[Federal Register Volume 89, Number 185 (Tuesday, September 24, 2024)]
[Notices]
[Pages 77910-77913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21752]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101080; File No. SR-CboeBZX-2024-084]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the ARK 21Shares Bitcoin ETF and the 21Shares Core Ethereum ETF To Add 
Two New Custodians to Each Trust

September 18, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 12, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' 
or ``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. 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\ 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

    Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (``Commission'' or ``SEC'') 
a proposed rule change to amend the ARK 21Shares Bitcoin ETF (the 
``Bitcoin Trust'') and the 21Shares Core Ethereum ETF (the ``Eth 
Trust''), shares of which have been approved by the Commission to list 
and trade on the Exchange pursuant to BZX Rule 14.11(e)(4), to add two 
new custodians to each trust.
    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
    The Commission approved the listing and trading of shares (the 
``Bitcoin ETP Shares'') of the ARK 21Shares Bitcoin ETF (the ``Bitcoin 
Trust'') on the Exchange pursuant to Exchange Rule 14.11(e)(4), 
Commodity-Based Trust Shares, on January 10, 2024.\3\ The Commission 
also approved the listing and trading of shares (the ``Eth ETP 
Shares'') of the 21Shares Core Ethereum ETF (the ``Eth Trust'') on the 
Exchange pursuant to Exchange Rule 14.11(e)(4), Commodity-Based Trust 
Shares, on May 23, 2024.\4\ Exchange Rule 14.11(e)(4) governs the 
listing and trading of Commodity-Based Trust Shares, which means a 
security (a) that is issued by a trust that holds (1) a specified 
commodity deposited with the trust, or (2) a specified commodity and, 
in addition to such specified commodity, cash; (b) that is issued by 
such trust in a specified aggregate minimum number in return for a 
deposit of a quantity of the underlying commodity and/or cash; and (c) 
that, when aggregated in the same specified minimum number, may be 
redeemed at a holder's request by such trust which will deliver to the 
redeeming holder the quantity of the underlying commodity and/or cash. 
The Bitcoin ETP Shares are issued by the Bitcoin Trust and the Eth ETP 
Shares are issued by the Eth Trust. The Bitcoin Trust was formed as a 
Delaware statutory trust on June 22, 2021 and the

[[Page 77911]]

Eth Trust was formed as a Delaware statutory trust on September 5, 
2023.
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    \3\ See Securities Exchange Act Release No. 99306 (January 10, 
2024) 89 FR 3008 (January 17, 2024) (SR-CboeBZX-2023-028) (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 ``Bitcoin ETP Approval 
Order'').
    \4\ See Securities Exchange Act Release No. 100224 (May 23, 
2024) 89 FR 46937 (May 30, 2024) (SR-CboeBZX-2023-070) (Order 
Granting Accelerated Approval of Proposed Rule Changes, as Modified 
by Amendments Thereto, to List and Trade Shares of Ether-Based 
Exchange-Traded Products) (the ``Eth ETP Approval Order''). The Eth 
Trust was originally named the ARK 21Shares Ethereum ETF, as 
reflected in the Eth ETP Approval Order. However, the Exchange later 
submitted an amendment, in part, to rename the Eth Trust to the 
21Shares Core Ethereum ETF. See Securities Exchange Act Release No. 
100306 (June 10, 2024) 89 FR 50656 (June 14, 2024) (SR-CboeBZX-2024-
050) (Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change To Amend the ARK 21Shares Ethereum ETF To Amend the 
Trust Name and Reflect That the Trust Will No Longer Have a Sub-
Adviser).
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    The Exchange proposes to amend a representation set forth in the 
Exchange's previous rule filing to list and trade Bitcoin ETP Shares to 
reflect the addition of two new custodians that will provide bitcoin 
custody services to the Bitcoin Trust in addition to the existing 
custodian. Specifically, the Bitcoin ETP Amendment No. 5 \5\ 
represented that Coinbase Trust Company, LLC is the custodian (the 
``Current Custodian'') and will be responsible for custody of the 
Bitcoin Trust's bitcoin. Now, the Exchange proposes to provide that 
Anchorage Digital Bank N.A. (``Anchorage'') and BitGo New York Trust 
Company, LLC (``BitGo'' and together with Anchorage, the ``New 
Custodians'' and collectively, with Coinbase Trust Company, LLC, the 
``Custodians'') will also provide bitcoin custody services to the 
Bitcoin Trust in addition to the Current Custodian.
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    \5\ See Securities Exchange Act Release No. 99288 (January 8, 
2024) 89 FR 2387 (January 12, 2024) (SR-CboeBZX-2023-028) (Notice of 
Filing of Amendment No. 5 to a Proposed Rule Change To List and 
Trade Shares of the ARK 21Shares Bitcoin ETF Under BZX Rule 
14.11(e)(4), Commodity-Based Trust Shares) (``Bitcoin ETP Amendment 
No. 5'').
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    The Exchange similarly proposes to amend a representation set forth 
in the Exchange's previous rule filings to list and trade the Eth ETP 
Shares to reflect that the two New Custodians will provide ether 
custody services to the Eth Trust in addition to the Current 
Custodian.\6\ Specifically, the Eth ETP Amendment No. 2,\7\ as 
amended,\8\ represented that the Current Custodian will be responsible 
for custody of the Eth Trust's ether. Now, the Exchange proposes to 
provide that Anchorage and BitGo will provide ether custody services to 
the Eth Trust in addition to the Current Custodian.
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    \6\ The Exchange notes that the Current Custodian to the Eth 
Trust is also Coinbase Trust Company, LLC.
    \7\ See Securities Exchange Act Release No. 100216 (May 22, 
2024) 89 FR 46514 (May 29, 2024) (SR-CboeBZX-2023-070) (Notice of 
Filing of Amendment No. 2 to a Proposed Rule Change to List and 
Trade Shares of the ARK 21Shares Ethereum ETF Under BZX Rule 
14.11(e)(4), Commodity-Based Trust Shares) (``Eth ETP Amendment No. 
2'').
    \8\ Supra note 4.
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    BitGo is a New York chartered trust companies overseen by the New 
York Department of Financial Services (``NYDFS''). Anchorage is a South 
Dakota chartered trust company and a National Bank Trust chartered by 
the Office of the Comptroller of the Currency. The New Custodians are 
qualified custodians under Rule 206-4 of the Investment Adviser Act. 
The New Custodians will each custody the Bitcoin Trust's bitcoin 
pursuant to a custody agreement. The new Custodians will each custody 
the Eth Trust's ether pursuant to a custody agreement. Such custody 
agreements with the Bitcoin Trust requires the New Custodians to 
maintain the Bitcoin Trust's bitcoin in segregated accounts that 
clearly identify the Bitcoin Trust as owner of the respective accounts 
and assets held on those accounts; the segregation will be both from 
the proprietary property of the New Custodians and the assets of any 
other customer. Such custody agreements with the Eth Trust requires the 
New Custodians to maintain the Eth Trust's ether in segregated accounts 
that clearly identify the Eth Trust as owner of the respective accounts 
and assets held on those accounts; the segregation will be both from 
the proprietary property of the New Custodians and the assets of any 
other customer. Such an arrangement is generally deemed to be 
``bankruptcy remote,'' that is, in the event of an insolvency of either 
New Custodian, assets held in such segregated accounts would not become 
property of the New Custodian's estate and would not be available to 
satisfy claims of creditors of the New Custodian. In addition, the New 
Custodians carry fidelity insurance, which covers assets held by the 
New Custodians in custody from risks such as theft of funds.
    Bitcoin owned by the Bitcoin Trust will at all times be held by, 
and in the control of, the Custodians, and transfer of such bitcoin to 
or from the Custodians will occur only in connection with creation and 
redemptions of Bitcoin ETP Shares or allocations among the Custodians. 
The New Custodians will be bound by all representations made in the 
Bitcoin ETP Amendment No. 5 applicable to the Current Custodian.
    Ether owned by the Eth Trust will at all times be held by, and in 
the control of, the Custodians, and transfer of such ether to or from 
the Custodians will occur only in connection with creation and 
redemptions of Eth ETP Shares or allocations among the Custodians. Like 
the Current Custodian, the New Custodians will not, directly or 
indirectly, engage in action where any portion of the Eth Trust's ether 
becomes subject to the ethereum proof-of-stake validation or is used to 
earn additional ether or generate income or other earnings. The New 
Custodians will be bound by all representations made in Eth ETP 
Amendment No. 2, as amended,\9\ applicable to the Current Custodian.
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    \9\ Supra note 4.
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    Except for the above changes, all other representations in the 
Bitcoin ETP Amendment No. 5 and Eth ETP Amendment No. 2, as 
amended,\10\ remain unchanged and will continue to constitute 
continuing listing requirements. In addition, the Bitcoin Trust will 
continue to comply with the terms of Bitcoin ETP Amendment No. 5 and 
the Eth Trust will continue to comply with the terms of Eth ETP 
Amendment No. 2, as amended,\11\ and both the Bitcoin Trust and Eth 
Trust will continue to comply with the requirements of Rule 
14.11(e)(4).
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    \10\ Supra note 4.
    \11\ Supra note 4.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\12\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \13\ requirements that the rules 
of an exchange be 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 regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed rule change is designed to 
remove impediments to and perfect the mechanism of a free and open 
market and, in general, to protect investors and the public interest 
because it would update a representation in Bitcoin ETP Amendment No. 5 
regarding the custodian responsible for the custody of the Bitcoin 
Trust's bitcoin to provide for the two New Custodians, in addition to 
the Current Custodian. Similarly, the proposed rule change would update 
a representation in the Eth ETP Amendment No. 2, as amended,\14\ 
regarding the custodian responsible for the custody of the Eth Trust's 
ether to provide for the two New Custodians, in addition to the Current 
Custodian. The Exchange believes the addition of two New Custodians for 
both the Bitcoin Trust and Eth Trust would mitigate and diversify 
potential third-party service provider risk in the event that the

[[Page 77912]]

Current Custodian was unable to provide custody services.
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    \14\ Supra note 4.
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    Except for the addition of the two New Custodians for the Bitcoin 
Trust all other representations made in the Bitcoin ETP Amendment No. 5 
remain unchanged and will continue to constitute continuing listing 
requirements for the Bitcoin Trust. The New Custodians will be bound by 
all representations made in the Bitcoin ETP Amendment No. 5 applicable 
to the Current Custodian. Similarly, except for the addition of the two 
New Custodians for the Eth Trust all other representations made in the 
Eth ETP Amendment No. 2, as amended,\15\ remain unchanged and will 
continue to constitute continuing listing requirements for the Eth 
Trust. The New Custodians will be bound by all representations made in 
the Eth ETP Amendment No. 2, as amended,\16\ applicable to the Current 
Custodian.
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    \15\ Supra note 4.
    \16\ Supra note 4.
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    Accordingly, the Exchange believes that this proposed rule change 
raises no novel regulatory issues.

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. As noted above, the proposed 
amendment is intended to reflect that the two New Custodians will have 
the ability to custody the Bitcoin Trust's bitcoin. Those two New 
Custodians will also have the ability to custody the Eth Trust's ether. 
The Exchange believes these changes will not impose any burden on 
competition.

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

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

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\ 
Because the proposed rule change does not: (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, it has become effective pursuant to 
Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.\19\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ In addition, Rule 19b-4(f)(6) requires a self-regulatory 
organization to give the Commission written notice of its intent to 
file the proposed rule change at least five business days prior to 
the date of filing of the proposed rule change, or such shorter time 
as designated by the Commission. The Exchange has satisfied this 
requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\21\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange states that 
the proposed rule change would reflect the addition of the two New 
Custodians for each of the Bitcoin Trust and the Eth Trust. The New 
Custodians will be bound by all representations made in the Bitcoin ETP 
Amendment No. 5 and the Eth ETP Amendment No. 2, as amended,\22\ 
applicable to the Current Custodian. The Bitcoin Trust and Eth Trust 
will continue to comply with the requirements of Rule 14.11(e) and, 
except for the addition of the two New Custodians, all other 
representations made in the Bitcoin ETP Amendment No. 5 and the Eth ETP 
Amendment No. 2, as amended,\23\ remain unchanged and will continue to 
constitute continuing listing requirements for the Bitcoin Trust and 
the Eth Trust, as applicable. The Commission believes that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest because the proposal does not raise 
any new or novel regulatory issues. Accordingly, the Commission hereby 
waives the 30-day operative delay and designates the proposal operative 
upon filing.\24\
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    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 17 CFR 240.19b-4(f)(6)(iii).
    \22\ See supra note 4.
    \23\ Id.
    \24\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

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-CboeBZX-2024-084 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-2024-084. 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-CboeBZX-2024-084 and should 
be submitted on or before October 15, 2024.


[[Page 77913]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12), (59).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21752 Filed 9-23-24; 8:45 am]
BILLING CODE 8011-01-P