[Federal Register Volume 89, Number 9 (Friday, January 12, 2024)]
[Notices]
[Pages 2281-2294]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00507]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99287; File No. SR-NASDAQ-2023-019]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Amendment No. 1 to a Proposed Rule Change To List 
and Trade Shares of the Valkyrie Bitcoin Fund Under Nasdaq Rule 
5711(d), Commodity-Based Trust Shares

January 8, 2024.
    On July 3, 2023, The Nasdaq Stock Market LLC (``Nasdaq'' 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 of the Valkyrie Bitcoin 
Fund under Nasdaq Rule 5711(d), Commodity-Based Trust Shares. The 
proposed rule change was published for comment in the Federal Register 
on July 21, 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.\5\ On September 28, 2023, the Commission 
instituted proceedings to determine whether to disapprove the proposed 
rule change.\6\ On January 5, 2024, the Exchange filed Amendment No. 1 
to the proposed rule change as described in Items I and II below, which 
Items have been prepared by the Exchange. Amendment No. 1 amended and 
replaced the proposed rule change in its entirety. The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as modified by Amendment No. 1, 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. 97922 (July 17, 
2023), 88 FR 47214. Comments on the proposed rule change are 
available at: https://www.sec.gov/comments/sr-nasdaq-2023-019/srnasdaq2023019.htm.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 98262, 88 FR 61658 
(Sept. 7, 2023).
    \6\ See Securities Exchange Act Release No. 98606, 88 FR 68894 
(Oct. 4, 2023).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the Valkyrie 
Bitcoin Fund (the ``Trust'') under Nasdaq Rule 5711(d) (``Commodity-
Based Trust

[[Page 2282]]

Shares''). The shares of the Trust are referred to herein as the 
``Shares.'' This Amendment No. 1 supersedes the original filing in its 
entirety.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to list and trade Shares of the Trust under 
Nasdaq Rule 5711(d), which governs the listing and trading of 
Commodity-Based Trust Shares on the Exchange.\7\
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    \7\ Nasdaq Rule 5711(d)(iv)(A) defines Commodity-Based Trust 
Shares as ``a security (1) that is issued by a trust that holds (a) 
a specified commodity deposited with the trust, or (b) a specified 
commodity and, in addition to such specified commodity, cash; (2) 
that is issued by such trust in a specified aggregate minimum number 
in return for a deposit of a quantity of the underlying commodity 
and/or cash; and (3) that, when aggregated in the same specified 
minimum number, may be redeemed at a holder's request by such trust 
which will deliver to the redeeming holder the quantity of the 
underlying commodity and/or cash.''
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Description of the Trust
    The Shares will be issued by the Trust, a Delaware statutory trust. 
The Trust will operate pursuant to a trust agreement (the ``Trust 
Agreement'') between Valkyrie Digital Assets, LLC (the ``Sponsor'') and 
Delaware Trust Company, as the Trust's trustee (the ``Trustee''). The 
Shares will be registered with the Commission by means of the Trust's 
registrations statement on Form S-1 (the ``Registration 
Statement'').\8\ Pursuant to the Trust Agreement, the Sponsor will 
enter into a custodian agreement (the ``Custodian Agreement'') with 
Coinbase Custody Trust Company, LLC (the ``Custodian'') to act as 
custodian for the Trust's bitcoins. The Custodian is not an affiliate 
of the Trust or the Sponsor. Pursuant to the Custodian Agreement, the 
Custodian will establish accounts that hold the bitcoins deposited with 
the Custodian on behalf of the Trust. U.S. Bancorp Fund Services, LLC 
will act as the transfer agent for the Trust (the ``Transfer Agent'') 
and as the administrator of the Trust (the ``Administrator'') to 
perform various administrative, accounting and recordkeeping functions 
on behalf of the Trust. One or more cash custodians (each, a ``Cash 
Custodian'') will act as custodian for the cash held by the Trust.
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    \8\ See Amendment No. 5 to Registration Statement on Form S-1, 
dated December 29, 2023 filed with the Commission by the Sponsor on 
behalf of the Trust (File No. 333-252344). The descriptions of the 
Trust contained herein are based, in part, on information in the 
Registration Statement. The Registration Statement in not yet 
effective and the Shares will not trade on the Exchange until such 
time that the Registration Statement is effective.
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    The investment objective of the Trust is for the Shares to reflect 
the performance of the value of a bitcoin as represented by the CME CF 
Bitcoin Reference Rate--New York Variant (the ``Index''), less the 
Trust's liabilities and expenses. The purpose of the Trust is to 
provide investors with a cost-effective and convenient way to invest in 
bitcoin in a manner that is more efficient and convenient than the 
purchase of a stand-alone bitcoin, while also mitigating some of the 
risk by reducing the volatility typically associated with the purchase 
of stand-alone bitcoin and without the uncertain and often complex 
requirements relating to acquiring and/or holding bitcoin.
    The Trust will only hold bitcoin and cash, and will, from time to 
time, issue a block of 5,000 Shares (a ``Basket'') in exchange for 
deposits of cash to the Trust. The Trust intends to hold cash only to 
the extent necessary to pay Trust expenses, when receiving cash in 
connection the creation of Baskets, or when distributing cash in 
connection with redemptions of Baskets. The Shares of the Trust 
represent units of fractional undivided beneficial interest in, and 
ownership of, the Trust. The bitcoins held by the Custodian on behalf 
of the Trust will be transferred out of its custody only to be sold on 
an as-needed basis in connection with the redemption of Baskets, to pay 
additional trust expenses, or in the event the Trust terminates and 
liquidates its assets or as otherwise required by law or regulation.
Custody of the Trust's Bitcoins
    The Custodian will custody all of the Trust's bitcoin, other than 
that which may be maintained in a trading account (the ``Trading 
Balance'') with Coinbase, Inc. (``Coinbase,'' which is an affiliate of 
the Custodian), in accounts that are required to be segregated from the 
assets held by the Custodian as principal and the assets of its other 
customers (the ``Vault Balance''). The Custodian will keep all of the 
private keys associated with the Trust's bitcoin held by the Custodian 
in the Vault Balance in ``cold storage'', which refers to a 
safeguarding method by which the private keys corresponding to the 
Trust's bitcoins are generated and stored in an offline manner using 
computers or devices that are not connected to the internet, which is 
intended to make them more resistant to hacking. By contrast, in hot 
storage, the private keys are held online, where they are more 
accessible, leading to more efficient transfers, though they are 
potentially more vulnerable to being hacked. While the Custodian will 
generally keep a substantial portion of the Trust's bitcoin in cold 
storage on an ongoing basis, from time to time, portions of the Trust's 
bitcoin will be held outside of cold storage temporarily in the Trading 
Balance maintained by Coinbase as part of trade facilitation in 
connection with creations and redemptions of Baskets or to sell 
bitcoins including to pay Trust expenses. The Trust's bitcoin held in 
the Vault Balance by the Custodian are held in segregated wallets and 
therefore are not commingled with the Custodian's or other customer 
assets.
    All bitcoins exist and are stored on the decentralized transaction 
ledger of the Bitcoin network (the ``Blockchain''). The Blockchain 
records most transactions (including mining of new bitcoins) for all 
bitcoins in existence, and in doing so verifies the location of each 
bitcoin (or fraction thereof) in a particular digital wallet. Each 
digital wallet of the Custodian may be accessed using its corresponding 
private key. The Custodian's custodial operations will maintain custody 
of the private keys that have been deposited in cold storage at its 
various vaulting premises which are located in geographically dispersed 
locations across the world, including but not limited to the United 
States, Europe, including Switzerland and South America. The locations 
of the vaulting premises may change regularly and are kept confidential 
by the Custodian for security purposes.
    The Custodian is the custodian of the Trust's private keys 
corresponding to the Trust's bitcoins in accordance with the terms and 
provisions of the Custodian Agreement and will utilize the certain 
security procedures such as algorithms, codes, passwords, encryption or 
telephone call-backs

[[Page 2283]]

(together, the ``Security Procedures'') in the administration and 
operation of the Trust and the safekeeping of its bitcoins and private 
keys. The Custodian will create a Vault Balance for the Trust assets in 
which private keys are placed in cold storage. The Custodian will 
segregate the private keys stored with it from any other assets it 
holds or holds for others. Further, multiple distinct private keys must 
sign any transaction in order to transfer the Trust's bitcoins from a 
multi-signature address to any other address on the bitcoin blockchain. 
Distinct private keys required for multi-signature address transfers 
reside in geographically dispersed vault locations, known as ``signing 
vaults.'' In addition to multiple signing vaults, the Custodian 
maintains multiple ``back-up vaults'' in which backup private keys are 
stored. In the event that one or more of the ``signing vaults'' is 
compromised, the back-up vaults would be activated and used as signing 
vaults to complete a transaction within 72 hours. As such, if any one 
signing vault is compromised, it would have no impact on the ability of 
the Trust to access its bitcoins, other than a possible delay in 
operations of 72 hours, while one or more of the ``backup vaults'' is 
transitioned to a signing vault. These Security Procedures ensure that 
there is no single point of failure in the protection of the Trust's 
assets.
Calculation of Net Asset Value
    The Trust's net asset value (``NAV'') per Share is calculated by 
taking the current market value of its total assets, less any 
liabilities of the Trust (including accrued by unpaid expenses) and 
dividing that total by the total number of outstanding Shares. The 
bitcoin held by the Trust will typically be valued based on the price 
set by the Index (the ``Bitcoin Index Price''). The Sponsor holds full 
discretion to change either the index used for calculating NAV or the 
index provider subject to proper notification to shareholders (such 
notification will be made via a prospectus supplement to the 
Registration Statement and/or a current report filed with the SEC and 
will occur in advance of any such change). Shareholder approval is not 
required to effect such change. Any permanent change to the Index and/
or calculation of the NAV will require a 19b-4 filing. The 
Administrator will calculate the NAV of the Trust once each Exchange 
trading day. The Exchange's Regular Market Session closes at 4:00 p.m. 
ET. The NAV for a normal trading day will be released after the end of 
the Regular Market Session. However, NAVs are not officially struck 
until later in the day (often by 5:30 p.m. Eastern Time and almost 
always by 8:00 p.m. Eastern Time). The pause between 4:00 p.m. Eastern 
Time and 5:30 p.m. Eastern Time provides an opportunity to detect, 
flag, investigate, and correct unusual pricing should it occur.
    The Sponsor anticipates that the Bitcoin Index Price will be 
reflective of a reasonable valuation of the average spot price of 
bitcoin. However, in the event the Bitcoin Index Price is not available 
or determined by the Sponsor to not be reliable, the Sponsor would 
``fair value'' the Trust's bitcoin holdings on a temporary basis. 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 (e.g., if the Index is 
not available the Sponsor). In certain circumstances, the Sponsor will 
determine whether to fair value the Trust's bitcoin on a given day on 
whether certain pre-determined criteria have been met. For example, if 
the Index deviates by more than a pre-determined amount from an 
alternate benchmark available to the Sponsor, then the Sponsor may 
determine to utilize the alternate benchmark. The Trust and the Sponsor 
have licensed use of the Lukka Prime Reference Rate as such an 
alternative benchmark. The Sponsor may also fair value the Trust's 
bitcoin using observed market transactions from various platforms, 
including some or all of the Constituent Bitcoin Platforms (as defined 
below) included in the Index. The Sponsor may also fair value the 
Trust's bitcoin using a combination of inputs in certain situations 
(e.g., using observed market transactions, OTC quotations from brokers, 
etc.).
    The NAV for the Trust's Shares will be disseminated daily to all 
market participants at the same time. The Sponsor will publish the NAV 
and NAV per Share at https://valkyrieinvest.com/BRRR as soon as 
practicable after their determination and availability.
Intraday Indicative Value
    In order to provide updated information relating to the Trust for 
use by shareholders and market professionals, an updated intraday 
indicative value (``IIV'') per Share updated every 15 seconds will be 
disseminated by one of more major market data vendors during the 
Exchange's Regular Market Session through the facilities of the 
relevant securities information processor 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.\9\ 
The IIV will be calculated by a third-party financial data provider 
during the Exchange's Regular Market Session. The IIV will be 
calculated by using the prior day's closing NAV per Share of the Trust 
as a base and updating that value throughout the trading day to reflect 
changes in the most recently reported price level of the CME CF Bitcoin 
Real-Time Index (``BRTI''), as reported by CME Group, Inc., Bloomberg, 
L.P. or another reporting service. The BRTI is a real time index of the 
U.S. dollar price of one bitcoin, published once per second, 24 hours 
per day, 7 days per week, and 365 days per year. The BRTI is calculated 
once per second in real time based on the Relevant Order Books of all 
Constituent Bitcoin Platforms. A ``Relevant Order Book'' is the 
universe of the currently unmatched limit orders to buy or sell in the 
BTC/USD pair that is reported and disseminated by CF Benchmarks Ltd., 
as the BRTI. calculation agent.
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    \9\ Several major market data vendors display and/or make widely 
available IIVs taken from the relevant securities information 
processor or other data feeds. In addition, the indicative fund 
value will be available through on-line information services such as 
Bloomberg and Reuters.
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Creation and Redemption of Shares
    The Trust will issue Shares on an ongoing basis, but only in one or 
more Baskets. The creation and redemption of a Basket requires the 
delivery to the Trust, or the distribution by the Trust, of the cash 
value of the amount of bitcoin represented by each Basket being created 
or redeemed, which is calculated pursuant to the same procedures used 
to calculate the Trust's NAV (the ``Basket Amount''). The amount of 
bitcoin represented by each Basket is determined by dividing the number 
of bitcoins owned by the Trust at 4:00 p.m. ET, on the trade date of a 
creation or redemption order, as adjusted for the number of whole and 
fractional bitcoins constituting accrued but unpaid fees and expenses 
of the Trust, by the number of Shares outstanding at such time (the 
quotient so obtained calculated to one-hundred-millionth of one 
bitcoin) and multiplying such quotient by 5,000. The Basket Amount 
multiplied by the number of Baskets being created or redeemed is the 
``Total Basket Amount.''
    The only persons that may place orders to create or redeem Baskets 
are authorized participants (``Authorized Participants''). Each 
Authorized Participant must (i) be a registered broker-dealer or 
similar exempt

[[Page 2284]]

financial institution and (ii) enter into a participant agreement with 
the Sponsor, the Administrator, and the marketing agent (the 
``Marketing Agent''). Authorized Participants may act for their own 
accounts or as agents for broker-dealers, custodians and other 
securities market participants that wish to create or redeem Baskets. 
Shareholders who are not Authorized Participants will only be able to 
redeem their Shares through an Authorized Participant. 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 Sponsor will maintain ownership and control of the bitcoin in a 
manner consistent with good delivery requirements for spot commodity 
transactions.
Creation Procedures
    On any ``Business Day'' (defined as any day other than a day when 
the Exchange is closed for regular trading), an Authorized Participant 
may order one or more Baskets (each a ``Creation Basket'') from the 
Trust by placing a creation order with the Administrator. Creation 
orders may only be placed in exchange for cash. Creation orders must be 
placed no later than 12:59:59 p.m. Eastern Time on each Business Day. 
Authorized Participants may only create Baskets and cannot create any 
Shares in an amount less than a Basket.
    Upon receiving instruction from the Administrator that a creation 
order has been accepted by the Transfer Agent, the Authorized 
Participant will on the same day send the U.S. Dollar value of the 
Total Basket Amount, which will be based on the NAV per Share 
multiplied by the number of Shares. The Authorized Participant will 
also be responsible for any difference in the price of bitcoin used to 
calculate the NAV per Share and the actual price at which the Trust 
purchases bitcoin in connection with such order, as well as any 
brokerage fees, transfer fees, network fees or other costs of the Trust 
in purchasing bitcoin in connection with the creation order. After the 
Administrator receives the Total Basket Amount, the Administrator will 
instruct the Transfer Agent to deliver the Creation Baskets to the 
Authorized Participant on the day following the creation order date.
Redemption Procedures
    The procedures by which an Authorized Participant can redeem one or 
more Baskets (each, a ``Redemption Basket'') mirror the procedures for 
the creation of Creation Baskets. On any Business Day, an Authorized 
Participant may place a redemption order specifying the number of 
Redemption Baskets to be redeemed. Redemption orders may only be placed 
in exchange for cash. Redemption orders must be placed no later than 
12:59:59 p.m. ET, on each Business Day. Authorized Participants may 
only redeem Redemption Baskets and cannot redeem any Shares in an 
amount less than a Basket.
    To redeem Redemption Baskets, Authorized Participants will send the 
Administrator a redemption order. The Transfer Agent will accept or 
reject the redemption order on that same date. On the date following 
the redemption order date, the Administrator will send the Total Basket 
Amount to the Authorized Participant and the Transfer Agent will cancel 
the Shares once the Authorized Participant delivers the Redemption 
Baskets to the Transfer Agent. The amount of the redemption proceeds 
will be calculated in the same manner as the determination of the 
creation basket deposits discussed above.
    With respect to the Authorized Participant involved with a creation 
or redemption order, the following conditions apply to such Authorized 
Participant and the Trust:
     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 deliver 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.
     The Trust will redeem Shares by delivering bitcoin to a 
third party that is not the Authorized Participant and the Trust--not 
the Authorized Participant--is responsible for selecting the 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 third party will be unaffiliated with the Trust and 
the Sponsor.
Overview of the Bitcoin Industry and Market \10\
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    \10\ For the purpose of this section, Bitcoin with an upper case 
``B'' is used to describe the system as a whole that is involved in 
maintaining the ledger of bitcoin ownership and facilitating the 
transfer of bitcoin among parties. When referring to the digital 
asset within the bitcoin network, bitcoin is written with a lower 
case ``b'' (except, at the beginning of sentences or paragraph 
sections).
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Bitcoin
    Bitcoin is the digital asset that is native to, and created and 
transmitted through the operations of, the peer-to-peer Bitcoin 
network, a decentralized network of computers that operates on 
cryptographic protocols. No single entity owns or operates the Bitcoin 
network, the infrastructure of which is collectively maintained by a 
decentralized user base. The Bitcoin network allows people to exchange 
tokens of value, called bitcoin, which are recorded on a public 
transaction ledger known as the Blockchain. Bitcoin can be used to pay 
for goods and services, or it can be converted to fiat currencies, such 
as the U.S. dollar, at rates determined on bitcoin trading platforms or 
in individual end-user-to-end-user transactions under a barter system.
    The value of bitcoin is determined by the supply of and demand for 
bitcoin. New bitcoins are created and rewarded to the parties providing 
the Bitcoin network's infrastructure (``miners'') in exchange for their 
expending computational power to verifying transactions and add them to 
the Blockchain. The Blockchain is effectively a decentralized database 
that includes all blocks that have been solved by miners and it is 
updated to include new blocks as they are solved. Each bitcoin 
transaction is broadcast to the Bitcoin network and, when included in a 
block, recorded in the Blockchain. As each new block records 
outstanding bitcoin transactions, and outstanding transactions are 
settled and validated through such recording, the Blockchain represents 
a complete, transparent and unbroken history of all transactions of the 
Bitcoin network.
Bitcoin Network
    Bitcoin was first described in a white paper released in 2008 and 
published under the pseudonym ``Satoshi Nakamoto.'' The protocol 
underlying Bitcoin was subsequently released in 2009 as open-source 
software and currently operates on a worldwide network of computers.
    The first step in directly using the Bitcoin network for 
transactions is to download specialized software referred

[[Page 2285]]

to as a ``bitcoin wallet.'' A user's bitcoin wallet can run on a 
computer or smartphone and can be used both to send and to receive 
bitcoin. Within a bitcoin wallet, a user can generate one or more 
unique ``bitcoin addresses,'' which are conceptually similar to bank 
account numbers. After establishing a bitcoin address, a user can send 
or receive bitcoin from his or her bitcoin address to another user's 
address. Sending bitcoin from one bitcoin address to another is similar 
in concept to sending a bank wire from one person's bank account to 
another person's bank account; provided, however, that such 
transactions are not managed by an intermediary and erroneous 
transactions generally may not be reversed or remedied once sent.
    The amount of bitcoin associated with each bitcoin address, as well 
as each bitcoin transaction to or from such address, is transparently 
reflected in the Blockchain and can be viewed by websites that operate 
as ``blockchain explorers.'' Copies of the Blockchain exist on 
thousands of computers on the Bitcoin network. A user's bitcoin wallet 
will either contain a copy of the blockchain or be able to connect with 
another computer that holds a copy of the blockchain. The innovative 
design of the Bitcoin network protocol allows each Bitcoin user to 
trust that their copy of the Blockchain will generally be updated 
consistent with each other user's copy.
Bitcoin Protocol
    The Bitcoin protocol is open-source software, meaning any developer 
can review the underlying code and suggest changes. There is no 
official company or group that is responsible for making modifications 
to Bitcoin. There are, however, a number of individual developers that 
regularly contribute to a specific distribution of Bitcoin software 
known as the ``Bitcoin Core,'' which is maintained in an open-source 
repository on the website Github. There are many other compatible 
versions of Bitcoin software, but Bitcoin Core provides the de-facto 
standard for the Bitcoin protocol, also known as the ``reference 
software.'' The core developers for Bitcoin Core operate under a 
volunteer basis and without strict hierarchical administration.
    Significant changes to the Bitcoin protocol are typically 
accomplished through a so-called ``Bitcoin Improvement Proposal'' or 
``BIP.'' Such proposals are generally posted on websites, and the 
proposals explain technical requirements for the protocol change as 
well as reasons why the change should be accepted. Upon its inclusion 
in the most recent version of Bitcoin Core, a new BIP becomes part of 
the reference software's Bitcoin protocol. Several BIPs have been 
implemented since 2011 and have provided various new features and 
scaling improvements.
    Because Bitcoin has no central authority, updating the reference 
software's Bitcoin protocol will not immediately change the Bitcoin 
network's operations. Instead, the implementation of a change is 
achieved by users and miners downloading and running updated versions 
of Bitcoin Core or other Bitcoin software that abides by the new 
Bitcoin protocol. Users and miners must accept any changes made to the 
Bitcoin source code by downloading a version of their Bitcoin software 
that incorporates the proposed modification of the Bitcoin network's 
source code. A modification of the Bitcoin network's source code is 
only effective with respect to the Bitcoin users and miners that 
download it. If an incompatible modification is accepted only by a 
percentage of users and miners, a division in the Bitcoin network will 
occur such that one network will run the pre-modification source code 
and the other network will run the modified source code. Such a 
division is known as a ``fork'' in the Bitcoin network.
    Such a fork in the Bitcoin network occurred on August 1, 2017, when 
a group of developers and miners accepted certain changes to the 
Bitcoin network software intended to increase transaction capacity. 
Blocks mined on this network now diverge from blocks mined on the 
Bitcoin network, which has resulted in the creation of a new blockchain 
whose digital asset is referred to as ``bitcoin cash.'' Bitcoin and 
bitcoin cash now operate as separate, independent networks, and have 
distinct related assets (bitcoin and bitcoin cash). Additional forks 
have followed the Bitcoin Cash fork, including those for Bitcoin Gold 
and Bitcoin SegWit2X, in the months after the creation of Bitcoin Cash.
Bitcoin Transactions
    A bitcoin transaction contains the sender's bitcoin address, the 
recipient's bitcoin address, the amount of bitcoin to be sent, a 
transaction fee and the sender's digital signature. Bitcoin 
transactions are secured by cryptography known as public-private key 
cryptography, represented by the bitcoin addresses and digital 
signature in a transaction's data file. Each Bitcoin network address, 
or wallet, is associated with a unique ``public key'' and ``private 
key'' pair, both of which are lengthy alphanumeric codes, derived 
together and possessing a unique relationship. The public key is 
visible to the public and analogous to the Bitcoin network address. The 
private key is a secret and may be used to digitally sign a transaction 
in a way that proves the transaction has been signed by the holder of 
the public-private key pair, without having to reveal the private key.
    The Bitcoin network incorporates a system to prevent double 
spending of a single bitcoin. To prevent the possibility of double 
spending a single bitcoin, each validated transaction is recorded, time 
stamped and publicly displayed in a ``block'' in the Blockchain, which 
is publicly available. Any user may validate, through their bitcoin 
wallet or a blockchain explorer, that each transaction in the Bitcoin 
network was authorized by the holder of the applicable private key, and 
Bitcoin network mining software consistent with reference software 
requirements typically validates each such transaction before including 
it in the Blockchain.
Bitcoin Mining--Creation of New Bitcoins
    The process by which bitcoins are created and bitcoin transactions 
are verified is called mining. To begin mining, a user, or ``miner,'' 
can download and run a mining client, which, like regular Bitcoin 
network software, turns the user's computer into a ``node'' on the 
Bitcoin network that validates blocks. Each time transactions are 
validated and bundled into new blocks added to the Blockchain, the 
Bitcoin network awards the miner solving such blocks with newly issued 
bitcoin and any transaction fees paid by bitcoin transaction senders. 
This reward system is the method by which new bitcoins enter into 
circulation to the public.
Mathematically Controlled Supply
    The method for creating new bitcoin is mathematically controlled in 
a manner so that the supply of bitcoin grows at a limited rate pursuant 
to a pre-set schedule. The number of bitcoin awarded for solving a new 
block is automatically halved every 210,000 blocks. Thus, the current 
fixed reward for solving a new block is 6.25 bitcoin per block; the 
reward decreased from twenty-five (25) bitcoin in July 2016 and 12.5 in 
May 2020. It is estimated to halve again at the start of 2024. This 
deliberately controlled rate of bitcoin creation means that the number 
of bitcoin in existence will never exceed twenty-one (21) million and 
that bitcoin cannot be devalued through excessive production unless the 
Bitcoin network's

[[Page 2286]]

source code (and the underlying protocol for bitcoin issuance) is 
altered. As of January 1, 2023, approximately 19,250,000 bitcoin have 
been mined.
Bitcoin Value
    The value of bitcoin is determined by the value that various market 
participants place on bitcoin through their transactions. The most 
common means of determining the value of a bitcoin is by surveying one 
or more bitcoin platforms where bitcoin is traded publicly and 
transparently (e.g., Bitstamp, Coinbase, Kraken, itBit, Gemini and LMAX 
Digital). Additionally, in parallel to the open bitcoin platforms, 
informal ``over-the-counter'' or ``OTC markets'' for bitcoin trading 
also exist as a result of the peer-to-peer nature of the Bitcoin 
network, which allows direct transactions between any seller and buyer.
    On each platform, bitcoin is traded with publicly disclosed 
valuations for each executed trade, measured by one or more fiat 
currencies such as the U.S. dollar or Euro. OTC markets do not 
typically disclose their trade data. Currently, there are many 
platforms operating worldwide, and each such platform represents a 
substantial percentage of bitcoin buying and selling activity.
The Index
    As described in the Registration Statement, the Fund will typically 
use the Index to calculate the Trust's NAV for days on which the Trust 
does not trade bitcoin. The Index is not affiliated with the Sponsor 
and was created and is administered by CF Benchmarks Ltd. (the 
``Benchmark Administrator''), an independent entity, to facilitate 
financial products based on bitcoin. The Index is designed based on the 
IOSCO Principals for Financial Benchmarks and serves as a once-a-day 
benchmark rate of the U.S. dollar price of bitcoin (USD/BTC), 
calculated as of 4:00 p.m. Eastern Time. The Index is based on 
materially the same methodology (except calculation time) \11\ as the 
Benchmark Administrator's CME CF Bitcoin Reference Rate (the ``BRR''), 
which was first introduced on November 14, 2016 and is the rate on 
which bitcoin futures contracts (``Bitcoin Futures'') are cash-settled 
in U.S. dollars at the CME. The Index aggregates the trade flow of 
several bitcoin platforms, during an observation window between 3:00 
p.m. and 4:00 p.m. Eastern Time into the U.S. dollar price of one 
bitcoin at 4:00 p.m. Eastern Time. The current constituent bitcoin 
platforms of the Index are Bitstamp, Coinbase, Gemini, itBit, Kraken 
and LMAX Digital (the ``Constituent Bitcoin Platforms'').
---------------------------------------------------------------------------

    \11\ The Index is calculated as of 4 p.m. Eastern Time, whereas 
the BRR is calculated as of 4 p.m. London Time.
---------------------------------------------------------------------------

    The Index is calculated based on the ``Relevant Transactions'' \12\ 
of all of its Constituent Bitcoin Platforms, as follows:
---------------------------------------------------------------------------

    \12\ A ``Relevant Transaction'' is any cryptocurrency versus 
U.S. dollar spot trade that occurs during the observation window 
between 3:00 p.m. and 4:00 p.m. Eastern Time on a Constituent 
Bitcoin Platforms in the BTC/USD pair that is reported and 
disseminated by a Constituent Bitcoin Platforms through its publicly 
available application programming interface and observed by the 
Benchmark Administrator, CF Benchmarks Ltd.
---------------------------------------------------------------------------

     All Relevant Transactions are added to a joint list, 
recording the time of execution, trade price and size for each 
transaction.
     The list is partitioned by timestamp into 12 equally-sized 
time intervals of 5 (five) minute length.
     For each partition separately, the volume-weighted median 
trade price is calculated from the trade prices and sizes of all 
Relevant Transactions, i.e., across all Constituent Bitcoin Platforms. 
A volume-weighted median differs from a standard median in that a 
weighting factor, in this case trade size, is factored into the 
calculation.
     The Index is then determined by the arithmetic mean of the 
volume-weighted medians of all partitions.
    By employing the foregoing steps, the Index thereby seeks to ensure 
that transactions in bitcoin conducted at outlying prices do not have 
an undue effect on the value of a specific partition, large trades or 
clusters of trades transacted over a short period of time will not have 
an undue influence on the Index level, and the effect of large trades 
at prices that deviate from the prevailing price are mitigated from 
having an undue influence on the Index level. In addition, the Sponsor 
notes that an oversight function is implemented by the Benchmark 
Administrator in seeking to ensure that the Index is administered 
through codified policies for Index integrity.
    The Sponsor believes the Index provides an accurate reference to 
the average spot price of bitcoin and the methodology employed in 
constructing the Index, specifically its use of medians in filtering 
out small trades, makes the Index more resistant to manipulation than 
other measurements that employ different methodologies. In addition, 
the Index included over $375 billion in bitcoin trades during the one-
year period ended December 31, 2022. Finally, an oversight committee is 
responsible for regularly reviewing and overseeing the methodology, 
practice, standards and scope of the Index to ensure that it continues 
to accurately track the spot prices of bitcoin.
Background
    The Commission has historically approved or disapproved exchange 
filings to list and trade series of Trust Issued Receipts, including 
spot-based Commodity-Based Trust Shares, on the basis of whether the 
listing exchange has in place a comprehensive surveillance sharing 
agreement with a regulated market of significant size related to the 
underlying commodity to be held.\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 regulated futures market.\14\ Further to this point,

[[Page 2287]]

the Commission's prior orders have noted that the spot commodities and 
currency markets for which it has previously approved spot ETPs are 
generally unregulated and that the Commission relied on the underlying 
futures market as the regulated market of significant size that formed 
the basis for approving the series of Currency and Commodity-Based 
Trust Shares, including gold, silver, platinum, palladium, copper, and 
other commodities and currencies. The Commission specifically noted in 
the Winklevoss Order that the First Gold Approval Order ``was based on 
an assumption that the currency market and the spot gold market were 
largely unregulated.'' \15\
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    \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 Winklevoss Order at 37592.
---------------------------------------------------------------------------

    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 Bitcoin Futures market, as defined below, 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 
recently approved proposals related to the listing and trading of funds 
that would primarily hold Bitcoin Futures that are registered under the 
Securities Act of 1933 instead of the Investment Company Act of 1940, 
as amended (the ``1940 Act'').\16\ In the Teucrium Approval, the 
Commission found the Bitcoin Futures market to be a regulated market of 
significant size as it relates to Bitcoin Futures, an odd tautological 
truth that is also inconsistent with prior disapproval orders for 
exchange traded products (``ETPs'') that would hold actual bitcoin 
instead of derivatives contracts (``Spot Bitcoin ETPs'') that use the 
exact same pricing methodology as the 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 
Bitcoin Futures market represents a regulated market of significant 
size as it relates both to the Bitcoin Futures market and to the spot 
bitcoin market and that this proposal should be approved.
---------------------------------------------------------------------------

    \16\ 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'').
---------------------------------------------------------------------------

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.\17\ 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 
276,542 Bitcoin Futures contracts traded in March 2023 compared to 
165,567, 233,345, and 183,131 contracts traded in March 2020, March 
2021, and March 2023, respectively.
---------------------------------------------------------------------------

    \17\ The CME CF Bitcoin Reference Rate is based on a publicly 
available calculation methodology based on pricing sourced from 
several crypto and trading platforms, including Bitstamp, Coinbase, 
Gemini, itBit, Kraken, and LMAX Digital.
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BILLING CODE 8011-01-P

[[Page 2288]]

[GRAPHIC] [TIFF OMITTED] TN12JA24.024

[GRAPHIC] [TIFF OMITTED] TN12JA24.025

BILLING CODE 8011-01-C
    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.\18\
---------------------------------------------------------------------------

    \18\ 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.''

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[[Page 2289]]

Preventing Fraudulent and Manipulative Practices
    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; \19\ 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 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.
---------------------------------------------------------------------------

    \19\ The Exchange believes 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 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 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 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.
---------------------------------------------------------------------------

(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 \20\ with a regulated market of significant size. 
Both the Exchange and CME are members of ISG.\21\ 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.\22\
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    \20\ 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'').
    \21\ For a list of the current members and affiliate members of 
ISG, see https://www.isgportal.com/.
    \22\ 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.\23\
---------------------------------------------------------------------------

    \23\ 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.
---------------------------------------------------------------------------

(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 
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.\24\ Stated 
another way, a market participant could enter a market buy or sell 
order for $5 million

[[Page 2290]]

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.
---------------------------------------------------------------------------

    \24\ 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.
---------------------------------------------------------------------------

    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
    The Exchange is also proposing to take additional steps to those 
described above to supplement its ability to obtain information that 
would be helpful in detecting, investigating, and deterring fraud and 
market manipulation in the Commodity-Based Trust Shares.
    As noted in the Surveillance section, the surveillance program 
includes real-time patterns for price and volume movements and post-
trade surveillance patterns (e.g., spoofing, marking the close, 
pinging, phishing). In addition to the Exchange's existing 
surveillance, a new pattern will be added to surveil for significant 
deviation in the Commodity-Based Trust Shares' price from the 
underlying asset's price. The Exchange will use the trade data from an 
external vendor that consolidates the real-time data from multiple 
bitcoin platforms.
    Trading of Shares on the Exchange will be subject to the Exchange's 
surveillance program for derivative products, as well as cross-market 
surveillances administered by Financial Industry Regulatory Authority 
(``FINRA''), on behalf of the Exchange pursuant to a regulatory 
services agreement, which are also designed to detect violations of 
Exchange rules and applicable federal securities laws. The Exchange is 
responsible for FINRA's performance under this regulatory services 
agreement.
    The Exchange will require the Trust to represent to the Exchange 
that it will advise the Exchange of any failure by the Trust to comply 
with the continued listing requirements, and, pursuant to its 
obligations under section 19(g)(1) of the Exchange Act, the Exchange 
will surveil for compliance with the continued listing requirements. If 
the Trust is not in compliance with the applicable listing 
requirements, the Exchange will commence delisting procedures under the 
Nasdaq 5800 Series. In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
    The Exchange will communicate as needed regarding trading in the 
Shares with other markets and other entities that are members of the 
ISG, and the Exchange may obtain trading information regarding trading 
in the Shares from such markets and other entities.
Availability of Information
    The Trust's website (https://valkyrieinvest.com/BRRR) will include, 
free of charge, quantitative information on a per Share basis updated 
on a daily basis, including (i) the current NAV per Share daily and the 
prior business day's NAV and the reported closing price; (ii) the mid-
point of the bid-ask price \25\ in relation to the NAV as of the time 
the NAV is calculated (``Bid-Ask Price'') and a calculation of the 
premium or discount of such price against such NAV; (iii) data in chart 
format displaying the frequency distribution of discounts and premiums 
of the daily Bid-Ask Price against the NAV, within appropriate ranges, 
for each of the four previous calendar quarters (or for the life of the 
Trust, if shorter); and (iv) copies of the Trust's prospectus in 
electronic format. In addition, on each business day the Trust's 
website will also provide free of charge: (i) the Trust's NAV and NAV 
per Share; (ii) information regarding the Trust's holdings; and (iii) 
information regarding the Index and the value of a bitcoin as 
calculated by the Index (which may also be found on the Index's website 
(https://www.cfbenchmarks.com/data/indices/BRRNY), or, if an 
alternative fair value methodology is used to value the Trust's 
bitcoin, such other pricing source(s) used in such calculation.
---------------------------------------------------------------------------

    \25\ The bid-ask price of the Trust is determined using the 
highest bid and lowest offer on the Consolidated Tape as of the time 
of calculation of the closing day NAV.
---------------------------------------------------------------------------

    The Trust's website 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 Market Session (9:30 a.m. to 
4:00 p.m. (Eastern Time)).\26\ The IIV will be calculated by using the 
prior day's closing NAV per Share as a base and updating that value 
throughout the trading day to reflect changes in the most recently 
reported price level of the BRTI, as reported by CME Group, Inc., 
Bloomberg, L.P. or another reporting service. The BRTI is calculated in 
real time once per second based on the Relevant Order Books of all 
Constituent Bitcoin Platforms. All aspects of the BRTI methodology are 
publicly available at the website of the Benchmark Administrator.
---------------------------------------------------------------------------

    \26\ The IIV on a per Share basis disseminated during the 
Regular Market Session should not be viewed as a real-time update of 
the NAV, which is calculated once a day.
---------------------------------------------------------------------------

    The IIV disseminated during the Exchange's Regular Market Session 
should not be viewed as an actual real-time update of the NAV, which 
will be calculated only once at the end of each trading day. The IIV 
will be widely disseminated on a per Share basis every 15 seconds 
during the Exchange's Regular Market Session by one or more major 
market data vendors. In addition, the IIV will be available published 
on the Exchange's website and through on-line information services such 
as Bloomberg and Reuters.
    The NAV for the Trust will be calculated by the Sponsor 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 relevant securities 
information processor.
    Quotation and last sale information for bitcoin is widely 
disseminated through a variety of major market data vendors, including 
Bloomberg and Reuters, as well as CF Benchmarks. Information relating 
to trading, including price and volume information, in bitcoin is 
available from major market data vendors and from the platforms on 
which bitcoin are traded. Depth of book information is also available 
from bitcoin platforms. The normal trading hours for bitcoin 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. Market prices for the Shares will be available 
from a variety of sources, including brokerage firms, information 
websites and other information service providers.
Initial and Continued Listing
    The Shares will be subject to Nasdaq Rule 5711(d)(vi), which sets 
forth the initial and continued listing criteria applicable to 
Commodity-Based Trust Shares. The Exchange will obtain a representation 
that the Trust's NAV will

[[Page 2291]]

be calculated daily and will be made available to all market 
participants at the same time. A minimum of 40,000 Commodity-Based 
Trust Shares will be required to be outstanding at the time of 
commencement of trading on the Exchange. The Sponsor expects there to 
be multiple creation units in circulation at launch of the Trust. 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 Nasdaq Rule 5711(d)(vi)(D) 
and no change will be made to the trustee without prior notice to and 
approval of the Exchange.
    As required in Nasdaq Rule 5711(d)(viii), the Exchange notes that 
any registered market maker (``Market Maker'') in the Shares must file 
with the Exchange, in a manner prescribed by the Exchange, and keep 
current a list identifying all accounts for trading the underlying 
commodity, related futures or options on futures, or any other related 
derivatives, which the registered Market Maker may have or over which 
it may exercise investment discretion. No registered Market Maker in 
the Shares shall trade in the underlying commodity, related futures or 
options on futures, or any other related derivatives, in an account in 
which a registered Market Maker, directly or indirectly, controls 
trading activities, or has a direct interest in the profits or losses 
thereof, which has not been reported to the Exchange as required by 
Nasdaq Rule 5711(d). In addition to the existing obligations under 
Exchange rules regarding the production of books and records, the 
registered Market Maker in the Shares shall make available to the 
Exchange such books, records or other information pertaining to 
transactions by such entity or any limited partner, officer or approved 
person thereof, registered or non-registered employee affiliated with 
such entity for its or their own accounts in the underlying commodity, 
related futures or options on futures, or any other related 
derivatives, as may be requested by the Exchange.
    The Exchange is able to obtain information regarding trading in the 
Shares and the underlying 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 Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. The Exchange will 
allow trading in the Shares from 4:00 a.m. to 8:00 p.m. (Eastern Time). 
The Exchange has appropriate rules to facilitate transactions in the 
Shares during all trading sessions. The Shares of the Trust will 
conform to the initial and continued listing criteria set forth in 
Nasdaq Rule 5711(d).
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. The Exchange will halt trading in the Shares 
under the conditions specified in Nasdaq Rules 4120 and 4121, including 
without limitation the conditions specified in Nasdaq Rule 4120(a)(9) 
and (10) and the trading pauses under Nasdaq Rules 4120(a)(11) and 
(12).
    Trading may be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) the extent to which trading is not 
occurring in the bitcoin underlying the Shares; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present.
    If the IIV or the Index value 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 Index value occurs. 
If the interruption to the dissemination of the IIV or the Index value 
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.
Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. The surveillance 
program includes real-time patterns for price and volume movements and 
post-trade surveillance patterns (e.g., spoofing, marking the close, 
pinging, phishing). In addition to the Exchange's existing 
surveillance, a new pattern will be added to surveil for significant 
deviation in the Commodity-Based Trust Shares' price from the 
underlying asset's price. The Exchange will use the trade data from an 
external vendor that consolidates the real-time data from multiple 
bitcoin platforms.
    Trading of Shares on the Exchange will be subject to the Exchange's 
surveillance program for derivative products, as well as cross-market 
surveillances administered by FINRA, on behalf of the Exchange pursuant 
to a regulatory services agreement, which are also designed to detect 
violations of Exchange rules and applicable federal securities laws. 
The Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
    The Exchange will require the Trust to represent to the Exchange 
that it will advise the Exchange of any failure by the Trust to comply 
with the continued listing requirements, and, pursuant to its 
obligations under section 19(g)(1) of the Exchange Act, the Exchange 
will surveil for compliance with the continued listing requirements. If 
the Trust is not in compliance with the applicable listing 
requirements, the Exchange will commence delisting procedures under the 
Nasdaq 5800 Series. In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets and other entities that are members of the ISG, and the 
Exchange or FINRA, on behalf of the Exchange, or both, may obtain 
trading information regarding trading in the Shares from such markets 
and other entities. The Exchange also 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

[[Page 2292]]

has entered into a comprehensive surveillance sharing agreement.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (1) the procedures for purchases 
and redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) Section 10 of Nasdaq General Rule 9, 
which imposes suitability obligations on Nasdaq members with respect to 
recommending transactions in the Shares to customers; (3) how 
information regarding the IIV is disseminated; (4) the risks involved 
in trading the Shares during the Pre-Market and Post-Market Sessions 
when an updated IIV will not be calculated or publicly disseminated; 
(5) the requirement that members deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information. The 
Information Circular will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    The Information Circular will also reference the fact that there is 
no regulated source of last sale information regarding 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.
    Additionally, the Information Circular will disclose the trading 
hours of the Shares. The Information Circular will also disclose that 
information about the Shares will be publicly available on the Trust's 
website.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act \27\ in general and section 6(b)(5) of the Act \28\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest.
---------------------------------------------------------------------------

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

    The Commission has approved numerous series of Trust Issued 
Receipts,\29\ including Commodity-Based Trust Shares,\30\ to be listed 
on U.S. national securities exchanges. In order for any proposed rule 
change from an exchange to be approved, the Commission must determine 
that, among other things, the proposal is consistent with the 
requirements of section 6(b)(5) of the Act, specifically including: (i) 
the requirement that a national securities exchange's rules are 
designed to prevent fraudulent and manipulative acts and practices; 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 because this filing sufficiently demonstrates that 
the standard that has previously been articulated by the Commission 
applicable to Commodity-Based Trust Shares has been met as outlined 
below.
---------------------------------------------------------------------------

    \29\ See Exchange Rule 5720.
    \30\ Commodity-Based Trust Shares, as described in Exchange Rule 
5711(d), are a type of Trust Issued Receipt.
---------------------------------------------------------------------------

Designed To Prevent Fraudulent and Manipulative Acts and Practices
    In order for a proposal to list and trade a series of Commodity-
Based Trust Shares to be deemed consistent with the Act, the Commission 
requires that an exchange demonstrate that there is a comprehensive 
surveillance-sharing agreement in place with a regulated market of 
significant size. Both the Exchange and CME are members of ISG.\31\ As 
such, the only remaining issue to be addressed is whether the Bitcoin 
Futures market constitutes a market of significant size, which the 
Exchange believes 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.\32\
---------------------------------------------------------------------------

    \31\ For a list of the current members and affiliate members of 
ISG, see https://www.isgportal.com/.
    \32\ 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.\33\
---------------------------------------------------------------------------

    \33\ See Winklevoss Order at 37580. The Commission has also 
specifically noted that it ``is not applying a ``cannot be 
manipulated'' standard; instead, the Commission is examining whether 
the proposal meets the requirements of the Exchange Act and, 
pursuant to its Rules of Practice, places the burden on the listing 
exchange to demonstrate the validity of its contentions and to 
establish that the requirements of the Exchange Act have been met. 
Id. at 37582.
---------------------------------------------------------------------------

(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 
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

[[Page 2293]]

addition to the Bitcoin Futures market data points cited above, the 
spot market for bitcoin is also very liquid.
    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
    The Exchange is also proposing to take additional steps to those 
described above to supplement its ability to obtain information that 
would be helpful in detecting, investigating, and deterring fraud and 
market manipulation in the Commodity-Based Trust Shares.
    As noted in the Surveillance section, the surveillance program 
includes real-time patterns for price and volume movements and post-
trade surveillance patterns (e.g., spoofing, marking the close, 
pinging, phishing). In addition to the Exchange's existing 
surveillance, a new pattern will be added to surveil for significant 
deviation in the Commodity-Based Trust Shares' price from the 
underlying asset's price. The Exchange will use the trade data from an 
external vendor that consolidates the real-time data from multiple 
bitcoin platforms.
    Trading of Shares on the Exchange will be subject to the Exchange's 
surveillance program for derivative products, as well as cross-market 
surveillances administered by FINRA, on behalf of the Exchange pursuant 
to a regulatory services agreement, which are also designed to detect 
violations of Exchange rules and applicable federal securities laws. 
The Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
    The Exchange will require the Trust to represent to the Exchange 
that it will advise the Exchange of any failure by the Trust to comply 
with the continued listing requirements, and, pursuant to its 
obligations under section 19(g)(1) of the Exchange Act, the Exchange 
will surveil for compliance with the continued listing requirements. If 
the Trust is not in compliance with the applicable listing 
requirements, the Exchange will commence delisting procedures under the 
Nasdaq 5800 Series. In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
    The Exchange will communicate as needed regarding trading in the 
Shares with other markets and other entities that are members of the 
ISG, and the Exchange may obtain trading information regarding trading 
in the Shares from such markets and other entities.
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 5711(d). 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, including Commodity-Based Trust 
Shares.
    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 5800 and following. 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 Trust's website (https://valkyrieinvest.com/BRRR) will include, 
free of charge, quantitative information on a per Share basis updated 
on a daily basis, including (i) the current NAV per Share daily and the 
prior business day's NAV and the reported closing price; (ii) the mid-
point of the bid-ask price \34\ in relation to the NAV as of the time 
the NAV is calculated (``Bid-Ask Price'') and a calculation of the 
premium or discount of such price against such NAV; (iii) data in chart 
format displaying the frequency distribution of discounts and premiums 
of the daily Bid-Ask Price against the NAV, within appropriate ranges, 
for each of the four previous calendar quarters (or for the life of the 
Trust, if shorter); and (iv) copies of the Trust's prospectus in 
electronic format. In addition, on each business day the Trust's 
website will also provide free of charge: (i) the Trust's NAV and NAV 
per Share; (ii) information regarding the Trust's holdings; and (iii) 
information regarding the Index and the value of a bitcoin as 
calculated by the Index (which may also be found on the Index's website 
(https://www.cfbenchmarks.com/data/indices/BRRNY), or, if an 
alternative fair value methodology is used to value the Trust's 
bitcoin, such other pricing source(s) used in such calculation.
---------------------------------------------------------------------------

    \34\ The bid-ask price of the Trust is determined using the 
highest bid and lowest offer on the Consolidated Tape as of the time 
of calculation of the closing day NAV.
---------------------------------------------------------------------------

    The Trust's website 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 Market Session (9:30 a.m. to 
4:00 p.m. (Eastern Time)).\35\ The IIV will be calculated by using the 
prior day's closing NAV per Share as a base and updating that value 
throughout the trading day to reflect changes in the most recently 
reported price level of the BRTI, as reported by CME Group, Inc., 
Bloomberg, L.P. or another reporting service. The BRTI is calculated in 
real time once per second based on the Relevant Order Books of all 
Constituent Bitcoin Platforms. All aspects of the BRTI methodology are 
publicly available at the website of the Benchmark Administrator.
---------------------------------------------------------------------------

    \35\ The IIV on a per Share basis disseminated during the 
Regular Market Session should not be viewed as a real-time update of 
the NAV, which is calculated once a day.
---------------------------------------------------------------------------

    The IIV disseminated during the Exchange's Regular Market Session 
should not be viewed as an actual real-time update of the NAV, which 
will be calculated only once at the end of each trading day. The IIV 
will be widely disseminated on a per Share basis every 15 seconds 
during the Exchange's Regular Market Session by one or more major 
market data vendors. In addition, the IIV will be available published 
on the Exchange's website and through on-line information services such 
as Bloomberg and Reuters.
    The NAV for the Trust will be calculated by the Sponsor 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

[[Page 2294]]

the relevant securities information processor.
    Quotation and last sale information for bitcoin is widely 
disseminated through a variety of major market data vendors, including 
Bloomberg and Reuters, as well as CF Benchmarks. Information relating 
to trading, including price and volume information, in bitcoin is 
available from major market data vendors and from the platforms on 
which bitcoin are traded. Depth of book information is also available 
from bitcoin platforms. The normal trading hours for bitcoin 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. Market prices for the Shares will be available 
from a variety of sources, including brokerage firms, information 
websites and other information service providers.
    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 
additional actively-managed exchange-traded products that will enhance 
competition among both market participants and listing venues, to the 
benefit of investors and the marketplace.

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

    No written comments were either solicited or received.

III. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2023-019 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-NASDAQ-2023-019. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NASDAQ-2023-019 and should 
be submitted on or before February 2, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00507 Filed 1-11-24; 8:45 am]
BILLING CODE 8011-01-P