[Federal Register Volume 89, Number 9 (Friday, January 12, 2024)]
[Notices]
[Pages 2413-2429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00503]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99289; File No. SR-CboeBZX-2023-040]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of Amendment No. 2 to a Proposed Rule Change To List and Trade 
Shares of the VanEck Bitcoin Trust Under BZX Rule 14.11(e)(4), 
Commodity-Based Trust Shares

January 8, 2024.
    On June 30, 2023, Cboe BZX Exchange, Inc. (``BZX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares (``Shares'') of the VanEck Bitcoin Trust under 
BZX Rule 14.11(e)(4), Commodity-Based Trust Shares. On July 11, 2023, 
the Exchange filed Amendment No. 1 to the proposed rule change, which 
amended and replaced the proposed rule change in its entirety. The 
proposed rule change, as modified by Amendment No. 1, was published for 
comment in the Federal Register on July 19, 2023.\3\ On August 31, 
2023, pursuant to section 19(b)(2) of the Act,\4\ the Commission 
designated a longer period within which to approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to disapprove the proposed rule change, as 
modified by Amendment No. 1.\5\ On September 28, 2023, the Commission 
instituted proceedings to determine whether to disapprove the proposed 
rule change, as modified by Amendment No. 1.\6\ On January 5, 2024, the 
Exchange filed Amendment No. 2 to the proposed rule change as described 
in Items I and II below, which Items have been prepared by the 
Exchange. Amendment No. 2 amended and replaced the proposed rule 
change, as modified by Amendment No. 1, in its entirety. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change, as modified by Amendment No. 2, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 97903 (July 13, 
2023), 88 FR 46320. Comments on the proposed rule change, as 
modified by Amendment No. 1, are available at: https://www.sec.gov/comments/sr-cboebzx-2023-040/srcboebzx2023040.htm.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 98265, 88 FR 61641 
(Sept. 7, 2023).
    \6\ See Securities Exchange Act Release No. 98614, 88 FR 68785 
(Oct. 4, 2023).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (``Commission'' or ``SEC'') 
a proposed rule change to list and trade shares of the VanEck Bitcoin 
Trust (the ``Trust''),\7\ under BZX Rule 14.11(e)(4), Commodity-Based 
Trust Shares.
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    \7\ The Trust was formed as a Delaware statutory trust on 
December 17, 2020 and is operated as a grantor trust for U.S. 
federal tax purposes. The Trust has no fixed termination date.
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    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

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

[[Page 2414]]

forth in sections A, B, and C below, of the most significant aspects of 
such statements.

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

1. Purpose
    This Amendment No. 2 to SR-CboeBZX-2023-040 amends and replaces in 
its entirety the proposal as originally submitted on June 30, 2023, and 
as amended by Amendment No. 1 on July 11, 2023. The Exchange submits 
this Amendment No. 2 in order to clarify certain points and add 
additional details to the proposal.
    The Exchange proposes to list and trade the Shares under BZX Rule 
14.11(e)(4),\8\ which governs the listing and trading of Commodity-
Based Trust Shares on the Exchange.\9\ VanEck Digital Assets, LLC is 
the sponsor of the Trust (``Sponsor'').\10\ The Shares will be 
registered with the Commission by means of the Trust's registration 
statement on Form S-1 (the ``Registration Statement'').\11\ As further 
discussed below, the Commission has historically approved or 
disapproved exchange filings to list and trade series of Trust Issued 
Receipts,\12\ 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.\13\ 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.\14\

[[Page 2415]]

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 exchange-traded products (``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 \15\ 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 First Gold Approval Order ``was based on 
an assumption that the currency market and the spot gold market were 
largely unregulated.'' \16\
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    \8\ The Commission approved BZX Rule 14.11(e)(4) in Securities 
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 
(September 6, 2011) (SR-BATS-2011-018).
    \9\ Any of the statements or representations regarding the index 
composition, the description of the portfolio or reference assets, 
limitations on portfolio holdings or reference assets, dissemination 
and availability of index, reference asset, and intraday indicative 
values, or the applicability of Exchange listing rules specified in 
this filing to list a series of Other Securities (collectively, 
``Continued Listing Representations'') shall constitute continued 
listing requirements for the Shares listed on the Exchange.
    \10\ The Exchange notes that two other proposals to list and 
trade shares of the Trust were previously disapproved pursuant to 
delegated authority, one of which is currently pending Commission 
Review pursuant to Rule 431 of the Commission's Rules of Practice, 
17 CFR 201.431. See Securities Exchange Act Release Nos. 93559 
(November 12, 2021) (SR-CboeBZX-2021-019), 86 FR 64539 (November 18, 
2021); 95978 (October 4, 2022) 87 FR 61418 (October 11, 2022) (SR-
CboeBZX-2022-035). See also Letter from Assistant Secretary J. 
Matthew DeLesDernier to Kyle Murray, Assistant General Counsel, Cboe 
Global Markets, dated November 12, 2021.
    \11\ See Amendment No. 6 to Registration Statement on Form S-1, 
dated December 29, 2023, submitted to the Commission by the Sponsor 
on behalf of the Trust (333-251808). The descriptions of the Trust, 
the Shares, and the Benchmark contained herein are based, in part, 
on information in the Registration Statement. The Registration 
Statement is not yet effective and the Shares will not trade on the 
Exchange until such time that the Registration Statement is 
effective.
    \12\ See Exchange Rule 14.11(f)(1).
    \13\ See Securities Exchange Act Release No. 83723 (July 26, 
2018), 83 FR 37579 (August 1, 2018). This 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'').
    \14\ See streetTRACKS Gold Shares, Exchange Act Release No. 
50603 (Oct. 28, 2004), 69 FR 64614, 64618-19 (Nov. 5, 2004) (SR-
NYSE-2004-22) (the ``First Gold Approval Order''); iShares COMEX 
Gold Trust, Exchange Act Release No. 51058 (Jan. 19, 2005), 70 FR 
3749, 3751, 3754-55 (Jan. 26, 2005) (SR-Amex-2004-38); iShares 
Silver Trust, Exchange Act Release No. 53521 (Mar. 20, 2006), 71 FR 
14967, 14968, 14973-74 (Mar. 24, 2006) (SR-Amex-2005-072); ETFS Gold 
Trust, Exchange Act Release No. 59895 (May 8, 2009), 74 FR 22993, 
22994-95, 22998, 23000 (May 15, 2009) (SR-NYSEArca-2009-40); ETFS 
Silver Trust, Exchange Act Release No. 59781 (Apr. 17, 2009), 74 FR 
18771, 18772, 18775-77 (Apr. 24, 2009) (SR-NYSEArca-2009-28); ETFS 
Palladium Trust, Exchange Act Release No. 61220 (Dec. 22, 2009), 74 
FR 68895, 68896 (Dec. 29, 2009) (SR-NYSEArca-2009-94) (notice of 
proposed rule change included NYSE Arca's representation that 
``[t]he most significant palladium futures exchanges are the NYMEX 
and the Tokyo Commodity Exchange,'' that ``NYMEX is the largest 
exchange in the world for trading precious metals futures and 
options,'' and that NYSE Arca ``may obtain trading information via 
the Intermarket Surveillance Group,'' of which NYMEX is a member, 
Exchange Act Release No. 60971 (Nov. 9, 2009), 74 FR 59283, 59285-
86, 59291 (Nov. 17, 2009)); ETFS Platinum Trust, Exchange Act 
Release No. 61219 (Dec. 22, 2009), 74 FR 68886, 68887-88 (Dec. 29, 
2009) (SR-NYSEArca-2009-95) (notice of proposed rule change included 
NYSE Arca's representation that ``[t]he most significant platinum 
futures exchanges are the NYMEX and the Tokyo Commodity Exchange,'' 
that ``NYMEX is the largest exchange in the world for trading 
precious metals futures and options,'' and that NYSE Arca ``may 
obtain trading information via the Intermarket Surveillance Group,'' 
of which NYMEX is a member, Exchange Act Release No. 60970 (Nov. 9, 
2009), 74 FR 59319, 59321, 59327 (Nov. 17, 2009)); Sprott Physical 
Gold Trust, Exchange Act Release No. 61496 (Feb. 4, 2010), 75 FR 
6758, 6760 (Feb. 10, 2010) (SR-NYSEArca-2009-113) (notice of 
proposed rule change included NYSE Arca's representation that the 
COMEX is one of the ``major world gold markets,'' that NYSE Arca 
``may obtain trading information via the Intermarket Surveillance 
Group,'' and that NYMEX, of which COMEX is a division, is a member 
of the Intermarket Surveillance Group, Exchange Act Release No. 
61236 (Dec. 23, 2009), 75 FR 170, 171, 174 (Jan. 4, 2010)); Sprott 
Physical Silver Trust, Exchange Act Release No. 63043 (Oct. 5, 
2010), 75 FR 62615, 62616, 62619, 62621 (Oct. 12, 2010) (SR-
NYSEArca-2010-84); ETFS Precious Metals Basket Trust, Exchange Act 
Release No. 62692 (Aug. 11, 2010), 75 FR 50789, 50790 (Aug. 17, 
2010) (SR-NYSEArca-2010-56) (notice of proposed rule change included 
NYSE Arca's representation that ``the most significant gold, silver, 
platinum and palladium futures exchanges are the COMEX and the 
TOCOM'' and that NYSE Arca ``may obtain trading information via the 
Intermarket Surveillance Group,'' of which COMEX is a member, 
Exchange Act Release No. 62402 (Jun. 29, 2010), 75 FR 39292, 39295, 
39298 (July 8, 2010)); ETFS White Metals Basket Trust, Exchange Act 
Release No. 62875 (Sept. 9, 2010), 75 FR 56156, 56158 (Sept. 15, 
2010) (SR-NYSEArca-2010-71) (notice of proposed rule change included 
NYSE Arca's representation that ``the most significant silver, 
platinum and palladium futures exchanges are the COMEX and the 
TOCOM'' and that NYSE Arca ``may obtain trading information via the 
Intermarket Surveillance Group,'' of which COMEX is a member, 
Exchange Act Release No. 62620 (July 30, 2010), 75 FR 47655, 47657, 
47660 (Aug. 6, 2010)); ETFS Asian Gold Trust, Exchange Act Release 
No. 63464 (Dec. 8, 2010), 75 FR 77926, 77928 (Dec. 14, 2010) (SR-
NYSEArca-2010-95) (notice of proposed rule change included NYSE 
Arca's representation that ``the most significant gold futures 
exchanges are the COMEX and the Tokyo Commodity Exchange,'' that 
``COMEX is the largest exchange in the world for trading precious 
metals futures and options,'' and that NYSE Arca ``may obtain 
trading information via the Intermarket Surveillance Group,'' of 
which COMEX is a member, Exchange Act Release No. 63267 (Nov. 8, 
2010), 75 FR 69494, 69496, 69500-01 (Nov. 12, 2010)); Sprott 
Physical Platinum and Palladium Trust, Exchange Act Release No. 
68430 (Dec. 13, 2012), 77 FR 75239, 75240-41 (Dec. 19, 2012) (SR-
NYSEArca-2012–111) (notice of proposed rule change included 
NYSE Arca's representation that ``[f]utures on platinum and 
palladium are traded on two major exchanges: The New York Mercantile 
Exchange . . . and Tokyo Commodities Exchange'' and that NYSE Arca 
``may obtain trading information via the Intermarket Surveillance 
Group,'' of which COMEX is a member, Exchange Act Release No. 68101 
(Oct. 24, 2012), 77 FR 65732, 65733, 65739 (Oct. 30, 2012)); APMEX 
Physical--1 oz. Gold Redeemable Trust, Exchange Act Release No. 
66930 (May 7, 2012), 77 FR 27817, 27818 (May 11, 2012) (SR-NYSEArca-
2012-18) (notice of proposed rule change included NYSE Arca's 
representation that NYSE Arca ``may obtain trading information via 
the Intermarket Surveillance Group,'' of which COMEX is a member, 
and that gold futures are traded on COMEX and the Tokyo Commodity 
Exchange, with a cross-reference to the proposed rule change to list 
and trade shares of the ETFS Gold Trust, in which NYSE Arca 
represented that COMEX is one of the ``major world gold markets,'' 
Exchange Act Release No. 66627 (Mar. 20, 2012), 77 FR 17539, 17542-
43, 17547 (Mar. 26, 2012)); JPM XF Physical Copper Trust, Exchange 
Act Release No. 68440 (Dec. 14, 2012), 77 FR 75468, 75469-70, 75472, 
75485-86 (Dec. 20, 2012) (SR-NYSEArca-2012-28); iShares Copper 
Trust, Exchange Act Release No. 68973 (Feb. 22, 2013), 78 FR 13726, 
13727, 13729-30, 13739-40 (Feb. 28, 2013) (SR-NYSEArca-2012-66); 
First Trust Gold Trust, Exchange Act Release No. 70195 (Aug. 14, 
2013), 78 FR 51239, 51240 (Aug. 20, 2013) (SR-NYSEArca-2013-61) 
(notice of proposed rule change included NYSE Arca's representation 
that FINRA, on behalf of the exchange, may obtain trading 
information regarding gold futures and options on gold futures from 
members of the Intermarket Surveillance Group, including COMEX, or 
from markets ``with which [NYSE Arca] has in place a comprehensive 
surveillance sharing agreement,'' and that gold futures are traded 
on COMEX and the Tokyo Commodity Exchange, with a cross-reference to 
the proposed rule change to list and trade shares of the ETFS Gold 
Trust, in which NYSE Arca represented that COMEX is one of the 
``major world gold markets,'' Exchange Act Release No. 69847 (June 
25, 2013), 78 FR 39399, 39400, 39405 (July 1, 2013)); Merk Gold 
Trust, Exchange Act Release No. 71378 (Jan. 23, 2014), 79 FR 4786, 
4786-87 (Jan. 29, 2014) (SR-NYSEArca-2013-137) (notice of proposed 
rule change included NYSE Arca's representation that ``COMEX is the 
largest gold futures and options exchange'' and that NYSE Arca ``may 
obtain trading information via the Intermarket Surveillance Group,'' 
including with respect to transactions occurring on COMEX pursuant 
to CME and NYMEX's membership, or from exchanges ``with which [NYSE 
Arca] has in place a comprehensive surveillance sharing agreement,'' 
Exchange Act Release No. 71038 (Dec. 11, 2013), 78 FR 76367, 76369, 
76374 (Dec. 17, 2013)); Long Dollar Gold Trust, Exchange Act Release 
No. 79518 (Dec. 9, 2016), 81 FR 90876, 90881, 90886, 90888 (Dec. 15, 
2016) (SR-NYSEArca-2016-84).
    \15\ See Exchange Rule 14.11(e)(5).
    \16\ See Winklevoss Order at 37592.
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    As such, the regulated market of significant size test does not 
require that the spot bitcoin 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. With this 
in mind, the Chicago Mercantile Exchange (``CME'') bitcoin futures 
(``Bitcoin Futures'') market is the proper market to consider in 
determining whether there is a related regulated market of significant 
size.
    Further to this point, the Exchange notes that the Commission has 
approved proposals related to the listing and trading of funds that 
would primarily hold CME Bitcoin Futures that are registered under the 
Securities Act of 1933.\17\ In the Teucrium Approval, the Commission 
found the CME Bitcoin Futures market to be a regulated market of 
significant size as it relates to CME Bitcoin Futures, an odd 
tautological truth that is also inconsistent with prior disapproval 
orders for ETPs that would hold actual bitcoin instead of derivatives 
contracts (``Spot Bitcoin ETPs'') that use the exact same pricing 
methodology as the CME Bitcoin Futures. As further discussed below, 
both the Exchange and the Sponsor believe that this proposal and the 
included analysis are sufficient to establish that the CME Bitcoin 
Futures market represents a regulated market of significant size as it 
relates both to the CME Bitcoin Futures market and to the spot bitcoin 
market and that this proposal should be approved.
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    \17\ See Exchange Act Release No. 94620 (April 6, 2022), 87 FR 
21676 (April 12, 2022) (the ``Teucrium Approval'') and 94853 (May 5, 
2022) (collectively, with the Teucrium Approval, the ``Bitcoin 
Futures Approvals'').
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    Finally, as discussed in greater detail below, by using 
professional custodians and other service providers, the Trust provides 
investors interested in exposure to bitcoin with important protections 
that are not always available to investors that invest directly in 
bitcoin, including protection against insolvency, cyber attacks, and 
other risks. If U.S. investors had access to vehicles such as the Trust 
for their bitcoin investments, instead of directing their bitcoin 
investments into loosely regulated offshore vehicles (such as the 
offshore regulated centralized trading platforms that have since faced 
bankruptcy proceedings or other insolvencies), then countless investors 
might have protected their principal investments in bitcoin and thus 
benefited.
Background
    Bitcoin is a digital asset based on the decentralized, open source 
protocol of the peer-to-peer computer network launched in 2009 that 
governs the creation, movement, and ownership of bitcoin and hosts the 
public ledger, or ``blockchain,'' on which all bitcoin transactions are 
recorded (the ``Bitcoin Network'' or ``Bitcoin''). The decentralized 
nature of the Bitcoin Network allows parties to transact directly with 
one another based on cryptographic proof instead of relying on a 
trusted third party. The protocol also lays out the rate of issuance of 
new bitcoin within the Bitcoin Network, a rate that is reduced by half 
approximately every four years with an eventual hard cap of 21 million. 
It's generally understood that the combination of these two features--a 
systemic hard cap of 21 million bitcoin and the ability to transact 
trustlessly with anyone connected to the Bitcoin Network--gives bitcoin 
its value. The first rule filing proposing to list an ETP to provide 
exposure to bitcoin in the U.S. was submitted by the Exchange on June 
30, 2016.\18\ At that time, blockchain technology, and digital assets 
that utilized it, were relatively new to the broader public. The market 
cap of all bitcoin in existence at that time was approximately $10 
billion. No registered offering of digital asset securities or shares 
in an investment vehicle with exposure to bitcoin or any other 
cryptocurrency had yet been conducted, and the regulated infrastructure 
for conducting a digital asset securities offering had not begun to 
develop.\19\ Similarly, regulated U.S. Bitcoin Futures contracts did 
not exist. The CFTC had determined that bitcoin is a commodity,\20\ but 
had not engaged in significant enforcement actions in the space. The 
New York Department of Financial Services (``NYDFS'') adopted its final 
``BitLicense'' regulatory framework in 2015, but had only approved four 
entities to engage in activities relating to virtual currencies 
(whether through granting a BitLicense or a limited-purpose trust 
charter) as of June 30, 2016.\21\ While the first over-the-counter 
bitcoin fund launched in 2013, public trading was limited and the fund 
had only $60 million in assets.\22\ There were very few, if any, 
traditional financial institutions engaged in the space, whether 
through investment or providing services to digital asset companies. In 
January 2018, the staff of the Commission noted in a letter to the 
Investment Company Institute (``ICI'') and Securities Industry and 
Financial Markets Association (``SIFMA'') that it

[[Page 2416]]

was not aware, at that time, of a single custodian providing fund 
custodial services for digital assets.\23\ Fast forward to today and 
the digital assets financial ecosystem, including bitcoin, has 
progressed significantly. The development of a regulated market for 
digital asset securities has significantly evolved, with market 
participants having conducted registered public offerings of both 
digital asset securities \24\ and shares in investment vehicles holding 
Bitcoin Futures.\25\ Additionally, licensed and regulated service 
providers have emerged to provide fund custodial services for digital 
assets, among other services. For example, in February 2023, the 
Commission proposed to amend Rule 206(4)-2 under the Advisers Act of 
1940 (the ``custody rule'') to expand the scope beyond client funds and 
securities to include all crypto assets, among other assets; \26\ in 
May 2021, the staff of the Commission released a statement permitting 
open-end mutual funds to invest in cash-settled Bitcoin Futures; in 
December 2020, the Commission adopted a conditional no-action position 
permitting certain special purpose broker-dealers to custody digital 
asset securities under Rule 15c3-3 under the Exchange Act (the 
``Custody Statement''); \27\ in September 2020, the staff of the 
Commission released a no-action letter permitting certain broker-
dealers to operate a non-custodial Alternative Trading System (``ATS'') 
for digital asset securities, subject to specified conditions; \28\ in 
October 2019, the staff of the Commission granted temporary relief from 
the clearing agency registration requirement to an entity seeking to 
establish a securities clearance and settlement system based on 
distributed ledger technology,\29\ and multiple transfer agents who 
provide services for digital asset securities registered with the 
Commission.\30\
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    \18\ See Winklevoss Order.
    \19\ Digital assets that are securities under U.S. law are 
referred to throughout this proposal as ``digital asset 
securities.'' All other digital assets, including bitcoin, are 
referred to interchangeably as ``cryptocurrencies'' or ``virtual 
currencies.'' The term ``digital assets'' refers to all digital 
assets, including both digital asset securities and 
cryptocurrencies, together.
    \20\ See ``In the Matter of Coinflip, Inc.'' (``Coinflip'') 
(CFTC Docket 15-29 (September 17, 2015)) (order instituting 
proceedings pursuant to sections 6(c) and 6(d) of the CEA, making 
findings and imposing remedial sanctions), in which the CFTC stated: 
``section 1a(9) of the CEA defines `commodity' to include, among 
other things, `all services, rights, and interests in which 
contracts for future delivery are presently or in the future dealt 
in.' 7 U.S.C. 1a(9). The definition of a `commodity' is broad. See, 
e.g., Board of Trade of City of Chicago v. SEC, 677 F. 2d 1137, 1142 
(7th Cir. 1982). Bitcoin and other virtual currencies are 
encompassed in the definition and properly defined as commodities.''
    \21\ A list of virtual currency businesses that are entities 
regulated by the NYDFS is available on the NYDFS website. See 
https://www.dfs.ny.gov/apps_and_licensing/virtual_currency_businesses/regulated_entities.
    \22\ Data as of March 31, 2016 according to publicly available 
filings. See Bitcoin Investment Trust Form S-1, dated May 27, 2016, 
available: https://www.sec.gov/Archives/edgar/data/1588489/000095012316017801/filename1.htm.
    \23\ See letter from Dalia Blass, Director, Division of 
Investment Management, U.S. Securities and Exchange Commission to 
Paul Schott Stevens, President & CEO, Investment Company Institute 
and Timothy W. Cameron, Asset Management Group--Head, Securities 
Industry and Financial Markets Association (January 18, 2018), 
available at https://www.sec.gov/divisions/investment/noaction/2018/cryptocurrency-011818.htm.
    \24\ See Prospectus supplement filed pursuant to Rule 424(b)(1) 
for INX Tokens (Registration No. 333-233363), available at: https://www.sec.gov/Archives/edgar/data/1725882/000121390020023202/ea125858-424b1_inxlimited.htm.
    \25\ See Prospectus filed by Stone Ridge Trust VI on behalf of 
NYDIG Bitcoin Strategy Fund Registration, available at: https://www.sec.gov/Archives/edgar/data/1764894/000119312519309942/d693146d497.htm.
    \26\ See Investment Advisers Act Release No. 6240 88 FR 14672 
(March 9, 2023) (Safeguarding Advisory Client Assets).
    \27\ See Securities Exchange Act Release No. 90788, 86 FR 11627 
(February 26, 2021) (File Number S7-25-20) (Custody of Digital Asset 
Securities by Special Purpose Broker-Dealers).
    \28\ See letter from Elizabeth Baird, Deputy Director, Division 
of Trading and Markets, U.S. Securities and Exchange Commission to 
Kris Dailey, Vice President, Risk Oversight & Operational 
Regulation, Financial Industry Regulatory Authority (September 25, 
2020), available at: https://www.sec.gov/divisions/marketreg/mr-noaction/2020/finra-ats-role-in-settlement-of-digital-asset-security-trades-09252020.pdf.
    \29\ See letter from Jeffrey S. Mooney, Associate Director, 
Division of Trading and Markets, U.S. Securities and Exchange 
Commission to Charles G. Cascarilla & Daniel M. Burstein, Paxos 
Trust Company, LLC (October 28, 2019), available at: https://www.sec.gov/divisions/marketreg/mr-noaction/2019/paxos-trust-company-102819-17a.pdf.
    \30\ See, e.g., Form TA-1/A filed by Tokensoft Transfer Agent 
LLC (CIK: 0001794142) on January 8, 2021, available at: https://www.sec.gov/Archives/edgar/data/1794142/000179414219000001/xslFTA1X01/primary_doc.xml.
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    Outside the Commission's purview, the regulatory landscape has 
changed significantly since 2016, and cryptocurrency markets have grown 
and evolved as well. The market for bitcoin is approximately 100 times 
larger, having at one point reached a market cap of over $1 
trillion.\31\ According to the CME Bitcoin Futures report, from October 
2, 2023 through October 31, 2023, CFTC regulated Bitcoin Futures 
represented between $633 million and $6.5 billion in notional trading 
volume on CME Bitcoin Futures on a daily basis.\32\ Daily average open 
interest was over $2.6 billion for the entirety of the period. The CFTC 
has exercised its regulatory jurisdiction in bringing a number of 
enforcement actions related to bitcoin and against trading platforms 
that offer cryptocurrency trading.\33\ As of April 25, 2023 the NYDFS 
has granted no fewer than thirty-four BitLicenses,\34\ including to 
established public payment companies like PayPal Holdings, Inc. and 
Square, Inc., and limited purpose trust charters to entities providing 
cryptocurrency custody services. The Treasury's Office of Foreign 
Assets Control (``OFAC'') has brought enforcement actions over apparent 
violations of the sanctions laws in connection with the provision of 
wallet management services for digital assets.\35\
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    \31\ As of December 1, 2021, the total market cap of all bitcoin 
in circulation was approximately $1.08 trillion.
    \32\ Data sourced from Bloomberg as of October 31, 2023.
    \33\ The CFTC's annual report for Fiscal Year 2022 (which ended 
on September 30, 2022) noted that the CFTC completed the fiscal year 
with 18 enforcement filings related to digital assets. ``Digital 
asset actions included manipulation, a $1.7 billion fraudulent 
scheme, and a decentralized autonomous organization (DAO) failing to 
register as a SEF or FCM or to seek DCM designation.'' See CFTC FY 
2022 Agency Financial Report, available at: https://www.cftc.gov/media/7941/2022afr/download. Additionally, the CFTC filed on March 
27, 2023, a civil enforcement action against the owner/operators of 
the Binance centralized digital asset trading platform, which is one 
of the largest bitcoin derivative exchanges. See CFTC Release No. 
8680-23 (March 27, 2023), available at: https://www.cftc.gov/PressRoom/PressReleases/8680-23.
    \34\ See https://www.dfs.ny.gov/virtual_currency_businesses.
    \35\ See U.S. Department of the Treasury Enforcement Release: 
``OFAC Enters Into $98,830 Settlement with BitGo, Inc. for Apparent 
Violations of Multiple Sanctions Programs Related to Digital 
Currency Transactions'' (December 30, 2020) available at: https://home.treasury.gov/system/files/126/20201230_bitgo.pdf. See also U.S. 
Department of the Treasury Enforcement Release: ``Treasury Announces 
Two Enforcement Actions for over $24M and $29M Against Virtual 
Currency Exchange, Bittrex, Inc.'' (October 11, 2022) available at: 
https://home.treasury.gov/news/press-releases/jy1006. See also U.S. 
Department of Treasure Enforcement Release ``OFAC Settles with 
Virtual Currency Exchange Kraken for $362,158.70 Related to Apparent 
Violations of the Iranian Transactions and Sanctions Regulations'' 
(November 28, 2022) available at: https://home.treasury.gov/system/files/126/20221128_kraken.pdf.
---------------------------------------------------------------------------

    In addition to the regulatory developments laid out above, more 
traditional financial market participants become more active in 
cryptocurrency: large insurance companies, asset managers, university 
endowments, pension funds, and even historically bitcoin skeptical fund 
managers have allocated to bitcoin. As noted in the Financial Stability 
Oversight Council (``FSOC'') report on Digital Asset Financial 
Stability Risks and Regulation, ``[i]ndustry surveys suggest that the 
scale of these investments grew quickly during the boom in crypto-asset 
markets through late 2021. In June 2022, PwC estimated that the number 
of crypto-specialist hedge funds was more than 300 globally, with $4.1 
billion in assets under management. In addition, in a survey PwC found 
that 38 percent of surveyed traditional hedge funds were currently 
investing in `digital assets,' compared to 21 percent the year prior.'' 
\36\ The largest over-the-counter bitcoin fund previously filed a Form 
10 registration statement, which the staff of the Commission reviewed 
and which took effect automatically, and is now a reporting 
company.\37\ Established companies like Tesla, Inc., MicroStrategy 
Incorporated, and Square, Inc., among others, have announced 
substantial investments in bitcoin in

[[Page 2417]]

amounts as large as $1.5 billion (Tesla) and $1 billion 
(MicroStrategy).\38\ The foregoing examples demonstrate that bitcoin 
has gained mainstream usage and recognition.
---------------------------------------------------------------------------

    \36\ See the FSOC ``Report on Digital Asset Financial Stability 
Risks and Regulation 2022'' (October 3, 2022) (at footnote 26) at 
https://home.treasury.gov/system/files/261/FSOC-Digital-Assets-Report-2022.pdf.
    \37\ See Letter from Division of Corporation Finance, Office of 
Real Estate & Construction to Barry E. Silbert, Chief Executive 
Officer, Grayscale Bitcoin Trust (January 31, 2020) https://www.sec.gov/Archives/edgar/data/1588489/000000000020000953/filename1.pdf.
    \38\ See https://www.microstrategy.com/en/investor-relations/press/microstrategy-acquires-additional-19452-bitcoins-for-1-026-billion_02-24-2021.
---------------------------------------------------------------------------

    Despite these developments, access for U.S. retail investors to 
gain exposure to bitcoin via a transparent and U.S. regulated, U.S. 
exchange-traded vehicle remains limited. Instead current options 
include: (i) facing the counter-party risk, legal uncertainty, 
technical risk, and complexity associated with accessing spot bitcoin; 
(ii) over-the-counter bitcoin funds (``OTC Bitcoin Funds'') with high 
management fees and potentially volatile premiums and discounts; \39\ 
(iii) purchasing shares of operating companies that they believe will 
provide proxy exposure to bitcoin with limited disclosure about the 
associated risks; \40\ or (iv) purchasing Bitcoin Futures exchange-
traded funds (``ETFs''), as defined below, which represent a sub-
optimal structure for long-term investors that will cost them 
significant amounts of money every year compared to Spot Bitcoin ETPs, 
as further discussed below. Meanwhile, investors in many other 
countries, including Canada and Brazil, are able to use more 
traditional exchange listed and traded products (including ETFs holding 
physical bitcoin) to gain exposure to bitcoin. Similarly, investors in 
Switzerland and across Europe have access to ETPs which trade on 
regulated exchanges and provide exposure to a broad array of spot 
crypto assets. U.S. investors, by contrast, are left with fewer and 
more risky means of getting bitcoin exposure, as described above.\41\
---------------------------------------------------------------------------

    \39\ The premium and discount for OTC Bitcoin Funds is known to 
move rapidly. For example, over the period of 12/21/20 to 1/21/21, 
the premium for the largest OTC Bitcoin Fund went from 40.18% to 
2.79%. While the price of bitcoin appreciated significantly during 
this period and NAV per share increased by 41.25%, the price per 
share increased by only 3.58%. This means that investors are buying 
shares of a fund that experiences significant volatility in its 
premium and discount outside of the fluctuations in price of the 
underlying asset. Even operating within the normal premium and 
discount range, it's possible for an investor to buy shares of an 
OTC Bitcoin Fund only to have those shares quickly lose 10% or more 
in dollar value excluding any movement of the price of bitcoin. That 
is to say--the price of bitcoin could have stayed exactly the same 
from market close on one day to market open the next, yet the value 
of the shares held by the investor decreased only because of the 
fluctuation of the premium. As more investment vehicles, including 
mutual funds and ETFs, seek to gain exposure to bitcoin, the easiest 
option for a buy and hold strategy for such vehicles is often an OTC 
Bitcoin Fund, meaning that even investors that do not directly buy 
OTC Bitcoin Funds can be disadvantaged by extreme premiums (or 
discounts) and premium volatility.
    \40\ A number of operating companies engaged in unrelated 
businesses--such as Tesla (a car manufacturer) and MicroStrategy (an 
enterprise software company)--have announced investments as large as 
$5.3 billion in bitcoin. Without access to bitcoin exchange-traded 
products, retail investors seeking investment exposure to bitcoin 
may end up purchasing shares in these companies in order to gain the 
exposure to bitcoin that they seek. In fact, mainstream financial 
news networks have written a number of articles providing investors 
with guidance for obtaining bitcoin exposure through publicly traded 
companies (such as MicroStrategy, Tesla, and bitcoin mining 
companies, among others) instead of dealing with the complications 
associated with buying spot bitcoin in the absence of a bitcoin ETP. 
See e.g., ``7 public companies with exposure to bitcoin'' (February 
8, 2021) available at: https://finance.yahoo.com/news/7-public-companies-with-exposure-to-bitcoin-154201525.html; and ``Want to get 
in the crypto trade without holding bitcoin yourself? Here are some 
investing ideas'' (February 19, 2021) available at: https://www.cnbc.com/2021/02/19/ways-to-invest-in-bitcoin-without-holding-the-cryptocurrency-yourself-.html.
    \41\ The Exchange notes that the list of countries above is not 
exhaustive and that securities regulators in a number of additional 
countries have either approved or otherwise allowed the listing and 
trading of Spot Bitcoin ETPs.
---------------------------------------------------------------------------

    To this point, the lack of a Spot Bitcoin ETP exposes U.S. investor 
assets to significant risk because investors that would otherwise seek 
crypto asset exposure through a Spot Bitcoin ETP are forced to find 
alternative exposure through generally riskier means. For instance, 
many U.S. investors that held their digital assets in accounts at 
FTX,\42\ Celsius Network LLC,\43\ BlockFi Inc.\44\ and Voyager Digital 
Holdings, Inc.\45\ have become unsecured creditors in the insolvencies 
of those entities. If a Spot Bitcoin ETP was available, it is likely 
that at least a portion of the billions of dollars tied up in those 
proceedings would still reside in the brokerage accounts of U.S. 
investors, having instead been invested in a transparent, regulated, 
and well-understood structure--a Spot Bitcoin ETP. To this point, 
approval of a Spot Bitcoin ETP would represent a major win for the 
protection of U.S. investors in the crypto asset space. As further 
described below, the Trust, like all other series of Commodity-Based 
Trust Shares, is designed to protect investors against the risk of 
losses through fraud and insolvency that arise by holding digital 
assets, including bitcoin, on centralized platforms.
---------------------------------------------------------------------------

    \42\ See FTX Trading Ltd., et al., Case No. 22-11068.
    \43\ See Celsius Network LLC, et al., Case No. 22-10964.
    \44\ See BlockFi Inc., Case No. 22-19361.
    \45\ See Voyager Digital Holdings, Inc., et al., Case No. 22-
10943.
---------------------------------------------------------------------------

    Additionally, investors in other countries, specifically Canada, 
generally pay lower fees than U.S. retail investors that invest in OTC 
Bitcoin Funds due to the fee pressure that results from increased 
competition among available bitcoin investment options. Without an 
approved and regulated Spot Bitcoin ETP in the U.S. as a viable 
alternative, U.S. investors could seek to purchase shares of non-U.S. 
bitcoin vehicles in order to get access to bitcoin exposure. Given the 
separate regulatory regime and the potential difficulties associated 
with any international litigation, such an arrangement would create 
more risk exposure for U.S. investors than they would otherwise have 
with a U.S. exchange listed ETP. In addition to the benefits to U.S. 
investors articulated throughout this proposal, approving this proposal 
(and others like it) would provide U.S. ETFs and mutual funds with a 
U.S.-listed and regulated product to provide such access rather than 
relying on either flawed products or products listed and primarily 
regulated in other countries.
Bitcoin Futures ETFs
    The Exchange and Sponsor applaud the Commission for allowing the 
launch of ETFs registered under the Investment Company Act of 1940, as 
amended (the ``1940 Act'') and the Bitcoin Futures Approvals that 
provide exposure to bitcoin primarily through CME Bitcoin Futures 
(``Bitcoin Futures ETFs''). Allowing such products to list and trade is 
a productive first step in providing U.S. investors and traders with 
transparent, exchange-listed tools for expressing a view on bitcoin. 
The Bitcoin Futures Approvals, however, have created a logical 
inconsistency in the application of the standard the Commission applies 
when considering bitcoin ETP proposals.
    As discussed further below, the standard applicable to bitcoin ETPs 
is whether the listing exchange has in place a comprehensive 
surveillance sharing agreement with a regulCated market of significant 
size in the underlying asset. Previous disapproval orders have made 
clear that a market that constitutes a regulated market of significant 
size is generally a futures and/or options market based on the 
underlying reference asset rather than the spot commodity markets, 
which are often unregulated.\46\ Leaving aside the

[[Page 2418]]

analysis of that standard until later in this proposal,\47\ the 
Exchange believes that the following rationale the Commission applied 
to a Bitcoin Futures ETF should result in the Commission approving this 
and other Spot Bitcoin ETP proposals:
---------------------------------------------------------------------------

    \46\ See Winklevoss Order at 37593, specifically footnote 202, 
which includes the language from numerous approval orders for which 
the underlying futures markets formed the basis for approving series 
of ETPs that hold physical metals, including gold, silver, 
palladium, platinum, and precious metals more broadly; and 37600, 
specifically where the Commission provides that ``when the spot 
market is unregulated--the requirement of preventing fraudulent and 
manipulative acts may possibly be satisfied by showing that the ETP 
listing market has entered into a surveillance-sharing agreement 
with a regulated market of significant size in derivatives related 
to the underlying asset.'' As noted above, the Exchange believes 
that these citations are particularly helpful in making clear that 
the spot market for a spot commodity ETP need not be ``regulated'' 
in order for a spot commodity ETP to be approved by the Commission, 
and in fact that it's been the common historical practice of the 
Commission to rely on such derivatives markets as the regulated 
market of significant size because such spot commodities markets are 
largely unregulated.
    \47\ As further outlined below, both the Exchange and the 
Sponsor believe that the Bitcoin Futures market represents a 
regulated market of significant size and that this proposal and 
others like it should be approved on this basis.

    The CME ``comprehensively surveils futures market conditions and 
price movements on a real-time and ongoing basis in order to detect 
and prevent price distortions, including price distortions caused by 
manipulative efforts.'' Thus the CME's surveillance can reasonably 
be relied upon to capture the effects on the CME bitcoin futures 
market caused by a person attempting to manipulate the proposed 
futures ETP by manipulating the price of CME bitcoin futures 
contracts, whether that attempt is made by directly trading on the 
CME bitcoin futures market or indirectly by trading outside of the 
CME bitcoin futures market. As such, when the CME shares its 
surveillance information with Arca, the information would assist in 
detecting and deterring fraudulent or manipulative misconduct 
related to the non-cash assets held by the proposed ETP.\48\
---------------------------------------------------------------------------

    \48\ See Teucrium Approval at 21679.

    CME Bitcoin Futures pricing is based on pricing from spot bitcoin 
markets. The statement from the Teucrium Approval that ``CME's 
surveillance can reasonably be relied upon to capture the effects on 
the CME Bitcoin Futures market caused by a person attempting to 
manipulate the proposed futures ETP by manipulating the price of CME 
Bitcoin Futures contracts . . . indirectly by trading outside of the 
CME Bitcoin Futures market,'' makes clear that the Commission believes 
that CME's surveillance can capture the effects of trading on the 
relevant spot markets on the pricing of CME Bitcoin Futures. This was 
further acknowledged in the ``Grayscale lawsuit'' \49\ when Judge Rao 
stated ``. . . the Commission in the Teucrium order recognizes that the 
futures prices are influenced by the spot prices, and the Commission 
concludes in approving futures ETPs that any fraud on the spot market 
can be adequately addressed by the fact that the futures market is a 
regulated one . . .'' The Exchange agrees with the Commission on this 
point and notes that the pricing mechanism applicable to the Shares is 
similar to that of the CME Bitcoin Futures. As further discussed below, 
this view is also consistent with the Sponsor's research.
---------------------------------------------------------------------------

    \49\ Grayscale Investments, LLC v. Securities and Exchange 
Commission, et al., Case No. 22-1142.
---------------------------------------------------------------------------

    The structure of Bitcoin Futures ETFs provides negative outcomes 
for buy and hold investors as compared to a Spot Bitcoin ETP.\50\ 
Specifically, the cost of rolling CME Bitcoin Futures contracts will 
cause the Bitcoin Futures ETFs to lag the performance of bitcoin itself 
and, at over a billion dollars in assets under management, would cost 
U.S. investors significant amounts of money on an annual basis compared 
to Spot Bitcoin ETPs. Such rolling costs would not be required for Spot 
Bitcoin ETPs that hold bitcoin. Further, Bitcoin Futures ETFs could 
potentially hit CME position limits, which would force a Bitcoin 
Futures ETF to invest in non-futures assets for bitcoin exposure and 
cause potential investor confusion and lack of certainty about what 
such Bitcoin Futures ETFs are actually holding to try to get exposure 
to bitcoin, not to mention completely changing the risk profile 
associated with such an ETF. While Bitcoin Futures ETFs represent a 
useful trading tool, they are clearly a sub-optimal structure for U.S. 
investors that are looking for long-term exposure to bitcoin that will, 
based on the calculations above, unnecessarily cost U.S. investors 
significant amounts of money every year compared to Spot Bitcoin ETPs 
and the Exchange believes that any proposal to list and trade a Spot 
Bitcoin ETP should be reviewed by the Commission with this important 
investor protection context in mind.
---------------------------------------------------------------------------

    \50\ See e.g., ``Bitcoin ETF's Success Could Come at 
Fundholders' Expense,'' Wall Street Journal (October 24, 2021), 
available at: https://www.wsj.com/articles/bitcoin-etfs-success-could-come-at-fundholders-expense-11635080580; ``Physical Bitcoin 
ETF Prospects Accelerate,'' ETF.com (October 25, 2021), available 
at: https://www.etf.com/sections/blog/physical-bitcoin-etf-prospects-shine?nopaging=1&__cf_chl_jschl_tk__=pmd_JsK.fjXz9eAQW9zol0qpzhXDrrlpIVdoCloLXbLjl44-1635476946-0-gqNtZGzNApCjcnBszQql.
---------------------------------------------------------------------------

    Based on the foregoing, the Exchange and Sponsor believe that any 
objective review of the proposals to list Spot Bitcoin ETPs compared to 
the Bitcoin Futures ETFs and the Bitcoin Futures Approvals would lead 
to the conclusion that Spot Bitcoin ETPs should be available to U.S. 
investors and, as such, this proposal and other comparable proposals to 
list and trade Spot Bitcoin ETPs should be approved by the Commission. 
Stated simply, U.S. investors will continue to lose significant amounts 
of money from holding Bitcoin Futures ETFs as compared to Spot Bitcoin 
ETPs, losses which could be prevented by the Commission approving Spot 
Bitcoin ETPs. Additionally, any concerns related to preventing 
fraudulent and manipulative acts and practices related to Spot Bitcoin 
ETPs would apply equally to the spot markets underlying the futures 
contracts held by a Bitcoin Futures ETF. Both the Exchange and Sponsor 
believe that the CME Bitcoin Futures market is a regulated market of 
significant size and that such manipulation concerns are mitigated, as 
described extensively below. After allowing and approving the listing 
and trading of Bitcoin Futures ETFs that hold primarily CME Bitcoin 
Futures, however, the only consistent outcome would be approving Spot 
Bitcoin ETPs on the basis that the CME Bitcoin Futures market is a 
regulated market of significant size.
    Given the current landscape, approving this proposal (and others 
like it) and allowing Spot Bitcoin ETPs to be listed and traded 
alongside Bitcoin Futures ETFs would establish a consistent regulatory 
approach, provide U.S. investors with choice in product structures for 
bitcoin exposure, and offer flexibility in the means of gaining 
exposure to bitcoin through transparent, regulated, U.S. exchange-
listed vehicles.
Spot and Proxy Exposure to Bitcoin
    Exposure to bitcoin through an ETP also presents certain advantages 
for retail investors compared to buying spot bitcoin directly. The most 
notable advantage from the Sponsor's perspective is the elimination of 
the need for an individual retail investor to either manage their own 
private keys or to hold bitcoin through a cryptocurrency trading 
platform that lacks sufficient protections. Typically, retail trading 
platforms hold most, if not all, retail investors' bitcoin in ``hot'' 
(internet-connected) storage and do not make any commitments to 
indemnify retail investors or to observe any particular cybersecurity 
standard. Meanwhile, a retail investor holding spot bitcoin directly in 
a self-hosted wallet may suffer from inexperience in private key 
management (e.g., insufficient password protection, lost key, etc.), 
which could cause them to lose some or all of their bitcoin holdings. 
Thus, with respect to custody of the Trust's bitcoin assets, the Trust 
presents advantages from an investment protection standpoint for retail 
investors compared to owning spot bitcoin directly.

[[Page 2419]]

    Finally, as described in the Background section above, a number of 
operating companies largely engaged in unrelated businesses--such as 
Tesla (a car manufacturer) and MicroStrategy (an enterprise software 
company)--have announced significant investments in bitcoin. Without 
access to bitcoin exchange-traded products, retail investors seeking 
investment exposure to bitcoin may end up purchasing shares in these 
companies in order to gain the exposure to bitcoin that they seek.\51\ 
In fact, mainstream financial news networks have written a number of 
articles providing investors with guidance for obtaining bitcoin 
exposure through publicly traded companies (such as MicroStrategy, 
Tesla, and bitcoin mining companies, among others) instead of dealing 
with the complications associated with buying spot bitcoin in the 
absence of a bitcoin ETP.\52\ Such operating companies, however, are 
imperfect bitcoin proxies and provide investors with partial bitcoin 
exposure paired with a host of additional risks associated with 
whichever operating company they decide to purchase. Additionally, the 
disclosures provided by the aforementioned operating companies with 
respect to risks relating to their bitcoin holdings are generally 
substantially smaller than the registration statement of a bitcoin ETP, 
including the Registration Statement, typically amounting to a few 
sentences of narrative description and a handful of risk factors.\53\ 
In other words, investors seeking bitcoin exposure through publicly 
traded companies are gaining only partial exposure to bitcoin and are 
not fully benefitting from the risk disclosures and associated investor 
protections that come from the securities registration process.
---------------------------------------------------------------------------

    \51\ In August 2017, the Commission's Office of Investor 
Education and Advocacy warned investors about situations where 
companies were publicly announcing events relating to digital coins 
or tokens in an effort to affect the price of the company's publicly 
traded common stock. See https://www.sec.gov/oiea/investor-alerts-and-bulletins/ia_icorelatedclaims.
    \52\ See e.g., ``7 public companies with exposure to bitcoin'' 
(February 8, 2021) available at: https://finance.yahoo.com/news/7-public-companies-with-exposure-to-bitcoin-154201525.html; and ``Want 
to get in the crypto trade without holding bitcoin yourself? Here 
are some investing ideas'' (February 19, 2021) available at: https://www.cnbc.com/2021/02/19/ways-to-invest-in-bitcoin-without-holding-the-cryptocurrency-yourself-.html.
    \53\ See, e.g., Tesla 10-K for the year ended December 31, 2020, 
which mentions bitcoin just nine times: https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000156459021004599/tsla-10k_20201231.htm.
---------------------------------------------------------------------------

Bitcoin Futures
    CME began offering trading in Bitcoin Futures in 2017. Each 
contract represents five bitcoin and is based on the CME CF Bitcoin 
Reference Rate.\54\ The contracts trade and settle like other cash-
settled commodity futures contracts. Nearly every measurable metric 
related to Bitcoin Futures has generally trended up since launch, 
although certain notional volume calculations have decreased roughly in 
line with the decrease in the price of bitcoin. For example, there were 
286,519 Bitcoin Futures contracts traded in October 2023 (approximately 
$43.5 billion) compared to 93,611 ($3.9 billion), 162,403 ($9.9 
billion), 266,975 ($79.2 billion), and 279,399 ($27.5 billion) 
contracts traded in October 2019, October 2020, October 2021, and 
October 2022, respectively.\55\
---------------------------------------------------------------------------

    \54\ The CME CF Bitcoin Reference Rate is based on a publicly 
available calculation methodology based on pricing sourced from 
several crypto trading platforms, including Bitstamp, Coinbase, 
Gemini, itBit, Kraken, and LMAX Digital.
    \55\ Source: Bloomberg as of October 31, 2023.
    [GRAPHIC] [TIFF OMITTED] TN12JA24.012
    
    The number of large open interest holders \56\ and unique accounts 
trading Bitcoin Futures have both increased.
---------------------------------------------------------------------------

    \56\ A large open interest holder in Bitcoin Futures is an 
entity that holds at least 25 contracts, which is the equivalent of 
125 bitcoin. At a price of approximately $36,304.40 per bitcoin on 
November 14, 2023, more than 131 firms had outstanding positions of 
greater than $4.5 million in Bitcoin Futures.

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[[Page 2420]]

[GRAPHIC] [TIFF OMITTED] TN12JA24.013

    The Sponsor further believes that publicly available research, 
including research done as part of rule filings proposing to list and 
trade shares of Spot Bitcoin ETPs, corroborates the overall trend 
outlined above and supports the thesis that the Bitcoin Futures pricing 
leads the spot market and, thus, a person attempting to manipulate the 
Shares would also have to trade on that market to manipulate the ETP. 
Specifically, the Sponsor believes that such research indicates that 
Bitcoin Futures lead the bitcoin spot market in price formation.\57\
---------------------------------------------------------------------------

    \57\ See Exchange Act Releases No. 94080 (January 27, 2022), 87 
FR 5527 (April 12, 2022) (specifically ``Amendment No. 1 to the 
Proposed Rule Change To List and Trade Shares of the Wise Origin 
Bitcoin Trust Under BZX Rule 14.11(3)(4), Commodity-Based Trust 
Shares''); 94982 (May 25, 2022), 87 FR 33250 (June 1, 2022); 94844 
(May 4, 2022), 87 FR 28043 (May 10, 2022); and 93445 (October 28, 
2021), 86 FR 60695 (November 3, 2021). See also Hu, Y., Hou, Y. and 
Oxley, L. (2019). ``What role do futures markets play in Bitcoin 
pricing? Causality, cointegration and price discovery from a time-
varying perspective'' (available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7481826/). This academic research paper concludes 
that ``There exist no episodes where the Bitcoin spot markets 
dominates the price discovery processes with regard to Bitcoin 
futures. This points to a conclusion that the price formation 
originates solely in the Bitcoin futures market. We can, therefore, 
conclude that the Bitcoin futures markets dominate the dynamic price 
discovery process based upon time-varying information share 
measures. Overall, price discovery seems to occur in the Bitcoin 
futures markets rather than the underlying spot market based upon a 
time-varying perspective.''
---------------------------------------------------------------------------

Section 6(b)(5) and the Applicable Standards
    The Commission has approved numerous series of Trust Issued 
Receipts,\58\ including Commodity-Based Trust Shares,\59\ 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; 
\60\ and (ii) the requirement that an exchange proposal be designed, in 
general, to protect investors and the public interest. The Exchange 
believes that this proposal is consistent with the requirements of 
section 6(b)(5) of the Act and that this filing sufficiently 
demonstrates that the CME Bitcoin Futures market represents a regulated 
market of significant size and that, on the whole, the manipulation 
concerns previously articulated by the Commission are sufficiently 
mitigated to the point that they are outweighed by quantifiable 
investor protection issues that would be resolved by approving this 
proposal.
---------------------------------------------------------------------------

    \58\ See Exchange Rule 14.11(f).
    \59\ Commodity-Based Trust Shares, as described in Exchange Rule 
14.11(e)(4), are a type of Trust Issued Receipt.
    \60\ As the Exchange has stated in a number of other public 
documents, it continues to believe that bitcoin is resistant to 
price manipulation and that ``other means to prevent fraudulent and 
manipulative acts and practices'' exist to justify dispensing with 
the requisite surveillance sharing agreement. The geographically 
diverse and continuous nature of bitcoin trading render it difficult 
and prohibitively costly to manipulate the price of bitcoin. The 
fragmentation across bitcoin platforms, the relatively slow speed of 
transactions, and the capital necessary to maintain a significant 
presence on each trading platform make manipulation of bitcoin 
prices through continuous trading activity challenging. To the 
extent that there are bitcoin trading platforms engaged in or 
allowing wash trading or other activity intended to manipulate the 
price of bitcoin on other markets, such pricing does not normally 
impact prices on other trading platforms because participants will 
generally ignore markets with quotes that they deem non-executable. 
Moreover, the linkage between the bitcoin markets and the presence 
of arbitrageurs in those markets means that the manipulation of the 
price of bitcoin price on any single venue would require 
manipulation of the global bitcoin price in order to be effective. 
Arbitrageurs must have funds distributed across multiple trading 
platforms in order to take advantage of temporary price 
dislocations, thereby making it unlikely that there will be strong 
concentration of funds on any particular bitcoin trading platform or 
OTC platform. As a result, the potential for manipulation on a 
trading platform would require overcoming the liquidity supply of 
such arbitrageurs who are effectively eliminating any cross-market 
pricing differences.

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[[Page 2421]]

(i) Designed To Prevent Fraudulent and Manipulative Acts and Practices
    In order to meet this standard in a proposal to list and trade a 
series of Commodity-Based Trust Shares, the Commission requires that an 
exchange demonstrate that there is a comprehensive surveillance-sharing 
agreement in place \61\ with a regulated market of significant size. 
Both the Exchange and CME are members of the Intermarket Surveillance 
Group (``ISG'').\62\ The only remaining issue to be addressed is 
whether the Bitcoin Futures market constitutes a market of significant 
size, which both the Exchange and the Sponsor believe that it does. The 
terms ``significant market'' and ``market of significant size'' include 
a market (or group of markets) as to which: (a) there is a reasonable 
likelihood that a person attempting to manipulate the ETP would also 
have to trade on that market to manipulate the ETP, so that a 
surveillance-sharing agreement would assist the listing exchange in 
detecting and deterring misconduct; and (b) it is unlikely that trading 
in the ETP would be the predominant influence on prices in that 
market.\63\
---------------------------------------------------------------------------

    \61\ As previously articulated by the Commission, ``The standard 
requires such surveillance-sharing agreements since ``they provide a 
necessary deterrent to manipulation because they facilitate the 
availability of information needed to fully investigate a 
manipulation if it were to occur.'' The Commission has emphasized 
that it is essential for an exchange listing a derivative securities 
product to enter into a surveillance- sharing agreement with markets 
trading underlying securities for the listing exchange to have the 
ability to obtain information necessary to detect, investigate, and 
deter fraud and market manipulation, as well as violations of 
exchange rules and applicable federal securities laws and rules. The 
hallmarks of a surveillance-sharing agreement are that the agreement 
provides for the sharing of information about market trading 
activity, clearing activity, and customer identity; that the parties 
to the agreement have reasonable ability to obtain access to and 
produce requested information; and that no existing rules, laws, or 
practices would impede one party to the agreement from obtaining 
this information from, or producing it to, the other party.'' The 
Commission has historically held that joint membership in the 
Intermarket Surveillance Group (``ISG'') constitutes such a 
surveillance sharing agreement. See Securities Exchange Act Release 
No. 88284 (February 26, 2020), 85 FR 12595 (March 3, 2020) (SR-
NYSEArca-2019-39) (the ``Wilshire Phoenix Disapproval'').
    \62\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
    \63\ See Wilshire Phoenix Disapproval.
---------------------------------------------------------------------------

    The Commission has also 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.\64\
---------------------------------------------------------------------------

    \64\ See Winklevoss Order at 37580. The Commission has also 
specifically noted that it ``is not applying a `cannot be 
manipulated' standard; instead, the Commission is examining whether 
the proposal meets the requirements of the Exchange Act and, 
pursuant to its Rules of Practice, places the burden on the listing 
exchange to demonstrate the validity of its contentions and to 
establish that the requirements of the Exchange Act have been met.'' 
Id. at 37582.
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(a) Manipulation of the ETP
    According to the Sponsor's research presented above, the Bitcoin 
Futures market is the leading market for bitcoin price formation. Where 
Bitcoin Futures lead the price in the spot market such that a potential 
manipulator of the bitcoin spot market (beyond just the constituents of 
the Benchmark \65\) would have to participate in the Bitcoin Futures 
market, it follows that a potential manipulator of the Shares would 
similarly have to transact in the Bitcoin Futures market because the 
Benchmark is based on spot prices.
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    \65\ As further described below, the ``Benchmark'' for the Fund 
is the MarketVector Bitcoin Benchmark Rate.
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(b) Predominant Influence on Prices in Spot and Bitcoin Futures
    The Exchange and Sponsor also believe that trading in the Shares 
would not be the predominant force on prices in the Bitcoin Futures 
market or spot market for a number of reasons, including the 
significant volume in the Bitcoin Futures market, the size of bitcoin's 
market cap, and the significant liquidity available in the spot market. 
In addition to the Bitcoin Futures market data points cited above, the 
spot market for bitcoin is also very liquid.
(c) Other Means To Prevent Fraudulent and Manipulative Acts and 
Practices
    As noted above, the Commission also permits a listing exchange to 
demonstrate that ``other means to prevent fraudulent and manipulative 
acts and practices'' are sufficient to justify dispensing with the 
requisite surveillance-sharing agreement. The Exchange and Sponsor 
believe that such conditions are present.
(ii) Designed To Protect Investors and the Public Interest
    The Exchange believes that the proposal is designed to protect 
investors and the public interest. Over the past several years, U.S. 
investor exposure to bitcoin through OTC Bitcoin Funds has grown into 
the tens of billions of dollars, including through Bitcoin Futures 
ETFs. With that growth, so too has grown the quantifiable investor 
protection issues to U.S. investors through roll costs for Bitcoin 
Futures ETFs and premium/discount volatility and management fees for 
OTC Bitcoin Funds. As noted above, many U.S. investors that held 
digital assets in accounts at FTX, Celsius Network LLC, BlockFi Inc, 
and Voyager Digital Holdings Inc, have become unsecured creditors in 
the insolvencies of those entities and, consequently, have suffered 
monetary losses. Moreover, most of those U.S. investors do not have 
access to any of their assets at this time due to such bankruptcy 
proceedings or other insolvencies. The Exchange believes that the 
concerns related to the prevention of fraudulent and manipulative acts 
and practices have been sufficiently addressed to be consistent with 
the Act and, to the extent that the Commission disagrees with that 
assertion, such concerns are now outweighed by investor protection 
concerns. As such, the Exchange believes that approving this proposal 
(and comparable proposals) provides the Commission with the opportunity 
to allow U.S. investors with access to bitcoin in a regulated and 
transparent exchange-traded vehicle that would act to limit risk to 
U.S. investors by: (i) reducing premium and discount volatility; (ii) 
reducing management fees through meaningful competition; (iii) reducing 
risks and costs associated with investing in Bitcoin Futures ETFs and 
operating companies that are imperfect proxies for bitcoin exposure; 
and (iv) providing an alternative to custodying spot bitcoin.
VanEck Bitcoin Trust
    Delaware Trust Company is the trustee (``Trustee''). The State 
Street Bank and Trust Company will be the administrator 
(``Administrator''), transfer agent (``Transfer Agent'') and will be 
responsible for the custody of the Trust's cash and cash equivalents 
\66\ (the ``Cash Custodian''). Van Eck Securities Corporation will be 
the marketing agent (``Marketing Agent'') in connection with the 
creation and redemption of ``Creation Baskets'', as defined below, of 
Shares. Van Eck Securities Corporation (``VanEck'') provides assistance 
in the marketing of the Shares. Gemini Trust Company, LLC (the 
``Custodian'') will be responsible for custody of the Trust's bitcoin.
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    \66\ Cash equivalents are short-term instruments with maturities 
of less than 3 months.
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    According to the Registration Statement, each Share will represent 
a fractional undivided beneficial interest in the Trust's net assets. 
The Trust's

[[Page 2422]]

assets will only consist of bitcoin, cash and cash equivalents.
    According to the Registration Statement, the Trust is neither an 
investment company registered under the Investment Company Act of 1940, 
as amended,\67\ nor a commodity pool for purposes of the Commodity 
Exchange Act (``CEA''), and neither the Trust nor the Sponsor is 
subject to regulation as a commodity pool operator or a commodity 
trading adviser in connection with the Shares.
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    \67\ 15 U.S.C. 80a-1.
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    When the Trust sells or redeems its Shares, it will do so in cash 
transactions in blocks of 50,000 Shares (a ``Creation Basket'') at the 
Trust's net asset value (``NAV''). A third party will use cash to buy 
and deliver bitcoin to create Shares or withdraw and sell bitcoin for 
cash to redeem Shares, on behalf of the Trust. For creations, 
authorized participants will deliver cash to the Trust's account with 
the Cash Custodian in exchange for Shares. Upon receipt of an approved 
creation order, the Sponsor, on behalf of the Trust, will submit an 
order to buy the amount of bitcoin represented by a Creation Basket. 
Based off bitcoin executions, the Cash Custodian will request the 
required cash from the authorized participant; the Transfer Agent will 
only issue ETF shares when the authorized participant has made delivery 
of the cash. Following receipt by the Cash Custodian of the cash from 
an authorized participant, the Sponsor, on behalf of the Trust, will 
approve an order with one or more previously onboarded trading partners 
to purchase the amount of bitcoin represented by the Creation Basket. 
This purchase of bitcoin will normally be cleared through an affiliate 
of the Custodian (although the purchase may also occur directly with 
the trading partner) and the bitcoin will settle directly into the 
Trust's account at the Custodian.\68\ Authorized participants may then 
offer Shares to the public at prices that depend on various factors, 
including the supply and demand for Shares, the value of the Trust's 
assets, and market conditions at the time of a transaction. 
Shareholders who buy or sell Shares during the day from their broker 
may do so at a premium or discount relative to the NAV of the Shares of 
the Trust.
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    \68\ For redemptions, the process will occur in the reverse 
order. Upon receipt of an approved redemption order, the Sponsor, on 
behalf of the Trust, will submit an order to sell the amount of 
bitcoin represented by a Creation Basket and the cash proceeds will 
be remitted to the authorized participant when the 50,000 Shares are 
received by the Transfer Agent.
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Investment Objective
    According to the Registration Statement and as further described 
below, the investment objective of the Trust is for the Shares to 
reflect the performance of bitcoin less the expenses of the Trust's 
operations. In seeking to achieve its investment objective, the Trust 
will hold bitcoin and will value its Shares daily based on the reported 
Benchmark and process all creations and redemptions in cash 
transactions with authorized participants. The Trust is not actively 
managed.
The Benchmark
    As described in the Registration Statement, the Fund will use the 
Benchmark to calculate the Trust's NAV. The Benchmark is designed to be 
a robust price for bitcoin in USD and there is no component other than 
bitcoin in the Benchmark. The underlying bitcoin platforms are sourced 
from the industry leading CryptoCompare Exchange Benchmark review 
report. CryptoCompare Exchange Benchmark was established in 2019 as a 
tool designed to bring clarity to the digital asset trading platform 
sector by providing a framework for assessing risk and in turn bringing 
transparency and accountability to a complex and rapidly evolving 
market.\69\ The current bitcoin platform composition of the Benchmark 
is Bitstamp, Coinbase, Bitfinex, LMAX and Kraken. The MarketVector 
Indexes GmbH (``MarketVector'') is the index sponsor and index 
administrator for the Benchmark. Data is the calculation agent for the 
Benchmark. The Benchmark is calculated daily between 00:00 and 24:00 
(CET) and the Benchmark values are disseminated to data vendors every 
fifteen seconds. The Benchmark is disseminated in USD and the closing 
value is calculated at 16:00:00 ET with fixed 16:00 bitcoin platform 
rates.
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    \69\ The CryptoCompare Exchange Benchmark methodology utilizes a 
combination of qualitative and quantitative metrics to analyze a 
comprehensive data set across eight categories of evaluation legal/
regulation, KYC/transaction risk, data provision, security, team/
trading platform, asset quality/diversity, market quality and 
negative events. The CryptoCompare Exchange Benchmark review report 
assigns a grade to each trading platform which helps identify what 
it believes to be the lowest risk trading platforms in the industry. 
Based on the CryptoCompare Exchange Benchmark, the Benchmark 
initially selects the top five trading platforms by rank for 
inclusion in the Benchmark. If an eligible trading platform is 
downgraded by two or more notches in a semi-annual review and is no 
longer in the top five by rank, it is replaced by the highest ranked 
non-component trading platform. Adjustments to trading platform 
coverage are announced four business days prior to the first 
business day of each of March and September at 23:00 CET. The 
Benchmark is rebalanced at 16:00:00 GMT/BST on the last business day 
of each of February and August.
---------------------------------------------------------------------------

    In calculating the closing price of the Benchmark, the methodology 
captures trade prices and sizes from bitcoin platforms and examines 
twenty three-minute periods leading up to 4:00 p.m. EST. It then 
calculates an equal-weighted average of the volume-weighted median 
price of these twenty three-minute periods, removing the highest and 
lowest contributed prices. Using twenty consecutive three-minute 
segments over a sixty-minute period means malicious actors would need 
to sustain efforts to manipulate the market over an extended period of 
time, or would need to replicate efforts multiple times across bitcoin 
platforms, potentially triggering review. This extended period also 
supports authorized participant activity by capturing volume over a 
longer time period, rather than forcing authorized participants to mark 
an individual close or auction. The use of a median price reduces the 
ability of outlier prices to impact the NAV, as it systematically 
excludes those prices from the NAV calculation. The use of a volume-
weighted median (as opposed to a traditional median) serves as an 
additional protection against attempts to manipulate the NAV by 
executing a large number of low-dollar trades, because, any 
manipulation attempt would have to involve a majority of global spot 
bitcoin volume in a three-minute window to have any influence on the 
NAV. As discussed in the Registration Statement, removing the highest 
and lowest prices further protects against attempts to manipulate the 
NAV, requiring bad actors to act on multiple bitcoin platforms at once 
to have any ability to influence the price.
Net Asset Value
    NAV means the total assets of the Trust (which includes all 
bitcoin, cash, and cash equivalents) less total liabilities of the 
Trust. The Administrator determines the NAV of the Trust on each day 
that the Exchange is open for regular trading, as promptly as practical 
after 4:00 p.m. ET based on the Benchmark. The NAV of the Trust is the 
aggregate value of the Trust's assets less its estimated accrued but 
unpaid liabilities (which include accrued expenses). In determining the 
NAV, the Administrator values the Shares of the Trust based on the 
closing price of the Benchmark as of 4:00 p.m. Eastern time. The 
Administrator also determines the NAV per Share.
    The NAV for the Trust will be calculated by the Administrator once 
a day and will be disseminated daily to

[[Page 2423]]

all market participants at the same time. The Sponsor will monitor for 
significant events related to crypto assets that may impact the value 
of bitcoin and will determine, in good faith, and in accordance with 
its valuation policies and procedures, whether to fair value the 
Trust's bitcoin on a given day based on whether certain pre-determined 
criteria have been met. For example, if the Benchmark deviates by more 
than a pre-determined amount from an alternate benchmark available to 
the Sponsor, the Sponsor may determine to utilize an alternate 
benchmark, such as the MarketVector\TM\ Bitcoin Index or the S&P 
Bitcoin Index. The Sponsor may also fair value the Trust's bitcoin 
using observed market transactions from various trading platforms, 
including some or all of the trading platforms included in the 
Benchmark.\70\
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    \70\ Any alternative method to determining NAV will only be 
employed on an ad hoc basis. Any permanent change to the calculation 
of the NAV would require a proposed rule change under Rule 19b-4.
---------------------------------------------------------------------------

Availability of Information
    In addition to the price transparency of the Benchmark, the Trust 
will provide information regarding the Trust's bitcoin 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 current NAV per Share daily and the 
prior business day's NAV and the reported closing price; (b) the BZX 
Official Closing Price \71\ in relation to the NAV as of the time the 
NAV is calculated and a calculation of the premium or discount of such 
price against such NAV; (c) data in chart form displaying the frequency 
distribution of discounts and premiums of the 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); 
(d) the prospectus; and (e) other applicable quantitative information. 
The aforementioned information will be published as of the close of 
business available on the Sponsor's website at www.vaneck.com, or any 
successor thereto. The NAV for the Trust will be calculated by the 
Administrator once a day and will be disseminated daily to all market 
participants at the same time. Quotation and last-sale information 
regarding the Shares will be disseminated through the facilities of the 
Consolidated Tape Association (``CTA''). The Trust will also 
disseminate its holdings on a daily basis on its website.
---------------------------------------------------------------------------

    \71\ As defined in Rule 11.23(a)(3), the term ``BZX Official 
Closing Price'' shall mean the price disseminated to the 
consolidated tape as the market center closing trade.
---------------------------------------------------------------------------

    The Intraday Indicative Value (``IIV'') will be updated during 
Regular Trading Hours to reflect changes in the value of the Trust's 
bitcoin holdings during the trading day. The IIV may differ from the 
NAV because NAV is calculated, using the closing price of the 
Benchmark, once a day at 4:00 p.m. Eastern time whereas the IIV draws 
prices from the last trade on each bitcoin platform to produce a 
relevant, real-time price. The IIV disseminated during Regular Trading 
Hours should not be viewed as an actual real-time update of the NAV, 
which will be calculated only once at the end of each trading day. The 
Trust will provide an IIV per Share updated every 15 seconds, as 
calculated by the Exchange or a third-party financial data provider 
during the Exchange's Regular Trading Hours (9:30 a.m. to 4:00 p.m. 
E.T.). The IIV will be widely disseminated on a per Share basis every 
15 seconds during the Exchange's Regular Trading Hours through the 
facilities of the consolidated tape association (CTA) and Consolidated 
Quotation System (CQS) high speed lines. In addition, the IIV will be 
available through on-line information services such as Bloomberg and 
Reuters.
    The price of bitcoin will be made available by one or more major 
market data vendors, updated at least every 15 seconds during Regular 
Trading Hours.
    As noted above, the Benchmark is calculated every 15 seconds and 
information about the Benchmark and Benchmark value, including index 
data and key elements of how the Benchmark is calculated, will be 
publicly available at https://www.marketvector.com/.
    Quotation and last sale information for bitcoin is widely 
disseminated through a variety of major market data vendors, including 
Bloomberg and Reuters. Information relating to trading, including price 
and volume information, in bitcoin is available from major market data 
vendors and from the trading platforms on which bitcoin are traded. 
Depth of book information is also available from bitcoin trading 
platforms. The normal trading hours for bitcoin 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 closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
The Custodian
    The Custodian's services (i) allow bitcoin to be deposited from a 
public blockchain address to the Trust's bitcoin account and (ii) allow 
bitcoin to be withdrawn from the bitcoin account to a public blockchain 
address as instructed by the Trust. The custody agreement requires the 
Custodian to hold the Trust's bitcoin in cold storage, unless required 
to facilitate withdrawals as a temporary measure. The Custodian will 
use segregated cold storage bitcoin addresses for the Trust which are 
separate from the bitcoin addresses that the Custodian uses for its 
other customers and which are directly verifiable via the Bitcoin 
Blockchain. The Custodian will safeguard the private keys to the 
bitcoin associated with the Trust's bitcoin account. The Custodian will 
at all times record and identify in its books and records that such 
bitcoins constitute the property of the Trust. The Custodian will not 
withdraw the Trust's bitcoin from the Trust's account with the 
Custodian, or loan, hypothecate, pledge or otherwise encumber the 
Trust's bitcoin, without the Trust's instruction. If the custody 
agreement terminates, the Sponsor may appoint another custodian and the 
Trust may enter into a custodian agreement with such custodian.
Creation and Redemption of Shares
    When the Trust sells or redeems its Shares, it will do so in cash 
transactions in blocks of 50,000 Shares that are based on the amount of 
bitcoin held by the Trust on a per unit (i.e., 50,000 Share) basis. 
According to the Registration Statement, on any business day, an 
authorized participant may place an order to create one or more 
Creation Baskets. Purchase orders must be placed by 4:00 p.m. ET, or 
the close of regular trading on the Exchange, whichever is earlier. The 
day on which an order is received is considered the purchase order 
date. The total deposit of cash required is an amount of cash 
sufficient to purchase such amount of bitcoin, the amount of which is 
equal to the combined NAV of the number of Shares included in the 
Creation Baskets being created determined as of 4:00 p.m. ET on the 
date the order to purchase is properly received. The Administrator 
determines the required deposit for a given day by dividing the number 
of bitcoin held by the Trust as of the opening of business on that 
business day, adjusted for the amount of bitcoin 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

[[Page 2424]]

number of Shares outstanding at the opening of business divided by 
50,000. The procedures by which an authorized participant can redeem 
one or more Creation Baskets mirror the procedures for the creation of 
Creation Baskets. For example, assume the total bitcoin held by the 
Trust less any estimated accrued but unpaid fees and expenses is 10,000 
bitcoin and the total number of Shares outstanding is 100,000. The 
Administrator would determine the required deposit as follows:
[GRAPHIC] [TIFF OMITTED] TN12JA24.066

Total deposited cash as described in the example above would be 5,000 
multiplied by the price of bitcoin.
    The 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 bitcoin as part of the creation or redemption process or 
otherwise direct the Trust or a third party with respect to purchasing, 
holding, delivering, or receiving bitcoin as part of the creation or 
redemption process.
    The Trust will create shares by receiving bitcoin from a third 
party that is not the authorized participant and the Trust--not the 
authorized participant--is responsible for selecting the third party to 
facilitate the delivery of the bitcoin. Further, the third party will 
not be acting as an agent of the authorized participant with respect to 
the delivery of the bitcoin to the Trust or acting at the direction of 
the authorized participant with respect to the delivery of the bitcoin 
to the Trust. When fulfilling a redemption request, the Trust will 
deliver bitcoin to a third party that is not the authorized participant 
and the Trust--not the authorized participant- is responsible for 
selecting such third party to receive the bitcoin. Further, the third 
party will not be acting as an agent of the authorized participant with 
respect to the receipt of the bitcoin from the Trust or acting at the 
direction of the authorized participant with respect to the receipt of 
the bitcoin from the Trust.
    The procedures by which an authorized participant can redeem one or 
more Creation Baskets mirror the procedures for the creation of 
Creation Baskets. A third party, that is unaffiliated with the Trust 
and the Sponsor, will use cash to buy and deliver bitcoin to create 
Shares or withdraw and sell bitcoin for cash to redeem Shares, on 
behalf of the Trust.
    The Sponsor will maintain ownership and control of bitcoin in a 
manner consistent with good delivery requirements for spot commodity 
transactions.
Rule 14.11(e)(4)--Commodity-Based Trust Shares
    The Shares will be subject to BZX Rule 14.11(e)(4), which sets 
forth the initial and continued listing criteria applicable to 
Commodity-Based Trust Shares. The Exchange represents that, for initial 
and continued listing, the Trust must be in compliance with Rule 10A-3 
under the Act. A minimum of 100,000 Shares will be outstanding at the 
commencement of listing on the Exchange. The Exchange will obtain a 
representation that the NAV will be calculated daily and that the NAV 
and information about the assets of the Trust will be made available to 
all market participants at the same time. The Exchange notes that, as 
defined in Rule 14.11(e)(4)(C)(i), the Shares will be: (a) issued by a 
trust that holds (1) a specified commodity \72\ deposited with the 
trust, or (2) a specified commodity and, in addition to such specified 
commodity, cash; (b) issued by such trust in a specified aggregate 
minimum number in return for a deposit of a quantity of the underlying 
commodity and/or cash; and (c) when aggregated in the same specified 
minimum number, may be redeemed at a holder's request by such trust 
which will deliver to the redeeming holder the quantity of the 
underlying commodity and/or cash.
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    \72\ For purposes of Rule 14.11(e)(4), the term commodity takes 
on the definition of the term as provided in the Commodity Exchange 
Act. As noted above, the CFTC has opined that Bitcoin is a commodity 
as defined in section 1a(9) of the Commodity Exchange Act. See 
Coinflip.
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    Upon termination of the Trust, the Shares will be removed from 
listing. The Trustee, Delaware Trust Company, is a trust company having 
substantial capital and surplus and the experience and facilities for 
handling corporate trust business, as required under Rule 
14.11(e)(4)(E)(iv)(a) and that no change will be made to the trustee 
without prior notice to and approval of the Exchange. The Exchange also 
notes that, pursuant to Rule 14.11(e)(4)(F), neither the Exchange nor 
any agent of the Exchange shall have any liability for damages, claims, 
losses or expenses caused by any errors, omissions or delays in 
calculating or disseminating any underlying commodity value, the 
current value of the underlying commodity required to be deposited to 
the Trust in connection with issuance of Commodity-Based Trust Shares; 
resulting from any negligent act or omission by the Exchange, or any 
agent of the Exchange, or any act, condition or cause beyond the 
reasonable control of the Exchange, its agent, including, but not 
limited to, an act of God; fire; flood; extraordinary weather 
conditions; war; insurrection; riot; strike; accident; action of 
government; communications or power failure; equipment or software 
malfunction; or any error, omission or delay in the reports of 
transactions in an underlying commodity. Finally, as required in Rule 
14.11(e)(4)(G), the Exchange notes that any registered market maker 
(``Market Maker'') in the Shares must file with the Exchange in a 
manner prescribed by the Exchange and keep current a list identifying 
all accounts for trading in an underlying commodity, related commodity 
futures or options on commodity futures, or any other related commodity 
derivatives, which the registered Market Maker may have or over which 
it may exercise investment discretion. No registered Market Maker shall 
trade in an underlying commodity, related commodity futures or options 
on commodity futures, or any other related commodity derivatives, in an 
account in which a registered Market Maker, directly or indirectly, 
controls trading activities, or has a direct interest in the profits or 
losses thereof, which has not been reported to the Exchange as required 
by this Rule. In addition to the existing obligations under Exchange 
rules regarding the production of books and records (see, e.g., Rule 
4.2), the registered Market Maker in Commodity-Based Trust Shares shall 
make available to the Exchange such books, records or other information 
pertaining to transactions by such entity or registered or non-
registered employee affiliated with such entity for its or their own 
accounts for trading the underlying physical commodity, related 
commodity futures or options on commodity

[[Page 2425]]

futures, or any other related commodity derivatives, as may be 
requested by the Exchange.
    The Exchange is able to obtain information regarding trading in the 
Shares and the underlying bitcoin, Bitcoin Futures contracts, options 
on Bitcoin Futures, or any other bitcoin 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.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. The Exchange will halt trading in the Shares 
under the conditions specified in BZX Rule 11.18. Trading may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable. These may include: 
(1) the extent to which trading is not occurring in the bitcoin 
underlying the Shares; or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present. Trading in the Shares also will be subject to Rule 
14.11(e)(4)(E)(ii), which sets forth circumstances under which trading 
in the Shares may be halted.
    If the IIV or the value of the Benchmark 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 
Benchmark occurs. If the interruption to the dissemination of the IIV 
or the value of the Benchmark persists past the trading day in which it 
occurred, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption.
    In addition, if the Exchange becomes aware that the NAV with 
respect to the Shares is not disseminated to all market participants at 
the same time, it will halt trading in the Shares until such time as 
the NAV is available to all market participants.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. BZX will allow 
trading in the Shares during all trading sessions on the Exchange. The 
Exchange has appropriate rules to facilitate transactions in the Shares 
during all trading sessions. As provided in BZX Rule 11.11(a) the 
minimum price variation for quoting and entry of orders in securities 
traded on the Exchange is $0.01 where the price is greater than $1.00 
per share or $0.0001 where the price is less than $1.00 per share. The 
Shares of the Trust will conform to the initial and continued listing 
criteria set forth in BZX Rule 14.11(e)(4).
Surveillance
    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the Shares on the Exchange 
during all trading sessions and to deter and detect violations of 
Exchange rules and the applicable federal securities laws. Trading of 
the Shares through the Exchange will be subject to the Exchange's 
surveillance procedures for derivative products, including Commodity-
Based Trust Shares. FINRA conducts certain cross-market surveillances 
on behalf of the Exchange pursuant to a regulatory services agreement. 
The Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and Bitcoin 
Futures 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 
Bitcoin Futures from such markets and other entities.\73\ The Exchange 
may obtain information regarding trading in the Shares and Bitcoin 
Futures via ISG, from other exchanges who are members or affiliates of 
the ISG, or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.
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    \73\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Trust or the Shares to comply with the 
continued listing requirements, and, pursuant to its obligations under 
section 19(g)(1) of the Exchange Act, the Exchange will surveil for 
compliance with the continued listing requirements. If the Trust or the 
Shares are not in compliance with the applicable listing requirements, 
the Exchange will commence delisting procedures under Exchange Rule 
14.12.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (i) the procedures for the 
creation and redemption of Baskets (and that the Shares are not 
individually redeemable); (ii) BZX Rule 3.7, which imposes suitability 
obligations on Exchange members with respect to recommending 
transactions in the Shares to customers; (iii) how information 
regarding the IIV and the Trust's NAV are disseminated; (iv) the risks 
involved in trading the Shares outside of Regular Trading Hours \74\ 
when an updated IIV will not be calculated or publicly disseminated; 
(v) the requirement that members deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (vi) trading information. The 
Information Circular will also reference the fact that there is no 
regulated source of last sale information regarding bitcoin, that the 
Commission has no jurisdiction over the trading of bitcoin as a 
commodity, and that the CFTC has regulatory jurisdiction over the 
trading of Bitcoin Futures contracts and options on Bitcoin Futures 
contracts.
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    \74\ Regular Trading Hours is the time between 9:30 a.m. and 
4:00 p.m. Eastern Time.
---------------------------------------------------------------------------

    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Shares. Members purchasing the Shares for resale to 
investors will deliver a prospectus to such investors. The Information 
Circular will also discuss any exemptive, no-action and interpretive 
relief granted by the Commission from any rules under the Act.

[[Page 2426]]

2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act \75\ in general and section 6(b)(5) of the Act \76\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest.
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    \75\ 15 U.S.C. 78f.
    \76\ 15 U.S.C. 78f(b)(5).
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    The Commission has approved numerous series of Trust Issued 
Receipts,\77\ including Commodity-Based Trust Shares,\78\ 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; 
\79\ and (ii) the requirement that an exchange proposal be designed, in 
general, to protect investors and the public interest. The Exchange 
believes that this proposal is consistent with the requirements of 
section 6(b)(5) of the Act and that this filing sufficiently 
demonstrates that the CME Bitcoin Futures market represents a regulated 
market of significant size and that, on the whole, the manipulation 
concerns previously articulated by the Commission are sufficiently 
mitigated to the point that they are outweighed by quantifiable 
investor protection issues that would be resolved by approving this 
proposal.
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    \77\ See Exchange Rule 14.11(f).
    \78\ Commodity-Based Trust Shares, as described in Exchange Rule 
14.11(e)(4), are a type of Trust Issued Receipt.
    \79\ As the Exchange has stated in a number of other public 
documents, it continues to believe that bitcoin is resistant to 
price manipulation and that ``other means to prevent fraudulent and 
manipulative acts and practices'' exist to justify dispensing with 
the requisite surveillance sharing agreement. The geographically 
diverse and continuous nature of bitcoin trading render it difficult 
and prohibitively costly to manipulate the price of bitcoin. The 
fragmentation across bitcoin platforms, the relatively slow speed of 
transactions, and the capital necessary to maintain a significant 
presence on each trading platform make manipulation of bitcoin 
prices through continuous trading activity challenging. To the 
extent that there are bitcoin trading platforms engaged in or 
allowing wash trading or other activity intended to manipulate the 
price of bitcoin on other markets, such activity does not normally 
impact prices on other trading platforms because participants will 
generally ignore markets with quotes that they deem non-executable. 
The reason is that wash trading aims to manipulate the volume rather 
than the price of an asset to give the impression of heightened 
market activity in hopes of attracting investors to that asset. 
Moreover, wash trades are executed within a trading platform rather 
than cross trading platforms since the entity executing the wash 
trades would aim to trade against itself, and as such, this can only 
happen within a trading platform. Should the wash trades of that 
entity result in a deviation of the price on that trading platform 
relative to others, arbitrageurs would then be able to capitalize on 
this mispricing, and bring the manipulated price back to 
equilibrium, resulting in a loss to the entity executing the wash 
trades. Moreover, the linkage between the bitcoin markets and the 
presence of arbitrageurs in those markets means that the 
manipulation of the price of bitcoin price on any single venue would 
require manipulation of the global bitcoin price in order to be 
effective. Arbitrageurs must have funds distributed across multiple 
trading platforms in order to take advantage of temporary price 
dislocations, thereby making it unlikely that there will be strong 
concentration of funds on any particular bitcoin trading platform or 
OTC platform. As a result, the potential for manipulation on a 
trading platform would require overcoming the liquidity supply of 
such arbitrageurs who are effectively eliminating any cross-market 
pricing differences.
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(i) Designed To Prevent Fraudulent and Manipulative Acts and Practices
    In order to meet this standard in a proposal to list and trade a 
series of Commodity-Based Trust Shares, the Commission requires that an 
exchange demonstrate that there is a comprehensive surveillance-sharing 
agreement in place \80\ with a regulated market of significant size. 
Both the Exchange and CME are members of ISG.\81\ The only remaining 
issue to be addressed is whether the Bitcoin Futures market constitutes 
a market of significant size, which both the Exchange and the Sponsor 
believe that it does. The terms ``significant market'' and ``market of 
significant size'' include a market (or group of markets) as to which: 
(a) there is a reasonable likelihood that a person attempting to 
manipulate the ETP would also have to trade on that market to 
manipulate the ETP, so that a surveillance-sharing agreement would 
assist the listing exchange in detecting and deterring misconduct; and 
(b) it is unlikely that trading in the ETP would be the predominant 
influence on prices in that market.\82\
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    \80\ As previously articulated by the Commission, ``The standard 
requires such surveillance-sharing agreements since ``they provide a 
necessary deterrent to manipulation because they facilitate the 
availability of information needed to fully investigate a 
manipulation if it were to occur.'' The Commission has emphasized 
that it is essential for an exchange listing a derivative securities 
product to enter into a surveillance-sharing agreement with markets 
trading underlying securities for the listing exchange to have the 
ability to obtain information necessary to detect, investigate, and 
deter fraud and market manipulation, as well as violations of 
exchange rules and applicable federal securities laws and rules. The 
hallmarks of a surveillance-sharing agreement are that the agreement 
provides for the sharing of information about market trading 
activity, clearing activity, and customer identity; that the parties 
to the agreement have reasonable ability to obtain access to and 
produce requested information; and that no existing rules, laws, or 
practices would impede one party to the agreement from obtaining 
this information from, or producing it to, the other party.'' The 
Commission has historically held that joint membership in ISG 
constitutes such a surveillance sharing agreement. See Wilshire 
Phoenix Disapproval.
    \81\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
    \82\ See Wilshire Phoenix Disapproval.
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    The Commission has also 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.\83\
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    \83\ See Winklevoss Order at 37580. The Commission has also 
specifically noted that it ``is not applying a `cannot be 
manipulated' standard; instead, the Commission is examining whether 
the proposal meets the requirements of the Exchange Act and, 
pursuant to its Rules of Practice, places the burden on the listing 
exchange to demonstrate the validity of its contentions and to 
establish that the requirements of the Exchange Act have been met.'' 
Id. at 37582.
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(a) Reasonable Likelihood That a Person Attempting To Manipulate the 
ETP Would Also Have To Trade on That Market To Manipulate the ETP
    Bitcoin Futures represent a growing influence on pricing in the 
spot bitcoin market as has been laid out above and in other proposals 
to list and trade Spot Bitcoin ETPs. Pricing in Bitcoin Futures is 
based on pricing from spot bitcoin markets. As noted above, the 
statement from the Teucrium Approval that ``CME's surveillance can 
reasonably be relied upon to capture the effects on the CME Bitcoin 
Futures market caused by a person attempting to manipulate the proposed 
futures ETP by manipulating the price of CME Bitcoin Futures contracts 
. . . indirectly by trading outside of the CME Bitcoin Futures 
market,'' makes clear that the Commission believes that CME's 
surveillance can capture the effects of trading on the relevant spot 
markets on the pricing of Bitcoin Futures. While the Commission makes 
clear in the Teucrium Approval that the analysis only applies to the 
Bitcoin Futures market as it relates to an ETP that invests in Bitcoin 
Futures as its only non-cash or cash equivalent holding, if CME's 
surveillance is sufficient to mitigate concerns related to trading in

[[Page 2427]]

Bitcoin Futures for which the pricing is based directly on pricing from 
spot bitcoin markets, it's not clear how such a conclusion could apply 
only to ETPs based on Bitcoin Futures and not extend to Spot Bitcoin 
ETPs.
(b) Predominant Influence on Prices in Spot and Bitcoin Futures
    The Exchange and Sponsor also believe that trading in the Shares 
would not be the predominant force on prices in the Bitcoin Futures 
market or spot market for a number of reasons, including the 
significant volume in the Bitcoin Futures market, the size of bitcoin's 
market cap, and the significant liquidity available in the spot market. 
In addition to the Bitcoin Futures market data points cited above, the 
spot market for bitcoin is also very liquid. According to data from 
Skew, the cost to buy or sell $5 million worth of bitcoin averages 
roughly 48 basis points with a market impact of $139.08.\84\ Stated 
another way, a market participant could enter a market buy or sell 
order for $5 million of bitcoin and only move the market 0.48%. More 
strategic purchases or sales (such as using limit orders and executing 
through OTC bitcoin trade desks) would likely have less obvious impact 
on the market--which is consistent with MicroStrategy, Tesla, and 
Square being able to collectively purchase billions of dollars in 
bitcoin.
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    \84\ These statistics are based on samples of bitcoin liquidity 
in USD (excluding stablecoins or Euro liquidity) based on executable 
quotes on Coinbase, FTX and Kraken during the one year period ending 
May 2022.
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    As such, the combination of the Bitcoin Futures leading price 
discovery, the overall size of the bitcoin market, and the ability for 
market participants to buy or sell large amounts of bitcoin without 
significant market impact will help prevent the Shares from becoming 
the predominant force on pricing in either the bitcoin spot or Bitcoin 
Futures markets, satisfying part (b) of the test outlined above.
(c) Other Means To Prevent Fraudulent and Manipulative Acts and 
Practices
    As noted above, the Commission also permits a listing exchange to 
demonstrate that ``other means to prevent fraudulent and manipulative 
acts and practices'' are sufficient to justify dispensing with the 
requisite surveillance-sharing agreement. The Exchange and Sponsor 
believe that such conditions are present.
(ii) Designed To Protect Investors and the Public Interest
    The Exchange believes that the proposal is designed to protect 
investors and the public interest. Over the past several years, U.S. 
investor exposure to bitcoin through OTC Bitcoin Funds has grown into 
the tens of billions of dollars and more than a billion dollars of 
exposure through Bitcoin Futures ETFs. With that growth, so too has 
grown the quantifiable investor protection issues to U.S. investors 
through roll costs for Bitcoin Futures ETFs and premium/discount 
volatility and management fees for OTC Bitcoin Funds. The Exchange 
believes that the concerns related to the prevention of fraudulent and 
manipulative acts and practices have been sufficiently addressed to be 
consistent with the Act and, to the extent that the Commission 
disagrees with that assertion, also believes that such concerns are now 
outweighed by these investor protection concerns. As such, the Exchange 
believes that approving this proposal (and comparable proposals) 
provides the Commission with the opportunity to allow U.S. investors 
with access to bitcoin in a regulated and transparent exchange-traded 
vehicle that would act to limit risk to U.S. investors by: (i) reducing 
premium and discount volatility; (ii) reducing management fees through 
meaningful competition; (iii) reducing risks and costs associated with 
investing in Bitcoin Futures ETFs and operating companies that are 
imperfect proxies for bitcoin exposure; and (iv) providing an 
alternative to custodying spot bitcoin.
Commodity-Based Trust Shares
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed on the Exchange pursuant to the initial and 
continued listing criteria in Exchange Rule 14.11(e)(4). The Exchange 
believes that its surveillance procedures are adequate to properly 
monitor the trading of the Shares on the Exchange during all trading 
sessions and to deter and detect violations of Exchange rules and the 
applicable federal securities laws. Trading of the Shares through the 
Exchange will be subject to the Exchange's surveillance procedures for 
derivative products, including Commodity-Based Trust Shares. The issuer 
has represented to the Exchange that it will advise the Exchange of any 
failure by the Trust or the Shares to comply with the continued listing 
requirements, and, pursuant to its obligations under section 19(g)(1) 
of the Exchange Act, the Exchange will surveil for compliance with the 
continued listing requirements. If the Trust or the Shares are not in 
compliance with the applicable listing requirements, the Exchange will 
commence delisting procedures under Exchange Rule 14.12. The Exchange 
may obtain information regarding trading in the Shares and listed 
bitcoin derivatives via the ISG, from other exchanges who are members 
or affiliates of the ISG, or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement.
Availability of Information
    The Exchange also believes that the proposal promotes market 
transparency in that a large amount of information is currently 
available about bitcoin and will be available regarding the Trust and 
the Shares. In addition to the price transparency of the Benchmark, the 
Trust will provide information regarding the Trust's bitcoin 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 current NAV per Share daily and the 
prior business day's NAV and the reported closing price; (b) the BZX 
Official Closing Price \85\ in relation to the NAV as of the time the 
NAV is calculated and a calculation of the premium or discount of such 
price against such NAV; (c) data in chart form displaying the frequency 
distribution of discounts and premiums of the 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); 
(d) the prospectus; and (e) other applicable quantitative information. 
The aforementioned information will be published as of the close of 
business available on the Sponsor's website at www.vaneck.com, or any 
successor thereto. The NAV for the Trust will be calculated by the 
Administrator once a day and will be disseminated daily to all market 
participants at the same time. Quotation and last-sale information 
regarding the Shares will be disseminated through the facilities of the 
CTA. The Trust will also disseminate its holdings on a daily basis on 
its website.
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    \85\ As defined in Rule 11.23(a)(3), the term ``BZX Official 
Closing Price'' shall mean the price disseminated to the 
consolidated tape as the market center closing trade.
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    The IIV will be updated during Regular Trading Hours to reflect 
changes in the value of the Trust's bitcoin holdings during the trading 
day. The IIV may differ from the NAV because NAV is calculated, using 
the closing price of the Benchmark, once a day at 4:00 p.m. Eastern 
time whereas the IIV draws prices from the last trade

[[Page 2428]]

on each bitcoin platform to produce a relevant, real-time price. The 
IIV disseminated during Regular Trading Hours should not be viewed as 
an actual real-time update of the NAV, which will be calculated only 
once at the end of each trading day. The Trust will provide an IIV per 
Share updated every 15 seconds, as calculated by the Exchange or a 
third-party financial data provider during the Exchange's Regular 
Trading Hours (9:30 a.m. to 4:00 p.m. E.T.). The IIV will be widely 
disseminated on a per Share basis every 15 seconds during the 
Exchange's Regular Trading Hours through the facilities of the 
consolidated tape association (CTA) and Consolidated Quotation System 
(CQS) high speed lines. In addition, the IIV will be available through 
on-line information services such as Bloomberg and Reuters.
    The price of bitcoin will be made available by one or more major 
market data vendors, updated at least every 15 seconds during Regular 
Trading Hours.
    As noted above, the Benchmark is calculated every 15 seconds and 
information about the Benchmark and Benchmark value, including index 
data and key elements of how the Benchmark is calculated, will be 
publicly available at https://www.marketvector.com/.
    Quotation and last sale information for bitcoin is widely 
disseminated through a variety of major market data vendors, including 
Bloomberg and Reuters. Information relating to trading, including price 
and volume information, in bitcoin is available from major market data 
vendors and from the trading platforms on which bitcoin are traded. 
Depth of book information is also available from bitcoin trading 
platforms. The normal trading hours for bitcoin 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 closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
    In sum, the Exchange believes that this proposal is consistent with 
the requirements of section 6(b)(5) of the Act, that this filing 
sufficiently demonstrates that the CME Bitcoin Futures market 
represents a regulated market of significant size, and that on the 
whole the manipulation concerns previously articulated by the 
Commission are sufficiently mitigated to the point that they are 
outweighed by investor protection issues that would be resolved by 
approving this proposal.
    The Exchange believes that the proposal is, in particular, designed 
to protect investors and the public interest. Premium and discount 
volatility, high fees, rolling costs, insufficient disclosures, and 
technical hurdles are putting U.S. investor money at risk on a daily 
basis that could potentially be eliminated through access to a Spot 
Bitcoin ETP. As such, the Exchange believes that this proposal acts to 
limit the risk to U.S. investors that are increasingly seeking exposure 
to bitcoin by providing direct, 1-for-1 exposure to bitcoin in a 
regulated, transparent, exchange-traded vehicle, specifically by: (i) 
reducing premium volatility; (ii) reducing management fees through 
meaningful competition; (iii) providing an alternative to Bitcoin 
Futures ETFs which will eliminate roll cost; (iv) reducing risks 
associated with investing in operating companies that are imperfect 
proxies for bitcoin exposure; and (v) providing an alternative to 
custodying spot bitcoin. The investor protection issues for U.S. 
investors has grown significantly over the last several years, through 
roll costs for Bitcoin Futures ETFs and premium/discount volatility and 
management fees for OTC Bitcoin Funds. As discussed throughout, this 
growth investor protection concerns need to be reevaluated and 
rebalanced with the prevention of fraudulent and manipulative acts and 
practices concerns that previous disapproval orders have relied upon. 
Finally, the Exchange notes that in addition to all of the arguments 
herein which it believes sufficiently establishes the CME Bitcoin 
Futures market as a regulated market of significant size, it is 
logically inconsistent to find that the CME Bitcoin Futures market is a 
significant market as it relates to the CME Bitcoin Futures market, but 
not a significant market as it relates to the bitcoin spot market for 
the numerous reasons laid out above.
    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of section 6(b)(5) of the 
Act.

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

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

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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeBZX-2023-040 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-CboeBZX-2023-040. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication

[[Page 2429]]

submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-CboeBZX-2023-040 and 
should be submitted on or before February 2, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\86\
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    \86\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00503 Filed 1-11-24; 8:45 am]
BILLING CODE 8011-01-P