[Federal Register Volume 89, Number 17 (Thursday, January 25, 2024)]
[Notices]
[Pages 5047-5052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-01389]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99396; File No. SR-ISE-2024-03]


Self-Regulatory Organizations; Nasdaq ISE LLC; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1, To List and 
Trade Options on iShares Bitcoin Trust

January 19, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 9, 2024, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I and II, below, which 
Items have been prepared by the Exchange. On January 11, 2024, the 
Exchange filed Amendment No. 1 to the proposal, which supersedes the 
original filing 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Options 4, Section 3, Criteria for 
Underlying Securities. 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/ise/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

[[Page 5048]]

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 amend Options 4, Section 3, Criteria for 
Underlying Securities, to allow the Exchange to list and trade options 
on iShares Bitcoin Trust (the ``Trust'') \3\ as a Unit deemed 
appropriate for options trading on the Exchange.
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    \3\ The Commission recently approved a rule change to list and 
trade shares of the Trust pursuant to Rule 5711(d) of The Nasdaq 
Stock Exchange LLC (``Commodity-Based Trust Shares''). See 
Securities Exchange Act Release No. 99306 (January 10, 2024) (SR-
NASDAQ-2023-016) (not yet published) (hereinafter ``SR-NASDAQ-2023-
016''). The Exchange represents it would not list options on the 
Trust unless it satisfied all applicable criteria in Options 4, 
Section 3.
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    Currently, Options 4, Section 3(h) provides that securities deemed 
appropriate for options trading shall include shares or other 
securities (``Exchange-Traded Fund Shares'' or ``ETFs'') that are 
traded on a national securities exchange and are defined as an ``NMS'' 
stock under Rule 600 of Regulation NMS, and that meet certain criteria 
specified in Options 4, Section 3(h), including that they:

    (i) represent interests in registered investment companies (or 
series thereof) organized as open-end management investment 
companies, unit investment trusts or similar entities that hold 
portfolios of securities and/or financial instruments, including, 
but not limited to, stock index futures contracts, options on 
futures, options on securities and indices, equity caps, collars and 
floors, swap agreements, forward contracts, repurchase agreements 
and reverse repurchase agreements (the ``Financial Instruments''), 
and money market instruments, including, but not limited to, U.S. 
government securities and repurchase agreements (the ``Money Market 
Instruments'') comprising or otherwise based on or representing 
investments in broad-based indexes or portfolios of securities and/
or Financial Instruments and Money Market Instruments (or that hold 
securities in one or more other registered investment companies that 
themselves hold such portfolios of securities and/or Financial 
Instruments and Money Market Instruments) or
    (ii) represent interests in a trust or similar entity that holds 
a specified non-U.S. currency or currencies deposited with the trust 
when aggregated in some specified minimum number may be surrendered 
to the trust or similar entity by the beneficial owner to receive 
the specified non-U.S. currency or currencies and pays the 
beneficial owner interest and other distributions on the deposited 
non-U.S. currency or currencies, if any, declared and paid by the 
trust (``Currency Trust Shares'') or
    (iii) represent commodity pool interests principally engaged, 
directly or indirectly, in holding and/or managing portfolios or 
baskets of securities, commodity futures contracts, options on 
commodity futures contracts, swaps, forward contracts and/or options 
on physical commodities and/or non-U.S. currency (``Commodity Pool 
ETFs'') or
    (iv) represent interests in the SPDR[supreg] Gold Trust, the 
iShares COMEX Gold Trust, the iShares Silver Trust, or the ETFS Gold 
Trust or
    (v) represents an interest in a registered investment company 
(``Investment Company'') organized as an open-end management company 
or similar entity, that invests in a portfolio of securities 
selected by the Investment Company's investment adviser consistent 
with the Investment Company's investment objectives and policies, 
which is issued in a specified aggregate minimum number in return 
for a deposit of a specified portfolio of securities and/or a cash 
amount with a value equal to the next determined net asset value 
(``NAV''), and when aggregated in the same specified minimum number, 
may be redeemed at a holder's request, which holder will be paid a 
specified portfolio of securities and/or cash with a value equal to 
the next determined NAV (``Managed Fund Share'').

    In addition to the aforementioned requirements, Options 4, Section 
3(h)(1) and (2) must be met to list options on ETFs.\4\
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    \4\ Options 4, Section 3(h)(1) and (2) state that the Exchange-
Traded Fund Shares either (i) meet the criteria and guidelines set 
forth in paragraphs (a) and (b) described herein; or (ii) the 
Exchange-Traded Fund Shares are available for creation or redemption 
each business day from or through the issuing trust, investment 
company, commodity pool or other entity in cash or in kind at a 
price related to net asset value, and the issuer is obligated to 
issue Exchange-Traded Fund Shares in a specified aggregate number 
even if some or all of the investment assets and/or cash required to 
be deposited have not been received by the issuer, subject to the 
condition that the person obligated to deposit the investment assets 
has undertaken to deliver them as soon as possible and such 
undertaking is secured by the delivery and maintenance of collateral 
consisting of cash or cash equivalents satisfactory to the issuer of 
the Exchange-Traded Fund Shares, all as described in the Exchange-
Traded Fund Shares' prospectus. Also, the Exchange-Traded Fund 
Shares based on international or global indexes, or portfolios that 
include non-U.S. securities, shall meet the criteria in Options 4, 
Section 3(h)(2)(A)-(F).
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Proposal
    The Exchange proposes to expand the list of ETFs that are 
appropriate for options trading on the Exchange in Options 3, Section 
4(h)(iv) to include the Trust.\5\
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    \5\ Specifically, the Exchange proposes to amend Options 3, 
Section 4(h)(iv) to include the name of the Trust to enable options 
to be listed on the Trust on the Exchange.
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Description of the Trust \6\
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    \6\ See SR-NASDAQ-2023-016 for a complete description of the 
Trust.
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    The Shares are issued by the Trust, a Delaware statutory trust. The 
Trust operates pursuant to a trust agreement (the ``Trust Agreement'') 
between the Sponsor, BlackRock Fund Advisors (the ``Trustee'') as the 
trustee of the Trust and Wilmington Trust, National Association, as 
Delaware trustee (the ``Delaware Trustee''). The Trust issues Shares 
representing fractional undivided beneficial interests in its net 
assets. The assets of the Trust consist only of bitcoin, held by a 
custodian on behalf of the Trust except under limited circumstances 
when transferred through the Trust's prime broker temporarily 
(described below), and cash. Coinbase Custody Trust Company, LLC (the 
``Bitcoin Custodian'') is the custodian for the Trust's bitcoin 
holdings, and maintains a custody account for the Trust (``Custody 
Account''); Coinbase, Inc. (the ``Prime Execution Agent''), an 
affiliate of the Bitcoin Custodian, is the prime broker for the Trust 
and maintains a trading account for the Trust (``Trading Account''); 
and Bank of New York Mellon is the custodian for the Trust's cash 
holdings (the ``Cash Custodian'' and together with the Bitcoin 
Custodian, the ``Custodians'') and the administrator of the Trust (the 
``Trust Administrator''). Under the Trust Agreement, the Trustee may 
delegate all or a portion of its duties to any agent, and has delegated 
the bulk of the day-to-day responsibilities to the Trust Administrator 
and certain other administrative and record-keeping functions to its 
affiliates and other agents. The Trust is not an investment company 
registered under the Investment Company Act of 1940, as amended (the 
``1940 Act'').
    The investment objective of the Trust is to reflect generally the 
performance of the price of bitcoin. The Trust seeks to reflect such 
performance before payment of the Trust's expenses and liabilities. The 
Shares are intended to constitute a simple means of making an 
investment similar to an investment in bitcoin through the public 
securities market rather than by acquiring, holding

[[Page 5049]]

and trading bitcoin directly on a peer-to-peer or other basis or via a 
digital asset exchange. The Shares have been designed to remove the 
obstacles represented by the complexities and operational burdens 
involved in a direct investment in bitcoin, while at the same time 
having an intrinsic value that reflects, at any given time, the 
investment exposure to the bitcoin owned by the Trust at such time, 
less the Trust's expenses and liabilities. Although the Shares are not 
the exact equivalent of a direct investment in bitcoin, they provide 
investors with an alternative method of achieving investment exposure 
to bitcoin through the public securities market, which may be more 
familiar to them.
Custody of the Trust's Bitcoin
    An investment in the Shares is backed by bitcoin held by the 
Bitcoin Custodian on behalf of the Trust. All of the Trust's bitcoin 
will be held in the Custody Account, other than the Trust's bitcoin 
which is temporarily maintained in the Trading Account under limited 
circumstances, i.e., in connection with creation and redemption Basket 
\7\ activity or sales of bitcoin deducted from the Trust's holdings in 
payment of Trust expenses or the Sponsor's fee (or, in extraordinary 
circumstances, upon liquidation of the Trust). The Custody Account 
includes all of the Trust's bitcoin held at the Bitcoin Custodian, but 
does not include the Trust's bitcoin temporarily maintained at the 
Prime Execution Agent in the Trading Account from time to time. The 
Bitcoin Custodian will keep all of the private keys associated with the 
Trust's bitcoin held in the Custody Account in ``cold storage''.\8\ The 
hardware, software, systems, and procedures of the Bitcoin Custodian 
may not be available or cost-effective for many investors to access 
directly.
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    \7\ The Trust issues and redeems Shares only in blocks of 40,000 
or integral multiples thereof. A block of 40,000 Shares is called a 
``Basket.'' These transactions take place in exchange for bitcoin.
    \8\ The term ``cold storage'' refers to a safeguarding method by 
which the private keys corresponding to the Trust's bitcoins are 
generated and stored in an offline manner, subject to layers of 
procedures designed to enhance security. Private keys are generated 
by the Bitcoin Custodian in offline computers that are not connected 
to the internet so that they are more resistant to being hacked.
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    The Exchange believes that offering options on the Trust will 
benefit investors by providing them with an additional, relatively 
lower cost investing tool to gain exposure to spot Bitcoin as well as a 
hedging vehicle to meet their investment needs in connection with 
Bitcoin products and positions. Similar to other commodity ETFs in 
which options may be listed on ISE (e.g., SPDR[supreg] Gold Trust, the 
iShares COMEX Gold Trust, the iShares Silver Trust, or the ETFS Gold 
Trust),\9\ the proposed ETF is a trust that essentially offers the same 
objectives and benefits to investors.
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    \9\ See ISE Options 4, Section 3(h)(iv).
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    Options on the Trust will trade in the same manner as options on 
other ETFs on the Exchange. Exchange Rules that currently apply to the 
listing and trading of all options on ETFs on the Exchange, including, 
for example, Rules that govern listing criteria, expirations, exercise 
prices, minimum increments, position and exercise limits, margin 
requirements, customer accounts and trading halt procedures, will apply 
to the listing and trading of options on the Trust on the Exchange. 
Today, these rules apply to options on the various commodities ETFs 
deemed appropriate for options trading on the Exchange pursuant to 
Options 4, Section 3(h)(iv).
    The Exchange's initial listing standards for ETFs on which options 
may be listed and traded on the Exchange will apply to the Trust. The 
initial listing standard as set forth in Options 4, Section 3(a) 
provides that:

    Underlying securities with respect to which put or call options 
contracts are approved for listing and trading on the Exchange must 
meet the following criteria: (1) the security must be registered and 
be an ``NMS stock'' as defined in Rule 600 of Regulation NMS under 
the Exchange Act; and (2) the security shall be characterized by a 
substantial number of outstanding shares that are widely held and 
actively traded.

    Pursuant to ISE Options 4, Section 3, ETFs on which options may be 
listed and traded must satisfy the listing standards set forth in 
Options 4, Section 3(h). Specifically, the Trust must meet either:

    (1) the criteria and guidelines for underlying securities set 
forth in Options 4, Section 3(h), or
    (2) it must be available for creation or redemption each 
business day from or through the issuing trust, investment company, 
commodity pool or other entity in cash or in kind at a price related 
to net asset value, and the issuer is obligated to issue Exchange-
Traded Fund Shares in a specified aggregate number even if some or 
all of the investment assets and/or cash required to be deposited 
have not been received by the issuer, subject to the condition that 
the person obligated to deposit the investment assets has undertaken 
to deliver them as soon as possible and such undertaking is secured 
by the delivery and maintenance of collateral consisting of cash or 
cash equivalents satisfactory to the issuer of the Exchange-Traded 
Fund Shares, all as described in the Exchange-Traded Fund Shares' 
prospectus, or the Exchange-Traded Fund Shares must be based on 
international or global indexes, or portfolios that include non-U.S. 
securities, and meet other criteria.

    Options on the Trust will also be subject to the Exchange's 
continued listing standards for options on ETFs set forth in Options 4, 
Section 4(g). Specifically, options approved for trading pursuant to 
Options 4, Section 3(h) will not be deemed to meet the requirements for 
continued approval, and the Exchange shall not open for trading any 
additional series of option contracts of the class covering such ETFs 
if the ETFs are delisted from trading as provided in subparagraph 
(b)(5) of Options 4, Section 4 \10\ or the ETFs are halted or suspended 
from trading on their primary market.\11\ In addition, the Exchange 
shall consider the suspension of opening transactions in any series of 
options of the class covering ETFs in any of the following 
circumstances:
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    \10\ Options 4, Section 4(b)(5) provides, if an underlying 
security is approved for options listing and trading under the 
provisions of Options 4, Section 3(c), the trading volume of the 
Original Security (as therein defined) prior to but not after the 
commencement of trading in the Restructure Security (as therein 
defined), including `when-issued' trading, may be taken into account 
in determining whether the trading volume requirement of (3) of this 
paragraph (b) is satisfied.
    \11\ See Options 4, Section 4(g).

    (1) in the case of options covering Exchange-Traded Fund Shares 
approved pursuant to Options 4, Section 3(h)(A)(i), in accordance 
with the terms of subparagraphs (b)(1), (2), (3) and (4) of Options 
4, Section 4; \12\
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    \12\ Options 4, Section 4(b)(5)(1) through (4) provides, if: (1) 
there are fewer than 6,300,000 shares of the underlying security 
held by persons other than those who are required to report their 
security holdings under Section 16(a) of the Act, (2) there are 
fewer than 1,600 holders of the underlying security, (3) the trading 
volume (in all markets in which the underlying security is traded) 
has been less than 1,800,000 shares in the preceding twelve (12) 
months, or (4) the underlying security ceases to be an `NMS stock' 
as defined in Rule 600 of Regulation NMS under the Exchange Act. 
Options 4, Section 3(h)(i) refers to Financial Instruments and Money 
Market Instruments. In addition, the Exchange proposes to amend the 
citation to ``Options 4, Section 3(h)(A)(i)'' herein to ``Options 4, 
Section 3(h)(i).''
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    (2) in the case of options covering Fund Shares approved 
pursuant to Options 4, Section 3(h)(A)(ii),\13\ following the 
initial twelve-month period beginning upon the commencement of 
trading in the Exchange-Traded Fund Shares on a national securities 
exchange and are defined as an ``NMS stock'' under Rule 600 of 
Regulation NMS [sic], there were fewer than 50 record and/or 
beneficial holders of such Exchange-Traded Fund Shares for 30 or 
more consecutive trading days;
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    \13\ Options 4, Section 3(h)(ii) refers to Currency Trust 
Shares. In addition, the Exchange proposes to amend the citation to 
``Options 4, Section 3(h)(A)(ii)'' herein to ``Options 4, Section 
3(h)(ii).''
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    (3) the value of the index or portfolio of securities or non-
U.S. currency, portfolio of

[[Page 5050]]

commodities including commodity futures contracts, options on 
commodity futures contracts, swaps, forward contracts, options on 
physical commodities and/or Financial Instruments and Money Market 
Instruments, on which the Exchange-Traded Fund Shares are based is 
no longer calculated or available; or
    (4) such other event occurs or condition exists that in the 
opinion of the Exchange makes further dealing in such options on the 
Exchange inadvisable.

    Options on the Trust would be physically settled contracts with 
American-style exercise.\14\ Consistent with current Options 4, Section 
5, which governs the opening of options series on a specific underlying 
security (including ETFs), the Exchange will open at least one 
expiration month for options on the Trust and may also list series of 
options on the Trust for trading on a weekly \15\ or quarterly \16\ 
basis. The Exchange may also list long-term equity option series 
(``LEAPS'') \17\ that expire from twelve to thirty-nine [sic] from the 
time they are listed.
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    \14\ See Options 4, Section 2, Rights and Obligations of Holders 
and Writers, which provides that the rights and obligations of 
holders and writers shall be as set forth in the Rules of the 
Clearing Corporation. See also OCC Rules, Chapter VIII, which 
governs exercise and assignment, and Chapter IX, which governs the 
discharge of delivery and payment obligations arising out of the 
exercise of physically settled stock option contracts. OCC Rules can 
be located at: https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occ_rules.pdf.
    \15\ See Supplementary .03 to Options 4, Section 5.
    \16\ See Supplementary .04 to Options 4, Section 5.
    \17\ See Options 4, Section 8.
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    Pursuant to Options 4, Section 5(d), which governs strike prices of 
series of options on ETFs, the interval between strike prices of series 
of options on ETFs approved for options trading pursuant to Section 
3(h) of Options 4 shall be fixed at a price per share which is 
reasonably close to the price per share at which the underlying 
security is traded in the primary market at or about the same time such 
series of options is first open for trading on the Exchange, or at such 
intervals as may have been established on another options exchange 
prior to the initiation of trading on the Exchange. With respect to the 
Short Term Options Series or Weekly Program, during the month prior to 
expiration of an option class that is selected for the Short Term 
Option Series Program, the strike price intervals for the related non-
Short Term Option (``Related non-Short Term Option'') shall be the same 
as the strike price intervals for the Short Term Option.\18\ 
Specifically, the Exchange may open for trading Short Term Option 
Series at strike price intervals of (i) $0.50 or greater where the 
strike price is less than $100, and $1 or greater where the strike 
price is between $100 and $150 for all option classes that participate 
in the Short Term Options Series Program; (ii) $0.50 for option classes 
that trade in one dollar increments and are in the Short Term Option 
Series Program; or (iii) $2.50 or greater where the strike price is 
above $150.\19\ Additionally, the Exchange may list series of options 
pursuant to the $1 Strike Price Interval Program,\20\ the $0.50 Strike 
Program,\21\ the $2.50 Strike Price Program,\22\ and the $5 Strike 
Program.\23\ Options 3, Section 3 governs the minimum increment for 
bids and offers for both equity and index options. Pursuant to Options 
3, Section 3, where the price of a series of options for the Trust is 
less than $3.00 the minimum increment will be $0.05, and where the 
price is $3.00 or higher, the minimum increment will be $0.10 \24\ 
consistent with the minimum increments for options on other ETFs listed 
on the Exchange. Any and all new series of Trust options that the 
Exchange lists will be consistent and comply with the expirations, 
strike prices, and minimum increments set forth in Options 4, Section 5 
and Options 3, Section 3, as applicable.
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    \18\ See Supplementary Material .03(e) to Options 4, Section 5.
    \19\ Id.
    \20\ See Supplementary Material .01 to Options 4, Section 5.
    \21\ See Supplementary Material .05 to Options 4, Section 5.
    \22\ See Supplementary Material .02 to Options 4, Section 5.
    \23\ See Supplementary Material .06 to Options 4, Section 5.
    \24\ Options that are eligible to participate in the Penny 
Interval Program have a minimum increment of $0.01 below $3.00 and 
$0.50 above $3.00. See Supplementary Material .01 to Options 3, 
Section 3.
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    Position and exercise limits for options on ETFs, including options 
on the Trust, are determined pursuant to Options 9, Sections 13 and 15, 
respectively. Position and exercise limits for ETFs options vary 
according to the number of outstanding shares and the trading volumes 
of the underlying ETF over the past six months, where the largest in 
capitalization and the most frequently traded ETFs have an option 
position and exercise limit of 250,000 contracts (with adjustments for 
splits, re-capitalizations, etc.) on the same side of the market; and 
smaller capitalization ETFs have position and exercise limits of 
200,000, 75,000, 50,000 or 25,000 contracts (with adjustments for 
splits, re-capitalizations, etc.) on the same side of the market. 
Further, Options 6C, Section 3, which governs margin requirements 
applicable to the trading of all options on the Exchange including 
options on ETFs, will also apply to the trading of the Trust options.
    The Exchange represents that the same surveillance procedures 
applicable to all other options on other ETFs currently listed and 
traded on the Exchange will apply to options on the Trust. Also, the 
Exchange represents that it has the necessary systems capacity to 
support the new option series. The Exchange believes that its existing 
surveillance and reporting safeguards are designed to deter and detect 
possible manipulative behavior which might potentially arise from 
listing and trading options on ETFs, including the proposed Trust 
options.
    The Exchange has also analyzed its capacity and represents that it 
believes the Exchange and the Options Price Reporting Authority or 
``OPRA'' have the necessary systems capacity to handle the additional 
traffic associated with the listing of new series that may result from 
the introduction of options on the Trust up to the number of 
expirations currently permissible under the Exchange Rules. Because the 
proposal is limited to one class, the Exchange believes any additional 
traffic that may be generated from the introduction of the Trust 
options will be manageable.
    Finally, the Exchange proposes a technical amendment to Options 4, 
Section 3(h)(iv) to amend the name ``ETFS Gold Trust'' to ``Aberdeen 
Standard Physical Gold Trust.'' In 2018 this ETF was renamed.\25\ At 
this time, the Exchange proposes to amend the name of the ETF to 
reflect its current name. The Exchange also proposes to correct two 
citations in Options 4, Section 4(g). The Exchange proposes to update a 
citation in Options 4, Section 4(g)(1) from ``Options 4, Section 
3(h)(A)(i)'' to ``Options 4, Section 3(h)(i)'' The Exchange also 
proposes to update a citation in Options 4, Section 4(g)(2) from 
``Options 4, Section 3(h)(A)(ii)'' to ``Options 4, Section 3(h)(ii).''
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    \25\ Effective October 1, 2018 ETFS Gold Trust was renamed 
Aberdeen Standard Gold ETF Trust. https://www.sec.gov/Archives/edgar/data/1450923/000138713118005292/ex10-2.htm.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\26\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\27\ 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

[[Page 5051]]

persons engaged in regulating, clearing, settling, processing 
information with respect to, and 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. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
(6)(b)(5) \28\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(5).
    \28\ 15 U.S.C. 78(f)(b)(5).
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    In particular, the Exchange believes that the proposal to list and 
trade options on the Trust will remove impediments to and perfect the 
mechanism of a free and open market and a national market system and, 
in general, protect investors because offering options on the Trust 
will provide investors with a greater opportunity to realize the 
benefits of utilizing options on an ETF based on spot bitcoin, 
including cost efficiencies and increased hedging strategies. The 
Exchange believes that offering options on a competitively priced ETF 
based on spot bitcoin will benefit investors by providing them with an 
additional, relatively lower cost risk management tool allowing them to 
manage, more easily, their positions, and associated risks, in their 
portfolios in connection with exposure to spot bitcoin. Today, the 
Exchange lists options on other commodity ETFs structured as a trust, 
which essentially offer the same objectives and benefits to investors, 
and for which the Exchange has not identified any issues with the 
continued listing and trading of options on those ETFs.
    The Exchange also believes the proposal to permit options on the 
Trust will remove impediments to and perfect the mechanism of a free 
and open market and a national market system, because options on the 
Trust will comply with current Exchange Rules. Options on the Trust 
must satisfy the initial listing standards and continued listing 
standards currently in the Exchange Rules, applicable to options on all 
ETFs, including options on other commodity ETFs already deemed 
appropriate for options trading on the Exchange pursuant to Options 4, 
Section 3(h)(iv). Further, Exchange Rules that currently govern the 
listing and trading of options on ETFs, including permissible 
expirations, strike prices, minimum increments, position and exercise 
limits, and margin requirements, will govern the listing and trading of 
options on the Trust. The Exchange represents that it has the necessary 
systems capacity to support options on the Trust. The Exchange believes 
that its existing surveillance and reporting safeguards are designed to 
deter and detect possible manipulative behavior which might arise from 
listing and trading options on ETFs, including the Trust options.
    Finally, the Commission has previously approved the listing and 
trading of options on other commodity ETFs structured as a trust, such 
as SPDR[supreg] Gold Trust,\29\ the iShares COMEX Gold Trust \30\ the 
iShares Silver Trust,\31\ the ETFS Gold Trust,\32\ and the ETFS Silver 
Trust.\33\
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    \29\ See Securities Exchange Act Release No. 57897 (May 30, 
2008), 73 FR 32061 (June 5, 2008) (SR-Amex-2008-15; SR-CBOE-2005-11; 
SR-ISE-2008-12; SR-NYSEArca-2008-52; and SR-Phlx-2008-17) (Order 
Granting Approval of a Proposed Rule Change, as Modified, and Notice 
of Filing and Order Granting Accelerated Approval of Proposed Rule 
Changes, as Modified, Relating to Listing and Trading Options on the 
SPDR Gold Trust).
    \30\ See Securities Exchange Act Release No. 59055 (December 4, 
2008), 73 FR 75148 (December 10, 2008) (SR-Amex-2008-68; SR-BSE-
2008-51; SR-CBOE-2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and 
SR-Phlx-2008-58) (Notice of Filing and Order Granting Accelerated 
Approval of Proposed Rule Changes Relating to the Listing and 
Trading Options on Shares of the iShares COMEX Gold Trust and the 
iShares Silver Trust).
    \31\ Id.
    \32\ See Securities Exchange Act Release No. 61483 (February 3, 
2010), 75 FR 6753 (February 10, 2010) (SR-CBOE-2010-007; SR-ISE-
2009-106; SR-NYSEAmex-2009-86; and SR-NYSEArca-2009-110) (Order 
Granting Approval of Proposed Rule Changes and Notice of Filing and 
Order Granting Accelerated Approval of a Proposed Rule Change 
Relating to Listing and Trading Options on the ETFS Gold Trust and 
the ETFS Silver Trust).
    \33\ Id.
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    Further, the Exchange's proposal to amend the name ``ETFS Gold 
Trust'' to ``Aberdeen Standard Physical Gold Trust'' in Options 4, 
Section 3(h)(iv) is consistent with the Act and the protection of 
investors as this amendment reflects the current name of this product. 
Also, the Exchange's proposal to correct two citations in Options 4, 
Section 4(g) \34\ are consistent with the Act as these amendments are 
intended to update incorrect citations.
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    \34\ The Exchange proposes to update a citation in Options 4, 
Section 4(g)(1) from ``Options 4, Section 3(h)(A)(i)'' to ``Options 
4, Section 3(h)(i)'' The Exchange also proposes to update a citation 
in Options 4, Section 4(g)(2) from ``Options 4, Section 
3(h)(A)(ii)'' to ``Options 4, Section 3(h)(ii).''
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act as options on the 
Trust will be subject to initial listing standards and continued 
listing standards the same as other options on ETFs listed on the 
Exchange. Further, options on the Trust will be subject to Exchange 
Rules that currently govern the listing and trading of options on ETFs, 
including permissible expirations, strike prices, minimum increments, 
position and exercise limits, and margin requirements. Options on the 
Trust will be equally available to all market participants who wish to 
trade such options. Also, and as stated above, the Exchange already 
lists options on other commodity ETFs structured as a trust.
    The Exchange does not believe that the proposal to list and trade 
options on the Trust will impose any burden on intermarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. To the extent that permitting options on the Trust to trade on 
the Exchange may make the Exchange a more attractive marketplace to 
market participants, such market participants are free to elect to 
become market participants on the Exchange. Additionally, other options 
exchanges are free to amend their listing rules, as applicable, to 
permit them to list and trade options on the Trust. The Exchange 
believes that the proposed rule change may relieve any burden on, or 
otherwise promote, competition as it is designed to increase 
competition for order flow on the Exchange in a manner that is 
beneficial to investors by providing them with a lower-cost option to 
hedge their investment portfolios. The Exchange notes that it operates 
in a highly competitive market in which market participants can readily 
direct order flow to competing venues that offer similar products. 
Ultimately, the Exchange believes that offering options on the Trust 
for trading on the Exchange will promote competition by providing 
investors with an additional, relatively low-cost means to hedge their 
portfolios and meet their investment needs in connection with spot 
bitcoin prices and bitcoin related products and positions.
    Finally, the Exchange's proposal to amend the name ``ETFS Gold 
Trust'' to ``Aberdeen Standard Physical Gold Trust'' in Options 4, 
Section 3(h)(iv) does not impose an undue burden on competition as this 
amendment reflects the current name of this product. Also, the 
Exchange's proposal to correct two

[[Page 5052]]

citations in Options 4, Section 4(g) \35\ does not impose an undue 
burden on competition as these amendments are intended to update 
incorrect citations.
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    \35\ The Exchange proposes to update a citation in Options 4, 
Section 4(g)(1) from ``Options 4, Section 3(h)(A)(i)'' to ``Options 
4, Section 3(h)(i)'' The Exchange also proposes to update a citation 
in Options 4, Section 4(g)(2) from ``Options 4, Section 
3(h)(A)(ii)'' to ``Options 4, Section 3(h)(ii).''
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. by order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment No. 1, 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-ISE-2024-03 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-ISE-2024-03. 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-ISE-2024-03 and should be 
submitted on or before February 15, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01389 Filed 1-24-24; 8:45 am]
BILLING CODE 8011-01-P