[Federal Register Volume 90, Number 89 (Friday, May 9, 2025)]
[Notices]
[Pages 19756-19761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-08115]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102996; File No. SR-NYSEAMER-2024-78]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To
Amend Certain Rules Related to Flexible Exchange Options
May 5, 2025.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on April 25, 2025, NYSE American LLC (``NYSE American'' or
``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 substantially prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change, as modified by Amendment No. 1, from
interested persons.\4\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ The initial proposed rule change was filed with the
Commission on December 13, 2024. See Securities Exchange Act Release
No. 102014 (Dec. 20, 2024), 89 FR 105669 (Dec. 27, 2024).
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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 Rules 903G and 906G to permit
Flexible Exchange (``FLEX'') Options on certain Exchange-Traded Funds
(or ETFs) that hold bitcoin. This Amendment No. 1 supersedes and
replaces the original filing in its entirety.\5\ The proposed rule
change is available on the Exchange's website at www.nyse.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
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\5\ This Amendment No. 1 modifies the scope of the original
filing to include (i) the Grayscale Bitcoin Mini Trust ETF and (ii)
the Bitwise Bitcoin ETF. The Exchange also proposes to update
existing rule text references to make technical corrections,
including to update the name of the Grayscale Bitcoin Mini Trust
(BTC) to the Grayscale Bitcoin Mini Trust ETF.
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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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes amend Rules 903G (Terms of FLEX Options) and
906G (Position Limits) to permit options the Grayscale Bitcoin Trust
(BTC) (``GBTC''), the Grayscale Bitcoin Mini Trust ETF (``BTC''), and
the Bitwise Bitcoin ETF (``BITB'') (each a ``Fund'' and, collectively,
the ``Funds'') to trade as FLEX Equity Options and to require the
aggregation of any FLEX and non-FLEX positions on the same underlying
Fund for purposes of calculating position and exercise limits as set
forth in Rules 904 and 905.\6\
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\6\ FLEX Options are customized equity or index contracts that
allow investors to tailor contract terms for exchange-listed equity
and index options. See generally Section 15 (Flexible Exchange
(``FLEX'') Options). A ``FLEX Equity Option'' is an option on a
specified underlying equity security that is subject to the rules of
Section 15. See Rule 900G(b)(10).
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The Exchange notes that this proposal is competitive given that
Nasdaq Phlx, LLC (``Phlx'') recently filed a proposal to permit FLEX
trading on options on iShares Bitcoin Trust ETF (``IBIT''), with an
aggregated position and exercise limit for IBIT options of 25,000-
contracts.\7\
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\7\ See Securities Exchange Act Release No. 102132 (Jan. 7,
2025), 90 FR 3266 (Jan. 14, 2025) (SR-Phlx-2024-72) (Notice of
Filing of Proposed Rule Change To Permit FLEX Trading in the iShares
Bitcoin Trust ETF) (``Phlx FLEX IBIT Proposal''). Like each of the
Funds, IBIT is an ETF that holds bitcoin.
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[[Page 19757]]
Background
Each Fund is ETF that holds bitcoin and is listed on NYSE Arca,
Inc. (``NYSE Arca''), the Exchange's affiliated equities exchange.\8\
Recently, the Commission approved options trading on the Funds.\9\ For
each Fund, the position and exercise limits are 25,000 contracts, as
set forth in Rule 904, Commentary .07(f), the lowest available
limit.\10\
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\8\ NYSE Arca received approval to list and trade Bitcoin-Based
Commodity-Based Trust Shares in GBTC, BTC, and BITB pursuant to NYSE
Arca Rule Rule 8.201-E(c)(1). See Securities Exchange Act Release
Nos. 99306 (January 10, 2024) (Order Granting Accelerated Approval
of Proposed Rule Changes, as Modified by Amendments Thereto, to list
and trade options in GBTC and BITB), 89 FR 3008 (January 17, 2024)
(SR-NYSEARCA-2021-90); 100610 (July 26, 2024) (Order Granting
Approval of Proposed Rule Changes, as Modified by Amendment No. 1,
to permit the listing and trading of options on BTC), 89 FR 62821
(August 1, 2024) (SR-NYSEARCA-2023-45)
\9\ See Securities Exchange Act Release No. 101386 (October 18,
2024), 89 FR 84960 (October 24, 2024) (SR-NYSEAMER-2024-49) (Order
approving the listing and trading of options on GBTC, BTC, and BITB,
pursuant to Rule 915, Commentary .10(a) (the ``Fund Options Approval
Order'').
\10\ Per Rule 905(a)(i), the exercise limit for options on each
Fund is the same as the position limit for that Fund as determined
by Rule 904. The following ETFs are also subject to a 25,000-
contract position and exercise limit: IBIT, Fidelity Wise Origin
Bitcoin Fund (``FBTC''), and ARK 21Shares Bitcoin (``ARKB''). See
Rules 904, Commentary .07(f) and 905(a)(i).
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FLEX Equity Options are not generally subject to position or
exercise limits.\11\ Today, pursuant to Rule 903G(a)(1), Fund options
are not approved for FLEX trading.\12\ Therefore, the 25,000-contract
limit applicable to options on each Fund currently applies solely to
non-FLEX Fund options.
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\11\ See Rule 906G(b) (subject to the exceptions enumerated in
the rule ``there shall be no position limits for FLEX Equity
options.'')
\12\ Rule 903G(a)(1) also does not permit FLEX trading on
options on IBIT, FBTC, and ARKB.
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Proposal
The Exchange proposes to permit options on each Fund to trade as
FLEX Equity Options and would require the aggregation of any FLEX and
non-FLEX positions in the same underlying Fund for purposes of
calculating the 25,000-contract position and exercise limits applicable
to each Fund.\13\
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\13\ See proposed Rules 5.32-O(f)(1) (excluding GBTC, BTC, and
BITB options from the prohibition against FLEX trading); and 5.35-
O(b)(iii) (adopting the requirement that, for options on each Fund,
the Exchange will aggregate any FLEX and non-FLEX positions in the
same underlying Fund for purposes of calculating the position and
exercise limits for that Fund, as set forth in Rules 904 and 905.
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Per the Commission ``rules regarding position and exercise limits
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 positions.'' \14\ For
this reason, the Commission requires that ``position and exercise
limits must be sufficient to prevent investors from disrupting the
market for the underlying security by acquiring and exercising a number
of options contracts disproportionate to the deliverable supply and
average trading volume of the underlying security.'' \15\ Based on its
review of the data and analysis provided by the Exchange, the
Commission concluded that the 25,000-contract position (and exercise)
limit for non-FLEX options on each Fund satisfied these objectives.\16\
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\14\ See supra note 9, Fund Options Approval Order, 89 FR, at
84971.
\15\ See id.
\16\ See id.
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As proposed, for options on each Fund, the Exchange will aggregate
any FLEX and non-FLEX positions in the same underlying Fund for
purposes of calculating the 25,000-contract position and exercise
limits. For each Fund, this proposed aggregated limit effectively
restricts a market participant from holding positions that could result
in the receipt of more than 2,500,000 shares, aggregated for FLEX and
non-FLEX in the same underlying Fund (if that market participant
exercised all its options). The Exchange believes that capping the
aggregated position and exercise limits at 25,000 contracts, the lowest
available limit, would be sufficient to address concerns related to
manipulation and the protection of investors. The Exchange notes that
this number is conservative given the liquidity of each Fund.\17\
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\17\ See id.
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While the Exchange proposes an aggregated 25,000-contract position
and exercise limit for options on each Fund, it nonetheless believes
that, for the reasons set forth below, evidence exists to support a
much higher position limit.\18\
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\18\ The Exchange may file a subsequent rule change to increase
the position and exercise limit for options on the Funds based on
additional data regarding trading activity, to continue to balance
any concerns regarding manipulation. A higher position and exercise
limit would allow institutional investors to utilize Fund options
for prudent risk management purposes. In this regard, the Exchange
would address the impact of higher position (and exercise) limits on
the proposed FLEX Fund options.
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Specifically, in approving the options on each Fund, the Commission
considered and reviewed the Exchange's analysis that the exercisable
risk associated with a position limit of 25,000 contracts represented
only 0.9%, 0.7%, and 3.6% of the outstanding shares of GBTC, BTC and
BITB, respectively.\19\ The Commission also considered and reviewed the
Exchange's arguments that with a 25,000-contract limit for each Fund:
(i) the 284,570,100 GBTC shares outstanding, 114 market participants
would have to simultaneously exercise their positions to place GBTC
under stress; (ii) the 366,950,100 BTC shares outstanding, meant that
147 market participants would have to simultaneously exercise their
same-side positions to place BTC under stress; and (iii) the 68,690,000
BITB shares outstanding, meant that 27 market participants would have
to simultaneously exercise their same-side positions to place BITB
under stress.\20\ Based on the Commission's review of this information
and analysis, the Commission concluded that the 25,000-contract
position and exercise limit for options on each Fund would address
concerns related to manipulation and investor protection and deemed
this limit conservative and therefore appropriate given the liquidity
of each Fund.\21\
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\19\ See id. Data represents figures from FactSet as of August
30, 2024.
\20\ See supra note 9, Fund Options Approval Order, 89 FR, at
84971.
\21\ Id.
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Each Fund qualifies a 250,000-contract limit, pursuant to Rule 904,
Commentary .06(e), which requires that, for the most recent six-month
period, trading volume for the underlying security is at least
100,000,000 shares.\22\ The following table sets forth the trading data
for each Fund, as of November 25, 2024, for the preceding six months
and the average daily volume (``ADV'') for the preceding three months.
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\22\ See Rule 904, Commentary .06 (providing at subparagraph (e)
that the position limit shall be 250,000 contracts for options: (i)
on underlying stock or Exchange-Traded Fund Share that had trading
volume of at least 100,000,000 shares during the most recent six-
month trading period; or (ii) on an underlying stock or Exchange-
Traded Fund Share that had trading volume of at least 75,000,000
shares during the most recent six-month trading period and has at
least 300,000,000 shares currently outstanding).
[[Page 19758]]
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Trading volume Market
Fund (shares) capitalization ADV (shares)
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GBTC................................................... 550,687,400 * $20,661,316,542 3,829,597
BTC.................................................... 163,712,700 [dagger] 2,036,369
$3,496,748,882
BITB................................................... 288,800,860 [Dagger] 2,480.478
4,095,157,000
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* The market capitalization was determined by multiplying a settlement price ($75.42) by the number of shares
outstanding (273,950,100). Data represents figures from FactSet as of November 25, 2024.
[dagger] The market capitalization of BTC was determined by multiplying a settlement price ($42.16) by the
number of shares outstanding (82,939,964). Data represents figures from FactSet as of November 25, 2024.
[Dagger] The market capitalization of BITB was determined by multiplying a settlement price ($51.70) by the
number of shares outstanding (79,950,100). Data represents figures from FactSet as of November 25, 2024.
Also, as of November 25, 2024, there were 19,787,762 bitcoins in
circulation.\23\ At a price of $94,830 per bitcoin,\24\ that equates to
a market capitalization of greater than $1.876 trillion. If a position
and exercise limit of 250,000 contracts were considered for each Fund,
the exercisable risk would represent 9.13% \25\ of the GBTC shares
outstanding; 30.14% \26\ of BTC shares outstanding; and 31.27% \27\ of
BITB shares outstanding. Given the liquidity of BTC and BITB, the
current 25,000 position and exercise limit appears extremely
conservative.
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\23\ See https://www.coingecko.com/en/coins/bitcoin.
\24\ This is the approximate price of bitcoin from 4:00 p.m. ET
on November 25, 2024.
\25\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/273,950.100 GBTC shares
outstanding).
\26\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/82,939,964 BTC shares
outstanding).
\27\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/79,950,100 BITB shares
outstanding).
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Despite the proposed addition of FLEX trading in options on GBTC,
BTC, and BITB (collectively, ``FLEX Fund Options''), the Exchange would
continue to limit to 25,000 the number of options on each Fund traded
on the Exchange that an investor, acting alone or in concert with
others directly or indirectly, may control and thereby mitigate
potential manipulation. The Exchange believes that allowing FLEX Fund
Options it consistent with the Act given FLEX trading is permitted
today in other ETFs overlying a commodity such as SPDR Gold Shares
(``GLD'') and iShares Silver Trust (``SLV'').\28\
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\28\ GLD and SLV, like the each of the Funds, holds one asset in
trust.
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Further, the Exchange believes that the share creation and
redemption process unique to ETFs would mitigate any potential risk of
manipulation in FLEX Fund Options. The creation and redemption process
is designed to ensure that an ETF's price closely tracks the value of
its underlying asset(s). For example, if a market participant exercised
a long call position for 25,000 contracts and purchased 2,500,000
shares of GBTC and this purchase resulted in the value of GBTC shares
to trade at a premium to the value of the (underlying) bitcoin held by
GBTC, the Exchange believes that other market participants would
attempt to arbitrage this price difference by selling short GBTC shares
while concurrently purchasing bitcoin. Those market participants
(arbitrageurs) would then deliver cash to GBTC and receive shares of
GBTC, which would be used to close out any previously established short
position in GBTC. Thus, this creation and redemptions process would
significantly reduce the potential risk of price dislocation between
the value of shares in each Fund and the value of bitcoin holdings.
The Exchange understands that FLEX Equity Options on ETFs are
currently traded in the over-the-counter (``OTC'') market by a variety
of market participants, e.g., hedge funds, proprietary trading firms,
and pension funds, to name a few. The Exchange believes there is room
for significant growth if a comparable product were introduced for
trading on a regulated market. The Exchange expects that users of these
OTC products would be among the primary users of FLEX Fund Options. The
Exchange also believes that the trading of FLEX Fund Options would
allow these same market participants to better manage the risk
associated with the volatility of positions in the underlying ETF
(i.e., GBTC, BTC, or BITB) given the enhanced liquidity that an
exchange-traded product would bring.
Additionally, the Exchange believes that FLEX Fund Options traded
on the Exchange would have three important advantages over the
contracts that are traded in the OTC market. First, as a result of
greater standardization of contract terms, exchange-traded contracts
should develop more liquidity. Second, counter-party credit risk would
be mitigated by the fact that the contracts are issued and guaranteed
by The Options Clearing Corporation (``OCC''). Finally, the price
discovery and dissemination provided by the Exchange and its members
would lead to more transparent markets. The Exchange believes that its
ability to offer FLEX Fund Options would aid it in competing with the
OTC market and at the same time expand the universe of products
available to interested market participants. The Exchange believes that
an exchange-traded alternative may provide a useful risk management and
trading vehicle for market participants and their customers.
The Exchange has analyzed its capacity and represents that it and
The Options Price Reporting Authority (``OPRA'') have the necessary
systems capacity to handle the additional traffic associated with the
listing of FLEX Fund Options. The Exchange believes any additional
traffic that would be generated from the trading of FLEX Fund Options
would be manageable. The Exchange believes ATP Holders will not have a
capacity issue as a result of this proposed rule change. The Exchange
also represents that it does not believe this proposed rule change will
cause fragmentation of liquidity. The Exchange will monitor the trading
volume associated with the additional options series listed as a result
of this proposed rule change and the effect (if any) of these
additional series on market fragmentation and on the capacity of the
Exchange's automated systems.
The Exchange represents that the same surveillance procedures
applicable to the Exchange's other options products listed and traded
on the Exchange, including non-FLEX options in each Fund, will apply to
FLEX Fund Options, and that it has the necessary systems capacity to
support such options. FLEX options products (and their respective
symbols) are integrated into the Exchange's existing surveillance
system architecture and are thus subject to the relevant surveillance
processes. The Exchange's market surveillance staff (including staff of
the Financial Industry Regulatory Authority (``FINRA'') who perform
surveillance and investigative work on behalf of the Exchange pursuant
a regulatory services agreement) conducts surveillances with respect to
GBTC, BTC, and BITB (i.e., the underlying ETFs) and, as
[[Page 19759]]
appropriate, would review activity in applicable ETF when conducting
surveillances for market abuse or manipulation in the FLEX Fund
Options.\29\ The Exchange does not believe that allowing FLEX Fund
Options would render the marketplace for non-FLEX options in any of the
Funds, or equity options in general, more susceptible to manipulative
practices.
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\29\ See supra note 9, Fund Options Approval Order, 89 FR 84966-
68 (regarding surveillance procedures applicable to GBTC, BTC, and
BITB).
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The Exchange represents that its existing trading surveillances are
adequate to monitor the trading in GBTC, BTC, and BITB, as well as any
subsequent trading of FLEX Fund Options on the Exchange. 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. For surveillance purposes, the
Exchange would therefore have access to information regarding trading
activity in GBTC, BTC, and BITB and in other pertinent underlying
securities on other exchanges through ISG. In addition, and as
referenced above, the Exchange has a regulatory services agreement with
FINRA, pursuant to which FINRA conducts certain surveillances on behalf
of the Exchange. Further, pursuant to a multi-party 17d-2 joint plan,
all options exchanges allocate regulatory responsibilities to FINRA to
conduct certain options-related market surveillances.\30\ The Exchange
will implement any additional surveillance procedures it deems
necessary to effectively monitor the trading of FLEX Fund Options.
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\30\ Section 19(g)(1) of the Act, among other things, requires
every 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.
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 proposed rule change is designed to allow investors seeking to
trade options on the Funds to utilize FLEX Fund Options. The Exchange
believes that offering innovative products flows to the benefit of the
investing public. A robust and competitive market requires that
exchanges respond to members' evolving needs by constantly improving
their offerings. Such efforts would be stymied if exchanges were
prohibited from offering innovative products such as the proposed FLEX
Fund Options. The Exchange believes that introducing FLEX Fund Options
would further broaden the base of investors that use FLEX Equity
Options (and options on the Funds in general) to manage their trading
and investment risk, including investors that currently trade in the
OTC market for customized options. The proposed rule change is also
designed to encourage market makers to shift liquidity from the OTC
market on the Exchange, which, it believes, will enhance the process of
price discovery conducted on the Exchange through increased order flow.
As discussed herein, the Exchange does not believe that this
proposed rule change raises any unique regulatory concerns because the
proposal to aggregate FLEX and non-FLEX option positions in each Fund
at the (most conservative) 25,000-contract position and exercise limit,
which currently applies solely to non-FLEX options on each Fund, should
provide an adequate safeguard.
Finally, the Exchange proposes to make technical changes to Rule
904, Commentary. 07(f) to update the name of the Grayscale Bitcoin Mini
Trust ETF (previously known as the Grayscale Bitcoin Mini Trust (BTC))
and to correct the symbol associated with Fidelity Ethereum Fund, which
changes will add accuracy and internal consistent to Exchange rules
making them easier to comprehend and understand.\31\
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\31\ See proposed Rule 904, Commentary .07(f) (updating the name
of the Grayscale Bitcoin Mini Trust (BTC) to Grayscale Bitcoin Mini
Trust ETF and correcting the trading symbol for the Fidelity
Ethereum Fund from ``ETH'' to ``FETH'').
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Implementation
The Exchange will announce the implementation date by Trader Update
within sixty (60) days of the rule approval.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\32\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\33\
in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system, and, in
general, to protect investors and the public interest. Specifically,
the Exchange believes that introducing FLEX Fund Options will increase
order flow to the Exchange, increase the variety of options products
available for trading, and provide a valuable tool for investors to
manage risk. The proposed rule change is designed to allow investors
seeking to trade options on any of the Funds to utilize FLEX Fund
Options.
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\32\ 15 U.S.C. 78f(b).
\33\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposal to permit FLEX Fund Options
would remove impediments to and perfect the mechanism of a free and
open market. The Exchange believes that offering FLEX Fund Options will
benefit investors by providing them with an additional, relatively
lower cost investing tool to gain exposure to the price of bitcoin and
provide a hedging vehicle to meet their investment needs in connection
with a bitcoin-related product. Moreover, the proposal would broaden
the base of investors that use FLEX Options to manage their trading and
investment risk, including investors that currently trade in the OTC
market for customized options. By trading a product in an exchange-
traded environment (that is currently being used in the OTC market),
the Exchange would be able to compete more effectively with the OTC
market. The Exchange believes the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that it would
lead to the migration of options currently trading in the OTC market to
trading to the Exchange. Also, any migration to the Exchange from the
OTC market would result in increased market transparency and enhance
the process of price discovery conducted on the Exchange through
increased order flow. The Exchange also believes that offering FLEX
Fund Options may appeal to retail investors interested in options
trading (both FLEX and non-FLEX) on GBTC, BTC, and BITB.
Additionally, the Exchange believes the proposed rule change is
designed to remove impediments to and to perfect the mechanism for a
free and open market and a national market system, and, in general, to
protect investors and the public interest in that it should create
greater trading and hedging opportunities and flexibility. The proposed
rule change should also result in enhanced efficiency in initiating and
closing out positions and heightened contra-party creditworthiness due
to the role of OCC as issuer and guarantor of FLEX Fund Options.
Further, the
[[Page 19760]]
proposed rule change would result in increased competition by
permitting the Exchange to offer products that are currently used in
the OTC market.
The Exchange does not believe that this proposed rule change raises
any unique regulatory concerns because the proposal to aggregate any
FLEX and non-FLEX options in each Fund at the current (and most
conservative) 25,000-contract limit should provide an adequate
safeguard. As noted herein, the purpose of position (and exercise)
limits is 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 Exchange believes the
proposal will benefit investors and public interest because the
aggregated position and exercise limits for (FLEX and non-FLEX) options
on the same underlying Fund at 25,000 contracts, the lowest limit
available in options, would address concerns related to manipulation
and protection of investors as this number is conservative and
therefore appropriate given the sufficient liquidity in each Fund.
The Exchange believes that offering innovative products benefits
the investing public. A robust and competitive market requires that
exchanges respond to the evolving needs of their members by constantly
improving their offerings. Such efforts would be stymied if exchanges
were prohibited from offering innovative products such as the proposed
FLEX Fund Options. The Exchange does not believe that allowing FLEX
Fund Options would render the marketplace for equity options more
susceptible to manipulative practices.
Finally, the Exchange represents that it has an adequate
surveillance program in place to detect manipulative trading in FLEX
Fund Options. Regarding the proposed FLEX Fund Options, the Exchange
would use the same surveillance procedures utilized for FLEX Options
currently listed on the Exchange (as well as for non-FLEX options on
each Fund). For surveillance purposes, the Exchange would have access
to information regarding trading activity in the underlying Funds
(i.e., GBTC, BTC, and BITB).\34\ In light of surveillance measures
related to both options and the underlying Funds, 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 FLEX Fund Options.
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\34\ See supra note 9, Fund Options Approval Order, 89 FR at
84966-68 (regarding surveillance procedures applicable to GBTC, BTC,
and BITB).
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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.
Intra-market competition. The Exchange does not believe that its
proposed rule change will impose any burden on intra-market competition
as all market participants would have the option of utilizing the FLEX
Fund Options. The proposed rule change is designed to allow investors
seeking option exposure to bitcoin to trade FLEX Fund Options.
Moreover, the Exchange believes that the proposal to permit FLEX Fund
Options would broaden the base of investors that use FLEX Options to
manage their trading and investment risk, including investors that
currently trade in the OTC market for customized options.
Inter-market competition. The Exchange does not believe that its
proposed rule change will impose any burden on inter-market competition
as all market participants would have the option of utilizing the FLEX
Fund Options. The Exchange notes that it operates in a highly
competitive market in which market participants can readily direct
order flow to competing venues. The proposed rule change would support
that intermarket competition by allowing the Exchange to offer
additional functionality to ATP Holders. The Exchange believes that the
proposed FLEX Fund Options will increase the variety of options
products available for trading in general and bitcoin-related products
in particular and, as such, will provide a valuable tool for investors
to manage risk.
As such, the Exchange believes that this proposal does not create
an undue burden on intermarket competition. Rather, the Exchange
believes that the proposed rule would bolster intermarket competition
by promoting fair competition among individual markets. The Exchange
notes that, upon approval of this proposal, competing options exchanges
will be free to offer products like the proposed FLEX Fund Options.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the 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-NYSEAMER-2024-78 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-NYSEAMER-2024-78. 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
[[Page 19761]]
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-NYSEAMER-
2024-78 and should be submitted on or before May 30, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-08115 Filed 5-8-25; 8:45 am]
BILLING CODE 8011-01-P