[Federal Register Volume 90, Number 118 (Monday, June 23, 2025)]
[Notices]
[Pages 26629-26631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-11426]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103284; File No. SR-BOX-2025-12]
Self-Regulatory Organizations; BOX Exchange LLC; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule
5020, Criteria for Underlying Securities, To Permit the Listing of
Options on Commodity-Based Trust Shares
June 17, 2025.
I. Introduction
On April 25, 2025, BOX Exchange LLC (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Rule
5020, Criteria for Underlying Securities, to allow the listing and
trading of options on units that represent interests in a trust that is
a Commodity-Based Trust.\3\ On May 7, 2025, the Exchange filed
Amendment No. 1 to the proposed rule change, which superseded and
replaced the original proposal in its entirety.\4\ The proposed rule
change, as modified by Amendment No. 1, was published for comment in
the Federal Register on May 15, 2025.\5\ The Commission has not
received any comments on the proposed rule change, as modified by
Amendment No. 1. This order institutes proceedings under Section
19(b)(2)(B) of the Act \6\ to determine whether to approve or
disapprove the proposed rule change, as modified by Amendment No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See, infra, note 8 and accompanying text.
\4\ Amendment No. 1 to the proposed rule change added
clarification regarding the applicability of the $5.00 strike
program and corrected minor technical errors.
\5\ See Securities Exchange Act Release No. 103015 (May 9,
2025), 90 FR 20699 (``Notice'').
\6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
As described more fully in the Notice, the Exchange proposes to
amend Rule 5020, Criteria for Underlying Securities, to allow the
listing and trading of options on units that represent interests in a
trust that is a Commodity-Based Trust.\7\
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\7\ See Notice, supra note 5.
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Specifically, the Exchange proposes to remove references in Rule
5020(h) to the SPDR[supreg] Gold Trust, the iShares COMEX Gold Trust,
the iShares Silver Trust, the abrdn Gold ETF Trust, the abrdn Silver
ETF Trust, the abrdn Palladium ETF Trust, the abrdn Platinum ETF Trust,
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, the ARK 21Shares
Bitcoin ETF, the iShares Ethereum Trust, the Grayscale Ethereum Trust
ETF, the Grayscale Ethereum Mini Trust ETF, the Bitwise Ethereum ETF,
and the Fidelity Ethereum Fund, which are all Commodity-Based Trust
Shares, and update the provision to state that securities deemed
appropriate for options trading shall include shares or other
securities (``Exchange-Traded Fund Shares'') that ``represent interests
in a security (a) issued by a trust that holds (1) a specified
commodity deposited with the trust, or (2) a specified commodity and,
in addition to such specified commodity, cash; (b) that is issued by
such trust in a specified aggregate minimum number in return for a
deposit of a quantity of the underlying commodity and/or cash; and (c)
that, when aggregated in the same specified minimum number, may be
redeemed at a holder's request by such trust which will deliver to the
redeeming holder the quantity of the underlying commodity and/or cash
(`Commodity-Based Trust Share').'' \8\
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\8\ See Notice, supra note 5, at 20700. BOX IM-5020-1
(Commodity-Based Trust Shares) currently defines ``Commodity-Based
Trust Shares.'' Because the proposed change to Rule 5020(h) would
add a definition of ``Commodity-Based Trust Shares'', the Exchange
proposes to delete from its rules IM-5020-1 because it would be made
unnecessary and duplicative by the proposed change to Rule 5020(h).
See id.
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As a result of this amendment, the listing criteria would permit
any Exchange-Traded Fund Shares (``ETFs'') that are approved to list on
the primary market as a Commodity-Based Trust Share to qualify as an
underlying for options traded on the Exchange, provided other listing
criteria have been met, without any additional approvals from the
Commission. The Exchange states that offering options on Commodity-
Based Trust Shares provides investors with the ability to hedge
exposure to the underlying security similar to options on any other
securities. Additionally, the Exchange states that options on a
Commodity-Based Trust Share provide investors with the ability to
transact in such options in a listed market environment, 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.\9\
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\9\ Id.
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The Exchange states that options on a Commodity-Based Trust Share
will trade in the same manner as options on other ETFs on the
Exchange.\10\ The Exchange's rules that currently apply to the listing
and trading of all options on ETFs on the Exchange, including, for
example, rules that govern listing criteria,\11\ including continued
listing standards,\12\ expirations,\13\ strike prices,\14\ minimum
increments,\15\
[[Page 26630]]
position and exercise limits,\16\ margin requirements,\17\ customer
accounts,\18\ and trading halt procedures \19\ would apply to the
listing and trading of options on a Commodity-Based Trust Share 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.
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\10\ Id. See also BOX Rule 5020(h)(1) (regarding certain
criteria and guidelines for ETFs).
\11\ See Notice, supra note 5, at 20700. See also BOX Rule
5020(a), (h).
\12\ See Notice, supra note 5, at 20700. See also BOX Rule
5030(h). The Exchange states that Commodity-Based Trust Shares 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 ETFs, if the ETFs cease
to be an ``NMS Stock'' as provided for in Rule 5030(b)(6), or the
ETFs are halted from trading on their primary market. See Notice,
supra note 5, at 20700.
\13\ See Notice, supra note 5, at 20700-01. The Exchange states
that it would open at least one expiration month for options on a
Commodity-Based Trust Share and may also list series of options on a
Commodity-Based Trust Share for trading on a weekly, monthly, or
quarterly basis. Id. The Exchange states that it may also list long-
term equity option series (``LEAPS'') that expire from twelve to one
hundred eighty months from the time they are listed. Id. at 20701.
\14\ See Notice, supra note 5, at 20701. See also BOX IM-5050-
1(b) (relating to strike prices of series of options on ETFs).
\15\ See Notice, supra note 5, at 20701. See also BOX Rule 7050.
\16\ See Notice, supra note 5, at 20701. The Exchange states
that position and exercise limits for options on a Commodity-Based
Trust Share would be determined pursuant to BOX Rules 3120 and 3140,
respectively, and that position and exercise limits for ETFs options
vary according to the number of outstanding shares and the trading
volumes of the underlying ETF over the past six months. Id.
\17\ See Notice, supra note 5, at 20701.
\18\ Id.
\19\ Id.
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In addition, the Exchange states that the same surveillance
procedures applicable to all other options on other ETFs currently
listed and traded on the Exchange will apply to options on Commodity-
Based Trust Shares.\20\ The Exchange also states that it may obtain
trading information via the Intermarket Surveillance Group (``ISG'')
from other exchanges that are members of the ISG.\21\ In addition, the
Exchange states that it has a Regulatory Services Agreement with the
Financial Industry Regulatory Authority.\22\ The Exchange represents
that it and the Options Price Reporting Authority have the necessary
systems capacity to support the new option series.\23\ The Exchange
states that it has not identified any issues with the continued listing
and trading of any ETF options, including ETFs that hold commodities
(i.e., precious metals) that it currently lists and trades on the
Exchange.\24\
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\20\ Id.
\21\ Id.
\22\ Id.
\23\ See Notice, supra note 5, at 20701.
\24\ Id. at 20700.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-BOX-
2025-12 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \25\ to determine whether the proposed rule
change, as modified by Amendment No. 1, should be approved or
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy issues raised by the proposed rule
change, as modified by Amendment No. 1. Institution of proceedings does
not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide comments
on the proposed rule change, as modified by Amendment No. 1.
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\25\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\26\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposal's consistency with Section 6(b)(5) of the
Act,\27\ which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to and protect the mechanism
of a free and open market and a national market system, and, in
general, to protect investors and the public interest.
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\26\ See id.
\27\ 15 U.S.C. 78f(b)(5).
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the self-
regulatory organization that proposed the rule change.'' \28\ The
description of a proposed rule change, its purpose and operation, its
effect, and a legal analysis of its consistency with applicable
requirements must all be sufficiently detailed and specific to support
an affirmative Commission finding,\29\ and any failure of a self-
regulatory organization to provide this information may result in the
Commission not having a sufficient basis to make an affirmative finding
that a proposed rule change is consistent with the Act and the
applicable rules and regulations.\30\ The Commission is instituting
proceedings to allow for additional consideration and comment on the
issues raised herein, including as to whether the proposal, as modified
by Amendment No. 1, is consistent with the Act. In particular, the
Commission asks commenters to address the potential market impacts of
allowing the listing and trading of options on Commodity-Based Trust
Shares.
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\28\ 17 CFR 201.700(b)(3).
\29\ See id.
\30\ See id.
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal, as modified by Amendment No. 1. In particular, the
Commission invites the written views of interested persons concerning
whether the proposal, as modified by Amendment No. 1, is consistent
with Section 6(b)(5) or any other provision of the Act, and the rules
and regulations thereunder. Although there do not appear to be any
issues relevant to approval or disapproval that would be facilitated by
an oral presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4 under the Act,\31\ any request for an
opportunity to make an oral presentation.\32\
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\31\ 17 CFR 240.19b-4.
\32\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Acts Amendments of 1975, Senate Comm.
on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change, as modified by
Amendment No. 1, should be approved or disapproved by July 14, 2025.
Any person who wishes to file a rebuttal to any other person's
submission must file that rebuttal by July 28, 2025.
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-BOX-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-BOX-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
[[Page 26631]]
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-BOX-2025-12 and should be
submitted on or before July 14, 2025. Rebuttal comments should be
submitted by July 28, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-11426 Filed 6-20-25; 8:45 am]
BILLING CODE 8011-01-P