[Federal Register Volume 87, Number 91 (Wednesday, May 11, 2022)]
[Notices]
[Pages 28848-28855]
[FR Doc No: 2022-10065]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94853; File No. SR-NASDAQ-2021-066]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order
Granting Approval of a Proposed Rule Change, as Modified by Amendment
Nos. 1 and 2, To List and Trade Shares of the Valkyrie XBTO Bitcoin
Futures Fund Under Nasdaq Rule 5711(g)

May 5, 2022.

I. Introduction

    On August 23, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to list and trade shares
(``Shares'') of the Valkyrie XBTO Bitcoin Futures Fund (``Trust'')
under Nasdaq Rule 5711(g) (Commodity Futures Trust Shares). On August
25, 2021, the Exchange filed Amendment No. 1 to the proposed rule
change. The proposed rule change, as modified by Amendment No. 1, was
published for comment in the Federal Register on September 9, 2021.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 92865 (Sept. 2,
2021), 86 FR 50570 (``Notice'').
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    On September 29, 2021, pursuant to Section 19(b)(2) of the Exchange
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 December 7, 2021, the Commission instituted
proceedings under Section 19(b)(2)(B) of the Exchange Act \6\ to
determine whether to approve or disapprove the proposed rule change.\7\
On February 25, 2022, the Commission designated a longer period for
Commission action on the proposed rule change.\8\ On April 12, 2022,
the Exchange filed partial Amendment No. 2 to the proposed rule
change.\9\ The Commission has received no comments on the proposed rule
change.
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 93172, 86 FR 55071
(Oct. 5, 2021).
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 93731, 86 FR 70882
(Dec. 13, 2021).
    \8\ See Securities Exchange Act Release No. 94316, 87 FR 12211
(Mar. 3, 2022).
    \9\ In Amendment No. 2, the Exchange clarified, among other
things, that under no circumstances will the Trust hold and/or
invest in any assets other than bitcoin futures contracts traded on
the Chicago Mercantile Exchange, Inc., cash, and Money Market
Instruments (as defined below), and provided additional
representations that are commonly made by and/or required for
futures-based exchange-traded products listed under Nasdaq Rule
5711(g) (Commodity Futures Trust Shares). Because Amendment No. 2
does not materially alter the substance of the proposed rule change,
Amendment No. 2 is not subject to notice and comment. The full text
of Amendment No. 2 is available on the Commission's website at:
https://www.sec.gov/comments/sr-nasdaq-2021-066/srnasdaq2021066-20125377-284868.pdf (``Amendment No. 2'').
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    When an exchange files a proposed rule change,\10\ the Commission
must determine whether the proposed rule change is consistent with the
statutory provisions, and the rules and regulations, that apply to
national securities exchanges.\11\ As discussed further below, the
Commission is approving the proposed rule change, as modified by
Amendment Nos. 1 and 2. In approving this proposed rule change,
however, the Commission emphasizes--as it has with previous orders
regarding bitcoin-related ETPs \12\--that its action does not rest on
an evaluation of whether bitcoin, or blockchain technology more
generally, has utility or value as an innovation or an investment.
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    \10\ Such filings are made under Section 19(b)(1) of the
Exchange Act, 15 U.S.C. 78s(b)(1), and Exchange Act Rule 19b-4, 17
CFR 240.19b-4.
    \11\ See Exchange Act Section 19(b)(2)(C), 15 U.S.C.
78s(b)(2)(C).
    \12\ See, e.g., Order Disapproving a Proposed Rule Change, as
Modified by Amendment No. 1, To Amend NYSE Arca Rule 8.201-E
(Commodity-Based Trust Shares) and To List and Trade Shares of the
United States Bitcoin and Treasury Investment Trust Under NYSE Arca
Rule 8.201-E, Securities Exchange Act Release No. 88284 (Feb. 26,
2020), 85 FR 12595, 12597 (Mar. 3, 2020) (SR-NYSEArca-2019-39)
(``USBT Order''); Order Disapproving a Proposed Rule Change To List
and Trade Shares of the NYDIG Bitcoin ETF Under NYSE Arca Rule
8.201-E (Commodity-Based Trust Shares), Securities Exchange Act
Release No. 94395 (Mar. 10, 2022), 87 FR 14932, 14934 (Mar. 16,
2022) (SR-NYSEArca-2021-57) (``NYDIG Order'').
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II. Description of the Proposed Rule Change, as Modified by Amendment
Nos. 1 and 2

    As described in more detail in the Notice and Amendment No. 2,\13\
the Exchange proposes to list and trade the Shares of the Trust under
Nasdaq Rule 5711(g), which governs the listing and trading of Commodity
Futures Trust Shares on the Exchange.
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    \13\ See Notice, supra note 3; Amendment No. 2, supra note 9.
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    The investment objective of the Trust is for the Shares to reflect
the performance of bitcoin \14\ as represented by the CME CF Bitcoin
Reference Rate (``CME CF BRR''), less the Trust's liabilities and
expenses.\15\ The CME CF BRR aggregates the trade flow of major bitcoin
spot platforms during a specific calculation window into a one-a-day
reference rate of the U.S. dollar price of bitcoin.\16\ The Trust will
pursue its investment objective by holding bitcoin futures that are
cash-settled and traded on the Chicago Mercantile Exchange, Inc. (the
``CME''), which was self-certified with the Commodity Futures

Trading Commission (the ``CFTC'').\17\ The Trust will not invest in or
hold spot bitcoin.\18\ In addition to the Trust's investments in CME
bitcoin futures, the Trust expects to have significant holdings of cash
and high-quality, short-term debt instruments that have remaining
terms-to maturity of less than 397 days, and include only U.S. Treasury
securities and repurchase agreements (``Money Market
Instruments'').\19\
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    \14\ Bitcoins are digital assets that are issued and transferred
via a decentralized, open-source protocol used by a peer-to-peer
computer network through which transactions are recorded on a public
transaction ledger known as the ``bitcoin blockchain.'' The bitcoin
protocol governs the creation of new bitcoins and the cryptographic
system that secures and verifies bitcoin transactions. See, e.g.,
Notice, 86 FR at 50571.
    \15\ See id. at 50574. Valkyrie Funds LLC (``Sponsor'') serves
as the Trust's sponsor and commodity pool operator; Vident
Investment Advisory, LLC (``Sub-Advisor'') serves as the Trust's
sub-advisor and commodity trading advisor; and XBTO Trading, LLC is
the research provider for the Sponsor and the Sub-Advisor. Delaware
Trust Company serves as the trustee for the Trust. The Sponsor is
currently considering third-party service providers for the roles of
administrator, transfer agent, custodian, and marketing agent. See
id. at 50571.
    \16\ See id. at 50573 n.8. According to the Exchange,
calculation rules are geared toward maximum transparency and real-
time replicability in underlying spot markets, including Bitstamp,
Coinbase, Gemini, itBit, and Kraken. See id.
    \17\ See id. at 50574.
    \18\ See Amendment No. 2, supra note 9, at 3.
    \19\ See id.; Notice, 86 FR at 50574.
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    The net asset value (``NAV'') of the Trust will be determined in
accordance with Generally Accepted Accounting Principles. The NAV per
Share will be determined by dividing the NAV of the Trust by the number
of Shares outstanding. The NAV of the Trust is typically determined as
of 4:00 p.m. E.T. on each day the Shares trade on the Exchange
(``Business Day''). The Trust's daily activities are generally not
reflected in the NAV determined for the Business Day on which the
transactions are effected (the trade date), but rather on the following
Business Day.\20\
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    \20\ See Notice, 86 FR at 50574.
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    The Trust will issue and redeem Shares on a continuous basis at NAV
per Share in large, specified blocks of Shares (``Creation Units'') in
transactions with broker-dealers and large institutional investors that
have entered into participation agreements (``Authorized
Participants''). The Exchange currently anticipates that a Creation
Unit will consist of 50,000 Shares, although this number may change
from time to time.\21\ In addition, the Shares will generally be
created and redeemed in cash.\22\
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    \21\ See id. at 50579-80. Upon the request of an Authorized
Participant made at the time of a redemption order, the Sponsor at
its sole discretion may determine, in addition to delivering
redemption proceeds, to transfer futures contracts to the Authorized
Participant pursuant to an exchange of a futures contract for a
related position or to a block trade sale of futures contracts to
the Authorized Participant. See id. at 50580.
    \22\ See Amendment No. 2, supra note 9, at 4.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change, as modified by Amendment Nos. 1 and 2, is consistent with the
Exchange Act and rules and regulations thereunder applicable to a
national securities exchange.\23\ In particular, the Commission finds
that the proposed rule change, as modified by Amendment Nos. 1 and 2,
is consistent with Section 6(b)(5) of the Exchange Act,\24\ which
requires, among other things, that the Exchange's rules be designed to
``prevent fraudulent and manipulative acts and practices,'' to
``promote just and equitable principles of trade,'' to ``remove
impediments to and perfect the mechanism of a free and open market and
a national market system,'' and, ``in general, to protect investors and
the public interest.'' The Commission also finds, with respect to the
dissemination of quotation and last trade information for the proposed
ETP, that the proposed rule change, as modified by Amendment Nos. 1 and
2, is consistent with Section 11A(a)(1)(C)(iii) of the Exchange
Act,\25\ which sets forth Congress' finding that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for and transactions in securities.
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    \23\ In approving this proposed rule change, as modified by
Amendment Nos. 1 and 2, the Commission notes that it has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
    \24\ 15 U.S.C. 78f(b)(5).
    \25\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    When considering whether Nasdaq's proposal to list and trade the
Shares is designed to prevent fraudulent and manipulative acts and
practices, the Commission applies the same standard it used in orders
considering previous proposals to list bitcoin-based commodity trusts
and bitcoin-based trust issued receipts.\26\ As the Commission has
explained, an exchange that lists bitcoin-based exchange-traded
products (``ETPs'') can meet its obligations under Exchange Act Section
6(b)(5) by demonstrating that the exchange has a comprehensive
surveillance-sharing agreement with a regulated market of significant
size related to the underlying or reference bitcoin assets.\27\ The
Winklevoss Order

applied this standard to a commodity-trust ETP based on spot bitcoin,
and the Commission has found that this standard is also appropriate
for, and has applied the standard to, proposed ETPs based on bitcoin
futures.\28\
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    \26\ See Order Setting Aside Action by Delegated Authority and
Disapproving a Proposed Rule Change, as Modified by Amendments No. 1
and 2, To List and Trade Shares of the Winklevoss Bitcoin Trust,
Securities Exchange Act Release No. 83723 (July 26, 2018), 83 FR
37579 (Aug. 1, 2018) (SR-BatsBZX-2016-30) (``Winklevoss Order'');
USBT Order, 85 FR 12595; Order Disapproving a Proposed Rule Change
To List and Trade Shares of the WisdomTree Bitcoin Trust Under BZX
Rule 14.11(e)(4), Commodity-Based Trust Shares, Securities Exchange
Act Release No. 93700 (Dec. 1, 2021), 86 FR 69322 (Dec. 7, 2021)
(SR-CboeBZX-2021-024) (``WisdomTree Order''); Order Disapproving a
Proposed Rule Change To List and Trade Shares of the Kryptoin
Bitcoin ETF Trust Under BZX Rule 14.11(e)(4), Commodity-Based Trust
Shares, Securities Exchange Act Release No. 93860 (Dec. 22, 2021),
86 FR 74166 (Dec. 29, 2021) (SR-CboeBZX-2021-029) (``Kryptoin
Order''); Order Disapproving a Proposed Rule Change To List and
Trade Shares of the Valkyrie Bitcoin Fund Under NYSE Arca Rule
8.201-E (Commodity-Based Trust Shares), Securities Exchange Act
Release No. 93859 (Dec. 22, 2021), 86 FR 74156 (Dec. 29, 2021) (SR-
NYSEArca-2021-31) (``Valkyrie Order''); Order Disapproving a
Proposed Rule Change To List and Trade Shares of the First Trust
SkyBridge Bitcoin ETF Trust Under NYSE Arca Rule 8.201-E, Securities
Exchange Act Release No. 94006 (Jan. 20, 2022), 87 FR 3869 (Jan. 25,
2022) (SR-NYSEArca-2021-37) (``Skybridge Order''); Order
Disapproving a Proposed Rule Change To List and Trade Shares of the
Wise Origin Bitcoin Trust Under BZX Rule 14.11(e)(4), Commodity-
Based Trust Shares, Securities Exchange Act Release No. 94080 (Jan.
27, 2022), 87 FR 5527 (Feb. 1, 2022) (SR-CboeBZX-2021-029) (``Wise
Origin Order''); NYDIG Order, 87 FR 14932; Order Disapproving a
Proposed Rule Change To List and Trade Shares of the Global X
Bitcoin Trust Under BZX Rule 14.11(e)(4), Commodity-Based Trust
Shares, Securities Exchange Act Release No. 94396 (Mar. 10, 2022),
87 FR 14912 (Mar. 16, 2022) (SR-CboeBZX-2021-052) (``Global X
Order''); Order Disapproving a Proposed Rule Change, as Modified by
Amendment No. 1, To List and Trade Shares of the ARK 21Shares
Bitcoin ETF Under BZX Rule 14.11(e)(4), Commodity-Based Trust
Shares, Securities Exchange Act Release No. 94571 (Mar. 31, 2022),
87 FR 20014 (Apr. 6, 2022) (SR-CboeBZX-2021-051) (``ARK 21Shares
Order''). See also Order Disapproving a Proposed Rule Change, as
Modified by Amendment No. 1, Relating to the Listing and Trading of
Shares of the SolidX Bitcoin Trust Under NYSE Arca Equities Rule
8.201, Securities Exchange Act Release No. 80319 (Mar. 28, 2017), 82
FR 16247 (Apr. 3, 2017) (SR-NYSEArca-2016-101) (``SolidX Order'').
The Commission also notes that orders were issued by delegated
authority on the following matters: Order Disapproving a Proposed
Rule Change To List and Trade the Shares of the ProShares Bitcoin
ETF and the ProShares Short Bitcoin ETF, Securities Exchange Act
Release No. 83904 (Aug. 22, 2018), 83 FR 43934 (Aug. 28, 2018) (SR-
NYSEArca-2017-139) (``ProShares Order''); Order Disapproving a
Proposed Rule Change To List and Trade the Shares of the
GraniteShares Bitcoin ETF and the GraniteShares Short Bitcoin ETF,
Securities Exchange Act Release No. 83913 (Aug. 22, 2018), 83 FR
43923 (Aug. 28, 2018) (SR-CboeBZX-2018-001) (``GraniteShares
Order''); Order Disapproving a Proposed Rule Change To List and
Trade Shares of the VanEck Bitcoin Trust Under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares, Securities Exchange Act Release No.
93559 (Nov. 12, 2021), 86 FR 64539 (Nov. 18, 2021) (SR-CboeBZX-2021-
019) (``VanEck Order''); Order Granting Approval of a Proposed Rule
Change, as Modified by Amendment No. 2, To List and Trade Shares of
the Teucrium Bitcoin Futures Fund Under NYSE Arca Rule 8.200-E,
Commentary .02 (Trust Issued Receipts), Securities Exchange Act
Release No. 94620 (Apr. 6, 2022), 87 FR 21676 (Apr. 12, 2022) (SR-
NYSEArca-2021-053) (``Teucrium Order'').
    \27\ See USBT Order, 85 FR at 12596. In the context of
derivative securities products such as commodity-trust ETPs, the
Commission has long recognized the importance of comprehensive
surveillance-sharing agreements to detect and deter fraudulent and
manipulative activity. See, e.g., streetTRACKS Gold Shares,
Securities Exchange Act Release No. 50603 (Oct. 28, 2004), 69 FR
64614, 64618-19 (Nov. 5, 2004) (SR-NYSE-2004-22); iShares Silver
Trust, Securities Exchange Act Release No. 53521 (Mar. 20, 2006), 71
FR 14967, 14968, 14973-74 (Jan 26, 2005) (SR-Amex-2004-38); JPM XF
Physical Copper Trust, Securities Exchange Act Release No. 68440
(Dec. 14, 2012), 77 FR 75468, 75469-70, 75272, 75485-86 (Dec. 20,
2012) (SR-NYSEArca-2012-28). See also Winklevoss Order, 83 FR at
37592 n.202 and accompanying text (discussing previous Commission
approvals of commodity-trust ETPs). And the Commission's approval
orders for commodity-futures ETPs consistently note the ability of
an ETP listing exchange to share surveillance information either
through surveillance-sharing agreements or through membership by the
listing exchange and the relevant futures exchange in the
Intermarket Surveillance Group. See, e.g., Securities Exchange Act
Release No. 53105 (Jan. 11, 2006), 71 FR 3129, 3136 (Jan. 19, 2006)
(SR-Amex-2005-059); Securities Exchange Act Release No. 53582 (Mar.
31, 2006), 71 FR 17510, 17518 (Apr. 6, 2006) (SR-Amex-2005-127);
Securities Exchange Act Release No. 54013 (June 16, 2006), 71 FR
36372, 36378-79 (June 26, 2006) (SR-NYSE-2006-17). See also
GraniteShares Order, 83 FR at 43925-27 nn.35-39 and accompanying
text (discussing previous Commission approvals of commodity-futures
ETPs).
    \28\ See ProShares Order, 83 FR at 43936; GraniteShares Order,
83 FR at 43925; Teucrium Order, 87 FR at 21677.
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    In the analysis below, the Commission examines whether the proposed
rule change, as modified by Amendment Nos. 1 and 2, is consistent with
Section 6(b)(5) of the Exchange Act by addressing: in Section III.A
whether Nasdaq has entered into a comprehensive surveillance-sharing
agreement with a regulated market of significant size related to the
underlying bitcoin assets (here, CME bitcoin futures contracts); in
Section III.B assertions that allowing investors to obtain exposure to
bitcoin futures contracts through a bitcoin futures-based ETP would be
beneficial; and in Section III.C whether the proposed ETP is consistent
with other standards for commodity-futures ETPs. Based on its analysis,
the Commission concludes that the proposed rule change, as modified by
Amendment Nos. 1 and 2, is consistent with the statutory requirements
of Exchange Act Sections 6(b)(5) and 11A(a)(1)(C)(iii).
    As discussed in more detail below, the approval is based on a
finding that the CME is a ``significant market'' related to CME bitcoin
futures contracts, which would be the exclusive non-cash holdings of
the proposed ETP. The Commission emphasizes that its approval of this
proposal is based on the specific facts and circumstances of the
proposal.\29\
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    \29\ The Commission is not suggesting that either the
development of the CME bitcoin futures market or the approval of
this proposal would require the Commission to approve a proposed
rule change seeking to list and trade shares of an ETP holding spot
bitcoin as an asset or ETPs related to other digital assets. See,
e.g., GraniteShares Order, 83 FR at 43931. Other proposed ETPs will
continue to be assessed on their particular facts and circumstances
and on whether those proposals are consistent with the requirements
of the Exchange Act.
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A. Comprehensive Surveillance-Sharing Agreement With a Regulated Market
of Significant Size Related to CME Bitcoin Futures Contracts

    As stated above, an exchange that lists a bitcoin-based ETP can
meet its obligations under Exchange Act Section 6(b)(5) by
demonstrating that the exchange has a comprehensive surveillance-
sharing agreement with a regulated market of significant size related
to the underlying bitcoin assets.\30\ When disapproving the earliest
proposals for bitcoin-based ETPs, the Commission recognized that
``regulated bitcoin-related markets are in the early stages of their
development,'' but that ``[o]ver time, regulated bitcoin-related
markets may continue to grow and develop'' in a way that would make it
possible for a bitcoin-based ETP to satisfy the requirements of the
Exchange Act.\31\ The Commission previously stated that, for example,
``existing or newly created bitcoin futures markets'' that are
regulated may achieve significant size, and an ETP listing exchange may
be able to demonstrate in a proposed rule change that it will be able
to address the risk of fraud and manipulation by entering into a
surveillance-sharing agreement with a regulated market of significant
size.\32\
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    \30\ See supra note 27.
    \31\ See Winklevoss Order, 83 FR at 37580.
    \32\ See id.; USBT Order, 85 FR at 12598.
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    With respect to the proposed ETP, the underlying bitcoin assets are
CME bitcoin futures contracts. The relevant analysis, therefore, is
whether Nasdaq has a comprehensive surveillance-sharing agreement with
a regulated market of significant size related to CME bitcoin futures
contracts. As discussed below, taking into consideration the direct
relationship between the regulated market with which Nasdaq has a
surveillance-sharing agreement and the assets held by the proposed
ETP--including the current state of the CME bitcoin futures market and
the trading of exchange-traded funds registered under the Investment
Company Act of 1940 (``1940 Act'') that hold CME bitcoin futures
(``Bitcoin Futures ETFs'')--the Commission concludes that the Exchange
has the requisite surveillance-sharing agreement. The Commission notes
that in the Teucrium Order it recently approved NYSE Arca, Inc.'s
proposal to list and trade shares of an ETP that similarly would hold
CME bitcoin futures contracts as its only non-cash holdings.\33\
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    \33\ See Teucrium Order, 87 FR at 21676.
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Comprehensive Surveillance-Sharing Agreements With the CME, a Regulated
Market
    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 the underlying assets 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.\34\ Comprehensive surveillance-sharing agreements ``provide
a necessary deterrent to manipulation because they facilitate the
availability of information needed to fully investigate a manipulation
if it were to occur.'' \35\ 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.\36\
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    \34\ See Amendment to Rule Filing Requirements for Self-
Regulatory Organizations Regarding New Derivative Securities
Products, Securities Exchange Act Release No. 40761 (Dec. 8, 1998),
63 FR 70952, 70959 (Dec. 22, 1998).
    \35\ Id. See also Winklevoss Order, 83 FR at 37594; ProShares
Order, 83 FR at 43936; GraniteShares Order, 83 FR at 43924; USBT
Order, 85 FR at 12596.
    \36\ See Winklevoss Order, 83 FR at 37592-93 (discussing Letter
from Brandon Becker, Director, Division of Market Regulation,
Commission, to Gerard D. O'Connell, Chairman, Intermarket
Surveillance Group (June 3, 1994), available at http://www.sec.gov/divisions/marketreg/mr-noaction/isg060394.htm).
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    As the Commission has stated, it considers two markets to have a
comprehensive surveillance-sharing agreement with one another if they
are both members of the Intermarket Surveillance Group (``ISG''), even
if they do not have a separate bilateral surveillance-sharing
agreement.\37\ Accordingly, based on the common membership of Nasdaq
and the CME in the ISG,\38\ Nasdaq has the equivalent of a
comprehensive surveillance-sharing agreement with the CME. Moreover, as
the Commission has previously recognized, the CFTC regulates the CME
futures market, including the CME bitcoin futures market, and thus that
market is ``regulated.'' \39\
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    \37\ See id. at 37580 n.19.
    \38\ See Notice, 86 FR at 50576.
    \39\ See, e.g., WisdomTree Order, 86 FR at 69330; Wise Origin
Order, 87 FR at 5534.

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Whether the CME Is a Market of Significant Size Related to CME Bitcoin
Futures Contracts
    In the Winklevoss Order, the Commission stated that the term
``significant market'' or ``market of significant size'' includes a
market (or group of markets) as to which (1) there is a reasonable
likelihood that a person attempting to manipulate the ETP would also
have to trade on that market to successfully manipulate the ETP, so
that a surveillance-sharing agreement would assist in detecting and
deterring misconduct, and (2) it is unlikely that trading in the ETP
would be the predominant influence on prices in that market.\40\ The
Commission explained that this definition is illustrative and not
exclusive, and that there could be other types of ``significant
markets'' and ``markets of significant size.'' \41\
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    \40\ See Winklevoss Order, 83 FR at 37594.
    \41\ See id.
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(1) Prong 1
    The first prong of the analysis addresses whether the surveillance-
sharing agreement on which the ETP listing exchange proposes to rely
would assist in detecting and deterring fraudulent or manipulative
misconduct related to the assets held by the ETP. In the present
proposal, the proposed ETP's only non-cash holdings will be CME bitcoin
futures contracts. Moreover, the proposed ``significant'' regulated
market (i.e., the CME) with which the listing exchange has a
surveillance-sharing agreement is the same market on which these assets
trade. As the Commission previously recognized in the Teucrium Order,
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
trading on the CME bitcoin futures market or indirectly by trading
outside of the CME bitcoin futures market, such that when the CME
shares its surveillance information with Nasdaq, the information would
assist in detecting and deterring fraudulent or manipulative misconduct
related to the non-cash assets held by the proposed ETP.\42\
Accordingly, for the present proposal, it is unnecessary for Nasdaq to
establish a reasonable likelihood that a would-be manipulator would
have to trade on the CME itself to manipulate the proposed ETP.\43\
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    \42\ See Teucrium Order, 87 FR at 21679. See also Notice, 86 FR
at 50574 (stating that ``[l]ike other futures products on the CME,
[CME bitcoin futures] are subject to oversight by the CFTC, and the
CME itself is empowered to enforce its own rulebook as it relates to
the [CME bitcoin futures]'' and ``has a surveillance team that
monitors the trading of [CME bitcoin futures] at all times''); 50579
(stating that as a Designated Contract Market (``DCM''), the CME
must ``certify that it has the ability to prevent manipulation,
price distortion, and disruptions of the cash-settlement process
through market surveillance, compliance, and enforcement practices
and procedures''). This reasoning, however, does not extend to spot
bitcoin ETPs. Spot bitcoin markets are not currently ``regulated.''
See, e.g., USBT Order, 85 FR at 12604; NYDIG Order, 87 FR at 14936
nn.65-67. If an exchange seeking to list a spot bitcoin ETP relies
on the CME as the regulated market with which it has a comprehensive
surveillance-sharing agreement, because the assets held by a spot
bitcoin ETP would not be traded on the CME, that proposal would be
significantly different from the current proposal. Because of this
important difference, with respect to a spot bitcoin ETP, there
would be reason to question whether a surveillance-sharing agreement
with the CME would, in fact, assist in detecting and deterring
fraudulent and manipulative misconduct affecting the price of the
spot bitcoin held by that ETP. If, however, an exchange proposing to
list and trade a spot bitcoin ETP identifies the CME as the
regulated market with which it has a comprehensive surveillance-
sharing agreement, the exchange could overcome the Commission's
concern by demonstrating that there is a reasonable likelihood that
a person attempting to manipulate the spot bitcoin ETP would have to
trade on the CME in order to manipulate the ETP, because such
demonstration would help establish that the exchange's surveillance-
sharing agreement with the CME would have the intended effect of
aiding in the detection and deterrence of fraudulent and
manipulative misconduct related to the spot bitcoin held by the ETP.
See Teucrium Order, 87 FR at 21679 n.46.
    \43\ In addition, when considering past proposals for spot
bitcoin ETPs, the Commission has discussed whether there is a lead-
lag relationship between the regulated market (e.g., the CME) and
the market on which the assets held by the ETP would have traded
(i.e., spot bitcoin platforms), as part of an analysis of whether a
would-be manipulator of the spot bitcoin ETP would need to trade on
the regulated market to effect such manipulation. See, e.g., USBT
Order, 85 FR at 12612. For the present proposal, because of the
direct relationship between the regulated market (i.e., the CME) and
the only non-cash assets held by the proposed ETP (i.e., CME bitcoin
futures contracts) establishing a ``lead-lag'' relationship between
the CME and non-CME markets is also unnecessary. See Teucrium Order,
87 FR at 21679 n.47.
---------------------------------------------------------------------------

    Nasdaq, however, makes several arguments in support of its
assertion that it is reasonably likely that a person attempting to
manipulate the proposed ETP would have to trade on the CME bitcoin
futures market to successfully manipulate the proposed ETP.\44\ First,
Nasdaq states that the CME bitcoin futures market has grown
considerably since Commission disapprovals of a bitcoin futures ETP in
August 2018 and a spot bitcoin ETP in January 2020, as evidenced by
empirical data on trading volume and open interest.\45\ Nasdaq further
states that ``because the [CME bitcoin futures] market has grown to
resemble other futures markets, a lead-lag relationship that exists in
other mature futures markets has also likely developed between the [CME
bitcoin futures] market and the bitcoin spot market.'' \46\ Second,
Nasdaq argues that observations made by the Staff of the Commission's
Division of Investment Management regarding the maturity of the bitcoin
futures market ``is strong evidence that concerns previously raised
regarding price manipulation in that market have been significantly
reduced.'' \47\ Finally, Nasdaq argues that the majority of academic
literature concerning the lead-lag relationship between the bitcoin
futures market and the spot bitcoin market, including studies with more
recent data, ``supports the proposition that price discovery does take
place in the [CME bitcoin futures] market and therefore a lead-lag
relationship exists between the spot and futures markets.'' \48\ Nasdaq
discusses two more recent studies,\49\ and concludes that this research
``build[s] upon the already emerging academic consensus . . . that the
[CME bitcoin futures] market does lead the spot market such that a
would-be manipulator would necessarily conclude that it must trade in
the futures market to successfully manipulate the spot price of
bitcoin.'' \50\
---------------------------------------------------------------------------

    \44\ See Notice, 86 FR at 50575-78.
    \45\ See id. at 50576.
    \46\ Id. at 50577.
    \47\ Id. (citing Staff Statement on Funds Registered Under the
Investment Company Act Investing in the Bitcoin Futures Market (May
11, 2021), available at: https://www.sec.gov/news/public-statement/staff-statement-investing-bitcoin-futures-market#_ftnref5) (``Staff
Statement'').
    \48\ Id.
    \49\ See id. at 50577-78 (discussing Y. Hu, Y. Hou & L. Oxley,
What role do futures markets play in Bitcoin pricing? Causality,
cointegration and price discovery from a time-varying perspective,
72 Int'l Rev. of Fin. Analysis 101569 (2020) (``Hu, Hou & Oxley'');
and J. Wu, K. Xu, X. Zheng & J. Chen, Fractional cointegration in
bitcoin spot and futures markets, 41 J. Futures Mkts. 1478 (2021)
(``Wu et al.'')).
    \50\ Id. at 50578 (citing B. Kapar & J. Olmo, An analysis of
price discovery between Bitcoin futures and spot markets, 174 Econ.
Letters 62 (2019) (``Kapar & Olmo''); E. Akyildirim, S. Corbet, P.
Katsiampa, N. Kellard & A. Sensoy, The development of Bitcoin
futures: Exploring the interactions between cryptocurrency
derivatives, 34 Fin. Res. Letters 101234 (2020) (``Akyildirim et
al.''); A. Chang, W. Herrmann & W. Cai, Efficient Price Discovery in
the Bitcoin Markets, Wilshire Phoenix, Oct. 14, 2020, available at:
https://www.wilshirephoenix.com/efficient-price-discovery-in-the-bitcoin-markets/ (``Wilshire Phoenix''). See also id. at 50577
(citing J. Hung, H. Liu & J. Yang, Trading activity and price
discovery in Bitcoin futures markets, 62 J. Empirical Finance 107
(2021) (``Hung, Liu & Yang'').
---------------------------------------------------------------------------

    The Commission disagrees with much of Nasdaq's reasoning. Nasdaq's
assertions about the general upward trends in trading volume and open
interest of CME bitcoin futures do not establish whether it is
reasonably likely that a would-be manipulator would

have to trade on the CME to successfully manipulate the proposed
ETP.\51\ In addition, as Nasdaq recognized, the Staff Statement did not
reach a conclusion that the CME bitcoin futures market is a
``significant market'' or a ``market of significant size'' related to
bitcoin in the context of the requirements of Section 6(b)(5) of the
Exchange Act,\52\ nor did it even undertake such an assessment.
Moreover, the evidence in the record for this proposal does not support
a finding that the CME leads bitcoin price discovery.\53\ As Nasdaq
recognizes, studies indicate that price discovery takes place in the
bitcoin spot market.\54\ Moreover, the literature discussed by Nasdaq
in its filing has been previously considered by the Commission.\55\ As
discussed in past Commission orders, the ``mixed results'' of price
discovery analyses, including the studies discussed by Nasdaq in its
filing, fail to demonstrate that the CME bitcoin futures market
constitutes a market of significant size vis-[agrave]-vis the bitcoin
spot market.\56\
---------------------------------------------------------------------------

    \51\ The Commission has previously considered and rejected
similar arguments in the context of spot bitcoin ETPs. See, e.g.,
USBT Order, 85 FR at 12612; GlobalX Order, 87 FR at 14919; NYDIG
Order, 87 FR at 14938.
    \52\ See Notice, 86 FR at 50577.
    \53\ See also USBT Order, 85 FR at 12612; WisdomTree Order, 86
FR at 69331; Wise Origin Order, 87 FR at 5535; GlobalX Order, 87 FR
at 14920; NYDIG Order, 87 FR at 14938; Teucrium Order, 87 FR at
21679.
    \54\ See Notice, 86 FR at 50577 (citing Hung, Liu & Yang). See
also C. Alexander & D. Heck, Price discovery in Bitcoin: The impact
of unregulated markets, 50 J. Financial Stability 100776 (2020)
(finding that, in a multi-dimensional setting, including the main
price leaders within futures, perpetuals, and spot markets, CME
bitcoin futures have a very minor effect on price discovery; and
that faster speed of adjustment and information absorption occurs on
the unregulated spot and derivatives platforms than on CME bitcoin
futures).
    \55\ See supra notes 49-50 and accompanying text.
    \56\ See, e.g., GlobalX Order, 87 FR at 14920 n.119 (concluding
that papers on the lead-lag relationship and price discovery between
bitcoin spot and futures markets, including the Wu et al. paper, the
Hung, Liu & Yang paper, and the Akyildirim et al. paper, show that
the academic literature is unsettled); NYDIG Order, 87 FR at 14938
(stating that Hu, Hou & Oxley's Granger causality analysis had
findings that are ``concededly mixed'' and that issues the
Commission previously raised in the USBT Order about an unpublished
version of that paper had not been addressed). See also USBT Order,
85 FR at 12613 n.244 (discussing that the use of daily price data,
as opposed to intraday prices, by Kapar & Olmo and Hu, Hou & Oxley
(in an unpublished version of the paper) may not be able to
distinguish which market incorporates new information faster);
WisdomTree Order, 86 FR at 69331 n.143 (concluding that the papers
cited by a commenter, including the Wilshire Phoenix working paper,
evidence the unsettled nature of the academic literature).
---------------------------------------------------------------------------

    However, none of these deficiencies in Nasdaq's arguments
concerning whether there is a reasonable likelihood that a would-be
manipulator of the proposed ETP would have to trade on the CME
conflicts with the Commission's determination that, because the only
non-cash assets held by the proposed ETP (i.e., CME bitcoin futures
contracts) are traded on the CME itself, Nasdaq's surveillance-sharing
agreement with the CME can reasonably be relied upon to assist in
detecting and deterring fraudulent or manipulative misconduct related
to those assets. Thus the first prong of the standard for ``market of
significant size'' has been established.
(2) Prong 2
    As discussed above, in determining whether the CME bitcoin futures
market constitutes a ``market of significant size'' related to CME
bitcoin futures contracts, the Commission has also considered as a
second prong of the analysis whether trading in the proposed ETP would
be unlikely to be the predominant influence on prices in the CME
bitcoin futures market.\57\ Based on the facts and circumstances here,
the Commission finds that this second prong has been satisfied.
---------------------------------------------------------------------------

    \57\ See Winklevoss Order, 83 FR at 37594; USBT Order, 85 FR at
12596-97.
---------------------------------------------------------------------------

    Nasdaq asserts that trading in the Shares would not be the
predominant force on prices in the CME bitcoin futures market (or spot
market) because of the significant volume in the CME bitcoin futures
market, the size of bitcoin's market capitalization, which is
approximately $1 trillion, and the significant liquidity available in
the spot market.\58\ Nasdaq states that, since the GraniteShares Order
and the USBT Order were issued, there has been steady and robust growth
observed in the CME bitcoin futures market.\59\ For example, according
to Nasdaq, the daily average trading volume for CME bitcoin futures was
$117 million or 3,629 contracts for the week including August 24, 2018,
as compared to $354.75 million or 7,731 contracts for the week
including February 26, 2020, and to $2.412 billion or 12,610 contracts
for the week ending May 28, 2021.\60\ Additionally, according to
Nasdaq, the daily average open interest in CME bitcoin futures was
$95.4 million or 2,956 contracts for the week including August 24,
2018, as compared to $250.25 million or 5,407 contracts for the week
including February 26, 2020, and to $1.6626 billion or 8,677 contracts
for the week ending May 28, 2021.\61\
---------------------------------------------------------------------------

    \58\ See Notice, 86 FR at 50578.
    \59\ See id. at 50576.
    \60\ See id.
    \61\ See id.
---------------------------------------------------------------------------

    Nasdaq also states that the spot market for bitcoin is very
liquid.\62\ According to Nasdaq, in February 2021, for example, the
cost to buy or sell $5 million worth of bitcoin averaged roughly 10
basis points, with a market impact of 30 basis points.\63\ For a $10
million market order, the cost to buy or sell was roughly 20 basis
points, with a market impact of 50 basis points.\64\ Stated another
way, Nasdaq provides that a market participant could enter a market buy
or sell order for $10 million and only move the market 0.5%.\65\ Nasdaq
further asserts that more strategic purchases or sales (such as using
limit orders and executing through OTC bitcoin desks) would likely have
a less obvious impact on the market, which Nasdaq states is consistent
with the ability of MicroStrategy, Tesla, and Square to collectively
purchase billions of dollars in bitcoin without resulting in
significant price movements.\66\
---------------------------------------------------------------------------

    \62\ See id. at 50578.
    \63\ See id. According to Nasdaq, these statistics are based on
samples of bitcoin liquidity in U.S. dollars (excluding stablecoins
or Euro liquidity) based on executable quotes on Coinbase Pro,
Gemini, Bitstamp, Kraken, LMAX Exchange, Binance US, and OK Coin
during February 2021. See id. at 50578 n.47.
    \64\ See id. at 50578.
    \65\ See id.
    \66\ See id.
---------------------------------------------------------------------------

    Nasdaq also provides the results from a study conducted by CF
Benchmarks (``CF Benchmarks Analysis'') to determine the extent of
``slippage'' (i.e., the difference between the expected price of a
trade and the price at which the trade was actually executed), which,
according to the Exchange, offers further evidence that trading in the
Shares in unlikely to be the predominant influence in either the
bitcoin spot or futures market.\67\ According to Nasdaq, the CF
Benchmarks Analysis simulates the purchase of 50 bitcoins a day for 686
days (an amount chosen, according to the Exchange, specifically to
replicate hypothetical trades by a bitcoin ETP) and found that the
maximum amount of slippage on a particular day was 0.3%, with the
remainder of values between 0% and 0.15%.\68\ According to Nasdaq, the
CF Benchmarks Analysis demonstrates that, during the observation
period, the slippage was largely negligible or, at most, minor.\69\
Nasdaq argues that, while the CF Benchmarks Analysis focuses on the

impact of a hypothetical ETP in the bitcoin spot market, arbitrage
mechanisms in the spot and futures market dictate that it would be
unlikely for a bitcoin futures ETP such as the Trust to overrun the CME
bitcoin futures market without also overrunning the bitcoin spot
market. Accordingly, the Exchange explains that the CF Benchmarks
Analysis further bolsters its contention that the Trust and other
similar ETPs would be unlikely to overrun the market.\70\ Nasdaq
finally concludes that the combination of CME bitcoin futures leading
price discovery, the overall size of the bitcoin market, and the
ability for market participants, including authorized participants
creating and redeeming in-kind with the Trust, to buy or sell large
amounts of bitcoin without significant market impact will help prevent
the Shares from becoming the predominant force on pricing in either the
bitcoin spot or CME bitcoin futures markets.\71\
---------------------------------------------------------------------------

    \67\ See id. (citing CF Benchmarks, ``An Analysis of the
Suitability of the CME CF BRR for the Creation of Regulated
Financial Products,'' December 2020 (available at: https://docsend.com/view/kizk7rarzaba6jxf)).
    \68\ See id.
    \69\ See id.
    \70\ See id.
    \71\ See id.
---------------------------------------------------------------------------

    The Commission has considered and rejected nearly identical
arguments as provided above in past disapproval orders of spot bitcoin
ETPs.\72\ Moreover, as stated in the Teucrium Order, the Commission
finds arguments centered around the relationship between the bitcoin
spot market and the CME bitcoin futures market to be inapposite where,
as here, the proposed ``significant'' market (i.e., the CME bitcoin
futures market) is the same as the market on which the proposed ETP's
only non-cash assets (i.e., CME bitcoin futures contracts) trade.\73\
---------------------------------------------------------------------------

    \72\ See, e.g., WisdomTree Order, 86 FR at 69332; Skybridge
Order, 87 FR at 3878-80; Wise Origin Order, 87 FR at 5536-37.
    \73\ See Teucrium Order, 87 FR at 21680.
---------------------------------------------------------------------------

    Nonetheless, the Commission concludes that it is unlikely that
trading in the proposed ETP would be the predominant influence on
prices in the CME bitcoin futures market. In the Teucrium Order, the
Commission stated that the CME bitcoin futures market has sufficiently
developed to support ETPs seeking exposure to bitcoin by holding CME
bitcoin futures contracts.\74\ As the order explained, the maturation
of the CME bitcoin futures market since its inception in 2017--
including, but not limited to, its overall size, volume, and liquidity,
as well as number of years since its commencement--and evidence from
the recent introduction of the 1940 Act-registered Bitcoin Futures ETFs
help support the conclusion that trading in an ETP that would hold CME
bitcoin futures is not likely to be the predominant influence on prices
in the CME bitcoin futures market. \75\ Here, the proposed ETP also
holds CME bitcoin futures contracts as its only non-cash holdings. The
Commission, therefore, reaches the same conclusion--that trading in the
proposed ETP is not likely to be the predominant influence on prices in
the CME bitcoin futures market. Thus the second prong of the standard
for ``market of significant size'' has been established.
---------------------------------------------------------------------------

    \74\ See id. at 21681.
    \75\ See id. Among other things, the Commission considered that
the CME bitcoin futures market began offering trading in bitcoin
futures contracts in 2017 and, as of March 2022, trading in the
standard-sized CME bitcoin futures contract was $38.9 billion. The
Commission also stated that, since the launch of 1940 Act-registered
Bitcoin Futures ETFs in October 2021, the Commission has neither
observed any disruption to the CME bitcoin futures market, nor any
evidence that the Bitcoin Futures ETFs have exerted a dominant
influence on CME bitcoin futures prices. See id.
---------------------------------------------------------------------------

    The Commission, accordingly, concludes that the CME is a
``significant market'' related to CME bitcoin futures contracts, and
thus that the Exchange has entered into the requisite surveillance-
sharing agreement. Nasdaq may, therefore, rely on this surveillance-
sharing agreement to demonstrate that its proposal to list and trade
the Shares is designed to prevent fraudulent and manipulative acts and
practices, as required by Section 6(b)(5) of the Exchange Act.\76\
---------------------------------------------------------------------------

    \76\ The Commission has recognized that a listing exchange could
demonstrate that other means to prevent fraudulent and manipulative
acts and practices are sufficient to justify dispensing with a
comprehensive surveillance-sharing agreement with a regulated market
of significant size, including by demonstrating that the bitcoin
market as a whole or the underlying bitcoin market is uniquely and
inherently resistant to fraud and manipulation. See USBT Order, 85
FR at 12587 n.23. Such resistance to fraud and manipulation must be
novel and beyond those protections that exist in traditional
commodities or securities markets. See id. at 12597. Moreover, in
the context of previous spot bitcoin ETP proposals that have
attempted to demonstrate that other means besides surveillance-
sharing agreements are sufficient to prevent fraudulent and
manipulative acts and practices, the Commission has consistently
rejected arguments made by the listing exchanges. See supra note 26.
In this proposal, Nasdaq likewise asserts that, with respect to the
proposed ETP, there are other means to prevent fraudulent and
manipulative acts and practices sufficient to justify dispensing
with the requisite surveillance-sharing requirement. See Notice, 86
FR at 50578-79. Because Nasdaq has the requisite surveillance
sharing agreement, the Commission does not need to reach the
separate question of whether Nasdaq has demonstrated that there are
other means, besides the surveillance-sharing agreement, that would
be sufficient to prevent fraudulent and manipulative acts and
practices.
---------------------------------------------------------------------------

B. Exposure to Bitcoin Futures Contracts Through a Bitcoin Futures-
Based ETP

    Nasdaq states that, despite growing investor interest in bitcoin,
the primary means for investors to gain access to bitcoin exposure
remains either through CME bitcoin futures or a direct investment
through bitcoin platforms or over-the-counter trading.\77\ Nasdaq
asserts that, for regular investors simply wishing to express an
investment view in bitcoin, investment through CME bitcoin futures is
complex and requires active management. Moreover, direct investment in
bitcoin brings with it significant inconvenience, complexity, expense,
and risk.\78\ Directly holding bitcoin requires investors to retain and
protect their private keys, which, if lost or compromised, renders
their bitcoin unavailable.\79\ According to Nasdaq, investment vehicles
that invest directly in bitcoin, or investors that hold bitcoin through
digital wallets or other storage mechanisms, must take extraordinary
steps in order to protect their bitcoin, such as placing the bitcoin in
``cold storage.'' \80\
---------------------------------------------------------------------------

    \77\ See Notice, 86 FR at 50582.
    \78\ See id.
    \79\ See id.
    \80\ See id.
---------------------------------------------------------------------------

    Nasdaq asserts that the Shares, instead, would represent a
significant innovation in the bitcoin market by providing an
inexpensive and simple vehicle for investors to gain exposure to
bitcoin in a secure and easily accessible product that is familiar and
transparent.\81\ As compared to a direct investment in bitcoin, the
proposed ETP would enhance the security afforded to investors.\82\
Further, the Trust would not face risks similar to investment vehicles
that hold bitcoin directly because the Trust's exposure to bitcoin
would be through cash-settled CME bitcoin futures.\83\
---------------------------------------------------------------------------

    \81\ See id.
    \82\ See id.
    \83\ See id.
---------------------------------------------------------------------------

    In essence, Nasdaq asserts that the risky nature of direct
investment in spot bitcoin or a spot bitcoin ETP and the complex nature
of direct investment in CME bitcoin futures compels approval of the
proposed ETP. The Commission disagrees.\84\ Pursuant to Section
19(b)(2) of the Exchange Act, the Commission must approve a proposed
rule change filed by a national securities exchange if it finds that
the proposed rule change is consistent with the applicable requirements
of the Exchange Act, and it must disapprove the filing if it does not
make such a finding.\85\ Thus, even if a proposed rule change purports
to protect investors from a particular type of investment risk--such as
the susceptibility of an asset to loss or

theft--the proposed rule change may still fail to meet the requirements
under the Exchange Act.\86\
---------------------------------------------------------------------------

    \84\ The Commission has disagreed with similar arguments made in
the context of a previous bitcoin futures-related ETP. See
GraniteShares Order, 83 FR at 43931.
    \85\ See Exchange Act Section 19(b)(2)(C), 15 U.S.C.
778s(b)(2)(C).
    \86\ See SolidX Order, 82 FR at 16259; WisdomTree Order, 86 FR
at 69334; Wise Origin Order, 87 FR at 5538.
---------------------------------------------------------------------------

    Regardless of Nasdaq's assertions and for the reasons discussed
herein--including that Nasdaq has demonstrated that it has a
comprehensive surveillance-sharing agreement with a regulated market of
significant size related to CME bitcoin futures contracts that will
help prevent fraudulent and manipulative acts and practices,\87\ and
that core aspects of the proposed ETP will be consistent with other
commodity-futures ETPs that the Commission has approved, including with
respect to the availability of pricing information, transparency of
portfolio holdings, and types of surveillance procedures \88\--the
Commission finds that the proposal is also consistent with the
requirement under Section 6(b)(5) that the Exchange's rules be designed
to protect investors and the public interest.\89\
---------------------------------------------------------------------------

    \87\ See supra Section III.A.
    \88\ See infra Section III.C.
    \89\ The Commission acknowledges that, compared to trading in
unregulated spot bitcoin markets, trading a CME bitcoin futures-
based ETP on a national securities exchange may provide some
additional protection to investors. See GraniteShares Order, 83 FR
at 43931; USBT Order, 85 FR at 12615; Teucrium Order, 87 FR at 21682
n.109.
---------------------------------------------------------------------------

C. Other Standards for Commodity-Futures ETPs

    Nasdaq's proposal sets forth aspects of the proposed ETP, including
the availability of pricing information, transparency of portfolio
holdings, and types of surveillance procedures, that are consistent
with the other commodity-futures ETPs that the Commission has
approved.\90\
---------------------------------------------------------------------------

    \90\ See, e.g., ProShares UltraPro 3X Natural Gas ETF and
ProShares UltraPro 3X Short Natural Gas ETF, Securities Exchange Act
Release No. 86532 (July 31, 2019), 84 FR 38312 (Aug. 6, 2019) (SR-
NYSEArca-2019-02); Teucrium Order, 87 FR at 21683-84.
---------------------------------------------------------------------------

    According to Nasdaq,\91\ quotation and last-sale information
regarding the Shares will be disseminated through the facilities of the
Consolidated Tape Association. Information regarding market price and
trading of the Shares will be continually available on a real-time
basis throughout the day on brokers' computer screens and other
electronic services. Price information for CME bitcoin futures can be
found on the CME's website. Intraday price quotations on Money Market
Instruments of the type held by the Trust will be available from major
broker-dealer firms and from third parties, which may provide prices
free with a time delay, or ``live'' with a paid fee. For CME bitcoin
futures, such intraday information will be available directly from the
applicable listing venue. Intraday price information will also be
available through subscription services, such as Bloomberg and Thomson
Reuters, which can be accessed by authorized participants and other
investors. Pricing information related to Money Market Instruments will
be available through issuer websites and publicly available quotation
services, such as Bloomberg, Markit, and Thomson Reuters. The CME CF
BRR will be disseminated once daily at 4:00 p.m. London time and will
be available on the CME's website. Information regarding the CME CF
BRR, including rules and methodologies can also be found on the CME's
website.
---------------------------------------------------------------------------

    \91\ See Notice, 86 FR at 50580, 50583; Amendment No. 2, supra
note 9, at 4-5.
---------------------------------------------------------------------------

    The Trust's website will display the prior business day's NAV. On
each business day, before commencement of trading in the Shares during
Regular Trading Hours, the Trust will disclose on its website the
portfolio holdings of the Trust. The Trust's website will also include
a form of the prospectus for the Trust. The website will include the
Shares' ticker symbol and CUSIP information, along with additional
quantitative information updated on a daily basis.\92\ The website will
also contain pricing information for the Shares. All information
disclosed on the Trust's website will be publicly available at no
charge.\93\
---------------------------------------------------------------------------

    \92\ The Trust's website will include: (1) The prior business
day's NAV and the reported closing price; (2) the mid-point of the
bid/ask price in relation to the NAV as of the time the NAV is
calculated (``Bid/Ask Price'') and a calculation of the premium or
discount of such price against such NAV; and (3) data in chart
format displaying the frequency distribution of discounts and
premiums of the daily Bid/Ask Price against the NAV, within
appropriate ranges, for at least each of the four previous calendar
quarters (or for the life of the Trust, if shorter).
    \93\ See Notice, 86 FR at 50580; Amendment No. 2, supra note 9,
at 4, 7.
---------------------------------------------------------------------------

    The Trust's NAV will be calculated by the Sponsor once a day and
will typically be determined as of 4:00 p.m. (Eastern time) on each day
the Shares trade on the Exchange. The Exchange or a third-party
financial data provider will calculate an intra-day indicative value
(``IIV'') by using the prior day's closing NAV per Share as a base and
updating that value during the Exchange's Regular Market Session (9:30
a.m. to 4:00 p.m. (Eastern time)) to reflect changes in the value of
the Trust's NAV during the trading day. The IIV will be widely
disseminated on a per Share basis every 15 seconds during the
Exchange's Regular Market Session by one or more major market data
vendors. The NAV for the Trust will be disseminated daily to all market
participants at the same time.\94\
---------------------------------------------------------------------------

    \94\ See Notice, 86 FR at 50574, 50580.
---------------------------------------------------------------------------

    The proposal also is reasonably designed to promote fair disclosure
of information that may be necessary to price the Shares appropriately
and to prevent trading in the Shares when a reasonable degree of
transparency cannot be assured. 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. Further,
if the IIV or the value of the underlying futures contract is not being
disseminated as required, the Exchange may halt trading during the day
in which an interruption to the dissemination of the IIV or the value
of the underlying futures contract occurs. If the interruption to the
dissemination of the IIV or the value of the underlying futures
contract 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. Trading in Shares of the Trust will be
halted if conditions specified in Nasdaq Rule 4120(a)(9) or the circuit
breaker parameters in Nasdaq Rules 4120(a)(11) and (12) have been
reached. Trading also may be halted because of market conditions or for
reasons that, in the view of the Exchange, make trading in the Shares
inadvisable. The Exchange states that it has a general policy
prohibiting the distribution of material, non-public information by its
employees.\95\ Moreover, trading of the Shares will be subject to
Nasdaq Rule 5711(g), which sets forth certain restrictions on
registered Market Makers in the Shares to facilitate surveillance.\96\
---------------------------------------------------------------------------

    \95\ See id. at 50581.
    \96\ See id. at 50580-81.
---------------------------------------------------------------------------

    The Commission notes that the Exchange or the Financial Industry
Regulatory Authority (``FINRA''), on behalf of the Exchange, or both,
will communicate as needed regarding trading in the Shares and the
underlying CME bitcoin futures 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 information regarding trading in the
Shares and the underlying CME bitcoin futures from such markets and
entities. In addition, the Exchange may obtain information regarding
trading in

the Shares and the underlying CME bitcoin futures from other exchanges
who are members or affiliates of the ISG or with which the Exchange has
in place a comprehensive surveillance-sharing agreement (``CSSA'').\97\
The Exchange may also obtain information regarding trading in the spot
bitcoin market from the exchanges with which the CME or the Exchange
has entered into a CSSA.\98\
---------------------------------------------------------------------------

    \97\ For a list of the current members and affiliate members of
ISG, see www.isgportal.org. According to the Exchange, not all
components of the Disclosed Portfolio for the Trust may trade on
markets that are members of the ISG or with which the Exchange has
in place a CSSA. See Notice, 86 FR at 50581 n.68.
    \98\ See Notice, 86 FR at 50581; Amendment No. 2, supra note 9,
at 5. For additional discussion of the CME bitcoin futures market
and how surveillance-sharing between the Exchange and the CME via
common membership in the ISG would assist in detecting and deterring
manipulative conduct related to the Shares, see Section III.A above.
---------------------------------------------------------------------------

    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.\99\ In support of
this proposal, the Exchange represented that: \100\
---------------------------------------------------------------------------

    \99\ See Notice, 86 FR at 50581.
    \100\ See id.; Amendment No. 2.
---------------------------------------------------------------------------

    (1) The Shares of the Trust will conform to the initial and
continued listing criteria set forth in Nasdaq Rule 5711(g).
    (2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
    (3) 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
Shares on the Exchange will be subject to the Exchange's surveillance
procedures for derivative products.
    (4) 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 in the Shares. Specifically, the
Information Circular will discuss the following: (a) The procedures for
purchases and redemptions of Shares in Creation Units (and that Shares
are not individually redeemable); (b) Section 10 of Nasdaq General Rule
9, which imposes suitability obligations on Nasdaq members with respect
to recommending transactions in the Shares to customers; (c) how
information regarding the IIV and the portfolio holdings is
disseminated; (d) the risks involved in trading the Shares during the
Pre-Market and Post-Market Sessions when an updated IIV will not be
calculated or publicly disseminated; (e) the requirement that members
deliver a prospectus to investors purchasing newly issued Shares prior
to or concurrently with the confirmation of a transaction; and (f)
trading information.
    (5) For initial and continued listing, the Trust will be in
compliance with Rule 10A-3 under the Exchange Act.\101\
---------------------------------------------------------------------------

    \101\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (6) Under no circumstances will the Trust hold and/or invest in any
assets other than CME bitcoin futures contracts, cash, and Money Market
Instruments. The Trust will not invest in or hold spot bitcoin.
    (7) The Trust's investments will be consistent with the Trust's
investment objective and will not be used to enhance leverage. That is,
the Trust's investments will not be used to seek performance that is
the multiple or inverse multiple (e.g., 2Xs, 3Xs, -2Xs, and -3Xs) of
the Trust's benchmark.
    (8) A minimum of 100,000 Shares of the Trust will be outstanding at
the commencement of trading on the Exchange.
    (9) The Exchange represents that all statements and representations
made in the filing regarding (a) the description of the reference
assets or trust holdings; (b) limitations on reference assets, or trust
holdings; (c) dissemination and availability of the reference asset or
intraday indicative values; or (d) the applicablilty of Nasdaq listing
rules specified in the filing shall constitute continued listing
standards. The Exchange will require the Trust to represent to the
Exchange that it will advise the Exchange of any failure by the Trust
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 is not in compliance with the applicable listing
requirements, the Exchange will commence delisting procedures under the
Nasdaq 5800 Series.

IV. Conclusion

    This approval order is based on all of the Exchange's
representations and description of the Trust, including those set forth
above and in Amendment No. 2. The Commission notes that the Shares must
comply with the requirements of Nasdaq Rule 5711(g) to be listed and
traded on the Exchange on an initial and continuing basis.
    For the reasons set forth above, the Commission finds, pursuant to
Section 19(b)(2) of the Exchange Act,\102\ that the proposed rule
change, as modified by Amendment Nos. 1 and 2, is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to a national securities exchange, and in
particular, with Section 6(b)(5) and Section 11A(a)(1)(C)(iii) of the
Exchange Act.\103\
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    \102\ 15 U.S.C. 78f(b)(2).
    \103\ 15 U.S.C. 78f(b)(5); 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\104\ that proposed rule change SR-NASDAQ-2021-066, as
modified by Amendment Nos. 1 and 2, be, and hereby is, approved.
---------------------------------------------------------------------------

    \104\ 15 U.S.C. 78f(b)(2).
    \105\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\105\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10065 Filed 5-10-22; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 118 (Friday, June 19, 2015)]
[Proposed Rules]
[Pages 35297-35298]
[FR Doc No: 2015-14950]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Chapter I

[EPA-HQ-OPP-2014-0818; FRL-9929-16]

Proposal To Mitigate Exposure to Bees From Acutely Toxic
Pesticide Products; Extension of Comment Period

AGENCY: Environmental Protection Agency (EPA).

ACTION: Extension of comment period.

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SUMMARY: EPA issued a notice in the Federal Register of May 29, 2015,
concerning EPA's Proposal to Mitigate Exposure to Bees from Acutely
Toxic Pesticide Products. This document extends the comment period for
30 days, from June 29, 2015 to July 29, 2015. Multiple stakeholders
requested that EPA extend the comment period due to the complexity and
importance of this issue. EPA is granting the extension.

DATES: The comment period for the document published on May 29, 2015
(80 FR 30644), is extended. Comments, identified by docket
identification (ID) number EPA-HQ-OPP-2014-0818 must be received on or
before July 29, 2015.

ADDRESSES: Follow the detailed instructions provided under ADDRESSES in
the Federal Register document of May 29, 2015 (80 FR 30644) (FRL-9927-
36).

FOR FURTHER INFORMATION CONTACT: Michael Goodis, Pesticide Re-
Evaluation Division (7508P), Office of Pesticide Programs,
Environmental Protection Agency, 1200 Pennsylvania Ave. NW.,
Washington, DC 20460-0001; telephone number:<PHONE_NUMBER>; email
address<EMAIL_ADDRESS>or
    Marietta Echeverria, Registration Division (7505P), Office of
Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania
Ave. NW., Washington, DC 20460-0001; telephone number:<PHONE_NUMBER>;
email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: This document extends the public comment
period established in the Federal Register document of May 29, 2015 (80
FR 30644) (FRL-9927-36). In that document, EPA is seeking comment on a
proposal to adopt mandatory pesticide label restrictions to protect
managed bees under contract pollination services from foliar
applications of pesticides that are acutely toxic to bees on a contact
exposure basis. These label restrictions would prohibit applications of
pesticide products, which are acutely toxic to bees, during bloom when
bees are known to be present under contract. EPA is also seeking
comment on a proposal to rely on efforts made by states and tribes to
reduce pesticide exposures through development of locally-based
measures, specifically through managed pollinator protection plans.
These plans would include local and customizable mitigation measures to
address certain scenarios that can result in exposure to pollinators.
EPA intends to monitor the success of these plans in deciding whether
further label restrictions are warranted. EPA is hereby extending the
comment period, which was set to end on June 29, 2015, to July 29,
2015.
    To submit comments, or access the docket, please follow the
detailed instructions provided under ADDRESSES in the Federal Register
document of May 29, 2015. If you have questions, consult the person
listed under FOR FURTHER INFORMATION CONTACT.

    Authority: 7 U.S.C. 136a.

    Dated: June 11, 2015.
Jack E. Housenger,
Director, Office of Pesticide Programs.
[FR Doc. 2015-14950 Filed 6-18-15; 8:45 am]
 BILLING CODE 6560-50-P