Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Options on the Grayscale Ethereum Trust ETF, the Grayscale Ethereum Mini Trust ETF, and the Bitwise Ethereum ETF, 10745-10756 [2025-03070]
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Federal Register / Vol. 90, No. 37 / Wednesday, February 26, 2025 / Notices
19b–4(f) thereunder.4 The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
fee schedule to adopt fees for Cboe
Timestamping Service reports. The text
of the proposed rule change is provided
in Exhibit 5.
The proposed rule change, including
the Exchange’s statement of the purpose
of, and statutory basis for, the proposed
rule change, is available on the
Exchange’s website at https://
markets.cboe.com/us/equities/
regulation/rule_filings/BZX/, and on the
Commission’s website at https://
www.sec.gov/rules-regulations/selfregulatory-organization-rulemaking/
national-securities-exchanges?file_
number=SR-CboeBZX-2025-028.
khammond on DSK9W7S144PROD with NOTICES
II. 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.5
Comments may be submitted
electronically by using the
Commission’s internet comment form
(https://www.sec.gov/rules-regulations/
self-regulatory-organizationrulemaking/national-securitiesexchanges?file_number=SR-CboeBZX2025-028) or by sending an email to
rule-comments@sec.gov. Please include
file number SR–CboeBZX–2025–028 on
the subject line. Alternatively, paper
comments may be sent to Secretary,
Securities and Exchange Commission,
100 F Street NE, Washington, DC
20549–1090. All submissions should
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
otherwise in furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission will institute proceedings to determine
whether the proposed rule change should be
approved or disapproved.
5 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.
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refer to file number SR–CboeBZX–2025–
028. 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-regulations/
self-regulatory-organizationrulemaking/national-securitiesexchanges?file_number=SR-CboeBZX2025-028). 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–2025–028 and should be
submitted on or before March 19, 2025.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025–03069 Filed 2–25–25; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–566, OMB Control No.
3235–0627]
Submission for OMB Review;
Comment Request; Extension: Rule
17g–4
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
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit an extension for this
current collection of information to the
Office of Management and Budget for
approval.
Rule 17g–4 (17 CFR 240.17g–4)
requires each nationally recognized
statistical rating organization
(‘‘NRSROs’’) to establish, maintain, and
enforce written policies and procedures
that are reasonably designed to prevent
the following: (1) the inappropriate
dissemination of material nonpublic
information obtained in connection
with the performance of credit rating
services; (2) a person within the NRSRO
6 17
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10745
from trading or otherwise benefiting on
material nonpublic information; and (3)
the inappropriate dissemination of a
pending credit rating action.1
Currently, there are 10 credit rating
agencies registered as NRSROs with the
Commission. Based on Commission
staff’s experience, it is estimated that an
NRSRO will spend an average of
approximately 10 hours per year
reviewing policies and procedures
required by Rule 17g–4, updating the
policies and procedures (if necessary),
and enforcing them, for a total industrywide annual hour burden of
approximately 100 hours.2
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 at the
following website: https://
www.reginfo.gov/public/do/
PRAViewICR?ref_nbr=202411-3235-004
or send an email comment to
MBX.OMB.OIRA.SEC_desk_officer@
omb.eop.gov within 30 days of
publication of this notice by March 28,
2025.
Dated: February 20, 2025.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025–03079 Filed 2–25–25; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–102461; File No. SR–
CboeEDGX–2025–008]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
of a Proposed Rule Change, as
Modified by Amendment No. 1, To List
and Trade Options on the Grayscale
Ethereum Trust ETF, the Grayscale
Ethereum Mini Trust ETF, and the
Bitwise Ethereum ETF
February 20, 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
5, 2025, Cboe EDGX Exchange, Inc.
(‘‘EDGX Options’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by EDGX Options. On
1 See
17 CFR 240.17g–4.
hours × 10 NRSROs = 100 hours.
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
2 10
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Federal Register / Vol. 90, No. 37 / Wednesday, February 26, 2025 / Notices
February 6, 2025, EDGX Options filed
Amendment No. 1 to the proposal. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX Options’’)
proposes to amend Rule 19.3, to allow
the Exchange to list and trade options
on the Grayscale Ethereum Trust ETF,
the Grayscale Ethereum Mini Trust ETF,
and the Bitwise Ethereum ETF. The text
of the proposed rule change is provided
in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes to amend
Rule 19.3 regarding the criteria for
underlying securities. Specifically, the
Exchange proposes to amend Rule
19.3(i)(4) to allow the Exchange to list
and trade options on shares or other
securities (‘‘Fund Shares’’) that are
principally traded on a national
securities exchange and are defined as
an ‘‘NMS stock’’ under Rule 600 of
Regulation NMS and that represent
interests in the Grayscale Ethereum
Trust ETF (the ‘‘Grayscale Fund’’), the
Grayscale Ethereum Mini Trust ETF (the
‘‘Grayscale Mini Fund’’), and the
Bitwise Ethereum ETF (the ‘‘Bitwise
Fund’’ and, collectively, the ‘‘Ethereum
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Funds’’).3 This is a competitive filing
based on a similar proposal submitted
by NYSE American, LLC (‘‘NYSE
American’’), which is currently pending
with the Securities and Exchange
Commission (the ‘‘Commission’’).4
Current Rule 19.3(i) provides that,
subject to certain other criteria set forth
in that Rule, securities deemed
appropriate for options trading include
Fund Shares that represent certain types
of interests,5 including interests in
3 See Securities Exchange Act Release Nos.
100224 (May 23, 2024), 89 FR 46937 (May 30, 2024)
(SR–NYSEArca–2023–70; SR–NYSEArca–2024–31;
SR–NASDAQ–2023–045; SR–CboeBZX–2023–069;
SR–CboeBZX–2023–070; SR–CboeBZX–2023–087;
SR–CboeBZX–2023–095; and SR–CboeBZX–2024–
018) (Order Granting Accelerated Approval of
Proposed Rule Changes, as Modified by
Amendments Thereto, to List and Trade Shares of
Ether-Based Exchange-Traded Products)
(‘‘Ethereum ETP Approval Order’’); and 100541
(July 17, 2024), 89 FR 59786 (July 23, 2024) (SR–
NYSEArca–2024–44; and SR–NYSEArca–2024–53)
(Order Granting Approval of Proposed Rule
Changes To List and Trade Shares of the Grayscale
Ethereum Mini Trust and ProShares Ethereum
ETF).
4 See Securities Exchange Act Release Nos. 99306
(August 7, 2024), 89 FR 65957 (August 13, 2024)
(SR–NYSEAMER–2024–45), as amended by
Amendment No. 1 (February 5, 2025) (‘‘NYSE
American Proposal’’).
5 See Rule 19.3(i), which permits options trading
on Fund Shares that (1) represent interests in
registered investment companies (or series thereof)
organized as open-end management investment
companies, unit investment trusts or similar
entities, and that hold portfolios of securities
comprising or otherwise based on or representing
investments in indexes or portfolios of securities (or
that hold securities in one or more other registered
investment companies that themselves hold such
portfolios of securities) (‘‘Funds ’’) and/or financial
instruments including, but not limited to, stock
index futures contracts, options on futures, options
on securities and indexes, equity caps, collars and
floors, swap agreements, forward contracts,
repurchase agreements and reverse repurchase
agreements (the ‘‘Financial Instruments’’), and
money market instruments, including, but not
limited to, U.S. government securities and
repurchase agreements (the ‘‘Money Market
Instruments’’) constituting or otherwise based on or
representing an investment in an index or portfolio
of securities and/or Financial Instruments and
Money Market Instruments, or (2) represent
commodity pool interests principally engaged,
directly or indirectly, in holding and/or managing
portfolios or baskets of securities, commodity
futures contracts, options on commodity futures
contracts, swaps, forward contracts and/or options
on physical commodities and/or non-U.S. currency
(‘‘Commodity Pool ETFs’’) or (3) represent interests
in a trust or similar entity that holds a specified
non-U.S. currency or currencies deposited with the
trust or similar entity when aggregated in some
specified minimum number may be surrendered to
the trust by the beneficial owner to receive the
specified non-U.S. currency or currencies and pays
the beneficial owner interest and other distributions
on the deposited non-U.S. currency or currencies,
if any, declared and paid by the trust (‘‘Currency
Trust Shares’’), or (4) represent interests in the
SPDR Gold Trust or are issued by the iShares
COMEX Gold Trust or iShares Silver Trust, the
Aberdeen Standard Physical Silver Trust, the
Aberdeen Standard Physical Gold Trust, the
Aberdeen Standard Physical Palladium Trust, the
Aberdeen Standard Physical Platinum Trust, the
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certain specific trusts that hold financial
instruments, money market instruments,
precious metals (which are deemed
commodities), or Bitcoin (which is
another crypto currency and deemed a
commodity). In addition, Rule 19.3(i)
requires that Fund Shares meet the
criteria and standards set forth in Rule
19.3(a) and (b),6 or (2) be available for
creation or redemption each business
day from or through the issuer in cash
or in kind at a price related to net asset
value, and the issuer must be obligated
to issue Fund Shares in a specified
aggregate number even if some or all of
the investment assets required to be
deposited have not been received by the
issuer, subject to the condition that the
person obligated to deposit the
investments has undertaken to deliver
the investment assets as soon as
possible and such undertaking is
secured by the delivery and
maintenance of collateral consisting of
cash or cash equivalents satisfactory to
the issuer, as provided in the respective
prospectus.
The Ethereum Funds are Ethereumbacked commodity ETFs structured as
trusts. Similar to any Fund Share
currently deemed appropriate for
options trading under Rule 19.3(i), the
investment objective of each Ethereum
Fund is for its shares to reflect the
performance of Ethereum (less the
expenses of the trust’s operations),
offering investors an opportunity to gain
exposure to Ethereum without the
complexities of Ethereum delivery. As is
the case for Fund Shares currently
deemed appropriate for options trading,
a Ethereum Fund’s shares represent
units of fractional undivided beneficial
interest in the trust, the assets of which
consist principally of Ethereum and are
designed to track Ethereum or the
performance of the price of Ethereum
and offer access to the Ethereum
market.7 The Ethereum Funds provide
investors with cost-efficient alternatives
that allow a level of participation in the
Ethereum market through the securities
market. The Ethereum Funds are similar
to the Bitcoin Funds, except that those
funds hold Bitcoin (another
cryptocurrency) rather than Ethereum,
which are already eligible for options
trading on the Exchange (i.e., the
Fidelity Wise Origin Bitcoin Fund, the
Sprott Physical Gold Trust, the Goldman Sachs
Physical Gold ETF, or the Fidelity Wise Origin
Bitcoin Fund, the ARK 21Shares Bitcoin ETF, the
iShares Bitcoin Trust, the Grayscale Bitcoin Trust,
the Grayscale Bitcoin Mini Trust, or the Bitwise
Bitcoin ETF.
6 Rule 19.3(a) and (b) sets forth the criteria that
underlying securities must satisfy for option
contracts on those underlying securities to be
eligible for listing and trading on the Exchange.
7 The trust may include minimal cash.
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Federal Register / Vol. 90, No. 37 / Wednesday, February 26, 2025 / Notices
ARK 21Shares Bitcoin ETF, the iShares
Bitcoin Trust, the Grayscale Bitcoin
Trust, the Grayscale Bitcoin Mini Trust,
or the Bitwise Bitcoin ETF).
The Exchange’s initial listing
standards for Fund Shares on which
options may be listed and traded on the
Exchange will apply to the Ethereum
Funds. Pursuant to Rule 19.3(a), a
security (which includes a Fund Share)
on which options may be listed and
traded on the Exchange must be
registered (with the Commission) and be
an NMS stock (as defined in Rule 600
of Regulation NMS under the Securities
Exchange Act of 1934, as amended (the
‘‘Act’’)), and be characterized by a
substantial number of outstanding
shares that are widely held and actively
traded.8 Additionally, Rule 19.3(i)(1)
requires that Fund Shares either (1)
meet the criteria and standards set forth
in Rule 19.3(a) and (b),9 or (2) are
available for creation or redemption
each business day in cash or in kind
from the investment company,
commodity pool or other entity at a
price related to net asset value, and the
investment company, commodity pool
or other entity is obligated to provide
that Fund Shares may be created even
if some or all of the securities and/or
cash required to be deposited have not
been received by the Fund, the unit
investment trust or the management
investment company, provided the
authorized creation participant has
undertaken to deliver the securities and/
or cash as soon as possible and such
undertaking is secured by the delivery
and maintenance of collateral consisting
of cash or cash equivalents satisfactory
to the Fund, all as described in the
Fund’s or unit trust’s prospectus. Each
Ethereum Fund satisfies Rule
19.3(i)(1)(B), as each is subject to this
creation and redemption process.
While not required by the Rules for
purposes of options listings, the
Exchange believes the Ethereum Funds
satisfies [sic] the criteria and guidelines
set forth in Rule 19.3(a) and (b).
Pursuant to Rule 19.3(a), a security
(which includes a Fund Share) on
which options may be listed and traded
on the Exchange must be duly registered
(with the Commission) and be an NMS
stock (as defined in Rule 600 of
Regulation NMS under the Act, and be
characterized by a substantial number of
outstanding shares that are widely held
and actively traded.10 Each of the
Ethereum Funds is an NMS Stock as
defined in Rule 600 of Regulation NMS
under the Act.11 Further, the Exchange
believes each Ethereum Fund is
characterized by a substantial number of
outstanding shares that are widely held
and actively traded.
With respect to the Grayscale Fund,
the Grayscale Mini Fund, and the
Bitwise Fund, the Exchange reviewed
the data presented by NYSE American
in its filing with respect to shares
outstanding (and corresponding market
capitalization), number of beneficial
holders, and trading volume. As of
November 29, 2024, the Ethereum
Funds had the following number of
shares outstanding (and corresponding
market capitalization):
Ethereum Fund
Grayscale Fund .......................................................................................................................................
Grayscale Mini Fund ................................................................................................................................
Bitwise Fund ............................................................................................................................................
As shown above, each of the
Ethereum Funds had significantly more
than 7,000,000 shares outstanding,
which is the minimum number of shares
of a corporate stock that the Exchange
generally requires to list options on that
stock pursuant to Rule 19.3(b).12 The
Exchange believes this demonstrates
that each Ethereum Fund is
characterized by a substantial number of
177,838,500
45,220,787
16,600,000
$5,425,852,635
1,547,003,157
430,886,200
outstanding shares. Further, the below
table contains information regarding the
number of beneficial holders of the
Ethereum Funds as of December 31,
2024.
Beneficial holders
(as of 12/31/24)
Ethereum Fund
Grayscale Fund .......................................................................................................................................................................
Grayscale Mini Fund ................................................................................................................................................................
Bitwise Fund ............................................................................................................................................................................
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Market value
(11/29/24)
Shares outstanding
112,320
17,396
5,992
As this table shows, each Ethereum
Fund has significantly more than 2,000
beneficial holders (approximately 56, 9,
and 3 times more, respectively), which
is the minimum number of holders the
Exchange generally requires for
corporate stock in order to list options
on that stock pursuant to pursuant to
Rule 19.3(b).13 Therefore, the Exchange
believes the shares of each Ethereum
Fund are widely held.
The Exchange also believes that,
based on trading volume since the
Ethereum Funds began trading on July
23, 2024, shares of the Ethereum Funds
are actively traded. In particular, the
table below sets forth the total trading
volume (by shares and notional) from
the inception of trading through either
November 29, 2024 (for the Grayscale
Fund and the Grayscale Mini Fund) or
December 31, 2024 (for the Bitwise
Fund). In addition, the below table
illustrates the average daily volume
(‘‘ADV’’) over the 30-day period of
either October 29, 2024–through
November 29, 2024 (for the Grayscale
Fund and the Grayscale Mini Fund) or
8 The criteria and guidelines for a security to be
considered widely held and actively traded are set
forth in Rule 19.3(b), subject to exceptions.
9 Rule 19.3(a) and (b) sets forth the criteria an
underlying security must meet for the Exchange to
be able to list options on the underlying.
10 The criteria and guidelines for a security to be
considered widely held and actively traded are set
forth in Rule 19.3(b), subject to exceptions.
11 An ‘‘NMS stock’’ means any NMS security
other than an option, and an ‘‘NMS security’’ means
any security or class of securities for which
transaction reports are collected, processed, and
made available pursuant to an effective transaction
reporting plan (or an effective national market
system plan for reporting transaction in listed
options). See 17 CFR 242.600(b)(64) (definition of
‘‘NMS security’’) and (65) (definition of ‘‘NMS
stock’’).
12 The Exchange notes that on November 19,
2024, the Grayscale Mini Fund underwent a reverse
stock split, reducing the number of shares
outstanding—and increasing the share price—
tenfold.
13 The number of beneficial holders of the
Grayscale Mini Fund may have been impacted by
the 10:1 reverse stock split, as investors with fewer
than 10 shares would have received a cash payout.
See id.
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Federal Register / Vol. 90, No. 37 / Wednesday, February 26, 2025 / Notices
November 29, 2024–through December
31, 2024 (for the Bitwise Fund).14
Trading volume
(shares)
Ethereum Fund
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Grayscale Fund ...................................................................................................................
Grayscale Mini Fund ............................................................................................................
Bitwise Fund ........................................................................................................................
427,312,540
172,400,020
44,477,060
As demonstrated above, even though
the Ethereum Funds have been trading
for less than one year, the trading
volume for each Ethereum Fund is
substantially higher than 2,400,000
shares (roughly 178, 72, and 16 times
that amount), which is the minimum 12month volume the Exchange generally
requires for a security in order to list
options on that security as set forth in
Rule 19.3(b). The Exchange believes this
data demonstrates each Ethereum Fund
is characterized by a substantial number
of outstanding shares that are actively
traded.
Options on the Ethereum Funds will
be subject to the Exchange’s continued
listing standards set forth in Rule 19.4(g)
for Fund Shares deemed appropriate for
options trading pursuant to Rule 19.3(i).
Specifically, 19.4(g) provides that Fund
Shares that were initially approved for
options trading pursuant to Rule 19.3
will not be deemed to meet the
requirements for continued approval,
and the Exchange shall not open for
trading any additional series of option
contracts of the class covering such
Fund Shares if the security ceases to be
an NMS stock (see Rule 19.4(b)(4)).
Additionally, the Exchange will not
open for trading any additional series of
option contracts of the class covering
Fund Shares in any of the following
circumstances: (1) in the case of options
covering Fund Shares approved for
trading under Rule 19.3(i)(4)(A), in
accordance with the terms of Rule
19.4(b)(1), (2) and (3); (2) in the case of
options covering Fund Shares approved
pursuant to Rule 19.3(i)(4)(B), following
the initial 12-month period beginning
upon the commencement of trading in
the Fund Shares on a national securities
exchange and are defined as NMS stock
under Rule 600 of Regulation NMS,
there were fewer than 50 record and/or
beneficial holders of such Fund Shares
for 30 consecutive days; (3) the value of
the index, non-U.S. currency, portfolio
of commodities including commodity
futures contracts, options on commodity
futures contracts, swaps, forward
contracts and/or options on physical
commodities and/or Financial
Instruments or Money Market
Instruments, or portfolio of securities on
which the Fund Shares are based is no
longer calculated or available; or (4)
such other event occurs or condition
exists that in the opinion of the
Exchange makes further dealing in such
options on the Exchange inadvisable.
Options on each Ethereum Fund will
be physically settled contracts with
American-style exercise.15 Consistent
with current Rule 19.6, which governs
the opening of options series on a
specific underlying security (including
Fund Shares), the Exchange will open at
least one expiration month for options
on Ethereum Funds 16 at the
commencement of trading on the
Exchange and may also list series of
options on a Ethereum Fund for trading
on a weekly,17 monthly,18 or quarterly 19
basis. The Exchange may also list longterm equity option series (‘‘LEAPS’’)
14 See FactSet, 11/29/2024 and 12/31/24, https://
www.factset.com/data-attribution.
15 See Rule 19.2, which provides that the rights
and obligations of holders and writers are set forth
in the Rules of the Options Clearing Corporation
(‘‘OCC’’); and Equity Options Product
Specifications January 3, 2024), available at Equity
Options Specifications (cboe.com); see also OCC
Rules, Chapters VIII (which governs exercise and
assignment) and Chapter IX (which governs the
discharge of delivery and payment obligations
arising out of the exercise of physically settled stock
option contracts).
16 See Rule 19.6(b). The monthly expirations are
subject to certain listing criteria for underlying
securities described within Rule 19.3. Monthly
listings expire the third Friday of the month. The
term ‘‘expiration date’’ (unless separately defined
elsewhere in the OCC By-Laws), when used in
respect of an option contract (subject to certain
exceptions), means the third Friday of the
expiration month of such option contract, or if such
Friday is a day on which the exchange on which
such option is listed is not open for business, the
preceding day on which such exchange is open for
business. See OCC By-Laws Article I, Section 1.
Pursuant to Rule 19.6(c), additional series of
options of the same class may be opened for trading
on the Exchange when the Exchange deems it
necessary to maintain an orderly market, to meet
customer demand or when the market price of the
underlying stock moves more than five strike prices
from the initial exercise price or prices. New series
of options on an individual stock may be added
until the beginning of the month in which the
options contract will expire. Due to unusual market
conditions, the Exchange, in its discretion, may add
a new series of options on an individual stock until
the close of trading on the business day prior to
expiration.
17 See Rule 19.6, Interpretation and Policy .05.
18 See Rule 19.6, Interpretation and Policy .08.
19 See Rule 19.6, Interpretation and Policy .04.
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Trading volume
(notional $)
$10,289,781,199
4,614,428,230
959,491,343
ADV
(shares)
4,237,811
3,065,796
291,627
that expire from 12 to 39 months from
the time they are listed.20
Pursuant to Rule 19.6, Interpretation
and Policy .01, which governs strike
prices of series of options on Fund
Shares, the interval of strikes prices for
series of options on Ethereum Funds
will be $1 or greater when the strike
price is $200 or less and $5 or greater
where the strike price is over $200.21
Additionally, the Exchange may list
series of options pursuant to the $1
Strike Price Interval Program,22 the
$0.50 Strike Program,23 the $2.50 Strike
Price Program,24 and the $5 Strike
Program.25 Pursuant to Rule 21.5, where
the price of a series of an Ethereum
Fund option is less than $3.00, the
minimum increment will be $0.05, and
where the price is $3.00 or higher, the
minimum increment will be $0.10.26
Any and all new series of Ethereum
Fund options that the Exchange lists
will be consistent and comply with the
expirations, strike prices, and minimum
increments set forth in Rules 19.6 and
21.5, as applicable.
Ethereum Fund options will trade in
the same manner as any other Fund
Share options on the Exchange. The
Exchange Rules that currently apply to
the listing and trading of all Fund Share
options on the Exchange, including, for
example, Rules that govern listing
criteria, expirations, exercise prices,
minimum increments, margin
requirements, customer accounts, and
trading halt procedures will apply to the
listing and trading of Ethereum Funds
20 See
Rule 19.8.
Exchange notes that for options listed
pursuant to the Short Term Option Series Program,
the Monthly Options Series Program, and the
Quarterly Options Series Program, Rule 19.6,
Interpretations and Policies .05, .08, and .04
specifically sets forth intervals between strike
prices on Quarterly Options Series, Short Term
Option Series, and Monthly Options Series,
respectively.
22 See Rule 19.6, Interpretation and Policy .02.
23 See Rule 19.6, Interpretation and Policy .06.
24 See Rule 19.6, Interpretation and Policy .03.
25 See Rule 19.6(d)(5).
26 If options on an Ethereum Fund are eligible to
participate in the Penny Interval Program, the
minimum increment will be $0.01 for series with
a price below $3.00 and $0.05 for series with a price
at or above $3.00. See Rule 21.5(e) (which describes
the requirements for the Penny Interval Program).
21 The
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options on the Exchange in the same
manner as they apply to other options
on all other Fund Shares that are listed
and traded on the Exchange, including
the precious-metal backed commodity
Fund Shares and the Bitcoin Funds
already deemed appropriate for options
trading on the Exchange pursuant to
current Rule 19.3(i).27 Position and
exercise limits for options on ETFs,
including options on Ethereum Funds,
are determined pursuant to Rules 18.7
and 18.9.28
Pursuant to Rules 18.7 and 18.9, the
position and exercise limits,
respectively, for Ethereum Fund options
will be 25,000 same side option
contracts.29 The Exchange believes
these proposed position and exercise
limits are reasonable and appropriate. In
considering the appropriate position
and exercise limits for the Ethereum
Funds, the Exchange reviewed the data
presented by NYSE American in its
filing with respect to the Bitwise Fund,
the Grayscale Fund and the Grayscale
Mini Fund.30 NYSE American
aggregated market capitalization,
volume, and shares outstanding data of
the Ethereum Funds and compared that
data to those of other ETFs, and
compared the proposed position limit of
the Ethereum Funds to the position
limits of the options overlying those
other ETFs. The Exchange reviewed
NYSE American’s data that
demonstrated that each of these three
Bitcoin [sic] Funds would easily qualify
for much higher position limits
Ethereum Fund
available to other ETFs and ETPs
pursuant to the criterion in Cboe
Options Rule 8.30, Interpretation and
Policy .02 (which governs position
limits on the Exchange pursuant to Rule
18.7).31
Cboe Options Rule 8.30,
Interpretation and Policy .02 sets forth
position (and exercise) limits for
options, which vary according to the
number of shares outstanding and the
amount of trading in underlying during
the most recent six-month period.32
Although the Ethereum Funds have
been trading for less than six months
[sic], the trading volume in each Fund
is sufficient to qualify the Funds for
position limits in excess of the proposed
25,000-contract limit, as shown below.33
Total volume
Grayscale Fund ........................................................................................
Grayscale Mini Fund ................................................................................
Bitwise Fund .............................................................................................
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10749
427,312,540 (7/23/24–11/29/24).
172,400,020 (7/23/24–11/29/24).
44,477,060 (7/23/24–12/31/24).
Based on this trading volume, the
most-recent trading volume in the
Grayscale Fund and the Grayscale Mini
Fund well exceeds the requisite
minimum of 100,000,000 shares
necessary to qualify for the 250,000contract position and exercise limits.34
By comparison, the underlying of other
options with six-month trading volume
less than the volumes in the table above
are eligible for position and exercise
limits of at least 250,000.35 Further, the
most-recent trading volume for the
Bitwise Fund well exceeded the
requisite minimum of 40,000,000 shares
necessary to qualify for the 75,000contract position (and exercise) limit,
which is three times the proposed
25,000-contract limit.36 Finally, the
proposed 25,000-contract position limit
is the default for options that do not
otherwise qualify for a higher limit and
is therefore an adequate limit for each
Ethereum Fund.37
Second, with respect to the
outstanding shares of these three
Ethereum Funds, the Exchange
reviewed NYSE American’s data
regarding the outstanding shares of each
of these Ethereum Funds. NYSE
American performed an exercise to
demonstrate that if a market participant
held the maximum number of contracts
possible pursuant to the proposed
position and exercise limits (25,000
contracts), the equivalent shares
represented by the proposed position
and exercise limits (2,500,000 shares)
would represent the following
approximate percentage of outstanding
shares as of November 29, 2024:
27 See, e.g., SPDR Gold Trust, iShares COMEX
Gold Trust or iShares Silver Trust, the Aberdeen
Standard Physical Silver Trust, the Aberdeen
Standard Physical Gold Trust, the Aberdeen
Standard Physical Palladium Trust, the Aberdeen
Standard Physical Platinum Trust, the Sprott
Physical Gold Trust, the Goldman Sachs Physical
Gold ETF or the Fidelity Wise Origin Bitcoin Fund,
the ARK 21Shares Bitcoin ETF, the iShares Bitcoin
Trust, the Grayscale Bitcoin Trust, the Grayscale
Bitcoin Mini Trust, or the Bitwise Bitcoin ETF.
28 Rule 18.7(a)(1) provides that no Options
Member shall make, for any account in which it has
any interest or for the account of any Customer, an
opening transaction on any exchange if the Options
Member has reason to believe that as a result of
such transaction the Options Member or its
Customer would, acting alone or in concert with
others, directly or indirectly, exceed the applicable
position limit fixed by Cboe Exchange, Inc. (‘‘Cboe
Options’’). See also Cboe Options Rules 8.30 and
8.42.
29 Rule 18.7(a)(1) provides that no Options
Member shall make, for any account in which it has
any interest or for the account of any Customer, an
opening transaction on any exchange if the Options
Member has reason to believe that as a result of
such transaction the Options Member or its
Customer would, acting alone or in concert with
others, directly or indirectly, exceed the applicable
position limit fixed by Cboe Exchange, Inc. (‘‘Cboe
Options’’). Cboe Options currently has a nearly
identical rule filing pending with the Commission
to amend Cboe Options Rule 8.30, Interpretation
and Policy .10 (and Cboe Options Rule 8.42) to
establish a position and exercise limit for Ethereum
Fund options of 25,000. See SR–CBOE–2025–008,
as amended by Amendment No. 1 (‘‘Cboe Ethereum
Fund Proposal’’). If the Commission approves the
Cboe Ethereum Fund Proposal, the position and
exercise limits in that filing would then apply to the
Exchange.
30 See NYSE American Proposal.
31 See Cboe Options Rule 8.30, Interpretation and
Policy .02; Exchange Rule 18.7.
32 See Cboe Options Rule 8.30, Interpretation and
Policy .02; Exchange Rule 18.7.
33 See FactSet, 11/29/2024 and 12/31,24, https://
www.factset.com/data-attribution.
34 Cboe Options Rule 8.30, Interpretation and
Policy .02(e) states that to be eligible for the 250,000
option contract limit, either the most recent six-
month trading volume of the underlying security
must have totaled at least 100,000,000 shares; or the
most recent six-month trading volume of the
underlying security must have totaled at least
75,000,000 shares and the underlying security must
have at least 300,000,000 currently outstanding.
35 See https://www.theocc.com/Market-Data/
Market-Data-Reports/Series-and-Trading-Data/
Series-Search (including the following symbols that
have a position limit of 250,000: GLD, IAU, SLV,
SIVR, SGOL).
36 Cboe Options Rule 8.30, Interpretation and
Policy .02(c) states that to be eligible for the 75,000
option contract limit, either the most recent sixmonth trading volume of the underlying security
must have totaled at least 40,000,000 shares; or the
most recent six-month trading volume of the
underlying security must have totaled at least
30,000,000 shares and the underlying security must
have at least 120,000,000 currently outstanding.
37 Cboe Options Rule 8.30, Interpretation and
Policy .02(a) states that the 25,000 option contract
limit applies to those options having an underlying
security that does not meet the requirements for a
higher option contract limit.
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Proposed
position/exercise
limits in
equivalent shares
Ethereum Fund
Grayscale Fund .....................................................................................................
Grayscale Mini Fund ..............................................................................................
Bitwise Fund ..........................................................................................................
As this table demonstrates, if a market
participant held the maximum
permissible options positions in one of
the Ethereum Fund options and
exercised all of them at the same time,
that market participant would control a
small percentage of the outstanding
shares of the underlying Ethereum
Fund. For example, as noted above, a
2,500,000
2,500,000
2,500,000
position limit of 25,000 same side
contracts effectively restricts a market
participant from holding positions that
could result in the receipt of no more
than 2,500,000 shares of the applicable
Ethereum Fund (if that market
participant exercised all its options).
NYSE American used the number of
shares outstanding for each Ethereum
177,838,500
45,220,787
16,600,000
Grayscale Fund ...............................................................................................................................
Grayscale Mini Fund ........................................................................................................................
Bitwise Fund ....................................................................................................................................
that may put the underlying security
under stress. The Exchange believes it is
highly unlikely for this to occur;
however, even if such event did occur,
the Exchange would not expect any of
the Ethereum Fund [sic] to be under
stress because such an event would
merely induce the creation of more
shares through the trust’s creation and
redemption process.
NYSE American also performed an
exercise to compare the size of the
proposed position limit to the market
capitalization of the Ethereum market
given that the issuer of each of these
three Ethereum Funds may create and
redeem shares that represent an interest
in Ethereum. NYSE American took the
global supply of Ethereum, which was
177,838,500
45,220,787
16,600,000
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1.4
5.5
15.1
Number of market
participants with 25,000
same side positions
71
18
7
120.44 million and the price of one
Ethereum, which was approximately
$3,593.49,38 which equates to a market
capitalization of approximately $439.78
billion. Consider the proposed position
and exercise limit of 25,000 option
contracts for each Ethereum Fund
option. A position and exercise limit of
25,000 same side contracts effectively
restricts a market participant from
holding positions that could result in
the receipt of no more than 2,500,000
shares of the Grayscale Fund, Grayscale
Mini Fund, and Bitwise Fund, as
applicable (if that market participant
exercised all its options). NYSE
American considered the share price of
each Bitcoin [sic] Fund on November
29, 2024 and calculated the value of
38 See https://finance.yahoo.com/quote/ETHUSD/history.
VerDate Sep<11>2014
Percentage of
outstanding shares
Fund as of November 29, 2024, and
calculated the approximate number of
market participants that could hold the
maximum of 25,000 same side positions
in each Ethereum Fund that would
equate to the number of shares
outstanding of that Ethereum Fund:
Outstanding
shares
Bitcoin [sic] Fund
This means if 71 market participants
had 25,000 same side positions in
options on the Grayscale Fund, each of
them would have to simultaneously
exercise all of those options to create a
scenario that may put the underlying
security under stress. Similarly, this
means if 18 market participants had
25,000 same side positions in options
on the Grayscale Mini Fund, each of
them would have to simultaneously
exercise all of those options to create a
scenario that may put the underlying
security under stress. Finally, this
means if 7 market participants had
25,000 same side positions in options
on the Bitwise Fund, each of them
would have to simultaneously exercise
all of those options to create a scenario
Outstanding
shares
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2,500,000 shares of the Ethereum Fund
at that price, and the approximate
percentage of that value of the size of
the Ethereum market:
Share price
($)
Bitcoin [sic] Fund
Grayscale Fund ...................................................................................................
Grayscale Mini Fund ............................................................................................
Bitwise Fund ........................................................................................................
Therefore, if a market participant with
the maximum 25,000 same side
contracts in options on the Grayscale
Fund, the Grayscale Mini Fund, or the
Bitwise Fund exercised all positions at
Value of
2,500,000 shares
30.15
33.84
25.80
one time, such an event would have no
practical impact on the Ethereum
market.
The Exchange also reviewed NYSE
American’s data regarding the market
75,250,000
84,600,000
64,500,000
As this data gathered by NYSE
American demonstrates, the Ethereum
Funds collectively represent
approximately 1.71% of the global
supply of Ethereum (120,440,000).39
Based on the $30.15 price of a Grayscale
Fund share on November 29, 2024, a
market participant could have redeemed
one Ethereum for approximately 119
Grayscale Fund shares. Another
14,354,890,070 Grayscale Fund shares
could be created before the supply of
Ethereum was exhausted. As a result,
5,742 market participants would have to
simultaneously exercise 25,000 same
side positions in Grayscale Fund
options to receive shares of the
Grayscale Fund holding the entire
global supply of Ethereum. Similarly,
based on the $33.84 price of a Grayscale
Mini Fund share on November 29, 2024,
a market participant could have
redeemed one Ethereum for
approximately 106 Grayscale Mini Fund
shares. Another 12,789,596,206
Grayscale Mini Fund shares could be
created before the supply of Ethereum
was exhausted. As a result, 5,116 market
120,440,000
177,838,500
45,220,787
16,600,000
participants would have to
simultaneously exercise 25,000 same
side positions in Grayscale Mini Fund
options to receive shares of Grayscale
Mini Fund holding the entire global
supply of Ethereum. Similarly, based on
the $25.80 price of a Bitwise Fund share
on November 29, 2024, a market
participant could have redeemed one
Ethereum for approximately 139 Bitwise
Fund shares. Another 16,775,191,302
Bitwise Fund shares could be created
before the supply of Ethereum was
exhausted. As a result, 6,710 market
participants would have to
simultaneously exercise 25,000 same
side positions in Bitwise Fund options
to receive shares of Bitwise Fund
holding the entire global supply of
Ethereum. Unlike the Ethereum Funds,
the number of shares that corporations
may issue is limited. However, like
corporations, which authorize
additional shares, repurchase shares, or
split their shares, the Ethereum Funds
may create, redeem, or split shares in
response to demand. The supply of
Ethereum is larger than the available
Market value
($)
khammond on DSK9W7S144PROD with NOTICES
id.
market capitalization of ethereum would
rank in the top 20 among securities. See https://
companiesmarketcap.com/usa/largest-companiesin-the-usa-by-market-cap/.
Share price
($)
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18:26 Feb 25, 2025
Jkt 265001
41 See CME Rulebook Chapter 349 (description of
CME ether futures) and Chapter 5, Position Limit,
Position Accountability and Reportable Level Table
in the Interpretations & Special Notices. Each CME
ether futures contract is valued at fifty ethers as
PO 00000
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100
1.25
0.36
0.10
supply of most securities.40 Given the
significant unlikelihood of any of these
events ever occurring, the Exchange
does not believe options on the
Ethereum Funds should be subject to
position and exercise limits even lower
than those proposed (which are already
equal to the lowest available limit for
equity options in the industry) to
protect the supply of Ethereum.
NYSE American compared the
proposed position limits to the position
limit of CME Ethereum futures. The
Chicago Mercantile Exchange (‘‘CME’’)
imposes a position limit of 8,000 futures
(for the initial spot month) on its
ethereum futures contract.41 On
November 29, 2024, CME Jan 25
Ethereum Futures settled at $3,629.69.
A position of 8,000 CME Ethereum
futures, therefore, would have a
notional value of $1,451,876,000. The
following table shows the share price of
each Ethereum Fund on November 29,
2024, and the approximate number of
option contracts that equates to that
notional value:
Grayscale Fund .......................................................................................................................................................
Grayscale Mini Fund ................................................................................................................................................
Bitwise Fund ............................................................................................................................................................
40 The
% of Total
bitcoin market
432,799,935,600
5,425,852,635
1,547,003,157
430,886,200
Ethereum Fund
39 See
0.017
0.020
0.015
capitalization of each of these three
Ethereum Funds relative to the market
capitalization of the entire Ethereum
market, as of November 29, 2024:
Ethereum/shares
outstanding
Total Ethereum Market ................................................................................................
Grayscale Fund ...........................................................................................................
Grayscale Mini Fund ....................................................................................................
Bitwise Fund ................................................................................................................
Percentage of
Bitcoin [sic] market
30.15
33.84
25.80
Number of
option
contracts
481,551
429,041
562,743
defined by the CME CF Ether Reference Rate
(‘‘ERR’’). See CME Rulebook Chapter 349.
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The approximate number of option
contracts for each Ethereum Fund that
would equate to the notional value of
CME Ethereum futures is significantly
higher than the proposed limit of 25,000
options contract for each Ethereum
Fund option. The fact that many options
ultimately expire out-of-the-money and
thus are not exercised for shares of the
underlying, while the delta of an
Ethereum future is 1, further
demonstrates how conservative the
proposed limits of 25,000 options
contracts are for the Ethereum Fund
options.
The Exchange notes, again, unlike
options contracts, CME position limits
are calculated on a net futuresequivalent basis by contract and include
contracts that aggregate into one or more
base contracts according to an
aggregation ratio(s).42 Therefore, if a
portfolio includes positions in options
on futures, CME would aggregate those
positions into the underlying futures
contracts in accordance with a table
published by CME on a delta equivalent
value for the relevant spot month,
subsequent spot month, single month
and all month position limits.43 If a
position exceeds position limits because
of an option assignment, CME permits
market participants to liquidate the
excess position within one business day
without being considered in violation of
its rules. Additionally, if at the close of
trading, a position that includes options
exceeds position limits for futures
contracts, when evaluated using the
delta factors as of that day’s close of
trading but does not exceed the limits
when evaluated using the previous
day’s delta factors, then the position
shall not constitute a position limit
violation. Considering CME’s position
limits on futures for Ethereum, the
Exchange believes that that the
proposed same side position limits are
more than appropriate for the Ethereum
options.
Consistent with its position regarding
the irrelevance of bitcoin supply to
position limits for options on bitcoin
ETPs, the Exchange likewise believes
the available supply of Ethereum is not
relevant to the determination of position
and exercise limits for Ethereum Fund
options.44 Position and exercise limits
42 See CME Rulebook Chapter 5, Position Limit,
Position Accountability and Reportable Level Table
in the Interpretations & Special Notices.
43 Id.
44 The Exchange is unaware of any proposed rule
change related to position and exercise limits for
any equity option (including commodity ETF
options) for which the Commission required
consideration of whether the available supply of an
underlying (whether it be a corporate stock or an
ETF) or the contents of an ETF (commodity or
otherwise) should be considered when an exchange
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18:26 Feb 25, 2025
Jkt 265001
are not a tool that should be used to
address a potential limited supply of the
underlying of an underlying. Position
and exercise limits do not limit the total
number of options that may be held, but
rather they limit the number of
positions a single customer may hold or
exercise at one time.45 ‘‘Since the
inception of standardized options
trading, the options exchanges have had
rules imposing limits on the aggregate
number of options contracts that a
member or customer could hold or
exercise.’’ 46 Position and exercise limit
rules are intended ‘‘to prevent the
establishment of options positions that
can be used or might create incentives
to manipulate or disrupt the underlying
market so as to benefit the options
position. In particular, position and
exercise limits are designed to minimize
the potential for mini-manipulations
and for corners or squeezes of the
underlying market. In addition, such
limits serve to reduce the possibility for
disruption of the options market itself,
especially in illiquid options classes.’’ 47
The Exchange notes that a
Registration Statement on Form S–1 was
filed with the Commission for each
Ethereum Fund, each of which
described the supply of Ethereum as
being unlimited.48 Each Registration
proposed to establish those limits. See, e.g.,
Securities Exchange Act Release No. 57894 (May
30, 2008), 73 FR 32061 (June 5, 2008) (SR–CBOE–
2005–11) (approval order in which the Commission
stated that the ‘‘listing and trading of Gold Trust
Options will be subject to the exchanges’ rules
pertaining to position and exercise limits and
margin’’). The Exchange notes when the
Commission approved this filing, the position
limits in Rule 8.30 were the same as they are today.
For reference, the current position and exercise
limits for options on SPDR Gold Shares ETF
(‘‘GLD’’) and options on iShares Silver Trust
(‘‘SLV’’) are 250,000 contracts, or 10 times that
proposed position and exercise limit for the Bitcoin
[sic] Fund options.
45 For example, suppose an option has a position
limit of 25,000 option contracts and there are a total
of 10 investors trading that option. If all 10
investors max out their positions, that would result
in 250,000 option contracts outstanding at that
time. However, suppose 10 more investors decide
to begin trading that option and also max out their
positions. This would result in 500,000 option
contracts outstanding at that time. An increase in
the number of investors could cause an increase in
outstanding options even if position limits remain
unchanged.
46 See Securities Exchange Act Release No. 39489
(December 24, 1997), 63 FR 276 (January 5, 1998)
(SR–CBOE–1997–11).
47 Id.
48 See, e.g., Grayscale Fund Form S–1 Registration
Statement, at p. 77, https://www.sec.gov/Archives/
edgar/data/2020455/000119312524106957/
d756153ds1.htm; Grayscale Mini Fund Amendment
No. 5 to Form S–1 Registration Statement, at p. 79,
https://www.sec.gov/Archives/edgar/data/2020455/
000119312524181081/d756153ds1a.htm; and
Bitwise Fund Form S–1 Registration Statement 1, at
p. 17, https://www.sec.gov/Archives/edgar/data/
2013744/000199937124007581/bitwise-s1a_
061824.htm (‘‘Ethereum Funds Reg. Stmts.’’).
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Statement permits an unlimited number
of shares of the applicable Ethereum
Fund to be created. Further, the
Commission approved proposed rule
changes that permitted the listing and
trading of shares of each Ethereum
Fund, which approval did not comment
on the sufficient supply of Ethereum or
address whether there was a risk that
permitting an unlimited number of
shares for a Ethereum Fund would
impact the supply of ether.49 Therefore,
the Exchange believes the Commission
had ample time and opportunity to
consider whether the supply of
ethereum was sufficient to permit the
creation of unlimited Ethereum Fund
shares, and does not believe considering
this supply with respect to the
establishment of position and exercise
limits is appropriate given its lack of
relevance to the purpose of position and
exercise limits. However, given the
significant size of the Ethereum supply,
the proposed positions limits are more
than sufficient to protect investors and
the market.
All of the above information
demonstrates that the proposed position
and exercise limits for the Ethereum
Fund options are more than reasonable
and appropriate. The trading volume,
ADV, and outstanding shares of each
Ethereum Fund demonstrate that these
funds are actively traded and widely
held, and proposed position and
exercise limits are well below those of
other ETFs with similar market
characteristics. The proposed position
and exercise limits are the lowest
position and exercise limits available for
equity options in the industry, are
extremely conservative, and are more
than appropriate given each Ethereum
Fund’s market capitalization and ADV.
The proposed position and exercise
limits reasonably and appropriately
balance the liquidity provisioning in the
market against the prevention of
manipulation. The Exchange believes
these proposed limits are effectively
designed to prevent an individual
customer or entity from establishing
options positions that could be used to
manipulate the market of the underlying
Ethereum Funds as well as the
Ethereum market.50
Today, the Exchange has an adequate
surveillance program in place for
options. The Exchange intends to apply
those same program procedures to
options on the Ethereum Funds that it
applies to the Exchange’s other options
products, including options on the
49 See
Ethereum ETP Approval Order.
Securities Exchange Act Release No. 39489
(December 24, 1997), 63 FR 276 (January 5, 1998)
(SR–CBOE–1997–11).
50 See
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Bitcoin Funds.51 The Exchange’s market
surveillance staff would have access to
the surveillances conducted by Cboe
BYX Exchange, Inc., Cboe BZX
Exchange, Inc., Cboe EDGA Exchange,
Inc., and Cboe Exchange, Inc.52 with
respect to the Ethereum Funds and
would review activity in the underlying
Ethereum Funds when conducting
surveillances for market abuse or
manipulation in the options on the
Ethereum Funds. Additionally, the
Exchange is a member of the
Intermarket Surveillance Group (‘‘ISG’’)
under the Intermarket Surveillance
Group Agreement. ISG members work
together to coordinate surveillance and
investigative information sharing in the
stock, options, and futures markets. In
addition to obtaining information from
its affiliated markets, the Exchange
would be able to obtain information
regarding trading in shares of the
Ethereum Funds from their primary
listing markets and from other markets
that trade shares of the Ethereum Funds
through ISG. In addition, the Exchange
has a Regulatory Services Agreement
with the Financial Industry Regulatory
Authority (‘‘FINRA’’) for certain market
surveillance, investigation and
examinations functions. Pursuant to a
multi-party 17d–2 joint plan, all options
exchanges allocate amongst themselves
and FINRA responsibilities to conduct
certain options-related market
surveillance that are common to rules of
all options exchanges.53
The underlying shares of spot
Ethereum exchange traded products
(‘‘ETPs’’), including the Ethereum
Funds, are also subject to safeguards
related to addressing market abuse and
manipulation. As the Commission
51 The surveillance program includes surveillance
patterns for price and volume movements as well
as patterns for potential manipulation (e.g.,
spoofing and marking the close).
52 Cboe BYX Exchange, Inc., Cboe BZX Exchange,
Inc., Cboe EDGA Exchange, Inc., and Cboe
Exchange, Inc. are affiliated markets of the
Exchange.
53 Section 19(g)(1) of the Act, among other things,
requires every self-regulatory organization (‘‘SRO’’)
registered as a national securities exchange or
national securities association to comply with the
Act, the rules and regulations thereunder, and the
SRO’s own rules, and, absent reasonable
justification or excuse, enforce compliance by its
members and persons associated with its members.
See 15 U.S.C. 78q(d)(1) and 17 CFR 240.17d–2.
Section 17(d)(1) of the Act allows the Commission
to relieve an SRO of certain responsibilities with
respect to members of the SRO who are also
members of another SRO (‘‘common members’’).
Specifically, Section 17(d)(1) allows the
Commission to relieve an SRO of its responsibilities
to: (i) receive regulatory reports from such
members; (ii) examine such members for
compliance with the Act and the rules and
regulations thereunder, and the rules of the SRO;
or (iii) carry out other specified regulatory
responsibilities with respect to such members.
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stated in its order approving proposals
of several exchanges to list and trade
shares of spot Ethereum-based ETPs,
‘‘[e]ach Exchange has a comprehensive
surveillance-sharing agreement with the
[CME] via their common membership in
the Intermarket Surveillance Group.
This facilitates the sharing of
information that is available to the CME
through its surveillance of its markets,
including its surveillance of the CME
ethereum futures market.’’ 54 The
Exchange states that, given the
consistently high correlation between
the CME Ethereum futures market and
the spot bitcoin [sic] market, as
confirmed by the Commission through
robust correlation analysis, the
Commission was able to conclude that
such surveillance sharing agreements
could reasonably be ‘‘expected to assist
in surveilling for fraudulent and
manipulative acts and practices in the
specific context of the [Ethereum
ETPs].’’ 55 In light of surveillance
measures related to both options and
futures as well as the underlying
Ethereum Funds,56 the Exchange
believes that existing surveillance
procedures are designed to deter and
detect possible manipulative behavior
which might potentially arise from
listing and trading the proposed options
on the Ethereum Funds. Further, the
Exchange will implement any new
surveillance procedures it deems
necessary to effectively monitor the
trading of options on Ethereum ETPs.
Finally, quotation and last sale
information for ETFs is available via the
Consolidated Tape Association (‘‘CTA’’)
high speed line. Quotation and last sale
information for such securities is also
available from the exchange on which
such securities are listed. Quotation and
last sale information for options on
Ethereum Funds will be available via
OPRA and major market data vendors.
The Exchange has also analyzed its
capacity and represents that it believes
the Exchange and OPRA have the
necessary systems capacity to handle
the additional traffic associated with the
listing of new series that may result
from the introduction of options on
Ethereum Funds up to the number of
expirations currently permissible under
the Rules.
Ethereum Fund options will trade in
the same manner as any other Fund
Share options on the Exchange. The
Exchange Rules that currently apply to
the listing and trading of all Fund Share
options on the Exchange, including, for
54 See Ethereum ETP Approval Order, at 46938
(footnotes excluded).
55 See id.
56 See id.
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10753
example, Rules that govern listing
criteria, expirations, exercise prices,
minimum increments, margin
requirements, customer accounts, and
trading halt procedures will apply to the
listing and trading of Ethereum Funds
options on the Exchange in the same
manner as they apply to other options
on all other Fund Shares that are listed
and traded on the Exchange, including
the precious-metal backed commodity
Fund Shares and the Bitcoin Funds
already deemed appropriate for options
trading on the Exchange pursuant to
current Rule 19.3(i).57 Position and
exercise limits for options on ETFs,
including options on Ethereum Funds,
are determined pursuant to Rules 18.7
and 18.9.58
The Exchange believes that offering
options on Ethereum Funds will benefit
investors by providing them with an
additional, relatively lower cost
investing tool to gain exposure to the
price of Ethereum and hedging vehicle
to meet their investment needs in
connection with Ethereum-related
products and positions. The Exchange
expects investors will transact in
options on Ethereum Funds in the
unregulated over-the-counter (‘‘OTC’’)
options market,59 but may prefer to
trade such options in a listed
environment to receive the benefits of
trading listing options, including (1)
enhanced efficiency in initiating and
closing out positions; (2) increased
market transparency; and (3) heightened
contra-party creditworthiness due to the
role of OCC as issuer and guarantor of
all listed options. The Exchange
believes that listing Ethereum Fund
options may cause investors to bring
this liquidity to the Exchange, would
increase market transparency and
enhance the process of price discovery
57 See, e.g., SPDR Gold Trust, iShares COMEX
Gold Trust or iShares Silver Trust, the Aberdeen
Standard Physical Silver Trust, the Aberdeen
Standard Physical Gold Trust, the Aberdeen
Standard Physical Palladium Trust, the Aberdeen
Standard Physical Platinum Trust, the Sprott
Physical Gold Trust, the Goldman Sachs Physical
Gold ETF or the Fidelity Wise Origin Bitcoin Fund,
the ARK 21Shares Bitcoin ETF, the iShares Bitcoin
Trust, the Grayscale Bitcoin Trust, the Grayscale
Bitcoin Mini Trust, or the Bitwise Bitcoin ETF.
58 Rule 18.7(a)(1) provides that no Options
Member shall make, for any account in which it has
any interest or for the account of any Customer, an
opening transaction on any exchange if the Options
Member has reason to believe that as a result of
such transaction the Options Member or its
Customer would, acting alone or in concert with
others, directly or indirectly, exceed the applicable
position limit fixed by Cboe Exchange, Inc. (‘‘Cboe
Options’’). See also Cboe Options Rules 8.30 and
8.42.
59 The Exchange understands from customers that
investors have historically transacted in options on
Fund Shares in the OTC options market if such
options were not available for trading in a listed
environment.
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conducted on the Exchange through
increased order flow. The Fund Shares
that hold financial instruments, money
market instruments, or precious metal
commodities on which the Exchange
may already list and trade options are
trusts structured in substantially the
same manner as Ethereum Funds and
essentially offer the same objectives and
benefits to investors, just with respect to
different assets. The Exchange notes that
it has not identified any issues with the
continued listing and trading of any
Fund Share options, including Fund
Shares that hold commodities (i.e.,
precious metals and Bitcoin) that it
currently lists and trades on the
Exchange.
Finally, the Exchange notes that
applicable Exchange rules will require
that customers receive appropriate
disclosure before trading options in
Ethereum Funds.60 Further, brokers
opening accounts and recommending
options transactions must comply with
relevant customer suitability
standards.61
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.62 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 63 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 64 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that the proposal to list and trade
options on the Ethereum Funds will
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
60 See
Rules 26.2(b)) and (e).
Rule 26.4.
62 15 U.S.C. 78f(b).
63 15 U.S.C. 78f(b)(5).
64 Id.
61 See
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general, protect investors because
offering options on the Ethereum Funds
will provide investors with a greater
opportunity to realize the benefits of
utilizing options on an ETF based on
spot Ethereum, including cost
efficiencies and increased hedging
strategies.
The Exchange believes that offering
options on a competitively priced ETF
based on spot Ethereum will benefit
investors by providing them with an
additional, relatively lower-cost risk
management tool, allowing them to
manage, more easily, their positions and
associated risks in their portfolios in
connection with exposure to spot
Ethereum. Today, the Exchange lists
options on other commodity (including
Ethereum [sic]) ETFs structured as a
trust, which essentially offer the same
objectives and benefits to investors, and
for which the Exchange has not
identified any issues with the continued
listing and trading of options on those
ETFs.
The Exchange also believes the
proposal to permit options on the
Ethereum Funds will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, because
options on the Ethereum Funds will
comply with current Exchange Rules as
discussed herein. Options on the
Ethereum Funds must satisfy the initial
listing standards and continued listing
standards currently in the Rules,
applicable to options on all ETFs,
including options on other commodity
ETFs already deemed appropriate for
options trading on the Exchange
pursuant to Rule 19.3(i). Additionally,
as demonstrated above, the Ethereum
Funds are characterized by a substantial
number of shares that are widely held
and actively traded. Further, Rules that
currently govern the listing and trading
of options on ETFs, including
permissible expirations, strike prices,
minimum increments, position and
exercise limits, and margin
requirements, will govern the listing
and trading of options on Ethereum
Funds.
The Exchange believes the proposed
position and exercise limits are
designed to prevent fraudulent and
manipulative acts and practices and
promote just and equitable principles of
trade, as they are designed to address
potential manipulative schemes and
adverse market impacts surrounding the
use of options, such as disrupting the
market in the security underlying the
options. The proposed position and
exercise limits for options on each of the
Ethereum Funds is 25,000 contracts.
These position and exercise limits are
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the lowest position and exercise limits
available in the options industry, are
extremely conservative and more than
appropriate given each Ethereum Fund’s
market capitalization, ADV, and high
number of outstanding shares. The
proposed position limit, and exercise
limit, is consistent with the Act as it
addresses concerns related to
manipulation and protection of
investors because, as demonstrated
above, the position limit (and exercise
limit) is extremely conservative and
more than appropriate given the
Ethereum Funds are actively traded. In
support of the proposed position and
exercise limits for options on the
Ethereum Funds are 25,000 contracts,
the Exchange is citing the in depth
analysis NYSE American did in their
filing. As noted above, in NYSE
American Proposal, NYSE American
considered the: (1) applicable Ethereum
Fund’s market capitalization and ADV,
and proposed position limit in relation
to other securities; (2) market
capitalization of the entire Ethereum
market in terms of exercise risk and
availability of deliverables; (3) proposed
position limit by comparing it to
position limits for derivative products
regulated by the CFTC; and (4) supply
of Ethereum. Based on the Exchange’s
review of these analyses, the Exchange
believes that the [sic] setting position
and exercise limits for options on each
of the Ethereum Funds is [sic] 25,000
contracts is more than appropriate. The
proposed position and exercise limits
reasonably and appropriately balance
the liquidity provisioning in the market
against the prevention of manipulation.
The Exchange believes these proposed
limits are effectively designed to
prevent an individual customer or entity
from establishing options positions that
could be used to manipulate the market
of the underlying as well as the
Ethereum market.65
The Exchange represents that it has
the necessary systems capacity to
support the new Ethereum Fund
options. As discussed above, the
Exchange believes that its existing
surveillance and reporting safeguards
are designed to deter and detect possible
manipulative behavior which might
arise from listing and trading Fund
Shareoptions [sic], including Ethereum
Fund options. The Exchange’s existing
surveillance and reporting safeguards
are designed to deter and detect possible
manipulative behavior which might
arise from listing and trading options on
ETFs and ETPs, such as (existing)
65 See Securities Exchange Act Release No. 39489
(December 24, 1997), 63 FR 276 (January 5, 1998)
(SR–CBOE–1997–11).
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precious metal-commodity backed ETP
options as well as the proposed options
on Ethereum Funds. The Exchange
believes that its surveillance procedures
are adequate to properly monitor the
trading of options on Ethereum Funds
in all trading sessions and to deter and
detect violations of Exchange rules.
Specifically, the Exchange’s market
surveillance staff will have access to
surveillances that it conducts, and that
FINRA conducts on its behalf, with
respect to the Ethereum Funds and, as
appropriate, would review activity in
the underlying Funds when conducting
surveillances for market abuse or
manipulation in the options on the
Ethereum Funds. Additionally, the
Exchange is a member of the ISG under
the Intermarket Surveillance Group
Agreement. ISG members work together
to coordinate surveillance and
investigative information sharing in the
stock, options, and futures markets. In
addition, the Exchange has a Regulatory
Services Agreement with the FINRA and
as noted herein, pursuant to a multiparty 17d–2 joint plan, all options
exchanges allocate regulatory
responsibilities to FINRA to conduct
certain options-related market
surveillances. Further, the Exchange
will implement any new surveillance
procedures it deems necessary to
effectively monitor the trading of
options on the Ethereum Funds.
The underlying shares of spot
Ethereum ETPs, including the Ethereum
Funds, are also subject to safeguards
related to addressing market abuse and
manipulation. As the Commission
stated in its order approving proposals
of several exchanges to list and trade
shares of spot Ethereum-based ETPs,
‘‘[e]ach Exchange has a comprehensive
surveillance-sharing agreement with the
CME via their common membership in
the Intermarket Surveillance Group.
This facilitates the sharing of
information that is available to the CME
through its surveillance of its markets,
including its surveillance of the CME
ether futures market.’’ 66 The Exchange
states that, given the consistently high
correlation between the CME ethereum
futures market and the spot ethereum
market, as confirmed by the
Commission through robust correlation
analysis, the Commission was able to
conclude that such surveillance sharing
agreements could reasonably be
‘‘expected to assist in surveilling for
fraudulent and manipulative acts and
practices in the specific context of the
66 See Ethereum ETP Approval Order, 89 FR, at
46938.
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[Ether ETPs].’’ 67 In light of the
foregoing, the Exchange believes that
existing surveillance procedures are
designed to deter and detect possible
manipulative behavior which might
potentially arise from listing and trading
the proposed options on the Ethereum
Funds. Further, the Exchange will
implement any new surveillance
procedures it deems necessary to
effectively monitor the trading of
options on Ethereum ETPs.
Finally, the Exchange notes that this
proposal will remove impediments to
and perfect the mechanism of a free and
open market and a national market
system and, in general, protect investors
because applicable Exchange rules will
require that customers receive
appropriate disclosure before trading
options in Ethereum Funds 68 and will
require that brokers opening accounts
and recommending options transactions
must comply with relevant customer
suitability standards.69
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
as the Ethereum Fund options will be
equally available to all market
participants who wish to trade such
options and will trade generally in the
same manner as other options. The
Rules that currently apply to the listing
and trading of all Fund Share options on
the Exchange, including, for example,
Rules that govern listing criteria,
expirations, exercise prices, minimum
increments, margin requirements,
customer accounts, and trading halt
procedures will apply to the listing and
trading of Ethereum Funds options on
the Exchange in the same manner as
they apply to other options on all other
Fund Shares that are listed and traded
on the Exchange. Also, and as stated
above, the Exchange already lists
options on other commodity-based
Fund Shares (including Bitcoinbased).70 Further, the Ethereum Funds
would need to satisfy the maintenance
listing standards set forth in the
Exchange Rules in the same manner as
67 See Ethereum ETP Approval Order, 89 FR at
46941.
68 See Rules 26.2(b)) and (e).
69 See Rule 26.4.
70 See Rule 19.3(i)(4).
PO 00000
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Sfmt 4703
10755
any other Fund Share for the Exchange
to continue listing options on them.
The Exchange does not believe that
the proposal to list and trade options on
Ethereum Funds will impose any
burden on intermarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
To the extent that the advent of
Ethereum Fund options trading on the
Exchange may make the Exchange a
more attractive marketplace to market
participants at other exchanges, such
market participants are free to elect to
become market participants on the
Exchange. The Exchange notes that
listing and trading Ethereum Fund
options on the Exchange will subject
such options to transparent exchangebased rules as well as price discovery
and liquidity, as opposed to
alternatively trading such options in the
OTC market.
The Exchange believes that the
proposed rule change may relieve any
burden on, or otherwise promote,
competition, as it is designed to increase
competition for order flow on the
Exchange in a manner that is beneficial
to investors by providing them with a
lower-cost option to hedge their
investment portfolios. The Exchange
notes that it operates in a highly
competitive market in which market
participants can readily direct order
flow to competing venues that offer
similar products. Ultimately, the
Exchange believes that offering
Ethereum Fund options for trading on
the Exchange will promote competition
by providing investors with an
additional, relatively low-cost means to
hedge their portfolios and meet their
investment needs in connection with
Ethereum prices and Ethereum-related
products and positions on a listed
options exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will:
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A. by order approve or disapprove
such proposed rule change, or
B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.71
Sherry R. Haywood,
Assistant Secretary.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
[FR Doc. 2025–03070 Filed 2–25–25; 8:45 am]
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–
CboeEDGX–2025–008 on the subject
line.
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Increase the
Monthly Fee for 10 Gb Physical Ports
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–CboeEDGX–2025–008. 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–CboeEDGX–2025–008 and should be
submitted on or before March 19, 2025.
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–102458; File No. SR–
CboeBYX–2025–003]
February 20, 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
14, 2025, Cboe BYX 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
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 increase
the monthly fee for 10 Gb physical
ports.
The proposed rule change, including
the Exchange’s statement of the purpose
of, and statutory basis for, the proposed
rule change, is available on the
Exchange’s website at https://
markets.cboe.com/us/equities/
regulation/rule_filings/BYX/ and on the
Commission’s website at https://
www.sec.gov/rules-regulations/self71 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 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
otherwise in furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission will institute proceedings to determine
whether the proposed rule change should be
approved or disapproved.
1 15
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Sfmt 9990
regulatory-organization-rulemaking/
national-securities-exchanges?file_
number=SR-CboeBYX-2025-003.
II. 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.5
Comments may be submitted
electronically by using the
Commission’s internet comment form
(https://www.sec.gov/rules-regulations/
self-regulatory-organizationrulemaking/national-securitiesexchanges?file_number=SR-CboeBYX2025-003) or by sending an email to
rule-comments@sec.gov. Please include
file number SR–CboeBYX–2025–003 on
the subject line. Alternatively, paper
comments may be sent to Secretary,
Securities and Exchange Commission,
100 F Street NE, Washington, DC
20549–1090. All submissions should
refer to file number SR–CboeBYX–
2025–003. 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/rulesregulations/self-regulatory-organizationrulemaking/national-securitiesexchanges?file_number=SR-CboeBYX2025-003). 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–CboeBYX–2025–003 and
should be submitted on or before March
19, 2025.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025–03067 Filed 2–25–25; 8:45 am]
BILLING CODE 8011–01–P
5 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.
6 17 CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 90, Number 37 (Wednesday, February 26, 2025)]
[Notices]
[Pages 10745-10756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-03070]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102461; File No. SR-CboeEDGX-2025-008]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To
List and Trade Options on the Grayscale Ethereum Trust ETF, the
Grayscale Ethereum Mini Trust ETF, and the Bitwise Ethereum ETF
February 20, 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 5, 2025, Cboe EDGX Exchange, Inc. (``EDGX Options'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by EDGX Options. On
[[Page 10746]]
February 6, 2025, EDGX Options filed Amendment No. 1 to the proposal.
The Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'')
proposes to amend Rule 19.3, to allow the Exchange to list and trade
options on the Grayscale Ethereum Trust ETF, the Grayscale Ethereum
Mini Trust ETF, and the Bitwise Ethereum ETF. The text of the proposed
rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 19.3 regarding the criteria for
underlying securities. Specifically, the Exchange proposes to amend
Rule 19.3(i)(4) to allow the Exchange to list and trade options on
shares or other securities (``Fund Shares'') that are principally
traded on a national securities exchange and are defined as an ``NMS
stock'' under Rule 600 of Regulation NMS and that represent interests
in the Grayscale Ethereum Trust ETF (the ``Grayscale Fund''), the
Grayscale Ethereum Mini Trust ETF (the ``Grayscale Mini Fund''), and
the Bitwise Ethereum ETF (the ``Bitwise Fund'' and, collectively, the
``Ethereum Funds'').\3\ This is a competitive filing based on a similar
proposal submitted by NYSE American, LLC (``NYSE American''), which is
currently pending with the Securities and Exchange Commission (the
``Commission'').\4\ Current Rule 19.3(i) provides that, subject to
certain other criteria set forth in that Rule, securities deemed
appropriate for options trading include Fund Shares that represent
certain types of interests,\5\ including interests in certain specific
trusts that hold financial instruments, money market instruments,
precious metals (which are deemed commodities), or Bitcoin (which is
another crypto currency and deemed a commodity). In addition, Rule
19.3(i) requires that Fund Shares meet the criteria and standards set
forth in Rule 19.3(a) and (b),\6\ or (2) be available for creation or
redemption each business day from or through the issuer in cash or in
kind at a price related to net asset value, and the issuer must be
obligated to issue Fund Shares in a specified aggregate number even if
some or all of the investment assets required to be deposited have not
been received by the issuer, subject to the condition that the person
obligated to deposit the investments has undertaken to deliver the
investment assets as soon as possible and such undertaking is secured
by the delivery and maintenance of collateral consisting of cash or
cash equivalents satisfactory to the issuer, as provided in the
respective prospectus.
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\3\ See Securities Exchange Act Release Nos. 100224 (May 23,
2024), 89 FR 46937 (May 30, 2024) (SR-NYSEArca-2023-70; SR-NYSEArca-
2024-31; SR-NASDAQ-2023-045; SR-CboeBZX-2023-069; SR-CboeBZX-2023-
070; SR-CboeBZX-2023-087; SR-CboeBZX-2023-095; and SR-CboeBZX-2024-
018) (Order Granting Accelerated Approval of Proposed Rule Changes,
as Modified by Amendments Thereto, to List and Trade Shares of
Ether-Based Exchange-Traded Products) (``Ethereum ETP Approval
Order''); and 100541 (July 17, 2024), 89 FR 59786 (July 23, 2024)
(SR-NYSEArca-2024-44; and SR-NYSEArca-2024-53) (Order Granting
Approval of Proposed Rule Changes To List and Trade Shares of the
Grayscale Ethereum Mini Trust and ProShares Ethereum ETF).
\4\ See Securities Exchange Act Release Nos. 99306 (August 7,
2024), 89 FR 65957 (August 13, 2024) (SR-NYSEAMER-2024-45), as
amended by Amendment No. 1 (February 5, 2025) (``NYSE American
Proposal'').
\5\ See Rule 19.3(i), which permits options trading on Fund
Shares that (1) represent interests in registered investment
companies (or series thereof) organized as open-end management
investment companies, unit investment trusts or similar entities,
and that hold portfolios of securities comprising or otherwise based
on or representing investments in indexes or portfolios of
securities (or that hold securities in one or more other registered
investment companies that themselves hold such portfolios of
securities) (``Funds '') and/or financial instruments including, but
not limited to, stock index futures contracts, options on futures,
options on securities and indexes, equity caps, collars and floors,
swap agreements, forward contracts, repurchase agreements and
reverse repurchase agreements (the ``Financial Instruments''), and
money market instruments, including, but not limited to, U.S.
government securities and repurchase agreements (the ``Money Market
Instruments'') constituting or otherwise based on or representing an
investment in an index or portfolio of securities and/or Financial
Instruments and Money Market Instruments, or (2) represent commodity
pool interests principally engaged, directly or indirectly, in
holding and/or managing portfolios or baskets of securities,
commodity futures contracts, options on commodity futures contracts,
swaps, forward contracts and/or options on physical commodities and/
or non-U.S. currency (``Commodity Pool ETFs'') or (3) represent
interests in a trust or similar entity that holds a specified non-
U.S. currency or currencies deposited with the trust or similar
entity when aggregated in some specified minimum number may be
surrendered to the trust by the beneficial owner to receive the
specified non-U.S. currency or currencies and pays the beneficial
owner interest and other distributions on the deposited non-U.S.
currency or currencies, if any, declared and paid by the trust
(``Currency Trust Shares''), or (4) represent interests in the SPDR
Gold Trust or are issued by the iShares COMEX Gold Trust or iShares
Silver Trust, the Aberdeen Standard Physical Silver Trust, the
Aberdeen Standard Physical Gold Trust, the Aberdeen Standard
Physical Palladium Trust, the Aberdeen Standard Physical Platinum
Trust, the Sprott Physical Gold Trust, the Goldman Sachs Physical
Gold ETF, or the Fidelity Wise Origin Bitcoin Fund, the ARK 21Shares
Bitcoin ETF, the iShares Bitcoin Trust, the Grayscale Bitcoin Trust,
the Grayscale Bitcoin Mini Trust, or the Bitwise Bitcoin ETF.
\6\ Rule 19.3(a) and (b) sets forth the criteria that underlying
securities must satisfy for option contracts on those underlying
securities to be eligible for listing and trading on the Exchange.
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The Ethereum Funds are Ethereum-backed commodity ETFs structured as
trusts. Similar to any Fund Share currently deemed appropriate for
options trading under Rule 19.3(i), the investment objective of each
Ethereum Fund is for its shares to reflect the performance of Ethereum
(less the expenses of the trust's operations), offering investors an
opportunity to gain exposure to Ethereum without the complexities of
Ethereum delivery. As is the case for Fund Shares currently deemed
appropriate for options trading, a Ethereum Fund's shares represent
units of fractional undivided beneficial interest in the trust, the
assets of which consist principally of Ethereum and are designed to
track Ethereum or the performance of the price of Ethereum and offer
access to the Ethereum market.\7\ The Ethereum Funds provide investors
with cost-efficient alternatives that allow a level of participation in
the Ethereum market through the securities market. The Ethereum Funds
are similar to the Bitcoin Funds, except that those funds hold Bitcoin
(another cryptocurrency) rather than Ethereum, which are already
eligible for options trading on the Exchange (i.e., the Fidelity Wise
Origin Bitcoin Fund, the
[[Page 10747]]
ARK 21Shares Bitcoin ETF, the iShares Bitcoin Trust, the Grayscale
Bitcoin Trust, the Grayscale Bitcoin Mini Trust, or the Bitwise Bitcoin
ETF).
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\7\ The trust may include minimal cash.
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The Exchange's initial listing standards for Fund Shares on which
options may be listed and traded on the Exchange will apply to the
Ethereum Funds. Pursuant to Rule 19.3(a), a security (which includes a
Fund Share) on which options may be listed and traded on the Exchange
must be registered (with the Commission) and be an NMS stock (as
defined in Rule 600 of Regulation NMS under the Securities Exchange Act
of 1934, as amended (the ``Act'')), and be characterized by a
substantial number of outstanding shares that are widely held and
actively traded.\8\ Additionally, Rule 19.3(i)(1) requires that Fund
Shares either (1) meet the criteria and standards set forth in Rule
19.3(a) and (b),\9\ or (2) are available for creation or redemption
each business day in cash or in kind from the investment company,
commodity pool or other entity at a price related to net asset value,
and the investment company, commodity pool or other entity is obligated
to provide that Fund Shares may be created even if some or all of the
securities and/or cash required to be deposited have not been received
by the Fund, the unit investment trust or the management investment
company, provided the authorized creation participant has undertaken to
deliver the securities and/or cash as soon as possible and such
undertaking is secured by the delivery and maintenance of collateral
consisting of cash or cash equivalents satisfactory to the Fund, all as
described in the Fund's or unit trust's prospectus. Each Ethereum Fund
satisfies Rule 19.3(i)(1)(B), as each is subject to this creation and
redemption process.
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\8\ The criteria and guidelines for a security to be considered
widely held and actively traded are set forth in Rule 19.3(b),
subject to exceptions.
\9\ Rule 19.3(a) and (b) sets forth the criteria an underlying
security must meet for the Exchange to be able to list options on
the underlying.
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While not required by the Rules for purposes of options listings,
the Exchange believes the Ethereum Funds satisfies [sic] the criteria
and guidelines set forth in Rule 19.3(a) and (b). Pursuant to Rule
19.3(a), a security (which includes a Fund Share) on which options may
be listed and traded on the Exchange must be duly registered (with the
Commission) and be an NMS stock (as defined in Rule 600 of Regulation
NMS under the Act, and be characterized by a substantial number of
outstanding shares that are widely held and actively traded.\10\ Each
of the Ethereum Funds is an NMS Stock as defined in Rule 600 of
Regulation NMS under the Act.\11\ Further, the Exchange believes each
Ethereum Fund is characterized by a substantial number of outstanding
shares that are widely held and actively traded.
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\10\ The criteria and guidelines for a security to be considered
widely held and actively traded are set forth in Rule 19.3(b),
subject to exceptions.
\11\ An ``NMS stock'' means any NMS security other than an
option, and an ``NMS security'' means any security or class of
securities for which transaction reports are collected, processed,
and made available pursuant to an effective transaction reporting
plan (or an effective national market system plan for reporting
transaction in listed options). See 17 CFR 242.600(b)(64)
(definition of ``NMS security'') and (65) (definition of ``NMS
stock'').
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With respect to the Grayscale Fund, the Grayscale Mini Fund, and
the Bitwise Fund, the Exchange reviewed the data presented by NYSE
American in its filing with respect to shares outstanding (and
corresponding market capitalization), number of beneficial holders, and
trading volume. As of November 29, 2024, the Ethereum Funds had the
following number of shares outstanding (and corresponding market
capitalization):
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Market value (11/
Ethereum Fund Shares outstanding 29/24)
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Grayscale Fund.................. 177,838,500 $5,425,852,635
Grayscale Mini Fund............. 45,220,787 1,547,003,157
Bitwise Fund.................... 16,600,000 430,886,200
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As shown above, each of the Ethereum Funds had significantly more
than 7,000,000 shares outstanding, which is the minimum number of
shares of a corporate stock that the Exchange generally requires to
list options on that stock pursuant to Rule 19.3(b).\12\ The Exchange
believes this demonstrates that each Ethereum Fund is characterized by
a substantial number of outstanding shares. Further, the below table
contains information regarding the number of beneficial holders of the
Ethereum Funds as of December 31, 2024.
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\12\ The Exchange notes that on November 19, 2024, the Grayscale
Mini Fund underwent a reverse stock split, reducing the number of
shares outstanding--and increasing the share price--tenfold.
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Beneficial holders
Ethereum Fund (as of 12/31/24)
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Grayscale Fund.................................... 112,320
Grayscale Mini Fund............................... 17,396
Bitwise Fund...................................... 5,992
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As this table shows, each Ethereum Fund has significantly more than
2,000 beneficial holders (approximately 56, 9, and 3 times more,
respectively), which is the minimum number of holders the Exchange
generally requires for corporate stock in order to list options on that
stock pursuant to pursuant to Rule 19.3(b).\13\ Therefore, the Exchange
believes the shares of each Ethereum Fund are widely held.
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\13\ The number of beneficial holders of the Grayscale Mini Fund
may have been impacted by the 10:1 reverse stock split, as investors
with fewer than 10 shares would have received a cash payout. See id.
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The Exchange also believes that, based on trading volume since the
Ethereum Funds began trading on July 23, 2024, shares of the Ethereum
Funds are actively traded. In particular, the table below sets forth
the total trading volume (by shares and notional) from the inception of
trading through either November 29, 2024 (for the Grayscale Fund and
the Grayscale Mini Fund) or December 31, 2024 (for the Bitwise Fund).
In addition, the below table illustrates the average daily volume
(``ADV'') over the 30-day period of either October 29, 2024-through
November 29, 2024 (for the Grayscale Fund and the Grayscale Mini Fund)
or
[[Page 10748]]
November 29, 2024-through December 31, 2024 (for the Bitwise Fund).\14\
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\14\ See FactSet, 11/29/2024 and 12/31/24, https://www.factset.com/data-attribution.
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Trading volume Trading volume
Ethereum Fund (shares) (notional $) ADV (shares)
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Grayscale Fund.............................................. 427,312,540 $10,289,781,199 4,237,811
Grayscale Mini Fund......................................... 172,400,020 4,614,428,230 3,065,796
Bitwise Fund................................................ 44,477,060 959,491,343 291,627
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As demonstrated above, even though the Ethereum Funds have been
trading for less than one year, the trading volume for each Ethereum
Fund is substantially higher than 2,400,000 shares (roughly 178, 72,
and 16 times that amount), which is the minimum 12-month volume the
Exchange generally requires for a security in order to list options on
that security as set forth in Rule 19.3(b). The Exchange believes this
data demonstrates each Ethereum Fund is characterized by a substantial
number of outstanding shares that are actively traded.
Options on the Ethereum Funds will be subject to the Exchange's
continued listing standards set forth in Rule 19.4(g) for Fund Shares
deemed appropriate for options trading pursuant to Rule 19.3(i).
Specifically, 19.4(g) provides that Fund Shares that were initially
approved for options trading pursuant to Rule 19.3 will not be deemed
to meet the requirements for continued approval, and the Exchange shall
not open for trading any additional series of option contracts of the
class covering such Fund Shares if the security ceases to be an NMS
stock (see Rule 19.4(b)(4)). Additionally, the Exchange will not open
for trading any additional series of option contracts of the class
covering Fund Shares in any of the following circumstances: (1) in the
case of options covering Fund Shares approved for trading under Rule
19.3(i)(4)(A), in accordance with the terms of Rule 19.4(b)(1), (2) and
(3); (2) in the case of options covering Fund Shares approved pursuant
to Rule 19.3(i)(4)(B), following the initial 12-month period beginning
upon the commencement of trading in the Fund Shares on a national
securities exchange and are defined as NMS stock under Rule 600 of
Regulation NMS, there were fewer than 50 record and/or beneficial
holders of such Fund Shares for 30 consecutive days; (3) the value of
the index, non-U.S. currency, portfolio of commodities including
commodity futures contracts, options on commodity futures contracts,
swaps, forward contracts and/or options on physical commodities and/or
Financial Instruments or Money Market Instruments, or portfolio of
securities on which the Fund Shares are based is no longer calculated
or available; or (4) such other event occurs or condition exists that
in the opinion of the Exchange makes further dealing in such options on
the Exchange inadvisable.
Options on each Ethereum Fund will be physically settled contracts
with American-style exercise.\15\ Consistent with current Rule 19.6,
which governs the opening of options series on a specific underlying
security (including Fund Shares), the Exchange will open at least one
expiration month for options on Ethereum Funds \16\ at the commencement
of trading on the Exchange and may also list series of options on a
Ethereum Fund for trading on a weekly,\17\ monthly,\18\ or quarterly
\19\ basis. The Exchange may also list long-term equity option series
(``LEAPS'') that expire from 12 to 39 months from the time they are
listed.\20\
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\15\ See Rule 19.2, which provides that the rights and
obligations of holders and writers are set forth in the Rules of the
Options Clearing Corporation (``OCC''); and Equity Options Product
Specifications January 3, 2024), available at Equity Options
Specifications (cboe.com); see also OCC Rules, Chapters VIII (which
governs exercise and assignment) and Chapter IX (which governs the
discharge of delivery and payment obligations arising out of the
exercise of physically settled stock option contracts).
\16\ See Rule 19.6(b). The monthly expirations are subject to
certain listing criteria for underlying securities described within
Rule 19.3. Monthly listings expire the third Friday of the month.
The term ``expiration date'' (unless separately defined elsewhere in
the OCC By-Laws), when used in respect of an option contract
(subject to certain exceptions), means the third Friday of the
expiration month of such option contract, or if such Friday is a day
on which the exchange on which such option is listed is not open for
business, the preceding day on which such exchange is open for
business. See OCC By-Laws Article I, Section 1. Pursuant to Rule
19.6(c), additional series of options of the same class may be
opened for trading on the Exchange when the Exchange deems it
necessary to maintain an orderly market, to meet customer demand or
when the market price of the underlying stock moves more than five
strike prices from the initial exercise price or prices. New series
of options on an individual stock may be added until the beginning
of the month in which the options contract will expire. Due to
unusual market conditions, the Exchange, in its discretion, may add
a new series of options on an individual stock until the close of
trading on the business day prior to expiration.
\17\ See Rule 19.6, Interpretation and Policy .05.
\18\ See Rule 19.6, Interpretation and Policy .08.
\19\ See Rule 19.6, Interpretation and Policy .04.
\20\ See Rule 19.8.
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Pursuant to Rule 19.6, Interpretation and Policy .01, which governs
strike prices of series of options on Fund Shares, the interval of
strikes prices for series of options on Ethereum Funds will be $1 or
greater when the strike price is $200 or less and $5 or greater where
the strike price is over $200.\21\ Additionally, the Exchange may list
series of options pursuant to the $1 Strike Price Interval Program,\22\
the $0.50 Strike Program,\23\ the $2.50 Strike Price Program,\24\ and
the $5 Strike Program.\25\ Pursuant to Rule 21.5, where the price of a
series of an Ethereum Fund option is less than $3.00, the minimum
increment will be $0.05, and where the price is $3.00 or higher, the
minimum increment will be $0.10.\26\ Any and all new series of Ethereum
Fund options that the Exchange lists will be consistent and comply with
the expirations, strike prices, and minimum increments set forth in
Rules 19.6 and 21.5, as applicable.
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\21\ The Exchange notes that for options listed pursuant to the
Short Term Option Series Program, the Monthly Options Series
Program, and the Quarterly Options Series Program, Rule 19.6,
Interpretations and Policies .05, .08, and .04 specifically sets
forth intervals between strike prices on Quarterly Options Series,
Short Term Option Series, and Monthly Options Series, respectively.
\22\ See Rule 19.6, Interpretation and Policy .02.
\23\ See Rule 19.6, Interpretation and Policy .06.
\24\ See Rule 19.6, Interpretation and Policy .03.
\25\ See Rule 19.6(d)(5).
\26\ If options on an Ethereum Fund are eligible to participate
in the Penny Interval Program, the minimum increment will be $0.01
for series with a price below $3.00 and $0.05 for series with a
price at or above $3.00. See Rule 21.5(e) (which describes the
requirements for the Penny Interval Program).
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Ethereum Fund options will trade in the same manner as any other
Fund Share options on the Exchange. The Exchange Rules that currently
apply to the listing and trading of all Fund Share options on the
Exchange, including, for example, Rules that govern listing criteria,
expirations, exercise prices, minimum increments, margin requirements,
customer accounts, and trading halt procedures will apply to the
listing and trading of Ethereum Funds
[[Page 10749]]
options on the Exchange in the same manner as they apply to other
options on all other Fund Shares that are listed and traded on the
Exchange, including the precious-metal backed commodity Fund Shares and
the Bitcoin Funds already deemed appropriate for options trading on the
Exchange pursuant to current Rule 19.3(i).\27\ Position and exercise
limits for options on ETFs, including options on Ethereum Funds, are
determined pursuant to Rules 18.7 and 18.9.\28\
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\27\ See, e.g., SPDR Gold Trust, iShares COMEX Gold Trust or
iShares Silver Trust, the Aberdeen Standard Physical Silver Trust,
the Aberdeen Standard Physical Gold Trust, the Aberdeen Standard
Physical Palladium Trust, the Aberdeen Standard Physical Platinum
Trust, the Sprott Physical Gold Trust, the Goldman Sachs Physical
Gold ETF or the Fidelity Wise Origin Bitcoin Fund, the ARK 21Shares
Bitcoin ETF, the iShares Bitcoin Trust, the Grayscale Bitcoin Trust,
the Grayscale Bitcoin Mini Trust, or the Bitwise Bitcoin ETF.
\28\ Rule 18.7(a)(1) provides that no Options Member shall make,
for any account in which it has any interest or for the account of
any Customer, an opening transaction on any exchange if the Options
Member has reason to believe that as a result of such transaction
the Options Member or its Customer would, acting alone or in concert
with others, directly or indirectly, exceed the applicable position
limit fixed by Cboe Exchange, Inc. (``Cboe Options''). See also Cboe
Options Rules 8.30 and 8.42.
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Pursuant to Rules 18.7 and 18.9, the position and exercise limits,
respectively, for Ethereum Fund options will be 25,000 same side option
contracts.\29\ The Exchange believes these proposed position and
exercise limits are reasonable and appropriate. In considering the
appropriate position and exercise limits for the Ethereum Funds, the
Exchange reviewed the data presented by NYSE American in its filing
with respect to the Bitwise Fund, the Grayscale Fund and the Grayscale
Mini Fund.\30\ NYSE American aggregated market capitalization, volume,
and shares outstanding data of the Ethereum Funds and compared that
data to those of other ETFs, and compared the proposed position limit
of the Ethereum Funds to the position limits of the options overlying
those other ETFs. The Exchange reviewed NYSE American's data that
demonstrated that each of these three Bitcoin [sic] Funds would easily
qualify for much higher position limits available to other ETFs and
ETPs pursuant to the criterion in Cboe Options Rule 8.30,
Interpretation and Policy .02 (which governs position limits on the
Exchange pursuant to Rule 18.7).\31\
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\29\ Rule 18.7(a)(1) provides that no Options Member shall make,
for any account in which it has any interest or for the account of
any Customer, an opening transaction on any exchange if the Options
Member has reason to believe that as a result of such transaction
the Options Member or its Customer would, acting alone or in concert
with others, directly or indirectly, exceed the applicable position
limit fixed by Cboe Exchange, Inc. (``Cboe Options''). Cboe Options
currently has a nearly identical rule filing pending with the
Commission to amend Cboe Options Rule 8.30, Interpretation and
Policy .10 (and Cboe Options Rule 8.42) to establish a position and
exercise limit for Ethereum Fund options of 25,000. See SR-CBOE-
2025-008, as amended by Amendment No. 1 (``Cboe Ethereum Fund
Proposal''). If the Commission approves the Cboe Ethereum Fund
Proposal, the position and exercise limits in that filing would then
apply to the Exchange.
\30\ See NYSE American Proposal.
\31\ See Cboe Options Rule 8.30, Interpretation and Policy .02;
Exchange Rule 18.7.
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Cboe Options Rule 8.30, Interpretation and Policy .02 sets forth
position (and exercise) limits for options, which vary according to the
number of shares outstanding and the amount of trading in underlying
during the most recent six-month period.\32\ Although the Ethereum
Funds have been trading for less than six months [sic], the trading
volume in each Fund is sufficient to qualify the Funds for position
limits in excess of the proposed 25,000-contract limit, as shown
below.\33\
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\32\ See Cboe Options Rule 8.30, Interpretation and Policy .02;
Exchange Rule 18.7.
\33\ See FactSet, 11/29/2024 and 12/31,24, https://www.factset.com/data-attribution.
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Ethereum Fund Total volume
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Grayscale Fund......................... 427,312,540 (7/23/24-11/29/24).
Grayscale Mini Fund.................... 172,400,020 (7/23/24-11/29/24).
Bitwise Fund........................... 44,477,060 (7/23/24-12/31/24).
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Based on this trading volume, the most-recent trading volume in the
Grayscale Fund and the Grayscale Mini Fund well exceeds the requisite
minimum of 100,000,000 shares necessary to qualify for the 250,000-
contract position and exercise limits.\34\ By comparison, the
underlying of other options with six-month trading volume less than the
volumes in the table above are eligible for position and exercise
limits of at least 250,000.\35\ Further, the most-recent trading volume
for the Bitwise Fund well exceeded the requisite minimum of 40,000,000
shares necessary to qualify for the 75,000-contract position (and
exercise) limit, which is three times the proposed 25,000-contract
limit.\36\ Finally, the proposed 25,000-contract position limit is the
default for options that do not otherwise qualify for a higher limit
and is therefore an adequate limit for each Ethereum Fund.\37\
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\34\ Cboe Options Rule 8.30, Interpretation and Policy .02(e)
states that to be eligible for the 250,000 option contract limit,
either the most recent six-month trading volume of the underlying
security must have totaled at least 100,000,000 shares; or the most
recent six-month trading volume of the underlying security must have
totaled at least 75,000,000 shares and the underlying security must
have at least 300,000,000 currently outstanding.
\35\ See https://www.theocc.com/Market-Data/Market-Data-Reports/Series-and-Trading-Data/Series-Search (including the following
symbols that have a position limit of 250,000: GLD, IAU, SLV, SIVR,
SGOL).
\36\ Cboe Options Rule 8.30, Interpretation and Policy .02(c)
states that to be eligible for the 75,000 option contract limit,
either the most recent six-month trading volume of the underlying
security must have totaled at least 40,000,000 shares; or the most
recent six-month trading volume of the underlying security must have
totaled at least 30,000,000 shares and the underlying security must
have at least 120,000,000 currently outstanding.
\37\ Cboe Options Rule 8.30, Interpretation and Policy .02(a)
states that the 25,000 option contract limit applies to those
options having an underlying security that does not meet the
requirements for a higher option contract limit.
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Second, with respect to the outstanding shares of these three
Ethereum Funds, the Exchange reviewed NYSE American's data regarding
the outstanding shares of each of these Ethereum Funds. NYSE American
performed an exercise to demonstrate that if a market participant held
the maximum number of contracts possible pursuant to the proposed
position and exercise limits (25,000 contracts), the equivalent shares
represented by the proposed position and exercise limits (2,500,000
shares) would represent the following approximate percentage of
outstanding shares as of November 29, 2024:
[[Page 10750]]
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Proposed position/
Ethereum Fund exercise limits in Outstanding Percentage of
equivalent shares shares outstanding shares
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Grayscale Fund....................................... 2,500,000 177,838,500 1.4
Grayscale Mini Fund.................................. 2,500,000 45,220,787 5.5
Bitwise Fund......................................... 2,500,000 16,600,000 15.1
----------------------------------------------------------------------------------------------------------------
As this table demonstrates, if a market participant held the
maximum permissible options positions in one of the Ethereum Fund
options and exercised all of them at the same time, that market
participant would control a small percentage of the outstanding shares
of the underlying Ethereum Fund. For example, as noted above, a
position limit of 25,000 same side contracts effectively restricts a
market participant from holding positions that could result in the
receipt of no more than 2,500,000 shares of the applicable Ethereum
Fund (if that market participant exercised all its options). NYSE
American used the number of shares outstanding for each Ethereum Fund
as of November 29, 2024, and calculated the approximate number of
market participants that could hold the maximum of 25,000 same side
positions in each Ethereum Fund that would equate to the number of
shares outstanding of that Ethereum Fund:
----------------------------------------------------------------------------------------------------------------
Number of market
Bitcoin [sic] Fund Outstanding participants with 25,000
shares same side positions
----------------------------------------------------------------------------------------------------------------
Grayscale Fund..................................................... 177,838,500 71
Grayscale Mini Fund................................................ 45,220,787 18
Bitwise Fund....................................................... 16,600,000 7
----------------------------------------------------------------------------------------------------------------
This means if 71 market participants had 25,000 same side positions
in options on the Grayscale Fund, each of them would have to
simultaneously exercise all of those options to create a scenario that
may put the underlying security under stress. Similarly, this means if
18 market participants had 25,000 same side positions in options on the
Grayscale Mini Fund, each of them would have to simultaneously exercise
all of those options to create a scenario that may put the underlying
security under stress. Finally, this means if 7 market participants had
25,000 same side positions in options on the Bitwise Fund, each of them
would have to simultaneously exercise all of those options to create a
scenario that may put the underlying security under stress. The
Exchange believes it is highly unlikely for this to occur; however,
even if such event did occur, the Exchange would not expect any of the
Ethereum Fund [sic] to be under stress because such an event would
merely induce the creation of more shares through the trust's creation
and redemption process.
NYSE American also performed an exercise to compare the size of the
proposed position limit to the market capitalization of the Ethereum
market given that the issuer of each of these three Ethereum Funds may
create and redeem shares that represent an interest in Ethereum. NYSE
American took the global supply of Ethereum, which was 120.44 million
and the price of one Ethereum, which was approximately $3,593.49,\38\
which equates to a market capitalization of approximately $439.78
billion. Consider the proposed position and exercise limit of 25,000
option contracts for each Ethereum Fund option. A position and exercise
limit of 25,000 same side contracts effectively restricts a market
participant from holding positions that could result in the receipt of
no more than 2,500,000 shares of the Grayscale Fund, Grayscale Mini
Fund, and Bitwise Fund, as applicable (if that market participant
exercised all its options). NYSE American considered the share price of
each Bitcoin [sic] Fund on November 29, 2024 and calculated the value
of
[[Page 10751]]
2,500,000 shares of the Ethereum Fund at that price, and the
approximate percentage of that value of the size of the Ethereum
market:
---------------------------------------------------------------------------
\38\ See https://finance.yahoo.com/quote/ETH-USD/history.
----------------------------------------------------------------------------------------------------------------
Share price Value of 2,500,000 Percentage of Bitcoin
Bitcoin [sic] Fund ($) shares [sic] market
----------------------------------------------------------------------------------------------------------------
Grayscale Fund..................................... 30.15 75,250,000 0.017
Grayscale Mini Fund................................ 33.84 84,600,000 0.020
Bitwise Fund....................................... 25.80 64,500,000 0.015
----------------------------------------------------------------------------------------------------------------
Therefore, if a market participant with the maximum 25,000 same
side contracts in options on the Grayscale Fund, the Grayscale Mini
Fund, or the Bitwise Fund exercised all positions at one time, such an
event would have no practical impact on the Ethereum market.
The Exchange also reviewed NYSE American's data regarding the
market capitalization of each of these three Ethereum Funds relative to
the market capitalization of the entire Ethereum market, as of November
29, 2024:
----------------------------------------------------------------------------------------------------------------
Ethereum/shares % of Total
outstanding Market value ($) bitcoin market
----------------------------------------------------------------------------------------------------------------
Total Ethereum Market................................... 120,440,000 432,799,935,600 100
Grayscale Fund.......................................... 177,838,500 5,425,852,635 1.25
Grayscale Mini Fund..................................... 45,220,787 1,547,003,157 0.36
Bitwise Fund............................................ 16,600,000 430,886,200 0.10
----------------------------------------------------------------------------------------------------------------
As this data gathered by NYSE American demonstrates, the Ethereum
Funds collectively represent approximately 1.71% of the global supply
of Ethereum (120,440,000).\39\ Based on the $30.15 price of a Grayscale
Fund share on November 29, 2024, a market participant could have
redeemed one Ethereum for approximately 119 Grayscale Fund shares.
Another 14,354,890,070 Grayscale Fund shares could be created before
the supply of Ethereum was exhausted. As a result, 5,742 market
participants would have to simultaneously exercise 25,000 same side
positions in Grayscale Fund options to receive shares of the Grayscale
Fund holding the entire global supply of Ethereum. Similarly, based on
the $33.84 price of a Grayscale Mini Fund share on November 29, 2024, a
market participant could have redeemed one Ethereum for approximately
106 Grayscale Mini Fund shares. Another 12,789,596,206 Grayscale Mini
Fund shares could be created before the supply of Ethereum was
exhausted. As a result, 5,116 market participants would have to
simultaneously exercise 25,000 same side positions in Grayscale Mini
Fund options to receive shares of Grayscale Mini Fund holding the
entire global supply of Ethereum. Similarly, based on the $25.80 price
of a Bitwise Fund share on November 29, 2024, a market participant
could have redeemed one Ethereum for approximately 139 Bitwise Fund
shares. Another 16,775,191,302 Bitwise Fund shares could be created
before the supply of Ethereum was exhausted. As a result, 6,710 market
participants would have to simultaneously exercise 25,000 same side
positions in Bitwise Fund options to receive shares of Bitwise Fund
holding the entire global supply of Ethereum. Unlike the Ethereum
Funds, the number of shares that corporations may issue is limited.
However, like corporations, which authorize additional shares,
repurchase shares, or split their shares, the Ethereum Funds may
create, redeem, or split shares in response to demand. The supply of
Ethereum is larger than the available supply of most securities.\40\
Given the significant unlikelihood of any of these events ever
occurring, the Exchange does not believe options on the Ethereum Funds
should be subject to position and exercise limits even lower than those
proposed (which are already equal to the lowest available limit for
equity options in the industry) to protect the supply of Ethereum.
---------------------------------------------------------------------------
\39\ See id.
\40\ The market capitalization of ethereum would rank in the top
20 among securities. See https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/.
---------------------------------------------------------------------------
NYSE American compared the proposed position limits to the position
limit of CME Ethereum futures. The Chicago Mercantile Exchange
(``CME'') imposes a position limit of 8,000 futures (for the initial
spot month) on its ethereum futures contract.\41\ On November 29, 2024,
CME Jan 25 Ethereum Futures settled at $3,629.69. A position of 8,000
CME Ethereum futures, therefore, would have a notional value of
$1,451,876,000. The following table shows the share price of each
Ethereum Fund on November 29, 2024, and the approximate number of
option contracts that equates to that notional value:
---------------------------------------------------------------------------
\41\ See CME Rulebook Chapter 349 (description of CME ether
futures) and Chapter 5, Position Limit, Position Accountability and
Reportable Level Table in the Interpretations & Special Notices.
Each CME ether futures contract is valued at fifty ethers as defined
by the CME CF Ether Reference Rate (``ERR''). See CME Rulebook
Chapter 349.
------------------------------------------------------------------------
Number of
Ethereum Fund Share price option
($) contracts
------------------------------------------------------------------------
Grayscale Fund.......................... 30.15 481,551
Grayscale Mini Fund..................... 33.84 429,041
Bitwise Fund............................ 25.80 562,743
------------------------------------------------------------------------
[[Page 10752]]
The approximate number of option contracts for each Ethereum Fund
that would equate to the notional value of CME Ethereum futures is
significantly higher than the proposed limit of 25,000 options contract
for each Ethereum Fund option. The fact that many options ultimately
expire out-of-the-money and thus are not exercised for shares of the
underlying, while the delta of an Ethereum future is 1, further
demonstrates how conservative the proposed limits of 25,000 options
contracts are for the Ethereum Fund options.
The Exchange notes, again, unlike options contracts, CME position
limits are calculated on a net futures-equivalent basis by contract and
include contracts that aggregate into one or more base contracts
according to an aggregation ratio(s).\42\ Therefore, if a portfolio
includes positions in options on futures, CME would aggregate those
positions into the underlying futures contracts in accordance with a
table published by CME on a delta equivalent value for the relevant
spot month, subsequent spot month, single month and all month position
limits.\43\ If a position exceeds position limits because of an option
assignment, CME permits market participants to liquidate the excess
position within one business day without being considered in violation
of its rules. Additionally, if at the close of trading, a position that
includes options exceeds position limits for futures contracts, when
evaluated using the delta factors as of that day's close of trading but
does not exceed the limits when evaluated using the previous day's
delta factors, then the position shall not constitute a position limit
violation. Considering CME's position limits on futures for Ethereum,
the Exchange believes that that the proposed same side position limits
are more than appropriate for the Ethereum options.
---------------------------------------------------------------------------
\42\ See CME Rulebook Chapter 5, Position Limit, Position
Accountability and Reportable Level Table in the Interpretations &
Special Notices.
\43\ Id.
---------------------------------------------------------------------------
Consistent with its position regarding the irrelevance of bitcoin
supply to position limits for options on bitcoin ETPs, the Exchange
likewise believes the available supply of Ethereum is not relevant to
the determination of position and exercise limits for Ethereum Fund
options.\44\ Position and exercise limits are not a tool that should be
used to address a potential limited supply of the underlying of an
underlying. Position and exercise limits do not limit the total number
of options that may be held, but rather they limit the number of
positions a single customer may hold or exercise at one time.\45\
``Since the inception of standardized options trading, the options
exchanges have had rules imposing limits on the aggregate number of
options contracts that a member or customer could hold or exercise.''
\46\ Position and exercise limit rules are intended ``to prevent the
establishment of options positions that can be used or might create
incentives to manipulate or disrupt the underlying market so as to
benefit the options position. In particular, position and exercise
limits are designed to minimize the potential for mini-manipulations
and for corners or squeezes of the underlying market. In addition, such
limits serve to reduce the possibility for disruption of the options
market itself, especially in illiquid options classes.'' \47\
---------------------------------------------------------------------------
\44\ The Exchange is unaware of any proposed rule change related
to position and exercise limits for any equity option (including
commodity ETF options) for which the Commission required
consideration of whether the available supply of an underlying
(whether it be a corporate stock or an ETF) or the contents of an
ETF (commodity or otherwise) should be considered when an exchange
proposed to establish those limits. See, e.g., Securities Exchange
Act Release No. 57894 (May 30, 2008), 73 FR 32061 (June 5, 2008)
(SR-CBOE-2005-11) (approval order in which the Commission stated
that the ``listing and trading of Gold Trust Options will be subject
to the exchanges' rules pertaining to position and exercise limits
and margin''). The Exchange notes when the Commission approved this
filing, the position limits in Rule 8.30 were the same as they are
today. For reference, the current position and exercise limits for
options on SPDR Gold Shares ETF (``GLD'') and options on iShares
Silver Trust (``SLV'') are 250,000 contracts, or 10 times that
proposed position and exercise limit for the Bitcoin [sic] Fund
options.
\45\ For example, suppose an option has a position limit of
25,000 option contracts and there are a total of 10 investors
trading that option. If all 10 investors max out their positions,
that would result in 250,000 option contracts outstanding at that
time. However, suppose 10 more investors decide to begin trading
that option and also max out their positions. This would result in
500,000 option contracts outstanding at that time. An increase in
the number of investors could cause an increase in outstanding
options even if position limits remain unchanged.
\46\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
\47\ Id.
---------------------------------------------------------------------------
The Exchange notes that a Registration Statement on Form S-1 was
filed with the Commission for each Ethereum Fund, each of which
described the supply of Ethereum as being unlimited.\48\ Each
Registration Statement permits an unlimited number of shares of the
applicable Ethereum Fund to be created. Further, the Commission
approved proposed rule changes that permitted the listing and trading
of shares of each Ethereum Fund, which approval did not comment on the
sufficient supply of Ethereum or address whether there was a risk that
permitting an unlimited number of shares for a Ethereum Fund would
impact the supply of ether.\49\ Therefore, the Exchange believes the
Commission had ample time and opportunity to consider whether the
supply of ethereum was sufficient to permit the creation of unlimited
Ethereum Fund shares, and does not believe considering this supply with
respect to the establishment of position and exercise limits is
appropriate given its lack of relevance to the purpose of position and
exercise limits. However, given the significant size of the Ethereum
supply, the proposed positions limits are more than sufficient to
protect investors and the market.
---------------------------------------------------------------------------
\48\ See, e.g., Grayscale Fund Form S-1 Registration Statement,
at p. 77, https://www.sec.gov/Archives/edgar/data/2020455/000119312524106957/d756153ds1.htm; Grayscale Mini Fund Amendment No.
5 to Form S-1 Registration Statement, at p. 79, https://www.sec.gov/Archives/edgar/data/2020455/000119312524181081/d756153ds1a.htm; and
Bitwise Fund Form S-1 Registration Statement 1, at p. 17, https://www.sec.gov/Archives/edgar/data/2013744/000199937124007581/bitwise-s1a_061824.htm (``Ethereum Funds Reg. Stmts.'').
\49\ See Ethereum ETP Approval Order.
---------------------------------------------------------------------------
All of the above information demonstrates that the proposed
position and exercise limits for the Ethereum Fund options are more
than reasonable and appropriate. The trading volume, ADV, and
outstanding shares of each Ethereum Fund demonstrate that these funds
are actively traded and widely held, and proposed position and exercise
limits are well below those of other ETFs with similar market
characteristics. The proposed position and exercise limits are the
lowest position and exercise limits available for equity options in the
industry, are extremely conservative, and are more than appropriate
given each Ethereum Fund's market capitalization and ADV. The proposed
position and exercise limits reasonably and appropriately balance the
liquidity provisioning in the market against the prevention of
manipulation. The Exchange believes these proposed limits are
effectively designed to prevent an individual customer or entity from
establishing options positions that could be used to manipulate the
market of the underlying Ethereum Funds as well as the Ethereum
market.\50\
---------------------------------------------------------------------------
\50\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
---------------------------------------------------------------------------
Today, the Exchange has an adequate surveillance program in place
for options. The Exchange intends to apply those same program
procedures to options on the Ethereum Funds that it applies to the
Exchange's other options products, including options on the
[[Page 10753]]
Bitcoin Funds.\51\ The Exchange's market surveillance staff would have
access to the surveillances conducted by Cboe BYX Exchange, Inc., Cboe
BZX Exchange, Inc., Cboe EDGA Exchange, Inc., and Cboe Exchange,
Inc.\52\ with respect to the Ethereum Funds and would review activity
in the underlying Ethereum Funds when conducting surveillances for
market abuse or manipulation in the options on the Ethereum Funds.
Additionally, the Exchange is a member of the Intermarket Surveillance
Group (``ISG'') under the Intermarket Surveillance Group Agreement. ISG
members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets. In
addition to obtaining information from its affiliated markets, the
Exchange would be able to obtain information regarding trading in
shares of the Ethereum Funds from their primary listing markets and
from other markets that trade shares of the Ethereum Funds through ISG.
In addition, the Exchange has a Regulatory Services Agreement with the
Financial Industry Regulatory Authority (``FINRA'') for certain market
surveillance, investigation and examinations functions. Pursuant to a
multi-party 17d-2 joint plan, all options exchanges allocate amongst
themselves and FINRA responsibilities to conduct certain options-
related market surveillance that are common to rules of all options
exchanges.\53\
---------------------------------------------------------------------------
\51\ The surveillance program includes surveillance patterns for
price and volume movements as well as patterns for potential
manipulation (e.g., spoofing and marking the close).
\52\ Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA
Exchange, Inc., and Cboe Exchange, Inc. are affiliated markets of
the Exchange.
\53\ Section 19(g)(1) of the Act, among other things, requires
every self-regulatory organization (``SRO'') registered as a
national securities exchange or national securities association to
comply with the Act, the rules and regulations thereunder, and the
SRO's own rules, and, absent reasonable justification or excuse,
enforce compliance by its members and persons associated with its
members. See 15 U.S.C. 78q(d)(1) and 17 CFR 240.17d-2. Section
17(d)(1) of the Act allows the Commission to relieve an SRO of
certain responsibilities with respect to members of the SRO who are
also members of another SRO (``common members''). Specifically,
Section 17(d)(1) allows the Commission to relieve an SRO of its
responsibilities to: (i) receive regulatory reports from such
members; (ii) examine such members for compliance with the Act and
the rules and regulations thereunder, and the rules of the SRO; or
(iii) carry out other specified regulatory responsibilities with
respect to such members.
---------------------------------------------------------------------------
The underlying shares of spot Ethereum exchange traded products
(``ETPs''), including the Ethereum Funds, are also subject to
safeguards related to addressing market abuse and manipulation. As the
Commission stated in its order approving proposals of several exchanges
to list and trade shares of spot Ethereum-based ETPs, ``[e]ach Exchange
has a comprehensive surveillance-sharing agreement with the [CME] via
their common membership in the Intermarket Surveillance Group. This
facilitates the sharing of information that is available to the CME
through its surveillance of its markets, including its surveillance of
the CME ethereum futures market.'' \54\ The Exchange states that, given
the consistently high correlation between the CME Ethereum futures
market and the spot bitcoin [sic] market, as confirmed by the
Commission through robust correlation analysis, the Commission was able
to conclude that such surveillance sharing agreements could reasonably
be ``expected to assist in surveilling for fraudulent and manipulative
acts and practices in the specific context of the [Ethereum ETPs].''
\55\ In light of surveillance measures related to both options and
futures as well as the underlying Ethereum Funds,\56\ the Exchange
believes that existing surveillance procedures are designed to deter
and detect possible manipulative behavior which might potentially arise
from listing and trading the proposed options on the Ethereum Funds.
Further, the Exchange will implement any new surveillance procedures it
deems necessary to effectively monitor the trading of options on
Ethereum ETPs.
---------------------------------------------------------------------------
\54\ See Ethereum ETP Approval Order, at 46938 (footnotes
excluded).
\55\ See id.
\56\ See id.
---------------------------------------------------------------------------
Finally, quotation and last sale information for ETFs is available
via the Consolidated Tape Association (``CTA'') high speed line.
Quotation and last sale information for such securities is also
available from the exchange on which such securities are listed.
Quotation and last sale information for options on Ethereum Funds will
be available via OPRA and major market data vendors.
The Exchange has also analyzed its capacity and represents that it
believes the Exchange and OPRA have the necessary systems capacity to
handle the additional traffic associated with the listing of new series
that may result from the introduction of options on Ethereum Funds up
to the number of expirations currently permissible under the Rules.
Ethereum Fund options will trade in the same manner as any other
Fund Share options on the Exchange. The Exchange Rules that currently
apply to the listing and trading of all Fund Share options on the
Exchange, including, for example, Rules that govern listing criteria,
expirations, exercise prices, minimum increments, margin requirements,
customer accounts, and trading halt procedures will apply to the
listing and trading of Ethereum Funds options on the Exchange in the
same manner as they apply to other options on all other Fund Shares
that are listed and traded on the Exchange, including the precious-
metal backed commodity Fund Shares and the Bitcoin Funds already deemed
appropriate for options trading on the Exchange pursuant to current
Rule 19.3(i).\57\ Position and exercise limits for options on ETFs,
including options on Ethereum Funds, are determined pursuant to Rules
18.7 and 18.9.\58\
---------------------------------------------------------------------------
\57\ See, e.g., SPDR Gold Trust, iShares COMEX Gold Trust or
iShares Silver Trust, the Aberdeen Standard Physical Silver Trust,
the Aberdeen Standard Physical Gold Trust, the Aberdeen Standard
Physical Palladium Trust, the Aberdeen Standard Physical Platinum
Trust, the Sprott Physical Gold Trust, the Goldman Sachs Physical
Gold ETF or the Fidelity Wise Origin Bitcoin Fund, the ARK 21Shares
Bitcoin ETF, the iShares Bitcoin Trust, the Grayscale Bitcoin Trust,
the Grayscale Bitcoin Mini Trust, or the Bitwise Bitcoin ETF.
\58\ Rule 18.7(a)(1) provides that no Options Member shall make,
for any account in which it has any interest or for the account of
any Customer, an opening transaction on any exchange if the Options
Member has reason to believe that as a result of such transaction
the Options Member or its Customer would, acting alone or in concert
with others, directly or indirectly, exceed the applicable position
limit fixed by Cboe Exchange, Inc. (``Cboe Options''). See also Cboe
Options Rules 8.30 and 8.42.
---------------------------------------------------------------------------
The Exchange believes that offering options on Ethereum Funds will
benefit investors by providing them with an additional, relatively
lower cost investing tool to gain exposure to the price of Ethereum and
hedging vehicle to meet their investment needs in connection with
Ethereum-related products and positions. The Exchange expects investors
will transact in options on Ethereum Funds in the unregulated over-the-
counter (``OTC'') options market,\59\ but may prefer to trade such
options in a listed environment to receive the benefits of trading
listing options, including (1) enhanced efficiency in initiating and
closing out positions; (2) increased market transparency; and (3)
heightened contra-party creditworthiness due to the role of OCC as
issuer and guarantor of all listed options. The Exchange believes that
listing Ethereum Fund options may cause investors to bring this
liquidity to the Exchange, would increase market transparency and
enhance the process of price discovery
[[Page 10754]]
conducted on the Exchange through increased order flow. The Fund Shares
that hold financial instruments, money market instruments, or precious
metal commodities on which the Exchange may already list and trade
options are trusts structured in substantially the same manner as
Ethereum Funds and essentially offer the same objectives and benefits
to investors, just with respect to different assets. The Exchange notes
that it has not identified any issues with the continued listing and
trading of any Fund Share options, including Fund Shares that hold
commodities (i.e., precious metals and Bitcoin) that it currently lists
and trades on the Exchange.
---------------------------------------------------------------------------
\59\ The Exchange understands from customers that investors have
historically transacted in options on Fund Shares in the OTC options
market if such options were not available for trading in a listed
environment.
---------------------------------------------------------------------------
Finally, the Exchange notes that applicable Exchange rules will
require that customers receive appropriate disclosure before trading
options in Ethereum Funds.\60\ Further, brokers opening accounts and
recommending options transactions must comply with relevant customer
suitability standards.\61\
---------------------------------------------------------------------------
\60\ See Rules 26.2(b)) and (e).
\61\ See Rule 26.4.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\62\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \63\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \64\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\62\ 15 U.S.C. 78f(b).
\63\ 15 U.S.C. 78f(b)(5).
\64\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposal to list and
trade options on the Ethereum Funds will remove impediments to and
perfect the mechanism of a free and open market and a national market
system and, in general, protect investors because offering options on
the Ethereum Funds will provide investors with a greater opportunity to
realize the benefits of utilizing options on an ETF based on spot
Ethereum, including cost efficiencies and increased hedging strategies.
The Exchange believes that offering options on a competitively
priced ETF based on spot Ethereum will benefit investors by providing
them with an additional, relatively lower-cost risk management tool,
allowing them to manage, more easily, their positions and associated
risks in their portfolios in connection with exposure to spot Ethereum.
Today, the Exchange lists options on other commodity (including
Ethereum [sic]) ETFs structured as a trust, which essentially offer the
same objectives and benefits to investors, and for which the Exchange
has not identified any issues with the continued listing and trading of
options on those ETFs.
The Exchange also believes the proposal to permit options on the
Ethereum Funds will remove impediments to and perfect the mechanism of
a free and open market and a national market system, because options on
the Ethereum Funds will comply with current Exchange Rules as discussed
herein. Options on the Ethereum Funds must satisfy the initial listing
standards and continued listing standards currently in the Rules,
applicable to options on all ETFs, including options on other commodity
ETFs already deemed appropriate for options trading on the Exchange
pursuant to Rule 19.3(i). Additionally, as demonstrated above, the
Ethereum Funds are characterized by a substantial number of shares that
are widely held and actively traded. Further, Rules that currently
govern the listing and trading of options on ETFs, including
permissible expirations, strike prices, minimum increments, position
and exercise limits, and margin requirements, will govern the listing
and trading of options on Ethereum Funds.
The Exchange believes the proposed position and exercise limits are
designed to prevent fraudulent and manipulative acts and practices and
promote just and equitable principles of trade, as they are designed to
address potential manipulative schemes and adverse market impacts
surrounding the use of options, such as disrupting the market in the
security underlying the options. The proposed position and exercise
limits for options on each of the Ethereum Funds is 25,000 contracts.
These position and exercise limits are the lowest position and exercise
limits available in the options industry, are extremely conservative
and more than appropriate given each Ethereum Fund's market
capitalization, ADV, and high number of outstanding shares. The
proposed position limit, and exercise limit, is consistent with the Act
as it addresses concerns related to manipulation and protection of
investors because, as demonstrated above, the position limit (and
exercise limit) is extremely conservative and more than appropriate
given the Ethereum Funds are actively traded. In support of the
proposed position and exercise limits for options on the Ethereum Funds
are 25,000 contracts, the Exchange is citing the in depth analysis NYSE
American did in their filing. As noted above, in NYSE American
Proposal, NYSE American considered the: (1) applicable Ethereum Fund's
market capitalization and ADV, and proposed position limit in relation
to other securities; (2) market capitalization of the entire Ethereum
market in terms of exercise risk and availability of deliverables; (3)
proposed position limit by comparing it to position limits for
derivative products regulated by the CFTC; and (4) supply of Ethereum.
Based on the Exchange's review of these analyses, the Exchange believes
that the [sic] setting position and exercise limits for options on each
of the Ethereum Funds is [sic] 25,000 contracts is more than
appropriate. The proposed position and exercise limits reasonably and
appropriately balance the liquidity provisioning in the market against
the prevention of manipulation. The Exchange believes these proposed
limits are effectively designed to prevent an individual customer or
entity from establishing options positions that could be used to
manipulate the market of the underlying as well as the Ethereum
market.\65\
---------------------------------------------------------------------------
\65\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
---------------------------------------------------------------------------
The Exchange represents that it has the necessary systems capacity
to support the new Ethereum Fund options. As discussed above, the
Exchange believes that its existing surveillance and reporting
safeguards are designed to deter and detect possible manipulative
behavior which might arise from listing and trading Fund Shareoptions
[sic], including Ethereum Fund options. The Exchange's existing
surveillance and reporting safeguards are designed to deter and detect
possible manipulative behavior which might arise from listing and
trading options on ETFs and ETPs, such as (existing)
[[Page 10755]]
precious metal-commodity backed ETP options as well as the proposed
options on Ethereum Funds. The Exchange believes that its surveillance
procedures are adequate to properly monitor the trading of options on
Ethereum Funds in all trading sessions and to deter and detect
violations of Exchange rules. Specifically, the Exchange's market
surveillance staff will have access to surveillances that it conducts,
and that FINRA conducts on its behalf, with respect to the Ethereum
Funds and, as appropriate, would review activity in the underlying
Funds when conducting surveillances for market abuse or manipulation in
the options on the Ethereum Funds. Additionally, the Exchange is a
member of the ISG under the Intermarket Surveillance Group Agreement.
ISG members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets. In
addition, the Exchange has a Regulatory Services Agreement with the
FINRA and as noted herein, pursuant to a multi-party 17d-2 joint plan,
all options exchanges allocate regulatory responsibilities to FINRA to
conduct certain options-related market surveillances. Further, the
Exchange will implement any new surveillance procedures it deems
necessary to effectively monitor the trading of options on the Ethereum
Funds.
The underlying shares of spot Ethereum ETPs, including the Ethereum
Funds, are also subject to safeguards related to addressing market
abuse and manipulation. As the Commission stated in its order approving
proposals of several exchanges to list and trade shares of spot
Ethereum-based ETPs, ``[e]ach Exchange has a comprehensive
surveillance-sharing agreement with the CME via their common membership
in the Intermarket Surveillance Group. This facilitates the sharing of
information that is available to the CME through its surveillance of
its markets, including its surveillance of the CME ether futures
market.'' \66\ The Exchange states that, given the consistently high
correlation between the CME ethereum futures market and the spot
ethereum market, as confirmed by the Commission through robust
correlation analysis, the Commission was able to conclude that such
surveillance sharing agreements could reasonably be ``expected to
assist in surveilling for fraudulent and manipulative acts and
practices in the specific context of the [Ether ETPs].'' \67\ In light
of the foregoing, the Exchange believes that existing surveillance
procedures are designed to deter and detect possible manipulative
behavior which might potentially arise from listing and trading the
proposed options on the Ethereum Funds. Further, the Exchange will
implement any new surveillance procedures it deems necessary to
effectively monitor the trading of options on Ethereum ETPs.
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\66\ See Ethereum ETP Approval Order, 89 FR, at 46938.
\67\ See Ethereum ETP Approval Order, 89 FR at 46941.
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Finally, the Exchange notes that this proposal will remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, protect investors because
applicable Exchange rules will require that customers receive
appropriate disclosure before trading options in Ethereum Funds \68\
and will require that brokers opening accounts and recommending options
transactions must comply with relevant customer suitability
standards.\69\
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\68\ See Rules 26.2(b)) and (e).
\69\ See Rule 26.4.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act as the Ethereum Fund options
will be equally available to all market participants who wish to trade
such options and will trade generally in the same manner as other
options. The Rules that currently apply to the listing and trading of
all Fund Share options on the Exchange, including, for example, Rules
that govern listing criteria, expirations, exercise prices, minimum
increments, margin requirements, customer accounts, and trading halt
procedures will apply to the listing and trading of Ethereum Funds
options on the Exchange in the same manner as they apply to other
options on all other Fund Shares that are listed and traded on the
Exchange. Also, and as stated above, the Exchange already lists options
on other commodity-based Fund Shares (including Bitcoin-based).\70\
Further, the Ethereum Funds would need to satisfy the maintenance
listing standards set forth in the Exchange Rules in the same manner as
any other Fund Share for the Exchange to continue listing options on
them.
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\70\ See Rule 19.3(i)(4).
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The Exchange does not believe that the proposal to list and trade
options on Ethereum Funds will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. To the extent that the advent of Ethereum Fund
options trading on the Exchange may make the Exchange a more attractive
marketplace to market participants at other exchanges, such market
participants are free to elect to become market participants on the
Exchange. The Exchange notes that listing and trading Ethereum Fund
options on the Exchange will subject such options to transparent
exchange-based rules as well as price discovery and liquidity, as
opposed to alternatively trading such options in the OTC market.
The Exchange believes that the proposed rule change may relieve any
burden on, or otherwise promote, competition, as it is designed to
increase competition for order flow on the Exchange in a manner that is
beneficial to investors by providing them with a lower-cost option to
hedge their investment portfolios. The Exchange notes that it operates
in a highly competitive market in which market participants can readily
direct order flow to competing venues that offer similar products.
Ultimately, the Exchange believes that offering Ethereum Fund options
for trading on the Exchange will promote competition by providing
investors with an additional, relatively low-cost means to hedge their
portfolios and meet their investment needs in connection with Ethereum
prices and Ethereum-related products and positions on a listed options
exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
[[Page 10756]]
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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-CboeEDGX-2025-008 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-CboeEDGX-2025-008. 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-CboeEDGX-2025-008 and should
be submitted on or before March 19, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\71\
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\71\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-03070 Filed 2-25-25; 8:45 am]
BILLING CODE 8011-01-P
