8011-01P
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100420; File No. SR-CboeBZX-2023-101]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of Amendment
No. 1 to a Proposed Rule Change to List and Trade Shares of the Pando Asset Spot Bitcoin
Trust Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares
June 25, 2024.
On December 5, 2023, Cboe BZX Exchange, Inc. (“BZX” or “Exchange”) filed with the
Securities and Exchange Commission (“Commission” or “SEC”), 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 shares (“Shares”) of the Pando Asset Spot Bitcoin Trust under BZX Rule
14.11(e)(4), Commodity-Based Trust Shares. The proposed rule change was published for
comment in the Federal Register on December 22, 2023.3 On February 1, 2024, 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 March 21, 2024, the
Commission instituted proceedings under Section 19(b)(2)(B) of the Act6 to determine whether
to approve or disapprove the proposed rule change.7 On June 6, 2024, the Commission
designated a longer period for Commission action on the proposed rule change.8 On June 24,
2024, the Exchange filed Amendment No. 1 to the proposed rule change as described in Items I

15 U.S.C. 78s(b)(1).

17 CFR 240.19b-4.

See Securities Exchange Act Release No. 99197 (Dec. 18, 2023), 88 FR 88668. Comments on the proposed
rule change are available at https://www.sec.gov/comments/sr-cboebzx-2023-101/srcboebzx2023101.htm.

15 U.S.C. 78s(b)(2).

See Securities Exchange Act Release No. 99460, 89 FR 8472 (Feb. 7, 2024).

15 U.S.C. 78s(b)(2)(B).

See Securities Exchange Act Release No. 99833, 89 FR 21310 (Mar. 27, 2024).

See Securities Exchange Act Release No. 100289, 89 FR 49926 (June 12, 2024).

and II below, which Items have been prepared by the Exchange. Amendment No. 1 amended and
replaced the proposed rule change in its entirety. The Commission is publishing this notice to
solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested
persons.
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 list and trade shares
of the Pando Asset Spot Bitcoin Trust (the “Trust”),9 under BZX Rule 14.11(e)(4), CommodityBased Trust Shares. 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/), 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

This Amendment No. 1 to SR-CboeBZX-2023-101 amends and replaces in its entirety
the proposal as originally submitted on December 5, 2023. The Exchange submits this
Amendment No. 1 in order to clarify certain points and add additional details to the proposal.

The Trust was formed as a Delaware statutory trust on November 16, 2023, and is operated as a grantor
trust for U.S. federal tax purposes. The Trust has no fixed termination date.

The Exchange proposes to list and trade the Shares under BZX Rule 14.11(e)(4),10 which
governs the listing and trading of Commodity-Based Trust Shares on the Exchange.11 Pando
Asset AG is the Sponsor (“Sponsor”). The Shares will be registered with the Commission by
means of the Trust’s registration statement on Form S-1 (the “Registration Statement”).12
Coinbase Custody Trust Company, LLC (the “Bitcoin Custodian”), which is a third-party U.S.based trust company and qualified custodian, will be responsible for custody of the Trust’s
bitcoin holdings and U.S. Bank will be the custodian for the Trust’s cash holdings, if any (the
“Cash Custodian” and together with the Bitcoin Custodian, the “Custodians”).
As further discussed below, the Commission has historically approved or disapproved
exchange filings to list and trade series of Trust Issued Receipts,13 including spot-based
Commodity-Based Trust Shares, on the basis of whether the listing exchange has in place a
comprehensive surveillance sharing agreement with a regulated market of significant size related
to the underlying commodity to be held.14 Prior orders from the Commission have pointed out
that in every prior approval order for Commodity-Based Trust Shares, there has been a
derivatives market that represents the regulated market of significant size, generally a
Commodity Futures Trading Commission (the “CFTC”) regulated futures market.15 Further to

The Commission approved BZX Rule 14.11(e)(4) in Securities Exchange Act Release No. 65225 (August
30, 2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018).

Any of the statements or representations regarding the index composition, the description of the portfolio or
reference assets, limitations on portfolio holdings or reference assets, dissemination and availability of
index, reference asset, intraday indicative values, and Verified Intraday Indicative Values (as applicable),
or the applicability of Exchange listing rules specified in any filing to list a series of Other Securities
(collectively, “Continued Listing Representations”) shall constitute continued listing requirements for the
securities listed on the Exchange.

See Form S-1 Registration Statement filed on November 29, 2023 (Registration No. 333-275781). The
Registration Statement is not yet effective, and the Shares will not trade on the Exchange until such time
that the Registration Statement is effective.

See Exchange Rule 14.11(f)(1).

See Securities Exchange Act Release No. 83723 (July 26, 2018), 83 FR 37579 (August 1, 2018). This
proposal was subsequently disapproved by the Commission. See Securities Exchange Act Release No.
83723 (July 26, 2018), 83 FR 37579 (August 1, 2018) (the “Winklevoss Order”).

See streetTRACKS Gold Shares, Exchange Act Release No. 50603 (Oct. 28, 2004), 69 FR 64614, 64618–
19 (Nov. 5, 2004) (SR-NYSE-2004-22) (the “First Gold Approval Order”); iShares COMEX Gold Trust,
Exchange Act Release No. 51058 (Jan. 19, 2005), 70 FR 3749, 3751, 3754–55 (Jan. 26, 2005) (SR-Amex2004-38); iShares Silver Trust, Exchange Act Release No. 53521 (Mar. 20, 2006), 71 FR 14967, 14968,
14973–74 (Mar. 24, 2006) (SR-Amex-2005-072); ETFS Gold Trust, Exchange Act Release No. 59895

(May 8, 2009), 74 FR 22993, 22994–95, 22998, 23000 (May 15, 2009) (SR-NYSEArca-2009-40); ETFS
Silver Trust, Exchange Act Release No. 59781 (Apr. 17, 2009), 74 FR 18771, 18772, 18775–77 (Apr. 24,
2009) (SR-NYSEArca-2009-28); ETFS Palladium Trust, Exchange Act Release No. 61220 (Dec. 22,
2009), 74 FR 68895, 68896 (Dec. 29, 2009) (SR-NYSEArca-2009-94) (notice of proposed rule change
included NYSE Arca’s representation that “[t]he most significant palladium futures exchanges are the
NYMEX and the Tokyo Commodity Exchange,” that “NYMEX is the largest exchange in the world for
trading precious metals futures and options,” and that NYSE Arca “may obtain trading information via the
Intermarket Surveillance Group,” of which NYMEX is a member, Exchange Act Release No. 60971 (Nov.
9, 2009), 74 FR 59283, 59285–86, 59291 (Nov. 17, 2009)); ETFS Platinum Trust, Exchange Act Release
No. 61219 (Dec. 22, 2009), 74 FR 68886, 68887–88 (Dec. 29, 2009) (SR-NYSEArca-2009-95) (notice of
proposed rule change included NYSE Arca’s representation that “[t]he most significant platinum futures
exchanges are the NYMEX and the Tokyo Commodity Exchange,” that “NYMEX is the largest exchange
in the world for trading precious metals futures and options,” and that NYSE Arca “may obtain trading
information via the Intermarket Surveillance Group,” of which NYMEX is a member, Exchange Act
Release No. 60970 (Nov. 9, 2009), 74 FR 59319, 59321, 59327 (Nov. 17, 2009)); Sprott Physical Gold
Trust, Exchange Act Release No. 61496 (Feb. 4, 2010), 75 FR 6758, 6760 (Feb. 10, 2010) (SR-NYSEArca2009-113) (notice of proposed rule change included NYSE Arca’s representation that the COMEX is one
of the “major world gold markets,” that NYSE Arca “may obtain trading information via the Intermarket
Surveillance Group,” and that NYMEX, of which COMEX is a division, is a member of the Intermarket
Surveillance Group, Exchange Act Release No. 61236 (Dec. 23, 2009), 75 FR 170, 171, 174 (Jan. 4,
2010)); Sprott Physical Silver Trust, Exchange Act Release No. 63043 (Oct. 5, 2010), 75 FR 62615, 62616,
62619, 62621 (Oct. 12, 2010) (SR-NYSEArca-2010-84); ETFS Precious Metals Basket Trust, Exchange
Act Release No. 62692 (Aug. 11, 2010), 75 FR 50789, 50790 (Aug. 17, 2010) (SR-NYSEArca-2010-56)
(notice of proposed rule change included NYSE Arca’s representation that “the most significant gold,
silver, platinum and palladium futures exchanges are the COMEX and the TOCOM” and that NYSE Arca
“may obtain trading information via the Intermarket Surveillance Group,” of which COMEX is a member,
Exchange Act Release No. 62402 (Jun. 29, 2010), 75 FR 39292, 39295, 39298 (July 8, 2010)); ETFS
White Metals Basket Trust, Exchange Act Release No. 62875 (Sept. 9, 2010), 75 FR 56156, 56158 (Sept.
15, 2010) (SR-NYSEArca-2010-71) (notice of proposed rule change included NYSE Arca’s representation
that “the most significant silver, platinum and palladium futures exchanges are the COMEX and the
TOCOM” and that NYSE Arca “may obtain trading information via the Intermarket Surveillance Group,”
of which COMEX is a member, Exchange Act Release No. 62620 (July 30, 2010), 75 FR 47655, 47657,
47660 (Aug. 6, 2010)); ETFS Asian Gold Trust, Exchange Act Release No. 63464 (Dec. 8, 2010), 75 FR
77926, 77928 (Dec. 14, 2010) (SR-NYSEArca-2010-95) (notice of proposed rule change included NYSE
Arca’s representation that “the most significant gold futures exchanges are the COMEX and the Tokyo
Commodity Exchange,” that “COMEX is the largest exchange in the world for trading precious metals
futures and options,” and that NYSE Arca “may obtain trading information via the Intermarket Surveillance
Group,” of which COMEX is a member, Exchange Act Release No. 63267 (Nov. 8, 2010), 75 FR 69494,
69496, 69500–01 (Nov. 12, 2010)); Sprott Physical Platinum and Palladium Trust, Exchange Act Release
No. 68430 (Dec. 13, 2012), 77 FR 75239, 75240–41 (Dec. 19, 2012) (SR-NYSEArca-2012-111) (notice of
proposed rule change included NYSE Arca’s representation that “[f]utures on platinum and palladium are
traded on two major exchanges: The New York Mercantile Exchange ... and Tokyo Commodities
Exchange” and that NYSE Arca “may obtain trading information via the Intermarket Surveillance Group,”
of which COMEX is a member, Exchange Act Release No. 68101 (Oct. 24, 2012), 77 FR 65732, 65733,
65739 (Oct. 30, 2012)); APMEX Physical—1 oz. Gold Redeemable Trust, Exchange Act Release No.
66930 (May 7, 2012), 77 FR 27817, 27818 (May 11, 2012) (SR-NYSEArca- 2012-18) (notice of proposed
rule change included NYSE Arca’s representation that NYSE Arca “may obtain trading information via the
Intermarket Surveillance Group,” of which COMEX is a member, and that gold futures are traded on
COMEX and the Tokyo Commodity Exchange, with a cross-reference to the proposed rule change to list
and trade shares of the ETFS Gold Trust, in which NYSE Arca represented that COMEX is one of the
“major world gold markets,” Exchange Act Release No. 66627 (Mar. 20, 2012), 77 FR 17539, 17542–43,
17547 (Mar. 26, 2012)); JPM XF Physical Copper Trust, Exchange Act Release No. 68440 (Dec. 14,
2012), 77 FR 75468, 75469–70, 75472, 75485–86 (Dec. 20, 2012) (SR-NYSEArca-2012-28); iShares
Copper Trust, Exchange Act Release No. 68973 (Feb. 22, 2013), 78 FR 13726, 13727, 13729–30, 13739–
40 (Feb. 28, 2013) (SR-NYSEArca-2012-66); First Trust Gold Trust, Exchange Act Release No. 70195
(Aug. 14, 2013), 78 FR 51239, 51240 (Aug. 20, 2013) (SR-NYSEArca-2013-61) (notice of proposed rule
change included NYSE Arca’s representation that FINRA, on behalf of the exchange, may obtain trading
information regarding gold futures and options on gold futures from members of the Intermarket
Surveillance Group, including COMEX, or from markets “with which [NYSE Arca] has in place a
comprehensive surveillance sharing agreement,” and that gold futures are traded on COMEX and the
Tokyo Commodity Exchange, with a cross-reference to the proposed rule change to list and trade shares of

this point, the Commission’s prior orders have noted that the spot commodities and currency
markets for which it has previously approved spot exchange-traded products (“ETPs”) are
generally unregulated and that the Commission relied on the underlying futures market as the
regulated market of significant size that formed the basis for approving the series of Currency16
and Commodity-Based Trust Shares, including gold, silver, platinum, palladium, copper, and
other commodities and currencies. The Commission specifically noted in the Winklevoss Order
that the First Gold Approval Order “was based on an assumption that the currency market and
the spot gold market were largely unregulated.”17
As such, the regulated market of significant size test does not require that the spot bitcoin
market be regulated in order for the Commission to approve this proposal, and precedent makes
clear that an underlying market for a spot commodity or currency being a regulated market
would actually be an exception to the norm. These largely unregulated currency and commodity
markets do not provide the same protections as the markets that are subject to the Commission’s
oversight, but the Commission has consistently looked to surveillance sharing agreements with
the underlying futures market in order to determine whether such products were consistent with
the Act. With this in mind, the Chicago Mercantile Exchange (“CME”) bitcoin futures (“Bitcoin
Futures”) market is the proper market to consider in determining whether there is a related
regulated market of significant size.

the ETFS Gold Trust, in which NYSE Arca represented that COMEX is one of the “major world gold
markets,” Exchange Act Release No. 69847 (June 25, 2013), 78 FR 39399, 39400, 39405 (July 1, 2013));
Merk Gold Trust, Exchange Act Release No. 71378 (Jan. 23, 2014), 79 FR 4786, 4786–87 (Jan. 29, 2014)
(SR-NYSEArca-2013-137) (notice of proposed rule change included NYSE Arca’s representation that
“COMEX is the largest gold futures and options exchange” and that NYSE Arca “may obtain trading
information via the Intermarket Surveillance Group,” including with respect to transactions occurring on
COMEX pursuant to CME and NYMEX’s membership, or from exchanges “with which [NYSE Arca] has
in place a comprehensive surveillance sharing agreement,” Exchange Act Release No. 71038 (Dec. 11,
2013), 78 FR 76367, 76369, 76374 (Dec. 17, 2013)); Long Dollar Gold Trust, Exchange Act Release No.
79518 (Dec. 9, 2016), 81 FR 90876, 90881, 90886, 90888 (Dec. 15, 2016) (SR-NYSEArca-2016-84).
See Exchange Rule 14.11(e)(5).

See Winklevoss Order at 37592.

Further to this point, the Exchange notes that the Commission has approved proposals
related to the listing and trading of funds that would primarily hold CME Bitcoin Futures that are
registered under the Securities Act of 1933.18 In the Teucrium Approval, the Commission found
the CME Bitcoin Futures market to be a regulated market of significant size as it relates to CME
Bitcoin Futures; a position that represents a departure from prior disapproval orders for ETPs
that would hold actual bitcoin instead of derivatives contracts (“Spot Bitcoin ETPs”) that use the
exact same pricing methodology as the CME Bitcoin Futures. In the recently decided Grayscale
Investments, LLC v Securities and Exchange Commission,19 however, the court addressed this
conflict by finding that the SEC had failed to provide a coherent explanation as to why it had
approved the Bitcoin Futures ETPs while disapproving the proposal to list and trade shares of the
Grayscale Bitcoin Trust and vacating the disapproval order.20 As further discussed below, both
the Exchange and the Sponsor believe that this proposal and the included analysis are sufficient
to establish that the CME Bitcoin Futures market represents a regulated market of significant size
as it relates both to the CME Bitcoin Futures market and to the spot bitcoin market and that this
proposal should be approved, consistent with the Teucrium precedent and in view of the court’s
findings relating to the Grayscale Order.
Finally, as discussed in greater detail below, by using professional custodians and other
service providers, the Trust provides investors interested in exposure to bitcoin via the securities
markets with important protections that are not always available to investors that invest directly
in bitcoin, including protection against counterparty insolvency, cyber attacks, and other risks.
For example, an exchange-traded vehicle such as the Trust, which will be subject to the
registration and periodic reporting requirements of the 1933 Act and the Exchange Act, would

See Exchange Act Release No. 94620 (April 6, 2022), 87 FR 21676 (April 12, 2022) (the “Teucrium
Approval”) and 94853 (May 5, 2022) (collectively, with the Teucrium Approval, the “Bitcoin Futures
Approvals”).

Grayscale Investments, LLC v. Securities and Exchange Commission, et al., Case No. 22-1142 (the
“Grayscale Order”).

Id.

offer U.S. investors an alternative to directing their bitcoin investments into loosely regulated
offshore vehicles (including loosely regulated centralized trading platforms that have since faced
bankruptcy proceedings or other insolvencies).
Background
Bitcoin is a digital asset based on the decentralized, open source protocol of the peer-topeer computer network launched in 2009 that governs the creation, movement, and ownership of
bitcoin and hosts the public ledger, or “blockchain,” on which all bitcoin transactions are
recorded (the “Bitcoin Network” or “Bitcoin”). The decentralized nature of the Bitcoin Network
allows parties to transact directly with one another based on cryptographic proof instead of
relying on a trusted third party. The protocol also lays out the rate of issuance of new bitcoin
within the Bitcoin Network, a rate that is reduced by half approximately every four years with an
eventual hard cap of 21 million. It’s generally understood that the combination of these two
features – a systemic hard cap of 21 million bitcoin and the ability to transact trustlessly with
anyone connected to the Bitcoin Network – gives bitcoin its value. The first rule filing proposing
to list an ETP to provide exposure to bitcoin in the U.S. was submitted by the Exchange on June
30, 2016.21 At that time, blockchain technology, and digital assets that utilized it, were relatively
new to the broader public. The market capitalization of all bitcoin in existence at that time was
approximately $10 billion. No registered offering of digital asset securities or shares in an
investment vehicle with exposure to bitcoin or any other cryptocurrency had yet been conducted,
and the regulated infrastructure for conducting a digital asset securities offering had not begun to
develop.22 Similarly, regulated U.S. Bitcoin Futures contracts did not exist. The CFTC had
determined that bitcoin is a commodity,23 but had not engaged in significant enforcement actions

See Winklevoss Order.

Digital assets that are securities under U.S. law are referred to throughout this proposal as “digital asset
securities.” All other digital assets, including bitcoin, are referred to interchangeably as “cryptocurrencies”
or “virtual currencies.” The term “digital assets” refers to all digital assets, including both digital asset
securities and cryptocurrencies, together.

See “In the Matter of Coinflip, Inc.” (“Coinflip”) (CFTC Docket 15-29 (September 17, 2015)) (order
instituting proceedings pursuant to Sections 6(c) and 6(d) of the CEA, making findings and imposing

in the space. The New York Department of Financial Services (“NYDFS”) adopted its final
“BitLicense” regulatory framework in 2015, but had only approved four entities to engage in
activities relating to virtual currencies (whether through granting a BitLicense or a limitedpurpose trust charter) as of June 30, 2016.24 While the first over-the-counter bitcoin fund
launched in 2013, public trading was limited and the fund had only $60 million in assets.25 There
were very few, if any, traditional financial institutions engaged in the space, whether through
investment or providing services to digital asset companies. In January 2018, the staff of the
Commission noted in a letter to the Investment Company Institute (“ICI”) and Securities
Industry and Financial Markets Association (“SIFMA”) that it was not aware, at that time, of a
single custodian providing fund custodial services for digital assets.26 The digital assets financial
ecosystem, including bitcoin, has progressed significantly in the intervening years. The
development of a regulated market for digital asset securities has significantly evolved, with
market participants having conducted registered public offerings of both digital asset securities27
and shares in investment vehicles holding Bitcoin Futures.28 Additionally, licensed and regulated
service providers have emerged to provide fund custodial services for digital assets, among other

remedial sanctions), in which the CFTC stated: “Section 1a(9) of the CEA defines ‘commodity’ to include,
among other things, ‘all services, rights, and interests in which contracts for future delivery are presently or
in the future dealt in.’ 7 U.S.C. 1a(9). The definition of a ‘commodity’ is broad. See, e.g., Board of Trade
of City of Chicago v. SEC, 677 F. 2d 1137, 1142 (7th Cir. 1982). Bitcoin and other virtual currencies are
encompassed in the definition and properly defined as commodities.”
A list of virtual currency businesses that are entities regulated by the NYDFS is available on the NYDFS
website. See https://www.dfs.ny.gov/apps_and_licensing/virtual_currency_businesses/regulated_entities

Data as of March 31, 2016 according to publicly available filings. See Bitcoin Investment Trust Form S-1,
dated May 27, 2016, available:
https://www.sec.gov/Archives/edgar/data/1588489/000095012316017801/filename1.htm.

See letter from Dalia Blass, Director, Division of Investment Management, U.S. Securities and Exchange
Commission to Paul Schott Stevens, President & CEO, Investment Company Institute and Timothy W.
Cameron, Asset Management Group – Head, Securities Industry and Financial Markets Association
(January 18, 2018), available at https://www.sec.gov/divisions/investment/noaction/2018/cryptocurrency011818.htm.

See Prospectus supplement filed pursuant to Rule 424(b)(1) for INX Tokens (Registration No. 333233363), available at:
https://www.sec.gov/Archives/edgar/data/1725882/000121390020023202/ea125858424b1_inxlimited.htm.

See Prospectus filed by Stone Ridge Trust VI on behalf of NYDIG Bitcoin Strategy Trust Registration,
available at: https://www.sec.gov/Archives/edgar/data/1764894/000119312519309942/d693146d497.htm.

services, including the Bitcoin Custodian. For example, in February 2023, the Commission
proposed to amend Rule 206(4)-2 under the Advisers Act of 1940 (the “custody rule”) to expand
the scope beyond client funds and securities to include all crypto assets, among other assets;29 in
May 2021, the staff of the Commission released a statement permitting open-end mutual funds to
invest in cash-settled Bitcoin Futures; in December 2020, the Commission adopted a conditional
no-action position permitting certain special purpose broker-dealers to custody digital asset
securities under Rule 15c3-3 under the Exchange Act (the “Custody Statement”);30 in September
2020, the staff of the Commission released a no-action letter permitting certain broker-dealers to
operate a non-custodial Alternative Trading System (“ATS”) for digital asset securities, subject
to specified conditions;31 in October 2019, the staff of the Commission granted temporary relief
from the clearing agency registration requirement to an entity seeking to establish a securities
clearance and settlement system based on distributed ledger technology,32 and multiple transfer
agents who provide services for digital asset securities registered with the Commission.33
Outside the Commission's purview, the regulatory landscape has also changed
significantly since 2016, and cryptocurrency markets have grown and evolved as well. The
market for bitcoin is approximately 100 times larger, having at one point reached a market

See Investment Advisers Act Release No. 6240 88 FR 14672 (March 9, 2023) (Safeguarding Advisory
Client Assets).

See Securities Exchange Act Release No. 90788, 86 FR 11627 (February 26, 2021) (File Number S7-2520) (Custody of Digital Asset Securities by Special Purpose Broker-Dealers).

See letter from Elizabeth Baird, Deputy Director, Division of Trading and Markets, U.S. Securities and
Exchange Commission to Kris Dailey, Vice President, Risk Oversight & Operational Regulation, Financial
Industry Regulatory Authority (September 25, 2020), available at:
https://www.sec.gov/divisions/marketreg/mr-noaction/2020/finra-ats-role-in-settlement-of-digital-assetsecurity-trades-09252020.pdf.

See letter from Jeffrey S. Mooney, Associate Director, Division of Trading and Markets, U.S. Securities
and Exchange Commission to Charles G. Cascarilla & Daniel M. Burstein, Paxos Trust Company, LLC
(October 28, 2019), available at: https://www.sec.gov/divisions/marketreg/mr-noaction/2019/paxos-trustcompany-102819-17a.pdf.

See, e.g., Form TA-1/A filed by Tokensoft Transfer Agent LLC (CIK: 0001794142) on January 8, 2021,
available at:
https://www.sec.gov/Archives/edgar/data/1794142/000179414219000001/xslFTA1X01/primary_doc.xml.

capitalization of over $1 trillion.34 According to the CME Bitcoin Futures report, from February
13, 2023 through March 27, 2023, CFTC regulated Bitcoin Futures represented between $750
million and $3.2 billion in notional trading volume on CME Bitcoin Futures on a daily basis.35
Open interest was over $1.4 billion for the entirety of the period and at one point was over $2
billion.36 ETPs that primarily hold CME Bitcoin Futures have raised over $1 billion dollars in
assets. The CFTC has exercised its regulatory jurisdiction in bringing a number of enforcement
actions related to bitcoin and against trading platforms that offer cryptocurrency trading.37 As of
February 14, 2023, the NYDFS has granted no fewer than thirty-four BitLicenses,38 including to
established public payment companies like PayPal Holdings, Inc. and Square, Inc., and limited
purpose trust charters to entities providing cryptocurrency custody services. In addition, the
Treasury's Office of Foreign Assets Control (“OFAC”) has brought enforcement actions over
apparent violations of applicable sanctions laws in connection with the provision of wallet
management services for digital assets.39

As of December 1, 2021, the total market capitalization of all bitcoin in circulation was approximately
$1.08 trillion.

Data sourced from the CME Bitcoin Futures Report: 30 March 2023, available at:
https://www.cmegroup.com/markets/cryptocurrencies/bitcoin/bitcoin.volume.htm.

See, e.g., Id.

The CFTC’s annual report for Fiscal Year 2022 (which ended on September 30, 2022) noted that the CFTC
completed the fiscal year with 18 enforcement filings related to digital assets. “Digital asset actions
included manipulation, a $1.7 billion fraudulent scheme, and a decentralized autonomous organization
(DAO) failing to register as a SEF or FCM or to seek DCM designation.” See CFTC FY 2022 Agency
Financial Report, available at: https://www.cftc.gov/media/7941/2022afr/download. Additionally, the
CFTC filed on March 27, 2023, a civil enforcement action against the owner/operators of the Binance
centralized digital asset trading platform, which is one of the largest bitcoin derivative exchanges. See
CFTC Release No. 8680-23 (March 27, 2023), available at:
https://www.cftc.gov/PressRoom/PressReleases/8680-23.

See https://www.dfs.ny.gov/virtual_currency_businesses.

See U.S. Department of the Treasury Enforcement Release: “OFAC Enters Into $98,830 Settlement with
BitGo, Inc. for Apparent Violations of Multiple Sanctions Programs Related to Digital Currency
Transactions” (December 30, 2020) available at:
https://home.treasury.gov/system/files/126/20201230_bitgo.pdf. See also U.S. Department of the Treasury
Enforcement Release: “Treasury Announces Two Enforcement Actions for over $24M and $29M Against
Virtual Currency Exchange, Bittrex, Inc.” (October 11, 2022) available at:
https://home.treasury.gov/news/press-releases/jy1006. See also U.S. Department of Treasure Enforcement
Release “OFAC Settles with Virtual Currency Exchange Kraken for $362,158.70 Related to Apparent
Violations of the Iranian Transactions and Sanctions Regulations” (November 28, 2022) available at:
https://home.treasury.gov/system/files/126/20221128_kraken.pdf.

In addition to the regulatory developments laid out above, more traditional financial
market participants have become more active in cryptocurrency trading and investment activity:
large insurance companies, asset managers, university endowments, pension funds, and even
historically bitcoin skeptical fund managers have allocated to bitcoin investments. As noted in
the Financial Stability Oversight Council (“FSOC”) report on Digital Asset Financial Stability
Risks and Regulation, “[i]ndustry surveys suggest that the scale of these investments grew
quickly during the boom in crypto-asset markets through late 2021. In June 2022, PwC estimated
that the number of crypto-specialist hedge funds was more than 300 globally, with $4.1 billion in
assets under management. In addition, in a survey PwC found that 38 percent of surveyed
traditional hedge funds were currently investing in ‘digital assets,’ compared to 21 percent the
year prior.”40 The largest over-the-counter bitcoin fund previously filed a Form 10 registration
statement, which the staff of the Commission reviewed and which took effect automatically, and
is now a reporting company.41 Established U.S. exchange-traded companies like Tesla, Inc.,
MicroStrategy Incorporated, and Square, Inc., among others, have announced substantial
investments in bitcoin in amounts as large as $1.5 billion (Tesla) and $425 million
(MicroStrategy). The foregoing examples demonstrate that bitcoin has gained mainstream usage
and recognition across the U.S. market.
Despite these developments, access for U.S. retail investors to gain exposure to bitcoin
via a transparent and U.S. regulated, U.S. exchange-traded vehicle remains limited. Instead
current options include: (i) facing the counter-party risk, legal uncertainty, technical risk, and
complexity associated with accessing spot bitcoin; (ii) over-the-counter bitcoin funds (“OTC
Bitcoin Funds”) with high management fees and potentially volatile premiums and discounts;42

See the FSOC “Report on Digital Asset Financial Stability Risks and Regulation 2022” (October 3, 2022)
(at footnote 26) at https://home.treasury.gov/system/files/261/FSOC-Digital-Assets-Report-2022.pdf.

See Letter from Division of Corporation Finance, Office of Real Estate & Construction to Barry E. Silbert,
Chief Executive Officer, Grayscale Bitcoin Trust (January 31, 2020)
https://www.sec.gov/Archives/edgar/data/1588489/000000000020000953/filename1.pdf.

The premium and discount for OTC Bitcoin Funds is known to move rapidly. For example, over the period
of 12/21/20 to 1/21/21, the premium for the largest OTC Bitcoin Funds went from 40.18% to 2.79%. While

(iii) purchasing shares of operating companies that they believe will provide proxy exposure to
bitcoin with limited disclosure about the associated risks;43 or (iv) purchasing Bitcoin Futures
exchange-traded funds (“ETFs”), as defined below, which represent a sub-optimal structure for
long-term investors that will cost them significant amounts of money every year compared to
Spot Bitcoin ETPs, as further discussed below. Meanwhile, investors in many other countries,
including Canada and Brazil, are able to use more traditional exchange listed and traded products
(including ETFs holding physical bitcoin) to gain exposure to bitcoin. Similarly, investors in
Switzerland and across Europe have access to ETPs which trade on regulated exchanges and
provide exposure to a broad array of spot crypto assets. U.S. investors, by contrast, are left with
fewer and more risky means of getting bitcoin exposure, as described above.44
To this point, the lack of a Spot Bitcoin ETP exposes U.S. investor assets to significant
risk because investors that would otherwise seek crypto asset exposure through a Spot Bitcoin
ETP are forced to find alternative exposure through generally riskier means. For instance, many

the price of bitcoin appreciated significantly during this period and NAV per share increased by 41.25%,
the price per share increased by only 3.58%. This means that investors are buying shares of a fund that
experiences significant volatility in its premium and discount outside of the fluctuations in price of the
underlying asset. Even operating within the normal premium and discount range, it’s possible for an
investor to buy shares of an OTC Bitcoin Funds only to have those shares quickly lose 10% or more in
dollar value excluding any movement of the price of bitcoin. That is to say – the price of bitcoin could have
stayed exactly the same from market close on one day to market open the next, yet the value of the shares
held by the investor decreased only because of the fluctuation of the premium. As more investment
vehicles, including mutual funds and ETFs, seek to gain exposure to bitcoin, the easiest option for a buy
and hold strategy for such vehicles is often an OTC Bitcoin Funds, meaning that even investors that do not
directly buy OTC Bitcoin Funds can be disadvantaged by extreme premiums (or discounts) and
premium/discount volatility.
A number of operating companies engaged in unrelated businesses – such as Tesla (a car manufacturer) and
MicroStrategy (an enterprise software company) – have announced investments as large as $5.3 billion in
bitcoin. Without access to bitcoin exchange-traded products, retail investors seeking investment exposure to
bitcoin may end up purchasing shares in these companies in order to gain the exposure to bitcoin that they
seek. In fact, mainstream financial news networks have written a number of articles providing investors
with guidance for obtaining bitcoin exposure through publicly traded companies (such as MicroStrategy,
Tesla, and bitcoin mining companies, among others) instead of dealing with the complications associated
with buying spot bitcoin in the absence of a Bitcoin ETP. See e.g., “7 public companies with exposure to
bitcoin” (February 8, 2021) available at: https://finance.yahoo.com/news/7-public-companies-withexposure-to-bitcoin-154201525.html; and “Want to get in the crypto trade without holding bitcoin
yourself? Here are some investing ideas” (February 19, 2021) available at:
https://www.cnbc.com/2021/02/19/ways-to-invest-in-bitcoin-without-holding-the-cryptocurrency-yourself.html.

The Exchange notes that the list of countries above is not exhaustive and that securities regulators in a
number of additional countries have either approved or otherwise allowed the listing and trading of Spot
Bitcoin ETPs.

U.S. investors that held their digital assets in accounts at FTX,45 Celsius Network LLC,46
BlockFi Inc.47 and Voyager Digital Holdings, Inc.48 have become unsecured creditors in the
insolvencies of those entities. If a Spot Bitcoin ETP was available, it is likely that at least a
portion of the billions of dollars tied up in those proceedings would still reside in the brokerage
accounts of U.S. investors, having instead been invested in a transparent, regulated, and wellunderstood structure – a Spot Bitcoin ETP. To this point, approval of a Spot Bitcoin ETP would
represent a major win for the protection of U.S. investors in the crypto asset space. As further
described below, the Trust, like all other series of Commodity-Based Trust Shares, is designed to
protect investors against the risk of losses through fraud and insolvency that arise by holding
bitcoin, on centralized platforms.
Additionally, investors in other countries, specifically Canada, generally pay lower fees
than U.S. retail investors that invest in OTC Bitcoin Funds due to the fee pressure that results
from increased competition among available bitcoin investment options. Without an approved
and regulated Spot Bitcoin ETP in the U.S. as a viable alternative, U.S. investors could seek to
purchase shares of non-U.S. bitcoin vehicles in order to get access to bitcoin exposure. Given the
separate regulatory regime and the potential difficulties associated with any international
litigation, such an arrangement would create more risk exposure for U.S. investors than they
would otherwise have with a U.S. exchange listed ETP. In addition to the benefits to U.S.
investors articulated throughout this proposal, approving this proposal (and others like it) would
provide U.S. ETFs and mutual funds with a U.S.-listed and regulated product to provide such
access rather than relying on either more expensive, riskier U.S. based products or products
listed and primarily regulated in other countries.
Bitcoin Futures ETFs
See FTX Trading Ltd., et al., Case No. 22-11068.

See Celsius Network LLC, et al., Case No. 22-10964.

See BlockFi Inc., Case No. 22-19361.

See Voyager Digital Holdings, Inc., et al., Case No. 22-10943.

The Exchange and Sponsor applaud the Commission for allowing the launch of ETFs
registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and the
Bitcoin Futures Approvals that provide exposure to bitcoin primarily through CME Bitcoin
Futures (“Bitcoin Futures ETFs”). Allowing such products to list and trade is a productive first
step in providing U.S. investors and traders with transparent, exchange-listed tools for expressing
an investment view on bitcoin. The Bitcoin Futures Approvals, however, have created a logical
inconsistency in the application of the standard the Commission applies when considering
Bitcoin ETP proposals.
As discussed further below, the standard applicable to Bitcoin ETPs is whether the listing
exchange has in place a comprehensive surveillance sharing agreement with a regulated market
of significant size in the underlying asset. Previous disapproval orders have made clear that a
market that constitutes a regulated market of significant size is generally a futures and/or options
market based on the underlying reference asset rather than the spot commodity markets, which
are often unregulated.49 Leaving aside the analysis of that standard until later in this proposal,50
the Exchange believes that the following rationale the Commission applied to a Bitcoin Futures
ETF should result in the Commission approving this and other Spot Bitcoin ETP proposals:
The CME “comprehensively surveils futures market conditions and price movements on
a real-time and ongoing basis in order to detect and prevent price distortions, including
price distortions caused by manipulative efforts.” Thus, the CME’s surveillance can
reasonably be relied upon to capture the effects on the CME Bitcoin Futures market
caused by a person attempting to manipulate the proposed futures ETP by manipulating
the price of CME Bitcoin Futures contracts, whether that attempt is made by directly
See Winklevoss Order at 37593, specifically footnote 202, which includes the language from numerous
approval orders for which the underlying futures markets formed the basis for approving series of ETPs
that hold physical metals, including gold, silver, palladium, platinum, and precious metals more broadly;
and 37600, specifically where the Commission provides that “when the spot market is unregulated – the
requirement of preventing fraudulent and manipulative acts may possibly be satisfied by showing that the
ETP listing market has entered into a surveillance-sharing agreement with a regulated market of significant
size in derivatives related to the underlying asset.” As noted above, the Exchange believes that these
citations are particularly helpful in making clear that the spot market for a spot commodity ETP need not be
“regulated” in order for a spot commodity ETP to be approved by the Commission, and in fact that it’s
been the common historical practice of the Commission to rely on such derivatives markets as the regulated
market of significant size because such spot commodities markets are largely unregulated.

As further outlined below, both the Exchange and the Sponsor believe that the Bitcoin Futures market
represents a regulated market of significant size and that this proposal and others like it should be approved
on this basis.

trading on the CME Bitcoin Futures market or indirectly by trading outside of the CME
Bitcoin Futures market. As such, when the CME shares its surveillance information with
Arca, the information would assist in detecting and deterring fraudulent or manipulative
misconduct related to the non-cash assets held by the proposed ETP.51
CME Bitcoin Futures pricing is based on pricing from spot bitcoin markets. The statement from
the Teucrium Approval that “CME’s surveillance can reasonably be relied upon to capture the
effects on the CME Bitcoin Futures market caused by a person attempting to manipulate the
proposed futures ETP by manipulating the price of CME Bitcoin Futures contracts…indirectly
by trading outside of the CME Bitcoin Futures market,” makes clear that the Commission
believes that CME’s surveillance can capture the effects of trading on the relevant spot markets
on the pricing of CME Bitcoin Futures.
This was further acknowledged in the “Grayscale lawsuit”52 when Judge Rao stated “…the
Commission in the Teucrium order recognizes that the futures prices are influenced by the spot
prices, and the Commission concludes in approving futures ETPs that any fraud on the spot
market can be adequately addressed by the fact that the futures market is a regulated one…”. The
Exchange agrees with the Commission on this point and notes that the pricing mechanism
applicable to the Shares is similar to that of the CME Bitcoin Futures.
The structure of Bitcoin Futures ETFs provides negative outcomes for buy and hold
investors as compared to a Spot Bitcoin ETP.53 Specifically, the cost of rolling CME Bitcoin
Futures contracts will cause the Bitcoin Futures ETFs to lag the performance of bitcoin itself and
would cost U.S. investors significant amounts of money on an annual basis compared to Spot
Bitcoin ETPs. Such rolling costs would not be required for Spot Bitcoin ETPs that hold bitcoin.
Further, Bitcoin Futures ETFs could potentially hit CME position limits, which would force a

See Teucrium Approval at 21679.

Grayscale Investments, LLC v. Securities and Exchange Commission, et al., Case No. 22-1142.

See e.g., “Bitcoin ETF’s Success Could Come at Fundholders’ Expense,” Wall Street Journal (October 24,
2021), available at: https://www.wsj.com/articles/bitcoin-etfs-success-could-come-at-fundholders-expense11635080580; “Physical Bitcoin ETF Prospects Accelerate,” ETF.com (October 25, 2021), available at:
https://www.etf.com/sections/blog/physical-bitcoin-etf-prospectsshine?nopaging=1&cf_chl_jschl_tk=pmd_JsK.fjXz9eAQW9zol0qpzhXDrrlpIVdoCloLXbLjl441635476946-0-gqNtZGzNApCjcnBszQql.

Bitcoin Futures ETF to invest in non-futures assets for bitcoin exposure and cause potential
investor confusion and lack of certainty about what such Bitcoin Futures ETFs are actually
holding to try to get exposure to bitcoin, which would also materially change the risk profile
associated with such an ETF. While Bitcoin Futures ETFs represent a useful trading tool, they
are clearly sub-optimal as the sole exchange traded vehicle structure for U.S. investors that are
looking for long-term exposure to bitcoin and could, based on the calculations above,
unnecessarily cost U.S. investors significant amounts of money every year compared to Spot
Bitcoin ETPs. The Exchange believes that any proposal to list and trade a Spot Bitcoin ETP
should be reviewed by the Commission with this important investor protection context in mind.
Based on the foregoing, the Exchange and Sponsor believe that an objective review of the
proposals to list Spot Bitcoin ETPs compared to and in view of the Bitcoin Futures ETFs and the
Bitcoin Futures Approvals as well as limitations of existing approved product structures, would
lead to the conclusion that Spot Bitcoin ETPs would benefit U.S. investors and should be
available to U.S. investors. As such, this proposal and other comparable proposals to list and
trade Spot Bitcoin ETPs should be approved by the Commission. In summary, U.S. investors
lose significant amounts of money from holding Bitcoin Futures ETFs as compared to Spot
Bitcoin ETPs, losses which could be prevented by the Commission approving Spot Bitcoin
ETPs. Additionally, any concerns related to preventing fraudulent and manipulative acts and
practices related to Spot Bitcoin ETPs would apply equally to the spot markets underlying the
futures contracts held by a Bitcoin Futures ETF. Both the Exchange and Sponsor believe that the
CME Bitcoin Futures market is a regulated market of significant size and that such manipulation
concerns are mitigated, as described extensively below. After allowing and approving the listing
and trading of Bitcoin Futures ETFs that hold primarily CME Bitcoin Futures, however, the only
consistent outcome would be approving Spot Bitcoin ETPs on the basis that the CME Bitcoin
Futures market is a regulated market of significant size.

Given the current landscape, approving this proposal (and others like it) and allowing
Spot Bitcoin ETPs to be listed and traded alongside Bitcoin Futures ETFs would establish a
consistent regulatory approach, provide U.S. investors with choice in product structures for
bitcoin exposure, and offer flexibility in the means of gaining exposure to bitcoin through
transparent, regulated, U.S. exchange-listed vehicles.
Bitcoin Futures
CME began offering trading in Bitcoin Futures in 2017. Each contract represents five
bitcoin and is based on the CME CF Bitcoin Reference Rate.54 The contracts trade and settle like
other cash-settled commodity futures contracts. Nearly every measurable metric related to
Bitcoin Futures has generally trended up since launch, although certain notional volume
calculations have decreased roughly in line with the decrease in the price of bitcoin. For
example, there were 143,215 Bitcoin Futures contracts traded in April 2023 (approximately
$20.7 billion) compared to 193,182 ($5 billion), 104,713 ($3.9 billion), 118,714 ($42.7 billion),
and 111,964 ($23.2 billion) contracts traded in April 2019, April 2020, April 2021, and April
2022, respectively.55

According to CME, the CME CF Bitcoin Reference Rate aggregates the trade flow of major bitcoin spot
trading platforms during a specific calculation window into a once-a-day reference rate of the U.S. dollar
price of bitcoin. Calculation rules are geared toward maximum transparency and real-time replicability in
underlying spot markets, including Bitstamp, Coinbase, Gemini, itBit, Kraken, and LMAX Digital. For
additional information, refer to https://www.cmegroup.com/trading/cryptocurrency-indices/cf-bitcoinreference-rate.html?redirect=/trading/cf-bitcoin-reference-rate.html.

Source: CME, Yahoo Finance 4/30/23.

The number of large open interest holders56 and unique accounts trading Bitcoin Futures
have both increased, even in the face of heightened bitcoin price volatility.

A large open interest holder in Bitcoin Futures is an entity that holds at least 25 contracts, which is the
equivalent of 125 bitcoin. At a price of approximately $29,268.81 per bitcoin on 4/30/2023, more than 100
firms had outstanding positions of greater than $3.65 million in Bitcoin Futures.

The Sponsor further believes that publicly available research, including research done as
part of rule filings proposing to list and trade shares of Spot Bitcoin ETPs, corroborates the
overall trend outlined above and supports the thesis that the Bitcoin Futures pricing leads the
spot market and, thus, a person attempting to manipulate the Shares would also have to trade on
that market to manipulate the ETP. Specifically, the Sponsor believes that such research
indicates that Bitcoin Futures lead the bitcoin spot market in price formation.57
Section 6(b)(5) and the Applicable Standards
The Commission has approved numerous series of Trust Issued Receipts,58 including
Commodity-Based Trust Shares,59 to be listed on U.S. national securities exchanges. In order for
any proposed rule change from an exchange to be approved, the Commission must determine
See Exchange Act Releases No. 94080 (January 27, 2022), 87 FR 5527 (April 12, 2022) (specifically
“Amendment No. 1 to the Proposed Rule Change To List and Trade Shares of the Wise Origin Bitcoin
Trust Under BZX Rule 14.11(3)(4), Commodity-Based Trust Shares”); 94982 (May 25, 2022), 87 FR
33250 (June 1, 2022); 94844 (May 4, 2022), 87 FR 28043 (May 10, 2022); and 93445 (October 28, 2021),
86 FR 60695 (November 3, 2021). See also Hu, Y., Hou, Y. and Oxley, L. (2019). “What role do futures
markets play in Bitcoin pricing? Causality, cointegration and price discovery from a time-varying
perspective” (available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7481826/). This academic
research paper concludes that “There exist no episodes where the Bitcoin spot markets dominates the price
discovery processes with regard to Bitcoin futures. This points to a conclusion that the price formation
originates solely in the Bitcoin futures market. We can, therefore, conclude that the Bitcoin futures markets
dominate the dynamic price discovery process based upon time-varying information share measures.
Overall, price discovery seems to occur in the Bitcoin futures markets rather than the underlying spot
market based upon a time-varying perspective.”

See Exchange Rule 14.11(f).

Commodity-Based Trust Shares, as described in Exchange Rule 14.11(e)(4), are a type of Trust Issued
Receipt.

that, among other things, the proposal is consistent with the requirements of Section 6(b)(5) of
the Act, specifically including: (i) the requirement that a national securities exchange’s rules are
designed to prevent fraudulent and manipulative acts and practices;60 and (ii) the requirement that
an exchange proposal be designed, in general, to protect investors and the public interest. The
Exchange believes that this proposal is consistent with the requirements of Section 6(b)(5) of the
Act and that this filing sufficiently demonstrates that the CME Bitcoin Futures market represents
a regulated market of significant size and that, on the whole, the manipulation concerns
previously articulated by the Commission are sufficiently mitigated to the point that they are
outweighed by quantifiable investor protection issues that would be resolved by approving this
proposal.
(i) Designed to Prevent Fraudulent and Manipulative Acts and Practices
In order to meet this standard in a proposal to list and trade a series of Commodity-Based
Trust Shares, the Commission requires that an exchange demonstrate that there is a
comprehensive surveillance-sharing agreement in place61 with a regulated market of significant

As the Exchange has stated in a number of other public documents, it continues to believe that bitcoin is
resistant to price manipulation and that “other means to prevent fraudulent and manipulative acts and
practices” exist to justify dispensing with the requisite surveillance sharing agreement. The geographically
diverse and continuous nature of bitcoin trading render it difficult and prohibitively costly to manipulate the
price of bitcoin. The fragmentation across bitcoin platforms, the relatively slow speed of transactions, and
the capital necessary to maintain a significant presence on each trading platform make manipulation of
bitcoin prices through continuous trading activity challenging. To the extent that there are bitcoin trading
platforms engaged in or allowing wash trading or other activity intended to manipulate the price of bitcoin
on other markets, such pricing does not normally impact prices on other trading platforms because
participants will generally ignore markets with quotes that they deem non-executable. Moreover, the
linkage between the bitcoin markets and the presence of arbitrageurs in those markets means that the
manipulation of the price of bitcoin price on any single venue would require manipulation of the global
bitcoin price in order to be effective. Arbitrageurs must have funds distributed across multiple trading
platforms in order to take advantage of temporary price dislocations, thereby making it unlikely that there
will be strong concentration of funds on any particular bitcoin trading platform or OTC platform. As a
result, the potential for manipulation on a trading platform would require overcoming the liquidity supply
of such arbitrageurs who are effectively eliminating any cross-market pricing differences.

As previously articulated by the Commission, “The standard requires such surveillance-sharing agreements
since “they provide a necessary deterrent to manipulation because they facilitate the availability of
information needed to fully investigate a manipulation if it were to occur.” The Commission has
emphasized that it is essential for an exchange listing a derivative securities product to enter into a
surveillance- sharing agreement with markets trading underlying securities for the listing exchange to have
the ability to obtain information necessary to detect, investigate, and deter fraud and market manipulation,
as well as violations of exchange rules and applicable federal securities laws and rules. The hallmarks of a
surveillance-sharing agreement are that the agreement provides for the sharing of information about market
trading activity, clearing activity, and customer identity; that the parties to the agreement have reasonable
ability to obtain access to and produce requested information; and that no existing rules, laws, or practices

size. Both the Exchange and CME are members of the Intermarket Surveillance Group
(“ISG”).62 The only remaining issue to be addressed is whether the Bitcoin Futures market
constitutes a market of significant size, which both the Exchange and the Sponsor believe that it
does. The terms “significant market” and “market of significant size” include a market (or group
of markets) as to which: (a) there is a reasonable likelihood that a person attempting to
manipulate the ETP would also have to trade on that market to manipulate the ETP, so that a
surveillance-sharing agreement would assist the listing exchange in detecting and deterring
misconduct; and (b) it is unlikely that trading in the ETP would be the predominant influence on
prices in that market.63
The Commission has also recognized that the “regulated market of significant size”
standard is not the only means for satisfying Section 6(b)(5) of the act, specifically providing that
a listing exchange could demonstrate that “other means to prevent fraudulent and manipulative
acts and practices” are sufficient to justify dispensing with the requisite surveillance-sharing
agreement.64
(a)

Manipulation of the ETP

According to the research and analysis presented above, the Bitcoin Futures market is the
leading market for bitcoin price formation. Where Bitcoin Futures lead the price in the spot
market such that a potential manipulator of the bitcoin spot market (beyond just the constituents
of the Index 65) would have to participate in the Bitcoin Futures market, it follows that a potential

would impede one party to the agreement from obtaining this information from, or producing it to, the other
party.” The Commission has historically held that joint membership in the ISG constitutes such a
surveillance sharing agreement. See Securities Exchange Act Release No. 88284 (February 26, 2020), 85
FR 12595 (March 3, 2020) (SR-NYSEArca-2019-39) (the “Wilshire Phoenix Disapproval”).
For a list of the current members and affiliate members of ISG, see www.isgportal.com.

See Wilshire Phoenix Disapproval.

See Winklevoss Order at 37580. The Commission has also specifically noted that it “is not applying a
‘cannot be manipulated’ standard; instead, the Commission is examining whether the proposal meets the
requirements of the Exchange Act and, pursuant to its Rules of Practice, places the burden on the listing
exchange to demonstrate the validity of its contentions and to establish that the requirements of the
Exchange Act have been met.” Id. at 37582.

As further described below, the “Index” for the Trust is the CME CF Bitcoin Reference Rate.

manipulator of the Shares would similarly have to transact in the Bitcoin Futures market because
the Index is based on spot prices. As such, the Exchange believes that part (a) of the significant
market test outlined above is satisfied and that common membership in ISG between the
Exchange and CME would assist the listing exchange in detecting and deterring misconduct in
the trading of the Shares.
(b)

Predominant Influence on Prices in Spot and Bitcoin Futures

The Exchange and Sponsor also believe that trading in the Shares would not be the
predominant force influencing prices in the Bitcoin Futures market or spot market for a number
of reasons, including the significant daily trading volume in the Bitcoin Futures market, the size
of bitcoin’s market capitalization, and the significant liquidity available in the spot market. In
addition to the Bitcoin Futures market data points cited above, the spot market for bitcoin is also
very liquid. As the court found in the Grayscale Order, the Exchange and the Sponsor submit that
“[b]ecause the spot market is deeper and more liquid than the futures market, manipulation should
be more difficult, not less.”
(c)

Other Means to Prevent Fraudulent and Manipulative Acts and Practices

The Commission also permits a listing exchange to demonstrate that “other means to
prevent fraudulent and manipulative acts and practices” are sufficient to justify dispensing with
the requisite surveillance-sharing agreement. The Exchange and Sponsor believe that such
conditions are present.
(ii) Designed to Protect Investors and the Public Interest
The Exchange believes that the proposal is designed to protect investors and the public
interest. Over the past several years, U.S. investor exposure to bitcoin through OTC Bitcoin
Funds has grown into the tens of billions of dollars, including through Bitcoin Futures ETFs.
With that growth, so too has grown the quantifiable investor protection issues to U.S. investors
including in connection with roll costs for Bitcoin Futures ETFs and premium/discount volatility
and management fees for OTC Bitcoin Funds. The Exchange believes that the concerns related

to the prevention of fraudulent and manipulative acts and practices have been sufficiently
addressed for this proposal to be consistent with the Act and, to the extent that the Commission
disagrees with that assertion, such concerns are now outweighed by investor protection concerns.
As such, the Exchange believes that approving this proposal (and comparable proposals)
provides the Commission with the opportunity to allow U.S. investors to access bitcoin in a
regulated and transparent exchange-traded vehicle that would act to limit risk and benefit U.S.
investors by: (i) reducing premium and discount volatility as compared to OTC investment
vehicles; (ii) increasing competitive pressure on management fees resulting in fee
compression/reductions; (iii) reducing risks and costs as compared to those associated with
investing in Bitcoin Futures ETFs and operating companies that represent imperfect proxies for
bitcoin exposure; and (iv) providing an alternative to custodying spot bitcoin.
Pando Asset Spot Bitcoin Trust
Wilmington Trust is the trustee (“Trustee”). The Bitcoin Custodian will be responsible
for safekeeping of the Trust’s bitcoin. U.S. Bank serves as the Trust’s administrator (the
“Administrator”), transfer agent (the “Transfer Agent”), and will act as the Cash Custodian of the
Trust’s cash and cash equivalents. 66 As noted above, Coinbase Custody Trust Company, LLC is
the Bitcoin Custodian and will be responsible for safekeep of the Trust’s bitcoin.
According to the Registration Statement, each Share will represent a fractional undivided
beneficial interest in the Trust. The Trust’s assets will consist only of bitcoin, cash, and cash
equivalents.
According to the Registration Statement, the Trust is neither an investment company
registered under the Investment Company Act of 1940, as amended,67 nor a commodity pool for
purposes of the Commodity Exchange Act (“CEA”), and neither the Trust nor or the Sponsor is
subject to regulation as a commodity pool operator or a commodity trading adviser in connection

Cash equivalents are short-term instruments with maturities of less than 3 months.

15 U.S.C. 80a-1.

with the Shares. The Trust will not acquire and will disclaim any incidental right (“IR”) or IR
asset received, for example as a result of forks or airdrops, and such assets will not be taken into
account for purposes of determining NAV.
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.
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.
Investment Objective
According to the Registration Statement and as further described below, the investment
objective of the Trust is to generally reflect the performance of the price of bitcoin before
payment of the Trust’s expenses. In seeking to achieve its investment objective, the Trust will
hold only bitcoin, cash, and cash equivalents. The Trust will value its Shares daily based on the
value of bitcoin as reflected by the Index, which is an independently calculated value based on
an aggregation of executed trade flow of major bitcoin spot trading platforms. Specifically, the
Index is calculated based on certain transactions of all of its constituent bitcoin trading platforms,
which are currently Bitstamp, Coinbase, itBit, Kraken, Gemini, and LMAX Digital, and which
may change from time to time. If the Index is not available or the Sponsor determines, in its sole
discretion, that the Index should not be used, the Trust’s holdings may be fair valued in
accordance with the policy approved by the Sponsor.68

Any alternative method will only be employed on an ad hoc basis. Any permanent change to the calculation
of the NAV would require a proposed rule change under Rule 19b-4.

The Index
As described in the Registration Statement, the Trust will value its Shares daily based on
the value of bitcoin as reflected by the Index. The Index is calculated daily and aggregates the
notional value of bitcoin trading activity across major bitcoin spot trading platforms. The Index
uses the same methodology as the CME CF Bitcoin Reference Rate (“BRR”), including utilizing
the same constituent bitcoin trading platforms, which is the underlying rate to determine
settlement of CME Bitcoin Futures contracts, except that the Index is calculated as of 4 p.m. ET,
whereas the BRR is calculated as of 4 p.m. London time. The Index is designed based on the
International Organization of Securities Commissions (“IOSCO”) Principals for Financial
Benchmarks. The administrator of the Index is CF Benchmarks Ltd. (the “Index Provider”).
The Index was created to facilitate financial products based on bitcoin. It serves as a
once-a-day benchmark rate of the U.S. dollar price of bitcoin (USD/BTC), calculated as of 4:00
p.m. ET. The Index, which has been calculated and published since February 28, 2022,
aggregates the trade flow of several bitcoin trading platforms, during an observation window
between 3:00 p.m. and 4:00 p.m. ET into the U.S. dollar price of one bitcoin at 4:00 p.m. ET.
Specifically, the Index is calculated based on the “Relevant Transactions” (as defined below) of
all of its constituent bitcoin trading platforms, which are currently Coinbase, Bitstamp, Kraken,
itBit, LMAX Digital and Gemini (the “Constituent Platforms”), as follows:
•

All Relevant Transactions are added to a joint list, recording the time of

execution, trade price and size for each transaction.
•

The list is partitioned by timestamp into 12 equally-sized time intervals of 5 (five)

minute length.
•

For each partition separately, the volume-weighted median trade price is

calculated from the trade prices and sizes of all Relevant Transactions, i.e., across all Constituent
Platforms. A volume-weighted median differs from a standard median in that a weighting factor,
in this case trade size, is factored into the calculation.

•

The Index is then determined by the equally-weighted average of the volume

medians of all partitions.
The Index does not include any futures prices in its methodology. A “Relevant
Transaction” is any cryptocurrency versus U.S. dollar spot trade that occurs during the
observation window between 3:00 p.m. and 4:00 p.m. ET on a Constituent Platform in the
BTC/USD pair that is reported and disseminated by a Constituent Platform through its publicly
available Application Programming Interface and observed by the Index Provider.
The Sponsor believes that the use of the Index is reflective of a reasonable valuation of
the average spot price of bitcoin and that resistance to manipulation is a priority aim of its design
methodology. The methodology: (i) takes an observation period and divides it into equal
partitions of time; (ii) then calculates the volume-weighted median of all transactions within each
partition; and (iii) the value is determined from the arithmetic mean of the volume-weighted
medians, equally weighted. By employing the foregoing steps, the Index thereby seeks to ensure
that transactions in bitcoin conducted at outlying prices do not have an undue effect on the value
of the Index, large trades or clusters of trades transacted over a short period of time will not have
an undue influence on the Index value, and the effect of large trades at prices that deviate from
the prevailing price are mitigated from having an undue influence on the Index value.
In addition, the Sponsor notes that an oversight function is implemented by the Index
Provider in seeking to ensure that the Index is administered through codified policies for Index
integrity.
Index data and the description of the Index are based on information made publicly
available by the Index Provider on its website at https://www.cfbenchmarks.com.
Net Asset Value
NAV means the total assets of the Trust (which includes bitcoin, cash and cash
equivalents) less total liabilities of the Trust. The Administrator will determine the NAV of the
Trust on each day that the Exchange is open for regular trading, as promptly as practical after

4:00 p.m. ET. The NAV of the Trust is the aggregate value of the Trust’s assets less its estimated
accrued but unpaid liabilities (which include accrued expenses). In determining the Trust’s NAV,
the Administrator values the bitcoin held by the Trust based on the price set by the Index as of
4:00 p.m. ET. The Administrator also determines the NAV per Share.
The NAV for the Trust will be calculated by the Administrator once a day and will be
disseminated daily to all market participants at the same time.
Availability of Information
The website for the Trust, which will be publicly accessible at no charge, will contain the
following information: (a) the current NAV per Share daily and the prior business day’s NAV
per Share and the reported BZX Official Closing Price;69 (b) the BZX Official Closing Price in
relation to the NAV per Share as of the time the NAV is calculated and a calculation of the
premium or discount of such price against such NAV per Share; (c) data in chart form displaying
the frequency distribution of discounts and premiums of the BZX Official Closing Price against
the NAV per Share, within appropriate ranges for each of the four previous calendar quarters (or
for the life of the Trust, if shorter); (d) the prospectus; and (e) other applicable quantitative
information. The aforementioned information will be published as of the close of business
available on the Trust’s website at https://puglisiassoc.com, or any successor thereto. The Trust
will also disseminate its holdings on a daily basis on its website.
The Intraday Indicative Value (“IIV”) will be calculated by using the prior day’s closing
NAV per Share as a base and updating that value during Regular Trading Hours to reflect
changes in the value of the Trust’s bitcoin holdings during the trading day, which is based on the
CME CF Bitcoin Real Time Index (“BRTI”). The IIV disseminated during Regular Trading
Hours should not be viewed as an actual real-time update of the NAV, which will be calculated
only once at the end of each trading day. The IIV will be widely disseminated on a per Share

As defined in Rule 11.23(a)(3), the term “BZX Official Closing Price” shall mean the price disseminated to
the consolidated tape as the market center closing trade.

basis every 15 seconds during the Exchange’s Regular Trading Hours through the facilities of the
consolidated tape association (CTA) and Consolidated Quotation System (CQS) high speed
lines. In addition, the IIV will be available through on-line information services such as
Bloomberg and Reuters.
The price of bitcoin will be made available by one or more major market data vendors,
updated at least every 15 seconds during Regular Trading Hours.
As noted above, the Index is calculated daily and aggregates the notional value of bitcoin
trading activity across major bitcoin spot trading platforms. Index data, the Index value, and the
description of the Index are based on information made publicly available by the Index Provider
on its website at https://www.cfbenchmarks.com.
Quotation and last sale information for bitcoin is widely disseminated through a variety
of major market data vendors, including Bloomberg and Reuters. Information relating to trading,
including price and volume information, in bitcoin is available from major market data vendors
and from the trading platforms on which bitcoin are traded. Depth of book information is also
available from bitcoin trading platforms. The normal trading hours for bitcoin trading platforms
are 24 hours per day, 365 days per year.
Information regarding market price and trading volume of the Shares will be continually
available on a real-time basis throughout the day on brokers’ computer screens and other
electronic services. Information regarding the previous day’s BZX Official Closing Price and
trading volume information for the Shares will be published daily in the financial section of
newspapers. Quotation and last-sale information regarding the Shares will be disseminated
through the facilities of the CTA.
The Bitcoin Custodian
The Bitcoin Custodian carefully considers the design of the physical, operational and
cryptographic systems for secure storage of the Trust’s private keys in an effort to lower the risk
of loss or theft. The Bitcoin Custodian utilizes a variety of security measures to ensure that

private keys necessary to transfer digital assets remain uncompromised and that the Trust
maintains exclusive ownership of its assets. The Bitcoin Custodian will keep a substantial
portion of the private keys associated with the Trust’s bitcoin in “cold storage”70 or similarly
secure technology (the “Cold Vault Balance”) The hardware, software, systems, and procedures
of the Bitcoin Custodian may not be available or cost-effective for many investors to access
directly Only specific individuals are authorized to participate in the custody process, and no
individual acting alone will be able to access or use any of the private keys. In addition, no
combination of the executive officers of the Sponsor, acting alone or together, will be able to
access or use any of the private keys that hold the Trust’s bitcoin.
Creation and Redemption of Shares
When the Trust sells or redeems its Shares, it will do so in cash transactions in blocks of
5,000 Shares that are based on the quantity of bitcoin attributable to each Share of the Trust (e.g.,
a Creation Basket) at the NAV. The authorized participants will deliver only cash to create
Shares and will receive only cash when redeeming Shares. Further, authorized participants will
not directly or indirectly purchase, hold, deliver, or receive bitcoin as part of the creation or
redemption process or otherwise direct the Trust or a third party with respect to purchasing,
holding, delivering, or receiving bitcoin as part of the creation or redemption process. The Trust
will create Shares by receiving bitcoin from a third party that is not the authorized participant
and the Trust—not the authorized participant—is responsible for selecting the third party to
deliver the bitcoin. Further, the third party will not be acting as an agent of the authorized
participant with respect to the delivery of the bitcoin to the Trust or acting at the direction of the
authorized participant with respect to the delivery of the bitcoin to the Trust. The Trust will

The term “cold storage” refers to a safeguarding method by which the private keys corresponding to
bitcoins stored on a digital wallet are removed from any computers actively connected to the internet. Cold
storage of private keys may involve keeping such wallet on a non-networked computer or electronic device
or storing the public key and private keys relating to the digital wallet on a storage device (for example, a
USB thumb drive) or printed medium (for example, papyrus or paper) and deleting the digital wallet from
all computers.

redeem shares by delivering bitcoin to a third party that is not the authorized participant and the
Trust—not the authorized participant—is responsible for selecting the third party to receive the
bitcoin. Further, the third party will not be acting as an agent of the authorized participant with
respect to the receipt of the bitcoin from the Trust or acting at the direction of the authorized
participant with respect to the receipt of the bitcoin from the Trust.
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 transaction
Creation Baskets must be placed by 4:00 p.m. Eastern Time, 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. 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 p.m. ET
on the date the order to purchase is properly received. The Administrator determines the quantity
of bitcoin associated with a Creation Basket for a given day by dividing the number of bitcoin
held by the Trust as of the opening of business on that business day, 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.
The Sponsor (including its delegates) will maintain ownership and control of the Trust’s
bitcoin in a manner consistent with good delivery requirements for spot commodity transactions.
Rule 14.11(e)(4) – Commodity-Based Trust Shares
The Shares will be subject to BZX Rule 14.11(e)(4), which sets forth the initial and
continued listing criteria applicable to Commodity-Based Trust Shares. The Exchange represents
that, for initial and continued listing, the Trust must be in compliance with Rule 10A-3 under the
Act. A minimum of 100,000 Shares will be outstanding at the commencement of listing on the

Exchange. The Exchange will obtain a representation that the NAV will be calculated daily and
information about the NAV and the assets of the Trust will be made available to all market
participants at the same time. The Exchange notes that, as defined in Rule 14.11(e)(4)(C)(i), the
Shares will be: (a) issued by a trust that holds (1) a specified commodity71 deposited with the
trust, or (2) a specified commodity and, in addition to such specified commodity, cash; (b) 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) 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.
Upon termination of the Trust, the Shares will be removed from listing. The Trustee,
Delaware Trust Company, is a trust company having substantial capital and surplus and the
experience and facilities for handling corporate trust business, as required under Rule
14.11(e)(4)(E)(iv)(a) and that no change will be made to the trustee without prior notice to and
approval of the Exchange. The Exchange also notes that, pursuant to Rule 14.11(e)(4)(F), neither
the Exchange nor any agent of the Exchange shall have any liability for damages, claims, losses
or expenses caused by any errors, omissions or delays in calculating or disseminating any
underlying commodity value, the current value of the underlying commodity required to be
deposited to the Trust in connection with issuance of Commodity-Based Trust Shares; resulting
from any negligent act or omission by the Exchange, or any agent of the Exchange, or any act,
condition or cause beyond the reasonable control of the Exchange, its agent, including, but not
limited to, an act of God; fire; flood; extraordinary weather conditions; war; insurrection; riot;
strike; accident; action of government; communications or power failure; equipment or software
malfunction; or any error, omission or delay in the reports of transactions in an underlying
commodity. Finally, as required in Rule 14.11(e)(4)(G), the Exchange notes that any registered

For purposes of Rule 14.11(e)(4), the term commodity takes on the definition of the term as provided in the
Commodity Exchange Act. As noted above, the CFTC has opined that Bitcoin is a commodity as defined in
Section 1a(9) of the Commodity Exchange Act. See Coinflip.

market maker (“Market Maker”) in the Shares must file with the Exchange in a manner
prescribed by the Exchange and keep current a list identifying all accounts for trading in an
underlying commodity, related commodity futures or options on commodity futures, or any other
related commodity derivatives, which the registered Market Maker may have or over which it
may exercise investment discretion. No registered Market Maker shall trade in an underlying
commodity, related commodity futures or options on commodity futures, or any other related
commodity derivatives, in an account in which a registered Market Maker, directly or indirectly,
controls trading activities, or has a direct interest in the profits or losses thereof, which has not
been reported to the Exchange as required by this Rule. In addition to the existing obligations
under Exchange rules regarding the production of books and records (see, e.g., Rule 4.2), the
registered Market Maker in Commodity-Based Trust Shares shall make available to the
Exchange such books, records or other information pertaining to transactions by such entity or
registered or non-registered employee affiliated with such entity for its or their own accounts for
trading the underlying physical commodity, related commodity futures or options on commodity
futures, or any other related commodity derivatives, as may be requested by the Exchange.
The Exchange is able to obtain information regarding trading in the Shares and the
underlying bitcoin, Bitcoin Futures contracts, options on Bitcoin Futures, or any other bitcoin
derivative through members acting as registered Market Makers, in connection with their
proprietary or customer trades.
As a general matter, the Exchange has regulatory jurisdiction over its members, and their
associated persons. The Exchange also has regulatory jurisdiction over any person or entity
controlling a member, as well as a subsidiary or affiliate of a member that is in the securities
business. A subsidiary or affiliate of a member organization that does business only in
commodities would not be subject to Exchange jurisdiction, but the Exchange could obtain
information regarding the activities of such subsidiary or affiliate through surveillance sharing
agreements with regulatory organizations of which such subsidiary or affiliate is a member.

Trading Halts
With respect to trading halts, the Exchange may consider all relevant factors in exercising
its discretion to halt or suspend trading in the Shares. The Exchange will halt trading in the
Shares under the conditions specified in BZX Rule 11.18. Trading may be halted because of
market conditions or for reasons that, in the view of the Exchange, make trading in the Shares
inadvisable. These may include: (1) the extent to which trading is not occurring in the bitcoin
underlying the Shares; or (2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present. Trading in the Shares also will be
subject to Rule 14.11(e)(4)(E)(ii), which sets forth circumstances under which trading in the
Shares may be halted.
If the IIV or the value of the Index is not being disseminated as required, the Exchange
may halt trading during the day in which the interruption to the dissemination of the IIV or the
value of the Index occurs. If the interruption to the dissemination of the IIV or the value of the
Index persists past the trading day in which it occurred, the Exchange will halt trading no later
than the beginning of the trading day following the interruption.
In addition, if the Exchange becomes aware that the NAV with respect to the Shares is
not disseminated to all market participants at the same time, it will halt trading in the Shares until
such time as the NAV is available to all market participants.
Trading Rules
The Exchange deems the Shares to be equity securities, thus rendering trading in the
Shares subject to the Exchange’s existing rules governing the trading of equity securities. BZX
will allow trading in the Shares during all trading sessions on the Exchange. The Exchange has
appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided
in BZX Rule 11.11(a) the minimum price variation for quoting and entry of orders in securities
traded on the Exchange is $0.01 where the price is greater than $1.00 per share or $0.0001 where

the price is less than $1.00 per share. The Shares of the Trust will conform to the initial and
continued listing criteria set forth in BZX Rule 14.11(e)(4).
Surveillance
The Exchange represents that its surveillance procedures are adequate to properly
monitor the trading of the Shares on the Exchange during all trading sessions and to deter and
detect violations of Exchange rules and the applicable federal securities laws. Trading of the
Shares through the Exchange will be subject to the Exchange’s surveillance procedures for
derivative products, including Commodity-Based Trust Shares. FINRA conducts certain crossmarket surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The
Exchange is responsible for FINRA’s performance under this regulatory services agreement.
The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as
needed regarding trading in the Shares, CME Bitcoin Futures, or any other bitcoin derivative
with other markets and other entities that are members of the ISG, and the Exchange, or FINRA
on behalf of the Exchange, or both, may obtain trading information regarding trading in the
Shares, CME Bitcoin Futures, or any other bitcoin derivative from such markets and other
entities.72 The Exchange may obtain information regarding trading in the Shares, CME Bitcoin
Futures, or any other bitcoin derivative via ISG, from other exchanges who are members or
affiliates of the ISG, or with which the Exchange has entered into a comprehensive surveillance
sharing agreement.
In addition, the Exchange also has a general policy prohibiting the distribution of
material, non-public information by its employees.
The Sponsor has represented to the Exchange that it will advise the Exchange of any
failure by the Trust or the Shares to comply with the continued listing requirements, and,
pursuant to its obligations under Section 19(g)(1) of the Exchange Act, the Exchange will surveil

For a list of the current members and affiliate members of ISG, see www.isgportal.com.

for compliance with the continued listing requirements. If the Trust or the Shares are not in
compliance with the applicable listing requirements, the Exchange will commence delisting
procedures under Exchange Rule 14.12.
Information Circular
Prior to the commencement of trading, the Exchange will inform its members in an
Information Circular of the special characteristics and risks associated with trading the Shares.
Specifically, the Information Circular will discuss the following: (i) the procedures for the
creation and redemption of Creation Baskets (and that the Shares are not individually
redeemable); (ii) BZX Rule 3.7, which imposes suitability obligations on Exchange members
with respect to recommending transactions in the Shares to customers; (iii) how information
regarding the IIV and the Trust’s NAV are disseminated; (iv) the risks involved in trading the
Shares outside of Regular Trading Hours73 when an updated IIV will not be calculated or
publicly disseminated; (v) the requirement that members deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction;
and (vi) trading information. The Information Circular will also reference the fact that there is no
regulated source of last sale information regarding bitcoin, that the Commission has no
jurisdiction over the trading of bitcoin as a commodity, and that the CFTC has regulatory
jurisdiction over the trading of CME Bitcoin Futures contracts and options on CME Bitcoin
Futures contracts.
In addition, the Information Circular will advise members, prior to the commencement of
trading, of the prospectus delivery requirements applicable to the Shares. Members purchasing
the Shares for resale to investors will deliver a prospectus to such investors. The Information
Circular will also discuss any exemptive, no-action and interpretive relief granted by the
Commission from any rules under the Act.

Regular Trading Hours is the time between 9:30 a.m. and 4:00 p.m. Eastern time.

2.

Statutory Basis

The Exchange believes that the proposal is consistent with Section 6(b) of the Act74 in
general and Section 6(b)(5) of the Act75 in particular in that it is 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 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.
The Commission has approved numerous series of Trust Issued Receipts, including
Commodity-Based Trust Shares, to be listed on U.S. national securities exchanges. In order for
any proposed rule change from an exchange to be approved, the Commission must determine
that, among other things, the proposal is consistent with the requirements of Section 6(b)(5) of
the Act, specifically including: (i) the requirement that a national securities exchange’s rules are
designed to prevent fraudulent and manipulative acts and practices;76 and (ii) the requirement that
an exchange proposal be designed, in general, to protect investors and the public interest. The
Exchange believes that this proposal is consistent with the requirements of Section 6(b)(5) of the
Act and that this filing, in conjunction with precedent filings, sufficiently demonstrates that the
CME Bitcoin Futures market represents a regulated market of significant size and that, on the

15 U.S.C. 78f.

15 U.S.C. 78f(b)(5).

As the Exchange has stated in a number of other public documents, it continues to believe that bitcoin is
resistant to price manipulation and that “other means to prevent fraudulent and manipulative acts and
practices” exist to justify dispensing with the requisite surveillance sharing agreement. The geographically
diverse and continuous nature of bitcoin trading render it difficult and prohibitively costly to manipulate the
price of bitcoin. The fragmentation across bitcoin platforms, the relatively slow speed of transactions, and
the capital necessary to maintain a significant presence on each trading platform make manipulation of
bitcoin prices through continuous trading activity challenging and impractical. To the extent that there are
bitcoin trading platforms engaged in or allowing wash trading or other activity intended to manipulate the
price of bitcoin on other markets, such pricing does not normally impact prices on other trading platform
because participants will generally ignore markets with quotes that they deem non-executable. Moreover,
the linkage between the bitcoin markets and the presence of arbitrageurs in those markets means that the
manipulation of the price of bitcoin price on any single venue would require manipulation of the global
bitcoin price in order to be effective. Arbitrageurs must have funds distributed across multiple trading
platforms in order to take advantage of temporary price dislocations, thereby making it unlikely that there
will be strong concentration of funds on any particular bitcoin trading platform or OTC platform. As a
result, the potential for manipulation on a trading platform would require overcoming the liquidity supply
of such arbitrageurs who are effectively eliminating any cross-market pricing differences.

whole, the manipulation concerns previously articulated by the Commission are sufficiently
mitigated to the point that they are outweighed by quantifiable investor protection issues that
would be resolved by approving this proposal.
(i) Designed to Prevent Fraudulent and Manipulative Acts and Practices
In order to meet this standard in a proposal to list and trade a series of Commodity-Based
Trust Shares, the Commission requires that an exchange demonstrate that there is a
comprehensive surveillance-sharing agreement in place77 with a regulated market of significant
size. Both the Exchange and CME are members of ISG. The only remaining issue to be
addressed is whether the Bitcoin Futures market constitutes a market of significant size, which
both the Exchange and the Sponsor believe that it does. The terms “significant market” and
“market of significant size” include a market (or group of markets) as to which: (a) there is a
reasonable likelihood that a person attempting to manipulate the ETP would also have to trade on
that market to manipulate the ETP, so that a surveillance-sharing agreement would assist the
listing exchange in detecting and deterring misconduct; and (b) it is unlikely that trading in the
ETP would be the predominant influence on prices in that market.78
The Commission has also recognized that the “regulated market of significant size”
standard is not the only means for satisfying Section 6(b)(5) of the Act, specifically providing
that a listing exchange could demonstrate that “other means to prevent fraudulent and

As previously articulated by the Commission, “The standard requires such surveillance-sharing agreements
since “they provide a necessary deterrent to manipulation because they facilitate the availability of
information needed to fully investigate a manipulation if it were to occur.” The Commission has
emphasized that it is essential for an exchange listing a derivative securities product to enter into a
surveillance- sharing agreement with markets trading underlying securities for the listing exchange to have
the ability to obtain information necessary to detect, investigate, and deter fraud and market manipulation,
as well as violations of exchange rules and applicable federal securities laws and rules. The hallmarks of a
surveillance-sharing agreement are that the agreement provides for the sharing of information about market
trading activity, clearing activity, and customer identity; that the parties to the agreement have reasonable
ability to obtain access to and produce requested information; and that no existing rules, laws, or practices
would impede one party to the agreement from obtaining this information from, or producing it to, the other
party.” The Commission has historically held that joint membership in the ISG constitutes such a
surveillance sharing agreement. See Wilshire Phoenix Disapproval).

Id.

manipulative acts and practices” are sufficient to justify dispensing with the requisite
surveillance-sharing agreement.79
(a)

Manipulation of the ETP

According to the research and analysis presented above, the Bitcoin Futures market is the
leading market for bitcoin price formation. Where Bitcoin Futures lead the price in the spot
market such that a potential manipulator of the bitcoin spot market (beyond just the constituents
of the Index) would have to participate in the Bitcoin Futures market, it follows that a potential
manipulator of the Shares would similarly have to transact in the Bitcoin Futures market because
the Index is based on spot prices. As such, the Exchange believes that part (a) of the significant
market test outlined above is satisfied and that common membership in ISG between the
Exchange and CME would assist the listing exchange in detecting and deterring misconduct in
the Shares.
(b)

Predominant Influence on Prices in Spot and Bitcoin Futures

The Exchange and Sponsor also believe that trading in the Shares would not be the
predominant influence on prices in the Bitcoin Futures market or spot market for a number of
reasons, including the significant daily trading volume in the Bitcoin Futures market, the size of
bitcoin’s market capitalization, and the significant liquidity available in the spot market. In
addition to the Bitcoin Futures market data points cited above, the spot market for bitcoin is also
very liquid. As the court found in the Grayscale Order, the Exchange and the Sponsor submit that
“[b]ecause the spot market is deeper and more liquid than the futures market, manipulation should
be more difficult, not less.”
(c)

Other Means to Prevent Fraudulent and Manipulative Acts and Practices

See Winklevoss Order at 37580. The Commission has also specifically noted that it “is not applying a
‘cannot be manipulated’ standard; instead, the Commission is examining whether the proposal meets the
requirements of the Exchange Act and, pursuant to its Rules of Practice, places the burden on the listing
exchange to demonstrate the validity of its contentions and to establish that the requirements of the
Exchange Act have been met.” Id. at 37582.

As noted above, the Commission also permits a listing exchange to demonstrate that
“other means to prevent fraudulent and manipulative acts and practices” are sufficient to justify
dispensing with the requisite surveillance-sharing agreement. The Exchange and Sponsor believe
that such conditions are present in this case, in addition to the existence of a surveillance sharing
agreement that meets the Commission’s previously articulated standards.
(ii) Designed to Protect Investors and the Public Interest
The Exchange believes that the proposal is designed to protect investors and the public
interest. Over the past several years, U.S. investor exposure to bitcoin through OTC Bitcoin
Funds has grown into the tens of billions of dollars, including through Bitcoin Futures ETFs.
With that growth, so too has grown the quantifiable investor protection issues to U.S. investors
including in connection with roll costs for Bitcoin Futures ETFs and premium/discount volatility
and management fees for OTC Bitcoin Funds. The Exchange believes that the concerns related
to the prevention of fraudulent and manipulative acts and practices have been sufficiently
addressed for this proposal to be consistent with the Act and, to the extent that the Commission
disagrees with that assertion, such concerns are now outweighed by investor protection concerns.
As such, the Exchange believes that approving this proposal (and comparable proposals)
provides the Commission with the opportunity to allow U.S. investors to access bitcoin in a
regulated and transparent exchange-traded vehicle that would act to limit risk and benefit U.S.
investors by: (i) reducing premium and discount volatility as compared to OTC investment
vehicles; (ii) increasing competitive pressure on management fees resulting in fee
compression/reductions; (iii) reducing risks and costs as compared to those associated with
investing in Bitcoin Futures ETFs and operating companies that represent imperfect proxies for
bitcoin exposure; and (iv) providing an alternative to custodying spot bitcoin.
Commodity-Based Trust Shares
The Exchange believes that the proposed rule change is designed to prevent fraudulent
and manipulative acts and practices in that the Shares will be listed on the Exchange pursuant to

the initial and continued listing criteria in Exchange Rule 14.11(e)(4). The Exchange believes
that its surveillance procedures are adequate to properly monitor the trading of the Shares on the
Exchange during all trading sessions and to deter and detect violations of Exchange rules and the
applicable federal securities laws. Trading of the Shares through the Exchange will be subject to
the Exchange’s surveillance procedures for derivative products, including Commodity-Based
Trust Shares. The issuer has represented to the Exchange that it will advise the Exchange of any
failure by the Trust or the Shares to comply with the continued listing requirements, and,
pursuant to its obligations under Section 19(g)(1) of the Exchange Act, the Exchange will surveil
for compliance with the continued listing requirements. If the Trust or the Shares are not in
compliance with the applicable listing requirements, the Exchange will commence delisting
procedures under Exchange Rule 14.12. The Exchange may obtain information regarding trading
in the Shares and listed bitcoin derivatives via the ISG, from other exchanges who are members
or affiliates of the ISG, or with which the Exchange has entered into a comprehensive
surveillance sharing agreement.
Availability of Information
The Exchange also believes that the proposal promotes market transparency in that a
large amount of information is currently available about bitcoin and will be available regarding
the Trust and the Shares. The website for the Trust, which will be publicly accessible at no
charge, will contain the following information: (a) the current NAV per Share daily and the prior
business day’s NAV per Share and the reported BZX Official Closing Price; (b) the BZX
Official Closing Price80 in relation to the NAV per Share as of the time the NAV is calculated
and a calculation of the premium or discount of such price against such NAV per Share; (c) data
in chart form displaying the frequency distribution of discounts and premiums of the BZX
Official Closing Price against the NAV per Share, within appropriate ranges for each of the four

As defined in Rule 11.23(a)(3), the term “BZX Official Closing Price” shall mean the price disseminated to
the consolidated tape as the market center closing trade.

previous calendar quarters (or for the life of the Trust, if shorter); (d) the prospectus; and (e)
other applicable quantitative information. The aforementioned information will be published as
of the close of business available on the Trust’s website at https://puglisiassoc.com/, or any
successor thereto. The Trust will also disseminate its holdings on a daily basis on its website.
The IIV will be calculated by using the prior day’s closing NAV per Share as a base and
updating that value during Regular Trading Hours to reflect changes in the value of the Trust’s
bitcoin holdings during the trading day, which is based on the CME CF Bitcoin Real Time Index
(“BRTI”). The IIV disseminated during Regular Trading Hours should not be viewed as an
actual real-time update of the NAV, which will be calculated only once at the end of each trading
day. The IIV will be widely disseminated on a per Share basis every 15 seconds during the
Exchange’s Regular Trading Hours through the facilities of the consolidated tape association
(CTA) and Consolidated Quotation System (CQS) high speed lines. In addition, the IIV will be
available through on-line information services such as Bloomberg and Reuters.
The price of bitcoin will be made available by one or more major market data vendors,
updated at least every 15 seconds during Regular Trading Hours.
As noted above, the Index is calculated daily and aggregates the notional value of bitcoin
trading activity across major bitcoin spot trading platforms. Index data, the Index value, and the
description of the Index are based on information made publicly available by the Index Provider
on its website at https://www.cfbenchmarks.com.
Quotation and last sale information for bitcoin is widely disseminated through a variety
of major market data vendors, including Bloomberg and Reuters. Information relating to trading,
including price and volume information, in bitcoin is available from major market data vendors
and from the trading platforms on which bitcoin are traded. Depth of book information is also
available from bitcoin trading platforms. The normal trading hours for bitcoin trading platforms
are 24 hours per day, 365 days per year.

Information regarding market price and trading volume of the Shares will be continually
available on a real-time basis throughout the day on brokers’ computer screens and other
electronic services. Information regarding the previous day’s BZX Official Closing Price and
trading volume information for the Shares will be published daily in the financial section of
newspapers. Quotation and last-sale information regarding the Shares will be disseminated
through the facilities of the CTA.
In sum, the Exchange believes that this proposal is consistent with the requirements of
Section 6(b)(5) of the Act, that this filing sufficiently demonstrates that the CME Bitcoin Futures
market represents a regulated market of significant size, and that on the whole the manipulation
concerns previously articulated by the Commission are sufficiently mitigated to the point that
they are outweighed by investor protection issues that would be resolved by approving this
proposal.
The Exchange believes that the proposal is, in particular, designed to protect investors
and the public interest. The investor protection issues for U.S. investors has grown significantly
over the last several years, through roll costs for Bitcoin Futures ETFs and premium/discount
volatility and management fees for OTC Bitcoin Funds. As discussed herein, this growth
investor protection concerns need to be reevaluated and rebalanced with the prevention of
fraudulent and manipulative acts and practices concerns that previous disapproval orders have
relied upon. The Exchange notes that in addition to all of the arguments herein which it believes
sufficiently establish the CME Bitcoin Futures market as a regulated market of significant size, it
is logically inconsistent to find that the CME Bitcoin Futures market is a significant market as it
relates to the CME Bitcoin Futures market, but not a significant market as it relates to the bitcoin
spot market for the numerous reasons laid out above.

Finally, the Exchange believes this proposal should be approved as it is similar to other
proposals to list spot bitcoin ETFs, which were recently approved by the Commission.81
For the above reasons, the Exchange believes that the proposed rule change is consistent
with the requirements of Section 6(b)(5) of the Act.
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 purpose of the Act. The
Exchange notes that the proposed rule change, rather will facilitate the listing and trading of an
additional exchange-traded product that will enhance competition among both market
participants and listing venues, to the benefit of investors and the marketplace.
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 rule-comments@sec.gov. Please include file number
SR-CboeBZX-2023-101 on the subject line.

See Securities Exchange Act Release No. 99306 (January 10, 2024) 89 FR 3008 (January 17, 2024) (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).

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-2023-101. 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-CboeBZX-2023-101 and should be
submitted on or before [INSERT DATE 21 DAYS AFTER DATE OF PUBLICATION IN THE
FEDERAL REGISTER].
For the Commission, by the Division of Trading and Markets, pursuant to delegated
authority.82
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-14379 Filed: 6/28/2024 8:45 am; Publication Date: 7/1/2024]

17 CFR 200.30-3(a)(12).