[Federal Register Volume 90, Number 73 (Thursday, April 17, 2025)]
[Notices]
[Pages 16372-16380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-06510]
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SECURITIES AND EXCHANGE COMMISSION
Release No. 34-102833; File No. SR-CboeBZX-2025-056]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 19.3
April 11, 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 10, 2025, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'')
proposes to amend Rule 19.3 regarding the criteria for underlying
securities. The text of the proposed rule change is provided in Exhibit
5.
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 Exchange proposes to amend Rule 19.3 regarding the criteria for
underlying securities. Specifically, the Exchange proposes to amend
Rule 19.3(i)(4) to allow the Exchange to list and trade options on
shares or other securities (``Fund Shares'') that are principally
traded on a national securities exchange and are defined as an ``NMS
stock'' under Rule 600 of Regulation NMS and that represent interests
in the Fidelity Ethereum Fund (the ``Fidelity Fund'').\5\ This is a
competitive filing based on a similar proposal submitted by Cboe
Exchange, Inc., which was recently approved by the Securities and
Exchange Commission (the ``Commission'').\6\ Current Rule 19.3(i)
provides that, subject to certain other criteria set forth in that
Rule, securities deemed appropriate for options trading include Fund
Shares that represent certain types of interests,\7\ including
interests in
[[Page 16373]]
certain specific trusts that hold financial instruments, money market
instruments, or precious metals (which are deemed commodities).
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\5\ See Securities Exchange Act Release No. 100224 (May 23,
2024), 89 FR 46937 (May 30, 2024) (SR-NYSEArca-2023-70; SR-NYSEArca-
2024-31; SR-NASDAQ-2023-045; SR-CboeBZX-2023-069; SR-CboeBZX-2023-
070; SR-CboeBZX-2023-087; SR-CboeBZX-2023-095; and SRCboeBZX-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) (``Ethereum ETP Approval
Order'').
\6\ See Securities Exchange Act Release Nos. 100862 (August 28,
2024), 89 FR 72146 (August 28, 2024) (SR-CBOE-2024-036); and 102797
(April 9, 2025) (SR-CBOE-2024-036) (``Cboe Approval Order'').
\7\ See Rule 19.3(i) which permits options trading on Fund
Shares that (1) represent interests in registered investment
companies (or series thereof) organized as open-end management
investment companies, unit investment trusts or similar entities,
and that hold portfolios of securities comprising or otherwise based
on or representing investments in indexes or portfolios of
securities (or that hold securities in one or more other registered
investment companies that themselves hold such portfolios of
securities) (``Funds '') and/or financial instruments including, but
not limited to, stock index futures contracts, options on futures,
options on securities and indexes, equity caps, collars and floors,
swap agreements, forward contracts, repurchase agreements and
reverse repurchase agreements (the ``Financial Instruments''), and
money market instruments, including, but not limited to, U.S.
government securities and repurchase agreements (the ``Money Market
Instruments'') constituting or otherwise based on or representing an
investment in an index or portfolio of securities and/or Financial
Instruments and Money Market Instruments, or (2) represent commodity
pool interests principally engaged, directly or indirectly, in
holding and/or managing portfolios or baskets of securities,
commodity futures contracts, options on commodity futures contracts,
swaps, forward 477 contracts and/or options on physical commodities
and/or non-U.S. currency (``Commodity Pool ETFs'') or (3) represent
interests in a trust or similar entity that holds a specified non-
U.S. currency or currencies deposited with the trust or similar
entity when aggregated in some specified minimum number may be
surrendered to the trust by the beneficial owner to receive the
specified non-U.S. currency or currencies and pays the beneficial
owner interest and other distributions on the deposited non-U.S.
currency or currencies, if any, declared and paid by the trust
(``Currency Trust Shares''), or (4) represent interests in the SPDR
Gold Trust or are issued by the iShares COMEX Gold Trust or iShares
Silver Trust.
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The Fidelity Fund is an Ethereum-backed commodity ETF structured as
a trust. Similar to any Fund Share currently deemed appropriate for
options trading under Rule 19.3(i), the investment objective of the
Fidelity Fund is for its shares to reflect the performance of Ethereum
(less the expenses of the trust's operations), offering investors an
opportunity to gain exposure to Ethereum without the complexities of
Ethereum delivery. As is the case for Fund Shares currently deemed
appropriate for options trading, the Fidelity Fund's shares represent
units of fractional undivided beneficial interest in the trust, the
assets of which consist principally of Ethereum and are designed to
track Ethereum or the performance of the price of Ethereum and offer
access to the Ethereum market.\8\ The Fidelity Fund provides investors
with cost-efficient alternatives that allow a level of participation in
the Ethereum market through the securities market. The primary
substantive difference between the Fidelity Fund and Fund Shares
currently deemed appropriate for options trading are that Fund Shares
may hold securities, certain financial instruments, specified precious
metals (which are deemed commodities), and Bitcoin (which is also
deemed a commodity), while the Fidelity Fund holds Ethereum (which is
also deemed a commodity).
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\8\ The trust may include minimal cash.
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The Exchange believes the Fidelity Fund satisfies the Exchange's
initial listing standards for Fund Shares on which the Exchange may
list options. Specifically, the Fidelity Fund satisfies the initial
listing standards set forth in Rule 19.3(i), as is the case for other
Fund Shares on which the Exchange lists options (including trusts that
hold commodities). Rule 19.3(i)(1) requires that Fund Shares either (1)
meet the criteria and standards set forth in Rule 19.3(a) and (b),\9\
or (2) are available for creation or redemption each business day in
cash or in kind from the investment company, commodity pool or other
entity at a price related to net asset value, and the investment
company, commodity pool or other entity is obligated to provide that
Fund Shares may be created even if some or all of the securities and/or
cash required to be deposited have not been received by the Fund, the
unit investment trust or the management investment company, provided
the authorized creation participant has undertaken to deliver the
securities and/or cash as soon as possible and such undertaking is
secured by the delivery and maintenance of collateral consisting of
cash or cash equivalents satisfactory to the Fund, all as described in
the Fund's or unit trust's prospectus. The Fidelity Fund satisfies Rule
19.3(i)(1)(B) as each is subject to this creation and redemption
process.
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\9\ Rule 19.3(a) and (b) sets forth the criteria an underlying
security must meet for the Exchange to be able to list options on
the underlying.
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While not required by the Rules for purposes of options listings,
the Exchange believes the Fidelity Fund satisfies the criteria and
guidelines set forth in Rule 19.3(a) and (b). Pursuant to Rule 19.3(a),
a security (which includes a Fund Share) on which options may be listed
and traded on the Exchange must be registered with the Commission and
be an NMS stock (as defined in Rule 600 of Regulation NMS under the
Securities Exchange Act of 1934, as amended (the ``Act'')), and be
characterized by a substantial number of outstanding shares that are
widely held and actively traded.\10\ The Fidelity Fund is an NMS Stock
as defined in Rule 600 of Regulation NMS under the Act.\11\ The
Exchange believes the Fidelity Fund is characterized by a substantial
number of outstanding shares that are widely held and actively traded.
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\10\ The criteria and guidelines for a security to be considered
widely held and actively traded are set forth in Rule 19.3(b),
subject to exceptions.
\11\ An ``NMS stock'' means any NMS security other than an
option, and an ``NMS security'' means any security or class of
securities for which transaction reports are collected, processed,
and made available pursuant to an effective transaction reporting
plan (or an effective national market system plan for reporting
transaction in listed options). See 17 CFR 242.600(b)(64)
(definition of ``NMS security'') and (65) (definition of ``NMS
stock'').
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As of December 23, 2024, the Fidelity Fund had 41,700,000 shares
outstanding, which is nearly six times more than the minimum number of
shares of a corporate stock (i.e., 7,000,000 shares) that the Exchange
generally requires to list options on that stock pursuant to Rule
19.3(b)(1). The Exchange believes this demonstrates that the Fidelity
Fund is characterized by a substantial number of outstanding shares.
Further, as of November 26, 2024, there were 38,170 beneficial
holders of shares of the Fidelity Fund, which is significantly more
than 2,000 beneficial holders (approximately 19 times more), which is
the minimum number of holders the Exchange generally requires for
corporate stock in order to list options on that stock pursuant to Rule
19.3(b). Therefore, the Exchange believes the shares of the Fidelity
Fund are widely held.\12\
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\12\ The Exchange continues to believe assets under management
(``AUM''), rather than shares outstanding and number of holders, is
a better measure of investable capacity of ETFs and a more
appropriate figure for determining position and exercise limits of
ETFs and looks forward to further discussions with the Commission
staff on this topic.
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The Exchange also believes the shares of the Fidelity Fund are
actively traded. As of December 23, 2024, the total trading volume (by
shares) and the approximate average daily volume (``ADV'') (in shares
and notional) from July 23, 2024 (the date on which shares of the
Fidelity Fund began trading) to December 23, 2024 for the Fidelity Fund
was as follows:
------------------------------------------------------------------------
ADV ADV (notional
Trading volume (shares) (shares) $)
------------------------------------------------------------------------
115,589,047............................... 1,070,269 33,864,193
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As demonstrated above, despite the fact that the Fidelity Fund has
been trading for approximately five months as of December 23, 2024, its
total trading volume as of that date was substantially higher than
2,400,000 shares (more than 48 times that amount), which is the minimum
12-month volume the Exchange generally requires for a corporate stock
in order to list options on that security as set forth in Rule 19.3(b).
Additionally, as of December 23, 2024, the trading volume for the
Fidelity Fund was in the top 5% of all ETFs that are currently trading.
The Exchange believes this data demonstrates the Fidelity Fund is
characterized as having shares that are actively traded.
Options on the Fidelity Fund will be subject to the Exchange's
continued listing standards set forth in Rule 19.4(g) for Fund Shares
deemed appropriate for options trading pursuant to Rule 19.3(i).
Specifically, 19.4(g) provides that Fund
[[Page 16374]]
Shares that were initially approved for options trading pursuant to
Rule 19.3 will not be deemed to meet the requirements for continued
approval, and the Exchange shall not open for trading any additional
series of option contracts of the class covering such Fund Shares if
the security ceases to be an NMS stock (see Rule 19.4(b)(4)).
Additionally, the Exchange will not open for trading any additional
series of option contracts of the class covering Fund Shares in any of
the following circumstances: (1) in the case of options covering Fund
Shares approved for trading under Rule 19.3(i)(4)(A), in accordance
with the terms of Rule 19.4(b)(1), (2) and (3); (2) in the case of
options covering Fund Shares approved pursuant to Rule 19.3(i)(4)(B),
following the initial 12-month period beginning upon the commencement
of trading in the Fund Shares on a national securities exchange and are
defined as NMS stock under Rule 600 of Regulation NMS, there were fewer
than 50 record and/or beneficial holders of such Fund Shares for 30
consecutive days; (3) the value of the index, non-U.S. currency,
portfolio of commodities including commodity futures contracts, options
on commodity futures contracts, swaps, forward contracts and/or options
on physical commodities and/or Financial Instruments or Money Market
Instruments, or portfolio of securities on which the Fund Shares are
based is no longer calculated or available; or (4) such other event
occurs or condition exists that in the opinion of the Exchange makes
further dealing in such options on the Exchange inadvisable.
Options on the Fidelity Fund will be physically settled contracts
with American-style exercise.\13\ Consistent with current Rule 19.6,
which governs the opening of options series on a specific underlying
security (including Fund Shares), the Exchange will open at least one
expiration month for options on the Fidelity Fund \14\ at the
commencement of trading on the Exchange and may also list series of
options on the Fidelity Fund for trading on a weekly,\15\ monthly,\16\
or quarterly \17\ basis. The Exchange may also list long-term equity
option series (``LEAPS'') that expire from 12 to 39 months from the
time they are listed.\18\
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\13\ See Rule 19.2, which provides that the rights and
obligations of holders and writers are set forth in the Rules of the
Options Clearing Corporation (``OCC''); and Equity Options Product
Specifications January 3, 2024), available at Equity Options
Specifications (cboe.com); see also OCC Rules, Chapters VIII (which
governs exercise and assignment) and Chapter IX (which governs the
discharge of delivery and payment obligations arising out of the
exercise of physically settled stock option contracts).
\14\ See Rule 19.6(b). The monthly expirations are subject to
certain listing criteria for underlying securities described within
Rule 19.3. Monthly listings expire the third Friday of the month.
The term ``expiration date'' (unless separately defined elsewhere in
the OCC By-Laws), when used in respect of an option contract
(subject to certain exceptions), means the third Friday of the
expiration month of such option contract, or if such Friday is a day
on which the exchange on which such option is listed is not open for
business, the preceding day on which such exchange is open for
business. See OCC By-Laws Article I, Section 1. Pursuant to Rule
19.6(c), additional series of options of the same class may be
opened for trading on the Exchange when the Exchange deems it
necessary to maintain an orderly market, to meet customer demand or
when the market price of the underlying stock moves more than five
strike prices from the initial exercise price or prices. New series
of options on an individual stock may be added until the beginning
of the month in which the options contract will expire. Due to
unusual market conditions, the Exchange, in its discretion, may add
a new series of options on an individual stock until the close of
trading on the business day prior to expiration.
\15\ See Rule 19.6, Interpretation and Policy .05.
\16\ See Rule 19.6, Interpretation and Policy .08.
\17\ See Rule 19.6, Interpretation and Policy .04.
\18\ See Rule 19.8.
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Pursuant to Rule 19.6, Interpretation and Policy .01, which governs
strike prices of series of options on Fund Shares, the interval of
strikes prices for series of options on the Fidelity Fund will be $1 or
greater when the strike price is $200 or less and $5 or greater where
the strike price is over $200.\19\ Additionally, the Exchange may list
series of options pursuant to the $1 Strike Price Interval Program,\20\
the $0.50 Strike Program,\21\ the $2.50 Strike Price Program,\22\ and
the $5 Strike Program.\23\ Pursuant to Rule 21.5, where the price of a
series of a Fidelity Fund option is less than $3.00, the minimum
increment will be $0.05, and where the price is $3.00 or higher, the
minimum increment will be $0.10.\24\ Any and all new series of Fidelity
Fund options that the Exchange lists will be consistent and comply with
the expirations, strike prices, and minimum increments set forth in
Rules 19.6 and 21.5, as applicable.
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\19\ The Exchange notes that for options listed pursuant to the
Short Term Option Series Program, the Monthly Options Series
Program, and the Quarterly Options Series Program, Rule 19.6,
Interpretations and Policies .05, .08, and .04 specifically sets
forth intervals between strike prices on Quarterly Options Series,
Short Term Option Series, and Monthly Options Series, respectively.
\20\ See Rule 19.6, Interpretation and Policy .02.
\21\ See Rule 19.6, Interpretation and Policy .06.
\22\ See Rule 19.6, Interpretation and Policy .03.
\23\ See Rule 19.6(d)(5).
\24\ If options on the Fidelity Fund are eligible to participate
in the Penny Interval Program, the minimum increment will be $0.01
for series with a price below $3.00 and $0.05 for series with a
price at or above $3.00. See 21.5(d) (which describes the
requirements for the Penny Interval Program).
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Pursuant to Rules 18.7 and 18.9, the position and exercise limits,
respectively, for Fidelity Fund options will be 25,000 same side option
contracts.\25\
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\25\ Rule 18.7(a)(1) provides that no Options Member shall make,
for any account in which it has any interest or for the account of
any Customer, an opening transaction on any exchange if the Options
Member has reason to believe that as a result of such transaction
the Options Member or its Customer would, acting alone or in concert
with others, directly or indirectly, exceed the applicable position
limit fixed by Cboe Exchange, Inc. (``Cboe Options''). The
Commission recently approved a nearly identical rule filing of Cboe
Options to amend Cboe Options Rule 8.30, Interpretation and Policy
.10 (and Cboe Options Rule 8.42) to establish a position and
exercise limit for Fidelity Fund options of 25,000. See Cboe
Approval Order. Therefore, those position and exercise limits apply
to the Exchange.
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The Exchange believes these proposed position and exercise limits
are reasonable and appropriate considering, among other things, the ADV
(since trading of the Fidelity Fund began on July 23, 2024) and
outstanding shares of the Fidelity Fund (which as discussed above
demonstrate that the Fidelity Fund is widely held and actively traded
and thus justify these conservatively proposed position limits), as set
forth below, along with market capitalization (as of December 23,
2024):
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ADV (shares) Outstanding shares Market capitalization ($)
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1,070,269................................................ 41,700,000 1,433,229,000
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The Exchange then compared the number of outstanding shares of the
Fidelity Fund to those of other ETFs. The approximate average position
(and exercise limit) of ETF options with similar outstanding shares (as
of December 31, 2024) was approximately 102,703 contracts, which is
significantly higher (approximately 4 times) than the proposed position
and exercise limit of 25,000 contracts for Fidelity Fund
[[Page 16375]]
options.\26\ As discussed above, shares of the Fidelity Fund are
actively held and widely traded: (1) the Fidelity Fund (as of December
23, 2024) had significantly more than 7,000,000 shares outstanding,
which is the minimum number of shares of a corporate stock that the
Exchange generally requires to list options on that stock pursuant to
Rule 19.3(b)(1); (2) the Fidelity Fund (as of November 26, 2024) had
significantly more than 2,000 beneficial holders, which is the minimum
number of holders the Exchange generally requires for corporate stock
in order to list options on that stock pursuant to Rule 19.3(b)(2); and
(3) the Fidelity Fund had a trading volume in the approximately five-
month time period since it began trading substantially higher than
2,400,000 shares, which is the minimum 12-month volume the Exchange
generally requires for a security in order to list options on that
security as set forth in Rule 19.3(b)(4).
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\26\ The position limits for those ETF options for which the
underlying ETFs had similar outstanding shares were all 50,000 or
above, and nearly half of them had position limits of 200,000 or
250,000 contracts.
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With respect to outstanding shares, if a market participant held
the maximum number of positions possible pursuant to the proposed
position and exercise limits, the equivalent shares represented by the
proposed position/exercise limit would represent approximately 6.0% of
the 41,700,000 current outstanding shares of the Fidelity Fund.
Therefore, if a market participant held the maximum permissible options
positions in Fidelity Fund options and exercised all of them at the
same time, that market participant would control a small percentage of
the outstanding shares of the Fidelity Fund.
Cboe Options Rule 8.30, Interpretation and Policy .02 (which
governs position limits on the Exchange pursuant to Rule 18.7),
provides two methods of qualifying for a position limit tier above
25,000 option contracts. The first method is based on six-month trading
volume in the underlying security, and the second method is based on
slightly lower six-month trading volume and number of shares
outstanding in the underlying security. An underlying stock or ETF that
qualifies for method two based on trading volume and number of shares
outstanding would be required to have the minimum number of outstanding
shares as shown in middle column of the table below.
The table, which provides the equivalent shares of the position
limits applicable to equity options, including ETFs, further represents
the percentages of the minimum number of outstanding shares that an
underlying stock or ETF must have to qualify for that position limit
(under the second method described above).
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Minimum Percentage of
Position/exercise limit (in equivalent outstanding outstanding
shares) shares shares (%)
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2,500,000............................... 6,300,000 40.0
5,000,000............................... 40,000,000 12.5
7,500,000............................... 120,000,000 6.3
20,000,000.............................. 240,000,000 8.3
25,000,000.............................. 300,000,000 8.3
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The equivalent shares represented by the proposed position and
exercise limits for the Fidelity Fund as a percentage of outstanding
shares of the Fidelity Fund is significantly lower than the percentage
for the lowest possible position limit for equity options of 25,000,
which is the position limit the Exchange is proposing for Fidelity Fund
options.\27\
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\27\ As these percentages are based on the minimum number of
outstanding shares an underlying security must have to qualify for
the applicable position limit, these are the highest possible
percentages that would apply to any option subject to that position
and exercise limit. 6,300,000 is the minimum number of outstanding
shares an underlying security must have for the Exchange to continue
to list options on that security, so this would be the smallest
number of outstanding shares permissible for any corporate option
that would have a position limit of 25,000 contract. See Rule
19.4(b)(1). This rule applies to corporate stock options but not ETF
options, which currently have no requirement regarding outstanding
shares of the underlying ETF for the Exchange to continue listing
options on that ETF. Therefore, there may be ETF options trading for
which the 25,000 contract position limits represents an even larger
percentage of outstanding shares of the underlying ETF than set
forth above.
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Further, the proposed position and exercise limit for Fidelity Fund
options is equal to the lowest position and exercise limits available
in the options industry for equity options, are extremely conservative
and more than appropriate given the market capitalization, average
daily volume, and high number of outstanding shares of the Fidelity
Fund. The proposed position and exercise limit for the Fidelity Fund is
also equal to the position and exercise limits for ETFs that hold
Bitcoin, as recently approved by the Commission.\28\
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\28\ See Securities Exchange Act Release No. 101387 (October 18,
2024), 89 FR 84948 (October 24, 2024) (SR-CBOE-2024-035) (``Bitcoin
ETF Option Approval''); see also Cboe Options Rules 8.30,
Interpretation and Policy .10 and 8.42 (which applies to the
Exchange pursuant to Rule 18.7 and 18.9).
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All of the above information demonstrates that the proposed
position and exercise limits for Fidelity Fund options are more than
reasonable and appropriate. The trading volume, ADV, and outstanding
shares of the Fidelity Fund demonstrate that its shares are actively
traded and widely held, and proposed position and exercise limit is
well below those of options on other ETFs with similar market
characteristics. The proposed position and exercise limit would be the
lowest position and exercise limit available for equity options in the
industry, are extremely conservative, and are more than appropriate
given the Fidelity Fund's market capitalization, ADV, and high number
of outstanding shares.
Fidelity Fund options will trade in the same manner as any other
Fund Share options on the Exchange. The Exchange Rules that currently
apply to the listing and trading of all Fund Share options on the
Exchange, including, for example, Rules that govern listing criteria,
expirations, exercise prices, minimum increments, margin requirements,
customer accounts, and trading halt procedures will apply to the
listing and trading of Fidelity Fund options on the Exchange in the
same manner as they apply to other options on all other Fund Shares
that are listed and traded on the Exchange, including the precious-
metal backed commodity Fund Shares already deemed appropriate for
options trading on the Exchange pursuant to current Rule 19.3(i).
Today, the Exchange has an adequate surveillance program in place
for options. The Exchange intends to apply those same program
procedures to
[[Page 16376]]
options on the Fidelity Fund that it applies to the Exchange's other
options products.\29\ The Exchange's market surveillance staff would
have access to the surveillances conducted by the Exchange with respect
to the Fidelity Fund and would review activity in the Fidelity Fund
when conducting surveillances for market abuse or manipulation in the
options on the Fidelity Fund. Additionally, the Exchange is a member of
the Intermarket Surveillance Group (``ISG'') under the Intermarket
Surveillance Group Agreement. ISG members work together to coordinate
surveillance and investigative information sharing in the stock,
options, and futures markets. In addition to obtaining information from
the Exchange's equities, the Exchange would be able to obtain
information regarding trading of shares of the Fidelity Fund through
ISG.
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\29\ The surveillance program includes surveillance patterns for
price and volume movements as well as patterns for potential
manipulation (e.g., spoofing and marking the close).
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In addition, the Exchange has a Regulatory Services Agreement with
the Financial Industry Regulatory Authority (``FINRA'') for certain
market surveillance, investigation and examinations functions. Pursuant
to a multi-party 17d-2 joint plan, all options exchanges allocate
amongst themselves and FINRA responsibilities to conduct certain
options-related market surveillance that are common to rules of all
options exchanges.\30\ The underlying shares of spot Ethereum exchange-
traded products (``ETPs''), including the Fidelity Fund, are also
subject to safeguards related to addressing market abuse and
manipulation. As the Commission stated in its order approving proposals
of several exchanges to list and trade shares of spot Ethereum-based
ETPs, ``[e]ach Exchange has a comprehensive surveillance-sharing
agreement with the [Chicago Mercantile Exchange (``CME'')] via their
common membership in the Intermarket Surveillance Group. This
facilitates the sharing of information that is available to the CME
through its surveillance of its markets, including its surveillance of
the CME ether futures market.'' \31\ The Exchange states that, given
the consistently high correlation between the CME Ethereum futures
market and the spot Ethereum market, as confirmed by the Commission
through robust correlation analysis, the Commission was able to
conclude that such surveillance sharing agreements could reasonably be
``expected to assist in surveilling for fraudulent and manipulative
acts and practices in the specific context of the [Ethereum ETPs].''
\32\ In light of surveillance measures related to both options and
futures as well as the Fidelity Fund,\33\ the Exchange believes that
existing surveillance procedures are designed to deter and detect
possible manipulative behavior which might potentially arise from
listing and trading the proposed options on the Fidelity Fund. Further,
the Exchange will implement any new surveillance procedures it deems
necessary to effectively monitor the trading of options on the Fidelity
Fund.
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\30\ Section 19(g)(1) of the Act, among other things, requires
every self-regulatory organization (``SRO'') registered as a
national securities exchange or national securities association to
comply with the Act, the rules and regulations thereunder, and the
SRO's own rules, and, absent reasonable justification or excuse,
enforce compliance by its members and persons associated with its
members. See 15 U.S.C. 78q(d)(1) and 17 CFR 240.17d-2. Section
17(d)(1) of the Act allows the Commission to relieve an SRO of
certain responsibilities with respect to members of the SRO who are
also members of another SRO (``common members''). Specifically,
Section 17(d)(1) allows the Commission to relieve an SRO of its
responsibilities to: (i) receive regulatory reports from such
members; (ii) examine such members for compliance with the Act and
the rules and regulations thereunder, and the rules of the SRO; or
(iii) carry out other specified regulatory responsibilities with
respect to such members.
\31\ See Ethereum ETP Approval Order, 89 FR at 46938.
\32\ See Ethereum ETP Approval Order, 89 FR at 46939.
\33\ See Amendment No. 2 to SR-CboeBZX-2023-095, Proposed Rule
Change To List and Trade Shares of the Fidelity Ethereum Fund Under
BZX Rule 14.11(e)(4), Commodity-Based Trust Shares (filed May 21,
2024); see also Ethereum ETP Approval Order.
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The Exchange has also analyzed its capacity and represents that it
believes the Exchange and OPRA have the necessary systems capacity to
handle the additional traffic associated with the listing of new series
that may result from the introduction of options on the Fidelity Fund
up to the number of expirations currently permissible under the Rules.
Because the proposal is limited to one class, the Exchange believes any
additional traffic that may be generated from the introduction of
Fidelity Fund options will be manageable.
The Exchange believes that offering options on the Fidelity Fund
will benefit investors by providing them with an additional, relatively
lower cost investing tool to gain exposure to the price of Ethereum and
hedging vehicle to meet their investment needs in connection with
Ethereum-related products and positions. The Exchange expects investors
will transact in options on the Fidelity Fund in the unregulated over-
the-counter (``OTC'') options market,\34\ but may prefer to trade such
options in a listed environment to receive the benefits of trading
listed options, including (1) enhanced efficiency in initiating and
closing out positions; (2) increased market transparency; and (3)
heightened contra-party creditworthiness due to the role of OCC as
issuer and guarantor of all listed options. The Exchange believes that
listing Fidelity Fund options may cause investors to bring this
liquidity to the Exchange, would increase market transparency and
enhance the process of price discovery conducted on the Exchange
through increased order flow. The Fund Shares that hold financial
instruments, money market instruments, or precious metal commodities on
which the Exchange may already list and trade options are trusts
structured in substantially the same manner as the Fidelity Fund and
essentially offer the same objectives and benefits to investors, just
with respect to different assets. The Exchange notes that it has not
identified any issues with the continued listing and trading of any
Fund Share options, including Fund Shares that hold commodities (i.e.,
precious metals) that it currently lists and trades on the Exchange.
The Exchange notes that quotation and last sale information for shares
of the Fidelity Fund are available from the CTA high-speed lines, as
well as from the Exchange's equities market (on which the shares are
primarily listed). Quotation and last sale information for options on
the Fidelity Fund will be available from OPRA and market data vendors.
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\34\ The Exchange understands from customers that investors have
historically transacted in options on Units in the OTC options
market if such options were not available for trading in a listed
environment.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\35\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \36\ 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
[[Page 16377]]
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. Additionally, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \37\ requirement that the rules
of an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\35\ 15 U.S.C. 78f(b).
\36\ 15 U.S.C. 78f(b)(5).
\37\ Id.
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In particular, the Exchange believes that the proposal to list and
trade options on the Fidelity Fund will remove impediments to and
perfect the mechanism of a free and open market and a national market
system and, in general, protect investors because offering options on
the Fidelity Fund will provide investors with an opportunity to realize
the benefits of utilizing options on the Fidelity Fund, including cost
efficiencies and increased hedging strategies. The Exchange believes
that offering Fidelity Fund options will benefit investors by providing
them with a relatively lower-cost risk management tool, which will
allow them to manage their positions and associated risk in their
portfolios more easily in connection with exposure to the price of
Ethereum and with Ethereum-related products and positions.
Additionally, the Exchange's offering of Fidelity Fund options will
provide investors with the ability to transact in such options in a
listed market environment as opposed to in the unregulated OTC options
market, which would increase market transparency and enhance the
process of price discovery conducted on the Exchange through increased
order flow to the benefit of all investors. The Exchange also notes
that it already lists (or has the authority to list) options on other
commodity-based Fund Shares,\38\ which, as described above, are trusts
structured in substantially the same manner as the Fidelity Fund and
essentially offer the same objectives and benefits to investors, just
with respect to a different commodity (i.e., Ethereum rather than
Bitcoin or precious metals) and for which the Exchange has not
identified any issues with the continued listing and trading of
commodity-backed Fund Share options it currently lists for trading.
---------------------------------------------------------------------------
\38\ See Rule 19.3(i)(4).
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The Exchange also believes the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system, because it is consistent with current
Exchange Rules previously filed with the Commission. Options on the
Fidelity Fund satisfy the initial listing standards and continued
listing standards currently in the Exchange Rules applicable to options
on all Fund Shares, including Fund Shares that hold other commodities
already deemed appropriate for options trading on the Exchange.
Additionally, as demonstrated above, the Fidelity Fund is characterized
by a substantial number of shares that are widely held and actively
traded. Fidelity Fund options will trade in the same manner as any
other Fund Share options--the same Exchange Rules that currently govern
the listing and trading of all Fund Share options, including
permissible expirations, strike prices and minimum increments, and
applicable margin requirements, will govern the listing and trading of
options on the Fidelity Fund in the same manner.
The Exchange believes the proposed position and exercise limits are
designed to prevent fraudulent and manipulative acts and practices and
promote just and equitable principles of trade, as they are designed to
address potential manipulative schemes and adverse market impacts
surrounding the use of options, such as disrupting the market in the
security underlying the options. The proposed position and exercise
limits in this are 25,000 contracts, which is currently the lowest
limit applicable to any equity options (including ETF options) and the
position and exercise limits that apply to comparable ETFs that hold
Bitcoin.\39\ The Exchange believes the proposed position and exercise
limits are extremely conservative for Fidelity Fund options given the
trading volume and outstanding shares for the Fidelity Fund. The
information above demonstrates that the average position and exercise
limits of options on ETFs with comparable outstanding shares and
trading volume to those of the Fidelity Fund are significantly higher
than the proposed position and exercise limits for Fidelity Fund
options. Therefore, the proposed position and exercise limits for
Fidelity Fund options are conservative relative to options on ETFs with
comparable market characteristics.
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\39\ See Cboe Options Rule 8.30.
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Further, given that the issuer of the Fidelity Fund may create and
redeem shares that represent an interest in Ethereum, the Exchange
believes it is relevant to compare the size of a position limit to the
market capitalization of the Ethereum market. As of December 23, 2024,
the global supply of Ethereum was approximately 120,000,000 coins, and
the price of one Ethereum coin was approximately $3,494.25,\40\ which
equates to a market capitalization of approximately $419.31 billion.
Consider the proposed position and exercise limit of 25,000 option
contracts for the Fidelity Fund option. A position and exercise limit
of 25,000 same side contracts effectively restricts a market
participant from holding positions that could result in the receipt of
no more than 2,500,000 of Fidelity Fund shares (if that market
participant exercised all its options). Using a share price of $34.37
on December 23, 2024, the value of 2,500,000 shares of the Fidelity
Fund at that price is $85,925,000, and the approximate percentage of
that value of the size of the Ethereum market is 0.02%. Therefore, if a
market participant with the maximum 25,000 same side contracts in
Fidelity Fund options exercised all positions at one time, such an
event would have no practical impact on the Ethereum market.
---------------------------------------------------------------------------
\40\ See Ethereum Price (ETH), Market Cap, Price Today & Chart
History--Blockworks.
---------------------------------------------------------------------------
The Exchange also believes the proposed position and exercise
limits are appropriate given position limits for Ethereum futures. For
example, the Chicago Mercantile Exchange (``CME'') imposes a position
limit of 8,000 futures (for the initial spot month) on its Ethereum
futures contract.\41\ On December 23, 2024, CME Dec 24 Ethereum Futures
settled at approximately $3,418.00. A position of 8,000 CME Ethereum
futures, therefore, would have a notional value of $1,367,200,000. A
position of approximately 397,789 option contracts would equate to that
notional value.\42\ This approximate number of option contracts for the
Fidelity Fund that equate to the notional value of CME Ethereum futures
is significantly higher than the proposed limit of 25,000 options
contract for the Fidelity Fund option. The fact that many options
ultimately expire out-of-the-money and thus are not exercised for
shares of the underlying, while the delta of a Ethereum Future is 1,
further demonstrates how conservative the proposed limit of 25,000
options
[[Page 16378]]
contracts are for the Fidelity Fund options.
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\41\ See CME Rulebook Chapter 349 (description of CME Ether
Futures) and Chapter 5, Position Limit, Position Accountability and
Reportable Level Table in the Interpretations & Special Notices.
Each CME Ethereum futures contract is valued at 50 Ethereum as
defined by the CME CF Ether Reference Rate (``BRR''). See CME Rule
35001.
\42\ The notional value of the futures is calculated as follows:
8,000 futures x 50 (the futures multiplier) x $3,418 (the price of
one future) = $1,367,200,000. The number of option contracts that
equates to that notional value is calculated as follows:
$1,367,200,000/notional value of one option contract ($34.37 (share
price of Fidelity Fund) x 100 (option multiplier)) = 397,789 option
contracts.
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The Exchange notes, unlike options contracts, CME position limits
are calculated on a net futures-equivalent basis by contract and
include contracts that aggregate into one or more base contracts
according to an aggregation ratio(s).\43\ Therefore, if a portfolio
includes positions in options on futures, CME would aggregate those
positions into the underlying futures contracts in accordance with a
table published by CME on a delta equivalent value for the relevant
spot month, subsequent spot month, single month and all month position
limits.\44\ If a position exceeds position limits because of an option
assignment, CME permits market participants to liquidate the excess
position within one business day without being considered in violation
of its rules. Additionally, if at the close of trading, a position that
includes options exceeds position limits for futures contracts, when
evaluated using the delta factors as of that day's close of trading but
does not exceed the limits when evaluated using the previous day's
delta factors, then the position shall not constitute a position limit
violation. Considering CME's position limits on futures for Ethereum,
the Exchange believes that that the proposed same side position limits
are more than appropriate for Fidelity Fund options.
---------------------------------------------------------------------------
\43\ See CME Rulebook Chapter 5, Position Limit, Position
Accountability and Reportable Level Table in the Interpretations &
Special Notices.
\44\ Id.
---------------------------------------------------------------------------
The Exchange believes the proposed position and exercise limits
will have no material impact to the supply of Ethereum. For example,
consider again the proposed position limit of 25,000 option contracts
for the Fidelity Fund option. As noted above, a position limit of
25,000 same side contracts effectively restricts a market participant
from holding positions that could result in the receipt of no more than
2,500,000 shares of the Fidelity Fund (if that market participant
exercised all its options). As of December 23, 2024, the Fidelity Fund
had 41,700,000 shares outstanding. This means that the approximate
number of market participants that could hold the maximum of 25,000
same side positions in the Fidelity Fund that would equate to the
number of shares outstanding of that Fund is 16.
This means if 16 market participants had 25,000 same side positions
in Fidelity Fund options, each of them would have to simultaneously
exercise all of those options to create a scenario that may put the
underlying security under stress. The Exchange believes it is highly
unlikely for such an event to occur; however, even if either such event
did occur, the Exchange would not expect the Fidelity Fund to be under
stress because such an event would merely induce the creation of more
shares through the trust's creation and redemption process.
As of December 23, 2024, the global supply of Ethereum was
approximately 120,000,000, and the price of one Ethereum coin was
approximately $3,418.00,\45\ which equates to a market capitalization
of approximately $419.31 billion. Based on the $34.37 price of a
Fidelity Fund share on December 23, 2024, a market participant could
have redeemed one Ethereum for approximately 99 Fidelity Fund shares.
Another 11,880,000,000 Fidelity Fund shares could be created before the
then-circulating global supply of Ethereum was exhausted. As a result,
4,752 market participants would have to simultaneously exercise 25,000
same side positions in Fidelity Fund options to receive shares of the
Fidelity Fund holding the entire global supply of Ethereum. Unlike the
Fidelity Fund, the number of shares that corporations may issue is
limited. However, like corporations, which authorize additional shares,
repurchase shares, or split their shares, the Fidelity Fund may create,
redeem, or split shares in response to demand. Additionally, the supply
of Ethereum is unlimited.\46\ The current supply of Ethereum is larger
than the available supply of most securities.\47\ Given the significant
unlikelihood of any of these events ever occurring, the Exchange does
not believe options on the Fidelity Fund should be subject to position
and exercise limits even lower than those proposed (which are already
equal to the lowest available limit for equity options in the industry)
to protect the supply of Ethereum.
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\45\ See Ethereum Price (ETH), Market Cap, Price Today & Chart
History--Blockworks.
\46\ See Ethereum Price (ETH), Market Cap, Price Today & Chart
History--Blockworks; see also Amendment No. 5 to Form S-1
Registration Statement No. 333-278249, Fidelity Fund, filed July 17,
2024, at 17 (noting that approximately 1,700 Ethereum are issued per
day, subject to various factors); and Amendment No. 3 to Form S-1
Registration Statement No. 333-257474, ARK 21 Fund, filed May 10,
2024, at 15-16 (noting that approximately 1,700 Ethereum are issued
per day, subject to various factors).
\47\ The market capitalization of Ethereum would rank in the top
25 among securities. See https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/.
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The Exchange believes the available supply of Ethereum is not
relevant to the determination of position and exercise limits for
options overlying the Fidelity Fund.\48\ Position and exercise limits
are not a tool that should be used to address a potential limited
supply of the underlying of the instrument underlying the option (in
this case, the Ethereum being held within the Fidelity Fund). Position
and exercise limits do not limit the total number of options that may
be held, but rather they limit the number of positions a single
customer may hold or exercise at one time.\49\ ``Since the inception of
standardized options trading, the options exchanges have had rules
imposing limits on the aggregate number of options contracts that a
member or customer could hold or exercise.'' \50\ Position and exercise
limit rules are intended ``to prevent the establishment of options
positions that can be used or might create incentives to manipulate or
disrupt the underlying market so as to benefit the options position. In
particular, position and exercise limits are designed to minimize the
potential for mini-manipulations and for corners or squeezes of the
underlying market. In addition, such limits serve to reduce the
possibility for disruption of the options market itself, especially in
illiquid options classes.'' \51\
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\48\ The Exchange is unaware of any proposed rule change related
to position and exercise limits for any equity option (including
commodity ETF options) for which the Commission required
consideration of whether the available supply of an underlying
(whether it be a corporate stock or an ETF) or the contents of an
ETF (commodity or otherwise) should be considered when an exchange
proposed to establish those limits, other than recently with respect
to ETFs that hold Bitcoin. See, e.g., Securities Exchange Act
Release No. 57894 (May 30, 2008), 73 FR 32061 (June 5, 2008) (SR-
CBOE-2005-11) (approval order in which the Commission stated that
the ``listing and trading of Gold Trust Options will be subject to
the exchanges' rules pertaining to position and exercise limits and
margin''); compare to Bitcoin ETF Option Approval. The Exchange
notes when the Commission approved the filing to list options on an
ETF holding gold, filing, the position limits in Cboe Options Rule
8.30 were the same as they are today. For reference, the current
position and exercise limits for options on SPDR Gold Shares ETF
(``GLD'') and options on iShares Silver Trust (``SLV'') are 250,000
contracts, or 10 times that proposed position and exercise limit for
the Fidelity Fund options.
\49\ For example, suppose an option has a position limit of
25,000 option contracts and there are a total of 10 investors
trading that option. If all 10 investors max out their positions,
that would result in 250,000 option contracts outstanding at that
time. However, suppose 10 more investors decide to begin trading
that option and also max out their positions. This would result in
500,000 option contracts outstanding at that time. An increase in
the number of investors could cause an increase in outstanding
options even if position limits remain unchanged.
\50\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
\51\ See id.
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[[Page 16379]]
The Exchange notes that a Registration Statement on Form S-1 was
filed with the Commission for the Fidelity Fund, which described the
supply of Ethereum and the potential limits to that supply.\52\ The
Registration Statement permits an unlimited number of shares of the
Fidelity Fund to be created. Further, the Commission approved the
listing and trading of shares of the Fidelity Fund, which approval did
not comment on the sufficient supply of Ethereum or address whether
there was a risk that permitting an unlimited number of shares for the
Fidelity Fund would impact the supply of Ethereum.\53\ Therefore, the
Exchange believes the Commission had ample time and opportunity to
consider whether the supply of Ethereum was sufficient to permit the
creation of unlimited Fidelity Fund shares, and does not believe
considering this supply with respect to the establishment of position
and exercise limits is appropriate given its lack of relevance to the
purpose of position and exercise limits. However, given the significant
size of the Ethereum supply, the proposed positions limit is more than
sufficient to protect investors and the market.
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\52\ See Amendment No. 5 to Form S-1 Registration Statement No.
333-278249, Fidelity Fund, filed July 17, 2024, at 17.
\53\ See Ethereum ETP Approval Order.
---------------------------------------------------------------------------
Based on the above information demonstrating, among other things,
that the Fidelity Fund is characterized by a substantial number of
outstanding shares that are actively traded and widely held, the
Exchange believes the proposed position and exercise limits are
extremely conservative compared to those of ETF options with similar
market characteristics. The proposed position and exercise limits
reasonably and appropriately balance the liquidity provisioning in the
market against the prevention of manipulation. The Exchange believes
these proposed limits are effectively designed to prevent an individual
customer or entity from establishing options positions that could be
used to manipulate the market of the underlying as well as the Ethereum
market.\54\
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\54\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
---------------------------------------------------------------------------
The Exchange represents that it has the necessary systems capacity
to support the new Fidelity Fund options. As discussed above, the
Exchange believes that its existing surveillance and reporting
safeguards are designed to deter and detect possible manipulative
behavior which might arise from listing and trading Fund Share options,
including Fidelity Fund options.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act as options on the Fidelity Fund
will be equally available to all market participants who wish to trade
such options and will trade generally in the same manner as other
options. The Exchange Rules that currently apply to the listing and
trading of all Fund Share options on the Exchange, including, for
example, Rules that govern listing criteria, expirations, exercise
prices, minimum increments, margin requirements, customer accounts, and
trading halt procedures will apply to the listing and trading of
Fidelity Fund options on the Exchange in the same manner as they apply
to other options on all other Fund Shares that are listed and traded on
the Exchange. Also, and as stated above, the Commission has approved
the trading of options on other commodity-based Fund Shares.\55\
Further, the Fidelity Fund would need to satisfy the maintenance
listing standards set forth in the Exchange Rules in the same manner as
any other Fund Share for the Exchange to continue listing options on
them.
---------------------------------------------------------------------------
\55\ See Rule 19.3(i)(4).
---------------------------------------------------------------------------
The Exchange does not believe that the proposal to list and trade
options on the Fidelity Fund will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. To the extent that the advent of Fidelity Fund
options trading on the Exchange may make the Exchange a more attractive
marketplace to market participants at other exchanges, such market
participants are free to elect to become market participants on the
Exchange. Additionally, other options exchanges are free to amend their
listing rules, as applicable, to permit them to list and trade options
on the Fidelity Fund.\56\ The Exchange notes that listing and trading
Fidelity Fund options on the Exchange will subject such options to
transparent exchange-based rules as well as price discovery and
liquidity, as opposed to alternatively trading such options in the OTC
market.
---------------------------------------------------------------------------
\56\ As noted above, at least one other options exchange has
amended its rules to list and trade options on the Fidelity Fund.
See Cboe Approval Order.
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change may relieve any
burden on, or otherwise promote, competition, as it is designed to
increase competition for order flow on the Exchange in a manner that is
beneficial to investors by providing them with a lower-cost option to
hedge their investment portfolios. The Exchange notes that it operates
in a highly competitive market in which market participants can readily
direct order flow to competing venues that offer similar products.
Ultimately, the Exchange believes that offering Fidelity Fund options
for trading on the Exchange will promote competition by providing
investors with an additional, relatively low-cost means to hedge their
portfolios and meet their investment needs in connection with Ethereum
prices and Ethereum-related products and positions on a listed options
exchange.
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 written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \57\ and Rule 19b-4(f)(6) thereunder.\58\
Because the foregoing proposed rule change does not: (i) significantly
affect the protection of investors or the public interest; (ii) impose
any significant burden on competition; and (iii) become operative for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A)(iii) of the Act \59\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\60\
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\57\ 15 U.S.C. 78s(b)(3)(A)(iii).
\58\ 17 CFR 240.19b-4(f)(6).
\59\ 15 U.S.C. 78s(b)(3)(A)(iii).
\60\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Commission has waived the pre-filing requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \61\ under the
Act does not normally become operative prior to 30 days after the date
of the filing.
[[Page 16380]]
However, pursuant to Rule 19b-4(f)(6)(iii),\62\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. The
Commission previously approved the listing and trading of options on
the Fidelity Fund.\63\ The Exchange has provided information regarding
the underlying Fidelity Fund, including, among other things,
information regarding trading volume, the number of beneficial holders,
and the market capitalization of the Fidelity Fund. The proposal also
establishes position and exercise limits for options on the Fidelity
Fund and provides information regarding the surveillance procedures
that will apply to Fidelity Fund options. The Commission believes that
waiver of the operative delay could benefit investors by providing an
additional venue for trading Fidelity Fund options. Therefore, the
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
Accordingly, the Commission hereby waives the 30-day operative delay
and designates the proposed rule change as operative upon filing.\64\
---------------------------------------------------------------------------
\61\ 17 CFR 240.19b-4(f)(6).
\62\ 17 CFR 240.19b-4(f)(6)(iii).
\63\ See supra note 6.
\64\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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-2025-056 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-2025-056. 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-2025-056 and should
be submitted on or before May 8, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\65\
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\65\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-06510 Filed 4-16-25; 8:45 am]
BILLING CODE 8011-01-P