[Federal Register Volume 90, Number 125 (Wednesday, July 2, 2025)]
[Notices]
[Pages 29088-29097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-12300]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103340; File No. SR-CBOE-2025-017]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of Amendment No. 4 and Order Instituting Proceedings To
Determine Whether To Approve or Disapprove a Proposed Rule Change, as
Modified by Amendment No. 4, To Amend Rules 4.3, 4.20, and 8.30, To
Allow the Exchange To List and Trade Options on the VanEck Bitcoin ETF
June 27, 2025.
On March 14, 2025, Cboe Exchange, Inc. (``Cboe'' or ``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
list and trade options on the VanEck Bitcoin Trust.\3\ On March 26,
2025, the Exchange filed Amendment No. 1 to the proposed rule change.
On March 27, 2025, the Exchange withdrew Amendment No. 1, filed and
withdrew Amendment No. 2, and filed Amendment No. 3 to the proposal,
which superseded and replaced the original proposal in its entirety.\4\
The proposed rule change, as modified by Amendment No. 3, was published
for comment in the Federal Register on April 3, 2025.\5\ On May 1,
2025, the Exchange filed Amendment No. 4 to the proposed rule change,
described in Items I and II below, which Items have been prepared by
the Exchange. Amendment No. 4 supersedes the initial proposed rule
change and Amendment Nos. 1 through 3 and replaces them in their
entirety.\6\ On May 14, 2025, the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change, as modified by Amendment No. 4.\7\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ On January 10, 2024, the Commission approved proposals by
NYSE Arca, Inc., The Nasdaq Stock Market LLC, and Cboe BZX Exchange,
Inc. to list and trade the shares of 11 spot bitcoin-based
commodity-based trust shares and trust units, including the trust
underlying the proposed options herein. See Securities Exchange Act
Release No. 99306 (Jan. 10, 2024), 89 FR 3008 (Jan. 17, 2024) (order
approving File Nos. SR-NYSEARCA-2021-90; SR-NYSEARCA-2023-44; SR-
NYSEARCA-2023-58; SR-NASDAQ-2023-016; SR-NASDAQ-2023-019; SR-
CboeBZX-2023-028; SR-CboeBZX-2023-038; SR-CboeBZX-2023-040; SR-
CboeBZX-2023-042; SR-CboeBZX-2023-044; SR-CboeBZX-2023-072)
(``Bitcoin ETP Order'').
\4\ Amendment No. 3 modified the original filing by (1) adding
information regarding the proposed changes to Rule 4.20; and (2)
correcting minor technical errors.
\5\ See Securities Exchange Act Release No. 102742 (Mar. 28,
2025), 90 FR 14670. The Commission did not receive any comments
regarding the proposal.
\6\ Amendment No. 4 modifies the original filing, as modified by
Amendment No. 3, by (1) changing references to the VanEck Bitcoin
Trust to the VanEck Bitcoin ETF and (2) correcting a description of
the 30-day period over which average daily volume was measured for
shares of the VanEck Bitcoin ETF. Amendment No. 4 is available at
https://www.sec.gov/comments/sr-cboe-2025-017/srcboe2025017-600895-1751482.pdf.
\7\ See Securities Exchange Act Release No. 103046, 90 FR 21524
(May 20, 2025). The Commission designated July 2, 2025, as the date
by which the Commission shall either approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change as modified by Amendment No. 4.
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The Commission is publishing this notice to solicit comments on
Amendment No. 4 from interested persons and is instituting proceedings
under Section 19(b)(2)(B) of the Act \8\ to determine whether to
approve or
[[Page 29089]]
disapprove the proposed rule change, as modified by Amendment No. 4.
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\8\ 15 U.S.C. 78s(b)(2)(B).
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I. The Exchange's Description of the Proposed Rule Change, as Modified
by Amendment No. 4
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rules 4.3, 4.20, and 8.30, to allow the Exchange to list and
trade options on the VanEck Bitcoin ETF. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 4.3 regarding the criteria for
underlying securities. Specifically, the Exchange proposes to amend
Rule 4.3, Interpretation and Policy .06(a)(4) to allow the Exchange to
list and trade options on Units \9\ that represent interests in the
VanEck Bitcoin ETF,\10\ designating them as ``Units'' deemed
appropriate for options trading on the Exchange. Current Rule 4.3,
Interpretation and Policy .06 provides that, subject to certain other
criteria set forth in that Rule, securities deemed appropriate for
options trading include Units that represent certain types of
interests,\11\ including interests in certain specific trusts that hold
financial instruments, money market instruments, or precious metals
(which are deemed commodities).
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\9\ Rule 1.1 defines a ``Unit'' (which may also be referred to
as an ETF) as a share or other security traded on a national
securities exchange and defined as an NMS stock as set forth in Rule
4.3.
\10\ 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'').
\11\ See Rule 4.3, Interpretation and Policy .06(a), which
permits options trading on Units that represent (1) 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 including, but not limited to, stock index futures
contracts, options on futures, options on securities and indexes,
equity caps, collars and floors, swap agreements, forward contracts,
repurchase agreements and reverse purchase 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 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) interests in a trust or similar entity that holds
a specified non-U.S. currency deposited with the trust or similar
entity when aggregated in some specified minimum number may be
surrendered to the trust by the beneficial owner to receive the
specified non-U.S. currency and pays the beneficial owner interest
and other distributions on deposited non-U.S. currency, if any,
declared and paid by the trust (``Currency Trust Shares''); (3)
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
Units''); (4) represent interests in the SPDR Gold Trust, the
iShares COMEX Gold Trust, the iShares Silver Trust, the Aberdeen
Standard Physical Silver Trust, the Aberdeen Standard Physical Gold
Trust, the Aberdeen Standard Physical Palladium Trust, the Aberdeen
Standard Physical Platinum Trust, the Sprott Physical Gold Trust,
the Goldman Sachs Physical Gold ETF, the Fidelity Wise Origin
Bitcoin Fund, the ARK 21Shares Bitcoin ETF, the iShares Bitcoin
Trust, the Grayscale Bitcoin Trust, the Grayscale Bitcoin Mini
Trust, or the Bitwise Bitcoin ETF; or (5) an interest in a
registered investment company (``Investment Company'') organized as
an open-end management investment 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'').
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The VanEck Bitcoin ETF is a Bitcoin-backed commodity ETF structured
as a trust. Similar to any Unit currently deemed appropriate for
options trading under Rule 4.3, Interpretation and Policy .06, the
investment objective of the VanEck Bitcoin ETF 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 Units currently deemed appropriate for options trading, the VanEck
Bitcoin ETF'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.\12\ The VanEck
Bitcoin ETF provides investors with cost-efficient alternatives that
allow a level of participation in the Bitcoin market through the
securities market.
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\12\ 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 VanEck Bitcoin ETF satisfies the
Exchange's initial listing standards for Units on which the Exchange
may list options. Specifically, the VanEck Bitcoin ETF satisfies the
initial listing standards set forth in Rule 4.3, Interpretation and
Policy .06(b), as is the case for other Units on which the Exchange
lists options (including trusts that hold commodities). Rule 4.3,
Interpretation and Policy .06 requires that Units must either (1) meet
the criteria and standards set forth in Rule 4.3, Interpretation and
Policy .01(a),\13\ 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
Units 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 VanEck Bitcoin ETF satisfies Rule 4.3, Interpretation and Policy
.06(b)(2), as each is subject to this creation and redemption process.
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\13\ Rule 4.3, Interpretation and Policy .01 provides for
guidelines to be 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 VanEck Bitcoin ETF satisfies the criteria and
guidelines set forth in Rule 4.3, Interpretation and Policy .01.
Pursuant to Rule 4.3(a), a security (which includes a Unit) on which
options may be listed and traded
[[Page 29090]]
on the Exchange must be duly registered (with the Commission) and be an
NMS stock (as defined in Rule 600 of Regulation NMS under the
Securities Exchange Act of 1934, as amended (the ``Act'')), and be
characterized by a substantial number of outstanding shares that are
widely held and actively traded.\14\ The VanEck Bitcoin ETF is an NMS
Stock as defined in Rule 600 of Regulation NMS under the Act.\15\ The
Exchange believes the VanEck Bitcoin ETF is characterized by a
substantial number of outstanding shares that are widely held and
actively traded.
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\14\ The criteria and guidelines for a security to be considered
widely held and actively traded are set forth in Rule 4.3,
Interpretation and Policy .01, subject to exceptions.
\15\ 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, the VanEck Bitcoin ETF had the following
number of shares outstanding:
------------------------------------------------------------------------
Shares
Bitcoin fund outstanding
------------------------------------------------------------------------
VanEck Bitcoin ETF......................................... 49,900,000
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The VanEck Bitcoin ETF 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 Rule 4.3,
Interpretation and Policy .01(a)(1). The Exchange believes this
demonstrates that the VanEck Bitcoin ETF is characterized by a
substantial number of outstanding shares.
Further, the below table contains information regarding the number
of beneficial holders of the VanEck Bitcoin ETF as of the specified
dates:
------------------------------------------------------------------------
Beneficial
Bitcoin fund holders Date
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VanEck Bitcoin ETF.............................. 32,469 1/31/25
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As this table shows, the VanEck Bitcoin ETF 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 Rule
4.3, Interpretation and Policy .01(a)(2). Therefore, the Exchange
believes the shares of the VanEck Bitcoin ETF are widely held.\16\
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\16\ The Exchange continues to believe assets under management
(``AUM''), rather than shares outstanding and number of holders, is
a better measure of investable capacity of ETFs and a more
appropriate figure for determining position and exercise limits of
ETFs and looks forward to further discussions with the Commission
staff on this topic.
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The Exchange also believes the shares of the VanEck Bitcoin ETF are
actively traded. As of March 5, 2025, 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 January
21, 2025, through March 5, 2025, for the VanEck Bitcoin ETF was as
follows:
------------------------------------------------------------------------
6-Month
trading 30-Day 30-Day ADV
Bitcoin fund volume ADV (notional $)
(shares) (shares)
------------------------------------------------------------------------
VanEck Bitcoin ETF............. 133,275,448 794,677 39,163,513.72
------------------------------------------------------------------------
As demonstrated above, as of March 5, 2025, the six-month trading
volume for the VanEck Bitcoin ETF 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 a corporate stock in order to list options on that security as set
forth in Rule 4.3, Interpretation and Policy .01. The Exchange believes
this data demonstrates the VanEck Bitcoin ETF is characterized as
having shares that are actively traded.
Options on the VanEck Bitcoin ETF will be subject to the Exchange's
continued listing standards set forth in Rule 4.4, Interpretation and
Policy .06 for Units deemed appropriate for options trading pursuant to
Rule 4.3, Interpretation and Policy .06. Specifically, Rule 4.4,
Interpretation and Policy .06 provides that Units that were initially
approved for options trading pursuant to Rule 4.3, Interpretation and
Policy .06 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 Units, if
the Units cease to be an NMS stock or the Units are halted from trading
in their primary market. Additionally, options on Units may be subject
to the suspension of opening transactions in any of the following
circumstances: (1) in the case of options covering Units approved for
trading under Rule 4.3, Interpretation and Policy .06(b)(1), in
accordance with the terms of paragraphs (a), (b), and (c) of Rule 4.4,
Interpretation and Policy .01; (2) in the case of options covering
Units approved for trading under Rule 4.3 Interpretation and Policy
.06(b)(2) (as is the case for the VanEck Bitcoin ETF), following the
initial twelve-month period beginning upon the commencement of trading
in the Units on a national securities exchange and are defined as an
NMS stock, there are fewer than 50 record and/or beneficial holders of
such Units 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 Units 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 VanEck Bitcoin ETF will be physically settled
contracts with American-style exercise.\17\ Consistent with current
Rule 4.5, which governs the opening of options series on a specific
underlying security (including Units), the Exchange will open at least
one expiration month for options on the
[[Page 29091]]
VanEck Bitcoin ETF \18\ at the commencement of trading on the Exchange
and may also list series of options on the VanEck Bitcoin ETF for
trading on a weekly,\19\ monthly,\20\ or quarterly \21\ basis. The
Exchange may also list long-term equity option series (``LEAPS'') that
expire from 12 to 180 months from the time they are listed.
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\17\ See Rule 4.2, which provides that the rights and
obligations of holders and writers are set forth in the Rules of the
Options Clearing Corporation (``OCC''); and Equity Options Product
Specifications January 3, 2024), available at Equity Options
Specifications (cboe.com); see also OCC Rules, Chapters VIII (which
governs exercise and assignment) and Chapter IX (which governs the
discharge of delivery and payment obligations arising out of the
exercise of physically settled stock option contracts).
\18\ See Rule 4.5(b). The monthly expirations are subject to
certain listing criteria for underlying securities described within
Rule 4.3. Monthly listings expire the third Friday of the month. The
term ``expiration date'' (unless separately defined elsewhere in the
OCC By-Laws), when used in respect of an option contract (subject to
certain exceptions), means the third Friday of the expiration month
of such option contract, or if such Friday is a day on which the
exchange on which such option is listed is not open for business,
the preceding day on which such exchange is open for business. See
OCC By-Laws Article I, Section 1. Pursuant to Rule 4.5(c),
additional series of options of the same class may be opened for
trading on the Exchange when the Exchange deems it necessary to
maintain an orderly market, to meet customer demand or when the
market price of the underlying stock moves more than five strike
prices from the initial exercise price or prices. New series of
options on an individual stock may be added until the beginning of
the month in which the options contract will expire. Due to unusual
market conditions, the Exchange, in its discretion, may add a new
series of options on an individual stock until the close of trading
on the business day prior to expiration.
\19\ See Rule 4.5(d).
\20\ See Rule 4.5(g).
\21\ See Rule 4.5(e).
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Pursuant to Rule 4.5, Interpretation and Policy .07, which governs
strike prices of series of options on Units, the interval of strikes
prices for series of options on the VanEck Bitcoin ETF will be $1 or
greater when the strike price is $200 or less and $5 or greater where
the strike price is over $200.\22\ Additionally, the Exchange may list
series of options pursuant to the $1 Strike Price Interval Program,\23\
the $0.50 Strike Program,\24\ the $2.50 Strike Price Program,\25\ and
the $5 Strike Program.\26\ Pursuant to Rule 5.4, where the price of a
series of the VanEck Bitcoin ETF option is less than $3.00, the minimum
increment will be $0.05, and where the price is $3.00 or higher, the
minimum increment will be $0.10.\27\ Any and all new series of VanEck
Bitcoin ETF options that the Exchange lists will be consistent and
comply with the expirations, strike prices, and minimum increments set
forth in Rules 4.5 and 5.4, as applicable.
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\22\ The Exchange notes that for options listed pursuant to the
Short Term Option Series Program, the Monthly Options Series
Program, and the Quarterly Options Series Program, Rules 4.5(d),
(e), and (g) specifically sets forth intervals between strike prices
on Quarterly Options Series, Short Term Option Series, and Monthly
Options Series, respectively.
\23\ See Rule 4.5, Interpretation and Policy .01(a).
\24\ See Rule 4.5, Interpretation and Policy .01(b).
\25\ See Rule 4.5, Interpretation and Policy .04.
\26\ See Rule 4.5, Interpretation and Policy .01(f).
\27\ If options on the VanEck Bitcoin ETF are eligible to
participate in the Penny Interval Program, the minimum increment
will be $0.01 for series with a price below $3.00 and $0.05 for
series with a price at or above $3.00. See 5.4(d) (which describes
the requirements for the Penny Interval Program).
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VanEck Bitcoin ETF options will trade in the same manner as any
other Unit options on the Exchange. The Exchange Rules that currently
apply to the listing and trading of all Unit options on the Exchange,
including, for example, Rules that govern listing criteria,
expirations, exercise prices, minimum increments, margin requirements,
customer accounts, and trading halt procedures will apply to the
listing and trading of VanEck Bitcoin ETF options on the Exchange in
the same manner as they apply to other options on all other Units that
are listed and traded on the Exchange, including the precious-metal
backed commodity Units already deemed appropriate for options trading
on the Exchange pursuant to current Rule 4.3, Interpretation and Policy
.06(a)(4).
Rule 4.20 currently permits the Exchange to authorize for trading a
FLEX option class on any equity security if it may authorize for
trading a non-FLEX option class on that equity security pursuant to
Rule 4.3. The proposed rule change amends Rule 4.20 to exclude the
VanEck Bitcoin ETF from this provision.
The Exchange also proposes to amend Rule 8.30. Specifically, the
Exchange proposes to amend Rule 8.30, Interpretation and Policy .10 to
provide a position limit of 25,000 same side option contracts for the
VanEck Bitcoin ETF option. Additionally, pursuant to Rule 8.42,
Interpretation and Policy .02, the exercise limits for options on the
VanEck Bitcoin ETF will be equivalent to this proposed position limit.
The Exchange determined these proposed position and exercise limits
considering, among other things, the approximate six-month average
daily volume (``ADV'') and outstanding shares of the VanEck Bitcoin ETF
(which as discussed above demonstrate that the VanEck Bitcoin ETF is
widely held and actively traded and thus justify these conservatively
proposed position limits), as set forth below, along with market
capitalization (as of March 5, 2025):
------------------------------------------------------------------------
Six-Month Market
Underlying Bitcoin fund ADV Outstanding capitalization
(shares) shares ($)
------------------------------------------------------------------------
VanEck Bitcoin ETF............ 1,074,802 49,900,000 1,271,859,416
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The Exchange then compared the number of outstanding shares of the
VanEck Bitcoin ETF to those of other ETFs. The following table provides
the approximate average position (and exercise limit) of ETF options
with similar outstanding shares (as of March 5, 2025), compared to the
proposed position and exercise limit for the VanEck Bitcoin ETF
options:
------------------------------------------------------------------------
Average limit of
other ETF Proposed
Underlying Bitcoin fund options limit
(contracts) (contracts)
------------------------------------------------------------------------
VanEck Bitcoin ETF....................... 225,000 * 25,000
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* Over 90% of the ETFs used for comparison have a limit of at least
200,000, and more than 75% have a limit of 250,000.
The Exchange considered current position and exercise limits of
options on ETFs with outstanding shares comparable to those of the
VanEck Bitcoin ETF, with the proposed limit significantly lower
(between two and ten times lower) than the average limits of the
options on the other ETFs. As discussed above, the VanEck Bitcoin ETF
is actively held and widely traded (all statistics as of March 5, 2025)
because it: (1) had significantly more than 7,000,000 shares
outstanding, which is the minimum number of shares of a corporate stock
that the Exchange generally requires to list options on that stock
pursuant to Rule 4.3, Interpretation and Policy .01(a)(1); (2) had
significantly more than 2,000 beneficial holders, which is the minimum
number of holders the Exchange generally requires for
[[Page 29092]]
corporate stock in order to list options on that stock pursuant to Rule
4.3, Interpretation and Policy .01(a)(2); and (3) had a six-month
trading volume substantially higher than 2,400,000 shares, which is the
minimum 12-month volume the Exchange generally requires for a security
in order to list options on that security as set forth in Rule 4.3,
Interpretation and Policy .01.
With respect to outstanding shares, if a market participant held
the maximum number of positions possible pursuant to the proposed
position and exercise limits, the equivalent shares represented by the
proposed position/exercise limit would represent the following
approximate percentage of current outstanding shares:
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Proposed position/ Percentage of
Underlying Bitcoin fund exercise limit (in Outstanding outstanding shares
equivalent shares) shares (%)
----------------------------------------------------------------------------------------------------------------
VanEck Bitcoin ETF..................................... 2,500,000 49,900,000 5.01
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As this table demonstrates, if a market participant held the
maximum permissible options positions in VanEck Bitcoin ETF options and
exercised all of them at the same time, that market participant would
control a small percentage of the outstanding shares of the VanEck
Bitcoin ETF.
Cboe Options Rule 8.30, Interpretation and Policy .02, provides two
methods of qualifying for a position limit tier above 25,000 option
contracts. The first method is based on six-month trading volume in the
underlying security, and the second method is based on slightly lower
six-month trading volume and number of shares outstanding in the
underlying security. An underlying stock or ETF that qualifies for
method two based on trading volume and number of shares outstanding
would be required to have the minimum number of outstanding shares as
shown in middle column of the table below.
The table, which provides the equivalent shares of the position
limits applicable to equity options, including ETFs, further represents
the percentages of the minimum number of outstanding shares that an
underlying stock or ETF must have to qualify for that position limit
(under the second method described above), all of which are higher than
the percentages for the VanEck Bitcoin ETF.
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Minimum Percentage of
Position/exercise limit (in outstanding outstanding shares
equivalent shares) shares (%)
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2,500,000........................... ** 6,300,000 40.0
5,000,000........................... 40,000,000 12.5
7,500,000........................... 120,000,000 6.3
20,000,000.......................... 240,000,000 8.3
25,000,000.......................... 300,000,000 8.3
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** This is the minimum number of outstanding shares an underlying
security must have for the Exchange to continue to list options on
that security, so this would be the smallest number of outstanding
shares permissible for any corporate option that would have a position
limit of 25,000 contract. See Rule 4.4, Interpretation and Policy .01.
This rule applies to corporate stock options but not ETF options,
which currently have no requirement regarding outstanding shares of
the underlying ETF for the Exchange to continue listing options on
that ETF. Therefore, there may be ETF options trading for which the
25,000 contract position limits represents an even larger percentage
of outstanding shares of the underlying ETF than set forth above.
The equivalent shares represented by the proposed position and
exercise limits for the VanEck Bitcoin ETF as a percentage of
outstanding shares of the VanEck Bitcoin ETF is significantly lower
than the percentage for the lowest possible position limit for equity
options of 25,000 (under 6% compared to 40%) and is lower than that
percentage for each current position limit bucket.\28\
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\28\ As these percentages are based on the minimum number of
outstanding shares an underlying security must have to qualify for
the applicable position limit, these are the highest possible
percentages that would apply to any option subject to that position
and exercise limit.
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Further, the proposed position and exercise limits for the VanEck
Bitcoin ETF option are significantly below the limits that would
otherwise apply pursuant to current Rule 8.30. These position and
exercise limits are the lowest position and exercise limits available
in the options industry, are extremely conservative and more than
appropriate given the market capitalization, average daily volume, and
high number of outstanding shares of the VanEck Bitcoin ETF.
All of the above information demonstrates that the proposed
position and exercise limits for the VanEck Bitcoin ETF options are
more than reasonable and appropriate. The trading volume, ADV, and
outstanding shares of the VanEck Bitcoin ETF demonstrate that the trust
is actively traded and widely held, and proposed position and exercise
limits are well below those of other ETFs with similar market
characteristics. The proposed position and exercise limits are the
lowest position and exercise limits available for equity options in the
industry, are extremely conservative, and are more than appropriate
given the VanEck Bitcoin ETF's market capitalization, ADV, and high
number of outstanding shares.
Today, the Exchange has an adequate surveillance program in place
for options. Cboe intends to apply those same program procedures to
options on the VanEck Bitcoin ETF that it applies to the Exchange's
other options products.\29\ Cboe's market surveillance staff would have
access to the surveillances conducted by Cboe BZX Exchange, Inc.\30\
with respect to the VanEck Bitcoin ETF and would review activity in the
underlying VanEck Bitcoin ETF when conducting
[[Page 29093]]
surveillances for market abuse or manipulation in the options on the
VanEck Bitcoin ETF. 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 BZX, the Exchange would be able
to obtain information regarding trading of shares of the VanEck Bitcoin
ETF through ISG.
---------------------------------------------------------------------------
\29\ The surveillance program includes surveillance patterns for
price and volume movements as well as patterns for potential
manipulation (e.g., spoofing and marking the close).
\30\ Cboe BZX Exchange, Inc. is an affiliated market of the
Exchange.
---------------------------------------------------------------------------
In addition, Cboe 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.\31\
---------------------------------------------------------------------------
\31\ 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.
---------------------------------------------------------------------------
The underlying shares of spot bitcoin exchange-traded products
(``ETPs''), including the VanEck Bitcoin ETF, 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.\32\
---------------------------------------------------------------------------
\32\ See Bitcoin ETP Approval Order 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].'' \33\
---------------------------------------------------------------------------
\33\ See Bitcoin ETP Approval Order, 89 FR at 3010-11.
---------------------------------------------------------------------------
In light of surveillance measures related to both options and
futures as well as the VanEck Bitcoin ETF,\34\ 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 VanEck Bitcoin ETF.
Further, the Exchange will implement any new surveillance procedures it
deems necessary to effectively monitor the trading of options on the
VanEck Bitcoin ETF.
---------------------------------------------------------------------------
\34\ See supra note 10.
---------------------------------------------------------------------------
The Exchange has also analyzed its capacity and represents that it
believes the Exchange and OPRA have the necessary systems capacity to
handle the additional traffic associated with the listing of new series
that may result from the introduction of options on VanEck Bitcoin ETF
up to the number of expirations currently permissible under the Rules.
Because the proposal is limited to two classes, the Exchange believes
any additional traffic that may be generated from the introduction of
VanEck Bitcoin ETF options will be manageable.
The Exchange believes that offering options on the VanEck Bitcoin
ETF 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 VanEck Bitcoin ETF in
the unregulated over-the-counter (``OTC'') options market,\35\ 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
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 VanEck Bitcoin ETF 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 Units 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 VanEck
Bitcoin ETF 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 Unit options, including Units that hold commodities
(i.e., precious metals) that it currently lists and trades on the
Exchange.
---------------------------------------------------------------------------
\35\ The Exchange understands from customers that investors have
historically transacted in options on Units in the OTC options
market if such options were not available for trading in a listed
environment.
---------------------------------------------------------------------------
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.\36\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \37\ 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) \38\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\36\ 15 U.S.C. 78f(b).
\37\ 15 U.S.C. 78f(b)(5).
\38\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposal to list and
trade options on the VanEck Bitcoin ETF 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 VanEck Bitcoin ETF will provide investors with an opportunity to
realize the benefits of utilizing options on the VanEck Bitcoin ETF,
including cost efficiencies and increased hedging strategies. The
Exchange believes that offering the VanEck Bitcoin ETF options will
benefit investors by providing them with a relatively lower-cost risk
management tool, which will allow them to manage
[[Page 29094]]
their positions and associated risk in their portfolios more easily in
connection with exposure to the price of Bitcoin and with Bitcoin-
related products and positions. Additionally, the Exchange's offering
of VanEck Bitcoin ETF 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 Units,\39\ which, as described above, are trusts
structured in substantially the same manner as the VanEck Bitcoin ETF
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-backed Unit options it currently lists
for trading. \40\
---------------------------------------------------------------------------
\39\ See Rule 4.3, Interpretation and Policy .06(a)(4).
\40\ See Securities Exchange Act No. 101387 (October 18, 2024)
89 FR 84948 (October 24, 2024) (SR-CBOE-2024-035) (Notice of Filing
of Amendment Nos. 2 and 3 and Order Granting Accelerated Approval of
a Proposed Rule Change, as Modified by Amendment Nos. 2 and 3, To
Permit the Listing and Trading of Options on Bitcoin Exchange-Traded
Funds).
---------------------------------------------------------------------------
The Exchange also believes the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system, because it is consistent with current
Exchange Rules previously filed with the Commission.\41\ Options on the
VanEck Bitcoin ETF satisfy the initial listing standards and continued
listing standards currently in the Exchange Rules applicable to options
on all Units, including Units that hold other commodities already
deemed appropriate for options trading on the Exchange. Additionally,
as demonstrated above, the VanEck Bitcoin ETF is characterized by a
substantial number of shares that are widely held and actively traded.
VanEck Bitcoin ETF options will trade in the same manner as any other
Unit options--the same Exchange Rules that currently govern the listing
and trading of all Unit options, including permissible expirations,
strike prices and minimum increments, and applicable margin
requirements, will govern the listing and trading of options on the
VanEck Bitcoin ETF in the same manner.
---------------------------------------------------------------------------
\41\ Id.
---------------------------------------------------------------------------
The Exchange believes the proposed rule change to exclude the
VanEck Bitcoin ETF from being eligible for trading as FLEX options is
consistent with the Act, because it will permit the Exchange to
continue to participate in ongoing discussions with the Commission
regarding appropriate position limits for ETF options.\42\
---------------------------------------------------------------------------
\42\ The Exchange may submit a separate rule filing that would
permit the Exchange to authorize for trading FLEX options on the
VanEck Bitcoin ETF (which filing may propose changes to existing
FLEX option position limits for such options if appropriate).
---------------------------------------------------------------------------
The Exchange believes the proposed position and exercise limits are
designed to prevent fraudulent and manipulative acts and practices and
promote just and equitable principles of trade, as they are designed to
address potential manipulative schemes and adverse market impacts
surrounding the use of options, such as disrupting the market in the
security underlying the options. The proposed position and exercise
limits in this proposal for the VanEck Bitcoin ETF options are 25,000
contracts, which is currently the lowest limit applicable to any equity
options (including ETF options). The Exchange believes the proposed
position and exercise limits are extremely conservative for the VanEck
Bitcoin ETF option given the trading volume and outstanding shares for
each. The information above demonstrates that the average position and
exercise limits of options on ETFs with comparable outstanding shares
and trading volume to those of the VanEck Bitcoin ETF is significantly
higher than the proposed position and exercise limits for the VanEck
Bitcoin ETF options. Therefore, the proposed position and exercise
limits for the VanEck Bitcoin ETF options are conservative relative to
options on ETFs with comparable market characteristics.
Further, given that the issuer of the VanEck Bitcoin ETF may create
and redeem shares that represent an interest in Bitcoin, the Exchange
believes it is relevant to compare the size of a position limit to the
market capitalization of the Bitcoin market. As of March 5, 2025, the
global supply of Bitcoin was 19,832,309, and the price of one Bitcoin
was approximately $90,608.57,\43\ which equates to a market
capitalization of approximately $1.797 trillion. Consider the proposed
position and exercise limit of 25,000 option contracts for the VanEck
Bitcoin ETF option. A position and exercise limit of 25,000 same side
contracts effectively restricts a market participant from holding
positions that could result in the receipt of no more than 2,500,000 of
VanEck Bitcoin ETF shares, as applicable (if that market participant
exercised all of its options). The following table shows the share
price of the VanEck Bitcoin ETF on March 5, 2025, the value of
2,500,000 shares of the VanEck Bitcoin ETF at that price, and the
approximate percentage of that value of the size of the Bitcoin market:
---------------------------------------------------------------------------
\43\ See Blockchain.com [verbar] Charts--Total Circulating
Bitcoin.
----------------------------------------------------------------------------------------------------------------
Value of
2,500,000
Bitcoin fund March 5, 2025 shares of Percentage of
share price ($) Bitcoin fund Bitcoin market
($)
----------------------------------------------------------------------------------------------------------------
VanEck Bitcoin ETF........................................... 25.60 64,000,000 0.0035
----------------------------------------------------------------------------------------------------------------
Therefore, if a market participant with the maximum 25,000 same
side contracts in VanEck Bitcoin ETF options exercised all positions at
one time, such an event would have no practical impact on the Bitcoin
market.
The Exchange also believes the proposed limits are appropriate
given position limits for Bitcoin futures. For example, the Chicago
Mercantile Exchange (``CME'') imposes a position limit of 2,000 futures
(for the initial spot month) on its Bitcoin futures contract.\44\ On
March 5, 2025, CME Mar 25 Bitcoin Futures settled at $90,935. A
position of 2,000 CME Bitcoin futures, therefore, would have a notional
value of $909,350,000. The following table shows the share price of the
VanEck Bitcoin ETF on March 5, 2025, and the
[[Page 29095]]
approximate number of option contracts that equates to that notional
value:
---------------------------------------------------------------------------
\44\ See CME Rulebook Chapter 350 (description of CME Bitcoin
Futures) and Chapter 5, Position Limit, Position Accountability and
Reportable Level Table in the Interpretations & Special Notices.
Each CME Bitcoin futures contract is valued at five Bitcoins as
defined by the CME CF Bitcoin Reference Rate (``BRR''). See CME Rule
35001.
------------------------------------------------------------------------
Number of
Bitcoin fund March 5, 2025 option
share price ($) contracts
------------------------------------------------------------------------
VanEck Bitcoin ETF......................... 25.60 355,214
------------------------------------------------------------------------
The approximate number of option contracts for the VanEck Bitcoin
ETF that equate to the notional value of CME Bitcoin futures is
significantly higher than the proposed limit of 25,000 options contract
for the VanEck Bitcoin ETF option. The fact that many options
ultimately expire out-of-the-money and thus are not exercised for
shares of the underlying, while the delta of a Bitcoin Future is 1,
further demonstrates how conservative the proposed limits of 25,000
options contracts are for the VanEck Bitcoin ETF options.
The Exchange notes, unlike options contracts, CME position limits
are calculated on a net futures-equivalent basis by contract and
include contracts that aggregate into one or more base contracts
according to an aggregation ratio(s).\45\ Therefore, if a portfolio
includes positions in options on futures, CME would aggregate those
positions into the underlying futures contracts in accordance with a
table published by CME on a delta equivalent value for the relevant
spot month, subsequent spot month, single month and all month position
limits.\46\ If a position exceeds position limits because of an option
assignment, CME permits market participants to liquidate the excess
position within one business day without being considered in violation
of its rules. Additionally, if at the close of trading, a position that
includes options exceeds position limits for futures contracts, when
evaluated using the delta factors as of that day's close of trading but
does not exceed the limits when evaluated using the previous day's
delta factors, then the position shall not constitute a position limit
violation. Considering CME's position limits on futures for Bitcoin,
the Exchange believes that that the proposed same side position limits
are more than appropriate for the VanEck Bitcoin ETF options.
---------------------------------------------------------------------------
\45\ See CME Rulebook Chapter 5, Position Limit, Position
Accountability and Reportable Level Table in the Interpretations &
Special Notices.
\46\ Id.
---------------------------------------------------------------------------
The Exchange believes the proposed position and exercise limits in
this proposal will have no material impact to the supply of Bitcoin.
For example, consider again the proposed position limit of 25,000
option contracts for the VanEck Bitcoin ETF option. As noted above, a
position limit of 25,000 same side contracts effectively restricts a
market participant from holding positions that could result in the
receipt of no more than 2,500,000 shares of the applicable VanEck
Bitcoin ETF (if that market participant exercised all its options). As
of March 5, 2025, the VanEck Bitcoin ETF had the number of shares
outstanding set forth in the table below. The table below also sets
forth the approximate number of market participants that could hold the
maximum of 25,000 same side positions in the VanEck Bitcoin ETF that
would equate to the number of shares outstanding of the VanEck Bitcoin:
------------------------------------------------------------------------
Number of market
Shares participants with
Bitcoin fund outstanding 25,000 same side
positions
------------------------------------------------------------------------
VanEck Bitcoin ETF................. 49,900,000 20
------------------------------------------------------------------------
This means if 20 market participants had 25,000 same side positions
in VanEck Bitcoin ETF options, each of them would have to
simultaneously exercise all of those options to create a scenario that
may put the underlying security under stress. The Exchange believes it
is highly unlikely for either such event to occur; however, even if
either such event did occur, the Exchange would not expect the VanEck
Bitcoin ETF to be under stress because such an event would merely
induce the creation of more shares through the trust's creation and
redemption process.
As of March 5, 2025, the global supply of Bitcoin was approximately
19,832,309.\47\ Based on the $25.60 price of VanEck Bitcoin ETF share
on March 5, 2025, a market participant could have redeemed one Bitcoin
for approximately 3,539 VanEck Bitcoin ETF shares. Another
70,194,417,201 VanEck Bitcoin ETF shares could be created before the
supply of Bitcoin was exhausted. As a result, 28,078 market
participants would have to simultaneously exercise 25,000 same side
positions in VanEck Bitcoin ETF options to receive shares of the VanEck
Bitcoin ETF holding the entire global supply of Bitcoin. Unlike the
VanEck Bitcoin ETF, the number of shares that corporations may issue is
limited. However, like corporations, which authorize additional shares,
repurchase shares, or split their shares, the VanEck Bitcoin ETF may
create, redeem, or split shares in response to demand. While the supply
of Bitcoin is limited to 21,000,000, it is believed that it will take
more than 100 years to fully mine the remaining Bitcoin. The supply of
Bitcoin is larger than the available supply of most securities.\48\
Given the significant unlikelihood of any of these events ever
occurring, the Exchange does not believe options on the VanEck Bitcoin
ETF should be subject to position and exercise limits even lower than
those proposed (which are already equal to the lowest available limit
for equity options in the industry) to protect the supply of
Bitcoin.\49\
---------------------------------------------------------------------------
\47\ See Blockchain.com [verbar] Charts--Total Circulating
Bitcoin (which also shows the price of one Bitcoin equal to
$90,608.57).
\48\ The market capitalization of Bitcoin would rank in the top
10 among securities. See https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/.
\49\ This would be even more unlikely with respect to the VanEck
Bitcoin ETF for which the Exchange proposes lower position limits.
---------------------------------------------------------------------------
The Exchange believes the available supply of Bitcoin is not
relevant to the determination of position and exercise limits for
options overlying the VanEck Bitcoin ETF. Position and exercise limits
are not a tool that should be used to address a potential limited
supply of the underlying of an underlying. Position and exercise limits
do not limit the total number of options that may be held, but rather
they limit the number of positions a single customer may hold or
exercise at one time.\50\ ``Since the inception of standardized options
trading, the options exchanges have had rules imposing limits on the
aggregate
[[Page 29096]]
number of options contracts that a member or customer could hold or
exercise.'' \51\ Position and exercise limit rules are intended ``to
prevent the establishment of options positions that can be used or
might create incentives to manipulate or disrupt the underlying market
so as to benefit the options position. In particular, position and
exercise limits are designed to minimize the potential for mini-
manipulations and for corners or squeezes of the underlying market. In
addition, such limits serve to reduce the possibility for disruption of
the options market itself, especially in illiquid options classes.''
\52\
---------------------------------------------------------------------------
\50\ For example, suppose an option has a position limit of
25,000 option contracts and there are a total of 10 investors
trading that option. If all 10 investors max out their positions,
that would result in 250,000 option contracts outstanding at that
time. However, suppose 10 more investors decide to begin trading
that option and also max out their positions. This would result in
500,000 option contracts outstanding at that time. An increase in
the number of investors could cause an increase in outstanding
options even if position limits remain unchanged.
\51\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
\52\ See id.
---------------------------------------------------------------------------
The Exchange notes that a Registration Statement on Form S-1 was
filed with the Commission for the VanEck Bitcoin ETF, each of which
described the supply of Bitcoin as being limited to 21,000,000 (of
which approximately 90% had already been mined), and that the limit
would be reached around the year 2140.\53\ The Registration Statement
permits an unlimited number of shares of the applicable the VanEck
Bitcoin ETF to be created. Further, the Commission approved proposed
rule changes that permitted the listing and trading of shares of the
VanEck Bitcoin ETF, which approval did not comment on the sufficient
supply of Bitcoin or address whether there was a risk that permitting
an unlimited number of shares for the VanEck Bitcoin ETF would impact
the supply of Bitcoin.\54\ Therefore, the Exchange believes the
Commission had ample time and opportunity to consider whether the
supply of Bitcoin was sufficient to permit the creation of unlimited
the VanEck Bitcoin ETF shares, and does not believe considering this
supply with respect to the establishment of position and exercise
limits is appropriate given its lack of relevance to the purpose of
position and exercise limits. However, given the significant size of
the Bitcoin supply, the proposed positions limits are more than
sufficient to protect investors and the market.
---------------------------------------------------------------------------
\53\ See Amendment No. 8 to Form S-1 Registration Statement No.
333-251808, filed January 9, 2024.
\54\ See Bitcoin ETP Approval Order.
---------------------------------------------------------------------------
Based on the above information demonstrating, among other things,
that the VanEck Bitcoin ETF is characterized by a substantial number of
outstanding shares that are actively traded and widely held, the
Exchange believes the proposed position and exercise limits are
extremely conservative compared to those of ETF options with similar
market characteristics. The proposed position and exercise limits
reasonably and appropriately balance the liquidity provisioning in the
market against the prevention of manipulation. The Exchange believes
these proposed limits are effectively designed to prevent an individual
customer or entity from establishing options positions that could be
used to manipulate the market of the underlying as well as the Bitcoin
market.\55\
---------------------------------------------------------------------------
\55\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
---------------------------------------------------------------------------
The Exchange represents that it has the necessary systems capacity
to support VanEck Bitcoin ETF 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 Unit options, including VanEck Bitcoin
ETF options.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act as the VanEck Bitcoin ETF will
be equally available to all market participants who wish to trade such
options and will trade generally in the same manner as other options.
The Exchange Rules that currently apply to the listing and trading of
all Unit options on the Exchange, including, for example, Rules that
govern listing criteria, expirations, exercise prices, minimum
increments, margin requirements, customer accounts, and trading halt
procedures will apply to the listing and trading of the VanEck Bitcoin
ETF options on the Exchange in the same manner as they apply to other
options on all other Units that are listed and traded on the Exchange.
Also, and as stated above, the Exchange already lists options on other
commodity-based Units.\56\ Further, the VanEck Bitcoin ETF would need
to satisfy the maintenance listing standards set forth in the Exchange
Rules in the same manner as any other Unit for the Exchange to continue
listing options on them.
---------------------------------------------------------------------------
\56\ See Rule 4.3, Interpretation and Policy .06(a)(4).
---------------------------------------------------------------------------
The Exchange does not believe that the proposal to list and trade
options on the VanEck Bitcoin ETF 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 VanEck
Bitcoin ETF 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 VanEck Bitcoin ETF. The Exchange notes
that listing and trading VanEck Bitcoin ETF 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 VanEck Bitcoin ETF
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
The Exchange neither solicited nor received written comments on the
proposed rule change.
III. Proceedings To Determine Whether To Approve or Disapprove SR-CBOE-
2025-017, as Modified by Amendment No. 4, and Grounds for Disapproval
Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \57\ to determine whether the proposed rule
change, as modified by Amendment No. 4, should be approved or
disapproved. Institution of such proceedings is appropriate at
[[Page 29097]]
this time in view of the legal and policy issues raised by the proposed
rule change, as modified by Amendment No. 4. 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. 4.
---------------------------------------------------------------------------
\57\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\58\ 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,\59\ 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.
---------------------------------------------------------------------------
\58\ See id.
\59\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.'' \60\ 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,\61\ 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.\62\ 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. 4, is consistent with the Act. In particular, the
Commission asks commenters to address whether the proposal, as modified
by Amendment No. 4, includes sufficient data and analysis to support a
conclusion that the proposal, as modified by Amendment No. 4, is
consistent with the requirements of Section 6(b)(5) of the Act.
---------------------------------------------------------------------------
\60\ 17 CFR 201.700(b)(3).
\61\ See id.
\62\ See id.
---------------------------------------------------------------------------
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. 4. In particular, the
Commission invites the written views of interested persons concerning
whether the proposal, as modified by Amendment No. 4, 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,\63\ any request for an
opportunity to make an oral presentation.\64\
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\63\ 17 CFR 240.19b-4.
\64\ 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. 4, should be approved or disapproved by July 23, 2025.
Any person who wishes to file a rebuttal to any other person's
submission must file that rebuttal by August 6, 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-CBOE-2025-017 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-CBOE-2025-017. 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-CBOE-2025-017 and should be
submitted on or before July 23, 2025. Rebuttal comments should be
submitted by August 6, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\65\
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\65\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-12300 Filed 7-1-25; 8:45 am]
BILLING CODE 8011-01-P