[Federal Register Volume 90, Number 75 (Monday, April 21, 2025)]
[Notices]
[Pages 16717-16722]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-06766]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102864; File No. SR-PEARL-2025-12]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
of a Proposed Rule Change To Amend Exchange Rule 402, Criteria for
Underlying Securities, To List and Trade Options on the VanEck Bitcoin
Trust
April 15, 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 1, 2025, MIAX PEARL, LLC (``MIAX Pearl'' or the ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by MIAX Pearl. 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
The Exchange proposes to amend Exchange Rule 402, Criteria for
Underlying Securities to list and trade options on the VanEck Bitcoin
Trust (the ``Trust'').
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxglobal.com/markets/us-equities/pearl-equities/rule-filings, at MIAX Pearl's principal office, 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, MIAX Pearl 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. MIAX Pearl 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 Exchange Rule 402, Criteria for
Underlying Securities,\3\ to allow the Exchange to list and trade
options on the Trust, designating it as appropriate for options trading
on the Exchange.\4\ This is a competitive filing based on a similar
proposal submitted by Cboe Exchange, Inc. (``Cboe''), which is
currently pending with the Securities and Exchange Commission (the
``Commission'').\5\
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\3\ The Exchange notes that its affiliate options exchanges,
Miami International Securities Exchange, LLC (``MIAX'') and MIAX
Sapphire, LLC (``MIAX Sapphire''), submitted (or will submit)
substantively similar proposals. The Exchange notes that all the
rules of Chapter III of MIAX, including Exchange Rules 307 and 309,
are incorporated by reference into the MIAX Pearl and MIAX Sapphire
rulebooks. The Exchange also notes that all of the rules of Chapter
III of MIAX, including Exchange Rules 307 and 309, and the rules of
Chapter IV of MIAX, including Exchange Rule 402, are incorporated by
reference into the MIAX Emerald, LLC (``MIAX Emerald'') rulebook.
\4\ See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008 (January 17, 2024) (SR-CboeBZX-2023-040) (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) (``Bitcoin ETP Approval
Order'').
\5\ See Securities Exchange Act Release No. 102742 (March 28,
2025) (SR-CBOE-2025-017) (Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as
Modified by Amendment No. 3, to Amend Rules 4.3, 4.20, and 8.30, to
Allow the Exchange to List and Trade Options on the VanEck Bitcoin
Trust) (``Cboe Proposal'').
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Current Exchange Rule 402(i)(4) provides that, subject to certain
other criteria set forth in that Rule, securities deemed appropriate
for options trading include shares or other securities (``Exchange
Traded Fund Shares'' or ``ETFs'') that represent certain types of
interests,\6\ including interests in certain
[[Page 16718]]
specific trusts that hold financial instruments, money market
instruments, precious metals (which are deemed commodities).
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\6\ See Exchange Rule 402(i), which permits options trading on
exchange-traded funds that: (1) represent interests in registered
investment companies (or series thereof) organized as open-end
management investment companies, unit investment trusts or similar
entities that hold portfolios of securities and/or financial
instruments (``Funds''), including, but not limited to, stock index
futures contracts, options on futures, options on securities and
indices, 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'') comprising
or otherwise based on or representing investments in broad-based
indexes or portfolios of securities and/or Financial Instruments and
Money Market Instruments (or that hold securities in one or more
other registered investment companies that themselves hold such
portfolios of securities and/or Financial Instruments and Money
Market Instruments); (2) represent interests in a trust or similar
entity that holds a specified non-U.S. currency or currencies
deposited with the trust which when aggregated in some specified
minimum number may be surrendered to the trust or similar entity 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''); (3)
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 contracts and/or options on
physical commodities and/or non-U.S. currency (``Commodity Pool
ETFs''); (4) are issued by the SPDR[supreg] Gold Trust, the iShares
COMEX Gold Trust, the iShares Silver Trust, the Aberdeen Standard
Silver ETF Trust, the Aberdeen Standard Physical Gold Trust, the
Aberdeen Standard Palladium ETF Trust, the Aberdeen Standard
Platinum ETF Trust, the Goldman Sachs Physical Gold ETF, the Sprott
Physical Gold Trust, the iShares Bitcoin Trust, the Grayscale
Bitcoin Trust, the Grayscale Bitcoin Mini Trust, the Bitwise Bitcoin
ETF, the Fidelity Wise Origin Bitcoin Fund, or the ARK 21 Shares
Bitcoin ETF; or (5) represent an interest in a registered investment
company (``Investment Company'') organized as an open-end management
company or similar entity, that invests in a portfolio of securities
selected by the Investment Company's investment adviser consistent
with the Investment Company's investment objectives and policies,
which is issued in a specified aggregate minimum number in return
for a deposit of a specified portfolio of securities and/or a cash
amount with a value equal to the next determined net asset value
(``NAV''), and when aggregated in the same specified minimum number,
may be redeemed at a holder's request, which holder will be paid a
specified portfolio of securities and/or cash with a value equal to
the next determined NAV (``Managed Fund Share''); provided that all
of the conditions listed in (5)(i) and 5(ii) are met.
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The Trust is a Bitcoin-backed commodity ETF structured as a trust.
Similar to any ETF currently deemed appropriate for options trading
under Exchange Rule 402(i)(4), the investment objective of the Trust is
for its shares to reflect the performance of Bitcoin (less the expenses
of the Trust's operations), offering investors an opportunity to gain
exposure to Bitcoin without the complexities of Bitcoin delivery. As is
the case for ETFs currently deemed appropriate for options trading, the
Trust's shares represent units of fractional undivided beneficial
interest in the trust, the assets of which consist principally of
Bitcoin and are designed to track Bitcoin or the performance of the
price of Bitcoin and offer access to the Bitcoin market.\7\ The Trust
provides investors with cost-efficient alternatives that allow a level
of participation in the Bitcoin market through the securities market.
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\7\ The Trust may include minimal cash and cash equivalents
(i.e., short-term instruments with maturities of less than three
months).
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The Exchange believes the Trust satisfies the Exchange's initial
listing standards for ETFs on which the Exchange may list options.
Specifically, the Trust satisfies the initial listing standards set
forth in Exchange Rule 402(a), as is the case for other ETFs on which
the Exchange lists options (including trusts that hold commodities).
Exchange Rule 402(i)(5)(i) requires that the ETFs must either (1) meet
the criteria and standards set forth in Exchange Rule 402(a) or
402(b),\8\ or (2) be available for creation or redemption each business
day from or through the issuer in cash or in kind at a price related to
net asset value, and the issuer must be obligated to issue ETFs in a
specified aggregate number even if some or all of the investment assets
required to be deposited have not been received by the issuer, subject
to the condition that the person obligated to deposit the investments
has undertaken to deliver the investment assets 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
issuer, as provided in the respective prospectus. The Trust satisfies
Exchange Rule 402(i)(5)(i), as it is subject to this creation and
redemption process.
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\8\ Subparagraphs (a) and (b) of Exchange Rule 402 provide for
guidelines to be used by the Exchange when evaluating potential
underlying securities for Exchange option transactions.
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While not required by the Rules for purposes of options listings,
the Exchange believes the Trust satisfies the criteria and guidelines
set forth Exchange Rule 402(b). Pursuant to Rule 402(a), a security
(which includes an ETF) 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 Act, and be
characterized by a substantial number of outstanding shares that are
widely held and actively traded.\9\ The Trust is an NMS Stock as
defined in Rule 600 of Regulation NMS under the Act.\10\ The Exchange
believes the VanEck Bitcoin Trust is characterized by a substantial
number of outstanding shares that are widely held and actively traded.
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\9\ The criteria and guidelines for a security to be considered
widely held and actively traded are set forth in Exchange Rule
402(b), subject to exceptions.
\10\ 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 March 5, 2025, based on the data presented in the Cboe
Proposal, the Trust had the following number of shares outstanding:
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Shares
Bitcoin fund outstanding
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VanEck Bitcoin Trust.................................... 49,900,000
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The Trust had significantly more than 7,000,000 shares outstanding
(approximately 7 times that amount), which is the minimum number of
shares of a corporate stock that the Exchange generally requires to
list options on that stock pursuant to Exchange Rule 402(b)(1). The
Exchange believes this demonstrates that the Trust is characterized by
a substantial number of outstanding shares.
Further, the below table presented in the Cboe Proposal contains
information regarding the number of beneficial holders of the Trust as
of the specified dates:
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Beneficial
Bitcoin fund holders Date
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VanEck Bitcoin Trust.................... 32,469 1/31/25
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As this table shows, the Trust has significantly more than 2,000
beneficial holders (approximately 16 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 Exchange Rule
402(b)(2). Therefore, the Exchange believes the shares of the Trust are
widely held.
The Exchange also believes the shares of the Trust are actively
traded. As of March 5, 2025, based on the data presented in the Cboe
Proposal, the total trading volume (by shares) for the trust for the
six-month period of September 5, 2024, through March 5, 2025, and the
approximate average daily volume (``ADV'') (in shares and notional)
over the 30-day period of September 5, 2024, through March 5, 2025, for
the Trust was as follows:
[[Page 16719]]
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6-Month
Bitcoin fund trading volume 30-Day ADV 30-Day ADV (notional $)
(shares) (shares)
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VanEck Bitcoin Trust................................... 133,275,448 794,677 39,163,513.72
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As demonstrated above, as of March 5, 2025, based on the data
presented in the Cboe Proposal, the six-month trading volume for the
Trust as of that date was substantially higher than 2,400,000 shares
(approximately 55 times that amount), which is the minimum 12-month
volume the Exchange generally requires for an underlying security in
order to list options on that security as set forth in Exchange Rule
402(b)(4). The Exchange believes this data demonstrates the Trust is
characterized as having shares that are actively traded.
Options on the Trust will be subject to the Exchange's continued
listing standards set forth in Exchange Rule 403(g), for ETFs deemed
appropriate for options trading pursuant to Exchange Rule 402(i).
Specifically, Exchange Rule 403(g) provides that ETFs that were
initially approved for options trading pursuant to Exchange Rule 402(i)
shall be deemed not 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 that such ETFs, if the ETFs
cease to be an NMS stock or the ETFs, are delisted from trading
pursuant to Exchange Rule 403(b)(4), are halted or suspended from
trading in their primary market. Additionally, options on ETFs may be
subject to the suspension of opening transactions in any of the
following circumstances: (1) in the case of options covering ETFs
approved for trading under Exchange Rule 402(i)(5)(i)(A), in accordance
with the terms of paragraphs (b)(1), (2), and (3) of Exchange Rule 403;
(2) in the case of options covering ETFs approved for trading under
Exchange Rule 402(i)(5)(i)(B)(as is the case for the Trust), following
the initial twelve-month period beginning upon the commencement of
trading in the ETFs on a national securities exchange and are defined
as an NMS stock, there are fewer than 50 record and/or beneficial
holders of such ETFs for 30 or more consecutive trading days; (3) the
value of the index or portfolio of securities, non-U.S. currency, or
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 and money market
instruments on which the ETFs are based is no longer calculated or
available; or (4) such other event shall occur or condition exist that
in the opinion of the Exchange makes further dealing in such options on
the Exchange inadvisable.
Options on the Trust will be physically settled contracts with
American-style exercise.\11\ Consistent with current Exchange Rule 404,
which governs the opening of options series on a specific underlying
security (including ETFs), the Exchange will open at least one
expiration month for options on the Trust \12\ at the commencement of
trading on the Exchange and may also list series of options on the
Trust for trading on a weekly,\13\ monthly,\14\ or quarterly \15\
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.\16\
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\11\ See Exchange Rule 401, which provides that the rights and
obligations of holders and writers are set forth in the Rules of the
Options Clearing Corporation (``OCC''); 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).
\12\ See Exchange Rule 404(b). The monthly expirations are
subject to certain listing criteria for underlying securities
described within Exchange Rule 404 and its Interpretations and
Policies. 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 Exchange Rule 404(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. Pursuant to
Exchange Rule 404(e), 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.
\13\ See Exchange Rule 404, Interpretations and Policies .02.
\14\ See Exchange Rule 404, Interpretations and Policies .13.
\15\ See Exchange Rule 404, Interpretations and Policies .03.
\16\ See Exchange Rule 406.
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Pursuant to Exchange Rule 404, Interpretations and Policies .06,
which governs strike prices of series of options on ETFs, the interval
between strike prices of series of options on ETFs approved for options
trading pursuant to Exchange Rule 402(i) shall be fixed at a price per
share which is reasonably close to the price per share at which the
underlying security is traded in the primary market at or about the
same time such series of options is first open for trading on the
Exchange, or at such intervals as may have been established on another
options exchange prior to the initiation of trading on the Exchange.
With respect to the Short Term Options Series or Weekly Program, during
the month prior to expiration of an option class that is selected for
the Short Term Option Series Program, the strike price intervals for
the related non-Short Term Option (``Related non-Short Term Option'')
shall be the same as the strike price intervals for the Short Term
Option.\17\ Specifically, the Exchange may open for trading Short Term
Option Series at strike price intervals of (i) $0.50 or greater where
the strike price is less than $100, and $1 or greater where the strike
price is between $100 and $150 for all option classes that participate
in the Short Term Options Series Program; (ii) $0.50 for option classes
that trade in one dollar increments and are in the Short Term Option
Series Program; or (iii) $2.50 or greater where the strike price is
above $150.\18\ Additionally, the Exchange may list series of options
pursuant to the $1 Strike Price Interval Program,\19\ the $0.50 Strike
Program,\20\ and the $2.50 Strike Price Program.\21\ Pursuant to
Exchange Rule 510, where the price of a series of options for a Bitcoin
Fund 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 \22\
consistent with the minimum increments for options on other ETFs listed
on the Exchange. Any and all new series of Trust options that the
Exchange lists will be consistent and comply with the
[[Page 16720]]
expirations, strike prices, and minimum increments set forth in Rules
404 and 510, as applicable.
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\17\ See Exchange Rule 404, Interpretations and Policies .02(e).
\18\ Id.
\19\ See Exchange Rule 404, Interpretation and Policy .01.
\20\ See Exchange Rule 404, Interpretation and Policy .04.
\21\ See Exchange Rule 404(f).
\22\ See Exchange Rule 510.
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Trust options will trade in the same manner as any other ETF
options on the Exchange. The Exchange Rules that currently apply to the
listing and trading of all ETFs options on the Exchange, including, for
example, Exchange 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 the Trust options on the Exchange in the same manner as they
apply to other options on all other ETFs that are listed and traded on
the Exchange, including the precious-metal backed commodity ETFs
already deemed appropriate for options trading on the Exchange pursuant
to current Exchange Rule 402(i)(4).
As mentioned above, the rules for position and exercise limits for
options on ETFs, including the Trust options, are determined pursuant
to MIAX Rules 307 and 309, respectively, as incorporated by reference
into the MIAX Pearl Rulebook. Position and exercise limits for ETF
options vary according to the number of outstanding shares and the
trading volumes of the underlying ETF over the past six months, where
the largest in capitalization and the most frequently traded ETFs have
an option position and exercise limit of 250,000 contracts (with
adjustments for splits, re-capitalizations, etc.) on the same side of
the market; and smaller capitalization ETFs have position and exercise
limits of 200,000, 75,000, 50,000 or 25,000 contracts (with adjustments
for splits, re-capitalizations, etc.) on the same side of the market.
The Exchange further notes that MIAX Rule 1502, which governs margin
requirements applicable to trading on the Exchange, including options
on ETFs, will also apply to the trading of the Trust options, as MIAX
Chapter XV (Margins) is also incorporated by reference into the MIAX
Pearl Rulebook. Notwithstanding the position limits in MIAX Rule 307(d)
and exercise limits in MIAX Rule 309, the Exchange proposes the
position and exercise limits for the Trust to be 25,000 contracts on
the same side pursuant to proposed Interpretations and Policies .01 to
MIAX Rule 307 and proposed Interpretations and Policies.01 to MIAX Rule
309.
Today, the Exchange has an adequate surveillance program in place
for options. The Exchange intends to apply those same program
procedures to options on the Trust that it applies to the Exchange's
other options products.\23\ The Exchange's market surveillance staff
would have access to the surveillances conducted by its affiliate
exchanges, MIAX and MIAX Sapphire, with respect to the Trust and would
review activity in the underlying Trust when conducting surveillances
for market abuse or manipulation in the options on the Trust.
Additionally, the Exchange is a member of the Intermarket Surveillance
Group (``ISG'') under the ISG 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 affiliates, the Exchange would be able
to obtain information regarding trading of shares of the Trust from
Cboe and other markets through ISG.
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\23\ 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.\24\
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\24\ 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.
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The underlying shares of spot bitcoin exchange-traded products
(``ETPs''), including the Trust, 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 bitcoin-based ETPs:
Each Exchange has a comprehensive surveillance-sharing agreement
with the 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 bitcoin futures market.\25\
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\25\ See Bitcoin ETP Approval Order, 89 FR at 3009.
The Exchange states that, given the consistently high correlation
between the CME Bitcoin futures market and the spot bitcoin 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 [Bitcoin ETPs].'' \26\
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\26\ See Bitcoin ETP Approval Order, 89 FR at 3010-11.
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In light of surveillance measures related to both options and
futures as well as the Trust,\27\ 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 Trust. Further, the Exchange will
implement any new surveillance procedures it deems necessary to
effectively monitor the trading of options on the Trust.
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\27\ See supra note 4.
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The Exchange has also analyzed its capacity and represents that it
believes the Exchange and Options Price Reporting Authority (``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 Trust up to the number of expirations
currently permissible under the Rules. The Exchange believes any
additional traffic that may be generated from the introduction of the
Trust options will be manageable.
The Exchange believes that offering options on the Trust will
benefit investors by providing them with an additional, relatively
lower cost investing tool to gain exposure to the price of Bitcoin and
hedging vehicle to meet their investment needs in connection with
Bitcoin-related products and positions. The Exchange expects investors
will transact in options on the Trust in the unregulated over-the-
counter (``OTC'') options market,\28\ but may prefer to trade such
options in a listed environment to receive the benefits of trading
listing options, including (1) enhanced efficiency in initiating and
closing out positions; (2) increased market
[[Page 16721]]
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 the Trust 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 ETFs 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 Trust 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
options on ETFs, including ETFs that hold commodities (i.e., precious
metals) that it currently lists and trades on the Exchange.
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\28\ The Exchange understands from customers that investors have
historically transacted in options on ETFs 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.\29\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \30\ 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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \31\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\29\ 15 U.S.C. 78f(b).
\30\ 15 U.S.C. 78f(b)(5).
\31\ Id.
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In particular, the Exchange believes that the proposal to list and
trade options on the Trust 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 Trust
will provide investors with a greater opportunity to realize the
benefits of utilizing options on the Trust, including cost efficiencies
and increased hedging strategies. The Exchange believes that offering
options on the Trust will benefit investors by providing them with a
relatively lower-cost risk management tool, which will allow them to
manage their positions and associated risks in their portfolios more
easily in connection with to the price of Bitcoin and with Bitcoin-
related products and positions. Additionally, the Exchange's offering
of Trust 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 options on
other commodity-based ETFs,\32\ which, as described above, are trusts
structured in substantially the same manner as the Trust and
essentially offer the same objectives and benefits to investors, and
for which the Exchange has not identified any issues with the continued
listing and trading of commodity-based ETF options it currently lists
for trading.\33\
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\32\ See Exchange Rule 402(i)(4).
\33\ See Securities Exchange Act No. 101719 (November 22, 2024)
89 FR 94812 (November 29, 2024) (SR-PEARL-2024-54) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend
Exchange Rule 402, Criteria for Underlying Securities, To Allow the
Exchange To List and Trade Options on the Fidelity Wise Origin
Bitcoin Fund (the ``Fidelity Fund'') and the ARK 21Shares Bitcoin
ETF (the ``ARK 21 Fund'')).
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The Exchange also believes the proposal to permit options on the
Trust 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.\34\
Options on the Trust satisfy the initial listing standards and
continued listing standards currently in the Exchange Rules applicable
to options on all ETFs, including ETFs that hold other commodities
already deemed appropriate for options trading on the Exchange.
Additionally, as demonstrated above, the Trust is characterized by a
substantial number of shares that are widely held and actively traded.
Further, the Trust options will trade in the same manner as any other
options on ETFs--the same Exchange Rules that currently govern the
listing and trading of options on ETFs, including permissible
expirations, strike prices, minimum increments, position and exercise
limits (including as proposed in the filing submitted by Exchange's
affiliate, MIAX) and margin requirements, will govern the listing and
trading of options on the Trust in the same manner.
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\34\ See Id.
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The Exchange believes the proposed position and exercise limits, as
proposed in the filing submitted by Exchange's affiliate, MIAX, 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 for options for the Trust is 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. The Exchange believes the proposed
position and exercise limits are extremely conservative for the Trust
options given the trading volume and outstanding shares for the Trust.
The Exchange represents that it has the necessary systems capacity
to support the Trust 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 options on ETFs, including the Trust 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. In this regard and as
indicated above, the Exchange notes that the rule change is being
proposed as a competitive response to the filing submitted by Cboe.\35\
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\35\ See supra note 5.
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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 the Trust 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
[[Page 16722]]
trading of all options on ETFs 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 the Trust
options on the Exchange in the same manner as they apply to other
options on all other ETFs that are listed and traded on the Exchange.
Also, and as stated above, the Exchange already lists options on other
commodity-based securities.\36\ Further, the Trust would need to
satisfy the maintenance listing standards set forth in the Exchange
Rules in the same manner as any other ETFs for the Exchange to continue
listing options on them.
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\36\ See Exchange Rule 402(i)(4).
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The Exchange does not believe that the proposal to list and trade
options on the Trust 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 the Trust 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
Trust. The Exchange notes that listing and trading the Trust 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.
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 the Trust 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 Bitcoin prices and
Bitcoin-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
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission 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-PEARL-2025-12 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-PEARL-2025-12. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-PEARL-2025-12 and should be
submitted on or before May 12, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-06766 Filed 4-18-25; 8:45 am]
BILLING CODE 8011-01-P