Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the Franklin Solana ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, 12824-12835 [2025-04505]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 90, Number 52 (Wednesday, March 19, 2025)]
[Notices]
[Pages 12824-12835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-04505]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102651; File No. SR-CboeBZX-2025-039]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To List and Trade Shares of the 
Franklin Solana ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust 
Shares

March 13, 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 March 12, 2025, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
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 the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change 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 BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (``Commission'' or ``SEC'') 
a proposed rule change to list and trade shares of the Franklin Solana 
ETF (the ``Fund''), a series of the Franklin Solana Trust (the 
``Trust''),\3\ under BZX Rule 14.11(e)(4), Commodity-Based Trust 
Shares.
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    \3\ The Trust was formed as a Delaware statutory trust on 
February 10, 2025. The Fund is operated as a grantor trust for U.S. 
federal tax purposes. The Trust and the Fund have no fixed 
termination date.
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    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements

[[Page 12825]]

concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the Shares under BZX Rule 
14.11(e)(4),\4\ which governs the listing and trading of Commodity-
Based Trust Shares on the Exchange.\5\ Franklin Holdings, LLC is the 
sponsor of the Fund (the ``Sponsor''). The Shares will be registered 
with the Commission by means of the Trust's registration statement on 
Form S-1 (the ``Registration Statement'').\6\ According to the 
Registration Statement, the Trust is neither an investment company 
registered under the Investment Company Act of 1940, as amended (the 
``1940 Act''),\7\ nor a commodity pool for purposes of the Commodity 
Exchange Act (``CEA''), and neither the Trust, the Fund nor the Sponsor 
is subject to regulation as a commodity pool operator or a commodity 
trading adviser in connection with the Shares.
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    \4\ The Commission approved BZX Rule 14.11(e)(4) in Securities 
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 
(September 6, 2011) (SR-BATS-2011-018).
    \5\ Any of the statements or representations regarding the index 
composition, the description of the portfolio or reference assets, 
limitations on portfolio holdings or reference assets, dissemination 
and availability of index, reference asset, and intraday indicative 
values, or the applicability of Exchange listing rules specified in 
this filing to list a series of Other Securities (collectively, 
``Continued Listing Representations'') shall constitute continued 
listing requirements for the Shares listed on the Exchange.
    \6\ On February 21, 2025, the Trust filed with the Commission 
the Registration Statement on Form S-1, submitted to the Commission 
by the Sponsor on behalf of the Trust (333-285121). The descriptions 
of the Trust, the Fund, the Shares, and the Index (as defined below) 
contained herein are based, in part, on information in the 
Registration Statement. The Registration Statement is not yet 
effective, and the Shares will not trade on the Exchange until such 
time that the Registration Statement is effective.
    \7\ 15 U.S.C. 80a-1.
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    Since 2017, the Commission has approved or disapproved exchange 
filings to list and trade series of Trust Issued Receipts, including 
spot-based Commodity-Based Trust Shares, on the basis of whether the 
listing exchange has in place a comprehensive surveillance sharing 
agreement with a regulated market of significant size related to the 
underlying commodity to be held (the ``Winklevoss Test'').\8\ The 
Commission has also consistently recognized, however, that this is not 
the exclusive means by which an ETP listing exchange can meet this 
statutory obligation.\9\ A listing exchange could, alternatively, 
demonstrate that ``other means to prevent fraudulent and manipulative 
acts and practices will be sufficient'' to justify dispensing with a 
surveillance-sharing agreement with a regulated market of significant 
size.\10\
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    \8\ See Securities Exchange Act Release Nos. 78262 (July 8, 
2016), 81 FR 78262 (July 14. 2016) (the ``Winklevoss Proposal''). 
The Winklevoss Proposal was the first exchange rule filing proposing 
to list and trade shares of an ETP that would hold spot bitcoin (a 
``Spot Bitcoin ETP''). It was subsequently disapproved by the 
Commission. See Securities Exchange Act Release No. 83723 (July 26, 
2018), 83 FR 37579 (August 1, 2018) (the ``Winklevoss Order''); 
99306 (January 10, 2024), 89 FR 3008 (January 17, 2024) (Self-
Regulatory Organizations; NYSE Arca, Inc.; The Nasdaq Stock Market 
LLC; Cboe BZX Exchange, Inc.; Order Granting Accelerated Approval of 
Proposed Rule Changes, as Modified by Amendments Thereto, To List 
and Trade Bitcoin-Based Commodity-Based Trust Shares and Trust 
Units) (the ``Spot Bitcoin ETP Approval Order''); 100224 (May 23, 
2024), 89 FR 46937 (May 30, 2024) (Self-Regulatory Organizations; 
NYSE Arca, Inc.; The Nasdaq Stock Market LLC; Cboe BZX Exchange, 
Inc.; Order Granting Accelerated Approval of Proposed Rule Changes, 
as Modified by Amendments Thereto, To List and Trade Shares of 
Ether-Based Exchange-Traded Products) (the ``Spot ETH ETP Approval 
Order'').
    \9\ See Winklevoss Order, 83 FR at 37580; see Spot Bitcoin ETP 
Approval Order, 89 FR at 3009; see Spot ETH ETP Approval Order 89 FR 
at 46938.
    \10\ The Exchange notes that that the Winklevoss Test was first 
applied in 2017 in the Winklevoss Order, which was the first 
disapproval order related to an exchange proposal to list and trade 
a Spot Bitcoin ETP. All prior approval orders issued by the 
Commission approving the listing and trading of series of Trust 
Issued Receipts included no specific analysis related to a 
``regulated market of significant size.''In the Winklevoss Order and 
the Commission's prior orders approving the listing and trading of 
series of Trust Issued Receipts have noted that the spot commodities 
and currency markets for which it has previously approved spot ETPs 
are generally unregulated and that the Commission relied on the 
underlying futures market as the regulated market of significant 
size that formed the basis for approving the series of Currency and 
Commodity-Based Trust Shares, including gold, silver, platinum, 
palladium, copper, and other commodities and currencies. The 
Commission specifically noted in the Winklevoss Order that the 
approval order issued related to the first spot gold ETP ``was based 
on an assumption that the currency market and the spot gold market 
were largely unregulated.'' See Winklevoss Order at 37592. As such, 
the regulated market of significant size test does not require that 
the spot market be regulated in order for the Commission to approve 
this proposal, and precedent makes clear that an underlying market 
for a spot commodity or currency being a regulated market would 
actually be an exception to the norm. These largely unregulated 
currency and commodity markets do not provide the same protections 
as the markets that are subject to the Commission's oversight, but 
the Commission has consistently looked to surveillance sharing 
agreements with the underlying futures market in order to determine 
whether such products were consistent with the Act.
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    The Commission recently issued orders granting approval for 
proposals to list bitcoin- and ether-based commodity trust shares and 
bitcoin-based, ether-based, and a combination of bitcoin- and ether-
based trust issued receipts (these proposed funds are nearly identical 
to the Fund, but proposed to hold bitcoin and/or ether, respectively, 
instead of Solana (also referred to as ``SOL'')) (``Spot Bitcoin ETPs'' 
and ``Spot ETH ETPs''). In both the Spot Bitcoin ETP Approval Order and 
Spot ETH ETP Approval Order, the Commission found that sufficient 
``other means'' of preventing fraud and manipulation had been 
demonstrated that justified dispensing with a surveillance-sharing 
agreement with a regulated market of significant size. Specifically, 
the Commission found that while the Chicago Mercantile Exchange 
(``CME'') futures market for both bitcoin and ether were not of 
``significant size'' related to the spot market, the Exchange 
demonstrated that other means could be reasonably expected to assist in 
surveilling for fraudulent and manipulative acts and practices in the 
specific context of the proposals.
    As further discussed below, both the Exchange and the Sponsor 
believe that this proposal and the included analysis are sufficient to 
establish that the proposal is consistent with the Act itself and, 
additionally, that there are sufficient ``other means'' of preventing 
fraud and manipulation that warrant dispensing of the surveillance-
sharing agreement with a regulated market of significant size, as was 
done with both Spot Bitcoin ETPs and Spot ETH ETPs, and that this 
proposal should be approved.
Background
    SOL is a digital asset that is created and transmitted through the 
operations of the peer-to-peer Solana Network, a decentralized network 
of computers that operates on cryptographic protocols. No single entity 
is known to own or operate the Solana Network, the infrastructure of 
which is understood to be collectively maintained by a decentralized 
user base. The Solana Network allows people to exchange tokens of 
value, called SOL, which are recorded on a public transaction ledger 
known as a blockchain. SOL can be used to pay for goods and services, 
including computational power on the Solana Network, or it can be 
converted to fiat currencies, such as the U.S. dollar, at rates 
determined on Digital

[[Page 12826]]

Asset Trading Platforms or in individual end-user- to-end-user 
transactions under a barter system. Furthermore, the Solana Network was 
designed to allow users to write and implement smart contracts--that 
is, general-purpose code that executes on every computer in the network 
and can instruct the transmission of information and value based on a 
sophisticated set of logical conditions. Using smart contracts, users 
can create markets, store registries of debts or promises, represent 
the ownership of property, move funds in accordance with conditional 
instructions and create digital assets other than SOL on the Solana 
Network. Smart contract operations are executed on the Solana 
blockchain in exchange for payment of SOL. Like the Ethereum network, 
the Solana Network is one of a number of projects intended to expand 
blockchain use beyond just a peer-to-peer money system.
    The Solana protocol introduced the Proof-of-History (``PoH'') 
timestamping mechanism. PoH automatically orders on-chain transactions 
by creating a historical record that proves an event has occurred at a 
specific moment in time. PoH is intended to provide a transaction 
processing speed and capacity advantage over other blockchain networks 
like Bitcoin and Ethereum, which rely on sequential production of 
blocks and can lead to delays caused by validator confirmations. PoH is 
a new blockchain technology that is not widely used. PoH may not 
function as intended. For example, it may require more specialized 
equipment to participate in the network and fail to attract a 
significant number of users, or may be subject to outages or fail to 
function as intended. In addition, there may be flaws in the 
cryptography underlying PoH, including flaws that affect functionality 
of the Solana Network or make the network vulnerable to attack.
    In addition to the PoH mechanism described above, the Solana 
Network uses a proof-of-stake consensus mechanism to incentivize SOL 
holders to validate transactions. Unlike proof-of-work, in which miners 
expend computational resources to compete to validate transactions and 
are rewarded coins in proportion to the amount of computational 
resources expended, in proof-of-stake, validators risk or ``stake'' 
coins to compete to be randomly selected to validate transactions and 
are rewarded coins in proportion to the amount of coins staked. Any 
malicious activity, such as disagreeing with the eventual consensus or 
otherwise violating protocol rules, results in the forfeiture or 
``slashing'' of a portion of the staked coins. Proof- of-stake is 
viewed as more energy efficient and scalable than proof-of-work and is 
sometimes referred to as ``virtual mining''.
    The Solana protocol was first conceived by Anatoly Yakovenko in a 
2017 whitepaper. Development of the Solana Network is overseen by the 
Solana Foundation, a Swiss non-profit organization, and Solana Labs, 
Inc., a Delaware corporation, which administered the original network 
launch and token distribution.
    Although Solana Labs, Inc. and the Solana Foundation continue to 
exert significant influence over the direction of the development of 
Solana, the Solana Network, like the Ethereum network, is believed to 
be decentralized and does not require governmental authorities or 
financial institution intermediaries to create, transmit or determine 
the value of SOL.
    As noted above, this proposal is to list and trade shares of the 
Fund that would hold spot Solana. Neither the Trust, Fund, nor the 
Sponsor or any of their affiliates are affiliates of Solana Labs, Inc., 
the Solana Foundation, or any of their respective affiliates.
    In light of these factors and consistent with applicable legal 
precedent, particularly as applied in SEC v. Ripple Labs, the Sponsor 
believes that it is applying the proper legal standards in making a 
good faith determination that it believes that SOL is not under these 
circumstances a security under federal law in light of the 
uncertainties inherent in applying the Howey and Reves tests.\11\
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    \11\ See SEC v. Ripple Labs, 2023 WL 4507900 at 15, (S.D.N.Y. 
July 13, 2023) (``(XRP, as a digital token, is not in and of itself 
a `contract, transaction[,] or scheme' that embodies the Howey 
requirements of an investment contract.)'') and 23 (``Ripple's 
Programmatic Sales were blind bid/ask transactions, and Programmatic 
Buyers could not have known if their payments of money went to 
Ripple, or any other seller of XRP. Since 2017, Ripple's 
Programmatic Sales represented less than 1% of the global XRP 
trading volume. Therefore, the vast majority of individuals who 
purchased XRP from digital asset exchanges did not invest their 
money in Ripple at all. An Institutional Buyer knowingly purchased 
XRP directly from Ripple pursuant to a contract, but the economic 
reality is that a Programmatic Buyer stood in the same shoes as a 
secondary market purchaser who did not know to whom or what it was 
paying its money.'') The Court specifically notes that the question 
of whether secondary market sales of XRP constitute offers and sales 
of investment contracts because it was not before the Court and 
therefore was not addressed. However, the general logic applied 
above in the Court's finding that an investment contract did not 
exist seems to similarly indicate that purchases and sales on the 
secondary market where the purchaser ``did not know to whom or what 
it was paying its money'' would also not constitute an investment 
contract.
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Section 6(b)(5) and the Applicable Standards
    The Commission has approved numerous series of Trust Issued 
Receipts,\12\ including Commodity-Based Trust Shares,\13\ to be listed 
on U.S. national securities exchanges. In order for any proposed rule 
change from an exchange to be approved, the Commission must determine 
that, among other things, the proposal is consistent with the 
requirements of Section 6(b)(5) of the Act, specifically including: (i) 
the requirement that a national securities exchange's rules are 
designed to prevent fraudulent and manipulative acts and practices; 
\14\ and (ii) the requirement that an exchange proposal be designed, in 
general, to protect investors and the public interest. The Exchange 
believes that this proposal is consistent with the requirements of 
Section 6(b)(5) of the Act and that this filing sufficiently 
demonstrates that potential policy concerns under the Act are 
sufficiently mitigated to the point that they are outweighed by 
quantifiable investor protection issues that would be resolved by 
approving this proposal.
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    \12\ See Exchange Rule 14.11(f).
    \13\ Commodity-Based Trust Shares, as described in Exchange Rule 
14.11(e)(4), are a type of Trust Issued Receipt.
    \14\ Much like bitcoin and ether, the Exchange believes that SOL 
is resistant to price manipulation and that ``other means to prevent 
fraudulent and manipulative acts and practices'' exist to justify 
dispensing with the requisite surveillance sharing agreement. The 
geographically diverse and continuous nature of SOL trading render 
it difficult and prohibitively costly to manipulate the price of 
SOL. The fragmentation across platforms and the capital necessary to 
maintain a significant presence on each trading platform make 
manipulation of SOL prices through continuous trading activity 
challenging. To the extent that there are trading platforms engaged 
in or allowing wash trading or other activity intended to manipulate 
the price of SOL on other markets, such pricing does not normally 
impact prices on other trading platforms because participants will 
generally ignore markets with quotes that they deem non-executable. 
Moreover, the linkage between SOL markets and the presence of 
arbitrageurs in those markets means that the manipulation of the 
price of SOL on any single venue would require manipulation of the 
global SOL price in order to be effective. Arbitrageurs must have 
funds distributed across multiple trading platforms in order to take 
advantage of temporary price dislocations, thereby making it 
unlikely that there will be strong concentration of funds on any 
particular trading platforms or OTC platform. Further, the speed and 
relatively inexpensive nature of transactions on the Solana network 
allow arbitrageurs to quickly move capital between trading platforms 
where price dislocations may occur. As a result, the potential for 
manipulation on a trading platform would require overcoming the 
liquidity supply of such arbitrageurs who are effectively 
eliminating any cross-market pricing differences.
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    More recently, the Commission has applied the Winklevoss Test while 
also recognizing that the ``regulated market

[[Page 12827]]

of significant size'' standard is not the only means for satisfying 
Section 6(b)(5) of the Act. In the specifically providing that a 
listing exchange could demonstrate that ``other means to prevent 
fraudulent and manipulative acts and practices'' are sufficient to 
justify dispensing with the requisite surveillance-sharing 
agreement.\15\ While there is currently no futures market for SOL, in 
the Spot Bitcoin ETF Approval Order and Spot ETH ETF Approval Order the 
Commission determined that the CME bitcoin futures market and CME ether 
futures market, respectively, were not of ``significant size'' related 
to the spot market. Instead, the Commission found that sufficient 
``other means'' of preventing fraud and manipulation had been 
demonstrated that justified dispensing with a surveillance-sharing 
agreement with a regulated market of significant size. The Exchange and 
Sponsor believe that this proposal provides for other means of 
preventing fraud and manipulation justify dispensing with a 
surveillance-sharing agreement with a regulated market of significant 
size.
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    \15\ See Winklevoss Order at 37580. The Commission has also 
specifically noted that it ``is not applying a `cannot be 
manipulated' standard; instead, the Commission is examining whether 
the proposal meets the requirements of the Exchange Act and, 
pursuant to its Rules of Practice, places the burden on the listing 
exchange to demonstrate the validity of its contentions and to 
establish that the requirements of the Exchange Act have been met.'' 
Id. at 37582.
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    Over the past several years, U.S. investor exposure to SOL, through 
OTC SOL Funds and digital asset trading platforms, has grown into 
billions of dollars with a fully diluted market cap of greater than 
$150 billion. The Exchange believes that approving this proposal (and 
comparable proposals) provides the Commission with the opportunity to 
allow U.S. investors with access to SOL in a regulated and transparent 
exchange-traded vehicle that would act to limit risk to U.S. investors 
by: (i) reducing premium and discount volatility; (ii) reducing 
management fees through meaningful competition; and (iii) providing an 
alternative to custodying spot SOL.
    The policy concerns that the Exchange Act is designed to address 
are also otherwise mitigated by the fact that the size of the market 
for the underlying reference asset (approximately $150 billion fully 
diluted value). The geographically diverse and continuous nature of SOL 
trading makes it difficult and prohibitively costly to manipulate the 
price of SOL and, in many instances, the SOL market can be less 
susceptible to manipulation than the equity, fixed income, and 
commodity futures markets. There are a number of reasons this is the 
case, including that there is not inside information about revenue, 
earnings, corporate activities, or sources of supply; manipulation of 
the price on any single venue would require manipulation of the global 
SOL price in order to be effective; a substantial over-the-counter 
market provides liquidity and shock-absorbing capacity; SOL's 24/7/365 
nature provides constant arbitrage opportunities across all trading 
venues; and it is unlikely that any one actor could obtain a dominant 
market share.
    Further, SOL is arguably less susceptible to manipulation than 
other commodities that underlie ETPs; there may be inside information 
relating to the supply of the physical commodity such as the discovery 
of new sources of supply or significant disruptions at mining 
facilities that supply the commodity that simply are inapplicable as it 
relates to certain cryptoassets, including SOL. Further, the Exchange 
believes that the fragmentation across SOL trading platforms and 
increased adoption of SOL, as displayed through increased user 
engagement and trading volumes on the Solana Network, make manipulation 
of SOL prices through continuous trading activity unlikely. Moreover, 
the linkage between the SOL markets and the presence of arbitrageurs in 
those markets means that the manipulation of the price of SOL price on 
any single venue would require manipulation of the global SOL price in 
order to be effective. Arbitrageurs must have funds distributed across 
multiple SOL trading platforms in order to take advantage of temporary 
price dislocations, thereby making it unlikely that there will be 
strong concentration of funds on any particular SOL trading platform. 
As a result, the potential for manipulation on a particular SOL trading 
platform would require overcoming the liquidity supply of such 
arbitrageurs who are effectively eliminating any cross-market pricing 
differences. For all of these reasons, SOL is not particularly 
susceptible to manipulation, especially as compared to other approved 
ETP reference assets.
    The Exchange also believes this proposal is designed to remove 
impediments to and perfect the mechanism of a free and open market and, 
in general, to protect investors and the public interest because it 
would allow the Fund to stake its SOL on behalf of its investors. The 
Solana Network allows for staking of its native asset, SOL tokens, and 
permits validators who successfully stake SOL to receive rewards in the 
form of more SOL tokens. The net beneficiaries are not only validators, 
or those on behalf of whom they stake SOL, but also the Solana 
blockchain itself which grows and is progressively made more secure 
through the validation of transactions. Staking permits validators to 
contribute to the network by staking their tokens to secure the 
blockchain, facilitating the creation of blocks, and helping process 
transactions. Validators are compensated for fulfilling this important 
role through transaction fees and consensus rewards paid by the 
blockchain itself.
    Staking through mechanisms such as ``point-and-click'' staking can 
also permit the earning of rewards without certain additional risks to 
the tokens held by the Solana Custodian on behalf of the Fund. As such, 
not staking the Fund's SOL would amount to waiving the Fund's right to 
free additional SOL, an act analogous to an equity ETP refusing 
dividends from the companies it holds. Allowing the Fund to stake its 
SOL would benefit investors and help the Fund to better track the 
returns associated with holding SOL. This would improve the creation 
and redemption process for both authorized participants and the Fund, 
increase efficiency, and ultimately benefit the end investors in the 
Fund.
Franklin Solana ETF
    CSC Delaware Trust Company, a subsidiary of the Corporation Service 
Company, is the trustee (``Trustee''). A third party will be the 
administrator (``Administrator'') and transfer agent (``Transfer 
Agent'') and will be responsible for the custody of the Fund's cash and 
cash equivalents \16\ (the ``Cash Custodian''). Coinbase Custody Trust 
Company, LLC (the ``Solana Custodian'') will be responsible for custody 
of the Fund's SOL.
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    \16\ Cash equivalents are short-term instruments with maturities 
of less than 3 months.
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    According to the Registration Statement, each Share will represent 
a fractional undivided beneficial interest in the Fund's net assets. 
The Fund's assets will only consist of SOL, cash, and cash equivalents.
    According to the Registration Statement, the Trust will be neither 
an investment company registered under the 1940 Act,\17\ nor a 
commodity pool for purposes of the CEA, and neither the Trust, the Fund 
nor the Sponsor is subject to regulation as a commodity pool operator 
or a commodity trading adviser in connection with the Shares.
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    \17\ 15 U.S.C. 80a-1.
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    The Fund will not acquire and will disclaim any incidental right 
(``IR'') or IR asset received, for example as a result of forks or 
airdrops, and such assets will

[[Page 12828]]

not be taken into account for purposes of determining the Fund's net 
asset value (``NAV'').
    When the Fund sells or redeems its Shares, it will do so in large 
blocks of 50,000 Shares (a ``Creation Basket'') based on the quantity 
of SOL attributable to each Share (net of the accrued but unpaid 
Sponsor's fee and any accrued but unpaid expenses or liabilities). 
Creation Baskets are issued and redeemed in exchange for SOL and/or 
cash. For cash creations, authorized participants will deliver, or 
facilitate the delivery of, cash to the Fund's account with the Cash 
Custodian in exchange for Shares. Upon receipt of an approved cash 
creation order, the Sponsor, on behalf of the Fund, will submit to one 
or more previously onboarded trading partners an order to buy the 
amount of SOL represented by a Creation Basket.\18\ For in-kind 
creations, authorized participants or their designee will deliver, or 
facilitate the delivery of, SOL to the Fund's account with the Solana 
Custodian in exchange for Shares.\19\ Authorized participants may then 
offer Shares to the public at prices that depend on various factors, 
including the supply and demand for Shares, the value of the Fund's 
assets, and market conditions at the time of a transaction. 
Shareholders who buy or sell Shares during the day from their broker 
may do so at a premium or discount relative to the NAV per Share of the 
Fund.
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    \18\ For cash redemptions, the process will occur in the reverse 
order. Upon receipt of an approved cash redemption order, the 
Sponsor, on behalf of the Fund, will submit an order to sell the 
amount of SOL represented by a Creation Basket and the cash proceeds 
will be remitted to the authorized participant when the large block 
of Shares is received by the Transfer Agent.
    \19\ For in-kind redemptions, the process will occur in the 
reverse order. Upon receipt of an approved in-kind redemption order, 
the Sponsor, on behalf of the Fund, will transfer the amount of SOL 
represented by a Creation Basket to the authorized participant or 
its designee when the large block of Shares is received by the 
Transfer Agent.
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Investment Objective
    According to the Registration Statement and as further described 
below, the Fund's investment objective is to seek to reflect generally 
the performance of the price of SOL before payment of the Fund's 
expenses and liabilities. In seeking to achieve its investment 
objective, the Fund will hold only SOL, cash, and cash equivalents. The 
Fund will value its Shares daily as of 4:00 p.m. ET based on the value 
of the SOL held by the Fund as reflected by the Index, as described 
below. All of the Fund's SOL will be held by the Solana Custodian.
The Index
    As described in the Registration Statement, the Fund will value its 
Shares daily based on the value of SOL as reflected by the CME CF 
Solana-Dollar Reference Rate--New York Variant (the ``Index''). The 
Index is calculated daily and aggregates the notional value of SOL 
trading activity across major spot SOL trading platforms. The 
administrator of the Index is CF Benchmarks Ltd. (the ``Index 
Provider'').
    The Index serves as a once-a-day benchmark rate of the U.S. dollar 
price of Solana (USD/SOL), calculated as of 4:00 p.m. ET. The Index 
aggregates the trade flow of several SOL trading platforms, during an 
observation window between 3:00 p.m. and 4:00 p.m. ET into the U.S. 
dollar price of one SOL at 4:00 p.m. ET. Specifically, the Index is 
calculated based on the ``Relevant Transactions'' (as defined below) of 
all of its constituent SOL trading platforms, which are currently 
Coinbase, Kraken, and Gemini (the ``Constituent Platforms''), as 
follows:
     All Relevant Transactions are added to a joint list, 
recording the time of execution, trade price and size for each 
transaction.
     The list is partitioned by timestamp into 12 equally-sized 
time intervals of 5 (five) minute length.
     For each partition separately, the volume-weighted median 
trade price is calculated from the trade prices and sizes of all 
Relevant Transactions, i.e., across all Constituent Platforms. A 
volume-weighted median differs from a standard median in that a 
weighting factor, in this case trade size, is factored into the 
calculation.
     The Index is then determined by the equally-weighted 
average of the volume medians of all partitions.
    The Constituent Platforms may change from time to time. The Index 
does not include any futures prices in its methodology. A ``Relevant 
Transaction'' is any cryptocurrency versus U.S. dollar spot trade that 
occurs during the observation window between 3:00 p.m. and 4:00 p.m. ET 
on a Constituent Platform in the SOL/USD pair that is reported and 
disseminated by a Constituent Platform through its publicly available 
Application Programming Interface (``API'') and observed by the Index 
Provider.
    The Sponsor believes that the use of the Index is reflective of a 
reasonable valuation of the average spot price of SOL and that 
resistance to manipulation is a priority aim of its design methodology. 
The methodology: (i) takes an observation period and divides it into 
equal partitions of time; (ii) then calculates the volume-weighted 
median of all transactions within each partition; and (iii) the value 
is determined from the arithmetic mean of the volume-weighted medians, 
equally weighted. By employing the foregoing steps, the Index thereby 
seeks to ensure that transactions in SOL conducted at outlying prices 
do not have an undue effect on the value of the Index, large trades or 
clusters of trades transacted over a short period of time will not have 
an undue influence on the Index value, and the effect of large trades 
at prices that deviate from the prevailing price are mitigated from 
having an undue influence on the Index value.
    In addition, the Sponsor notes that an oversight function is 
implemented by the Index Provider in seeking to ensure that the Index 
is administered through codified policies for Index integrity.
    Index data and the description of the Index are based on 
information made publicly available by the Index Provider on its 
website at https://www.cfbenchmarks.com.
Net Asset Value
    NAV means the total assets of the Fund (which includes SOL and cash 
and cash equivalents) less total liabilities of the Fund. The 
Administrator will determine the NAV of the Fund on each day that the 
Exchange is open for regular trading, as promptly as practical after 
4:00 p.m. ET. The NAV of the Fund is the aggregate value of the Fund's 
assets less its estimated accrued but unpaid liabilities (which include 
accrued expenses). In determining the Fund's NAV, the Administrator 
values the SOL held by the Fund based on the Index as of 4:00 p.m. ET. 
The Administrator also determines the NAV per Share. The NAV for the 
Fund will be calculated by the Administrator once a day and will be 
disseminated daily to all market participants at the same time.
    If the Index is not available or the Sponsor determines, in its 
sole discretion, that the Index should not be used, the Fund's holdings 
may be fair valued in accordance with the policy approved by the 
Sponsor.\20\
---------------------------------------------------------------------------

    \20\ Any alternative method will only be employed on an ad hoc 
basis. Any permanent change to the calculation of the NAV would 
require a proposed rule change under Rule 19b-4.
---------------------------------------------------------------------------

Availability of Information
    In addition to the price transparency of the Index, the Fund will 
provide information regarding the Fund's SOL holdings as well as 
additional data regarding the Fund. The website for the Fund, which 
will be publicly accessible

[[Page 12829]]

at no charge, will contain the following information: (a) the current 
NAV per Share daily and the prior business day's NAV per Share and the 
reported BZX Official Closing Price; \21\ (b) the BZX Official Closing 
Price in relation to the NAV per Share as of the time the NAV is 
calculated and a calculation of the premium or discount of such price 
against such NAV per Share; (c) data in chart form displaying the 
frequency distribution of discounts and premiums of the BZX Official 
Closing Price against the NAV per Share, within appropriate ranges for 
each of the four previous calendar quarters (or for the life of the 
Fund, if shorter); (d) the prospectus; and (e) other applicable 
quantitative information. The aforementioned information will be 
published as of the close of business and be available on the Fund's 
website at https://www.franklintempleton.com/investments/options/exchange-traded-funds, or any successor thereto. The NAV for the Fund 
will be calculated by the Administrator once a day and will be 
disseminated daily to all market participants at the same time. 
Quotation and last-sale information regarding the Shares will be 
disseminated through the facilities of the Consolidated Tape 
Association (``CTA''). The Fund will also disseminate its holdings on a 
daily basis on its website.
---------------------------------------------------------------------------

    \21\ As defined in Rule 11.23(a)(3), the term ``BZX Official 
Closing Price'' shall mean the price disseminated to the 
consolidated tape as the market center closing trade.
---------------------------------------------------------------------------

    The Intraday Indicative Value (``IIV'') will be calculated by using 
the prior day's closing NAV per Share as a base and updating that value 
during Regular Trading Hours \22\ to reflect changes in the value of 
the Fund's SOL holdings during the trading day, which is based on the 
CME CF Solana-Dollar Real Time Index. The IIV disseminated during 
Regular Trading Hours should not be viewed as an actual real-time 
update of the NAV, which will be calculated only once at the end of 
each trading day. The IIV will be widely disseminated on a per Share 
basis every 15 seconds during the Exchange's Regular Trading Hours 
through the facilities of the CTA and Consolidated Quotation System 
(``CQS'') high speed lines. In addition, the IIV will be available 
through online information services, such as Bloomberg and Reuters.
---------------------------------------------------------------------------

    \22\ Regular Trading Hours is the time between 9:30 a.m. and 
4:00 p.m. Eastern Time.
---------------------------------------------------------------------------

    The price of SOL will be made available by one or more major market 
data vendors, updated at least every 15 seconds during Regular Trading 
Hours.
    As noted above, the Index is calculated daily and aggregates the 
notional value of SOL trading activity across major spot SOL trading 
platforms. Index data, the Index value, and the description of the 
Index are based on information made publicly available by the Index 
Provider on its website https://www.cfbenchmarks.com.
    Quotation and last sale information for SOL is widely disseminated 
through a variety of major market data vendors, including Bloomberg and 
Reuters. Information relating to trading, including price and volume 
information, in SOL is available from major market data vendors and 
from the trading platforms on which SOL are traded. Depth of book 
information is also available from SOL trading platforms. The normal 
trading hours for SOL trading platforms are 24 hours per day, 365 days 
per year.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's BZX Official Closing Price and trading 
volume information for the Shares will be published daily in the 
financial section of newspapers. Quotation and last-sale information 
regarding the Shares will be disseminated through the facilities of the 
CTA.
The Solana Custodian
    The Solana Custodian carefully considers the design of the 
physical, operational and cryptographic systems for secure storage of 
the Fund's private keys in an effort to lower the risk of loss or 
theft. The Solana Custodian utilizes a variety of security measures to 
ensure that private keys necessary to transfer digital assets remain 
uncompromised and that the Fund maintains exclusive ownership of its 
assets. The Solana Custodian will keep the private keys associated with 
the Fund's SOL in ``cold storage'' \23\ (the ``Cold Vault Balance''). 
The hardware, software, systems, and procedures of the Solana Custodian 
may not be available or cost-effective for many investors to access 
directly. Only specific individuals are authorized to participate in 
the custody process, and no individual acting alone will be able to 
access or use any of the private keys. In addition, no combination of 
the executive officers of the Sponsor, acting alone or together, will 
be able to access or use any of the private keys that hold the Fund's 
SOL.
---------------------------------------------------------------------------

    \23\ The term ``cold storage'' refers to a safeguarding method 
by which the private keys corresponding to SOL stored on a digital 
wallet are removed from any computers actively connected to the 
internet. Cold storage of private keys may involve keeping such 
wallet on a non-networked computer or electronic device or storing 
the public key and private keys relating to the digital wallet on a 
storage device (for example, a USB thumb drive) or printed medium 
(for example, papyrus or paper) and deleting the digital wallet from 
all computers.
---------------------------------------------------------------------------

Staking
    The Sponsor may, from time to time, stake a portion of the Fund's 
SOL on behalf of the Fund through one or more trusted staking 
providers, which may include the Solana Custodian, an affiliate of the 
Solana Custodian or an affiliate of the Sponsor (``Staking 
Providers''). In consideration for any staking activity in which the 
Fund may engage, the Fund would receive certain staking rewards of SOL 
tokens, which may be treated as income to the Fund.
The Staking Process
    The Solana Network uses a proof-of-stake consensus mechanism. 
Proof-of-stake is intended to address the perceived shortcomings of the 
proof-of-work consensus mechanism in terms of labor intensity and 
duplicative computational effort expended by validators (known under 
proof-of-work as ``miners''). In a proof-of-work consensus mechanism, 
miners effectively compete to be the first in time to solve the 
cryptographic puzzle that would allow them to be the only validator 
permitted to validate the block and thus be the only ones to receive 
the resulting block reward. Miners who are not first in time (and thus 
are not permitted to be validators) will have effectively expended 
significant labor and computing power for no gain. In a proof-of-stake 
mechanism, by contrast, a single validator is randomly selected to 
solve the cryptographic puzzle needed to validate a block, which it 
proposes to a committee of other validators, who vote for whether to 
include the block (or not). This proof-of-stake system reduces the 
computational work performed--and energy expended--to validate each 
block compared to proof-of-work.
    Unlike proof-of-work, in which miners expend computational 
resources to compete to validate transactions and are rewarded coins in 
proportion to the amount of computational resources expended, in proof-
of-stake, validators risk or ``stake'' coins to compete to be randomly 
selected to validate transactions and are rewarded coins in proportion 
to the amount of coins staked. Any malicious activity, such as mining 
multiple blocks, disagreeing with the eventual consensus or otherwise 
violating protocol rules, results in the forfeiture or ``slashing'' of 
a portion of the staked coins. Proof-of-stake is viewed as more energy 
efficient and scalable than proof-of-work.

[[Page 12830]]

    New SOL is created as a result of the staking of SOL by validators. 
Validators are required to stake SOL in order to be selected to perform 
validation activities and then once selected, as a reward, they earn 
newly created SOL. Validation activities include verifying 
transactions, storing data, and adding to the Solana blockchain.
    To operate a node on the Solana blockchain, a validator must 
acquire and lock SOL by sending a special transaction to the staking 
contract. This transaction associates the staked SOL with a withdrawal 
address (to unlock the SOL and receive any staking rewards) and a 
validator address (to designate the validator node performing 
transaction verification).
Staking by the Sponsor on Behalf of the Fund
    The Sponsor may, from time to time, stake a portion of the Fund's 
SOL on behalf of the Fund through one or more Staking Providers. The 
Sponsor expects to maintain sufficient liquidity in the Fund to satisfy 
redemptions. The SOL staked by the Sponsor on behalf of the Fund will 
consist exclusively of SOL owned by the Fund. The Sponsor's staking 
activities on behalf of the Fund will not constitute ``delegated 
staking'' and will not form part of a ``staking as a service'' 
offering.\24\
---------------------------------------------------------------------------

    \24\ See SEC v. Payward Ventures, Inc. and Payward Trading, 
Ltd., (Complaint filed February 9, 2023) available at https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-25.pdf. (In 
February 2023, the SEC charged and entered into a settlement order 
with Payward Ventures, Inc. and Payward Trading Ltd., both commonly 
known as Kraken, regarding Kraken's alleged failure to register the 
offer and sale of their crypto asset staking-as-a-service program, 
whereby investors transfer crypto assets to Kraken for staking in 
exchange for advertised annual investment returns of as much as 21 
percent. According to the SEC's complaint, since 2019, Kraken has 
offered and sold its crypto asset ``staking services'' to the 
general public, whereby Kraken pools certain crypto assets 
transferred by investors and stakes them on behalf of those 
investors. According to the SEC, investors would lock up--or 
``stake''--their crypto tokens with Kraken with the goal of being 
rewarded with new tokens when their staked crypto tokens become part 
of the process for validating data for the blockchain. The complaint 
alleged that Kraken touted that its staking investment program 
offered an easy-to-use platform and benefits that derived from 
Kraken's efforts on behalf of investors, including Kraken's 
strategies to obtain regular investment returns and payouts.) See 
also SEC v. Binance Holdings Limited, et al., (Complaint filed June 
5, 2023) available at https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf. (On June 5, 2023, the SEC filed 
a complaint charging Binance Holdings Ltd. and certain of its 
affiliates with a variety of securities law violations, including 
operating a ``staking-as-a-service'' program. The SEC's complaint 
alleges, among other things, that BAM Trading violated Sections 5(a) 
and 5(c) of the Securities Act by offering and selling its staking 
program without a registration statement, and that BAM Trading's 
Staking Program was promoted ``as a superior and much easier way to 
obtain staking rewards by, among other things, pooling the crypto 
assets of a large number of investors.'') See also SEC v. Coinbase, 
Inc. and Coinbase Global (Complaint filed June 6, 2023) available at 
https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-102.pdf. (On June 6, 2023, the SEC filed a complaint against 
Coinbase, Inc. and Coinbase Global in federal district court in the 
Southern District of New York, alleging, inter alia that Coinbase 
Inc. violated the Securities Act by failing to register with the SEC 
the offer and sale of its staking program. The SEC's complaint 
alleges that through the Coinbase staking program, investors' crypto 
assets are transferred to and pooled by Coinbase (segregated by 
asset), and subsequently ``staked'' (or committed) by Coinbase in 
exchange for rewards, which Coinbase distributes pro rata to 
investors after paying itself a 25-35% commission. The SEC also 
alleges that investors understand that Coinbase will expend efforts 
and leverage its experience and expertise to generate returns.)
---------------------------------------------------------------------------

    As further discussed below, the Sponsor believes its activities in 
relation to staking the SOL held by the Fund on behalf of the Fund are 
materially different from the delegated staking and ``staking as a 
service'' activities that the SEC has alleged to involve securities 
offerings in violation of Section 5 of the Securities Act of 1933 (the 
``Securities Act'').
    First, the Sponsor will only stake the SOL held by the Fund. The 
Sponsor will not seek to pool the SOL held by the Fund with SOL held by 
other entities (although such pooling may occur at the level of a 
Staking Provider). Second, the Sponsor will not advertise itself as 
providing any staking services generally, or promise any specific level 
of return from staking, or solicit delegated stakes from entities other 
than the Fund. Third, the Sponsor has stated that it is staking the 
Fund's SOL solely in order to maximize the Fund's revenue generation 
opportunities, and to generate returns for the Fund's shareholders. 
Fourth, the Sponsor will not bear or subsidize the risk of slashing on 
behalf of the Fund.
    Staking by the Sponsor will not result in the SOL held by the Fund 
moving out of the custody of the Solana Custodian. In order to stake 
the Fund's SOL, the Sponsor will engage in what is known as ``point-
and-click staking.'' Point-and-click staking involves an interface 
through which an entity can simply initiate staking by pointing and 
clicking on the SOL assets to be staked. This process does not involve 
the staked SOL leaving the wallet in which it is held and accordingly 
reduces the risk of loss of SOL through theft at the node while the 
asset is staked (although this process will not reduce the risk of loss 
of the SOL through slashing).
Creation and Redemption of Shares
    When the Fund sells or redeems its Shares, it will do so in 
Creation Baskets that are based on the quantity of SOL attributable to 
each Share (net of the accrued but unpaid Sponsor's fee and any accrued 
but unpaid expenses or liabilities). Creation Baskets are issued and 
redeemed in exchange for SOL and/or cash. According to the Registration 
Statement, on any business day, an authorized participant may place an 
order to create one or more Creation Baskets. Purchase orders for cash 
transaction Creation Baskets must be placed by 2:00 p.m. ET, or the 
close of regular trading on the Exchange, whichever is earlier. 
Purchase orders for in-kind transaction Creation Baskets must be placed 
by 4:00 p.m. ET, or the close of regular trading on the Exchange, 
whichever is earlier. The day on which an order is properly received is 
considered the purchase order date. For cash creations, the total 
deposit of cash required is based on the combined NAV of the number of 
Shares included in the Creation Baskets being created determined as of 
4:00 p.m. ET on the purchase order date. The Administrator determines 
the quantity of SOL associated with a Creation Basket for a given day 
by dividing the number of SOL held by the Fund as of the opening of 
business on that business day, adjusted for the amount of SOL 
constituting estimated accrued but unpaid fees and expenses of the Fund 
as of the opening of business on that business day, by the quotient of 
the number of Shares outstanding at the opening of business divided by 
the number of Shares in a Creation Basket.
    The procedures by which an authorized participant can redeem one or 
more Creation Baskets mirror the procedures for the creation of 
Creation Baskets.
    The Sponsor (including its delegates) will maintain ownership and 
control of the Fund's SOL in a manner consistent with good delivery 
requirements for spot commodity transactions.
Rule 14.11(e)(4)--Commodity-Based Trust Shares
    The Shares will be subject to BZX Rule 14.11(e)(4), which sets 
forth the initial and continued listing criteria applicable to 
Commodity-Based Trust Shares. The Exchange represents that, for initial 
and continued listing, the Fund must be in compliance with Rule 10A-3 
under the Act. A minimum of 100,000 Shares will be outstanding at the 
commencement of listing on the Exchange. The Exchange will obtain a 
representation that the NAV will be calculated daily and that the NAV 
and information about the assets of the Fund will be made available to 
all market participants at the same time. The

[[Page 12831]]

Exchange notes that, as defined in Rule 14.11(e)(4)(C)(i), the Shares 
will be: (a) issued by a trust that holds (1) a specified commodity 
\25\ deposited with the trust, or (2) a specified commodity and, in 
addition to such specified commodity, cash; (b) issued by such trust in 
a specified aggregate minimum number in return for a deposit of a 
quantity of the underlying commodity and/or cash; and (c) when 
aggregated in the same specified minimum number, may be redeemed at a 
holder's request by such trust which will deliver to the redeeming 
holder the quantity of the underlying commodity and/or cash.
---------------------------------------------------------------------------

    \25\ For purposes of Rule 14.11(e)(4), the term commodity takes 
on the definition of the term as provided in the CEA.
---------------------------------------------------------------------------

    Upon termination of the Fund, the Shares will be removed from 
listing. The Trustee is a trust company having substantial capital and 
surplus and the experience and facilities for handling corporate trust 
business, as required under Rule 14.11(e)(4)(E)(iv)(a) and that no 
change will be made to the trustee without prior notice to and approval 
of the Exchange. The Exchange also notes that, pursuant to Rule 
14.11(e)(4)(F), neither the Exchange nor any agent of the Exchange 
shall have any liability for damages, claims, losses or expenses caused 
by any errors, omissions or delays in calculating or disseminating any 
underlying commodity value, the current value of the underlying 
commodity required to be deposited to the Fund in connection with 
issuance of Commodity-Based Trust Shares; resulting from any negligent 
act or omission by the Exchange, or any agent of the Exchange, or any 
act, condition or cause beyond the reasonable control of the Exchange, 
its agent, including, but not limited to, an act of God; fire; flood; 
extraordinary weather conditions; war; insurrection; riot; strike; 
accident; action of government; communications or power failure; 
equipment or software malfunction; or any error, omission or delay in 
the reports of transactions in an underlying commodity. Finally, as 
required in Rule 14.11(e)(4)(G), the Exchange notes that any registered 
market maker (``Market Maker'') in the Shares must file with the 
Exchange in a manner prescribed by the Exchange and keep current a list 
identifying all accounts for trading in an underlying commodity, 
related commodity futures or options on commodity futures, or any other 
related commodity derivatives, which the registered Market Maker may 
have or over which it may exercise investment discretion. No registered 
Market Maker shall trade in an underlying commodity, related commodity 
futures or options on commodity futures, or any other related commodity 
derivatives, in an account in which a registered Market Maker, directly 
or indirectly, controls trading activities, or has a direct interest in 
the profits or losses thereof, which has not been reported to the 
Exchange as required by this Rule. In addition to the existing 
obligations under Exchange rules regarding the production of books and 
records (see, e.g., Rule 4.2), the registered Market Maker in 
Commodity-Based Trust Shares shall make available to the Exchange such 
books, records or other information pertaining to transactions by such 
entity or registered or non-registered employee affiliated with such 
entity for its or their own accounts for trading the underlying 
physical commodity, related commodity futures or options on commodity 
futures, or any other related commodity derivatives, as may be 
requested by the Exchange.
    The Exchange is able to obtain information regarding trading in the 
Shares and the underlying SOL or any other SOL derivative through 
members acting as registered Market Makers, in connection with their 
proprietary or customer trades.
    As a general matter, the Exchange has regulatory jurisdiction over 
its Members and their associated persons, which include any person or 
entity controlling a Member. To the extent the Exchange may be found to 
lack jurisdiction over a subsidiary or affiliate of a Member that does 
business only in commodities or futures contracts, the Exchange could 
obtain information regarding the activities of such subsidiary or 
affiliate through surveillance sharing agreements with regulatory 
organizations of which such subsidiary or affiliate is a member.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. The Exchange will halt trading in the Shares 
under the conditions specified in BZX Rule 11.18. Trading may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable. These may include: 
(1) the extent to which trading is not occurring in the SOL underlying 
the Shares; or (2) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present. Trading in the Shares also will be subject to Rule 
14.11(e)(4)(E)(ii), which sets forth circumstances under which trading 
in the Shares may be halted.
    If the IIV or the value of the Index is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
interruption to the dissemination of the IIV or the value of the Index 
occurs. If the interruption to the dissemination of the IIV or the 
value of the Index persists past the trading day in which it occurred, 
the Exchange will halt trading no later than the beginning of the 
trading day following the interruption.
    In addition, if the Exchange becomes aware that the NAV with 
respect to the Shares is not disseminated to all market participants at 
the same time, it will halt trading in the Shares until such time as 
the NAV is available to all market participants.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. BZX will allow 
trading in the Shares during all trading sessions on the Exchange. The 
Exchange has appropriate rules to facilitate transactions in the Shares 
during all trading sessions. As provided in BZX Rule 11.11(a) the 
minimum price variation for quoting and entry of orders in securities 
traded on the Exchange is $0.01 where the price is greater than $1.00 
per share or $0.0001 where the price is less than $1.00 per share. The 
Shares of the Fund will conform to the initial and continued listing 
criteria set forth in BZX Rule 14.11(e)(4).
Surveillance
    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the Shares on the Exchange 
during all trading sessions and to deter and detect violations of 
Exchange rules and the applicable federal securities laws. Trading of 
the Shares through the Exchange will be subject to the Exchange's 
surveillance procedures for derivative products, including Commodity-
Based Trust Shares. FINRA conducts certain cross-market surveillances 
on behalf of the Exchange pursuant to a regulatory services agreement. 
The Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares or any other SOL 
derivative with other markets and other entities that are members of 
the ISG, and the Exchange, or FINRA, on behalf of the Exchange, or 
both, may obtain trading information regarding trading in

[[Page 12832]]

the Shares or any other SOL derivative from such markets and other 
entities.\26\ The Exchange may obtain information regarding trading in 
the Shares or any other SOL derivative via ISG, from other exchanges 
who are members or affiliates of the ISG, or with which the Exchange 
has entered into a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \26\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    The Sponsor has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund or the Shares to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Exchange Act, the Exchange will surveil for 
compliance with the continued listing requirements. If the Fund or the 
Shares are not in compliance with the applicable listing requirements, 
the Exchange will commence delisting procedures under Exchange Rule 
14.12.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (i) the procedures for the 
creation and redemption of Creation Baskets (and that the Shares are 
not individually redeemable); (ii) BZX Rule 3.7, which imposes 
suitability obligations on Exchange members with respect to 
recommending transactions in the Shares to customers; (iii) how 
information regarding the IIV and the Fund's NAV are disseminated; (iv) 
the risks involved in trading the Shares outside of Regular Trading 
Hours \27\ when an updated IIV will not be calculated or publicly 
disseminated; (v) the requirement that members deliver a prospectus to 
investors purchasing newly issued Shares prior to or concurrently with 
the confirmation of a transaction; and (vi) trading information. The 
Information Circular will also reference the fact that there is no 
regulated source of last sale information regarding SOL, and that the 
Commission has no jurisdiction over the trading of SOL as a commodity.
---------------------------------------------------------------------------

    \27\ Regular Trading Hours is the time between 9:30 a.m. and 
4:00 p.m. Eastern Time.
---------------------------------------------------------------------------

    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Shares. Members purchasing the Shares for resale to 
investors will deliver a prospectus to such investors. The Information 
Circular will also discuss any exemptive, no-action and interpretive 
relief granted by the Commission from any rules under the Act.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \28\ in general and Section 6(b)(5) of the Act \29\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78f.
    \29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission has approved numerous series of Trust Issued 
Receipts,\30\ including Commodity-Based Trust Shares,\31\ to be listed 
on U.S. national securities exchanges. In order for any proposed rule 
change from an exchange to be approved, the Commission must determine 
that, among other things, the proposal is consistent with the 
requirements of Section 6(b)(5) of the Act, specifically including: (i) 
the requirement that a national securities exchange's rules are 
designed to prevent fraudulent and manipulative acts and practices; 
\32\ and (ii) the requirement that an exchange proposal be designed, in 
general, to protect investors and the public interest. The Exchange 
believes that this proposal is consistent with the requirements of 
Section 6(b)(5) of the Act and that this filing sufficiently 
demonstrates that potential policy concerns under the Act are 
sufficiently mitigated to the point that they are outweighed by 
quantifiable investor protection issues that would be resolved by 
approving this proposal.
---------------------------------------------------------------------------

    \30\ See Exchange Rule 14.11(f).
    \31\ Commodity-Based Trust Shares, as described in Exchange Rule 
14.11(e)(4), are a type of Trust Issued Receipt.
    \32\ Much like bitcoin and ether, the Exchange believes that SOL 
is resistant to price manipulation and that ``other means to prevent 
fraudulent and manipulative acts and practices'' exist to justify 
dispensing with the requisite surveillance sharing agreement. The 
geographically diverse and continuous nature of SOL trading render 
it difficult and prohibitively costly to manipulate the price of 
SOL. The fragmentation across platforms and the capital necessary to 
maintain a significant presence on each trading platform make 
manipulation of SOL prices through continuous trading activity 
challenging. To the extent that there are trading platforms engaged 
in or allowing wash trading or other activity intended to manipulate 
the price of SOL on other markets, such pricing does not normally 
impact prices on other trading platforms because participants will 
generally ignore markets with quotes that they deem non-executable. 
Moreover, the linkage between SOL markets and the presence of 
arbitrageurs in those markets means that the manipulation of the 
price of SOL on any single venue would require manipulation of the 
global SOL price in order to be effective. Arbitrageurs must have 
funds distributed across multiple trading platforms in order to take 
advantage of temporary price dislocations, thereby making it 
unlikely that there will be strong concentration of funds on any 
particular trading platforms or OTC platform. Further, the speed and 
relatively inexpensive nature of transactions on the Solana network 
allow arbitrageurs to quickly move capital between trading platforms 
where price dislocations may occur. As a result, the potential for 
manipulation on a trading platform would require overcoming the 
liquidity supply of such arbitrageurs who are effectively 
eliminating any cross-market pricing differences.
---------------------------------------------------------------------------

    More recently, the Commission has applied the Winklevoss Test while 
also recognizing that the ``regulated market of significant size'' 
standard is not the only means for satisfying Section 6(b)(5) of the 
Act. In the specifically providing that a listing exchange could 
demonstrate that ``other means to prevent fraudulent and manipulative 
acts and practices'' are sufficient to justify dispensing with the 
requisite surveillance-sharing agreement.\33\ While there is currently 
no futures market for SOL, in the Spot Bitcoin ETF Approval Order and 
Spot ETH ETF Approval Order the Commission determined that the CME 
bitcoin futures market and CME ether futures market, respectively, were 
not of ``significant size'' related to the spot market. Instead, the 
Commission found that sufficient ``other means'' of preventing fraud 
and manipulation had been demonstrated that justified dispensing with a 
surveillance-sharing agreement with a regulated market of significant 
size. The Exchange and Sponsor believe that this proposal provides for 
other means of preventing fraud and manipulation justify dispensing 
with a surveillance-sharing agreement with a regulated market of 
significant size.
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    \33\ See Winklevoss Order at 37580. The Commission has also 
specifically noted that it ``is not applying a `cannot be 
manipulated' standard; instead, the Commission is examining whether 
the proposal meets the requirements of the Exchange Act and, 
pursuant to its Rules of Practice, places the burden on the listing 
exchange to demonstrate the validity of its contentions and to 
establish that the requirements of the Exchange Act have been met.'' 
Id. at 37582.
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    The Exchange believes that the proposal is designed to protect 
investors and the public interest. Over the past several years, U.S. 
investor exposure to SOL has grown into the billions of dollars, mostly 
through transactions in

[[Page 12833]]

spot SOL on digital asset trading platforms. The Exchange believes that 
approving this proposal (and comparable proposals) provides the 
Commission with the opportunity to allow U.S. investors with access to 
SOL in a regulated and transparent exchange-traded vehicle that would 
act to limit risk to U.S. investors by: (i) reducing premium and 
discount volatility; (ii) reducing management fees through meaningful 
competition; and (iii) providing an alternative to custodying spot SOL.
    The policy concerns that the Exchange Act is designed to address 
are also otherwise mitigated by the fact that the size of the market 
for the underlying reference asset (approximately $150 billion fully 
diluted value). The geographically diverse and continuous nature of SOL 
trading makes it difficult and prohibitively costly to manipulate the 
price of SOL and, in many instances, the SOL market can be less 
susceptible to manipulation than the equity, fixed income, and 
commodity futures markets. There are a number of reasons this is the 
case, including that there is not inside information about revenue, 
earnings, corporate activities, or sources of supply; manipulation of 
the price on any single venue would require manipulation of the global 
SOL price in order to be effective; a substantial over-the-counter 
market provides liquidity and shock-absorbing capacity; SOL's 24/7/365 
nature provides constant arbitrage opportunities across all trading 
venues; and it is unlikely that any one actor could obtain a dominant 
market share.
    Further, SOL is arguably less susceptible to manipulation than 
other commodities that underlie ETPs; there may be inside information 
relating to the supply of the physical commodity such as the discovery 
of new sources of supply or significant disruptions at mining 
facilities that supply the commodity that simply are inapplicable as it 
relates to bitcoin. Further, the Exchange believes that the 
fragmentation across SOL trading platforms, the relatively slow speed 
of transactions, and the capital necessary to maintain a significant 
presence on each trading platform make manipulation of SOL prices 
through continuous trading activity unlikely. Moreover, the linkage 
between the SOL markets and the presence of arbitrageurs in those 
markets means that the manipulation of the price of SOL price on any 
single venue would require manipulation of the global SOL price in 
order to be effective. Arbitrageurs must have funds distributed across 
multiple SOL trading platforms in order to take advantage of temporary 
price dislocations, thereby making it unlikely that there will be 
strong concentration of funds on any particular SOL trading platform. 
As a result, the potential for manipulation on a particular SOL trading 
platform would require overcoming the liquidity supply of such 
arbitrageurs who are effectively eliminating any cross-market pricing 
differences. For all of these reasons, SOL is not particularly 
susceptible to manipulation, especially as compared to other approved 
ETP reference assets.
    The Exchange also believes this proposal is designed to remove 
impediments to and perfect the mechanism of a free and open market and, 
in general, to protect investors and the public interest because it 
would allow the Fund to stake its SOL on behalf of its investors. The 
Solana Network allows for staking of its native asset, SOL tokens, and 
permits validators who successfully stake SOL to receive rewards in the 
form of more SOL tokens. The net beneficiaries are not only validators, 
or those on behalf of whom they stake SOL, but also the Solana 
blockchain itself which grows and is progressively made more secure 
through the validation of transactions. Staking permits validators to 
contribute to the network by staking their tokens to secure the 
blockchain, facilitating the creation of blocks, and helping process 
transactions. Validators are compensated for fulfilling this important 
role through transaction fees and consensus rewards paid by the 
blockchain itself.
    Staking through mechanisms such as ``point-and-click'' staking can 
also permit the earning of rewards without certain additional risks to 
the tokens held by the Solana Custodian on behalf of the Fund. As such, 
not staking the Fund's SOL would amount to waiving the Fund's right to 
free additional SOL, an act analogous to an equity ETP refusing 
dividends from the companies it holds. Allowing the Fund to stake its 
SOL would benefit investors and help the Fund to better track the 
returns associated with holding SOL. This would improve the creation 
and redemption process for both authorized participants and the Fund, 
increase efficiency, and ultimately benefit the end investors in the 
Fund.
Commodity-Based Trust Shares
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed on the Exchange pursuant to the initial and 
continued listing criteria in Exchange Rule 14.11(e)(4). The Exchange 
believes that its surveillance procedures are adequate to properly 
monitor the trading of the Shares on the Exchange during all trading 
sessions and to deter and detect violations of Exchange rules and the 
applicable federal securities laws. Trading of the Shares through the 
Exchange will be subject to the Exchange's surveillance procedures for 
derivative products, including Commodity-Based Trust Shares. The 
Sponsor has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund or the Shares to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Exchange Act, the Exchange will surveil for 
compliance with the continued listing requirements. If the Fund or the 
Shares are not in compliance with the applicable listing requirements, 
the Exchange will commence delisting procedures under Exchange Rule 
14.12. The Exchange may obtain information regarding trading in the 
Shares and listed SOL derivatives via the ISG, from other exchanges who 
are members or affiliates of the ISG, or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement.
Availability of Information
    In addition to the price transparency of the Index, the Fund will 
provide information regarding the Fund's SOL holdings as well as 
additional data regarding the Fund.
    The website for the Fund, which will be publicly accessible at no 
charge, will contain the following information: (a) the current NAV per 
Share daily and the prior business day's NAV per Share and the reported 
BZX Official Closing Price; \34\ (b) the BZX Official Closing Price in 
relation to the NAV per Share as of the time the NAV is calculated and 
a calculation of the premium or discount of such price against such NAV 
per Share; (c) data in chart form displaying the frequency distribution 
of discounts and premiums of the BZX Official Closing Price against the 
NAV per Share, within appropriate ranges for each of the four previous 
calendar quarters (or for the life of the Fund, if shorter); (d) the 
prospectus; and (e) other applicable quantitative information. The 
aforementioned information will be published as of the close of 
business and be available on the Fund's website at https://
www.franklintempleton.com/investments/options/exchange-traded-

[[Page 12834]]

funds, or any successor thereto. The NAV for the Fund will be 
calculated by the Administrator once a day and will be disseminated 
daily to all market participants at the same time. Quotation and last-
sale information regarding the Shares will be disseminated through the 
facilities of the CTA. The Fund will also disseminate its holdings on a 
daily basis on its website.
---------------------------------------------------------------------------

    \34\ As defined in Rule 11.23(a)(3), the term ``BZX Official 
Closing Price'' shall mean the price disseminated to the 
consolidated tape as the market center closing trade.
---------------------------------------------------------------------------

    The IIV will be calculated by using the prior day's closing NAV per 
Share as a base and updating that value during Regular Trading Hours to 
reflect changes in the value of the Fund's SOL holdings during the 
trading day, which is based on the CME CF Solana-Dollar Real Time 
Index. The IIV disseminated during Regular Trading Hours should not be 
viewed as an actual real-time update of the NAV, which will be 
calculated only once at the end of each trading day. The IIV will be 
widely disseminated on a per Share basis every 15 seconds during the 
Exchange's Regular Trading Hours through the facilities of the CTA and 
CQS high speed lines. In addition, the IIV will be available through 
on-line information services such as Bloomberg and Reuters.
    The price of SOL will be made available by one or more major market 
data vendors, updated at least every 15 seconds during Regular Trading 
Hours.
    As noted above, the Index is calculated daily and aggregates the 
notional value of SOL trading activity across major spot SOL trading 
platforms. Index data, the Index value, and the description of the 
Index are based on information made publicly available by the Index 
Provider on its website at https://www.cfbenchmarks.com.
    Quotation and last sale information for SOL is widely disseminated 
through a variety of major market data vendors, including Bloomberg and 
Reuters. Information relating to trading, including price and volume 
information, in SOL is available from major market data vendors and 
from the trading platforms on which SOL are traded. Depth of book 
information is also available from SOL trading platforms. The normal 
trading hours for SOL trading platforms are 24 hours per day, 365 days 
per year.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's BZX Official Closing Price and trading 
volume information for the Shares will be published daily in the 
financial section of newspapers. Quotation and last-sale information 
regarding the Shares will be disseminated through the facilities of the 
CTA.
    In sum, the Exchange believes that this proposal is consistent with 
the requirements of Section 6(b)(5) of the Act, that on the whole the 
manipulation concerns previously articulated by the Commission are 
sufficiently mitigated to the point that they are outweighed by 
investor protection issues that would be resolved by approving this 
proposal.
    The Exchange believes that the proposal is, in particular, designed 
to protect investors and the public interest. The investor protection 
issues for U.S. investors has grown significantly over the last several 
years, through premium/discount volatility and management fees for OTC 
SOL Funds. As discussed throughout, this growth investor protection 
concerns need to be re-evaluated and rebalanced with the prevention of 
fraudulent and manipulative acts and practices concerns that previous 
disapproval orders have relied upon.
    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change, rather will facilitate the listing and trading of 
an additional exchange-traded product that will enhance competition 
among both market participants and listing venues, to the benefit of 
investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    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:
    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 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-CboeBZX-2025-039 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-CboeBZX-2025-039. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CboeBZX-2025-039 and should 
be submitted on or before April 9, 2025.


[[Page 12835]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-04505 Filed 3-18-25; 8:45 am]
BILLING CODE 8011-01-P