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inoperative provisions. These proposed Commission, 100 F Street NE, STATUS: This meeting will be closed to changes are technical in nature and Washington, DC 20549–1090. the public. would not impact the rights or All submissions should refer to File MATTERS TO BE CONSIDERED: obligations of Clearing Members or Number SR–OCC–2021–008. This file Commissioners, Counsel to the other participants in a way that would number should be included on the Commissioners, the Secretary to the benefit or disadvantage any participant subject line if email is used. To help the Commission, and recording secretaries versus another participant. Accordingly, Commission process and review your will attend the closed meeting. Certain OCC does not believe that the proposed comments more efficiently, please use staff members who have an interest in corrections to its By-Laws and Rules only one method. The Commission will the matters also may be present. have any impact, or impose any burden, post all comments on the Commission’s In the event that the time, date, or on competition. internet website (http://www.sec.gov/ location of this meeting changes, an rules/sro.shtml). Copies of the (C) Clearing Agency’s Statement on announcement of the change, along with submission, all subsequent Comments on the Proposed Rule the new time, date, and/or place of the amendments, all written statements Change Received From Members, meeting will be posted on the with respect to the proposed rule Participants or Others Commission’s website at https:// change that are filed with the www.sec.gov. Written comments were not and are Commission, and all written The General Counsel of the not intended to be solicited with respect communications relating to the Commission, or his designee, has to the proposed rule change, and none proposed rule change between the certified that, in his opinion, one or have been received. Commission and any person, other than more of the exemptions set forth in 5 III. Date of Effectiveness of the those that may be withheld from the U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) Proposed Rule Change and Timing for public in accordance with the and (10) and 17 CFR 200.402(a)(3), provisions of 5 U.S.C. 552, will be Commission Action (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and available for website viewing and (a)(10), permit consideration of the Pursuant to Section 19(b)(3)(A)(ii) 21 printing in the Commission’s Public scheduled matters at the closed meeting. of the Act, and Rule 19b–4(f)(1) 22 and Reference Room, 100 F Street NE, The subject matter of the closed (f)(4) 23 thereunder, the proposed rule Washington, DC 20549, on official meeting will consist of the following change is filed for immediate business days between the hours of topics: effectiveness. At any time within 60 10:00 a.m. and 3:00 p.m. Copies of such Institution and settlement of days of the filing of the proposed rule filing also will be available for injunctive actions; change, the Commission summarily may inspection and copying at the principal Institution and settlement of temporarily suspend such rule change if office of OCC and on OCC’s website at administrative proceedings; it appears to the Commission that such https://www.theocc.com/Company- Resolution of litigation claims; and action is necessary or appropriate in the Information/Documents-and-Archives/ Other matters relating to examinations public interest, for the protection of By-Laws-and-Rules. and enforcement proceedings. investors, or otherwise in furtherance of All comments received will be posted At times, changes in Commission the purposes of the Act. The proposal without change. Persons submitting priorities require alterations in the shall not take effect until all regulatory comments are cautioned that we do not scheduling of meeting agenda items that actions required with respect to the redact or edit personal identifying may consist of adjudicatory, proposal are completed.24 information from comment submissions. examination, litigation, or regulatory You should submit only information matters. IV. Solicitation of Comments that you wish to make available Interested persons are invited to publicly. CONTACT PERSON FOR MORE INFORMATION: submit written data, views and All submissions should refer to File For further information; please contact arguments concerning the foregoing, Number SR–OCC–2021–008 and should Vanessa A. Countryman from the Office including whether the proposed rule be submitted on or before September 13, of the Secretary at (202) 551–5400. change is consistent with the Act. 2021. Dated: August 19, 2021. Comments may be submitted by any of For the Commission, by the Division of Vanessa A. Countryman, the following methods: Trading and Markets, pursuant to delegated Secretary. authority.25 Electronic Comments [FR Doc. 2021–18218 Filed 8–19–21; 4:15 pm] Jill M. Peterson, • BILLING CODE 8011–01–P Use the Commission’s internet Assistant Secretary. comment form (http://www.sec.gov/ [FR Doc. 2021–17966 Filed 8–20–21; 8:45 am] rules/sro.shtml); or • BILLING CODE 8011–01–P SECURITIES AND EXCHANGE Send an email to rule-comments@ COMMISSION sec.gov. Please include File Number SR– OCC–2021–008 on the subject line. SECURITIES AND EXCHANGE [Release No. 34–92689; File No. SR– CboeBZX–2021–052] Paper Comments COMMISSION • Send paper comments in triplicate Sunshine Act Meetings Self-Regulatory Organizations; Cboe to Secretary, Securities and Exchange BZX Exchange, Inc.; Notice of Filing of TIME AND DATE: 2:00 p.m. on Thursday, a Proposed Rule Change To List and 21 15 U.S.C. 78s(b)(3)(A)(ii). August 26, 2021. Trade Shares of the Global X 22 17 CFR 240.19b–4(f)(1). PLACE: The meeting will be held via Trust Under BZX Rule 14.11(e)(4), 23 17 CFR 240.19b–4(f)(4). remote means and/or at the Commodity-Based Trust Shares 24 Notwithstanding its immediate effectiveness, Commission’s headquarters, 100 F implementation of this rule change will be delayed August 17, 2021. until this change is deemed certified under Street NE, Washington, DC 20549. Commodity Futures Trading Commission Pursuant to Section 19(b)(1) of the Regulation 40.6. 25 17 CFR 200.30–3(a)(12). Securities Exchange Act of 1934 (the

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‘‘Act’’),1 and Rule 19b–4 thereunder,2 Shares on the Exchange.5 Global X approximately $10 billion. No registered notice is hereby given that on August 3, Digital Assets, LLC is the sponsor of the offering of digital asset securities or 2021, Cboe BZX Exchange, Inc. (the Trust (the ‘‘Sponsor’’). The Shares will shares in an investment vehicle with ‘‘Exchange’’ or ‘‘BZX’’) filed with the be registered with the Commission by exposure to bitcoin or any other Securities and Exchange Commission means of the Trust’s registration had yet been conducted, (the ‘‘Commission’’) the proposed rule statement on Form S–1 (the and the regulated infrastructure for change as described in Items I, II, and ‘‘Registration Statement’’).6 conducting a digital asset securities 9 III below, which Items have been Background offering had not begun to develop. prepared by the Exchange. The Similarly, regulated U.S. bitcoin futures Commission is publishing this notice to Bitcoin is a digital asset based on the contracts did not exist. The Commodity solicit comments on the proposed rule decentralized, open source protocol of Futures Trading Commission (the change from interested persons. the peer-to-peer computer network ‘‘CFTC’’) had determined that bitcoin is launched in 2009 that governs the a commodity,10 but had not engaged in I. Self-Regulatory Organization’s creation, movement, and ownership of significant enforcement actions in the Statement of the Terms of Substance of bitcoin and hosts the public , or space. The New York Department of the Proposed Rule Change ‘‘,’’ on which all bitcoin Financial Services (‘‘NYDFS’’) adopted Cboe BZX Exchange, Inc. (the transactions are recorded (the ‘‘Bitcoin its final BitLicense regulatory ‘‘Exchange’’ or ‘‘BZX’’) is filing with the Network’’ or ‘‘Bitcoin’’). The framework in 2015, but had only Securities and Exchange Commission decentralized nature of the Bitcoin approved four entities to engage in (‘‘Commission’’) a proposed rule change Network allows parties to transact activities relating to virtual currencies to list and trade shares of the Global X directly with one another based on (whether through granting a BitLicense Bitcoin Trust (the ‘‘Trust’’),3 under BZX cryptographic proof instead of relying or a limited-purpose trust charter) as of Rule 14.11(e)(4), Commodity-Based on a trusted third party. The protocol June 30, 2016.11 While the first over-the- Trust Shares. also lays out the rate of issuance of new counter bitcoin fund launched in 2013, bitcoin within the Bitcoin Network, a The text of the proposed rule change public trading was limited and the fund rate that is reduced by half is also available on the Exchange’s had only $60 million in assets.12 There approximately every four years with an website (http://markets.cboe.com/us/ were very few, if any, traditional eventual hard cap of 21 million. It’s equities/regulation/rule_filings/bzx/), at financial institutions engaged in the generally understood that the the Exchange’s Office of the Secretary, space, whether through investment or combination of these two features—a and at the Commission’s Public providing services to digital asset systemic hard cap of 21 million bitcoin Reference Room. companies. In January 2018, the Staff of and the ability to transact trustlessly the Commission noted in a letter to the II. Self-Regulatory Organization’s (i.e., without a trusted intermediary) Investment Company Institute and Statement of the Purpose of, and with anyone connected to the Bitcoin 7 SIFMA that it was not aware, at that Statutory Basis for, the Proposed Rule Network—gives bitcoin its value. The time, of a single custodian providing Change first rule filing proposing to list an fund custodial services for digital exchange-traded product to provide In its filing with the Commission, the assets.13 Fast forward to the first quarter exposure to bitcoin in the U.S. was Exchange included statements submitted by the Exchange on June 30, concerning the purpose of and basis for 9 Digital assets that are securities under U.S. law 2016.8 At that time, blockchain the proposed rule change and discussed are referred to throughout this proposal as ‘‘digital technology, and digital assets that asset securities.’’ All other digital assets, including any comments it received on the utilized it, were relatively new to the bitcoin, are referred to interchangeably as proposed rule change. The text of these ‘‘’’ or ‘‘virtual currencies.’’ The broader public. The market cap of all statements may be examined at the term ‘‘digital assets’’ refers to all digital assets, bitcoin in existence at that time was including both digital asset securities and places specified in Item IV below. The cryptocurrencies, together. Exchange has prepared summaries, set 5 All statements and representations made in this 10 See ‘‘In the Matter of Coinflip, Inc.’’ forth in sections A, B, and C below, of filing regarding (a) the description of the portfolio, (‘‘Coinflip’’) (CFTC Docket 15–29 (September 17, the most significant aspects of such (b) limitations on portfolio holdings or reference 2015)) (order instituting proceedings pursuant to statements. assets, or (c) the applicability of Exchange rules and Sections 6(c) and 6(d) of the CEA, making findings surveillance procedures shall constitute continued and imposing remedial sanctions), in which the A. Self-Regulatory Organization’s listing requirements for listing the Shares on the CFTC stated: Statement of the Purpose of, and Exchange. ‘‘Section 1a(9) of the CEA defines ‘commodity’ to 6 See Registration Statement on Form S–1, dated include, among other things, ‘all services, rights, Statutory Basis for, the Proposed Rule July 21, 2021 submitted to the Commission by the and interests in which contracts for future delivery Change Sponsor on behalf of the Trust. The descriptions of are presently or in the future dealt in.’ 7 U.S.C. the Trust, the Shares, and the Trust’s methodology 1a(9). The definition of a ‘commodity’ is broad. See, 1. Purpose for calculating net asset value contained herein are e.g., Board of Trade of City of Chicago v. SEC, 677 based, in part, on information in the Registration F. 2d 1137, 1142 (7th Cir. 1982). Bitcoin and other The Exchange proposes to list and Statement. The Registration Statement is not yet virtual currencies are encompassed in the definition trade the Shares under BZX Rule effective and the Shares will not trade on the and properly defined as commodities.’’ 14.11(e)(4),4 which governs the listing Exchange until such time that the Registration 11 A list of businesses that are and trading of Commodity-Based Trust Statement is effective. entities regulated by the NYDFS is available on the 7 For additional information about bitcoin and the NYDFS website. See https://www.dfs.ny.gov/apps_ Bitcoin Network, see https://bitcoin.org/en/getting- and_licensing/virtual_currency_businesses/ 1 15 U.S.C. 78s(b)(1). started; https://www.fidelitydigitalassets.com/ regulated_entities. 2 17 CFR 240.19b–4. articles/addressing-bitcoin-criticisms; and https:// 12 Data as of March 31, 2016 according to publicly 3 The Trust was formed as a Delaware statutory www.vaneck.com/education/investment-ideas/ available filings. See Bitcoin Investment Trust Form trust on July 13, 2021 and is operated as a grantor investing-in-bitcoin-and-digital-assets/. S–1, dated May 27, 2016, available: https:// trust for U.S. federal tax purposes. The Trust has 8 See Securities Exchange Act Release No. 83723 www.sec.gov/Archives/edgar/data/1588489/ no fixed termination date. (July 26, 2018), 83 FR 37579 (August 1, 2018). This 000095012316017801/filename1.htm. 4 The Commission approved BZX Rule 14.11(e)(4) proposal was subsequently disapproved by the 13 See letter from Dalia Blass, Director, Division in Securities Exchange Act Release No. 65225 Commission. See Securities Exchange Act Release of Investment Management, U.S. Securities and (August 30, 2011), 76 FR 55148 (September 6, 2011) No. 83723 (July 26, 2018), 83 FR 37579 (August 1, Exchange Commission to Paul Schott Stevens, (SR–BATS–2011–018). 2018) (the ‘‘Winklevoss Order’’). Continued

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of 2021 and the digital assets financial services for digital asset securities than twenty-five BitLicenses, including ecosystem, including bitcoin, has registered with the Commission.19 to established public payment progressed significantly. The Outside the Commission’s purview, companies like PayPal Holdings, Inc. development of a regulated market for the regulatory landscape has changed and Square, Inc., and limited purpose digital asset securities has significantly significantly since 2016, and trust charters to entities providing evolved, with market participants cryptocurrency markets have grown and cryptocurrency custody services, having conducted registered public evolved as well. The market for bitcoin including the Trust’s Custodian. The offerings of both digital asset is approximately 100 times larger, U.S. Treasury Financial Crimes securities 14 and shares in investment having recently reached a market cap of Enforcement Network (‘‘FinCEN’’) has over $1 trillion, although as of July 19, released extensive guidance regarding vehicles holding bitcoin futures.15 2021, it is closer to $580 billion. CFTC the applicability of the Bank Secrecy Additionally, licensed and regulated regulated bitcoin futures represented Act (‘‘BSA’’) and implementing service providers have emerged to approximately $28 billion in notional regulations to virtual currency provide fund custodial services for trading volume on Chicago Mercantile businesses,24 and has proposed rules digital assets, among other services. For Exchange (‘‘CME’’) (‘‘Bitcoin Futures’’) imposing requirements on entities example, in December 2020, the in December 2020 compared to $737 subject to the BSA that are specific to Commission adopted a conditional no- million, $1.4 billion, and $3.9 billion in the technological context of virtual action position permitting certain total trading in December 2017, currencies.25 In addition, the Treasury’s special purpose broker-dealers to December 2018, and December 2019, Office of Foreign Assets Control custody digital asset securities under respectively. Bitcoin Futures traded (‘‘OFAC’’) has brought enforcement Rule 15c3–3 under the Exchange Act; 16 over $1.2 billion per day in December actions over apparent violations of the in September 2020, the Staff of the 2020 and represented $1.6 billion in sanctions laws in connection with the Commission released a no-action letter open interest compared to $115 million provision of wallet management permitting certain broker-dealers to in December 2019, which the Exchange services for digital assets.26 operate a non-custodial Alternative believes represents a regulated market of In addition to the regulatory Trading System (‘‘ATS’’) for digital asset significant size, as further discussed developments laid out above, more securities, subject to specified below.20 The CFTC has exercised its traditional financial market participants conditions; 17 and in October 2019, the regulatory jurisdiction in bringing a appear to be embracing cryptocurrency: 27 Staff of the Commission granted number of enforcement actions related large insurance companies, asset 28 29 temporary relief from the clearing to bitcoin and against trading platforms managers, university endowments, agency registration requirement to an that offer cryptocurrency trading.21 The U.S. Office of the Comptroller of the available at: https://www.occ.gov/news-issuances/ entity seeking to establish a securities news-releases/2021/nr-occ-2021-19.html. clearance and settlement system based Currency (the ‘‘OCC’’) has made clear 24 See FinCEN Guidance FIN–2019–G001 (May 9, on technology,18 and that federally-chartered banks are able 2019) (Application of FinCEN’s Regulations to multiple transfer agents who provide to provide custody services for Certain Business Models Involving Convertible cryptocurrencies and other digital Virtual Currencies) available at: https:// 22 www.fincen.gov/sites/default/files/2019-05/FinCEN President & CEO, Investment Company Institute assets. The OCC recently granted %20Guidance%20CVC%20FINAL%20508.pdf. and Timothy W. Cameron, Asset Management conditional approval of two charter 25 See U.S. Department of the Treasury Press Group—Head, Securities Industry and Financial conversions by state-chartered trust Release: ‘‘The Financial Crimes Enforcement Markets Association (January 18, 2018), available at companies to national banks, both of Network Proposes Rule Aimed at Closing Anti- https://www.sec.gov/divisions/investment/ Money Laundering Regulatory Gaps for Certain noaction/2018/cryptocurrency-011818.htm. which provide cryptocurrency custody 23 Convertible Virtual Currency and Digital Asset 14 See Prospectus supplement filed pursuant to services. NYDFS has granted no fewer Transactions’’ (December 18, 2020), available at: Rule 424(b)(1) for INX Tokens (Registration No. https://home.treasury.gov/news/press-releases/ 333–233363), available at: https://www.sec.gov/ 19 See, e.g., Form TA–1/A filed by Tokensoft sm1216. Archives/edgar/data/1725882/ Transfer Agent LLC (CIK: 0001794142) on January 26 See U.S. Department of the Treasury 000121390020023202/ea125858-424b1_ 8, 2021, available at: https://www.sec.gov/Archives/ Enforcement Release: ‘‘OFAC Enters Into $98,830 inxlimited.htm. edgar/data/1794142/000179414219000001/ Settlement with BitGo, Inc. for Apparent Violations 15 See Prospectus filed by Stone Ridge Trust VI xslFTA1X01/primary_doc.xml. of Multiple Sanctions Programs Related to Digital on behalf of NYDIG Bitcoin Strategy Fund 20 All statistics and charts included in this Currency Transactions’’ (December 30, 2020) Registration, available at: https://www.sec.gov/ proposal are sourced from https:// available at: https://home.treasury.gov/system/files/ Archives/edgar/data/1764894/ www.cmegroup.com/trading/bitcoin-futures.html. 126/20201230_bitgo.pdf. 000119312519309942/d693146d497.htm. 21 The CFTC’s annual report for Fiscal Year 2020 27 On December 10, 2020, Massachusetts Mutual 16 See Securities Exchange Act Release No. 90788, (which ended on September 30, 2020) noted that Life Insurance Company (MassMutual) announced 86 FR 11627 (February 26, 2021) (File Number S7– the CFTC ‘‘continued to aggressively prosecute that it had purchased $100 million in bitcoin for its 25–20) (Custody of Digital Asset Securities by misconduct involving digital assets that fit within general investment account. See MassMutual Press Special Purpose Broker-Dealers). the CEA’s definition of commodity’’ and ‘‘brought Release ‘‘Institutional Bitcoin provider NYDIG 17 See letter from Elizabeth Baird, Deputy a record setting seven cases involving digital announces minority stake purchase by Director, Division of Trading and Markets, U.S. assets.’’ See CFTC FY2020 Division of Enforcement MassMutual’’ (December 10, 2020) available at: Securities and Exchange Commission to Kris Annual Report, available at: https://www.cftc.gov/ https://www.massmutual.com/about-us/news-and- Dailey, Vice President, Risk Oversight & media/5321/DOE_FY2020_AnnualReport_120120/ press-releases/press-releases/2020/12/institutional- Operational Regulation, Financial Industry download. Additionally, the CFTC filed on October bitcoin-provider-nydig-announces-minority-stake- Regulatory Authority (September 25, 2020), 1, 2020, a civil enforcement action against the purchase-by-massmutual. available at: https://www.sec.gov/divisions/ owner/operators of the BitMEX trading platform, 28 See e.g., ‘‘BlackRock’s Rick Rieder says the marketreg/mr-noaction/2020/finra-ats-role-in- which was one of the largest bitcoin derivative world’s largest asset manager has ‘started to dabble’ settlement-of-digital-asset-security-trades- exchanges. See CFTC Release No. 8270–20 (October in bitcoin’’ (February 17, 2021) available at: https:// 09252020.pdf. 1, 2020) available at: https://www.cftc.gov/ www.cnbc.com/2021/02/17/blackrock-has-started- 18 See letter from Jeffrey S. Mooney, Associate PressRoom/PressReleases/8270-20. to-dabble-in-bitcoin-says-rick-rieder.html and Director, Division of Trading and Markets, U.S. 22 See OCC News Release 2021–2 (January 4, ‘‘Guggenheim’s Scott Minerd Says Bitcoin Should Securities and Exchange Commission to Charles G. 2021) available at: https://www.occ.gov/news- Be Worth $400,000’’ (December 16, 2020) available Cascarilla & Daniel M. Burstein, Paxos Trust issuances/news-releases/2021/nr-occ-2021-2.html. at: https://www.bloomberg.com/news/articles/2020- Company, LLC (October 28, 2019), available at: 23 See OCC News Release 2021–6 (January 13, 12-16/guggenheim-s-scott-minerd-says-bitcoin- https://www.sec.gov/divisions/marketreg/mr- 2021) available at: https://www.occ.gov/news- should-be-worth-400-000. noaction/2019/paxos-trust-company-102819- issuances/news-releases/2021/nr-occ-2021-6.html 29 See e.g., ‘‘Harvard and Yale Endowments 17a.pdf. and OCC News Release 2021–19 (February 5, 2021) Among Those Reportedly Buying Crypto’’ (January

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pension funds,30 and even historically able to create and redeem shares at net allow U.S. investors with access to bitcoin skeptical fund managers 31 are asset value (‘‘NAV’’) directly with the bitcoin in a regulated and transparent allocating to bitcoin. The largest over- issuing trust; (ii) facing the technical exchange-traded vehicle that would act the-counter bitcoin fund previously risk, complexity and generally high fees to limit risk to U.S. investors by: (i) filed a Form 10 registration statement, associated with buying spot bitcoin; or Reducing premium and discount which the Staff of the Commission (iii) purchasing shares of operating volatility; (ii) reducing management fees reviewed and which took effect companies that they believe will through meaningful competition; (iii) automatically, and is now a reporting provide proxy exposure to bitcoin with reducing risks associated with investing company.32 Established companies like limited disclosure about the associated in operating companies that are Tesla, Inc.,33 MicroStrategy risks. Meanwhile, investors in many imperfect proxies for bitcoin exposure; Incorporated,34 and Square, Inc.,35 other countries, including Canada,36 are and (iv) providing an alternative to among others, have recently announced able to use more traditional exchange custodying spot bitcoin. substantial investments in bitcoin in listed and traded products to gain amounts as large as $1.5 billion (Tesla) exposure to bitcoin, disadvantaging U.S. (i) OTC Bitcoin Funds and Premium/ and $425 million (MicroStrategy). investors and leaving them with riskier Discount Volatility Suffice to say, bitcoin is on its way to and more expensive means of getting OTC Bitcoin Funds are generally gaining mainstream usage. bitcoin exposure.37 designed to provide exposure to bitcoin Despite these developments, access in a manner similar to the Shares. for U.S. retail investors to gain exposure OTC Bitcoin Funds and Investor Protection However, unlike the Shares, OTC to bitcoin via a transparent and Bitcoin Funds are unable to freely offer regulated exchange-traded vehicle Over the past year, U.S. investor creation and redemption in a way that remains limited. As investors and exposure to bitcoin through OTC incentivizes market participants to keep advisors increasingly utilize ETPs to Bitcoin Funds has grown into the tens their shares trading in line with their manage diversified portfolios (including of billions of dollars. With that growth, NAV 38 and, as such, frequently trade at equities, fixed income securities, so too has grown the potential risk to a price that is out of line with the value commodities, and currencies) quickly, U.S. investors. As described below, of their assets held. Historically, OTC easily, relatively inexpensively, and premium and discount volatility, high Bitcoin Funds have traded at a without having to hold directly any of fees, insufficient disclosures, and significant premium to NAV.39 the underlying assets, options for technical hurdles are putting U.S. Trading at a premium or a discount is bitcoin exposure for U.S. investors investor money at risk on a daily basis not unique to OTC Bitcoin Funds and is remain limited to: (i) Investing in over- that could potentially be eliminated not in itself problematic, but the size of the-counter bitcoin funds (‘‘OTC Bitcoin through access to a bitcoin ETP. The such premiums/discounts and volatility Funds’’) that are subject to high Exchange understands the thereof highlight the key differences in premium/discount volatility (and high Commission’s previous focus on operations and market structure of OTC management fees) to the advantage of potential manipulation of a bitcoin ETP Bitcoin Funds as compared to ETPs. more sophisticated investors that are in prior disapproval orders, but now This, combined with the significant believes that such concerns have been increase in AUM for OTC Bitcoin Funds 25, 2021) available at: https://www.bloomberg.com/ sufficiently mitigated and that the over the past year, has given rise to news/articles/2021-01-26/harvard-and-yale- growing and quantifiable investor significant and quantifiable investor endowments-among-those-reportedly-buying- protection concerns should be the crypto. protection issues, as further described central consideration as the Commission 30 See e.g., ‘‘Virginia Police Department Reveals below. In fact, the largest OTC Bitcoin reviews this proposal. As such, the Why its Pension Fund is Betting on Bitcoin’’ Fund has grown to $38.3 billion in (February 14, 2019) available at: https:// Exchange believes that approving this AUM 40 and has historically traded at a finance.yahoo.com/news/virginia-police- proposal (and comparable proposals department-reveals-why-194558505.html. submitted hereafter) provides the 31 See e.g., ‘‘Bridgewater: Our Thoughts on 38 Because OTC Bitcoin Funds are not listed on Bitcoin’’ (January 28, 2021) available at: https:// Commission with the opportunity to an exchange, they are also not subject to the same www.bridgewater.com/research-and-insights/our- transparency and regulatory oversight by a listing thoughts-on-bitcoin and ‘‘Paul Tudor Jones says he 36 The Exchange notes that the Purpose Bitcoin exchange as the Shares would be. In the case of the likes bitcoin even more now, rally still in the ‘first ETF, a retail physical bitcoin ETP recently launched Trust, the existence of a surveillance-sharing inning’ ’’ (October 22, 2020) available at: https:// in Canada, reportedly reached $421.8 million in agreement between the Exchange and the Bitcoin www.cnbc.com/2020/10/22/-paul-tudor-jones-says- assets under management (‘‘AUM’’) in two days, Futures market results in increased investor he-likes-bitcoin-even-more-now-rally-still-in-the- demonstrating the demand for a North American protections compared to OTC Bitcoin Funds. first-inning.html. market listed bitcoin exchange-traded product 39 The inability to trade in line with NAV may at 32 See Letter from Division of Corporation (‘‘ETP’’). The Purpose Bitcoin ETF also offers a class some point result in OTC Bitcoin Funds trading at Finance, Office of Real Estate & Construction to of units that is U.S. dollar denominated, which a discount to their NAV, which has occurred more Barry E. Silbert, Chief Executive Officer, Grayscale could appeal to U.S. investors. Without an recently with respect to one prominent OTC Bitcoin Bitcoin Trust (January 31, 2020) https:// approved bitcoin ETP in the U.S. as a viable Fund. While that has not historically been the case, www.sec.gov/Archives/edgar/data/1588489/ alternative, U.S. investors could seek to purchase and it is not clear whether such discounts will 000000000020000953/filename1.pdf. these shares in order to get access to bitcoin continue, such a prolonged, significant discount 33 See Form 10–K submitted by Tesla, Inc. for the exposure. Given the separate regulatory regime and scenario would give rise to nearly identical fiscal year ended December 31, 2020 at 23: https:// the potential difficulties associated with any potential issues related to trading at a premium as www.sec.gov/ix?doc=/Archives/edgar/data/ international litigation, such an arrangement would described below. 1318605/000156459021004599/tsla-10k_ create more risk exposure for U.S. investors than 40 As of March 31, 2021. See Form 10–Q 20201231.htm. they would otherwise have with a U.S. exchange submitted by on behalf of the Grayscale Bitcoin 34 See Form 10–Q submitted by MicroStrategy listed ETP. Trust for the quarterly period ended March 31, 2021 Incorporated for the quarterly period ended 37 The Exchange notes that securities regulators in at 4: https://grayscale.com/wp-content/uploads/ September 30, 2020 at 8: https://www.sec.gov/ a number of other countries have either approved sites/3/2021/05/gbtc_q1-2021_10q_as-filed.pdf. ix?doc=/Archives/edgar/data/1050446/ or otherwise allowed the listing and trading of Compare to an AUM of approximately $2.6 billion 000156459020047995/mstr-10q_20200930.htm. bitcoin ETPs. Specifically, these funds include the on February 26, 2020, the date on which the 35 See Form 10–Q submitted by Square, Inc. for Purpose Bitcoin ETF, Bitcoin ETF, VanEck Vectors Commission issued the most recent disapproval the quarterly period ended September 30, 2020 at Bitcoin ETN, WisdomTree Bitcoin ETP, Bitcoin order for a bitcoin ETP. See Securities Exchange Act 51: https://www.sec.gov/ix?doc=/Archives/edgar/ Tracker One, BTCetc bitcoin ETP, Amun Bitcoin Release No. 88284 (February 26, 2020), 85 FR 12595 data/1512673/000151267320000012/sq- ETP, Amun Bitcoin Suisse ETP, 21Shares Short (March 3, 2020) (SR–NYSEArca–2019–39) (the 20200930.htm. Bitcoin ETP, and CoinShares Physical Bitcoin ETP. Continued

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premium of between roughly five and the trust at NAV (in exchange for either Custodian, a third party custodian that 40%, though it has seen premiums at cash or bitcoin) without having to pay carries insurance covering both hot and times above 100%.41 Recently, however, the premium or sell into the discount. cold storage and is chartered as a trust it has traded at a discount. As of June While there are often minimum holding company and will custody the Trust’s 18, 2021, the discount was periods for shares, an investor that is bitcoin assets in a manner so that it approximately 11%, representing allowed to interact directly with the meets the definition of qualified around $4.1 billion in market value less trust is able to hedge their bitcoin custodian under the Investment than the bitcoin actually held by the exposure as needed to satisfy the Advisers Act of 1940, as amended. This fund. If premium/discount numbers holding requirements and collect on the includes, among others, the use of move back to the middle of its historical premium or discount opportunity. ‘‘cold’’ (offline) storage to hold private range to a 20% premium (which As noted above, the existence of a keys and the employment by the historically could occur at any time and premium or discount and the premium/ Custodian of a certain degree of overnight), it would represent a swing of discount collection opportunity is not cybersecurity measures and operational approximately $11 billion in value unique to OTC Bitcoin Funds and does best practices. By contrast, an unrelated to the value of bitcoin held by not in itself warrant the approval of an individual retail investor holding the fund. These numbers are only ETP.42 What makes this situation bitcoin through a cryptocurrency associated with a single OTC Bitcoin unique is that such significant and exchange lacks these protections. Fund—as more and more OTC Bitcoin persistent premiums and discounts can Typically, retail exchanges hold most, if Funds come to market and more exist in a product with $30+ billion in not all, retail investors’ bitcoin in ‘‘hot’’ investor assets flood into them to get assets under management,43 that (internet-connected) storage and do not access to bitcoin exposure, the potential billions of retail investor dollars are make any commitments to indemnify dollars at risk will only increase. constantly under threat of premium/ retail investors or to observe any This raises significant investor discount volatility,44 and that premium/ particular cybersecurity standard. protection issues in several ways. First, discount volatility is generally captured Meanwhile, a retail investor holding the most obvious issue is that investors by more sophisticated investors on a spot bitcoin directly in a self-hosted are buying shares of a fund for a price riskless basis. The Exchange wallet may suffer from inexperience in that is not reflective of the per share understands the Commission’s focus on private key management (e.g., value of the fund’s underlying assets. potential manipulation of a bitcoin ETP insufficient password protection, lost Even operating within the normal in prior disapproval orders, but now key, etc.), which could cause them to premium range, it’s possible for an believes that current circumstances lose some or all of their bitcoin investor to buy shares of an OTC Bitcoin warrant that this direct, quantifiable holdings. In the Custodian, the Trust Fund only to have those shares quickly investor protection issue should be the has engaged a regulated and licensed lose 10% or more in dollar value central consideration as the Commission entity highly experienced in bitcoin excluding any movement of the price of determines whether to approve this custody, with dedicated, trained bitcoin. That is to say—the price of proposal, particularly when the Trust as employees and procedures to manage bitcoin could have stayed exactly the a bitcoin ETP is designed to reduce the the private keys to the Trust’s bitcoin, same from market close on one day to likelihood of significant and prolonged and which is accountable for failures. market open the next, yet the value of premiums and discounts with its open- Thus, with respect to custody of the the shares held by the investor ended nature as well as the ability of Trust’s bitcoin assets, the Trust presents decreased only because of the market participants (i.e., market makers advantages from an investment fluctuation of the premium/discount. As and authorized participants) to create protection standpoint for retail investors more investment vehicles, including and redeem on a daily basis. compared to owning spot bitcoin mutual funds and ETFs, seek to gain directly. exposure to bitcoin, the easiest option (ii) Spot and Proxy Exposure Finally, as described in the for a buy and hold strategy is often an Exposure to bitcoin through an ETP Background section above, recently a OTC Bitcoin Fund, meaning that even also presents certain advantages for number of operating companies engaged investors that do not directly buy OTC retail investors compared to buying spot in unrelated businesses—such as Tesla Bitcoin Funds can be disadvantaged by bitcoin directly. The most notable (a car manufacturer) and MicroStrategy extreme premiums (or discounts) and advantage is the use of the Custodian to (an enterprise software company)—have premium volatility. custody the Trust’s bitcoin assets. The announced investments as large as $1.5 The second issue is related to the first Sponsor has carefully selected the billion in bitcoin.45 Without access to and explains how the premium in OTC bitcoin exchange-traded products, retail Bitcoin Funds essentially creates a 42 The Exchange notes, for example, that similar investors seeking investment exposure direct payment from retail investors to premiums/discounts and premium/discount to bitcoin may end up purchasing shares more sophisticated investors. Generally volatility exist for other non-bitcoin cryptocurrency in these companies in order to gain the speaking, only accredited investors are related over-the-counter funds, but that the size and exposure to bitcoin that they seek.46 In able to create or redeem shares with the investor interest in those funds does not give rise issuing trust, which means that they are to the same investor protection concerns that exist for OTC Bitcoin Funds. 45 In addition to numerous debt offerings, able to buy or sell shares directly with 43 At $35 billion in AUM, the largest OTC Bitcoin MicroStrategy recently filed with the SEC to offer Fund would be the 32nd largest out of roughly for sale up to $1 billion in additional common ‘‘Wilshire Phoenix Disapproval’’). While the price 2,400 U.S. listed ETPs. stock, the proceeds of which may at least be of one bitcoin has increased approximately 400% 44 The Exchange notes that in two recent partially used to acquire more bitcoin. See Form S– in the intervening period, the total AUM has incidents, the premium dropped from 28.28% to 3 submitted by MicroStrategy Incorporated on June increased by approximately 1240%, indicating that 12.29% from the close on 3/19/20 to the close on 14, 2021: https://www.sec.gov/Archives/edgar/data/ the increase in AUM was created beyond just price 3/20/20 and from 38.40% to 21.05% from the close 1050446/000119312521190150/ appreciation in bitcoin. on 5/13/19 to the close on 5/14/19. Similarly, over d159028ds3asr.htm#tocb159028_8. 41 See ‘‘Traders Piling Into Overvalued Crypto the period of 12/21/20 to 1/21/20, the premium 46 In August 2017, the Commission’s Office of Funds Risk a Painful Exit’’ (February 4, 2021) went from 40.18% to 2.79%. While the price of Investor Education and Advocacy warned investors available at: https://www.bloomberg.com/news/ bitcoin appreciated significantly during this period about situations where companies were publicly articles/2021-02-04/bitcoin-one-big-risk-when- and NAV per share increased by 41.25%, the price announcing events relating to digital coins or investing-in-crypto-funds. per share increased by only 3.58%. tokens in an effort to affect the price of the

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fact, mainstream financial news bitcoin holdings are generally cash-settled commodity futures networks have written a number of substantially smaller than the contracts. Nearly every measurable articles providing investors with registration statement of a bitcoin ETP, metric related to Bitcoin Futures has guidance for obtaining bitcoin exposure including the Registration Statement, trended consistently up since launch through publicly traded companies typically amounting to a few sentences and/or accelerated upward in the past (such as MicroStrategy, Tesla, and of narrative description and a handful of year. For example, there was 48 bitcoin mining companies, among risk factors. In other words, investors approximately $28 billion in trading in others) instead of dealing with the seeking bitcoin exposure through Bitcoin Futures in December 2020 complications associated with buying publicly traded companies are gaining compared to $737 million, $1.4 billion, spot bitcoin in the absence of a bitcoin only partial exposure to bitcoin and are and $3.9 billion in total trading in not fully benefitting from the risk ETP.47 Such operating companies, December 2017, December 2018, and disclosures and associated investor however, are imperfect bitcoin proxies December 2019, respectively. Bitcoin protections that come from the and provide investors with partial Futures traded over $1.2 billion per day securities registration process. bitcoin exposure paired with a host of on the CME in December 2020 and additional risks associated with Bitcoin Futures represented $1.6 billion in open interest whichever operating company they CME began offering trading in Bitcoin compared to $115 million in December decide to purchase. Additionally, the Futures in 2017. Each contract 2019. This general upward trend in disclosures provided by the represents five bitcoin and is based on trading volume and open interest is aforementioned operating companies the CME CF Bitcoin Reference Rate.49 captured in the following chart. with respect to risks relating to their The contracts trade and settle like other BILLING CODE 8011–01–P

Similarly, the number of large open risen, as have the number of unique interest holders 50 has continued to accounts trading Bitcoin Futures. increase even as the price of bitcoin has

company’s publicly traded common stock. See 48 See e.g., Tesla 10–K for the year ended , , , itBit, and . For https://www.sec.gov/oiea/investor-alerts-and- December 31, 2020, which mentions bitcoin just additional information, refer to https:// _ bulletins/ia icorelatedclaims nine times: https://www.sec.gov/ix?doc=/Archives/ www.cmegroup.com/trading/cryptocurrency- 47 See e.g., ‘‘7 public companies with exposure to edgar/data/1318605/000156459021004599/tsla- _ indices/cf-bitcoin-reference-rate.html?redirect=/ bitcoin’’ (February 8, 2021) available at: https:// 10k 20201231.htm. trading/cf-bitcoin-reference-rate.html. finance.yahoo.com/news/7-public-companies-with- 49 According to CME, the CME CF Bitcoin 50 A large open interest holder in Bitcoin Futures exposure-to-bitcoin-154201525.html; and ‘‘Want to Reference Rate aggregates the trade flow of major get in the crypto trade without holding bitcoin bitcoin spot exchanges during a specific calculation is an entity that holds at least 25 contracts, which yourself? Here are some investing ideas’’ (February window into a once-a-day reference rate of the U.S. is the equivalent of 125 bitcoin. At a price of 19, 2021) available at: https://www.cnbc.com/2021/ dollar price of bitcoin. Calculation rules are geared approximately $30,000 per bitcoin on 12/31/20, 02/19/ways-to-invest-in-bitcoin-without-holding- toward maximum transparency and real-time more than 80 firms had outstanding positions of the-cryptocurrency-yourself-.html. replicability in underlying spot markets, including greater than $3.8 million in Bitcoin Futures.

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The Sponsor further believes that Futures pricing leads the spot market the ETP. Specifically, the Sponsor academic research corroborates the and, thus, a person attempting to believes that such research indicates overall trend outlined above and manipulate the Shares would also have that bitcoin futures lead the bitcoin spot supports the thesis that the Bitcoin to trade on that market to manipulate market in price formation.51

BILLING CODE 8011–01–C

51 See Hu, Y., Hou, Y. and Oxley, L. (2019). paper concludes that ‘‘There exist no episodes markets dominate the dynamic price discovery ‘‘What role do futures markets play in Bitcoin where the Bitcoin spot markets dominates the price process based upon time-varying information share pricing? Causality, cointegration and price discovery processes with regard to Bitcoin futures. measures. Overall, price discovery seems to occur discovery from a time-varying perspective’’ This points to a conclusion that the price formation in the Bitcoin futures markets rather than the (available at: https://www.ncbi.nlm.nih.gov/pmc/ originates solely in the Bitcoin futures market. We underlying spot market based upon a time-varying articles/PMC7481826/). This academic research can, therefore, conclude that the Bitcoin futures perspective.’’

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Section 6(b)(5) and the Applicable at the inside in the spot market for unlikely that trading in the ETP would Standards bitcoin, and certain features of the be the predominant influence on prices 57 The Commission has approved Shares mitigate potential manipulation in that market. numerous series of Trust Issued concerns to the point that the investor The Commission has also recognized Receipts,52 including Commodity-Based protection issues that have arisen from that the ‘‘regulated market of significant Trust Shares,53 to be listed on U.S. the rapid growth of over-the-counter size’’ standard is not the only means for national securities exchanges. In order bitcoin funds since the Commission last satisfying Section 6(b)(5) of the act, for any proposed rule change from an reviewed an exchange proposal to list specifically providing that a listing exchange to be approved, the and trade a bitcoin ETP, including exchange could demonstrate that ‘‘other Commission must determine that, premium/discount volatility and means to prevent fraudulent and among other things, the proposal is management fees, should be the central manipulative acts and practices’’ are consistent with the requirements of consideration as the Commission sufficient to justify dispensing with the Section 6(b)(5) of the Act, specifically determines whether to approve this requisite surveillance-sharing including: (i) The requirement that a proposal. agreement.58 national securities exchange’s rules are (i) Designed To Prevent Fraudulent and (a) Manipulation of the ETP designed to prevent fraudulent and Manipulative Acts and Practices manipulative acts and practices; 54 and The significant growth in Bitcoin In order to meet this standard in a (ii) the requirement that an exchange Futures across each of trading volumes, proposal to list and trade a series of proposal be designed, in general, to open interest, large open interest Commodity-Based Trust Shares, the protect investors and the public interest. holders, and total market participants Commission requires that an exchange The Exchange believes that this since the Wilshire Phoenix Disapproval demonstrate that there is a proposal is consistent with the was issued are reflective of that market’s comprehensive surveillance-sharing requirements of Section 6(b)(5) of the growing influence on the spot price, agreement in place 55 with a regulated Act and that it has sufficiently which according to the academic market of significant size. Both the demonstrated that, on the whole, the research cited above, was already Exchange and CME are members of the manipulation concerns previously leading the spot price in 2018 and 2019. Intermarket Surveillance Group (the articulated by the Commission are Where Bitcoin Futures lead the price in ‘‘ISG’’).56 The only remaining issue to be sufficiently mitigated to the point that the spot market such that a potential addressed is whether the Bitcoin they are outweighed by quantifiable manipulator of the bitcoin spot market Futures market constitutes a market of investor protection issues that would be would have to participate in the Bitcoin significant size, which the Exchange resolved by approving this proposal. Futures market, it follows that a believes that it does. The terms Specifically, the Exchange lays out potential manipulator of the Shares ‘‘significant market’’ and ‘‘market of below why it believes that the would similarly have to transact in the significant size’’ include a market (or significant increase in trading volume in Bitcoin Futures market because the group of markets) as to which: (a) There Bitcoin Futures, the growth of liquidity NAV is based on the price of bitcoin on is a reasonable likelihood that a person the principal market, which identified attempting to manipulate the ETP 52 See Exchange Rule 14.11(f). market must be an active market with would also have to trade on that market 53 Commodity-Based Trust Shares, as described in orderly transactions. Further, the Trust to manipulate the ETP, so that a Exchange Rule 14.11(e)(4), are a type of Trust only allows for in-kind creation and Issued Receipt. surveillance-sharing agreement would 54 As the Exchange has stated in a number of assist the listing exchange in detecting redemption, which, as further described other public documents, it continues to believe that and deterring misconduct; and (b) it is below, reduces the potential for bitcoin is resistant to price manipulation and that manipulation of the Shares through ‘‘other means to prevent fraudulent and manipulation of the Trust’s manipulative acts and practices’’ exist to justify 55 As previously articulated by the Commission, dispensing with the requisite surveillance sharing ‘‘The standard requires such surveillance-sharing methodology for calculating NAV or any agreement. The geographically diverse and agreements since ‘‘they provide a necessary of its individual constituents, again continuous nature of bitcoin trading render it deterrent to manipulation because they facilitate the emphasizing that a potential difficult and prohibitively costly to manipulate the availability of information needed to fully manipulator of the Shares would have price of bitcoin. The fragmentation across bitcoin investigate a manipulation if it were to occur.’’ The platforms, the relatively slow speed of transactions, Commission has emphasized that it is essential for to manipulate the entirety of the bitcoin and the capital necessary to maintain a significant an exchange listing a derivative securities product spot market, which is led by the Bitcoin presence on each trading platform make to enter into a surveillance- sharing agreement with Futures market. As such, the Exchange manipulation of bitcoin prices through continuous markets trading underlying securities for the listing trading activity challenging. To the extent that there exchange to have the ability to obtain information believes that part (a) of the significant are bitcoin exchanges engaged in or allowing wash necessary to detect, investigate, and deter fraud and market test outlined above is satisfied trading or other activity intended to manipulate the market manipulation, as well as violations of and that common membership in ISG price of bitcoin on other markets, such pricing does exchange rules and applicable federal securities between the Exchange and CME, not normally impact prices on other exchange laws and rules. The hallmarks of a surveillance- because participants will generally ignore markets sharing agreement are that the agreement provides together with comprehensive with quotes that they deem non-executable. for the sharing of information about market trading surveillance sharing agreements Moreover, the linkage between the bitcoin markets activity, clearing activity, and customer identity; between the Exchange and spot markets and the presence of arbitrageurs in those markets that the parties to the agreement have reasonable with material volume, would assist the means that the manipulation of the price of bitcoin ability to obtain access to and produce requested price on any single venue would require information; and that no existing rules, laws, or manipulation of the global bitcoin price in order to practices would impede one party to the agreement 57 See Wilshire Phoenix Disapproval. be effective. Arbitrageurs must have funds from obtaining this information from, or producing 58 See Winklevoss Order at 37580. The distributed across multiple trading platforms in it to, the other party.’’ The Commission has Commission has also specifically noted that it ‘‘is order to take advantage of temporary price historically held that joint membership in ISG not applying a ‘cannot be manipulated’ standard; dislocations, thereby making it unlikely that there constitutes such a surveillance sharing agreement. instead, the Commission is examining whether the will be strong concentration of funds on any See Wilshire Phoenix Disapproval. The Exchange proposal meets the requirements of the Exchange particular bitcoin exchange or OTC platform. As a also notes that it has surveillance sharing Act and, pursuant to its Rules of Practice, places the result, the potential for manipulation on a trading agreements in place with several spot bitcoin burden on the listing exchange to demonstrate the platform would require overcoming the liquidity exchanges. validity of its contentions and to establish that the supply of such arbitrageurs who are effectively 56 For a list of the current members and affiliate requirements of the Exchange Act have been met.’’ eliminating any cross-market pricing differences. members of ISG, see www.isgportal.com. Id. at 37582.

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listing exchange in detecting and price of bitcoin mean that attempting to methodology because there is little deterring misconduct in the Shares. move the price of bitcoin is costly and financial incentive to do so. has grown more expensive over the past (b) Predominant Influence on Prices in Global X Bitcoin Trust year. In January 2020, for example, the Spot and Bitcoin Futures cost to buy or sell $5 million worth of Delaware Trust Company is the The Exchange also believes that bitcoin averaged roughly 30 basis points trustee (‘‘Trustee’’). The Sponsor selects trading in the Shares would not be the (compared to 10 basis points in 2/2021) the administrator, transfer agent, predominant force on prices in the with a market impact of 50 basis points marketing agent in connection with the Bitcoin Futures market (or spot market) (compared to 30 basis points in 2/ creation and redemption of ‘‘Baskets’’ of for a number of reasons, including the 2021).60 For a $10 million market order, Shares, and third-party regulated significant volume in the Bitcoin the cost to buy or sell was roughly 50 custodian that will be responsible for Futures market, the size of bitcoin’s basis points (compared to 20 basis custody of the Trust’s bitcoin.61 market cap (approximately $1 trillion), points in 2/2021) with a market impact According to the Registration and the significant liquidity available in of 80 basis points (compared to 50 basis Statement, each Share will represent a the spot market. In addition to the points in 2/2021). As the liquidity in the fractional undivided beneficial interest Bitcoin Futures market data points cited bitcoin spot market increases, it follows in the bitcoin held by the Trust. The above, the spot market for bitcoin is also that the impact of $5 million and $10 Trust’s assets will consist of bitcoin very liquid. According to data from million orders will continue to decrease held by the Custodian on behalf of the CoinRoutes from February 2021, the the overall impact in spot price. Trust. The Trust generally does not cost to buy or sell $5 million worth of Additionally, offering only in-kind intend to hold cash or cash equivalents. bitcoin averages roughly 10 basis points creation and redemption will provide However, there may be situations where with a market impact of 30 basis unique protections against potential the Trust will hold cash on a temporary 59 points. For a $10 million market order, attempts to manipulate the Shares. basis. the cost to buy or sell is roughly 20 basis While the Sponsor believes that the According to the Registration points with a market impact of 50 basis methodology which it uses to value the Statement, the Trust is neither an points. Stated another way, a market Trust’s bitcoin is itself resistant to investment company registered under participant could enter a market buy or manipulation based on the methodology the Investment Company Act of 1940, as sell order for $10 million of bitcoin and further described below, the fact that amended,62 nor a commodity pool for only move the market 0.5%. More creations and redemptions are only purposes of the Commodity Exchange strategic purchases or sales (such as available in-kind makes the valuation Act (‘‘CEA’’), and neither the Trust nor using limit orders and executing methodology significantly less the Sponsor is subject to regulation as through OTC bitcoin trade desks) would important. Specifically, because the a commodity pool operator or a likely have less obvious impact on the Trust will not accept cash to buy bitcoin commodity trading adviser in market—which is consistent with in order to create new shares, will connection with the Shares. MicroStrategy, Tesla, and Square being charge fees as a percentage of the Trust’s When the Trust sells or redeems its able to collectively purchase billions of bitcoin holdings measure in bitcoin and Shares, it will do so in ‘‘in-kind’’ dollars in bitcoin. As such, the not in dollars, and, barring a forced transactions in blocks of Shares of a size combination of Bitcoin Futures leading redemption of the Trust or under other to be determined (a ‘‘Creation Basket’’) price discovery, the overall size of the at the Trust’s NAV. Authorized bitcoin market, and the ability for extraordinary circumstances, will not be forced to sell bitcoin to pay cash for participants will deliver, or facilitate the market participants, including delivery of, bitcoin to the Trust’s authorized participants creating and redeemed shares, the price that the Sponsor uses to value the Trust’s bitcoin account with the Custodian in exchange redeeming in-kind with the Trust, to for Shares when they purchase Shares, buy or sell large amounts of bitcoin is not particularly important. When authorized participants are creating and the Trust, through the Custodian, without significant market impact will will deliver bitcoin to such authorized help prevent the Shares from becoming with the Trust, they need to deliver a certain number of bitcoin per share participants when they redeem Shares the predominant force on pricing in with the Trust. Authorized participants either the bitcoin spot or Bitcoin (regardless of the valuation used) and when they’re redeeming, they can may then offer Shares to the public at Futures markets, satisfying part (b) of prices that depend on various factors, the test outlined above. similarly expect to receive a certain number of bitcoin per share. As such, including the supply and demand for (c) Other Means To Prevent Fraudulent even if the price used to value the Shares, the value of the Trust’s assets, and Manipulative Acts and Practices Trust’s bitcoin is manipulated (which and market conditions at the time of a As noted above, the Commission also the Sponsor believes that its transaction. Shareholders who buy or permits a listing exchange to methodology is resistant to), the ratio of sell Shares during the day from their demonstrate that ‘‘other means to bitcoin per Share does not change and broker may do so at a premium or prevent fraudulent and manipulative the Trust will either accept (for discount relative to the NAV of the acts and practices’’ are sufficient to creations) or distribute (for Shares of the Trust. justify dispensing with the requisite redemptions) the same number of Investment Objective surveillance-sharing agreement. The bitcoin regardless of the value. This not According to the Registration Exchange believes that such conditions only mitigates the risk associated with Statement and as further described are present. Specifically, the significant potential manipulation, but also liquidity in the spot market and the discourages and disincentivizes 61 The Exchange notes that the Sponsor is impact of market orders on the overall manipulation of the valuation finalizing negotiations with each of the administrator, transfer agent, marketing agent, and 59 These statistics are based on samples of bitcoin 60 These statistics are based on samples of bitcoin custodian, and it will submit an amendment to this liquidity in USD (excluding or Euro liquidity in USD (excluding stablecoins or Euro proposal upon execution of agreements with the liquidity) based on executable quotes on Coinbase liquidity) based on executable quotes on Coinbase administrator, transfer agent, marketing agent, and Pro, Gemini, Bitstamp, Kraken, LMAX Exchange, Pro, Gemini, Bitstamp, Kraken, LMAX Exchange, custodian. BinanceUS, and OKCoin during February 2021. BinanceUS, and OKCoin during February 2021. 62 15 U.S.C. 80a–1.

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below, the investment objective of the strength, compliance with laws and compliance, surveillance, and Trust is to reflect the performance of the regulations, and stability; hours of enforcement mechanisms; price of bitcoin less the expenses of the operation and willingness to transact; • trading volume and prices on the Trust’s operations. The Trust will not confidentiality of trading activity; and principal market at and around the time seek to reflect the performance of any integrity of trade and price data. of valuation relative to historical benchmark or index. The Sponsor has determined that both activity on the principal market and In seeking to achieve its investment certain bitcoin venues and the OTC eligible venues; • objective, the Trust will hold bitcoin. market meet these criteria. Among the the Sponsor’s understanding of the The Trust will value its assets daily in venues supporting active markets with market’s regulatory compliance, accordance with Generally Accepted orderly transactions, the Sponsor including with applicable federal and Accounting Principles (‘‘GAAP’’), which determines to which such venues the state licensing requirements, and generally value bitcoin by reference to Trust has access and refers to these as practices regarding anti-money orderly transactions in the principal laundering; eligible venues. Eligible venues consist • active market for bitcoin, as further of eligible OTC venues and eligible the degree of intraday price described in the ‘‘Calculation of NAV’’ exchanges. fluctuations the market experiences at section below. The Trust will process all The Sponsor then determines the and around the time of valuation; and • the ability of the Trust to trade on creations and redemptions in-kind in principal market for bitcoin as either the transactions with authorized the market. market that the Trust normally transacts If the Sponsor determines that participants. The Trust is not actively in for bitcoin, or, if the Trust does not managed. transactions on the principal market are normally transact in any market or the not orderly, the Sponsor will determine Calculation of NAV Sponsor has sufficient evidence that a the fair value of bitcoin based on the particular market has the highest trading As described in the Registration eligible exchange with the next-highest volume and level of activity, such Statement, the Sponsor has adopted a volume, as long as the Sponsor market. policy pursuant to which the Trust will determines that that market has orderly The Trust will not purchase or, value its assets and liabilities. Under transactions at the time of the valuation. barring the liquidation of the Trust or this policy, the Sponsor uses fair value If market quotations are not readily the Trust incurring certain extraordinary standards according to GAAP. available (including in cases in which Generally, the fair value of an asset expenses or liabilities not contractually available market quotations are deemed that is traded on a market is measured assumed by the Sponsor, sell bitcoin to be unreliable or infrequent), the by reference to the orderly transactions directly. As a result, the Sponsor Trust’s bitcoin will be valued as on an active market. Among all active expects that the principal market will determined in good faith pursuant to markets with orderly transactions, the generally be the market with the highest policies and procedures approved by market that is used to determine the fair trading volume and level of activity, the Sponsor’s valuation committee (‘‘fair value of an asset is the principal market which the Sponsor expects will value pricing’’). In these circumstances, (with exceptions described in more typically be an eligible exchange. The the Trust determines fair value in a detail below), which is either the market Sponsor determines the principal manner that seeks to reflect the market on which the Trust actually transacts, or market for bitcoin at least quarterly and value of the investment at the time of if there is sufficient evidence, the more frequently as circumstances valuation based on consideration of any market with the most trading volume warrant. Circumstances in which the information or factors the Sponsor’s and level of activity for the asset. Where Sponsor may re-determine the principal valuation committee deems appropriate, there is no active market with orderly market include but are not limited to the as further described below. The transactions for an asset, the Sponsor’s following: Where the market is no Sponsor’s valuation committee is valuation committee follows policies longer an eligible market or when the responsible for overseeing the and procedures described in more detail trading volume for bitcoin on another implementation of the Trust’s valuation below to determine the fair value. eligible market increases such that that procedures and fair value The Sponsor first determines which eligible market has the highest trading determinations. For purposes of markets are likely to be active markets volume for the digital asset by a material determining the fair value of bitcoin, the with orderly transactions for bitcoin. margin. valuation committee may consider, Currently, the Sponsor has determined Whether the principal market for without limitation: (i) Indications or that active markets with orderly bitcoin is an eligible exchange or the quotes from brokers, (ii) valuations transactions are those that provide OTC market, the price on such principal provided by a third-party pricing agent, relevant and reliable price and volume market may not always represent fair (iii) internal models that take into information because the venues value or the transactions on such market consideration different factors supporting such markets: may not always represent orderly determined to be relevant by the • Conduct trading for bitcoin in U.S. transactions. Thus, the Sponsor will not Sponsor or (iv) any combination of the dollars; use the principal market to determine above. • are appropriately licensed to engage the fair value of bitcoin on a in bitcoin trading involving New York- measurement date if the Sponsor Availability of Information based customers (and therefore, among determines, at the time of valuation, that In addition to the price transparency other things, have programs to transactions on the principal market are related to the price of bitcoin, the Trust effectively detect, prevent, and respond not orderly (e.g., indicative of forced will provide information regarding the to fraud); and liquidations or distress sales). To make Trust’s bitcoin holdings as well as • otherwise have sufficient indicia of this determination, the Sponsor reviews additional data regarding the Trust. The an active market with orderly criteria including: Trust will provide an Intraday transactions: Quality of execution • A comparison of the prices on the Indicative Value (‘‘IIV’’) per Share (overall costs of a trade, accurate and principal market against the prices on updated every 15 seconds, as calculated timely execution, clearance and error/ other eligible venues that the Sponsor by the Exchange or a third-party dispute resolution); reputation, financial believes have the strongest regulatory financial data provider during the

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Exchange’s Regular Trading Hours (9:30 normal trading hours for bitcoin return for a deposit of a quantity of the a.m. to 4:00 p.m. E.T.). The IIV will be exchanges are 24 hours per day, 365 underlying commodity; and (c) when calculated by using the prior day’s days per year. aggregated in the same specified closing NAV per Share as a base and minimum number, may be redeemed at Creation and Redemption of Shares updating that value during Regular a holder’s request by such trust which Trading Hours to reflect changes in the According to the Registration will deliver to the redeeming holder the value of the Trust’s bitcoin holdings Statement, on any business day, an quantity of the underlying commodity. during the trading day. authorized participant may place an Upon termination of the Trust, the order to create one or more baskets. The IIV disseminated during Regular Shares will be removed from listing. Purchase orders must be placed by 4:00 Trading Hours should not be viewed as The Trustee, Delaware Trust Company, p.m. Eastern Time, or the close of an actual real-time update of the NAV, is a trust company having substantial regular trading on the Exchange, which will be calculated only once at capital and surplus and the experience whichever is earlier. The day on which the end of each trading day. The IIV will and facilities for handling corporate an order is received is considered the be widely disseminated on a per Share trust business, as required under Rule purchase order date. The total deposit of basis every 15 seconds during the 14.11(e)(4)(E)(iv)(a) and that no change bitcoin required is an amount of bitcoin Exchange’s Regular Trading Hours by will be made to the trustee without prior that is in the same proportion to the one or more major market data vendors. notice to and approval of the Exchange. In addition, the IIV will be available total assets of the Trust, net of accrued expenses and other liabilities, on the The Exchange also notes that, pursuant through on-line information services. to Rule 14.11(e)(4)(F), neither the The website for the Trust, which will date the order to purchase is properly received, as the number of Shares to be Exchange nor any agent of the Exchange be publicly accessible at no charge, will shall have any liability for damages, contain the following information: (a) created under the purchase order is in proportion to the total number of Shares claims, losses or expenses caused by The current NAV per Share daily and any errors, omissions or delays in the prior business day’s NAV and the outstanding on the date the order is received. Each night, the Sponsor will calculating or disseminating any reported closing price; (b) the BZX underlying commodity value, the Official Closing Price 63 in relation to publish the amount of bitcoin that will be required in exchange for each current value of the underlying the NAV as of the time the NAV is commodity required to be deposited to calculated and a calculation of the creation order. The Administrator determines the required deposit for a the Trust in connection with issuance of premium or discount of such price Commodity-Based Trust Shares; against such NAV; (c) data in chart form given day by dividing the number of bitcoin held by the Trust as of the resulting from any negligent act or displaying the frequency distribution of omission by the Exchange, or any agent discounts and premiums of the Official opening of business on that business day, adjusted for the amount of bitcoin of the Exchange, or any act, condition or Closing Price against the NAV, within cause beyond the reasonable control of appropriate ranges for each of the four constituting estimated accrued but unpaid fees and expenses of the Trust the Exchange or its agent, including, but previous calendar quarters (or for the not limited to, an act of God; fire; flood; life of the Trust, if shorter); (d) the as of the opening of business on that business day, by the quotient of the extraordinary weather conditions; war; prospectus; and (e) other applicable number of Shares outstanding at the insurrection; riot; strike; accident; quantitative information. The Trust will opening of business divided by the size action of government; communications also disseminate the Trust’s holdings on of a Creation Basket. The procedures by or power failure; equipment or software a daily basis on the Trust’s website. The which an authorized participant can malfunction; or any error, omission or price of bitcoin will be made available redeem one or more Creation Baskets delay in the reports of transactions in an by one or more major market data mirror the procedures for the creation of underlying commodity. Finally, as vendors, updated at least every 15 Creation Baskets. required in Rule 14.11(e)(4)(G), the seconds during Regular Trading Hours. Exchange notes that any registered The NAV for the Trust will be Rule 14.11(e)(4)—Commodity-Based market maker (‘‘Market Maker’’) in the calculated by the Administrator once a Trust Shares Shares must file with the Exchange in day and will be disseminated daily to The Shares will be subject to BZX a manner prescribed by the Exchange all market participants at the same time. Rule 14.11(e)(4), which sets forth the and keep current a list identifying all Quotation and last-sale information initial and continued listing criteria accounts for trading in an underlying regarding the Shares will be applicable to Commodity-Based Trust commodity, related commodity futures disseminated through the facilities of Shares. The Exchange will obtain a or options on commodity futures, or any the Consolidated Tape Association representation that the Trust’s NAV will other related commodity derivatives, (‘‘CTA’’). be calculated daily and that these values which the registered Market Maker may Quotation and last sale information and information about the assets of the have or over which it may exercise for bitcoin is widely disseminated Trust will be made available to all investment discretion. No registered through a variety of major market data market participants at the same time. Market Maker shall trade in an vendors, including Bloomberg and The Exchange notes that, as defined in underlying commodity, related Reuters. Information relating to trading, Rule 14.11(e)(4)(C)(i), the Shares will be: commodity futures or options on including price and volume (a) issued by a trust that holds a commodity futures, or any other related information, in bitcoin is available from specified commodity 64 deposited with commodity derivatives, in an account in major market data vendors and from the the trust; (b) issued by such trust in a which a registered Market Maker, exchanges on which bitcoin are traded. specified aggregate minimum number in directly or indirectly, controls trading Depth of book information is also activities, or has a direct interest in the available from bitcoin exchanges. The 64 For purposes of Rule 14.11(e)(4), the term profits or losses thereof, which has not commodity takes on the definition of the term as been reported to the Exchange as 63 As defined in Rule 11.23(a)(3), the term ‘‘BZX provided in the Commodity Exchange Act. As noted Official Closing Price’’ shall mean the price above, the CFTC has opined that Bitcoin is a required by this Rule. In addition to the disseminated to the consolidated tape as the market commodity as defined in Section 1a(9) of the existing obligations under Exchange center closing trade. Commodity Exchange Act. See Coinflip. rules regarding the production of books

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and records (see, e.g., Rule 4.2), the issuer has represented to the Exchange of the Act 67 in general and Section registered Market Maker in Commodity- that it will advise the Exchange of any 6(b)(5) of the Act 68 in particular in that Based Trust Shares shall make available failure by the Trust or the Shares to it is designed to prevent fraudulent and to the Exchange such books, records or comply with the continued listing manipulative acts and practices, to other information pertaining to requirements, and, pursuant to its promote just and equitable principles of transactions by such entity or registered obligations under Section 19(g)(1) of the trade, to foster cooperation and or non-registered employee affiliated Exchange Act, the Exchange will surveil coordination with persons engaged in with such entity for its or their own for compliance with the continued facilitating transactions in securities, to accounts for trading the underlying listing requirements. If the Trust or the remove impediments to and perfect the physical commodity, related commodity Shares are not in compliance with the mechanism of a free and open market futures or options on commodity applicable listing requirements, the and a national market system and, in futures, or any other related commodity Exchange will commence delisting general, to protect investors and the derivatives, as may be requested by the procedures under Exchange Rule 14.12. public interest. Exchange. The Exchange may obtain information The Commission has approved numerous series of Trust Issued Trading Halts regarding trading in the Shares and Bitcoin Futures via ISG, from other Receipts,69 including Commodity-Based With respect to trading halts, the exchanges who are members or affiliates Trust Shares,70 to be listed on U.S. Exchange may consider all relevant of the ISG, or with which the Exchange national securities exchanges. In order factors in exercising its discretion to has entered into a comprehensive for any proposed rule change from an halt or suspend trading in the Shares. surveillance sharing agreement.65 exchange to be approved, the The Exchange will halt trading in the Commission must determine that, Shares under the conditions specified in Information Circular among other things, the proposal is BZX Rule 11.18. Trading may be halted Prior to the commencement of consistent with the requirements of because of market conditions or for trading, the Exchange will inform its Section 6(b)(5) of the Act, specifically reasons that, in the view of the members in an Information Circular of including: (i) The requirement that a Exchange, make trading in the Shares the special characteristics and risks national securities exchange’s rules are inadvisable. These may include: (1) The associated with trading the Shares. designed to prevent fraudulent and extent to which trading is not occurring Specifically, the Information Circular manipulative acts and practices; 71 and in the bitcoin underlying the Shares; or will discuss the following: (i) The (ii) the requirement that an exchange (2) whether other unusual conditions or procedures for the creation and proposal be designed, in general, to circumstances detrimental to the redemption of Baskets (and that the protect investors and the public interest. maintenance of a fair and orderly Shares are not individually redeemable); The Exchange believes that the market are present. Trading in the (ii) BZX Rule 3.7, which imposes proposal is, in particular, designed to Shares also will be subject to Rule suitability obligations on Exchange protect investors and the public interest. 14.11(e)(4)(E)(ii), which sets forth members with respect to recommending With the growth of OTC Bitcoin Funds circumstances under which trading in transactions in the Shares to customers; over the past year, so too has grown the the Shares may be halted. (iii) how information regarding the IIV potential risk to U.S. investors. Significant and prolonged premiums Trading Rules and the Trust’s NAV are disseminated; (iv) the risks involved in trading the and discounts, significant premium/ The Exchange deems the Shares to be Shares outside of Regular Trading discount volatility, high fees, equity securities, thus rendering trading Hours 66 when an updated IIV will not insufficient disclosures, and technical in the Shares subject to the Exchange’s hurdles are putting U.S. investor money be calculated or publicly disseminated; existing rules governing the trading of at risk on a daily basis, via risks that (v) the requirement that members equity securities. BZX will allow trading could potentially be eliminated through deliver a prospectus to investors in the Shares during all trading sessions access to a bitcoin ETP. As such, the purchasing newly issued Shares prior to on the Exchange. The Exchange has Exchange believes that this proposal or concurrently with the confirmation of appropriate rules to facilitate acts to limit the risk to U.S. investors a transaction; and (vi) trading transactions in the Shares during all that are increasingly seeking exposure to information. trading sessions. As provided in BZX bitcoin through the elimination of In addition, the Information Circular Rule 11.11(a), the minimum price significant and prolonged premiums will advise members, prior to the variation for quoting and entry of orders and discounts, significant premium/ commencement of trading, of the in securities traded on the Exchange is discount volatility, the reduction of prospectus delivery requirements $0.01 where the price is greater than management fees through meaningful applicable to the Shares. Members $1.00 per share or $0.0001 where the competition, the avoidance of risks purchasing the Shares for resale to price is less than $1.00 per share. associated with investing in operating investors will deliver a prospectus to companies that are imperfect proxies for Surveillance such investors. The Information Circular bitcoin exposure, and protection from The Exchange believes that its will also discuss any exemptive, no- risk associated with custodying spot surveillance procedures are adequate to action and interpretive relief granted by bitcoin by providing direct, 1-for-1 properly monitor the trading of the the Commission from any rules under exposure to bitcoin in a regulated, Shares on the Exchange during all the Act. transparent, exchange-traded vehicle trading sessions and to deter and detect 2. Statutory Basis designed to reduce the likelihood of violations of Exchange rules and the applicable federal securities laws. The Exchange believes that the 67 15 U.S.C. 78f. Trading of the Shares through the proposal is consistent with Section 6(b) 68 15 U.S.C. 78f(b)(5). Exchange will be subject to the 69 See Exchange Rule 14.11(f). 65 For a list of the current members and affiliate 70 Commodity-Based Trust Shares, as described in Exchange’s surveillance procedures for members of ISG, see www.isgportal.com. Exchange Rule 14.11(e)(4), are a type of Trust derivative products, including 66 Regular Trading Hours is the time between 9:30 Issued Receipt. Commodity-Based Trust Shares. The a.m. and 4:00 p.m. Eastern Time. 71 See note 54.

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significant and prolonged premiums market of significant size. Both the above, reduces the potential for and discounts with its open-ended Exchange and CME are members of manipulation of the Shares through nature as well as the ability of market ISG.73 The only remaining issue to be manipulation of the Trust’s participants (i.e., market makers and addressed is whether the Bitcoin methodology for calculating NAV or any authorized participants) to create and Futures market constitutes a market of of its individual constituents, again redeem on a daily basis. significant size, which the Exchange emphasizing that a potential The Exchange also believes that this believes that it does. The terms manipulator of the Shares would have proposal is consistent with the ‘‘significant market’’ and ‘‘market of to manipulate the entirety of the bitcoin requirements of Section 6(b)(5) of the significant size’’ include a market (or spot market, which is led by the Bitcoin Act and that it has sufficiently group of markets) as to which: (a) There Futures market. As such, the Exchange demonstrated that, on the whole, the is a reasonable likelihood that a person believes that part (a) of the significant manipulation concerns previously attempting to manipulate the ETP market test outlined above is satisfied articulated by the Commission are would also have to trade on that market and that common membership in ISG sufficiently mitigated to the point that to manipulate the ETP, so that a between the Exchange and CME would they are outweighed by quantifiable surveillance-sharing agreement would assist the listing exchange in detecting investor protection issues that would be assist the listing exchange in detecting and deterring misconduct in the Shares. resolved by approving this proposal. and deterring misconduct; and (b) it is Specifically, the Exchange believes that unlikely that trading in the ETP would (b) Predominant Influence on Prices in the significant increase in trading be the predominant influence on prices Spot and Bitcoin Futures volume in Bitcoin Futures, the growth in that market.74 of liquidity at the inside in the spot The Commission has also recognized The Exchange also believes that market for bitcoin, and certain features that the ‘‘regulated market of significant trading in the Shares would not be the of the Shares mitigate potential size’’ standard is not the only means for predominant force on prices in the manipulation concerns to the point that satisfying Section 6(b)(5) of the act, Bitcoin Futures market (or spot market) the investor protection issues that have specifically providing that a listing for a number of reasons, including the arisen from the rapid growth of over- exchange could demonstrate that ‘‘other significant volume in the Bitcoin the-counter bitcoin funds since the means to prevent fraudulent and Futures market, the size of bitcoin’s Commission last reviewed an exchange manipulative acts and practices’’ are market cap (approximately $1 trillion), proposal to list and trade a bitcoin ETP, sufficient to justify dispensing with the and the significant liquidity available in including premium/discount volatility requisite surveillance-sharing the spot market. In addition to the and management fees, should be the agreement.75 Bitcoin Futures market data points cited central consideration as the Commission above, the spot market for bitcoin is also (a) Manipulation of the ETP determines whether to approve this very liquid. According to data from proposal. The significant growth in Bitcoin CoinRoutes from February 2021, the Futures across each of trading volumes, cost to buy or sell $5 million worth of (i) Designed To Prevent Fraudulent and open interest, large open interest Manipulative Acts and Practices bitcoin averages roughly 10 basis points holders, and total market participants with a market impact of 30 basis In order to meet this standard in a since the Wilshire Phoenix Disapproval points.76 For a $10 million market order, proposal to list and trade a series of was issued are reflective of that market’s the cost to buy or sell is roughly 20 basis Commodity-Based Trust Shares, the growing influence on the spot price, points with a market impact of 50 basis Commission requires that an exchange which according to the academic points. Stated another way, a market demonstrate that there is a research cited above, was already participant could enter a market buy or comprehensive surveillance-sharing leading the spot price in 2018 and 2019. sell order for $10 million of bitcoin and 72 agreement in place with a regulated Where Bitcoin Futures lead the price in only move the market 0.5%. More the spot market such that a potential strategic purchases or sales (such as 72 As previously articulated by the Commission, manipulator of the bitcoin spot market using limit orders and executing ‘‘The standard requires such surveillance-sharing would have to participate in the Bitcoin agreements since ‘‘they provide a necessary through OTC bitcoin trade desks) would deterrent to manipulation because they facilitate the Futures market, it follows that a likely have less obvious impact on the availability of information needed to fully potential manipulator of the Shares market—which is consistent with investigate a manipulation if it were to occur.’’ The would similarly have to transact in the Commission has emphasized that it is essential for MicroStrategy, Tesla, and Square being an exchange listing a derivative securities product Bitcoin Futures market because the able to collectively purchase billions of to enter into a surveillance-sharing agreement with NAV is based on the price of bitcoin on dollars in bitcoin. As such, the markets trading underlying securities for the listing the principal market, which identified combination of Bitcoin Futures leading exchange to have the ability to obtain information market must be an active market with necessary to detect, investigate, and deter fraud and price discovery, the overall size of the market manipulation, as well as violations of orderly transactions. Further, the Trust bitcoin market, and the ability for exchange rules and applicable federal securities only allows for in-kind creation and market participants, including laws and rules. The hallmarks of a surveillance- redemption, which, as further described sharing agreement are that the agreement provides authorized participants creating and for the sharing of information about market trading redeeming in-kind with the Trust, to 73 activity, clearing activity, and customer identity; For a list of the current members and affiliate buy or sell large amounts of bitcoin that the parties to the agreement have reasonable members of ISG, see www.isgportal.com. 74 without significant market impact will ability to obtain access to and produce requested See Wilshire Phoenix Disapproval. information; and that no existing rules, laws, or 75 See Winklevoss Order at 37580. The help prevent the Shares from becoming practices would impede one party to the agreement Commission has also specifically noted that it ‘‘is the predominant force on pricing in from obtaining this information from, or producing not applying a ‘‘cannot be manipulated’’ standard; either the bitcoin spot or Bitcoin it to, the other party.’’ The Commission has instead, the Commission is examining whether the historically held that joint membership in ISG proposal meets the requirements of the Exchange constitutes such a surveillance sharing agreement. Act and, pursuant to its Rules of Practice, places the 76 These statistics are based on samples of bitcoin See Wilshire Phoenix Disapproval. The Exchange burden on the listing exchange to demonstrate the liquidity in USD (excluding stablecoins or Euro also notes that it has surveillance sharing validity of its contentions and to establish that the liquidity) based on executable quotes on Coinbase agreements in place with several spot bitcoin requirements of the Exchange Act have been met. Pro, Gemini, Bitstamp, Kraken, LMAX Exchange, exchanges. Id. at 37582. BinanceUS, and OKCoin during February 2021.

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Futures markets, satisfying part (b) of similarly expect to receive a certain bitcoin holdings as well as additional the test outlined above. number of bitcoin per share. As such, data regarding the Trust. The Trust will even if the price used to value the provide an IIV per Share updated every (c) Other Means To Prevent Fraudulent Trust’s bitcoin is manipulated (which 15 seconds, as calculated by the and Manipulative Acts and Practices the Sponsor believes that its Exchange or a third-party financial data As noted above, the Commission also methodology is resistant to), the ratio of provider during the Exchange’s Regular permits a listing exchange to bitcoin per Share does not change and Trading Hours (9:30 a.m. to 4:00 p.m. demonstrate that ‘‘other means to the Trust will either accept (for E.T.). The IIV will be calculated by prevent fraudulent and manipulative creations) or distribute (for using the prior day’s closing NAV per acts and practices’’ are sufficient to redemptions) the same number of Share as a base and updating that value justify dispensing with the requisite bitcoin regardless of the value. This not during Regular Trading Hours to reflect surveillance-sharing agreement. The only mitigates the risk associated with changes in the value of the Trust’s Exchange believes that such conditions potential manipulation, but also bitcoin holdings during the trading day. are present. Specifically, the significant discourages and disincentivizes The IIV disseminated during Regular liquidity in the spot market and the manipulation of the valuation Trading Hours should not be viewed as impact of market orders on the overall methodology because there is little an actual real-time update of the NAV, price of bitcoin mean that attempting to financial incentive to do so. which will be calculated only once at move the price of bitcoin is costly and the end of each trading day. The IIV will has grown more expensive over the past Commodity-Based Trust Shares be widely disseminated on a per Share year. In January 2020, for example, the The Exchange believes that the basis every 15 seconds during the cost to buy or sell $5 million worth of proposed rule change is designed to Exchange’s Regular Trading Hours by bitcoin averaged roughly 30 basis points prevent fraudulent and manipulative one or more major market data vendors. (compared to 10 basis points in 2/2021) acts and practices in that the Shares will In addition, the IIV will be available with a market impact of 50 basis points be listed on the Exchange pursuant to through on-line information services. (compared to 30 basis points in 2/ the initial and continued listing criteria The website for the Trust, which will 2021).77 For a $10 million market order, in Exchange Rule 14.11(e)(4). The be publicly accessible at no charge, will the cost to buy or sell was roughly 50 Exchange believes that its surveillance contain the following information: (a) basis points (compared to 20 basis procedures are adequate to properly The current NAV per Share daily and points in 2/2021) with a market impact monitor the trading of the Shares on the the prior business day’s NAV and the of 80 basis points (compared to 50 basis Exchange during all trading sessions reported closing price; (b) the BZX points in 2/2021). As the liquidity in the and to deter and detect violations of Official Closing Price in relation to the bitcoin spot market increases, it follows Exchange rules and the applicable NAV as of the time the NAV is that the impact of $5 million and $10 federal securities laws. Trading of the calculated and a calculation of the million orders will continue to decrease Shares through the Exchange will be premium or discount of such price the overall impact in spot price. subject to the Exchange’s surveillance against such NAV; (c) data in chart form Additionally, offering only in-kind procedures for derivative products, displaying the frequency distribution of creation and redemption will provide including Commodity-Based Trust discounts and premiums of the Official unique protections against potential Shares. The issuer has represented to Closing Price against the NAV, within attempts to manipulate the Shares. the Exchange that it will advise the appropriate ranges for each of the four While the Sponsor believes that the Exchange of any failure by the Trust or previous calendar quarters (or for the methodology which it uses to value the the Shares to comply with the life of the Trust, if shorter); (d) the Trust’s bitcoin is itself resistant to continued listing requirements, and, prospectus; and (e) other applicable manipulation based on the methodology pursuant to its obligations under quantitative information. The Trust will further described below, the fact that Section 19(g)(1) of the Exchange Act, the also disseminate the Trust’s holdings on creations and redemptions are only Exchange will surveil for compliance a daily basis on the Trust’s website. The available in-kind makes the valuation with the continued listing requirements. price of bitcoin will be made available methodology significantly less If the Trust or the Shares are not in by one or more major market data important. Specifically, because the compliance with the applicable listing vendors, updated at least every 15 Trust will not accept cash to buy bitcoin requirements, the Exchange will seconds during Regular Trading Hours. in order to create new shares, will commence delisting procedures under The NAV for the Trust will be charge fees as a percentage of the Trust’s Exchange Rule 14.12. The Exchange calculated by the Administrator once a bitcoin holdings measure in bitcoin and may obtain information regarding day and will be disseminated daily to not in dollars, and, barring a forced trading in the Shares and listed bitcoin all market participants at the same time. redemption of the Trust or under other derivatives via the ISG, from other Quotation and last-sale information extraordinary circumstances, will not be exchanges who are members or affiliates regarding the Shares will be forced to sell bitcoin to pay cash for of the ISG, or with which the Exchange disseminated through the facilities of redeemed shares, the price that the has entered into a comprehensive the CTA. Sponsor uses to value the Trust’s bitcoin surveillance sharing agreement. Quotation and last sale information is not particularly important. When for bitcoin is widely disseminated authorized participants are creating Availability of Information through a variety of major market data with the Trust, they need to deliver a The Exchange also believes that the vendors, including Bloomberg and certain number of bitcoin per share proposal promotes market transparency Reuters. Information relating to trading, (regardless of the valuation used) and in that a large amount of information is including price and volume when they’re redeeming, they can currently available about bitcoin and information, in bitcoin is available from will be available regarding the Trust and major market data vendors and from the 77 These statistics are based on samples of bitcoin the Shares. In addition to the price exchanges on which bitcoin are traded. liquidity in USD (excluding stablecoins or Euro transparency related to the price of Depth of book information is also liquidity) based on executable quotes on Coinbase Pro, Gemini, Bitstamp, Kraken, LMAX Exchange, bitcoin, the Trust will provide available from bitcoin exchanges. The BinanceUS, and OKCoin during February 2021. information regarding the Trust’s normal trading hours for bitcoin

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exchanges are 24 hours per day, 365 All submissions should refer to File CONTACT PERSON FOR MORE INFORMATION: days per year Number SR–CboeBZX–2021–052. This For further information; please contact For the above reasons, the Exchange file number should be included on the Vanessa A. Countryman from the Office believes that the proposed rule change subject line if email is used. To help the of the Secretary at (202) 551–5400. is consistent with the requirements of Commission process and review your Dated: August 19, 2021. Section 6(b)(5) of the Act. comments more efficiently, please use Vanessa A. Countryman, B. Self-Regulatory Organization’s only one method. The Commission will Secretary. Statement on Burden on Competition post all comments on the Commission’s internet website (http://www.sec.gov/ [FR Doc. 2021–18173 Filed 8–19–21; 11:15 am] The Exchange does not believe that rules/sro.shtml). Copies of the BILLING CODE 8011–01–P the proposed rule change will impose submission, all subsequent any burden on competition that is not amendments, all written statements necessary or appropriate in furtherance with respect to the proposed rule SOCIAL SECURITY ADMINISTRATION of the purpose of the Act. The Exchange change that are filed with the [Docket No: SSA–2021–0030] notes that the proposed rule change, Commission, and all written rather will facilitate the listing and communications relating to the Agency Information Collection trading of an additional exchange-traded proposed rule change between the Activities: Proposed Request product that will enhance competition Commission and any person, other than among both market participants and The Social Security Administration those that may be withheld from the (SSA) publishes a list of information listing venues, to the benefit of investors public in accordance with the and the marketplace. collection packages requiring clearance provisions of 5 U.S.C. 552, will be by the Office of Management and C. Self-Regulatory Organization’s available for website viewing and Budget (OMB) in compliance with Statement on Comments on the printing in the Commission’s Public Public Law 104–13, the Paperwork Proposed Rule Change Received From Reference Room, 100 F Street NE, Reduction Act of 1995, effective October Members, Participants, or Others Washington, DC 20549 on official 1, 1995. This notice includes revisions The Exchange has neither solicited business days between the hours of of OMB-approved information nor received written comments on the 10:00 a.m. and 3:00 p.m. Copies of the collections. proposed rule change. filing also will be available for SSA is soliciting comments on the inspection and copying at the principal accuracy of the agency’s burden III. Date of Effectiveness of the office of the Exchange. All comments estimate; the need for the information; Proposed Rule Change and Timing for received will be posted without change. its practical utility; ways to enhance its Commission Action Persons submitting comments are quality, utility, and clarity; and ways to Within 45 days of the date of cautioned that we do not redact or edit minimize burden on respondents, publication of this notice in the Federal personal identifying information from including the use of automated Register or within such longer period comment submissions. You should collection techniques or other forms of up to 90 days (i) as the Commission may submit only information that you wish information technology. Mail, email, or designate if it finds such longer period to make available publicly. All fax your comments and to be appropriate and publishes its submissions should refer to File recommendations on the information reasons for so finding or (ii) as to which Number SR–CboeBZX–2021–052 and collection(s) to the OMB Desk Officer the Exchange consents, the Commission should be submitted on or before and SSA Reports Clearance Officer at will: September 13, 2021. the following addresses or fax numbers. A. By order approve or disapprove For the Commission, by the Division of (OMB) Office of Management and such proposed rule change, or Trading and Markets, pursuant to delegated Budget, Attn: Desk Officer for SSA, B. institute proceedings to determine authority.78 Comments: https://www.reginfo.gov/ whether the proposed rule change Jill M. Peterson, public/do/PRAMain. Submit your should be disapproved. Assistant Secretary. comments online referencing Docket IV. Solicitation of Comments [FR Doc. 2021–17965 Filed 8–20–21; 8:45 am] ID Number [SSA–2021–0030]. (SSA) Social Security Administration, Interested persons are invited to BILLING CODE 8011–01–P submit written data, views, and OLCA, Attn: Reports Clearance arguments concerning the foregoing, Director, 3100 West High Rise, 6401 including whether the proposed rule SECURITIES AND EXCHANGE Security Blvd., Baltimore, MD 21235, change is consistent with the Act. COMMISSION Fax: 410–966–2830, Email address: [email protected]. Comments may be submitted by any of Sunshine Act Meeting; Cancellation the following methods: Or you may submit your comments online through https://www.reginfo.gov/ Electronic Comments FEDERAL REGISTER CITATION OF PREVIOUS public/do/PRAMain, referencing Docket • Use the Commission’s internet ANNOUNCEMENT: 86 FR 45795, August ID Number [SSA–2021–0030]. comment form (http://www.sec.gov/ 16, 2021. The information collections below are rules/sro.shtml); or PREVIOUSLY ANNOUNCED TIME AND DATE OF pending at SSA. SSA will submit them • Send an email to rule-comments@ THE MEETING: Thursday, August 19, 2021 to OMB within 60 days from the date of sec.gov. Please include File Number SR– at 2:00 p.m. this notice. To be sure we consider your CboeBZX–2021–052 on the subject line. comments, we must receive them no CHANGES IN THE MEETING: The Closed later than October 19, 2021. Individuals Paper Comments Meeting scheduled for Thursday, can obtain copies of the collection • Send paper comments in triplicate August 19, 2021 at 2:00 p.m., has been instruments by writing to the above to: Secretary, Securities and Exchange cancelled. email address. Commission, 100 F Street NE, 1. Certificate of Support—20 CFR Washington, DC 20549–1090. 78 17 CFR 200.30–3(a)(12). 404.370, 404.408a, and 404.750—0960–

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