Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the Franklin XRP Fund Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, 12881-12890 [2025-04509]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 90, Number 52 (Wednesday, March 19, 2025)]
[Notices]
[Pages 12881-12890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-04509]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102656; File No. SR-CboeBZX-2025-040]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To List and Trade Shares of the 
Franklin XRP Fund 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 13, 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

[[Page 12882]]

rule change to list and trade shares of the Franklin XRP ETF (the 
``Fund''), a series of the Franklin XRP 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 28, 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 
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 March 11, 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 (333-285706). 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 XRP) (``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.

[[Page 12883]]

Background
    XRP is a digital asset that is created and transmitted through the 
operations of the XRP Ledger, a decentralized ledger upon which XRP 
transactions are processed and settled. XRP can be used to pay for 
goods and services, or it can be converted to fiat currencies, such as 
the U.S. dollar. The XRP Ledger is based on a shared public ledger 
similar to the Bitcoin network. However, the XRP Ledger differentiates 
itself from other digital asset networks in that its stated primary 
function is transactional utility, not store of value. The XRP Ledger 
is designed to be a global real-time payment and settlement system. As 
a result, the XRP Ledger and XRP aim to improve the speed at which 
parties on the network may transfer value while also reducing the fees 
and delays associated with the traditional methods of interbank 
payments.
    Unlike a centralized system, no single entity controls the XRP 
Ledger. Instead, a network of independent nodes validates transactions 
pursuant to a consensus-based algorithm. It is this mechanism, as 
opposed to the proof-of-work mechanism utilized by the Bitcoin 
blockchain, that allows the XRP Ledger to be fast, energy-efficient and 
scalable, and therefore suitable for its most prominent use case, the 
facilitation of cross-border financial transactions. Unlike proof-of-
work systems, which require massive computational power to secure the 
network, the consensus-based algorithm utilized by the XRP Ledger is 
extremely lightweight in terms of energy usage, as it relies on trusted 
validators rather than mining. The XRP Ledger can handle up to 1,500 
transactions per second, far more than the Bitcoin or Ethereum 
blockchain. This makes the XRP Ledger suitable for high-volume use 
cases, such as cross-border payments. Lastly, because validators do not 
need to spend resources on mining, transaction fees are extremely low 
(typically a fraction of a cent per transaction).
    Transactions are validated on the XRP Ledger by a network of 
independent validator nodes. These nodes do not mine new blocks but 
participate in a consensus process to ensure that transactions are 
valid and correctly ordered on the ledger. Any node can be a validator, 
but for practical purposes, the XRP Ledger depends on a list of trusted 
validators known as the Unique Node List or ``UNL.'' Validators are 
entities (which can be individuals, institutions or other 
organizations) that run nodes to participate in the consensus process. 
These validators ensure the integrity and accuracy of the ledger. Each 
node in the network maintains a Unique Node List--a list of other 
validators that the node trusts to reliably validate transactions. The 
XRP Ledger's decentralized architecture means that different nodes may 
maintain different UNLs, but there needs to be some overlap in the UNLs 
for consensus to work effectively.
    Unlike other digital assets such as bitcoin or ether, XRP was not 
and is not mined gradually over time. Instead, all 100 billion XRP 
tokens were created at the time of the XRP Ledger's launch in 2012. 
This means that every XRP token that exists today was generated from 
the outset, without the need for a mining process. Of the 100 billion 
XRP generated by the XRP Ledger's code, the founders of Ripple Labs 
Inc. (``Ripple Labs'') retained 20 billion XRP and the rest, nearly 80 
billion XRP, was provided to Ripple Labs.
    As noted above, this proposal is to list and trade shares of the 
Fund that would hold spot XRP. Neither the Trust, Fund, nor the Sponsor 
or any of their affiliates are affiliates of Ripple Labs or any of its 
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 XRP 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 XRP 
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 XRP trading render 
it difficult and prohibitively costly to manipulate the price of 
XRP. The fragmentation across platforms and the capital necessary to 
maintain a significant presence on each trading platform make 
manipulation of XRP 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 XRP 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 XRP markets and the presence of 
arbitrageurs in those markets means that the manipulation of the 
price of XRP on any single venue would require manipulation of the 
global XRP 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 XRP Ledger 
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 12884]]

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 XRP, 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 XRP, through 
OTC XRP Funds and digital asset trading platforms, has grown into 
billions of dollars with a fully diluted market cap of greater than 
$300 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 XRP 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 XRP.
    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 $300+ billion fully 
diluted value) and the nature of the XRP ecosystem reduces its 
susceptibility to manipulation. The geographically diverse and 
continuous nature of XRP trading makes it difficult and prohibitively 
costly to manipulate the price of XRP and, in many instances, the XRP 
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 XRP price in order to be effective; a 
substantial over-the-counter market provides liquidity and shock-
absorbing capacity; XRP'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, XRP 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 XRP. Further, the Exchange 
believes that the fragmentation across XRP trading platforms and 
increased adoption of XRP, as displayed through increased user 
engagement and trading volumes on the XRP Ledger, make manipulation of 
XRP prices through continuous trading activity more difficult. 
Moreover, the linkage between the XRP markets and the presence of 
arbitrageurs in those markets means that the manipulation of the price 
of XRP price on any single venue would require manipulation of the 
global XRP price in order to be effective. Arbitrageurs must have funds 
distributed across multiple XRP 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 XRP 
trading platform. As a result, the potential for manipulation on a 
particular XRP 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, XRP is not 
particularly susceptible to manipulation, especially as compared to 
other approved ETP reference assets.
Franklin XRP 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 ``XRP Custodian'') will be responsible for custody of 
the Fund's XRP.
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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 XRP, 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 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 XRP 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 XRP 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 XRP represented by a Creation Basket.\18\ For in-kind 
creations, authorized participants or their designee will deliver, or 
facilitate the delivery of, XRP to the Fund's account with the XRP 
Custodian in exchange for Shares.\19\ Authorized participants may then 
offer Shares to the public at prices that

[[Page 12885]]

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 XRP 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 XRP 
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 XRP before payment of the Fund's 
expenses and liabilities. In seeking to achieve its investment 
objective, the Fund will hold only XRP, cash, and cash equivalents. The 
Fund will value its Shares daily as of 4:00 p.m. ET based on the value 
of the XRP held by the Fund as reflected by the Index, as described 
below. All of the Fund's XRP will be held by the XRP Custodian.
The Index
    As described in the Registration Statement, the Fund will value its 
Shares daily based on the value of XRP as reflected by the CME CF XRP-
Dollar Reference Rate--New York Variant (the ``Index''). The Index is 
calculated daily and aggregates the notional value of XRP trading 
activity across major spot XRP 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 XRP (USD/XRP), calculated as of 4:00 p.m. ET. The Index 
aggregates the trade flow of several XRP 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 XRP at 4:00 p.m. ET. Specifically, the Index is 
calculated based on the ``Relevant Transactions'' (as defined below) of 
all of its constituent XRP trading platforms, which are currently 
Bitstamp, Coinbase, Kraken, and LMAX Digital (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 XRP/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 XRP 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 XRP 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 XRP 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 XRP 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 XRP 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; \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

[[Page 12886]]

Trading Hours \22\ to reflect changes in the value of the Fund's XRP 
holdings during the trading day, which is based on the CME CF XRP-
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 XRP 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 XRP trading activity across major spot XRP 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 XRP 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 XRP is available from major market data vendors and 
from the trading platforms on which XRP are traded. Depth of book 
information is also available from XRP trading platforms. The normal 
trading hours for XRP 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 XRP Custodian
    The XRP 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 XRP 
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 XRP 
Custodian will keep the private keys associated with the Fund's XRP in 
``cold storage'' \23\ (the ``Cold Vault Balance''). The hardware, 
software, systems, and procedures of the XRP 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 XRP.
---------------------------------------------------------------------------

    \23\ The term ``cold storage'' refers to a safeguarding method 
by which the private keys corresponding to XRP 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.
---------------------------------------------------------------------------

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 XRP 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 XRP 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 XRP associated with a Creation Basket for a given day 
by dividing the number of XRP held by the Fund as of the opening of 
business on that business day, adjusted for the amount of XRP 
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 XRP 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 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 \24\ 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.
---------------------------------------------------------------------------

    \24\ 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

[[Page 12887]]

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 XRP or any other XRP 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 XRP 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 XRP 
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 the Shares or 
any other XRP derivative from such markets and other entities.\25\ The 
Exchange may obtain information regarding trading in the Shares or any 
other XRP 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.
---------------------------------------------------------------------------

    \25\ 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.

[[Page 12888]]

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 \26\ 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 XRP, and that the 
Commission has no jurisdiction over the trading of XRP as a commodity.
---------------------------------------------------------------------------

    \26\ 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 \27\ in general and Section 6(b)(5) of the Act \28\ 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.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78f.
    \28\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission has approved numerous series of Trust Issued 
Receipts,\29\ including Commodity-Based Trust Shares,\30\ 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; 
\31\ 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.
---------------------------------------------------------------------------

    \29\ See Exchange Rule 14.11(f).
    \30\ Commodity-Based Trust Shares, as described in Exchange Rule 
14.11(e)(4), are a type of Trust Issued Receipt.
    \31\ Much like bitcoin and ether, the Exchange believes that XRP 
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 XRP trading render 
it difficult and prohibitively costly to manipulate the price of 
XRP. The fragmentation across platforms and the capital necessary to 
maintain a significant presence on each trading platform make 
manipulation of XRP 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 XRP 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 XRP markets and the presence of 
arbitrageurs in those markets means that the manipulation of the 
price of XRP on any single venue would require manipulation of the 
global XRP 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 XRP Ledger 
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.\32\ While there is currently 
no futures market for XRP, 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.
---------------------------------------------------------------------------

    \32\ 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.
---------------------------------------------------------------------------

    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 XRP, through OTC XRP Funds and digital asset 
trading platforms, has grown into billions of dollars with a fully 
diluted market cap of greater than $300 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 
XRP 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 XRP.
    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 $300+ billion fully 
diluted value) and the nature of the XRP ecosystem reduces its 
susceptibility to manipulation. The geographically diverse and 
continuous nature of XRP trading makes it difficult and prohibitively 
costly to manipulate the price of XRP and, in many instances, the XRP 
market can be less susceptible to manipulation than the equity, fixed 
income, and commodity futures

[[Page 12889]]

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 XRP price in 
order to be effective; a substantial over-the-counter market provides 
liquidity and shock-absorbing capacity; XRP'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, XRP 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 XRP. Further, the Exchange 
believes that the fragmentation across XRP trading platforms and 
increased adoption of XRP, as displayed through increased user 
engagement and trading volumes, and the XRP Ledger make manipulation of 
XRP prices through continuous trading activity more difficult. 
Moreover, the linkage between the XRP markets and the presence of 
arbitrageurs in those markets means that the manipulation of the price 
of XRP price on any single venue would require manipulation of the 
global XRP price in order to be effective. Arbitrageurs must have funds 
distributed across multiple XRP 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 XRP 
trading platform. As a result, the potential for manipulation on a 
particular XRP 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, XRP is not 
particularly susceptible to manipulation, especially as compared to 
other approved ETP reference assets.
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 XRP 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 XRP 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; \33\ (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 
CTA. The Fund will also disseminate its holdings on a daily basis on 
its website.
---------------------------------------------------------------------------

    \33\ 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 XRP holdings during the 
trading day, which is based on the CME CF XRP-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 XRP 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 XRP trading activity across major spot XRP 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 XRP 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 XRP is available from major market data vendors and 
from the trading platforms on which XRP are traded. Depth of book 
information is also available from XRP trading platforms. The normal 
trading hours for XRP 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.

[[Page 12890]]

    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 
XRP 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-2025-040 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-2025-040. 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-2025-040 and should 
be submitted on or before April 9, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2025-04509 Filed 3-18-25; 8:45 am]
BILLING CODE 8011-01-P