[Federal Register Volume 90, Number 44 (Friday, March 7, 2025)]
[Notices]
[Pages 11563-11578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-03662]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102513; File No. SR-NASDAQ-2025-016]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change, as Modified by Amendment No.
1, To Adopt Nasdaq Rule 5712 To Provide for the Listing and Trading of
Commodity- and Digital Asset-Based Investment Interests and To List and
Trade Shares of the Hashdex Nasdaq Crypto Index US ETF Under Proposed
Nasdaq Rule 5712
March 3, 2025.
On February 18, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 adopt new Nasdaq Rule 5712 to provide for the
listing and trading of Commodity- and Digital Asset-Based Investment
Interests, and to list and trade shares of the Hashdex Nasdaq Crypto
Index US ETF under proposed Nasdaq Rule 5712. On February 27, 2025, the
Exchange filed Amendment No. 1 to the proposed rule change, which
replaced and superseded the original filing in its entirety. The
proposed rule change, as modified by Amendment No. 1, is described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendment No. 1, from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt new Nasdaq Rule 5712 to provide for
the listing and trading of Commodity- and Digital Asset-Based
Investment Interests, which are securities issued by a trust, limited
liability company, or other similar entity that holds specified
commodities, digital assets, derivative securities products, and/or
cash. The Exchange also proposes to list and trade shares of the
Hashdex Nasdaq Crypto Index US ETF (the ``Trust'') under proposed
Nasdaq Rule 5712. This Amendment No. 1 supersedes the original filing
in its entirety.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings, 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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt new Rule 5712 to provide for the
listing and trading of Commodity- and Digital Asset-Based Investment
Interests, which are securities issued by a trust, limited liability
company, or other similar entity that holds specified commodities,
digital assets, derivative securities products, and/or cash. The
Exchange also proposes to list and trade Shares of the Trust under
proposed Rule 5712.
The units of the Trust are referred to herein as the ``Shares.''
\4\ The Commission approved the listing and trading of the Shares of
the Trust under Nasdaq Rule 5711(d) \5\ on December 19, 2024.\6\ This
proposal aims to amend representations regarding the investment
objective and strategy of the Trust made in the Hashdex Original
Filing, and to list and trade the Shares pursuant to proposed Rule
5712. This proposal will supersede the Hashdex Original Filing in its
entirety. The Hashdex Original Filing will remain in effect until this
proposal is approved by the Commission, at which time the Exchange will
transfer the Trust from its current listing standards under Rule
5711(d) into the new listing standards under proposed Rule 5712, and
the Trust can implement its amended investment strategy described in
this proposal upon such approval.
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\4\ The Shares are listed under the ticker symbol ``NCIQ.''
\5\ Nasdaq Rule 5711(d) governs the listing and trading of
Commodity-Based Trust Shares, which means a security (1) that is
issued by a trust that holds (a) a specified commodity deposited
with the trust, or (b) a specified commodity and, in addition to
such specified commodity, cash; (2) that is issued by such trust in
a specified aggregate minimum number in return for a deposit of a
quantity of the underlying commodity and/or cash; and (3) that, when
aggregated in the same specified minimum number, may be redeemed at
a holder's request by such trust which will deliver to the redeeming
holder the quantity of the underlying commodity and/or cash. See
Nasdaq Rule 5711(d)(iv)(A).
\6\ See Securities Exchange Act Release No. 101998 (December 19,
2024), 89 FR 106707 (December 30, 2024) (SR-NASDAQ-2024-028; SR-
CboeBZX-2024-091). See also Securities Exchange Act Release Nos.
101218 (Sept. 30, 2024), 89 FR 80970 (Oct. 4, 2024) (SR-NASDAQ-2024-
028) (``Amendment No. 1''); and 102309 (January 29, 2025), 90 FR
8961 (February 4, 2025) (SR-NASDAQ-2025-006). SR-NASDAQ-2025-006
updated certain representations made in Amendment No. 1 relating to
the service providers and the basket size of the Hashdex Nasdaq
Crypto Index US ETF. Amendment No. 1, as amended by SR-NASDAQ-2025-
006, will hereinafter be referred to as the ``Hashdex Original
Filing.''
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Proposed Listing Rules
Proposed Rule 5712(a) provides that the Exchange will consider for
trading, whether by listing or pursuant to unlisted trading privileges,
Commodity- and/or Digital Asset-Based Investment Interests that meet
the criteria of this rule. The Exchange will file separate proposals
under Section 19(b) of the Act before trading, either by listing or
pursuant to unlisted trading privileges, Commodity- and/or Digital
Asset-Based Investment Interests. All statements or representations
contained in such rule filing regarding (a) the description of the
index, portfolio, or reference asset, (b) limitations on index or
portfolio holdings or reference assets, or (c) the applicability of
Exchange listing rules specified in such rule filing will constitute
continued listing requirements. An issuer of such securities must
notify the Exchange of any failure to comply with such continued
listing requirements. If an issue of Commodity- and/or Digital Asset-
Based Investment Interests does not satisfy these requirements, the
Exchange may halt trading in the securities and will initiate delisting
proceedings under the Rule 5800 Series.
[[Page 11564]]
Proposed Rule 5712(b) provides that this rule is applicable only to
Commodity- and/or Digital Asset-Based Investment Interests. Except to
the extent inconsistent with this Rule, or unless the context otherwise
requires, the provisions of the Bylaws and all other rules and
procedures of the Board shall be applicable to the trading on the
Exchange of such securities. Commodity- and/or Digital Asset-Based
Investment Interests are included within the definition of ``security''
or ``securities'' as such terms are used in the Bylaws and Rules of the
Exchange.
Proposed Rule 5712(c)(1) defines a Commodity- and/or Digital Asset-
Based Investment Interest as a security (a) that is issued by a trust,
limited liability company, or other similar entity (the ``Fund'') that
holds (1) specified commodities and/or digital assets deposited with
the Fund, or (2) specified commodities and/or digital assets and, in
addition to such specified commodities and/or digital assets,
derivative securities products (i.e., securities that meet the
definition of ``derivative securities product'' in Rule 19b-4(e) under
the Act) deposited with the Fund and/or cash; (b) that is issued by
such Fund in a specified aggregate minimum number in return for a
deposit of a quantity of the underlying commodity(ies), digital
asset(s), derivative securities products, and/or cash; and (c) that,
when aggregated in the same specified minimum number, may be redeemed
at a holder's request by such Fund which will deliver to the redeeming
holder the quantity of the underlying commodity(ies), digital asset(s),
derivative securities products, and/or cash.
Proposed Rule 5712(c)(2) provides that the term ``commodity,'' as
used in this rule, means commodities as defined in Section 1a(9) of the
Commodity Exchange Act.
Proposed Rule 5712(c)(3) defines the term ``digital asset,'' for
purposes of this rule, as any digital representation of value recorded
on a cryptographically secured, distributed ledger (i.e., blockchain)
or similar technology.
Proposed Rule 5712(d) provides that the Exchange may trade, either
by listing or pursuant to unlisted trading privileges, Commodity- and/
or Digital Asset-Based Investment Interests based on an underlying
commodity(ies), digital asset(s), and/or derivative securities
products. Each issue of a Commodity- and/or Digital Asset-Based
Investment Interest shall be designated as a separate series and shall
be identified by a unique symbol.
Proposed Rule 5712(e)(1) sets forth initial listing criteria for
Commodity- and/or Digital Asset-Based Investment Interests. Proposed
Rule 5712(e)(1)(i) provides that the Exchange will establish a minimum
number of Commodity- and/or Digital Asset-Based Investment Interests
required to be outstanding at the time of commencement of trading on
the Exchange. Proposed Rule 5712(e)(1)(ii) provides that there shall be
no limitation on the percentage of a Fund's portfolio that may be
invested in commodity and/or digital asset holdings, except that, in
the aggregate, at least 90% of the weight of such holdings shall, on
both an initial and continuing basis, consist of commodities and/or
digital assets concerning which the Exchange is able to obtain
information via the Intermarket Surveillance Group (``ISG'') from other
members of the ISG or via a comprehensive surveillance sharing
agreement (``CSSA'').
Proposed Rule 5712(e)(2) and subparagraphs (i) through (viii)
thereunder set forth continued listing criteria for Commodity- and/or
Digital Asset-Based Investment Interests. Proposed Rule 5712(e)(2)
provides that the Exchange will maintain surveillance procedures for
securities listed under this rule and will consider the suspension of
trading in, and will initiate delisting proceedings under the Rule 5800
Series of, such series under any of the following circumstances:
if, following the initial twelve-month period following
commencement of trading on the Exchange of Commodity- and/or Digital
Asset-Based Investment Interests, the Fund has more than 60 days
remaining until termination and there are fewer than 50 record and/or
beneficial holders of Commodity- and/or Digital Asset-Based Investment
Interests (proposed Rule 5712(e)(2)(i));
if, following the initial twelve-month period following
commencement of trading on the Exchange of Commodity- and/or Digital
Asset-Based Investment Interests, the Fund has fewer than 50,000
securities issued and outstanding (proposed Rule 5712(e)(2)(ii));
if, following the initial twelve-month period following
commencement of trading on the Exchange of Commodity- and/or Digital
Asset-Based Investment Interests, the market value of all securities
issued and outstanding is less than $1,000,000 (proposed Rule
5712(e)(2)(iii));
if the value of the underlying commodity(ies) and/or
digital asset(s) is no longer calculated or available on at least a 15-
second delayed basis from a source unaffiliated with the sponsor, Fund,
custodian or the Exchange (proposed Rule 5712(e)(2)(iv));
if the intraday indicative value is no longer made
available on at least a 15-second delayed basis (proposed Rule
5712(e)(2)(v));
if any of the continued listing requirements set forth in
this Rule 5712 are not continuously maintained (proposed Rule
5712(e)(2)(vi));
if the Exchange submits a rule filing pursuant to Section
19(b) of the Act to permit the listing and trading of a series of
Commodity and/or Digital Asset-Based Investment Interests and any of
the statements or representations regarding (a) the description of the
index, portfolio, or reference asset, (b) limitations on index or
portfolio holdings or reference assets, or (c) the applicability of
Exchange listing rules specified in such rule filing are not
continuously maintained (proposed Rule 5712(e)(2)(vii)); or
if such other event shall occur or condition exists which
in the opinion of the Exchange makes further dealings on the Exchange
inadvisable (proposed Rule 5712(e)(2)(viii)).
Proposed Rule 5712(e)(3) and the subparagraphs thereunder set forth
certain requirements specific to Commodity- and/or Digital Asset-Based
Investment Interests issued by a trust. Proposed Rule 5712(e)(3)(i)
provides that the stated term of a trust shall be as stated in the
trust prospectus; however, a trust may be terminated under such earlier
circumstances as may be specified in the trust prospectus. In addition,
a trust may terminate in accordance with the provisions of the trust
prospectus, which may provide for termination if the value of the trust
falls below a specified amount. Proposed Rule 5712(e)(3)(ii) provides
for the following requirements on an initial and continued listing
basis: (1) that the trustee of a trust must be a trust company or
banking institution having substantial capital and surplus and the
experience and facilities for handling corporate trust business, and
that, in cases where, for any reason, an individual has been appointed
as trustee, a qualified trust company or banking institution must be
appointed co-trustee; and (2) that no change is to be made in the
trustee of a listed issue without prior notice to and approval of the
Exchange.
Proposed Rule 5712(f) provides that, upon termination of a Fund
issuing securities pursuant to Rule 5712, the Exchange requires that
Commodity- and/or Digital Asset-Based Investment Interests issued in
connection with the Fund be removed from Exchange listing.
[[Page 11565]]
Proposed Rule 5712(g) provides that voting rights shall be as set
forth in the applicable prospectus of the Fund issuing Commodity- and/
or Digital Asset-Based Investment Interests.
Proposed Rule 5712(h) provides that neither the Exchange nor any
agent of the Exchange shall have any liability for damages, claims,
losses or expenses caused by any errors, omissions, or delays in
calculating or disseminating any underlying commodity value, the
current value of the underlying commodity required to be deposited to
the Fund in connection with issuance of Commodity- and/or Digital
Asset-Based Investment Interests; resulting from any negligent act or
omission by the Exchange, or any agent of the Exchange, or any act,
condition or cause beyond the reasonable control of the Exchange, its
agent, including, but not limited to, an act of God; fire; flood;
extraordinary weather conditions; war; insurrection; riot; strike;
accident; action of government; communications or power failure;
equipment or software malfunction; or any error, omission or delay in
the reports of transactions in an underlying commodity.
Proposed Rule 5712(i) provides that a registered Market Maker \7\
in Commodity- and/or Digital Asset-Based Investment Interests must file
with the Exchange in a manner prescribed by the Exchange and keep
current a list identifying all accounts for trading that the Market
Maker may have or over which it may exercise investment discretion in
an underlying commodity, related commodity futures or options on
commodity futures, or any other related commodity derivatives; an
underlying digital asset, related digital asset futures or options on
digital assets, or any other related digital asset derivatives; or an
underlying series of derivative securities products, related future or
options on such derivative securities products, or any other related
derivatives of such derivative securities products. No Market Maker in
Commodity- and/or Digital-Asset Based Investment Interests shall trade
in a commodity, or any related derivative in an account that the Market
Maker (1) directly or indirectly controls trading activities or has a
direct interest in the profits or losses thereof, (2) is required by
this rule to disclose to the Exchange, and (3) has not reported to the
Exchange.
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\7\ ``Market Maker'' means a dealer that, with respect to a
security, holds itself out (by entering quotations in the Nasdaq
Market Center) as being willing to buy and sell such security for
its own account on a regular and continuous basis and that is
registered as such. See Rule 5005(a)(25).
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In addition to the existing obligations under Exchange rules
regarding the production of books and records, the Market Maker in
Commodity- and/or Digital Asset Based Investment Interests shall make
available to the Exchange such books, records, or other information
pertaining to transactions by such entity or registered or non-
registered employee affiliated with such entity for its or their own
accounts for trading the underlying physical commodity, related
commodity futures or options on commodity futures, or any other related
commodity, as may be requested by the Exchange.
Finally, the Exchange proposes to include the following commentary
to Rule 5712. Proposed Commentary .01 provides that Exchange members
(``Members'') shall provide to all purchasers of newly issued
Commodity- and/or Digital Asset-Based Investment Interests a prospectus
for the series of Commodity- and/or Digital Asset-Based Investment
Interests. Proposed Commentary .02 provides that transactions in
Commodity- and/or Digital-Asset Based Investment Interests will occur
during the trading hours specified in Equity 4, Rule 4120.
The Exchange also proposes to amend its existing rules to add
references to Commodity- and/or Digital Asset-Based Investment
Interests, which are intended to align the treatment of the proposed
interests with how Commodity-Based Trust Shares are treated under
Exchange's rules. Specifically, the Exchange proposes to amend Rule
5615(a)(6)(B) to include Commodity- and/or Digital Asset-Based
Investment Interests listed pursuant to proposed Rule 5712 in the
definition of ``Derivative Securities'' such that Commodity- and/or
Digital Asset-Based Investment Interests are among the Derivative
Securities that are exempt from the enumerated corporate governance
requirements in Rule 5615(a)(6)(A).\8\
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\8\ Rule 5615(a)(6)(A) provides that issuers whose only
securities listed on Nasdaq are non-voting preferred securities,
debt securities or Derivative Securities, are exempt from the
requirements relating to Independent Directors (as set forth in Rule
5605(b)), Compensation Committees (as set forth in Rule 5605(d)),
Director Nominations (as set forth in Rule 5605(e)), Codes of
Conduct (as set forth in Rule 5610), and Meetings of Shareholders
(as set forth in Rule 5620(a)). In addition, these issuers are
exempt from the requirements relating to Audit Committees (as set
forth in Rule 5605(c)), except for the applicable requirements of
SEC Rule 10A-3. Notwithstanding, if the issuer also lists its common
stock or voting preferred stock, or their equivalent on Nasdaq it
will be subject to all the requirements of the Nasdaq 5600 Rule
Series.
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In addition, the Exchange proposes to amend Equity 4, Rule
4120(a)(9) to add Commodity- and/or Digital Asset-Based Investment
Interests to the list of exchange-traded products (``ETPs'') (including
Commodity-Based Trust Shares) in which the Exchange may halt trading.
The Exchange also proposes to amend Equity 4, Rule 4120(b)(4)(A) to add
Commodity- and/or Digital Asset-Based Investment Interests in the
definition of ``Derivative Securities Product'' \9\ to make clear that
this new ETP type will also be subject to the Exchange's authority to
halt pursuant to Rule 4120(a)(10).
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\9\ As set forth in Rule 4120(b)(4)(A), Derivative Securities
Product currently includes Commodity-Based Trust Shares.
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Commodity- and/or Digital Asset-Based Investment Interests listed
and traded pursuant to proposed Rule 5712 would be substantially
similar to Commodity-Based Trust Shares listed and traded pursuant to
current Rule 5711(d), with two main differences. First, whereas
Commodity-Based Trust Shares are issued by a trust, Commodity- and/or
Digital Asset-Based Investment Interests could be issued, as proposed,
by a trust, limited liability company, or other similar entity. Second,
whereas Commodity-Based Trust Shares are based on an underlying
commodity only, the Exchange proposes that Commodity- and/or Digital
Asset-Based Investment Interests could be based on an underlying
commodity or commodities, as well as digital assets and derivative
securities products.\10\ The Exchange believes this flexibility with
respect to the structure of the entity issuing Commodity- and/or
Digital Asset-Based Investment Interests and the holdings underlying
such securities would benefit both issuers and the investing public and
would facilitate the availability of a new type of ETP.
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\10\ The Exchange notes that the requirement set forth in
proposed Rule 5712(c)(1) regarding digital asset holdings is based
on a similar provision set forth in current Rule 5735 regarding
Managed Fund Shares. See Rule 5735(b)(1)(D)(i).
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The Trust
The Trust is managed and controlled by the Hashdex Asset Management
Ltd. (``Sponsor'') and administered by U.S. Bancorp Fund Services, LLC
(the ``Administrator''). The Shares are registered with the SEC by
means of the Trust's registration statement on Form S-1 (the
``Registration Statement'').\11\
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\11\ On February 7, 2025, the Trust filed with the Commission a
Registration Statement on Form S-1 under the Securities Act of 1933
(15 U.S.C. 77a). The description of the operation of the Trust
herein is based, in part, on the most recent Registration Statement.
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The Shares are issued by the Trust, a Delaware statutory trust
established by the Sponsor. The Trust is operating pursuant to the
rules and guidelines set forth in the Trust agreement (``Trust
[[Page 11566]]
Agreement''). The Trust issues Shares representing fractional undivided
beneficial interests in its net assets. The Trust is neither an
investment company registered under the Investment Company Act of 1940,
as amended (the ``1940 Act''), nor a commodity pool under the Commodity
Exchange Act.
U.S. Bancorp Fund Services, LLC is the transfer agent for the Trust
(``Transfer Agent''). U.S. Bank, N.A. holds the Trust's cash and/or
cash equivalents \12\ (``Cash Custodian''). Coinbase Custody Trust
Company, LLC and BitGo Trust Company, Inc. are the custodians of the
Trust's digital assets (``Crypto Custodians'', and together with the
Cash Custodian, the ``Custodians'').\13\
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\12\ ``Cash equivalents'' are limited to short-term treasury
bills (90 days or less to maturity), money market funds, and demand
deposit accounts.
\13\ The Trust may engage additional custodians for its digital
assets, each of whom may be referred to as a Crypto Custodian. The
Trust may also remove or change current Crypto Custodians, provided
that there is at least one Crypto Custodian at all times.
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The Trust's Investment Objective
The investment objective of the Trust will be to ensure that the
daily changes in the net asset value (``NAV'') of the Shares correspond
to the daily changes in the price of the Nasdaq Crypto Settlement Price
Index,\14\ NCIS (the ``NCIS'' or ``Index''), less expenses and
liabilities of the Trust, by investing in the digital asset
constituents of the Index (``Index Constituents'').
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\14\ See https://indexes.nasdaqomx.com/docs/Nasdaq%20Crypto%20Indexes%20Methodology.pdf.
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The Shares are designed to provide a straightforward means of
obtaining price exposure to the Index Constituents, as opposed to
direct acquisition, holding, and trading of digital assets on a peer-
to-peer or other basis or via a digital asset platform. The Shares have
been designed to remove the obstacles represented by the complexities
and operational burdens involved in a direct investment in digital
assets, while at the same time having an intrinsic value that reflects,
at any given time, the investment exposure to the Index Constituents
held by the Trust at such time, less the Trust's expenses and
liabilities. The Shares provide investors with an alternative method of
accessing the digital asset markets through the public securities
market.
The Trust gains exposure to the Index Constituents by buying spot
digital assets. The Trust maintains cash and/or cash equivalent
balances to the extent it is necessary to cover currently due Trust-
payable expenses.
If there are no Share redemption orders or currently due Trust-
payable expenses, the Trust's portfolio is expected to consist of
solely of Index Constituents, except that the Sponsor may, at its sole
discretion, exclude a specific Index Constituent under certain
circumstances further described below. The Trust does not invest in any
other spot digital asset besides the Index Constituents. The Trust does
not invest in tokenized assets or stablecoins. As of December 31, 2024,
the Index Constituents and their weightings \15\ were as follows:
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\15\ The Index Constituents will be weighted according to their
relative free float market capitalizations, as described in the next
section ``The Trust's Benchmark''.
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Weight
Constituents (%)
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Bitcoin (BTC)................................................ 72.70
Ether (ETH).................................................. 14.48
Solana (SOL)................................................. 4.78
XRP Ledger (XRP)............................................. 5.02
Cardano (ADA)................................................ 1.50
Chainlink (LINK)............................................. 0.51
Avalanche (AVAX)............................................. 0.37
Litecoin (LTC)............................................... 0.37
Uniswap (UNI)................................................ 0.27
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The weighting of each Index Constituent in the Trust's portfolio is
generally expected to match the weighting of the Index Constituents in
the Index, except when the Sponsor determines to exclude or limit the
weight of one or more digital assets from the Trust's portfolio in the
rules-based circumstances set forth below. In such cases, the
weightings of the digital assets held by the Trust are generally
expected to be calculated proportionally to the respective Index
Constituents for the remaining Index Constituents.
The Sponsor may, at its discretion, exclude or limit the weighting
of Index Constituents in the Trust's portfolio under the following
circumstances:
(1) The inclusion or projected weighting of a digital asset could,
in the Sponsor's sole judgment, result in the Trust being required to
register as an investment company under the Investment Company Act or
require the Sponsor to register as an investment adviser under the
Investment Advisers Act of 1940;
(2) None or few of the authorized participants or service providers
have the ability to trade or otherwise support the asset in a way that
impacts the Trust operations;
(3) The Sponsor determines, based on available guidance, that the
use or trading of the digital asset raises, or is likely to raise,
significant governmental, policy, or regulatory concerns or is subject
to, or likely to become subject to, a specialized regulatory regime,
such as U.S. federal securities or commodities laws or similar laws in
other significant jurisdictions;
(4) The digital asset's underlying code contains, or may contain,
material flaws or vulnerabilities; or
(5) Holding the digital asset would cause the Trust's holdings to
be inconsistent with the listing requirements of proposed Rule 5712.
To ensure compliance with proposed Nasdaq Rule 5712, the Sponsor
will monitor the weights of the digital assets in the Trust's portfolio
and Index Constituents on a daily basis. If the portfolio breaches the
requirement, the Sponsor will adjust the portfolio to comply with its
listing rule according to the following method:
The combined allocation of all digital assets other than
those eligible under the 90% requirement will be limited to 10% of the
portfolio, with their individual weights proportionally adjusted to
reflect their relative weightings in the Index.
The remaining 90% of the portfolio will be redistributed
proportionally among the eligible digital assets, based on their
respective weights in the Index.
The Sponsor employs a passive investment strategy that is intended
to track the changes in the Index regardless of whether the Index goes
up or goes down, meaning that the Sponsor does not try to ``beat'' the
Index. The Trust's passive investment strategy is designed to allow
investors to purchase and sell the Shares for the purpose of investing
in the Index, whether to hedge the risk of losses in their Index-
related transactions or gain price exposure to the Index. Consistent
with its investment objective, the Trust will not use its investments
to enhance leverage or seek performance that is the multiple or inverse
multiple of the Index.
Unless permitted by the Commission, none of the Trust, the Sponsor,
any Crypto Custodian, or any other person associated with the Trust
will, directly or indirectly, engage in action where any portion of the
Trust's holdings becomes subject to a proof-of-stake validation or is
used to earn additional assets or generate income or other earnings
through staking.
From time to time, the Trust may be entitled to or come into
possession of ``Incidental Rights'' and/or ``IR Virtual Currency'' by
virtue of its ownership of digital assets, generally through a fork in
the Index Constituents blockchains, an airdrop offered to holders of
the Index Constituents or other similar event. ``Incidental Rights''
are rights to acquire, or otherwise establish dominion and control
over, any crypto asset (other than the Index Constituents) or other
[[Page 11567]]
asset or right, which rights are incident to the Trust's ownership of
the Index Constituents and arise without any action of the Trust or of
the Sponsor. ``IR Virtual Currency'' is any crypto asset (other than
the Index Constituents), or other assets or rights, acquired through
the exercise of any Incidental Right.
With respect to a fork, airdrop or similar event, the Sponsor will
cause the Trust to irrevocably abandon any such Incidental Rights and
IR Virtual Currency and no such Incidental Right or IR Virtual Currency
shall be taken into account for purposes of determining the NAV of the
Trust.
The Trust's Benchmark
The Trust will use the Index as a reference to track and measure
its performance compared to the price performance of the markets for
the Index Constituents and to value the Index Constituents held by the
Trust for purposes of calculating the Trust's NAV.
The Index is designed to measure the performance of a portion of
the overall crypto asset market. The Index does not track the overall
performance of all crypto assets generally, nor the performance of any
specific crypto assets. The Index is owned and administered by Nasdaq,
Inc. (``Index Provider'') and is calculated by CF Benchmarks Limited
(``Calculation Agent''), which is experienced in calculating and
administering crypto assets indices. The Calculation Agent publishes
daily the Index Constituents, the Index Constituents' weightings, the
intraday value of the Index (under the ticker NCI), and the daily
settlement value of the Index (under the ticker NCIS), which is
effectively the Index's closing value.\16\
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\16\ The closing level of the Index is calculated once a day on
business days at 4:05 p.m. New York Time. See https://indexes.nasdaqomx.com/docs/methodology_NCI.pdf (under ``Appendix B:
Settlement Times'').
---------------------------------------------------------------------------
The Index is derived from a rules-based methodology (``Index
Rules''), which is overseen by the Nasdaq Index Management Committee
(``NIMC''). The NIMC governs the Index and is responsible for its
implementation, administration, and general oversight, including
assessing crypto assets for eligibility, adjustments to account for
regulatory changes and periodic methodology reviews. Neither the Trust,
nor the Sponsor have control over the Index Rules or the Index
administration.
According to the Index Rules, crypto assets are eligible for
inclusion in the Index if they satisfy the criteria set forth under the
NCI methodology. The Index adjusts its constituents and weightings on a
quarterly basis to reflect changes in the crypto asset markets.
Pursuant to the Index Rules, to be eligible for inclusion in the
Index, crypto assets must meet the following criteria on a quarterly
basis:
(1) Have active tradable markets listed on at least two Core Crypto
Platforms \17\ for the entire period since the previous Index
reconstitution;
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\17\ A ``Core Crypto Platform'' is a crypto asset platform that,
in the opinion of the NIMC, exhibits at a minimum the
characteristics specified in the Nasdaq Digital Assets Indexes
Guidelines for Core Crypto Platforms and Core Custodians (the
``Guidelines''), such as (1) having strong forking controls, (2)
effective anti-money laundering controls, including surveillance for
manipulative trading practices and erroneous transactions, (3)
demonstrating robust IT infrastructure and active capacity
management, (4) evidencing cooperation with regulators and law
enforcement, and be licensed by a public independent governing body.
See https://indexes.nasdaqomx.com/docs/Nasdaq_Digital_Assets_Indexes_Guidelines_Core_Exchanges_Core_Custodians.pdf. Such license could be obtained today through bodies such as
the New York State Department of Financial Services' (NYDFS)
BitLicense, or other state, national or international regulators.
The list of existing Core Crypto Platforms will be recertified by
the NIMC at a minimum on an annual basis. The Core Crypto Platforms
as of December 31, 2024 are BitStamp, Coinbase, Gemini, itBit,
Kraken, and LMAX Digital.
---------------------------------------------------------------------------
(2) Be supported by at least one Core Custodian \18\ for the entire
period since the previous Index reconstitution.
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\18\ A ``Core Custodian'' is a crypto assets custodian that, in
the opinion of the NIMC, exhibits the characteristics specified in
the Guidelines. See https://indexes.nasdaqomx.com/docs/Nasdaq_Digital_Assets_Indexes_Guidelines_Core_Exchanges_Core_Custodians.pdf (under ``Core Custodians''). A Core Custodian might lose
eligibility if it does not comply with the specified requirements in
the Index methodology or with any other NIMC requirements. The NIMC
will review new Core Custodian candidates throughout the year and
announce any new additions when approved. The list of existing Core
Custodians will be recertified by the NIMC at a minimum on an annual
basis. Changes to the list of Core Custodians may be made by the
approval of the NIMC and announced accordingly in the case of
exceptional events or in order to maintain the integrity of the
Index. The Core Custodians as of December 31, 2024 are BitGo,
Coinbase, Fidelity, Gemini, Komainu, and Zodia.
---------------------------------------------------------------------------
(3) To be considered for entry to the Index at any Index
reconstitution, an asset must have a median daily trading volume in the
USD pair conducted across all Core Crypto Platforms that is no less
than 0.5% of the cryptocurrency asset that has the highest median daily
trading volume.
(4) Be eligible for listing in an ETP on SIX Swiss Exchange and
Deutsche B[ouml]rse Xetra as of thirty (30) calendar days prior to the
day of inclusion.
(5) Have free-floating pricing (i.e., not be pegged to the value of
any asset).
If a crypto asset meets requirements (1) through (5), it will be
considered eligible for Index inclusion.
Notwithstanding inclusion in the eligible list, the NIMC reserves
the right to further exclude any additional assets based on one or more
factors, including but not limited to its review of general
reputational, fraud, manipulation, or security concerns connected to
the asset. Assets that, in the sole discretion of the NIMC, do not
offer utility, do not facilitate novel use cases, or that do not
exhibit technical, structural or cryptoeconomic innovation (e.g.,
assets inspired by memes or internet jokes) may also be excluded.
The Index will assess any crypto assets resulting from a hard fork
or an airdrop under the same criteria as established crypto assets and
will only include a new digital asset if it meets the eligibility
criteria set forth above.
The Index Constituents are weighted according to their relative
free float market capitalizations. The free float market capitalization
of an Index Constituent on any given day is defined as the product of
an Index Constituent Settlement Price (as defined below) and its
``Circulating Supply'' \19\ as set in the most recent reconstitution.
Weights are calculated by dividing the free float market capitalization
of a digital asset by the total free float market capitalization of all
Index Constituents at the time of rebalancing.
---------------------------------------------------------------------------
\19\ The Index will utilize ``Circulating Supply'' of an Index
Constituent for all calculations of free float market capitalization
and the determination of constituent weights. ``Circulating Supply''
is defined as the total supply of all units of a digital asset
issued outside of the codebase since the initial block on a digital
asset's blockchain or since the point of inception of the digital
asset on a cryptographic distributed ledger that can be ``spent'' or
moved from one deposit address to another that is deemed to be
likely to be available for trading as defined by the Calculation
Agent and described by the methods in the CF Cryptocurrency Index
Family Multi Asset Ground Rules (section 4.2.1 to 4.3.1.2.1).
Circulating Supply data will be determined at the block height or
ledger number which is the last confirmed block or ledger number at
16:00:00 UTC on the day that is eight (8) business days immediately
preceding the relevant Reconstitution Date. Where the Calculation
Agent cannot reliably determine any of the respective inputs for the
calculation of the Circulating Supply for a given crypto asset that
is an Index Constituent then its Circulating Supply shall be
approximated. This will be done by applying the Median Free Float
Factor (Circulating Supply/Total Supply) that has been determined
for that reconstitution of all Index Constituents to the Total
Supply (Circulating Supply = Total Supply X Median Free Float
Factor). During reconstitution, updated Circulating Supply of crypto
assets will be set and will remain fixed until the next
reconstitution. The Index fixes Circulating Supply of Index
Constituents between reconstitutions in order to preserve the
investability property of the Index.
---------------------------------------------------------------------------
The Index is reconstituted and rebalanced quarterly, on the first
Business Day in March, June, September, and December (each a
``Reconstitution Date''). For this purpose, a Business Day means any
day other than a day when Nasdaq is closed for regular trading
(``Business Day'').
[[Page 11568]]
The settlement price of each Index Constituent (``Index Constituent
Settlement Price'') is calculated once every trading day \20\ by
applying a publicly available rules-based pricing methodology (the
``Pricing Methodology'') to a diverse collection of pricing sources to
provide an institutional-grade reference price for each constituent.
The Pricing Methodology is designed to account for variances in price
across a wide range of sources, each of which has been vetted according
to criteria identified in the methodology. Specifically, the Index
Constituent Settlement Price is the Time Weighted Average Price
(``TWAP'') calculated across the volume weighted average prices
(``VWAPs'') for each minute in the settlement price window, which is
between 3:50:00 and 4:00:00 p.m. New York time, on all Core Crypto
Platforms. Where there are no transactions observed in any given minute
of the settlement price window, that minute is excluded from the
calculation of the TWAP.
---------------------------------------------------------------------------
\20\ All Index Constituent calculations are performed
concurrently with the Index calculation, which takes place at 4:05
p.m. New York time. See supra note 15.
---------------------------------------------------------------------------
The Pricing Methodology also utilizes penalty factors to mitigate
the impact of anomalous trading activity such as manipulation,
illiquidity, large block trading, or operational issues that could
compromise price representation. Three types of penalties are applied
when three or more contributing Core Crypto Platforms contribute
pricing for a constituent asset: abnormal price penalties, abnormal
volatility penalties, and abnormal volume penalties. These penalties
are defined as adjustment factors to the weight of information from
each platform that contributes pricing information based on the
deviation of a platform's price, volatility, or volume from the median
across all Core Crypto Platforms. For example, if a Core Crypto
Platform's price is 2.5 standard deviations away from the median price,
its price penalty factor will be a 1/2.5 multiplier.
The Sponsor believes that the NCIS is a suitable Index for the
Trust for pricing the Trust's assets and as an Index that the Trust
tracks. Specifically, the Index would provide reliable pricing for
purposes of tracking the actual performance of the crypto asset markets
for the Index Constituents. Second, it is administered by a reputable
index administrator that is not affiliated with the Sponsor or
Trust,\21\ which provides assurances of accountability and
independence. Finally, its Pricing Methodology is designed to resist
potential price manipulation from unregulated crypto markets by
applying the following safeguards:
---------------------------------------------------------------------------
\21\ Nasdaq, Inc. (``Nasdaq''), the Index Provider, adheres to
the International Organization of Securities Commissions principles
for benchmarks (the ``IOSCO Principles'') for many of its indexes
via an internal control and governance framework that is audited by
an external, independent auditor on an annual basis. Although NCIS
is not currently one of the indexes that is required to comply with
IOSCO Principles, as a reference rate index, it is administered in a
manner that is generally consistent with both the IOSCO Principles
and the elements of Nasdaq's internal control and governance
framework pursuant to IOSCO Principles. NCIS is administered and
governed by the NIMC in accordance with the publicly available NCI
methodology. The NIMC oversees all aspects of the administration of
the NCIS, including the defined processes and controls for the
selection and recertification of third parties such as the Core
Crypto Platforms and Core Custodians, as well as the validation and
reconciliation of Index calculations and pricing data. As discussed
above, the list of existing Core Crypto Platforms and Core
Custodians will be recertified by the NIMC at a minimum on an annual
basis. The NIMC also oversees the identification and mitigation of
any potential conflicts of interest, formal complaints, and updates
or changes to the Index methodology consistent with the IOSCO
Principles.
---------------------------------------------------------------------------
(1) Requiring that constituents are eligible for being listed as an
underlying asset of an ETP listed on the SIX Swiss Exchange and the
Deutsche B[ouml]rse Xetra as of thirty (30) calendar days prior to the
day of its inclusion;
(2) Strict eligibility criteria for the Core Crypto Platforms from
which the Index data is drawn;
(3) A diverse collection of trustworthy pricing sources to provide
an institutional-grade reference price for the Index Constituents; and
(4) The use of adjustment factors to mitigate against the impact of
any anomalous trading activity on the Index Constituent Settlement
Prices.
The Index Constituents
The Trust gains exposure to digital assets by investing in the
Index Constituents. As of December 31, 2024, the Index Constituents are
bitcoin (BTC), ether (ETH), solana (SOL), XRP ledger (XRP), cardano
(ADA), chainlink (LINK), avalanche (AVA), litecoin (LTC), and uniswap
(UNI). Below, the Sponsor provides a description of each of the Index
Constituents as of the date of this proposal.
Bitcoin (BTC)
Bitcoin, introduced in 2009, is the first decentralized
cryptocurrency and operates on a proof-of-work consensus mechanism. It
is designed to facilitate peer-to-peer transactions without relying on
intermediaries like banks. Transactions are validated by miners who
compete to solve complex cryptographic puzzles, ensuring the integrity
and security of the Bitcoin blockchain. Bitcoin's capped supply of 21
million coins adds to its appeal as a deflationary asset, often
regarded as ``digital gold'' due to its scarcity and store of value
characteristics.
The Bitcoin blockchain serves as a transparent and immutable
ledger, recording all transactions in sequential blocks. It uses the
SHA-256 cryptographic hash function to secure its network, and the
difficulty of mining adjusts dynamically to maintain block generation
approximately every 10 minutes. Beyond its use as a digital currency,
Bitcoin is increasingly employed as collateral in decentralized finance
(DeFi) applications and is traded in both spot and derivative markets
worldwide.
Bitcoin's role as the dominant cryptocurrency has positioned it as
a key component of institutional portfolios and investment products.
Its market dynamics are influenced by macroeconomic trends, adoption
rates, and its regulatory environment, making it a focal point for the
broader crypto industry. With a decentralized governance model and a
community-driven upgrade process, Bitcoin continues to evolve while
adhering to its core principles of decentralization and security.
Ethereum (ETH)
Ethereum, launched in 2015, revolutionized blockchain technology by
introducing smart contracts, enabling developers to build decentralized
applications (DApps). Its native cryptocurrency, ether (ETH), functions
as the fuel for the Ethereum Virtual Machine (EVM), where smart
contracts execute automatically upon meeting predefined conditions.
Ethereum's transition from proof-of-work to proof-of-stake in 2022
(dubbed ``The Merge'') significantly reduced its energy consumption and
strengthened its scalability and security.
The Ethereum blockchain supports a thriving ecosystem of
applications, particularly in decentralized finance (DeFi) and non-
fungible tokens (NFTs). DeFi platforms leverage Ethereum's capabilities
to enable lending, borrowing, and trading without intermediaries, while
NFTs have transformed the way digital ownership and collectibles are
conceptualized. Ethereum's programmability and robust network effect
have positioned it as a leading blockchain for innovation and adoption.
Ether's value is driven by its utility as a medium for transaction
fees (gas), staking rewards, and as a speculative asset. Continuous
upgrades, such as the Shapella and Dencun updates, aim to
[[Page 11569]]
enhance Ethereum's performance, scalability, and user experience. The
network's decentralized governance model ensures ongoing improvements
while balancing the needs of its diverse user base.
Solana (SOL)
Solana is a high-performance blockchain designed for scalability
and low transaction costs, making it ideal for decentralized
applications (DApps) such as gaming and decentralized finance (DeFi).
It employs a unique Proof-of-History (PoH) mechanism integrated with
Proof-of-Stake (PoS) to achieve high throughput and efficient block
validation. Solana's architecture allows for consistent and rapid
transaction processing, supporting its role as a leading platform for
innovative blockchain solutions.
XRP Ledger (XRP)
The XRP Ledger (XRPL) is a decentralized blockchain optimized for
fast, cost-efficient global payments. Its unique consensus protocol,
distinct from proof-of-work or proof-of-stake, enables secure
transaction validation without significant energy consumption. XRP
serves as the network's native currency, functioning as a bridge asset
for cross-border payments and a tool to prevent spam on the network.
With a fixed supply of 100 billion tokens, XRP plays a pivotal role in
supporting the network's ecosystem.
Cardano (ADA)
Cardano is a research-driven blockchain platform that emphasizes
scalability, security, and sustainability. Utilizing the Ouroboros
Proof-of-Stake protocol, Cardano supports smart contracts and DApps
while ensuring energy efficiency and decentralization. Its native
token, ADA, facilitates transactions, staking rewards, and governance,
empowering participants to influence the network's development.
Chainlink (LINK)
Chainlink is a decentralized oracle network that bridges
blockchain-based smart contracts with real-world data. Its LINK token
incentivizes node operators to provide accurate data and ensures the
integrity of information used in DeFi, gaming, and other blockchain
applications. Chainlink's modularity and interoperability make it a
cornerstone for expanding blockchain use cases.
Avalanche (AVAX)
Avalanche is a high-speed, scalable blockchain ecosystem designed
for decentralized applications and custom blockchain networks. Its
unique consensus mechanism, Avalanche Consensus, offers rapid finality
and supports interoperable subnets, making it a versatile platform for
diverse use cases. AVAX, its native token, is utilized for transaction
fees, staking, and network security.
Litecoin (LTC)
Litecoin, launched in 2011, has a main chain that shares a slightly
modified Bitcoin codebase. The practical effects of those codebase
differences are lower transaction fees, faster transaction
confirmations, and faster mining difficulty retargeting. Utilizing the
Scrypt proof-of-work algorithm, Litecoin remains a popular choice for
payments and a reliable store of value in the cryptocurrency space.
Uniswap (UNI)
Uniswap is a leading decentralized exchange protocol that operates
on Ethereum. It enables users to trade tokens directly from their
wallets without intermediaries, leveraging automated market maker (AMM)
mechanisms. The UNI token is central to Uniswap's governance, allowing
holders to propose and vote on protocol upgrades and changes.
Custody of the Trust's Digital Assets
An investment in the Shares is backed by assets held by the Trust,
including the Index Constituents held by the Crypto Custodians on
behalf of the Trust. The Crypto Custodians must qualify as Core
Custodians by the NIMC and thus satisfy at least the requirements set
forth by the NIMC in the NCIS methodology.\22\ The Trust may engage
additional custodians and may also remove or change current Crypto
Custodians, provided that there is at least one Crypto Custodian who is
also a Core Custodian at all times.\23\
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\22\ See https://indexes.nasdaqomx.com/docs/Nasdaq_Digital_Assets_Indexes_Guidelines_Core_Exchanges_Core_Custodians.pdf. As noted above, the Core Custodians as of December 31, 2024
are BitGo, Coinbase, Fidelity, Gemini, Komainu, and Zodia, and the
Trust's Crypto Custodians are on this list.
\23\ If the Trust determines to do so, the Exchange will submit
a rule filing with the Commission under Rule 19b-4 of the Act.
---------------------------------------------------------------------------
The Trust's Crypto Custodians hold and are responsible for
maintaining custody of the Trust's digital assets. The Sponsor causes
the Trust to maintain ownership and control of the Trust's digital
assets in a manner consistent with good delivery requirements for spot
commodity transactions.
All of the Trust's digital assets are held in one or more accounts
in the name of the Trust (each a ``Custody Account'' and together the
``Custody Accounts''), other than the Trust's assets which are
temporarily maintained in a trading account under limited circumstances
(``Trading Account''), i.e., in connection with creation and redemption
basket activity or sales of digital assets deducted from the Trust's
holdings in payment of Trust expenses or the Sponsor's fee (or, in
extraordinary circumstances, upon liquidation of the Trust).
The Trust's digital assets and cash holdings from time to time may
temporarily be maintained in the Trading Account. The Sponsor intends
to execute an agreement so Coinbase Inc. can serve as the Trust's
``Prime Execution Agent'' (``Prime Execution Agent Agreement''). In
this capacity, the Prime Execution Agent facilitates the buying and
selling of digital assets by the Trust in response to cash creations
and redemptions between the Trust and registered broker-dealers that
are Depositary Trust Company (``DTC'') participants that enter into an
authorized participant agreement with the Sponsor (``Authorized
Participants''), and the sale of digital assets to pay the Sponsor's
fee, any other Trust expenses not assumed by the Sponsor, to the extent
applicable, and in extraordinary circumstances, in connection with the
liquidation of the Trust's assets.
Creation and Redemption of Shares
The Trust issues and redeems ``Baskets'' \24\ on a continuous
basis. Baskets are issued or redeemed only in exchange for an amount of
cash determined by the Sponsor or the Administrator on each Business
Day. No Shares are issued unless the Cash Custodian has allocated to
the Trust's account the corresponding amount of cash. Baskets may be
created or redeemed only by Authorized Participants. Each Authorized
Participant must be registered as a broker-dealer under the Exchange
Act and regulated by Financial Industry Regulatory Authority
(``FINRA''), and must be qualified to act as a broker or dealer in the
states or other jurisdictions where the nature of its business so
requires.
---------------------------------------------------------------------------
\24\ Baskets will be offered continuously at NAV per Share for
10,000 Shares. Therefore, a Basket of Shares would be valued at NAV
per Share multiplied by the Basket size and the value of the bitcoin
and ether to be acquired by the Trust as part of the creation of a
Basket would be based on the dollar value of the NAV per Share
multiplied by the Basket size for such creations. Only Authorized
Participants may purchase or redeem Baskets.
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The Authorized Participants deliver only cash to create Shares and
receive
[[Page 11570]]
only cash when redeeming Shares. Further, Authorized Participants do
not directly or indirectly purchase, hold, deliver, or receive digital
assets 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 digital assets as part of the creation or
redemption process.
The Trust creates Shares by receiving Index Constituents from a
third party that is not the Authorized Participant, and the Trust--not
the Authorized Participant--is responsible for selecting the third
party to deliver the assets. Further, the third party will not be
acting as an agent of the Authorized Participant with respect to the
delivery of the Index Constituents to the Trust or acting at the
direction of the Authorized Participant with respect to the delivery of
the Index Constituents to the Trust. The Trust redeems Shares by
delivering Index Constituents to a third party that is not the
Authorized Participant, and the Trust--not the Authorized Participant--
is responsible for selecting the third party to receive the Index
Constituents. Further, the third party does not act as an agent of the
Authorized Participant with respect to the receipt of the Index
Constituents from the Trust or acting at the direction of the
Authorized Participant with respect to the receipt of the Index
Constituents from the Trust. The third-party will be unaffiliated with
the Trust and the Sponsor.
In connection with cash creations and cash redemptions, the
Authorized Participants submit orders to create or redeem Baskets \25\
of Shares exclusively in exchange for cash. The Trust engages in
transactions to convert cash into digital assets (in association with
creation orders) and digital assets into cash (in association with
redemption orders). The Trust conducts its digital assets purchase and
sale transactions by choosing, in its sole discretion, either to trade
directly with designated third parties (each, a ``Crypto Trading
Counterparty''), who are not registered broker-dealers pursuant to
written agreements between each such Crypto Trading Counterparty and
the Trust, or to trade through the Prime Execution Agent acting in an
agency capacity with third parties pursuant to the Prime Execution
Agent Agreement. Crypto Trading Counterparties settle trades with the
Trust using their own accounts at the Prime Execution Agent when
trading with the Trust.
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\25\ The Trust issues and redeems Shares only in blocks or
``Baskets'' of 10,000 or integral multiples thereof.
---------------------------------------------------------------------------
For the creation of a Basket of Shares, the Authorized Participant
is required to submit the creation order by 2:00 p.m. ET, or the close
of regular trading on the Exchange, whichever is earlier (the ``Order
Cutoff Time''). The Order Cutoff Time may be modified by the Sponsor in
its sole discretion.
On the date of the Order Cutoff Time for a creation order, the
Trust enters into a transaction by choosing, in its sole discretion, to
trade directly with a Crypto Trading Counterparty or the Prime
Execution Agent, to buy the Index Constituents in exchange for the cash
proceeds from such creation order. The Authorized Participant is
responsible for the dollar cost of the difference between the digital
assets price utilized in calculating the NAV per Share on the Creation
Order Date (as described below) and the price at which the Trust
acquires the Index Constituents to the extent the price amount for
buying the digital assets is higher than the price utilized in
calculating the NAV. In the case the price amount for buying the Index
Constituents is lower than the price utilized in calculating the NAV,
the Authorized Participant shall keep the dollar impact of any such
difference.
Creation orders take place as follows, where ``T'' is the date of
the creation order and each day in the sequence must be a business day
in the U.S.
------------------------------------------------------------------------
Creation order date (T) Settlement date (T+1)
------------------------------------------------------------------------
Authorized Participant places a The Authorized
creation order. Participant delivers the
The Transfer Agent accepts (or Basket cash component to
rejects) the creation order. the Trust's cash account
The Trust enters into a that is maintained with the
transaction with the Crypto Trading Cash Custodian.
Counterparty or the Prime Execution Agent The Crypto Trading
to purchase the corresponding digital Counterparty or the Prime
assets. Execution Agent deposits
As soon as practicable after 4:00 the digital assets into the
p.m. ET, the Sponsor determines the Trust's Trading Account
Basket cash component, including any related to the purchase
dollar cost difference between the transaction.
digital assets price utilized in Once the Trust is
calculating NAV per Share and the price in simultaneous possession
at which the Trust acquires the digital of the Basket cash
assets. component and the digital
assets, the Trust delivers
the corresponding Shares to
the Authorized Participant.
The Trust transfers
the cash related to the
purchase transaction from
the Trust cash account
maintained with the Cash
Custodian to the Crypto
Trading Counterparty or the
Prime Execution Agent.
------------------------------------------------------------------------
When the Trust chooses to enter into a transaction with the Prime
Execution Agent, because the Trust's Trading Account may not be funded
with cash on the Creation Order Date for the purchase of the Index
Constituents associated with a cash creation order, the Trust may
borrow trade credits (``Trade Credits'') in the form of cash from the
``Trade Credit Lender'', under a trade financing agreement (``Trade
Financing Agreement'') or may require the Authorized Participant to
deliver the required cash for the creation order on the Creation Order
Date. The extension of Trade Credits on the Creation Order Date allows
the Trust to purchase digital assets through the Prime Execution Agent
on the Creation Order Date, with such digital assets being deposited in
the Trust's Trading Account. On Settlement Date for a creation order,
the Trust delivers Shares to the Authorized Participant in exchange for
cash received from the Authorized Participant. To the extent Trade
Credits were utilized, the Trust uses the cash to repay the Trade
Credits borrowed from the Trade Credit Lender. On the Settlement Date
for a creation order, the digital assets purchased are swept from the
Trust's Trading Account to the Custody Account pursuant to a regular
end-of-day sweep process.
For a redemption of a Basket of Shares, the Authorized Participant
is required to submit a redemption order by the Order Cutoff Time. On
the date of the Order Cutoff Time for a redemption order, the Trust
enters into a transaction by choosing, in its sole discretion, to trade
directly with a Crypto Trading Counterparty or the Prime Execution
Agent, to sell digital assets in exchange for cash. The
[[Page 11571]]
Authorized Participant bears the difference between the Index
Constituents price utilized in calculating the NAV per Share on the
Redemption Order Date and the price realized in selling the Index
Constituents to raise the cash needed for the cash redemption order to
the extent the price realized in selling the Index Constituents is
lower than the price utilized in the NAV. To the extent the price
realized in selling the digital assets is higher than the price
utilized in the NAV, the Trust delivers the dollar impact of any such
difference to the Authorized Participant.
Redemption orders take place as follows, where ``T'' is the date of
the redemption order and each day in the sequence must be a business
day.
------------------------------------------------------------------------
Redemption order date (T) Settlement date (T+1)
------------------------------------------------------------------------
Authorized Participant places a The Authorized
redemption order. Participant delivers the
The Transfer Agent accepts (or Baskets of Shares to be
rejects) the redemption order. redeemed to the Trust.
The Trust instructs the Crypto The Crypto Trading
Custodian to prepare to move the Counterparty or the Prime
corresponding digital assets from the Execution Agent delivers
Trust's Custody Account to the Trading cash to the Trust's cash
Account. account that is maintained
The Trust enters into a with the Cash Custodian
transaction with the Crypto Trading related to the sell
Counterparty or the Prime Execution Agent transaction.
to sell the corresponding digital assets. Once the Trust is
As soon as practicable after 4:00 in simultaneous possession
p.m. ET, the Sponsor determines the of the Basket of Shares and
Basket cash component, including any the respective Basket cash
dollar cost difference between the component, the Trust
digital assets price utilized in cancels the Shares
calculating NAV per Share and the price comprising the number of
at which the Trust sells the digital Baskets redeemed by the
assets. Authorized Participant.
The Trust instructs
the Crypto Custodian to
transfer the corresponding
digital assets agreed on
the sell transaction from
the Trust's Trading Account
to the Crypto Trading
Counterparty or Prime
Execution Agent.
The Trust transfers
the Basket cash component
from the cash account
maintained with the Cash
Custodian to the Authorized
Participant.
------------------------------------------------------------------------
The Trust may use financing in connection with a redemption order
when the Index Constituents remain in the Custody Account at the point
of intended execution of a sale of the Index Constituents. In those
circumstances, the Trust may borrow Trade Credits in the form of Index
Constituents from the Trade Credit Lender, which allows the Trust to
sell digital assets through the Prime Execution Agent on the Redemption
Order Date, and the cash proceeds are deposited in the Trading Account.
On the Settlement Date for a redemption order, the Trust delivers cash
to the Authorized Participant in exchange for Shares received from the
Authorized Participant. In the event financing is used, the Trust will
use the digital assets moved from the Custody Account to the Trading
Account to repay the Trade Credits borrowed from the Trade Credit
Lender.
Net Asset Value
The Trust's NAV per Share is calculated by taking the current value
of its total assets, subtracting any liabilities, and dividing that
total by the number of Shares. The assets of the Trust will consist of
the Index Constituents, cash and cash equivalents. The Sponsor has the
exclusive authority to determine the Trust's NAV, which it has
delegated to the Administrator.
The Administrator of the Trust calculates the NAV once each
Business Day, as of the earlier of the close of the Nasdaq or 4:00 p.m.
New York time.
The Administrator values the digital assets held by the Trust based
on the Index Constituent Settlement Price, unless the prices are not
available or the Administrator, in its sole discretion, determines that
the Index Constituent Settlement Price is unreliable (``Fair Value
Event''). In the instance of a Fair Value Event, the Trust's holdings
may be valued on a temporary basis in accordance with the fair value
policies approved by the Administrator.
In the instance of a Fair Value Event and pursuant to the
Administrator's fair valuation policies and procedures, VWAP or Volume
Weighted Median Prices (``VWMP'') from another index administrator
(``Secondary Index'') will be utilized.
If a Secondary Index is also not available or the Administrator in
its sole discretion determines the Secondary Index is unreliable, the
price set by the Trust's principal market as of 4:00 p.m. ET, on the
valuation date will be utilized. In the event the principal market
price is not available or the Administrator in its sole discretion
determines the principal market valuation is unreliable, the
Administrator will use its best judgment to determine a good faith
estimate of fair value. The Administrator identifies and determines the
Trust's principal market (or in the absence of a principal market, the
most advantageous market) for Index Constituents consistent with the
application of fair value measurement framework in FASB ASC 820-10.\26\
The principal market is the market where the reporting entity would
normally enter into a transaction to sell the asset or transfer the
liability. The principal market must be available to and be accessible
by the reporting entity. The reporting entity is the Trust.
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\26\ See FASB (Financial Accounting Standards Board) Accounting
standards codification (ASC) 820-10. For financial reporting
purposes only, the Trustee has adopted a valuation policy that
outlines the methodology for valuing the Trust's assets. The policy
also outlines the methodology for determining the principal market
(or in the absence of a principal market, the most advantageous
market) in accordance with FASB ASC 820-10.
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If the Index Constituent Settlement Price is not used to determine
the Trust's digital asset holdings, owners of the beneficial interests
of Shares (the ``Shareholders'') will be notified in a prospectus
supplement or on the Trust's website and, if this index change is on a
permanent basis, a filing with the Commission under Rule 19b-4 of the
Act will be required.
A Fair Value Event value determination will be based upon all
available factors that the Sponsor or the Administrator deems relevant
at the time of the determination and may be based on analytical values
determined by the Sponsor or Administrator using third-party valuation
models. Fair value policies approved by the Administrator will seek to
determine the fair value price that the Trust might reasonably expect
to receive from the current sale of that asset or liability in an
arm's-length transaction on the date on which the asset or liability is
being valued consistent with ``Relevant Transactions''.\27\
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\27\ A ``Relevant Transaction'' is any crypto asset versus U.S.
dollar spot trade that occurs during the observation window between
3:00 p.m. and 4:00 p.m. ET on a ``Core Crypto Platform'' in the BTC/
USD and ETH/USD pair that is reported and disseminated by a Core
Crypto Platform through its publicly available application
programming interface and observed by the index administrator.
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[[Page 11572]]
Intraday Indicative Value
In order to provide updated information relating to the Trust for
use by Shareholders and market professionals, the Sponsor has engaged
an independent calculator to calculate an updated intraday indicative
value (``IIV''). The IIV will be calculated by using the prior day's
closing NAV per Share of the Trust as a base and will be updated
throughout the regular market session of 9:30 a.m. E.T. to 4:00 p.m.
E.T. (the ``Regular Market Session'') to reflect changes in the value
of the Trust's holdings during the trading day. For purposes of
calculating the IIV, the Trust's digital assets holdings will be priced
using a real time version of the Index, the Nasdaq Crypto Index
(``NCI'').\28\
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\28\ The Nasdaq Crypto Index (Index symbol NCI) is calculated
every second throughout a 24-hour trading day, seven days per week,
using published, real-time bid and ask quotes for Index constituents
observed on Core Crypto Platforms through the publicly available
API. See https://indexes.nasdaqomx.com/docs/methodology_NCI.pdf.
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The IIV will be disseminated on a per Share basis every 15 seconds
during the Exchange's Regular Market Session and be widely disseminated
by one or more major market data vendors during the Regular Market
Session.\29\
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\29\ Several major market data vendors display and/or make
widely available IIVs taken from the Consolidated Tape Association
(``CTA'') or other data feeds.
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Digital Asset ETPs--Applicable Standard
The Commission has recently permitted ETPs to directly hold bitcoin
and ether. The Exchange and the Sponsor applaud the Commission as these
approvals mark a significant step forward in offering U.S. investors
and traders transparent, exchange-listed products for expressing views
on digital assets.
On January 10, 2024, the Commission issued an order granting
approval for proposals to list certain bitcoin-based commodity trust
and bitcoin-based trust units (``Spot Bitcoin ETPs'').\30\ In
considering the Spot Bitcoin ETPs, the Commission determined in the
Spot Bitcoin ETP Approval Order that the exchanges' comprehensive
surveillance-sharing agreement with the Chicago Mercantile Exchange
(``CME'')--a U.S. regulated market whose bitcoin futures market is
consistently highly correlated to spot bitcoin--could be reasonably
expected to assist in surveilling for fraudulent and manipulative acts
and practices in the specific context of the proposals. The exchanges
have comprehensive surveillance-sharing agreements with the CME via
their common membership in the ISG, which facilitates the sharing of
information that is available to the CME through its surveillance of
its markets.
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\30\ See Exchange Act Release No. 99306 (January 10, 2024), 89
FR 3008 (January 17, 2024) (Self-Regulatory Organizations; NYSE
Arca, Inc.; The Nasdaq Stock Market LLC; Cboe BZX Exchange, Inc.;
Order Granting Accelerated Approval of Proposed Rule Changes, as
Modified by Amendments Thereto, To List and Trade Bitcoin-Based
Commodity-Based Trust Shares and Trust Units) (the ``Spot Bitcoin
ETP Approval Order'').
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After reviewing the proposals for the Spot Bitcoin ETPs, the
Commission found that they were consistent with the Act, including with
Section 6(b)(5), and rules and regulations thereunder applicable to a
national securities exchange, including the Exchange. The
abovementioned Section 6(b)(5) requires, among other things, that the
investment product is designed to ``prevent fraudulent and manipulative
acts and practices'' and, ``in general, to protect investors and the
public interest.''
The Commission's analysis \31\ in the Spot Bitcoin ETP Approval
Order also demonstrated that prices typically move in close, though not
perfect, correlation \32\ between the spot bitcoin market and the CME
bitcoin futures market. Therefore, the Commission concluded that fraud
or manipulation affecting spot bitcoin market prices would likely
similarly impact CME bitcoin futures prices. Since the CME's
surveillance can help detect these impacts on CME bitcoin futures
prices, such surveillance can be reasonably expected to assist in
surveilling for fraudulent and manipulative acts and practices in the
specific context of the Spot Bitcoin ETPs proposals.
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\31\ The robustness of the Commission's correlation analysis
rests on the pre-requisites of (1) the correlations being calculated
with respect to bitcoin futures that trade on the CME, a U.S. market
regulated by the CFTC, (2) the lengthy sample period of price
returns for both the CME bitcoin futures market and the spot bitcoin
market, (3) the frequent intra-day trading data in both the CME
bitcoin futures market and the spot bitcoin market over that lengthy
sample period, and (4) the consistency of the correlation results
throughout the lengthy sample period.
\32\ Correlation should not be interpreted as an indicator of a
causal relationship or whether one variable leads or lags the other.
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In the Spot Bitcoin ETP Approval Order, the Commission also stated
that the Spot Bitcoin ETP proposals, similar to other spot commodity
ETPs it has approved, are reasonably designed to ensure fair disclosure
of information necessary for accurate share pricing, to prevent trading
in the absence of sufficient transparency, to protect material
nonpublic information related to the products' portfolios, and to
maintain fair and orderly markets for the shares of the Spot Bitcoin
ETPs.
A few months after the issuance of its Spot Bitcoin ETP Approval
Order, the Commission issued on May 23, 2024 an approval order for
proposals to list certain ether-based trusts (``Spot Ether ETPs'').\33\
The Commission also concluded in the Spot Ether ETP Approval Order that
the exchanges' comprehensive surveillance-sharing agreement with the
CME, a U.S.-regulated market whose ether futures market is consistently
highly correlated with spot ether, can be reasonably expected to assist
in surveilling for fraudulent and manipulative acts and practices
within the context of the mentioned proposals.
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\33\ See Exchange Act Release No. 100224 (May 23, 2024), 89 FR
46937 (May 30, 2024) (Self-Regulatory Organizations; NYSE Arca,
Inc.; The Nasdaq Stock Market LLC; Cboe BZX Exchange, Inc.; Order
Granting Accelerated Approval of Proposed Rule Changes, as Modified
by Amendments Thereto, to List and Trade Shares of Ether-Based
Exchange-Traded Products) (the ``Spot Ether ETP Approval Order'').
---------------------------------------------------------------------------
As in the case of the Spot Bitcoin ETP Approval Order, in the Spot
Ether ETP Approval Order, the Commission determined that the exchanges'
comprehensive surveillance-sharing agreement with the CME ether futures
market, which exhibits a consistent high correlation with spot ether,
can reasonably be expected to assist in surveilling for fraudulent and
manipulative practices in the specific context of the Spot Ether ETP
proposals. Therefore, based on similar reasons to the Spot Bitcoin ETP
Approval Order, the Commission approved the Spot Ether ETPs, stating
that the proposals to list and trade those Spot Ether ETPs were also
consistent with the requirements of the Act and the regulations
applicable to a national securities exchange, in particular with
Section 6(b)(5) and Section 11A(a)(1)(C)(iii) of the Act.
On December 19, 2024, the Commission issued an order granting
approval for the listing and trading of shares of the Trust and the
Franklin Crypto Index ETF. The order highlighted the consistency of the
proposals with the requirements of the Act, particularly Section
6(b)(5) and Section 11A(a)(1)(C)(iii), which emphasize the prevention
of fraudulent and manipulative practices and the maintenance of fair
and orderly markets. The Commission's decision relied on
[[Page 11573]]
the robust correlation analyses demonstrating the high consistency
between CME bitcoin and ether futures markets and their respective spot
markets, and the SEC's determination that the exchanges' comprehensive
surveillance-sharing agreement could reasonably be expected to assist
in monitoring and deterring fraudulent activities, ensuring compliance
with the Act and safeguarding investor interests.
In addition to the CME, Coinbase Derivatives, LLC (``Coinbase
Derivatives'')--similar to the CME, Coinbase Derivatives regulated by
the Commodity Futures Trading Commission (``CFTC'') and sharing ISG
membership with Nasdaq--also lists futures contracts for digital assets
beyond bitcoin and ether. Notably, the Coinbase Derivatives offers
derivative products for three additional Index Constituents (as of the
filing date): chainlink (LINK), litecoin (LTC), and avalanche (AVAX).
This facilitates the sharing of information that is available to
Coinbase Derivatives through its surveillance of its markets, including
its surveillance of Coinbase Derivatives' LINK, LTC, and AVAX futures
market. Nasdaq's ability to obtain information regarding trading in the
LINK, LTC, and AVAX futures from other markets that are members of the
ISG would assist Nasdaq in detecting and deterring misconduct.
The Sponsor acknowledges that the Index Constituents currently
include minority positions in digital assets that are not bitcoin or
ether. The Sponsor represents that no more than 10% of the weight of
its digital asset holdings will consist of digital assets concerning
which the Exchange may not be able to obtain information via the ISG or
via a CSSA. For clarification purposes, in the aggregate, at least 90%
of the weight of digital asset holding of the Trust shall, on both an
initial and continuing basis, consist of commodities and/or digital
assets concerning which the Exchange is able to obtain information via
the ISG from other members of the ISG or via a CSSA.
In the context of prior spot digital asset ETP proposal disapproval
orders for bitcoin and ether, the Commission expressed concerns about
the underlying digital asset market due to the potential for fraud and
manipulation and has outlined the reasons why such ETP proposals have
been unable to satisfy these concerns.\34\ For purposes of the Trust's
proposal, the Sponsor anticipates that the Commission may have the same
concerns about digital assets other than bitcoin and ether.
---------------------------------------------------------------------------
\34\ See Securities Exchange Act Release Nos. 83723 (July 26,
2018), 83 FR 37579 (August 1, 2018) (SR-BatsBZX-2016-30) (Order
Setting Aside Action by Delegated Authority and Disapproving a
Proposed Rule Change, as Modified by Amendments No. 1 and 2, To List
and Trade Shares of the Winklevoss Bitcoin Fund) (the ``Winklevoss
Order''); 87267 (October 9, 2019), 84 FR 55382 (October 16, 2019)
(SR-NYSEArca-2019-01) (Order Disapproving a Proposed Rule Change, as
Modified by Amendment No. 1, Relating to the Listing and Trading of
Shares of the Bitwise Bitcoin ETF Fund Under NYSE Arca Rule 8.201-E)
(the ``Bitwise Order''); 88284 (February 26, 2020), 85 FR 12595
(March 3, 2020) (SR-NYSEArca-2019-39) (Order Disapproving a Proposed
Rule Change, as Modified by Amendment No. 1, to Amend NYSE Arca Rule
8.201-E (Commodity-Based Trust Shares) and to List and Trade Shares
of the United States Bitcoin and Treasury Investment Trust Under
NYSE Arca Rule 8.201-E) (the ``Wilshire Phoenix Order''); 83904
(August 22, 2018), 83 FR 43934 (August 28, 2018) (SR-NYSEArca-2017-
139) (Order Disapproving a Proposed Rule Change to List and Trade
the Shares of the ProShares Bitcoin ETF and the ProShares Short
Bitcoin ETF); 83912 (August 22, 2018), 83 FR 43912 (August 28, 2018)
(SR-NYSEArca-2018-02) (Order Disapproving a Proposed Rule Change
Relating to Listing and Trading of the Direxion Daily Bitcoin Bear
1X Shares, Direxion Daily Bitcoin 1.25X Bull Shares, Direxion Daily
Bitcoin 1.5X Bull Shares, Direxion Daily Bitcoin 2X Bull Shares, and
Direxion Daily Bitcoin 2X Bear Shares Under NYSE Arca Rule 8.200-E);
83913 (August 22, 2018), 83 FR 43923 (August 28, 2018) (SR-CboeBZX-
2018-01) (Order Disapproving a Proposed Rule Change to List and
Trade the Shares of the GraniteShares Bitcoin ETF and the
GraniteShares Short Bitcoin ETF).
---------------------------------------------------------------------------
The Commission has recognized that a listing exchange could
demonstrate that other means to prevent fraudulent and manipulative
acts and practices are sufficient to justify dispensing with the
requisite surveillance-sharing agreement.\35\ In evaluating the
effectiveness of this type of resistance, the Commission does not apply
a ``cannot be manipulated'' standard.
---------------------------------------------------------------------------
\35\ See Winklevoss Order, 84 FR at 37580, 37582-91; Bitwise
Order, 84 FR at 55383, 55385-406; Wilshire Phoenix Order, 85 FR at
12597.
---------------------------------------------------------------------------
The Sponsor believes that a more diversified ETP, such as the
proposed Trust, offers additional resistance to potential manipulation
compared to single-asset or dual-asset ETPs, thereby enhancing the
effectiveness of other measures designed to prevent fraudulent and
manipulative acts and practices. By diversifying exposure across
multiple digital assets, the Trust will reduce the impact that
manipulation of a single constituent asset could have on the overall
performance of the Trust. The inclusion of assets with differing
liquidity profiles, trading volumes, and market dynamics further
complicates any coordinated attempt to manipulate the Index as a whole.
These structural safeguards, combined with the Exchange's ability to
monitor trading activity through the ISG and CSSAs, provide strong
protection against market abuse and enhance the reliability of the
Trust as an investment vehicle for U.S. investors.
Additionally, the Sponsor believes that the proposed rule to list
and trade Shares of the Trust aligns with precedents established by the
SEC for commodity-indexed ETPs. These precedents demonstrate that the
trading rules and procedures governing ETPs, where up to 10% of the
portfolio weight consists of assets whose principal trading market is
not a member of the ISG or does not have a CSSA with the Exchange, are
consistent with the Act.
In December 2007, the SEC approved the 19b-4 filing for the iShares
S&P GSCI Commodity-Indexed Trust (``GSG''), which established an
important precedent for index composition standards. The order states:
``A new component may be added to the Index if it does not constitute
more than 10% of the weight of the index or, if it constitutes more
than 10% of the weight of the Index, then the principal trading market
for such component either (a) is a member of ISG, or (b) has a
comprehensive surveillance sharing agreement with the Exchange.'' \36\
---------------------------------------------------------------------------
\36\ See Securities Exchange Act No. 56932 (December 7, 2007),
72 FR 71178 (December 14, 2007) (SR-NYSEArca-2007-112) at 71183.
---------------------------------------------------------------------------
This standard reflects the SEC's emphasis on ensuring that markets
for index components are sufficiently transparent and subject to
effective regulatory oversight, particularly for components with
substantial weightings in the index.
Building on the GSG precedent, the SEC approved the 19b-4 filing
for the United States Commodity Index Fund (``USCI'') in July 2010. The
SEC's approval included a similar condition for monitoring trading
markets and ensuring appropriate surveillance mechanisms. Specifically,
the order states: ``With respect to Fund assets traded on exchanges,
not more than 10% of the weight of such assets in the aggregate shall
consist of components whose principal trading market is not a member of
ISG or is a market with which the Exchange does not have a
comprehensive surveillance sharing agreement.'' \37\
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\37\ See Securities Exchange Act No. 62527 (July 19, 2010), 75
FR 43606 (July 26, 2010) (SR-NYSEArca-2010-44) at 43609.
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This condition reinforced the SEC's commitment to safeguarding the
integrity of ETPs by limiting the exposure to markets without adequate
surveillance. The proposed listing of the Trust incorporates
protections consistent with the principles established in the GSG and
USCI precedents. This ensures that the vast majority of the Trust's
portfolio remains
[[Page 11574]]
subject to robust surveillance mechanisms, allowing the Exchange to
monitor trading activity effectively and address potential risks to
market integrity.
By maintaining this 90% threshold, the Sponsor believes that this
proposal is consistent with the requirements of the Act. The Sponsor
believes that the 10% limit ensures that the Trust adheres to a high
standard of investor protection while accommodating the evolving nature
of the crypto asset market. This approach aligns with the SEC's
historical approval of commodity-indexed ETPs and promotes public
interest by fostering fair and orderly markets.
Furthermore, the Sponsor believes the Trust's use of the reference
prices provided by the Calculation Agent to value the Trust's holdings
(``Reference Prices'') and to determine NAV and IIV for the Trust, in
tandem with the Trust's cash create and redeem structure represents a
novel means to prevent fraud and manipulation from impacting the price
of the Shares, by offering protections beyond those that exist in
traditional commodity markets and consistent with those that exist in
equity markets.
The Sponsor believes that its use of Reference Prices accomplishes
these objectives in the following ways:
(1) The Calculation Agent calculates the Reference Prices for the
Index Constituents exclusively through trading activity on spot digital
asset trading platforms that are Core Crypto Platforms.
(2) The Reference Prices are calculated by the Calculation Agent,
which is under the UK Benchmarks Regime.\38\
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\38\ The ``UK Benchmarks Regime'' refers to the regulatory
framework governing the administration, use, and oversight of
financial benchmarks in the United Kingdom. Following the UK's
withdrawal from the European Union, the regime is based on the UK
Benchmarks Regulation (UK BMR), which closely aligns with the EU
Benchmarks Regulation (EU BMR) but is independently supervised by
the UK Financial Conduct Authority (FCA). The regime establishes
standards and requirements for benchmark administrators to ensure
the integrity, transparency, and reliability of benchmarks used in
financial markets.
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Finally, the Sponsor believes that the cash creation and redemption
structure of the Trust also underscores the protections that the
Reference Prices afford to the Trust. The Trust's Shares will have
their NAV and IIV determined by the Reference Prices and because all
Shares in the Trust will be created and redeemed with cash (not
physical digital assets), any attempts to manipulate Shares would have
to involve transactions on the spot trading platforms that are Core
Crypto Platforms to be able to influence the price of the Shares.
Although the Trust is adopting a new strategy of investing in a
more diversified basket of crypto assets, the Exchange and the Sponsor
believe that the proposed rule change will add value to the U.S.
market.
Availability of Information
The website for the Trust, which will be publicly accessible at no
charge, will contain the following information: (a) the prior Business
Day's NAV per Share; (b) the prior Business Day's Nasdaq official
closing price; (c) calculation of the premium or discount of such
Nasdaq official closing price against such NAV per Share; (d) data in
chart form displaying the frequency distribution of discounts and
premiums of the Nasdaq official closing price against the NAV per
Share, within appropriate ranges for each of the four previous calendar
quarters (or for the life of the Trust, if shorter); (e) the
prospectus; and (f) other applicable quantitative information. The
Administrator will also disseminate the Trust's holdings on a daily
basis on the Trust's website. The NAV per Share for the Trust will be
calculated by the Administrator once a day and will be disseminated
daily to all market participants at the same time. Quotation and last
sale information regarding the Shares will be disseminated through the
facilities of the relevant securities information processor.
An estimated value that reflects an estimated IIV will also be
disseminated. For more information on the IIV, including the
calculation methodology, see ``Intraday Indicative Value'' above. The
IIV disseminated during the Regular Market 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
Regular Market Session by one or more major market data vendors. In
addition, the IIV will be available through online information
services.
Quotation and last sale information for Index Constituents is
widely disseminated through a variety of major market data vendors,
including Bloomberg and Reuters. Information relating to trading,
including price and volume information for Index Constituents, is
available from major market data vendors and from the platforms on
which such digital assets are traded. Depth of book information is also
available from such crypto platforms. The normal trading hours for the
digital asset platforms are 24 hours per day, 365 days per year.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers.
Initial and Continued Listing
The Shares will be subject to proposed Nasdaq Rule 5712, which sets
forth the initial and continued listing criteria applicable to
Commodity- and/or Digital Asset-Based Investment Interests Shares. A
minimum of 40,000 Shares, or the equivalent of four Baskets, will be
required to be outstanding at the time of commencement of trading on
the Exchange. Upon termination of the Trust, the Shares will be removed
from listing.
The trading of the Shares will be subject to proposed Nasdaq Rule
5712(i), which sets forth certain restrictions on registered Market
Makers in Commodity- and/or Digital Asset-Based Investment Interests to
facilitate surveillance. As required in Nasdaq Rule 5712(i), the
Exchange notes that any registered Market Maker in the Shares must file
with the Exchange, in a manner prescribed by the Exchange, and keep
current a list identifying all accounts for trading that the Market
Maker may have or over which it may exercise investment discretion in
an underlying commodity, related commodity futures or options on
commodity futures, or any other related commodity derivatives; an
underlying digital asset, related digital asset futures or options on
digital asset futures, or any other related digital asset derivatives;
or an underlying series of derivative securities products, related
futures or options on such derivative securities products, or any other
related derivatives of such derivative securities products. No Market
Maker in Commodity- and/or Digital-Asset Based Investment Interests
shall trade in a commodity or any related derivative in an account that
the Market Maker (1) directly or indirectly controls trading activities
or has a direct interest in the profits or losses thereof, (2) is
required by this rule to disclose to the Exchange, and (3) has not
reported to the Exchange. In addition to the existing obligations under
Exchange rules regarding the production of books and records, the
Market Maker in Commodity- and/or Digital Asset-Based
[[Page 11575]]
Investment Interests shall make available to the Exchange such books,
records, or other information pertaining to transactions by such entity
or registered or non-registered employee affiliated with such entity
for its or their own accounts for trading the underlying physical
commodity, related commodity futures or options on commodity futures,
or any other related commodity, as may be requested by the Exchange.
The Exchange is able to obtain information regarding trading in the
Shares and the underlying digital assets, or any other digital assets
derivative through members acting as registered Market Makers, in
connection with their proprietary or customer trades.
As a general matter, the Exchange has regulatory jurisdiction over
its Members, and their associated persons. The Exchange also has
regulatory jurisdiction over any person or entity controlling a Member,
as well as a subsidiary or affiliate of a Member that is in the
securities business. A subsidiary or affiliate of a Member that does
business only in commodities would not be subject to Exchange
jurisdiction, but the Exchange could obtain information regarding the
activities of such subsidiary or affiliate through surveillance sharing
agreements with regulatory or self-regulatory organizations of which
such subsidiary or affiliate is a member.
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. The Exchange will
allow trading in the Shares from 4:00 a.m. to 8:00 p.m. ET. The
Exchange has appropriate rules to facilitate transactions in the Shares
during all trading sessions. The Shares of the Trust will conform to
the initial and continued listing criteria set forth in Nasdaq Rule
5712 and will comply with the requirements of Rule 10A-3 of the Act.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. The Exchange will halt trading in the Shares
under the conditions specified in Nasdaq Rules 4120 and 4121, including
without limitation the conditions specified in Nasdaq Rule 4120(a)(9)
and (10) and the trading pauses under Nasdaq Rules 4120(a)(11) and
(12).
Trading may be halted because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable. These may include: (1) the extent to which trading is not
occurring in the Index Constituents underlying the Shares; or (2)
whether other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present.
If the IIV or the value of the Index is not being disseminated as
required, the Exchange may halt trading during the day in which the
interruption to the dissemination of the IIV or the value of the 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
with respect to the Shares is not disseminated to all market
participants at the same time, it will halt trading in the Shares until
such time as the NAV per Share is available to all market participants.
Surveillance
The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of the Shares on the Exchange during
all trading sessions and to deter and detect violations of Exchange
rules and the applicable federal securities laws. The surveillance
program includes real-time patterns for price and volume movements and
post-trade surveillance patterns (e.g., spoofing, marking the close,
pinging, phishing).
Trading of Shares on the Exchange will be subject to the Exchange's
surveillance program for derivative products, as well as cross-market
surveillances administered by FINRA, on behalf of the Exchange pursuant
to a regulatory services agreement, which are also designed to detect
violations of Exchange rules and applicable federal securities laws.
The Exchange is responsible for FINRA's performance under this
regulatory services agreement.
The Exchange will require the Trust to represent 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 Exchange Act, the Exchange
will surveil 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 the
Nasdaq 5800 Series. In addition, the Exchange also has a general policy
prohibiting the distribution of material, non-public information by its
employees.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares and Index
Constituents' derivatives with other markets and other entities that
are members of the ISG,\39\ and the Exchange or FINRA, on behalf of the
Exchange, or both, may obtain trading information regarding trading in
the Shares and Index Constituents' derivatives from such markets and
other entities. The Exchange also may obtain information regarding
trading in the Shares and Index Constituents' derivatives via the ISG,
from other exchanges who are members or affiliates of the ISG, or with
which the Exchange has entered into a CSSA.
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\39\ For a list of the current members and affiliate members of
ISG, see https://isgportal.org/public-members. The Exchange notes
that not all Index Constituents may trade on markets that are
members of ISG or with which the Exchange has in place a CSSA, but
that, consistent with proposed Rule 5712(e)(1)(ii), at least 90% of
the Trust's commodity and/or digital asset holdings will consist of
commodities and/or digital assets for which the Exchange may obtain
information via the ISG from other members or affiliates of the ISG
or for which the principal market is a market with which the
Exchange has a CSSA.
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Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an information circular (``Information Circular'') of the
special characteristics and risks associated with trading the Shares.
Specifically, the Information Circular will discuss the following: (1)
the procedures for creations and redemptions of Shares in Baskets (and
that Shares are not individually redeemable); (2) Section 10 of Nasdaq
General Rule 9, which imposes suitability obligations on Nasdaq members
with respect to recommending transactions in the Shares to customers;
(3) how information regarding the IIV and NAV is disseminated; (4) the
risks involved in trading the Shares during the pre-market and
postmarket sessions when an updated IIV will not be calculated or
publicly disseminated; (5) the requirement that members deliver a
prospectus to investors purchasing newly issued Shares prior to or
concurrently with the confirmation of a transaction; and (6) trading
information. The Information Circular will also discuss any exemptive,
no action and interpretive relief granted by the Commission from any
rules under the Act.
[[Page 11576]]
The Information Circular will also reference the fact that there is
no regulated source of last sale information regarding the Index
Constituents, that the Commission has no jurisdiction over the trading
of the Index Constituents as commodities or digital assets.
Additionally, the Information Circular will reference that the
Trust is subject to various fees and expenses described in the
Registration Statement. The Information Circular will also disclose the
trading hours of the Shares. The Information Circular will disclose
that information about the Shares will be publicly available on the
Trust's website.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \40\ that an exchange has 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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\40\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that proposed Rule 5712 is designed to
prevent fraudulent and manipulative acts and practices in that the
proposed rules relating to listing and trading of Commodity- and/or
Digital Asset-Based Investment Interests provide specific initial and
continued listing criteria required to be met by such securities.
Proposed Rule 5712(a) provides that the Exchange will file separate
proposals under Rule 19(b) of the Act before the listing and trading of
Commodity- and/or Digital Asset-Based Investment Interests. All
statements or representations contained in such rule filing regarding
(a) the description of the index, portfolio, or reference asset, (b)
limitations on index or portfolio holdings or reference assets, or (c)
the applicability of Exchange listing rules specified in such rule
filing will constitute continued listing requirements. An issuer of
such securities must notify the Exchange of any failure to comply with
such continued listing requirements. If an issue of Commodity- and/or
Digital Asset-Based Investment Interests does not satisfy these
requirements, the Exchange may halt trading in the securities and will
initiate delisting proceedings under the Rule 5800 Series.
Proposed Rule 5712(e) sets forth initial and continued listing
criteria applicable to Commodity- and/or Digital Asset-Based Investment
Interests. Proposed Rule 5712(e)(1)(i) provides that, for each series
of Commodity- and/or Digital Asset-Based Investment Interests, the
Exchange will establish a minimum number of Commodity- and/or Digital
Asset-Based Investment Interests required to be outstanding at the time
of commencement of trading on the Exchange. Proposed Rule
5712(e)(1)(ii) provides that in the aggregate, at least 90% of the
weight of the commodity and/or digital asset holdings of a series of
Commodity- and/or Digital Asset-Based Investment Interests shall, on
both an initial and continuing basis, consist of commodities and/or
digital assets for which the Exchange may obtain information pursuant
to its ISG membership or for which the principal market is a market
with which the Exchange has a CSSA. In addition, proposed Rule
5712(e)(2) provides that the Exchange will maintain surveillance
procedures for securities listed under proposed Rule 5712 and sets
forth the circumstances under which the Exchange would consider the
suspension of trading in and delisting under the Rule 5800 Series of a
series of Commodity- and/or Digital Asset-Based Investment Interests.
With respect to proposed Rule 5712, the Exchange believes that the
proposed rule change is designed to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general, to protect investors and the public interest because
Commodity- and/or Digital Asset-Based Investment Interests listed and
traded pursuant to proposed Rule 5712 would be substantially similar to
Commodity-Based Trust Shares listed and traded pursuant to current Rule
5711(d). Commodity- and/or Digital Asset-Based Investment Interests
differ from Commodity-Based Trust Shares only in that Commodity- and/or
Digital Asset-Based Investment Interests could be issued, as a
proposed, by a trust, limited liability company, or other similar
entity (rather than only by a trust), and in that Commodity- and/or
Digital Asset-Based Investment Interests could be based, as proposed,
on underlying commodities, digital assets (provided that at least 90%
of commodity and/or digital asset holdings are those concerning which
the Exchange may obtain information via the ISG from other members of
the ISG or via CSSA), and/or derivative securities products. The
Exchange believes this additional flexibility with respect to the
structure of the entity issuing Commodity- and/or Digital Asset-Based
Investment Interests and the holdings underlying such securities would
remove impediments to and perfect the mechanism of a free and open
market, as well as promote competition, by promoting the listing and
trading of a new type of ETP, to the benefit of all market
participants. The Exchange further believes that the proposed
requirement that at least 90% of any commodity and/or digital asset
holdings are those concerning which the Exchange may obtain information
via the ISG from other members of the ISG or via a CSSA would remove
impediments to and perfect the mechanism of a free and open market, as
well as protect investors and the public interest, because it would
offer flexibility to issuers of series of Commodity- and/or Digital
Asset-Based Investment Interests, to the benefit of investors, while
facilitating information sharing among market participants regarding
the vast majority of any commodities and/or digital assets underlying
series of Commodity- and/or Digital Asset-Based Investment Interests.
As noted above, this requirement is based on a similar provision
approved by the Commission in 5735(b)(1)(D)(i) regarding Managed Fund
Shares.
The Exchange also believes that the proposed addition of Commodity-
and/or Digital Asset-Based Investment Interests in Rule 5615(a)(6)(B)'s
definition of Derivative Securities, which are exempt from the
enumerated corporate governance requirements in Rule 5615(a)(6)(A),
would promote just and equitable principles of trade and remove
impediments to and perfect the mechanism of a free and open market and
a national market system by holding Commodity- and/or Digital Asset-
Based Investment Interests to the same exemptions currently applicable
to other ETPs (including Commodity-Based Trust Shares). The Exchange
similarly believes that adding references to Commodity- and/or Digital
Asset-Based Investment Interests to Equity 4, Rule 4120(a)(9) and
Equity 4, Rule 4120(b)(4)(A), each as discussed above, will promote
just and equitable principles of trade and remove impediments to and
perfect the mechanism of a free and open market and a national market
system by holding Commodity- and/or Digital Asset-Based Investment
Interests to the same halt provisions currently applicable to other
ETPs (including Commodity-Based Trust Shares).
With respect to the proposed listing and trading of the Shares, the
Exchange believes that the proposed rule change is designed to prevent
fraudulent and manipulative acts and practices and to
[[Page 11577]]
protect investors and the public interest in that the Shares will be
listed and traded on the Exchange pursuant to the initial and continued
listing criteria set forth in proposed Nasdaq Rule 5712. The Exchange
has in place surveillance procedures that are adequate to properly
monitor trading in the Shares in all trading sessions and to deter and
detect violations of Exchange rules and applicable federal securities
laws. The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares and Index
Constituents' derivatives with other markets and other entities that
are members of the ISG, and the Exchange or FINRA, on behalf of the
Exchange, or both, may obtain trading information regarding trading in
the Shares and Index Constituents' derivatives from such markets and
other entities. In addition, the Exchange may obtain information
regarding trading in the Shares and listed Index Constituents'
derivatives via the ISG, from other exchanges that are members or
affiliates of ISG, or with which the Exchange has in place a CSSA. The
Exchange is also able to obtain information regarding trading in the
Shares and Index Constituents' derivatives through Members, in
connection with such Members' proprietary or customer trades which they
effect on any relevant market. The Exchange will require the Trust to
represent 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 Exchange
Act, the Exchange will surveil 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 the Nasdaq 5800 Series.
Trading in Shares of the Trust will be halted if the circuit
breaker parameters have been reached or because of market conditions or
for reasons that, in the view of the Exchange, make trading in the
Shares inadvisable. These may include unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market.
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
Shares 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 that are adequate to properly
monitor trading in the Shares in all trading sessions and to deter and
detect violations of Exchange rules and applicable federal securities
laws.
In the Spot Bitcoin ETP Approval Order and the Spot Ether ETP
Approval Order, the Commission concluded that the proposing exchanges'
CSSA with the CME--a U.S. regulated market--whose bitcoin and ether
futures market is consistently highly correlated to spot bitcoin and
spot ether, respectively--could be reasonably expected to assist in
surveilling for fraudulent and manipulative acts and practices in the
specific context of the proposals.
The proposed rule change is also designed to prevent fraudulent and
manipulative acts and practices because the Trust is structured
similarly to and will operate in materially the same manner as the Spot
Bitcoin ETPs and Spot Ether ETPs previously approved by the Commission.
The Exchange further believes that the proposed rule change is designed
to prevent fraudulent and manipulative acts and practices because, as
noted by the Commission in the Spot Bitcoin ETP Approval Order and Spot
Ether ETP Approval Order, the Exchange's ability to obtain information
regarding trading in the Shares and futures from other markets that are
members of the ISG (including the CME) would assist the Exchange in
detecting and deterring misconduct. In particular, the CME bitcoin
futures market and CME ether futures market are large, surveilled, and
regulated markets that are closely connected with the spot markets for
bitcoin and ether, respectively, through which the Exchange could
obtain information to assist in detecting and deterring potential fraud
or manipulation.
In addition, Coinbase Derivatives offers trading in LINK, LTC, and
AVAX futures. Nasdaq has a comprehensive surveillance-sharing agreement
with Coinbase Derivatives via its common membership in ISG, which
facilitates the sharing of information that is available to Coinbase
Derivatives through its surveillance of its markets, including its
surveillance of Coinbase Derivatives' LINK, LTC, and AVAX futures
market. Similar to the Spot Bitcoin and Spot ETH ETPs previously
approved by the SEC, Nasdaq's ability to obtain information regarding
trading in these futures products from other markets that are members
of the ISG would assist Nasdaq in detecting and deterring misconduct.
The GSG and USCI Orders provide further context for products with
diversified holdings, where a majority of the assets are subject to
surveillance mechanisms. In the GSG Order, the Commission approved an
ETP on condition that no more than 10% of the index's weight could
consist of assets whose principal trading market was not a member of
the ISG or lacked a CSSA with the Exchange. Similarly, the USCI Order
established a similar standard, requiring that at least 90% of the
fund's portfolio consist of assets traded on markets with ISG or CSSA
arrangements. These orders demonstrate that a majority of assets
subject to surveillance are sufficient to mitigate manipulation risks,
even when a limited portion of the portfolio is not covered by a
surveillance-sharing agreement.
Consequently, this Trust, which primarily invests in bitcoin and
ether but may include up to 10% of its assets in other digital assets
that do not have surveillance-sharing agreements in place, is
consistent with the principles of these approved products. While the
majority of the Trust's holdings will consist of bitcoin and ether, the
inclusion of up to 10% of other digital assets reflects a balanced
approach that maintains robust oversight while offering diversified
exposure. CME's bitcoin futures market and ether futures market are
highly, though not perfectly, correlated with the spot bitcoin market
and the spot ether market, respectively. As such, surveillance of CME's
bitcoin futures market and ether futures market can reasonably be
expected to assist in surveilling for fraudulent and manipulative acts
and practices in the context of the majority of this Trust's portfolio.
For the remaining assets, diversification across multiple digital
assets and the 10% limitation reduce the potential for market
manipulation, providing additional safeguards within the framework of
this proposal.
As noted above, the Reference Prices for the Index Constituents are
calculated by the Calculation Agent based exclusively on trading
activity at the Core Crypto Platforms, each of which must meet robust
eligibility criteria designed to protect the Reference Prices against
fraud and manipulation. The layers of defense provided by the Trust's
use of Reference Prices to calculate NAV, in conjunction with the
Trust's use of cash creations and redemptions, constitute a novel means
to detect, prevent, and respond to fraud, attempted fraud, and similar
wrongdoing, including market manipulation, consistent with the
requirements of the Act. 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
[[Page 11578]]
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 and may obtain information via ISG from other exchanges that
are members of ISG or with which the Exchange has entered into a CSSA
for at least 90% of the Trust's commodity and/or digital asset
holdings. 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.
For all the above reasons, the Exchange believes that the proposed
rule change is consistent with the requirements of Section 6(b)(5) of
the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of the
Shares, which are Commodity- and/or Digital Asset-Based Investment
Interests Shares and that 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 either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as modified by Amendment No. 1, is consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NASDAQ-2025-016 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-NASDAQ-2025-016. 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, as
modified 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-NASDAQ-2025-016 and should be submitted on or before March 28, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
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\41\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-03662 Filed 3-6-25; 8:45 am]
BILLING CODE 8011-01-P