Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To List and Trade Shares of the CoinShares Litecoin ETF Under Nasdaq Rule 5711(d), 10656-10663 [2025-03033]
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10656
Federal Register / Vol. 90, No. 36 / Tuesday, February 25, 2025 / Notices
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change, is consistent with the Act.
Comments may be submitted by any of
the following methods:
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
[FR Doc. 2025–03029 Filed 2–24–25; 8:45 am]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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–
CboeBZX–2025–022 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.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Sherry R. Haywood,
Assistant Secretary.
All submissions should refer to file
number SR–CboeBZX–2025–022. 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–CboeBZX–2025–022 and should be
submitted on or before March 18, 2025.
[Release No. 34–102444; File No. SR–
NASDAQ–2025–013]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
List and Trade Shares of the
CoinShares Litecoin ETF Under
Nasdaq Rule 5711(d)
February 19, 2025.
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 February
7, 2025, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the 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 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 CoinShares Litecoin
ETF (the ‘‘Trust’’) under Nasdaq Rule
5711(d) (‘‘Commodity-Based Trust
Shares’’). The shares of the Trust are
referred to herein as the ‘‘Shares.’’
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rulefilings, 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
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
17 CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
30
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1. Purpose
The Exchange proposes to list and
trade the Shares under Nasdaq Rule
5711(d), which governs the listing and
trading of Commodity-Based Trust
Shares on the Exchange.3 CoinShares
Co. is the sponsor of the Trust (the
‘‘Sponsor’’).4 Any statements or
representations included in this
proposal regarding: (a) the description
of the reference assets or trust holdings;
(b) limitations on the reference assets or
trust holdings; (c) dissemination and
availability of the reference asset or
intraday indicative value; or (d) the
applicability of Nasdaq listing rules
specified in this proposal shall
constitute continued listing standards
for the Shares listed on the Exchange.
Overview of the Trust and the Shares
According to the Registration
Statement, the Trust is a Delaware
Statutory Trust that was formed on
December 10, 2024. The Trust will
operate pursuant to a trust agreement
(the ‘‘Trust Agreement’’), as amended
and/or restated from time to time. CSC
Delaware Trust Company, a Delaware
corporation, is the trustee of the Trust
(the ‘‘Trustee’’). A third party will be the
transfer agent of the Trust (in such
capacity, the ‘‘Transfer Agent’’) and the
administrator of the Trust (in such
capacity, the ‘‘Administrator’’). A thirdparty custodian (the ‘‘Custodian’’) will
be responsible for custody of the Trust’s
Litecoin.
According to the Registration
Statement, each Share will represent a
fractional undivided beneficial interest
in and ownership of the Trust. The
Trust holds only Litecoin (‘‘LTC’’) and
cash. The investment objective of the
Trust is for the Shares to reflect the
performance of the value of LTC as
represented by the Compass Crypto
3 The Commission approved Nasdaq Rule 5711 in
Securities Exchange Act Release No. 66648 (March
23, 2012), 77 FR 19428 (March 30, 2012) (SR–
NASDAQ–2012–013).
4 See Registration Statement on Form S–1, dated
January 24, 2025 filed with the Commission on
behalf of the Trust. The descriptions of the Trust,
the Shares, the Index (as defined below), and
Litecoin contained herein are based, in part on
information in the Registration Statement. The
Registration Statement in not yet effective and the
Shares will not trade on the Exchange until such
time that the Registration Statement is effective.
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Reference Index Litecoin—4 p.m. NY
Time (the ‘‘Index’’), less the Trust’s
liabilities and expenses. In seeking to
achieve its investment objective, the
Trust will hold LTC and will value its
Shares daily based on the value of LTC
as reflected by the Index. The Index is
calculated independently by Compass
Financial Technologies (the
‘‘Benchmark Administrator’’).
According to the Registration
Statement, the Trust is passive and is
not managed like a corporation or an
active investment vehicle. The Trust is
not registered as an investment
company under the Investment
Company Act of 1940, and the Sponsor
believes that the Trust is not required to
register under the Investment Company
Act of 1940. The Trust will not hold or
trade in commodity futures contracts or
other derivative contracts regulated by
the Commodity Exchange Act of 1936,
as administered by the Commodity
Futures Trading Commission (the
‘‘CFTC’’). The Sponsor believes that the
Trust is not a commodity pool for
purposes of the CEA, and that neither
the Sponsor nor the Trustee is subject to
regulation as a commodity pool operator
or a commodity trading adviser in
connection with the operation of the
Trust.
When the Trust creates or redeems
Shares, it will do so in blocks of 5,000
Shares (a ‘‘Basket’’) based on the
quantity of LTC attributable to each
Share of the Trust (net of accrued but
unpaid expenses and liabilities). The
Trust issues Baskets to authorized
participants on an ongoing basis in
exchange for cash, which is used to
purchase LTC that is deposited for
safekeeping with the Custodian.
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 LTC is used
to earn additional LTC or generate
rewards or other income. The Trust will
not acquire and will disclaim any
incidental right (‘‘IR’’) or IR asset
received, for example as a result of forks
or airdrops, and such assets will not be
taken into account for purposes of
determining the Trust’s net asset value
(‘‘NAV’’).
Investment Objective
According to the Registration
Statement, the Trust’s investment
objective is for the Shares to reflect the
performance of the value of LTC as
represented by the Index, less the
Trust’s liabilities and expenses. While
an investment in the Shares is not a
direct investment in LTC, the Shares are
designed to provide investors with a
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cost-effective and convenient way to
gain investment exposure to LTC.
Generally speaking, a substantial direct
investment in LTC may require
expensive and sometimes complicated
arrangements in connection with the
acquisition, security and safekeeping of
the LTC and may involve the payment
of substantial fees to acquire such LTC
from third-party facilitators through
cash payments of U.S. dollars. Because
the value of the Shares is correlated
with the value of the LTC held by the
Trust, it is important to understand the
investment attributes of, and the market
for, LTC.
LTC Background
According to the Registration
Statement, LTC is a digital asset that is
created and transmitted through the
operations of the peer-to-peer,
decentralized network of computers that
operates on cryptographic protocols (the
‘‘Litecoin Network’’). No single entity
owns or operates the Litecoin Network,
the infrastructure of which is
collectively maintained by a
decentralized user base. The Litecoin
Network allows people to exchange
LTC, which are recorded on a public
transaction ledger known as a
blockchain (the ‘‘Litecoin Blockchain’’).
LTC can be used to pay for goods and
services on the Litecoin Network, or it
can be converted to fiat currencies, such
as the U.S. dollar, at rates determined
on digital asset trading platforms or in
individual end-user-to-end-user
transactions under a barter system.
Litecoin is an alternative software
implementation of Bitcoin that was
created in late 2011 by Charlie Lee, a
former Google employee, who set out to
create a proof-of-work currency that
could be an alternative to Bitcoin.
Ultimately, this resulted in a clone of
Bitcoin. Although Litecoin is thus very
similar to Bitcoin, there are several key
differences between the Litecoin
Network and the Bitcoin Network.
These differences include a block
generation time of approximately two
and a half minutes for LTC as compared
to ten minutes for Bitcoin, and a cap on
the number of coins that will be created
of 84 million LTC, as compared to 21
million for Bitcoin. As a result of these
differences, transactions using LTC
occur four times faster than transactions
using Bitcoin and at a lower cost.
Litecoin also implemented ‘‘crypt,’’ a
distinct hashing algorithm different
from Bitcoin’s SHA–256 hashing
algorithm, which does not require
application-specific integrated circuits
(‘‘ASICs’’) to mine LTC and therefore
results in less centralized mining hash
power.
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The Litecoin Network is decentralized
and does not require governmental
authorities or financial institution
intermediaries to create, transmit or
determine the value of LTC. Rather, LTC
is created and allocated by the Litecoin
Network protocol through a ‘‘mining’’
process. The value of LTC is determined
by the supply of and demand for LTC
on the digital asset trading platforms or
in private end-user-to-end-user
transactions.
Similar to the Bitcoin Network, the
Litecoin Network operates on a proof-ofwork model. New LTC is created and
rewarded to the miners of a block in the
Litecoin Blockchain for verifying
transactions. The Litecoin Blockchain is
effectively a decentralized database that
includes all blocks that have been
mined by miners and it is updated to
include new blocks as they are solved.
Each LTC transaction is broadcast to the
Litecoin Network and, when included
in a block, recorded on the Litecoin
Blockchain. As each new block records
outstanding LTC transactions, and
outstanding transactions are settled and
validated through such recording, the
Litecoin Blockchain represents a
complete, transparent and unbroken
history of all transactions of the Litecoin
Network. The current miner reward of
6.25 LTC per block was reduced from
12.5 LTC per block by 50% in August
2023, and will be further reduced by
another 50% every 840,000 blocks, or
approximately four years, thereafter.
Similar to Bitcoin, LTC can be used to
pay for goods and services or can be
converted to fiat currencies, such as the
U.S. dollar, at rates determined on
digital asset exchanges or in individual
end-user-to-end-user transactions under
a barter system. Additionally, LTC is
used to pay for transaction fees to
miners for verifying transactions on the
Litecoin Network.
Index
According to the Registration
Statement, the Index is designed to
provide a daily, 4:00 p.m. Eastern Time
(‘‘ET’’) reference rate of the U.S. dollar
price of one LTC that may be used to
develop financial products. The Index is
representative of the LTC trading
activity on selected crypto trading
platforms. For purposes of determining
the value of the Trust’s LTC, the Trust
uses the Index to calculate a per-LTC
value in U.S. dollars (the ‘‘LTC Index
Price’’). The LTC Index Price is
published between 4:00 p.m. and 4:30
p.m. ET on each trading day.
The Sponsor believes that the use of
the Index is reflective of a reasonable
valuation of the average spot price of
LTC and that resistance to manipulation
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is a priority aim of its design
methodology. The methodology: (i)
takes an observation period and divides
it in twelve (12) time-equally sized
partitions of trade records; (ii) then
calculates the volume-weighted median
of all trade prices within each partition;
and (iii) determines the value from the
arithmetic mean of the volume-weighted
medians, equally weighted. By
employing the foregoing steps, the Index
thereby seeks to ensure that transactions
in LTC conducted at outlying prices do
not have an undue effect on the value
of a specific partition, large trades or
clusters of trades transacted over a short
period of time will not have an undue
influence on the index level, and the
effect of large trades at prices that
deviate from the prevailing price are
mitigated from having an undue
influence on the benchmark level.
In addition, the Sponsor notes that an
oversight function is implemented by
the Benchmark Administrator in seeking
to ensure that the Index is administered
through codified policies for Index
integrity.
Net Asset Value
According to the Registration
Statement, the Shares are valued on a
daily basis as of 4:00 p.m. ET. The value
of LTC held by the Trust is determined
based on the fair market value price for
LTC determined by the Benchmark
Administrator.
The Trust’s NAV is calculated by:
• taking the current market value of
its LTC (determined as set forth below)
and any other; and assets;
• subtracting any liabilities
(including accrued by unpaid expenses).
The Trust’s NAV per Share is
calculated by taking the Trust’s NAV
and dividing it by the total amount of
Shares outstanding.
The LTC held by the Trust will
typically be valued based on the LTC
Index Price. The Administrator
calculates the NAV of the Trust once
each business day. The end-of-day LTC
price is calculated using the LTC Index
Price as of 4:00 p.m. ET. However,
NAVs are not officially struck until later
in the day (often by 5:30 p.m. ET and
almost always by 8:00 p.m. ET). The
pause after 4:00 p.m. ET provides an
opportunity for the Sponsor to detect,
flag, investigate, and correct unusual
pricing should it occur. If the Sponsor
determines in good faith that the Index
does not reflect an accurate LTC price,
then the Sponsor will instruct the
Benchmark Administrator to employ an
alternative method to determine the fair
value of the Trust’s assets. The Compass
Crypto Reference Index Litecoin—4
p.m. NY Time shall constitute the
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Index, but if the Index becomes
unavailable, or if the Sponsor
determines in good faith that such Index
does not reflect an accurate price for
LTC, then the Sponsor will employ an
alternative method to determine the fair
value of the Trust’s assets.5
Availability of Information and Intraday
Indicative Value
In addition to the price transparency
of the Index, the Trust will provide
information regarding the Trust’s LTC
holdings as well as additional data
regarding the Trust. The website for the
Trust, which will be publicly accessible
at no charge, will contain the following
information: (a) the prior business day’s
NAV per Share; (b) the prior business
day’s Nasdaq official closing price; (c)
calculation of the premium or discount
of such Exchange official closing price
against such NAV per Share; (d) data in
chart form displaying the frequency
distribution of discounts and premiums
of the Exchange’s official closing price
against the NAV, within appropriate
ranges for each of the four previous
calendar quarters (or for the life of the
Trust, if shorter); (e) the prospectus; and
(f) other applicable quantitative
information. The Trust will also
disseminate the Trust’s holdings on a
daily basis on the Trust’s website.
Quotation and last sale information
regarding the Shares will be
disseminated through the facilities of
the relevant securities information
processor.
The intraday indicative value (‘‘IIV’’)
will be calculated by using the prior
day’s closing NAV per Share as a base
and updating that value during the
Exchange’s regular market session of
9:30 a.m. to 4:00 p.m. ET (the ‘‘Regular
Market Session’’) to reflect changes in
the value of the Trust’s LTC holdings
during the trading day. The IIV
disseminated during the Regular Market
Session should not be viewed as an
actual real-time update of the NAV,
because NAV per Share is calculated
only once at the end of each trading day
based upon the relevant end-of-day
values of the Trust’s investments. The
IIV will be widely disseminated on a
per-Share basis every 15 seconds during
the Regular Market Session through the
facilities of the relevant securities
information processor by market data
vendors. In addition, the IIV will be
available through online information
services, such as Bloomberg and
Reuters.
5 Such alternative method will only be employed
on an ad hoc basis. Any permanent change to the
calculation of the NAV would require a proposed
rule change under Rule 19b–4.
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Quotation and last sale information
for LTC is disseminated through a
variety of major market data vendors.
Information related to trading, including
price and volume information, in LTC is
available from major market data
vendors and from the trading platforms
on which LTC are traded. Depth of book
information is also available from LTC
trading platforms. The normal trading
hours for LTC trading platforms are 24
hours per day, 365 days per year.
Information regarding market price
and trading volume of the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services. Information regarding the
previous day’s Nasdaq official closing
price and trading volume information
for the Shares will be published daily in
the financial section of newspapers.
Custody of the Trust’s LTC
The Custodian will be responsible for
custody of the Trust’s LTC. The
Custodian is a qualified custodian under
Rule 206–4 of the Investment Adviser
Act. The Custodian will custody the
Trust’s LTC pursuant to a custody
agreement. The custody agreement
requires the Custodian to maintain the
Trust’s LTC in segregated accounts that
clearly identify the Trust as owner of
the respective accounts and assets held
in those accounts; the segregation will
be both from the proprietary property of
the Custodian and the assets of any
other customer. Such arrangements are
generally deemed to be ‘‘bankruptcy
remote,’’ that is, in the event of an
insolvency of the Custodian, assets held
in such segregated accounts would not
become property of the Custodian’s
estate and would not be available to
satisfy claims of creditors of the
Custodian. In addition, the Custodian
carries fidelity insurance, which covers
assets held by the Custodian in custody
from risks such as theft of funds. LTC
owned by the Trust will at all times be
held by, and in the control of, the
Custodian, and transfer of such LTC to
or from the Custodian will occur only in
connection with creation and
redemptions of Shares.
The Custodian carefully considers the
design of the physical, operational and
cryptographic systems for secure storage
of the Trust’s private keys in an effort
to lower the risk of loss or theft. The
Custodian utilizes a variety of security
measures to ensure that private keys
necessary to transfer digital assets
remain uncompromised and that the
Trust maintains exclusive ownership of
its assets. The operational procedures of
the Custodian are reviewed by thirdparty advisors with specific expertise in
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physical security. The devices that store
the keys will never be connected to the
internet or any other public or private
distributed network—this is colloquially
known as ‘‘cold storage.’’ Only specific
individuals are authorized to participate
in the custody process, and no
individual acting alone will be able to
access or use any of the private keys. In
addition, no combination of the
executive officers of the Sponsor or the
investment professionals managing the
Trust, acting alone or together, will be
able to access or use any of the private
keys that hold the Trust’s LTC.
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Creation and Redemption of Shares
The Trust creates and redeems Shares
from time to time, but only in one or
more Baskets. Baskets are only made in
exchange for delivery to the Trust or the
distribution by the Trust of the amount
of cash represented by the Baskets being
created or redeemed (the ‘‘Basket
Deposit’’). The amount of cash required
in a Basket Deposit (the ‘‘Basket Cash
Deposit’’) is based on the quantity or
value of the quantity, as applicable, of
LTC and cash attributable to each Share
of the Trust (net of accrued but unpaid
fees and expenses of the Trust) being
created or redeemed determined as of
4:00 p.m. ET on the day the order to
create or redeem Baskets is properly
received.
Baskets will only made in exchange
for delivery to the Trust or the
distribution by the Trust of the amount
of cash represented by the Shares being
created or redeemed, the amount of
which is based on the value of the LTC
attributable to each Share of the Trust
(net of accrued but unpaid fees and
expenses of the Trust) being created or
redeemed determined as of 4:00 p.m. ET
on the day the order to create or redeem
Baskets is properly received. The Trust
will engage in LTC transactions for
converting cash into LTC (in association
with purchase orders) and LTC into
cash (in association with redemption
orders).
The only persons that may place
orders to create or redeem Baskets are
authorized participants (‘‘Authorized
Participants’’). Authorized Participants
must be (1) registered broker-dealers or
other securities market participants,
such as banks or other financial
institutions, that are not required to
register as broker-dealers to engage in
securities transactions, and (2)
Depository Trust Company participants.
To become an Authorized Participant, a
person must enter into an authorized
participant agreement, which provides
the procedures for the creation and
redemption of Shares and for the
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delivery of the cash required for such
creation and redemptions.
Authorized Participants may act for
their own accounts or as agents for
broker-dealers, custodians and other
securities market participants that wish
to create or redeem Baskets.
Shareholders who are not Authorized
Participants will only be able to redeem
their Shares through an Authorized
Participant. 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 LTC 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 LTC as part of the creation or
redemption process.
Applicable Standard
The Commission has historically
approved or disapproved exchange
filings to list and trade series of Trust
Issued Receipts, including spot-based
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.6 The Commission has also
6 See Securities Exchange Act Release Nos. 78262
(July 8, 2016), 81 FR 78262 (July 14. 2016) (the
‘‘Winklevoss Proposal’’). The Winklevoss Proposal
was subsequently disapproved by the Commission.
See Securities Exchange Act Release No. 83723
(July 26, 2018), 83 FR 37579 (August 1, 2018) (the
‘‘Winklevoss Order’’). Prior orders from the
Commission have pointed out that in every prior
approval order for Commodity-Based Trust Shares,
there has been a derivatives market that represents
the regulated market of significant size, generally a
Commodity Futures Trading Commission (the
‘‘CFTC’’) regulated futures market. Further to this
point, the Commission’s prior orders have noted
that the spot commodities and currency markets for
which it has previously approved spot ETPs are
generally unregulated and that the Commission
relied on the underlying futures market as the
regulated market of significant size that formed the
basis for approving the series of Currency and
Commodity-Based Trust Shares, including gold,
silver, platinum, palladium, copper, and other
commodities and currencies. The Commission
specifically noted in the Winklevoss Order that the
approval order issued related to the first spot gold
ETP ‘‘was based on an assumption that the currency
market and the spot gold market were largely
unregulated.’’ See Winklevoss Order at 37592. As
such, the regulated market of significant size test
does not require that the spot market be regulated
in order for the Commission to approve this
proposal, and precedent makes clear that an
underlying market for a spot commodity or
currency being a regulated market would actually
be an exception to the norm. These largely
unregulated currency and commodity markets do
not provide the same protections as the markets that
are subject to the Commission’s oversight, but the
Commission has consistently looked to surveillance
sharing agreements with the underlying futures
market in order to determine whether such
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10659
consistently recognized, however, that
this is not the exclusive means by which
an ETP listing exchange can meet this
statutory obligation.7 A listing exchange
could, alternatively, demonstrate that
‘‘other means to prevent fraudulent and
manipulative acts and practices will be
sufficient’’ to justify dispensing with a
surveillance-sharing agreement with a
regulated market of significant size.
The Commission has issued orders
granting approval for proposals to list
bitcoin- and ether-based commodity
trust shares and bitcoin- and ether-based
trust issued receipts (these proposed
funds are nearly identical to the Trust,
but proposed to hold bitcoin and ether,
respectively, instead of Litecoin) (‘‘Spot
Bitcoin ETPs’’ and ‘‘Spot ETH ETPs’’).
In both the Spot Bitcoin ETP Approval
Order and Spot ETH ETP Approval
Order, the Commission found that
sufficient ‘‘other means’’ of preventing
fraud and manipulation had been
demonstrated that justified dispensing
with a surveillance-sharing agreement
with a market of significant size.
Specifically, the Commission found that
while the Chicago Mercantile Exchange
(‘‘CME’’) futures market for both bitcoin
and ether were not of ‘‘significant size’’
with respect to the spot market, the
Exchange demonstrated that other
means could be reasonably expected to
assist in surveilling for fraudulent and
manipulative acts and practices in the
specific context of the proposals.
As further discussed below, both the
Exchange and the Sponsor believe that
this proposal and the analysis to be
included are sufficient to establish that
there are sufficient ‘‘other means’’ of
preventing fraud and manipulation that
warrant dispensing of the surveillancesharing agreement with a regulated
market of significant size, as was done
with both Spot Bitcoin ETPs and Spot
ETH ETPs, and that this proposal
should be approved.
The Commission has approved
numerous series of Trust Issued
products were consistent with the Act. See
Securities Exchange Act No. 99306 (January 10,
2024), 89 FR 3008 (January 17, 2024) (SelfRegulatory Organizations; NYSE Arca, Inc.; The
Nasdaq Stock Market LLC; Cboe BZX Exchange,
Inc.; Order Granting Accelerated Approval of
Proposed Rule Changes, as Modified by
Amendments Thereto, To List and Trade BitcoinBased Commodity-Based Trust Shares and Trust
Units) (the ‘‘Spot Bitcoin ETP Approval Order’’);
100224 (May 23, 2024), 89 FR 46937 (May 30, 2024)
(Self-Regulatory Organizations; NYSE Arca, Inc.;
The Nasdaq Stock Market LLC; Cboe BZX
Exchange, Inc.; 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
ETH ETP Approval Order’’).
7 See Winklevoss Order, 83 FR at 37580; see Spot
Bitcoin ETP Approval Order, 89 FR at 3009; see
Spot ETH ETP Approval Order 89 FR at 46938.
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lotter on DSK11XQN23PROD with NOTICES1
Receipts,8 including Commodity-Based
Trust Shares,9 to be listed on U.S.
national securities exchanges. In order
for any proposed rule change from an
exchange to be approved, the
Commission must determine that,
among other things, the proposal is
consistent with the requirements of
Section 6(b)(5) of the Act, specifically
including: (i) the requirement that a
national securities exchange’s rules are
designed to prevent fraudulent and
manipulative acts and practices; and (ii)
the requirement that an exchange
proposal be designed, in general, to
protect investors and the public interest.
The Exchange believes that this
proposal is consistent with the
requirements of Section 6(b)(5) of the
Act.
As noted above, the Commission has
recognized that the ‘‘regulated market of
significant size’’ standard is not the only
means for satisfying Section 6(b)(5) of
the Act, specifically providing 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.10 For example, in approving
the Spot Bitcoin ETPs, the Commission
found that there were ‘‘sufficient ‘other
means’ of preventing fraud and
manipulation,’’ including that:
[B]ased on the record before the
Commission and the improved quality
of the correlation analysis in the record,
including the Commission’s own
8 Pursuant to Nasdaq Rule 5720(a), the term
‘‘Trust Issued Receipt’’ means a security (a) that is
issued by a trust which holds specified securities
deposited with the trust; (b) that, when aggregated
in some specified minimum number, may be
surrendered to the trust by the beneficial owner to
receive the securities; and (c) that pays beneficial
owners dividends and other distributions on the
deposited securities, if any are declared and paid
to the trustee by an issuer of the deposited
securities
9 Pursuant to Nasdaq Rule 5711(d)(iv), the term
‘‘Commodity-Based Trust Shares’’ means a security
(1) that is issued by a trust that holds (a) a specified
commodity deposited with the trust, or (b) a
specified commodity and, in addition to such
specified commodity, cash; (2) that is issued by
such trust in a specified aggregate minimum
number in return for a deposit of a quantity of the
underlying commodity and/or cash; and (3) that,
when aggregated in the same specified minimum
number, may be redeemed at a holder’s request by
such trust which will deliver to the redeeming
holder the quantity of the underlying commodity
and/or cash.
10 See Winklevoss Order at 37580. The
Commission has also specifically noted that it ‘‘is
not applying a ‘cannot be manipulated’ standard;
instead, the Commission is examining whether the
proposal meets the requirements of the Exchange
Act and, pursuant to its Rules of Practice, places the
burden on the listing exchange to demonstrate the
validity of its contentions and to establish that the
requirements of the Exchange Act have been met.’’
Id. at 37582
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17:40 Feb 24, 2025
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analysis, the Commission is able to
conclude that fraud or manipulation
that impacts prices in spot bitcoin
markets would likely similarly impact
CME bitcoin futures prices. And
because the CME’s surveillance can
assist in detecting those impacts on
CME bitcoin futures prices, the
Exchanges’ comprehensive surveillancesharing agreement with the CME—a
U.S. regulated market whose bitcoin
futures market is consistently highly
correlated to spot bitcoin, albeit not of
‘‘significant size’’ related to spot
bitcoin—can be reasonably expected to
assist in surveilling for fraudulent and
manipulative acts and practices in the
specific context of the [Spot Bitcoin
ETPs].11
Today, Coinbase Derivatives, LLC
(‘‘Coinbase Derivatives’’) offers trading
in LTC futures.12 Nasdaq has a
comprehensive surveillance-sharing
agreement with Coinbase Derivatives via
its common membership in the
Intermarket Surveillance Group
(‘‘ISG’’).13 This facilitates the sharing of
information that is available to Coinbase
Derivatives through its surveillance of
its markets, including its surveillance of
Coinbase Derivatives’ LTC futures
market. Similar to the Spot Bitcoin and
Spot ETH ETPs previously approved by
the SEC, Nasdaq’s ability to obtain
information regarding trading in the
LTC futures from other markets that are
members of the ISG (specifically
Coinbase Derivatives) would assist
Nasdaq in detecting and deterring
misconduct.
Initial and Continued Listing
The Shares will be subject to Nasdaq
Rule 5711(d)(vi), which sets forth the
initial and continued listing criteria
applicable to Commodity-Based Trust
Shares. The Exchange will obtain a
representation that the Trust’s NAV per
Share will be calculated daily and will
be made available to all market
participants at the same time. A
11 See Securities Exchange Act Release No. 99306
(January 10, 2024), 89 FR 3008 (January 17, 2024)
(Order Granting Accelerated Approval of Proposed
Rule Changes, as Modified by Amendments
Thereto, To List and Trade Shares of Bitcoin-Based
Commodity-Based Trust Shares and Trust Units).
The SEC made substantially similar findings in the
approval order for Spot ETH ETPs. See Securities
Exchange Act Release No. 100224 (May 23, 2024),
89 FR 46937 (May 30, 2024) (Order Granting
Accelerated Approval of Proposed Rule Changes, as
Modified by Amendments Thereto, To List and
Trade Shares of Ether-Based Exchange-Traded
Products).
12 See https://assets.ctfassets.net/k3n74unfin40/
3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3
d01fc9f7f6e996c/2024-7_Listing_of_LC_
Futures.docx.pdf.
13 For a list of the current members and affiliate
members of ISG, see https://www.isgportal.com/.
PO 00000
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Fmt 4703
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minimum of 40,000 Shares will be
required to be outstanding at the time of
commencement of trading on the
Exchange. Upon termination of the
Trust, the Shares will be removed from
listing. The Trustee will be a trust
company having substantial capital and
surplus and the experience and facilities
for handling corporate trust business, as
required under Nasdaq Rule
5711(d)(vi)(D) and no change will be
made to the Trustee without prior notice
to and approval of the Exchange.
As required in Nasdaq Rule
5711(d)(viii), the Exchange notes that
any registered market maker (‘‘Market
Maker’’) in the Shares must file with the
Exchange, in a manner prescribed by the
Exchange, and keep current a list
identifying all accounts for trading the
underlying commodity, related futures
or options on futures, or any other
related derivatives, which the registered
Market Maker may have or over which
it may exercise investment discretion.
No registered Market Maker in the
Shares shall trade in the underlying
commodity, related futures or options
on futures, or any other related
derivatives, in an account in which a
registered Market Maker, directly or
indirectly, controls trading activities, or
has a direct interest in the profits or
losses thereof, which has not been
reported to the Exchange as required by
Nasdaq Rule 5711(d). In addition to the
existing obligations under Exchange
rules regarding the production of books
and records, the registered Market
Maker in the Shares shall make
available to the Exchange such books,
records or other information pertaining
to transactions by such entity or any
limited partner, officer or approved
person thereof, registered or nonregistered employee affiliated with such
entity for its or their own accounts in
the underlying commodity, related
futures or options on futures, or any
other related derivatives, as may be
requested by the Exchange.
The Exchange is able to obtain
information regarding trading in the
Shares and the underlying LTC, LTC
futures contracts, or any other LTC
derivative through members acting as
registered Market Makers, in connection
with their proprietary or customer
trades.
As a general matter, the Exchange has
regulatory jurisdiction over its members,
and their associated persons. The
Exchange also has regulatory
jurisdiction over any person or entity
controlling a member, as well as a
subsidiary or affiliate of a member that
is in the securities business. A
subsidiary or affiliate of a member
organization that does business only in
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Federal Register / Vol. 90, No. 36 / Tuesday, February 25, 2025 / Notices
commodities would not be subject to
Exchange jurisdiction, but 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.
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. The Exchange will
allow trading in the Shares from 4:00
a.m. to 8:00 p.m. ET. The Exchange has
appropriate rules to facilitate
transactions in the Shares during all
trading sessions. The Shares of the Trust
will conform to the initial and
continued listing criteria set forth in
Nasdaq Rule 5711(d) and will comply
with the requirements of Rule 10A–3 of
the Act.
lotter on DSK11XQN23PROD with NOTICES1
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.
The Exchange will halt trading in the
Shares under the conditions specified in
Nasdaq Rules 4120 and 4121, including
without limitation the conditions
specified in Nasdaq Rule 4120(a)(9) and
(10) and the trading pauses under
Nasdaq Rules 4120(a)(11) and (12).
Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable. These may
include: (1) the extent to which trading
is not occurring in the LTC underlying
the Shares; or (2) whether other unusual
conditions or circumstances detrimental
to the maintenance of a fair and orderly
market are present.
If the IIV or the value of the Index is
not being disseminated as required, the
Exchange may halt trading during the
day in which the interruption to the
dissemination of the IIV or the value of
the Index occurs. If the interruption to
the dissemination of the IIV 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 trading day following the
interruption.
In addition, if the Exchange becomes
aware that the NAV per Share 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
per Share is available to all market
participants.
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17:40 Feb 24, 2025
Jkt 265001
Surveillance
The Exchange believes that its
surveillance procedures are adequate to
properly monitor the trading of the
Shares on the Exchange during all
trading sessions and to deter and detect
violations of Exchange rules and the
applicable federal securities laws. The
surveillance program includes real-time
patterns for price and volume
movements and post-trade surveillance
patterns (e.g., spoofing, marking the
close, pinging, phishing). Trading of
Shares on the Exchange will be subject
to the Exchange’s surveillance program
for derivative products, as well as crossmarket surveillances administered by
FINRA, on behalf of the Exchange
pursuant to a regulatory services
agreement, which are also designed to
detect violations of Exchange rules and
applicable federal securities laws. The
Exchange is responsible for FINRA’s
performance under this regulatory
services agreement.
The Exchange will require the Trust
to represent 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 Exchange Act, the Exchange will
surveil 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 the Nasdaq 5800
Series. In addition, the Exchange also
has a general policy prohibiting the
distribution of material, non-public
information by its employees.
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 and listed LTC
futures from such markets and other
entities. The Exchange also may obtain
information regarding trading in the
Shares, listed LTC futures via the ISG,
from other exchanges who are members
or affiliates of the ISG, or with which
the Exchange has entered into a
comprehensive surveillance sharing
agreement.
Information Circular
Prior to the commencement of
trading, the Exchange will inform its
members in an information circular
(‘‘Information Circular’’) of the special
characteristics and risks associated with
trading the Shares. Specifically, the
PO 00000
Frm 00039
Fmt 4703
Sfmt 4703
10661
Information Circular will discuss the
following: (1) the procedures for
creations and redemptions of Shares in
Baskets (and that Shares are not
individually redeemable); (2) Section 10
of Nasdaq General Rule 9, which
imposes suitability obligations on
Nasdaq members with respect to
recommending transactions in the
Shares to customers; (3) how
information regarding the IIV and NAV
is disseminated; (4) the risks involved in
trading the Shares during the pre-market
and post-market sessions when an
updated IIV 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.
The Information Circular will also
discuss any exemptive, no action and
interpretive relief granted by the
Commission from any rules under the
Act.
The Information Circular will also
reference the fact that there is no
regulated source of last sale information
regarding LTC, that the Commission has
no jurisdiction over the trading of LTC
as a commodity.
Additionally, the Information Circular
will reference that the Trust is subject
to various fees and expenses described
in the Registration Statement. The
Information Circular will also disclose
the trading hours of the Shares. The
Information Circular will disclose that
information about the Shares will be
publicly available on the Trust’s
website.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,14 in general, and furthers the
objectives of Section 6(b)(5) of the Act,15
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
The Commission has approved
numerous series of Trust Issued
Receipts, including Commodity-Based
Trust Shares, to be listed on U.S.
national securities exchanges. In order
for any proposed rule change from an
exchange to be approved, the
Commission must determine that,
among other things, the proposal is
consistent with the requirements of
Section 6(b)(5) of the Act, specifically
14 15
15 15
E:\FR\FM\25FEN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
25FEN1
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Federal Register / Vol. 90, No. 36 / Tuesday, February 25, 2025 / Notices
including: (i) the requirement that a
national securities exchange’s rules are
designed to prevent fraudulent and
manipulative acts and practices; and (ii)
the requirement that an exchange
proposal be designed, in general, to
protect investors and the public interest.
The Exchange believes that this
proposal is consistent with the
requirements of Section 6(b)(5) of the
Act.
As noted above, the Commission has
recognized that the ‘‘regulated market of
significant size’’ standard is not the only
means for satisfying Section 6(b)(5) of
the act, specifically providing 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
with the underlying spot market. The
Exchange and Sponsor believe that such
conditions are present. As discussed
above, in approving the Spot Bitcoin
ETPs, the Commission found that there
were ‘‘sufficient ‘other means’ of
preventing fraud and manipulation,’’
including that:
[B]ased on the record before the
Commission and the improved quality
of the correlation analysis in the record,
including the Commission’s own
analysis, the Commission is able to
conclude that fraud or manipulation
that impacts prices in spot bitcoin
markets would likely similarly impact
CME bitcoin futures prices. And
because the CME’s surveillance can
assist in detecting those impacts on
CME bitcoin futures prices, the
Exchanges’ comprehensive surveillancesharing agreement with the CME—a
U.S. regulated market whose bitcoin
futures market is consistently highly
correlated to spot bitcoin, albeit not of
‘‘significant size’’ related to spot
bitcoin—can be reasonably expected to
assist in surveilling for fraudulent and
manipulative acts and practices in the
specific context of the [Spot Bitcoin
ETPs].16
As discussed above, Coinbase
Derivatives offers trading in LTC
futures.17 Nasdaq has a comprehensive
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16 See
Securities Exchange Act Release No. 99306
(January 10, 2024), 89 FR 3008 (January 17, 2024)
(Order Granting Accelerated Approval of Proposed
Rule Changes, as Modified by Amendments
Thereto, To List and Trade Shares of Bitcoin-Based
Commodity-Based Trust Shares and Trust Units).
The SEC made substantially similar findings in the
approval order for spot ether ETPs. See Securities
Exchange Act Release No. 100224 (May 23, 2024),
89 FR 46937 (May 30, 2024) (Order Granting
Accelerated Approval of Proposed Rule Changes, as
Modified by Amendments Thereto, To List and
Trade Shares of Ether-Based Exchange-Traded
Products).
17 See https://assets.ctfassets.net/k3n74unfin40/
3xEbgdn4kcSEfs409Yrwuo/76eaa812a06
VerDate Sep<11>2014
17:40 Feb 24, 2025
Jkt 265001
surveillance-sharing agreement with
Coinbase Derivatives via its common
membership in ISG, which facilitates
the sharing of information that is
available to Coinbase Derivatives
through its surveillance of its markets,
including its surveillance of Coinbase
Derivatives’ LTC futures market. Similar
to the Spot Bitcoin and Spot ETH ETPs
previously approved by the SEC,
Nasdaq’s ability to obtain information
regarding trading in the LTC futures
from other markets that are members of
the ISG (specifically Coinbase
Derivatives) would assist Nasdaq in
detecting and deterring misconduct.
The Exchange further believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices and to protect
investors and the public interest in that
the Shares will be listed and traded on
the Exchange pursuant to the initial and
continued listing criteria set forth in
Nasdaq Rule 5711(d). 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. As discussed above, the
surveillance program includes real-time
patterns for price and volume
movements and post-trade surveillance
patterns (e.g., spoofing, marking the
close, pinging, phishing). Trading of
Shares on the Exchange will be subject
to the Exchange’s surveillance program
for derivative products, as well as crossmarket surveillances administered by
FINRA, on behalf of the Exchange
pursuant to a regulatory services
agreement, which are also designed to
detect violations of Exchange rules and
applicable federal securities laws. The
Exchange is responsible for FINRA’s
performance under this regulatory
services agreement.
The Exchange will require the Trust
to represent 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 Exchange Act, the Exchange will
surveil 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 the Nasdaq 5800
Series. In addition, the Exchange also
has a general policy prohibiting the
distribution of material, non-public
information by its employees.
b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_
Futures.docx.pdf.
PO 00000
Frm 00040
Fmt 4703
Sfmt 4703
The Exchange will communicate as
needed regarding trading in the Shares
with other markets and other entities
that are members of the ISG, and the
Exchange may obtain trading
information regarding trading in the
Shares and listed LTC futures from such
markets and other entities.
Trading in Shares of the Trust will be
halted if the circuit breaker parameters
have been reached or because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. These may
include unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market.
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 Shares that will enhance competition
among market participants, to the
benefit of investors and the marketplace.
For all the above reasons, the
Exchange believes that the proposed
rule change is consistent with the
requirements of Section 6(b)(5) of the
Act.
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 purpose of the Act. The Exchange
notes that the proposed rule change
rather will facilitate the listing and
trading of additional exchange-traded
product that will enhance competition
among both market participants and
listing venues, 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 either
solicited or received.
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 (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission shall: (a) by order
approve or disapprove such proposed
rule change, or (b) institute proceedings
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Federal Register / Vol. 90, No. 36 / Tuesday, February 25, 2025 / Notices
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:
• 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–
NASDAQ–2025–013 on the subject line.
Paper Comments
lotter on DSK11XQN23PROD with NOTICES1
• 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–NASDAQ–2025–013. 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–NASDAQ–2025–013 and should be
submitted on or before March 18, 2025.
17:40 Feb 24, 2025
[FR Doc. 2025–03033 Filed 2–24–25; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–451, OMB Control No.
3235–0763]
Electronic Comments
VerDate Sep<11>2014
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Sherry R. Haywood,
Assistant Secretary.
Jkt 265001
Submission for OMB Review;
Comment Request; Extension: Rule
304 of Regulation ATS
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rule 304 of Regulation ATS (17 CFR
242.304) and Form ATS–N under the
Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.) (‘‘Exchange Act’’).
Regulation ATS provides a regulatory
structure for alternative trading systems.
Rule 304 of Regulation ATS provides
conditions for NMS Stock ATSs seeking
to rely on the exemption from the
definition of ‘‘exchange’’ provided by
Rule 3a1–1(a) of the Exchange Act,
including to file a Form ATS–N, and for
that Form ATS–N to become effective.
Form ATS–N requires NMS Stock ATSs
to provide information about their
manner of operations, the broker-dealer
operator, and the ATS-related activities
of the broker-dealer operator and its
affiliates to comply with the conditions
provided under Rule 304. Form ATS–N
promotes more efficient and effective
market operations by providing more
transparency to market participants
about the operations of NMS Stock
ATSs and the potential conflicts of
interest of the controlling broker-dealer
operator and its affiliates, and helps
brokers meet their best execution
obligations to their customers.
Operational transparency rules,
including Form ATS–N, are designed to
increase competition among trading
centers in regard to order routing and
execution quality.
18 17
PO 00000
The Commission staff estimates that
entities subject to the requirements of
Rule 304 and Form ATS–N will spend
a total of approximately 1,901 hours a
year to comply with the Rule.
Regulation ATS requires ATSs to
preserve any records, for at least three
years, made in the process of complying
with the systems capacity, integrity, and
security requirements.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view and comment
on this information collection request
at: https://www.reginfo.gov/public/do/
PRAViewICR?ref_nbr=202411-3235-010
or send an email comment to
MBX.OMB.OIRA.SEC_desk_officer@
omb.eop.gov within 30 days of the day
after publication of this notice by March
28, 2025.
Dated: February 19, 2025.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025–03022 Filed 2–24–25; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–102446; File No. SR–
CBOE–2025–010]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fee
Schedule To Adopt Fees for Cboe
Timestamping Service Reports
February 19, 2025.
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 February
13, 2025, Cboe Exchange, Inc.
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Item I below,
which Item has been substantially
prepared by the Exchange. The
Exchange has designated this proposal
for immediate effectiveness pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f) thereunder.4 The Commission
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f). At any time within 60 days
of the filing of the proposed rule change, the
Commission summarily may temporarily suspend
such rule change if it appears to the Commission
that such action is necessary or appropriate in the
public interest, for the protection of investors, or
2 17
CFR 200.30–3(a)(12).
Frm 00041
Fmt 4703
Sfmt 4703
10663
Continued
E:\FR\FM\25FEN1.SGM
25FEN1
]]>Agencies
[Federal Register Volume 90, Number 36 (Tuesday, February 25, 2025)]
[Notices]
[Pages 10656-10663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-03033]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102444; File No. SR-NASDAQ-2025-013]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To List and Trade Shares of
the CoinShares Litecoin ETF Under Nasdaq Rule 5711(d)
February 19, 2025.
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 February 7, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the 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 comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade shares of the CoinShares
Litecoin ETF (the ``Trust'') under Nasdaq Rule 5711(d) (``Commodity-
Based Trust Shares''). The shares of the Trust are referred to herein
as the ``Shares.''
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings, 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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the Shares under Nasdaq
Rule 5711(d), which governs the listing and trading of Commodity-Based
Trust Shares on the Exchange.\3\ CoinShares Co. is the sponsor of the
Trust (the ``Sponsor'').\4\ Any statements or representations included
in this proposal regarding: (a) the description of the reference assets
or trust holdings; (b) limitations on the reference assets or trust
holdings; (c) dissemination and availability of the reference asset or
intraday indicative value; or (d) the applicability of Nasdaq listing
rules specified in this proposal shall constitute continued listing
standards for the Shares listed on the Exchange.
---------------------------------------------------------------------------
\3\ The Commission approved Nasdaq Rule 5711 in Securities
Exchange Act Release No. 66648 (March 23, 2012), 77 FR 19428 (March
30, 2012) (SR-NASDAQ-2012-013).
\4\ See Registration Statement on Form S-1, dated January 24,
2025 filed with the Commission on behalf of the Trust. The
descriptions of the Trust, the Shares, the Index (as defined below),
and Litecoin contained herein are based, in part on information in
the Registration Statement. The Registration Statement in not yet
effective and the Shares will not trade on the Exchange until such
time that the Registration Statement is effective.
---------------------------------------------------------------------------
Overview of the Trust and the Shares
According to the Registration Statement, the Trust is a Delaware
Statutory Trust that was formed on December 10, 2024. The Trust will
operate pursuant to a trust agreement (the ``Trust Agreement''), as
amended and/or restated from time to time. CSC Delaware Trust Company,
a Delaware corporation, is the trustee of the Trust (the ``Trustee'').
A third party will be the transfer agent of the Trust (in such
capacity, the ``Transfer Agent'') and the administrator of the Trust
(in such capacity, the ``Administrator''). A third-party custodian (the
``Custodian'') will be responsible for custody of the Trust's Litecoin.
According to the Registration Statement, each Share will represent
a fractional undivided beneficial interest in and ownership of the
Trust. The Trust holds only Litecoin (``LTC'') and cash. The investment
objective of the Trust is for the Shares to reflect the performance of
the value of LTC as represented by the Compass Crypto
[[Page 10657]]
Reference Index Litecoin--4 p.m. NY Time (the ``Index''), less the
Trust's liabilities and expenses. In seeking to achieve its investment
objective, the Trust will hold LTC and will value its Shares daily
based on the value of LTC as reflected by the Index. The Index is
calculated independently by Compass Financial Technologies (the
``Benchmark Administrator'').
According to the Registration Statement, the Trust is passive and
is not managed like a corporation or an active investment vehicle. The
Trust is not registered as an investment company under the Investment
Company Act of 1940, and the Sponsor believes that the Trust is not
required to register under the Investment Company Act of 1940. The
Trust will not hold or trade in commodity futures contracts or other
derivative contracts regulated by the Commodity Exchange Act of 1936,
as administered by the Commodity Futures Trading Commission (the
``CFTC''). The Sponsor believes that the Trust is not a commodity pool
for purposes of the CEA, and that neither the Sponsor nor the Trustee
is subject to regulation as a commodity pool operator or a commodity
trading adviser in connection with the operation of the Trust.
When the Trust creates or redeems Shares, it will do so in blocks
of 5,000 Shares (a ``Basket'') based on the quantity of LTC
attributable to each Share of the Trust (net of accrued but unpaid
expenses and liabilities). The Trust issues Baskets to authorized
participants on an ongoing basis in exchange for cash, which is used to
purchase LTC that is deposited for safekeeping with the Custodian.
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 LTC is used to earn
additional LTC or generate rewards or other income. The Trust will not
acquire and will disclaim any incidental right (``IR'') or IR asset
received, for example as a result of forks or airdrops, and such assets
will not be taken into account for purposes of determining the Trust's
net asset value (``NAV'').
Investment Objective
According to the Registration Statement, the Trust's investment
objective is for the Shares to reflect the performance of the value of
LTC as represented by the Index, less the Trust's liabilities and
expenses. While an investment in the Shares is not a direct investment
in LTC, the Shares are designed to provide investors with a cost-
effective and convenient way to gain investment exposure to LTC.
Generally speaking, a substantial direct investment in LTC may require
expensive and sometimes complicated arrangements in connection with the
acquisition, security and safekeeping of the LTC and may involve the
payment of substantial fees to acquire such LTC from third-party
facilitators through cash payments of U.S. dollars. Because the value
of the Shares is correlated with the value of the LTC held by the
Trust, it is important to understand the investment attributes of, and
the market for, LTC.
LTC Background
According to the Registration Statement, LTC is a digital asset
that is created and transmitted through the operations of the peer-to-
peer, decentralized network of computers that operates on cryptographic
protocols (the ``Litecoin Network''). No single entity owns or operates
the Litecoin Network, the infrastructure of which is collectively
maintained by a decentralized user base. The Litecoin Network allows
people to exchange LTC, which are recorded on a public transaction
ledger known as a blockchain (the ``Litecoin Blockchain''). LTC can be
used to pay for goods and services on the Litecoin Network, or it can
be converted to fiat currencies, such as the U.S. dollar, at rates
determined on digital asset trading platforms or in individual end-
user-to-end-user transactions under a barter system.
Litecoin is an alternative software implementation of Bitcoin that
was created in late 2011 by Charlie Lee, a former Google employee, who
set out to create a proof-of-work currency that could be an alternative
to Bitcoin. Ultimately, this resulted in a clone of Bitcoin. Although
Litecoin is thus very similar to Bitcoin, there are several key
differences between the Litecoin Network and the Bitcoin Network. These
differences include a block generation time of approximately two and a
half minutes for LTC as compared to ten minutes for Bitcoin, and a cap
on the number of coins that will be created of 84 million LTC, as
compared to 21 million for Bitcoin. As a result of these differences,
transactions using LTC occur four times faster than transactions using
Bitcoin and at a lower cost. Litecoin also implemented ``crypt,'' a
distinct hashing algorithm different from Bitcoin's SHA-256 hashing
algorithm, which does not require application-specific integrated
circuits (``ASICs'') to mine LTC and therefore results in less
centralized mining hash power.
The Litecoin Network is decentralized and does not require
governmental authorities or financial institution intermediaries to
create, transmit or determine the value of LTC. Rather, LTC is created
and allocated by the Litecoin Network protocol through a ``mining''
process. The value of LTC is determined by the supply of and demand for
LTC on the digital asset trading platforms or in private end-user-to-
end-user transactions.
Similar to the Bitcoin Network, the Litecoin Network operates on a
proof-of-work model. New LTC is created and rewarded to the miners of a
block in the Litecoin Blockchain for verifying transactions. The
Litecoin Blockchain is effectively a decentralized database that
includes all blocks that have been mined by miners and it is updated to
include new blocks as they are solved. Each LTC transaction is
broadcast to the Litecoin Network and, when included in a block,
recorded on the Litecoin Blockchain. As each new block records
outstanding LTC transactions, and outstanding transactions are settled
and validated through such recording, the Litecoin Blockchain
represents a complete, transparent and unbroken history of all
transactions of the Litecoin Network. The current miner reward of 6.25
LTC per block was reduced from 12.5 LTC per block by 50% in August
2023, and will be further reduced by another 50% every 840,000 blocks,
or approximately four years, thereafter.
Similar to Bitcoin, LTC can be used to pay for goods and services
or can be converted to fiat currencies, such as the U.S. dollar, at
rates determined on digital asset exchanges or in individual end-user-
to-end-user transactions under a barter system. Additionally, LTC is
used to pay for transaction fees to miners for verifying transactions
on the Litecoin Network.
Index
According to the Registration Statement, the Index is designed to
provide a daily, 4:00 p.m. Eastern Time (``ET'') reference rate of the
U.S. dollar price of one LTC that may be used to develop financial
products. The Index is representative of the LTC trading activity on
selected crypto trading platforms. For purposes of determining the
value of the Trust's LTC, the Trust uses the Index to calculate a per-
LTC value in U.S. dollars (the ``LTC Index Price''). The LTC Index
Price is published between 4:00 p.m. and 4:30 p.m. ET on each trading
day.
The Sponsor believes that the use of the Index is reflective of a
reasonable valuation of the average spot price of LTC and that
resistance to manipulation
[[Page 10658]]
is a priority aim of its design methodology. The methodology: (i) takes
an observation period and divides it in twelve (12) time-equally sized
partitions of trade records; (ii) then calculates the volume-weighted
median of all trade prices within each partition; and (iii) determines
the value from the arithmetic mean of the volume-weighted medians,
equally weighted. By employing the foregoing steps, the Index thereby
seeks to ensure that transactions in LTC conducted at outlying prices
do not have an undue effect on the value of a specific partition, large
trades or clusters of trades transacted over a short period of time
will not have an undue influence on the index level, and the effect of
large trades at prices that deviate from the prevailing price are
mitigated from having an undue influence on the benchmark level.
In addition, the Sponsor notes that an oversight function is
implemented by the Benchmark Administrator in seeking to ensure that
the Index is administered through codified policies for Index
integrity.
Net Asset Value
According to the Registration Statement, the Shares are valued on a
daily basis as of 4:00 p.m. ET. The value of LTC held by the Trust is
determined based on the fair market value price for LTC determined by
the Benchmark Administrator.
The Trust's NAV is calculated by:
taking the current market value of its LTC (determined as
set forth below) and any other; and assets;
subtracting any liabilities (including accrued by unpaid
expenses).
The Trust's NAV per Share is calculated by taking the Trust's NAV
and dividing it by the total amount of Shares outstanding.
The LTC held by the Trust will typically be valued based on the LTC
Index Price. The Administrator calculates the NAV of the Trust once
each business day. The end-of-day LTC price is calculated using the LTC
Index Price as of 4:00 p.m. ET. However, NAVs are not officially struck
until later in the day (often by 5:30 p.m. ET and almost always by 8:00
p.m. ET). The pause after 4:00 p.m. ET provides an opportunity for the
Sponsor to detect, flag, investigate, and correct unusual pricing
should it occur. If the Sponsor determines in good faith that the Index
does not reflect an accurate LTC price, then the Sponsor will instruct
the Benchmark Administrator to employ an alternative method to
determine the fair value of the Trust's assets. The Compass Crypto
Reference Index Litecoin--4 p.m. NY Time shall constitute the Index,
but if the Index becomes unavailable, or if the Sponsor determines in
good faith that such Index does not reflect an accurate price for LTC,
then the Sponsor will employ an alternative method to determine the
fair value of the Trust's assets.\5\
---------------------------------------------------------------------------
\5\ Such alternative method will only be employed on an ad hoc
basis. Any permanent change to the calculation of the NAV would
require a proposed rule change under Rule 19b-4.
---------------------------------------------------------------------------
Availability of Information and Intraday Indicative Value
In addition to the price transparency of the Index, the Trust will
provide information regarding the Trust's LTC holdings as well as
additional data regarding the Trust. The website for the Trust, which
will be publicly accessible at no charge, will contain the following
information: (a) the prior business day's NAV per Share; (b) the prior
business day's Nasdaq official closing price; (c) calculation of the
premium or discount of such Exchange official closing price against
such NAV per Share; (d) data in chart form displaying the frequency
distribution of discounts and premiums of the Exchange's official
closing price against the NAV, within appropriate ranges for each of
the four previous calendar quarters (or for the life of the Trust, if
shorter); (e) the prospectus; and (f) other applicable quantitative
information. The Trust will also disseminate the Trust's holdings on a
daily basis on the Trust's website. Quotation and last sale information
regarding the Shares will be disseminated through the facilities of the
relevant securities information processor.
The intraday indicative value (``IIV'') will be calculated by using
the prior day's closing NAV per Share as a base and updating that value
during the Exchange's regular market session of 9:30 a.m. to 4:00 p.m.
ET (the ``Regular Market Session'') to reflect changes in the value of
the Trust's LTC holdings during the trading day. The IIV disseminated
during the Regular Market Session should not be viewed as an actual
real-time update of the NAV, because NAV per Share is calculated only
once at the end of each trading day based upon the relevant end-of-day
values of the Trust's investments. The IIV will be widely disseminated
on a per-Share basis every 15 seconds during the Regular Market Session
through the facilities of the relevant securities information processor
by market data vendors. In addition, the IIV will be available through
online information services, such as Bloomberg and Reuters.
Quotation and last sale information for LTC is disseminated through
a variety of major market data vendors. Information related to trading,
including price and volume information, in LTC is available from major
market data vendors and from the trading platforms on which LTC are
traded. Depth of book information is also available from LTC trading
platforms. The normal trading hours for LTC trading platforms are 24
hours per day, 365 days per year.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's Nasdaq official closing price and trading
volume information for the Shares will be published daily in the
financial section of newspapers.
Custody of the Trust's LTC
The Custodian will be responsible for custody of the Trust's LTC.
The Custodian is a qualified custodian under Rule 206-4 of the
Investment Adviser Act. The Custodian will custody the Trust's LTC
pursuant to a custody agreement. The custody agreement requires the
Custodian to maintain the Trust's LTC in segregated accounts that
clearly identify the Trust as owner of the respective accounts and
assets held in those accounts; the segregation will be both from the
proprietary property of the Custodian and the assets of any other
customer. Such arrangements are generally deemed to be ``bankruptcy
remote,'' that is, in the event of an insolvency of the Custodian,
assets held in such segregated accounts would not become property of
the Custodian's estate and would not be available to satisfy claims of
creditors of the Custodian. In addition, the Custodian carries fidelity
insurance, which covers assets held by the Custodian in custody from
risks such as theft of funds. LTC owned by the Trust will at all times
be held by, and in the control of, the Custodian, and transfer of such
LTC to or from the Custodian will occur only in connection with
creation and redemptions of Shares.
The Custodian carefully considers the design of the physical,
operational and cryptographic systems for secure storage of the Trust's
private keys in an effort to lower the risk of loss or theft. The
Custodian utilizes a variety of security measures to ensure that
private keys necessary to transfer digital assets remain uncompromised
and that the Trust maintains exclusive ownership of its assets. The
operational procedures of the Custodian are reviewed by third-party
advisors with specific expertise in
[[Page 10659]]
physical security. The devices that store the keys will never be
connected to the internet or any other public or private distributed
network--this is colloquially known as ``cold storage.'' Only specific
individuals are authorized to participate in the custody process, and
no individual acting alone will be able to access or use any of the
private keys. In addition, no combination of the executive officers of
the Sponsor or the investment professionals managing the Trust, acting
alone or together, will be able to access or use any of the private
keys that hold the Trust's LTC.
Creation and Redemption of Shares
The Trust creates and redeems Shares from time to time, but only in
one or more Baskets. Baskets are only made in exchange for delivery to
the Trust or the distribution by the Trust of the amount of cash
represented by the Baskets being created or redeemed (the ``Basket
Deposit''). The amount of cash required in a Basket Deposit (the
``Basket Cash Deposit'') is based on the quantity or value of the
quantity, as applicable, of LTC and cash attributable to each Share of
the Trust (net of accrued but unpaid fees and expenses of the Trust)
being created or redeemed determined as of 4:00 p.m. ET on the day the
order to create or redeem Baskets is properly received.
Baskets will only made in exchange for delivery to the Trust or the
distribution by the Trust of the amount of cash represented by the
Shares being created or redeemed, the amount of which is based on the
value of the LTC attributable to each Share of the Trust (net of
accrued but unpaid fees and expenses of the Trust) being created or
redeemed determined as of 4:00 p.m. ET on the day the order to create
or redeem Baskets is properly received. The Trust will engage in LTC
transactions for converting cash into LTC (in association with purchase
orders) and LTC into cash (in association with redemption orders).
The only persons that may place orders to create or redeem Baskets
are authorized participants (``Authorized Participants''). Authorized
Participants must be (1) registered broker-dealers or other securities
market participants, such as banks or other financial institutions,
that are not required to register as broker-dealers to engage in
securities transactions, and (2) Depository Trust Company participants.
To become an Authorized Participant, a person must enter into an
authorized participant agreement, which provides the procedures for the
creation and redemption of Shares and for the delivery of the cash
required for such creation and redemptions.
Authorized Participants may act for their own accounts or as agents
for broker-dealers, custodians and other securities market participants
that wish to create or redeem Baskets. Shareholders who are not
Authorized Participants will only be able to redeem their Shares
through an Authorized Participant. 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 LTC 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 LTC
as part of the creation or redemption process.
Applicable Standard
The Commission has historically approved or disapproved exchange
filings to list and trade series of Trust Issued Receipts, including
spot-based 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.\6\ The Commission has also
consistently recognized, however, that this is not the exclusive means
by which an ETP listing exchange can meet this statutory obligation.\7\
A listing exchange could, alternatively, demonstrate that ``other means
to prevent fraudulent and manipulative acts and practices will be
sufficient'' to justify dispensing with a surveillance-sharing
agreement with a regulated market of significant size.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release Nos. 78262 (July 8,
2016), 81 FR 78262 (July 14. 2016) (the ``Winklevoss Proposal'').
The Winklevoss Proposal was subsequently disapproved by the
Commission. See Securities Exchange Act Release No. 83723 (July 26,
2018), 83 FR 37579 (August 1, 2018) (the ``Winklevoss Order'').
Prior orders from the Commission have pointed out that in every
prior approval order for Commodity-Based Trust Shares, there has
been a derivatives market that represents the regulated market of
significant size, generally a Commodity Futures Trading Commission
(the ``CFTC'') regulated futures market. Further to this point, the
Commission's prior orders have noted that the spot commodities and
currency markets for which it has previously approved spot ETPs are
generally unregulated and that the Commission relied on the
underlying futures market as the regulated market of significant
size that formed the basis for approving the series of Currency and
Commodity-Based Trust Shares, including gold, silver, platinum,
palladium, copper, and other commodities and currencies. The
Commission specifically noted in the Winklevoss Order that the
approval order issued related to the first spot gold ETP ``was based
on an assumption that the currency market and the spot gold market
were largely unregulated.'' See Winklevoss Order at 37592. As such,
the regulated market of significant size test does not require that
the spot market be regulated in order for the Commission to approve
this proposal, and precedent makes clear that an underlying market
for a spot commodity or currency being a regulated market would
actually be an exception to the norm. These largely unregulated
currency and commodity markets do not provide the same protections
as the markets that are subject to the Commission's oversight, but
the Commission has consistently looked to surveillance sharing
agreements with the underlying futures market in order to determine
whether such products were consistent with the Act. See Securities
Exchange Act No. 99306 (January 10, 2024), 89 FR 3008 (January 17,
2024) (Self-Regulatory Organizations; NYSE Arca, Inc.; The Nasdaq
Stock Market LLC; Cboe BZX Exchange, Inc.; 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''); 100224 (May 23, 2024), 89 FR 46937 (May 30, 2024) (Self-
Regulatory Organizations; NYSE Arca, Inc.; The Nasdaq Stock Market
LLC; Cboe BZX Exchange, Inc.; 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 ETH ETP Approval Order'').
\7\ See Winklevoss Order, 83 FR at 37580; see Spot Bitcoin ETP
Approval Order, 89 FR at 3009; see Spot ETH ETP Approval Order 89 FR
at 46938.
---------------------------------------------------------------------------
The Commission has issued orders granting approval for proposals to
list bitcoin- and ether-based commodity trust shares and bitcoin- and
ether-based trust issued receipts (these proposed funds are nearly
identical to the Trust, but proposed to hold bitcoin and ether,
respectively, instead of Litecoin) (``Spot Bitcoin ETPs'' and ``Spot
ETH ETPs''). In both the Spot Bitcoin ETP Approval Order and Spot ETH
ETP Approval Order, the Commission found that sufficient ``other
means'' of preventing fraud and manipulation had been demonstrated that
justified dispensing with a surveillance-sharing agreement with a
market of significant size. Specifically, the Commission found that
while the Chicago Mercantile Exchange (``CME'') futures market for both
bitcoin and ether were not of ``significant size'' with respect to the
spot market, the Exchange demonstrated that other means could be
reasonably expected to assist in surveilling for fraudulent and
manipulative acts and practices in the specific context of the
proposals.
As further discussed below, both the Exchange and the Sponsor
believe that this proposal and the analysis to be included are
sufficient to establish that there are sufficient ``other means'' of
preventing fraud and manipulation that warrant dispensing of the
surveillance-sharing agreement with a regulated market of significant
size, as was done with both Spot Bitcoin ETPs and Spot ETH ETPs, and
that this proposal should be approved.
The Commission has approved numerous series of Trust Issued
[[Page 10660]]
Receipts,\8\ including Commodity-Based Trust Shares,\9\ to be listed on
U.S. national securities exchanges. In order for any proposed rule
change from an exchange to be approved, the Commission must determine
that, among other things, the proposal is consistent with the
requirements of Section 6(b)(5) of the Act, specifically including: (i)
the requirement that a national securities exchange's rules are
designed to prevent fraudulent and manipulative acts and practices; and
(ii) the requirement that an exchange proposal be designed, in general,
to protect investors and the public interest. The Exchange believes
that this proposal is consistent with the requirements of Section
6(b)(5) of the Act.
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\8\ Pursuant to Nasdaq Rule 5720(a), the term ``Trust Issued
Receipt'' means a security (a) that is issued by a trust which holds
specified securities deposited with the trust; (b) that, when
aggregated in some specified minimum number, may be surrendered to
the trust by the beneficial owner to receive the securities; and (c)
that pays beneficial owners dividends and other distributions on the
deposited securities, if any are declared and paid to the trustee by
an issuer of the deposited securities
\9\ Pursuant to Nasdaq Rule 5711(d)(iv), the term ``Commodity-
Based Trust Shares'' means a security (1) that is issued by a trust
that holds (a) a specified commodity deposited with the trust, or
(b) a specified commodity and, in addition to such specified
commodity, cash; (2) that is issued by such trust in a specified
aggregate minimum number in return for a deposit of a quantity of
the underlying commodity and/or cash; and (3) that, when aggregated
in the same specified minimum number, may be redeemed at a holder's
request by such trust which will deliver to the redeeming holder the
quantity of the underlying commodity and/or cash.
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As noted above, the Commission has recognized that the ``regulated
market of significant size'' standard is not the only means for
satisfying Section 6(b)(5) of the Act, specifically providing 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.\10\ For example, in approving the Spot Bitcoin ETPs, the
Commission found that there were ``sufficient `other means' of
preventing fraud and manipulation,'' including that:
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\10\ See Winklevoss Order at 37580. The Commission has also
specifically noted that it ``is not applying a `cannot be
manipulated' standard; instead, the Commission is examining whether
the proposal meets the requirements of the Exchange Act and,
pursuant to its Rules of Practice, places the burden on the listing
exchange to demonstrate the validity of its contentions and to
establish that the requirements of the Exchange Act have been met.''
Id. at 37582
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[B]ased on the record before the Commission and the improved
quality of the correlation analysis in the record, including the
Commission's own analysis, the Commission is able to conclude that
fraud or manipulation that impacts prices in spot bitcoin markets would
likely similarly impact CME bitcoin futures prices. And because the
CME's surveillance can assist in detecting those impacts on CME bitcoin
futures prices, the Exchanges' comprehensive surveillance-sharing
agreement with the CME--a U.S. regulated market whose bitcoin futures
market is consistently highly correlated to spot bitcoin, albeit not of
``significant size'' related to spot bitcoin--can be reasonably
expected to assist in surveilling for fraudulent and manipulative acts
and practices in the specific context of the [Spot Bitcoin ETPs].\11\
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\11\ See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008 (January 17, 2024) (Order Granting Accelerated
Approval of Proposed Rule Changes, as Modified by Amendments
Thereto, To List and Trade Shares of Bitcoin-Based Commodity-Based
Trust Shares and Trust Units). The SEC made substantially similar
findings in the approval order for Spot ETH ETPs. See Securities
Exchange Act Release No. 100224 (May 23, 2024), 89 FR 46937 (May 30,
2024) (Order Granting Accelerated Approval of Proposed Rule Changes,
as Modified by Amendments Thereto, To List and Trade Shares of
Ether-Based Exchange-Traded Products).
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Today, Coinbase Derivatives, LLC (``Coinbase Derivatives'') offers
trading in LTC futures.\12\ Nasdaq has a comprehensive surveillance-
sharing agreement with Coinbase Derivatives via its common membership
in the Intermarket Surveillance Group (``ISG'').\13\ This facilitates
the sharing of information that is available to Coinbase Derivatives
through its surveillance of its markets, including its surveillance of
Coinbase Derivatives' LTC futures market. Similar to the Spot Bitcoin
and Spot ETH ETPs previously approved by the SEC, Nasdaq's ability to
obtain information regarding trading in the LTC futures from other
markets that are members of the ISG (specifically Coinbase Derivatives)
would assist Nasdaq in detecting and deterring misconduct.
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\12\ See https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf.
\13\ For a list of the current members and affiliate members of
ISG, see https://www.isgportal.com/.
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Initial and Continued Listing
The Shares will be subject to Nasdaq Rule 5711(d)(vi), which sets
forth the initial and continued listing criteria applicable to
Commodity-Based Trust Shares. The Exchange will obtain a representation
that the Trust's NAV per Share will be calculated daily and will be
made available to all market participants at the same time. A minimum
of 40,000 Shares will be required to be outstanding at the time of
commencement of trading on the Exchange. Upon termination of the Trust,
the Shares will be removed from listing. The Trustee will be a trust
company having substantial capital and surplus and the experience and
facilities for handling corporate trust business, as required under
Nasdaq Rule 5711(d)(vi)(D) and no change will be made to the Trustee
without prior notice to and approval of the Exchange.
As required in Nasdaq Rule 5711(d)(viii), the Exchange notes that
any registered market maker (``Market Maker'') in the Shares must file
with the Exchange, in a manner prescribed by the Exchange, and keep
current a list identifying all accounts for trading the underlying
commodity, related futures or options on futures, or any other related
derivatives, which the registered Market Maker may have or over which
it may exercise investment discretion. No registered Market Maker in
the Shares shall trade in the underlying commodity, related futures or
options on futures, or any other related derivatives, in an account in
which a registered Market Maker, directly or indirectly, controls
trading activities, or has a direct interest in the profits or losses
thereof, which has not been reported to the Exchange as required by
Nasdaq Rule 5711(d). In addition to the existing obligations under
Exchange rules regarding the production of books and records, the
registered Market Maker in the Shares shall make available to the
Exchange such books, records or other information pertaining to
transactions by such entity or any limited partner, officer or approved
person thereof, registered or non-registered employee affiliated with
such entity for its or their own accounts in the underlying commodity,
related futures or options on futures, or any other related
derivatives, as may be requested by the Exchange.
The Exchange is able to obtain information regarding trading in the
Shares and the underlying LTC, LTC futures contracts, or any other LTC
derivative through members acting as registered Market Makers, in
connection with their proprietary or customer trades.
As a general matter, the Exchange has regulatory jurisdiction over
its members, and their associated persons. The Exchange also has
regulatory jurisdiction over any person or entity controlling a member,
as well as a subsidiary or affiliate of a member that is in the
securities business. A subsidiary or affiliate of a member organization
that does business only in
[[Page 10661]]
commodities would not be subject to Exchange jurisdiction, but 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.
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. The Exchange will
allow trading in the Shares from 4:00 a.m. to 8:00 p.m. ET. The
Exchange has appropriate rules to facilitate transactions in the Shares
during all trading sessions. The Shares of the Trust will conform to
the initial and continued listing criteria set forth in Nasdaq Rule
5711(d) and will comply with the requirements of Rule 10A-3 of the Act.
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. The Exchange will halt trading in the Shares
under the conditions specified in Nasdaq Rules 4120 and 4121, including
without limitation the conditions specified in Nasdaq Rule 4120(a)(9)
and (10) and the trading pauses under Nasdaq Rules 4120(a)(11) and
(12).
Trading may be halted because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable. These may include: (1) the extent to which trading is not
occurring in the LTC underlying the Shares; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present.
If the IIV or the value of the Index is not being disseminated as
required, the Exchange may halt trading during the day in which the
interruption to the dissemination of the IIV or the value of the Index
occurs. If the interruption to the dissemination of the IIV 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
trading day following the interruption.
In addition, if the Exchange becomes aware that the NAV per Share
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 per Share is available to all market participants.
Surveillance
The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of the Shares on the Exchange during
all trading sessions and to deter and detect violations of Exchange
rules and the applicable federal securities laws. The surveillance
program includes real-time patterns for price and volume movements and
post-trade surveillance patterns (e.g., spoofing, marking the close,
pinging, phishing). Trading of Shares on the Exchange will be subject
to the Exchange's surveillance program for derivative products, as well
as cross-market surveillances administered by FINRA, on behalf of the
Exchange pursuant to a regulatory services agreement, which are also
designed to detect violations of Exchange rules and applicable federal
securities laws. The Exchange is responsible for FINRA's performance
under this regulatory services agreement.
The Exchange will require the Trust to represent 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 Exchange Act, the Exchange
will surveil 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 the
Nasdaq 5800 Series. In addition, the Exchange also has a general policy
prohibiting the distribution of material, non-public information by its
employees.
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 and listed LTC
futures from such markets and other entities. The Exchange also may
obtain information regarding trading in the Shares, listed LTC futures
via the ISG, from other exchanges who are members or affiliates of the
ISG, or with which the Exchange has entered into a comprehensive
surveillance sharing agreement.
Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an information circular (``Information Circular'') of the
special characteristics and risks associated with trading the Shares.
Specifically, the Information Circular will discuss the following: (1)
the procedures for creations and redemptions of Shares in Baskets (and
that Shares are not individually redeemable); (2) Section 10 of Nasdaq
General Rule 9, which imposes suitability obligations on Nasdaq members
with respect to recommending transactions in the Shares to customers;
(3) how information regarding the IIV and NAV is disseminated; (4) the
risks involved in trading the Shares during the pre-market and post-
market sessions when an updated IIV 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. The
Information Circular will also discuss any exemptive, no action and
interpretive relief granted by the Commission from any rules under the
Act.
The Information Circular will also reference the fact that there is
no regulated source of last sale information regarding LTC, that the
Commission has no jurisdiction over the trading of LTC as a commodity.
Additionally, the Information Circular will reference that the
Trust is subject to various fees and expenses described in the
Registration Statement. The Information Circular will also disclose the
trading hours of the Shares. The Information Circular will disclose
that information about the Shares will be publicly available on the
Trust's website.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\14\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\15\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
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The Commission has approved numerous series of Trust Issued
Receipts, including Commodity-Based Trust Shares, to be listed on U.S.
national securities exchanges. In order for any proposed rule change
from an exchange to be approved, the Commission must determine that,
among other things, the proposal is consistent with the requirements of
Section 6(b)(5) of the Act, specifically
[[Page 10662]]
including: (i) the requirement that a national securities exchange's
rules are designed to prevent fraudulent and manipulative acts and
practices; and (ii) the requirement that an exchange proposal be
designed, in general, to protect investors and the public interest. The
Exchange believes that this proposal is consistent with the
requirements of Section 6(b)(5) of the Act.
As noted above, the Commission has recognized that the ``regulated
market of significant size'' standard is not the only means for
satisfying Section 6(b)(5) of the act, specifically providing 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
with the underlying spot market. The Exchange and Sponsor believe that
such conditions are present. As discussed above, in approving the Spot
Bitcoin ETPs, the Commission found that there were ``sufficient `other
means' of preventing fraud and manipulation,'' including that:
[B]ased on the record before the Commission and the improved
quality of the correlation analysis in the record, including the
Commission's own analysis, the Commission is able to conclude that
fraud or manipulation that impacts prices in spot bitcoin markets would
likely similarly impact CME bitcoin futures prices. And because the
CME's surveillance can assist in detecting those impacts on CME bitcoin
futures prices, the Exchanges' comprehensive surveillance-sharing
agreement with the CME--a U.S. regulated market whose bitcoin futures
market is consistently highly correlated to spot bitcoin, albeit not of
``significant size'' related to spot bitcoin--can be reasonably
expected to assist in surveilling for fraudulent and manipulative acts
and practices in the specific context of the [Spot Bitcoin ETPs].\16\
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\16\ See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008 (January 17, 2024) (Order Granting Accelerated
Approval of Proposed Rule Changes, as Modified by Amendments
Thereto, To List and Trade Shares of Bitcoin-Based Commodity-Based
Trust Shares and Trust Units). The SEC made substantially similar
findings in the approval order for spot ether ETPs. See Securities
Exchange Act Release No. 100224 (May 23, 2024), 89 FR 46937 (May 30,
2024) (Order Granting Accelerated Approval of Proposed Rule Changes,
as Modified by Amendments Thereto, To List and Trade Shares of
Ether-Based Exchange-Traded Products).
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As discussed above, Coinbase Derivatives offers trading in LTC
futures.\17\ Nasdaq has a comprehensive surveillance-sharing agreement
with Coinbase Derivatives via its common membership in ISG, which
facilitates the sharing of information that is available to Coinbase
Derivatives through its surveillance of its markets, including its
surveillance of Coinbase Derivatives' LTC futures market. Similar to
the Spot Bitcoin and Spot ETH ETPs previously approved by the SEC,
Nasdaq's ability to obtain information regarding trading in the LTC
futures from other markets that are members of the ISG (specifically
Coinbase Derivatives) would assist Nasdaq in detecting and deterring
misconduct.
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\17\ See https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf.
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The Exchange further believes that the proposed rule change is
designed to prevent fraudulent and manipulative acts and practices and
to protect investors and the public interest in that the Shares will be
listed and traded on the Exchange pursuant to the initial and continued
listing criteria set forth in Nasdaq Rule 5711(d). 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. As
discussed above, the surveillance program includes real-time patterns
for price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, pinging, phishing). Trading of
Shares on the Exchange will be subject to the Exchange's surveillance
program for derivative products, as well as cross-market surveillances
administered by FINRA, on behalf of the Exchange pursuant to a
regulatory services agreement, which are also designed to detect
violations of Exchange rules and applicable federal securities laws.
The Exchange is responsible for FINRA's performance under this
regulatory services agreement.
The Exchange will require the Trust to represent 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 Exchange Act, the Exchange
will surveil 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 the
Nasdaq 5800 Series. In addition, the Exchange also has a general policy
prohibiting the distribution of material, non-public information by its
employees.
The Exchange will communicate as needed regarding trading in the
Shares with other markets and other entities that are members of the
ISG, and the Exchange may obtain trading information regarding trading
in the Shares and listed LTC futures from such markets and other
entities.
Trading in Shares of the Trust will be halted if the circuit
breaker parameters have been reached or because of market conditions or
for reasons that, in the view of the Exchange, make trading in the
Shares inadvisable. These may include unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market.
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
Shares that will enhance competition among market participants, to the
benefit of investors and the marketplace.
For all the above reasons, the Exchange believes that the proposed
rule change is consistent with the requirements of Section 6(b)(5) of
the Act.
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 purpose of the Act. The Exchange notes that the
proposed rule change rather will facilitate the listing and trading of
additional exchange-traded product that will enhance competition among
both market participants and listing venues, 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 either solicited or received.
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 (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
[[Page 10663]]
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-NASDAQ-2025-013 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-NASDAQ-2025-013. 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-NASDAQ-2025-013 and should
be submitted on or before March 18, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-03033 Filed 2-24-25; 8:45 am]
BILLING CODE 8011-01-P
