[Federal Register Volume 89, Number 171 (Wednesday, September 4, 2024)]
[Notices]
[Pages 71945-71950]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19773]



[[Page 71945]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100863; File No. SR-NYSEAMER-2024-49]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing of Proposed Rule Change To Amend Rule 915 to Permit the Listing 
and Trading of Options on Bitcoin ETFs

August 28, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on August 15, 2024, NYSE American LLC (``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by the self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 915 regarding the criteria for 
underlying securities. The proposed rule change is available on the 
Exchange's website at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Rule 915 (Criteria for Underlying 
Securities). Specifically, the Exchange proposes to amend Rule 915, 
Commentary .10 to allow the Exchange to list and trade options on the 
following Exchange-Traded Fund Shares (``ETFs'') \4\: the Fidelity Wise 
Origin Bitcoin Fund (the ``Fidelity Fund''), the ARK21Shares Bitcoin 
ETF (the ``ARK 21Shares Fund''), the Invesco Galaxy Bitcoin ETF (the 
``Invesco Fund''), the Franklin Bitcoin ETF (the ``Franklin Fund''), 
the VanEck Bitcoin Trust (the ``VanEck Fund''), and the WisdomTree 
Bitcoin Fund (the ``WisdomTree Fund''), the Grayscale Bitcoin Trust BTC 
(the ``Grayscale Fund''), the Grayscale Bitcoin Mini Trust (the 
``Grayscale Mini Fund''), the Bitwise Bitcoin ETF (the ``Bitwise 
Fund''), the iShares Bitcoin Trust ETF (the ``iShares Fund''), and the 
Valkyrie Bitcoin Fund (the ``Valkyrie Fund'' and, collectively, the 
``Bitcoin Funds'').
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    \4\ Rule 900.2NYP defines the term ``Exchange-Traded Fund 
Share'' as Exchange-listed securities representing interests in 
open-end unit investment trusts or open-end management investment 
companies that hold securities (including fixed income securities) 
based on an index or a portfolio of securities.
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    The Exchange notes that this is a competitive filing as at least 
one other options exchange has filed similar a rule proposal that is 
currently pending with the Commission to allow the listing and trading 
of options on Bitcoin Funds.\5\
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    \5\ See SR-CBOE-2024-035, filed on August 8, 2024, by Cboe 
Exchange, Inc. (``Cboe''). Unlike Cboe, the Exchange proposes to 
include as a Bitcoin Fund the Grayscale Bitcoin Mini Trust, which 
was listed on NYSE Arca, Inc. on July 31,2024.
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    Commentary .06 to Rule 915 (hereinafter ``Commentary .06'') 
provides that, subject to certain other criteria set forth in Rule 915, 
securities deemed appropriate for options trading include ETFs that 
represent certain types of interests,\6\ including interests in certain 
specific trusts that hold financial instruments, money market 
instruments, or precious metals (which are deemed commodities).
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    \6\ See Commentary .06, which permits options trading on ETFs 
that are traded on a national securities exchange and are defined as 
an ``NMS stock'' in Rule 600(b)(55) of Regulation NMS, that 
represent interests in registered investment companies (or series 
thereof) organized as open-end management investment companies, unit 
investment trusts or similar entities that hold portfolios of 
securities and/or financial instruments including, but not limited 
to, stock index futures contracts, options on futures, options on 
securities and indexes, equity caps, collars and floors, swap 
agreements, forward contracts, repurchase agreements and reverse 
purchase agreements (the ``Financial Instruments''), and money 
market instruments, including, but not limited to, U.S. government 
securities and repurchase agreements (the ``Money Market 
Instruments'') comprising or otherwise based on or representing 
investments in indexes or portfolios of securities and/or Financial 
Instruments and Money Market Instruments (or that hold securities in 
one or more other registered investment companies that themselves 
hold such portfolios of securities and/or Financial Instruments and 
Money Market Instruments); interests in a trust or similar entity 
that holds a specified non-U.S. currency deposited with the trust or 
similar entity when aggregated in some specified minimum number may 
be surrendered to the trust by the beneficial owner to receive the 
specified non-U.S. currency and pays the beneficial owner interest 
and other distributions on deposited non-U.S. currency, if any, 
declared and paid by the trust (``Currency Trust Shares''); 
commodity pool interests principally engaged, directly or 
indirectly, in holding and/or managing portfolios or baskets of 
securities, commodity futures contracts, options on commodity 
futures contracts, swaps, forward contracts and/or options on 
physical commodities and/or non-U.S. currency (``Commodity Pool 
Units''); or represents an interest in a registered investment 
company (``Investment Company'') organized as an open-end management 
investment company or similar entity, that invests in a portfolio of 
securities selected by the Investment Company's investment adviser 
consistent with the Investment Company's investment objectives and 
policies, which is issued in a specified aggregate minimum number in 
return for a deposit of a specified portfolio of securities and/or a 
cash amount with a value equal to the next determined net asset 
value (``NAV''), and when aggregated in the same specified minimum 
number, may be redeemed at a holder's request, which holder will be 
paid a specified portfolio of securities and/or cash with a value 
equal to the next determined NAV (``Managed Fund Share''); provided 
that all of the conditions listed in Rules 915 and 916 are met.
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    The Bitcoin Funds are Bitcoin-backed commodity ETFs structured as 
trusts. Like any ETF currently deemed appropriate for options trading 
under Commentary .06, the investment objective of each Bitcoin Fund 
trust is for its shares to reflect the performance of Bitcoin (less the 
expenses of the trust's operations), offering investors an opportunity 
to gain exposure to Bitcoin without the complexities of Bitcoin 
delivery. As is the case for ETFs currently deemed appropriate for 
options trading, a Bitcoin Fund's shares represent units of fractional 
undivided beneficial interest in the trust, the assets of which consist 
principally of Bitcoin and are designed to track Bitcoin or the 
performance of the price of Bitcoin and offer access to the Bitcoin 
market.\7\ The Bitcoin Funds provide investors with cost-efficient 
alternatives that allow a level of participation in the Bitcoin market 
through the securities market. The primary substantive difference 
between Bitcoin Funds and ETFs currently deemed appropriate for options 
trading are that ETFs may hold securities, certain financial 
instruments, and specified precious metals (which are deemed 
commodities), while Bitcoin Funds hold bitcoin (which is also deemed a 
commodity).
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    \7\ The trust may include minimal cash.
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    The Exchange believes the Bitcoin Funds satisfy the Exchange's 
initial listing standards for ETFs on which the Exchange may list 
options. Specifically, the Bitcoin Funds satisfy the initial listing 
standards set forth in

[[Page 71946]]

Commentary .06, as is the case for other ETFs on which the Exchange 
lists options (including trusts that hold commodities). Commentary .06 
requires that ETFs must either (1) meet the criteria and standards set 
forth in Commentary .01 to Rule 915,\8\ or (2) the ETFs are available 
for creation and redemption each business day as set forth in 
Commentary .06(a)(ii).\9\ The Bitcoin Funds satisfy Commentary 
.06(a)(ii), as they are all subject to this creation and redemption 
process.
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    \8\ Commentary .01 to Rule 915 provides for guidelines to be by 
the Exchange when evaluating potential underlying securities for 
Exchange option transactions.
    \9\ Commentary .06(a)(ii) requires that ETFs must be available 
for creation or redemption each business day from or through the 
issuer in cash or in kind at a price related to net asset value, and 
the issuer must be obligated to issue ETFs in a specified aggregate 
number even if some or all of the investment assets required to be 
deposited have not been received by the issuer, subject to the 
condition that the person obligated to deposit the investments has 
undertaken to deliver the investment assets as soon as possible and 
such undertaking is secured by the delivery and maintenance of 
collateral consisting of cash or cash equivalents satisfactory to 
the issuer, as provided in the respective prospectus.
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    While not required by the Rules for purposes of options listings, 
the majority of the Bitcoin Funds satisfy the criteria and guidelines 
set forth in Rule 915(a). Pursuant to Rule 915(a), a security (which 
includes ETFs) on which options may be listed and traded on the 
Exchange must be duly registered (with the Commission) and be an NMS 
stock (as defined in Rule 600 of Regulation NMS under the Act) and be 
characterized by a substantial number of outstanding shares that are 
widely held and actively traded.\10\ Each of the Bitcoin Funds is an 
NMS Stock as defined in Rule 600 of Regulation NMS under the Act.\11\ 
The Exchange believes each Bitcoin Fund is characterized by a 
substantial number of outstanding shares that are widely held and 
actively traded.
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    \10\ The criteria and guidelines for a security to be considered 
widely held and actively traded are set forth in Commentary .01 to 
Rule 915, subject to exceptions.
    \11\ An ``NMS stock'' means any NMS security other than an 
option, and an ``NMS security'' means any security or class of 
securities for which transaction reports are collected, processed, 
and made available pursuant to an effective transaction reporting 
plan (or an effective national market system plan for reporting 
transaction in listed options). See 17 CFR 242.600(b)(64) 
(definition of ``NMS security'') and (65) (definition of ``NMS 
stock'').
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    As of August 7, 2024, the Bitcoin Funds had the following number of 
shares outstanding:

------------------------------------------------------------------------
                   Bitcoin fund                      Shares outstanding
------------------------------------------------------------------------
Fidelity Fund.....................................           201,100,100
ARK 21Shares Fund.................................            45,495,000
Invesco Fund......................................             7,965,000
Franklin Fund.....................................            11,100,000
VanEck Fund.......................................             9,600,000
WisdomTree Fund...................................             1,420,000
Grayscale Fund....................................           296,930,100
Grayscale Mini Fund...............................           353,580,100
Bitwise Fund......................................            69,910,000
iShares Fund......................................           606,120,000
Valkyrie Fund.....................................            31,335,000
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    All but one Bitcoin Fund had more than 7,000,000 shares 
outstanding, which is the minimum number of shares of a corporate stock 
that the Exchange generally requires to list options on that stock 
pursuant to Commentary .01(1) to Rule 915. However, the Exchange 
believes shares outstanding (i.e., free float \12\), while commonly 
used to determine investable capacities of corporate stocks, the figure 
has little utility with respect to ETFs due to the market structure of 
ETFs. Proofing of ETF baskets, in addition to the efficiency of 
creation/redemption mechanisms, decouple concepts of ``floating'' ETF 
shares against the impacts of ETF liquidity to the liquidity of ETF 
constituents. While ETF Market Makers may often limit the amount of 
floating ETF shares, primary market mechanisms enable virtually 
limitless capacity to create and redeem ETF shares on a daily 
basis.\13\ As evidenced during their time in market since beginning 
trading in January of 2024, the gross value of daily shares created or 
redeemed for each Bitcoin Fund exceeds the assets under management 
(``AUM'') of each fund as of August 7, 2024, which was as follows:
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    \12\ All outstanding ETF shares are considered free float, as 
there are no restricted ETF shares or shares held by insiders, as is 
the case with respect to corporate stocks.
    \13\ This is the primary reasoning for why the Exchange may list 
options on ETFs as long as they are subject to the creation and 
redemption process and generally do not need to satisfy the criteria 
set forth in Commentary .01 to Rule 915.

------------------------------------------------------------------------
                   Bitcoin fund                              AUM
------------------------------------------------------------------------
Fidelity Fund.....................................        10,240,420,000
ARK 21Shares Fund.................................         2,887,759,000
Invesco Fund......................................           405,628,500
Franklin Fund.....................................           339,882,800
VanEck Fund.......................................           617,779,500
WisdomTree Fund...................................            81,690,950
Grayscale Fund....................................        20,117,590,000
Grayscale Mini Fund...............................         1,908,524,806
Bitwise Fund......................................         2,266,633,000
iShares Fund......................................        18,274,490,000
Valkyrie Fund.....................................           527,831,700
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[[Page 71947]]

    As a result, the Exchange believes this demonstrates that each 
Bitcoin Fund is characterized by a substantial number of outstanding 
shares.
    Further, the below table contains information regarding the number 
of beneficial holders of certain Bitcoin Funds as of the specified 
dates:

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                                            Beneficial
              Bitcoin fund                    holders          Date
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Fidelity Fund...........................         279,656       6/27/2024
ARK 21Shares Fund.......................          69,425       6/26/2024
Invesco Fund............................          13,420       6/25/2024
Franklin Fund...........................          12,224       6/27/2024
VanEck Fund.............................          19,061       6/28/2024
WisdomTree Fund.........................           3,509        7/2/2024
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    As this table shows, each of these six Bitcoin Funds has more than 
2,000 beneficial holders, which is the minimum number of holders the 
Exchange generally requires for corporate stock in order to list 
options on that stock pursuant to Commentary .01(2) to Rule 915. Given 
that the other four Bitcoin Funds have significant trading volumes 
similar to the trading volumes of the Bitcoin Funds listed in the table 
above (as discussed below), the Exchange believes it is reasonable to 
expect that shares of all of the Bitcoin Funds are characterized by a 
substantial number of outstanding shares that are widely held.
    The Exchange also believes each Bitcoin Fund is characterized by a 
substantial number of outstanding shares that are actively traded. As 
of August 7, 2024, the total trading volume (by shares and notional) 
for each fund since they began trading on January 11, 2024, and the 
average daily volume (``ADV'') over the 30-day period of July 9 through 
August 7, 2024 for each Bitcoin Fund was as follows:

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                                                   Trading volume        Trading volume
                 Bitcoin fund                         (shares)            (notional $)          ADV (shares)
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Fidelity Fund.................................         1,490,261,825     78,936,647,100.20          6,014,335.50
ARK 21Shares Fund.............................           413,159,977     24,787,148,013.81          1,893,335.00
Invesco Fund..................................            78,609,595      4,578,462,838.89            299,372.94
Franklin Fund.................................            58,954,975      2,063,321,834.88            338,901.56
VanEck Fund...................................            59,991,039      4,195,401,686.66            265,605.84
WisdomTree Fund...............................            39,977,866      2,546,889,570.58            209,501.33
Grayscale Fund................................         2,074,101,826     95,371,791,353.17          4,794,193.00
Bitwise Fund..................................           455,817,104     14,926,192,896.43          2,250,989.25
iShares Fund..................................         5,209,443,211    185,451,676,432.50         28,406,964.00
Valkyrie Fund.................................           100,580,329      1,762,278,782.37            349,587.41
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* * * * *
    As demonstrated above, despite the Bitcoin Funds have been trading 
for approximately seven months, the trading volume for each is 
substantially higher than 2,400,000 shares (between 16 and 620 times 
that amount), which is the minimum 12-month volume the Exchange 
generally requires for a security in order to list options on that 
security as set forth in Commentary .01 to Rule 915. Additionally, as 
of August 7, 2024, the six-month ADV for each Bitcoin Fund is in the 
top 20% of all ETFs that are currently trading. The Exchange believes 
this data demonstrates each Bitcoin Fund is characterized by a 
substantial number of outstanding shares that are actively traded.
    Like all ETFs deemed appropriate for options trading, options on 
Bitcoin Funds will be subject to the Exchange's continued listing 
standards as set forth in Commentary .07 to Rule 916. Pursuant to 
Commentary .07 to Rule 916, the Exchange will not open for trading any 
additional series of option contracts covering an ETF if such ETF 
ceases to be an ``NMS stock'' as provided for Commentary .01(5) to Rule 
915 or the ETF is halted from trading on its primary market.\14\ 
Additionally, options on ETFs may be subject to the suspension of 
opening transactions as follows: (1) the ETFs no longer meets the terms 
of Commentary .01 to Rule 916; (2) following the initial twelve-month 
period beginning upon the commencement of trading of the ETFs, there 
are fewer than 50 record and/or beneficial holders of the ETFs for 30 
or more consecutive trading days; (3) the value of the underlying 
commodity is no longer calculated or available; or (4) such other event 
occurs or condition exists that in the opinion of the Exchange makes 
further dealing on the Exchange inadvisable.
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    \14\ See Commentary .07 to Rule 916. For avoidance of doubt and 
consistent with this proposal, the Exchange proposes to amend Rule 
916 to include in the Bitcoin Funds in the list of ETFs subject to 
the continued listing standards. See proposed Commentary .11 to Rule 
916.
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    Options on each Bitcoin Fund will be physically settled contracts 
with American-style exercise.\15\ Consistent with Rule 903, which 
governs the opening of options series on a specific underlying security 
(including ETFs), the Exchange will open at least one expiration month 
for options on each Bitcoin Fund \16\ at the commencement of

[[Page 71948]]

trading on the Exchange and may also list series of options on Bitcoin 
Funds for trading on a weekly,\17\ monthly,\18\ or quarterly \19\ 
basis. The Exchange may also list long-term equity option series 
(``LEAPS'') \20\ that expire from twelve to thirty-nine months from the 
time they are listed.
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    \15\ See Rule 902 (Rights and Obligations of Holders and 
Writers), which provides that the rights and obligations of holders 
and writers of option contracts of any class of options dealt in on 
the Exchange shall be as set forth in the Rules of the Clearing 
Corporation. See also OCC Rules, Chapter VIII, which governs 
exercise and assignment, and Chapter IX, which governs the discharge 
of delivery and payment obligations arising out of the exercise of 
physically settled stock option contracts. OCC Rules can be located 
at: https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occrules.pdf.
    \16\ See Rule 903(c), Commentary .03. The monthly expirations 
are subject to certain listing criteria for underlying securities 
described within Rule 915. Monthly listings expire the third Friday 
of the month. The term ``expiration date'' (unless separately 
defined elsewhere in the OCC By-Laws), when used in respect of an 
option contract (subject to certain exceptions), means the third 
Friday of the expiration month of such option contract, or if such 
Friday is a day on which the exchange on which such option is listed 
is not open for business, the preceding day on which such exchange 
is open for business. See OCC By-Laws Article I, Section 1. Pursuant 
to Rule 903(d), additional series of options of the same class may 
be opened for trading on the Exchange when the Exchange deems it 
necessary to maintain an orderly market, to meet customer demand or 
when the market price of the underlying stock moves more than five 
strike prices from the initial exercise price or prices. New series 
of options on an individual stock may be added until the beginning 
of the month in which the options contract will expire. Due to 
unusual market conditions, the Exchange, in its discretion, may add 
a new series of options on an individual stock until the close of 
trading on the business day prior to expiration.
    \17\ See Rule 903(h).
    \18\ See Rule 903, Commentary .11.
    \19\ See Rule 903, Commentary .09.
    \20\ See Rule 903, Commentary .03.
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    Pursuant to Rule 903, Commentary .05(a), which governs strike 
prices of series of options on ETFs, the interval between strike prices 
of series of options on Bitcoin Funds will be $1 or greater when the 
strike price is $200 or less and $5 or greater where the strike price 
is over $200.\21\ Additionally, the Exchange may list series of options 
pursuant to the $1 Strike Price sup [sic].
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    \21\ The Exchange notes that for options listed pursuant to the 
Short Term Option Series Program, the Monthly Options Series 
Program, and the Quarterly Options Series Program, Rules 903(h) and 
Commentaries .09 and .03 to Rule 903, specifically set forth 
intervals between strike prices on Quarterly Options Series, Short 
Term Option Series, and Monthly Options Series, respectively.
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    Bitcoin Fund options will trade in the same manner as any other ETF 
options on the Exchange. The Exchange Rules that currently apply to the 
listing and trading of all ETF options on the Exchange, including, for 
example, Rules that govern listing criteria, expiration and exercise 
prices, minimum increments, position and exercise limits, margin 
requirements, customer accounts and trading halt procedures will apply 
to the listing and trading of Bitcoin Funds on the Exchange in the same 
manner as they apply to other options on all other ETF that are listed 
and traded on the Exchange, including the precious-metal backed 
commodity ETF already deemed appropriate for options trading on the 
Exchange pursuant to current Commentary .10 to Rule 915.
    Position and exercise limits for options on ETFs, including options 
on Bitcoin Funds, pursuant to Rules 904 and 905, respectively. Position 
and exercise limits for ETF options vary according to the number of 
outstanding shares and the trading volumes of the underlying ETF over 
the past six months, where the largest in capitalization and the most 
frequently traded ETFs have an option position and exercise limit of 
250,000 contracts (with adjustments for splits, re-capitalizations, 
etc.) on the same side of the market; and smaller capitalization ETFs 
have position and exercise limits of 200,000, 75,000, 50,000 or 25,000 
contracts (with adjustments for splits, re-capitalizations, etc.) on 
the same side of the market.\22\ The Exchange further notes that Rule 
462, which governs margin requirements applicable to the trading of all 
options on the Exchange, including options on ETFs, will also apply to 
the trading of Bitcoin Fund options.
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    \22\ As Bitcoin Funds do not currently trade, options on Bitcoin 
Funds would be subject to the 25,000 option contract limit.
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* * * * *
    The Exchange notes that options on Bitcoin Funds would not be 
available for trading until The Options Clearing Corporation (``OCC'') 
represents to the Exchange that it is fully able to clear and settle 
such options. The Exchange has also analyzed its capacity and 
represents that it and The Options Price Reporting Authority (``OPRA'') 
have the necessary systems capacity to handle the additional traffic 
associated with the listing of options on Bitcoin Funds. The Exchange 
believes any additional traffic that would be generated from the 
trading of options on Bitcoin Funds would be manageable. The Exchange 
represents that Exchange members will not have a capacity issue as a 
result of this proposed rule change.
    The Exchange represents that the same surveillance procedures 
applicable to all other options on other ETFs currently listed and 
traded on the Exchange will apply to options on Bitcoin Funds, and that 
it has the necessary systems capacity to support the new option series. 
The Exchange's existing surveillance and reporting safeguards are 
designed to deter and detect possible manipulative behavior which might 
arise from listing and trading options on ETFs, such as (existing) 
precious metal-commodity backed ETF options as well as the proposed 
options on Bitcoin Funds. The Exchange believes that its surveillance 
procedures are adequate to properly monitor the trading of options on 
Bitcoin Funds in all trading sessions and to deter and detect 
violations of Exchange rules. In addition, the Exchange will implement 
any new surveillance procedures it deems necessary to effectively 
monitor the trading of options on Bitcoin Funds. Also, the Exchange may 
obtain trading information via the Intermarket Surveillance Group 
(``ISG'') from other exchanges who are members of the ISG, or from 
other exchanges with which the Exchange has entered into a 
comprehensive surveillance sharing agreement (``CSSA''). The Exchange 
will enter into new CSSAs with other exchanges as necessary to 
effectively monitor the trading of options on Bitcoin Funds. The 
Exchange represents that these procedures will be adequate to properly 
monitor Exchange trading of options on Bitcoin Funds and to deter and 
detect violations of Exchange rules.
    Finally, quotation and last sale information for ETFs is available 
via the Consolidated Tape Association (``CTA'') high speed line. 
Quotation and last sale information for such securities is also 
available from the exchange on which such securities are listed. 
Quotation and last sale information for options on Bitcoin Funds will 
be available via OPRA and major market data vendors.
    The Exchange believes that offering options on Bitcoin Funds will 
benefit investors by providing them with an additional, relatively 
lower cost investing tool to gain exposure to the price of Bitcoin and 
hedging vehicle to meet their investment needs in connection with 
Bitcoin-related products and positions. The Exchange expects investors 
will transact in options on Bitcoin Funds in the unregulated over-the-
counter (``OTC'') options market (if the Commission approves Bitcoin 
Funds for exchange-trading),\23\ but may prefer to trade such options 
in a listed environment to receive the benefits of trading listing 
options, including (1) enhanced efficiency in initiating and closing 
out position; (2) increased market transparency; and (3) heightened 
contra-party creditworthiness due to the role of OCC as issuer and 
guarantor of all listed options. The Exchange believes that listing 
Bitcoin Fund options may cause investors to bring this liquidity to the 
Exchange, would increase market transparency and enhance the process of 
price discovery conducted on the Exchange through increased order flow. 
The ETFs that hold financial instruments, money market instruments, or 
precious metal commodities on which the Exchange may already list and 
trade options are trusts structured in substantially the same manner as

[[Page 71949]]

Bitcoin Funds and essentially offer the same objectives and benefits to 
investors, just with respect to different assets. The Exchange notes 
that it has not identified any issues with the continued listing and 
trading of any ETF options, including ETFs that hold commodities (i.e., 
precious metals) that it currently lists and trades on the Exchange.
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    \23\ The Exchange understands from customers that investors have 
historically transacted in options on ETFs in the OTC options market 
if such options were not available for trading in a listed 
environment.
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2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \24\ in general and furthers the 
objectives of Section 6(b)(5) of the Act \25\ in particular, in that it 
is designed to promote just and equitable principles of trade, to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system.
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    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that the proposal to list and 
trade options on Bitcoin Funds will remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
and, in general, protect investors because offering options on Bitcoin 
Funds will provide investors with an opportunity to realize the 
benefits of utilizing options on a Bitcoin Fund, including cost 
efficiencies and increased hedging strategies. The Exchange believes 
that offering Bitcoin Fund options will benefit investors by providing 
them with a relatively lower-cost risk management tool, which will 
allow them to manage their positions and associated risk in their 
portfolios more easily in connection with exposure to the price of 
Bitcoin and with Bitcoin-related products and positions. Additionally, 
the Exchange's offering of Bitcoin Fund options will provide investors 
with the ability to transact in such options in a listed market 
environment as opposed to in the unregulated OTC options market, which 
would increase market transparency and enhance the process of price 
discovery conducted on the Exchange through increased order flow to the 
benefit of all investors. The Exchange also notes that it already lists 
options on other commodity-based ETFs,\26\ which, as described above, 
are trusts structured in substantially the same manner as Bitcoin Funds 
and essentially offer the same objectives and benefits to investors, 
just with respect to a different commodity (i.e., Bitcoin rather than 
precious metals) and for which the Exchange has not identified any 
issues with the continued listing and trading of commodity-backed ETF 
options it currently lists for trading.
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    \26\ See Rule 915, Commentary .10.
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    The Exchange also believes the proposed rule change will remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, because it is consistent with current 
Exchange Rules previously filed with the Commission. Options on Bitcoin 
Funds satisfy the initial listing standards and continued listing 
standards currently in the Exchange Rules applicable to options on all 
ETFs, including ETFs that hold other commodities already deemed 
appropriate for options trading on the Exchange. Additionally, as 
demonstrated above, each Bitcoin Fund is characterized by a substantial 
number of shares that are widely held and actively traded. Bitcoin Fund 
options will trade in the same manner as any other ETF options -- the 
same Exchange Rules that currently govern the listing and trading of 
all ETF options, including permissible expirations, strike prices and 
minimum increments, and applicable position and exercise limits and 
margin requirements, will govern the listing and trading of options on 
Bitcoin Funds in the same manner.
    The Exchange believes the proposed position and exercise limits for 
the Bitcoin Fund options are consistent with the Exchange Act, will 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, protect investors 
and the public interest, because these position and exercise limits are 
designed to address potential manipulative schemes and adverse market 
impacts surrounding the use of options, such as disrupting the market 
in the security underlying the options. The proposed position and 
exercise limits are the same limits that apply to other ETF options, 
including other commodity ETF options. The Exchange believes proposed 
position and exercise limits balance the liquidity provisioning in the 
market against the prevention of manipulation, as they currently do for 
other equity options (including commodity ETF options). The Exchange 
believes the available supply in the markets of Bitcoin is not relevant 
when establishing position limits for options on the Bitcoin Funds, as 
what is held by an ETF has historically not been a relevant factor 
considered by the Commission when it has considered rule filings to 
list options on ETFs, including commodity ETFs. The Commission has 
previously stated:
    Since the inception of standardized options trading, the options 
exchanges have had rules imposing limits on the aggregate number of 
options contracts that a member or customer could hold or exercise. 
These rules are intended to prevent the establishment of options 
positions that can be used or might create incentives to manipulate or 
disrupt the underlying market so as to benefit the options position. In 
particular, position and exercise limits are designed to minimize the 
potential for mini-manipulations and for corners or squeezes of the 
underlying market. In addition, such limits serve to reduce the 
possibility for disruption of the options market itself, especially in 
illiquid options classes.\27\
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    \27\ See Securities Exchange Act Release No. 39489 (December 24, 
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
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    As the Commission itself notes, the position limits are ``intended 
to prevent the establishment of options positions that can be used . . 
. to manipulate or disrupt the underlying market'' (emphasis added). 
When the Commission previously approved Rules to list options on other 
commodity ETFs, the Commission did not require consideration of whether 
the available supply of those commodities should be considered when the 
Exchange established those position limits.\28\ The Exchange notes that 
position limits in the Exchange's Rules at that time were the same as 
they are today as set forth in Rule 904 (and as proposed to be 
applicable to options on the Bitcoin Funds).
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    \28\ See, e.g., Securities Exchange Act Release No. 57894 (May 
30, 2008), 73 FR 32061 (June 5, 2008) (SR-CBOE-2005-11) (approval 
order in which the Commission stated that the ``listing and trading 
of Gold Trust Options will be subject to the exchanges' rules 
pertaining to position and exercise limits and margin'').
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    The Exchange represents that it has the necessary systems capacity 
to support the new Bitcoin Fund options. The Exchange believes that its 
existing surveillance and reporting safeguards are designed to deter 
and detect possible manipulative behavior which might arise from 
listing and trading ETF options, including Bitcoin Fund options.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    Intramarket Competition: The Exchange does not believe that the 
proposed rule change will impose any burden on intramarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act

[[Page 71950]]

as Bitcoin Funds would need to satisfy the initial listing standards 
set forth in the Exchange Rules in the same manner as any other ETF 
before the Exchange could list options on them. Additionally, Bitcoin 
Fund options will be equally available to all market participants who 
wish to trade such options. The Exchange Rules currently applicable to 
the listing and trading of options on ETFs on the Exchange will apply 
in the same manner to the listing and trading of all options on Bitcoin 
Funds. Also, and as stated above, the Exchange already lists options on 
other commodity-based ETFs.\29\
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    \29\ See Rule 915, Commentary .10.
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    Intermarket Competition: The Exchange does not believe that the 
proposal to list and trade options on Bitcoin Funds will impose any 
burden on intermarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the extent that the 
advent of Bitcoin Fund options trading on the Exchange may make the 
Exchange a more attractive marketplace to market participants at other 
exchanges, such market participants are free to elect to become market 
participants on the Exchange. As noted herein, this is a competitive 
filing as at least one other options exchange has filed similar a rule 
proposal that is currently pending with the Commission to allow the 
listing and trading of options on Bitcoin Funds.\30\ Additionally, 
other options exchanges are free to amend their listing rules, as 
applicable, to permit them to list and trade options on Bitcoin Funds. 
The Exchange notes that listing and trading Bitcoin Fund options on the 
Exchange will subject such options to transparent exchange-based rules 
as well as price discovery and liquidity, as opposed to alternatively 
trading such options in the OTC market.
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    \30\ See SR-CBOE-2024-035, filed on August 8, 2024.
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    The Exchange believes that the proposed rule change may relieve any 
burden on, or otherwise promote, competition as it is designed to 
increase competition for order flow on the Exchange in a manner that is 
beneficial to investors by providing them with a lower-cost option to 
hedge their investment portfolios. The Exchange notes that it operates 
in a highly competitive market in which market participants can readily 
direct order flow to competing venues that offer similar products. 
Ultimately, the Exchange believes that offering Bitcoin Fund options 
for trading on the Exchange will promote competition by providing 
investors with an additional, relatively low-cost means to hedge their 
portfolios and meet their investment needs in connection with Bitcoin 
prices and Bitcoin-related products and positions on a listed options 
exchange.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEAMER-2024-49 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSEAMER-2024-49. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEAMER-2024-49 and should 
be submitted on or before September 25, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-19773 Filed 9-3-24; 8:45 am]
BILLING CODE 8011-01-P