Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To List and Trade Shares of the 21Shares Polkadot Trust Under Nasdaq Rule 5711(d), 13805-13813 [2025-05045]

Download as PDF Federal Register / Vol. 90, No. 57 / Wednesday, March 26, 2025 / Notices 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–CboeEDGA–2025–006 and should be submitted on or before April 16, 2025. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Sherry R. Haywood, Assistant Secretary. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–102704; File No. SR– NASDAQ–2025–029] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To List and Trade Shares of the 21Shares Polkadot Trust Under Nasdaq Rule 5711(d) khammond on DSK9W7S144PROD with NOTICES March 20, 2025. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 17, 2025, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to 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. 1. Purpose The Exchange proposes to list and trade the Shares under Nasdaq Rule 5711(d), which governs the listing and trading of Commodity-Based Trust Shares on the Exchange.3 21Shares US LLC (the ‘‘Sponsor’’) is the sponsor of the Trust. Any statements or representations included in this proposal regarding: (a) the description of the reference assets or trust holdings; (b) limitations on the reference assets or trust holdings; (c) dissemination and availability of the reference asset or intraday indicative value; or (d) the applicability of Nasdaq listing rules specified in this proposal shall constitute continued listing standards for the Shares listed on the Exchange. Overview of the Trust and the Shares According to the Registration Statement, the Trust is a Delaware 3 The Commission approved Nasdaq Rule 5711 in Securities Exchange Act Release No. 66648 (March 23, 2012), 77 FR 19428 (March 30, 2012) (SR– NASDAQ–2012–013). 29 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 16:57 Mar 25, 2025 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of 21Shares Polkadot Trust (the ‘‘Trust’’) under Nasdaq Rule 5711(d) (‘‘Commodity-Based Trust Shares’’). The shares of the Trust are referred to herein as the ‘‘Shares.’’ The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/nasdaq/rulefilings, at the principal office of the Exchange, and at the Commission’s Public Reference Room. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change [FR Doc. 2025–05042 Filed 3–25–25; 8:45 am] VerDate Sep<11>2014 solicit comments on the proposed rule change from interested persons. Jkt 265001 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 13805 statutory trust, formed on October 29, 2024.4 The Trust will operate pursuant to a trust agreement (the ‘‘Trust Agreement’’), as amended and/or restated from time to time. CSC Delaware Trust Company, a Delaware trust company, is the trustee of the Trust (the ‘‘Trustee’’). The Trust is managed and controlled by 21Shares US LLC (the ‘‘Sponsor’’). A third party to be appointed by the Sponsor and/or the Trustee will be the administrator of the Trust (the ‘‘Administrator’’). The Trust is a passive investment vehicle that does not seek to generate returns beyond tracking the price of DOT tokens, the native token of the Polkadot Network (as defined below) (‘‘DOT’’). This means the Sponsor does not speculatively sell DOT at times when its price is high or speculatively acquire DOT at low prices in the expectation of future price increases. It also means the Trust will not utilize leverage, derivatives or any similar arrangements in seeking to meet its investment objective. The Trust’s investment objective is to seek to track the performance of DOT, as measured by the performance of the CME CF Polkadot—Dollar Reference Rate—New York Variant (‘‘Pricing Benchmark’’), adjusted for the Trust’s expenses and other liabilities. The Pricing Benchmark is calculated by CF Benchmarks Ltd. (the ‘‘Benchmark Provider’’) based on an aggregation of executed trade flow of major DOT trading platforms (‘‘Constituent Exchanges’’). The Pricing Benchmark is designed to reflect the performance of DOT in U.S. dollars. In seeking to achieve its investment objective, the Trust will hold DOT and will value its Shares daily based on the Pricing Benchmark. Coinbase Custody Trust Company, LLC (the ‘‘DOT Custodian’’) is the DOT custodian for the Trust and will hold all of the Trust’s DOT on the Trust’s behalf. When the Trust sells or redeems its Shares, DOT will be transferred into or out of the Trust, as applicable, in exchange for blocks of 10,000 Shares (a ‘‘Basket’’) that are based on the quantity of DOT attributable to each Share of the Trust (net of accrued but unpaid Sponsor Fees (defined below) and any accrued but unpaid extraordinary expenses or liabilities). 4 See Registration Statement on Form S–1, dated January 31, 2025 filed with the Commission on behalf of the Trust. The descriptions of the Trust, the Shares, the Pricing Benchmark (as defined below), and Trust’s holdings contained herein are based, in part, on information in the Registration Statement. The Registration Statement in not yet effective and the Shares will not trade on the Exchange until such time that the Registration Statement is effective. E:\FR\FM\26MRN1.SGM 26MRN1 khammond on DSK9W7S144PROD with NOTICES 13806 Federal Register / Vol. 90, No. 57 / Wednesday, March 26, 2025 / Notices Financial firms that are authorized to purchase Shares from or redeem Shares to the Trust (known as ‘‘Authorized Participants’’) purchase Shares by depositing cash in the Trust’s account with the Cash Custodian (as defined below). This will cause the Sponsor, on behalf of the Trust, to automatically instruct a designated third party, who is not an Authorized Participant but who may be an affiliate of an Authorized Participant and with whom the Sponsor has entered into an agreement on behalf of the Trust (a ‘‘DOT Counterparty’’), to (i) purchase the amount of DOT equivalent in value to the cash deposit amount associated with the order and (ii) deposit the resulting DOT amount in the Trust’s account with the DOT Custodian, resulting in the Transfer Agent crediting the applicable amount of Shares to the Authorized Participant. When such an Authorized Participant redeems its Shares, the Sponsor, on behalf of the Trust will direct the DOT Custodian to transfer DOT to a DOT Counterparty, who will sell the DOT to be executed, in the Sponsor’s reasonable efforts, at the Pricing Benchmark price used by the Trust to calculate NAV, taking into account any spread, commissions, or other trading costs and deposit the cash proceeds of such sale in the Trust’s account with the Cash Custodian for settlement with the Authorized Participant. Any slippage incurred (including, but not limited to, any trading fees, spreads, or commissions), on a cash equivalent basis, will be the responsibility of the Authorized Participant and not of the Trust or Sponsor. Authorized Participants will deliver only cash to create shares and will receive only cash when redeeming Shares. Further, Authorized Participants will not directly or indirectly purchase, hold, deliver, or receive DOT as part of the creation or redemption process or otherwise direct the Trust or a DOT Counterparty with respect to purchasing, holding, delivering, or receiving DOT as part of the creation or redemption process. The DOT Counterparty is a designated third party with whom the Sponsor has entered into an agreement on behalf of the Trust that will deliver, receive or convert to U.S. dollars the DOT related to the Authorized Participant’s creation or redemption order. The Sponsor performs extensive due diligence as part of its DOT Counterparty selection and onboarding process. As part of this process, the Sponsor assesses DOT Counterparty candidates against various criteria, including those relating to candidates’ (1) financials, (2) reputation, (3) settlement history with the Sponsor, VerDate Sep<11>2014 16:57 Mar 25, 2025 Jkt 265001 and (4) their regulatory oversight. The Trust will create Shares by receiving DOT from a DOT Counterparty that is not the Authorized Participant, and the Trust—not the Authorized Participant— is responsible for selecting the DOT Counterparty to deliver the DOT. Further, the DOT Counterparty will not be acting as an agent of the Authorized Participant with respect to the delivery of the DOT to the Trust or acting at the direction of the Authorized Participant with respect to the delivery of the DOT to the Trust. The DOT Counterparty is not contractually obligated to participate in cash orders for creations or redemptions. The DOT Counterparty reserves the right to refuse or to cancel any pending creation or redemption order at any time before the Sponsor places a purchase order. According to the Registration Statement, the Trust is not an investment company registered under the Investment Company Act of 1940, as amended (the ‘‘1940 Act’’), and is not subject to regulation under the 1940 Act. The Trust is not a commodity pool for purposes of the Commodity Exchange Act of 1936, as amended (the ‘‘CEA’’), and the Sponsor is not subject to regulation by the Commodity Futures Trading Commission (the ‘‘CFTC’’) as a commodity pool operator or a commodity trading advisor. Neither the Trust, nor the Sponsor, nor the DOT Custodian, nor any other person associated with the Trust will, directly or indirectly, engage in action where any portion of the Trust’s DOT is used to earn additional DOT or generate rewards or other income. The Trust will not acquire and will disclaim any incidental right (‘‘IR’’) or IR asset received, for example as a result of forks or airdrops, and such assets will not be taken into account for purposes of determining the Trust’s net asset value (‘‘NAV’’). Investment Objective According to the Registration Statement, the Trust’s investment objective is to seek to track the performance of DOT, as measured by the Pricing Benchmark, adjusted for the Trust’s expenses and other liabilities. In seeking to achieve its investment objective, the Trust will hold DOT and will value its Shares daily as of 4:00 p.m. ET based on the Pricing Benchmark. The Trust does not provide investors with direct exposure to DOT, and an investment in the Trust is not a direct investment in DOT. Rather, the Trust provides investors with the opportunity to indirectly access the market for DOT through a traditional brokerage account PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 without the potential barriers to entry or risks involved with holding or transferring DOT directly or acquiring it from a DOT spot market. DOT and the Polkadot Network According to the Registration Statement, DOT is a digital asset that is created and transmitted through the operations of the ‘‘Polkadot Network,’’ an online, decentralized, distributed computing platform that operates on a peer-to-peer basis. The Polkadot Network uses a heterogeneous multichain to ensure the secure transfer and authenticity of each DOT and hosts the public transaction ledger. This central chain is known as the Relay Chain (the ‘‘Relay Chain’’) on which all DOT is recorded. The Relay Chain is a decentralized digital file, or ledger, that contains all the records of DOT and is stored in multiple copies globally on the computers of users of the Polkadot Network. DOT is mainly used for the functional mechanisms of the Polkadot Network, including governance of updates, staking for network operations, as the gas token of the network and bonding for Parachains to secure a spot on the Relay Chain (see Technology and Operation, below). Unlike bitcoin, there is no maximum amount of DOT that may be outstanding. DOT is divisible to up to ten decimal places into units named ‘‘Plancks.’’ DOT is ‘‘stored’’ on a blockchain and is linked to a unique digital address, or wallet, that is associated with a public key and a private key. The public key is used to generate the address that is available to other users of the Polkadot Network. The address serves as the location to which DOT can be transferred and from which DOT can be sent. The private key authorizes the transfer or ‘‘spending’’ of DOT from its associated public address. Ownership of DOT is established by recording on the Relay Chain the unique address and the amount of DOT held. The wallet thus holds the cryptographic keys associated with DOT, rather than the DOT itself. DOT cannot be transferred by a holder unless that holder provides the private key. The Relay Chain is the decentralized, publicly distributed ledger that holds DOT and the mechanism that allows people to exchange DOT. All transactions on the Polkadot Network are recorded on the Relay Chain. Like other blockchains, the Polkadot Relay Chain can be thought of as a collective chain of digital signatures that reflect transaction history. The Relay Chain is downloaded and stored, in whole or in part, on the computers of each user of the Polkadot Network. The Relay Chain E:\FR\FM\26MRN1.SGM 26MRN1 khammond on DSK9W7S144PROD with NOTICES Federal Register / Vol. 90, No. 57 / Wednesday, March 26, 2025 / Notices is public and accessible to all, and includes a record of every DOT, every transaction in DOT in order and every public address on the Polkadot Network. Every computer on the Polkadot Network is a ‘‘node’’, and collectively all of the nodes ensure that each new transaction in DOT adheres to certain rules before it is added to the Relay Chain. Transaction data is permanently recorded on the Relay Chain in data files called ‘‘blocks,’’ which reflect transactions that have been recorded and authenticated by Polkadot Network participants. Each newly recorded block of transactions refers back to and ‘‘connects’’ with the immediately preceding recorded block in the ledger. Each new block records outstanding DOT transactions, and outstanding transactions are settled and validated through such recording. Although there are size limits to each block, the Relay Chain is designed to represent a complete, transparent, secure and unbroken history of all the transactions that have occurred on the Polkadot Network. The Polkadot Network and associated software programs can view the Relay Chain to determine the exact balance, if any, of DOT associated with any public address listed on the Relay Chain. DOT can be transferred in direct peerto-peer transactions through the direct sending of DOT over the Polkadot Network from one Polkadot Network address to another. DOT can be used as a means to conduct cross-border payments and to pay other users of the Polkadot Network for goods and services under what resembles a barter system. Consumers can also pay merchants and other commercial businesses for goods or services through direct peer-to-peer transactions on the Polkadot Network or through third-party service providers. DOT spot markets typically permit investors to open accounts with the market and then purchase and sell DOT via websites or through mobile applications. Prices for trades on DOT spot markets are typically reported publicly. An investor opening a trading account on a digital asset trading platform must deposit an accepted government-issued currency into its account with the trading platform, or a previously acquired digital asset, before they can purchase or sell assets on the trading platform. The process of establishing an account with a digital asset trading platform and trading DOT is different from, and should not be confused with, the process of users sending DOT from one DOT address to another DOT address on the Polkadot VerDate Sep<11>2014 16:57 Mar 25, 2025 Jkt 265001 Network. This latter process is an activity that occurs on the Polkadot Network, while the former is an activity that occurs entirely within the order book operated by the digital asset trading platform. The digital asset trading platform typically records the investor’s ownership of DOT in its internal books and records, rather than on the Polkadot Network. The digital asset trading platform ordinarily does not transfer DOT to the investor on the Polkadot Network unless the investor makes a request to the exchange to withdraw the DOT in its platform trading account to an off-platform DOT wallet. Outside of the spot markets, DOT can be traded OTC. The OTC market is largely institutional in nature, and OTC market participants generally consist of institutional entities, such as firms that offer two-sided liquidity for DOT, investment managers, proprietary trading firms, high-net-worth individuals that trade DOT on a proprietary basis, entities with sizeable DOT holdings, and family offices. The OTC market provides a relatively flexible market in terms of quotes, price, quantity, and other factors, although it tends to involve large blocks of DOT. The OTC market has no formal structure and no open-outcry meeting place. Parties engaging in OTC transactions will agree upon a price—often via phone or email—and then one of the two parties will then initiate the transaction. For example, a seller of DOT could initiate the transaction by sending the DOT to the buyer’s DOT address. The buyer would then wire U.S. dollars to the seller’s bank account. OTC trades are sometimes hedged and eventually settled with concomitant trades on digital asset trading platforms. Pricing Benchmark According to the Registration Statement, the net assets of the Trust and its Shares are valued on a daily basis with reference to the Pricing Benchmark, a standardized reference rate published by the Benchmark Provider, which is designed to reflect the performance of DOT in U.S. dollars. The Pricing Benchmark is calculated daily and aggregates the notional value of DOT trading activity across major DOT spot exchanges. The Benchmark Provider is the administrator of the Pricing Benchmark. The Trust also uses the Pricing Benchmark to calculate its NAV, which is the aggregate U.S. Dollar value of DOT in the Trust, based on the Pricing Benchmark, less its liabilities and expenses. ‘‘NAV per Share’’ is calculated by dividing NAV by the number of Shares currently outstanding. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 13807 The Pricing Benchmark was created to facilitate financial products based on DOT and provides a USD-denominated reference rate for the spot price of DOT. The Pricing Benchmark leverages realtime prices from multiple Constituent Exchanges to provide a representative spot price. Each constituent exchange is weighted proportionally to its trailing 24-hour liquidity with adjustments for price variance and inactivity. The Sponsor believes that the use of the Pricing Benchmark is reflective of a reasonable valuation of the average spot price of DOT 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 Pricing Benchmark thereby seeks to ensure that transactions in DOT conducted at outlying prices do not have an undue effect on the value of a specific partition, large trades or clusters of trades transacted over a short period of time will not have an undue influence on the benchmark level, and the effect of large trades at prices that deviate from the prevailing price are mitigated from having an undue influence on the benchmark level. In addition, the Sponsor notes that an oversight function is implemented by the Benchmark Provider in seeking to ensure that the Pricing Benchmark is administered through codified policies for Pricing Benchmark integrity, which include a conflicts of interest policy, a control framework, an accountability framework, and an input data policy. It is also subject to the UK Benchmark Regulation (‘‘BMR’’), compliance with which regulations has been subject to a Limited Assurance Audit under the ISAE 3000 standards of September 12, 2022. The Sponsor has selected the Pricing Benchmark for its quality and rigor as well as its broad, well-balanced universe, which the Sponsor believes best reflects the market price of DOT. As of the date of this filing, the Constituent Exchanges included in the Pricing Benchmark that is utilized by the Trust are Kraken and Coinbase. As of March 2, 2025, Coinbase makes up 80% of the volume of the Pricing Benchmark, with Kraken holding the remaining 20%. Coinbase provides a platform for people to engage with digital assets through trading, staking, and other activities. As of December 31, 2024, Coinbase had an annual trading E:\FR\FM\26MRN1.SGM 26MRN1 13808 Federal Register / Vol. 90, No. 57 / Wednesday, March 26, 2025 / Notices volume of $1,162,000,000,000. Kraken also provides a platform for people to engage with digital assets with accessible trading and investment options. As of December 31, 2024, Kraken had an annual trading volume of $665,000,000,000. Net Asset Value The Administrator daily calculates the Trust’s NAV (which means the total assets of the Trust including, but not limited to, all DOT and cash less total liabilities of the Trust) and NAV per Share once each Exchange trading day. The Administrator calculates the NAV of the Trust once each Exchange trading day. The NAV for a normal trading day will be released after 4:00 p.m. Eastern Time (‘‘ET’’). Trading during the regular market session on the Exchange closes at 4:00 p.m. ET. However, NAVs are not officially struck until later in the day (often by 5:30 p.m. ET and almost always by 8:00 p.m. EST). The pause between 4:00 p.m. ET and 5:30 p.m. ET (or later) provides an opportunity for the Administrator to algorithmically detect, flag, investigate, and correct unusual pricing should it occur. If the Pricing Benchmark is not available, or if the Sponsor determines in good faith that the Pricing Benchmark does not reflect an accurate DOT price, then the Sponsor will employ an alternative method to determine the fair value of the Trust’s assets.5 khammond on DSK9W7S144PROD with NOTICES Availability of Information and Intraday Indicative Value In addition to the price transparency of the Index, the Trust will provide information regarding the Trust’s DOT holdings as well as additional data regarding the Trust. The website for the Trust, which will be publicly accessible at no charge, will contain the following information: (a) the prior business day’s NAV per Share; (b) the prior business day’s Nasdaq official closing price; (c) calculation of the premium or discount of such Exchange official closing price against such NAV per Share; (d) data in chart form displaying the frequency distribution of discounts and premiums of the Exchange’s official closing price against the NAV, within appropriate ranges for each of the four previous calendar quarters (or for the life of the Trust, if shorter); (e) the prospectus; and (f) other applicable quantitative information. The Trust will also disseminate the Trust’s holdings on a daily basis on the Trust’s website. 5 Such alternative method will only be employed on an ad hoc basis. Any permanent change to the calculation of the NAV would require a proposed rule change under Rule 19b–4. VerDate Sep<11>2014 16:57 Mar 25, 2025 Jkt 265001 Quotation and last sale information regarding the Shares will be disseminated through the facilities of the relevant securities information processor. The intraday indicative value (‘‘IIV’’) will be calculated by using the prior day’s closing NAV per Share as a base and updating that value during the Exchange’s regular market session of 9:30 a.m. to 4:00 p.m. ET (the ‘‘Regular Market Session’’) to reflect changes in the value of the Trust’s DOT holdings during the trading day. The IIV disseminated during the Regular Market Session should not be viewed as an actual real-time update of the NAV, because NAV per Share is calculated only once at the end of each trading day based upon the relevant end-of-day values of the Trust’s investments. The IIV will be widely disseminated on a per-Share basis every 15 seconds during the Regular Market Session through the facilities of the relevant securities information processor by market data vendors. In addition, the IIV will be available through online information services, such as Bloomberg and Reuters. Quotation and last sale information for DOT is disseminated through a variety of major market data vendors. Information related to trading, including price and volume information, in DOT is available from major market data vendors and from the trading platforms on which DOT are traded. The normal trading hours for DOT trading platforms are 24 hours per day, 365 days per year. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s Nasdaq official closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Custody of the Trust’s DOT The DOT Custodian will keep custody of the Trust’s DOT. The transfer of DOT to and from DOT Counterparties is directed by the Sponsor. The DOT Custodian carefully considers the design of the physical, operational, and cryptographic systems for secure storage of the Trust’s private keys in an effort to lower the risk of loss or theft. The DOT Custodian utilizes a variety of security measures to ensure that private keys necessary to transfer digital assets remain uncompromised and that the Trust maintains exclusive ownership of its assets. The operational procedures of the DOT Custodian are reviewed by third-party advisors with PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 specific expertise in physical security. The devices that store the keys will never be connected to the internet or any other public or private distributed network—this is colloquially known as ‘‘cold storage.’’ Only specific individuals are authorized to participate in the custody process, and no individual acting alone will be able to access or use any of the private keys. The DOT Custodian will maintain the Trust’s DOT in segregated accounts that clearly identify the Trust as owner of the account and assets held in that account; the segregation will be both from the proprietary property of the DOT Custodian and the assets of any other customer. Creation and Redemption of Shares According to the Registration Statement, the Trust creates and redeems Shares from time to time, but only in one or more Baskets. Baskets are only made in exchange for delivery to the Trust or the distribution by the Trust of the amount of cash equivalent to the amount of DOT represented by the Baskets being created or redeemed, the amount of which is based on the quantity of DOT attributable to each Share of the Trust (net of accrued but unpaid Sponsor fees and any accrued but unpaid extraordinary expenses or liabilities) being created or redeemed determined as of 4:00 p.m. ET on the day the order to create or redeem Baskets is properly received. Authorized Participants are the only persons that may place orders to create and redeem Baskets. Authorized Participants must be (1) registered broker-dealers or other securities market participants, such as banks and other financial institutions, which are not required to register as broker-dealers to engage in securities transactions described below, and (2) DTC Participants. Authorized Participants will deliver only cash to create shares and will receive only cash when redeeming Shares. Further, Authorized Participants will not directly or indirectly purchase, hold, deliver, or receive DOT as part of the creation or redemption process or otherwise direct the Trust or a DOT Counterparty with respect to purchasing, holding, delivering, or receiving DOT as part of the creation or redemption process. The DOT Counterparty is a designated third party with whom the Sponsor has entered into an agreement on behalf of the Trust that will deliver, receive or convert to U.S. dollars the DOT related to the Authorized Participant’s creation or redemption order. The Sponsor performs extensive due diligence as part E:\FR\FM\26MRN1.SGM 26MRN1 khammond on DSK9W7S144PROD with NOTICES Federal Register / Vol. 90, No. 57 / Wednesday, March 26, 2025 / Notices of its DOT Counterparty selection and onboarding process. As part of this process, the Sponsor assesses DOT Counterparty candidates against various criteria, including those relating to candidates’ (1) financials, (2) reputation, (3) settlement history with the Sponsor, and (4) their regulatory oversight. The Trust will create Shares by receiving DOT from a DOT Counterparty that is not the Authorized Participant, and the Trust—not the Authorized Participant— is responsible for selecting the DOT Counterparty to deliver the DOT. Further, the DOT Counterparty will not be acting as an agent of the Authorized Participant with respect to the delivery of the DOT to the Trust or acting at the direction of the Authorized Participant with respect to the delivery of the DOT to the Trust. The Trust will redeem Shares by delivering DOT to a DOT Counterparty that is not the Authorized Participant and the Trust—not the Authorized Participant—is responsible for selecting the DOT Counterparty to receive the DOT. Further, the DOT Counterparty will not be acting as an agent of the Authorized Participant with respect to the receipt of the DOT from the Trust. Each Authorized Participant will be required to be registered as a brokerdealer under the Exchange Act and a member in good standing with FINRA, or exempt from being or otherwise not required to be licensed as a brokerdealer or a member of FINRA, and will be qualified to act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires. Certain Authorized Participants may also be regulated under federal and state banking laws and regulations. Each Authorized Participant has its own set of rules and procedures, internal controls and information barriers as it determines is appropriate in light of its own regulatory regime. According to the Registration Statement, on any business day, an Authorized Participant may place an order to create one or more Baskets via a cash transaction. Purchase orders must be placed by 12:00 p.m. ET, the close of regular trading on the Exchange, or another time determined by the Sponsor. The day on which an order is received by the Transfer Agent is considered the purchase order date. The total deposit of cash required is based on the combined NAV of the number of Shares included in the Baskets being created determined as of 4:00 p.m. ET on the date the order to purchase is properly received. The Administrator determines the quantity of DOT associated with a Basket for a given day by dividing the number of DOT held by VerDate Sep<11>2014 16:57 Mar 25, 2025 Jkt 265001 the Trust as of the opening of business on that business day, adjusted for the amount of DOT constituting estimated accrued but unpaid fees and expenses of the Trust 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 Basket. The procedures by which an authorized participant can redeem one or more Baskets mirror the procedures for the creation of Baskets. The Sponsor will maintain ownership and control of DOT in a manner consistent with good delivery requirements for spot commodity transactions. Applicable Standard The Commission has historically approved or disapproved exchange filings to list and trade series of Trust Issued Receipts, including spot-based Commodity-Based Trust Shares, on the basis of whether the listing exchange has in place a comprehensive surveillance sharing agreement with a regulated market of significant size related to the underlying commodity to be held.6 The Commission has also 6 See Securities Exchange Act Release Nos. 78262 (July 8, 2016), 81 FR 78262 (July 14, 2016) (the ‘‘Winklevoss Proposal’’). The Winklevoss Proposal was subsequently disapproved by the Commission. See Securities Exchange Act Release No. 83723 (July 26, 2018), 83 FR 37579 (August 1, 2018) (the ‘‘Winklevoss Order’’). Prior orders from the Commission have pointed out that in every prior approval order for Commodity-Based Trust Shares, there has been a derivatives market that represents the regulated market of significant size, generally a Commodity Futures Trading Commission (the ‘‘CFTC’’) regulated futures market. Further to this point, the Commission’s prior orders have noted that the spot commodities and currency markets for which it has previously approved spot ETPs are generally unregulated and that the Commission relied on the underlying futures market as the regulated market of significant size that formed the basis for approving the series of Currency and Commodity-Based Trust Shares, including gold, silver, platinum, palladium, copper, and other commodities and currencies. The Commission specifically noted in the Winklevoss Order that the approval order issued related to the first spot gold ETP ‘‘was based on an assumption that the currency market and the spot gold market were largely unregulated.’’ See Winklevoss Order at 37592. As such, the regulated market of significant size test does not require that the spot market be regulated in order for the Commission to approve this proposal, and precedent makes clear that an underlying market for a spot commodity or currency being a regulated market would actually be an exception to the norm. These largely unregulated currency and commodity markets do not provide the same protections as the markets that are subject to the Commission’s oversight, but the Commission has consistently looked to surveillance sharing agreements with the underlying futures market in order to determine whether such products were consistent with the Act. See Securities Exchange Act No. 99306 (January 10, 2024), 89 FR 3008 (January 17, 2024) (SelfRegulatory Organizations; NYSE Arca, Inc.; The Nasdaq Stock Market LLC; Cboe BZX Exchange, PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 13809 consistently recognized, however, that this is not the exclusive means by which an ETP listing exchange can meet this statutory obligation.7 A listing exchange could, alternatively, demonstrate that ‘‘other means to prevent fraudulent and manipulative acts and practices will be sufficient’’ to justify dispensing with a surveillance-sharing agreement with a regulated market of significant size. The Commission has issued orders granting approval for proposals to list bitcoin- and ether-based commodity trust shares and bitcoin- and ether-based trust issued receipts (these proposed funds are nearly identical to the Trust, but proposed to hold bitcoin and ether, respectively, instead of DOT) (‘‘Spot Bitcoin ETPs’’ and ‘‘Spot ETH ETPs’’). In both the Spot Bitcoin ETP Approval Order and Spot ETH ETP Approval Order, the Commission found that sufficient ‘‘other means’’ of preventing fraud and manipulation had been demonstrated that justified dispensing with a surveillance-sharing agreement with a market of significant size. Specifically, the Commission found that while the Chicago Mercantile Exchange (‘‘CME’’) futures market for both bitcoin and ether were not of ‘‘significant size’’ with respect to the spot market, the Exchange demonstrated that other means could be reasonably expected to assist in surveilling for fraudulent and manipulative acts and practices in the specific context of the proposals. As further discussed below, both the Exchange and the Sponsor believe that this proposal and the analysis to be included are sufficient to establish that there are sufficient ‘‘other means’’ of preventing fraud and manipulation that warrant dispensing of the surveillancesharing agreement with a regulated market of significant size, as was done with both Spot Bitcoin ETPs and Spot ETH ETPs, and that this proposal should be approved. The Commission has approved numerous series of Trust Issued Receipts,8 including Commodity-Based Inc.; Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, To List and Trade BitcoinBased Commodity-Based Trust Shares and Trust Units) (the ‘‘Spot Bitcoin ETP Approval Order’’); 100224 (May 23, 2024), 89 FR 46937 (May 30, 2024) (Self-Regulatory Organizations; NYSE Arca, Inc.; The Nasdaq Stock Market LLC; Cboe BZX Exchange, Inc.; Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, To List and Trade Shares of Ether-Based Exchange-Traded Products) (the ‘‘Spot ETH ETP Approval Order’’). 7 See Winklevoss Order, 83 FR at 37580; see Spot Bitcoin ETP Approval Order, 89 FR at 3009; see Spot ETH ETP Approval Order 89 FR at 46938. 8 Pursuant to Nasdaq Rule 5720(a), the term ‘‘Trust Issued Receipt’’ means a security (a) that is E:\FR\FM\26MRN1.SGM Continued 26MRN1 13810 Federal Register / Vol. 90, No. 57 / Wednesday, March 26, 2025 / Notices Trust Shares,9 to be listed on U.S. national securities exchanges. In order for any proposed rule change from an exchange to be approved, the Commission must determine that, among other things, the proposal is consistent with the requirements of Section 6(b)(5) of the Act, specifically including: (i) the requirement that a national securities exchange’s rules are designed to prevent fraudulent and manipulative acts and practices; and (ii) the requirement that an exchange proposal be designed, in general, to protect investors and the public interest. The Exchange believes that this proposal is consistent with the requirements of Section 6(b)(5) of the Act. As noted above, the Commission has recognized that the ‘‘regulated market of significant size’’ standard is not the only means for satisfying Section 6(b)(5) of the Act, specifically providing that a listing exchange could demonstrate that ‘‘other means to prevent fraudulent and manipulative acts and practices’’ are sufficient to justify dispensing with the requisite surveillance-sharing agreement.10 For example, in approving the Spot Bitcoin ETPs, the Commission found that there were ‘‘sufficient ‘other means’ of preventing fraud and manipulation,’’ including that: khammond on DSK9W7S144PROD with NOTICES [B]ased on the record before the Commission and the improved quality of the correlation analysis in the record, including the Commission’s own analysis, the Commission is able to conclude that fraud or manipulation that impacts prices in spot bitcoin markets would likely similarly issued by a trust which holds specified securities deposited with the trust; (b) that, when aggregated in some specified minimum number, may be surrendered to the trust by the beneficial owner to receive the securities; and (c) that pays beneficial owners dividends and other distributions on the deposited securities, if any are declared and paid to the trustee by an issuer of the deposited securities 9 Pursuant to Nasdaq Rule 5711(d)(iv), the term ‘‘Commodity-Based Trust Shares’’ means a security (1) that is issued by a trust that holds (a) a specified commodity deposited with the trust, or (b) a specified commodity and, in addition to such specified commodity, cash; (2) that is issued by such trust in a specified aggregate minimum number in return for a deposit of a quantity of the underlying commodity and/or cash; and (3) that, when aggregated in the same specified minimum number, may be redeemed at a holder’s request by such trust which will deliver to the redeeming holder the quantity of the underlying commodity and/or cash. 10 See Winklevoss Order at 37580. The Commission has also specifically noted that it ‘‘is not applying a ‘cannot be manipulated’ standard; instead, the Commission is examining whether the proposal meets the requirements of the Exchange Act and, pursuant to its Rules of Practice, places the burden on the listing exchange to demonstrate the validity of its contentions and to establish that the requirements of the Exchange Act have been met.’’ Id. at 37582. VerDate Sep<11>2014 16:57 Mar 25, 2025 Jkt 265001 impact CME bitcoin futures prices. And because the CME’s surveillance can assist in detecting those impacts on CME bitcoin futures prices, the Exchanges’ comprehensive surveillance-sharing agreement with the CME—a U.S. regulated market whose bitcoin futures market is consistently highly correlated to spot bitcoin, albeit not of ‘‘significant size’’ related to spot bitcoin—can be reasonably expected to assist in surveilling for fraudulent and manipulative acts and practices in the specific context of the [Spot Bitcoin ETPs].11 Today, Coinbase Derivatives, LLC (‘‘Coinbase Derivatives’’) offers trading in DOT futures. Nasdaq has a comprehensive surveillance-sharing agreement with Coinbase Derivatives via its common membership in the Intermarket Surveillance Group (‘‘ISG’’).12 This facilitates the sharing of information that is available to Coinbase Derivatives through its surveillance of its markets, including its surveillance of Coinbase Derivatives’ DOT futures market. Similar to the Spot Bitcoin and Spot ETH ETPs previously approved by the SEC, Nasdaq’s ability to obtain information regarding trading in the DOT futures from other markets that are members of the ISG (specifically Coinbase Derivatives) would assist Nasdaq in detecting and deterring misconduct. Initial and Continued Listing The Shares will be subject to Nasdaq Rule 5711(d)(vi), which sets forth the initial and continued listing criteria applicable to Commodity-Based Trust Shares. The Exchange will obtain a representation that the Trust’s NAV per Share will be calculated daily and will be made available to all market participants at the same time. A minimum of 40,000 Shares will be required to be outstanding at the time of commencement of trading on the Exchange. Upon termination of the Trust, the Shares will be removed from listing. The Trustee will be a trust company having substantial capital and surplus and the experience and facilities for handling corporate trust business, as required under Nasdaq Rule 11 See Securities Exchange Act Release No. 99306 (January 10, 2024), 89 FR 3008 (January 17, 2024) (Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, To List and Trade Shares of Bitcoin-Based Commodity-Based Trust Shares and Trust Units). The SEC made substantially similar findings in the approval order for Spot ETH ETPs. See Securities Exchange Act Release No. 100224 (May 23, 2024), 89 FR 46937 (May 30, 2024) (Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, To List and Trade Shares of Ether-Based Exchange-Traded Products). 12 For a list of the current members and affiliate members of ISG, see https://isgportal.org/publicmembers. PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 5711(d)(vi)(D) and no change will be made to the Trustee without prior notice to and approval of the Exchange. As required in Nasdaq Rule 5711(d)(viii), the Exchange notes that any registered market maker (‘‘Market Maker’’) in the Shares must file with the Exchange, in a manner prescribed by the Exchange, and keep current a list identifying all accounts for trading the underlying commodity, related futures or options on futures, or any other related derivatives, which the registered Market Maker may have or over which it may exercise investment discretion. No registered Market Maker in the Shares shall trade in the underlying commodity, related futures or options on futures, or any other related derivatives, in an account in which a registered Market Maker, directly or indirectly, controls trading activities, or has a direct interest in the profits or losses thereof, which has not been reported to the Exchange as required by Nasdaq Rule 5711(d). In addition to the existing obligations under Exchange rules regarding the production of books and records, the registered Market Maker in the Shares shall make available to the Exchange such books, records or other information pertaining to transactions by such entity or any limited partner, officer or approved person thereof, registered or nonregistered employee affiliated with such entity for its or their own accounts in the underlying commodity, related futures or options on futures, or any other related derivatives, as may be requested by the Exchange. The Exchange is able to obtain information regarding trading in the Shares and the underlying DOT, DOT futures contracts, or any other DOT derivative through members acting as registered Market Makers, in connection with their proprietary or customer trades. As a general matter, the Exchange has regulatory jurisdiction over its members, and their associated persons. The Exchange also has regulatory jurisdiction over any person or entity controlling a member, as well as a subsidiary or affiliate of a member that is in the securities business. A subsidiary or affiliate of a member organization that does business only in commodities would not be subject to Exchange jurisdiction, but the Exchange could obtain information regarding the activities of such subsidiary or affiliate through surveillance sharing agreements with regulatory organizations of which such subsidiary or affiliate is a member. E:\FR\FM\26MRN1.SGM 26MRN1 Federal Register / Vol. 90, No. 57 / Wednesday, March 26, 2025 / Notices Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. The Exchange will allow trading in the Shares from 4:00 a.m. to 8:00 p.m. ET. The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. The Shares of the Trust will conform to the initial and continued listing criteria set forth in Nasdaq Rule 5711(d) and will comply with the requirements of Rule 10A–3 of the Act. Trading Halts khammond on DSK9W7S144PROD with NOTICES With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares. The Exchange will halt trading in the Shares under the conditions specified in Nasdaq Rules 4120 and 4121, including without limitation the conditions specified in Nasdaq Rule 4120(a)(9) and (10) and the trading pauses under Nasdaq Rules 4120(a)(11) and (12). Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) the extent to which trading is not occurring in the DOT underlying the Shares; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. If the IIV or the value of the Index is not being disseminated as required, the Exchange may halt trading during the day in which the interruption to the dissemination of the IIV or the value of the Index occurs. If the interruption to the dissemination of the IIV or the value of the Index persists past the trading day in which it occurred, the Exchange will halt trading no later than the beginning of the trading day following the interruption. In addition, if the Exchange becomes aware that the NAV per Share with respect to the Shares is not disseminated to all market participants at the same time, it will halt trading in the Shares until such time as the NAV per Share is available to all market participants. Surveillance The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. The VerDate Sep<11>2014 16:57 Mar 25, 2025 Jkt 265001 surveillance program includes real-time patterns for price and volume movements and post-trade surveillance patterns (e.g., spoofing, marking the close, pinging, phishing). Trading of Shares on the Exchange will be subject to the Exchange’s surveillance program for derivative products, as well as crossmarket surveillances administered by FINRA, on behalf of the Exchange pursuant to a regulatory services agreement, which are also designed to detect violations of Exchange rules and applicable federal securities laws. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. The Exchange will require the Trust to represent to the Exchange that it will advise the Exchange of any failure by the Trust to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Exchange Act, the Exchange will surveil for compliance with the continued listing requirements. If the Trust is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under the Nasdaq 5800 Series. In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares with other markets and other entities that are members of the ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading in the Shares and listed DOT futures from such markets and other entities. The Exchange also may obtain information regarding trading in the Shares, listed DOT futures via the ISG, from other exchanges who are members or affiliates of the DOT, or with which the Exchange has entered into a comprehensive surveillance sharing agreement. Information Circular Prior to the commencement of trading, the Exchange will inform its members in an information circular (‘‘Information Circular’’) of the special characteristics and risks associated with trading the Shares. Specifically, the Information Circular will discuss the following: (1) the procedures for creations and redemptions of Shares in Baskets (and that Shares are not individually redeemable); (2) Section 10 of Nasdaq General Rule 9, which imposes suitability obligations on Nasdaq members with respect to recommending transactions in the PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 13811 Shares to customers; (3) how information regarding the IIV and NAV is disseminated; (4) the risks involved in trading the Shares during the pre-market and post-market sessions when an updated IIV will not be calculated or publicly disseminated; (5) the requirement that members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. The Information Circular will also discuss any exemptive, no action and interpretive relief granted by the Commission from any rules under the Act. The Information Circular will also reference the fact that there is no regulated source of last sale information regarding DOT, that the Commission has no jurisdiction over the trading of DOT as a commodity. Additionally, the Information Circular will reference that the Trust is subject to various fees and expenses described in the Registration Statement. The Information Circular will also disclose the trading hours of the Shares. The Information Circular will disclose that information about the Shares will be publicly available on the Trust’s website. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,13 in general, and furthers the objectives of Section 6(b)(5) of the Act,14 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. The Commission has approved numerous series of Trust Issued Receipts, including Commodity-Based Trust Shares, to be listed on U.S. national securities exchanges. In order for any proposed rule change from an exchange to be approved, the Commission must determine that, among other things, the proposal is consistent with the requirements of Section 6(b)(5) of the Act, specifically including: (i) the requirement that a national securities exchange’s rules are designed to prevent fraudulent and manipulative acts and practices; and (ii) the requirement that an exchange proposal be designed, in general, to protect investors and the public interest. The Exchange believes that this proposal is consistent with the 13 15 14 15 E:\FR\FM\26MRN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 26MRN1 13812 Federal Register / Vol. 90, No. 57 / Wednesday, March 26, 2025 / Notices requirements of Section 6(b)(5) of the Act. As noted above, the Commission has recognized that the ‘‘regulated market of significant size’’ standard is not the only means for satisfying Section 6(b)(5) of the act, specifically providing that a listing exchange could demonstrate that ‘‘other means to prevent fraudulent and manipulative acts and practices’’ are sufficient to justify dispensing with the requisite surveillance-sharing agreement with the underlying spot market. The Exchange and Sponsor believe that such conditions are present. As discussed above, in approving the Spot Bitcoin ETPs, the Commission found that there were ‘‘sufficient ‘other means’ of preventing fraud and manipulation,’’ including that: [B]ased on the record before the Commission and the improved quality of the correlation analysis in the record, including the Commission’s own analysis, the Commission is able to conclude that fraud or manipulation that impacts prices in spot bitcoin markets would likely similarly impact CME bitcoin futures prices. And because the CME’s surveillance can assist in detecting those impacts on CME bitcoin futures prices, the Exchanges’ comprehensive surveillance-sharing agreement with the CME—a U.S. regulated market whose bitcoin futures market is consistently highly correlated to spot bitcoin, albeit not of ‘‘significant size’’ related to spot bitcoin—can be reasonably expected to assist in surveilling for fraudulent and manipulative acts and practices in the specific context of the [Spot Bitcoin ETPs].15 khammond on DSK9W7S144PROD with NOTICES As discussed above, Coinbase Derivatives offers trading in DOT futures. Nasdaq has a comprehensive surveillance-sharing agreement with Coinbase Derivatives via its common membership in ISG, which facilitates the sharing of information that is available to Coinbase Derivatives through its surveillance of its markets, including its surveillance of Coinbase Derivatives’ DOT futures market. Similar to the Spot Bitcoin and Spot ETH ETPs previously approved by the SEC, Nasdaq’s ability to obtain information regarding trading in the DOT futures from other markets that are members of the ISG (specifically Coinbase Derivatives) would assist 15 See Securities Exchange Act Release No. 99306 (January 10, 2024), 89 FR 3008 (January 17, 2024) (Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, To List and Trade Shares of Bitcoin-Based Commodity-Based Trust Shares and Trust Units). The SEC made substantially similar findings in the approval order for spot ether ETPs. See Securities Exchange Act Release No. 100224 (May 23, 2024), 89 FR 46937 (May 30, 2024) (Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, To List and Trade Shares of Ether-Based Exchange-Traded Products). VerDate Sep<11>2014 16:57 Mar 25, 2025 Jkt 265001 Nasdaq in detecting and deterring misconduct. The Exchange further believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria set forth in Nasdaq Rule 5711(d). The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. As discussed above, the surveillance program includes real-time patterns for price and volume movements and post-trade surveillance patterns (e.g., spoofing, marking the close, pinging, phishing). Trading of Shares on the Exchange will be subject to the Exchange’s surveillance program for derivative products, as well as crossmarket surveillances administered by FINRA, on behalf of the Exchange pursuant to a regulatory services agreement, which are also designed to detect violations of Exchange rules and applicable federal securities laws. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. The Exchange will require the Trust to represent to the Exchange that it will advise the Exchange of any failure by the Trust to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Exchange Act, the Exchange will surveil for compliance with the continued listing requirements. If the Trust is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under the Nasdaq 5800 Series. In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. The Exchange will communicate as needed regarding trading in the Shares with other markets and other entities that are members of the ISG, and the Exchange may obtain trading information regarding trading in the Shares and listed DOT futures from such markets and other entities. Trading in Shares of the Trust will be halted if the circuit breaker parameters have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of Shares that will enhance competition among market participants, to the benefit of investors and the marketplace. For all the above reasons, the Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule change rather will facilitate the listing and trading of an additional exchangetraded product that will enhance competition among both market participants and listing venues, to the benefit of investors and the marketplace. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period 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 shall: (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 rule-comments@ sec.gov. Please include file number SR– NASDAQ–2025–029 on the subject line. E:\FR\FM\26MRN1.SGM 26MRN1 Federal Register / Vol. 90, No. 57 / Wednesday, March 26, 2025 / Notices Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–NASDAQ–2025–029. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–NASDAQ–2025–029 and should be submitted on or before April 16, 2025. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2025–05045 Filed 3–25–25; 8:45 am] khammond on DSK9W7S144PROD with NOTICES BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–102702; File No. SR– CboeEDGX–2025–021] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule Regarding Dedicated Cores March 20, 2025. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 13, 2025, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX Equities’’) proposes to amend its fee schedule to adopt fees for Dedicated Cores. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ options/regulation/rule_filings/edgx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 1 15 16 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 16:57 Mar 25, 2025 2 17 Jkt 265001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00087 Fmt 4703 Sfmt 4703 13813 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its fee schedule to adopt fees for Dedicated Cores.3 By way of background, the Exchange recently began allowing Users 4 to assign a Single Binary Order Entry (‘‘BOE’’) logical order entry port 5 to a single dedicated Central Processing Unit (CPU Core) (‘‘Dedicated Core’’). Historically, CPU Cores had been shared by logical order entry ports (i.e., multiple logical ports from multiple firms may connect to a single CPU Core). Use of Dedicated Cores however, can provide reduced latency, enhanced throughput, and improved performance since a firm using a Dedicated Core is utilizing the full processing power of a CPU Core instead of sharing that power with other firms. This offering is completely voluntary and is available to all Users that wish to purchase Dedicated Cores. Users may utilize BOE logical order entry ports on shared CPU Cores, either in lieu of, or in addition to, their use of Dedicated Core(s). As such, Users are able to operate across a mix of shared and dedicated CPU Cores which the Exchange believes provides additional risk and capacity management. Further, Dedicated Cores are not required nor necessary to participate on the Exchange and as such Users may opt not to use Dedicated Cores at all. The Exchange proposes to assess the following monthly fees for Users that wish to use Dedicated Cores and adopt 3 The Exchange initially adopted pricing for Dedicated Cores on July 1, 2024 (SR–CboeEDGX– 2024–043). On August 1, 2024, the Exchange withdrew that filing and submitted SR–CboeEDGX– 2024–051. On business date September 30, 2024, the Exchange withdrew that filing and submitted SR–CboeEDGX–2024–061. On November 26, 2024, the Exchange withdrew that filing and submitted SR–CboeEDGX–2024–080. On January 24, 2025, the Exchange withdrew that filing and submitted SR– CboeEDGX–2025–006. On March 13, 2025, the Exchange withdrew that filing and submitted this filing. 4 A User may be either a Member or Sponsored Participant. The term ‘‘Member’’ shall mean any registered broker or dealer that has been admitted to membership in the Exchange, limited liability company or other organization which is a registered broker or dealer pursuant to Section 15 of the Act, and which has been approved by the Exchange. A Sponsored Participant may be a Member or nonMember of the Exchange whose direct electronic access to the Exchange is authorized by a Sponsoring Member subject to certain conditions. See Exchange Rule 11.3. 5 Users may currently connect to the Exchange using a logical port available through an application programming interface (‘‘API’’), such as the Binary Order Entry (‘‘BOE’’) protocol. A BOE logical order entry port is used for order entry. E:\FR\FM\26MRN1.SGM 26MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 90, Number 57 (Wednesday, March 26, 2025)]
[Notices]
[Pages 13805-13813]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-05045]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102704; File No. SR-NASDAQ-2025-029]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change To List and Trade Shares of 
the 21Shares Polkadot Trust Under Nasdaq Rule 5711(d)

March 20, 2025.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 17, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of 21Shares Polkadot 
Trust (the ``Trust'') under Nasdaq Rule 5711(d) (``Commodity-Based 
Trust Shares''). The shares of the Trust are referred to herein as the 
``Shares.''
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to list and trade the Shares under Nasdaq 
Rule 5711(d), which governs the listing and trading of Commodity-Based 
Trust Shares on the Exchange.\3\ 21Shares US LLC (the ``Sponsor'') is 
the sponsor of the Trust. Any statements or representations included in 
this proposal regarding: (a) the description of the reference assets or 
trust holdings; (b) limitations on the reference assets or trust 
holdings; (c) dissemination and availability of the reference asset or 
intraday indicative value; or (d) the applicability of Nasdaq listing 
rules specified in this proposal shall constitute continued listing 
standards for the Shares listed on the Exchange.
---------------------------------------------------------------------------

    \3\ The Commission approved Nasdaq Rule 5711 in Securities 
Exchange Act Release No. 66648 (March 23, 2012), 77 FR 19428 (March 
30, 2012) (SR-NASDAQ-2012-013).
---------------------------------------------------------------------------

Overview of the Trust and the Shares
    According to the Registration Statement, the Trust is a Delaware 
statutory trust, formed on October 29, 2024.\4\ The Trust will operate 
pursuant to a trust agreement (the ``Trust Agreement''), as amended 
and/or restated from time to time. CSC Delaware Trust Company, a 
Delaware trust company, is the trustee of the Trust (the ``Trustee''). 
The Trust is managed and controlled by 21Shares US LLC (the 
``Sponsor''). A third party to be appointed by the Sponsor and/or the 
Trustee will be the administrator of the Trust (the ``Administrator'').
---------------------------------------------------------------------------

    \4\ See Registration Statement on Form S-1, dated January 31, 
2025 filed with the Commission on behalf of the Trust. The 
descriptions of the Trust, the Shares, the Pricing Benchmark (as 
defined below), and Trust's holdings contained herein are based, in 
part, on information in the Registration Statement. The Registration 
Statement in not yet effective and the Shares will not trade on the 
Exchange until such time that the Registration Statement is 
effective.
---------------------------------------------------------------------------

    The Trust is a passive investment vehicle that does not seek to 
generate returns beyond tracking the price of DOT tokens, the native 
token of the Polkadot Network (as defined below) (``DOT''). This means 
the Sponsor does not speculatively sell DOT at times when its price is 
high or speculatively acquire DOT at low prices in the expectation of 
future price increases. It also means the Trust will not utilize 
leverage, derivatives or any similar arrangements in seeking to meet 
its investment objective. The Trust's investment objective is to seek 
to track the performance of DOT, as measured by the performance of the 
CME CF Polkadot--Dollar Reference Rate--New York Variant (``Pricing 
Benchmark''), adjusted for the Trust's expenses and other liabilities. 
The Pricing Benchmark is calculated by CF Benchmarks Ltd. (the 
``Benchmark Provider'') based on an aggregation of executed trade flow 
of major DOT trading platforms (``Constituent Exchanges''). The Pricing 
Benchmark is designed to reflect the performance of DOT in U.S. 
dollars. In seeking to achieve its investment objective, the Trust will 
hold DOT and will value its Shares daily based on the Pricing 
Benchmark. Coinbase Custody Trust Company, LLC (the ``DOT Custodian'') 
is the DOT custodian for the Trust and will hold all of the Trust's DOT 
on the Trust's behalf.
    When the Trust sells or redeems its Shares, DOT will be transferred 
into or out of the Trust, as applicable, in exchange for blocks of 
10,000 Shares (a ``Basket'') that are based on the quantity of DOT 
attributable to each Share of the Trust (net of accrued but unpaid 
Sponsor Fees (defined below) and any accrued but unpaid extraordinary 
expenses or liabilities).

[[Page 13806]]

    Financial firms that are authorized to purchase Shares from or 
redeem Shares to the Trust (known as ``Authorized Participants'') 
purchase Shares by depositing cash in the Trust's account with the Cash 
Custodian (as defined below). This will cause the Sponsor, on behalf of 
the Trust, to automatically instruct a designated third party, who is 
not an Authorized Participant but who may be an affiliate of an 
Authorized Participant and with whom the Sponsor has entered into an 
agreement on behalf of the Trust (a ``DOT Counterparty''), to (i) 
purchase the amount of DOT equivalent in value to the cash deposit 
amount associated with the order and (ii) deposit the resulting DOT 
amount in the Trust's account with the DOT Custodian, resulting in the 
Transfer Agent crediting the applicable amount of Shares to the 
Authorized Participant.
    When such an Authorized Participant redeems its Shares, the 
Sponsor, on behalf of the Trust will direct the DOT Custodian to 
transfer DOT to a DOT Counterparty, who will sell the DOT to be 
executed, in the Sponsor's reasonable efforts, at the Pricing Benchmark 
price used by the Trust to calculate NAV, taking into account any 
spread, commissions, or other trading costs and deposit the cash 
proceeds of such sale in the Trust's account with the Cash Custodian 
for settlement with the Authorized Participant. Any slippage incurred 
(including, but not limited to, any trading fees, spreads, or 
commissions), on a cash equivalent basis, will be the responsibility of 
the Authorized Participant and not of the Trust or Sponsor.
    Authorized Participants will deliver only cash to create shares and 
will receive only cash when redeeming Shares. Further, Authorized 
Participants will not directly or indirectly purchase, hold, deliver, 
or receive DOT as part of the creation or redemption process or 
otherwise direct the Trust or a DOT Counterparty with respect to 
purchasing, holding, delivering, or receiving DOT as part of the 
creation or redemption process.
    The DOT Counterparty is a designated third party with whom the 
Sponsor has entered into an agreement on behalf of the Trust that will 
deliver, receive or convert to U.S. dollars the DOT related to the 
Authorized Participant's creation or redemption order. The Sponsor 
performs extensive due diligence as part of its DOT Counterparty 
selection and onboarding process. As part of this process, the Sponsor 
assesses DOT Counterparty candidates against various criteria, 
including those relating to candidates' (1) financials, (2) reputation, 
(3) settlement history with the Sponsor, and (4) their regulatory 
oversight. The Trust will create Shares by receiving DOT from a DOT 
Counterparty that is not the Authorized Participant, and the Trust--not 
the Authorized Participant--is responsible for selecting the DOT 
Counterparty to deliver the DOT. Further, the DOT Counterparty will not 
be acting as an agent of the Authorized Participant with respect to the 
delivery of the DOT to the Trust or acting at the direction of the 
Authorized Participant with respect to the delivery of the DOT to the 
Trust. The DOT Counterparty is not contractually obligated to 
participate in cash orders for creations or redemptions. The DOT 
Counterparty reserves the right to refuse or to cancel any pending 
creation or redemption order at any time before the Sponsor places a 
purchase order.
    According to the Registration Statement, the Trust is not an 
investment company registered under the Investment Company Act of 1940, 
as amended (the ``1940 Act''), and is not subject to regulation under 
the 1940 Act. The Trust is not a commodity pool for purposes of the 
Commodity Exchange Act of 1936, as amended (the ``CEA''), and the 
Sponsor is not subject to regulation by the Commodity Futures Trading 
Commission (the ``CFTC'') as a commodity pool operator or a commodity 
trading advisor.
    Neither the Trust, nor the Sponsor, nor the DOT Custodian, nor any 
other person associated with the Trust will, directly or indirectly, 
engage in action where any portion of the Trust's DOT is used to earn 
additional DOT or generate rewards or other income. The Trust will not 
acquire and will disclaim any incidental right (``IR'') or IR asset 
received, for example as a result of forks or airdrops, and such assets 
will not be taken into account for purposes of determining the Trust's 
net asset value (``NAV'').
Investment Objective
    According to the Registration Statement, the Trust's investment 
objective is to seek to track the performance of DOT, as measured by 
the Pricing Benchmark, adjusted for the Trust's expenses and other 
liabilities. In seeking to achieve its investment objective, the Trust 
will hold DOT and will value its Shares daily as of 4:00 p.m. ET based 
on the Pricing Benchmark.
    The Trust does not provide investors with direct exposure to DOT, 
and an investment in the Trust is not a direct investment in DOT. 
Rather, the Trust provides investors with the opportunity to indirectly 
access the market for DOT through a traditional brokerage account 
without the potential barriers to entry or risks involved with holding 
or transferring DOT directly or acquiring it from a DOT spot market.
DOT and the Polkadot Network
    According to the Registration Statement, DOT is a digital asset 
that is created and transmitted through the operations of the 
``Polkadot Network,'' an online, decentralized, distributed computing 
platform that operates on a peer-to-peer basis. The Polkadot Network 
uses a heterogeneous multi-chain to ensure the secure transfer and 
authenticity of each DOT and hosts the public transaction ledger. This 
central chain is known as the Relay Chain (the ``Relay Chain'') on 
which all DOT is recorded. The Relay Chain is a decentralized digital 
file, or ledger, that contains all the records of DOT and is stored in 
multiple copies globally on the computers of users of the Polkadot 
Network. DOT is mainly used for the functional mechanisms of the 
Polkadot Network, including governance of updates, staking for network 
operations, as the gas token of the network and bonding for Parachains 
to secure a spot on the Relay Chain (see Technology and Operation, 
below). Unlike bitcoin, there is no maximum amount of DOT that may be 
outstanding. DOT is divisible to up to ten decimal places into units 
named ``Plancks.''
    DOT is ``stored'' on a blockchain and is linked to a unique digital 
address, or wallet, that is associated with a public key and a private 
key. The public key is used to generate the address that is available 
to other users of the Polkadot Network. The address serves as the 
location to which DOT can be transferred and from which DOT can be 
sent. The private key authorizes the transfer or ``spending'' of DOT 
from its associated public address. Ownership of DOT is established by 
recording on the Relay Chain the unique address and the amount of DOT 
held. The wallet thus holds the cryptographic keys associated with DOT, 
rather than the DOT itself. DOT cannot be transferred by a holder 
unless that holder provides the private key.
    The Relay Chain is the decentralized, publicly distributed ledger 
that holds DOT and the mechanism that allows people to exchange DOT. 
All transactions on the Polkadot Network are recorded on the Relay 
Chain. Like other blockchains, the Polkadot Relay Chain can be thought 
of as a collective chain of digital signatures that reflect transaction 
history. The Relay Chain is downloaded and stored, in whole or in part, 
on the computers of each user of the Polkadot Network. The Relay Chain

[[Page 13807]]

is public and accessible to all, and includes a record of every DOT, 
every transaction in DOT in order and every public address on the 
Polkadot Network. Every computer on the Polkadot Network is a ``node'', 
and collectively all of the nodes ensure that each new transaction in 
DOT adheres to certain rules before it is added to the Relay Chain.
    Transaction data is permanently recorded on the Relay Chain in data 
files called ``blocks,'' which reflect transactions that have been 
recorded and authenticated by Polkadot Network participants. Each newly 
recorded block of transactions refers back to and ``connects'' with the 
immediately preceding recorded block in the ledger. Each new block 
records outstanding DOT transactions, and outstanding transactions are 
settled and validated through such recording. Although there are size 
limits to each block, the Relay Chain is designed to represent a 
complete, transparent, secure and unbroken history of all the 
transactions that have occurred on the Polkadot Network. The Polkadot 
Network and associated software programs can view the Relay Chain to 
determine the exact balance, if any, of DOT associated with any public 
address listed on the Relay Chain.
    DOT can be transferred in direct peer-to-peer transactions through 
the direct sending of DOT over the Polkadot Network from one Polkadot 
Network address to another.
    DOT can be used as a means to conduct cross-border payments and to 
pay other users of the Polkadot Network for goods and services under 
what resembles a barter system. Consumers can also pay merchants and 
other commercial businesses for goods or services through direct peer-
to-peer transactions on the Polkadot Network or through third-party 
service providers.
    DOT spot markets typically permit investors to open accounts with 
the market and then purchase and sell DOT via websites or through 
mobile applications. Prices for trades on DOT spot markets are 
typically reported publicly. An investor opening a trading account on a 
digital asset trading platform must deposit an accepted government-
issued currency into its account with the trading platform, or a 
previously acquired digital asset, before they can purchase or sell 
assets on the trading platform. The process of establishing an account 
with a digital asset trading platform and trading DOT is different 
from, and should not be confused with, the process of users sending DOT 
from one DOT address to another DOT address on the Polkadot Network. 
This latter process is an activity that occurs on the Polkadot Network, 
while the former is an activity that occurs entirely within the order 
book operated by the digital asset trading platform. The digital asset 
trading platform typically records the investor's ownership of DOT in 
its internal books and records, rather than on the Polkadot Network. 
The digital asset trading platform ordinarily does not transfer DOT to 
the investor on the Polkadot Network unless the investor makes a 
request to the exchange to withdraw the DOT in its platform trading 
account to an off-platform DOT wallet.
    Outside of the spot markets, DOT can be traded OTC. The OTC market 
is largely institutional in nature, and OTC market participants 
generally consist of institutional entities, such as firms that offer 
two-sided liquidity for DOT, investment managers, proprietary trading 
firms, high-net-worth individuals that trade DOT on a proprietary 
basis, entities with sizeable DOT holdings, and family offices. The OTC 
market provides a relatively flexible market in terms of quotes, price, 
quantity, and other factors, although it tends to involve large blocks 
of DOT. The OTC market has no formal structure and no open-outcry 
meeting place. Parties engaging in OTC transactions will agree upon a 
price--often via phone or email--and then one of the two parties will 
then initiate the transaction. For example, a seller of DOT could 
initiate the transaction by sending the DOT to the buyer's DOT address. 
The buyer would then wire U.S. dollars to the seller's bank account. 
OTC trades are sometimes hedged and eventually settled with concomitant 
trades on digital asset trading platforms.
Pricing Benchmark
    According to the Registration Statement, the net assets of the 
Trust and its Shares are valued on a daily basis with reference to the 
Pricing Benchmark, a standardized reference rate published by the 
Benchmark Provider, which is designed to reflect the performance of DOT 
in U.S. dollars. The Pricing Benchmark is calculated daily and 
aggregates the notional value of DOT trading activity across major DOT 
spot exchanges. The Benchmark Provider is the administrator of the 
Pricing Benchmark. The Trust also uses the Pricing Benchmark to 
calculate its NAV, which is the aggregate U.S. Dollar value of DOT in 
the Trust, based on the Pricing Benchmark, less its liabilities and 
expenses. ``NAV per Share'' is calculated by dividing NAV by the number 
of Shares currently outstanding.
    The Pricing Benchmark was created to facilitate financial products 
based on DOT and provides a USD-denominated reference rate for the spot 
price of DOT. The Pricing Benchmark leverages real-time prices from 
multiple Constituent Exchanges to provide a representative spot price. 
Each constituent exchange is weighted proportionally to its trailing 
24-hour liquidity with adjustments for price variance and inactivity.
    The Sponsor believes that the use of the Pricing Benchmark is 
reflective of a reasonable valuation of the average spot price of DOT 
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 Pricing Benchmark thereby seeks to ensure that transactions in DOT 
conducted at outlying prices do not have an undue effect on the value 
of a specific partition, large trades or clusters of trades transacted 
over a short period of time will not have an undue influence on the 
benchmark level, and the effect of large trades at prices that deviate 
from the prevailing price are mitigated from having an undue influence 
on the benchmark level.
    In addition, the Sponsor notes that an oversight function is 
implemented by the Benchmark Provider in seeking to ensure that the 
Pricing Benchmark is administered through codified policies for Pricing 
Benchmark integrity, which include a conflicts of interest policy, a 
control framework, an accountability framework, and an input data 
policy. It is also subject to the UK Benchmark Regulation (``BMR''), 
compliance with which regulations has been subject to a Limited 
Assurance Audit under the ISAE 3000 standards of September 12, 2022.
    The Sponsor has selected the Pricing Benchmark for its quality and 
rigor as well as its broad, well-balanced universe, which the Sponsor 
believes best reflects the market price of DOT.
    As of the date of this filing, the Constituent Exchanges included 
in the Pricing Benchmark that is utilized by the Trust are Kraken and 
Coinbase. As of March 2, 2025, Coinbase makes up 80% of the volume of 
the Pricing Benchmark, with Kraken holding the remaining 20%. Coinbase 
provides a platform for people to engage with digital assets through 
trading, staking, and other activities. As of December 31, 2024, 
Coinbase had an annual trading

[[Page 13808]]

volume of $1,162,000,000,000. Kraken also provides a platform for 
people to engage with digital assets with accessible trading and 
investment options. As of December 31, 2024, Kraken had an annual 
trading volume of $665,000,000,000.
Net Asset Value
    The Administrator daily calculates the Trust's NAV (which means the 
total assets of the Trust including, but not limited to, all DOT and 
cash less total liabilities of the Trust) and NAV per Share once each 
Exchange trading day. The Administrator calculates the NAV of the Trust 
once each Exchange trading day. The NAV for a normal trading day will 
be released after 4:00 p.m. Eastern Time (``ET''). Trading during the 
regular market session on the Exchange closes at 4:00 p.m. ET. However, 
NAVs are not officially struck until later in the day (often by 5:30 
p.m. ET and almost always by 8:00 p.m. EST). The pause between 4:00 
p.m. ET and 5:30 p.m. ET (or later) provides an opportunity for the 
Administrator to algorithmically detect, flag, investigate, and correct 
unusual pricing should it occur. If the Pricing Benchmark is not 
available, or if the Sponsor determines in good faith that the Pricing 
Benchmark does not reflect an accurate DOT price, then the Sponsor will 
employ an alternative method to determine the fair value of the Trust's 
assets.\5\
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    \5\ Such alternative method will only be employed on an ad hoc 
basis. Any permanent change to the calculation of the NAV would 
require a proposed rule change under Rule 19b-4.
---------------------------------------------------------------------------

Availability of Information and Intraday Indicative Value
    In addition to the price transparency of the Index, the Trust will 
provide information regarding the Trust's DOT holdings as well as 
additional data regarding the Trust. The website for the Trust, which 
will be publicly accessible at no charge, will contain the following 
information: (a) the prior business day's NAV per Share; (b) the prior 
business day's Nasdaq official closing price; (c) calculation of the 
premium or discount of such Exchange official closing price against 
such NAV per Share; (d) data in chart form displaying the frequency 
distribution of discounts and premiums of the Exchange's official 
closing price against the NAV, within appropriate ranges for each of 
the four previous calendar quarters (or for the life of the Trust, if 
shorter); (e) the prospectus; and (f) other applicable quantitative 
information. The Trust will also disseminate the Trust's holdings on a 
daily basis on the Trust's website. Quotation and last sale information 
regarding the Shares will be disseminated through the facilities of the 
relevant securities information processor.
    The intraday indicative value (``IIV'') will be calculated by using 
the prior day's closing NAV per Share as a base and updating that value 
during the Exchange's regular market session of 9:30 a.m. to 4:00 p.m. 
ET (the ``Regular Market Session'') to reflect changes in the value of 
the Trust's DOT holdings during the trading day. The IIV disseminated 
during the Regular Market Session should not be viewed as an actual 
real-time update of the NAV, because NAV per Share is calculated only 
once at the end of each trading day based upon the relevant end-of-day 
values of the Trust's investments. The IIV will be widely disseminated 
on a per-Share basis every 15 seconds during the Regular Market Session 
through the facilities of the relevant securities information processor 
by market data vendors. In addition, the IIV will be available through 
online information services, such as Bloomberg and Reuters.
    Quotation and last sale information for DOT is disseminated through 
a variety of major market data vendors. Information related to trading, 
including price and volume information, in DOT is available from major 
market data vendors and from the trading platforms on which DOT are 
traded. The normal trading hours for DOT trading platforms are 24 hours 
per day, 365 days per year.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's Nasdaq official closing price and trading 
volume information for the Shares will be published daily in the 
financial section of newspapers.
Custody of the Trust's DOT
    The DOT Custodian will keep custody of the Trust's DOT. The 
transfer of DOT to and from DOT Counterparties is directed by the 
Sponsor.
    The DOT Custodian carefully considers the design of the physical, 
operational, and cryptographic systems for secure storage of the 
Trust's private keys in an effort to lower the risk of loss or theft. 
The DOT Custodian utilizes a variety of security measures to ensure 
that private keys necessary to transfer digital assets remain 
uncompromised and that the Trust maintains exclusive ownership of its 
assets. The operational procedures of the DOT Custodian are reviewed by 
third-party advisors with specific expertise in physical security. The 
devices that store the keys will never be connected to the internet or 
any other public or private distributed network--this is colloquially 
known as ``cold storage.'' Only specific individuals are authorized to 
participate in the custody process, and no individual acting alone will 
be able to access or use any of the private keys. The DOT Custodian 
will maintain the Trust's DOT in segregated accounts that clearly 
identify the Trust as owner of the account and assets held in that 
account; the segregation will be both from the proprietary property of 
the DOT Custodian and the assets of any other customer.
Creation and Redemption of Shares
    According to the Registration Statement, the Trust creates and 
redeems Shares from time to time, but only in one or more Baskets. 
Baskets are only made in exchange for delivery to the Trust or the 
distribution by the Trust of the amount of cash equivalent to the 
amount of DOT represented by the Baskets being created or redeemed, the 
amount of which is based on the quantity of DOT attributable to each 
Share of the Trust (net of accrued but unpaid Sponsor fees and any 
accrued but unpaid extraordinary expenses or liabilities) being created 
or redeemed determined as of 4:00 p.m. ET on the day the order to 
create or redeem Baskets is properly received.
    Authorized Participants are the only persons that may place orders 
to create and redeem Baskets. Authorized Participants must be (1) 
registered broker-dealers or other securities market participants, such 
as banks and other financial institutions, which are not required to 
register as broker-dealers to engage in securities transactions 
described below, and (2) DTC Participants.
    Authorized Participants will deliver only cash to create shares and 
will receive only cash when redeeming Shares. Further, Authorized 
Participants will not directly or indirectly purchase, hold, deliver, 
or receive DOT as part of the creation or redemption process or 
otherwise direct the Trust or a DOT Counterparty with respect to 
purchasing, holding, delivering, or receiving DOT as part of the 
creation or redemption process.
    The DOT Counterparty is a designated third party with whom the 
Sponsor has entered into an agreement on behalf of the Trust that will 
deliver, receive or convert to U.S. dollars the DOT related to the 
Authorized Participant's creation or redemption order. The Sponsor 
performs extensive due diligence as part

[[Page 13809]]

of its DOT Counterparty selection and onboarding process. As part of 
this process, the Sponsor assesses DOT Counterparty candidates against 
various criteria, including those relating to candidates' (1) 
financials, (2) reputation, (3) settlement history with the Sponsor, 
and (4) their regulatory oversight. The Trust will create Shares by 
receiving DOT from a DOT Counterparty that is not the Authorized 
Participant, and the Trust--not the Authorized Participant--is 
responsible for selecting the DOT Counterparty to deliver the DOT. 
Further, the DOT Counterparty will not be acting as an agent of the 
Authorized Participant with respect to the delivery of the DOT to the 
Trust or acting at the direction of the Authorized Participant with 
respect to the delivery of the DOT to the Trust.
    The Trust will redeem Shares by delivering DOT to a DOT 
Counterparty that is not the Authorized Participant and the Trust--not 
the Authorized Participant--is responsible for selecting the DOT 
Counterparty to receive the DOT. Further, the DOT Counterparty will not 
be acting as an agent of the Authorized Participant with respect to the 
receipt of the DOT from the Trust.
    Each Authorized Participant will be required to be registered as a 
broker-dealer under the Exchange Act and a member in good standing with 
FINRA, or exempt from being or otherwise not required to be licensed as 
a broker-dealer or a member of FINRA, and will be qualified to act as a 
broker or dealer in the states or other jurisdictions where the nature 
of its business so requires. Certain Authorized Participants may also 
be regulated under federal and state banking laws and regulations. Each 
Authorized Participant has its own set of rules and procedures, 
internal controls and information barriers as it determines is 
appropriate in light of its own regulatory regime.
    According to the Registration Statement, on any business day, an 
Authorized Participant may place an order to create one or more Baskets 
via a cash transaction. Purchase orders must be placed by 12:00 p.m. 
ET, the close of regular trading on the Exchange, or another time 
determined by the Sponsor. The day on which an order is received by the 
Transfer Agent is considered the purchase order date. The total deposit 
of cash required is based on the combined NAV of the number of Shares 
included in the Baskets being created determined as of 4:00 p.m. ET on 
the date the order to purchase is properly received. The Administrator 
determines the quantity of DOT associated with a Basket for a given day 
by dividing the number of DOT held by the Trust as of the opening of 
business on that business day, adjusted for the amount of DOT 
constituting estimated accrued but unpaid fees and expenses of the 
Trust 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 Basket.
    The procedures by which an authorized participant can redeem one or 
more Baskets mirror the procedures for the creation of Baskets.
    The Sponsor will maintain ownership and control of DOT in a manner 
consistent with good delivery requirements for spot commodity 
transactions.
Applicable Standard
    The Commission has historically approved or disapproved exchange 
filings to list and trade series of Trust Issued Receipts, including 
spot-based Commodity-Based Trust Shares, on the basis of whether the 
listing exchange has in place a comprehensive surveillance sharing 
agreement with a regulated market of significant size related to the 
underlying commodity to be held.\6\ The Commission has also 
consistently recognized, however, that this is not the exclusive means 
by which an ETP listing exchange can meet this statutory obligation.\7\ 
A listing exchange could, alternatively, demonstrate that ``other means 
to prevent fraudulent and manipulative acts and practices will be 
sufficient'' to justify dispensing with a surveillance-sharing 
agreement with a regulated market of significant size.
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    \6\ See Securities Exchange Act Release Nos. 78262 (July 8, 
2016), 81 FR 78262 (July 14, 2016) (the ``Winklevoss Proposal''). 
The Winklevoss Proposal was subsequently disapproved by the 
Commission. See Securities Exchange Act Release No. 83723 (July 26, 
2018), 83 FR 37579 (August 1, 2018) (the ``Winklevoss Order''). 
Prior orders from the Commission have pointed out that in every 
prior approval order for Commodity-Based Trust Shares, there has 
been a derivatives market that represents the regulated market of 
significant size, generally a Commodity Futures Trading Commission 
(the ``CFTC'') regulated futures market. Further to this point, the 
Commission's prior orders have noted that the spot commodities and 
currency markets for which it has previously approved spot ETPs are 
generally unregulated and that the Commission relied on the 
underlying futures market as the regulated market of significant 
size that formed the basis for approving the series of Currency and 
Commodity-Based Trust Shares, including gold, silver, platinum, 
palladium, copper, and other commodities and currencies. The 
Commission specifically noted in the Winklevoss Order that the 
approval order issued related to the first spot gold ETP ``was based 
on an assumption that the currency market and the spot gold market 
were largely unregulated.'' See Winklevoss Order at 37592. As such, 
the regulated market of significant size test does not require that 
the spot market be regulated in order for the Commission to approve 
this proposal, and precedent makes clear that an underlying market 
for a spot commodity or currency being a regulated market would 
actually be an exception to the norm. These largely unregulated 
currency and commodity markets do not provide the same protections 
as the markets that are subject to the Commission's oversight, but 
the Commission has consistently looked to surveillance sharing 
agreements with the underlying futures market in order to determine 
whether such products were consistent with the Act. See Securities 
Exchange Act No. 99306 (January 10, 2024), 89 FR 3008 (January 17, 
2024) (Self-Regulatory Organizations; NYSE Arca, Inc.; The Nasdaq 
Stock Market LLC; Cboe BZX Exchange, Inc.; Order Granting 
Accelerated Approval of Proposed Rule Changes, as Modified by 
Amendments Thereto, To List and Trade Bitcoin-Based Commodity-Based 
Trust Shares and Trust Units) (the ``Spot Bitcoin ETP Approval 
Order''); 100224 (May 23, 2024), 89 FR 46937 (May 30, 2024) (Self-
Regulatory Organizations; NYSE Arca, Inc.; The Nasdaq Stock Market 
LLC; Cboe BZX Exchange, Inc.; Order Granting Accelerated Approval of 
Proposed Rule Changes, as Modified by Amendments Thereto, To List 
and Trade Shares of Ether-Based Exchange-Traded Products) (the 
``Spot ETH ETP Approval Order'').
    \7\ See Winklevoss Order, 83 FR at 37580; see Spot Bitcoin ETP 
Approval Order, 89 FR at 3009; see Spot ETH ETP Approval Order 89 FR 
at 46938.
---------------------------------------------------------------------------

    The Commission has issued orders granting approval for proposals to 
list bitcoin- and ether-based commodity trust shares and bitcoin- and 
ether-based trust issued receipts (these proposed funds are nearly 
identical to the Trust, but proposed to hold bitcoin and ether, 
respectively, instead of DOT) (``Spot Bitcoin ETPs'' and ``Spot ETH 
ETPs''). In both the Spot Bitcoin ETP Approval Order and Spot ETH ETP 
Approval Order, the Commission found that sufficient ``other means'' of 
preventing fraud and manipulation had been demonstrated that justified 
dispensing with a surveillance-sharing agreement with a market of 
significant size. Specifically, the Commission found that while the 
Chicago Mercantile Exchange (``CME'') futures market for both bitcoin 
and ether were not of ``significant size'' with respect to the spot 
market, the Exchange demonstrated that other means could be reasonably 
expected to assist in surveilling for fraudulent and manipulative acts 
and practices in the specific context of the proposals.
    As further discussed below, both the Exchange and the Sponsor 
believe that this proposal and the analysis to be included are 
sufficient to establish that there are sufficient ``other means'' of 
preventing fraud and manipulation that warrant dispensing of the 
surveillance-sharing agreement with a regulated market of significant 
size, as was done with both Spot Bitcoin ETPs and Spot ETH ETPs, and 
that this proposal should be approved.
    The Commission has approved numerous series of Trust Issued 
Receipts,\8\ including Commodity-Based

[[Page 13810]]

Trust Shares,\9\ to be listed on U.S. national securities exchanges. In 
order for any proposed rule change from an exchange to be approved, the 
Commission must determine that, among other things, the proposal is 
consistent with the requirements of Section 6(b)(5) of the Act, 
specifically including: (i) the requirement that a national securities 
exchange's rules are designed to prevent fraudulent and manipulative 
acts and practices; and (ii) the requirement that an exchange proposal 
be designed, in general, to protect investors and the public interest. 
The Exchange believes that this proposal is consistent with the 
requirements of Section 6(b)(5) of the Act.
---------------------------------------------------------------------------

    \8\ Pursuant to Nasdaq Rule 5720(a), the term ``Trust Issued 
Receipt'' means a security (a) that is issued by a trust which holds 
specified securities deposited with the trust; (b) that, when 
aggregated in some specified minimum number, may be surrendered to 
the trust by the beneficial owner to receive the securities; and (c) 
that pays beneficial owners dividends and other distributions on the 
deposited securities, if any are declared and paid to the trustee by 
an issuer of the deposited securities
    \9\ Pursuant to Nasdaq Rule 5711(d)(iv), the term ``Commodity-
Based Trust Shares'' means a security (1) that is issued by a trust 
that holds (a) a specified commodity deposited with the trust, or 
(b) a specified commodity and, in addition to such specified 
commodity, cash; (2) that is issued by such trust in a specified 
aggregate minimum number in return for a deposit of a quantity of 
the underlying commodity and/or cash; and (3) that, when aggregated 
in the same specified minimum number, may be redeemed at a holder's 
request by such trust which will deliver to the redeeming holder the 
quantity of the underlying commodity and/or cash.
---------------------------------------------------------------------------

    As noted above, the Commission has recognized that the ``regulated 
market of significant size'' standard is not the only means for 
satisfying Section 6(b)(5) of the Act, specifically providing that a 
listing exchange could demonstrate that ``other means to prevent 
fraudulent and manipulative acts and practices'' are sufficient to 
justify dispensing with the requisite surveillance-sharing 
agreement.\10\ For example, in approving the Spot Bitcoin ETPs, the 
Commission found that there were ``sufficient `other means' of 
preventing fraud and manipulation,'' including that:
---------------------------------------------------------------------------

    \10\ See Winklevoss Order at 37580. The Commission has also 
specifically noted that it ``is not applying a `cannot be 
manipulated' standard; instead, the Commission is examining whether 
the proposal meets the requirements of the Exchange Act and, 
pursuant to its Rules of Practice, places the burden on the listing 
exchange to demonstrate the validity of its contentions and to 
establish that the requirements of the Exchange Act have been met.'' 
Id. at 37582.

    [B]ased on the record before the Commission and the improved 
quality of the correlation analysis in the record, including the 
Commission's own analysis, the Commission is able to conclude that 
fraud or manipulation that impacts prices in spot bitcoin markets 
would likely similarly impact CME bitcoin futures prices. And 
because the CME's surveillance can assist in detecting those impacts 
on CME bitcoin futures prices, the Exchanges' comprehensive 
surveillance-sharing agreement with the CME--a U.S. regulated market 
whose bitcoin futures market is consistently highly correlated to 
spot bitcoin, albeit not of ``significant size'' related to spot 
bitcoin--can be reasonably expected to assist in surveilling for 
fraudulent and manipulative acts and practices in the specific 
context of the [Spot Bitcoin ETPs].\11\
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 99306 (January 10, 
2024), 89 FR 3008 (January 17, 2024) (Order Granting Accelerated 
Approval of Proposed Rule Changes, as Modified by Amendments 
Thereto, To List and Trade Shares of Bitcoin-Based Commodity-Based 
Trust Shares and Trust Units). The SEC made substantially similar 
findings in the approval order for Spot ETH ETPs. See Securities 
Exchange Act Release No. 100224 (May 23, 2024), 89 FR 46937 (May 30, 
2024) (Order Granting Accelerated Approval of Proposed Rule Changes, 
as Modified by Amendments Thereto, To List and Trade Shares of 
Ether-Based Exchange-Traded Products).

    Today, Coinbase Derivatives, LLC (``Coinbase Derivatives'') offers 
trading in DOT futures. Nasdaq has a comprehensive surveillance-sharing 
agreement with Coinbase Derivatives via its common membership in the 
Intermarket Surveillance Group (``ISG'').\12\ This facilitates the 
sharing of information that is available to Coinbase Derivatives 
through its surveillance of its markets, including its surveillance of 
Coinbase Derivatives' DOT futures market. Similar to the Spot Bitcoin 
and Spot ETH ETPs previously approved by the SEC, Nasdaq's ability to 
obtain information regarding trading in the DOT futures from other 
markets that are members of the ISG (specifically Coinbase Derivatives) 
would assist Nasdaq in detecting and deterring misconduct.
---------------------------------------------------------------------------

    \12\ For a list of the current members and affiliate members of 
ISG, see https://isgportal.org/public-members.
---------------------------------------------------------------------------

Initial and Continued Listing
    The Shares will be subject to Nasdaq Rule 5711(d)(vi), which sets 
forth the initial and continued listing criteria applicable to 
Commodity-Based Trust Shares. The Exchange will obtain a representation 
that the Trust's NAV per Share will be calculated daily and will be 
made available to all market participants at the same time. A minimum 
of 40,000 Shares will be required to be outstanding at the time of 
commencement of trading on the Exchange. Upon termination of the Trust, 
the Shares will be removed from listing. The Trustee will be a trust 
company having substantial capital and surplus and the experience and 
facilities for handling corporate trust business, as required under 
Nasdaq Rule 5711(d)(vi)(D) and no change will be made to the Trustee 
without prior notice to and approval of the Exchange.
    As required in Nasdaq Rule 5711(d)(viii), the Exchange notes that 
any registered market maker (``Market Maker'') in the Shares must file 
with the Exchange, in a manner prescribed by the Exchange, and keep 
current a list identifying all accounts for trading the underlying 
commodity, related futures or options on futures, or any other related 
derivatives, which the registered Market Maker may have or over which 
it may exercise investment discretion. No registered Market Maker in 
the Shares shall trade in the underlying commodity, related futures or 
options on futures, or any other related derivatives, in an account in 
which a registered Market Maker, directly or indirectly, controls 
trading activities, or has a direct interest in the profits or losses 
thereof, which has not been reported to the Exchange as required by 
Nasdaq Rule 5711(d). In addition to the existing obligations under 
Exchange rules regarding the production of books and records, the 
registered Market Maker in the Shares shall make available to the 
Exchange such books, records or other information pertaining to 
transactions by such entity or any limited partner, officer or approved 
person thereof, registered or non-registered employee affiliated with 
such entity for its or their own accounts in the underlying commodity, 
related futures or options on futures, or any other related 
derivatives, as may be requested by the Exchange.
    The Exchange is able to obtain information regarding trading in the 
Shares and the underlying DOT, DOT futures contracts, or any other DOT 
derivative through members acting as registered Market Makers, in 
connection with their proprietary or customer trades.
    As a general matter, the Exchange has regulatory jurisdiction over 
its members, and their associated persons. The Exchange also has 
regulatory jurisdiction over any person or entity controlling a member, 
as well as a subsidiary or affiliate of a member that is in the 
securities business. A subsidiary or affiliate of a member organization 
that does business only in commodities would not be subject to Exchange 
jurisdiction, but the Exchange could obtain information regarding the 
activities of such subsidiary or affiliate through surveillance sharing 
agreements with regulatory organizations of which such subsidiary or 
affiliate is a member.

[[Page 13811]]

Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. The Exchange will 
allow trading in the Shares from 4:00 a.m. to 8:00 p.m. ET. The 
Exchange has appropriate rules to facilitate transactions in the Shares 
during all trading sessions. The Shares of the Trust will conform to 
the initial and continued listing criteria set forth in Nasdaq Rule 
5711(d) and will comply with the requirements of Rule 10A-3 of the Act.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. The Exchange will halt trading in the Shares 
under the conditions specified in Nasdaq Rules 4120 and 4121, including 
without limitation the conditions specified in Nasdaq Rule 4120(a)(9) 
and (10) and the trading pauses under Nasdaq Rules 4120(a)(11) and 
(12).
    Trading may be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) the extent to which trading is not 
occurring in the DOT underlying the Shares; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present.
    If the IIV or the value of the Index is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
interruption to the dissemination of the IIV or the value of the Index 
occurs. If the interruption to the dissemination of the IIV or the 
value of the Index persists past the trading day in which it occurred, 
the Exchange will halt trading no later than the beginning of the 
trading day following the interruption.
    In addition, if the Exchange becomes aware that the NAV per Share 
with respect to the Shares is not disseminated to all market 
participants at the same time, it will halt trading in the Shares until 
such time as the NAV per Share is available to all market participants.
Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. The surveillance 
program includes real-time patterns for price and volume movements and 
post-trade surveillance patterns (e.g., spoofing, marking the close, 
pinging, phishing). Trading of Shares on the Exchange will be subject 
to the Exchange's surveillance program for derivative products, as well 
as cross-market surveillances administered by FINRA, on behalf of the 
Exchange pursuant to a regulatory services agreement, which are also 
designed to detect violations of Exchange rules and applicable federal 
securities laws. The Exchange is responsible for FINRA's performance 
under this regulatory services agreement.
    The Exchange will require the Trust to represent to the Exchange 
that it will advise the Exchange of any failure by the Trust to comply 
with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Exchange Act, the Exchange 
will surveil for compliance with the continued listing requirements. If 
the Trust is not in compliance with the applicable listing 
requirements, the Exchange will commence delisting procedures under the 
Nasdaq 5800 Series. In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets and other entities that are members of the ISG, and the 
Exchange or FINRA, on behalf of the Exchange, or both, may obtain 
trading information regarding trading in the Shares and listed DOT 
futures from such markets and other entities. The Exchange also may 
obtain information regarding trading in the Shares, listed DOT futures 
via the ISG, from other exchanges who are members or affiliates of the 
DOT, or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an information circular (``Information Circular'') of the 
special characteristics and risks associated with trading the Shares. 
Specifically, the Information Circular will discuss the following: (1) 
the procedures for creations and redemptions of Shares in Baskets (and 
that Shares are not individually redeemable); (2) Section 10 of Nasdaq 
General Rule 9, which imposes suitability obligations on Nasdaq members 
with respect to recommending transactions in the Shares to customers; 
(3) how information regarding the IIV and NAV is disseminated; (4) the 
risks involved in trading the Shares during the pre-market and post-
market sessions when an updated IIV will not be calculated or publicly 
disseminated; (5) the requirement that members deliver a prospectus to 
investors purchasing newly issued Shares prior to or concurrently with 
the confirmation of a transaction; and (6) trading information. The 
Information Circular will also discuss any exemptive, no action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    The Information Circular will also reference the fact that there is 
no regulated source of last sale information regarding DOT, that the 
Commission has no jurisdiction over the trading of DOT as a commodity.
    Additionally, the Information Circular will reference that the 
Trust is subject to various fees and expenses described in the 
Registration Statement. The Information Circular will also disclose the 
trading hours of the Shares. The Information Circular will disclose 
that information about the Shares will be publicly available on the 
Trust's website.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\14\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission has approved numerous series of Trust Issued 
Receipts, including Commodity-Based Trust Shares, to be listed on U.S. 
national securities exchanges. In order for any proposed rule change 
from an exchange to be approved, the Commission must determine that, 
among other things, the proposal is consistent with the requirements of 
Section 6(b)(5) of the Act, specifically including: (i) the requirement 
that a national securities exchange's rules are designed to prevent 
fraudulent and manipulative acts and practices; and (ii) the 
requirement that an exchange proposal be designed, in general, to 
protect investors and the public interest. The Exchange believes that 
this proposal is consistent with the

[[Page 13812]]

requirements of Section 6(b)(5) of the Act.
    As noted above, the Commission has recognized that the ``regulated 
market of significant size'' standard is not the only means for 
satisfying Section 6(b)(5) of the act, specifically providing that a 
listing exchange could demonstrate that ``other means to prevent 
fraudulent and manipulative acts and practices'' are sufficient to 
justify dispensing with the requisite surveillance-sharing agreement 
with the underlying spot market. The Exchange and Sponsor believe that 
such conditions are present. As discussed above, in approving the Spot 
Bitcoin ETPs, the Commission found that there were ``sufficient `other 
means' of preventing fraud and manipulation,'' including that:

    [B]ased on the record before the Commission and the improved 
quality of the correlation analysis in the record, including the 
Commission's own analysis, the Commission is able to conclude that 
fraud or manipulation that impacts prices in spot bitcoin markets 
would likely similarly impact CME bitcoin futures prices. And 
because the CME's surveillance can assist in detecting those impacts 
on CME bitcoin futures prices, the Exchanges' comprehensive 
surveillance-sharing agreement with the CME--a U.S. regulated market 
whose bitcoin futures market is consistently highly correlated to 
spot bitcoin, albeit not of ``significant size'' related to spot 
bitcoin--can be reasonably expected to assist in surveilling for 
fraudulent and manipulative acts and practices in the specific 
context of the [Spot Bitcoin ETPs].\15\
---------------------------------------------------------------------------

    \15\ See Securities Exchange Act Release No. 99306 (January 10, 
2024), 89 FR 3008 (January 17, 2024) (Order Granting Accelerated 
Approval of Proposed Rule Changes, as Modified by Amendments 
Thereto, To List and Trade Shares of Bitcoin-Based Commodity-Based 
Trust Shares and Trust Units). The SEC made substantially similar 
findings in the approval order for spot ether ETPs. See Securities 
Exchange Act Release No. 100224 (May 23, 2024), 89 FR 46937 (May 30, 
2024) (Order Granting Accelerated Approval of Proposed Rule Changes, 
as Modified by Amendments Thereto, To List and Trade Shares of 
Ether-Based Exchange-Traded Products).

    As discussed above, Coinbase Derivatives offers trading in DOT 
futures. Nasdaq has a comprehensive surveillance-sharing agreement with 
Coinbase Derivatives via its common membership in ISG, which 
facilitates the sharing of information that is available to Coinbase 
Derivatives through its surveillance of its markets, including its 
surveillance of Coinbase Derivatives' DOT futures market. Similar to 
the Spot Bitcoin and Spot ETH ETPs previously approved by the SEC, 
Nasdaq's ability to obtain information regarding trading in the DOT 
futures from other markets that are members of the ISG (specifically 
Coinbase Derivatives) would assist Nasdaq in detecting and deterring 
misconduct.
    The Exchange further believes that the proposed rule change is 
designed to prevent fraudulent and manipulative acts and practices and 
to protect investors and the public interest in that the Shares will be 
listed and traded on the Exchange pursuant to the initial and continued 
listing criteria set forth in Nasdaq Rule 5711(d). The Exchange has in 
place surveillance procedures that are adequate to properly monitor 
trading in the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws. As 
discussed above, the surveillance program includes real-time patterns 
for price and volume movements and post-trade surveillance patterns 
(e.g., spoofing, marking the close, pinging, phishing). Trading of 
Shares on the Exchange will be subject to the Exchange's surveillance 
program for derivative products, as well as cross-market surveillances 
administered by FINRA, on behalf of the Exchange pursuant to a 
regulatory services agreement, which are also designed to detect 
violations of Exchange rules and applicable federal securities laws. 
The Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
    The Exchange will require the Trust to represent to the Exchange 
that it will advise the Exchange of any failure by the Trust to comply 
with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Exchange Act, the Exchange 
will surveil for compliance with the continued listing requirements. If 
the Trust is not in compliance with the applicable listing 
requirements, the Exchange will commence delisting procedures under the 
Nasdaq 5800 Series. In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
    The Exchange will communicate as needed regarding trading in the 
Shares with other markets and other entities that are members of the 
ISG, and the Exchange may obtain trading information regarding trading 
in the Shares and listed DOT futures from such markets and other 
entities.
    Trading in Shares of the Trust will be halted if the circuit 
breaker parameters have been reached or because of market conditions or 
for reasons that, in the view of the Exchange, make trading in the 
Shares inadvisable. These may include unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
Shares that will enhance competition among market participants, to the 
benefit of investors and the marketplace.
    For all the above reasons, the Exchange believes that the proposed 
rule change is consistent with the requirements of Section 6(b)(5) of 
the Act.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes 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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period 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 shall: (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-NASDAQ-2025-029 on the subject line.

[[Page 13813]]

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-NASDAQ-2025-029. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NASDAQ-2025-029 and should 
be submitted on or before April 16, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-05045 Filed 3-25-25; 8:45 am]
BILLING CODE 8011-01-P

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