[Federal Register Volume 90, Number 69 (Friday, April 11, 2025)]
[Notices]
[Pages 15499-15503]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-06171]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102776; File No. SR-CboeBZX-2025-050]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend the Franklin Bitcoin ETF, the
Franklin Ethereum ETF, and the Franklin Crypto Index ETF, To Allow for
In-Kind Creations and Redemptions
April 7, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 2, 2025, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
[sic] amend the Franklin Bitcoin ETF (the ``Bitcoin Fund''), the
Franklin Ethereum ETF (the ``Eth Fund''), and the Franklin Crypto Index
ETF (the ``Crypto Index Fund'' and, collectively with the Bitcoin Fund
and the Eth Fund, the ``Funds''),\3\ 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.
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\3\ The Bitcoin Fund is a series of the Franklin Templeton
Digital Holdings Trust (the ``Bitcoin Trust''), the Eth Fund is a
series of the Franklin Ethereum Trust (the ``Eth Trust''), and the
Crypto Index Fund is a series of the Franklin Crypto Trust (the
``Crypto Trust'').
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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 Fund on the Exchange pursuant to
Exchange Rule 14.11(e)(4), Commodity-Based Trust Shares, on January 10,
2024.\4\ The Commission approved the listing and trading of shares (the
``Eth ETP Shares'') of the Eth Fund on the Exchange pursuant to
Exchange Rule 14.11(e)(4), Commodity-Based Trust Shares, on May 23,
2024.\5\ The Commission also approved the listing and trading of shares
(the ``Crypto Index ETP Shares'') of the Crypto Index Fund on the
Exchange pursuant to Exchange Rule 14.11(e)(4), Commodity-Based Trust
Shares, on December 19, 2024.\6\ 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 Fund, the Eth ETP
Shares are issued by the Eth Fund, and the Crypto Index ETP Shares are
issued by the Crypto Index Fund. The Bitcoin Trust was formed as a
Delaware statutory trust on September 6, 2023, the Eth Trust was formed
as a Delaware statutory trust on February 8, 2024, and the Crypto Trust
was formed as a Delaware statutory trust on August 13, 2024.
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\4\ See Securities Exchange Act Release Nos. 99286 (January 8,
2024) 89 FR 2372 (January 12, 2024) (SR-CboeBZX-2023-072) (Notice of
Filing of Amendment No. 1 to a Proposed Rule Change To List and
Trade Shares of the Franklin Bitcoin ETF Under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares) (``Bitcoin ETP Amendment No. 1'');
99306 (January 10, 2024) 89 FR 3008 (January 17, 2024) (SR-CboeBZX-
2023-072) (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''). The Bitcoin ETP Amendment No. 1 was
later amended to amend the time at which purchase orders for cash
transaction creation baskets must be placed. See Securities Exchange
Act Release No. 100245 (May 29, 2024) 89 FR 48016 (June 4, 2024)
(SR-CboeBZX-2024-040) (Notice of Filing and Immediate Effectiveness
of a Proposed Rule Change To Amend the Franklin Bitcoin ETF).
\5\ See Securities Exchange Act Release Nos. 100218 (May 22,
2024) 89 FR 46499 (May 29, 2024) (SR-CboeBZX-2024-018) (Notice of
Filing of Amendment No. 1 to a Proposed Rule Change Relating To List
and Trade Shares of the Franklin Ethereum ETF, a Series of the
Franklin Ethereum Trust, Under BZX Rule 14.11(e)(4), Commodity-Based
Trust Shares) (``Eth ETP Amendment No. 1''); 100224 (May 23, 2024)
89 FR 46937 (May 30, 2024) (SR-CboeBZX-2024-018) (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'').
\6\ See Securities Exchange Act Release Nos. 101963 (December
18, 2024) 89 FR 105109 (December 26, 2024) (SR-CboeBZX-2024-091)
(Notice of Filing of Amendment No. 1 to a Proposed Rule Change To
List and Trade Shares of the Franklin Crypto Index ETF, a Series of
the Franklin Crypto Trust, Under BZX Rule 14.11(e)(4), Commodity-
Based Trust Shares) (``Crypto Index ETP Amendment No. 1''); 101998
(December 19, 2024) 89 FR 106707 (December 30, 2024) (SR-CboeBZX-
2024-028) (Order Granting Approval of a Proposed Rule Change, as
Modified by Amendment No. 1, To List and Trade Shares of the Hashdex
Nasdaq Crypto Index US ETF and Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To List and
Trade Shares of the Franklin Crypto Index ETF, a Series of the
Franklin Crypto Trust) (the ``Crypto Index ETF Approval Order'').
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Bitcoin Fund
The Exchange proposes to amend several portions of the Bitcoin ETP
Amendment No. 1, as amended, in order to permit in-kind creation and
redemptions.
Representations
The Bitcoin ETP Amendment No. 1 included specific representations
making clear that the Bitcoin Fund would only process creations and
redemptions in cash. Specifically, the ``Franklin Templeton Digital
Holdings Trust'' section of Bitcoin ETP Amendment No. 1 stated:
When the Fund sells or redeems its Shares, it will do so in cash
transactions in large blocks of 50,000 Shares (a ``Creation Basket'')
at the Fund's NAV. In such cases, a third party that is unaffiliated
with the Fund and the Sponsor 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 Fund. Authorized participants will deliver, or
[[Page 15500]]
facilitate the delivery of, cash to the Fund's account with the Cash
Custodian in exchange for Shares when they purchase Shares, and the
Fund, through the Cash Custodian, will deliver cash to such authorized
participants when they redeem Shares. Authorized participants may then
offer Shares to the public at prices that depend on various factors,
including the supply and demand for Shares, the value of the Fund's
assets, and market conditions at the time of a transaction.
Shareholders who buy or sell Shares during the day from their broker
may do so at a premium or discount relative to the NAV of the Shares of
the Fund.\7\
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\7\ See Bitcoin ETP Amendment No. 1 at 2381.
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The Exchange proposes to replace the above paragraph as follows:
When the Fund sells or redeems its Shares, it will do so in
large blocks of 50,000 Shares (a ``Creation Basket'') based on the
quantity of bitcoin attributable to each Share (net of the accrued
but unpaid Sponsor's fee and any accrued but unpaid expenses or
liabilities). Creation Baskets are issued and redeemed in exchange
for bitcoin or cash. For cash creations, authorized participants
will deliver, or facilitate the delivery of, cash to the Fund's
account with the Cash Custodian in exchange for Shares. Upon receipt
of an approved cash creation order, the Sponsor, on behalf of the
Fund, will submit to one or more previously onboarded trading
partners an order to buy the amount of bitcoin represented by a
Creation Basket.\8\ For in-kind creations, authorized participants
or their designee will deliver, or facilitate the delivery of,
bitcoin to the Fund's account with the bitcoin Custodian in exchange
for Shares.\9\ Authorized participants may then offer Shares to the
public at prices that depend on various factors, including the
supply and demand for Shares, the value of the Fund's assets, and
market conditions at the time of a transaction. Shareholders who buy
or sell Shares during the day from their broker may do so at a
premium or discount relative to the net asset value (``NAV'') per
Share of the Fund.
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\8\ For cash redemptions, the process will occur in the reverse
order. Upon receipt of an approved cash redemption order, the
Sponsor, on behalf of the Fund, will submit an order to sell the
amount of bitcoin represented by a Creation Basket and the cash
proceeds will be remitted to the authorized participant when the
large block of Shares is received by the Transfer Agent.
\9\ For in-kind redemptions, the process will occur in the
reverse order. Upon receipt of an approved in-kind redemption order,
the Sponsor, on behalf of the Fund, will transfer the amount of
bitcoin represented by a Creation Basket to the authorized
participant or its designee when the large block of Shares is
received by the Transfer Agent.
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Creation and Redemption of Shares
Additionally, the ``Creation and Redemption of Shares'' section of
the filing, as amended, 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 Bitcoin ETP Amendment No. 1 at 2382-2383.
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Creation and Redemption of Shares
When the Fund sells or redeems its Shares, it will do so in
Creation Baskets that are based on the quantity of bitcoin attributable
to each Share (net of the accrued but unpaid Sponsor's fee and any
accrued but unpaid expenses or liabilities). Creation Baskets are
issued and redeemed in exchange for bitcoin or cash. 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 transaction Creation Baskets must be placed by 2:00
p.m. ET (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 transaction Creation Baskets must be placed
by 4:00 p.m. ET (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 properly received is considered the purchase
order date.
For cash creations, authorized participants will deliver, or
facilitate the delivery of, cash to the Fund's account with the Cash
Custodian in exchange for Shares. Upon receipt of an approved cash
creation order, the Sponsor, on behalf of the Fund, will submit to one
or more previously onboarded trading partners an order to buy the
amount of bitcoin represented by a Creation Basket. For in-kind
creations, authorized participants or their designee will deliver, or
facilitate the delivery of, bitcoin to the Fund's account with the
bitcoin Custodian in exchange for Shares.
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 p.m. ET on the
purchase order date, in an amount sufficient to purchase the requisite
amount of bitcoin (as described below). 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 purchase order date. The Administrator
determines the quantity of bitcoin associated with a Creation Basket
for a given day by dividing the number of bitcoin held by the Fund 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 Fund 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, or facilitate the delivery of, cash to create Shares. For
an in-kind creation order, an authorized participant or its designee
will deliver, or facilitate the delivery of, bitcoin to create Shares.
For a cash redemption order, an authorized participant will deliver
Shares to the Fund and will receive cash for the Shares delivered. For
an in-kind redemption order, an authorized participant will deliver
Shares to the Fund and the authorized participant or its designee will
receive bitcoin for the Shares delivered.
The Sponsor (including its delegates) will maintain ownership and
control of the Fund's bitcoin in a manner consistent with good delivery
requirements for spot commodity transactions.
Eth Fund
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 specific representations
making clear that the Eth Fund would only process creations and
redemptions in cash. Specifically, the ``Franklin Ethereum ETF''
section of the Eth ETP Amendment No. 1 stated:
When the Fund sells or redeems its Shares, it will do so in cash
transactions in large blocks of 50,000 Shares (a ``Creation
Basket'') at the Fund's net asset value (``NAV''). For creations,
authorized participants will deliver, or facilitate the delivery of,
cash to the Fund's account with the Cash Custodian in exchange for
Shares. Upon receipt of an approved creation order, the Sponsor, on
behalf of the Fund, will submit an order to buy the amount of ether
represented by a Creation Basket. Based off ether executions, the
Cash Custodian will request the required cash from the authorized
participant. Following receipt by the Cash Custodian of the cash
from an authorized participant, the Sponsor, on behalf of the Fund,
will approve an order with one or more previously onboarded trading
partners to purchase the amount of ether represented by the Creation
[[Page 15501]]
Basket.\11\ Authorized participants may then offer Shares to the
public at prices that depend on various factors, including the
supply and demand for Shares, the value of the Fund's assets, and
market conditions at the time of a transaction. Shareholders who buy
or sell Shares during the day from their broker may do so at a
premium or discount relative to the NAV of the Shares of the
Fund.\12\
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\11\ For redemptions, the process will occur in the reverse
order. Upon receipt of an approved redemption order, the Sponsor, on
behalf of the Fund, will submit an order to sell the amount of ether
represented by a Creation Basket and the cash proceeds will be
remitted to the authorized participant when the large block of
Shares is received by the Transfer Agent.
\12\ See Eth ETP Amendment No. 1 at 46505.
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The Exchange proposes to replace the above with the following:
When the Fund sells or redeems its Shares, it will do so in
large blocks of 50,000 Shares (a ``Creation Basket'') based on the
quantity of ETH attributable to each Share (net of the accrued but
unpaid Sponsor's fee and any accrued but unpaid expenses or
liabilities). Creation Baskets are issued and redeemed in exchange
for ETH or cash. For cash creations, authorized participants will
deliver, or facilitate the delivery of, cash to the Fund's account
with the Cash Custodian in exchange for Shares. Upon receipt of an
approved cash creation order, the Sponsor, on behalf of the Fund,
will submit to one or more previously onboarded trading partners an
order to buy the amount of ETH represented by a Creation Basket.\13\
For in-kind creations, authorized participants or their designee
will deliver, or facilitate the delivery of, ETH to the Fund's
account with the Custodian in exchange for Shares.\14\ Authorized
participants may then offer Shares to the public at prices that
depend on various factors, including the supply and demand for
Shares, the value of the Fund's assets, and market conditions at the
time of a transaction. Shareholders who buy or sell Shares during
the day from their broker may do so at a premium or discount
relative to the net asset value (``NAV'') per Share of the Fund.
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\13\ For cash redemptions, the process will occur in the reverse
order. Upon receipt of an approved cash redemption order, the
Sponsor, on behalf of the Fund, will submit an order to sell the
amount of ETH represented by a Creation Basket and the cash proceeds
will be remitted to the authorized participant when the large block
of Shares is received by the Transfer Agent.
\14\ For in-kind redemptions, the process will occur in the
reverse order. Upon receipt of an approved in-kind redemption order,
the Sponsor, on behalf of the Fund, will transfer the amount of ETH
represented by a Creation Basket to the authorized participant or
its designee when the large block of Shares is received by the
Transfer Agent.
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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.\15\ The Exchange proposes to
replace this section as follows:
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\15\ See Eth ETP Amendment No. 1 at 46507.
Creation and Redemption of Shares
When the Fund sells or redeems its Shares, it will do so in
Creation Baskets that are based on the quantity of ETH attributable
to each Share (net of the accrued but unpaid Sponsor's fee and any
accrued but unpaid expenses or liabilities). Creation Baskets are
issued and redeemed in exchange for ETH or cash. 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 transaction Creation Baskets must
be placed by 2:00 p.m. ET (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 transaction
Creation Baskets must be placed by 4:00 p.m. ET (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
properly received is considered the purchase order date.
For cash creations, authorized participants will deliver, or
facilitate the delivery of, cash to the Fund's account with the Cash
Custodian in exchange for Shares. Upon receipt of an approved cash
creation order, the Sponsor, on behalf of the Fund, will submit to
one or more previously onboarded trading partners an order to buy
the amount of ETH represented by a Creation Basket. For in-kind
creations, authorized participants or their designee will deliver,
or facilitate the delivery of, ETH to the Fund's account with the
Custodian in exchange for Shares.
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 p.m. ET on the
purchase order date, in an amount sufficient to purchase the
requisite amount of ETH (as described below). For a creation order
in-kind, the total in-kind transfer of ETH is based on the quantity
of bitcoin attributable to the Creation Baskets being created
determined as of 4:00 p.m. ET on the purchase order date. 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 Fund 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 Fund 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, or facilitate the delivery of, cash to
create Shares. For an in-kind creation order, an authorized
participant or its designee will deliver, or facilitate the delivery
of, ETH to create Shares. For a cash redemption order, an authorized
participant will deliver Shares to the Fund and will receive cash
for the Shares delivered. For an in-kind redemption order, an
authorized participant will deliver Shares to the Fund and the
authorized participant or its designee will receive ETH for the
Shares delivered.
The Sponsor (including its delegates) will maintain ownership
and control of the Fund's ETH in a manner consistent with good
delivery requirements for spot commodity transactions.
Crypto Index Fund
The Exchange proposes to amend several portions of the Crypto Index
ETP Amendment No. 1 in order to permit in-kind creations and
redemptions.
Representations
The Crypto Index ETP Amendment No. 1 included specific
representations making clear that the Crypto Index Fund would only
process creations and redemptions in cash. Specifically, the ``Franklin
Crypto Index ETF'' section of the Crypto Index ETP Amendment No. 1
stated:
When the Fund sells or redeems its Shares, it will do so in cash
transactions in large blocks of 50,000 Shares (a ``Creation
Basket'') at the Fund's NAV. For creations, authorized participants
will deliver, or facilitate the delivery of, cash to the Fund's
account with the Cash Custodian in exchange for Shares. Upon receipt
of an approved creation order, the Sponsor, on behalf of the Fund,
will submit to one or more previously onboarded trading partners an
order to buy the amount of bitcoin and ether represented by a
Creation Basket.\16\ Authorized participants may then offer Shares
to the public at prices that depend on various factors, including
the supply and demand for Shares, the value of the Fund's assets,
and market conditions at the time of a transaction. Shareholders who
buy or sell Shares during the day from their broker may do so at a
premium or discount relative to the NAV per Share of the Fund.\17\
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\16\ For redemptions, the process will occur in the reverse
order. Upon receipt of an approved redemption order, the Sponsor, on
behalf of the Fund, will submit an order to sell the amount of
bitcoin and ether represented by a Creation Basket and the cash
proceeds will be remitted to the authorized participant when the
large block of Shares is received by the Transfer Agent.
\17\ See Crypto Index ETP Amendment No. 1 at 105111.
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The Exchange proposes to replace the above with the following:
When the Fund sells or redeems its Shares, it will do so in
large blocks of 50,000 Shares (a ``Creation Basket'') based on the
quantity of bitcoin and ether attributable to each Share (net of the
accrued but unpaid Sponsor's fee and any accrued but unpaid expenses
or liabilities). Creation Baskets are issued and redeemed in
exchange for (i) bitcoin and ether or (ii) cash. For cash creations,
authorized participants will deliver, or facilitate the delivery of,
cash to the Fund's account with the Cash Custodian in exchange for
Shares. Upon receipt of an approved cash creation order, the
Sponsor, on behalf of the
[[Page 15502]]
Fund, will submit to one or more previously onboarded trading
partners an order to buy the amount of bitcoin and ether represented
by a Creation Basket.\18\ For in-kind creations, authorized
participants or their designee will deliver, or facilitate the
delivery of, bitcoin and ether to the Fund's account with the
Custodian in exchange for Shares.\19\ Authorized participants may
then offer Shares to the public at prices that depend on various
factors, including the supply and demand for Shares, the value of
the Fund's assets, and market conditions at the time of a
transaction. Shareholders who buy or sell Shares during the day from
their broker may do so at a premium or discount relative to the net
asset value (``NAV'') per Share of the Fund.
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\18\ For cash redemptions, the process will occur in the reverse
order. Upon receipt of an approved cash redemption order, the
Sponsor, on behalf of the Fund, will submit an order to sell the
amount of bitcoin and ether represented by a Creation Basket and the
cash proceeds will be remitted to the authorized participant when
the large block of Shares is received by the Transfer Agent.
\19\ For in-kind redemptions, the process will occur in the
reverse order. Upon receipt of an approved in-kind redemption order,
the Sponsor, on behalf of the Fund, will transfer the amount of
bitcoin and ether represented by a Creation Basket to the authorized
participant or its designee when the large block of Shares is
received by the Transfer Agent.
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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.\20\ The Exchange proposes to
replace this section as follows:
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\20\ See Crypto Index ETP Amendment No. 1 at 105113.
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Creation and Redemption of Shares
When the Fund sells or redeems its Shares, it will do so in
Creation Baskets that are based on the quantity of bitcoin and ether
attributable to each Share (net of the accrued but unpaid Sponsor's fee
and any accrued but unpaid expenses or liabilities). Creation Baskets
are issued and redeemed in exchange for (i) bitcoin and ether or (ii)
cash. 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 transaction Creation Baskets
must be placed by 2:00 p.m. ET (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 transaction Creation Baskets
must be placed by 4:00 p.m. ET (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 properly received is
considered the purchase order date.
For cash creations, authorized participants will deliver, or
facilitate the delivery of, cash to the Fund's account with the Cash
Custodian in exchange for Shares. Upon receipt of an approved cash
creation order, the Sponsor, on behalf of the Fund, will submit to one
or more previously onboarded trading partners an order to buy the
amount of bitcoin and ether represented by a Creation Basket. For in-
kind creations, authorized participants or their designee will deliver,
or facilitate the delivery of, bitcoin and ether to the Fund's account
with the Custodian in exchange for Shares.
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 p.m. ET on the
purchase order date, in an amount sufficient to purchase the requisite
amount of bitcoin and ether (as described below). For a creation order
in-kind, the total in-kind transfer of bitcoin and ether is based on
the quantity of bitcoin and ether attributable to the Creation Baskets
being created determined as of 4:00 p.m. ET on the purchase order date.
The Administrator determines the quantity of bitcoin and ether
associated with a Creation Basket for a given day by dividing the
number of bitcoin and ether held by the Fund as of the opening of
business on that business day, adjusted for the amount of bitcoin and
ether constituting estimated accrued but unpaid fees and expenses of
the Fund 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, or facilitate the delivery of, cash to create Shares. For
an in-kind creation order, an authorized participant or its designee
will deliver, or facilitate the delivery of, bitcoin and ether to
create Shares. For a cash redemption order, an authorized participant
will deliver Shares to the Fund and will receive cash for the Shares
delivered. For an in-kind redemption order, an authorized participant
will deliver Shares to the Fund and the authorized participant or its
designee will receive bitcoin and ether for the Shares delivered.
The Sponsor (including its delegates) will maintain ownership and
control of the Fund's bitcoin and ether in a manner consistent with
good delivery requirements for spot commodity transactions.
Conclusion
Except for the above changes, all other representations in the
Bitcoin ETP Amendment No. 1, as amended, the Eth ETP Amendment No. 1,
and the Crypto Index ETP Amendment No. 1 remain unchanged and will
continue to constitute continuing listing requirements. In addition,
the Bitcoin Fund will continue to comply with the terms of Bitcoin ETP
Amendment No. 1, as amended, the Eth Fund will continue to comply with
the terms of Eth ETP Amendment No. 1, and the Crypto Index Fund will
continue to comply with the terms of the Crypto Index ETP Amendment
No.1 and the Funds will continue to comply with the requirements of
Rule 14.11(e)(4).
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\21\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \22\ 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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\21\ 15 U.S.C. 78f(b).
\22\ 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 the Bitcoin ETP Amendment
No. 1, as amended, the Eth ETP Amendment No. 1, and the Crypto Index
ETP Amendment No. 1 such that the Funds would be able to engage in in-
kind creation and redemptions with authorized participants or their
designees, as described above. This ability would make the Funds (and
the market more generally) operate more efficiently because authorized
participants would be able to source bitcoin and/or ether, as
applicable, rather than to provide
[[Page 15503]]
cash to the applicable Fund and to receive bitcoin and/or ether from
the Funds. This means that the authorized participant would be
responsible for buying and selling the applicable crypto asset(s)
rather than the Fund itself, which would potentially lessen the impact
on the market of the Funds 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 received for redemptions.
This would improve the creation and redemption process for both
authorized participants and the Funds, increase efficiency, and
ultimately benefit the end investors in the Funds.
Except for the addition of in-kind creation and redemption for the
Bitcoin Fund as specifically set forth herein, all other
representations made in the Bitcoin ETP Amendment No. 1, as amended,
remain unchanged, and will continue to constitute continuing listing
requirements for the Bitcoin Fund. Except for the addition of in-kind
creation and redemption for the Eth Fund as specifically set forth
herein, all other representations made in the Eth ETP Amendment No. 1
remain unchanged and will continue to constitute continuing listing
requirements for the Eth Fund. Similarly, except for the addition of
in-kind creation and redemption for the Crypto Index Fund as
specifically set forth herein, all other representations made in the
Crypto Index ETP Amendment No. 1 remain unchanged and will continue to
constitute continuing listing requirements for the Crypto Index Fund.
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 Funds 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-2025-050 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-2025-050. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CboeBZX-2025-050 and should
be submitted on or before May 2, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-06171 Filed 4-10-25; 8:45 am]
BILLING CODE 8011-01-P