[Federal Register Volume 90, Number 51 (Tuesday, March 18, 2025)]
[Notices]
[Pages 12602-12606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-04332]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102645; File No. SR-CboeBZX-2025-035]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend the Invesco Galaxy Bitcoin
ETF and the Invesco Galaxy Ethereum ETF in Order To Permit In-Kind
Creations and Redemptions
March 12, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on March 10, 2025, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 12603]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
a proposed rule change to amend the Invesco Galaxy Bitcoin ETF (the
``Bitcoin Trust'') and the Invesco Galaxy Ethereum ETF (the ``ETH
Trust'' and, collectively with the Bitcoin Trust, the ``Trusts''),
shares of which have been approved by the Commission to list and trade
on the Exchange pursuant to BZX Rule 14.11(e)(4), to permit in-kind
creations and redemptions.
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Commission approved the listing and trading of shares (the
``Bitcoin ETP Shares'') of the Bitcoin Trust on the Exchange pursuant
to Exchange Rule 14.11(e)(4), Commodity-Based Trust Shares, on January
10, 2024.\3\ The Commission also approved the listing and trading of
shares (the ``ETH ETP Shares'') of the ETH Trust on the Exchange
pursuant to Exchange Rule 14.11(e)(4), Commodity-Based Trust Shares, on
May 23, 2024.\4\ Exchange Rule 14.11(e)(4) governs the listing and
trading of Commodity-Based Trust Shares, which means a security (a)
that is issued by a trust that holds (1) a specified commodity
deposited with the trust, or (2) a specified commodity and, in addition
to such specified commodity, cash; (b) that is issued by such trust in
a specified aggregate minimum number in return for a deposit of a
quantity of the underlying commodity and/or cash; and (c) that, when
aggregated in the same specified minimum number, may be redeemed at a
holder's request by such trust which will deliver to the redeeming
holder the quantity of the underlying commodity and/or cash. The
Bitcoin ETP Shares are issued by the Bitcoin Trust and the ETH ETP
Shares are issued by the ETH Trust. The Bitcoin Trust was formed as a
Delaware statutory trust on December 17, 2020 and the ETH Trust was
formed as a Delaware statutory trust on September 27, 2023.
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\3\ See Securities Exchange Act Release Nos. 99283 (January 8,
2024) 89 FR 2263 (January 12, 2024) (SR-CboeBZX-2023-038) (Notice of
Filing of Amendment No. 2 to a Proposed Rule Change To List and
Trade Shares of the Invesco Galaxy Bitcoin ETF Under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares) (the ``Bitcoin ETP
Amendment No. 2); 99306 (January 10, 2024) 89 FR 3008 (January 17,
2024) (SR-CboeBZX-2023-038) (Order Granting Accelerated Approval of
Proposed Rule Changes, as Modified by Amendments Thereto, To List
and Trade Bitcoin-Based Commodity-Based Trust Shares and Trust
Units) (the ``Bitcoin ETP Approval Order'').
\4\ See Securities Exchange Act Release Nos. 100219 (May 22,
2024) 89 FR 46543 (May 29, 2024) (SR-CboeBZX-2023-087) (Notice of
Filing of Amendment No. 1 to a Proposed Rule Change To List and
Trade Shares of the Invesco Galaxy Ethereum ETF Under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares) (the ``Eth ETP Amendment
No. 1); 100224 (May 23, 2024) 89 FR 46937 (May 30, 2024) (SR-
CboeBZX-2023-038) (Order Granting Accelerated Approval of Proposed
Rule Changes, as Modified by Amendments Thereto, to List and Trade
Shares of Ether-Based Exchange-Traded Products) (the ``ETH ETP
Approval Order'').
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Bitcoin Trust
The Exchange proposes to amend several portions of the Exchange's
previous rule filing to list and trade Bitcoin ETP Amendment No. 2 in
order to permit in-kind creations and redemptions.
Representations
Bitcoin ETP Amendment No. 2 included specific representations
making clear that the Bitcoin Trust would only process creations and
redemptions in cash. Specifically, the ``Invesco Galaxy Bitcoin ETF''
section of the Bitcoin Amendment No. 2 stated the following:
When the Trust sells or redeems its Shares, it will do so in
cash transactions in blocks of 5,000 Shares (a ``Creation Basket'')
at the Trust's net asset value (``NAV''). Authorized participants
will deliver, or facilitate the delivery of, cash to the Trust's
account with the Cash Custodian (which will then be used to purchase
bitcoin for the Trust) in exchange for Shares when they purchase
Shares, and the Trust, through the Cash Custodian, will deliver cash
to such authorized participants when they redeem Shares with the
Trust. A third party will use cash to buy and deliver bitcoin to
create Shares or withdraw and sell bitcoin for cash to redeem
Shares, on behalf of the Trust.\5\
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\5\ See Bitcoin ETP Amendment No. 2 at 2272.
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The Exchange proposes to replace the above with the following:
When the Trust creates or redeems its Shares, it will do so in
cash transactions or in-kind transactions in blocks of 5,000 Shares
(a ``Creation Basket'') at the Trust's net asset value (``NAV'').
For cash creations and redemptions, authorized participants will
deliver, or facilitate the delivery of, cash to the Trust's account
with the Cash Custodian, in exchange for Shares when they create
Shares, and the Trust, through the Cash Custodian, will deliver cash
to such authorized participants when they redeem Shares with the
Trust. For in-kind creation and redemptions, authorized participants
will deliver, or facilitate delivery of, bitcoin to the Trust's
account with the Custodian, in exchange for Shares when they create
Shares, and the Trust, through the Custodian, will deliver bitcoin
to such authorized participants when they redeem Shares with the
Trust.
The ``Investment Objective'' section of Bitcoin ETP Amendment No. 2
stated: ``The Trust will process all creations and redemptions in cash
transactions with authorized participants. The Trust is not actively
managed.'' \6\ The Exchange proposes to replace this sentence with the
following: ``The Trust will process all creations and redemptions in
cash or in-kind transactions with authorized participants.''
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\6\ See Bitcoin ETP Amendment No. 2 at 2273.
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Creation and Redemption of Shares
Additionally, the ``Creation and Redemption of Shares'' section of
the filing includes a detailed description of how the cash-only
creation and redemption process works.\7\ The Exchange proposes to
replace this section as follows:
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\7\ See Bitcoin ETP Amendment No. 2 at 2274.
Creation and Redemption of Shares
When the Trust creates or redeems its Shares, it will do so in
cash or in-kind. In connection with cash creations and cash
redemptions, the authorized participants will submit orders to
create or redeem Baskets of Shares in exchange for cash. When the
Trust creates or redeems its Shares in cash, it will do so in
transactions in blocks of 5,000 Shares that are based on the
quantity of bitcoin attributable to each Share of the Trust (e.g., a
Creation Basket) at the Trust's NAV. When the Trust creates or
redeems its Shares in kind, it will do so in transfers of bitcoin in
blocks of 5,000 Shares that are based on the quantity of bitcoin
attributable to the Creation Basket being created or redeemed.
The authorized participants will deliver or cause to be
delivered cash or bitcoin to create
[[Page 12604]]
Shares and the authorized participant will receive cash or bitcoin
when redeeming Shares. The Trust will create Shares by receiving
bitcoin or cash from an authorized participant and will redeem
shares by delivering bitcoin or cash to an authorized participant.
According to the Registration Statement, on any business day, an
authorized participant may place an order to create one or more
Creation Baskets. Purchase orders for cash creations must be placed
by 2:30 p.m. Eastern Time (or such other time as disclosed in the
Prospectus), or the close of regular trading on the Exchange,
whichever is earlier. Purchase orders for in-kind creations must be
placed by 4:00 p.m. Eastern Time (or such other time as disclosed in
the Prospectus), or the close of regular trading on the Exchange,
whichever is earlier. The day on which an order is received is
considered the purchase order date.
For a cash creation order, the total deposit of cash required is
an amount of cash sufficient to purchase such amount of bitcoin, the
amount of which is equal to the combined NAV of the number of Shares
included in the Creation Baskets being created determined as of 4:00
p.m. ET on the date the order to purchase is properly received. The
Administrator determines the required deposit for a given day by
multiplying the NAV per share by the number of Shares in each
Creation Basket (5,000) and dividing the product by that day's
bitcoin price as determined by the Index.
For a creation order in kind, the total in-kind transfer of
bitcoin is based on the quantity of bitcoin attributable to the
Creation Baskets being created determined as of 4:00 p.m. ET on the
date the order to purchase is properly received. The Administrator
determines the quantity of bitcoin used to calculate the Creation
Basket for a given day by dividing the number of bitcoin held by the
Trust as of the opening of business on that business day, adjusted
for the amount of bitcoin constituting estimated accrued but unpaid
fees and expenses of the Trust as of the opening of business on that
business day, by the quotient of the number of Shares outstanding at
the opening of business divided by the number of Shares in a
Creation Basket.
The procedures by which an authorized participant can redeem one
or more Creation Baskets mirror the procedures for the creation of
Creation Baskets. For a cash creation order, an authorized
participant will deliver cash to create Shares. For an in-kind
creation order, an authorized participant will deliver bitcoin to
create Shares. For a cash redemption order, an authorized
participant will deliver Shares to the Trust and will receive cash
for the Shares delivered. For an in-kind redemption order, an
authorized participant will deliver Shares to the Trust and the
authorized participant will receive bitcoin for the Shares
delivered.
Except for the above changes, all other representations in the
Bitcoin ETP Amendment No. 2 remain unchanged and will continue to
constitute continuing listing requirements. In addition, the Bitcoin
Trust will continue to comply with the terms of Bitcoin ETP Amendment
No. 2 and the Trust will continue to comply with the requirements of
Rule 14.11(e)(4).
Eth Trust
Similarly, the Exchange proposes to amend several portions of the
Eth ETP Amendment No. 1 in order to permit in-kind creations and
redemptions.
Representations
The Eth ETP Amendment No. 1 included a specific representation
making clear that the Eth Trust would only process creations and
redemptions in cash. Specifically, the ``Invesco Galaxy Ethereum
Trust'' section of the Eth ETP Amendment No. 1 stated:
When the Trust sells or redeems its Shares, it will do so in
cash transactions in blocks of 5,000 Shares (a ``Creation Basket'')
at the Trust's net asset value (``NAV''). Authorized participants
will deliver, or facilitate the delivery of, cash to the Trust's
account with the Cash Custodian in exchange for Shares when they
purchase Shares, and the Trust, through the Cash Custodian, will
deliver cash to such authorized participants when they redeem Shares
with the Trust.\8\
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\8\ See Eth ETP Amendment No. 1 at 46550.
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The Exchange proposes to replace this language with the following:
When the Trust creates or redeems its Shares in cash
transactions, it will do so in blocks of 5,000 Shares (a ``Creation
Basket'') at the Trust's net asset value (``NAV''). For cash
creations or redemptions, Authorized participants will deliver, or
facilitate the delivery of, cash to the Trust's account with the
Cash Custodian in exchange for Shares when they create Shares, and
the Trust, through the Cash Custodian, will deliver cash to such
authorized participants when they redeem Shares with the Trust. When
the Trust creates or redeems its Shares in-kind, it will do so in
Creation Units in exchange for ether. Authorized participants will
deliver, or facilitate delivery of, ether to the Trust's account
with the Custodian, in exchange for Shares when they create Shares,
and the Trust, through the Custodian, will deliver ether to such
authorized participants when they redeem Shares with the Trust.
Additionally, the ``Investment Objective'' section of the Eth ETP
Amendment No. 1 stated: ``The Trust will process all creations and
redemptions in cash transactions with authorized participants.'' \9\
The Exchange proposes to replace this language with the following:
``The Trust will process all creations and redemptions in cash or in-
kind transactions with authorized participants.''
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\9\ Id.
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Creation and Redemption of Shares
Additionally, the ``Creation and Redemption of Shares'' section of
the filing includes a detailed description of how the cash-only
creation and redemption process works.\10\ The Exchange proposes to
replace this section as follows:
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\10\ See Eth ETP Amendment No. 2 at 46471.
Creation and Redemption of Shares
When the Trust creates or redeems its Shares, it will do so in
cash or in-kind. When the Trust creates or redeems its Shares in
cash, it will do so in transactions in blocks of 5,000 Shares that
are based on the quantity of ETH attributable to each Share of the
Trust (e.g., a Creation Basket) at the Trust's NAV. When the Trust
creates or redeems its Shares in-kind, it will do so in transfers of
ether in blocks of 5,000 Shares that are based on the quantity of
ether attributable to the Creation Basket being created or redeemed.
The authorized participants will deliver or cause to be
delivered cash or ether to create Shares and the authorized
participant or its designee will receive cash or ether when
redeeming Shares. The Trust will create Shares by receiving ether or
cash from an authorized participant or its designee and will redeem
Shares by delivering ether or cash to an authorized participant or
its designee.
According to the Registration Statement, on any business day, an
authorized participant may place an order to create one or more
Creation Baskets. Purchase orders for cash creations must be placed
by 2:30 p.m. Eastern Time (or such other time as disclosed in the
Prospectus), or the close of regular trading on the Exchange,
whichever is earlier. Purchase orders for in-kind creations must be
placed by 4:00 p.m. Eastern Time (or such other time as disclosed in
the Prospectus), or the close of regular trading on the Exchange,
whichever is earlier. The day on which an order is received is
considered the purchase order date.
For a cash creation order, the total deposit of cash required is
based on the combined NAV of the number of Shares included in the
Creation Baskets being created determined as of 4:00 ET on the date
the order to purchase is properly received. The Administrator
determines the required deposit for a given day by multiplying the
NAV per share by the number of Shares in each Creation Basket
(5,000) and dividing the product by that day's bitcoin price as
determined by the Index.
For a creation order in-kind, the total in-kind transfer of ETH
is equal to the combined NAV of the number of Shares included in the
Creation Baskets being created determined as promptly as practicable
after 4:00 p.m. ET on the date the order to purchase is properly
received. The Administrator determines the quantity of ETH
associated with a Creation Basket for a given day by dividing the
number of ETH held by the Trust as of the opening of business on
that business day, adjusted for the amount of ETH constituting
estimated accrued but unpaid fees and expenses of the Trust as of
the opening of
[[Page 12605]]
business on that business day, by the quotient of the number of
Shares outstanding at the opening of business divided by the number
of Shares in a Creation Basket.
The procedures by which an authorized participant can redeem one
or more Creation Baskets mirror the procedures for the creation of
Creation Baskets. For a cash creation order, an authorized
participant will deliver cash to create Shares. For an in-kind
creation order, an authorized participant will deliver ether to
create Shares. For a cash redemption order, an authorized
participant will deliver Shares to the Trust and will receive cash
for the Shares delivered. For an in-kind redemption order, an
authorized participant will deliver Shares to the Trust and will
receive ether for the Shares delivered.
Conclusion
Except for the above changes, all other representations in the
Bitcoin ETP Amendment No. 2 and ETH ETP Amendment No. 1 remain
unchanged and will continue to constitute continuing listing
requirements. In addition, the Bitcoin Trust will continue to comply
with the terms of Bitcoin ETP Amendment No. 2 and the ETH Trust will
continue to comply with the terms of ETH ETP Amendment No. 1 and the
Trusts will continue to comply with the requirements of Rule
14.11(e)(4).
Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\11\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \12\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed rule change is designed to
remove impediments to and perfect the mechanism of a free and open
market and, in general, to protect investors and the public interest
because it would update representations in both the Bitcoin ETP
Amendment No. 2 and the ETH ETP Amendment No. 1 such that the Trusts
would both be able to engage in in-kind transactions with authorized
participants, as described above. This ability would make the Trusts
(and the market more generally) operate more efficiently because
authorized participants would be able to source bitcoin or ether, as
applicable, rather than to provide cash to the applicable Trust and/or
to receive bitcoin or ether directly from the Trusts. This means that
the authorized participant would be responsible for buying and selling
the applicable crypto asset rather than the Trust itself, which would
potentially lessen the impact on the market of the Trusts on both sides
of the transaction by allowing the authorized participant to decide how
and where to source the underlying crypto asset for creations and
deciding how, where, and whether to sell the underlying crypto asset
for redemptions. This would improve the creation and redemption process
for both authorized participants and the Trusts, increase efficiency,
and ultimately benefit the end investors in the Trusts.
Except for the addition of in-kind creation and redemption for the
Bitcoin Trust, all other representations made in the Bitcoin ETP
Amendment No. 2 remain unchanged and will continue to constitute
continuing listing requirements for the Bitcoin Trust. Similarly,
except for the addition of in-kind creation and redemption for the ETH
Trust, all other representations made in the ETH ETP Amendment No. 1
remain unchanged and will continue to constitute continuing listing
requirements for the ETH Trust.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. As noted above, the proposed
amendment is intended to allow the Trusts to operate more efficiently
by allowing for in-kind creation and redemption. The Exchange believes
these changes will not impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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 will:
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 is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CboeBZX-2025-035 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-CboeBZX-2025-035. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or
[[Page 12606]]
withhold entirely from publication submitted material that is obscene
or subject to copyright protection. All submissions should refer to
file number SR-CboeBZX-2025-035 and should be submitted on or before
April 8, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-04332 Filed 3-17-25; 8:45 am]
BILLING CODE 8011-01-P