[Federal Register Volume 89, Number 104 (Wednesday, May 29, 2024)]
[Notices]
[Pages 46462-46476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-11706]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100214; File No. SR-CboeBZX-2023-069]


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

May 22, 2024.
    On September 6, 2023, Cboe BZX Exchange, Inc. (``BZX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the 
VanEck Ethereum Trust (f/k/a VanEck Ethereum ETF) under BZX Rule 
14.11(e)(4), Commodity-Based Trust Shares. The proposed rule change was 
published for comment in the Federal Register on September 26, 2023.\3\ 
On September 27, 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 December 18, 2023, the Commission instituted proceedings 
under Section 19(b)(2)(B) of the Act \6\ to determine whether to 
approve or disapprove the proposed rule change.\7\ On February 16, 
2024, the Exchange filed Amendment No. 1, which replaced and superseded 
the proposed rule change in its entirety. On March 20, 2024, the 
Commission provided notice of Amendment No. 1 to the proposed rule 
change and designated a longer period for Commission action on the 
proposed rule change, as modified by Amendment No. 1.\8\ On May 21, 
2024, the Exchange filed Amendment No. 2 to the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. Amendment No. 2 amended and replaced the proposed rule 
change, as modified by Amendment No. 1, in its entirety. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change, as modified by Amendment No. 2, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 98457 (Sept. 20, 
2023), 88 FR 66076. Comments on the proposed rule change are 
available at: https://www.sec.gov/comments/sr-cboebzx-2023-069/srcboebzx2023069.htm.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 98566, 88 FR 68236 
(Oct. 3, 2023).
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 99195, 88 FR 88683 
(Dec. 22, 2023).
    \8\ See Securities Exchange Act Release No. 99782, 89 FR 21032 
(Mar. 26, 2024).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (``Commission'' or ``SEC'') 
a proposed rule change to list and trade shares of the VanEck Ethereum 
Trust (the ``Trust''),\9\ under BZX Rule 14.11(e)(4), Commodity-Based 
Trust Shares.
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    \9\ The Trust was formed as a Delaware statutory trust on June 
22, 2021 and is operated as a grantor trust for U.S. federal tax 
purposes. The Trust has no fixed termination date.
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    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

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

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

1. Purpose
    This Amendment No. 2 to SR-CboeBZX-2023-069 amends and

[[Page 46463]]

replaces in its entirety the proposal as originally submitted on 
September 6, 2023 and as amended by Amendment No. 1 on February 16, 
2024. The Exchange submits this Amendment No. 2 in order to clarify 
certain points and add additional details to the proposal.
    The Exchange proposes to list and trade the Shares under BZX Rule 
14.11(e)(4),\10\ which governs the listing and trading of Commodity-
Based Trust Shares on the Exchange.\11\ VanEck Digital Assets, LLC is 
the sponsor of the Trust (``Sponsor''). The Shares will be registered 
with the Commission by means of the Trust's registration statement on 
Form S-1 (the ``Registration Statement'').\12\
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    \10\ The Commission approved BZX Rule 14.11(e)(4) in Securities 
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 
(September 6, 2011) (SR-BATS-2011-018).
    \11\ Any of the statements or representations regarding the 
index composition, the description of the portfolio or reference 
assets, limitations on portfolio holdings or reference assets, 
dissemination and availability of index, reference asset, and 
intraday indicative values, or the applicability of Exchange listing 
rules specified in this filing to list a series of Other Securities 
(collectively, ``Continued Listing Representations'') shall 
constitute continued listing requirements for the Shares listed on 
the Exchange.
    \12\ See Amendment No. 1 to Registration Statement on Form S-1, 
dated February 16, 2024, submitted to the Commission by the Sponsor 
on behalf of the Trust (333-255888). The descriptions of the Trust, 
the Shares, and the Benchmark contained herein are based, in part, 
on information in the Registration Statement. The Registration 
Statement is not yet effective and the Shares will not trade on the 
Exchange until such time that the Registration Statement is 
effective.
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    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\ With this in mind, the Chicago 
Mercantile Exchange (``CME'') ether futures (``Ether Futures'') market, 
which launched in February 2021, is the proper market to consider in 
determining whether there is a related regulated market of significant 
size.
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    \13\ See Securities Exchange Act Release No. 78262 (July 8, 
2016), 81 FR 78262 (July 14, 2016) (the ``Winklevoss Proposal''). 
The Winklevoss Proposal was subsequently disapproved by the 
Commission. See Securities Exchange Act Release No. 83723 (July 26, 
2018), 83 FR 37579 (August 1, 2018) (the ``Winklevoss Order''). 
Prior orders from the Commission have pointed out that in every 
prior approval order for Commodity-Based Trust Shares, there has 
been a derivatives market that represents the regulated market of 
significant size, generally a Commodity Futures Trading Commission 
(the ``CFTC'') regulated futures market. Further to this point, the 
Commission's prior orders have noted that the spot commodities and 
currency markets for which it has previously approved spot ETPs are 
generally unregulated and that the Commission relied on the 
underlying futures market as the regulated market of significant 
size that formed the basis for approving the series of Currency and 
Commodity-Based Trust Shares, including gold, silver, platinum, 
palladium, copper, and other commodities and currencies. The 
Commission specifically noted in the Winklevoss Order that the 
approval order issued related to the first spot gold ETP ``was based 
on an assumption that the currency market and the spot gold market 
were largely unregulated.'' See Winklevoss Order at 37592. As such, 
the regulated market of significant size test does not require that 
the spot ether 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.
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    Recently, the Commission issued an order granting approval for 
proposals to list bitcoin-based commodity trust and bitcoin-based trust 
issued receipts (these proposed funds are nearly identical to the 
Trust, but proposed to hold bitcoin instead of ether) (``Spot Bitcoin 
ETPs'').\14\ By way of background, in 2022 the Commission disapproved 
proposals \15\ to list Spot Bitcoin ETPs, including a proposal 
sponsored by Grayscale Investments, LLC (``Grayscale'').\16\ Grayscale 
appealed the decision with the U.S. Court of Appeals for the D.C. 
Circuit, which held that the Commission had failed to adequately 
explain its reasoning that the proposing exchange had not established 
that the CME bitcoin futures market was a market of significant size 
related to spot bitcoin, or that the ``other means'' asserted were 
sufficient to satisfy the statutory standard. As a result, the court 
vacated the Grayscale Order and remanded the matter to the 
Commission.\17\ In considering the remand of the Grayscale Order and 
Spot Bitcoin ETPs, the Commission determined in the Spot Bitcoin ETP 
Approval Order that the CME bitcoin futures (``Bitcoin Futures'') 
market is highly correlated to spot bitcoin. Specifically, the 
Commission stated:
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    \14\ See Exchange Act Release No. 99306 (January 10, 2024), 89 
FR 3008 (January 17, 2024) (Self-Regulatory Organizations; NYSE 
Arca, Inc.; The Nasdaq Stock Market LLC; Cboe BZX Exchange, Inc.; 
Order Granting Accelerated Approval of Proposed Rule Changes, as 
Modified by Amendments Thereto, To List and Trade Bitcoin-Based 
Commodity-Based Trust Shares and Trust Units) (the ``Spot Bitcoin 
ETP Approval Order'').
    \15\ See Order Disapproving a Proposed Rule Change To List and 
Trade Shares of the VanEck Bitcoin Trust Under BZX Rule 14.11(e)(4), 
Commodity-Based Trust Shares, Securities Exchange Act Release No. 
97102 (Mar. 10, 2023), 88 FR 16055 (Mar. 15, 2023) (SR-CboeBZX-2022-
035) (``VanEck Order II'') and n.11 therein for the complete list of 
previous proposals.
    \16\ See Securities Exchange Act Release No. 95180 (June 29, 
2022) 87 FR 40299 (July 6, 2022) (SR-NYSEArca-2021-90) (Order 
Disapproving a Proposed Rule Change, as Modified by Amendment No. 1, 
to List and Trade Shares of Grayscale Bitcoin Trust Under NYSE Arca 
Rule 8.201-E (Commodity-Based Trust Shares) (the ``Grayscale 
Order'').
    \17\ See Grayscale Investments, LLC v. SEC, 82 F.4th 1239 (D.C. 
Cir. 2023).

    [B]ased on the record before the Commission and the improved 
quality of the correlation analysis in the record . . . the 
Commission is able to conclude that fraud or manipulation that 
impacts prices in spot bitcoin markets would likely similarly impact 
CME bitcoin futures prices. And because the CME's surveillance can 
assist in detecting those impacts on CME bitcoin futures prices, the 
Exchanges' comprehensive surveillance-sharing agreement with the 
CME--a U.S. regulated market whose bitcoin futures market is 
consistently highly correlated to spot bitcoin, albeit not of 
``significant size'' related to spot bitcoin--can be reasonably 
expected to assist in surveilling for fraudulent and manipulative 
acts and practices in the specific context of the [p]roposals.\18\
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    \18\ See the Spot Bitcoin ETP Approval Order at 3011-3012.

    As further discussed below, both the Exchange and the Sponsor 
believe that this proposal and the included analysis are sufficient to 
establish that the CME Ether Futures market represents a regulated 
market of significant size and that this proposal should be approved.
Background
    Ethereum is free software that is hosted on computers distributed 
throughout the globe. It employs an array of logic, called a protocol, 
to create a unified understanding of ownership, commercial activity, 
and business logic. This allows users to engage in commerce without the 
need to trust any of its participants or counterparties. Ethereum code 
creates verifiable and unambiguous rules that assign clear, strong 
property rights to create a platform for unrestrained business 
formation and free exchange. It is widely understood that no single 
intermediary or entity operates or controls the Ethereum network 
(referred to as ``decentralization''), the transaction validation and 
recordkeeping infrastructure of which is collectively maintained by a 
disparate user base. The Ethereum network allows people to exchange 
tokens of value, referred to as ``ether'' or ``ETH'', which are 
recorded on a distributed public recordkeeping system or ledger known 
as a blockchain (the ``Ethereum Blockchain''), and which can be used to 
pay for goods and services, including computational power on the 
Ethereum network, or converted to fiat currencies, such as the U.S. 
dollar, at rates determined on

[[Page 46464]]

digital asset platforms or in individual peer-to-peer transactions. 
Furthermore, by combining the recordkeeping system of the Ethereum 
Blockchain with a flexible scripting language that is programmable and 
can be used to implement sophisticated logic and execute a wide variety 
of instructions, the Ethereum network is intended to act as a 
foundational infrastructure layer on top of which users can build their 
own custom software programs, as an alternative to centralized web 
servers. In theory, anyone can build their own custom software programs 
on the Ethereum network. In this way, the Ethereum network represents a 
project to expand blockchain deployment beyond a limited-purpose, peer-
to-peer private money system into a flexible, distributed alternative 
computing infrastructure that is available to all. On the Ethereum 
network, ETH is the unit of account that users pay for the 
computational resources consumed by running their programs.
    Heretofore, U.S. retail investors have lacked a U.S. regulated, 
U.S. exchange-traded vehicle to gain exposure to ETH. Instead current 
options include: (i) facing the counter-party risk, legal uncertainty, 
technical risk, and complexity associated with accessing spot ether; or 
(ii) over-the-counter ether funds (``OTC ETH Funds'') with high 
management fees and potentially volatile premiums and discounts. 
Meanwhile, investors in other countries, including Germany, Canada, 
Switzerland, and France, are able to use more traditional exchange 
listed and traded products (including exchange-traded funds holding 
physical ETH) to gain exposure to ETH. Investors across Europe and 
Canada have access to products which trade on regulated exchanges and 
provide exposure to a broad array of spot crypto assets. U.S. 
investors, by contrast, are left with fewer and more risky means of 
getting ether exposure.\19\
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    \19\ The Exchange notes that the list of countries above is not 
exhaustive and that securities regulators in a number of additional 
countries have either approved or otherwise allowed the listing and 
trading of Spot Ether ETPs.
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    To this point, the lack of an ETP that holds spot ETH (a ``Spot 
Ether ETP'') exposes U.S. investor assets to significant risk because 
investors that would otherwise seek cryptoasset exposure through a Spot 
Ether ETP are forced to find alternative exposure through generally 
riskier means. For example, investors in OTC ETH Funds are not afforded 
the benefits and protections of regulated Spot Ether ETPs, resulting in 
retail investors suffering losses due to drastic movements in the 
premium/discount of OTC ETH Funds. An investor who purchased the 
largest OTC ETH Fund in January 2021 and held the position at the end 
of 2022 would have suffered a 69% loss due to the premium/discount, 
even if the price of ETH did not change. Many retail investors likely 
suffered losses due to this premium/discount in OTC ETH Fund trading; 
all such losses could have been avoided if a Spot Ether ETP had been 
available. Additionally, many U.S. investors that held their digital 
assets in accounts at FTX,\20\ Celsius Network LLC,\21\ BlockFi 
Inc.\22\ and Voyager Digital Holdings, Inc.\23\ have become unsecured 
creditors in the insolvencies of those entities. If a Spot Ether ETP 
was available, it is likely that at least a portion of the billions of 
dollars tied up in those proceedings would still reside in the 
brokerage accounts of U.S. investors, having instead been invested in a 
transparent, regulated, and well-understood structure--a Spot Ether 
ETP. To this point, approval of a Spot Ether ETP would represent a 
major win for the protection of U.S. investors in the cryptoasset 
space. The Trust, like all other series of Commodity-Based Trust 
Shares, is designed to protect investors against the risk of losses 
through fraud and insolvency that arise by holding digital assets, 
including ETH, on centralized platforms.
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    \20\ See FTX Trading Ltd., et al., Case No. 22-11068.
    \21\ See Celsius Network LLC, et al., Case No. 22-10964.
    \22\ See BlockFi Inc., Case No. 22-19361.
    \23\ See Voyager Digital Holdings, Inc., et al., Case No. 22-
10943.
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Ether Futures ETFs
    The Exchange and Sponsor applaud the Commission for allowing the 
launch of ETFs registered under the Investment Company Act of 1940, as 
amended (the ``1940 Act'') that provide exposure to ether primarily 
through CME Ether Futures (``Ether Futures ETFs''). Allowing such 
products to list and trade is a productive first step in providing U.S. 
investors and traders with transparent, exchange-listed tools for 
expressing a view on ether.
    The structure of Ether Futures ETFs provides negative outcomes for 
buy and hold investors as compared to a Spot Ether ETP. Specifically, 
the cost of rolling CME Ether Futures contracts will cause the Ether 
Futures ETFs to lag the performance of ether itself and could cost U.S. 
investors significant amounts of money on an annual basis compared to 
Spot Ether ETPs. Such rolling costs would not be required for Spot 
Ether ETPs that hold ether. Further, Ether Futures ETFs could 
potentially hit CME position limits, which would force an Ether Futures 
ETF to invest in non-futures assets for ether exposure and cause 
potential investor confusion and lack of certainty about what such 
Ether Futures ETFs are actually holding to try to get exposure to 
ether, not to mention completely changing the risk profile associated 
with such an ETF. While Ether Futures ETFs represent a useful trading 
tool, they are clearly a sub-optimal structure for U.S. investors that 
are looking for long-term exposure to ether that will unnecessarily 
cost U.S. investors significant amounts of money every year compared to 
Spot Ether ETPs and the Exchange believes that any proposal to list and 
trade a Spot Ether ETP should be reviewed by the Commission with this 
important investor protection context in mind.
    To the extent the Commission may view differential treatment of 
Ether Futures ETFs and Spot Ether ETPs as warranted based on the 
Commission's concerns about the custody of physical ether that a Spot 
Ether ETP would hold (compared to cash-settled futures contracts),\24\ 
the Sponsor believes this concern is mitigated to a significant degree 
by the custodial arrangements that the Trust has contracted with the 
Custodian (as defined below) to provide, as further outlined below. In 
the custody statement, the Commission stated that the fourth step that 
a broker-dealer could take to shield traditional securities customers 
and others from the risks and consequences of digital asset security 
fraud, theft, or loss is to establish, maintain, and enforce reasonably 
designed written policies, procedures, and controls for safekeeping and 
demonstrating the broker-dealer has exclusive possession or control 
over digital asset securities that are consistent with industry best 
practices to protect against the theft, loss, and unauthorized and 
accidental use of the private keys necessary to access and transfer the 
digital asset securities the broker-dealer holds in custody. While 
ether is not a security and the Custodian is not a broker-dealer, the 
Sponsor believes that similar considerations apply to the Custodian's 
holding of the Trust's ether. After diligent investigation, the Sponsor 
believes that the Custodian's policies, procedures, and controls for 
safekeeping,

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exclusively possessing, and controlling the Trust's ether holdings are 
consistent with industry best practices to protect against the theft, 
loss, and unauthorized and accidental use of the private keys. As a 
trust company chartered by the New York Department of Financial 
Services (``NYDFS''), the Sponsor notes that the Custodian is subject 
to extensive regulation and has among longest track records in the 
industry of providing custodial services for digital asset private 
keys. Under the circumstances, therefore, to the extent the Commission 
believes that its concerns about the risks of spot ether custody 
justifies differential treatment of a Ether Futures ETF versus a Spot 
Ether ETP, the Sponsor believes that the fact that the Custodian 
employs the same types of policies, procedures, and safeguards in 
handling spot ether that the Commission has stated that broker-dealers 
should implement with respect to digital asset securities would appear 
to weaken the justification for treating a Ether Futures ETF compared 
to a Spot Ether ETP differently due to spot ether custody concerns.
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    \24\ See, e.g., Division of Investment Management Staff, Staff 
Statement on Funds Registered Under the Investment Company Act 
Investing in the Bitcoin Futures Market, May 11, 2021 (``The Bitcoin 
Futures market also has not presented the custody challenges 
associated with some cryptocurrency-based investing because the 
futures are cash-settled'').
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    Based on the foregoing, the Exchange and Sponsor believe that any 
objective review of the proposals to list Spot Ether ETPs compared to 
the Ether Futures ETFs would lead to the conclusion that Spot Ether 
ETPs should be available to U.S. investors and, as such, this proposal 
and other comparable proposals to list and trade Spot Ether ETPs should 
be approved by the Commission. Stated simply, U.S. investors will 
continue to lose significant amounts of money from holding Ether 
Futures ETFs as compared to Spot Ether ETPs, losses which could be 
prevented by the Commission approving Spot Ether ETPs. Additionally, 
any concerns related to preventing fraudulent and manipulative acts and 
practices related to Spot Ether ETPs would apply equally to the spot 
markets underlying the futures contracts held by an Ether Futures ETF. 
Both the Exchange and Sponsor believe that the CME Ether Futures market 
is a regulated market of significant size and that such manipulation 
concerns are mitigated, as described extensively below. After allowing 
the listing and trading of Ether Futures ETFs that hold primarily CME 
Ether Futures, however, the only consistent outcome would be approving 
Spot Ether ETPs on the basis that the CME Ether Futures market is a 
regulated market of significant size.
    Given the current landscape, approving this proposal (and others 
like it) and allowing Spot Ether ETPs to be listed and traded alongside 
Ether Futures ETFs and Spot Bitcoin ETPs would establish a consistent 
regulatory approach, provide U.S. investors with choice in product 
structures for ether exposure, and offer flexibility in the means of 
gaining exposure to ether through transparent, regulated, U.S. 
exchange-listed vehicles.
CME Ether Futures \25\
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    \25\ Unless otherwise noted, all data and analysis presented in 
this section and referenced elsewhere in the filing has been 
provided by the Sponsor.
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    CME began offering trading in CME Ether Futures in February 2021. 
Each contract represents 50 ETH and is based on the CME CF Ether-Dollar 
Reference Rate.\26\ The contracts trade and settle like other cash-
settled commodity futures contracts. Most measurable metrics related to 
CME Ether Futures have generally trended up since launch, although some 
metrics have slowed recently. For example, there were 76,293 CME Ether 
Futures contracts traded in July 2023 (approximately $7.3 billion) 
compared to 70,305 ($11.1 billion) and 158,409 ($7.5 billion) contracts 
traded in July 2021, and July 2022 respectively.\27\ The Sponsor's 
research indicates daily correlation between the spot ETH and the CME 
Ether Futures is 0.998 from the period of 9/1/22 through 9/1/23.
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    \26\ The CME CF Ether-Dollar Reference Rate is based on a 
publicly available calculation methodology based on pricing sourced 
from several crypto trading platforms, including Bitstamp, Coinbase, 
Gemini, itBit, Kraken, and LMAX Digital.
    \27\ Source: CME, 7/31/23.

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    The number of large open interest holders \28\ and unique accounts 
trading CME Ether Futures have both increased, even in the face of 
heightened ether price volatility.
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    \28\ A large open interest holder in CME Ether Futures is an 
entity that holds at least 25 contracts, which is the equivalent of 
1,250 ether. At a price of approximately $1,867 per ether on 7/31/
2023, more than 59 firms had outstanding positions of greater than 
$2.3 million in CME Ether Futures.
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Section 6(b)(5) and the Applicable Standards
    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; 
\31\ 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

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demonstrates that the CME Ether Futures market represents a regulated 
market of significant size and that, on the whole, the manipulation 
concerns previously articulated by the Commission are sufficiently 
mitigated to the point that they are outweighed by quantifiable 
investor protection issues that would be resolved by approving this 
proposal.
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    \29\ See Exchange Rule 14.11(f).
    \30\ Commodity-Based Trust Shares, as described in Exchange Rule 
14.11(e)(4), are a type of Trust Issued Receipt.
    \31\ The Exchange believes that ETH 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 ETH trading render it difficult and 
prohibitively costly to manipulate the price of ETH. The 
fragmentation across ETH platforms, the relatively slow speed of 
transactions, and the capital necessary to maintain a significant 
presence on each trading platform make manipulation of ETH prices 
through continuous trading activity challenging. To the extent that 
there are ETH platforms engaged in or allowing wash trading or other 
activity intended to manipulate the price of ETH on other platforms, 
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 ETH 
markets and the presence of arbitrageurs in those markets means that 
the manipulation of the price of ETH on any single venue would 
require manipulation of the global ETH 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 ETH platform or OTC 
platform. As a result, the potential for manipulation on a trading 
platform would require overcoming the liquidity supply of such 
arbitrageurs who are effectively eliminating any cross-market 
pricing differences.
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(i) Designed To Prevent Fraudulent and Manipulative Acts and Practices
    In order to meet this standard in a proposal to list and trade a 
series of Commodity-Based Trust Shares, the Commission requires that an 
exchange demonstrate that there is a comprehensive surveillance-sharing 
agreement in place \32\ with a regulated market of significant size. 
Both the Exchange and CME are members of the Intermarket Surveillance 
Group (``ISG'').\33\ The only remaining issue to be addressed is 
whether the CME Ether 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.\34\
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    \32\ 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 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'').
    \33\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
    \34\ See Wilshire Phoenix Disapproval.
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    The Commission has also recognized that the ``regulated market of 
significant size'' standard is not the only means for satisfying 
Section 6(b)(5) of the act, specifically providing that a listing 
exchange could demonstrate that ``other means to prevent fraudulent and 
manipulative acts and practices'' are sufficient to justify dispensing 
with the requisite surveillance-sharing agreement.\35\
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    \35\ See Winklevoss Order at 37580. The Commission has also 
specifically noted that it ``is not applying a `cannot be 
manipulated' standard; instead, the Commission is examining whether 
the proposal meets the requirements of the Exchange Act and, 
pursuant to its Rules of Practice, places the burden on the listing 
exchange to demonstrate the validity of its contentions and to 
establish that the requirements of the Exchange Act have been met.'' 
Id. at 37582.
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(a) Manipulation of the ETP
    The significant market test requires that 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. In light of the similarly high 
correlation between spot ETH/CME Ether Futures and spot bitcoin/CME 
Bitcoin Futures, applying the same rationale that the Commission 
applied to a Spot Bitcoin ETP in the Spot Bitcoin ETP Approval Order 
also indicates that this test is satisfied for this proposal. As noted 
above, in the Spot Bitcoin ETP Approval Order, the SEC concluded that:

. . . fraud or manipulation that impacts prices in spot bitcoin 
markets would likely similarly impact CME bitcoin futures prices. 
And because the CME's surveillance can assist in detecting those 
impacts on CME bitcoin futures prices, the Exchanges' comprehensive 
surveillance-sharing agreement with the CME . . . can be reasonably 
expected to assist in surveilling for fraudulent and manipulative 
acts and practices in the specific context of the [p]roposals.\36\
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    \36\ See the Spot Bitcoin ETP Approval Order at 3011-3012.

    The assumptions from this statement are also true for CME Ether 
Futures. CME Ether Futures pricing is based on pricing from spot ether 
markets. The statement from the Spot Bitcoin ETP Approval Order that 
the surveillance-sharing agreement with the CME ``can be reasonably 
expected to assist in surveilling for fraudulent and manipulative acts 
and practices in the specific context of the [p]roposals'' makes clear 
that the Commission believes that CME's surveillance can capture the 
effects of trading on the relevant spot markets on the pricing of CME 
Bitcoin Futures. This same logic would extend to CME Ether Futures 
markets where CME's surveillance would be able to capture the effects 
of trading on the relevant spot markets on the pricing of CME Ether 
Futures.
(b) Predominant Influence on Prices in Spot and ETH Futures
    The Exchange and Sponsor also believe that trading in the Shares 
would not be the predominant force on prices in the CME Ether Futures 
market for a number of reasons. First, because the Trust would not hold 
CME Ether Futures contracts, the only way that it could be the 
predominant force on prices in that market is through the spot markets 
that CME Ether Futures contracts use for pricing.\37\ The Sponsor notes 
that ether total 24-hour spot trading volume has averaged $9.4 billion 
over the year ending September 1, 2023.\38\ The Sponsor expects that 
the Trust would represent a very small percentage of this daily trading 
volume in the spot ether market even in its most aggressive projections 
for the Trust's assets and therefore could not be the predominant force 
on prices in the CME Ether Futures market. Second, much like the CME 
Bitcoin Futures market, the CME Ether Futures market has progressed and 
matured significantly. As the U.S. Court of Appeals for the D.C. 
Circuit found in its review of the Grayscale Order, ``Because the spot 
market is deeper and more liquid than the futures market, manipulation 
should be more difficult, not less.'' The Exchange and Sponsor agree 
with this sentiment and believe it applies equally to the spot ether 
and CME Ether Futures markets.
---------------------------------------------------------------------------

    \37\ This logic is reflected by the U.S. Court of Appeals for 
the D.C. Circuit on its review of the Grayscale Order at 17-18. See 
Grayscale Investments, LLC v. SEC, 82 F. 4th 1239 (D.C. Cir. 2023). 
Specifically, the court found that ``Because Grayscale owns no 
futures contracts, trading in Grayscale can affect the futures 
market only through the spot market . . . But Grayscale holds just 
3.4 percent of outstanding bitcoin, and the Commission did not 
suggest Grayscale can dominate the price of bitcoin.''
    \38\ Source: TokenTerminal.
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(c) Other Means To Prevent Fraudulent and Manipulative Acts and 
Practices
    As noted above, the Commission also permits a listing exchange to 
demonstrate that ``other means to prevent fraudulent and manipulative 
acts and practices'' are sufficient to justify dispensing with the 
requisite surveillance-sharing agreement. The

[[Page 46469]]

Exchange and Sponsor believe that such conditions are present.
    The Exchange believes that the proposal is designed to protect 
investors and the public interest. Over the past several years, U.S. 
investor exposure to ether through OTC ETH Funds has grown. With that 
growth, so too has grown the quantifiable investor protection issues to 
U.S. investors through roll costs for Ether Futures ETFs and premium/
discount volatility and management fees for OTC ETH Funds. The Exchange 
believes that the concerns related to the prevention of fraudulent and 
manipulative acts and practices have been sufficiently addressed to be 
consistent with the Act and, to the extent that the Commission 
disagrees with that assertion, also believes that such concerns are now 
outweighed by these investor protection concerns. As such, the Exchange 
believes that approving this proposal (and comparable proposals) 
provides the Commission with the opportunity to allow U.S. investors 
with access to ether in a regulated and transparent exchange-traded 
vehicle that would act to limit risk to U.S. investors by: (i) reducing 
premium and discount volatility; (ii) reducing management fees through 
meaningful competition; (iii) reducing risks and costs associated with 
investing in Ether Futures ETFs and operating companies that are 
imperfect proxies for ether exposure; and (iv) providing an alternative 
to custodying spot ether.
VanEck Ethereum ETF
    Delaware Trust Company is the trustee (``Trustee''). The State 
Street Bank and Trust Company will be the administrator 
(``Administrator'') and transfer agent (``Transfer Agent'') and will be 
responsible for the custody of the Trust's cash and cash equivalents 
\39\ (the ``Cash Custodian''). Van Eck Securities Corporation will be 
the marketing agent (``Marketing Agent'') in connection with the 
creation and redemption of ``Creation Baskets'', as defined below, of 
Shares. Gemini Trust Company, LLC, a third-party custodian (the 
``Custodian''), will be responsible for custody of the Trust's ether.
---------------------------------------------------------------------------

    \39\ Cash equivalents are short-term instruments with maturities 
of less than 3 months.
---------------------------------------------------------------------------

    According to the Registration Statement, each Share will represent 
a fractional undivided beneficial interest in the Trust's net assets. 
The Trust's assets will only consist of ether, cash and cash 
equivalents.
    According to the Registration Statement, the Trust is neither an 
investment company registered under the Investment Company Act of 1940, 
as amended,\40\ nor a commodity pool for purposes of the Commodity 
Exchange Act (``CEA''), and neither the Trust nor the Sponsor is 
subject to regulation as a commodity pool operator or a commodity 
trading adviser in connection with the Shares.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 80a-1.
---------------------------------------------------------------------------

    Neither the Trust, nor the Sponsor, nor the Custodian, nor any 
other person associated with the Trust will, directly or indirectly, 
engage in action where any portion of the Trust's ETH becomes subject 
to the Ethereum proof-of-stake validation or is used to earn additional 
ETH or generate income or other earnings. The Trust will not acquire 
and will disclaim any incidental right (``IR'') or IR asset received, 
for example as a result of forks or airdrops, and such assets will not 
be taken into account for purposes of determining NAV.
    When the Trust sells or redeems its Shares, it will do so in cash 
transactions in blocks of 25,000 Shares (a ``Creation Basket'') at the 
Trust's net asset value (``NAV''). For creations, authorized 
participants will deliver cash to the Trust's account with the Cash 
Custodian in exchange for Shares. Upon receipt of an approved creation 
order, the Sponsor, on behalf of the Trust, will submit an order to buy 
the amount of ether represented by a Creation Basket. Based off ether 
executions, the Cash Custodian will request the required cash from the 
authorized participant; the Transfer Agent will only issue Shares when 
the authorized participant has made delivery of the cash. Following 
receipt by the Cash Custodian of the cash from an authorized 
participant, the Sponsor, on behalf of the Trust, will approve an order 
with one or more previously onboarded trading partners to purchase the 
amount of ether represented by the Creation Basket. This purchase of 
ether will normally be cleared through an affiliate of the Custodian 
(although the purchase may also occur directly with the trading 
partner) and the ether will settle directly into the Trust's account at 
the Custodian.\41\ Authorized participants may then offer Shares to the 
public at prices that depend on various factors, including the supply 
and demand for Shares, the value of the Trust's assets, and market 
conditions at the time of a transaction. Shareholders who buy or sell 
Shares during the day from their broker may do so at a premium or 
discount relative to the NAV of the Shares of the Trust.
---------------------------------------------------------------------------

    \41\ For redemptions, the process will occur in the reverse 
order. Upon receipt of an approved redemption order, the Sponsor, on 
behalf of the Trust, will submit an order to sell the amount of 
ether represented by a Creation Basket and the cash proceeds will be 
remitted to the authorized participant when the 25,000 Shares are 
received by the Transfer Agent.
---------------------------------------------------------------------------

Investment Objective
    According to the Registration Statement and as further described 
below, the investment objective of the Trust is for the Shares to 
reflect the performance of ether less the expenses of the Trust's 
operations. In seeking to achieve its investment objective, the Trust 
will hold ether and will value its Shares daily based on the reported 
Benchmark (as discussed below) and process all creations and 
redemptions in cash transactions with authorized participants. The 
Trust is not actively managed.
The Benchmark
    As described in the Registration Statement, the Trust will use the 
MarketVectorTM Ethereum Benchmark Rate (the ``Benchmark'') 
to calculate the Trust's NAV. The Benchmark is designed to be a robust 
price for ETH in USD and there is no component other than ETH in the 
Benchmark. The underlying ether platforms (the ``constituent 
platforms'') are sourced from the industry leading CryptoCompare 
Exchange Benchmark review report. The CryptoCompare Exchange Benchmark 
review report was established in 2019 as a tool designed to bring 
clarity to the digital trading platform sector by providing a framework 
for assessing risk and in turn bringing transparency and accountability 
to a complex and rapidly evolving market.\42\ The current constituent 
platforms of the Benchmark is Bitstamp, Coinbase, Gemini, itBit, and 
Kraken. CryptoCompare Data Limited is the index sponsor and index 
administrator for the Benchmark. CryptoCompare Data Limited is the

[[Page 46470]]

calculation agent for the Benchmark. The Benchmark is calculated daily 
between 00:00 and 24:00 (CET) and the Benchmark values are disseminated 
to data vendors every fifteen seconds. The Benchmark is disseminated in 
USD and the closing value is calculated at 16:00:00 ET with fixed 16:00 
ether platform rates.
---------------------------------------------------------------------------

    \42\ The CryptoCompare Exchange Benchmark review report 
methodology utilizes a combination of qualitative and quantitative 
metrics to analyze a comprehensive data set across eight categories 
of evaluation legal/regulation, KYC/transaction risk, data 
provision, security, team/exchange, asset quality/diversity, market 
quality and negative events. The CryptoCompare Exchange Benchmark 
review report assigns a grade to each platform which helps identify 
what it believes to be the lowest risk platforms in the industry. 
Based on the CryptoCompare Exchange Benchmark review report, 
MarketVector Indexes initially selects the top five platforms by 
rank for inclusion in the MarketVectorTM Ethereum 
Benchmark Rate. If an eligible platform is downgraded by two or more 
notches in a semi-annual review and is no longer in the top five by 
rank, it is replaced by the highest ranked non-component platform. 
Adjustments to platform coverage are announced four business days 
prior to the first business day of each of June and December 23:00 
CET. The MarketVectorTM Ethereum Benchmark Rate is 
rebalanced at 16:00:00 GMT/BST on the last business day of each of 
May and November.
---------------------------------------------------------------------------

    In calculating the closing value of the Benchmark, the methodology 
captures trade prices and sizes from ether platforms and examines 
twenty three-minute periods leading up to 4:00 p.m. ET. It then 
calculates an equal-weighted average of the volume-weighted median 
price of these twenty three-minute periods, removing the highest and 
lowest contributed prices. Using twenty consecutive three-minute 
segments over a sixty-minute period means malicious actors would need 
to sustain efforts to manipulate the market over an extended period of 
time, or would need to replicate efforts multiple times across ether 
platforms, potentially triggering review. This extended period also 
supports authorized participant activity by capturing volume over a 
longer time period, rather than forcing authorized participants to mark 
an individual close or auction. The use of a median price reduces the 
ability of outlier prices to impact the NAV, as it systematically 
excludes those prices from the NAV calculation. The use of a volume-
weighted median (as opposed to a traditional median) serves as an 
additional protection against attempts to manipulate the NAV by 
executing a large number of low-dollar trades, because any manipulation 
attempt would have to involve a majority of global spot ETH volume in a 
three-minute window to have any influence on the NAV. As discussed in 
the Registration Statement, removing the highest and lowest prices 
further protects against attempts to manipulate the NAV, requiring bad 
actors to act on multiple ether platforms at once to have any ability 
to influence the price.
Net Asset Value
    NAV means the total assets of the Trust (which includes all ether, 
cash, and cash equivalents) less total liabilities of the Trust. The 
Administrator determines the NAV of the Trust on each day that the 
Exchange is open for regular trading, as promptly as practical after 
4:00 p.m. ET based on the closing value of the Benchmark. The NAV of 
the Trust is the aggregate value of the Trust's assets less its 
estimated accrued but unpaid liabilities (which include accrued 
expenses). In determining the NAV, the Administrator values the ether 
held by the Trust based on the closing value of the Benchmark as of 
4:00 p.m. ET. The Administrator also determines the NAV per Share.
    The NAV for the Trust will be calculated by the Administrator once 
a day and will be disseminated daily to all market participants at the 
same time. The Sponsor will monitor for significant events related to 
crypto assets that may impact the value of ether and will determine, in 
good faith, and in accordance with its valuation policies and 
procedures, whether to fair value the Trust's ether on a given day 
based on whether certain pre-determined criteria have been met. For 
example, if the closing value of the Benchmark deviates by more than a 
pre-determined amount from an alternate benchmark available to the 
Sponsor, the Sponsor may determine to utilize an alternate benchmark, 
such as the MarketVector\TM\ Ethereum Index or the S&P Ethereum Index. 
The Sponsor may also fair value the Trust's ether using observed market 
transactions from various trading platforms, including some or all of 
the trading platforms included in the Benchmark.\43\
---------------------------------------------------------------------------

    \43\ Any alternative method to determining NAV will only be 
employed on an ad hoc basis. Any permanent change to the calculation 
of the NAV would require a proposed rule change under Rule 19b-4.
---------------------------------------------------------------------------

Availability of Information
    In addition to the price transparency of the Benchmark, the Trust 
will provide information regarding the Trust's ETH holdings as well as 
additional data regarding the Trust. The website for the Trust, which 
will be publicly accessible at no charge, will contain the following 
information: (a) the current NAV per Share daily and the prior business 
day's NAV per Share and the reported BZX Official Closing Price; \44\ 
(b) the BZX Official Closing Price in relation to the NAV per Share as 
of the time the NAV is calculated and a calculation of the premium or 
discount of such price against such NAV per Share; (c) data in chart 
form displaying the frequency distribution of discounts and premiums of 
the BZX Official Closing Price against the NAV per Share, within 
appropriate ranges for each of the four previous calendar quarters (or 
for the life of the Trust, if shorter); (d) the prospectus; and (e) 
other applicable quantitative information. The aforementioned 
information will be published as of the close of business available on 
the Sponsor's website at www.vaneck.com, or any successor thereto. The 
NAV for the Trust will be calculated by the Administrator once a day 
and will be disseminated daily to all market participants at the same 
time. Quotation and last-sale information regarding the Shares will be 
disseminated through the facilities of the Consolidated Tape 
Association (``CTA''). The Trust will also disseminate its holdings on 
a daily basis on its website.
---------------------------------------------------------------------------

    \44\ As defined in Rule 11.23(a)(3), the term ``BZX Official 
Closing Price'' shall mean the price disseminated to the 
consolidated tape as the market center closing trade.
---------------------------------------------------------------------------

    The Intraday Indicative Value (``IIV'') will be updated during 
Regular Trading Hours to reflect changes in the value of the Trust's 
ether holdings during the trading day. The IIV may differ from the NAV 
because NAV is calculated, using the closing value of the Benchmark, 
once a day at 4:00 p.m. Eastern time whereas the IIV draws prices from 
the last trade on each constituent platform \45\ to produce a relevant, 
real-time price. The IIV disseminated during Regular Trading Hours 
should not be viewed as an actual real-time update of the NAV, which 
will be calculated only once at the end of each trading day. The Trust 
will provide an IIV per Share updated every 15 seconds, as calculated 
by the Exchange or a third-party financial data provider during the 
Exchange's Regular Trading Hours (9:30 a.m. to 4:00 p.m. E.T.). The IIV 
will be widely disseminated on a per Share basis every 15 seconds 
during the Exchange's Regular Trading Hours through the facilities of 
the CTA and Consolidated Quotation System (CQS) high speed lines. In 
addition, the IIV will be available through on-line information 
services such as Bloomberg and Reuters.
---------------------------------------------------------------------------

    \45\ The constituent platforms for purposes of calculating IIV 
are Gemini, Bitstamp, and Bitfinex.
---------------------------------------------------------------------------

    The price of ether will be made available by one or more major 
market data vendors, updated at least every 15 seconds during Regular 
Trading Hours.
    As noted above, the Benchmark is calculated every 15 seconds and 
information about the Benchmark and Benchmark value, including index 
data and key elements of how the Benchmark is calculated, will be 
publicly available at https://www.marketvector.com/.
    Quotation and last sale information for ether is widely 
disseminated through a variety of major market data vendors, including 
Bloomberg and Reuters. Information relating to trading, including price 
and volume information, in ether is available from major market data 
vendors and from the trading platforms on which ether are traded. Depth 
of book information is also available from ether trading platforms. The 
normal trading hours for

[[Page 46471]]

ether trading platforms are 24 hours per day, 365 days per year.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's BZX Official Closing Price and trading 
volume information for the Shares will be published daily in the 
financial section of newspapers. Quotation and last-sale information 
regarding the Shares will be disseminated through the facilities of the 
CTA.
The Custodian
    The Custodian's services (i) allow ETH to be deposited from a 
public blockchain address to the Trust's ETH account and (ii) allow ETH 
to be withdrawn from the ETH account to a public blockchain address as 
instructed by the Trust. The custody agreement requires the Custodian 
to hold the Trust's ETH in cold storage, unless required to facilitate 
withdrawals as a temporary measure. The Custodian will use segregated 
cold storage ETH addresses for the Trust which are separate from the 
ETH addresses that the Custodian uses for its other customers and which 
are directly verifiable via the ETH blockchain. The Custodian will 
safeguard the private keys to the ETH associated with the Trust's ETH 
account. The Custodian will at all times record and identify in its 
books and records that such ETH constitutes the property of the Trust. 
The Custodian will not withdraw the Trust's ETH from the Trust's 
account with the Custodian, or loan, hypothecate, pledge or otherwise 
encumber the Trust's ETH, without the Trust's instruction. If the 
custody agreement terminates, the Sponsor may appoint another custodian 
and the Trust may enter into a custodian agreement with such custodian.
Creation and Redemption of Shares
    When the Trust sells or redeems its Shares, it will do so in cash 
transactions in blocks of 25,000 Shares that are based on the amount of 
ether held by the Trust on a per unit (i.e., 25,000 Share) basis. 
According to the Registration Statement, on any business day, an 
authorized participant may place an order to create one or more 
Creation Baskets. Purchase orders must be placed by 4:00 p.m. ET, or 
the close of regular trading on the Exchange, whichever is earlier. The 
day on which an order is received is considered the purchase order 
date. The total deposit of cash required is based on the combined NAV 
of the number of Shares included in the Creation Baskets being created 
determined as of 4:00 p.m. ET on the date the order to purchase is 
properly received. The Administrator determines the quantity of ether 
associated with a Creation Basket for a given day by dividing the 
number of ether held by the Trust as of the opening of business on that 
business day, adjusted for the amount of ether constituting estimated 
accrued but unpaid fees and expenses of the Trust as of the opening of 
business on that business day, by the quotient of the number of Shares 
outstanding at the opening of business divided by the number of Shares 
in a Creation Basket.
    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 ether 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 ether as part of the creation or 
redemption process.
    The Trust will create Shares by receiving ether from a third party 
that is not the authorized participant and the Trust--not the 
authorized participant--is responsible for selecting the third party to 
facilitate the delivery of the ether. Further, the third party will not 
be acting as an agent of the authorized participant with respect to the 
delivery of the ether to the Trust or acting at the direction of the 
authorized participant with respect to the delivery of the ether to the 
Trust. When fulfilling a redemption request, the Trust will deliver 
ether to a third party that is not the authorized participant and the 
Trust--not the authorized participant- is responsible for selecting 
such third party to receive the ether. Further, the third party will 
not be acting as an agent of the authorized participant with respect to 
the receipt of the ether from the Trust or acting at the direction of 
the authorized participant with respect to the receipt of the ether 
from the Trust.
    The procedures by which an authorized participant can redeem one or 
more Creation Baskets mirror the procedures for the creation of 
Creation Baskets.
    The Sponsor will maintain ownership and control of ether in a 
manner consistent with good delivery requirements for spot commodity 
transactions.
Rule 14.11(e)(4)--Commodity-Based Trust Shares
    The Shares will be subject to BZX Rule 14.11(e)(4), which sets 
forth the initial and continued listing criteria applicable to 
Commodity-Based Trust Shares. The Exchange represents that, for initial 
and continued listing, the Trust must be in compliance with Rule 10A-3 
under the Act. A minimum of 100,000 Shares will be outstanding at the 
commencement of listing on the Exchange. The Exchange will obtain a 
representation that the NAV will be calculated daily and that the NAV 
and information about the assets of the Trust will be made available to 
all market participants at the same time. The Exchange notes that, as 
defined in Rule 14.11(e)(4)(C)(i), the Shares will be: (a) issued by a 
trust that holds (1) a specified commodity \46\ deposited with the 
trust, or (2) a specified commodity and, in addition to such specified 
commodity, cash; (b) issued by such trust in a specified aggregate 
minimum number in return for a deposit of a quantity of the underlying 
commodity and/or cash; and (c) when aggregated in the same specified 
minimum number, may be redeemed at a holder's request by such trust 
which will deliver to the redeeming holder the quantity of the 
underlying commodity and/or cash.
---------------------------------------------------------------------------

    \46\ For purposes of Rule 14.11(e)(4), the term commodity takes 
on the definition of the term as provided in the Commodity Exchange 
Act.
---------------------------------------------------------------------------

    Upon termination of the Trust, the Shares will be removed from 
listing. The Trustee, Delaware Trust Company, is a trust company having 
substantial capital and surplus and the experience and facilities for 
handling corporate trust business, as required under Rule 
14.11(e)(4)(E)(iv)(a) and that no change will be made to the trustee 
without prior notice to and approval of the Exchange. The Exchange also 
notes that, pursuant to Rule 14.11(e)(4)(F), neither the Exchange nor 
any agent of the Exchange shall have any liability for damages, claims, 
losses or expenses caused by any errors, omissions or delays in 
calculating or disseminating any underlying commodity value, the 
current value of the underlying commodity required to be deposited to 
the Trust in connection with issuance of Commodity-Based Trust Shares; 
resulting from any negligent act or omission by the Exchange, or any 
agent of the Exchange, or any act, condition or cause beyond the 
reasonable control of the Exchange, its agent, including, but not 
limited to, an act of God; fire; flood; extraordinary weather 
conditions; war; insurrection; riot; strike; accident; action of 
government; communications or power failure; equipment or software 
malfunction; or any error, omission or delay in the reports of 
transactions in an underlying commodity. Finally, as

[[Page 46472]]

required in Rule 14.11(e)(4)(G), the Exchange notes that any registered 
market maker (``Market Maker'') in the Shares must file with the 
Exchange in a manner prescribed by the Exchange and keep current a list 
identifying all accounts for trading in an underlying commodity, 
related commodity futures or options on commodity futures, or any other 
related commodity derivatives, which the registered Market Maker may 
have or over which it may exercise investment discretion. No registered 
Market Maker shall trade in an underlying commodity, related commodity 
futures or options on commodity futures, or any other related commodity 
derivatives, in an account in which a registered Market Maker, directly 
or indirectly, controls trading activities, or has a direct interest in 
the profits or losses thereof, which has not been reported to the 
Exchange as required by this Rule. In addition to the existing 
obligations under Exchange rules regarding the production of books and 
records (see, e.g., Rule 4.2), the registered Market Maker in 
Commodity-Based Trust Shares shall make available to the Exchange such 
books, records or other information pertaining to transactions by such 
entity or registered or non-registered employee affiliated with such 
entity for its or their own accounts for trading the underlying 
physical commodity, related commodity futures or options on commodity 
futures, or any other related commodity derivatives, as may be 
requested by the Exchange.
    The Exchange is able to obtain information regarding trading in the 
Shares and the underlying ether, CME Ether Futures, options on CME 
Ether Futures, or any other ether 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, which include any person or 
entity controlling a Member. To the extent the Exchange may be found to 
lack jurisdiction over a subsidiary or affiliate of a Member that does 
business only in commodities or futures contracts, the Exchange could 
obtain information regarding the activities of such subsidiary or 
affiliate through surveillance sharing agreements with regulatory 
organizations of which such subsidiary or affiliate is a member.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. The Exchange will halt trading in the Shares 
under the conditions specified in BZX Rule 11.18. Trading may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable. These may include: 
(1) the extent to which trading is not occurring in the ether 
underlying the Shares; or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present. Trading in the Shares also will be subject to Rule 
14.11(e)(4)(E)(ii), which sets forth circumstances under which trading 
in the Shares may be halted.
    If the IIV or the value of the Benchmark is not being disseminated 
as required, the Exchange may halt trading during the day in which the 
interruption to the dissemination of the IIV or the value of the 
Benchmark occurs. If the interruption to the dissemination of the IIV 
or the value of the Benchmark persists past the trading day in which it 
occurred, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption.
    In addition, if the Exchange becomes aware that the NAV with 
respect to the Shares is not disseminated to all market participants at 
the same time, it will halt trading in the Shares until such time as 
the NAV is available to all market participants.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. BZX will allow 
trading in the Shares during all trading sessions on the Exchange. The 
Exchange has appropriate rules to facilitate transactions in the Shares 
during all trading sessions. As provided in BZX Rule 11.11(a) the 
minimum price variation for quoting and entry of orders in securities 
traded on the Exchange is $0.01 where the price is greater than $1.00 
per share or $0.0001 where the price is less than $1.00 per share. The 
Shares of the Trust will conform to the initial and continued listing 
criteria set forth in BZX Rule 14.11(e)(4).
Surveillance
    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the Shares on the Exchange 
during all trading sessions and to deter and detect violations of 
Exchange rules and the applicable federal securities laws. Trading of 
the Shares through the Exchange will be subject to the Exchange's 
surveillance procedures for derivative products, including Commodity-
Based Trust Shares. FINRA conducts certain cross-market surveillances 
on behalf of the Exchange pursuant to a regulatory services agreement. 
The Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, CME Ether 
Futures, and any other ether derivative 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, CME Ether Futures, and any other ether 
derivative from such markets and other entities.\47\ The Exchange may 
obtain information regarding trading in the Shares, CME Ether Futures, 
and any other ether derivative via ISG, from other exchanges who are 
members or affiliates of the ISG, or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement.
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    \47\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
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    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    The Sponsor has represented to the Exchange that it will advise the 
Exchange of any failure by the Trust or the Shares to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Exchange Act, the Exchange will surveil for 
compliance with the continued listing requirements. If the Trust or the 
Shares are not in compliance with the applicable listing requirements, 
the Exchange will commence delisting procedures under Exchange Rule 
14.12.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (i) the procedures for the 
creation and redemption of Creation Baskets (and that the Shares are 
not individually redeemable); (ii) BZX Rule 3.7, which imposes 
suitability obligations on Exchange members with respect to 
recommending transactions in the Shares to customers; (iii) how 
information regarding the IIV and the Trust's NAV are disseminated; 
(iv) the

[[Page 46473]]

risks involved in trading the Shares outside of Regular Trading Hours 
\48\ when an updated IIV will not be calculated or publicly 
disseminated; (v) the requirement that members deliver a prospectus to 
investors purchasing newly issued Shares prior to or concurrently with 
the confirmation of a transaction; and (vi) trading information. The 
Information Circular will also reference the fact that there is no 
regulated source of last sale information regarding ether, that the 
Commission has no jurisdiction over the trading of ether as a 
commodity, and that the CFTC has regulatory jurisdiction over the 
trading of CME Ether Futures and options on CME Ether Futures.
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    \48\ Regular Trading Hours is the time between 9:30 a.m. and 
4:00 p.m. Eastern Time.
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    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Shares. Members purchasing the Shares for resale to 
investors will deliver a prospectus to such investors. The Information 
Circular will also discuss any exemptive, no-action and interpretive 
relief granted by the Commission from any rules under the Act.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \49\ in general and Section 6(b)(5) of the Act \50\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest.
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    \49\ 15 U.S.C. 78f.
    \50\ 15 U.S.C. 78f(b)(5).
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    The Commission has approved numerous series of Trust Issued 
Receipts,\51\ including Commodity-Based Trust Shares,\52\ to be listed 
on U.S. national securities. 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; \53\ and (ii) the 
requirement that an exchange proposal be designed, in general, to 
protect investors and the public interest. The Exchange believes that 
this proposal is consistent with the requirements of Section 6(b)(5) of 
the Act and that this filing sufficiently demonstrates that the CME 
Ether Futures market represents a regulated market of significant size 
and that, on the whole, the manipulation concerns previously 
articulated by the Commission are sufficiently mitigated to the point 
that they are outweighed by quantifiable investor protection issues 
that would be resolved by approving this proposal.
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    \51\ See Exchange Rule 14.11(f).
    \52\ Commodity-Based Trust Shares, as described in Exchange Rule 
14.11(e)(4), are a type of Trust Issued Receipt.
    \53\ The Exchange believes that ETH 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 ETH trading render it difficult and 
prohibitively costly to manipulate the price of ETH. The 
fragmentation across ETH platforms, the relatively slow speed of 
transactions, and the capital necessary to maintain a significant 
presence on each trading platform make manipulation of ETH prices 
through continuous trading activity challenging. To the extent that 
there are ETH platforms engaged in or allowing wash trading or other 
activity intended to manipulate the price of ETH 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 ETH 
markets and the presence of arbitrageurs in those markets means that 
the manipulation of the price of ETH price on any single venue would 
require manipulation of the global ETH 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 ETH platform or OTC 
platform. As a result, the potential for manipulation on a trading 
platform would require overcoming the liquidity supply of such 
arbitrageurs who are effectively eliminating any cross-market 
pricing differences.
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(i) Designed To Prevent Fraudulent and Manipulative Acts and Practices
    In order to meet this standard in a proposal to list and trade a 
series of Commodity-Based Trust Shares, the Commission requires that an 
exchange demonstrate that there is a comprehensive surveillance-sharing 
agreement in place \54\ with a regulated market of significant size. 
Both the Exchange and CME are members of ISG.\55\ The only remaining 
issue to be addressed is whether the CME Ether 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.\56\
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    \54\ As previously articulated by the Commission, ``The standard 
requires such surveillance-sharing agreements since ``they provide a 
necessary deterrent to manipulation because they facilitate the 
availability of information needed to fully investigate a 
manipulation if it were to occur.'' The Commission has emphasized 
that it is essential for an exchange listing a derivative securities 
product to enter into a surveillance-sharing agreement with markets 
trading underlying securities for the listing exchange to have the 
ability to obtain information necessary to detect, investigate, and 
deter fraud and market manipulation, as well as violations of 
exchange rules and applicable federal securities laws and rules. The 
hallmarks of a surveillance-sharing agreement are that the agreement 
provides for the sharing of information about market trading 
activity, clearing activity, and customer identity; that the parties 
to the agreement have reasonable ability to obtain access to and 
produce requested information; and that no existing rules, laws, or 
practices would impede one party to the agreement from obtaining 
this information from, or producing it to, the other party.'' The 
Commission has historically held that joint membership in ISG 
constitutes such a surveillance sharing agreement. See Wilshire 
Phoenix Disapproval.
    \55\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
    \56\ See Wilshire Phoenix Disapproval.
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    The Commission has also recognized that the ``regulated market of 
significant size'' standard is not the only means for satisfying 
Section 6(b)(5) of the act, specifically providing that a listing 
exchange could demonstrate that ``other means to prevent fraudulent and 
manipulative acts and practices'' are sufficient to justify dispensing 
with the requisite surveillance-sharing agreement.\57\
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    \57\ See Winklevoss Order at 37580. The Commission has also 
specifically noted that it ``is not applying a `cannot be 
manipulated' standard; instead, the Commission is examining whether 
the proposal meets the requirements of the Exchange Act and, 
pursuant to its Rules of Practice, places the burden on the listing 
exchange to demonstrate the validity of its contentions and to 
establish that the requirements of the Exchange Act have been met.'' 
Id. at 37582.
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(a) Manipulation of the ETP
    The significant market test requires that 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. In light of the similarly high 
correlation between spot ETH/CME Ether Futures and spot bitcoin/CME 
Bitcoin Futures, applying the same rationale that the Commission 
applied to a Spot Bitcoin ETP in the

[[Page 46474]]

Spot Bitcoin ETP Approval Order also indicates that this test is 
satisfied for this proposal. As noted above, in the Spot Bitcoin ETP 
Approval Order, the SEC concluded that:

    . . . fraud or manipulation that impacts prices in spot bitcoin 
markets would likely similarly impact CME bitcoin futures prices. 
And because the CME's surveillance can assist in detecting those 
impacts on CME bitcoin futures prices, the Exchanges' comprehensive 
surveillance-sharing agreement with the CME . . . can be reasonably 
expected to assist in surveilling for fraudulent and manipulative 
acts and practices in the specific context of the [p]roposals.\58\
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    \58\ See the Spot Bitcoin ETP Approval Order at 3011-3012.

    The assumptions from this statement are also true for CME Ether 
Futures. CME Ether Futures pricing is based on pricing from spot ether 
markets. The statement from the Spot Bitcoin ETP Approval Order that 
the surveillance-sharing agreement with the CME ``can be reasonably 
expected to assist in surveilling for fraudulent and manipulative acts 
and practices in the specific context of the [p]roposals'' makes clear 
that the Commission believes that CME's surveillance can capture the 
effects of trading on the relevant spot markets on the pricing of CME 
Bitcoin Futures. This same logic would extend to CME Ether Futures 
markets where CME's surveillance would be able to capture the effects 
of trading on the relevant spot markets on the pricing of CME Ether 
Futures.
(b) Predominant Influence on Prices in Spot and ETH Futures
    The Exchange and Sponsor also believe that trading in the Shares 
would not be the predominant force on prices in the CME Ether Futures 
market for a number of reasons. First, because the Trust would not hold 
CME Ether Futures contracts, the only way that it could be the 
predominant force on prices in that market is through the spot markets 
that CME Ether Futures contracts use for pricing.\59\ The Sponsor notes 
that ether total 24-hour spot trading volume has averaged $9.4 billion 
over the year ending September 1, 2023.\60\ The Sponsor expects that 
the Trust would represent a very small percentage of this daily trading 
volume in the spot ether market even in its most aggressive projections 
for the Trust's assets and therefore could not be the predominant force 
on prices in the CME Ether Futures market. Second, much like the CME 
Bitcoin Futures market, the CME Ether Futures market has progressed and 
matured significantly. As the U.S. Court of Appeals for the D.C. 
Circuit found in its review of the Grayscale Order, ``Because the spot 
market is deeper and more liquid than the futures market, manipulation 
should be more difficult, not less.'' The Exchange and Sponsor agree 
with this sentiment and believe it applies equally to the spot ether 
and CME Ether Futures markets.
---------------------------------------------------------------------------

    \59\ This logic is reflected by the U.S. Court of Appeals for 
the D.C. Circuit on its review of the Grayscale Order at 17-18. See 
Grayscale Investments, LLC v. SEC, 82 F. 4tha 1239 (D.C. Cir. 2023). 
Specifically, the court found that ``Because Grayscale owns no 
futures contracts, trading in Grayscale can affect the futures 
market only through the spot market . . . But Grayscale holds just 
3.4 percent of outstanding bitcoin, and the Commission did not 
suggest Grayscale can dominate the price of bitcoin.''
    \60\ Source: TokenTerminal.
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(c) Other Means To Prevent Fraudulent and Manipulative Acts and 
Practices
    As noted above, the Commission also permits a listing exchange to 
demonstrate that ``other means to prevent fraudulent and manipulative 
acts and practices'' are sufficient to justify dispensing with the 
requisite surveillance-sharing agreement. The Exchange and Sponsor 
believe that such conditions are present.
    The Exchange believes that the proposal is designed to protect 
investors and the public interest. Over the past several years, U.S. 
investor exposure to ether through OTC ETH Funds has grown. With that 
growth, so too has grown the quantifiable investor protection issues to 
U.S. investors through roll costs for Ether Futures ETFs and premium/
discount volatility and management fees for OTC ETH Funds. The Exchange 
believes that the concerns related to the prevention of fraudulent and 
manipulative acts and practices have been sufficiently addressed to be 
consistent with the Act and, to the extent that the Commission 
disagrees with that assertion, also believes that such concerns are now 
outweighed by these investor protection concerns. As such, the Exchange 
believes that approving this proposal (and comparable proposals) 
provides the Commission with the opportunity to allow U.S. investors 
with access to ether in a regulated and transparent exchange-traded 
vehicle that would act to limit risk to U.S. investors by: (i) reducing 
premium and discount volatility; (ii) reducing management fees through 
meaningful competition; (iii) reducing risks and costs associated with 
investing in Ether Futures ETFs and operating companies that are 
imperfect proxies for ether exposure; and (iv) providing an alternative 
to custodying spot ether.
Commodity-Based Trust Shares
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed on the Exchange pursuant to the initial and 
continued listing criteria in Exchange Rule 14.11(e)(4). The Exchange 
believes that its surveillance procedures are adequate to properly 
monitor the trading of the Shares on the Exchange during all trading 
sessions and to deter and detect violations of Exchange rules and the 
applicable federal securities laws. Trading of the Shares through the 
Exchange will be subject to the Exchange's surveillance procedures for 
derivative products, including Commodity-Based Trust Shares. The issuer 
has represented to the Exchange that it will advise the Exchange of any 
failure by the Trust or the Shares to comply with the continued listing 
requirements, and, pursuant to its obligations under Section 19(g)(1) 
of the Exchange Act, the Exchange will surveil for compliance with the 
continued listing requirements. If the Trust or the Shares are not in 
compliance with the applicable listing requirements, the Exchange will 
commence delisting procedures under Exchange Rule 14.12. The Exchange 
may obtain information regarding trading in the Shares and listed ether 
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
    In addition to the price transparency of the Benchmark, the Trust 
will provide information regarding the Trust's ETH holdings as well as 
additional data regarding the Trust. The website for the Trust, which 
will be publicly accessible at no charge, will contain the following 
information: (a) the current NAV per Share daily and the prior business 
day's NAV per Share and the reported BZX Official Closing Price; (b) 
the BZX Official Closing Price in relation to the NAV per Share as of 
the time the NAV is calculated and a calculation of the premium or 
discount of such price against such NAV per Share; (c) data in chart 
form displaying the frequency distribution of discounts and premiums of 
the BZX Official Closing Price against the NAV per Share, within 
appropriate ranges for each of the four previous calendar quarters (or 
for the life of the Trust, if shorter); (d) the prospectus; and (e) 
other applicable quantitative information. The aforementioned

[[Page 46475]]

information will be published as of the close of business available on 
the Sponsor's website at www.vaneck.com, or any successor thereto. The 
NAV for the Trust will be calculated by the Administrator once a day 
and will be disseminated daily to all market participants at the same 
time. Quotation and last-sale information regarding the Shares will be 
disseminated through the facilities of the CTA. The Trust will also 
disseminate its holdings on a daily basis on its website.
    The IIV will be updated during Regular Trading Hours to reflect 
changes in the value of the Trust's ether holdings during the trading 
day. The IIV may differ from the NAV because NAV is calculated, using 
the closing value of the Benchmark, once a day at 4:00 p.m. Eastern 
time whereas the IIV draws prices from the last trade on each 
constituent platform to produce a relevant, real-time price. The IIV 
disseminated during Regular Trading Hours should not be viewed as an 
actual real-time update of the NAV, which will be calculated only once 
at the end of each trading day. The Trust will provide an IIV per Share 
updated every 15 seconds, as calculated by the Exchange or a third-
party financial data provider during the Exchange's Regular Trading 
Hours (9:30 a.m. to 4:00 p.m. E.T.). The IIV will be widely 
disseminated on a per Share basis every 15 seconds during the 
Exchange's Regular Trading Hours through the facilities of the CTA and 
CQS high speed lines. In addition, the IIV will be available through 
on-line information services such as Bloomberg and Reuters.
    The price of ether will be made available by one or more major 
market data vendors, updated at least every 15 seconds during Regular 
Trading Hours.
    As noted above, the Benchmark is calculated every 15 seconds and 
information about the Benchmark and Benchmark value, including index 
data and key elements of how the Benchmark is calculated, will be 
publicly available at https://www.marketvector.com/.
    Quotation and last sale information for ether is widely 
disseminated through a variety of major market data vendors, including 
Bloomberg and Reuters. Information relating to trading, including price 
and volume information, in ether is available from major market data 
vendors and from the trading platforms on which ether are traded. Depth 
of book information is also available from ether trading platforms. The 
normal trading hours for ether trading platforms are 24 hours per day, 
365 days per year.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's BZX Official Closing Price and trading 
volume information for the Shares will be published daily in the 
financial section of newspapers. Quotation and last-sale information 
regarding the Shares will be disseminated through the facilities of the 
CTA.
    In sum, the Exchange believes that this proposal is consistent with 
the requirements of Section 6(b)(5) of the Act, that this filing 
sufficiently demonstrates that the CME Ether Futures market represents 
a regulated market of significant size, and that on the whole the 
manipulation concerns previously articulated by the Commission are 
sufficiently mitigated to the point that they are outweighed by 
investor protection issues that would be resolved by approving this 
proposal.
    The Exchange believes that the proposal is, in particular, designed 
to protect investors and the public interest. Premium and discount 
volatility, high fees, rolling costs, insufficient disclosures, and 
technical hurdles are putting U.S. investor money at risk on a daily 
basis that could potentially be eliminated through access to a Spot 
Ether ETP. As such, the Exchange believes that this proposal acts to 
limit the risk to U.S. investors that are increasingly seeking exposure 
to ether by providing direct, 1-for-1 exposure to ether in a regulated, 
transparent, exchange-traded vehicle, specifically by: (i) reducing 
premium volatility; (ii) reducing management fees through meaningful 
competition; (iii) providing an alternative to Ether Futures ETFs which 
will eliminate roll cost; (iv) reducing risks associated with investing 
in operating companies that are imperfect proxies for ether exposure; 
and (v) providing an alternative to custodying spot ether. The investor 
protection issues for U.S. investors has grown significantly over the 
last several years, through roll costs for Ether Futures ETFs and 
premium/discount volatility and management fees for OTC ETH Funds. As 
discussed throughout, this growth investor protection concerns need to 
be reevaluated and rebalanced with the prevention of fraudulent and 
manipulative acts and practices concerns that previous disapproval 
orders have relied upon. Finally, the Exchange notes that in addition 
to all of the arguments herein which it believes sufficiently 
establishes the CME Ether Futures market as a regulated market of 
significant size, it is logically inconsistent to find that the CME 
Ether Futures market is a significant market as it relates to the CME 
Ether Futures market, but not a significant market as it relates to the 
ether spot market for the numerous reasons laid out above.
    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

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

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

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

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

III. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeBZX-2023-069 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-CboeBZX-2023-069. 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

[[Page 46476]]

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-CboeBZX-2023-069 and should be submitted 
on or before June 20, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\61\
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    \61\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-11706 Filed 5-28-24; 8:45 am]
BILLING CODE 8011-01-P