors with the ability to transact in such
options in a listed market environment as opposed to in the unregulated
OTC market, which would increase market transparency and enhance the
process of price discovery conducted on the Exchange through increased
order flow to the benefit of all investors. The Exchange also notes
that it already lists options on other commodity-based ETPs,\43\
including on bitcoin-backed ETPs already trading on the Exchange,
which, as described above, are trusts structured in substantially the
same manner as the Bitcoin Funds and essentially offer the same
objectives and benefits to investors.\44\
---------------------------------------------------------------------------
\43\ See Rule 915, Commentary .10. The Exchange has not
identified any issues with the continued listing and trading of
precious metal commodity-backed ETP options that it currently lists
for trading.
\44\ See Rule 915, Commentary .10(a).
---------------------------------------------------------------------------
The Exchange also believes the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system, because it is consistent with current
Exchange Rules previously filed with the Commission. Options on the
Bitcoin Funds satisfy the initial listing standards and continued
listing standards currently in the Exchange Rules applicable to options
on all ETFs and ETPs, including ETPs that hold other commodities
already deemed appropriate for options trading on the Exchange.
Additionally, as demonstrated above, each Bitcoin Fund is characterized
by a substantial number of shares that are widely held and actively
traded. Bitcoin Fund options will trade in the same manner as any other
ETF or ETP options--the same Exchange Rules that currently govern the
listing and trading of options, including permissible expirations,
strike prices, minimum increments, and margin requirements, will govern
the listing and trading of options on Bitcoin Funds in the same manner.
The Exchange believes the proposed exclusion of the Bitcoin Funds
from being eligible for trading as FLEX options is consistent with the
Act, because it will permit the Exchange to continue to participate in
ongoing discussions with the Commission regarding appropriate position
limits for options on the Bitcoin Funds.\45\
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\45\ The Exchange will submit a separate rule filing that would
permit the Exchange to authorize for trading FLEX options on the
Bitcoin Funds (which filing may propose changes to existing FLEX
option position limits for such options if appropriate).
---------------------------------------------------------------------------
The proposed position and exercise limit for options on the Bitcoin
Funds is 25,000 contracts. These position and exercise limits are the
lowest position and exercise limits available in the options industry,
are extremely conservative and more than appropriate given the Bitcoin
Funds' market capitalization, average daily volume, number of
beneficial holders, and high number of outstanding shares. The proposed
position and exercise limits are consistent with the Act as they
addresses concerns related to manipulation and protection of investors
because the position and exercise limits are extremely conservative and
more than appropriate given the Bitcoin Funds are actively traded.
The Exchange represents that it has the necessary systems capacity
to support the new Bitcoin Fund options. The Exchange believes that its
existing surveillance and reporting safeguards are designed to deter
and detect possible manipulative behavior which might arise from
listing and trading options, including Bitcoin Fund options. The
[[Page 95263]]
Exchange's existing surveillance and reporting safeguards are designed
to deter and detect possible manipulative behavior which might arise
from listing and trading options on ETFs and ETPs, such as (existing)
precious metal-commodity backed ETP options as well as the proposed
options on Bitcoin Funds. The Exchange believes that its surveillance
procedures are adequate to properly monitor the trading of options on
Bitcoin Funds in all trading sessions and to deter and detect
violations of Exchange rules.
Specifically, the Exchange's market surveillance staff also
conducts surveillances with respect to the Bitcoin Funds and, as
appropriate, would review activity in the underlying Funds when
conducting surveillances for market abuse or manipulation in the
options on each Trust. Additionally, the Exchange is a member of the
Intermarket Surveillance Group (``ISG'') under the ISG Agreement. ISG
members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets. The
Exchange will be able to obtain information regarding trading in the
shares of the underlying Trusts from Nasdaq, LLC, Cboe Exchange, Inc.,
and other markets on which the Trusts trade through the ISG. In
addition, the Exchange is a party to an RSA with FINRA and pursuant to
a multi-party 17d-2 joint plan, all options exchanges allocate
regulatory responsibilities to FINRA to conduct certain options-related
market surveillances. Further, the Exchange will implement any new
surveillance procedures it deems necessary to effectively monitor the
trading of options on the Bitcoin Funds.
The underlying shares of spot bitcoin ETPs, including the Bitcoin
Funds, are also subject to safeguards related to addressing market
abuse and manipulation. As the Commission stated in its order approving
proposals of several exchanges to list and trade shares of spot
bitcoin-based ETPs, ``[e]ach Exchange has a comprehensive surveillance-
sharing agreement with the CME via their common membership in the
Intermarket Surveillance Group. This facilitates the sharing of
information that is available to the CME through its surveillance of
its markets, including its surveillance of the CME bitcoin futures
market.'' \46\ Given the consistently high correlation between the CME
bitcoin futures market and the spot bitcoin market, as confirmed by the
Commission through robust correlation analysis, and given that the
``CME's surveillance can assist in detecting [the impact of fraud or
manipulation] on CME bitcoin future prices,'' the Commission was able
to conclude that such surveillance sharing agreements could reasonably
be ``expected to assist in surveilling for fraudulent and manipulative
acts and practices in the specific context of the [Bitcoin ETPs].''
\47\ In light of surveillance measures related to both options and
futures as well as the underlying Bitcoin Funds,\48\ the Exchange
believes that existing surveillance procedures are designed to deter
and detect possible manipulative behavior which might potentially arise
from listing and trading the proposed options on the Bitcoin Funds.
Further, the Exchange will implement any new surveillance procedures it
deems necessary to effectively monitor the trading of options on
Bitcoin ETPs.
---------------------------------------------------------------------------
\46\ See Bitcoin ETP Order, 89 FR at 3009.
\47\ See Bitcoin ETP Order, 89 FR at 3010-11.
\48\ See Amendment No. 1 to Proposed Rule Change to List and
Trade Shares of the iShares Bitcoin Trust under Nasdaq Rule 5711(d),
Commodity-Based Trust Shares (SR-NASDAQ-2023-016), filed Jan. 5,
2024, available at https://www.sec.gov/comments/sr-nasdaq-2023-016/srnasdaq2023016-357659-883042.pdf; Amendment No. 5 to Proposed Rule
Change to List and Trade Shares of the ARK 21Shares Bitcoin ETF
under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares (SR-
CboeBZX-2023-028), filed Jan. 5, 2024, available at https://www.sec.gov/comments/sr-cboebzx-2023-028/srcboebzx2023028-358679-884202.pdf; and Amendment No. 3 to Proposed Rule Change to List and
Trade Shares of the Fidelity Wise Origin Bitcoin Fund under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares (SR-CboeBZX-2023-044),
filed Jan. 5, 2024, available at https://www.sec.gov/comments/sr-cboebzx-2023-044/srcboebzx2023044-358759-884163.pdf.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
Intramarket Competition: The Exchange does not believe that the
proposed rule change will impose any burden on intramarket competition
that is not necessary or appropriate in furtherance of the purposes of
the Act as options on the Bitcoin Funds would need to satisfy the
initial listing standards set forth in the Exchange Rules in the same
manner as any other options on an ETF before the Exchange could list
these options. Additionally, Bitcoin Fund options will be equally
available to all market participants who wish to trade such options.
The Exchange Rules currently applicable to the listing and trading of
options on ETFs on the Exchange will apply in the same manner to the
listing and trading of all options on the Bitcoin Funds. Also, and as
stated above, the Exchange already lists options on other commodity-
based ETPs, including on bitcoin-backed ETPs.\49\
---------------------------------------------------------------------------
\49\ See Rule 915, Commentary .10 and Commentary .10(a).
---------------------------------------------------------------------------
Intermarket Competition: The Exchange does not believe that the
proposal to list and trade options on Bitcoin Funds will impose any
burden on intermarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. To the extent that the
advent of Bitcoin Fund options trading on the Exchange may make the
Exchange a more attractive marketplace to market participants at other
exchanges, such market participants are free to elect to become market
participants on the Exchange. As noted herein, this is a competitive
filing as the Commission recently approved the listing and trading of
options on an ETP that, like the Bitcoin Funds, holds bitcoin.\50\
Additionally, other options exchanges are free to amend their listing
rules, as applicable, to permit them to list and trade options on
Bitcoin Funds. The Exchange notes that listing and trading Bitcoin Fund
options on the Exchange will subject such options to transparent
exchange-based rules as well as price discovery and liquidity, as
opposed to alternatively trading such options in the OTC market.
---------------------------------------------------------------------------
\50\ See id. See also supra notes 4 and 5 (regarding the IBIT
Approval Order and the FBTC and ARKB Approval Order).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change may relieve any
burden on, or otherwise promote, competition as it is designed to
increase competition for order flow on the Exchange in a manner that is
beneficial to investors by providing them with a lower-cost option to
hedge their investment portfolios. The Exchange notes that it operates
in a highly competitive market in which market participants can readily
direct order flow to competing venues that offer similar products.
Ultimately, the Exchange believes that offering Bitcoin Fund options
for trading on the Exchange will promote competition by providing
investors with an additional, relatively low-cost means to hedge their
portfolios and meet their investment needs in connection with Bitcoin
prices and Bitcoin-related products and positions on a listed options
exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
[[Page 95264]]
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\
---------------------------------------------------------------------------
\51\ 15 U.S.C. 78s(b)(3)(A)(iii).
\52\ 17 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.
---------------------------------------------------------------------------
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 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\
---------------------------------------------------------------------------
\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) (Self-
Regulatory 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).
\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).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-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/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\
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\59\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-28107 Filed 11-29-24; 8:45 am]
BILLING CODE 8011-01-P
