[Federal Register Volume 90, Number 141 (Friday, July 25, 2025)]
[Notices]
[Pages 35335-35339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-14034]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103529; File No. SR-CboeBZX-2025-035]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To
Amend the Rule Governing the Listing and Trading of the Invesco Galaxy
Bitcoin ETF and the Invesco Galaxy Ethereum ETF To Permit In-Kind
Creations and Redemptions
July 22, 2025.
On March 10, 2025, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (``SEC'' or
``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 the rules governing the listing and
trading of shares of the Invesco Galaxy Bitcoin ETF and the Invesco
Galaxy Ethereum ETF under BZX Rule 14.11(e)(4). The proposed rule
change was published for comment in the Federal Register on March 18,
2025.\3\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 102645 (Mar. 12,
2025), 90 FR 12602.
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On April 29, 2025, pursuant to Section 19(b)(2) of the Act,\4\ 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.\5\ On June 16, 2025, the Commission instituted proceedings
under Section 19(b)(2)(B) of the Act,\6\ to determine whether to
approve or disapprove the proposed rule change.\7\ On July 21, 2025,
pursuant
[[Page 35336]]
to Section 19(b)(2) of the Act,\8\ the Exchange filed Amendment No. 1
to the proposed rule change, which replaced and superseded the original
filing in its entirety. The proposed rule change, as modified by
Amendment No. 1, is described in Items I and II 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.
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\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 102949, 90 FR 19039
(May 5, 2025) (designating June 16, 2025, as the date by which the
Commission shall either approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change).
\6\ 15 U.S.C. 78s(b)(2)(B).
\7\ See Securities Exchange Act Release No. 103260, 90 FR 26389
(June 20, 2025).
\8\ 15 U.S.C. 78s(b)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
a proposed rule change to amend the rule governing the Invesco Galaxy
Bitcoin ETF (the ``Bitcoin Trust'') and the Invesco Galaxy Ethereum ETF
(the ``ETH Trust'' and, collectively with the Bitcoin Trust, the
``Trusts''), shares of which have been approved by the Commission to
list and trade on the Exchange pursuant to BZX Rule 14.11(e)(4), to
permit in-kind creations and redemptions.
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/) and at the Exchange's Office of the Secretary.
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 III 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
This Amendment No. 1 to SR-CboeBZX-2025-035 amends and replaces in
its entirety the proposal as originally submitted on March 10, 2025.
The Exchange submits this Amendment No. 1 in order to clarify certain
points and add additional details to the proposal.
The Commission approved the listing and trading of shares (the
``Bitcoin ETP Shares'') of the Bitcoin Trust on the Exchange pursuant
to Exchange Rule 14.11(e)(4), Commodity-Based Trust Shares, on January
10, 2024.\9\ The Commission also approved the listing and trading of
shares (the ``ETH ETP Shares'') of the ETH Trust on the Exchange
pursuant to Exchange Rule 14.11(e)(4), Commodity-Based Trust Shares, on
May 23, 2024.\10\ Exchange Rule 14.11(e)(4) governs the listing and
trading of Commodity-Based Trust Shares, which means a security (a)
that is 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. The
Bitcoin ETP Shares are issued by the Bitcoin Trust and the ETH ETP
Shares are issued by the ETH Trust. The Bitcoin Trust was formed as a
Delaware statutory trust on December 17, 2020, and the ETH Trust was
formed as a Delaware statutory trust on September 27, 2023.
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\9\ See Securities Exchange Act Release Nos. 99283 (January 8,
2024) 89 FR 2263 (January 12, 2024) (SR-CboeBZX-2023-038) (Notice of
Filing of Amendment No. 2 to a Proposed Rule Change To List and
Trade Shares of the Invesco Galaxy Bitcoin ETF Under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares) (the ``Bitcoin ETP
Amendment No. 2); 99306 (January 10, 2024) 89 FR 3008 (January 17,
2024) (SR-CboeBZX-2023-038) (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) (the ``Bitcoin ETP Approval Order'').
\10\ See Securities Exchange Act Release Nos. 100219 (May 22,
2024) 89 FR 46543 (May 29, 2024) (SR-CboeBZX-2023-087) (Notice of
Filing of Amendment No. 1 to a Proposed Rule Change To List and
Trade Shares of the Invesco Galaxy Ethereum ETF Under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares) (the ``ETH ETP Amendment
No. 1); 100224 (May 23, 2024) 89 FR 46937 (May 30, 2024) (SR-
CboeBZX-2023-038) (Order Granting Accelerated Approval of Proposed
Rule Changes, as Modified by Amendments Thereto, to List and Trade
Shares of Ether-Based Exchange-Traded Products) (the ``ETH ETP
Approval Order'').
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Bitcoin Trust
The Exchange proposes to amend several portions of the Exchange's
previous rule filing to list and trade Bitcoin ETP Amendment No. 2 in
order to permit in-kind creations and redemptions.
Representations
Bitcoin ETP Amendment No. 2 included specific representations
making clear that the Bitcoin Trust would only process creations and
redemptions in cash. Specifically, the ``Invesco Galaxy Bitcoin ETF''
section of the Bitcoin Amendment No. 2 stated the following:
When the Trust sells or redeems its Shares, it will do so in
cash transactions in blocks of 5,000 Shares (a ``Creation Basket'')
at the Trust's net asset value (``NAV''). Authorized participants
will deliver, or facilitate the delivery of, cash to the Trust's
account with the Cash Custodian (which will then be used to purchase
bitcoin for the Trust) in exchange for Shares when they purchase
Shares, and the Trust, through the Cash Custodian, will deliver cash
to such authorized participants when they redeem Shares with the
Trust. A third party will use cash to buy and deliver bitcoin to
create Shares or withdraw and sell bitcoin for cash to redeem
Shares, on behalf of the Trust. Authorized participants may then
offer Shares to the public at prices that depend on various factors,
including the supply and demand for Shares, the value of the Trust's
assets, and market conditions at the time of a transaction.
Shareholders who buy or sell Shares during the day from their broker
may do so at a premium or discount relative to the NAV of the Shares
of the Trust.\11\
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\11\ See Bitcoin ETP Amendment No. 2 at 2272.
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The Exchange proposes to replace the above with the following:
When the Trust creates or redeems its Shares, it will do so in
cash transactions or in-kind transactions in blocks of 5,000 Shares
(a ``Creation Basket''). For cash creations and redemptions,
authorized participants will deliver, or facilitate the delivery of,
cash to the Trust's account with the Cash Custodian, in exchange for
Shares when they create Shares, and the Trust, through the Cash
Custodian, will deliver cash to such authorized participants when
they redeem Shares with the Trust. For in-kind creation and
redemptions, authorized participants will deliver, or facilitate
delivery of, bitcoin to the Trust's account with the Custodian, in
exchange for Shares when they create Shares, and the Trust, through
the Custodian, will deliver bitcoin to such authorized participants
when they redeem Shares with the Trust. Authorized participants may
then offer Shares to the public at prices that depend on various
factors, including the supply and demand for Shares, the value of
the Trust's assets, and market conditions at the time of a
transaction. Shareholders who buy or sell Shares during the day from
their broker may do so at a premium or discount relative to the NAV
of the Shares of the Trust.
The ``Investment Objective'' section of Bitcoin ETP Amendment No. 2
stated: ``The Trust will process all creations and redemptions in cash
transactions
[[Page 35337]]
with authorized participants.'' \12\ The Exchange proposes to replace
this sentence with the following: ``The Trust will process all
creations and redemptions in cash or in-kind transactions with
authorized participants.''
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\12\ See Bitcoin ETP Amendment No. 2 at 2273.
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Creation and Redemption of Shares
Additionally, the ``Creation and Redemption of Shares'' section of
the filing includes a detailed description of how the cash-only
creation and redemption process works.\13\ The Exchange proposes to
replace this section as provided below. The Exchange proposes no change
to the subheading ``Rule 14.11(e)(4)--Commodity-Based Trust Shares''
\14\ and proposes to retain everything thereunder.
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\13\ See Bitcoin ETP Amendment No. 2 at 2274.
\14\ See Bitcoin ETP Amendment No. 2 at 2274-2275.
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Creation and Redemption of Shares
When the Trust creates or redeems its Shares, it will do so in
cash or in-kind. In connection with cash creations and cash
redemptions, the authorized participants will submit orders to
create or redeem Baskets of Shares in exchange for cash. When the
Trust creates or redeems its Shares in cash, it will do so in
transactions based on the quantity of bitcoin attributable to each
Share of the Trust (e.g., a Creation Basket). When the Trust creates
or redeems its Shares in kind, it will do so in transfers of bitcoin
that are based on the quantity of bitcoin attributable to the
Creation Basket being created or redeemed.
The authorized participants will deliver or cause to be
delivered cash or bitcoin to create Shares and the authorized
participant will receive cash or bitcoin when redeeming Shares. The
Trust will create Shares by receiving bitcoin or cash from an
authorized participant and will redeem shares by delivering bitcoin
or cash to an authorized participant.
According to the Registration Statement, on any business day, an
authorized participant may place an order to create one or more
Creation Baskets. Purchase orders for cash creations must be placed
by 2:30 p.m. Eastern Time (or such other time as disclosed in the
Prospectus), or the close of regular trading on the Exchange,
whichever is earlier. Purchase orders for in-kind creations must be
placed by 4:00 p.m. Eastern Time (or such other time as disclosed in
the Prospectus), or the close of regular trading on the Exchange,
whichever is earlier. The day on which an order is properly received
is considered the purchase order date.
For a cash creation order, the total deposit of cash required is
an amount of cash sufficient to purchase such amount of bitcoin, the
amount of which is equal to the combined NAV of the number of Shares
included in the Creation Baskets being created determined as of 4:00
p.m. ET on the date the order to purchase is properly received.
For a creation order in kind, the total in-kind transfer of
bitcoin is based on the quantity of bitcoin attributable to the
Creation Baskets applicable to the date the order to purchase is
properly received. The Administrator determines the quantity of
bitcoin used to calculate the Creation Basket for a given day by
dividing the number of bitcoin held by the Trust, adjusted for the
amount of bitcoin constituting estimated accrued but unpaid fees and
expenses of the Trust as of the opening of business on that business
day, by the quotient of the number of Shares outstanding at the
opening of business divided by the number of Shares in a Creation
Basket.
The procedures by which an authorized participant can redeem one
or more Creation Baskets mirror the procedures for the creation of
Creation Baskets. For a cash redemption order, an authorized
participant will deliver Shares to the Trust and will receive cash
for the Shares delivered. For an in-kind redemption order, an
authorized participant will deliver Shares to the Trust and the
authorized participant will receive bitcoin for the Shares
delivered.
Except for the above changes, all other representations in the
Bitcoin ETP Amendment No. 2 remain unchanged and will continue to
constitute continuing listing requirements. In addition, the Bitcoin
Trust will continue to comply with the terms of Bitcoin ETP Amendment
No. 2 and the Trust will continue to comply with the requirements of
Rule 14.11(e)(4).
ETH Trust
Similarly, the Exchange proposes to amend several portions of the
ETH ETP Amendment No. 1 in order to permit in-kind creations and
redemptions.
Representations
The ETH ETP Amendment No. 1 included a specific representation
making clear that the ETH Trust would only process creations and
redemptions in cash. Specifically, the ``Invesco Galaxy Ethereum
Trust'' section of the ETH ETP Amendment No. 1 stated:
When the Trust sells or redeems its Shares, it will do so in
cash transactions in blocks of 5,000 Shares (a ``Creation Basket'')
at the Trust's net asset value (``NAV''). Authorized participants
will deliver, or facilitate the delivery of, cash to the Trust's
account with the Cash Custodian in exchange for Shares when they
purchase Shares, and the Trust, through the Cash Custodian, will
deliver cash to such authorized participants when they redeem Shares
with the Trust.\15\ Authorized participants may then offer Shares to
the public at prices that depend on various factors, including the
supply and demand for Shares, the value of the Trust's assets, and
market conditions at the time of a transaction. Shareholders who buy
or sell Shares during the day from their broker may do so at a
premium or discount relative to the NAV of the Shares of the Trust.
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\15\ See ETH ETP Amendment No. 1 at 46550.
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The Exchange proposes to replace this language with the following:
When the Trust creates or redeems its Shares in cash
transactions, it will do so in blocks of 5,000 Shares (a ``Creation
Basket''). For cash creations or redemptions, Authorized
participants will deliver, or facilitate the delivery of, cash to
the Trust's account with the Cash Custodian in exchange for Shares
when they create Shares, and the Trust, through the Cash Custodian,
will deliver cash to such authorized participants when they redeem
Shares with the Trust. When the Trust creates or redeems its Shares
in-kind, it will do so in Creation Units in exchange for ether.
Authorized participants will deliver, or facilitate delivery of,
ether to the Trust's account with the Custodian, in exchange for
Shares when they create Shares, and the Trust, through the
Custodian, will deliver ether to such authorized participants when
they redeem Shares with the Trust. Authorized participants may then
offer Shares to the public at prices that depend on various factors,
including the supply and demand for Shares, the value of the Trust's
assets, and market conditions at the time of a transaction.
Shareholders who buy or sell Shares during the day from their broker
may do so at a premium or discount relative to the NAV of the Shares
of the Trust.
Additionally, the ``Investment Objective'' section of the ETH ETP
Amendment No. 1 stated: ``The Trust will process all creations and
redemptions in cash transactions with authorized participants.'' \16\
The Exchange proposes to replace this language with the following:
``The Trust will process all creations and redemptions in cash or in-
kind transactions with authorized participants.''
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\16\ Id.
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Creation and Redemption of Shares
Additionally, the ``Creation and Redemption of Shares'' section of
the filing includes a detailed description of how the cash-only
creation and redemption process works.\17\ The Exchange proposes to
replace this section as provided below. The Exchange proposes no change
to the subheading ``Rule 14.11(e)(4)--Commodity-Based Trust Shares''
\18\ and proposes to retain everything thereunder.
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\17\ See ETH ETP Amendment No. 1 at 46551-46552.
\18\ See ETH ETP Amendment No. 1 at 46552.
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Creation and Redemption of Shares
When the Trust creates or redeems its Shares, it will do so in
cash or in-kind. When the Trust creates or redeems its Shares in
cash, it will do so in transactions based on the quantity of ETH
attributable to each
[[Page 35338]]
Share of the Trust (e.g., a Creation Basket). When the Trust creates
or redeems its Shares in-kind, it will do so in transfers of ether
that are based on the quantity of ether attributable to the Creation
Basket being created or redeemed.
The authorized participants will deliver or cause to be
delivered cash or ether to create Shares and the authorized
participant or its designee will receive cash or ether when
redeeming Shares. The Trust will create Shares by receiving ether or
cash from an authorized participant or its designee and will redeem
Shares by delivering ether or cash to an authorized participant or
its designee.
According to the Registration Statement, on any business day, an
authorized participant may place an order to create one or more
Creation Baskets. Purchase orders for cash creations must be placed
by 2:30 p.m. Eastern Time (or such other time as disclosed in the
Prospectus), or the close of regular trading on the Exchange,
whichever is earlier. Purchase orders for in-kind creations must be
placed by 4:00 p.m. Eastern Time (or such other time as disclosed in
the Prospectus), or the close of regular trading on the Exchange,
whichever is earlier. The day on which an order is received is
considered the purchase order date.
For a cash creation order, the total deposit of cash required is
based on the combined NAV of the number of Shares included in the
Creation Baskets being created determined as of 4:00 ET on the date
the order to purchase is properly received.
For a creation order in-kind, the total in-kind transfer of ETH
is equal to the combined NAV of the number of Shares included in the
Creation Baskets applicable to 4:00 p.m. ET on the date the order to
purchase is properly received. The Administrator determines the
quantity of ETH associated with a Creation Basket for a given day by
dividing the number of ETH held by the Trust, adjusted for the
amount of ETH constituting estimated accrued but unpaid fees and
expenses of the Trust as of the opening of business on that business
day, by the quotient of the number of Shares outstanding at the
opening of business divided by the number of Shares in a Creation
Basket.
The procedures by which an authorized participant can redeem one
or more Creation Baskets mirror the procedures for the creation of
Creation Baskets. For a cash redemption order, an authorized
participant will deliver Shares to the Trust and will receive cash
for the Shares delivered. For an in-kind redemption order, an
authorized participant will deliver Shares to the Trust and will
receive ether for the Shares delivered.
Conclusion
Except for the above changes, all other representations in the
Bitcoin ETP Amendment No. 2 and ETH ETP Amendment No. 1 remain
unchanged and will continue to constitute continuing listing
requirements. In addition, the Bitcoin Trust will continue to comply
with the terms of Bitcoin ETP Amendment No. 2 and the ETH Trust will
continue to comply with the terms of ETH ETP Amendment No. 1 and the
Trusts will continue to comply with the requirements of Rule
14.11(e)(4).
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.\19\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \20\ 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.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed rule change is designed to
remove impediments to and perfect the mechanism of a free and open
market and, in general, to protect investors and the public interest
because it would update representations in both the Bitcoin ETP
Amendment No. 2 and the ETH ETP Amendment No. 1 such that the Trusts
would both be able to engage in in-kind transactions with authorized
participants, as described above. This ability would make the Trusts
(and the market more generally) operate more efficiently because
authorized participants would be able to source bitcoin or ether, as
applicable, rather than to provide cash to the applicable Trust and/or
to receive bitcoin or ether directly from the Trusts. This means that
the authorized participant would be responsible for buying and selling
the applicable crypto asset rather than the Trust itself, which would
potentially lessen the impact on the market of the Trusts on both sides
of the transaction by allowing the authorized participant to decide how
and where to source the underlying crypto asset for creations and
deciding how, where, and whether to sell the underlying crypto asset
for redemptions. This would improve the creation and redemption process
for both authorized participants and the Trusts, increase efficiency,
and ultimately benefit the end investors in the Trusts.
Except for the addition of in-kind creation and redemption for the
Bitcoin Trust, all other representations made in the Bitcoin ETP
Amendment No. 2 remain unchanged and will continue to constitute
continuing listing requirements for the Bitcoin Trust. Similarly,
except for the addition of in-kind creation and redemption for the ETH
Trust, all other representations made in the ETH ETP Amendment No. 1
remain unchanged and will continue to constitute continuing listing
requirements for the ETH Trust.
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. As noted above, the proposed
amendment is intended to allow the Trusts to operate more efficiently
by allowing for in-kind creation and redemption. The Exchange believes
these changes will not impose any burden on competition.
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 comments on the
proposed rule change.
III. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as modified by Amendment No. 1, is consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CboeBZX-2025-035 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-CboeBZX-2025-035. 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/
[[Page 35339]]
rules/sro.shtml). Copies of the filing will be available for inspection
and copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-CboeBZX-2025-035 and should be submitted
on or before August 15, 2025.
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\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14034 Filed 7-24-25; 8:45 am]
BILLING CODE 8011-01-P