Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Certain Rules Related to Flexible Exchange Options, 19756-19761 [2025-08115]
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lotter on DSK11XQN23PROD with NOTICES1
19756
Federal Register / Vol. 90, No. 89 / Friday, May 9, 2025 / Notices
Infrastructure Advisors L.L.C.,
Blackstone Ireland Fund Management
Limited, Blackstone Ireland Limited,
Blackstone Liquid Credit Advisors I
LLC, Blackstone Liquid Credit Strategies
LLC, Blackstone Private Credit
Strategies LLC, Blackstone Private
Investments Advisors L.L.C., Blackstone
Real Estate Special Situations Advisors
L.L.C., BX REIT Advisors L.L.C., BXMT
Advisors L.L.C., Clarus Ventures, LLC,
certain of their wholly-owned
subsidiaries, joint ventures and BDCdownstream funds as described in
Appendix A to the application and
certain of their affiliated entities as
described in Appendix B to the
application.
FILING DATES: The application was filed
on March 14, 2025, and amended on
April 11, 2025, and April 24, 2025.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
will be issued unless the Commission
orders a hearing. Interested persons may
request a hearing on any application by
emailing the SEC’s Secretary at
Secretarys-Office@sec.gov and serving
the Applicants with a copy of the
request by email, if an email address is
listed for the relevant Applicant below,
or personally or by mail, if a physical
address is listed for the relevant
Applicant below. Hearing requests
should be received by the Commission
by 5:30 p.m. on May 30, 2025, and
should be accompanied by proof of
service on the Applicants, in the form
of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0–
5 under the Act, hearing requests should
state the nature of the writer’s interest,
any facts bearing upon the desirability
of a hearing on the matter, the reason for
the request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
emailing the Commission’s Secretary at
Secretarys-Office@sec.gov.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
Leon Volchyok, Esq., Blackstone Inc.,
Leon.Volchyok@blackstone.com; Oran
Ebel, Esq., Blackstone Inc., Oran.Ebel@
blackstone.com; Rajib Chanda,
Rajib.Chanda@stblaw.com; Kenneth
Burdon, Kenneth.Burdon@stblaw.com;
and Jonathan Gaines, Jonathan.Gaines@
stblaw.com.
FOR FURTHER INFORMATION CONTACT:
Adam Large, Senior Special Counsel,
Laura Solomon, Senior Counsel, or
Daniele Marchesani, Assistant Chief
Counsel, at (202) 551–6825 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: For
Applicants’ representations, legal
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analysis, and conditions, please refer to
Applicants’ second amended
application, dated April 24, 2025, which
may be obtained via the Commission’s
website by searching for the file number
at the top of this document, or for an
Applicant using the Company name
search field, on the SEC’s EDGAR
system. The SEC’s EDGAR system may
be searched at https://www.sec.gov/
edgar/searchedgar/companysearch.
html. You may also call the SEC’s Office
of Investor Education and Advocacy at
(202) 551– 8090.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025–08100 Filed 5–8–25; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–102996; File No. SR–
NYSEAMER–2024–78]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing of a
Proposed Rule Change, as Modified by
Amendment No. 1, To Amend Certain
Rules Related to Flexible Exchange
Options
May 5, 2025.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on April 25,
2025, NYSE American LLC (‘‘NYSE
American’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III below, which Items
have been substantially prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendment No. 1, from
interested persons.4
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rules 903G and 906G to permit Flexible
Exchange (‘‘FLEX’’) Options on certain
Exchange-Traded Funds (or ETFs) that
hold bitcoin. This Amendment No. 1
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The initial proposed rule change was filed with
the Commission on December 13, 2024. See
Securities Exchange Act Release No. 102014 (Dec.
20, 2024), 89 FR 105669 (Dec. 27, 2024).
2 15
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supersedes and replaces the original
filing in its entirety.5 The proposed rule
change is available on the Exchange’s
website at www.nyse.com, 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
self-regulatory organization 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 those 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 parts 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 amend Rules
903G (Terms of FLEX Options) and
906G (Position Limits) to permit options
the Grayscale Bitcoin Trust (BTC)
(‘‘GBTC’’), the Grayscale Bitcoin Mini
Trust ETF (‘‘BTC’’), and the Bitwise
Bitcoin ETF (‘‘BITB’’) (each a ‘‘Fund’’
and, collectively, the ‘‘Funds’’) to trade
as FLEX Equity Options and to require
the aggregation of any FLEX and nonFLEX positions on the same underlying
Fund for purposes of calculating
position and exercise limits as set forth
in Rules 904 and 905.6
The Exchange notes that this proposal
is competitive given that Nasdaq Phlx,
LLC (‘‘Phlx’’) recently filed a proposal to
permit FLEX trading on options on
iShares Bitcoin Trust ETF (‘‘IBIT’’), with
an aggregated position and exercise
limit for IBIT options of 25,000contracts.7
5 This Amendment No. 1 modifies the scope of
the original filing to include (i) the Grayscale
Bitcoin Mini Trust ETF and (ii) the Bitwise Bitcoin
ETF. The Exchange also proposes to update existing
rule text references to make technical corrections,
including to update the name of the Grayscale
Bitcoin Mini Trust (BTC) to the Grayscale Bitcoin
Mini Trust ETF.
6 FLEX Options are customized equity or index
contracts that allow investors to tailor contract
terms for exchange-listed equity and index options.
See generally Section 15 (Flexible Exchange
(‘‘FLEX’’) Options). A ‘‘FLEX Equity Option’’ is an
option on a specified underlying equity security
that is subject to the rules of Section 15. See Rule
900G(b)(10).
7 See Securities Exchange Act Release No. 102132
(Jan. 7, 2025), 90 FR 3266 (Jan. 14, 2025) (SR–Phlx–
2024–72) (Notice of Filing of Proposed Rule Change
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Federal Register / Vol. 90, No. 89 / Friday, May 9, 2025 / Notices
Background
Each Fund is ETF that holds bitcoin
and is listed on NYSE Arca, Inc. (‘‘NYSE
Arca’’), the Exchange’s affiliated
equities exchange.8 Recently, the
Commission approved options trading
on the Funds.9 For each Fund, the
position and exercise limits are 25,000
contracts, as set forth in Rule 904,
Commentary .07(f), the lowest available
limit.10
FLEX Equity Options are not
generally subject to position or exercise
limits.11 Today, pursuant to Rule
903G(a)(1), Fund options are not
approved for FLEX trading.12 Therefore,
the 25,000-contract limit applicable to
options on each Fund currently applies
solely to non-FLEX Fund options.
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Proposal
The Exchange proposes to permit
options on each Fund to trade as FLEX
Equity Options and would require the
aggregation of any FLEX and non-FLEX
positions in the same underlying Fund
for purposes of calculating the 25,000contract position and exercise limits
applicable to each Fund.13
To Permit FLEX Trading in the iShares Bitcoin
Trust ETF) (‘‘Phlx FLEX IBIT Proposal’’). Like each
of the Funds, IBIT is an ETF that holds bitcoin.
8 NYSE Arca received approval to list and trade
Bitcoin-Based Commodity-Based Trust Shares in
GBTC, BTC, and BITB pursuant to NYSE Arca Rule
Rule 8.201–E(c)(1). See Securities Exchange Act
Release Nos. 99306 (January 10, 2024) (Order
Granting Accelerated Approval of Proposed Rule
Changes, as Modified by Amendments Thereto, to
list and trade options in GBTC and BITB), 89 FR
3008 (January 17, 2024) (SR–NYSEARCA–2021–90);
100610 (July 26, 2024) (Order Granting Approval of
Proposed Rule Changes, as Modified by
Amendment No. 1, to permit the listing and trading
of options on BTC), 89 FR 62821 (August 1, 2024)
(SR–NYSEARCA–2023–45)
9 See Securities Exchange Act Release No. 101386
(October 18, 2024), 89 FR 84960 (October 24, 2024)
(SR–NYSEAMER–2024–49) (Order approving the
listing and trading of options on GBTC, BTC, and
BITB, pursuant to Rule 915, Commentary .10(a) (the
‘‘Fund Options Approval Order’’).
10 Per Rule 905(a)(i), the exercise limit for options
on each Fund is the same as the position limit for
that Fund as determined by Rule 904. The following
ETFs are also subject to a 25,000-contract position
and exercise limit: IBIT, Fidelity Wise Origin
Bitcoin Fund (‘‘FBTC’’), and ARK 21Shares Bitcoin
(‘‘ARKB’’). See Rules 904, Commentary .07(f) and
905(a)(i).
11 See Rule 906G(b) (subject to the exceptions
enumerated in the rule ‘‘there shall be no position
limits for FLEX Equity options.’’)
12 Rule 903G(a)(1) also does not permit FLEX
trading on options on IBIT, FBTC, and ARKB.
13 See proposed Rules 5.32–O(f)(1) (excluding
GBTC, BTC, and BITB options from the prohibition
against FLEX trading); and 5.35–O(b)(iii) (adopting
the requirement that, for options on each Fund, the
Exchange will aggregate any FLEX and non-FLEX
positions in the same underlying Fund for purposes
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Per the Commission ‘‘rules regarding
position and exercise limits are
intended to prevent the establishment of
options positions that can be used or
might create incentives to manipulate or
disrupt the underlying market so as to
benefit the options positions.’’ 14 For
this reason, the Commission requires
that ‘‘position and exercise limits must
be sufficient to prevent investors from
disrupting the market for the underlying
security by acquiring and exercising a
number of options contracts
disproportionate to the deliverable
supply and average trading volume of
the underlying security.’’ 15 Based on its
review of the data and analysis provided
by the Exchange, the Commission
concluded that the 25,000-contract
position (and exercise) limit for nonFLEX options on each Fund satisfied
these objectives.16
As proposed, for options on each
Fund, the Exchange will aggregate any
FLEX and non-FLEX positions in the
same underlying Fund for purposes of
calculating the 25,000-contract position
and exercise limits. For each Fund, this
proposed aggregated limit effectively
restricts a market participant from
holding positions that could result in
the receipt of more than 2,500,000
shares, aggregated for FLEX and nonFLEX in the same underlying Fund (if
that market participant exercised all its
options). The Exchange believes that
capping the aggregated position and
exercise limits at 25,000 contracts, the
lowest available limit, would be
sufficient to address concerns related to
manipulation and the protection of
investors. The Exchange notes that this
number is conservative given the
liquidity of each Fund.17
While the Exchange proposes an
aggregated 25,000-contract position and
exercise limit for options on each Fund,
it nonetheless believes that, for the
reasons set forth below, evidence exists
to support a much higher position
limit.18
of calculating the position and exercise limits for
that Fund, as set forth in Rules 904 and 905.
14 See supra note 9, Fund Options Approval
Order, 89 FR, at 84971.
15 See id.
16 See id.
17 See id.
18 The Exchange may file a subsequent rule
change to increase the position and exercise limit
for options on the Funds based on additional data
regarding trading activity, to continue to balance
any concerns regarding manipulation. A higher
position and exercise limit would allow
institutional investors to utilize Fund options for
prudent risk management purposes. In this regard,
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19757
Specifically, in approving the options
on each Fund, the Commission
considered and reviewed the Exchange’s
analysis that the exercisable risk
associated with a position limit of
25,000 contracts represented only 0.9%,
0.7%, and 3.6% of the outstanding
shares of GBTC, BTC and BITB,
respectively.19 The Commission also
considered and reviewed the Exchange’s
arguments that with a 25,000-contract
limit for each Fund: (i) the 284,570,100
GBTC shares outstanding, 114 market
participants would have to
simultaneously exercise their positions
to place GBTC under stress; (ii) the
366,950,100 BTC shares outstanding,
meant that 147 market participants
would have to simultaneously exercise
their same-side positions to place BTC
under stress; and (iii) the 68,690,000
BITB shares outstanding, meant that 27
market participants would have to
simultaneously exercise their same-side
positions to place BITB under stress.20
Based on the Commission’s review of
this information and analysis, the
Commission concluded that the 25,000contract position and exercise limit for
options on each Fund would address
concerns related to manipulation and
investor protection and deemed this
limit conservative and therefore
appropriate given the liquidity of each
Fund.21
Each Fund qualifies a 250,000contract limit, pursuant to Rule 904,
Commentary .06(e), which requires that,
for the most recent six-month period,
trading volume for the underlying
security is at least 100,000,000 shares.22
The following table sets forth the
trading data for each Fund, as of
November 25, 2024, for the preceding
six months and the average daily
volume (‘‘ADV’’) for the preceding three
months.
the Exchange would address the impact of higher
position (and exercise) limits on the proposed FLEX
Fund options.
19 See id. Data represents figures from FactSet as
of August 30, 2024.
20 See supra note 9, Fund Options Approval
Order, 89 FR, at 84971.
21 Id.
22 See Rule 904, Commentary .06 (providing at
subparagraph (e) that the position limit shall be
250,000 contracts for options: (i) on underlying
stock or Exchange-Traded Fund Share that had
trading volume of at least 100,000,000 shares during
the most recent six-month trading period; or (ii) on
an underlying stock or Exchange-Traded Fund
Share that had trading volume of at least 75,000,000
shares during the most recent six-month trading
period and has at least 300,000,000 shares currently
outstanding).
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Federal Register / Vol. 90, No. 89 / Friday, May 9, 2025 / Notices
Trading volume
(shares)
Fund
GBTC .........................................................................................................................
BTC ............................................................................................................................
BITB ...........................................................................................................................
550,687,400
163,712,700
288,800,860
Market
capitalization
* $20,661,316,542
† $3,496,748,882
‡ 4,095,157,000
ADV
(shares)
3,829,597
2,036,369
2,480.478
* The market capitalization was determined by multiplying a settlement price ($75.42) by the number of shares outstanding (273,950,100). Data
represents figures from FactSet as of November 25, 2024.
† The market capitalization of BTC was determined by multiplying a settlement price ($42.16) by the number of shares outstanding
(82,939,964). Data represents figures from FactSet as of November 25, 2024.
‡ The market capitalization of BITB was determined by multiplying a settlement price ($51.70) by the number of shares outstanding
(79,950,100). Data represents figures from FactSet as of November 25, 2024.
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Also, as of November 25, 2024, there
were 19,787,762 bitcoins in
circulation.23 At a price of $94,830 per
bitcoin,24 that equates to a market
capitalization of greater than $1.876
trillion. If a position and exercise limit
of 250,000 contracts were considered for
each Fund, the exercisable risk would
represent 9.13% 25 of the GBTC shares
outstanding; 30.14% 26 of BTC shares
outstanding; and 31.27% 27 of BITB
shares outstanding. Given the liquidity
of BTC and BITB, the current 25,000
position and exercise limit appears
extremely conservative.
Despite the proposed addition of
FLEX trading in options on GBTC, BTC,
and BITB (collectively, ‘‘FLEX Fund
Options’’), the Exchange would
continue to limit to 25,000 the number
of options on each Fund traded on the
Exchange that an investor, acting alone
or in concert with others directly or
indirectly, may control and thereby
mitigate potential manipulation. The
Exchange believes that allowing FLEX
Fund Options it consistent with the Act
given FLEX trading is permitted today
in other ETFs overlying a commodity
such as SPDR Gold Shares (‘‘GLD’’) and
iShares Silver Trust (‘‘SLV’’).28
Further, the Exchange believes that
the share creation and redemption
process unique to ETFs would mitigate
any potential risk of manipulation in
FLEX Fund Options. The creation and
redemption process is designed to
ensure that an ETF’s price closely tracks
the value of its underlying asset(s). For
example, if a market participant
exercised a long call position for 25,000
contracts and purchased 2,500,000
23 See https://www.coingecko.com/en/coins/
bitcoin.
24 This is the approximate price of bitcoin from
4:00 p.m. ET on November 25, 2024.
25 This percentage is arrived at with this equation:
(250,000 contract limit * 100 shares per option/
273,950.100 GBTC shares outstanding).
26 This percentage is arrived at with this equation:
(250,000 contract limit * 100 shares per option/
82,939,964 BTC shares outstanding).
27 This percentage is arrived at with this equation:
(250,000 contract limit * 100 shares per option/
79,950,100 BITB shares outstanding).
28 GLD and SLV, like the each of the Funds, holds
one asset in trust.
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shares of GBTC and this purchase
resulted in the value of GBTC shares to
trade at a premium to the value of the
(underlying) bitcoin held by GBTC, the
Exchange believes that other market
participants would attempt to arbitrage
this price difference by selling short
GBTC shares while concurrently
purchasing bitcoin. Those market
participants (arbitrageurs) would then
deliver cash to GBTC and receive shares
of GBTC, which would be used to close
out any previously established short
position in GBTC. Thus, this creation
and redemptions process would
significantly reduce the potential risk of
price dislocation between the value of
shares in each Fund and the value of
bitcoin holdings.
The Exchange understands that FLEX
Equity Options on ETFs are currently
traded in the over-the-counter (‘‘OTC’’)
market by a variety of market
participants, e.g., hedge funds,
proprietary trading firms, and pension
funds, to name a few. The Exchange
believes there is room for significant
growth if a comparable product were
introduced for trading on a regulated
market. The Exchange expects that users
of these OTC products would be among
the primary users of FLEX Fund
Options. The Exchange also believes
that the trading of FLEX Fund Options
would allow these same market
participants to better manage the risk
associated with the volatility of
positions in the underlying ETF (i.e.,
GBTC, BTC, or BITB) given the
enhanced liquidity that an exchangetraded product would bring.
Additionally, the Exchange believes
that FLEX Fund Options traded on the
Exchange would have three important
advantages over the contracts that are
traded in the OTC market. First, as a
result of greater standardization of
contract terms, exchange-traded
contracts should develop more
liquidity. Second, counter-party credit
risk would be mitigated by the fact that
the contracts are issued and guaranteed
by The Options Clearing Corporation
(‘‘OCC’’). Finally, the price discovery
and dissemination provided by the
Exchange and its members would lead
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to more transparent markets. The
Exchange believes that its ability to offer
FLEX Fund Options would aid it in
competing with the OTC market and at
the same time expand the universe of
products available to interested market
participants. The Exchange believes that
an exchange-traded alternative may
provide a useful risk management and
trading vehicle for market participants
and their customers.
The Exchange has analyzed its
capacity and represents that it and The
Options Price Reporting Authority
(‘‘OPRA’’) have the necessary systems
capacity to handle the additional traffic
associated with the listing of FLEX
Fund Options. The Exchange believes
any additional traffic that would be
generated from the trading of FLEX
Fund Options would be manageable.
The Exchange believes ATP Holders
will not have a capacity issue as a result
of this proposed rule change. The
Exchange also represents that it does not
believe this proposed rule change will
cause fragmentation of liquidity. The
Exchange will monitor the trading
volume associated with the additional
options series listed as a result of this
proposed rule change and the effect (if
any) of these additional series on market
fragmentation and on the capacity of the
Exchange’s automated systems.
The Exchange represents that the
same surveillance procedures applicable
to the Exchange’s other options
products listed and traded on the
Exchange, including non-FLEX options
in each Fund, will apply to FLEX Fund
Options, and that it has the necessary
systems capacity to support such
options. FLEX options products (and
their respective symbols) are integrated
into the Exchange’s existing
surveillance system architecture and are
thus subject to the relevant surveillance
processes. The Exchange’s market
surveillance staff (including staff of the
Financial Industry Regulatory Authority
(‘‘FINRA’’) who perform surveillance
and investigative work on behalf of the
Exchange pursuant a regulatory services
agreement) conducts surveillances with
respect to GBTC, BTC, and BITB (i.e.,
the underlying ETFs) and, as
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appropriate, would review activity in
applicable ETF when conducting
surveillances for market abuse or
manipulation in the FLEX Fund
Options.29 The Exchange does not
believe that allowing FLEX Fund
Options would render the marketplace
for non-FLEX options in any of the
Funds, or equity options in general,
more susceptible to manipulative
practices.
The Exchange represents that its
existing trading surveillances are
adequate to monitor the trading in
GBTC, BTC, and BITB, as well as any
subsequent trading of FLEX Fund
Options on the Exchange. Additionally,
the Exchange is a member of the
Intermarket Surveillance Group (‘‘ISG’’)
under the ISG Agreement. ISG members
work together to coordinate surveillance
and investigative information sharing in
the stock, options, and futures markets.
For surveillance purposes, the Exchange
would therefore have access to
information regarding trading activity in
GBTC, BTC, and BITB and in other
pertinent underlying securities on other
exchanges through ISG. In addition, and
as referenced above, the Exchange has a
regulatory services agreement with
FINRA, pursuant to which FINRA
conducts certain surveillances on behalf
of the Exchange. Further, pursuant to a
multi-party 17d–2 joint plan, all options
exchanges allocate regulatory
responsibilities to FINRA to conduct
certain options-related market
surveillances.30 The Exchange will
implement any additional surveillance
procedures it deems necessary to
effectively monitor the trading of FLEX
Fund Options.
The proposed rule change is designed
to allow investors seeking to trade
options on the Funds to utilize FLEX
Fund Options. The Exchange believes
that offering innovative products flows
to the benefit of the investing public. A
29 See supra note 9, Fund Options Approval
Order, 89 FR 84966–68 (regarding surveillance
procedures applicable to GBTC, BTC, and BITB).
30 Section 19(g)(1) of the Act, among other things,
requires every SRO registered as a national
securities exchange or national securities
association to comply with the Act, the rules and
regulations thereunder, and the SRO’s own rules,
and, absent reasonable justification or excuse,
enforce compliance by its members and persons
associated with its members. See 15 U.S.C.
78q(d)(1) and 17 CFR 240.17d–2. Section 17(d)(1)
of the Act allows the Commission to relieve an SRO
of certain responsibilities with respect to members
of the SRO who are also members of another SRO.
Specifically, Section 17(d)(1) allows the
Commission to relieve an SRO of its responsibilities
to: (i) receive regulatory reports from such
members; (ii) examine such members for
compliance with the Act and the rules and
regulations thereunder, and the rules of the SRO;
or (iii) carry out other specified regulatory
responsibilities with respect to such members.
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robust and competitive market requires
that exchanges respond to members’
evolving needs by constantly improving
their offerings. Such efforts would be
stymied if exchanges were prohibited
from offering innovative products such
as the proposed FLEX Fund Options.
The Exchange believes that introducing
FLEX Fund Options would further
broaden the base of investors that use
FLEX Equity Options (and options on
the Funds in general) to manage their
trading and investment risk, including
investors that currently trade in the OTC
market for customized options. The
proposed rule change is also designed to
encourage market makers to shift
liquidity from the OTC market on the
Exchange, which, it believes, will
enhance the process of price discovery
conducted on the Exchange through
increased order flow.
As discussed herein, the Exchange
does not believe that this proposed rule
change raises any unique regulatory
concerns because the proposal to
aggregate FLEX and non-FLEX option
positions in each Fund at the (most
conservative) 25,000-contract position
and exercise limit, which currently
applies solely to non-FLEX options on
each Fund, should provide an adequate
safeguard.
Finally, the Exchange proposes to
make technical changes to Rule 904,
Commentary. 07(f) to update the name
of the Grayscale Bitcoin Mini Trust ETF
(previously known as the Grayscale
Bitcoin Mini Trust (BTC)) and to correct
the symbol associated with Fidelity
Ethereum Fund, which changes will add
accuracy and internal consistent to
Exchange rules making them easier to
comprehend and understand.31
Implementation
The Exchange will announce the
implementation date by Trader Update
within sixty (60) days of the rule
approval.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Securities Exchange Act of 1934
(the ‘‘Act’’),32 in general, and furthers
the objectives of Section 6(b)(5) of the
Act,33 in particular, in that it is designed
to prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to and perfect the
31 See proposed Rule 904, Commentary .07(f)
(updating the name of the Grayscale Bitcoin Mini
Trust (BTC) to Grayscale Bitcoin Mini Trust ETF
and correcting the trading symbol for the Fidelity
Ethereum Fund from ‘‘ETH’’ to ‘‘FETH’’).
32 15 U.S.C. 78f(b).
33 15 U.S.C. 78f(b)(5).
PO 00000
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Fmt 4703
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19759
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. Specifically, the
Exchange believes that introducing
FLEX Fund Options will increase order
flow to the Exchange, increase the
variety of options products available for
trading, and provide a valuable tool for
investors to manage risk. The proposed
rule change is designed to allow
investors seeking to trade options on
any of the Funds to utilize FLEX Fund
Options.
The Exchange believes that the
proposal to permit FLEX Fund Options
would remove impediments to and
perfect the mechanism of a free and
open market. The Exchange believes
that offering FLEX Fund Options will
benefit investors by providing them
with an additional, relatively lower cost
investing tool to gain exposure to the
price of bitcoin and provide a hedging
vehicle to meet their investment needs
in connection with a bitcoin-related
product. Moreover, the proposal would
broaden the base of investors that use
FLEX Options to manage their trading
and investment risk, including investors
that currently trade in the OTC market
for customized options. By trading a
product in an exchange-traded
environment (that is currently being
used in the OTC market), the Exchange
would be able to compete more
effectively with the OTC market. The
Exchange believes the proposed rule
change is designed to prevent
fraudulent and manipulative acts and
practices in that it would lead to the
migration of options currently trading in
the OTC market to trading to the
Exchange. Also, any migration to the
Exchange from the OTC market would
result in increased market transparency
and enhance the process of price
discovery conducted on the Exchange
through increased order flow. The
Exchange also believes that offering
FLEX Fund Options may appeal to retail
investors interested in options trading
(both FLEX and non-FLEX) on GBTC,
BTC, and BITB.
Additionally, the Exchange believes
the proposed rule change is designed to
remove impediments to and to perfect
the mechanism for a free and open
market and a national market system,
and, in general, to protect investors and
the public interest in that it should
create greater trading and hedging
opportunities and flexibility. The
proposed rule change should also result
in enhanced efficiency in initiating and
closing out positions and heightened
contra-party creditworthiness due to the
role of OCC as issuer and guarantor of
FLEX Fund Options. Further, the
E:\FR\FM\09MYN1.SGM
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19760
Federal Register / Vol. 90, No. 89 / Friday, May 9, 2025 / Notices
proposed rule change would result in
increased competition by permitting the
Exchange to offer products that are
currently used in the OTC market.
The Exchange does not believe that
this proposed rule change raises any
unique regulatory concerns because the
proposal to aggregate any FLEX and
non-FLEX options in each Fund at the
current (and most conservative) 25,000contract limit should provide an
adequate safeguard. As noted herein, the
purpose of position (and exercise) limits
is to address potential manipulative
schemes and adverse market impacts
surrounding the use of options, such as
disrupting the market in the security
underlying the options. The Exchange
believes the proposal will benefit
investors and public interest because
the aggregated position and exercise
limits for (FLEX and non-FLEX) options
on the same underlying Fund at 25,000
contracts, the lowest limit available in
options, would address concerns related
to manipulation and protection of
investors as this number is conservative
and therefore appropriate given the
sufficient liquidity in each Fund.
The Exchange believes that offering
innovative products benefits the
investing public. A robust and
competitive market requires that
exchanges respond to the evolving
needs of their members by constantly
improving their offerings. Such efforts
would be stymied if exchanges were
prohibited from offering innovative
products such as the proposed FLEX
Fund Options. The Exchange does not
believe that allowing FLEX Fund
Options would render the marketplace
for equity options more susceptible to
manipulative practices.
Finally, the Exchange represents that
it has an adequate surveillance program
in place to detect manipulative trading
in FLEX Fund Options. Regarding the
proposed FLEX Fund Options, the
Exchange would use the same
surveillance procedures utilized for
FLEX Options currently listed on the
Exchange (as well as for non-FLEX
options on each Fund). For surveillance
purposes, the Exchange would have
access to information regarding trading
activity in the underlying Funds (i.e.,
GBTC, BTC, and BITB).34 In light of
surveillance measures related to both
options and the underlying Funds, the
Exchange believes that existing
surveillance procedures are designed to
deter and detect possible manipulative
behavior which might potentially arise
34 See supra note 9, Fund Options Approval
Order, 89 FR at 84966–68 (regarding surveillance
procedures applicable to GBTC, BTC, and BITB).
VerDate Sep<11>2014
17:11 May 08, 2025
Jkt 265001
from listing and trading the proposed
FLEX Fund Options.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intra-market competition. The
Exchange does not believe that its
proposed rule change will impose any
burden on intra-market competition as
all market participants would have the
option of utilizing the FLEX Fund
Options. The proposed rule change is
designed to allow investors seeking
option exposure to bitcoin to trade
FLEX Fund Options. Moreover, the
Exchange believes that the proposal to
permit FLEX Fund Options would
broaden the base of investors that use
FLEX Options to manage their trading
and investment risk, including investors
that currently trade in the OTC market
for customized options.
Inter-market competition. The
Exchange does not believe that its
proposed rule change will impose any
burden on inter-market competition as
all market participants would have the
option of utilizing the FLEX Fund
Options. The Exchange notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues. The proposed rule change
would support that intermarket
competition by allowing the Exchange
to offer additional functionality to ATP
Holders. The Exchange believes that the
proposed FLEX Fund Options will
increase the variety of options products
available for trading in general and
bitcoin-related products in particular
and, as such, will provide a valuable
tool for investors to manage risk.
As such, the Exchange believes that
this proposal does not create an undue
burden on intermarket competition.
Rather, the Exchange believes that the
proposed rule would bolster intermarket
competition by promoting fair
competition among individual markets.
The Exchange notes that, upon approval
of this proposal, competing options
exchanges will be free to offer products
like the proposed FLEX Fund Options.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
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 self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the 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–
NYSEAMER–2024–78 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NYSEAMER–2024–78. 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
E:\FR\FM\09MYN1.SGM
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Federal Register / Vol. 90, No. 89 / Friday, May 9, 2025 / Notices
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–NYSEAMER–2024–78 and should
be submitted on or before May 30, 2025.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025–08115 Filed 5–8–25; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–102994; File No. SR–FICC–
2025–011]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
the Capital Policy and the Capital
Replenishment Plan
May 5, 2025.
lotter on DSK11XQN23PROD with NOTICES1
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 April 25,
2025, Fixed Income Clearing
Corporation (‘‘FICC’’) 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 clearing agency. FICC filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(3) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
amendments to (i) the Clearing Agency
Policy on Capital Requirements
(‘‘Capital Policy’’ or ‘‘Policy’’) of FICC
and its affiliates, The Depository Trust
Company (‘‘DTC’’) and National
Securities Clearing Corporation
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(3).
17:11 May 08, 2025
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency 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
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The Clearing Agencies are proposing
to revise the Capital Policy and Capital
Replenishment Plan, which were
adopted by the Clearing Agencies in
July 2017 5 and are maintained by the
Clearing Agencies in compliance with
Rule 17ad–22(e)(15) under the Act.6
Overview of the Capital Policy and
Capital Replenishment Plan
The Capital Policy sets forth the
manner in which each Clearing Agency
identifies, monitors, and manages its
general business risk with respect to the
requirement to hold sufficient liquid net
assets (‘‘LNA’’) funded by equity to
cover potential general business losses
so the Clearing Agency can continue
operations and services as a going
concern if such losses materialize.7 The
amount of LNA funded by equity to be
held by each of the Clearing Agencies
for this purpose is defined in the Policy
as the General Business Risk Capital
Requirement. The Policy provides that
the General Business Risk Requirement
is calculated for each Clearing Agency
5 See Securities Exchange Act Release No. 81105
(July 7, 2017), 82 FR 32399 (July 13, 2017) (SR–
DTC–2017–003, SR–FICC–2017–007, SR–NSCC–
2017–004).
6 17 CFR 240.17ad–22(e)(15).
7 Id.
35 17
VerDate Sep<11>2014
(‘‘NSCC,’’ and together with DTC and
FICC, the ‘‘Clearing Agencies’’); and (ii)
the Clearing Agency Capital
Replenishment Plan (‘‘Capital
Replenishment Plan’’ or ‘‘Plan’’) of the
Clearing Agencies. In particular, the
proposed revisions to the Capital Policy
and Capital Replenishment Plan would
(1) make technical revisions to update,
simplify, and clarify statements in the
Policy and Plan; and (2) update the Plan
to document alternate authorizations in
case an authorizing officer is not
available.
Jkt 265001
PO 00000
Frm 00094
Fmt 4703
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19761
as the greatest of three separate
calculations—(1) an amount based on
that Clearing Agency’s general business
risk profile (‘‘Risk-Based Capital
Requirement’’), (2) an amount based on
the time estimated to execute a recovery
or orderly wind-down of the critical
operations of that Clearing Agency
(‘‘Recovery/Wind-down Capital
Requirement’’), and (3) an amount based
on an analysis of that Clearing Agency’s
estimated operating expenses for a sixmonth period (‘‘Operating Expense
Capital Requirement’’). On an annual
basis, each of these three capital
requirements are measured, and the
General Business Risk Capital
Requirement for each Clearing Agency
are determined as the greatest of these
calculations.
Currently, the Capital Policy also
addresses how each Clearing Agency
maintains a portion of retained earnings
as LNA funded by equity as its
Corporate Contribution, as a part of its
management of credit risk 8 and
pursuant to its respective rules.9 These
resources are maintained to address
losses due to a participant default, and
are held in addition to the LNA funded
by equity held by each of the Clearing
Agencies as its General Business Risk
Capital Requirement. The Capital Policy
describes how each Clearing Agency’s
General Business Risk Capital
Requirement and Corporate
Contribution fit within the Clearing
Agencies’ Capital Framework, where the
Total Capital Requirement of each
Clearing Agency is calculated as the
sum of its General Business Risk Capital
Requirement and Corporate
Contribution.
The Policy also provides a plan for
the replenishment of capital through the
Capital Replenishment Plan. The
Capital Replenishment Plan was
adopted by the Clearing Agencies as a
plan for the replenishment of capital by
each Clearing Agency should its equity
fall close to or below the amount being
held as its Total Capital Requirement
pursuant to the Capital Policy. The
Capital Replenishment Plan identifies
8 LNA funded by equity held as the Clearing
Agencies’ Corporate Contribution is held in
addition to resources held by the Clearing Agencies
for credit risk in compliance with Rule 17ad–
22(e)(4) under the Act and in addition to resources
held by the Clearing Agencies for liquidity risk in
compliance with Rule 17ad–22(e)(7). 17 CFR
240.17ad–22(e)(4), (7).
9 The Rules, By-laws and Organization Certificate
of DTC (‘‘DTC Rules’’), the Rulebook of the
Government Securities Division of FICC (‘‘GSD
Rules’’), the Clearing Rules of the Mortgage-Backed
Securities Division of FICC (‘‘MBSD Rules’’), or the
Rules & Procedures of NSCC (‘‘NSCC Rules,’’ and
together with the DTC Rules, GSD Rules and MBSD
Rules, the ‘‘Clearing Agencies’ Rules’’), available at
www.dtcc.com/legal/rules-and-procedures.
E:\FR\FM\09MYN1.SGM
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]]>Agencies
[Federal Register Volume 90, Number 89 (Friday, May 9, 2025)]
[Notices]
[Pages 19756-19761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-08115]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102996; File No. SR-NYSEAMER-2024-78]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To
Amend Certain Rules Related to Flexible Exchange Options
May 5, 2025.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on April 25, 2025, NYSE American LLC (``NYSE American'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I, II,
and III below, which Items have been substantially prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change, as modified by Amendment No. 1, from
interested persons.\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ The initial proposed rule change was filed with the
Commission on December 13, 2024. See Securities Exchange Act Release
No. 102014 (Dec. 20, 2024), 89 FR 105669 (Dec. 27, 2024).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rules 903G and 906G to permit
Flexible Exchange (``FLEX'') Options on certain Exchange-Traded Funds
(or ETFs) that hold bitcoin. This Amendment No. 1 supersedes and
replaces the original filing in its entirety.\5\ The proposed rule
change is available on the Exchange's website at www.nyse.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
---------------------------------------------------------------------------
\5\ This Amendment No. 1 modifies the scope of the original
filing to include (i) the Grayscale Bitcoin Mini Trust ETF and (ii)
the Bitwise Bitcoin ETF. The Exchange also proposes to update
existing rule text references to make technical corrections,
including to update the name of the Grayscale Bitcoin Mini Trust
(BTC) to the Grayscale Bitcoin Mini Trust ETF.
---------------------------------------------------------------------------
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 self-regulatory organization
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 those 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 parts 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 amend Rules 903G (Terms of FLEX Options) and
906G (Position Limits) to permit options the Grayscale Bitcoin Trust
(BTC) (``GBTC''), the Grayscale Bitcoin Mini Trust ETF (``BTC''), and
the Bitwise Bitcoin ETF (``BITB'') (each a ``Fund'' and, collectively,
the ``Funds'') to trade as FLEX Equity Options and to require the
aggregation of any FLEX and non-FLEX positions on the same underlying
Fund for purposes of calculating position and exercise limits as set
forth in Rules 904 and 905.\6\
---------------------------------------------------------------------------
\6\ FLEX Options are customized equity or index contracts that
allow investors to tailor contract terms for exchange-listed equity
and index options. See generally Section 15 (Flexible Exchange
(``FLEX'') Options). A ``FLEX Equity Option'' is an option on a
specified underlying equity security that is subject to the rules of
Section 15. See Rule 900G(b)(10).
---------------------------------------------------------------------------
The Exchange notes that this proposal is competitive given that
Nasdaq Phlx, LLC (``Phlx'') recently filed a proposal to permit FLEX
trading on options on iShares Bitcoin Trust ETF (``IBIT''), with an
aggregated position and exercise limit for IBIT options of 25,000-
contracts.\7\
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 102132 (Jan. 7,
2025), 90 FR 3266 (Jan. 14, 2025) (SR-Phlx-2024-72) (Notice of
Filing of Proposed Rule Change To Permit FLEX Trading in the iShares
Bitcoin Trust ETF) (``Phlx FLEX IBIT Proposal''). Like each of the
Funds, IBIT is an ETF that holds bitcoin.
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[[Page 19757]]
Background
Each Fund is ETF that holds bitcoin and is listed on NYSE Arca,
Inc. (``NYSE Arca''), the Exchange's affiliated equities exchange.\8\
Recently, the Commission approved options trading on the Funds.\9\ For
each Fund, the position and exercise limits are 25,000 contracts, as
set forth in Rule 904, Commentary .07(f), the lowest available
limit.\10\
---------------------------------------------------------------------------
\8\ NYSE Arca received approval to list and trade Bitcoin-Based
Commodity-Based Trust Shares in GBTC, BTC, and BITB pursuant to NYSE
Arca Rule Rule 8.201-E(c)(1). See Securities Exchange Act Release
Nos. 99306 (January 10, 2024) (Order Granting Accelerated Approval
of Proposed Rule Changes, as Modified by Amendments Thereto, to list
and trade options in GBTC and BITB), 89 FR 3008 (January 17, 2024)
(SR-NYSEARCA-2021-90); 100610 (July 26, 2024) (Order Granting
Approval of Proposed Rule Changes, as Modified by Amendment No. 1,
to permit the listing and trading of options on BTC), 89 FR 62821
(August 1, 2024) (SR-NYSEARCA-2023-45)
\9\ See Securities Exchange Act Release No. 101386 (October 18,
2024), 89 FR 84960 (October 24, 2024) (SR-NYSEAMER-2024-49) (Order
approving the listing and trading of options on GBTC, BTC, and BITB,
pursuant to Rule 915, Commentary .10(a) (the ``Fund Options Approval
Order'').
\10\ Per Rule 905(a)(i), the exercise limit for options on each
Fund is the same as the position limit for that Fund as determined
by Rule 904. The following ETFs are also subject to a 25,000-
contract position and exercise limit: IBIT, Fidelity Wise Origin
Bitcoin Fund (``FBTC''), and ARK 21Shares Bitcoin (``ARKB''). See
Rules 904, Commentary .07(f) and 905(a)(i).
---------------------------------------------------------------------------
FLEX Equity Options are not generally subject to position or
exercise limits.\11\ Today, pursuant to Rule 903G(a)(1), Fund options
are not approved for FLEX trading.\12\ Therefore, the 25,000-contract
limit applicable to options on each Fund currently applies solely to
non-FLEX Fund options.
---------------------------------------------------------------------------
\11\ See Rule 906G(b) (subject to the exceptions enumerated in
the rule ``there shall be no position limits for FLEX Equity
options.'')
\12\ Rule 903G(a)(1) also does not permit FLEX trading on
options on IBIT, FBTC, and ARKB.
---------------------------------------------------------------------------
Proposal
The Exchange proposes to permit options on each Fund to trade as
FLEX Equity Options and would require the aggregation of any FLEX and
non-FLEX positions in the same underlying Fund for purposes of
calculating the 25,000-contract position and exercise limits applicable
to each Fund.\13\
---------------------------------------------------------------------------
\13\ See proposed Rules 5.32-O(f)(1) (excluding GBTC, BTC, and
BITB options from the prohibition against FLEX trading); and 5.35-
O(b)(iii) (adopting the requirement that, for options on each Fund,
the Exchange will aggregate any FLEX and non-FLEX positions in the
same underlying Fund for purposes of calculating the position and
exercise limits for that Fund, as set forth in Rules 904 and 905.
---------------------------------------------------------------------------
Per the Commission ``rules regarding position and exercise limits
are intended to prevent the establishment of options positions that can
be used or might create incentives to manipulate or disrupt the
underlying market so as to benefit the options positions.'' \14\ For
this reason, the Commission requires that ``position and exercise
limits must be sufficient to prevent investors from disrupting the
market for the underlying security by acquiring and exercising a number
of options contracts disproportionate to the deliverable supply and
average trading volume of the underlying security.'' \15\ Based on its
review of the data and analysis provided by the Exchange, the
Commission concluded that the 25,000-contract position (and exercise)
limit for non-FLEX options on each Fund satisfied these objectives.\16\
---------------------------------------------------------------------------
\14\ See supra note 9, Fund Options Approval Order, 89 FR, at
84971.
\15\ See id.
\16\ See id.
---------------------------------------------------------------------------
As proposed, for options on each Fund, the Exchange will aggregate
any FLEX and non-FLEX positions in the same underlying Fund for
purposes of calculating the 25,000-contract position and exercise
limits. For each Fund, this proposed aggregated limit effectively
restricts a market participant from holding positions that could result
in the receipt of more than 2,500,000 shares, aggregated for FLEX and
non-FLEX in the same underlying Fund (if that market participant
exercised all its options). The Exchange believes that capping the
aggregated position and exercise limits at 25,000 contracts, the lowest
available limit, would be sufficient to address concerns related to
manipulation and the protection of investors. The Exchange notes that
this number is conservative given the liquidity of each Fund.\17\
---------------------------------------------------------------------------
\17\ See id.
---------------------------------------------------------------------------
While the Exchange proposes an aggregated 25,000-contract position
and exercise limit for options on each Fund, it nonetheless believes
that, for the reasons set forth below, evidence exists to support a
much higher position limit.\18\
---------------------------------------------------------------------------
\18\ The Exchange may file a subsequent rule change to increase
the position and exercise limit for options on the Funds based on
additional data regarding trading activity, to continue to balance
any concerns regarding manipulation. A higher position and exercise
limit would allow institutional investors to utilize Fund options
for prudent risk management purposes. In this regard, the Exchange
would address the impact of higher position (and exercise) limits on
the proposed FLEX Fund options.
---------------------------------------------------------------------------
Specifically, in approving the options on each Fund, the Commission
considered and reviewed the Exchange's analysis that the exercisable
risk associated with a position limit of 25,000 contracts represented
only 0.9%, 0.7%, and 3.6% of the outstanding shares of GBTC, BTC and
BITB, respectively.\19\ The Commission also considered and reviewed the
Exchange's arguments that with a 25,000-contract limit for each Fund:
(i) the 284,570,100 GBTC shares outstanding, 114 market participants
would have to simultaneously exercise their positions to place GBTC
under stress; (ii) the 366,950,100 BTC shares outstanding, meant that
147 market participants would have to simultaneously exercise their
same-side positions to place BTC under stress; and (iii) the 68,690,000
BITB shares outstanding, meant that 27 market participants would have
to simultaneously exercise their same-side positions to place BITB
under stress.\20\ Based on the Commission's review of this information
and analysis, the Commission concluded that the 25,000-contract
position and exercise limit for options on each Fund would address
concerns related to manipulation and investor protection and deemed
this limit conservative and therefore appropriate given the liquidity
of each Fund.\21\
---------------------------------------------------------------------------
\19\ See id. Data represents figures from FactSet as of August
30, 2024.
\20\ See supra note 9, Fund Options Approval Order, 89 FR, at
84971.
\21\ Id.
---------------------------------------------------------------------------
Each Fund qualifies a 250,000-contract limit, pursuant to Rule 904,
Commentary .06(e), which requires that, for the most recent six-month
period, trading volume for the underlying security is at least
100,000,000 shares.\22\ The following table sets forth the trading data
for each Fund, as of November 25, 2024, for the preceding six months
and the average daily volume (``ADV'') for the preceding three months.
---------------------------------------------------------------------------
\22\ See Rule 904, Commentary .06 (providing at subparagraph (e)
that the position limit shall be 250,000 contracts for options: (i)
on underlying stock or Exchange-Traded Fund Share that had trading
volume of at least 100,000,000 shares during the most recent six-
month trading period; or (ii) on an underlying stock or Exchange-
Traded Fund Share that had trading volume of at least 75,000,000
shares during the most recent six-month trading period and has at
least 300,000,000 shares currently outstanding).
[[Page 19758]]
----------------------------------------------------------------------------------------------------------------
Trading volume Market
Fund (shares) capitalization ADV (shares)
----------------------------------------------------------------------------------------------------------------
GBTC................................................... 550,687,400 * $20,661,316,542 3,829,597
BTC.................................................... 163,712,700 [dagger] 2,036,369
$3,496,748,882
BITB................................................... 288,800,860 [Dagger] 2,480.478
4,095,157,000
----------------------------------------------------------------------------------------------------------------
* The market capitalization was determined by multiplying a settlement price ($75.42) by the number of shares
outstanding (273,950,100). Data represents figures from FactSet as of November 25, 2024.
[dagger] The market capitalization of BTC was determined by multiplying a settlement price ($42.16) by the
number of shares outstanding (82,939,964). Data represents figures from FactSet as of November 25, 2024.
[Dagger] The market capitalization of BITB was determined by multiplying a settlement price ($51.70) by the
number of shares outstanding (79,950,100). Data represents figures from FactSet as of November 25, 2024.
Also, as of November 25, 2024, there were 19,787,762 bitcoins in
circulation.\23\ At a price of $94,830 per bitcoin,\24\ that equates to
a market capitalization of greater than $1.876 trillion. If a position
and exercise limit of 250,000 contracts were considered for each Fund,
the exercisable risk would represent 9.13% \25\ of the GBTC shares
outstanding; 30.14% \26\ of BTC shares outstanding; and 31.27% \27\ of
BITB shares outstanding. Given the liquidity of BTC and BITB, the
current 25,000 position and exercise limit appears extremely
conservative.
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\23\ See https://www.coingecko.com/en/coins/bitcoin.
\24\ This is the approximate price of bitcoin from 4:00 p.m. ET
on November 25, 2024.
\25\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/273,950.100 GBTC shares
outstanding).
\26\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/82,939,964 BTC shares
outstanding).
\27\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/79,950,100 BITB shares
outstanding).
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Despite the proposed addition of FLEX trading in options on GBTC,
BTC, and BITB (collectively, ``FLEX Fund Options''), the Exchange would
continue to limit to 25,000 the number of options on each Fund traded
on the Exchange that an investor, acting alone or in concert with
others directly or indirectly, may control and thereby mitigate
potential manipulation. The Exchange believes that allowing FLEX Fund
Options it consistent with the Act given FLEX trading is permitted
today in other ETFs overlying a commodity such as SPDR Gold Shares
(``GLD'') and iShares Silver Trust (``SLV'').\28\
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\28\ GLD and SLV, like the each of the Funds, holds one asset in
trust.
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Further, the Exchange believes that the share creation and
redemption process unique to ETFs would mitigate any potential risk of
manipulation in FLEX Fund Options. The creation and redemption process
is designed to ensure that an ETF's price closely tracks the value of
its underlying asset(s). For example, if a market participant exercised
a long call position for 25,000 contracts and purchased 2,500,000
shares of GBTC and this purchase resulted in the value of GBTC shares
to trade at a premium to the value of the (underlying) bitcoin held by
GBTC, the Exchange believes that other market participants would
attempt to arbitrage this price difference by selling short GBTC shares
while concurrently purchasing bitcoin. Those market participants
(arbitrageurs) would then deliver cash to GBTC and receive shares of
GBTC, which would be used to close out any previously established short
position in GBTC. Thus, this creation and redemptions process would
significantly reduce the potential risk of price dislocation between
the value of shares in each Fund and the value of bitcoin holdings.
The Exchange understands that FLEX Equity Options on ETFs are
currently traded in the over-the-counter (``OTC'') market by a variety
of market participants, e.g., hedge funds, proprietary trading firms,
and pension funds, to name a few. The Exchange believes there is room
for significant growth if a comparable product were introduced for
trading on a regulated market. The Exchange expects that users of these
OTC products would be among the primary users of FLEX Fund Options. The
Exchange also believes that the trading of FLEX Fund Options would
allow these same market participants to better manage the risk
associated with the volatility of positions in the underlying ETF
(i.e., GBTC, BTC, or BITB) given the enhanced liquidity that an
exchange-traded product would bring.
Additionally, the Exchange believes that FLEX Fund Options traded
on the Exchange would have three important advantages over the
contracts that are traded in the OTC market. First, as a result of
greater standardization of contract terms, exchange-traded contracts
should develop more liquidity. Second, counter-party credit risk would
be mitigated by the fact that the contracts are issued and guaranteed
by The Options Clearing Corporation (``OCC''). Finally, the price
discovery and dissemination provided by the Exchange and its members
would lead to more transparent markets. The Exchange believes that its
ability to offer FLEX Fund Options would aid it in competing with the
OTC market and at the same time expand the universe of products
available to interested market participants. The Exchange believes that
an exchange-traded alternative may provide a useful risk management and
trading vehicle for market participants and their customers.
The Exchange has analyzed its capacity and represents that it and
The Options Price Reporting Authority (``OPRA'') have the necessary
systems capacity to handle the additional traffic associated with the
listing of FLEX Fund Options. The Exchange believes any additional
traffic that would be generated from the trading of FLEX Fund Options
would be manageable. The Exchange believes ATP Holders will not have a
capacity issue as a result of this proposed rule change. The Exchange
also represents that it does not believe this proposed rule change will
cause fragmentation of liquidity. The Exchange will monitor the trading
volume associated with the additional options series listed as a result
of this proposed rule change and the effect (if any) of these
additional series on market fragmentation and on the capacity of the
Exchange's automated systems.
The Exchange represents that the same surveillance procedures
applicable to the Exchange's other options products listed and traded
on the Exchange, including non-FLEX options in each Fund, will apply to
FLEX Fund Options, and that it has the necessary systems capacity to
support such options. FLEX options products (and their respective
symbols) are integrated into the Exchange's existing surveillance
system architecture and are thus subject to the relevant surveillance
processes. The Exchange's market surveillance staff (including staff of
the Financial Industry Regulatory Authority (``FINRA'') who perform
surveillance and investigative work on behalf of the Exchange pursuant
a regulatory services agreement) conducts surveillances with respect to
GBTC, BTC, and BITB (i.e., the underlying ETFs) and, as
[[Page 19759]]
appropriate, would review activity in applicable ETF when conducting
surveillances for market abuse or manipulation in the FLEX Fund
Options.\29\ The Exchange does not believe that allowing FLEX Fund
Options would render the marketplace for non-FLEX options in any of the
Funds, or equity options in general, more susceptible to manipulative
practices.
---------------------------------------------------------------------------
\29\ See supra note 9, Fund Options Approval Order, 89 FR 84966-
68 (regarding surveillance procedures applicable to GBTC, BTC, and
BITB).
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The Exchange represents that its existing trading surveillances are
adequate to monitor the trading in GBTC, BTC, and BITB, as well as any
subsequent trading of FLEX Fund Options on the Exchange. Additionally,
the Exchange is a member of the Intermarket Surveillance Group
(``ISG'') under the ISG Agreement. ISG members work together to
coordinate surveillance and investigative information sharing in the
stock, options, and futures markets. For surveillance purposes, the
Exchange would therefore have access to information regarding trading
activity in GBTC, BTC, and BITB and in other pertinent underlying
securities on other exchanges through ISG. In addition, and as
referenced above, the Exchange has a regulatory services agreement with
FINRA, pursuant to which FINRA conducts certain surveillances on behalf
of the Exchange. Further, pursuant to a multi-party 17d-2 joint plan,
all options exchanges allocate regulatory responsibilities to FINRA to
conduct certain options-related market surveillances.\30\ The Exchange
will implement any additional surveillance procedures it deems
necessary to effectively monitor the trading of FLEX Fund Options.
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\30\ Section 19(g)(1) of the Act, among other things, requires
every SRO registered as a national securities exchange or national
securities association to comply with the Act, the rules and
regulations thereunder, and the SRO's own rules, and, absent
reasonable justification or excuse, enforce compliance by its
members and persons associated with its members. See 15 U.S.C.
78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows
the Commission to relieve an SRO of certain responsibilities with
respect to members of the SRO who are also members of another SRO.
Specifically, Section 17(d)(1) allows the Commission to relieve an
SRO of its responsibilities to: (i) receive regulatory reports from
such members; (ii) examine such members for compliance with the Act
and the rules and regulations thereunder, and the rules of the SRO;
or (iii) carry out other specified regulatory responsibilities with
respect to such members.
---------------------------------------------------------------------------
The proposed rule change is designed to allow investors seeking to
trade options on the Funds to utilize FLEX Fund Options. The Exchange
believes that offering innovative products flows to the benefit of the
investing public. A robust and competitive market requires that
exchanges respond to members' evolving needs by constantly improving
their offerings. Such efforts would be stymied if exchanges were
prohibited from offering innovative products such as the proposed FLEX
Fund Options. The Exchange believes that introducing FLEX Fund Options
would further broaden the base of investors that use FLEX Equity
Options (and options on the Funds in general) to manage their trading
and investment risk, including investors that currently trade in the
OTC market for customized options. The proposed rule change is also
designed to encourage market makers to shift liquidity from the OTC
market on the Exchange, which, it believes, will enhance the process of
price discovery conducted on the Exchange through increased order flow.
As discussed herein, the Exchange does not believe that this
proposed rule change raises any unique regulatory concerns because the
proposal to aggregate FLEX and non-FLEX option positions in each Fund
at the (most conservative) 25,000-contract position and exercise limit,
which currently applies solely to non-FLEX options on each Fund, should
provide an adequate safeguard.
Finally, the Exchange proposes to make technical changes to Rule
904, Commentary. 07(f) to update the name of the Grayscale Bitcoin Mini
Trust ETF (previously known as the Grayscale Bitcoin Mini Trust (BTC))
and to correct the symbol associated with Fidelity Ethereum Fund, which
changes will add accuracy and internal consistent to Exchange rules
making them easier to comprehend and understand.\31\
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\31\ See proposed Rule 904, Commentary .07(f) (updating the name
of the Grayscale Bitcoin Mini Trust (BTC) to Grayscale Bitcoin Mini
Trust ETF and correcting the trading symbol for the Fidelity
Ethereum Fund from ``ETH'' to ``FETH'').
---------------------------------------------------------------------------
Implementation
The Exchange will announce the implementation date by Trader Update
within sixty (60) days of the rule approval.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\32\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\33\
in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, 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. Specifically,
the Exchange believes that introducing FLEX Fund Options will increase
order flow to the Exchange, increase the variety of options products
available for trading, and provide a valuable tool for investors to
manage risk. The proposed rule change is designed to allow investors
seeking to trade options on any of the Funds to utilize FLEX Fund
Options.
---------------------------------------------------------------------------
\32\ 15 U.S.C. 78f(b).
\33\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposal to permit FLEX Fund Options
would remove impediments to and perfect the mechanism of a free and
open market. The Exchange believes that offering FLEX Fund Options will
benefit investors by providing them with an additional, relatively
lower cost investing tool to gain exposure to the price of bitcoin and
provide a hedging vehicle to meet their investment needs in connection
with a bitcoin-related product. Moreover, the proposal would broaden
the base of investors that use FLEX Options to manage their trading and
investment risk, including investors that currently trade in the OTC
market for customized options. By trading a product in an exchange-
traded environment (that is currently being used in the OTC market),
the Exchange would be able to compete more effectively with the OTC
market. The Exchange believes the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that it would
lead to the migration of options currently trading in the OTC market to
trading to the Exchange. Also, any migration to the Exchange from the
OTC market would result in increased market transparency and enhance
the process of price discovery conducted on the Exchange through
increased order flow. The Exchange also believes that offering FLEX
Fund Options may appeal to retail investors interested in options
trading (both FLEX and non-FLEX) on GBTC, BTC, and BITB.
Additionally, the Exchange believes the proposed rule change is
designed to remove impediments to and to perfect the mechanism for a
free and open market and a national market system, and, in general, to
protect investors and the public interest in that it should create
greater trading and hedging opportunities and flexibility. The proposed
rule change should also result in enhanced efficiency in initiating and
closing out positions and heightened contra-party creditworthiness due
to the role of OCC as issuer and guarantor of FLEX Fund Options.
Further, the
[[Page 19760]]
proposed rule change would result in increased competition by
permitting the Exchange to offer products that are currently used in
the OTC market.
The Exchange does not believe that this proposed rule change raises
any unique regulatory concerns because the proposal to aggregate any
FLEX and non-FLEX options in each Fund at the current (and most
conservative) 25,000-contract limit should provide an adequate
safeguard. As noted herein, the purpose of position (and exercise)
limits is to address potential manipulative schemes and adverse market
impacts surrounding the use of options, such as disrupting the market
in the security underlying the options. The Exchange believes the
proposal will benefit investors and public interest because the
aggregated position and exercise limits for (FLEX and non-FLEX) options
on the same underlying Fund at 25,000 contracts, the lowest limit
available in options, would address concerns related to manipulation
and protection of investors as this number is conservative and
therefore appropriate given the sufficient liquidity in each Fund.
The Exchange believes that offering innovative products benefits
the investing public. A robust and competitive market requires that
exchanges respond to the evolving needs of their members by constantly
improving their offerings. Such efforts would be stymied if exchanges
were prohibited from offering innovative products such as the proposed
FLEX Fund Options. The Exchange does not believe that allowing FLEX
Fund Options would render the marketplace for equity options more
susceptible to manipulative practices.
Finally, the Exchange represents that it has an adequate
surveillance program in place to detect manipulative trading in FLEX
Fund Options. Regarding the proposed FLEX Fund Options, the Exchange
would use the same surveillance procedures utilized for FLEX Options
currently listed on the Exchange (as well as for non-FLEX options on
each Fund). For surveillance purposes, the Exchange would have access
to information regarding trading activity in the underlying Funds
(i.e., GBTC, BTC, and BITB).\34\ In light of surveillance measures
related to both options and the underlying Funds, the Exchange believes
that existing surveillance procedures are designed to deter and detect
possible manipulative behavior which might potentially arise from
listing and trading the proposed FLEX Fund Options.
---------------------------------------------------------------------------
\34\ See supra note 9, Fund Options Approval Order, 89 FR at
84966-68 (regarding surveillance procedures applicable to GBTC, BTC,
and BITB).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
Intra-market competition. The Exchange does not believe that its
proposed rule change will impose any burden on intra-market competition
as all market participants would have the option of utilizing the FLEX
Fund Options. The proposed rule change is designed to allow investors
seeking option exposure to bitcoin to trade FLEX Fund Options.
Moreover, the Exchange believes that the proposal to permit FLEX Fund
Options would broaden the base of investors that use FLEX Options to
manage their trading and investment risk, including investors that
currently trade in the OTC market for customized options.
Inter-market competition. The Exchange does not believe that its
proposed rule change will impose any burden on inter-market competition
as all market participants would have the option of utilizing the FLEX
Fund Options. The Exchange notes that it operates in a highly
competitive market in which market participants can readily direct
order flow to competing venues. The proposed rule change would support
that intermarket competition by allowing the Exchange to offer
additional functionality to ATP Holders. The Exchange believes that the
proposed FLEX Fund Options will increase the variety of options
products available for trading in general and bitcoin-related products
in particular and, as such, will provide a valuable tool for investors
to manage risk.
As such, the Exchange believes that this proposal does not create
an undue burden on intermarket competition. Rather, the Exchange
believes that the proposed rule would bolster intermarket competition
by promoting fair competition among individual markets. The Exchange
notes that, upon approval of this proposal, competing options exchanges
will be free to offer products like the proposed FLEX Fund Options.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the 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-NYSEAMER-2024-78 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSEAMER-2024-78. 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
[[Page 19761]]
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-NYSEAMER-
2024-78 and should be submitted on or before May 30, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-08115 Filed 5-8-25; 8:45 am]
BILLING CODE 8011-01-P
