[Federal Register Volume 90, Number 39 (Friday, February 28, 2025)]
[Notices]
[Pages 10964-10980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-03231]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102475; File No. SR-NYSEARCA-2025-12]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change, as Modified by Amendment No. 2, To List and
Trade Shares of the Grayscale Cardano Trust (ADA) Under NYSE Arca Rule
8.201-E (Commodity-Based Trust Shares)
February 24, 2025.
On February 10, 2025, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ a
proposed rule change to list and trade shares of the Grayscale Cardano
Trust (ADA) under NYSE Arca Rule 8.201-E (Commodity-Based Trust
Shares). On February 20, 2025, the Exchange filed Amendment No. 2 to
the proposed rule change, which replaced and superseded the proposed
rule change in its entirety.\4\ The proposed rule change, as modified
by Amendment No. 2, is described in Items I, II and III below, which
Items have been prepared by the Exchange. 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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ On February 19, 2025, the Exchange filed Amendment No. 1 to
the proposed rule change and on February 20, 2025, the Exchange
withdrew Amendment No. 1.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade shares of the following
under NYSE Arca Rule 8.201-E: Grayscale Cardano Trust (ADA) (the
``Trust''). This Amendment No. 2 to SR-NYSEARCA-2025-12 replaces SR-
NYSEARCA-2025-12 and Amendment No. 1 thereto as originally filed and
supersedes such filings in their entirety. 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
Under NYSE Arca Rule 8.201-E, the Exchange may propose to list and/
or trade pursuant to unlisted trading privileges ``Commodity-Based
Trust Shares.'' \5\ The Exchange proposes to list and trade shares
(``Shares'') \6\ of the Trust pursuant to NYSE Arca Rule 8.201-E.
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\5\ Commodity-Based Trust Shares are securities issued by a
trust that represent investors' discrete identifiable and undivided
beneficial ownership interest in the commodities deposited into the
Trust.
\6\ The Shares are expected to be listed under the ticker symbol
``GADA.''
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The sponsors of the Trust are Grayscale Operating, LLC and
Grayscale Investments Sponsors, LLC (each, a ``Sponsor'' and,
collectively, the ``Sponsors''),\7\ each a Delaware limited liability
company. The Sponsors are indirect wholly owned subsidiaries of Digital
Currency Group, Inc. (``Digital Currency Group''). The trustee for the
Trust is Delaware Trust Company (``Trustee''). The custodian for the
Trust is Coinbase Custody Trust Company, LLC (``Custodian''). The
administrator and transfer agent of the Trust is expected to be BNY
Mellon Asset Servicing, a division of The Bank of New York Mellon (the
``Transfer Agent''). The distribution and marketing agent for the Trust
is expected to be Foreside Fund Services, LLC (the ``Marketing
Agent''). The index provider
[[Page 10965]]
for the Trust is CoinDesk Indices, Inc. (the ``Index Provider'').
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\7\ As of May 3, 2025, Grayscale Operating, LLC will cease to
act as Sponsor of the Trust and Grayscale Investment Sponsors, LLC
will be sole Sponsor of the Trust.
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The Trust is a Delaware statutory trust, formed on January 26,
2018, that operates pursuant to a trust agreement between the Sponsor
and the Trustee (``Trust Agreement''). The Trust has no fixed
termination date.
Operation of the Trust
According to the prospectus the Trust intends to file (the
``Prospectus''), the Trust's assets consist solely of Cardano
(``ADA'').\8\
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\8\ The Trust may from time to time come into possession of
Incidental Rights and/or IR Virtual Currency by virtue of its
ownership of ADA, generally through a fork in the Cardano
Blockchain, an airdrop offered to holders of ADA or other similar
event. ``Incidental Rights'' are rights to acquire, or otherwise
establish dominion and control over, any virtual currency or other
asset or right, which rights are incident to the Trust's ownership
of ADA and arise without any action of the Trust, or of the Sponsor
or Trustee on behalf of the Trust. ``IR Virtual Currency'' is any
virtual currency tokens, or other asset or right, acquired by the
Trust through the exercise (subject to the applicable provisions of
the Trust Agreement) of any Incidental Right. Although the Trust is
permitted to take certain actions with respect to Incidental Rights
and IR Virtual Currency in accordance with its Trust Agreement, at
this time the Trust will prospectively irrevocably abandon any
Incidental Rights and IR Virtual Currency. In the event the Trust
seeks to change this position, the Exchange would file a subsequent
proposed rule change with the Commission.
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Each Share represents a proportional interest, based on the total
number of Shares outstanding, in the Trust's assets as determined by
reference to the Index Price,\9\ less the Trust's expenses and other
liabilities (which include accrued but unpaid fees and expenses). The
Sponsors expect that the market price of the Shares will fluctuate over
time in response to the market prices of ADA. In addition, because the
Shares reflect the estimated accrued but unpaid expenses of the Trust,
the number of ADA represented by a Share will gradually decrease over
time as the Trust's ADA are used to pay the Trust's expenses.
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\9\ The ``Index Price'' means the U.S. dollar value of a ADA
derived from the Digital Asset Trading Platforms (as defined below)
that are reflected in the CoinDesk Cardano Price Index (ADX) (the
``Index''), calculated at 4:00 p.m., New York time, on each business
day. For purposes of the Trust Agreement, the term Cardano Index
Price has the same meaning as the Index Price as defined herein.
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The activities of the Trust are limited to (i) issuing ``Baskets''
(as defined below) in exchange for ADA transferred to the Trust as
consideration in connection with creations, (ii) transferring or
selling ADA as necessary to cover the ``Sponsor's Fee'' \10\ and/or
certain Trust expenses, (iii) transferring ADA in exchange for Baskets
surrendered for redemption (subject to obtaining regulatory approval
from the Commission and approval of the Sponsor), (iv) causing the
Sponsor to sell ADA on the termination of the Trust, and (v) engaging
in all administrative and security procedures necessary to accomplish
such activities in accordance with the provisions of the Trust
Agreement, the Custodian Agreement, the Index License Agreement, and
the Participant Agreements (each as defined below).
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\10\ The Sponsor's Fee means a fee, payable in ADA, which
accrues daily in U.S. dollars at an annual rate of currently 2.5%,
but which will be lowered in connection with the Trust becoming an
ETP, of the NAV Fee Basis Amount of the Trust as of 4:00 p.m., New
York time, on each day, provided that for a day that is not a
business day, the calculation of the Sponsor's Fee will be based on
the NAV Fee Basis Amount from the most recent business day, reduced
by the accrued and unpaid Sponsor's Fee for such most recent
business day and for each day after such most recent business day
and prior to the relevant calculation date. The ``NAV Fee Basis
Amount'' is calculated in the manner set forth under ``Valuation of
ADA and Determination of NAV'' below.
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The Trust will not be actively managed. It will not engage in any
activities designed to obtain a profit from, or to ameliorate losses
caused by, changes in the market prices of ADA.
The Trust is not a registered investment company under the
Investment Company Act and the Sponsors believe that the Trust is not
required to register under the Investment Company Act.
Investment Objective
According to the Prospectus, and as further described below, the
Trust's investment objective is for the value of the Shares (based on
ADA per Share) to reflect the value of the ADA held by the Trust,
determined by reference to the Index Price, less the Trust's expenses
and other liabilities. While an investment in the Shares is not a
direct investment in ADA, the Shares are designed to provide investors
with a cost-effective and convenient way to gain investment exposure to
ADA. Generally speaking, a substantial direct investment in ADA may
require expensive and sometimes complicated arrangements in connection
with the acquisition, security and safekeeping of the ADA and may
involve the payment of substantial fees to acquire such ADA from third-
party facilitators through cash payments of U.S. dollars. Because the
value of the Shares is correlated with the value of ADA held by the
Trust, it is important to understand the investment attributes of, and
the market for, ADA.
The Trust uses the Index Price to calculate its ``NAV,'' which is
the aggregate value, expressed in U.S. dollars, of the Trust's assets
(other than U.S. dollars or other fiat currency), less the U.S. dollar
value of the Trust's expenses and other liabilities calculated in the
manner set forth under ``Valuation of ADA and Determination of NAV.''
``NAV per Share'' is calculated by dividing NAV by the number of Shares
then outstanding.
Valuation of ADA and Determination of NAV
The following is a description of the material terms of the Trust
Agreement as they relate to valuation of the Trust's ADA and the NAV
calculations.
On each business day at 4:00 p.m., New York time, or as soon
thereafter as practicable (the ``Evaluation Time''), the Sponsor will
evaluate the ADA held by the Trust and calculate and publish the NAV of
the Trust. To calculate the NAV, the Sponsor will:
1. Determine the Index Price as of such business day.
2. Multiply the Index Price by the Trust's aggregate number of ADA
owned by the Trust as of 4:00 p.m., New York time, on the immediately
preceding day, less the aggregate number of ADA payable as the accrued
and unpaid Sponsor's Fee as of 4:00 p.m., New York time, on the
immediately preceding day.
3. Add the U.S. dollar value of ADA, calculated using the Index
Price, receivable under pending creation orders, if any, determined by
multiplying the number of the Baskets represented by such creation
orders by the Basket Amount and then multiplying such product by the
Index Price.\11\
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\11\ ``Baskets'' and ``Basket Amount'' have the meanings set
forth in ``Creation and Redemption of Shares'' below.
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4. Subtract the U.S. dollar amount of accrued and unpaid Additional
Trust Expenses, if any.\12\
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\12\ A ``Digital Asset Market'' is a ``Brokered Market,''
``Dealer Market,'' ``Principal-to-Principal Market'' or ``Exchange
Market,'' as each such term is defined in the Financial Accounting
Standards Board Accounting Standards Codification Master Glossary.
The ``Digital Asset Trading Platform Market'' is the global trading
platform market for the trading of ADA, which consists of
transactions on electronic Digital Asset Trading Platforms. A
``Digital Asset Trading Platform'' is an electronic marketplace
where trading participants may trade, buy and sell ADA based on bid-
ask trading. The largest Digital Asset Trading Platforms are online
and typically trade on a 24-hour basis, publishing transaction price
and volume data.
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5. Subtract the U.S. dollar value of the ADA, calculated using the
Index Price, to be distributed under pending redemption orders, if any,
determined by multiplying the number of Baskets to be redeemed
represented by such redemption orders by the Basket Amount and then
multiplying such product by the Index Price (the amount
[[Page 10966]]
derived from steps 1 through 5 above, the ``NAV Fee Basis Amount'').
6. Subtract the U.S. dollar amount of the Sponsor's Fee that
accrues for such business day, as calculated based on the NAV Fee Basis
Amount for such business day.
In the event that the Sponsor determines that the primary
methodology used to determine the Index Price is not an appropriate
basis for valuation of the Trust's ADA, the Sponsor will utilize the
cascading set of rules as described in ``Determination of the Index
Price When Index Price is Unavailable'' below.
ADA and the Cardano Network \13\
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\13\ The description of ADA and the Cardano Network in this
section was provided by the Sponsors and is based on the Prospectus.
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According to the Prospectus, ADA is a digital asset that is created
and transmitted through the operations of the peer-to-peer Cardano
network, a decentralized network of computers that operates on
cryptographic protocols. No single entity owns or operates the Cardano
network, the infrastructure of which is collectively maintained by a
decentralized user base. The Cardano network allows people to exchange
tokens of value, called ADA, which are recorded on a public transaction
ledger known as a blockchain. ADA can be used to pay for goods and
services, including computational power on the Cardano network, or it
can be converted to fiat currencies, such as the U.S. dollar, at rates
determined on Digital Asset Exchanges or in individual end-user-to-end-
user transactions under a barter system.
The Cardano network was designed to allow users to write and
implement smart contracts--that is, general-purpose code that executes
on every computer in the network and can instruct the transmission of
information and value based on a sophisticated set of logical
conditions. Using smart contracts, users can create markets, store
registries of debts or promises, represent the ownership of property,
move funds in accordance with conditional instructions and create
digital assets other than ADA on the Cardano network. When operational,
smart contract operations are executed on the Cardano blockchain in
exchange for payment of ADA. Like the Ethereum network, the Cardano
network is one of a number of projects intended to expand blockchain
use beyond just a peer-to-peer money system.
Cardano was founded by Charles Hoskinson, an early contributor of
the Ethereum Network, as a proof-of-stake alternative to blockchains
relying on proof-of-work. The proof-of-stake consensus mechanism is
intended to provide lower energy consumption in the validation of the
network and potentially faster transaction times. The Cardano
Foundation, a Swiss non-profit organization that administered the
original network launch and token distribution, contributes to the
development of the Cardano network. The Cardano Foundation has
contracted Input-Output Global (``IOHK''), a company founded by
Hoskinson, to continue building and maintaining the Cardano network, as
well as Emurgo Pte. Ltd. (``Emurgo''), a for-profit company responsible
for building partnerships with developers of the Cardano Network.
Additionally, twenty percent of Cardano transaction fees are currently
allocated to the Cardano's treasury (the ``Cardano Treasury'') (with
the rest of the fees being used for staking rewards). The Cardano
Treasury allocates resources to develop the Cardano network and create
new applications in the Cardano ecosystem.
The Cardano Network is decentralized and does not require
governmental authorities or financial institution intermediaries to
create, transmit or determine the value of ADA. Rather, ADA is created
and allocated by the Cardano Network protocol through a ``mining''
process. The value of ADA is determined by the supply of and demand for
ADA on the Digital Asset Trading Platforms or in private end-user-to-
end-user transactions.
Similar to the Ethereum Network, new ADA are created and rewarded
to the validators of a block in the Cardano Blockchain for verifying
transactions. The Cardano Blockchain is effectively a decentralized
database that includes all blocks that have been validated, and it is
updated to include new blocks as they are validated. Each ADA
transaction is broadcast to the Cardano Network and, when included in a
block, recorded in the Cardano Blockchain. As each new block records
outstanding ADA transactions, and outstanding transactions are settled
and validated through such recording, the Cardano Blockchain represents
a complete, transparent and unbroken history of all transactions of the
Cardano Network. Among other things, ADA is used to pay for transaction
fees and computational services (i.e., smart contracts) on the Cardano
Network; users of the Cardano Network pay for the computational power
of the machines executing the requested operations with ADA. Requiring
payment in ADA on the Cardano Network incentivizes developers to write
quality applications and increases the efficiency of the Cardano
Network while ensuring that the Cardano Network remains economically
viable by compensating for contributed computational resources.
Smart Contracts and Development on the Cardano Network
Smart contracts are programs that run on a blockchain that can
execute automatically when certain conditions are met. Smart contracts
facilitate the exchange of anything representative of value, such as
money, information, property, or voting rights. Using smart contracts,
users can send or receive digital assets, create markets, store
registries of debts or promises, represent ownership of property or a
company, move funds in accordance with conditional instructions and
create new digital assets. Development on the Cardano Network involves
building more complex tools on top of smart contracts, such as
decentralized apps (``DApps''); organizations that are autonomous,
known as decentralized autonomous organizations (``DAOs''); and
entirely new decentralized networks. For example, a company that
distributes charitable donations on behalf of users could hold donated
funds in smart contracts that are paid to charities only if the charity
satisfies certain pre-defined conditions.
Moreover, like the Ethereum network, the Cardano Network can also
be used as a platform for creating new digital assets and conducting
their associated initial coin offerings. However, a majority of digital
assets are built on the Ethereum network, with such assets representing
a significant amount of the total market value of all digital assets.
Like the Ethereum network, the Cardano Network is also used for
decentralized finance (``DeFi'') or open finance platforms, which seek
to democratize access to financial services, such as borrowing,
lending, custody, trading, derivatives and insurance, by removing
third-party intermediaries. DeFi can allow users to lend and earn
interest on their digital assets, exchange one digital asset for
another and create derivative digital assets such as stablecoins, which
are digital assets pegged to a reserve asset such as fiat currency. As
of the date hereof, approximately $384 million worth of digital assets
were locked up as collateral on DeFi platforms on the Cardano
Network.\14\
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\14\ See DeFi Llama, Cardano, https://defillama.com/chains. Last
visited: February 4, 2025.
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[[Page 10967]]
IOHK has also partnered with several entities to apply Cardano
products and ADA to real-world use cases, at various stages of
development and maturity. For example, IOHK announced partnerships and
launched projects with:
The Ethiopian Ministry of Science and Technology (2018);
The Georgia Ministry of Education (2019); \15\
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\15\ See Daniel Friedman, ``IOHK Announces Partnership with
Georgian Government and Universities,'' IOHK, (June 18, 2019),
available at https://iohk.io/en/blog/posts/2019/06/18/iohk-announces-partnership-with-georgian-government-and-universities/;
Mariam Papidze, Georgia to be 1st country to put educational
credentials on blockchain (Mar. 13, 2020), https://agenda.ge/en/article/2020/12.
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The Ethiopian Ministry of Education (2021) to use
Cardano's technology for agricultural and student educational
applications, respectively; \16\
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\16\ See Unocoin Blog, ``Ethiopia uses Cardano for Blockchain in
Agriculture,'' Unocoin (July 9, 2018), available at https://blog.unocoin.com/ethiopia-uses-cardano-for-blockchain-in-agriculture-658ebec94446; Helen Partz, ``Ethiopian Gov't Signs
Agreement With Cardano To Introduce Blockchain In Agritech,'' Coin
Telegraph (May 4, 2018), available at https://cointelegraph.com/news/ethiopian-govt-signs-agreement-with-cardano-to-introduce-blockchain-in-agritech; Anna Baydakova, ``Cardano in Africa: Inside
IOHK's Ethiopia Blockchain Deal,'' CoinDesk (Apr. 30, 2021),
available at https://www.coindesk.com/markets/2021/04/30/cardano-in-africa-inside-iohks-ethiopia-blockchain-deal/; Marc Hochstein,
Ethiopian Education Minister Confirms Cardano Blockchain
Partnership, CoinDesk (Apr. 30, 2021, updated Sept. 14, 2021),
https://www.coindesk.com/business/2021/04/30/ethiopian-education-minister-confirms-cardano-blockchain-partnership/.
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Dish Network (2021) to provide digital identity services
to Dish customers; \17\ and
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\17\ Anthony Quinn, ``US mobile operator calls on Cardano,''
IOHK (Sept. 27, 2021), available at https://iohk.io/en/blog/posts/2021/09/28/boost-mobile-and-dish-tv-call-on-cardano/; Kevin
Reynolds, ``Cardano Announces Partnerships With Dish Network,''
Chainlink, CoinDesk (Sept. 25, 2021, updated Sept. 27, 2021),
available at https://www.coindesk.com/business/2021/09/26/cardano-announces-partnerships-with-dish-network-chainlink/.
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Samsung, as part of the Cardano-based project Veritree to
track and verify tree plantings and reforestation efforts.\18\
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\18\ See Ekta Mourya, ``Samsung partners with Cardano Based
Project Veritree for its New Initiative,'' FXStreet (Jan. 6, 2022),
available at https://www.fxstreet.com/cryptocurrencies/news/samsung-partners-with-cardano-based-project-veritree-for-its-new-initiative-202201061335; Oluwapelumi Adejumo, ``Samsung Continues Crypto Drive
With new Cardano Exposure,'' Yahoo! (Jan. 5, 2022), available at
https://www.yahoo.com/video/samsung-continues-crypto-drive-cardano-095930154.html.
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Overview of the Cardano Network's Operations
In order to own, transfer or use ADA directly on the Cardano
Network (as opposed to through an intermediary, such as a custodian), a
person generally must have internet access to connect to the Cardano
Network. ADA transactions may be made directly between end-users
without the need for a third-party intermediary. To prevent the
possibility of double-spending ADA, a user must notify the Cardano
Network of the transaction by broadcasting the transaction data to its
network peers. The Cardano Network provides confirmation against
double-spending by memorializing every transaction in the Cardano
Blockchain, which is publicly accessible and transparent. This
memorialization and verification against double-spending is
accomplished through the Cardano Network validating process, which adds
``blocks'' of data, including recent transaction information, to the
Cardano Blockchain.
Summary of a ADA Transaction
Prior to engaging in ADA transactions directly on the Cardano
Network, a user generally must first install on its computer or mobile
device a Cardano Network software program that will allow the user to
generate a private and public key pair associated with a ADA address.
Each Cardano Network address, or wallet, is associated with a unique
``public key'' and ``private key'' pair. To receive ADA, the ADA
recipient must provide its public key to the party initiating the
transfer. This activity is analogous to a recipient for a transaction
in U.S. dollars providing a routing address in wire instructions to the
payor so that cash may be wired to the recipient's account. The payor
approves the transfer to the address provided by the recipient by
``signing'' a transaction that consists of the recipient's public key
with the private key of the address from where the payor is
transferring the ADA. The recipient, however, does not make public or
provide to the sender its related private key.
Neither the recipient nor the sender reveals their private keys in
a transaction, because the private key authorizes transfer of the funds
in that address to other users. Therefore, if a user loses his or her
private key, the user may permanently lose access to the ADA contained
in the associated address. Likewise, ADA is irretrievably lost if the
private key associated with them is deleted and no backup has been
made. When sending ADA, a user's Cardano Network software program must
validate the transaction with the associated private key. In addition,
since every computation on the Cardano Network requires processing
power, there is a transaction fee involved with the transfer that is
paid by the payor. The resulting digitally validated transaction is
sent by the user's Cardano Network software program to the Cardano
Network validators to allow transaction confirmation.
Cardano Network validators record and confirm transactions when
they validate and add blocks of information to the Cardano Blockchain.
In proof-of-stake, validators compete to be randomly selected to
validate transactions. When a validator is selected to validate a
block, it creates that block, which includes data relating to (i) the
verification of newly submitted and accepted transactions and (ii) a
reference to the prior block in the Cardano Blockchain to which the new
block is being added. The validator becomes aware of outstanding,
unrecorded transactions through the data packet transmission and
distribution discussed above.
Upon the addition of a block of ADA transactions, the Cardano
Network software program of both the spending party and the receiving
party will show confirmation of the transaction on the Cardano
Blockchain and reflect an adjustment to the ADA balance in each party's
Cardano Network public key, completing the ADA transaction. Once a
transaction is confirmed on the Cardano Blockchain, it is irreversible.
Some ADA transactions are conducted ``off-blockchain'' and are
therefore not recorded in the Cardano Blockchain. These ``off-
blockchain transactions'' involve the transfer of control over, or
ownership of, a specific digital wallet holding ADA or the reallocation
of ownership of certain ADA in a pooled-ownership digital wallet, such
as a digital wallet owned by a Digital Asset Trading Platform. In
contrast to on-blockchain transactions, which are publicly recorded on
the Cardano Blockchain, information and data regarding off-blockchain
transactions are generally not publicly available. Therefore, off-
blockchain transactions are not truly ADA transactions in that they do
not involve the transfer of transaction data on the Cardano Network and
do not reflect a movement of ADA between addresses recorded in the
Cardano Blockchain. For these reasons, off-blockchain transactions are
subject to risks as any such transfer of ADA ownership is not protected
by the protocol behind the Cardano Network or recorded in, and
validated through, the blockchain mechanism.
[[Page 10968]]
Creation of ADA
Initial Creation of ADA
Unlike other digital assets such as Bitcoin, which are solely
created through a progressive mining process, 31.11 million ADA were
created in connection with the launch of the Cardano Network in a
series of public token sales that occurred between September 2015 and
January 2017 to non-U.S. citizens. The initial 31.11 million ADA were
distributed as follows:
Tranche 1: 1,255,160,024 ADA sold, raising $2.66M (9.08K
BTC).
Tranche 2: 7,729,842,852 ADA sold, raising $16.49M (40.20K
BTC).
Tranche 3: 5,923,771,020 ADA sold, raising $14.32M (24.28K
BTC).
Tranche 3.5: 721,948,412 ADA sold, raising $19.36M (32.82K
BTC).
Tranche 4: 10,296,348,230 ADA sold, raising $26.36M
(32.82K BTC).
The remaining 5,185,414,108 ADA were received by the three legal
entities that govern the Cardano network as follows:
648,176,761 ADA to the Cardano Foundation;
2,074,165,644 ADA to Emurgo;
2,463,071,701 ADA to IOHK, which voluntarily adopted the
following vesting schedule:
[cir] a third of the holdings were made available to IOHK
immediately;
[cir] a third were made available to IOHK on June 1, 2018; and
[cir] a third were made available to IOHK on June 1, 2019.2229
Neither the Cardano Foundation nor Emurgo adopted a vesting
schedule.
In total, the Cardano Foundation, Emurgo and IOHK received 16.67%
of the initial ADA distributed, and the public received 83.33% of the
initial ADA distributed.
Following these distributions, the remaining 13.89 billion ADA
tokens are scheduled to be issued over time, in the form of staking
rewards.
Proof-of-Stake Process
Unlike proof-of-work, in which miners expend computational
resources to compete to validate transactions and are rewarded coins in
proportion to the amount of computational resources expended, in proof-
of-stake, miners (sometimes called validators) risk or ``stake'' coins
to compete to be randomly selected to validate transactions and are
rewarded coins in proportion to the amount of coins staked. Any
malicious activity, such as validating multiple blocks, disagreeing
with the eventual consensus, or otherwise violating protocol rules,
results in the forfeiture or ``slashing'' of a portion of the staked
coins. Proof-of-stake is viewed as more energy efficient and scalable
than proof-of-work and is sometimes referred to as ``virtual mining.''
As of December 31, 2024, every 12 seconds, approximately, a new block
is added to the Cardano Blockchain with the latest transactions
processed by the network, and the validator that generated this block
is awarded ADA.
Limits on ADA Supply
The Cardano Network is structured to allow a maximum of 45 billion
ADA to be created, which are mined over time with the creation of each
new block. The supply of new ADA is mathematically controlled so that
the number of ADA grows at a limited rate pursuant to a pre-set
schedule. This deliberately controlled rate of ADA creation means that
the number of ADA in existence will increase at a controlled rate until
the number of ADA in existence reaches 45 billion ADA.
As of the date hereof, approximately 35 billion ADA were
outstanding, which are scheduled to be issued over time, in the form of
staking rewards.
Modifications to the ADA Protocol
Historically, the Cardano Network's development has historically
been overseen by a core group of developers from the Cardano
Foundation, IOHK and Emmurgo. The core developers are able to access,
and can alter, the Cardano Network source code and, as a result, they
are responsible for quasi-official releases of updates and other
changes to the Cardano Network's source code.
The Cardano network's development has been taking place in five
phases. The first phase, known as Byron, began in 2015 and set the
foundation of the Cardano Network for transitions in connection with
the initial distribution and staking pools. The second phase, known as
Shelley, began in 2019 introduced decentralization and saw the
transition from staking pools being managed by IOHK and Emurgo to being
community-owned. The third phase, known as Gougen, began in 2021 and
introduced smart contract capabilities, enabling developers to build
dApps and users to create new digital assets on the Cardano Network.
The fourth phase, known as Basho, began in 2022 and seeks to improve
scalability and interoperability of the Cardano Network through the
introduction of sidechains. The fifth and final phase, known as
Voltaire, will transfer governance of the Cardano Network to the
community of ADA holders. Specifically, Voltaire is expected to
introduce a formal process for ADA holders to propose and vote on
``Cardano Improvement Proposals.'' Additionally, Voltaire phase is
expected to provide more formal voting rights for ADA holders with
respect to distributions of the Cardano Treasury. The release of
updates to the Cardano Network's source code does not guarantee that
the updates will be automatically adopted. Users and validators must
accept any changes made to the Cardano source code by downloading the
proposed modification of the Cardano Network's source code. A
modification of the Cardano Network's source code is effective only
with respect to the Cardano users and validators that download it. If a
modification is accepted by only a percentage of users and validators,
a division in the Cardano Network will occur such that one network will
run the pre-modification source code and the other network will run the
modified source code. Such a division is known as a ``fork.''
Consequently, as a practical matter, a modification to the source code
becomes part of the Cardano Network only if accepted by participants
collectively having most of the processing power on the Cardano
Network.
Custody of the Trust's ADA
Digital assets and digital asset transactions are recorded and
validated on blockchains, the public transaction ledgers of a digital
asset network. Each digital asset blockchain serves as a record of
ownership for all of the units of such digital asset, even in the case
of certain privacy-preserving digital assets, where the transactions
themselves are not publicly viewable. All digital assets recorded on a
blockchain are associated with a public blockchain address, also
referred to as a digital wallet. Digital assets held at a particular
public blockchain address may be accessed and transferred using a
corresponding private key.
Key Generation
Public addresses and their corresponding private keys are generated
by the Custodian in secret key generation ceremonies at secure
locations inside faraday cages, which are enclosures used to block
electromagnetic fields and thus mitigate against attacks. The Custodian
uses quantum random number generators to generate the public and
private key pairs.
Once generated, private keys are encrypted, separated into
``shards,'' and then further encrypted. After the key generation
ceremony, all materials used to generate private keys, including
[[Page 10969]]
computers, are destroyed. All key generation ceremonies are performed
offline. No party other than the Custodian (including the Trust itself)
has access to the private key shards of the Trust.
Key Storage
Private key shards are distributed geographically in secure vaults
around the world, including in the United States. The locations of the
secure vaults may change regularly and are kept confidential by the
Custodian for security purposes.
The ``Digital Asset Account'' is a segregated custody account
controlled and secured by the Custodian to store private keys, which
allows for the transfer of ownership or control of the Trust's ADA on
the Trust's behalf. The Digital Asset Account uses offline storage, or
``cold,'' mechanisms to secure the Trust's private keys. The term cold
storage refers to a safeguarding method by which the private keys
corresponding to digital assets are disconnected and/or deleted
entirely from the internet. Cold storage of private keys may involve
keeping such keys on a non-networked (or ``air-gapped'') computer or
electronic device or storing the private keys on a storage device (for
example, a USB thumb drive) or printed medium (for example, papyrus,
paper, or a metallic object). A digital wallet may receive deposits of
digital assets but may not send digital assets without use of the
digital assets' corresponding private keys. In order to send digital
assets from a digital wallet in which the private keys are kept in cold
storage, either the private keys must be retrieved from cold storage
and entered into an online, or ``hot,'' digital asset software program
to sign the transaction, or the unsigned transaction must be
transferred to the cold server in which the private keys are held for
signature by the private keys and then transferred back to the online
digital asset software program. At that point, the user of the digital
wallet can transfer its digital assets.
Security Procedures
The Custodian is the custodian of the Trust's private keys (which,
as noted above, facilitate the transfer of ownership or control of the
Trust's ADA) in accordance with the terms and provisions of the
custodian agreement by and between the Custodian, the Sponsor and the
Trust (the ``Custodian Agreement''). Transfers from the Digital Asset
Account require certain security procedures, including, but not limited
to, multiple encrypted private key shards, usernames, passwords and 2-
step verification. Multiple private key shards held by the Custodian
must be combined to reconstitute the private key to sign any
transaction in order to transfer the Trust's assets. Private key shards
are distributed geographically in secure vaults around the world,
including in the United States.
As a result, if any one secure vault is ever compromised, this
event will have no impact on the ability of the Trust to access its
assets, other than a possible delay in operations, while one or more of
the other secure vaults is used instead. These security procedures are
intended to remove single points of failure in the protection of the
Trust's assets.
Transfers of ADA to the Digital Asset Account will be available to
the Trust once processed on the Blockchain.
Subject to obtaining regulatory approval to operate a redemption
program and authorization of the Sponsor, the process of accessing and
withdrawing ADA from the Trust to redeem a Basket will follow the same
general procedure as transferring ADA to the Trust to create a Basket,
only in reverse.
The Sponsor will maintain ownership and control of the Trust's ADA
in a manner consistent with good delivery requirements for spot
commodity transactions.
ADA Value
Digital Asset Trading Platform Valuation
The value of ADA is determined by the value that various market
participants place on ADA through their transactions. The most common
means of determining the value of a ADA is by surveying one or more
Digital Asset Trading Platforms where ADA is traded publicly and
transparently (e.g., Bitfinex, Coinbase, Crypto.com, and Kraken).
Digital Asset Trading Platform Public Market Data
On each online Digital Asset Trading Platform, ADA is traded with
publicly disclosed valuations for each executed trade, measured by one
or more fiat currencies such as the U.S. dollar or euro or by the
widely used cryptocurrency Bitcoin. Over-the-counter dealers or market
makers do not typically disclose their trade data.
As of December 31, 2024, the Digital Asset Trading Platforms
included in the Index were Coinbase, Crypto.com, Bitfinex, and Kraken.
As further described below, the Sponsors and the Trust reasonably
believe each of these Digital Asset Trading Platforms are in material
compliance with applicable U.S. federal and state licensing
requirements (except for Bitfinex as detailed below) and maintain
practices and policies designed to comply with anti-money laundering
(``AML'') and know-your-customer (``KYC'') regulations.
Coinbase: A U.S.-based trading platform registered as a money
services business (``MSB'') with the Financial Crimes Enforcement
Network (``FinCEN'') and licensed as a virtual currency business under
the New York State Department of Financial Services (``NYDFS'')
BitLicense as well as a money transmitter in various U.S. states.
Crypto.com: A Singapore-based trading platform registered as an MSB
with FinCEN and licensed as a money transmitter in various U.S. states.
Crypto.com does not hold a BitLicense.
Bitfinex: A British Virgin Islands based trading platform. Bitfinex
does not hold any licenses or registrations in the U.S. and is not
available to U.S. based customers. Bitfinex is categorized by the Index
Provider as a ``Category 2'' trading platform which meets the Inclusion
Criteria outlined below but is non-U.S. licensed.
Kraken: A U.S.-based trading platform registered as an MSB with
FinCEN and licensed as a money transmitter in various U.S. states.
Kraken does not hold a BitLicense.
Currently, there are several Digital Asset Trading Platforms
operating worldwide and online Digital Asset Trading Platforms
represent a substantial percentage of ADA buying and selling activity
and provide the most data with respect to prevailing valuations of ADA.
These trading platforms include established trading platforms such as
trading platforms included in the Index which provide a number of
options for buying and selling ADA. The below table reflects the
trading volume in ADA and market share of the ADA-U.S. dollar trading
pairs of each of the Digital Asset Trading Platforms included in the
Index as of December 31, 2024, (collectively, ``Constituent Trading
Platforms'') using data since January 1, 2024:
[[Page 10970]]
------------------------------------------------------------------------
ADA Trading Platforms included in
the Index as of December 31, 2024 Volume (ADA) Market share \2\
\1\ (%)
------------------------------------------------------------------------
Coinbase.......................... 12,794,724,982 66.86
Kraken............................ 3,385,771,441 17.69
Crypto.com........................ 1,929,570,120 10.08
Bitfinex.......................... 655,644,313 3.43
-------------------------------------
Total U.S. Dollar-ADA trading 18,765,710,856 98.06
pair.........................
------------------------------------------------------------------------
\1\ Effective October 28, 2024, the Index Provider added Bitfinex to the
Index due to the trading platform meeting the Index Provider's minimum
liquidity requirement, and did not remove any Constituent Trading
Platforms as part of its scheduled quarterly review.
\2\ Market share is calculated using trading volume (in ADA) for certain
Digital Asset Trading Platforms including, Coinbase, Crypto.com,
Bitfinex and Kraken, as well as certain other large U.S.-dollar
denominated Digital Asset Trading Platforms that were not included in
the Index as of December 31, 2024, including Bitstamp.
Forms of Attack Against the Cardano Network
All networked systems are vulnerable to various kinds of attacks.
As with any computer network, the Cardano Network contains certain
flaws. For example, the Cardano Network is currently vulnerable to a
``51% attack'' where, if a party or group were to gain control of more
than 50% of the staked ADA, a malicious actor would be able to gain
full control of the network and the ability to manipulate the Cardano
Blockchain. As of the date of filing, the top three largest staking
pools controlled approximately 1.3% of the ADA staked on the Cardano
Network.
In addition, many digital asset networks have been subjected to a
number of denial of service attacks, which has led to temporary delays
in block creation and in the transfer of ADA. Any similar attacks on
the Cardano Network that impact the ability to transfer ADA could have
a material adverse effect on the price of ADA and the value of the
Shares.
The Index and the Index Price
The Index is a U.S. dollar-denominated composite reference rate for
the price of ADA. The Index is designed to (1) mitigate the effects of
fraud, manipulation and other anomalous trading activity from impacting
the ADA reference rate, (2) provide a real-time, volume-weighted fair
value of ADA and (3) appropriately handle and adjust for non-market
related events.
The Index Price is determined by the Index Provider through a
process in which trade data is cleansed and compiled in such a manner
as to algorithmically reduce the impact of anomalistic or manipulative
trading. This is accomplished by adjusting the weight of each data
input based on price deviation relative to the observable set, as well
as recent and long-term trading volume at each venue relative to the
observable set.
The value of the Index is calculated and disseminated on a 24-hour
basis and will be available on a continuous basis.
Constituent Trading Platform Selection
According to the Prospectus, the Digital Asset Trading Platforms
that are included in the Index are selected by the Index Provider
utilizing a methodology that is guided by the International
Organization of Securities Commissions (``IOSCO'') principles for
financial benchmarks. For a trading platform to become a Constituent
Trading Platform, it must satisfy each of the criteria listed below
(the ``Inclusion Criteria''):
Sufficient USD or USDC liquidity relative to the size of
the listed assets;
No evidence in the past 12 months of trading restrictions
on individuals or entities that would otherwise meet the trading
platform's eligibility requirements to trade;
No evidence in the past 12 months of undisclosed
restrictions on deposits or withdrawals from user accounts;
Real-time price discovery;
Limited or no capital controls; \19\
---------------------------------------------------------------------------
\19\ ``Capital controls'' in this context means governmental
sanctions that would limit the movement of capital into, or out of,
the jurisdiction in which such Digital Asset Trading Platforms
operate.
---------------------------------------------------------------------------
Transparent ownership including a publicly-known ownership
entity;
Publicly available language and policies addressing legal
and regulatory compliance in the U.S., including KYC, AML and other
policies designed to comply with relevant regulations that might apply
to it;
Be a trading platform that is licensed and able to service
investors in one or more of the following jurisdictions:
[cir] United States,
[cir] United Kingdom,
[cir] European Union,
[cir] Hong Kong,
[cir] Singapore; and
Offer programmatic spot trading of the trading pair \20\
and reliably publish trade prices and volumes on a real-time basis
through Rest and Websocket APIs.
---------------------------------------------------------------------------
\20\ Trading platforms with programmatic trading offer traders
an application programming interface that permits trading by sending
programmed commands to the trading platform.
---------------------------------------------------------------------------
A Digital Asset Trading Platform is removed as a Constituent
Trading Platform when it no longer satisfies the Inclusion Criteria.
The Index Provider does not currently include data from over-the-
counter markets or derivatives platforms among the Constituent Trading
Platforms. According to the Prospectus, over-the-counter data is not
currently included because of the potential for trades to include a
significant premium or discount paid for larger liquidity, which
creates an uneven comparison relative to more active markets. There is
also a higher potential for over-the-counter transactions to not be
arms-length, and thus not be representative of a true market price.
The Index Provider and the Sponsor have entered into the index
license agreement, dated as of February 1, 2022 (as amended, the
``Index License Agreement''), governing the Sponsor's use of the Index
Price.\21\ Pursuant to the terms of the Index License Agreement, the
Index Provider may adjust the calculation methodology for the Index
Price without notice to, or consent of, the Trust or its shareholders.
The Index Provider may decide to change the calculation methodology to
maintain the integrity of the Index Price calculation should it
identify or become aware of previously unknown variables or issues with
the existing methodology that it believes could materially impact its
performance and/or reliability. The Index Provider has sole discretion
over the determination of Index Price and may change the methodologies
for determining the Index Price from time to time. Shareholders will be
notified of any material changes to the calculation methodology or the
Index Price in the Trust's current reports and will be
[[Page 10971]]
notified of all other changes that the Sponsor considers significant in
the Trust's periodic or current reports. The Sponsor will determine the
materiality of any changes to the Index Price on a case-by-case basis,
in consultation with external counsel.
---------------------------------------------------------------------------
\21\ Upon entering into the Index License Agreement, the Sponsor
and the Index Provider terminated the license agreement between the
parties dated as of February 28, 2019.
---------------------------------------------------------------------------
The Index Provider may change the trading venues that are used to
calculate the Index or otherwise change the way in which the Index is
calculated at any time. For example, the Index Provider has scheduled
quarterly reviews in which it may add or remove Constituent Trading
Platforms that satisfy or fail the Inclusion Criteria. The Index
Provider does not have any obligation to consider the interests of the
Sponsor, the Trust, the shareholders, or anyone else in connection with
such changes. While the Index Provider is not required to publicize or
explain the changes or to alert the Sponsor to such changes, it has
historically notified the Trust (and other subscribers to the Index) of
any material changes to the Constituent Trading Platforms, including
any additions or removals, contemporaneous with its issuance of press
releases in connection with the same. The Sponsor will notify investors
of any such material event by filing a current report on Form 8-K.
Although the Index methodology is designed to operate without any
manual intervention, rare events would justify manual intervention.
Intervention of this kind would be in response to non-market-related
events, such as the halting of deposits or withdrawals of funds on a
Digital Asset Trading Platform, the unannounced closure of operations
on a Digital Asset Trading Platform, insolvency or the compromise of
user funds. In the event that such an intervention is necessary, the
Index Provider would issue a public announcement through its website,
API and other established communication channels with its clients.
Determination of the Index Price
The Index applies an algorithm to the price of ADA on the
Constituent Trading Platforms calculated on a per second basis over a
24-hour period. The Index's algorithm is expected to reflect a four-
pronged methodology to calculate the Index Price from the Constituent
Trading Platforms:
Volume Weighting: Constituent Trading Platforms with
greater liquidity receive a higher weighting in the Index, increasing
the ability to execute against (i.e., replicate) the Index in the
underlying spot markets.
Price-Variance Weighting: The Index Price reflects data
points that are discretely weighted in proportion to their variance
from the rest of the Constituent Trading Platforms. As the price at a
particular trading platform diverges from the prices at the rest of the
Constituent Trading Platforms, its weight in the Index Price
consequently decreases.
Inactivity Adjustment: The Index Price algorithm penalizes
stale activity from any given Constituent Trading Platform. When a
Constituent Trading Platform does not have recent trading data, its
weighting in the Index Price is gradually reduced until it is de-
weighted entirely. Similarly, once trading activity at a Constituent
Trading Platform resumes, the corresponding weighting for that
Constituent Trading Platform is gradually increased until it reaches
the appropriate level.
Manipulation Resistance: In order to mitigate the effects
of wash trading and order book spoofing, the Index only includes
executed trades in its calculation and the Index only includes
Constituent Trading Platforms that charge trading fees to its users in
order to attach a real, quantifiable cost to any manipulation attempts.
The Index Provider re-evaluates the weighting algorithm on a
periodic basis, but maintains discretion to change the way in which an
Index Price is calculated based on its periodic review or in extreme
circumstances and does not make the exact methodology to calculate the
Index Price publicly available. Nonetheless, the Sponsors believe that
the Index is designed to limit exposure to trading or price distortion
of any individual Digital Asset Trading Platform that experiences
periods of unusual activity or limited liquidity by discounting, in
real-time, anomalous price movements at individual Digital Asset
Trading Platforms.
The Sponsors believe the Index Provider's selection process for
Constituent Trading Platforms as well as the methodology of the Index
Price's algorithm provides a more accurate picture of ADA price
movements than a simple average of Digital Asset Trading Platform spot
prices, and that the weighting of ADA prices on the Constituent Trading
Platforms limits the inclusion of data that is influenced by temporary
price dislocations that may result from technical problems, limited
liquidity or fraudulent activity elsewhere in the ADA spot market. By
referencing multiple trading venues and weighting them based on trade
activity, the Sponsors believe that the impact of any potential fraud,
manipulation or anomalous trading activity occurring on any single
venue is reduced.
If the Index Price becomes unavailable, or if the Sponsor
determines in good faith that such Index Price does not reflect an
accurate price for ADA, then the Sponsor will, on a best efforts basis,
contact the Index Provider to obtain the Index Price directly from the
Index Provider. If after such contact such Index Price remains
unavailable or the Sponsor continues to believe in good faith that such
Index Price does not reflect an accurate price for ADA, then the
Sponsor will employ a cascading set of rules to determine the Index
Price, as described below in ``Determination of the Index Price When
Index Price is Unavailable.''
The Trust values its ADA for operational purposes by reference to
the Index Price. The Index Price is the value of ADA as represented by
the Index, calculated at 4:00 p.m., New York time, on each business
day.
Illustrative Example
For the purposes of illustration, outlined below are examples of
how the attributes that impact weighting and adjustments in the
aforementioned methodology may be utilized to generate the Index Price
for a digital asset. For example, Constituent Trading Platforms used to
calculate the Index Price of the digital asset may include trading
platforms such as Coinbase, Kraken, LMAX Digital, and Crypto.com.
The Index Price algorithm, as described above, is designed to
account for manipulation at the outset by only including data from
executed trades on Constituent Trading Platforms that charge trading
fees. Then, the below-listed elements may impact the weighting of the
Constituent Trading Platforms on the Index Price as follows:
Volume Weighting: Each Constituent Trading Platform will
be weighted to appropriately reflect the trading volume share of the
Constituent Trading Platform relative to all the Constituent Trading
Platforms during this same period. For example, an average hourly
weighting of 67.06%, 14.57%, 11.88%, and 6.49% for Coinbase, Kraken,
LMAX Digital, and Crypto.com, respectively, would represent each
Constituent Trading Platform's share of trading volume during the same
period.
Inactivity Adjustment: Assume that a Constituent Trading
Platform represented a 14% weighting on the Index Price of the digital
asset, which is based on the per-second calculations of its trading
volume and price-variance relative to the cohort of Constituent Trading
Platforms included in such Index, and then went offline for
approximately two hours. The index algorithm would automatically
recognize inactivity and start de-
[[Page 10972]]
weighting the Constituent Trading Platform at the 3-minute mark and
continue to do so over a 7-minute period until its influence was
effectively zero, 10 minutes after becoming inactive. As soon as
trading activity resumed at the Constituent Trading Platform, the index
algorithm would re-weight it to the appropriate weighting based on
trading volume and price-variance relative to the cohort of Constituent
Trading Platforms included in the Index. Due to the period of
inactivity, it would re-weight the Constituent Trading Platform
activity to a weight lower than its original weighting--for example, to
12%.
Price-Variance Weighting: The price-variance weighting
adjustment is a relative measure of each Constituent Trading Platform
versus the cohort of Constituent Trading Platforms. The further the
price at a Constituent Trading Platform is from the mean price of the
cohort, the less influence that trading platform's price will have on
the algorithm that produces the Index Price, as the trading platform
data is discretely weighted in proportion to their variance from the
rest of the trading platforms on a per-second basis and there is no
minimum threshold the variance must meet for this adjustment to take
place. For example, assume that for a one-hour period, the digital
asset's execution prices on one Constituent Trading Platform were
trading more than 7% higher than the average execution prices on
another Constituent Trading Platform. The algorithm is designed to
automatically detect the anomaly (price variance) and reduce that
specific Constituent Trading Platform's weighting during that one-hour
period, ensuring a spot reference price that is more reflective of
broader market activity.
Determination of the Index Price When Index Price Is Unavailable
The Sponsor uses the following cascading set of rules to calculate
the Index Price when the Index Price is unavailable.\22\ For the
avoidance of doubt, the Sponsor will employ the below rules
sequentially and in the order as presented below, should one or more
specific rule(s) fail:
---------------------------------------------------------------------------
\22\ The Sponsor updated these rules on January 11, 2022.
---------------------------------------------------------------------------
1. Index Price = The price set by the Index as of 4:00 p.m., New
York time, on the valuation date.\23\ If the Index becomes unavailable,
or if the Sponsor determines in good faith that the Index does not
reflect an accurate price, then the Sponsor will, on a best efforts
basis, contact the Index Provider to obtain the Index Price directly
from the Index Provider. If after such contact the Index remains
unavailable or the Sponsor continues to believe in good faith that the
Index does not reflect an accurate price, then the Sponsor will employ
the next rule to determine the Index Price. There are no predefined
criteria to make a good faith assessment and it will be made by the
Sponsor in its sole discretion.
---------------------------------------------------------------------------
\23\ The valuation date is any day for which the value of the
ADA in the Trust may be calculated utilizing the Index Price.
---------------------------------------------------------------------------
2. Index Price = The price set by Coin Metrics Real-Time Rate (the
``Secondary Index'') as of 4:00 p.m., New York time, on the valuation
date (the ``Secondary Index Price''). The Secondary Index Price is a
real-time reference rate price, calculated using trade data from
constituent markets selected by Coin Metrics, Inc. (the ``Secondary
Index Provider''). The Secondary Index Price is calculated by applying
weighted-median techniques to such trade data where half the weight is
derived from the trading volume on each constituent market and half is
derived from inverse price variance, where a constituent market with
high price variance as a result of outliers or market anomalies
compared to other constituent markets is assigned a smaller weight. If
the Secondary Index becomes unavailable, or if the Sponsor determines
in good faith that the Secondary Index does not reflect an accurate
price, then the Sponsor will, on a best efforts basis, contact the
Secondary Index Provider to obtain the Secondary Index Price directly
from the Secondary Index Provider. If after such contact the Secondary
Index remains unavailable or the Sponsor continues to believe in good
faith that the Secondary Index does not reflect an accurate price, then
the Sponsor will employ the next rule to determine the Index Price.
There are no predefined criteria to make a good faith assessment and it
will be made by the Sponsor in its sole discretion.
3. Index Price = The price set by the Trust's principal market (as
defined in the Prospectus) (the ``Tertiary Pricing Option'') as of 4:00
p.m., New York time, on the valuation date. The Tertiary Pricing Option
is a spot price derived from the principal market's public data feed
that is believed to be consistently publishing pricing information as
of 4:00 p.m., New York time, and is provided to the Sponsor via an
application programming interface. If the Tertiary Pricing Option
becomes unavailable, or if the Sponsor determines in good faith that
the Tertiary Pricing Option does not reflect an accurate price, then
the Sponsor will, on a best efforts basis, contact the Tertiary Pricing
Provider to obtain the Tertiary Pricing Option directly from the
Tertiary Pricing Provider. If after such contact the Tertiary Pricing
Option remains unavailable after such contact or the Sponsor continues
to believe in good faith that the Tertiary Pricing Option does not
reflect an accurate price, then the Sponsor will employ the next rule
to determine the Index Price. There are no predefined criteria to make
a good faith assessment and it will be made by the Sponsor in its sole
discretion.
4. Index Price = The Sponsor will use its best judgment to
determine a good faith estimate of the Index Price. There are no
predefined criteria to make a good faith assessment and it will be made
by the Sponsor in its sole discretion.
In the event of a fork, the Index Provider may calculate the Index
Price based on a digital asset that the Sponsor does not believe to be
an appropriate asset of the Trust (i.e., a digital asset other than
ADA).\24\ In this event, the Sponsor has full discretion to use a
different index provider or calculate the Index Price itself using its
best judgment. In such an event, the Exchange will submit a proposed
rule filing to contemplate the assets that would subsequently be held
by the Trust.
---------------------------------------------------------------------------
\24\ According to the Annual Report, the Cardano Network
operates using open-source protocols, meaning that any user can
download the software, modify it and then propose that the users and
validators of ADA adopt the modification. When a modification is
introduced and a substantial majority of users and validators'
consent to the modification, the change is implemented and the
network remains uninterrupted. However, if less than a substantial
majority of users and validators' consent to the proposed
modification, and the modification is not compatible with the
software prior to its modification, the consequence would be what is
known as a ``hard fork'' of the Cardano Network, with one group
running the pre-modified software and the other running the modified
software. The effect of such a fork would be the existence of two
versions of ADA running in parallel, yet lacking interchangeability.
---------------------------------------------------------------------------
The Sponsor may, in its sole discretion, select a different index
provider, select a different index price provided by the Index
Provider, calculate the Index Price by using the cascading set of rules
set forth above, or change the cascading set of rules set forth above
at any time.\25\
---------------------------------------------------------------------------
\25\ The Sponsor will provide notice of any such changes in the
Trust's periodic or current reports and, if the Sponsor makes such a
change other than on an ad hoc or temporary basis, will file a
proposed rule change with the Commission.
---------------------------------------------------------------------------
The Structure and Operation of the Trust Protects Investors
As described below, the Sponsors believe the structure and
operation of
[[Page 10973]]
the Trust are designed to mitigate fraudulent and manipulative acts and
practices, to protect investors and the public interest. The Sponsors
accordingly believe the Commission should approve the listing and
trading of Shares of the Trust.
Design of the Index
The Sponsors believe the Index represents an effective means to
mitigate the impact of potential fraud and manipulation on the
reference price for ADA. The Index operates materially similarly to
CoinDesk Bitcoin Price Index (XBX).
The Sponsors believe that the Index can (i) mitigate the effects of
fraud, manipulation and other anomalous trading activity on the ADA
reference rate, (ii) provide a real-time, volume-weighted fair value of
ADA and (iii) appropriately handle and adjust for non-market related
events.
As described in more detail below, the Sponsors believe that the
Index accomplishes those objectives in the following ways:
1. The Index tracks the Digital Asset Trading Platform Market price
through trading activity at Constituent Trading Platforms, the majority
of which are ``U.S.-Compliant Trading Platforms''; \26\
---------------------------------------------------------------------------
\26\ ``U.S.-Compliant Trading Platforms'' are trading platforms
in the Digital Asset Trading Platform Market that are compliant with
applicable U.S. federal and state licensing requirements and
practices regarding AML and KYC regulations. All Constituent Trading
Platforms (except for Bitfinex as detailed above) are U.S.-Compliant
Trading Platforms. ``Non-U.S.-Compliant Trading Platforms'' are all
other trading platforms in the Digital Asset Trading Platform
Market. As of the date of this filing, the U.S.-Compliant Trading
Platforms that the Index Provider considered for inclusion in the
Index were Bitstamp, Coinbase, Crypto.com and Kraken. From these
U.S.-Compliant Trading Platforms, the Index Provider then applies
additional Inclusion Criteria to determine the Constituent Trading
Platforms.
---------------------------------------------------------------------------
2. The Index mitigates the impact of instances of fraud,
manipulation and other anomalous trading activity in real-time through
systematic adjustments;
3. The Index is constructed and maintained by an expert third-party
index provider, allowing for prudent handling of non-market-related
events; and
4. The Index mitigates the impact of instances of fraud,
manipulation and other anomalous trading activity concentrated on any
one specific trading platform through a cross-trading platform
composite index rate.
1. The Index tracks the Digital Asset Trading Platform Market price
through trading activity at Constituent Trading Platforms, the majority
of which are ``U.S.-Compliant Trading Platforms.''
To reduce the risk of fraud, manipulation, and other anomalous
trading activity from impacting the Index, the Index Provider
prioritizes the inclusion of U.S.-Compliant Trading Platforms in the
Index.
The Index maintains a minimum number of three trading platforms and
a maximum number of eight trading platforms to track the Digital Asset
Trading Platform Market while offering replicability for traders and
market makers.\27\
---------------------------------------------------------------------------
\27\ According to the Sponsors, the more trading platforms
included in the Index, the more ability there is for traders and
market makers to trade against the Index by arbitraging price
differences. For example, in the event of variances between ADA
prices on Constituent Trading Platforms and non-Constituent Trading
Platforms, arbitrage trading opportunities would exist. These
discrepancies generally consolidate over time, as price differences
across trading platforms are realized and capitalized upon by
traders and market makers.
---------------------------------------------------------------------------
U.S.-Compliant Trading Platforms possess safeguards that protect
against fraud and manipulation. For example, U.S.-Compliant Trading
Platforms regulated by the NYDFS under the BitLicense program are
required to have regulatory requirements to implement measures designed
to effectively detect, prevent, and respond to fraud, attempted fraud,
market manipulation, and similar wrongdoing, and to monitor, control,
investigate and report back to the NYDFS regarding any wrongdoing.\28\
These trading platforms also have the following obligations: \29\
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\28\ See, e.g., ``DFS Takes Action to Deter Fraud and
Manipulation in Virtual Currency Markets,'' available at https://www.dfs.ny.gov/about/press/pr1802071.htm.
\29\ See ``New York's Final ``BitLicense'' Rule: Overview and
Changes from July 2014 Proposal,'' June 5, 2015, Davis Polk,
available at https://www.davispolk.com/files/new_yorks_final_bitlicense_rule_overview_changes_july_2014_proposal.pdf.
---------------------------------------------------------------------------
Submission of audited financial statements including
income statements, statements of assets/liabilities, insurance, and
banking;
Compliance with capitalization requirements set at NYDFS's
discretion;
Prohibitions against the sale or encumbrance to protect
full reserves of custodian assets;
Fingerprints and photographs of employees with access to
customer funds;
Retention of a qualified Chief Information Security
Officer and annual penetration testing/audits;
Documented business continuity and disaster recovery plan,
independently tested annually; and
Participation in an independent exam by NYDFS.
Other U.S.-Compliant Trading Platforms have voluntarily implemented
certain measures to protect against common forms of market
manipulation.\30\
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\30\ As of the date of this filing, one of the four Constituent
Trading Platforms, Coinbase, is regulated by NYDFS.
---------------------------------------------------------------------------
Furthermore, all U.S.-Compliant Trading Platforms are considered
MSBs that are subject to FinCEN's federal and state reporting
requirements that provide additional safeguards. For example,
unscrupulous traders may be less likely to engage in fraudulent or
manipulative acts and practices on trading platforms that (1) report
suspicious activity to FinCEN as money services businesses, (2) report
to state regulators as money transmitters, and/or (3) require customer
identification through KYC procedures. U.S.-Compliant Trading Platforms
are required to: \31\
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\31\ See BSA Requirements for MSBs, FinCEN website: https://www.fincen.gov/bsarequirements-msbs.
---------------------------------------------------------------------------
Identify people with ownership stakes or controlling roles
in the MSB;
Establish a formal Anti-Money Laundering (AML) policy in
place with documentation, training, independent review, and a named
compliance officer;
Implement strict customer identification and verification
policies and procedures;
File Suspicious Activity Reports (SARs) for suspicious
customer transactions;
File Currency Transaction Reports (CTRs) for cash-in or
cash-out transactions greater than $10,000; and
Maintain a five-year record of currency exchanges greater
than $1,000 and money transfers greater than $3,000.
2. The Index mitigates the impact of instances of fraud,
manipulation, and other anomalous trading activity in real-time through
systematic adjustments.
The Index is calculated once every second according to a systematic
methodology that relies on observed trading activity on the Constituent
Trading Platforms. While the precise methodology underlying the Index
is currently proprietary, the key elements of the Index are outlined
below:
Volume Weighting: Constituent Trading Platforms with
greater liquidity receive a higher weighting in the Index, increasing
the ability to execute against (i.e., replicate) the Index in the
underlying spot markets.
Price-Variance Weighting: The Index reflects data points
that are discretely weighted in proportion to their variance from the
rest of the Constituent Trading Platforms. As the price at a
Constituent Trading Platform diverges from the prices at the rest of
the Constituent Trading Platforms, its
[[Page 10974]]
weight in the Index consequently decreases.
Inactivity Adjustment: The Index algorithm penalizes stale
activity from any given Constituent Trading Platform. When a
Constituent Trading Platform does not have recent trading data, its
weighting in the Index is gradually reduced, until it is de-weighted
entirely. Similarly, once trading activity at the Constituent Trading
Platform resumes, the corresponding weighting for that Constituent
Trading Platform is gradually increased until it reaches the
appropriate level.
Manipulation Resistance: In order to mitigate the effects
of wash trading and order book spoofing, the Index only includes
executed trades in its calculation and the Index only includes
Constituent Trading Platforms that charge trading fees to its users in
order to attach a real, quantifiable cost to any manipulation attempts.
The Index Provider reviews and periodically updates the Constituent
Trading Platforms included in the Index by utilizing a methodology that
is guided by the IOSCO principles for financial benchmarks.
3. The Index is constructed and maintained by an expert third-party
index provider, allowing for prudent handling of non-market-related
events.
The Index Provider reviews and periodically updates which trading
platforms are included in the Index by utilizing a methodology that is
guided by the IOSCO principles for financial benchmarks.
According to the Index methodology, for a trading platform to
become a Constituent Trading Platform, it must satisfy each of the
following Inclusion Criteria:
Sufficient USD or USDC liquidity relative to the size of
the listed assets;
No evidence in the past 12 months of trading restrictions
on individuals or entities that would otherwise meet the trading
platform's eligibility requirements to trade;
No evidence in the past 12 months of undisclosed
restrictions on deposits or withdrawals from user accounts;
Real-time price discovery;
Limited or no capital controls;
Transparent ownership including a publicly-known ownership
entity;
Publicly available language and policies addressing legal
and regulatory compliance in the U.S., including KYC, AML and other
policies designed to comply with relevant regulations that might apply
to it; \32\
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\32\ To the extent a Digital Asset Trading Platform does not
service U.S. customers, it will still be eligible for inclusion in
the Index so long as it has publicly available language and policies
addressing legal and regulatory compliance, including KYC, AML and
other policies designed to comply with regulations applicable to
such platform.
---------------------------------------------------------------------------
Be a trading platform that is licensed and able to service
investors in one or more of the following jurisdictions:
[cir] United States,
[cir] United Kingdom,
[cir] European Union,
[cir] Hong Kong,
[cir] Singapore; and
Offer programmatic spot trading of the trading pair and
reliably publish trade prices and volumes on a real-time basis through
Rest and Websocket APIs.
Although the Index methodology is designed to operate without any
human interference, rare events would justify manual intervention.
Manual intervention would only be in response to ``non-market-related
events'' (e.g., halting of deposits or withdrawals of funds,
unannounced closure of trading platform operations, insolvency,
compromise of user funds, etc.). In the event that such an intervention
is necessary, the Index Provider would issue a public announcement
through its website, API and other established communication channels
with its clients.\33\
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\33\ To the extent any such intervention has a material impact
on the Trust, the Sponsor will also issue a public announcement.
---------------------------------------------------------------------------
4. The Index mitigates the impact of instances of fraud,
manipulation and other anomalous trading activity concentrated on any
one specific trading platform through a cross-trading platform
composite index rate.
The Index is based on the price and volume data of multiple
Constituent Trading Platforms that satisfy the Index Provider's
Inclusion Criteria. By referencing multiple trading venues and
weighting them based on trade activity, the impact of any potential
fraud, manipulation, or anomalous trading activity occurring on any
single venue is reduced. Specifically, the effects of fraud,
manipulation, or anomalous trading activity occurring on any single
venue are de-weighted and consequently diluted by non-anomalous trading
activity from other Constituent Trading Platforms.
Although the Index is designed to accurately capture the market
price of ADA, third parties may be able to purchase and sell ADA on
public or private markets not included among the constituent Digital
Asset Trading Platforms of the Index, and such transactions may take
place at prices materially higher or lower than the Index Price.
Moreover, there may be variances in the prices of ADA on the various
Digital Asset Trading Platforms, including as a result of differences
in fee structures or administrative procedures on different Digital
Asset Trading Platforms. For example, based on data provided by the
Index Provider, on any given day during the twelve months ended
December 31, 2024, the maximum differential between the 4:00 p.m., New
York time spot price of any single Digital Asset Trading Platform
included in the Index and the Index Price was 2.07% and the average of
the maximum differentials of the 4:00 p.m., New York time spot price of
each Digital Asset Trading Platform included in the Index and the Index
Price was 0.90%. During this same period, the average differential
between the 4:00 p.m., New York time spot prices of all the Digital
Asset Trading Platforms included in the Index and the Index Price was
0.01%. All Digital Asset Trading Platforms that were included in the
Index throughout the period were considered in this analysis.
Additionally, given pricing on the Digital Asset Trading Platforms
is known to the market, the Sponsors believe that, even if efforts to
manipulate the price of ADA at 4:00 p.m., Eastern Time (``E.T.''). were
successful on a Digital Asset Trading Platform, the effect of such
activity on the pricing of the Trust would be mitigated due to the
controls embedded in the structure of the Index.
Accordingly, the Sponsors believe that the Index has proven its
ability to (i) mitigate the effects of fraud, manipulation and other
anomalous trading activity on the ADA reference rate, (ii) provide a
real-time, volume-weighted fair value of ADA and (iii) appropriately
handle and adjust for non-market related events.
Creation and Redemption of Shares
Authorized Participants may submit orders to create or redeem
Shares under procedures for ``Cash Orders.''
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 ADA 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 ADA as part of the creation or
redemption process.
The Trust will create Shares by receiving ADA from a third party
that is not the Authorized Participant, and the Trust, or an affiliate
of the Trust (and in any event not the Authorized Participant), is
responsible for selecting
[[Page 10975]]
the third party to deliver the ADA. Further, the third party will not
be acting as an agent of the Authorized Participant with respect to the
delivery of the ADA to the Trust nor acting at the direction of the
Authorized Participant with respect to the delivery of the ADA to the
Trust. The Trust will redeem Shares by delivering ADA to a third party
that is not the Authorized Participant, and the Trust, or an affiliate
of the Trust (and in any event not the Authorized Participant), is
responsible for selecting the third party to receive the ADA. Further,
the third party will not be acting as an agent of the Authorized
Participant with respect to the receipt of the ADA from the Trust nor
acting at the direction of the Authorized Participant with respect to
the receipt of the ADA from the Trust.
Cash Orders are made through the participation of a Liquidity
Provider \34\ who obtains or receives ADA in exchange for cash, and are
facilitated by the Transfer Agent and Grayscale Investments Sponsors,
LLC, acting in its capacity as the Liquidity Engager. Liquidity
Providers are not party to the Participant Agreements (as defined
below) and are engaged separately by the Liquidity Engager.
---------------------------------------------------------------------------
\34\ A ``Liquidity Provider'' means one or more eligible
companies that facilitate the purchase and sale of ADA in connection
with creations or redemptions pursuant to Cash Orders. The Liquidity
Providers with which Grayscale Investments Sponsors, LLC, acting
other than in its capacity as the Sponsor (in such other capacity,
the ``Liquidity Engager'') will engage in ADA transactions are third
parties that are not affiliated with the Sponsor or the Trust and
are not acting as agents of the Trust, the Sponsor, or any
Authorized Participant, and all transactions will be done on an
arms-length basis. Except for the contractual relationships between
each Liquidity Provider and Grayscale Investments Sponsors, LLC in
its capacity as the Liquidity Engager, there is no contractual
relationship between each Liquidity Provider and the Trust, the
Sponsor, or any Authorized Participant. When seeking to buy ADA in
connection with creations or sell ADA in connection with
redemptions, the Liquidity Engager will seek to obtain commercially
reasonable prices and terms from the approved Liquidity Providers.
Once agreed upon, the transaction will generally occur on an ``over-
the-counter'' basis.
---------------------------------------------------------------------------
According to the Registration Statement, the Trust creates Baskets
(as described below) of Shares only upon receipt of ADA and redeems
Shares only by distributing ADA. ``Authorized Participants'' are the
only persons that may place orders to create and redeem Baskets. Each
Authorized Participant must (i) be a registered broker-dealer and (ii)
enter into an agreement with the Sponsor and Transfer Agent that
provides the procedures for the creation and redemption of Baskets and
for the delivery of ADA required for the creation and redemption of
Baskets via a Liquidity Provider (each, a ``Participant Agreement'').
An Authorized Participant may act for its own account or as agent for
broker-dealers, custodians and other securities market participants
that wish to create or redeem Baskets. Shareholders who are not
Authorized Participants will only be able to create or redeem their
Shares through an Authorized Participant.
The Trust issues Shares to and redeems Shares from Authorized
Participants on an ongoing basis, but only in one or more ``Baskets''
(with a Basket being a block of 10,000 Shares). The Trust will not
issue fractions of a Basket.
The creation and redemption of Baskets will be made only in
exchange for the delivery to the Trust, or the distribution by the
Trust, of the number of whole and fractional ADA represented by each
Basket being created or redeemed, which is determined by dividing (x)
the number of ADA owned by the Trust at 4:00 p.m., New York time, on
the trade date of a creation or redemption order, after deducting the
number of ADA representing the U.S. dollar value of accrued but unpaid
fees and expenses of the Trust (converted using the Index Price at such
time, and carried to the eighth decimal place), by (y) the number of
Shares outstanding at such time (with the quotient so obtained
calculated to one one-hundred-millionth of one ADA (i.e., carried to
the eighth decimal place)), and multiplying such quotient by 10,000
(the ``Basket Amount''). The U.S. dollar value of a Basket is
calculated by multiplying the Basket Amount by the Index Price as of
the trade date (the ``Basket NAV''). The Basket NAV multiplied by the
number of Baskets being created or redeemed is referred to as the
``Total Basket NAV.'' All questions as to the calculation of the Basket
Amount will be conclusively determined by the Sponsor and will be final
and binding on all persons interested in the Trust. The number of ADA
represented by a Share will gradually decrease over time as the Trust's
ADA are used to pay the Trust's expenses.
The creation of Baskets requires the delivery by the Authorized
Participant of a cash amount equivalent to the Total Basket Amount and
the redemption of Baskets requires the distribution to the Authorized
Participant of a cash amount equivalent to the Total Basket Amount.
Although the Trust creates Baskets only upon the receipt of ADA,
and redeems Baskets only by distributing ADA, an Authorized Participant
will submit Cash Orders, pursuant to which the Authorized Participant
will deposit cash with, or accept cash from, the Transfer Agent in
connection with the creation and redemption of Baskets.
Cash Orders will be facilitated by the Transfer Agent and Liquidity
Engager, acting other than in its capacity as Sponsor. On an order-by-
order basis, the Liquidity Engager will engage one or more Liquidity
Providers to obtain or receive ADA in exchange for cash in connection
with such order, as described in more detail below.
Unless the Sponsor requires that a Cash Order be effected at actual
execution prices (an ``Actual Execution Cash Order''),\35\ each
Authorized Participant that submits a Cash Order to create or redeem
Baskets (a ``Variable Fee Cash Order'') \36\ will pay a fee (the
``Variable Fee'') based on the Total Basket NAV, and any price
differential of ADA between the trade date and the settlement date will
be borne solely by the Liquidity Provider until such ADA have been
received or liquidated by the Trust. The Variable Fee is intended to
cover all of a Liquidity Provider's expenses in connection with the
creation or redemption order, including any ADA trading platform fees
that the Liquidity Provider incurs in connection with buying or selling
ADA. The amount may be changed by the Sponsor in its sole discretion at
any time, and Liquidity Providers will communicate to the Sponsor in
advance the Variable Fee they would be willing to accept in connection
with a Variable Fee Cash Order, based on market conditions and
[[Page 10976]]
other factors existing at the time of such Variable Fee Cash Order.
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\35\ With respect to a creation or redemption pursuant to an
Actual Execution Cash Order, as between the Trust and an Authorized
Participant, the Authorized Participant is responsible for the
dollar cost of the difference between the ADA price utilized in
calculating Total Basket NAV on the trade date and the price at
which the Trust acquires or disposes of the ADA on the settlement
date. If the price realized in acquiring or disposing of the
corresponding Total Basket Amount is higher than the Total Basket
NAV, the Authorized Participant will bear the dollar cost of such
difference, in the case of a creation, by delivering cash in the
amount of such shortfall (the ``Additional Creation Cash'') to the
Cash Account or, in the case of a redemption, with the amount of
cash to be delivered to the Authorized Participant being reduced by
the amount of such difference (the ``Redemption Cash Shortfall'').
If the price realized in acquiring the corresponding Total Basket
Amount is lower than the Total Basket NAV, the Authorized
Participant will benefit from such difference, with the Trust
promptly returning cash in the amount of such excess (the ``Excess
Creation Cash'') to the Authorized Participant.
\36\ Unless the Sponsor determines otherwise in its sole
discretion based on market conditions and other factors existing at
the time of such Cash Order, all creations and redemptions pursuant
to Cash Orders are expected to be executed as Variable Fee Cash
Orders, and any price differential of ADA between the trade date and
the settlement date will be borne solely by the Liquidity Provider
until such ADA have been received by the Trust.
---------------------------------------------------------------------------
Alternatively, the Sponsor may require that a Cash Order be
effected as an Actual Execution Cash Order, in its sole discretion
based on market conditions and other factors existing at the time of
such Cash Order, and under such circumstances, any price differential
of ADA between the trade date and the settlement date will be borne
solely by the Authorized Participant until such ADA have been received
or liquidated by the Trust.
In the case of creations, to transfer the Total Basket Amount to
the Trust's Digital Asset Account, the Liquidity Provider will transfer
ADA to one of the public key addresses associated with the Digital
Asset Account and as provided by the Sponsor. In the case of
redemptions, the same procedure is conducted, but in reverse, using the
public key addresses associated with the wallet of the Liquidity
Provider and as provided by such party. All such transactions will be
conducted on the Cardano Blockchain and parties acknowledge and agree
that such transfers may be irreversible if done incorrectly.
Authorized Participants do not pay a transaction fee to the Trust
in connection with the creation or redemption of Baskets, but there may
be transaction fees associated with the validation of the transfer of
ADA by the Cardano Network, which will be paid by the Custodian in the
case of redemptions and the Authorized Participant or the Liquidity
Provider in the case of creations. Service providers may charge
Authorized Participants administrative fees for order placement and
other services related to creation of Baskets. As discussed above,
Authorized Participants will also pay the Variable Fee in connection
with Variable Fee Cash Orders. Under certain circumstances, Authorized
Participants may also be required to deposit additional cash in the
Cash Account, or be entitled to receive excess cash from the Cash
Account, in connection with creations and redemptions pursuant to
Actual Execution Cash Orders. Authorized Participants will receive no
fees, commissions or other form of compensation or inducement of any
kind from either the Sponsor or the Trust and no such person has any
obligation or responsibility to the Sponsor or the Trust to effect any
sale or resale of Shares.
The following is a summary of the procedures for the creation and
redemption of Baskets.
Creation Procedures
On any business day, an Authorized Participant may place an order
with the Transfer Agent to create one or more Baskets.
Cash Orders for creation must be placed with the Transfer Agent no
later than 1:59:59 p.m., New York time.
The Sponsor may in its sole discretion limit the number of Shares
created pursuant to Cash Orders on any specified day without notice to
the Authorized Participants and may direct the Marketing Agent to
reject any Cash Orders in excess of such capped amount. In exercising
its discretion to limit the number of Shares created pursuant to Cash
Orders, the Sponsor expects to take into consideration a number of
factors, including the availability of Liquidity Providers to
facilitate Cash Orders and the cost of processing Cash Orders.
Creations under Cash Orders will take place as follows, where ``T''
is the trade date and each day in the sequence must be a business day.
Before a creation order is placed, the Sponsor determines if such
creation order will be a Variable Fee Cash Order or an Actual Execution
Cash Order, which determination is communicated to the Authorized
Participant.
------------------------------------------------------------------------
Settlement date (T+1, or
Trade date (T) T+2, as established at the
time of order placement)
------------------------------------------------------------------------
The Authorized Participant places The Authorized
a creation order with the Transfer Agent. Participant delivers to the
The Marketing Agent accepts (or Cash Account: *
rejects) the creation order, which is (x) in the case of a
communicated to the Authorized Variable Fee Cash Order,
Participant by the Transfer Agent. the Total Basket NAV, plus
The Sponsor notifies the any Variable Fee; or
Liquidity Provider of the creation order. (y) in the case of an Actual
The Sponsor determines the Total Execution Cash Order, the
Basket NAV and any Variable Fee and Total Basket NAV, plus any
Additional Creation Cash as soon as Additional Creation Cash,
practicable after 4:00 p.m., New York less any Excess Creation
time. Cash, if applicable (such
amount, as applicable, the
``Required Creation
Cash'').
The Liquidity
Provider transfers the
Total Basket Amount to the
Trust's Digital Asset
Account.
Once the Trust is
in simultaneous possession
of (x) the Total Basket
Amount and (y) the Required
Creation Cash, the Trust
issues the aggregate number
of Shares corresponding to
the Baskets ordered by the
Authorized Participant,
which the Transfer Agent
holds for the benefit of
the Authorized Participant.
Cash equal to the
Required Creation Cash is
delivered to the Liquidity
Provider from the Cash
Account.
The Transfer Agent
delivers Shares to the
Authorized Participant by
crediting the number of
Baskets created to the
Authorized Participant's
DTC account.
------------------------------------------------------------------------
* The ``Cash Account'' means the account maintained by the Transfer
Agent for purposes of receiving cash from, and distributing cash to,
Authorized Participants in connection with creations and redemptions
pursuant to Cash Orders. For the avoidance of doubt, the Trust shall
have no interest (beneficial, equitable or otherwise) in the Cash
Account or any cash held therein.
Redemption Procedures
The procedures by which an Authorized Participant can redeem one or
more Baskets mirror the procedures for the creation of Baskets. On any
business day, an Authorized Participant may place a redemption order
specifying the number of Baskets to be redeemed.
The redemption of Shares pursuant to Cash Orders will only take
place if approved by the Sponsor in writing, in its sole discretion and
on a case-by-case basis. In exercising its discretion to approve the
redemption of Shares pursuant to Cash Orders, the Sponsor expects to
take into consideration a number of factors, including the availability
of Liquidity Providers to facilitate Cash Orders and the cost of
processing Cash Orders.
Cash Orders for redemption must be placed no later than 1:59:59
p.m., New York time on each business day. The Authorized Participants
may only redeem Baskets and cannot redeem any Shares in an amount less
than a Basket.
[[Page 10977]]
Redemptions under Cash Orders will take place as follows, where
``T'' is the trade date and each day in the sequence must be a business
day. Before a redemption order is placed, the Sponsor determines if
such redemption order will be a Variable Fee Cash Order or an Actual
Execution Cash Order, which determination is communicated to the
Authorized Participant.
------------------------------------------------------------------------
Settlement date (T+1 (or T+2
Trade date (T) on case by case basis, as
approved by Sponsor))
------------------------------------------------------------------------
The Authorized Participant places The Authorized
a redemption order with the Transfer Participant delivers
Agent. Baskets to be redeemed from
The Marketing Agent accepts (or its DTC account to the
rejects) the redemption order, which is Transfer Agent.
communicated to the Authorized The Liquidity
Participant by the Transfer Agent. Provider delivers to the
The Sponsor notifies the Cash Account:
Liquidity Provider of the redemption (x) in the case of a
order. Variable Fee Cash Order,
The Sponsor determines the Total the Total Basket NAV less
Basket NAV and, in the case of a Variable any Variable Fee; or
Fee Cash Order, any Variable Fee, as soon (y) in the case of an Actual
as practicable after 4:00 p.m., New York Execution Cash Order, the
time. actual proceeds to the
Trust from the liquidation
of the Total Basket Amount
(such amount, as
applicable, the ``Required
Redemption Cash'').
Once the Trust is
in simultaneous possession
of (x) the Total Basket
Amount and (y) the Required
Redemption Cash, the
Transfer Agent cancels the
Shares comprising the
number of Baskets redeemed
by the Authorized
Participant.
The Custodian sends
the Liquidity Provider the
Total Basket Amount, and
cash equal to the Required
Redemption Cash is
delivered to the Authorized
Participant from the Cash
Account.
------------------------------------------------------------------------
Suspension or Rejection of Orders and Total Basket Amount
The creation or redemption of Shares may be suspended generally, or
refused with respect to particular requested creations or redemptions,
during any period when the transfer books of the Transfer Agent are
closed or if circumstances outside the control of the Sponsor or its
delegates make it for all practicable purposes not feasible to process
creation orders or redemption orders or for any other reason at any
time or from time to time.\37\ The Transfer Agent may reject an order
or, after accepting an order, may cancel such order if: (i) such order
is not presented in proper form as described in the Participant
Agreement, (ii) the transfer of the Total Basket Amount comes from an
account other than a ADA wallet address that is known to the Custodian
as belonging to a Liquidity Provider or (iii) the fulfillment of the
order, in the opinion of counsel, might be unlawful, among other
reasons. None of the Sponsor or its delegates will be liable for the
suspension, rejection or acceptance of any creation order or redemption
order.
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\37\ Extenuating circumstances outside of the control of the
Sponsor and its delegates or that could cause the transfer books of
the Transfer Agent to be closed are outlined in the Participant
Agreement and include, for example, public service or utility
problems, power outages resulting in telephone, telecopy and
computer failures, acts of God such as fires, floods or extreme
weather conditions, market conditions or activities causing trading
halts, systems failures involving computer or other information
systems, including any failures or outages of the Cardano Network,
affecting the Authorized Participant, the Sponsor, the Trust, the
Transfer Agent, the Marketing Agent and the Custodian and similar
extraordinary events.
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Availability of Information
The Trust's website (https://grayscale.com/crypto-products/grayscale-cardano-trust/) will include quantitative information on a
per Share basis updated on a daily basis, including, (i) the current
NAV per Share daily and the prior business day's NAV per Share and the
reported closing price of the Shares; (ii) the mid-point of the bid-ask
price \38\ as of the time the NAV per Share is calculated (``Bid-Ask
Price'') and a calculation of the premium or discount of such price
against such NAV per Share; and (iii) data in chart format displaying
the frequency distribution of discounts and premiums of the daily Bid-
Ask Price against the NAV per Share, within appropriate ranges, for
each of the four previous calendar quarters (or for as long as the
Trust has been trading as an ETP if shorter). In addition, on each
business day the Trust's website will provide pricing information for
the Shares.
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\38\ The bid-ask price of the Trust is determined using the
highest bid and lowest offer on the Consolidated Tape as of the time
of calculation of the closing day NAV.
---------------------------------------------------------------------------
One or more major market data vendors, will provide an intra-day
indicative value (``IIV'') per Share updated every 15 seconds, as
calculated by the Exchange or a third party financial data provider
during the Exchange's Core Trading Session (9:30 a.m. to 4:00 p.m.,
E.T.). The IIV will be calculated using the same methodology as the NAV
per Share of the Trust (as described above), specifically by using the
prior day's closing NAV per Share as a base and updating that value
during the NYSE Arca Core Trading Session to reflect changes in the
value of the Index during the trading day.
The IIV disseminated during the NYSE Arca Core Trading Session
should not be viewed as an actual real-time update of the NAV per
Share, which will be calculated only once at the end of each trading
day. The IIV will be widely disseminated on a per Share basis every 15
seconds during the NYSE Arca Core Trading Session by one or more major
market data vendors. In addition, the IIV will be available through on-
line information services.
The NAV for the Trust will be calculated by the Sponsor once a day
and will be disseminated daily to all market participants at the same
time. To the extent that the Sponsor has utilized the cascading set of
rules described in ``Index Price'' above, the Trust's website will note
the valuation methodology used and the price per ADA resulting from
such calculation. Quotation and last-sale information regarding the
Shares will be disseminated through the facilities of the Consolidated
Tape Association (``CTA'').
Quotation and last sale information for ADA will be widely
disseminated through a variety of major market data vendors, including
Bloomberg and Reuters. In addition, real-time price (and volume) data
for ADA is available by subscription from Reuters and Bloomberg. The
spot price of ADA is available on a 24-hour basis from major market
data vendors, including Bloomberg and Reuters. Information relating to
trading, including price and volume information, in ADA will be
available from major market data vendors and from the trading platforms
[[Page 10978]]
on which ADA are traded. The normal trading hours for Digital Asset
Trading Platforms are 24-hours per day, 365-days per year.
On each business day, the Sponsor will publish the Index Price, the
Trust's NAV, and the NAV per Share on the Trust's website as soon as
practicable after its determination. If the NAV and NAV per Share have
been calculated using a price per ADA other than the Index Price for
such Evaluation Time, the publication on the Trust's website will note
the valuation methodology used and the price per ADA resulting from
such calculation.
The Trust will provide website disclosure of its NAV daily. The
website disclosure of the Trust's NAV will occur at the same time as
the disclosure by the Sponsor of the NAV to Authorized Participants so
that all market participants are provided such portfolio information at
the same time. Therefore, the same portfolio information will be
provided on the public website as well as in electronic files provided
to Authorized Participants. Accordingly, each investor will have access
to the current NAV of the Trust through the Trust's website, as well as
from one or more major market data vendors.
The value of the Index, as well as additional information regarding
the Index, will be available on a continuous basis.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services.
Information regarding the previous day's closing price and trading
volume information for the Shares will be published daily in the
financial section of newspapers.
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. Shares will trade on
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m., E.T. in
accordance with NYSE Arca Rule 7.34-E (Early, Core, and Late Trading
Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Rule 7.6-E, the minimum price variation (``MPV'') for quoting
and entry of orders in equity securities traded on the NYSE Arca
Marketplace is $0.01, with the exception of securities that are priced
less than $1.00, for which the MPV for order entry is $0.0001.
The Shares will conform to the initial and continued listing
criteria under NYSE Arca Rule 8.201-E. The trading of the Shares will
be subject to NYSE Arca Rule 8.201-E(g), which sets forth certain
restrictions on Equity Trading Permit Holders (``ETP Holders'') acting
as registered Market Makers in Commodity-Based Trust Shares to
facilitate surveillance. The Exchange represents that, for initial and
continued listing, the Trust will be in compliance with Rule 10A-3 \39\
under the Act, as provided by NYSE Arca Rule 5.3-E. A minimum of
100,000 Shares of the Trust will be outstanding at the commencement of
trading on the Exchange.
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\39\ 17 CFR 240.10A-3.
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Trading Halts
With respect to trading halts, the Exchange may halt or suspend
trading in the Shares of the Trust in accordance with its rules.
Additionally, trading in Shares of the Trust will be halted if the
circuit breaker parameters in NYSE Arca Rule 7.12-E have been reached.
Trading also may be halted because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable.
The Exchange may halt trading during the day in which an
interruption to the dissemination of the IIV or the value of the Index
occurs. If the interruption to the dissemination of the IIV or the
value of the Index 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 per Share is not disseminated to all market
participants at the same time, it will halt trading in the Shares until
such time as the NAV per Share is available to all market participants.
Surveillance
The Exchange represents that trading in the Shares of the Trust on
the Exchange will be subject to the existing trading surveillances
administered by the Exchange, as well as cross-market surveillances
administered by the Financial Industry Regulatory Authority (``FINRA'')
on behalf of the Exchange, which are designed to detect potential
violations of Exchange rules and applicable federal securities laws
with respect to the Shares of the Trust trading on the Exchange.\40\
The Exchange represents that these procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules and federal securities
laws with respect to the Shares of the Trust trading on the Exchange.
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\40\ FINRA conducts 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.
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The existing surveillances referred to above generally focus on
detecting securities trading outside their normal trading patterns,
which could be indicative of manipulative or other violative activity
with respect to the Shares of the Trust. When such situations are
detected, surveillance analysis follows and investigations are opened,
where appropriate, to review the behavior of all relevant parties for
all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, may
communicate regarding trading in the Shares with other markets and
other entities that are members of the Intermarket Surveillance Group
(``ISG''). The Exchange or FINRA, on behalf of the Exchange, or both,
may obtain trading information regarding trading in the Shares and ADA
derivatives from such markets and other entities. In addition, the
Exchange may obtain information regarding trading in the Shares and ADA
derivatives from markets and other entities with which the Exchange has
in place a comprehensive surveillance sharing agreement (``CSSA'').\41\
The Exchange is also able to obtain information from ETP Holders
regarding their trading (as principal or agent) in the Shares and any
underlying ADA, options on ADA futures, or any other ADA
derivatives.\42\
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\41\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Trust may trade on markets that are members of ISG or with which the
Exchange has in place a CSSA.
\42\ See NYSE Arca Rule 10.8210.
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In addition, under NYSE Arca Rule 8.201-E(g), an ETP Holder acting
as a registered Market Maker in the Shares is required to provide the
Exchange with information relating to its accounts for trading in any
underlying commodity, related futures or options on futures, or any
other related derivatives. Commentary .04 of NYSE Arca Rule 11.3-E
requires an ETP Holder acting as a registered Market Maker, and its
affiliates, in the Shares to establish, maintain and enforce written
policies and procedures reasonably designed to prevent the misuse of
any material nonpublic information with respect to such products, any
components of the related products, any physical asset or commodity
underlying the product, applicable currencies, underlying indexes,
related futures or options on
[[Page 10979]]
futures, and any related derivative instruments (including the Shares).
As a general matter, the Exchange has regulatory jurisdiction over its
ETP Holders and their associated persons, which include any person or
entity controlling an ETP Holder. To the extent the Exchange may be
found to lack jurisdiction over a subsidiary or affiliate of an ETP
Holder that does business only in commodities or futures contracts and
that subsidiary or affiliate is a member of another regulatory
organization, the Exchange could obtain information regarding the
activities of such subsidiary or affiliate through surveillance sharing
agreements with regulatory organizations to the extent the Exchange has
such an agreement with that regulatory organization.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
All statements and representations made in this filing regarding
(a) the description of the index, portfolio, or reference assets of the
Trust, (b) limitations on index or portfolio holdings or reference
assets, or (c) the applicability of Exchange listing rules specified in
this rule filing shall constitute continued listing requirements for
listing the Shares on the Exchange.
The Sponsor has represented to the Exchange that it will advise the
Exchange of any failure by the Trust to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Trust is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an ``Information Bulletin'' of the special
characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (1)
the procedures for creations of Shares in Baskets; (2) NYSE Arca Rule
9.2-E(a), which imposes a duty of due diligence on its ETP Holders to
learn the essential facts relating to every customer prior to trading
the Shares; (3) information regarding how the value of the Index and
NAV are disseminated; (4) the possibility that trading spreads and the
resulting premium or discount on the Shares may widen during the
Opening and Late Trading Sessions, when an updated IIV will not be
calculated or publicly disseminated; (5) the requirement that members
deliver a prospectus to investors purchasing newly issues Shares prior
to or concurrently with the confirmation of a transaction; and (6)
trading information. The Exchange notes that investors purchasing
Shares directly from the Trust will receive a prospectus.
In addition, the Information Bulletin will reference that the Trust
is subject to various fees and expenses as described in the Prospectus.
The Information Bulletin will disclose that information about the
Shares of the Trust is publicly available on the Trust's website.
The Information Bulletin will also discuss any relief, if granted,
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \43\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
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\43\ 15 U.S.C. 78f(b)(5).
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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 and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Rule 8.201-E. The
Exchange has in place certain surveillance procedures that are adequate
to properly monitor trading in the Shares on the Exchange in all
trading sessions and to deter and detect violations of Exchange rules
and federal securities laws applicable to the Shares of the Trust
trading on the Exchange. The Exchange or FINRA, on behalf of the
Exchange, or both, will communicate as needed regarding trading in the
Shares with other markets that are members of the ISG, and the Exchange
or FINRA, on behalf of the Exchange, or both, may obtain trading
information regarding trading in the Shares from such markets. In
addition, the Exchange may obtain information regarding trading in the
Shares from markets with which the Exchange has in place a CSSA. Also,
pursuant to NYSE Arca rules, the Exchange is able to obtain information
from ETP Holders regarding their trading (as principal or agent) in the
Shares and any underlying ADA, options on ADA futures, or any ADA
derivatives.
The proposed rule change is also designed to prevent fraudulent and
manipulative acts and practices in connection with trading in the
Shares on the Exchange because it (1) tracks the Digital Asset Trading
Platform Market price through trading activity at Constituent Trading
Platforms, the majority of which are U.S.-Compliant Trading Platforms;
(2) mitigates the impact of instances of fraud, manipulation and other
anomalous trading activity in real-time through systematic adjustments;
(3) is constructed and maintained by an expert third-party index
provider, allowing for prudent handling of non-market-related events;
and (4) mitigates the impact of instances of fraud, manipulation and
other anomalous trading activity concentrated on any one specific
trading platform through a cross-trading platform composite index rate.
The Index has proven its ability to (i) mitigate the effects of fraud,
manipulation and other anomalous trading activity from impacting the
ADA reference rate, (ii) provide a real-time, volume-weighted fair
value of ADA and (iii) appropriately handle and adjust for non-market
related events.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that there is a considerable amount of ADA price and market information
available on public websites and through professional and subscription
services. Investors may obtain, on a 24-hour basis, ADA pricing
information based on the spot price for ADA from various financial
information service providers. The closing price and settlement prices
of ADA are readily available from the Digital Asset Trading Platforms
and other publicly available websites. In addition, such prices are
published in public sources, or on-line information services such as
Bloomberg and Reuters. The NAV per Share will be calculated daily and
made available to all market participants at the same time. The Trust
will provide website disclosure of its NAV daily. One or more major
market data vendors will disseminate for the Trust on a daily basis
information with respect to the most recent NAV per Share and Shares
outstanding. In addition, if the Exchange becomes aware that the NAV
per Share 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. Quotation and last-sale
information regarding the Shares will be disseminated through the
[[Page 10980]]
facilities of the CTA. The IIV will be widely disseminated on a per
Share basis every 15 seconds during the NYSE Arca Core Trading Session
(normally 9:30 a.m., E.T., to 4:00 p.m., E.T.) by one or more major
market data vendors. The Exchange represents that the Exchange may halt
trading during the day in which an interruption to the dissemination of
the IIV or the value of the Index occurs. If the interruption to the
dissemination of the IIV or the value of the Index 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.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of exchange-traded product that will enhance
competition among market participants, to the benefit of investors and
the marketplace. As noted above, the Exchange has in place surveillance
procedures relating to trading in the Shares on the Exchange and may
obtain information via ISG from other exchanges that are members of ISG
or with which the Exchange has entered into a CSSA. In addition, as
noted above, investors will have ready access to information regarding
the Trust's NAV, IIV, and quotation and last sale information for the
Shares.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
additional type of exchange-traded product, and the first such product
based on ADA, which will enhance competition among market participants,
to the benefit of investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were 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, as modified by Amendment No. 2, 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-NYSEARCA-2025-12 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-NYSEARCA-2025-12. 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-NYSEARCA-2025-12 and should
be submitted on or before March 21, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\44\
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\44\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-03231 Filed 2-27-25; 8:45 am]
BILLING CODE 8011-01-P