Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the Bitwise 10 Crypto Index Fund Under Proposed NYSE Arca Rule 8.800-E (Commodity- and Digital Asset-Based Investment Interests), 95853-95865 [2024-28343]
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95853
Federal Register / Vol. 89, No. 232 / Tuesday, December 3, 2024 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101775; File No. SR–
NYSEARCA–2024–98]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To List and Trade Shares
of the Bitwise 10 Crypto Index Fund
Under Proposed NYSE Arca Rule
8.800–E (Commodity- and Digital
Asset-Based Investment Interests)
November 27, 2024.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 14, 2024, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade shares of the Bitwise 10 Crypto
Index Fund (the ‘‘Trust’’) under
proposed NYSE Arca Rule 8.800–E
(Commodity- and/or Digital Asset-Based
Investment Interests). 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.
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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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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1. Purpose
The Exchange recently proposed to
adopt new NYSE Arca Rule 8.800–E to
provide for the listing and trading of
Commodity- and/or Digital Asset-Based
Investment Interests, which are
securities issued by a trust, limited
liability company, or other similar
entity that holds specified commodities,
digital assets, Derivative Securities
Products, and/or cash.4 The Exchange
now proposes to list and trade shares of
the Trust 5 under proposed NYSE Arca
Rule 8.800–E.
According to the Annual Report, the
Trust will not be registered as an
investment company under the
Investment Company Act of 1940,6 and
is not required to register thereunder.
The Trust is not a commodity pool for
purposes of the Commodity Exchange
Act.7
The Exchange represents that the
Shares satisfy the requirements of
proposed NYSE Arca Rule 8.800–E and
thereby qualify for listing on the
Exchange.8
Operation of the Trust 9
The Trust will issue the Shares
which, according to the Annual Report,
represent units of undivided beneficial
ownership of the Trust. The Trust is a
Delaware statutory trust and will
operate pursuant to a trust agreement
(the ‘‘Trust Agreement’’) between
Bitwise Investment Advisers, LLC (the
‘‘Sponsor’’ or ‘‘Bitwise’’) and Delaware
Trust Company, as the Trust’s trustee
(the ‘‘Trustee’’). Coinbase Custody Trust
Company, LLC will maintain custody of
the Trust’s assets (the ‘‘Custodian’’). The
Bank of New York Mellon will be the
custodian for the Trust’s cash holdings
(in such role, the ‘‘Cash Custodian’’), as
4 See Securities Exchange Act Release No. 101470
(October 29, 2024), 89 FR 87681 (November 4, 2024)
(SR–NYSEARCA–2024–87). Shares of the Trust will
not trade on the Exchange until such time that both
the instant proposed rule change and the proposed
rule change to adopt Rule 8.800–E have been
approved by the Commission.
5 The Trust is a Delaware statutory trust. Shares
of the Trust currently trade under the symbol BITW
on OTCQX. On March 1, 2024, the Trust filed with
the Commission an Annual Report on Form 10–K
for the fiscal year ended December 31, 2023 (the
‘‘Annual Report’’).
6 15 U.S.C. 80a–1.
7 17 U.S.C. 1.
8 With respect to the application of Rule 10A–3
(17 CFR 240.10A–3) under the Act, the Trust relies
on the exemption contained in Rule 10A–3(c)(7).
9 The description of the operation of the Trust,
the Shares, and digital asset markets contained
herein is based, in part, on the Annual Report. See
note 5, supra.
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well as the Trust’s administrator (in
such role, the ‘‘Administrator’’) and
transfer agent (in such role, the
‘‘Transfer Agent’’).
According to the Annual Report, the
investment objective of the Trust is to
invest in a portfolio of digital assets
(each, a ‘‘Portfolio Asset’’ and,
collectively, ‘‘Portfolio Assets’’) that
tracks the Bitwise 10 Large Cap Crypto
Index (the ‘‘Index’’). The Index is
administered by Bitwise Index Services,
LLC, an affiliate of the Sponsor (the
‘‘Index Provider’’). The Trust rebalances
monthly alongside the rebalance of the
Index to stay current with any changes
to the Index. As of October 31, 2024, the
Trust’s Portfolio Assets and respective
weightings are:
Portfolio asset
Bitcoin ..............................
Ethereum .........................
Solana .............................
XRP .................................
Cardano ..........................
Avalanche ........................
Chainlink ..........................
Bitcoin Cash ....................
Polkadot ..........................
Uniswap ...........................
Symbol
BTC
ETH
SOL
XRP
ADA
AVAX
LINK
BCH
DOT
UNI
Weight
(%)
75.10
16.5
4.30
1.50
0.70
0.60
0.40
0.40
0.30
0.30
To determine the Trust’s Net Asset
Value (‘‘NAV’’) at the end of every
Business Day,10 the Sponsor will rely on
a third-party valuation vendor, CF
Benchmarks Ltd. (the ‘‘Valuation
Vendor’’), to calculate and publish the
U.S. dollar price for each Portfolio Asset
(each, a ‘‘Reference Price’’ and,
collectively, the ‘‘Reference Prices’’) as
of 4:00 p.m. E.T. using prices from
several different digital asset trading
platforms selected by the Valuation
Vendor.11 Each Reference Price
aggregates the trade flow of several
major digital asset trading platforms
during an observation window between
3:00 p.m. and 4:00 p.m. E.T. into the
U.S. dollar price of one of each Portfolio
Asset at 4:00 p.m. E.T. The Reference
Price calculation is designed based on
the IOSCO Principals for Financial
Benchmarks.
The Trust’s only assets will be
Portfolio Assets and cash.12 The Trust
10 For purposes of this filing, a ‘‘Business Day’’ is
defined as any day on which the New York Stock
Exchange is scheduled to be open for trading.
11 Digital asset trading platforms considered by
the Valuation Vendor currently include Bitstamp,
Coinbase, Gemini, itBit, LMAX, and Kraken. The
Valuation Vendor’s selection of digital asset trading
platforms from which the Reference Prices may be
derived is further discussed below.
12 The Trust conducts creations and redemptions
of its Shares for cash. Authorized Participants
(defined below) will deliver cash to the Cash
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does not seek to hold any digital assets
other than Portfolio Assets and has
expressly disclaimed ownership of any
such assets in the event the Trust ever
involuntarily comes into possession of
such assets.13 The Trust will not use
derivatives that may subject the Trust to
counterparty and credit risks. The Trust
will process creations and redemptions
in cash. The Trust’s only recurring
ordinary expense is expected to be the
Sponsor’s unitary management fee (the
‘‘Management Fee’’), which will accrue
daily and will be payable monthly in
arrears. The Administrator will
calculate the Management Fee by
applying an annualized rate to the NAV
of the Trust’s assets at the end of each
month. Financial institutions authorized
to create and redeem Shares (each, an
‘‘Authorized Participant’’) will deliver,
or cause to be delivered, cash in
exchange for Shares of the Trust, and
the Trust will deliver cash to
Custodian pursuant to creation orders for Shares
and the Cash Custodian will hold such cash until
such time as it can be converted to Portfolio Assets,
which the Trust intends to do on the same Business
Day in which such cash is received by the Cash
Custodian. Additionally, the Trust will sell
Portfolio Assets in exchange for cash pursuant to
redemption orders of its Shares. In connection with
such sales, an approved Digital Asset Trading
Counterparty (defined below) will send cash to the
Cash Custodian. The Cash Custodian will hold such
cash until it can be distributed to the redeeming
Authorized Participant, which it intends to do on
the same Business Day in which it is received. In
connection with the purchases and sales of
Portfolio Assets pursuant to its creation and
redemption activity, it is possible that the Trust
may retain de minimis amounts of cash as a result
of rounding differences. The Trust may also
initially hold small amounts of cash to initiate Trust
operations in the immediate aftermath of its
Registration Statement being declared effective.
Lastly, the Trust may also sell Portfolio Assets and
temporarily hold cash as part of a liquidation of the
Trust or to pay certain extraordinary expenses not
assumed by the Sponsor. Under the Trust
Agreement, the Sponsor has agreed to assume the
normal operating expenses of the Trust, subject to
certain limitations. For example, the Trust will bear
any indemnification or litigation liabilities as
extraordinary expenses. In any event, in the
ongoing course of business, the amounts of cash
retained by the Trust are not expected to constitute
a material portion of the Trust’s holdings.
13 The Trust may, from time to time, passively
receive, by virtue of holding Portfolio Assets,
certain additional digital assets (‘‘IR Assets’’) or
rights to receive IR Assets (‘‘Incidental Rights’’)
through a fork of a digital asset network or an
airdrop of assets. The Trust will not seek to acquire
such IR Assets or Incidental Rights. Pursuant to the
terms of the Trust Agreement, the Trust has
disclaimed ownership in any such IR Assets and/
or Incidental Rights to make clear that such assets
are not and shall never be considered assets of the
Trust and will not be taken into account for
purposes of determining the Trust’s NAV or NAV
per Share. Neither the Trust, nor the Sponsor, nor
the Custodian, nor any other person associated with
the Trust will, directly or indirectly, engage in
action where any portion of the Trust’s Portfolio
Assets becomes subject to any proof-of-stake
validation or is used to earn additional assets or
generate income or other earnings.
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Authorized Participants when those
Authorized Participants redeem Shares
of the Trust.
The Index
The Bitwise Crypto Index Committee
(the ‘‘Committee’’), convened by the
Index Provider, is the governing body of
the Index and is responsible for
developing, maintaining, and adjusting
the methodology by which the Index is
constructed (the ‘‘Index
Methodology’’).14 The Index is
comprised of ten digital assets (the
‘‘Index Components’’) and is designed
to track the performance of the ten
largest digital assets that currently trade
publicly on eligible digital asset trading
platforms, as selected and weighted by
free-float market capitalization. The
market capitalization of a digital asset is
calculated by multiplying its price 15
times its free-float-adjusted or
‘‘circulating’’ 16 supply. The proportion
of each digital asset in the Index is
based on this adjusted market
capitalization.
The Index will only consider for
eligibility as Index Components digital
assets that satisfy the following criteria:
• The digital asset must be a
cryptographically secured digital bearer
instrument;
• The digital asset must have a price
that is not pegged to another digital
asset, fiat currency, group of those
currencies, or hard asset;
• The digital asset must be freely
traded and can be freely held for the
foreseeable future;
• The digital asset must trade on an
Eligible Digital Asset Trading
Platform,17 without withdrawal issues
specific to that digital asset;
14 The full Index Methodology is available at
https://bitwiseinvestments.com/indexes/
methodology.
15 Based on the Lukka Prime price.
16 According to the Annual Report, circulating
supply is the best approximation of the number of
coins available on public markets. Circulating
supply is derived by taking the total number of
existing digital assets native to a specific
Blockchain and subtracting the number of coins
verifiably burned, locked, or reserved (for example,
by a foundation).
17 The Committee determines which trading
platforms qualify as Eligible Digital Asset Trading
Platforms. To qualify as an Eligible Digital Asset
Trading Platform, a venue must: (1) provide an
open platform for exchanging at least one digital
asset for either another digital asset or for a fiat
currency; (2) not be domiciled in a country, region,
or locality that implements meaningful capital
controls on international investors; (3) not be
subject to extraordinary regulatory or legal action
that is likely to lead to unusual pricing,
significantly disrupt institutional access to the
market, or disrupt fiat withdrawals; (4) charge fees
for trading; (5) have a functioning, secure, and
reliable application programming interface (API)
allowing for the timely ingestion of trade and
volume data; (6) have no significant downtime,
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• The digital asset must be custodied
by a third-party custodian regulated as
a federally chartered bank or as a state
trust company, that meets additional
security practices, insurance
requirements, and business practice
requirements as determined by the
Committee; 18
• The digital asset must have no
known security vulnerabilities,
including critical bugs, undue exposure
to 51% attacks, or other factors, as
determined by the Committee;
• The digital asset must not face
undue risk of being deemed a security
under U.S. federal securities laws in the
opinion of the Committee, given present
knowable facts and circumstances; 19
• The digital asset must have traded
more than 1% of its free-float-adjusted
market capitalization on eligible trading
venues over the past 30 days; and
withdrawal, or known security issues; (7) account
for more than 1.0% of the combined trailing 30-day
dollar trading volume of all digital assets on entities
that meet the prior listed rules; and (8) in the
opinion of the Committee, have significant real spot
trading volume. The list of Eligible Digital Asset
Trading Platforms is reviewed on an annual basis.
As of January 25, 2024, the date that the Committee
performed its 2024 annual review of Eligible Digital
Asset Trading Platforms, the list of Eligible Digital
Asset Trading Platforms included Bitstamp,
BitFlyer, Coinbase, Gemini, Kraken, itBit, and
LMAX.
18 The list of approved custodians is reviewed
and updated on an annual basis, or at the discretion
of the Committee. As of January 23, 2024, the date
that the Committee performed its 2024 annual
review of eligible custodians, the list of approved
custodians included Anchorage, Bakkt Warehouse,
BitGo, Coinbase Custody, Fidelity Digital Assets,
and Gemini Custody.
19 The Committee conducts a risk-based
assessment that considers whether the digital asset
may be deemed a security under U.S. federal
securities laws and whether it is subject to
regulatory action that may imperil the value of the
digital asset. Such assessment does not preclude
legal or regulatory action based on the presence of
a security. The Committee does not engage in legal
analysis of any digital assets or perform any
analysis of digital assets based upon any legal
standards. The Committee reviews the following
information to make this determination: (1) public
information to determine if the Commission, any
other U.S. regulatory agency, or any court has made
any statements regarding the digital asset; (2) public
information regarding how the digital asset markets
view the digital asset, including whether the digital
asset has been listed on entities such as Coinbase
or other U.S. digital asset trading platforms that
would have had access to a reasonable amount of
information when making their determinations to
list the digital asset; (3) public information to
undertake reasonable diligence into the structure
and technology of the digital asset, including
reviewing the digital asset’s whitepaper if available
and speaking with the sponsor of the digital asset;
and (4) any other information gained from reputable
sources that may impact the Committee’s view of
the digital asset, including a review of any websites
associated with the digital asset’s development. If
the Committee adds a digital asset to the Index, but
later becomes aware of new information that causes
the Committee to revalue the risk profile of such
digital asset, the Committee will review such
information and determine whether the digital asset
should be removed from the Index.
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• The digital asset must have
maintained a unit price greater than
$0.01 for the past 30 consecutive days.
The Index is reconstituted on a
monthly basis at 4:00 p.m. E.T. on the
last Business Day of each month. As of
October 31, 2024, the Index included
the following digital assets, and their
weights were as follows: 20
Weight
(%)
Digital asset
Bitcoin ...........................................
Ethereum ......................................
Solana ...........................................
XRP ..............................................
Cardano ........................................
Avalanche .....................................
Chainlink .......................................
Bitcoin Cash .................................
Uniswap ........................................
Polkadot ........................................
75.14
16.42
4.30
1.56
0.66
0.55
0.39
0.38
0.31
0.30
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To the extent that a digital asset meets
the Index’s eligibility requirements at a
future date, it would be considered for
inclusion in the Index in connection
with a future rebalancing. Digital assets
will lose eligibility and be removed
from the Index at the next monthly
reconstitution event if they violate any
of the eligibility requirements described
above for 30 consecutive days.21
The Index is calculated on a daily
basis and published on the Sponsor’s
website. Should any material change be
made to the Index Methodology that
results in a material change to the
composition of the Index and, as part of
the Trust’s monthly rebalancing process,
results in a material change to the
composition of the Trust (which the
Sponsor generally considers to be a
change of 10% or more to the Trust or
the Index holdings, but in any event, is
also determined at the Trust’s
discretion), the Trust will notify
shareholders of such material change by
filing a Form 8–K with the Commission.
The Index will implement a rule that
will limit the Index Components and
weightings thereof such that at least
90% of the weight of the Index
Components shall, on both an initial
20 The weighting of the Trust’s Portfolio Assets
will differ slightly from the weightings of the Index
Components due to the need for the Trust to
implement actual rebalance transactions, unlike the
Index. The transactions undertaken by the Trust to
align the Portfolio Assets with the Index
Components may create transaction costs, fees, and
trading slippage, which may cause the Trust’s
performance to deviate slightly from the Index’s
performance.
21 Under extraordinary circumstances, digital
assets may lose eligibility to be Index Components
and be removed from the Index on a same-day basis
by a unanimous vote of the quorum of members of
the Committee. Such emergency removals will take
place at 4:00 p.m. E.T. following the conclusion of
such decision by the Committee and will be
publicly available on the Sponsor’s website.
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and continuing basis, consist of
commodities and/or digital assets
concerning which the Exchange is able
to obtain information via the
Intermarket Surveillance Group (‘‘ISG’’),
from other members of the ISG, or via
a comprehensive surveillance sharing
agreement (‘‘CSSA’’) at each monthly
rebalancing. This rule will be in effect
prior to such time that Shares of the
Trust begin trading on the Exchange.
The Portfolio Assets and Index
Components
The Portfolio Assets will consist of
the Index Components except that the
Sponsor may determine to exclude a
particular Index Component in its
discretion under certain specified
circumstances further described below
(including to comply with the proposed
requirements of Rule 8.800–E(e)(1)). The
weighting of each Portfolio Asset is
generally expected to be the same as the
weighting of the Index Components in
the Index, except when the Sponsor
determines to exclude one or more
digital assets from the Portfolio Assets
in the rules-based circumstances set
forth below, in which case the
weightings of the Portfolio Assets are
generally expected to be calculated
proportionally to the respective Index
Components for the remaining Index
Components.
The Sponsor will retain discretion to
include or exclude individual digital
assets from the Portfolio Assets only in
the following circumstances:
• The Sponsor may exclude a digital
asset or rebalance the weighting of an
existing Portfolio Asset to the extent its
inclusion as a Portfolio Asset or
projected weighting would exceed a
threshold that could, in the Sponsor’s
sole discretion, require the Trust to
register as an investment company
under the Investment Company Act or
require the Sponsor to register as an
investment adviser under the
Investment Advisers Act;
• None or few of the Authorized
Participants or service providers has the
ability to trade or otherwise support a
digital asset;
• The Sponsor believes, based on
current guidance, that use or trading of
the digital asset raises or potentially
raises significant governmental, policy,
or regulatory concerns or is subject or
likely subject to a specialized regulatory
regime, such as the U.S. federal
securities or commodities laws or
similar laws in other significant
jurisdictions;
• The digital asset’s underlying code
contains, or may contain, significant
flaws or vulnerabilities;
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95855
• There is limited or no reliable
information regarding, or concerns over
the intentions of, the core developers of
the digital asset; or
• Any of the existing criteria used by
the Index for inclusion in the Index is
found by the Sponsor to prohibit the
inclusion of the digital asset in the
Index, in which case, the Sponsor may,
in its sole discretion, cause the Portfolio
Assets to deviate from the Index
Components until such time as the
Index has taken similar action.
The Trust does not intend for the
Portfolio Assets to deviate from the
Index Components, and the Trust
anticipates that such deviation would
likely occur only if the Trust was unable
to hold a particular digital asset
included in the Index, if the Trust
determined that holding that particular
digital asset would result in significant
harm to shareholders, or if the holding
of that digital asset would cause the
Trust’s holdings to be inconsistent with
the proposed requirements of Rule
8.800–E(c)(1). The Sponsor will ensure
that the Trust’s holdings are consistent
with the requirements of Rule 8.800–
E(c)(1), as proposed, by monitoring the
weightings of the Portfolio Assets and
Index Components daily and taking any
measures as described in the preceding
section to ensure that 90% of the
holdings will consist of commodities
and/or digital assets concerning which
the Exchange may obtain information
via the ISG, from other members of the
ISG, or via CSSA 22 and by
implementing an Index rule that will
limit the Index Components and
weightings such that at least 90% of the
weight of such constituents shall, on
both an initial and continuing basis,
consist of the same assets.
Background on Portfolio Assets
Bitcoin
Bitcoin is the most well-recognized
digital asset in the world. As of October
31, 2024, bitcoin is the largest digital
asset in the world by market
capitalization. Bitcoin was invented in
2008 by a pseudonymous software
developer, or a group of software
developers, under the name Satoshi
Nakamoto. Nakamoto published a white
paper titled ‘‘Bitcoin: A Peer-to-Peer
Electronic Cash System’’ on October 31,
2008, which provided the technical
outline for launching the bitcoin
network. The network went live on
January 3, 2009, when Nakamoto mined
22 The Sponsor notes that, as of the date of this
filing, the Index Components and Portfolio Assets
that meet this standard are bitcoin and ether, which
make up more than 91% of the Trust and Index.
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the first block of transactions, known as
the ‘‘Genesis Block.’’
The software underlying the Bitcoin
Blockchain determines a number of key
and independent parameters. At the
heart of the system lies the algorithm
that enforces that all ledgers converge
over time (commonly known as the
‘‘Consensus Algorithm’’). Other
important portions of the system
include the rules that deem a
transaction valid, a programming
language that allows for different types
of transactions to be executed, and the
process through which new digital
assets are minted (commonly known as
‘‘Mining’’), and others. The network
strictly enforces the total amount of
units issued to converge towards 21
million by the year 2140 through a
predetermined schedule.
New bitcoin is created when Miners
process blocks of transactions. In the
bitcoin network, this occurs roughly
every ten minutes. The Blockchain
periodically adjusts the difficulty of
settling transactions to ensure that
cadence remains approximately
accurate. The amount of new bitcoin
created each time a block of bitcoin
transactions is processed is
predetermined by the software
underlying the bitcoin Blockchain.
Initially, the Miner that settled a block
of transactions on the bitcoin
Blockchain received 50 bitcoin. That
reward was and is programmed to be cut
in half roughly every four years;
currently, Miners receive 3.125 bitcoin
for each block of settled transactions.
The bitcoin network is known for
being extremely decentralized, as it is
maintained by a network of computers
that, joined together, represents the
largest supercomputer in the world.
Some believe that this makes bitcoin
more secure and resistant to attacks
compared to other Blockchain networks.
Ethereum
Ether is the native digital asset of
Ethereum, the second largest Blockchain
network ranked by market capitalization
as of October 31, 2024. Ethereum was
described in a white paper in late 2013,
and an online crowdsale to fund
development took place between July
and August 2014. The network went
live in July 2015.
Ethereum was specifically designed to
power smart contracts, which are
computer programs intended to enforce
the performance of a contract that
parties can codify and agree upon with
minimal or no need of trusted
intermediaries.
Ethereum’s script language, the
programming language that developers
use for creating Blockchain
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applications, is significantly more
flexible than bitcoin’s. This allows the
creation of programs that do general
computation instead of only the
relatively simple conditional payments
that are possible with bitcoin. As such,
a whole ecosystem of different
applications including asset issuance,
decentralized financial applications,
identity management, and others are
able to be and have been developed on
top of the Ethereum network. However,
Ethereum’s more permissive
programming language makes the
network inherently less secure because
it can increase the odds that a
catastrophic bug in one smart contract
could affect the whole network.
Due to Ethereum’s focus on enabling
innovation on its Blockchain system,
events like hard forks are significantly
more common in Ethereum than in
bitcoin. For example, on September 15,
2022, Ethereum transitioned from a
proof-of-work network to a proof-ofstake network. This infrastructure
upgrade was known as ‘‘The Merge.’’
This was only one of several hard forks
the Ethereum Blockchain has undergone
since inception. Some consider
Ethereum’s stance as an advantage,
while others perceive it as a risk,
especially as the project grows larger
and the cost of potential mistakes rises.
maximize speed, scalability, and
stability. For example, the XRP ledger
can accommodate 4,400 transactions per
second. This is, in part, because XRP is
not mined like bitcoin, but is designed
for the ledgers to close in seconds based
on a system of consensus. Further,
because of the consensus methodology
underlying the XRP design, network
transaction fees are substantially lower
than bitcoin, typically less than $0.01.
Given the unique qualities of XRP and
the natural suitability of this digital
asset to solve the friction experience
with payments, the XRP Creators started
a company, calling it Ripple, to further
develop the ecosystem around XRP and
build software solutions to address the
friction in sending, processing, and
sourcing liquidity for global payments.
Thus, the company, Ripple, began as,
and continues to be, a payments
software company. Today, Ripple is
focused on designing and deploying
state-of-the-art and industry-leading
software to enable banks and financial
institutions to more easily effect crossborder payments. For maximum
efficiency, Ripple’s software can
integrate XRP to solve liquidity and
value transfer challenges.
Solana
Solana is a decentralized blockchain
network with a focus on secure, low-fee,
high-speed transactions that are paid for
using SOL, which is the Solana
Blockchain’s native digital asset. By
leveraging proof-of-history and other
breakthrough innovations, Solana
allows for greater throughput than many
other Blockchains, with the ability to
scale at the rate of Moore’s Law. Solana,
like Ethereum, is home to several use
cases including gaming, decentralized
finance, and non-fungible token
marketplaces.
Cardano is a proof-of-stake
Blockchain and smart contract platform
that facilitates secure payments and
enables developers to build
decentralized applications. Grounded in
research and academia, the protocol and
its token were named after 16th and
19th century polymaths, and its
programming language, Haskell, is
commonly used in the traditional
finance and security sectors.
XRP
XRP is a digital asset that was created
by Chris Larsen, Jed McCaleb, Arthur
Britto, and David Schwartz (the ‘‘XRP
Creators’’) in 2012. Built out of the
frustrations of bitcoin’s utility for
payments, the XRP ledger (the ledger to
which XRP is native) is designed to be
a global real-time payment and
settlement system. The XRP Creators
developed this unique digital asset to
solve the scalability concerns that they
believed were inherent in the structure
of bitcoin. In particular, XRP was
created to improve the efficiency of
payments. To this end, the open source
code (available at https://github.com/
ripple/rippled/) was designed to
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Cardano
Avalanche
Avalanche is a Blockchain ecosystem
that is home to several applications
across a variety of use cases including,
but not limited to, gaming and
decentralized finance. Avalanche’s
design makes it relatively easy for
developers to deploy applications to
and from Ethereum. Avalanche was
designed to be a faster and cheaper
alternative to other Blockchains for
purposes of a better user and developer
experience. For example, the network
leverages its different built-in
Blockchains for enhanced transaction
speeds at economically feasible costs.
To that end, some of its built-in
Blockchains are dedicated to specific
use cases and/or applications to avoid
network congestion the popularity of
other applications can cause.
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Chainlink
Chainlink is a network that connects
smart contracts with real world data.
Blockchain networks are unaware of
what happens outside of those
networks, and therefore whenever a
Blockchain application needs to interact
with external data, it needs a reliable
data source to do so. These data sources
are known in the industry as ‘‘Oracles.’’
Relying on one Oracle creates a single
point of failure, and Chainlink aims to
solve this issue by providing a
decentralized network of multiple
Oracles that can evaluate the same data.
The accuracy of this data can be
important if this data is used to trigger
activity on a smart contract or other
Blockchain application. Chainlink
provides price reference data feeds for
decentralized finance, and also allows
users to create their own Oracle
networks. Larger enterprises can also
use Chainlink to sell their data to smart
contracts that need them to trigger a
certain condition. Current use cases for
Chainlink include stable digital assets,
decentralized lending and borrowing,
and asset management.
Chain. The purpose of the Relay Chain
is to provide ecosystem support, notably
in terms of security and interoperability.
Bitcoin Cash
Bitcoin Cash is a proof-of-work
lockchain that was created as a hard
fork of bitcoin on August 1, 2017. At
inception, the most significant
difference between Bitcoin Cash’s
Blockchain design and the Blockchain
design of bitcoin was Bitcoin Cash’s
adoption of larger block sizes. Larger
block sizes allow the Bitcoin Cash
Blockchain to process more transactions
per second than the bitcoin Blockchain.
Valuation of the Trust’s Portfolio Assets
and Determination of NAV
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Uniswap
Uniswap is the governance token of
the Uniswap protocol. Over the past five
years, Uniswap has emerged as a
leading decentralized exchange for
digital assets. Uniswap’s automated
platform lets traders exchange digital
assets in the same way they do on
centralized trading venues like
Coinbase, but without a company
standing in the middle of the
transaction. Additionally, Uniswap’s
decentralized structure allows any
individual to act as a market maker and
provide liquidity on the platform,
earning yield while facing risk.
Polkadot
Polkadot is a proof-of-stake
Blockchain that leverages a newer
infrastructure design to that of Solana’s
and Ethereum’s. For purposes of
enhanced performance, Polkadot splits
up the workload by hosting various
independent blockchains on top of one
central blockchain, known as the Relay
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Custody of the Trust’s Portfolio Assets
The Custodian will maintain custody
of the Portfolio Assets, other than that
which is maintained in a trading
account (the ‘‘Trading Balance’’) with
Coinbase, Inc. (the ‘‘Prime Execution
Agent,’’ which is an affiliate of the
Custodian). The Custodian will
maintain an account that holds the
Trust’s Portfolio Assets (the ‘‘Trust
Digital Asset Account’’) and will
facilitate the transfer of Portfolio Assets
required for the operation of the Trust.
The Trading Balance will only be used
in the limited circumstances in which
the Trust is using the Agent Execution
Model (as defined below) to effectuate
the purchases and sales of Portfolio
Assets. The Custodian provides
safekeeping of Portfolio Assets using a
multi-layer cold storage security
platform designed to provide offline
security of the Portfolio Assets held by
the Custodian.
The net assets of the Trust and its
Shares are valued on a daily basis by the
Valuation Vendor. The Trust uses the
Reference Prices to calculate its NAV.
The Sponsor, in its sole discretion,
may cause the Trust to price its portfolio
based upon an index, benchmark, or
standard other than the Reference Prices
at any time, with prior notice to the
shareholders, if investment conditions
change or the Sponsor believes that
another index, benchmark, or standard
better aligns with the Trust’s investment
objective and strategy. The Sponsor may
make this decision for a number of
reasons, including, but not limited to, a
determination that the Reference Prices
differ materially from the global market
price of the Portfolio Assets and/or that
third parties are able to purchase and
sell Portfolio Assets on public or private
markets not included among the
Valuation Trading Platforms, and such
transactions may take place at prices
materially higher or lower than the
Reference Prices. The Sponsor,
however, is under no obligation
whatsoever to make such changes in any
circumstance. In the event that the
Sponsor intends to establish the Trust’s
NAV by reference to an index,
benchmark, or standard other than
Reference Prices, it will provide
shareholders with notice in a prospectus
supplement and/or through a current
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report on Form 8–K or in the Trust’s
annual or quarterly reports.23
The Trust’s only assets will be
Portfolio Assets and, under limited
circumstances, cash. The Trust’s NAV
and NAV per Share will be determined
by the Administrator once each
Exchange trading day as of 4:00 p.m.
E.T., or as soon thereafter as practicable.
The Administrator will calculate the
NAV by multiplying the Portfolio Assets
held by the Trust by their respective
Reference Prices for such day, adding
any additional receivables and
subtracting the accrued but unpaid
liabilities of the Trust. The NAV per
Share is calculated by dividing the NAV
by the number of Shares then
outstanding. The Valuation Vendor will
determine the price of the Trust’s
Portfolio Assets by reference to the
Valuation Trading Platforms.
Intraday Trust Value
The Trust uses the real-time prices
published by the Valuation Vendor for
each Portfolio Asset to calculate an
Indicative Trust Value (‘‘ITV’’). One or
more major market data vendors will
disseminate the ITV, updated every 15
seconds each trading day as calculated
by the Exchange or a third-party
financial data provider during the
Exchange’s Core Trading Session (9:30
a.m. to 4:00 p.m. E.T.). The ITV will be
calculated throughout the trading day
by using the prior day’s holdings at the
close of business and the most recently
reported price level of the real-time
prices for each Portfolio Asset published
by the Valuation Vendor. The ITV will
be widely disseminated by one or more
major market data vendors during the
NYSE Arca Core Trading Session.
Creation and Redemption of Shares
The Trust creates and redeems Shares
from time to time, but only in one or
more Creation Units, which will
initially consist of at least 10,000
Shares, but may be subject to change
(‘‘Creation Unit’’). A Creation Unit is
only made in exchange for delivery to
the Trust or the distribution by the Trust
of an amount of cash, equivalent to the
value of Portfolio Assets represented by
the Creation Unit being created or
redeemed, the amount of which is
representative of the combined NAV of
the number of Shares included in the
Creation Units being created or
redeemed determined as of 4:00 p.m.
E.T. on the day the order to create or
redeem Creation Units is properly
23 The Sponsor will provide notice of any such
changes in the Trust’s periodic or current reports
and, if the Sponsor makes such a change other than
on an ad hoc or temporary basis, will file a
proposed rule change with the Commission.
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received. Except when aggregated in
Creation Units or under extraordinary
circumstances permitted under the
Trust Agreement, the Shares are not
redeemable securities.
Authorized Participants are the only
persons that may place orders to create
and redeem Creation Units. Authorized
Participants must be (1) registered
broker-dealers or other securities market
participants, such as banks and other
financial institutions, that are not
required to register as broker-dealers to
engage in securities transactions
described below, and (2) Depository
Trust Company (‘‘DTC’’) participants.
To become an Authorized Participant, a
person must enter into an Authorized
Participant Agreement with the Trust
and/or the Trust’s marketing agent (the
‘‘Marketing Agent’’).
When purchasing or selling Portfolio
Assets in response to the purchase of
Creation Units or the redemption of
Creation Units, which will be processed
in cash, the Trust would do so pursuant
to either (1) a ‘‘Trust-Directed Trade
Model,’’ or (2) an ‘‘Agent Execution
Model,’’ which are each described in
more detail below.
The Trust intends to utilize the TrustDirected Trade Model for all purchases
and sales of Portfolio Assets and would
only utilize the Agent Execution Model
in the event that no digital asset trading
counterparty approved by the Sponsor
(a ‘‘Digital Asset Trading
Counterparty’’) 24 is able to effectuate
the Trust’s purchase or sale of Portfolio
Assets. Under the Trust-Directed Trade
Model, in connection with receipt of a
purchase order or redemption order, the
Sponsor, on behalf of the Trust, would
be responsible for acquiring Portfolio
Assets from an approved Digital Asset
Trading Counterparty in an amount
equal to the Basket Amount. When
seeking to purchase Portfolio Assets on
behalf of the Trust, the Sponsor will
seek to purchase Portfolio Assets at
commercially reasonable prices and
terms from any of the approved Digital
Asset Trading Counterparties.25 Once
agreed upon, the transaction will
generally occur on an ‘‘over-thecounter’’ basis.
Whether utilizing the Trust-Directed
Trade Model or the Agent Execution
24 The Digital Asset Trading Counterparties with
which the Sponsor will engage in Portfolio Asset
transactions are unaffiliated third parties that are
not acting as agents of the Trust, the Sponsor or the
Authorized Participant, and all transactions will be
done on an arms-length basis. There is no
contractual relationship between the Trust, the
Sponsor or the Digital Asset Trading Counterparty.
25 The Sponsor will maintain ownership and
control of the Portfolio Assets in a manner
consistent with good delivery requirements for spot
commodity transactions.
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Model, the Authorized Participants will
deliver only cash to create shares and
will receive only cash when redeeming
Shares. Further, Authorized Participants
will not directly or indirectly purchase,
hold, deliver, or receive Portfolio Assets
as part of the creation or redemption
process or otherwise direct the Trust or
a third party with respect to purchasing,
holding, delivering, or receiving
Portfolio Assets as part of the creation
or redemption process. Additionally,
under either the Trust-Directed Trade
Model or the Agent Execution Model,
the Trust will create Shares by receiving
Portfolio Assets from a third party that
is not the Authorized Participant and is
not affiliated with the Sponsor or the
Trust, and the Trust—not the
Authorized Participant—is responsible
for selecting the third party to deliver
the Portfolio Assets. The third party will
not be acting as an agent of the
Authorized Participant with respect to
the delivery of the Portfolio Assets to
the Trust or acting at the direction of the
Authorized Participant with respect to
the delivery of the Portfolio Assets to
the Trust. Additionally, the Trust will
redeem Shares by delivering Portfolio
Assets to a third party that is not the
Authorized Participant and is not
affiliated with the Sponsor or the Trust,
and the Trust—not the Authorized
Participant—is responsible for selecting
the third party to receive the Portfolio
Assets. Finally, the third party will not
be acting as an agent of the Authorized
Participant with respect to the receipt of
Portfolio Assets from the Trust or acting
at the direction of the Authorized
Participant with respect to the receipt of
Portfolio Assets from the Trust.
Acquiring and Selling Portfolio Assets
Pursuant to Creation and Redemption of
Shares Under the Trust-Directed Trade
Model
Under the Trust-Directed Trade
Model, on any Business Day, an
Authorized Participant may create
Shares by placing an order to purchase
one or more Creation Units with the
Transfer Agent through the Marketing
Agent. Such orders are subject to
approval by the Marketing Agent and
the Transfer Agent. To be processed on
the date submitted, creation orders must
be placed before 4:00 p.m. E.T. or the
close of regular trading on the Exchange,
whichever is earlier, but may be
required to be placed earlier at the
discretion of the Sponsor. A purchase
order will be effective on the date it is
received by the Transfer Agent and
approved by the Marketing Agent
(‘‘Purchase Order Date’’).
Creation Units are processed in cash.
By placing a purchase order, an
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Authorized Participant agrees to
deposit, or cause to be deposited, an
amount of cash equal to the quantity of
Portfolio Assets attributable to each
Share of the Trust (net of accrued but
unpaid expenses and liabilities)
multiplied by the number of Shares
(10,000) comprising a Creation Unit (the
‘‘Basket Amount’’). The Sponsor will
cause to be published each Business
Day, prior to the commencement of
trading on the Exchange, the Basket
Amount relating to a Creation Unit
applicable for such Business Day. That
amount is derived by multiplying the
Basket Amount by the value of Portfolio
Assets ascribed by the Pricing Index.
However, the Authorized Participant is
also responsible for any additional cash
required to account for the price at
which the Trust agrees to purchase the
requisite amount of Portfolio Assets
from a Digital Asset Trading
Counterparty to the extent it is greater
than the Pricing Index price on each
Purchase Order Date.
Prior to the delivery of Creation Units,
the Authorized Participant must also
have wired to the Transfer Agent the
nonrefundable transaction fee due for
the creation order. Authorized
Participants may not withdraw a
creation request. If an Authorized
Participant fails to consummate the
foregoing, the order may be cancelled.
Following the acceptance of a
purchase order, the Authorized
Participant must wire the cash amount
described above to the Cash Custodian,
and the Digital Asset Trading
Counterparty must deposit the required
amount of Portfolio Assets with the
Custodian by the end of the day E.T. on
the Business Day following the Purchase
Order Date. The Portfolio Assets will be
purchased from Digital Asset Trading
Counterparties that are not acting as
agents of the Trust or agents of the
Authorized Participant. These
transactions will be done on an armslength basis, and there is no contractual
relationship between the Trust, the
Sponsor, or the Digital Asset Trading
Counterparty to acquire such Portfolio
Assets. Prior to any movement of cash
from the Cash Custodian to the Digital
Asset Trading Counterparty or
movement of Shares from the Transfer
Agent to the Authorized Participant’s
DTC account to settle the transaction,
the Portfolio Assets must be deposited
at the Custodian.
The Digital Asset Trading
Counterparty must deposit the required
amount of Portfolio Assets by end of day
E.T. on the Business Day following the
Purchase Order Date prior to any
movement of cash from the Cash
Custodian or Shares from the Transfer
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Agent. Upon receipt of the deposit
amount of Portfolio Assets at the
Custodian from the Digital Asset
Trading Counterparty, the Custodian
will notify the Sponsor that the Portfolio
Assets have been received. The Sponsor
will then notify the Transfer Agent that
the Portfolio Assets have been received,
and the Transfer Agent will direct DTC
to credit the number of Shares ordered
to the Authorized Participant’s DTC
account and will wire the cash
previously sent by the Authorized
Participant to the Digital Asset Trading
Counterparty to complete settlement of
the Purchase Order and the acquisition
of the Portfolio Assets by the Trust, as
described above.
As between the Trust and the
Authorized Participant, the expense and
risk of the difference between the value
of Portfolio Assets calculated by the
Administrator for daily valuation using
the Pricing Benchmarks and the price at
which the Trust acquires the Portfolio
Assets will be borne solely by the
Authorized Participant to the extent that
the Trust pays more for Portfolio Assets
than the price used by the Trust for
daily valuation. Any such additional
cash amount will be included in the
amount of cash calculated by the
Administrator on the Purchase Order
Date, communicated to the Authorized
Participant on the Purchase Order Date,
and wired by the Authorized Participant
to the Cash Custodian on the day
following the Purchase Order Date. If
the Digital Asset Trading Counterparty
fails to deliver the Portfolio Assets to
the Custodian, no cash is sent from the
Cash Custodian to the Digital Asset
Trading Counterparty, no Shares are
transferred to the Authorized
Participant’s DTC account, the cash is
returned to the Authorized Participant,
and the Purchase Order is cancelled.
Under the Trust-Directed Trade
Model and according to the Registration
Statement, the procedures by which an
Authorized Participant can redeem one
or more Creation Units mirror the
procedures for the creation of Creation
Units. On any Business Day, an
Authorized Participant may place an
order with the Transfer Agent through
the Marketing Agent to redeem one or
more Creation Units. To be processed on
the date submitted, redemption orders
must be placed before 4:00 p.m. E.T. or
the close of regular trading on the
Exchange, whichever is earlier, or
earlier as determined by the Sponsor. A
redemption order will be effective on
the date it is received by the Transfer
Agent and approved by the Marketing
Agent (‘‘Redemption Order Date’’). The
redemption procedures allow
Authorized Participants to redeem
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Creation Units and do not entitle an
individual shareholder to redeem any
Shares in an amount less than a
Creation Unit, or to redeem Creation
Units other than through an Authorized
Participant. In connection with receipt
of a redemption order accepted by the
Marketing Agent and Transfer Agent,
the Sponsor, on behalf of the Trust, is
responsible for selling the Portfolio
Assets to an approved Digital Asset
Trading Counterparty in an amount
equal to the Basket Amount.
The redemption distribution from the
Trust will consist of a transfer to the
redeeming Authorized Participant, or its
agent, of the amount of cash the Trust
received in connection with a sale of the
Basket Amount of Portfolio Assets to a
Digital Asset Trading Counterparty
made pursuant to the redemption order.
The Sponsor will cause to be published
each Business Day, prior to the
commencement of trading on the
Exchange, the redemption distribution
amount relating to a Creation Unit
applicable for such Business Day. The
redemption distribution amount is
derived by multiplying the Basket
Amount by the value of Portfolio Assets
ascribed by the Pricing Benchmarks.
However, as between the Trust and the
Authorized Participant, the expense and
risk of the difference between the value
of Portfolio Assets ascribed by the
Pricing Benchmarks and the price at
which the Trust sells the Portfolio
Assets will be borne solely by the
Authorized Participant to the extent that
the Trust receives less for Portfolio
Assets than the value ascribed by the
Pricing Benchmarks. Prior to the
delivery of Creation Units, the
Authorized Participant must also have
wired to the Transfer Agent the
nonrefundable transaction fee due for
the redemption order.
The redemption distribution due from
the Trust will be delivered by the
Transfer Agent to the Authorized
Participant once the Cash Custodian has
received the cash from the Digital Asset
Trading Counterparty. The Custodian
will not send the Basket Amount of
Portfolio Assets to the Digital Asset
Trading Counterparty until the Cash
Custodian has received the cash from
the Digital Asset Trading Counterparty
and is instructed by the Sponsor to
make such transfer. Once the Digital
Asset Trading Counterparty has sent the
cash to the Cash Custodian in an agreed
upon amount to settle the agreed upon
sale of the Basket Amount of Portfolio
Assets, the Transfer Agent will notify
the Sponsor. The Sponsor will then
notify the Custodian to transfer the
Portfolio Assets to the Digital Asset
Trading Counterparty, and the Transfer
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95859
Agent will wire the cash proceeds to the
Authorized Participant once the Trust’s
DTC account has been credited with the
Shares represented by the Creation Unit
from the redeeming Authorized
Participant. Once the Authorized
Participant has delivered the Shares
represented by the Creation Unit to be
redeemed to the Trust’s DTC account,
the Cash Custodian will wire the
requisite amount of cash to the
Authorized Participant. If the Trust’s
DTC account has not been credited with
all of the Shares of the Creation Unit to
be redeemed, the redemption
distribution will be delayed until such
time as the Transfer Agent confirms
receipt of all such Shares. If the Digital
Asset Trading Counterparty fails to
deliver the cash to the Cash Custodian,
the transaction will be cancelled, and no
transfer of Portfolio Assets or Shares
will occur.
Acquiring and Selling Portfolio Assets
Pursuant to Creation and Redemption of
Shares Under the Agent Execution
Model
Under the Agent Execution Model,
the Prime Execution Agent, acting in an
agency capacity, would conduct
Portfolio Assets purchases and sales on
behalf of the Trust with third parties
through its Coinbase Prime service
pursuant to the Prime Execution Agent
Agreement. To utilize the Agent
Execution Model, the Trust may
maintain some Portfolio Assets or cash
in the Trading Balance with the Prime
Execution Agent. The Prime Execution
Agent Agreement provides that the
Trust does not have an identifiable
claim to any particular Portfolio Assets
(and cash); rather, the Trust’s Trading
Balance represents an entitlement to a
pro rata share of the Portfolio Assets
(and cash) the Prime Execution Agent
holds on behalf of customers who hold
similar entitlements against the Prime
Execution Agent. In this way, the
Trust’s Trading Balance represents an
omnibus claim on the Prime Execution
Agent’s Portfolio Assets (and cash) held
on behalf of the Prime Execution
Agent’s customers.
To avoid having to pre-fund
purchases or sales of Portfolio Assets in
connection with cash creations and
redemptions and sales of Portfolio
Assets to pay Trust expenses not
assumed by the Sponsor, to the extent
applicable, the Trust may borrow
Portfolio Assets or cash as trade credit
(‘‘Trade Credit’’) from Coinbase Credit,
Inc. (the ‘‘Trade Credit Lender’’) on a
short-term basis pursuant to the
Coinbase Credit Committed Trade
Financing Agreement (the ‘‘Trade
Financing Agreement’’).
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On the day of the Purchase Order
Date, the Trust would enter into a
transaction to buy Portfolio Assets
through the Prime Execution Agent for
cash. Because the Trust’s Trading
Balance may not be funded with cash on
the Purchase Order Date for the
purchase of Portfolio Assets in
connection with the Purchase Order
under the Agent Execution Model, the
Trust may borrow Trade Credits in the
form of cash from the Trade Credit
Lender pursuant to the Trade Financing
Agreement or may require the
Authorized Participant to deliver the
required cash for the Purchase Order on
the Purchase Order Date. The extension
of Trade Credits on the Purchase Order
Date allows the Trust to purchase
Portfolio Assets through the Prime
Execution Agent on the Purchase Order
Date, with such Portfolio Assets being
deposited in the Trust’s Trading
Balance.
On the day following the Purchase
Order Date (the ‘‘Purchase Order
Settlement Date’’), the Trust would
deliver Shares to the Authorized
Participant in exchange for cash
received from the Authorized
Participant. Where applicable, the Trust
would use the cash to repay the Trade
Credits borrowed from the Trade Credit
Lender. On the Purchase Order
Settlement Date for a Purchase Order
utilizing the Agent Execution Model,
the Portfolio Assets associated with the
Purchase Order and purchased on the
Purchase Order Date is swept from the
Trust’s Trading Balance with the Prime
Execution Agent to the Trust Digital
Asset Account with the Custodian
pursuant to a regular end-of-day sweep
process. Transfers of Portfolio Assets
into the Trust’s Trading Balance are offchain transactions and transfers from
the Trust’s Trading Balance to the Trust
Digital Asset Account are ‘‘on-chain’’
transactions represented on the Portfolio
Assets blockchains, as applicable. Any
financing fee owed to the Trade Credit
Lender is deemed part of trade
execution costs and embedded in the
trade price for each transaction.
For a Redemption Order utilizing the
Agent Execution Model, on the day of
the Redemption Order Date the Trust
would enter into a transaction to sell
Portfolio Assets through the Prime
Execution Agent for cash. The Trust’s
Trading Balance with the Prime
Execution Agent may not be funded
with Portfolio Assets on trade date for
the sale of Portfolio Assets in
connection with the redemption order
under the Agent Execution Model, when
Portfolio Assets remains in the Trust
Digital Asset Account with the
Custodian at the point of intended
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execution of a sale of Portfolio Assets.
In those circumstances the Trust may
borrow Trade Credits in the form of
Portfolio Assets from the Trade Credit
Lender, which allows the Trust to sell
Portfolio Assets through the Prime
Execution Agent on the Redemption
Order Date, and the cash proceeds are
deposited in the Trust’s Trading Balance
with the Prime Execution Agent. On the
business day following the Redemption
Order Date (the ‘‘Redemption Order
Settlement Date’’) for a redemption
order utilizing the Agent Execution
Model where Trade Credits were
utilized, the Trust delivers cash to the
Authorized Participant in exchange for
Shares received from the Authorized
Participant. In the event Trade Credits
were used, the Trust will use the
Portfolio Assets that are moved from the
Trust Digital Asset Account with the
Custodian to the Trading Balance with
the Prime Execution Agent to repay the
Trade Credits borrowed from the Trade
Credit Lender.
For a redemption of Creation Units
utilizing the Agent Execution Model,
the Sponsor would instruct the
Custodian to prepare to transfer the
Portfolio Assets associated with the
redemption order from the Trust Digital
Asset Account with the Custodian to the
Trust’s Trading Balance with the Prime
Execution Agent. On the Redemption
Order Settlement Date, the Trust would
enter into a transaction to sell Portfolio
Assets through the Prime Execution
Agent for cash, and the Prime Execution
Agent credits the Trust’s Trading
Balance with the cash. On the same day,
the Authorized Participant would
deliver the necessary Shares to the Trust
and the Trust delivers cash to the
Authorized Participant.
Applicable Standard
The Commission has historically
approved or disapproved exchange
filings to list and trade series of Trust
Issued Receipts, including spot,
Commodity-Based Trust Shares, on the
basis of whether the listing exchange
has in place a comprehensive
surveillance sharing agreement with a
regulated market of significant size
related to the underlying commodity to
be held.26 However, the Commission
26 See Securities Exchange Act Release No. 83723
(July 26, 2018), 83 FR 37579 (August 1, 2018) (SRBatsBZX–2016–30) (Order Setting Aside Action by
Delegated Authority and Disapproving a Proposed
Rule Change, as Modified by Amendments No. 1
and 2, to List and Trade Shares of the Winklevoss
Bitcoin Trust) (‘‘Winklevoss Order’’). In the
Winklevoss Order, the Commission set forth both
the importance and definition of a surveilled,
regulated market of significant size, explaining that,
for approved commodity-trust ETPs, ‘‘there has
been in every case at least one significant, regulated
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recently approved the listing and
trading of shares of spot bitcoin
exchange-traded products (‘‘Spot
Bitcoin ETPs’’) and spot ether exchangetraded products (‘‘Spot Ether ETPs’’),
finding that there were sufficient ‘‘other
means’’ of preventing fraud and
manipulation sufficient to satisfy the
requirements of Section 6(b)(5) of the
Exchange Act.27 In each of the Spot
Bitcoin ETP Approval Order and Spot
Ether Approval Order, the Commission
concluded, through a robust correlation
analysis, that fraud or manipulation that
impacts prices in spot bitcoin markets
or spot ether markets would likely
similarly impact CME bitcoin futures
prices and CME ether futures prices,
respectively.28 The Commission further
found that, because the CME’s
surveillance can assist in detecting
those impacts on CME bitcoin futures
prices and CME ether futures prices, a
listing exchange’s CSSA with the CME
can be reasonably expected to assist in
surveilling for fraudulent and
manipulative acts and practices in the
context of the Spot Bitcoin ETPs and
Spot Ether ETPs.29
The Trust is structured and will
operate in a manner materially the same
as the Spot Bitcoin ETPs and Spot Ether
ETPs.30 The Sponsor believes that the
Exchange’s ability to obtain information
market for trading futures on the underlying
commodity—whether gold, silver, platinum,
palladium, or copper—and the ETP listing exchange
has entered into surveillance-sharing agreements
with, or held Intermarket Surveillance Group
membership in common with, that market.’’
Winklevoss Order, 83 FR at 37594.
27 See Securities Exchange Act Release No. 34–
99306 (January 10, 2024), 89 FR 3008 (January 17,
2024) (SR–NYSEARCA–2021–90; SR–NYSEARCA–
2023–44; SRNYSEARCA–2023–58; SR–NASDAQ–
2023–016; SR–NASDAQ–2023–019; SR–CboeBZX–
2023028; SR–CboeBZX–2023–038; SR–CboeBZX–
2023–040; SR–CboeBZX–2023–042; SRCboeBZX–
2023–044; SR–CboeBZX–2023–072) (Order
Granting Accelerated Approval of Proposed Rule
Changes, as Modified by Amendments Thereto, to
List and Trade Bitcoin-Based Commodity-Based
Trust Shares and Trust Units) (the ‘‘Spot Bitcoin
ETP Approval Order’’); Securities Exchange Act
Release No. 100224 (May 23, 2024), 89 FR 46937
(May 30, 2024) (SR–NYSEARCA–2023–70; SR–
NYSEARCA–2024–31; SR–NASDAQ–2023–045;
SR–CboeBZX–2023–069; SR–CboeBZX–2023–070;
SR–CboeBZX–2023–087; SR–CboeBZX–2023–095;
SR–CboeBZX–2024–018) (Order Granting
Accelerated Approval of Proposed Rule Changes, as
Modified by Amendments Thereto, to List and
Trade Shares of Ether-Based Exchange-Traded
Products) (the ‘‘Spot Ether ETP Approval Order’’).
28 See Spot Bitcoin ETP Approval Order, 89 FR
at 3010; Spot Ether ETP Approval Order, 89 FR at
46938.
29 See Spot Bitcoin ETP Approval Order, 89 FR
at 3010; Spot Ether ETP Approval Order, 89 FR at
46938–39.
30 The Sponsor is also the sponsor of the Bitwise
Bitcoin ETF and the Bitwise Ethereum ETF, which
were approved pursuant to the Spot Bitcoin ETP
Approval Order and Spot Ether ETP Approval,
respectively, and which are both currently listed
and traded on NYSE Arca.
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regarding trading in bitcoin futures and
ether futures from the CME, which, like
the Exchange, is a member of the ISG,
would assist the Exchange in detecting
potential fraud or manipulation with
respect to trading in the Shares. The
Sponsor thus believes that, for reasons
similar to those set forth in the Spot
Bitcoin ETP Approval Order and Spot
Ether ETP Approval Order, listing and
trading Shares of the Trust would be
consistent with the requirements of the
Act.
The Sponsor acknowledges that the
Portfolio Assets currently include
minority positions in digital assets that
are not bitcoin or ether. The Sponsor
also represents that, consistent with
proposed Rule 8.800–E(c)(1), no more
than 10% of the weight of its digital
asset holdings will consist of digital
assets concerning which the Exchange
may not be able to obtain information
via the ISG or via a CSSA. In the context
of prior spot digital asset ETP proposal
disapproval orders for bitcoin and ether,
the Commission expressed concerns
about the underlying digital asset
market due to the potential for fraud
and manipulation and has outlined the
reasons why such ETP proposals have
been unable to satisfy these concerns.31
For purposes of the Trust’s proposal, the
Sponsor anticipates that the
Commission may have the same
31 See Securities Exchange Act Release Nos.
83723 (July 26, 2018), 83 FR 37579 (August 1, 2018)
(SR–BatsBZX–2016–30) (Order Setting Aside
Action by Delegated Authority and Disapproving a
Proposed Rule Change, as Modified by
Amendments No. 1 and 2, To List and Trade Shares
of the Winklevoss Bitcoin Fund) (the ‘‘Winklevoss
Order’’); 87267 (October 9, 2019), 84 FR 55382
(October 16, 2019) (SR–NYSEArca–2019–01) (Order
Disapproving a Proposed Rule Change, as Modified
by Amendment No. 1, Relating to the Listing and
Trading of Shares of the Bitwise Bitcoin ETF Fund
Under NYSE Arca Rule 8.201–E) (the ‘‘Bitwise
Order’’); 88284 (February 26, 2020), 85 FR 12595
(March 3, 2020) (SR–NYSEArca–2019–39) (Order
Disapproving a Proposed Rule Change, as Modified
by Amendment No. 1, to Amend NYSE Arca Rule
8.201–E (Commodity-Based Trust Shares) and to
List and Trade Shares of the United States Bitcoin
and Treasury Investment Trust Under NYSE Arca
Rule 8.201–E) (the ‘‘Wilshire Phoenix Order’’);
83904 (August 22, 2018), 83 FR 43934 (August 28,
2018) (SR–NYSEArca–2017–139) (Order
Disapproving a Proposed Rule Change to List and
Trade the Shares of the ProShares Bitcoin ETF and
the ProShares Short Bitcoin ETF); 83912 (August
22, 2018), 83 FR 43912 (August 28, 2018) (SR–
NYSEArca–2018–02) (Order Disapproving a
Proposed Rule Change Relating to Listing and
Trading of the Direxion Daily Bitcoin Bear 1X
Shares, Direxion Daily Bitcoin 1.25X Bull Shares,
Direxion Daily Bitcoin 1.5X Bull Shares, Direxion
Daily Bitcoin 2X Bull Shares, and Direxion Daily
Bitcoin 2X Bear Shares Under NYSE Arca Rule
8.200–E); 83913 (August 22, 2018), 83 FR 43923
(August 28, 2018) (SR–CboeBZX–2018–01) (Order
Disapproving a Proposed Rule Change to List and
Trade the Shares of the GraniteShares Bitcoin ETF
and the GraniteShares Short Bitcoin ETF).
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concerns about digital assets other than
bitcoin and ether.
The Commission has recognized that
a listing exchange could demonstrate
that other means to prevent fraudulent
and manipulative acts and practices are
sufficient to justify dispensing with the
requisite surveillance-sharing
agreement.32 In evaluating the
effectiveness of this type of resistance,
the Commission does not apply a
‘‘cannot be manipulated’’ standard.
Instead, the Commission requires that
such resistance to fraud and
manipulation be novel and beyond
those protections that exist in
traditional commodity markets or equity
markets for which the Commission has
long required surveillance-sharing
agreements in the context of listing
derivative securities products.33 The
Sponsor believes the Trust’s use of the
Reference Prices provided by the
Valuation Vendor to value the Trust’s
holdings and to determine NAV and ITV
for the Trust, in tandem with the Trust’s
cash create and redeem structure
represents a novel means to prevent
fraud and manipulation from impacting
the price of the Shares, by offering
protections beyond those that exist in
traditional commodity markets and
consistent with those that exist in equity
markets.
As described in more detail below,
the Sponsor believes that its use of
Reference Prices accomplishes these
objectives in the following ways:
1. The Valuation Vendor calculates
the Reference Prices for the Portfolio
Assets exclusively through trading
activity on spot digital asset trading
platforms that are ‘‘CME CF Constituent
Trading Platforms.’’
CME CF Constituent Trading
Platforms are identified by the
Valuation Vendor and must meet the
following eligibility criteria, as
determined by the Valuation Vendor:
• The average daily volume of the
venue’s Relevant Pair 34 spot trading
contributed during the observation
window for the Reference Price (i.e.,
3:00 p.m. to 4:00 p.m. E.T.) must exceed
3% for two consecutive calendar
quarters.
• The venue has policies to ensure
fair and transparent market conditions
at all times and has processes in place
to identify and impede illegal, unfair, or
manipulative trading practices.
32 See Winklevoss Order, 84 FR 37580, 37582–91;
Bitwise Order, 84 FR 55383, 55385–406; Wilshire
Phoenix Order, 85 FR 12597.
33 See Winklevoss Order, 84 FR 37582; Wilshire
Phoenix Order, 85 FR 12597.
34 Relevant Pair is defined as each Portfolio Asset
versus the quote for that asset in U.S. Dollar terms.
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95861
• The venue does not impose undue
barriers to entry or restrictions on
market participants, and utilizing the
venue does not expose market
participants to undue credit risk,
operational risk, legal risk, or other
risks.
• The venue complies with
applicable laws and regulations,
including, but not limited to capital
markets regulations, money
transmission regulations, client money
custody regulations, know-your-client
(KYC) regulations, and anti-money
laundering (AML) regulations.
• The venue cooperates with
inquiries and investigations of
regulators and the Administrator upon
request and must execute data sharing
agreements with the CME Group.
Continued compliance with these
criteria is reviewed on an annual basis
by an independent committee, the CME
CF Oversight Committee, and the
Valuation Vendor’s trading platform
selection process has been continuously
audited since 2020.35 As of the date of
this filing, the CME CF Constituent
Trading Platforms are Bitstamp,
Coinbase, Gemini, Kraken, itBit and
LMAX Digital.36 The Sponsor believes
that the Valuation Vendor’s enforcement
of the rigorous criteria applicable to the
CME CF Constituent Trading Platforms
effectively acts as a first line of defense
against manipulation of the Shares by
ensuring that only data from spot
trading platforms equipped to detect
and impede market manipulation is
included in the calculation of the
Reference Prices that will determine the
Trust’s NAV and ITV.
2. The Reference Prices are
administered and provided by the
Valuation Vendor, which is an
Administrator of Benchmarks under the
UK Benchmarks Regime (‘‘BMR’’).
The Valuation Vendor received its
regulatory authorization in 2019 and has
held this regulatory authorization
continuously since then. The Valuation
Vendor’s compliance with the BMR’s
comprehensive regulation of financial
benchmarks has been audited since
2020.37 The Sponsor believes that the
Valuation Vendor is the leading
provider of benchmarks and indices for
regulated financial products that
reference digital assets in the US and
35 The latest IASE 300 Reasonable Assurance
Auditors Report by KPMG is publicly available on
the Valuation Vendor’s website: https://
www.cfbenchmarks.com/legal/audit.
36 The Sponsor notes that, given the rigorous
application of the selection criteria described above,
the list of CME CF Constituent Exchanges has never
included FTX.com, FTX.US, Binance.com, or
Binance.US.
37 See note 35, supra.
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internationally. Reference prices
provided by the Valuation Vendor
underpin derivatives contracts regulated
by the Commodity Futures Trading
Commission and listed by CME Group,
as well as exchange-traded funds offered
by BlackRock, Franklin Templeton, and
the Sponsor under the regulatory
purview of the Commission. In addition,
to ensure compliance with BMR Article
14, the Valuation Vendor conducts
surveillance of its benchmarks. When a
surveillance alert is triggered, the
Valuation Vendor conducts an
investigation, including seeking further
information from CME CF Constituent
Trading Platforms. Each such
investigation is memorialized in a report
shared with the CME CF Cryptocurrency
Committee. The UK Financial Conduct
Authority (‘‘FCA’’) has regulatory
oversight of this process, which is also
subject to audit. The Sponsor believes
that the Valuation Vendor’s robust
surveillance efforts would allow it to
promptly address manipulation or
attempted manipulation of Reference
Prices through a regulatory filing with
the UK FCA and, accordingly, that this
surveillance of the underlying spot
trading platforms constitutes a second
line of defense against manipulation in
the Shares.
3. The Valuation Vendor has in place
information sharing agreements with the
CME CF Constituent Trading Platforms,
from which it draws pricing data to
construct its benchmarks.
These agreements allow the Valuation
Vendor to the obtain identifying
information of any perpetrators of actual
or attempted benchmark manipulation
of any Reference Prices from the CME
CF Constituent Trading Platforms. This
identifying information can then be
shared with the UK FCA for potential
enforcement action under the provisions
of the Market Abuse Regime (MAR),
which specifically proscribes
benchmark manipulation as a criminal
offense in the UK. The Sponsor believes
that the availability of this information
to the Valuation Vendor supports
enforcement and sanction efforts in
response to actual or attempted
manipulation in digital asset markets,
and provides a third line of defense
against any potential manipulation in
the Shares.
*
*
*
*
*
Finally, the Sponsor believes that the
cash creation and redemption structure
of the Trust also underscores the
protections that the Reference Prices
afford to the Trust. The Trust’s Shares
will have their NAV and ITV
determined by the Reference Prices and
because all shares in the Trust will be
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17:09 Dec 02, 2024
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created and redeemed and secondary
traded with cash (not physical digital
assets), any attempts to manipulate
Shares would have to involve
transactions on the spot trading
platforms that are CME CF Constituent
Trading Platforms to be able to
influence the price of the Shares. The
Sponsor believes that the Valuation
Vendor’s surveillance of the CME CF
Constituent Trading Platforms to detect
such activity and the information
sharing mechanisms in place between
the Valuation Vendor and the CME CF
Constituent Trading Platforms would
both deter such activity and facilitate
enforcement action should it occur.
Availability of Information
The Trust’s website (https://
www.bitwiseinvestments.com/) will
include quantitative information on a
per Share basis updated on a daily basis,
including, (i) the current NAV per Share
daily and the prior Business Day’s NAV
per Share and the reported closing price
of the Shares; (ii) the mid-point of the
bid-ask price 38 as of the time the NAV
per Share is calculated (‘‘Bid-Ask
Price’’) and a calculation of the
premium or discount of such price
against such NAV per Share; and (iii)
data in chart format displaying the
frequency distribution of discounts and
premiums of the daily Bid-Ask Price
against the NAV per Share, within
appropriate ranges, for each of the four
previous calendar quarters (or for as
long as the Trust has been trading as an
ETP if shorter). In addition, on each
business day the Trust’s website will
provide pricing information for the
Shares and disclosed the Trust’s
holdings, including: (i) the name of each
Portfolio Asset; (ii) the quantity of each
Portfolio Asset; and (iii) the weighting
of each Portfolio Asset.
One or more major market data
vendors will provide the ITV per Share
updated every 15 seconds, as calculated
by the Exchange or a third party
financial data provider during the
Exchange’s Core Trading Session (9:30
a.m. to 4:00 p.m. E.T.).39 The ITV will
be calculated using the same
methodology as the NAV per Share of
the Trust (as described above),
specifically by using the prior day’s
closing NAV per Share as a base and
updating that value during the NYSE
Arca Core Trading Session to reflect
38 The bid-ask price of the Fund is determined
using the highest bid and lowest offer on the
Consolidated Tape as of the time of calculation of
the closing day NAV.
39 The IFV on a per Share basis disseminated
during the NYSE Arca Core Trading Session should
not be viewed as a real-time update of the NAV,
which is calculated once a day.
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changes in the value of the Trust’s NAV
during the trading day.
The ITV disseminated during the
NYSE Arca Core Trading Session should
not be viewed as an actual real-time
update of the NAV per Share, which
will be calculated only once at the end
of each trading day. The ITV will be
widely disseminated on a per Share
basis every 15 seconds during the NYSE
Arca Core Trading Session by one or
more major market data vendors. In
addition, the ITV will be available
through on-line information services.
The NAV for the Trust will be
calculated by the Administrator once a
day and will be disseminated daily to
all market participants at the same time.
Quotation and last-sale information
regarding the Shares will be
disseminated through the facilities of
the Consolidated Tape Association
(‘‘CTA’’).
Quotation and last sale information
for the Portfolio Assets will be widely
disseminated through a variety of major
market data vendors. In addition, realtime price (and volume) data for the
Portfolio Assets is available by
subscription major market data vendors.
The spot price of the Portfolio Assets is
available on a 24-hour basis from major
market data vendors. Information
relating to trading, including price and
volume information, will be available
from major market data vendors and
from the trading platforms on which the
Portfolio Assets are traded. The normal
trading hours for digital asset trading
platforms are 24-hours per day, 365days per year.
On each business day, the Sponsor
will publish the Reference Prices, the
Trust’s NAV, and the NAV per Share on
the Trust’s website as soon as
practicable after its determination. If the
NAV and NAV per Share have been
calculated using a price per Portfolio
other than the Reference Prices, the
publication on the Trust’s website will
note the valuation methodology used
and the price per Portfolio Asset
resulting from such calculation.
The Trust will provide website
disclosure of its NAV daily. The website
disclosure of the Trust’s NAV will occur
at the same time as the disclosure by the
Administrator of the NAV to Authorized
Participants so that all market
participants are provided such portfolio
information at the same time. Therefore,
the same portfolio information will be
provided on the public website as well
as in electronic files provided to
Authorized Participants. Accordingly,
each investor will have access to the
current NAV of the Trust through the
Trust’s website, as well as from one or
more major market data vendors.
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The value of the Index, as well as
additional information regarding the
Index such as the Index Methodology, is
publicly available on a continuous basis
on the Index Provider’s website.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Trust.40 Trading in Shares of the
Trust will be halted if the circuit breaker
parameters in NYSE Arca Rule 7.12–E
have been reached. Trading also may be
halted because of market conditions or
for reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable.
The Exchange may halt trading during
the day in which an interruption to the
dissemination of the ITV or Index
occurs.41 If the interruption to the
dissemination of the ITV or Index
persists past the trading day in which it
occurred, the Exchange will halt trading
no later than the beginning of the Core
Trading Session following the
interruption. In addition, if the
Exchange becomes aware that the NAV
with respect to the Shares is not
disseminated to all market participants
at the same time, it will halt trading in
the Shares until such time as the NAV
is available to all market participants.
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Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00
a.m. to 8:00 p.m. E.T. in accordance
with NYSE Arca Rule 7.34–E (Early,
Core, and Late Trading Sessions). The
Exchange has appropriate rules to
facilitate transactions in the Shares
during all trading sessions. As provided
in NYSE Arca Rule 7.6–E, the minimum
price variation (‘‘MPV’’) for quoting and
entry of orders in equity securities
traded on the NYSE Arca Marketplace is
$0.01, with the exception of securities
that are priced less than $1.00 for which
the MPV for order entry is $0.0001.
The Shares will conform to the initial
and continued listing criteria under
NYSE Arca Rule 8.800–E, as proposed.
The trading of the Shares will be subject
to proposed NYSE Arca Rule 8.800–E(i),
which sets forth certain restrictions on
Equity Trading Permit Holders (‘‘ETP
Holders’’) acting as registered Market
40 See
NYSE Arca Rule 7.12–E.
limit up/limit down condition in the futures
market would not be considered an interruption
requiring the Trust to be halted.
41 A
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Makers in Commodity-Based Trust
Shares to facilitate surveillance.42 The
Exchange represents that, for initial and
continued listing, the Trust will be in
compliance with Rule 10A–3 under the
Act,43 as provided by NYSE Arca Rule
5.3–E. A minimum of 100,000 Shares of
the Trust will be outstanding at the
commencement of trading on the
Exchange.
Surveillance
The Exchange represents that trading
in the Shares of the Trust will be subject
to the existing trading surveillances
administered by the Exchange, as well
as cross-market surveillances
administered by FINRA on behalf of the
Exchange, which are designed to detect
violations of Exchange rules and
applicable federal securities laws.44 The
Exchange represents that these
procedures are adequate to properly
monitor Exchange trading of the Shares
in all trading sessions and to deter and
detect violations of Exchange rules and
federal securities laws applicable to
trading on the Exchange.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
42 Under NYSE Arca Rule 8.201–E(g), an ETP
Holder acting as a registered Market Maker in the
Shares is required to provide the Exchange with
information relating to its accounts for trading in
the underlying commodity, related futures or
options on futures, or any other related derivatives.
Commentary .04 of NYSE Arca Rule 11.3–E requires
an ETP Holder acting as a registered Market Maker,
and its affiliates, in the Shares to establish,
maintain and enforce written policies and
procedures reasonably designed to prevent the
misuse of any material nonpublic information with
respect to such products, any components of the
related products, any physical asset or commodity
underlying the product, applicable currencies,
underlying indexes, related futures or options on
futures, and any related derivative instruments
(including the Shares). As a general matter, the
Exchange has regulatory jurisdiction over its ETP
Holders and their associated persons, which
include any person or entity controlling an ETP
Holder. To the extent the Exchange may be found
to lack jurisdiction over a subsidiary or affiliate of
an ETP Holder that does business only in
commodities or futures contracts, the Exchange
could obtain information regarding the activities of
such subsidiary or affiliate through surveillance
sharing agreements with regulatory organizations of
which such subsidiary or affiliate is a member.
43 17 CFR 240.10A–3. See note 8, supra.
44 FINRA conducts cross-market surveillances on
behalf of the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
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95863
The Exchange or FINRA, on behalf of
the Exchange, or both, will
communicate as needed regarding
trading in the Shares with other markets
and other entities that are members of
the ISG, and the Exchange or FINRA, on
behalf of the Exchange, or both, may
obtain trading information regarding
trading in the Shares from such markets
and other entities. In addition, the
Exchange may obtain information
regarding trading in the Shares from
markets and other entities that are
members of ISG or with which the
Exchange has in place a CSSA.45 The
Exchange is also able to obtain
information regarding trading in the
Shares in connection with such ETP
Holders’ proprietary or customer trades
which they effect through ETP Holders
on any relevant market.
Under proposed Rule 8.800–E(i), an
ETP Holder acting as a registered Market
Maker in the Shares is required to
provide the Exchange with information
relating to its accounts for trading in any
underlying commodity, related futures
or options on futures, or any other
related derivatives. Commentary .04 of
NYSE Arca Rule 11.3–E requires an ETP
Holder acting as a registered Market
Maker, and its affiliates, in the Shares to
establish, maintain and enforce written
policies and procedures reasonably
designed to prevent the misuse of any
material nonpublic information with
respect to such products, any
components of the related products, any
physical asset or commodity underlying
the product, applicable currencies,
underlying indexes, related futures or
options on futures, and any related
derivative instruments (including the
Shares). As a general matter, the
Exchange has regulatory jurisdiction
over its ETP Holders and their
associated persons, which include any
person or entity controlling an ETP
Holder. To the extent the Exchange may
be found to lack jurisdiction over a
subsidiary or affiliate of an ETP Holder
that does business only in commodities
or futures contracts and that subsidiary
or affiliate is a member of another
regulatory organization, the Exchange
could obtain information regarding the
activities of such subsidiary or affiliate
through a surveillance sharing
45 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
Portfolio Assets may trade on markets that are
members of ISG or with which the Exchange has in
place a CSSA, but that, consistent with proposed
Rule 8.800–E(c)(1), at least 90% of the Trust’s
commodity and/or digital asset holdings will
consist of commodities and/or digital assets
concerning which the Exchange may obtain
information via the ISG, from other members of the
ISG, or via a CSSA.
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agreement with that regulatory
organization.
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
All statements and representations
made in this filing regarding (a) the
description of the portfolios of the
Trust, (b) limitations on portfolio
holdings or reference assets, or (c) the
applicability of Exchange listing rules
specified in this rule filing shall
constitute continued listing
requirements for listing the Shares on
the Exchange.
The Sponsor has represented to the
Exchange that it will advise the
Exchange of any failure by the Trust to
comply with the continued listing
requirements, and, pursuant to its
obligations under Section 19(g)(1) of the
Act, the Exchange will monitor for
compliance with the continued listing
requirements. If the Trust is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
NYSE Arca Rule 5.5–E(m).
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an ‘‘Information
Bulletin’’ of the special characteristics
and risks associated with trading the
Shares. Specifically, the Information
Bulletin will discuss the following: (1)
the procedures for creations of Shares in
Creation Units; (2) NYSE Arca Rule 9.2–
E(a), which imposes a duty of due
diligence on its ETP Holders to learn the
essential facts relating to every customer
prior to trading the Shares; (3)
information regarding how the value of
the ITV and NAV is disseminated; (4)
the possibility that trading spreads and
the resulting premium or discount on
the Shares may widen during the
Opening and Late Trading Sessions,
when an updated ITV will not be
calculated or publicly disseminated; (5)
the requirement that members deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction and (6) trading information.
In addition, the Information Bulletin
will reference that the Trust is subject
to various fees and expenses as
described in the annual report. The
Information Bulletin will disclose that
information about the Shares of the
Trust is publicly available on the Trust’s
website.
The Information Bulletin will also
discuss any relief, if granted, by the
Commission or the staff from any rules
under the Act.
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17:09 Dec 02, 2024
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2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 46 that an
exchange have rules that are designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to, and perfect the
mechanism of a free and open market
and, in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in proposed NYSE Arca
Rule 8.800–E. The Exchange has in
place surveillance procedures that are
adequate to properly monitor trading in
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and applicable federal securities
laws. The Exchange or FINRA, on behalf
of the Exchange, or both, will
communicate as needed regarding
trading in the Shares with other markets
that are members of the ISG, and the
Exchange or FINRA, on behalf of the
Exchange, or both, may obtain trading
information regarding trading in the
Shares and Portfolio Asset derivatives
from such markets. In addition, the
Exchange may obtain information
regarding trading in the Shares and
Portfolio Asset derivatives from markets
that are members of ISG or with which
the Exchange has in place a CSSA. Also,
pursuant to proposed NYSE Arca Rule
8.800–E(i), the Exchange is able to
obtain information regarding Market
Maker accounts for trading in the Shares
and the underlying Portfolio Assets or
any Portfolio Asset derivatives through
ETP Holders acting as registered Market
Makers, in connection with such ETP
Holders’ proprietary or customer trades
through ETP Holders which they effect
on any relevant market.
The proposed rule change is also
designed to prevent fraudulent and
manipulative acts and practices because
the Trust is structured similarly to and
will operate in materially the same
manner as the Spot Bitcoin ETPs and
Spot Ether ETPs previously approved by
the Commission. The Exchange further
believes that the proposed rule change
is designed to prevent fraudulent and
manipulative acts and practices
because, as noted by the Commission in
the Bitcoin ETP Approval Order and
Ether ETP Approval Order, the
Exchange’s ability to obtain information
46 15
PO 00000
U.S.C. 78f(b)(5).
Frm 00133
Fmt 4703
Sfmt 4703
regarding trading in the Shares and
futures from other markets that are
members of the ISG (including the CME)
would assist the Exchange in detecting
and deterring misconduct. In particular,
the CME bitcoin futures market and
CME ether futures market are large,
surveilled, and regulated markets that
are closely connected with the spot
markets for bitcoin and ether,
respectively, through which the
Exchange could obtain information to
assist in detecting and deterring
potential fraud or manipulation.
The proposed rule change is also
designed to prevent fraudulent and
manipulative acts and practices because
the Trust’s use of Reference Prices to
calculate its NAV serves as a means
sufficient to mitigate the impact of
instances of fraud and manipulation on
a reference price for the Portfolio Assets.
As noted above, the Reference Prices for
the Portfolio Assets are calculated by
the Valuation Vendor based exclusively
on trading activity at the CME CF
Constituent Trading Platforms, each of
which must meet robust eligibility
criteria designed to protect the
Reference Prices against fraud and
manipulation. In addition, the Valuation
Vendor is an Administrator of
Benchmarks under the BMR that, among
other things, conducts surveillance of its
benchmarks to detect and investigate
potential manipulation. The Valuation
Vendor also has information sharing
agreements with each of the CME CF
Constituent Trading Platforms that
support access to identifying
information for perpetrators of actual or
attempted manipulation to aid in
pursuing regulatory action against those
actors. The layers of defense provided
by the Trust’s use of Reference Prices to
calculate NAV, in conjunction with the
Trust’s use of cash creations and
redemptions, constitute a novel means
to detect, prevent, and respond to fraud,
attempted fraud, and similar
wrongdoing, including market
manipulation, consistent with the
requirements of the Act.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that there is a
considerable amount of price and
market information available on public
websites and through professional and
subscription services for the Portfolio
Assets. Investors may obtain, on a 24hour basis, Portfolio Asset pricing
information based on the spot price for
the Portfolio Assets from various
financial information service providers.
The closing price and settlement prices
of the Portfolio Assets are readily
available from the Valuation Trading
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Platforms and other publicly available
websites. In addition, such prices are
published in public sources, or on-line
information services such as Bloomberg
and Reuters. The NAV per Share will be
calculated daily and made available to
all market participants at the same time.
The Trust will provide website
disclosure of its NAV daily. One or
more major market data vendors will
disseminate for the Trust on a daily
basis information with respect to the
most recent NAV per Share and Shares
outstanding. In addition, if the
Exchange becomes aware that the NAV
per Share is not disseminated to all
market participants at the same time, it
will halt trading in the Shares until such
time as the NAV is available to all
market participants. Quotation and lastsale information regarding the Shares
will be disseminated through the
facilities of the CTA. The ITV will be
widely disseminated on a per Share
basis every 15 seconds during the NYSE
Arca Core Trading Session (normally
9:30 a.m. E.T. to 4:00 p.m. E.T.) by one
or more major market data vendors. The
Exchange represents that the Exchange
may halt trading during the day in
which an interruption to the
dissemination of the ITV or the value of
the Index occurs. If the interruption to
the dissemination of the ITV or the
value of the Index persists past the
trading day in which it occurred, the
Exchange will halt trading no later than
the beginning of the NYSE Arca Core
Trading Session on the trading day
following the interruption.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of exchange-traded
product that will enhance competition
among market participants, to the
benefit of investors and the marketplace.
As noted above, the Exchange has in
place surveillance procedures relating to
trading in the Shares and may obtain
information via ISG from other
exchanges that are members of ISG or
with which the Exchange has entered
into a CSSA for at least 90% of the
Trust’s commodity and/or digital asset
holdings. In addition, as noted above,
investors will have ready access to
information regarding the Trust’s NAV,
ITV, and quotation and last sale
information for the Shares.
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
VerDate Sep<11>2014
17:09 Dec 02, 2024
Jkt 265001
of the purposes of the Act. The
Exchange notes that the proposed rule
change will facilitate the listing and
trading of an additional type of
exchange-traded product that would
enhance competition among market
participants, to the benefit of investors
and the marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSEARCA–2024–98 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NYSEARCA–2024–98. 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
PO 00000
Frm 00134
Fmt 4703
Sfmt 4703
95865
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSEARCA–2024–98 and should be
submitted on or before December 24,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.47
Stephanie J. Fouse,
Assistant Secretary.
[FR Doc. 2024–28343 Filed 12–2–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101776; File No. SR–Phlx–
2024–63]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Remove Rules Related
to the Nasdaq-100® Volatility Index
November 27, 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, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
47 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\03DEN1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 232 (Tuesday, December 3, 2024)]
[Notices]
[Pages 95853-95865]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28343]
[[Page 95853]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101775; File No. SR-NYSEARCA-2024-98]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Shares of the Bitwise 10
Crypto Index Fund Under Proposed NYSE Arca Rule 8.800-E (Commodity- and
Digital Asset-Based Investment Interests)
November 27, 2024.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on November 14, 2024, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade shares of the Bitwise 10
Crypto Index Fund (the ``Trust'') under proposed NYSE Arca Rule 8.800-E
(Commodity- and/or Digital Asset-Based Investment Interests). 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 recently proposed to adopt new NYSE Arca Rule 8.800-E
to provide for the listing and trading of Commodity- and/or Digital
Asset-Based Investment Interests, which are securities issued by a
trust, limited liability company, or other similar entity that holds
specified commodities, digital assets, Derivative Securities Products,
and/or cash.\4\ The Exchange now proposes to list and trade shares of
the Trust \5\ under proposed NYSE Arca Rule 8.800-E.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 101470 (October 29,
2024), 89 FR 87681 (November 4, 2024) (SR-NYSEARCA-2024-87). Shares
of the Trust will not trade on the Exchange until such time that
both the instant proposed rule change and the proposed rule change
to adopt Rule 8.800-E have been approved by the Commission.
\5\ The Trust is a Delaware statutory trust. Shares of the Trust
currently trade under the symbol BITW on OTCQX. On March 1, 2024,
the Trust filed with the Commission an Annual Report on Form 10-K
for the fiscal year ended December 31, 2023 (the ``Annual Report'').
---------------------------------------------------------------------------
According to the Annual Report, the Trust will not be registered as
an investment company under the Investment Company Act of 1940,\6\ and
is not required to register thereunder. The Trust is not a commodity
pool for purposes of the Commodity Exchange Act.\7\
---------------------------------------------------------------------------
\6\ 15 U.S.C. 80a-1.
\7\ 17 U.S.C. 1.
---------------------------------------------------------------------------
The Exchange represents that the Shares satisfy the requirements of
proposed NYSE Arca Rule 8.800-E and thereby qualify for listing on the
Exchange.\8\
---------------------------------------------------------------------------
\8\ With respect to the application of Rule 10A-3 (17 CFR
240.10A-3) under the Act, the Trust relies on the exemption
contained in Rule 10A-3(c)(7).
---------------------------------------------------------------------------
Operation of the Trust \9\
---------------------------------------------------------------------------
\9\ The description of the operation of the Trust, the Shares,
and digital asset markets contained herein is based, in part, on the
Annual Report. See note 5, supra.
---------------------------------------------------------------------------
The Trust will issue the Shares which, according to the Annual
Report, represent units of undivided beneficial ownership of the Trust.
The Trust is a Delaware statutory trust and will operate pursuant to a
trust agreement (the ``Trust Agreement'') between Bitwise Investment
Advisers, LLC (the ``Sponsor'' or ``Bitwise'') and Delaware Trust
Company, as the Trust's trustee (the ``Trustee''). Coinbase Custody
Trust Company, LLC will maintain custody of the Trust's assets (the
``Custodian''). The Bank of New York Mellon will be the custodian for
the Trust's cash holdings (in such role, the ``Cash Custodian''), as
well as the Trust's administrator (in such role, the ``Administrator'')
and transfer agent (in such role, the ``Transfer Agent'').
According to the Annual Report, the investment objective of the
Trust is to invest in a portfolio of digital assets (each, a
``Portfolio Asset'' and, collectively, ``Portfolio Assets'') that
tracks the Bitwise 10 Large Cap Crypto Index (the ``Index''). The Index
is administered by Bitwise Index Services, LLC, an affiliate of the
Sponsor (the ``Index Provider''). The Trust rebalances monthly
alongside the rebalance of the Index to stay current with any changes
to the Index. As of October 31, 2024, the Trust's Portfolio Assets and
respective weightings are:
------------------------------------------------------------------------
Weight
Portfolio asset Symbol (%)
------------------------------------------------------------------------
Bitcoin................................. BTC 75.10
Ethereum................................ ETH 16.5
Solana.................................. SOL 4.30
XRP..................................... XRP 1.50
Cardano................................. ADA 0.70
Avalanche............................... AVAX 0.60
Chainlink............................... LINK 0.40
Bitcoin Cash............................ BCH 0.40
Polkadot................................ DOT 0.30
Uniswap................................. UNI 0.30
------------------------------------------------------------------------
To determine the Trust's Net Asset Value (``NAV'') at the end of
every Business Day,\10\ the Sponsor will rely on a third-party
valuation vendor, CF Benchmarks Ltd. (the ``Valuation Vendor''), to
calculate and publish the U.S. dollar price for each Portfolio Asset
(each, a ``Reference Price'' and, collectively, the ``Reference
Prices'') as of 4:00 p.m. E.T. using prices from several different
digital asset trading platforms selected by the Valuation Vendor.\11\
Each Reference Price aggregates the trade flow of several major digital
asset trading platforms during an observation window between 3:00 p.m.
and 4:00 p.m. E.T. into the U.S. dollar price of one of each Portfolio
Asset at 4:00 p.m. E.T. The Reference Price calculation is designed
based on the IOSCO Principals for Financial Benchmarks.
---------------------------------------------------------------------------
\10\ For purposes of this filing, a ``Business Day'' is defined
as any day on which the New York Stock Exchange is scheduled to be
open for trading.
\11\ Digital asset trading platforms considered by the Valuation
Vendor currently include Bitstamp, Coinbase, Gemini, itBit, LMAX,
and Kraken. The Valuation Vendor's selection of digital asset
trading platforms from which the Reference Prices may be derived is
further discussed below.
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The Trust's only assets will be Portfolio Assets and cash.\12\ The
Trust
[[Page 95854]]
does not seek to hold any digital assets other than Portfolio Assets
and has expressly disclaimed ownership of any such assets in the event
the Trust ever involuntarily comes into possession of such assets.\13\
The Trust will not use derivatives that may subject the Trust to
counterparty and credit risks. The Trust will process creations and
redemptions in cash. The Trust's only recurring ordinary expense is
expected to be the Sponsor's unitary management fee (the ``Management
Fee''), which will accrue daily and will be payable monthly in arrears.
The Administrator will calculate the Management Fee by applying an
annualized rate to the NAV of the Trust's assets at the end of each
month. Financial institutions authorized to create and redeem Shares
(each, an ``Authorized Participant'') will deliver, or cause to be
delivered, cash in exchange for Shares of the Trust, and the Trust will
deliver cash to Authorized Participants when those Authorized
Participants redeem Shares of the Trust.
---------------------------------------------------------------------------
\12\ The Trust conducts creations and redemptions of its Shares
for cash. Authorized Participants (defined below) will deliver cash
to the Cash Custodian pursuant to creation orders for Shares and the
Cash Custodian will hold such cash until such time as it can be
converted to Portfolio Assets, which the Trust intends to do on the
same Business Day in which such cash is received by the Cash
Custodian. Additionally, the Trust will sell Portfolio Assets in
exchange for cash pursuant to redemption orders of its Shares. In
connection with such sales, an approved Digital Asset Trading
Counterparty (defined below) will send cash to the Cash Custodian.
The Cash Custodian will hold such cash until it can be distributed
to the redeeming Authorized Participant, which it intends to do on
the same Business Day in which it is received. In connection with
the purchases and sales of Portfolio Assets pursuant to its creation
and redemption activity, it is possible that the Trust may retain de
minimis amounts of cash as a result of rounding differences. The
Trust may also initially hold small amounts of cash to initiate
Trust operations in the immediate aftermath of its Registration
Statement being declared effective. Lastly, the Trust may also sell
Portfolio Assets and temporarily hold cash as part of a liquidation
of the Trust or to pay certain extraordinary expenses not assumed by
the Sponsor. Under the Trust Agreement, the Sponsor has agreed to
assume the normal operating expenses of the Trust, subject to
certain limitations. For example, the Trust will bear any
indemnification or litigation liabilities as extraordinary expenses.
In any event, in the ongoing course of business, the amounts of cash
retained by the Trust are not expected to constitute a material
portion of the Trust's holdings.
\13\ The Trust may, from time to time, passively receive, by
virtue of holding Portfolio Assets, certain additional digital
assets (``IR Assets'') or rights to receive IR Assets (``Incidental
Rights'') through a fork of a digital asset network or an airdrop of
assets. The Trust will not seek to acquire such IR Assets or
Incidental Rights. Pursuant to the terms of the Trust Agreement, the
Trust has disclaimed ownership in any such IR Assets and/or
Incidental Rights to make clear that such assets are not and shall
never be considered assets of the Trust and will not be taken into
account for purposes of determining the Trust's NAV or NAV per
Share. Neither the Trust, nor the Sponsor, nor the Custodian, nor
any other person associated with the Trust will, directly or
indirectly, engage in action where any portion of the Trust's
Portfolio Assets becomes subject to any proof-of-stake validation or
is used to earn additional assets or generate income or other
earnings.
---------------------------------------------------------------------------
The Index
The Bitwise Crypto Index Committee (the ``Committee''), convened by
the Index Provider, is the governing body of the Index and is
responsible for developing, maintaining, and adjusting the methodology
by which the Index is constructed (the ``Index Methodology'').\14\ The
Index is comprised of ten digital assets (the ``Index Components'') and
is designed to track the performance of the ten largest digital assets
that currently trade publicly on eligible digital asset trading
platforms, as selected and weighted by free-float market
capitalization. The market capitalization of a digital asset is
calculated by multiplying its price \15\ times its free-float-adjusted
or ``circulating'' \16\ supply. The proportion of each digital asset in
the Index is based on this adjusted market capitalization.
---------------------------------------------------------------------------
\14\ The full Index Methodology is available at https://bitwiseinvestments.com/indexes/methodology.
\15\ Based on the Lukka Prime price.
\16\ According to the Annual Report, circulating supply is the
best approximation of the number of coins available on public
markets. Circulating supply is derived by taking the total number of
existing digital assets native to a specific Blockchain and
subtracting the number of coins verifiably burned, locked, or
reserved (for example, by a foundation).
---------------------------------------------------------------------------
The Index will only consider for eligibility as Index Components
digital assets that satisfy the following criteria:
The digital asset must be a cryptographically secured
digital bearer instrument;
The digital asset must have a price that is not pegged to
another digital asset, fiat currency, group of those currencies, or
hard asset;
The digital asset must be freely traded and can be freely
held for the foreseeable future;
The digital asset must trade on an Eligible Digital Asset
Trading Platform,\17\ without withdrawal issues specific to that
digital asset;
---------------------------------------------------------------------------
\17\ The Committee determines which trading platforms qualify as
Eligible Digital Asset Trading Platforms. To qualify as an Eligible
Digital Asset Trading Platform, a venue must: (1) provide an open
platform for exchanging at least one digital asset for either
another digital asset or for a fiat currency; (2) not be domiciled
in a country, region, or locality that implements meaningful capital
controls on international investors; (3) not be subject to
extraordinary regulatory or legal action that is likely to lead to
unusual pricing, significantly disrupt institutional access to the
market, or disrupt fiat withdrawals; (4) charge fees for trading;
(5) have a functioning, secure, and reliable application programming
interface (API) allowing for the timely ingestion of trade and
volume data; (6) have no significant downtime, withdrawal, or known
security issues; (7) account for more than 1.0% of the combined
trailing 30-day dollar trading volume of all digital assets on
entities that meet the prior listed rules; and (8) in the opinion of
the Committee, have significant real spot trading volume. The list
of Eligible Digital Asset Trading Platforms is reviewed on an annual
basis. As of January 25, 2024, the date that the Committee performed
its 2024 annual review of Eligible Digital Asset Trading Platforms,
the list of Eligible Digital Asset Trading Platforms included
Bitstamp, BitFlyer, Coinbase, Gemini, Kraken, itBit, and LMAX.
---------------------------------------------------------------------------
The digital asset must be custodied by a third-party
custodian regulated as a federally chartered bank or as a state trust
company, that meets additional security practices, insurance
requirements, and business practice requirements as determined by the
Committee; \18\
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\18\ The list of approved custodians is reviewed and updated on
an annual basis, or at the discretion of the Committee. As of
January 23, 2024, the date that the Committee performed its 2024
annual review of eligible custodians, the list of approved
custodians included Anchorage, Bakkt Warehouse, BitGo, Coinbase
Custody, Fidelity Digital Assets, and Gemini Custody.
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The digital asset must have no known security
vulnerabilities, including critical bugs, undue exposure to 51%
attacks, or other factors, as determined by the Committee;
The digital asset must not face undue risk of being deemed
a security under U.S. federal securities laws in the opinion of the
Committee, given present knowable facts and circumstances; \19\
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\19\ The Committee conducts a risk-based assessment that
considers whether the digital asset may be deemed a security under
U.S. federal securities laws and whether it is subject to regulatory
action that may imperil the value of the digital asset. Such
assessment does not preclude legal or regulatory action based on the
presence of a security. The Committee does not engage in legal
analysis of any digital assets or perform any analysis of digital
assets based upon any legal standards. The Committee reviews the
following information to make this determination: (1) public
information to determine if the Commission, any other U.S.
regulatory agency, or any court has made any statements regarding
the digital asset; (2) public information regarding how the digital
asset markets view the digital asset, including whether the digital
asset has been listed on entities such as Coinbase or other U.S.
digital asset trading platforms that would have had access to a
reasonable amount of information when making their determinations to
list the digital asset; (3) public information to undertake
reasonable diligence into the structure and technology of the
digital asset, including reviewing the digital asset's whitepaper if
available and speaking with the sponsor of the digital asset; and
(4) any other information gained from reputable sources that may
impact the Committee's view of the digital asset, including a review
of any websites associated with the digital asset's development. If
the Committee adds a digital asset to the Index, but later becomes
aware of new information that causes the Committee to revalue the
risk profile of such digital asset, the Committee will review such
information and determine whether the digital asset should be
removed from the Index.
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The digital asset must have traded more than 1% of its
free-float-adjusted market capitalization on eligible trading venues
over the past 30 days; and
[[Page 95855]]
The digital asset must have maintained a unit price
greater than $0.01 for the past 30 consecutive days.
The Index is reconstituted on a monthly basis at 4:00 p.m. E.T. on
the last Business Day of each month. As of October 31, 2024, the Index
included the following digital assets, and their weights were as
follows: \20\
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\20\ The weighting of the Trust's Portfolio Assets will differ
slightly from the weightings of the Index Components due to the need
for the Trust to implement actual rebalance transactions, unlike the
Index. The transactions undertaken by the Trust to align the
Portfolio Assets with the Index Components may create transaction
costs, fees, and trading slippage, which may cause the Trust's
performance to deviate slightly from the Index's performance.
------------------------------------------------------------------------
Weight
Digital asset (%)
------------------------------------------------------------------------
Bitcoin...................................................... 75.14
Ethereum..................................................... 16.42
Solana....................................................... 4.30
XRP.......................................................... 1.56
Cardano...................................................... 0.66
Avalanche.................................................... 0.55
Chainlink.................................................... 0.39
Bitcoin Cash................................................. 0.38
Uniswap...................................................... 0.31
Polkadot..................................................... 0.30
------------------------------------------------------------------------
To the extent that a digital asset meets the Index's eligibility
requirements at a future date, it would be considered for inclusion in
the Index in connection with a future rebalancing. Digital assets will
lose eligibility and be removed from the Index at the next monthly
reconstitution event if they violate any of the eligibility
requirements described above for 30 consecutive days.\21\
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\21\ Under extraordinary circumstances, digital assets may lose
eligibility to be Index Components and be removed from the Index on
a same-day basis by a unanimous vote of the quorum of members of the
Committee. Such emergency removals will take place at 4:00 p.m. E.T.
following the conclusion of such decision by the Committee and will
be publicly available on the Sponsor's website.
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The Index is calculated on a daily basis and published on the
Sponsor's website. Should any material change be made to the Index
Methodology that results in a material change to the composition of the
Index and, as part of the Trust's monthly rebalancing process, results
in a material change to the composition of the Trust (which the Sponsor
generally considers to be a change of 10% or more to the Trust or the
Index holdings, but in any event, is also determined at the Trust's
discretion), the Trust will notify shareholders of such material change
by filing a Form 8-K with the Commission.
The Index will implement a rule that will limit the Index
Components and weightings thereof such that at least 90% of the weight
of the Index Components shall, on both an initial and continuing basis,
consist of commodities and/or digital assets concerning which the
Exchange is able to obtain information via the Intermarket Surveillance
Group (``ISG''), from other members of the ISG, or via a comprehensive
surveillance sharing agreement (``CSSA'') at each monthly rebalancing.
This rule will be in effect prior to such time that Shares of the Trust
begin trading on the Exchange.
The Portfolio Assets and Index Components
The Portfolio Assets will consist of the Index Components except
that the Sponsor may determine to exclude a particular Index Component
in its discretion under certain specified circumstances further
described below (including to comply with the proposed requirements of
Rule 8.800-E(e)(1)). The weighting of each Portfolio Asset is generally
expected to be the same as the weighting of the Index Components in the
Index, except when the Sponsor determines to exclude one or more
digital assets from the Portfolio Assets in the rules-based
circumstances set forth below, in which case the weightings of the
Portfolio Assets are generally expected to be calculated proportionally
to the respective Index Components for the remaining Index Components.
The Sponsor will retain discretion to include or exclude individual
digital assets from the Portfolio Assets only in the following
circumstances:
The Sponsor may exclude a digital asset or rebalance the
weighting of an existing Portfolio Asset to the extent its inclusion as
a Portfolio Asset or projected weighting would exceed a threshold that
could, in the Sponsor's sole discretion, require the Trust to register
as an investment company under the Investment Company Act or require
the Sponsor to register as an investment adviser under the Investment
Advisers Act;
None or few of the Authorized Participants or service
providers has the ability to trade or otherwise support a digital
asset;
The Sponsor believes, based on current guidance, that use
or trading of the digital asset raises or potentially raises
significant governmental, policy, or regulatory concerns or is subject
or likely subject to a specialized regulatory regime, such as the U.S.
federal securities or commodities laws or similar laws in other
significant jurisdictions;
The digital asset's underlying code contains, or may
contain, significant flaws or vulnerabilities;
There is limited or no reliable information regarding, or
concerns over the intentions of, the core developers of the digital
asset; or
Any of the existing criteria used by the Index for
inclusion in the Index is found by the Sponsor to prohibit the
inclusion of the digital asset in the Index, in which case, the Sponsor
may, in its sole discretion, cause the Portfolio Assets to deviate from
the Index Components until such time as the Index has taken similar
action.
The Trust does not intend for the Portfolio Assets to deviate from
the Index Components, and the Trust anticipates that such deviation
would likely occur only if the Trust was unable to hold a particular
digital asset included in the Index, if the Trust determined that
holding that particular digital asset would result in significant harm
to shareholders, or if the holding of that digital asset would cause
the Trust's holdings to be inconsistent with the proposed requirements
of Rule 8.800-E(c)(1). The Sponsor will ensure that the Trust's
holdings are consistent with the requirements of Rule 8.800-E(c)(1), as
proposed, by monitoring the weightings of the Portfolio Assets and
Index Components daily and taking any measures as described in the
preceding section to ensure that 90% of the holdings will consist of
commodities and/or digital assets concerning which the Exchange may
obtain information via the ISG, from other members of the ISG, or via
CSSA \22\ and by implementing an Index rule that will limit the Index
Components and weightings such that at least 90% of the weight of such
constituents shall, on both an initial and continuing basis, consist of
the same assets.
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\22\ The Sponsor notes that, as of the date of this filing, the
Index Components and Portfolio Assets that meet this standard are
bitcoin and ether, which make up more than 91% of the Trust and
Index.
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Background on Portfolio Assets
Bitcoin
Bitcoin is the most well-recognized digital asset in the world. As
of October 31, 2024, bitcoin is the largest digital asset in the world
by market capitalization. Bitcoin was invented in 2008 by a
pseudonymous software developer, or a group of software developers,
under the name Satoshi Nakamoto. Nakamoto published a white paper
titled ``Bitcoin: A Peer-to-Peer Electronic Cash System'' on October
31, 2008, which provided the technical outline for launching the
bitcoin network. The network went live on January 3, 2009, when
Nakamoto mined
[[Page 95856]]
the first block of transactions, known as the ``Genesis Block.''
The software underlying the Bitcoin Blockchain determines a number
of key and independent parameters. At the heart of the system lies the
algorithm that enforces that all ledgers converge over time (commonly
known as the ``Consensus Algorithm''). Other important portions of the
system include the rules that deem a transaction valid, a programming
language that allows for different types of transactions to be
executed, and the process through which new digital assets are minted
(commonly known as ``Mining''), and others. The network strictly
enforces the total amount of units issued to converge towards 21
million by the year 2140 through a predetermined schedule.
New bitcoin is created when Miners process blocks of transactions.
In the bitcoin network, this occurs roughly every ten minutes. The
Blockchain periodically adjusts the difficulty of settling transactions
to ensure that cadence remains approximately accurate. The amount of
new bitcoin created each time a block of bitcoin transactions is
processed is predetermined by the software underlying the bitcoin
Blockchain. Initially, the Miner that settled a block of transactions
on the bitcoin Blockchain received 50 bitcoin. That reward was and is
programmed to be cut in half roughly every four years; currently,
Miners receive 3.125 bitcoin for each block of settled transactions.
The bitcoin network is known for being extremely decentralized, as
it is maintained by a network of computers that, joined together,
represents the largest supercomputer in the world. Some believe that
this makes bitcoin more secure and resistant to attacks compared to
other Blockchain networks.
Ethereum
Ether is the native digital asset of Ethereum, the second largest
Blockchain network ranked by market capitalization as of October 31,
2024. Ethereum was described in a white paper in late 2013, and an
online crowdsale to fund development took place between July and August
2014. The network went live in July 2015.
Ethereum was specifically designed to power smart contracts, which
are computer programs intended to enforce the performance of a contract
that parties can codify and agree upon with minimal or no need of
trusted intermediaries.
Ethereum's script language, the programming language that
developers use for creating Blockchain applications, is significantly
more flexible than bitcoin's. This allows the creation of programs that
do general computation instead of only the relatively simple
conditional payments that are possible with bitcoin. As such, a whole
ecosystem of different applications including asset issuance,
decentralized financial applications, identity management, and others
are able to be and have been developed on top of the Ethereum network.
However, Ethereum's more permissive programming language makes the
network inherently less secure because it can increase the odds that a
catastrophic bug in one smart contract could affect the whole network.
Due to Ethereum's focus on enabling innovation on its Blockchain
system, events like hard forks are significantly more common in
Ethereum than in bitcoin. For example, on September 15, 2022, Ethereum
transitioned from a proof-of-work network to a proof-of-stake network.
This infrastructure upgrade was known as ``The Merge.'' This was only
one of several hard forks the Ethereum Blockchain has undergone since
inception. Some consider Ethereum's stance as an advantage, while
others perceive it as a risk, especially as the project grows larger
and the cost of potential mistakes rises.
Solana
Solana is a decentralized blockchain network with a focus on
secure, low-fee, high-speed transactions that are paid for using SOL,
which is the Solana Blockchain's native digital asset. By leveraging
proof-of-history and other breakthrough innovations, Solana allows for
greater throughput than many other Blockchains, with the ability to
scale at the rate of Moore's Law. Solana, like Ethereum, is home to
several use cases including gaming, decentralized finance, and non-
fungible token marketplaces.
XRP
XRP is a digital asset that was created by Chris Larsen, Jed
McCaleb, Arthur Britto, and David Schwartz (the ``XRP Creators'') in
2012. Built out of the frustrations of bitcoin's utility for payments,
the XRP ledger (the ledger to which XRP is native) is designed to be a
global real-time payment and settlement system. The XRP Creators
developed this unique digital asset to solve the scalability concerns
that they believed were inherent in the structure of bitcoin. In
particular, XRP was created to improve the efficiency of payments. To
this end, the open source code (available at https://github.com/ripple/rippled/) was designed to maximize speed, scalability, and stability.
For example, the XRP ledger can accommodate 4,400 transactions per
second. This is, in part, because XRP is not mined like bitcoin, but is
designed for the ledgers to close in seconds based on a system of
consensus. Further, because of the consensus methodology underlying the
XRP design, network transaction fees are substantially lower than
bitcoin, typically less than $0.01. Given the unique qualities of XRP
and the natural suitability of this digital asset to solve the friction
experience with payments, the XRP Creators started a company, calling
it Ripple, to further develop the ecosystem around XRP and build
software solutions to address the friction in sending, processing, and
sourcing liquidity for global payments. Thus, the company, Ripple,
began as, and continues to be, a payments software company. Today,
Ripple is focused on designing and deploying state-of-the-art and
industry-leading software to enable banks and financial institutions to
more easily effect cross-border payments. For maximum efficiency,
Ripple's software can integrate XRP to solve liquidity and value
transfer challenges.
Cardano
Cardano is a proof-of-stake Blockchain and smart contract platform
that facilitates secure payments and enables developers to build
decentralized applications. Grounded in research and academia, the
protocol and its token were named after 16th and 19th century
polymaths, and its programming language, Haskell, is commonly used in
the traditional finance and security sectors.
Avalanche
Avalanche is a Blockchain ecosystem that is home to several
applications across a variety of use cases including, but not limited
to, gaming and decentralized finance. Avalanche's design makes it
relatively easy for developers to deploy applications to and from
Ethereum. Avalanche was designed to be a faster and cheaper alternative
to other Blockchains for purposes of a better user and developer
experience. For example, the network leverages its different built-in
Blockchains for enhanced transaction speeds at economically feasible
costs. To that end, some of its built-in Blockchains are dedicated to
specific use cases and/or applications to avoid network congestion the
popularity of other applications can cause.
[[Page 95857]]
Chainlink
Chainlink is a network that connects smart contracts with real
world data. Blockchain networks are unaware of what happens outside of
those networks, and therefore whenever a Blockchain application needs
to interact with external data, it needs a reliable data source to do
so. These data sources are known in the industry as ``Oracles.''
Relying on one Oracle creates a single point of failure, and Chainlink
aims to solve this issue by providing a decentralized network of
multiple Oracles that can evaluate the same data. The accuracy of this
data can be important if this data is used to trigger activity on a
smart contract or other Blockchain application. Chainlink provides
price reference data feeds for decentralized finance, and also allows
users to create their own Oracle networks. Larger enterprises can also
use Chainlink to sell their data to smart contracts that need them to
trigger a certain condition. Current use cases for Chainlink include
stable digital assets, decentralized lending and borrowing, and asset
management.
Bitcoin Cash
Bitcoin Cash is a proof-of-work lockchain that was created as a
hard fork of bitcoin on August 1, 2017. At inception, the most
significant difference between Bitcoin Cash's Blockchain design and the
Blockchain design of bitcoin was Bitcoin Cash's adoption of larger
block sizes. Larger block sizes allow the Bitcoin Cash Blockchain to
process more transactions per second than the bitcoin Blockchain.
Uniswap
Uniswap is the governance token of the Uniswap protocol. Over the
past five years, Uniswap has emerged as a leading decentralized
exchange for digital assets. Uniswap's automated platform lets traders
exchange digital assets in the same way they do on centralized trading
venues like Coinbase, but without a company standing in the middle of
the transaction. Additionally, Uniswap's decentralized structure allows
any individual to act as a market maker and provide liquidity on the
platform, earning yield while facing risk.
Polkadot
Polkadot is a proof-of-stake Blockchain that leverages a newer
infrastructure design to that of Solana's and Ethereum's. For purposes
of enhanced performance, Polkadot splits up the workload by hosting
various independent blockchains on top of one central blockchain, known
as the Relay Chain. The purpose of the Relay Chain is to provide
ecosystem support, notably in terms of security and interoperability.
Custody of the Trust's Portfolio Assets
The Custodian will maintain custody of the Portfolio Assets, other
than that which is maintained in a trading account (the ``Trading
Balance'') with Coinbase, Inc. (the ``Prime Execution Agent,'' which is
an affiliate of the Custodian). The Custodian will maintain an account
that holds the Trust's Portfolio Assets (the ``Trust Digital Asset
Account'') and will facilitate the transfer of Portfolio Assets
required for the operation of the Trust. The Trading Balance will only
be used in the limited circumstances in which the Trust is using the
Agent Execution Model (as defined below) to effectuate the purchases
and sales of Portfolio Assets. The Custodian provides safekeeping of
Portfolio Assets using a multi-layer cold storage security platform
designed to provide offline security of the Portfolio Assets held by
the Custodian.
Valuation of the Trust's Portfolio Assets and Determination of NAV
The net assets of the Trust and its Shares are valued on a daily
basis by the Valuation Vendor. The Trust uses the Reference Prices to
calculate its NAV.
The Sponsor, in its sole discretion, may cause the Trust to price
its portfolio based upon an index, benchmark, or standard other than
the Reference Prices at any time, with prior notice to the
shareholders, if investment conditions change or the Sponsor believes
that another index, benchmark, or standard better aligns with the
Trust's investment objective and strategy. The Sponsor may make this
decision for a number of reasons, including, but not limited to, a
determination that the Reference Prices differ materially from the
global market price of the Portfolio Assets and/or that third parties
are able to purchase and sell Portfolio Assets on public or private
markets not included among the Valuation Trading Platforms, and such
transactions may take place at prices materially higher or lower than
the Reference Prices. The Sponsor, however, is under no obligation
whatsoever to make such changes in any circumstance. In the event that
the Sponsor intends to establish the Trust's NAV by reference to an
index, benchmark, or standard other than Reference Prices, it will
provide shareholders with notice in a prospectus supplement and/or
through a current report on Form 8-K or in the Trust's annual or
quarterly reports.\23\
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\23\ The Sponsor will provide notice of any such changes in the
Trust's periodic or current reports and, if the Sponsor makes such a
change other than on an ad hoc or temporary basis, will file a
proposed rule change with the Commission.
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The Trust's only assets will be Portfolio Assets and, under limited
circumstances, cash. The Trust's NAV and NAV per Share will be
determined by the Administrator once each Exchange trading day as of
4:00 p.m. E.T., or as soon thereafter as practicable. The Administrator
will calculate the NAV by multiplying the Portfolio Assets held by the
Trust by their respective Reference Prices for such day, adding any
additional receivables and subtracting the accrued but unpaid
liabilities of the Trust. The NAV per Share is calculated by dividing
the NAV by the number of Shares then outstanding. The Valuation Vendor
will determine the price of the Trust's Portfolio Assets by reference
to the Valuation Trading Platforms.
Intraday Trust Value
The Trust uses the real-time prices published by the Valuation
Vendor for each Portfolio Asset to calculate an Indicative Trust Value
(``ITV''). One or more major market data vendors will disseminate the
ITV, updated every 15 seconds each trading day as calculated by the
Exchange or a third-party financial data provider during the Exchange's
Core Trading Session (9:30 a.m. to 4:00 p.m. E.T.). The ITV will be
calculated throughout the trading day by using the prior day's holdings
at the close of business and the most recently reported price level of
the real-time prices for each Portfolio Asset published by the
Valuation Vendor. The ITV will be widely disseminated by one or more
major market data vendors during the NYSE Arca Core Trading Session.
Creation and Redemption of Shares
The Trust creates and redeems Shares from time to time, but only in
one or more Creation Units, which will initially consist of at least
10,000 Shares, but may be subject to change (``Creation Unit''). A
Creation Unit is only made in exchange for delivery to the Trust or the
distribution by the Trust of an amount of cash, equivalent to the value
of Portfolio Assets represented by the Creation Unit being created or
redeemed, the amount of which is representative of the combined NAV of
the number of Shares included in the Creation Units being created or
redeemed determined as of 4:00 p.m. E.T. on the day the order to create
or redeem Creation Units is properly
[[Page 95858]]
received. Except when aggregated in Creation Units or under
extraordinary circumstances permitted under the Trust Agreement, the
Shares are not redeemable securities.
Authorized Participants are the only persons that may place orders
to create and redeem Creation Units. Authorized Participants must be
(1) registered broker-dealers or other securities market participants,
such as banks and other financial institutions, that are not required
to register as broker-dealers to engage in securities transactions
described below, and (2) Depository Trust Company (``DTC'')
participants. To become an Authorized Participant, a person must enter
into an Authorized Participant Agreement with the Trust and/or the
Trust's marketing agent (the ``Marketing Agent'').
When purchasing or selling Portfolio Assets in response to the
purchase of Creation Units or the redemption of Creation Units, which
will be processed in cash, the Trust would do so pursuant to either (1)
a ``Trust-Directed Trade Model,'' or (2) an ``Agent Execution Model,''
which are each described in more detail below.
The Trust intends to utilize the Trust-Directed Trade Model for all
purchases and sales of Portfolio Assets and would only utilize the
Agent Execution Model in the event that no digital asset trading
counterparty approved by the Sponsor (a ``Digital Asset Trading
Counterparty'') \24\ is able to effectuate the Trust's purchase or sale
of Portfolio Assets. Under the Trust-Directed Trade Model, in
connection with receipt of a purchase order or redemption order, the
Sponsor, on behalf of the Trust, would be responsible for acquiring
Portfolio Assets from an approved Digital Asset Trading Counterparty in
an amount equal to the Basket Amount. When seeking to purchase
Portfolio Assets on behalf of the Trust, the Sponsor will seek to
purchase Portfolio Assets at commercially reasonable prices and terms
from any of the approved Digital Asset Trading Counterparties.\25\ Once
agreed upon, the transaction will generally occur on an ``over-the-
counter'' basis.
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\24\ The Digital Asset Trading Counterparties with which the
Sponsor will engage in Portfolio Asset transactions are unaffiliated
third parties that are not acting as agents of the Trust, the
Sponsor or the Authorized Participant, and all transactions will be
done on an arms-length basis. There is no contractual relationship
between the Trust, the Sponsor or the Digital Asset Trading
Counterparty.
\25\ The Sponsor will maintain ownership and control of the
Portfolio Assets in a manner consistent with good delivery
requirements for spot commodity transactions.
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Whether utilizing the Trust-Directed Trade Model or the Agent
Execution Model, the Authorized Participants will deliver only cash to
create shares and will receive only cash when redeeming Shares.
Further, Authorized Participants will not directly or indirectly
purchase, hold, deliver, or receive Portfolio Assets as part of the
creation or redemption process or otherwise direct the Trust or a third
party with respect to purchasing, holding, delivering, or receiving
Portfolio Assets as part of the creation or redemption process.
Additionally, under either the Trust-Directed Trade Model or the Agent
Execution Model, the Trust will create Shares by receiving Portfolio
Assets from a third party that is not the Authorized Participant and is
not affiliated with the Sponsor or the Trust, and the Trust--not the
Authorized Participant--is responsible for selecting the third party to
deliver the Portfolio Assets. The third party will not be acting as an
agent of the Authorized Participant with respect to the delivery of the
Portfolio Assets to the Trust or acting at the direction of the
Authorized Participant with respect to the delivery of the Portfolio
Assets to the Trust. Additionally, the Trust will redeem Shares by
delivering Portfolio Assets to a third party that is not the Authorized
Participant and is not affiliated with the Sponsor or the Trust, and
the Trust--not the Authorized Participant--is responsible for selecting
the third party to receive the Portfolio Assets. Finally, the third
party will not be acting as an agent of the Authorized Participant with
respect to the receipt of Portfolio Assets from the Trust or acting at
the direction of the Authorized Participant with respect to the receipt
of Portfolio Assets from the Trust.
Acquiring and Selling Portfolio Assets Pursuant to Creation and
Redemption of Shares Under the Trust-Directed Trade Model
Under the Trust-Directed Trade Model, on any Business Day, an
Authorized Participant may create Shares by placing an order to
purchase one or more Creation Units with the Transfer Agent through the
Marketing Agent. Such orders are subject to approval by the Marketing
Agent and the Transfer Agent. To be processed on the date submitted,
creation orders must be placed before 4:00 p.m. E.T. or the close of
regular trading on the Exchange, whichever is earlier, but may be
required to be placed earlier at the discretion of the Sponsor. A
purchase order will be effective on the date it is received by the
Transfer Agent and approved by the Marketing Agent (``Purchase Order
Date'').
Creation Units are processed in cash. By placing a purchase order,
an Authorized Participant agrees to deposit, or cause to be deposited,
an amount of cash equal to the quantity of Portfolio Assets
attributable to each Share of the Trust (net of accrued but unpaid
expenses and liabilities) multiplied by the number of Shares (10,000)
comprising a Creation Unit (the ``Basket Amount''). The Sponsor will
cause to be published each Business Day, prior to the commencement of
trading on the Exchange, the Basket Amount relating to a Creation Unit
applicable for such Business Day. That amount is derived by multiplying
the Basket Amount by the value of Portfolio Assets ascribed by the
Pricing Index. However, the Authorized Participant is also responsible
for any additional cash required to account for the price at which the
Trust agrees to purchase the requisite amount of Portfolio Assets from
a Digital Asset Trading Counterparty to the extent it is greater than
the Pricing Index price on each Purchase Order Date.
Prior to the delivery of Creation Units, the Authorized Participant
must also have wired to the Transfer Agent the nonrefundable
transaction fee due for the creation order. Authorized Participants may
not withdraw a creation request. If an Authorized Participant fails to
consummate the foregoing, the order may be cancelled.
Following the acceptance of a purchase order, the Authorized
Participant must wire the cash amount described above to the Cash
Custodian, and the Digital Asset Trading Counterparty must deposit the
required amount of Portfolio Assets with the Custodian by the end of
the day E.T. on the Business Day following the Purchase Order Date. The
Portfolio Assets will be purchased from Digital Asset Trading
Counterparties that are not acting as agents of the Trust or agents of
the Authorized Participant. These transactions will be done on an arms-
length basis, and there is no contractual relationship between the
Trust, the Sponsor, or the Digital Asset Trading Counterparty to
acquire such Portfolio Assets. Prior to any movement of cash from the
Cash Custodian to the Digital Asset Trading Counterparty or movement of
Shares from the Transfer Agent to the Authorized Participant's DTC
account to settle the transaction, the Portfolio Assets must be
deposited at the Custodian.
The Digital Asset Trading Counterparty must deposit the required
amount of Portfolio Assets by end of day E.T. on the Business Day
following the Purchase Order Date prior to any movement of cash from
the Cash Custodian or Shares from the Transfer
[[Page 95859]]
Agent. Upon receipt of the deposit amount of Portfolio Assets at the
Custodian from the Digital Asset Trading Counterparty, the Custodian
will notify the Sponsor that the Portfolio Assets have been received.
The Sponsor will then notify the Transfer Agent that the Portfolio
Assets have been received, and the Transfer Agent will direct DTC to
credit the number of Shares ordered to the Authorized Participant's DTC
account and will wire the cash previously sent by the Authorized
Participant to the Digital Asset Trading Counterparty to complete
settlement of the Purchase Order and the acquisition of the Portfolio
Assets by the Trust, as described above.
As between the Trust and the Authorized Participant, the expense
and risk of the difference between the value of Portfolio Assets
calculated by the Administrator for daily valuation using the Pricing
Benchmarks and the price at which the Trust acquires the Portfolio
Assets will be borne solely by the Authorized Participant to the extent
that the Trust pays more for Portfolio Assets than the price used by
the Trust for daily valuation. Any such additional cash amount will be
included in the amount of cash calculated by the Administrator on the
Purchase Order Date, communicated to the Authorized Participant on the
Purchase Order Date, and wired by the Authorized Participant to the
Cash Custodian on the day following the Purchase Order Date. If the
Digital Asset Trading Counterparty fails to deliver the Portfolio
Assets to the Custodian, no cash is sent from the Cash Custodian to the
Digital Asset Trading Counterparty, no Shares are transferred to the
Authorized Participant's DTC account, the cash is returned to the
Authorized Participant, and the Purchase Order is cancelled.
Under the Trust-Directed Trade Model and according to the
Registration Statement, the procedures by which an Authorized
Participant can redeem one or more Creation Units mirror the procedures
for the creation of Creation Units. On any Business Day, an Authorized
Participant may place an order with the Transfer Agent through the
Marketing Agent to redeem one or more Creation Units. To be processed
on the date submitted, redemption orders must be placed before 4:00
p.m. E.T. or the close of regular trading on the Exchange, whichever is
earlier, or earlier as determined by the Sponsor. A redemption order
will be effective on the date it is received by the Transfer Agent and
approved by the Marketing Agent (``Redemption Order Date''). The
redemption procedures allow Authorized Participants to redeem Creation
Units and do not entitle an individual shareholder to redeem any Shares
in an amount less than a Creation Unit, or to redeem Creation Units
other than through an Authorized Participant. In connection with
receipt of a redemption order accepted by the Marketing Agent and
Transfer Agent, the Sponsor, on behalf of the Trust, is responsible for
selling the Portfolio Assets to an approved Digital Asset Trading
Counterparty in an amount equal to the Basket Amount.
The redemption distribution from the Trust will consist of a
transfer to the redeeming Authorized Participant, or its agent, of the
amount of cash the Trust received in connection with a sale of the
Basket Amount of Portfolio Assets to a Digital Asset Trading
Counterparty made pursuant to the redemption order. The Sponsor will
cause to be published each Business Day, prior to the commencement of
trading on the Exchange, the redemption distribution amount relating to
a Creation Unit applicable for such Business Day. The redemption
distribution amount is derived by multiplying the Basket Amount by the
value of Portfolio Assets ascribed by the Pricing Benchmarks. However,
as between the Trust and the Authorized Participant, the expense and
risk of the difference between the value of Portfolio Assets ascribed
by the Pricing Benchmarks and the price at which the Trust sells the
Portfolio Assets will be borne solely by the Authorized Participant to
the extent that the Trust receives less for Portfolio Assets than the
value ascribed by the Pricing Benchmarks. Prior to the delivery of
Creation Units, the Authorized Participant must also have wired to the
Transfer Agent the nonrefundable transaction fee due for the redemption
order.
The redemption distribution due from the Trust will be delivered by
the Transfer Agent to the Authorized Participant once the Cash
Custodian has received the cash from the Digital Asset Trading
Counterparty. The Custodian will not send the Basket Amount of
Portfolio Assets to the Digital Asset Trading Counterparty until the
Cash Custodian has received the cash from the Digital Asset Trading
Counterparty and is instructed by the Sponsor to make such transfer.
Once the Digital Asset Trading Counterparty has sent the cash to the
Cash Custodian in an agreed upon amount to settle the agreed upon sale
of the Basket Amount of Portfolio Assets, the Transfer Agent will
notify the Sponsor. The Sponsor will then notify the Custodian to
transfer the Portfolio Assets to the Digital Asset Trading
Counterparty, and the Transfer Agent will wire the cash proceeds to the
Authorized Participant once the Trust's DTC account has been credited
with the Shares represented by the Creation Unit from the redeeming
Authorized Participant. Once the Authorized Participant has delivered
the Shares represented by the Creation Unit to be redeemed to the
Trust's DTC account, the Cash Custodian will wire the requisite amount
of cash to the Authorized Participant. If the Trust's DTC account has
not been credited with all of the Shares of the Creation Unit to be
redeemed, the redemption distribution will be delayed until such time
as the Transfer Agent confirms receipt of all such Shares. If the
Digital Asset Trading Counterparty fails to deliver the cash to the
Cash Custodian, the transaction will be cancelled, and no transfer of
Portfolio Assets or Shares will occur.
Acquiring and Selling Portfolio Assets Pursuant to Creation and
Redemption of Shares Under the Agent Execution Model
Under the Agent Execution Model, the Prime Execution Agent, acting
in an agency capacity, would conduct Portfolio Assets purchases and
sales on behalf of the Trust with third parties through its Coinbase
Prime service pursuant to the Prime Execution Agent Agreement. To
utilize the Agent Execution Model, the Trust may maintain some
Portfolio Assets or cash in the Trading Balance with the Prime
Execution Agent. The Prime Execution Agent Agreement provides that the
Trust does not have an identifiable claim to any particular Portfolio
Assets (and cash); rather, the Trust's Trading Balance represents an
entitlement to a pro rata share of the Portfolio Assets (and cash) the
Prime Execution Agent holds on behalf of customers who hold similar
entitlements against the Prime Execution Agent. In this way, the
Trust's Trading Balance represents an omnibus claim on the Prime
Execution Agent's Portfolio Assets (and cash) held on behalf of the
Prime Execution Agent's customers.
To avoid having to pre-fund purchases or sales of Portfolio Assets
in connection with cash creations and redemptions and sales of
Portfolio Assets to pay Trust expenses not assumed by the Sponsor, to
the extent applicable, the Trust may borrow Portfolio Assets or cash as
trade credit (``Trade Credit'') from Coinbase Credit, Inc. (the ``Trade
Credit Lender'') on a short-term basis pursuant to the Coinbase Credit
Committed Trade Financing Agreement (the ``Trade Financing
Agreement'').
[[Page 95860]]
On the day of the Purchase Order Date, the Trust would enter into a
transaction to buy Portfolio Assets through the Prime Execution Agent
for cash. Because the Trust's Trading Balance may not be funded with
cash on the Purchase Order Date for the purchase of Portfolio Assets in
connection with the Purchase Order under the Agent Execution Model, the
Trust may borrow Trade Credits in the form of cash from the Trade
Credit Lender pursuant to the Trade Financing Agreement or may require
the Authorized Participant to deliver the required cash for the
Purchase Order on the Purchase Order Date. The extension of Trade
Credits on the Purchase Order Date allows the Trust to purchase
Portfolio Assets through the Prime Execution Agent on the Purchase
Order Date, with such Portfolio Assets being deposited in the Trust's
Trading Balance.
On the day following the Purchase Order Date (the ``Purchase Order
Settlement Date''), the Trust would deliver Shares to the Authorized
Participant in exchange for cash received from the Authorized
Participant. Where applicable, the Trust would use the cash to repay
the Trade Credits borrowed from the Trade Credit Lender. On the
Purchase Order Settlement Date for a Purchase Order utilizing the Agent
Execution Model, the Portfolio Assets associated with the Purchase
Order and purchased on the Purchase Order Date is swept from the
Trust's Trading Balance with the Prime Execution Agent to the Trust
Digital Asset Account with the Custodian pursuant to a regular end-of-
day sweep process. Transfers of Portfolio Assets into the Trust's
Trading Balance are off-chain transactions and transfers from the
Trust's Trading Balance to the Trust Digital Asset Account are ``on-
chain'' transactions represented on the Portfolio Assets blockchains,
as applicable. Any financing fee owed to the Trade Credit Lender is
deemed part of trade execution costs and embedded in the trade price
for each transaction.
For a Redemption Order utilizing the Agent Execution Model, on the
day of the Redemption Order Date the Trust would enter into a
transaction to sell Portfolio Assets through the Prime Execution Agent
for cash. The Trust's Trading Balance with the Prime Execution Agent
may not be funded with Portfolio Assets on trade date for the sale of
Portfolio Assets in connection with the redemption order under the
Agent Execution Model, when Portfolio Assets remains in the Trust
Digital Asset Account with the Custodian at the point of intended
execution of a sale of Portfolio Assets. In those circumstances the
Trust may borrow Trade Credits in the form of Portfolio Assets from the
Trade Credit Lender, which allows the Trust to sell Portfolio Assets
through the Prime Execution Agent on the Redemption Order Date, and the
cash proceeds are deposited in the Trust's Trading Balance with the
Prime Execution Agent. On the business day following the Redemption
Order Date (the ``Redemption Order Settlement Date'') for a redemption
order utilizing the Agent Execution Model where Trade Credits were
utilized, the Trust delivers cash to the Authorized Participant in
exchange for Shares received from the Authorized Participant. In the
event Trade Credits were used, the Trust will use the Portfolio Assets
that are moved from the Trust Digital Asset Account with the Custodian
to the Trading Balance with the Prime Execution Agent to repay the
Trade Credits borrowed from the Trade Credit Lender.
For a redemption of Creation Units utilizing the Agent Execution
Model, the Sponsor would instruct the Custodian to prepare to transfer
the Portfolio Assets associated with the redemption order from the
Trust Digital Asset Account with the Custodian to the Trust's Trading
Balance with the Prime Execution Agent. On the Redemption Order
Settlement Date, the Trust would enter into a transaction to sell
Portfolio Assets through the Prime Execution Agent for cash, and the
Prime Execution Agent credits the Trust's Trading Balance with the
cash. On the same day, the Authorized Participant would deliver the
necessary Shares to the Trust and the Trust delivers cash to the
Authorized Participant.
Applicable Standard
The Commission has historically approved or disapproved exchange
filings to list and trade series of Trust Issued Receipts, including
spot, Commodity-Based Trust Shares, on the basis of whether the listing
exchange has in place a comprehensive surveillance sharing agreement
with a regulated market of significant size related to the underlying
commodity to be held.\26\ However, the Commission recently approved the
listing and trading of shares of spot bitcoin exchange-traded products
(``Spot Bitcoin ETPs'') and spot ether exchange-traded products (``Spot
Ether ETPs''), finding that there were sufficient ``other means'' of
preventing fraud and manipulation sufficient to satisfy the
requirements of Section 6(b)(5) of the Exchange Act.\27\ In each of the
Spot Bitcoin ETP Approval Order and Spot Ether Approval Order, the
Commission concluded, through a robust correlation analysis, that fraud
or manipulation that impacts prices in spot bitcoin markets or spot
ether markets would likely similarly impact CME bitcoin futures prices
and CME ether futures prices, respectively.\28\ The Commission further
found that, because the CME's surveillance can assist in detecting
those impacts on CME bitcoin futures prices and CME ether futures
prices, a listing exchange's CSSA with the CME can be reasonably
expected to assist in surveilling for fraudulent and manipulative acts
and practices in the context of the Spot Bitcoin ETPs and Spot Ether
ETPs.\29\
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\26\ See Securities Exchange Act Release No. 83723 (July 26,
2018), 83 FR 37579 (August 1, 2018) (SR-BatsBZX-2016-30) (Order
Setting Aside Action by Delegated Authority and Disapproving a
Proposed Rule Change, as Modified by Amendments No. 1 and 2, to List
and Trade Shares of the Winklevoss Bitcoin Trust) (``Winklevoss
Order''). In the Winklevoss Order, the Commission set forth both the
importance and definition of a surveilled, regulated market of
significant size, explaining that, for approved commodity-trust
ETPs, ``there has been in every case at least one significant,
regulated market for trading futures on the underlying commodity--
whether gold, silver, platinum, palladium, or copper--and the ETP
listing exchange has entered into surveillance-sharing agreements
with, or held Intermarket Surveillance Group membership in common
with, that market.'' Winklevoss Order, 83 FR at 37594.
\27\ See Securities Exchange Act Release No. 34-99306 (January
10, 2024), 89 FR 3008 (January 17, 2024) (SR-NYSEARCA-2021-90; SR-
NYSEARCA-2023-44; SRNYSEARCA-2023-58; SR-NASDAQ-2023-016; SR-NASDAQ-
2023-019; SR-CboeBZX-2023028; SR-CboeBZX-2023-038; SR-CboeBZX-2023-
040; SR-CboeBZX-2023-042; SRCboeBZX-2023-044; SR-CboeBZX-2023-072)
(Order Granting Accelerated Approval of Proposed Rule Changes, as
Modified by Amendments Thereto, to List and Trade Bitcoin-Based
Commodity-Based Trust Shares and Trust Units) (the ``Spot Bitcoin
ETP Approval Order''); Securities Exchange Act Release No. 100224
(May 23, 2024), 89 FR 46937 (May 30, 2024) (SR-NYSEARCA-2023-70; SR-
NYSEARCA-2024-31; SR-NASDAQ-2023-045; SR-CboeBZX-2023-069; SR-
CboeBZX-2023-070; SR-CboeBZX-2023-087; SR-CboeBZX-2023-095; SR-
CboeBZX-2024-018) (Order Granting Accelerated Approval of Proposed
Rule Changes, as Modified by Amendments Thereto, to List and Trade
Shares of Ether-Based Exchange-Traded Products) (the ``Spot Ether
ETP Approval Order'').
\28\ See Spot Bitcoin ETP Approval Order, 89 FR at 3010; Spot
Ether ETP Approval Order, 89 FR at 46938.
\29\ See Spot Bitcoin ETP Approval Order, 89 FR at 3010; Spot
Ether ETP Approval Order, 89 FR at 46938-39.
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The Trust is structured and will operate in a manner materially the
same as the Spot Bitcoin ETPs and Spot Ether ETPs.\30\ The Sponsor
believes that the Exchange's ability to obtain information
[[Page 95861]]
regarding trading in bitcoin futures and ether futures from the CME,
which, like the Exchange, is a member of the ISG, would assist the
Exchange in detecting potential fraud or manipulation with respect to
trading in the Shares. The Sponsor thus believes that, for reasons
similar to those set forth in the Spot Bitcoin ETP Approval Order and
Spot Ether ETP Approval Order, listing and trading Shares of the Trust
would be consistent with the requirements of the Act.
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\30\ The Sponsor is also the sponsor of the Bitwise Bitcoin ETF
and the Bitwise Ethereum ETF, which were approved pursuant to the
Spot Bitcoin ETP Approval Order and Spot Ether ETP Approval,
respectively, and which are both currently listed and traded on NYSE
Arca.
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The Sponsor acknowledges that the Portfolio Assets currently
include minority positions in digital assets that are not bitcoin or
ether. The Sponsor also represents that, consistent with proposed Rule
8.800-E(c)(1), no more than 10% of the weight of its digital asset
holdings will consist of digital assets concerning which the Exchange
may not be able to obtain information via the ISG or via a CSSA. In the
context of prior spot digital asset ETP proposal disapproval orders for
bitcoin and ether, the Commission expressed concerns about the
underlying digital asset market due to the potential for fraud and
manipulation and has outlined the reasons why such ETP proposals have
been unable to satisfy these concerns.\31\ For purposes of the Trust's
proposal, the Sponsor anticipates that the Commission may have the same
concerns about digital assets other than bitcoin and ether.
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\31\ See Securities Exchange Act Release Nos. 83723 (July 26,
2018), 83 FR 37579 (August 1, 2018) (SR-BatsBZX-2016-30) (Order
Setting Aside Action by Delegated Authority and Disapproving a
Proposed Rule Change, as Modified by Amendments No. 1 and 2, To List
and Trade Shares of the Winklevoss Bitcoin Fund) (the ``Winklevoss
Order''); 87267 (October 9, 2019), 84 FR 55382 (October 16, 2019)
(SR-NYSEArca-2019-01) (Order Disapproving a Proposed Rule Change, as
Modified by Amendment No. 1, Relating to the Listing and Trading of
Shares of the Bitwise Bitcoin ETF Fund Under NYSE Arca Rule 8.201-E)
(the ``Bitwise Order''); 88284 (February 26, 2020), 85 FR 12595
(March 3, 2020) (SR-NYSEArca-2019-39) (Order Disapproving a Proposed
Rule Change, as Modified by Amendment No. 1, to Amend NYSE Arca Rule
8.201-E (Commodity-Based Trust Shares) and to List and Trade Shares
of the United States Bitcoin and Treasury Investment Trust Under
NYSE Arca Rule 8.201-E) (the ``Wilshire Phoenix Order''); 83904
(August 22, 2018), 83 FR 43934 (August 28, 2018) (SR-NYSEArca-2017-
139) (Order Disapproving a Proposed Rule Change to List and Trade
the Shares of the ProShares Bitcoin ETF and the ProShares Short
Bitcoin ETF); 83912 (August 22, 2018), 83 FR 43912 (August 28, 2018)
(SR-NYSEArca-2018-02) (Order Disapproving a Proposed Rule Change
Relating to Listing and Trading of the Direxion Daily Bitcoin Bear
1X Shares, Direxion Daily Bitcoin 1.25X Bull Shares, Direxion Daily
Bitcoin 1.5X Bull Shares, Direxion Daily Bitcoin 2X Bull Shares, and
Direxion Daily Bitcoin 2X Bear Shares Under NYSE Arca Rule 8.200-E);
83913 (August 22, 2018), 83 FR 43923 (August 28, 2018) (SR-CboeBZX-
2018-01) (Order Disapproving a Proposed Rule Change to List and
Trade the Shares of the GraniteShares Bitcoin ETF and the
GraniteShares Short Bitcoin ETF).
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The Commission has recognized that a listing exchange could
demonstrate that other means to prevent fraudulent and manipulative
acts and practices are sufficient to justify dispensing with the
requisite surveillance-sharing agreement.\32\ In evaluating the
effectiveness of this type of resistance, the Commission does not apply
a ``cannot be manipulated'' standard. Instead, the Commission requires
that such resistance to fraud and manipulation be novel and beyond
those protections that exist in traditional commodity markets or equity
markets for which the Commission has long required surveillance-sharing
agreements in the context of listing derivative securities
products.\33\ The Sponsor believes the Trust's use of the Reference
Prices provided by the Valuation Vendor to value the Trust's holdings
and to determine NAV and ITV for the Trust, in tandem with the Trust's
cash create and redeem structure represents a novel means to prevent
fraud and manipulation from impacting the price of the Shares, by
offering protections beyond those that exist in traditional commodity
markets and consistent with those that exist in equity markets.
---------------------------------------------------------------------------
\32\ See Winklevoss Order, 84 FR 37580, 37582-91; Bitwise Order,
84 FR 55383, 55385-406; Wilshire Phoenix Order, 85 FR 12597.
\33\ See Winklevoss Order, 84 FR 37582; Wilshire Phoenix Order,
85 FR 12597.
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As described in more detail below, the Sponsor believes that its
use of Reference Prices accomplishes these objectives in the following
ways:
1. The Valuation Vendor calculates the Reference Prices for the
Portfolio Assets exclusively through trading activity on spot digital
asset trading platforms that are ``CME CF Constituent Trading
Platforms.''
CME CF Constituent Trading Platforms are identified by the
Valuation Vendor and must meet the following eligibility criteria, as
determined by the Valuation Vendor:
The average daily volume of the venue's Relevant Pair \34\
spot trading contributed during the observation window for the
Reference Price (i.e., 3:00 p.m. to 4:00 p.m. E.T.) must exceed 3% for
two consecutive calendar quarters.
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\34\ Relevant Pair is defined as each Portfolio Asset versus the
quote for that asset in U.S. Dollar terms.
---------------------------------------------------------------------------
The venue has policies to ensure fair and transparent
market conditions at all times and has processes in place to identify
and impede illegal, unfair, or manipulative trading practices.
The venue does not impose undue barriers to entry or
restrictions on market participants, and utilizing the venue does not
expose market participants to undue credit risk, operational risk,
legal risk, or other risks.
The venue complies with applicable laws and regulations,
including, but not limited to capital markets regulations, money
transmission regulations, client money custody regulations, know-your-
client (KYC) regulations, and anti-money laundering (AML) regulations.
The venue cooperates with inquiries and investigations of
regulators and the Administrator upon request and must execute data
sharing agreements with the CME Group.
Continued compliance with these criteria is reviewed on an annual
basis by an independent committee, the CME CF Oversight Committee, and
the Valuation Vendor's trading platform selection process has been
continuously audited since 2020.\35\ As of the date of this filing, the
CME CF Constituent Trading Platforms are Bitstamp, Coinbase, Gemini,
Kraken, itBit and LMAX Digital.\36\ The Sponsor believes that the
Valuation Vendor's enforcement of the rigorous criteria applicable to
the CME CF Constituent Trading Platforms effectively acts as a first
line of defense against manipulation of the Shares by ensuring that
only data from spot trading platforms equipped to detect and impede
market manipulation is included in the calculation of the Reference
Prices that will determine the Trust's NAV and ITV.
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\35\ The latest IASE 300 Reasonable Assurance Auditors Report by
KPMG is publicly available on the Valuation Vendor's website:
https://www.cfbenchmarks.com/legal/audit.
\36\ The Sponsor notes that, given the rigorous application of
the selection criteria described above, the list of CME CF
Constituent Exchanges has never included FTX.com, FTX.US,
Binance.com, or Binance.US.
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2. The Reference Prices are administered and provided by the
Valuation Vendor, which is an Administrator of Benchmarks under the UK
Benchmarks Regime (``BMR'').
The Valuation Vendor received its regulatory authorization in 2019
and has held this regulatory authorization continuously since then. The
Valuation Vendor's compliance with the BMR's comprehensive regulation
of financial benchmarks has been audited since 2020.\37\ The Sponsor
believes that the Valuation Vendor is the leading provider of
benchmarks and indices for regulated financial products that reference
digital assets in the US and
[[Page 95862]]
internationally. Reference prices provided by the Valuation Vendor
underpin derivatives contracts regulated by the Commodity Futures
Trading Commission and listed by CME Group, as well as exchange-traded
funds offered by BlackRock, Franklin Templeton, and the Sponsor under
the regulatory purview of the Commission. In addition, to ensure
compliance with BMR Article 14, the Valuation Vendor conducts
surveillance of its benchmarks. When a surveillance alert is triggered,
the Valuation Vendor conducts an investigation, including seeking
further information from CME CF Constituent Trading Platforms. Each
such investigation is memorialized in a report shared with the CME CF
Cryptocurrency Committee. The UK Financial Conduct Authority (``FCA'')
has regulatory oversight of this process, which is also subject to
audit. The Sponsor believes that the Valuation Vendor's robust
surveillance efforts would allow it to promptly address manipulation or
attempted manipulation of Reference Prices through a regulatory filing
with the UK FCA and, accordingly, that this surveillance of the
underlying spot trading platforms constitutes a second line of defense
against manipulation in the Shares.
---------------------------------------------------------------------------
\37\ See note 35, supra.
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3. The Valuation Vendor has in place information sharing agreements
with the CME CF Constituent Trading Platforms, from which it draws
pricing data to construct its benchmarks.
These agreements allow the Valuation Vendor to the obtain
identifying information of any perpetrators of actual or attempted
benchmark manipulation of any Reference Prices from the CME CF
Constituent Trading Platforms. This identifying information can then be
shared with the UK FCA for potential enforcement action under the
provisions of the Market Abuse Regime (MAR), which specifically
proscribes benchmark manipulation as a criminal offense in the UK. The
Sponsor believes that the availability of this information to the
Valuation Vendor supports enforcement and sanction efforts in response
to actual or attempted manipulation in digital asset markets, and
provides a third line of defense against any potential manipulation in
the Shares.
* * * * *
Finally, the Sponsor believes that the cash creation and redemption
structure of the Trust also underscores the protections that the
Reference Prices afford to the Trust. The Trust's Shares will have
their NAV and ITV determined by the Reference Prices and because all
shares in the Trust will be created and redeemed and secondary traded
with cash (not physical digital assets), any attempts to manipulate
Shares would have to involve transactions on the spot trading platforms
that are CME CF Constituent Trading Platforms to be able to influence
the price of the Shares. The Sponsor believes that the Valuation
Vendor's surveillance of the CME CF Constituent Trading Platforms to
detect such activity and the information sharing mechanisms in place
between the Valuation Vendor and the CME CF Constituent Trading
Platforms would both deter such activity and facilitate enforcement
action should it occur.
Availability of Information
The Trust's website (https://www.bitwiseinvestments.com/) will
include quantitative information on a per Share basis updated on a
daily basis, including, (i) the current NAV per Share daily and the
prior Business Day's NAV per Share and the reported closing price of
the Shares; (ii) the mid-point of the bid-ask price \38\ as of the time
the NAV per Share is calculated (``Bid-Ask Price'') and a calculation
of the premium or discount of such price against such NAV per Share;
and (iii) data in chart format displaying the frequency distribution of
discounts and premiums of the daily Bid-Ask Price against the NAV per
Share, within appropriate ranges, for each of the four previous
calendar quarters (or for as long as the Trust has been trading as an
ETP if shorter). In addition, on each business day the Trust's website
will provide pricing information for the Shares and disclosed the
Trust's holdings, including: (i) the name of each Portfolio Asset; (ii)
the quantity of each Portfolio Asset; and (iii) the weighting of each
Portfolio Asset.
---------------------------------------------------------------------------
\38\ The bid-ask price of the Fund is determined using the
highest bid and lowest offer on the Consolidated Tape as of the time
of calculation of the closing day NAV.
---------------------------------------------------------------------------
One or more major market data vendors will provide the ITV per
Share updated every 15 seconds, as calculated by the Exchange or a
third party financial data provider during the Exchange's Core Trading
Session (9:30 a.m. to 4:00 p.m. E.T.).\39\ The ITV will be calculated
using the same methodology as the NAV per Share of the Trust (as
described above), specifically by using the prior day's closing NAV per
Share as a base and updating that value during the NYSE Arca Core
Trading Session to reflect changes in the value of the Trust's NAV
during the trading day.
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\39\ The IFV on a per Share basis disseminated during the NYSE
Arca Core Trading Session should not be viewed as a real-time update
of the NAV, which is calculated once a day.
---------------------------------------------------------------------------
The ITV disseminated during the NYSE Arca Core Trading Session
should not be viewed as an actual real-time update of the NAV per
Share, which will be calculated only once at the end of each trading
day. The ITV will be widely disseminated on a per Share basis every 15
seconds during the NYSE Arca Core Trading Session by one or more major
market data vendors. In addition, the ITV will be available through on-
line information services.
The NAV for the Trust will be calculated by the Administrator once
a day and will be disseminated daily to all market participants at the
same time. Quotation and last-sale information regarding the Shares
will be disseminated through the facilities of the Consolidated Tape
Association (``CTA'').
Quotation and last sale information for the Portfolio Assets will
be widely disseminated through a variety of major market data vendors.
In addition, real-time price (and volume) data for the Portfolio Assets
is available by subscription major market data vendors. The spot price
of the Portfolio Assets is available on a 24-hour basis from major
market data vendors. Information relating to trading, including price
and volume information, will be available from major market data
vendors and from the trading platforms on which the Portfolio Assets
are traded. The normal trading hours for digital asset trading
platforms are 24-hours per day, 365-days per year.
On each business day, the Sponsor will publish the Reference
Prices, the Trust's NAV, and the NAV per Share on the Trust's website
as soon as practicable after its determination. If the NAV and NAV per
Share have been calculated using a price per Portfolio other than the
Reference Prices, the publication on the Trust's website will note the
valuation methodology used and the price per Portfolio Asset resulting
from such calculation.
The Trust will provide website disclosure of its NAV daily. The
website disclosure of the Trust's NAV will occur at the same time as
the disclosure by the Administrator of the NAV to Authorized
Participants so that all market participants are provided such
portfolio information at the same time. Therefore, the same portfolio
information will be provided on the public website as well as in
electronic files provided to Authorized Participants. Accordingly, each
investor will have access to the current NAV of the Trust through the
Trust's website, as well as from one or more major market data vendors.
[[Page 95863]]
The value of the Index, as well as additional information regarding
the Index such as the Index Methodology, is publicly available on a
continuous basis on the Index Provider's website.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Trust.\40\ Trading in Shares of the Trust
will be halted if the circuit breaker parameters in NYSE Arca Rule
7.12-E have been reached. Trading also may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable.
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\40\ See NYSE Arca Rule 7.12-E.
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The Exchange may halt trading during the day in which an
interruption to the dissemination of the ITV or Index occurs.\41\ If
the interruption to the dissemination of the ITV or Index persists past
the trading day in which it occurred, the Exchange will halt trading no
later than the beginning of the Core Trading Session following the
interruption. In addition, if the Exchange becomes aware that the NAV
with respect to the Shares is not disseminated to all market
participants at the same time, it will halt trading in the Shares until
such time as the NAV is available to all market participants.
---------------------------------------------------------------------------
\41\ A limit up/limit down condition in the futures market would
not be considered an interruption requiring the Trust to be halted.
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Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in
accordance with NYSE Arca Rule 7.34-E (Early, Core, and Late Trading
Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Rule 7.6-E, the minimum price variation (``MPV'') for quoting
and entry of orders in equity securities traded on the NYSE Arca
Marketplace is $0.01, with the exception of securities that are priced
less than $1.00 for which the MPV for order entry is $0.0001.
The Shares will conform to the initial and continued listing
criteria under NYSE Arca Rule 8.800-E, as proposed. The trading of the
Shares will be subject to proposed NYSE Arca Rule 8.800-E(i), which
sets forth certain restrictions on Equity Trading Permit Holders (``ETP
Holders'') acting as registered Market Makers in Commodity-Based Trust
Shares to facilitate surveillance.\42\ The Exchange represents that,
for initial and continued listing, the Trust will be in compliance with
Rule 10A-3 under the Act,\43\ as provided by NYSE Arca Rule 5.3-E. A
minimum of 100,000 Shares of the Trust will be outstanding at the
commencement of trading on the Exchange.
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\42\ Under NYSE Arca Rule 8.201-E(g), an ETP Holder acting as a
registered Market Maker in the Shares is required to provide the
Exchange with information relating to its accounts for trading in
the underlying commodity, related futures or options on futures, or
any other related derivatives. Commentary .04 of NYSE Arca Rule
11.3-E requires an ETP Holder acting as a registered Market Maker,
and its affiliates, in the Shares to establish, maintain and enforce
written policies and procedures reasonably designed to prevent the
misuse of any material nonpublic information with respect to such
products, any components of the related products, any physical asset
or commodity underlying the product, applicable currencies,
underlying indexes, related futures or options on futures, and any
related derivative instruments (including the Shares). As a general
matter, the Exchange has regulatory jurisdiction over its ETP
Holders and their associated persons, which include any person or
entity controlling an ETP Holder. To the extent the Exchange may be
found to lack jurisdiction over a subsidiary or affiliate of an ETP
Holder that does business only in commodities or futures contracts,
the Exchange could obtain information regarding the activities of
such subsidiary or affiliate through surveillance sharing agreements
with regulatory organizations of which such subsidiary or affiliate
is a member.
\43\ 17 CFR 240.10A-3. See note 8, supra.
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Surveillance
The Exchange represents that trading in the Shares of the Trust
will be subject to the existing trading surveillances administered by
the Exchange, as well as cross-market surveillances administered by
FINRA on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities
laws.\44\ The Exchange represents that these procedures are adequate to
properly monitor Exchange trading of the Shares in all trading sessions
and to deter and detect violations of Exchange rules and federal
securities laws applicable to trading on the Exchange.
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\44\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares with other
markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares from such markets
and other entities. In addition, the Exchange may obtain information
regarding trading in the Shares from markets and other entities that
are members of ISG or with which the Exchange has in place a CSSA.\45\
The Exchange is also able to obtain information regarding trading in
the Shares in connection with such ETP Holders' proprietary or customer
trades which they effect through ETP Holders on any relevant market.
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\45\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all Portfolio Assets
may trade on markets that are members of ISG or with which the
Exchange has in place a CSSA, but that, consistent with proposed
Rule 8.800-E(c)(1), at least 90% of the Trust's commodity and/or
digital asset holdings will consist of commodities and/or digital
assets concerning which the Exchange may obtain information via the
ISG, from other members of the ISG, or via a CSSA.
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Under proposed Rule 8.800-E(i), an ETP Holder acting as a
registered Market Maker in the Shares is required to provide the
Exchange with information relating to its accounts for trading in any
underlying commodity, related futures or options on futures, or any
other related derivatives. Commentary .04 of NYSE Arca Rule 11.3-E
requires an ETP Holder acting as a registered Market Maker, and its
affiliates, in the Shares to establish, maintain and enforce written
policies and procedures reasonably designed to prevent the misuse of
any material nonpublic information with respect to such products, any
components of the related products, any physical asset or commodity
underlying the product, applicable currencies, underlying indexes,
related futures or options on futures, and any related derivative
instruments (including the Shares). As a general matter, the Exchange
has regulatory jurisdiction over its ETP Holders and their associated
persons, which include any person or entity controlling an ETP Holder.
To the extent the Exchange may be found to lack jurisdiction over a
subsidiary or affiliate of an ETP Holder that does business only in
commodities or futures contracts and that subsidiary or affiliate is a
member of another regulatory organization, the Exchange could obtain
information regarding the activities of such subsidiary or affiliate
through a surveillance sharing
[[Page 95864]]
agreement with that regulatory organization.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
All statements and representations made in this filing regarding
(a) the description of the portfolios of the Trust, (b) limitations on
portfolio holdings or reference assets, or (c) the applicability of
Exchange listing rules specified in this rule filing shall constitute
continued listing requirements for listing the Shares on the Exchange.
The Sponsor has represented to the Exchange that it will advise the
Exchange of any failure by the Trust to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Trust is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an ``Information Bulletin'' of the special
characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (1)
the procedures for creations of Shares in Creation Units; (2) NYSE Arca
Rule 9.2-E(a), which imposes a duty of due diligence on its ETP Holders
to learn the essential facts relating to every customer prior to
trading the Shares; (3) information regarding how the value of the ITV
and NAV is disseminated; (4) the possibility that trading spreads and
the resulting premium or discount on the Shares may widen during the
Opening and Late Trading Sessions, when an updated ITV will not be
calculated or publicly disseminated; (5) the requirement that members
deliver a prospectus to investors purchasing newly issued Shares prior
to or concurrently with the confirmation of a transaction and (6)
trading information.
In addition, the Information Bulletin will reference that the Trust
is subject to various fees and expenses as described in the annual
report. The Information Bulletin will disclose that information about
the Shares of the Trust is publicly available on the Trust's website.
The Information Bulletin will also discuss any relief, if granted,
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \46\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
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\46\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in proposed NYSE Arca Rule
8.800-E. The Exchange has in place surveillance procedures that are
adequate to properly monitor trading in the Shares in all trading
sessions and to deter and detect violations of Exchange rules and
applicable federal securities laws. The Exchange or FINRA, on behalf of
the Exchange, or both, will communicate as needed regarding trading in
the Shares with other markets that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares and Portfolio Asset
derivatives from such markets. In addition, the Exchange may obtain
information regarding trading in the Shares and Portfolio Asset
derivatives from markets that are members of ISG or with which the
Exchange has in place a CSSA. Also, pursuant to proposed NYSE Arca Rule
8.800-E(i), the Exchange is able to obtain information regarding Market
Maker accounts for trading in the Shares and the underlying Portfolio
Assets or any Portfolio Asset derivatives through ETP Holders acting as
registered Market Makers, in connection with such ETP Holders'
proprietary or customer trades through ETP Holders which they effect on
any relevant market.
The proposed rule change is also designed to prevent fraudulent and
manipulative acts and practices because the Trust is structured
similarly to and will operate in materially the same manner as the Spot
Bitcoin ETPs and Spot Ether ETPs previously approved by the Commission.
The Exchange further believes that the proposed rule change is designed
to prevent fraudulent and manipulative acts and practices because, as
noted by the Commission in the Bitcoin ETP Approval Order and Ether ETP
Approval Order, the Exchange's ability to obtain information regarding
trading in the Shares and futures from other markets that are members
of the ISG (including the CME) would assist the Exchange in detecting
and deterring misconduct. In particular, the CME bitcoin futures market
and CME ether futures market are large, surveilled, and regulated
markets that are closely connected with the spot markets for bitcoin
and ether, respectively, through which the Exchange could obtain
information to assist in detecting and deterring potential fraud or
manipulation.
The proposed rule change is also designed to prevent fraudulent and
manipulative acts and practices because the Trust's use of Reference
Prices to calculate its NAV serves as a means sufficient to mitigate
the impact of instances of fraud and manipulation on a reference price
for the Portfolio Assets. As noted above, the Reference Prices for the
Portfolio Assets are calculated by the Valuation Vendor based
exclusively on trading activity at the CME CF Constituent Trading
Platforms, each of which must meet robust eligibility criteria designed
to protect the Reference Prices against fraud and manipulation. In
addition, the Valuation Vendor is an Administrator of Benchmarks under
the BMR that, among other things, conducts surveillance of its
benchmarks to detect and investigate potential manipulation. The
Valuation Vendor also has information sharing agreements with each of
the CME CF Constituent Trading Platforms that support access to
identifying information for perpetrators of actual or attempted
manipulation to aid in pursuing regulatory action against those actors.
The layers of defense provided by the Trust's use of Reference Prices
to calculate NAV, in conjunction with the Trust's use of cash creations
and redemptions, constitute a novel means to detect, prevent, and
respond to fraud, attempted fraud, and similar wrongdoing, including
market manipulation, consistent with the requirements of the Act.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that there is a considerable amount of price and market information
available on public websites and through professional and subscription
services for the Portfolio Assets. Investors may obtain, on a 24-hour
basis, Portfolio Asset pricing information based on the spot price for
the Portfolio Assets from various financial information service
providers. The closing price and settlement prices of the Portfolio
Assets are readily available from the Valuation Trading
[[Page 95865]]
Platforms and other publicly available websites. In addition, such
prices are published in public sources, or on-line information services
such as Bloomberg and Reuters. The NAV per Share will be calculated
daily and made available to all market participants at the same time.
The Trust will provide website disclosure of its NAV daily. One or more
major market data vendors will disseminate for the Trust on a daily
basis information with respect to the most recent NAV per Share and
Shares outstanding. In addition, if the Exchange becomes aware that the
NAV per Share is not disseminated to all market participants at the
same time, it will halt trading in the Shares until such time as the
NAV is available to all market participants. Quotation and last-sale
information regarding the Shares will be disseminated through the
facilities of the CTA. The ITV will be widely disseminated on a per
Share basis every 15 seconds during the NYSE Arca Core Trading Session
(normally 9:30 a.m. E.T. to 4:00 p.m. E.T.) by one or more major market
data vendors. The Exchange represents that the Exchange may halt
trading during the day in which an interruption to the dissemination of
the ITV or the value of the Index occurs. If the interruption to the
dissemination of the ITV or the value of the Index persists past the
trading day in which it occurred, the Exchange will halt trading no
later than the beginning of the NYSE Arca Core Trading Session on the
trading day following the interruption.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of exchange-traded product that will enhance
competition among market participants, to the benefit of investors and
the marketplace. As noted above, the Exchange has in place surveillance
procedures relating to trading in the Shares and may obtain information
via ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a CSSA for at least 90% of the Trust's
commodity and/or digital asset holdings. In addition, as noted above,
investors will have ready access to information regarding the Trust's
NAV, ITV, and quotation and last sale information for the Shares.
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. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
additional type of exchange-traded product that would enhance
competition among market participants, to the benefit of investors and
the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NYSEARCA-2024-98 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSEARCA-2024-98. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSEARCA-2024-98 and should
be submitted on or before December 24, 2024.
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\47\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\47\
Stephanie J. Fouse,
Assistant Secretary.
[FR Doc. 2024-28343 Filed 12-2-24; 8:45 am]
BILLING CODE 8011-01-P
