Federal Register / Vol. 81, No. 148 / Tuesday, August 2, 2016 / Notices 50763

Paper Comments SECURITIES AND EXCHANGE and/or trade pursuant to unlisted trading privileges (‘‘UTP’’) • COMMISSION Send paper comments in triplicate ‘‘Commodity-Based Trust Shares’’.4 The to Secretary, Securities and Exchange [Release No. 34–78426; File No. SR– NYSEArca–2016–101] Exchange proposes to list and trade Commission, 100 F Street NE., shares (‘‘Shares’’) of the Trust pursuant Washington, DC 20549–1090. Self-Regulatory Organizations; NYSE to NYSE Arca Equities Rule 8.201.5 The sponsor of the Trust is SolidX All submissions should refer to File Arca, Inc.; Notice of Filing of Proposed Management LLC (‘‘Sponsor’’), a Number SR–BOX–2016–36. This file Rule Change Relating to the Listing and Trading of Shares of SolidX Delaware limited liability company. The number should be included on the Sponsor is a wholly-owned subsidiary subject line if email is used. To help the Bitcoin Trust Under NYSE Arca Equities Rule 8.201 of SolidX Partners Inc. The trustee for Commission process and review your the Trust (‘‘Trustee’’) serves pursuant to comments more efficiently, please use July 27, 2016. a trust agreement. The Bank of New only one method. The Commission will Pursuant to Section 19(b)(1) 1 of the York Mellon will be the administrator post all comments on the Commission’s Securities Exchange Act of 1934 (the (‘‘Administrator’’) and the custodian, Internet Web site (http://www.sec.gov/ ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 with respect to cash, of the Trust rules/sro.shtml). Copies of the notice is hereby given that, on July 13, (‘‘Custodian’’). submission, all subsequent 2016, NYSE Arca, Inc. (the ‘‘Exchange’’ The Trust is a grantor trust formed amendments, all written statements or ‘‘NYSE Arca’’) filed with the under the laws of the State of New York. with respect to the proposed rule Securities and Exchange Commission The Trust has no fixed termination date. change that are filed with the (the ‘‘Commission’’) the proposed rule According to the Registration Commission, and all written change as described in Items I and II Statement, each Share will represent a communications relating to the below, which Items have been prepared fractional undivided beneficial interest proposed rule change between the by the self-regulatory organization. The in the Trust’s net assets. The Trust’s assets will consist of bitcoin 6 held on Commission and any person, other than Commission is publishing this notice to solicit comments on the proposed rule the Trust’s behalf by the Sponsor those that may be withheld from the change from interested persons. utilizing a secure process as described public in accordance with the below in ‘‘bitcoin Security and Storage provisions of 5 U.S.C. 552, will be I. Self-Regulatory Organization’s for the Trust’’. The Trust will not available for Web site viewing and Statement of the Terms of Substance of normally hold cash or any other assets, printing in the Commission’s Public the Proposed Rule Change but may hold a very limited amount of Reference Room, 100 F Street NE., The Exchange proposes to list and cash in connection with the creation Washington, DC 20549 on official trade shares of the following under and redemption of ‘‘Baskets’’ 7 and to business days between the hours of NYSE Arca Equities Rule 8.201: SolidX pay Trust expenses, as described below. 10:00 a.m. and 3:00 p.m. Copies of such Bitcoin Trust (‘‘Trust’’). The proposed According to the Registration filing also will be available for rule change is available on the Statement, the Trust will invest in inspection and copying at the principal Exchange’s Web site at www.nyse.com, bitcoin only. The activities of the Trust office of the Exchange. All comments at the principal office of the Exchange, are limited to: (i) Issuing Baskets in received will be posted without change; and at the Commission’s Public exchange for bitcoin or the cash the Commission does not edit personal Reference Room. deposited with the Custodian as consideration; (ii) purchasing bitcoin identifying information from II. Self-Regulatory Organization’s from various exchanges and in over-the- submissions. You should submit only Statement of the Purpose of, and information that you wish to make counter (‘‘OTC’’) transactions; (iii) Statutory Basis for, the Proposed Rule selling bitcoin (or transferring bitcoin, at available publicly. All submissions Change the Sponsor’s discretion) as necessary to should refer to File Number SR–BOX– In its filing with the Commission, the cover the Sponsor’s management fee, 2016–36, and should be submitted on or self-regulatory organization included before August 23, 2016. statements concerning the purpose of, 4 Commodity-Based Trust Shares are securities For the Commission, by the Division of and basis for, the proposed rule change issued by a trust that represent investors’ discrete and discussed any comments it received identifiable and undivided beneficial ownership Trading and Markets, pursuant to delegated interest in the commodities deposited into the authority.10 on the proposed rule change. The text Trust. Robert W. Errett, of those statements may be examined at 5 On July 11, 2016, the Trust filed a registration statement (‘‘Registration Statement’’) on Form S–1 Deputy Secretary. the places specified in Item IV below. The Exchange has prepared summaries, under the Securities Act of 1933 (15 U.S.C. 77a). [FR Doc. 2016–18206 Filed 8–1–16; 8:45 am] The descriptions of the Trust, the Shares and set forth in sections A, B, and C below, bitcoin contained herein are based, in part, on the BILLING CODE 8011–01–P of the most significant parts of such Registration Statement. statements. 6 A ‘‘bitcoin’’ is an asset that can be transferred among parties via the Internet, but without the use A. Self-Regulatory Organization’s of a central administrator or clearing agency Statement of the Purpose of, and the (‘‘bitcoin’’). The asset, bitcoin, is generally written Statutory Basis for, the Proposed Rule with a lower case ‘‘b’’. The asset, bitcoin, is differentiated from the computers and software (or Change the protocol) involved in the transfer of bitcoin among users, which constitute the ‘‘Bitcoin 1. Purpose Network’’. The asset, bitcoin, is the intrinsically Under NYSE Arca Equities Rule linked unit of account that exists within the Bitcoin 8.201, the Exchange may propose to list Network. See ‘‘bitcoin and the Bitcoin Industry’’ below. 7 The Trust will issue and redeem ‘‘Baskets’’, each 1 15 U.S.C. 78s(b)(1). equal to a block of 10,000 Shares, only to 2 15 U.S.C. 78a. ‘‘Authorized Participants’’. See ‘‘Creation and 10 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4. Redemption of Shares’’ below.

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Trust expenses not assumed by the receive-versus-payment (‘‘RVP’’) When a bitcoin user wishes to transfer Sponsor and other liabilities; (iv) selling arrangements. bitcoin to another user, the sender must bitcoin as necessary in connection with first request a bitcoin address from the Bitcoin and the Bitcoin Industry redemptions; (v) delivering bitcoin or recipient. The sender then uses his or cash in exchange for Baskets General her bitcoin wallet software, to create a surrendered for redemption; and (vi) The following is a brief introduction proposed addition to the blockchain. maintaining insurance coverage for the to the global bitcoin market. The data The proposal would decrement the bitcoin held by the Trust. presented below are derived from sender’s address and increment the According to the Registration information released by various third- recipient’s address by the amount of Statement, the Trust is neither an party sources, including white papers, bitcoin desired to be transferred. The investment company registered under other published materials, research proposal is entirely digital in nature, the Investment Company Act of 1940, as reports and regulatory guidance. similar to a file on a computer, and it amended,8 nor a commodity pool for can be sent to other computers purposes of the Commodity Exchange The Bitcoin Network participating in the Bitcoin Network. Act (‘‘CEA’’),9 and neither the Sponsor A bitcoin is an asset that can be Such digital proposals are referred to as nor the Trustee is subject to regulation transferred among parties via the ‘‘bitcoin transactions’’. Bitcoin as a commodity pool operator or a Internet, but without the use of a central transactions and the process of one user commodity trading adviser in administrator or clearing agency. The sending bitcoin to another should not be connection with the Shares. term ‘‘decentralized’’ is often used in confused with buying and selling bitcoin, which is a separate process (as Investment Objective descriptions of bitcoin, in reference to bitcoin’s lack of necessity for discussed below in ‘‘bitcoin Trading On According to the Registration administration by a central party. The Exchanges’’ and ‘‘bitcoin Trading Over- Statement and as further described Bitcoin Network (i.e., the network of the-Counter’’). below, the Trust will seek to provide computers running the software A bitcoin transaction is similar in investors with exposure to the daily protocol underlying bitcoin involved in concept to an irreversible digital check. change in the U.S. dollar price of maintaining the database of bitcoin The transaction contains the sender’s bitcoin, before expenses and liabilities ownership and facilitating the transfer bitcoin address, the recipient’s bitcoin of the Trust, as measured by the of bitcoin among parties) and the asset, address, the amount of bitcoin to be TradeBlock XBX Index (‘‘XBX’’). The bitcoin, are intrinsically linked and sent, a confirmation fee and the sender’s Trust intends to achieve this objective inseparable. Bitcoin was first described digital signature. The sender’s use of his by investing substantially all of its in a white paper released in 2008 and or her digital signature enables assets in bitcoin traded on various published under the name ‘‘Satoshi participants on the Bitcoin Network to domestic and international bitcoin Nakamoto’’, and the protocol underlying verify the authenticity of the bitcoin exchanges and OTC markets depending bitcoin was subsequently released in transaction. on liquidity and otherwise at the 2009 as open source software. A user’s digital signature is generated Sponsor’s discretion. The Trust is not via usage of the user’s so-called ‘‘private actively managed. It does not engage in Bitcoin Ownership and the Blockchain key’’, one of two numbers in a so-called any activities designed to obtain a profit To begin using bitcoin, a user may cryptographic ‘‘key pair’’. A key pair from, or to ameliorate losses caused by, download specialized software referred consists of a ‘‘public key’’ and its changes in the price of bitcoin. to as a ‘‘bitcoin wallet’’. A user’s bitcoin corresponding private key, both of which are lengthy numerical codes, Investment in Bitcoin wallet can run on a computer or smartphone. A bitcoin wallet can be derived together and possessing a Subject to certain requirements and used both to send and to receive bitcoin. unique relationship. conditions described below and in the Within a bitcoin wallet, a user will be Public keys are used to create bitcoin Registration Statement, the Trust, under able to generate one or more ‘‘bitcoin addresses. Private keys are used to sign normal market conditions,10 will use addresses’’, which are similar in transactions that initiate the transfer of available offering proceeds to purchase concept to bank account numbers, and bitcoin from a sender’s bitcoin address bitcoin that are traded on various each address is unique. Upon generating to a recipient’s bitcoin address. Only the domestic and international exchanges a bitcoin address, a user can begin to holder of the private key associated with and OTC markets, without being transact in bitcoin by receiving bitcoin a particular bitcoin address can digitally leveraged or exceeding relevant position at his or her bitcoin address and sending sign a transaction proposing a transfer of limits. Generally, the Sponsor will it from his or her address to another bitcoin from that particular bitcoin directly place purchase or sale orders user’s address. Sending bitcoin from one address. for bitcoin on behalf of the Trust on bitcoin address to another is similar in A user’s bitcoin address (which is domestic and international exchanges concept to sending a bank wire from one derived from a public key) may be safely and with OTC participants using person’s bank account to another distributed, but a user’s private key delivery-versus-payment (‘‘DVP’’) and person’s bank account. must remain known solely by its Balances of the quantity of bitcoin rightful owner. The utilization of a 8 15 U.S.C. 80a–1. associated with each bitcoin address are private key is the only mechanism by 9 17 U.S.C. 1. listed in a database, referred to as the which a bitcoin user can create a digital 10 The term ‘‘under normal circumstances’’ ‘‘blockchain’’. Copies of the blockchain signature to transfer bitcoin from him or includes, but is not limited to, the absence of extreme volatility or trading halts in the price of exist on thousands of computers on the herself to another user. Additionally, if bitcoin or the financial markets generally; Bitcoin Network throughout the a malicious third party learns of a user’s operational issues causing dissemination of Internet. A user’s bitcoin wallet will private key, that third party could forge inaccurate market information; or force majeure either contain a copy of the blockchain the user’s digital signature and send the type events such as systems failure, natural or man- user’s bitcoin to any arbitrary bitcoin made disaster, act of God, armed conflict, act of or be able to connect with another terrorism, riot or labor disruption or any similar computer that holds a copy of the address (i.e., the third party could steal intervening circumstance. blockchain. the user’s bitcoin).

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When a bitcoin holder sends bitcoin with new rounds won approximately settlement. Whether used for value to a destination bitcoin address, the every ten minutes, the average wait time transfer or other blockchain-focused transaction is initially considered for a confirmation is five minutes. applications, each transaction or use of unconfirmed. Confirmation of the The protocol underlying bitcoin the blockchain requires a fee, priced and validity of the transaction involves provides the rules by which all users paid in bitcoin. Therefore, the usage of verifying the signature of the sender, as and miners on the Bitcoin Network bitcoin, the asset, is inherently involved created by the sender’s private key. must operate. A user or miner in blockchain-focused applications, thus Confirmation also involves verifying attempting to operate under a different linking the growth and adoption of that the sender has not ‘‘double spent’’ set of rules will be ignored by other blockchain-focused applications to the the bitcoin (e.g., confirming Party A has network participants, thus rendering growth and adoption of bitcoin. not attempted to send the same bitcoin that user’s or miner’s behavior moot. According to the Registration both to Party B and to Party C). The The protocol also lays out the block Statement, as a value transfer confirmation process occurs via a reward, the amount of bitcoin that a mechanism, over 100,000 merchants process known as ‘‘bitcoin mining’’. miner earns upon creating a new block. worldwide currently accept bitcoin as Bitcoin mining utilizes a combination The initial block reward when Bitcoin payment for goods and services. Notable of computer hardware and software to was introduced in 2009 was 50 bitcoin merchants accepting bitcoin for certain accomplish a dual purpose: (i) To verify per block. That number has and will types of purchases include Microsoft, the authenticity and validity of bitcoin continue to halve approximately every Dell, Expedia, Overstock.com and Dish transactions (i.e., the movement of four years until approximately 2140, Network. Common bitcoin purchases bitcoin between addresses) and (ii) the when it is estimated that block rewards include Web site hosting, home creation of new bitcoin. Neither the will go to zero. The next halving is furnishings, gift cards and consumer Sponsor nor the Trust intends to engage projected for July 2016, which will electronics. Bitcoin is also accepted by in bitcoin mining. reduce the block reward to 12.5 bitcoin a number of non-profit organizations Bitcoin miners do not need from its current level of 25.11 The worldwide, including United Way permission to participate in verifying halving thereafter will occur in another Worldwide, the American Red Cross, transactions. Rather, miners compete to four years and will reduce the block Wikipedia and Fidelity Charitable.13 solve a prescribed and complicated reward to 6.25 bitcoin, and so on. Bitcoin Exchanges mathematical calculation using Currently, there are approximately 15 computers dedicated to the task. Rounds million bitcoin that have been created, Bitcoin exchanges operate Web sites of the competition repeat approximately a number that will grow with certainty that facilitate the purchase and sale of every ten minutes. In any particular to a maximum of 21 million, estimated bitcoin for various government-issued round of the competition, the first miner to occur by the year 2140. Bitcoin currencies, including the U.S. dollar, to find the solution to the mathematical mining should not be confused with the euro or the Chinese yuan. Activity calculation is the miner who gains the buying and selling bitcoin, which, as on bitcoin exchanges should not be privilege of announcing the next block discussed below, is a separate process. confused with the process of users to be added to the blockchain. sending bitcoin from one bitcoin A new block that is added to the Use of Bitcoin and the Blockchain address to another bitcoin address, the blockchain serves to take all of the Beyond using bitcoin as a value latter being an activity that is wholly recent-yet-unconfirmed transactions and transfer mechanism, applications within the confines of the Bitcoin verify that none are fraudulent. The related to the blockchain technology Network and the former being an recent-yet-unconfirmed transactions underlying bitcoin have become activity that occurs entirely on private also generally contain transaction fees increasingly prominent.12 Blockchain- Web sites. that are awarded to the miner who focused applications take advantage of Bitcoin exchanges operate in a produces the block in which the certain unique characteristics of the manner that is unlike the traditional transactions are inserted, and thereby blockchain such as secure time capital markets infrastructure in the confirmed. The successful miner also stamping (secure time stamps are on U.S. and in other developed nations. earns the so-called ‘‘block reward’’, an newly created blocks), highly redundant Bitcoin exchanges combine the process amount of newly created bitcoin. Thus, storage (copies of the blockchain are of order matching, trade clearing, trade bitcoin miners are financially distributed throughout the Internet) and settlement and custody into a single incentivized to conduct their work. The tamper-resistant data secured by secure entity. For example, a user can send financial incentives received by bitcoin digital signatures. U.S. dollars via wire to a bitcoin miners are a vital part of the process by According to the Registration exchange and then visit the exchange’s which the Bitcoin Network functions. Statement, blockchain-focused Web site to purchase bitcoin. The Upon successfully winning a round of applications in usage and under entirety of the transaction—from trade the competition (winning a round is development include, but are not to clearing to settlement to custody (at referred to as mining a new block), the limited to, supply chain management, least temporary custody)—is miner then transmits a copy of the secure cloud storage, identity accomplished by the bitcoin exchange newly-formed block to peers on the management, counterfeit and fraud in a matter of seconds. The user can Bitcoin Network, all of which then detection systems, database security then withdraw the purchased bitcoin update their respective copies of the enhancement, evidence capture, secure into a wallet to take custody of the blockchain by appending the new block, document and contract signing, asset bitcoin directly. thereby acknowledging the confirmation title transfer and financial asset According to the Registration of the transactions that had previously Statement, there are currently several existed in an unconfirmed state. 11 http://www.bitcoinblockhalf.com/. A recipient of bitcoin must wait until 12 Additional applications based on blockchain 13 Attached as Exhibit 3, Item 1 is a chart setting a new block is formed in order to see the technology—both the blockchain underlying bitcoin forth a summary of bitcoin transaction volume (i.e., as well as separate public blockchains incorporating transfers of bitcoin between parties on the Bitcoin transaction convert from an similar characteristics of the blockchain underlying Network, which is different than and should not be unconfirmed state to a confirmed state. bitcoin—are currently in development by numerous confused with bitcoin exchange-traded volume) According to the Registration Statement, entities, including financial institutions like banks. from January 2009 through January 2016.

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U.S.-based regulated entities that the exchanges with the most significant most bitcoin exchanges’ market prices facilitate bitcoin trading and that bitcoin trading by volume (i.e., should be relatively consistent with the comply with U.S. anti-money Bitfinex,14 Bitstamp,15 BTCC,16 BTC-e,17 bitcoin exchange market average since laundering (‘‘AML’’) and know your Coinbase, Huobi,18 itBit, OKCoin market participants can choose the customer (‘‘KYC’’) regulatory Exchange China 19 and OKCoin bitcoin exchange on which to buy or sell requirements: International 20) traded approximately bitcoin (i.e., exchange shopping). • Coinbase, which is based in 422 million bitcoin at U.S. dollar According to the Registration Statement, California, is a bitcoin exchange that converted prices ranging between $199 price differentials across bitcoin maintains money transmitter licenses in and $706 for a total trade volume of over exchanges enable arbitrage between over thirty states, the District of $154 billion during the period February bitcoin prices on the various exchanges. Columbia and Puerto Rico (‘‘Coinbase’’). 2014 through January 2016. The Bitcoin Price Indexes Coinbase is subject to the regulations Sponsor represents that average global enforced by the various state agencies daily trade volume during this period XBX Index. Launched in July 2014, that issued their respective money was approximately $212 million. the XBX represents the value of one transmitter licenses to Coinbase. In New The various bitcoin exchanges are bitcoin in U.S. dollars at any point in York, Coinbase applied for a BitLicense, generally available to the public through time and closes as of 4:00 p.m., Eastern a regulatory framework created by the online web portals. Trading time (‘‘E.T.’’), each weekday. The intra- New York Department of Financial information, including pricing, day levels of the XBX incorporate the Services (‘‘DFS’’) that sets forth volumes, and order book is available on real-time price of bitcoin based on consumer protection, AML compliance, the exchanges’ Web sites, and most such trading activity derived from constituent and cyber security rules tailored for information is publicly available to exchanges throughout each trading day. digital currency companies operating anyone who visits the site. According to The closing level of the XBX is and transacting business in New York. the Sponsor, for those exchanges that calculated using a proprietary • itBit is a bitcoin exchange that was comply with applicable KYC methodology utilizing bitcoin trading granted a limited purpose trust requirements, prior to trading bitcoin, data from constituent exchanges and is company charter by the DFS in May users are required to provide the published at or after 4:00 p.m., E.T., 2015 (‘‘itBit’’). Limited purpose trusts, exchange with KYC verifiable each weekday. The XBX is published to according to the DFS, are permitted to identification and other such two decimal places rounded on the last undertake certain activities, such as documentation. Once a user establishes digit. Schvey, Inc. d/b/a TradeBlock transfer agency, securities clearance, an account with the exchange, the user (‘‘TradeBlock’’) is the index sponsor and investment management, and custodial deposits government currency with the calculation agent for the XBX. The services, but without the power to take exchange by completing a wire of Sponsor has entered into a licensing deposits or make loans. government currency to the exchange’s • Gemini is a bitcoin exchange that is agreement with TradeBlock to use the bank. also regulated by the DFS. In October Bitcoin are traded with publicly XBX. The Trust is entitled to use the 2015, the DFS granted Gemini disclosed valuations for each XBX pursuant to a sub-licensing authorization to operate as a limited transaction, measured by one or more arrangement with the Sponsor. The XBX is a real-time U.S. dollar- purpose trust company (‘‘Gemini’’). government currencies such as the U.S. • SecondMarket, Inc. d/b/a Genesis denominated composite reference rate dollar, the euro or the Chinese yuan. Global Trading is a FINRA member firm for the price of bitcoin. The XBX Bitcoin exchanges typically report that makes a market in bitcoin by calculates the intra-day price of bitcoin publicly on their site the valuation of offering two-sided liquidity (‘‘Genesis every second, including the closing each transaction and bid and ask prices Global Trading’’). price as of 4:00 p.m., E.T. The intra-day for the purchase or sale of bitcoin. According to the Registration price and closing price are based on a Although each bitcoin exchange has its Statement, the majority of bitcoin methodology that consists of collecting own market price, it is expected that transactions are executed on public and cleansing actual trade data from bitcoin exchanges where bitcoin are several bitcoin exchanges included 14 Bitfinex is a bitcoin exchange that facilitates bought and sold daily for value in U.S. U.S. dollar-denominated bitcoin trading within the XBX. dollar, euro and other government (‘‘Bitfinex’’). It is based in Hong Kong and holds a According to the Registration currencies. These bitcoin exchanges Money Services Operator license issued by the Statement, to ensure that TradeBlock’s provide the most data with respect to Customs and Excise Department, Money Services exchange selection process is impartial, prevailing valuations of bitcoin. The Supervision Bureau. TradeBlock implements a standardized 15 Bitstamp is a bitcoin exchange that facilitates exchanges typically publish real-time U.S. dollar-denominated bitcoin trading eligibility criteria framework based on trade data including last price, bid and (‘‘Bitstamp’’). It is based in the United Kingdom periodically-reviewed governance ask spread, and trade volume on their with offices in London, Luxembourg and New York. principles that includes elements such respective Web sites and through The government of Luxembourg granted Bitstamp a as depth of liquidity, compliance with license to operate as a regulated bitcoin exchange application programming interfaces. As in the European Union. applicable legal and regulatory a result, the prices on bitcoin exchanges 16 BTCC is a bitcoin exchange that is requirements, data availability and are the most accurate expression of the headquartered in Shanghai and facilitates yuan- acceptance of U.S. dollar deposits. As of value of bitcoin. The XBX, which the denominated bitcoin trading (‘‘BTCC’’). June 30, 2016, the eligible bitcoin 17 Trust will use to calculate the net asset BTC-e is a U.S. dollar-denominated bitcoin exchanges selected by TradeBlock for exchange (‘‘BTC-e’’). value of the Shares, accordingly tracks 18 Huobi is a bitcoin exchange that is based in inclusion in the XBX are Bitfinex, the price of bitcoin across multiple Beijing and facilitates yuan-denominated bitcoin Bitstamp, Coinbase, itBit and OKCoin exchanges (see ‘‘bitcoin Price Indexes’’ trading. International. The XBX currently does below). 19 OKCoin Exchange China is located in Beijing not include any other bitcoin exchanges, The bitcoin marketplace is a 24-hour, and facilitates Chinese yuan-denominated bitcoin derivative exchanges, dark pools, OTC trading (‘‘OKCoin Exchange China’’). 365-day per year market. There 20 OKCoin International is located in Singapore or other trading venues. currently exist globally over 30 bitcoin and facilitates U.S. dollar-denominated bitcoin The logic utilized for the derivation of exchanges. The Sponsor represents that trading (‘‘OKCoin International’’). the daily closing index level for the XBX

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is intended to analyze actual bitcoin time and closes as of 4:00 p.m., E.T., only open to non-U.S. persons or which transactional data, verify and refine the each weekday. do not conduct business in New York or data set and yield an objective, fair- CoinDesk Bitcoin Price Index. with New York residents. The officers of market value of one bitcoin as of 4:00 CoinDesk, a digital currency content the Sponsor also serve as officers of the p.m., E.T., each weekday, priced in U.S. provider (‘‘Coindesk’’), launched a Subsidiary. When conducting trading dollars. As discussed herein, the XBX proprietary bitcoin price index, the through the Subsidiary, the Sponsor is intra-day price and the XBX closing CoinDesk Bitcoin Price Index (‘‘XBP’’) responsible for the security of the price are collectively referred to as the in September 2013. The XBP takes the bitcoin to the same extent as if trading XBX price, unless otherwise noted. average of U.S. dollar bitcoin prices bitcoin directly. Bitcoin traded through The key elements of the algorithm from leading exchanges. the Subsidiary will be stored in the underlying the XBX include: Bitcoin Trading on Exchanges same way as bitcoin that is traded • Volume/Liquidity Weighting: directly by the Sponsor, and the Trust’s Exchanges with greater liquidity receive According to the Registration bitcoin insurance on bitcoin traded a higher weighting in the XBX, Statement, an individual who wishes to through the Subsidiary will apply to the increasing the ability to execute against purchase bitcoin on a bitcoin exchange same extent as otherwise applicable. the XBX in the underlying spot markets. would create an account on the Furthermore, the Subsidiary will have Liquidity weighting also mitigates the exchange Web site. After creating an the same trading arrangements with the impact of volume spikes during off-peak account, the buyer would send applicable bitcoin exchanges as does the trading hours. government issued money to the Web Sponsor itself. Accordingly, references • Price Variance Weighting: The XBX site via traditional payment methods herein to the Sponsor’s trading price reflects data points that are such as ACH and wire transfer. The arrangements with bitcoin exchanges on discretely weighted in proportion to buyer’s account at the bitcoin exchange behalf of the Trust include trading their variance from contemporaneous would be credited with the money sent, conducted by the Sponsor through the pricing reflected on the XBX’s and the buyer would then be able to Subsidiary, unless otherwise noted. constituent exchanges. As the price at a visit the Web site and make a purchase The Sponsor intends to conduct its particular exchange diverges from the of bitcoin. Directly after the purchase is bitcoin exchange trading on the rest of the data points, its influence on made, the bitcoin acquired still remains following U.S. dollar-denominated the XBX consequently decreases. in the custody of the bitcoin exchange bitcoin exchanges: Bitfinex, Bitstamp, • Inactivity Adjustment: The (i.e., it remains at a bitcoin address Coinbase, Gemini, itBit, Kraken 21 and algorithm penalizes stale ticks on any controlled by the exchange). To take OKCoin International.22 The Sponsor given exchange. If an exchange does not custody of the bitcoin, the purchaser represents that all of these exchanges have recent trading data, its weighting is would direct the exchange Web site to follow AML and KYC regulatory gradually reduced, until it is de- transfer the bitcoin to a bitcoin address requirements. Because Bitfinex and weighted entirely. Similarly, once controlled by the purchaser, thereby Kraken do not conduct business in New activity resumes, the corresponding completing the process of acquiring York or with New York residents, and weighting for that constituent is bitcoin. A sale of bitcoin using a bitcoin OKCoin International is only open to gradually increased until it reaches the exchange involves the same process but non-U.S. persons, the Sponsor intends appropriate level. in reverse. The seller would transfer • to conduct its bitcoin trading on these Thin Order Books: The XBX bitcoin from an address under his or her three exchanges through the Subsidiary. minimizes the impact of thin order control to an address under the bitcoin As discussed above, the Sponsor does books and fluctuating prices, which exchange’s control. The seller’s account not expect the Trust to experience any provides a more stable and reliable at the bitcoin exchange would be differences between bitcoin exchange benchmark for the price of bitcoin. credited with the bitcoin sent, and the trades on the Trust’s behalf conducted The XBX index calculation seller would be able to commence the through the Subsidiary versus those methodology and governance protocol sale of the bitcoin via the Web site. conducted by the Sponsor directly. are based on principles established by Upon completion of the sale, the seller’s According to the Registration the International Organization of account would reflect the seller’s Statement, during the preceding twelve- Securities Commissions for financial balance, in government currency, which month period (June 2015 through May benchmarks. TradeBlock conducts a the seller could then receive by 2016), the aggregate trading volume on quarterly review of the constituent directing the exchange to send the funds the five constituent exchanges exchanges and the algorithm used to via traditional payment methods to the comprising the XBX (i.e., Bitfinex, calculate XBX prices and maintains a seller’s bank account. Bitcoin exchange Bitstamp, Coinbase, itBit and OKCoin history of all updates. In the event of Web sites generally show users a central International) represented market stress or unresponsive input data limit order book (i.e., a list of all bids approximately 80% of the entire global from the constituent exchanges, the and offers for purchases and sales of U.S. dollar-denominated bitcoin XBX algorithm will incorporate a bitcoin on the exchange). exchange market.23According to the minimum of one input to calculate a The Sponsor has trading experience benchmark value. In the unlikely event with several U.S. and foreign bitcoin 21 Kraken is located in San Francisco (‘‘Kraken’’). of no input data from all constituent exchanges that generally represent the Although Kraken conducts U.S. dollar bitcoin values, the XBX will default to the most highest daily U.S. dollar bitcoin trading trading, it is primarily a euro-denominated bitcoin recent value for which one or more volume. exchange. The Sponsor may conduct some of its 22 The Sponsor intends to trade with OKCoin inputs were present. International, the Singaporean entity, and not with The Sponsor is not aware of any bitcoin trading on behalf of the Trust the yuan-denominated OKCoin Exchange China. bitcoin derivatives currently trading through a wholly-owned subsidiary, 23 In addition to the five constituent exchanges based on the XBX. SolidX Management Ltd., an exempted comprising the XBX, the global U.S. dollar- NYXBT Index. Launched in May limited company established in the denominated bitcoin exchange market also includes BTC-e, Gemini, LakeBTC (located in Shanghai, 2015, the NYSE Bitcoin Index Cayman Islands (‘‘Subsidiary’’), to buy China) and Kraken. The Sponsor represents that (‘‘NYXBT’’) represents the value of one and sell bitcoin on behalf of the Trust although BTC-e is a U.S. dollar-denominated bitcoin in U.S. dollars at any point in on certain bitcoin exchanges which are Continued

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Registration Statement, during the Bitcoin Price Transparency the investor base in bitcoin, which period April 2015 through April 2016 According to the Registration could further reduce the possibility of (including weekends and holidays), Statement, bitcoin trading currently collusion among market participants to average daily bitcoin trading on occurs globally across over 30 bitcoin manipulate the bitcoin market. Bitfinex, Bitstamp, Coinbase, Gemini, exchanges and trades against over 20 According to the Sponsor, the XBX’s itBit and OKCoin International totaled government currencies 24-hours per price variance weighting, which approximately 64,000 bitcoin across all day, 365 days per year. Individual decreases the influence on the XBX of of those exchanges at prices that ranged bitcoin exchanges continually publish any particular exchange that diverges between $217 and $469. Of that trading, publicly available price and volume from the rest of the data points used by Bitfinex accounted for 38%, Bitstamp data that is utilized by service providers the XBX, reduces the possibility of an accounted for 19%, Coinbase accounted to create various bitcoin indexes. attempt to manipulate the price of for 13%, Gemini accounted for 1%, itBit Bitcoin prices are also available via bitcoin as reflected by the XBX. accounted for 7% and OKCoin major market data vendors such as Bitcoin Trading Over-the-Counter International accounted for 23%. With a Bloomberg and Thomson Reuters. Real- Basket (as defined below) size of 1,000 time and historical price data is OTC trading of bitcoin is generally bitcoin, the creation or redemption of available through numerous public web accomplished via bilateral agreements one Basket would represent platforms including: https:// on a principal-to-principal basis. All approximately 1.5% of the aggregate tradeblock.com/; http:// risks and issues of credit are between daily U.S. dollar-denominated bitcoin www.coindesk.com/; https:// the parties directly involved in the trading volume across these exchanges bitcoinaverage.com; and others. transaction. The OTC market provides a and approximately 1% of the aggregate Although the trading volumes on relatively flexible market in terms of daily (i) U.S. dollar-denominated BTCC, Huobi and OKCoin Exchange quotes, price, size and other factors. The bitcoin trading volume on these China are significant, trading on these OTC market has no formal structure and exchanges plus (ii) global U.S. dollar- exchanges is limited to Chinese yuan, no open-outcry meeting place. Parties denominated OTC bitcoin trading and the Sponsor therefore does not engaging in OTC transactions will agree volume. intend to transact with these exchanges. upon a price—often via phone or The Sponsor has established, on The Sponsor intends to transact with email—and one of the two parties behalf of the Trust, DVP and RVP U.S. dollar-denominated exchanges would then initiate the transaction. For trading arrangements with several of the only. However, the Sponsor represents example, a seller of bitcoin could U.S. dollar-denominated bitcoin that the price of bitcoin on BTCC, Huobi initiate the transaction by sending the exchanges pursuant to which the Trust and OKCoin Exchange China generally bitcoin to the buyer’s bitcoin address. will be able to minimize exchange has been consistent with the price of The buyer would then wire U.S. dollars counterparty risk. These arrangements bitcoin on U.S. dollar-denominated to the seller’s bank account. are on a trade-by-trade basis and do not bitcoin exchanges, including Bitfinex, Based on its observations and bind the Sponsor or the Trust to Bitstamp, Coinbase, itBit and OKCoin experience in the market, the Sponsor continue to trade with any exchange. International. estimates that the U.S. dollar OTC Under these arrangements, the Sponsor, The Sponsor represents that because bitcoin trading volume globally on behalf of the Trust, will receive bitcoin trades on more than 30 represents on average approximately bitcoin from an exchange that has exchanges globally on a 24-hour basis, fifty percent of the trading volume of entered into a DVP/RVP arrangement it is difficult for attempted market bitcoin traded globally in U.S. dollars with the Sponsor without having to manipulation on any one exchange to on U.S. dollar-denominated bitcoin deposit U.S. dollars with the exchange affect the global market price of bitcoin. exchanges. prior to trade execution. Once the Any such attempt to manipulate the According to the Registration Sponsor receives the bitcoin it price would result in an arbitrage Statement, transaction costs in the OTC purchased, the Sponsor will within 24 opportunity among exchanges, which market are negotiable between the hours wire U.S. dollars to the exchange typically would be acted upon by parties and therefore vary with some to settle the trade. When selling bitcoin market participants. participants willing to offer competitive on behalf of the Trust, an exchange that In addition to the price transparency prices for larger volumes, although this has entered into a DVP/RVP of the bitcoin exchange market itself, the will vary according to market arrangement with the Sponsor will Trust will provide information conditions. Cost indicators can be permit the Sponsor to sell bitcoin on the regarding the Trust’s bitcoin holdings as obtained from various information exchange without the need to deposit well as additional data regarding the service providers, such as the bitcoin bitcoin with the exchange beforehand. Trust. The Sponsor expects that the price indexes and bitcoin exchanges. The Sponsor will transmit bitcoin to the dissemination of information on the OTC trading tends to be in large blocks exchange only after the exchange has Trust’s Web site, along with quotations of bitcoin and between institutions. wired the U.S. dollar sales proceeds to for and last-sale prices of transactions in In addition to using Bitfinex, the Sponsor. These DVP and RVP the Shares and the intra-day indicative Bitstamp, Coinbase, Gemini, itBit, settlement terms reduce exchange value (‘‘IIV’’) and net asset value Kraken and OKCoin International to buy counterparty risks for the Trust. (‘‘NAV’’) of the Trust will help to reduce and sell bitcoin, the Trust intends to the ability of market participants to participate in the OTC bitcoin market bitcoin exchange with significant trading volume, manipulate the bitcoin market or the when such market opportunities are BTC-e does not comply with certain of the deemed by the Sponsor to be Sponsor’s internal criteria regarding the exchanges price of the Shares and that the Trust’s on which the Sponsor will trade and, therefore, the arbitrage mechanism will facilitate the advantageous for the Trust. The Sponsor Sponsor will not transact with BTC-e. The Sponsor correction of price discrepancies in currently expects that often it will be represents that it is also aware of other smaller U.S. bitcoin and the Shares. The Sponsor more cost efficient to effect large trades dollar-denominated bitcoin exchanges, but the believes that demand from new (e.g., $500,000 or greater) on behalf of trading volume on these exchanges is insignificant and the Sponsor does not intend to conduct investors accessing bitcoin through the Trust in the OTC market rather than business with these smaller exchanges. investment in the Shares will broaden on a bitcoin exchange. The Sponsor

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therefore expects to conduct most of its such arrangement would have no greater bitcoin such as options, swaps and trading in the OTC bitcoin market. impact on the Trust than a default under futures. When deciding whether to buy and the DVP and RVP arrangements. According to the Registration sell bitcoin in the OTC market, the To the extent a Basket creation or Statement, BitMex (based in the Sponsor will consider various market redemption order necessitates the Republic of Seychelles), CryptoFacilites factors, including the total U.S. dollar buying or selling of a large block of (based in the United Kingdom), 796 size of the trade, the volume of bitcoin bitcoin (e.g., an amount that if an order Exchange (based in China) and OKCoin traded across the various U.S. dollar- were placed on an exchange would Exchange China all offer futures denominated bitcoin exchanges during potentially move the price of bitcoin), contracts settled in bitcoin. Coinut, the preceding 24-hour period, available the Sponsor represents that placing such based in Singapore, offers bitcoin binary liquidity offered by OTC market a trade in the OTC market may be options and vanilla options based on the participants and the bid and ask quotes advantageous to the Trust. OTC trades Coinut index. Nadex, based in Chicago, offered by OTC market participants. The help avoid factors such as potential offers bitcoin binary options Sponsor’s experience is that the prices price slippage (causing the price of denominated in U.S. dollars using the at which trades in the OTC market are bitcoin to move as the order is filled on TeraBit Bitcoin Price Index.25 IGMarkets executed closely correspond to the XBX. the exchange), while offering speed in (based in the United Kingdom), The Sponsor expects the price at which trade execution and settlement (an OTC Avatrade (based in Ireland) and Plus500 it will trade bitcoin in the OTC market trade can be executed immediately upon (based in Israel) also offer bitcoin will generally track the XBX, and, agreement of terms between derivative products. therefore, should not affect the Trust’s counterparties) and privacy (to avoid The Commodity Futures Trading ability to track the XBX. The Sponsor other market participants entering Commission (‘‘CFTC’’) has approved also maintains an internal proprietary trades in advance of a large block order). TeraExchange, LLC as a swap execution database, which it does not share with OTC bitcoin trading is typically facility (‘‘TeraExchange’’) and LedgerX anyone, of potential OTC bitcoin trading private and not regularly reported. For provisionally as a swap execution counterparties, including hedge funds, example, Genesis Global Trading and facility, where bitcoin swap and non- family offices, private wealth managers itBit release periodic reports that deliverable forward contracts may be and high-net-worth individuals. All discuss their respective OTC trading entered into. The CFTC commissioners have such potential counterparties will be volumes. The Trust does not intend to expressed publicly that derivatives subject to the Sponsor’s AML and KYC report its OTC trading. compliance procedures. The Sponsor based on bitcoin are subject to Regardless of whether the Sponsor regulation by the CFTC, including will add additional potential buys bitcoin on an exchange or in the counterparties to its internal proprietary oversight to prevent market OTC market, the Sponsor expects the manipulation of the price of bitcoin. In database as it becomes aware of Trust to take custody of bitcoin within additional market participants. The addition, the CFTC has stated that one business day of receiving an order Sponsor will decide whether or not to bitcoin and other virtual currencies are from an Authorized Participant to create trade with OTC counterparties based on encompassed in the definition of a Basket (as defined in ‘‘Creation and its ability to fill orders at the best commodities under the CEA.26 Redemption of Shares’’ below). available price amongst OTC market In May 2015, the Swedish FSA participants and bitcoin exchanges. Historical Chart of the Price of Bitcoin approved the prospectus for ‘‘Bitcoin Generally, the Sponsor will directly Tracker One’’, an open-ended exchange- The price of bitcoin is volatile and traded note that tracks the price of place purchase or sale orders for bitcoin fluctuations are expected to have a on behalf of the Trust with participants bitcoin in U.S. dollars. The Bitcoin direct impact on the value of the Shares. in the OTC markets using DVP and RVP Tracker One initially traded in Swedish However, movements in the price of style arrangements. krona on the Nasdaq Nordic in While the Sponsor expects that most bitcoin in the past are not a reliable Stockholm, but is now also available to of its bitcoin trading with exchanges indicator of future movements. trade in euro. The Bitcoin Tracker One and OTC counterparties on behalf of the Movements may be influenced by is available to retail investors in the Trust will occur pursuant to DVP and various factors, including supply and European Union and to those investors RVP arrangements, the Sponsor may demand, geo-political uncertainties, in the U.S. who maintain brokerage also enter into collateral arrangements economic concerns such as inflation accounts with Interactive Brokers. with certain bitcoin exchanges and OTC and real or speculative investor Founded in 2013, Bitcoin Investment 24 counterparties where DVP and RVP interest. Trust, a private, open-ended trust arrangements are not practicable. Such Additional Bitcoin Trading Products available to accredited investors, is collateral arrangements require the another investment vehicle that derives Sponsor, out of its own assets, and the Certain non-U.S. based bitcoin bitcoin exchange or OTC counterparty exchanges offer derivative products on 25 The TeraBit Bitcoin Price Index is disseminated to open and maintain collateral deposit by TeraExchange. 26 accounts with a bank or similar 24 Attached as Exhibit 3, Item 2 is a chart See ‘‘In the Matter of Coinflip, Inc.’’ (CFTC illustrating the changes in the price of bitcoin Docket 15–29 (September 17, 2015)) (order financial intermediary for the purpose during the period July 2010 through March 2016. instituting proceedings pursuant to Sections 6(c) of collateralizing pending bitcoin Attached as Exhibit 3, Item 3 is a chart comparing and 6(d) of the CEA, making findings and imposing transactions effected by the Sponsor on the trailing calendar month volatility in the price remedial sanctions), in which the CFTC stated the behalf of the Trust and the bitcoin of bitcoin compared to the trailing calendar month following: volatility in the prices of gold, platinum, copper ‘‘Section 1a(9) of the CEA defines ‘commodity’ to exchange or OTC counterparty. The and oil during the period May 1, 2014 through May include, among other things, ‘all services, rights, Trust would not pledge (or receive) 31, 2016 (excluding holidays and weekends). and interests in which contracts for future delivery collateral pursuant to these Attached as Exhibit 3, Item 4 is a chart comparing are presently or in the future dealt in.’ 7 U.S.C. arrangements and the Sponsor would the trailing calendar month volatility in the price 1a(9). The definition of a ‘commodity’ is broad. See, of bitcoin compared to the trailing calendar month e.g., Board of Trade of City of Chicago v. SEC, 677 bear any exchange counterparty risk. volatility in the prices of gold, platinum, copper F. 2d 1137, 1142 (7th Cir. 1982). Bitcoin and other The Sponsor represents that a default of and oil during the period March 1, 2016 through virtual currencies are encompassed in the definition an exchange or OTC counterparty under May 31, 2016 (excluding holidays and weekends). and properly defined as commodities.’’

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its value from the price of bitcoin. will have inspection rights associated denominated composite reference rate Eligible shares of the Bitcoin Investment with the bitcoin held in custody by the for the price of bitcoin based on the Trust are quoted on the OTCQX Trust. volume-weighted price at trading marketplace under the symbol ‘‘GBTC’’. Bitcoin Market Price venues selected by CoinDesk. Trading venues used to calculate the XBP may Bitcoin Security and Storage for the In the ordinary course of business, the Trust include bitcoin exchanges, OTC markets Administrator will value the bitcoin or derivative platforms. CoinDesk uses According to the Sponsor, given the held by the Trust based on the price set its discretion to select trading venues novelty and unique digital by the XBX as of 4:00 p.m., E.T., on the that will be included in the XBP based characteristics (as set forth above) of valuation date on any day that the NYSE on guidelines, including depth of bitcoin as an innovative asset class, Arca is open for regular trading. For traditional custodians who normally further detail, see (i) below. If the liquidity, compliance with applicable custody assets do not currently offer procedures described in (i) fail and the legal and regulatory requirements, data custodial services for bitcoin. Administrator is unable to value the availability, domicile in the United Accordingly, the Sponsor will secure Trust’s bitcoin using the procedures States and acceptance of U.S. dollar the bitcoin held by the Trust using described in (i), the Administrator will deposits. To calculate the reference rate, multi-signature ‘‘cold storage wallets’’, value the Trust’s bitcoin using the trade data is cleansed and compiled in an industry best practice. A cold storage cascading set of rules set forth in (ii) such a manner as to algorithmically wallet is created and stored on a through (iv) below; the methodology reduce the impact of anomalistic or computer with no access to a network, used to established the value of the manipulative trading. This is i.e., an ‘‘air-gapped’’ computer with no bitcoin held by the Trust will be the accomplished by adjusting the weight of ability to access the Internet. Such a ‘‘bitcoin Market Price’’. For the each data input based on price deviation computer is isolated from any network, avoidance of doubt, the Administrator relative to the observable set of data for including local or Internet connections. will employ the below rules the relevant trading venue, as well as A multi-signature address is an address sequentially and in the order as recent and long-term trading volume at associated with more than one private presented, should the Sponsor each venue relative to the observable set key. For example, a ‘‘2 of 3’’ address determine that one or more specific for the relevant trading venues. To requires two signatures (out of three) rule(s) fails. The Sponsor may calculate volume-weighted price, the from two separate private keys (out of determine that a rule has failed if the weighting algorithm is applied to the three) to move bitcoin from a sender pricing source is unavailable or, in the price and volume of all inputs for the address to a receiver address. judgment of the Sponsor, is deemed immediately preceding 24-hour period The Sponsor will utilize bitcoin unreliable. To the extent the at 4:00 p.m., E.T., on the valuation date. private keys that are generated and Administrator uses any of the cascading stored on air-gapped computers. The set of rules, the Sponsor will make (iii) bitcoin Market Price = The movement of bitcoin will require public on the Trust’s Web site the rule volume-weighted average bitcoin price physical access to the air-gapped being used. for the immediately preceding 24-hour computers and use of multiple (i) bitcoin Market Price = The price period at 4:00 p.m., E.T., on the authorized signers. For backup and set by the XBX as of 4:00 p.m., E.T., on valuation date as published by an disaster recovery purposes, the Sponsor the valuation date. The XBX is a real- alternative third party’s public data feed will maintain cold wallet backups in time U.S. dollar-denominated composite that the Sponsor determines is locations geographically distributed reference rate for the price of bitcoin. reasonably reliable, subject to the throughout the United States, including The XBX calculates the intra-day price requirement that such data is calculated in the Northeast and Midwest. of bitcoin every second, including the based upon a volume-weighted average In addition to the Sponsor’s security closing price as of 4:00 p.m., E.T. The bitcoin price obtained from the major system, the Sponsor has arranged for the intra-day price and closing price are U.S. dollar-denominated bitcoin Trust to maintain comprehensive based on a methodology that consists of exchanges (‘‘Second Source’’). Subject insurance coverage underwritten by collecting and cleansing actual trade to the next sentence, if the Second various insurance carriers. The purpose data from several bitcoin exchanges Source becomes unavailable (e.g., data of the insurance is to protect investors included within the XBX. TradeBlock sources from the Second Source for against loss or theft of the Trust’s uses standardized eligibility criteria bitcoin prices become unavailable, bitcoin. The insurance will cover loss of based on periodically-reviewed unwieldy or otherwise impractical for bitcoin by, among other things, theft, governance principles to select trading use), or if the Sponsor determines in destruction, bitcoin in transit, computer venues for inclusion in the XBX. As of good faith that the Second Source does fraud (i.e., hacking attack) and other loss June 30, 2016, the eligible bitcoin not reflect an accurate bitcoin price, of the private keys that are necessary to exchanges selected by TradeBlock for then the Sponsor will, on a best efforts access the bitcoin held by the Trust. The inclusion in the XBX are Bitfinex, basis, contact the Second Source in an coverage is subject to certain terms, Bitstamp, Coinbase, itBit and OKCoin attempt to obtain the relevant data. If conditions and exclusions, as discussed International. The logic utilized for the after such contact the Second Source in the Registration Statement. The derivation of the daily closing index remains unavailable or the Sponsor insurance policy will carry initial limits level is intended to analyze actual continues to believe in good faith that of $25 million in primary coverage and bitcoin transactional data, verify and the Second Source does not reflect an $100 million in excess coverage, with refine the data set and yield an accurate bitcoin price, then the the ability to increase coverage objective, fair-market value of one Administrator will employ the next rule depending on the value of the bitcoin bitcoin as of 4:00 p.m., E.T., each to determine the bitcoin Market Price. held by the Trust. weekday, priced in U.S. dollars. The Sponsor expects that the Trust’s (ii) bitcoin Market Price = The price (iv) bitcoin Market Price = The auditor will verify the existence of set by the CoinDesk Bitcoin Price Index Sponsor will use its best judgment to bitcoin held in custody by the Trust. In XBP as of 4:00 p.m., E.T., on the determine a good faith estimate of the addition, the Trust’s insurance carriers valuation date. The XBP is a U.S. dollar- bitcoin Market Price.

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The Trust dividing the NAV of the Trust by the exchanges, bitcoin OTC market According to the Registration number of the Shares outstanding as of participants and the Sponsor itself, Statement, the Trust will invest in the close of trading on the NYSE Arca operating on a principal basis. Such bitcoin only. The Trust will cause the Core Trading Session, i.e., 9:30 a.m. to arrangements make it possible for Sponsor to either (i) receive bitcoin from 4:00 p.m., E.T. (which includes the net Authorized Participants that lack the the Trust in such quantity as may be number of any Shares deemed created trading infrastructure to transact in necessary to pay the Sponsor’s or redeemed on such day). bitcoin to be able to hedge their According to the Registration management fee and other Trust exposure by entering into an NDF or Statement, Authorized Participants (as swap contract. Accordingly, an expenses and liabilities not assumed by defined in ‘‘Creation and Redemption of Authorized Participant may hedge its the Sponsor or (ii) sell bitcoin in such Shares’’ below), or their clients or exposure to bitcoin without the need to quantity as may be necessary to permit customers, may have an opportunity to custody bitcoin, or to engage a third payment in cash of the Sponsor’s realize a riskless profit if they can create party to custody bitcoin. In addition, to management fee and other Trust a Basket (as defined in ‘‘Creation and the extent requested by Authorized expenses and liabilities not assumed by Redemption of Shares’’ below) at a Participants and market makers, the the Sponsor. As a result, the amount of discount to the public trading price of Sponsor will act as agent by buying and bitcoin sold will vary from time to time the Shares or can redeem a Basket at a selling bitcoin on behalf of the depending on the level of the Trust’s premium over the public trading price Authorized Participants and market expenses and the market price of of the Shares. The Sponsor expects that makers, including short sale orders for bitcoin. the exploitation of such arbitrage hedging purposes. The Trust will pay the Sponsor a opportunities by Authorized The NDF and swap contracts that the management fee as compensation for Participants and their clients and Sponsor will enter into as agent on services performed on behalf of the customers will tend to cause the public behalf of the Authorized Participants Trust and for services performed in trading price to track NAV per Share and market makers will be bespoke, connection with maintaining the Trust. closely over time. Such arbitrage OTC and cash settled. The terms of the The Sponsor’s fee will be payable opportunities will not be available to NDF and swap contracts will be monthly in arrears and will be accrued holders of Shares who are not negotiated between the counterparties to daily. Authorized Participants. the NDF and swap contracts. The NDF The Sponsor will be responsible for The Sponsor represents that bitcoin is and swap contracts may be traded paying all of the routine operational, a bearer asset, so unlike most financial electronically on at least one swap administrative and other ordinary assets within the modern financial execution facility. Generally, the NDF expenses of the Trust, including, but not system, Authorized Participants seeking and swap contract strike prices will be limited to, the fees and expenses of the to acquire quantities of bitcoin will based on the bitcoin spot price, as Trustee and Administrator, custody require specialized knowledge to source determined by the XBX, or other pricing fees, transfer agency fees, distribution and secure the bitcoin. Such potential source as agreed to between the NDF and marketing fees, up to $100,000 per holders of bitcoin without sufficient and swap contract counterparties, when annum in legal fees, audit and technological knowledge will encounter the contract is entered into. The NDF accounting fees and expenses, filing both counterparty and custodial issues termination price will be based on the fees, exchange listing fees and printing, that will effectively lock them out of NAV of the Trust determined as of 4:00 mailing and duplication costs. The accessing the bitcoin market. Therefore, p.m., E.T. The terms of the NDF and Sponsor will also be responsible for although there is nothing preventing swap contracts will be governed by paying the premiums associated with Authorized Participants from International Swaps and Derivatives the insurance coverage of the bitcoin participating directly in the bitcoin Associations, Inc. (‘‘ISDA’’) agreements. held by the Trust. The Trust will be market, the Sponsor believes, based on The ISDA terms, including to the extent responsible for paying, or for the current state of the bitcoin market necessary any collateral arrangements, reimbursing the Sponsor or its affiliates and its participants, many probably will will be negotiated between the for paying, all the extraordinary fees and not until such time as the bitcoin market counterparties to the NDF and swap expenses, if any, of the Trust. The matures so that the technological, contracts. management fee to be paid to the counterparty and custodial issues While the Trust’s investment Sponsor is expected to be the only evolve to become similar to those of objective is to seek to provide ordinary recurring operating expense of traditional financial instruments. shareholders with exposure to the daily the Trust. Notwithstanding the foregoing, the change in the U.S. dollar price of Sponsor believes, based on bitcoin, before expenses and liabilities Net Asset Value conversations with market participants, of the Trust, as measured by the XBX, The NAV for the Trust will equal the that one or more Authorized the Shares may trade in the secondary market value of the Trust’s total assets, Participants and/or market makers may market at prices that are lower or higher including bitcoin and cash, less be interested in participating directly in relative to their NAV per Share. liabilities of the Trust, which include the bitcoin market and creating or The NAV per Share may fluctuate estimated accrued but unpaid fees, redeeming Baskets in-kind. with changes in the market value of the expenses and other liabilities. Under the According to the Sponsor, whether bitcoin held by the Trust. The value of Trust’s proposed operational creating and redeeming baskets in-kind the Shares may be influenced by non- procedures, the Administrator will or for cash, Authorized Participants and concurrent trading hours between NYSE calculate the NAV on each business day market makers can hedge their exposure Arca and the various bitcoin exchanges that the NYSE Arca is open for regular to bitcoin using non-deliverable forward comprising the XBX, all of which trading, as promptly as practicable after contracts (‘‘NDFs’’) and swap contracts constituent bitcoin exchanges operate 4:00 p.m., E.T. To calculate the NAV, that will create synthetic long and short 24 hours per day, 365 days per year. As the Administrator will use the bitcoin exposure to bitcoin. NDFs will be a result, there will be periods when the Market Price. The Administrator will offered by several participants in the NYSE Arca is closed and such bitcoin also determine the NAV per Share by bitcoin marketplace, including bitcoin exchanges continue to trade. Significant

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changes in the price of bitcoin on such synthetic long exposure to bitcoin. The orders must be placed by 1:00 p.m., E.T. exchanges could result in a difference in Authorized Participant then could The day on which the Administrator performance between the value of create a Basket at NAV, use those newly receives a valid purchase order is the bitcoin as measured by the XBX and the created Shares to cover the short sale ‘‘purchase order date’’. Purchase orders most recent NAV per Share or closing and realize a profit. Such arbitrage are irrevocable. By placing a purchase trading price. The non-concurrent trades can tighten the tracking between order, and prior to delivery of such trading hours also may result in trading the market price of the Shares and the Baskets, an Authorized Participant’s spreads and the resulting premium or IIV and thus can be beneficial to all DTC account will be charged the non- discount on the Shares widening, market participants. refundable transaction fee due for the increasing the difference between the purchase order. Creation and Redemption of Shares price of the Shares and the NAV of such Determination of Required Payment Shares. According to the Registration The price difference may also be due Statement, the Trust will issue and The total payment required to create to the fact that supply and demand redeem ‘‘Baskets’’, each equal to a block each Basket is determined by forces at work in the secondary trading of 10,000 Shares, only to ‘‘Authorized calculating the NAV of 10,000 Shares of market for Shares are closely related, Participants’’ (as described below). The the Trust as of the closing time of the but not identical, to the same forces size of a Basket is subject to change. The NYSE Arca Core Trading Session on the influencing the XBX spot price. creation and redemption of Baskets will purchase order date. Baskets are issued Consequently, an Authorized principally be made in exchange for the as of 9:30 a.m., E.T., on the business day Participant may be able to create or delivery to the Trust or the distribution immediately following the purchase redeem a Basket of Shares at a discount by the Trust of the amount of cash or order date at the applicable NAV as of or a premium to the public trading price bitcoin represented by the combined the closing time of the NYSE Arca Core per Share. NAV of the Baskets being created or Trading Session on the purchase order redeemed, the amount of which will be date, but only if the required payment Impact on Arbitrage based on the combined bitcoin has been timely received. Investors and market participants are represented by the number of Shares Orders to purchase Baskets must be able throughout the trading day to included in the Baskets being created or placed no later than 1:00 p.m., E.T., but compare the market price of the Shares redeemed determined on the day the the total payment required to create a and the Share’s IIV. According to the order to create or redeem Baskets is Basket will not be determined until 4:00 Sponsor, if the market price of the properly received. p.m., E.T., on the date the purchase Shares diverges significantly from the Orders to create and redeem Baskets order is received. Authorized IIV, Authorized Participants will have may be placed only by Authorized Participants therefore will not know the an incentive to execute arbitrage trades. Participants.27 A transaction fee will be total amount of the payment required to Because of the potential for arbitrage assessed on all creation and redemption create a Basket at the time they submit inherent in the structure of the Trust, transactions effected in-kind. In an irrevocable purchase order for the the Sponsor believes that the Shares addition, a variable transaction fee will Basket. Valid orders to purchase Baskets will not trade at a material discount or be charged to the Authorized received after 1:00 p.m., E.T., are premium to the underlying bitcoin held Participants for creations and considered received on the following by the Trust. The arbitrage process, redemptions effected in cash to cover business day. The NAV of the Trust and which in general provides investors the the Trust’s expenses related to the total amount of the payment opportunity to profit from differences in purchasing and selling bitcoin on required to create a Basket could rise or prices of assets, increases the efficiency bitcoin exchanges or in OTC fall substantially between the time an of the markets, serves to prevent transactions. Such expenses may vary, irrevocable purchase order is submitted potentially manipulative efforts, and but the Trust currently expects such and the time the amount of the purchase can be expected to operate efficiently in expenses to constitute 1% or less of the price in respect thereof is determined. the case of the Shares and bitcoin. value of a Basket. The payment required to create a For example, if the Shares appear to Basket typically will be made in cash, be trading at a discount compared to the Creation Procedures but it may also be made partially or IIV, an Authorized Participant could On any business day, an Authorized wholly in-kind at the discretion of the buy the Shares on the NYSE Arca and Participant may place an order with the Sponsor if the Authorized Participant simultaneously hedge their exposure to Administrator to create one or more requests to convey bitcoin directly to the price of the Shares by entering into Baskets. For purposes of processing both the Trust. To the extent the Authorized an NDF or swap contract—in a dollar purchase and redemption orders, a Participant places an in-kind order to amount equal to the aggregate price of ‘‘business day’’ means any day other create, the Authorized Participant must the Shares bought—that would provide than a day when the NYSE Arca is deliver bitcoin directly to the Sponsor the Authorized Participant with closed for regular trading. Purchase (i.e., to the security system that holds synthetic short exposure to bitcoin. The the Trust’s bitcoin) and an amount of Authorized Participant then could 27 An Authorized Participant must: (1) Be a cash referred to as the ‘‘Cash registered broker-dealer or other securities market redeem a Basket at NAV and realize a participant, such as a bank or other financial Component’’, computed as described profit. Conversely, if the Shares appear institution, which, but for an exclusion from below, each no later than 1:00 p.m., to be trading at a premium compared to registration, would be required to register as a E.T., on the date the purchase order is the IIV, an Authorized Participant could broker-dealer to engage in securities transactions received. The amount of bitcoin and (2) be a participant in Depository Trust sell short the Shares on the NYSE Arca Company (‘‘DTC’’). To become an Authorized delivered by the Authorized Participant and simultaneously hedge their Participant, a person must enter into an must be in an amount equal to the exposure to the short sale by entering ‘‘Authorized Participant Agreement’’ with the number of bitcoin necessary to create a into an NDF or swap contract—in a Sponsor and the Administrator. The Authorized Basket as of 4:00 p.m., E.T., on the date Participant Agreement provides the procedures for dollar amount equal to the aggregate the creation and redemption of Baskets and for the the purchase order is received. Upon price of the Shares sold—that would delivery of the cash (and, potentially, bitcoin in- delivery of the bitcoin to the Sponsor’s provide the Authorized Participant with kind) required for such creations and redemptions. security system and the Cash

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Component to the Custodian, the receives a valid redemption order is the to the extent of whole Baskets received. Administrator will cause the Trust to ‘‘redemption order date’’. Redemption Any remainder of the redemption issue a Basket to the Authorized orders are irrevocable. The redemption distribution is delivered on the next Participant. Expenses relating to procedures allow only Authorized business day to the extent of remaining purchasing bitcoin in assembling an in- Participants to redeem Baskets. whole Baskets received if the Sponsor kind creation Basket, such as bitcoin By placing a redemption order, an receives the fee applicable to the exchange-related fees and transaction Authorized Participant agrees to deliver extension of the redemption distribution fees, will be borne by Authorized the Baskets to be redeemed through date which the Sponsor may, from time Participants. With respect to creations DTC’s book-entry system to the Trust to time, determine and the remaining in cash, Authorized Participants will be not later than 1:00 p.m., E.T., on the Baskets to be redeemed are credited to charged a variable transaction fee to business day immediately following the the Trust’s DTC account by 4:00 p.m., cover expenses as set forth above. redemption order date. By placing a E.T., on such next business day. Any The Cash Component is an amount redemption order, and prior to receipt of further outstanding amount of the equal to the difference between the NAV the redemption proceeds, an Authorized redemption order shall be cancelled. of the Shares (per Basket) and the Participant’s DTC account will be The Sponsor will also be authorized to ‘‘Deposit Amount’’, which is an amount charged the non-refundable transaction deliver the redemption distribution equal to the market value of bitcoin (per fee due for the redemption order. notwithstanding that the Baskets to be Basket) which, for this purpose, is Determination of Redemption Proceeds redeemed are not credited to the Trust’s calculated in the same manner as the DTC account by 4:00 p.m., E.T., on the Trust values its bitcoin as set forth in The redemption proceeds from the business day immediately following the ‘‘bitcoin Market Price’’ above. The Cash Trust consist of the ‘‘cash redemption redemption order date if the Authorized Component serves to compensate for amount’’ and, if making an in-kind Participant has collateralized its any difference between the NAV per redemption, bitcoin. The cash obligation to deliver the Baskets through Basket and the Deposit Amount. redemption amount is equal to the DTC’s book-entry system on such terms Payment of any tax or other fees and combined NAV of the number of as the Sponsor may determine from time expenses payable upon transfer of Baskets of the Trust requested in the to time. bitcoin shall be the sole responsibility of Authorized Participant’s redemption In the case of in-kind redemptions, the Authorized Participant purchasing a order as of the closing time of the NYSE the Sponsor makes available through the Basket. Arca Core Trading Session on the NSCC, prior to the opening of business The Sponsor makes available through redemption order date. The on the NYSE Arca on each business day, the National Securities Clearing Administrator will distribute the cash the amount of bitcoin per Basket that Corporation (‘‘NSCC’’) on each business redemption amount at 4:00 p.m., E.T., will be applicable to redemption day, prior to the opening of business on on the business day immediately requests received in proper form. the NYSE Arca, the amount of bitcoin following the redemption order date To the extent the Authorized required for an in-kind creation of a through DTC to the account of the Participant places an in-kind order to Basket. This amount is applicable in Authorized Participant as recorded on redeem a Basket, the Sponsor will order to effect in-kind purchases of DTC’s book-entry system. At the deliver, on the business day Baskets until such time as the next- discretion of the Sponsor and if the immediately following the day the announced amount is made available. Authorized Participant requests to redemption order is received, bitcoin to receive bitcoin directly, some or all of the Authorized Participant in an amount Rejection of Purchase Orders the redemption proceeds may be equal to the number of bitcoin necessary The Administrator may reject a distributed to the Authorized to redeem a Basket as of 4:00 p.m., E.T. purchase order if: (i) It determines that Participant in-kind. Expenses relating to transferring bitcoin the purchase order is not in proper Orders to redeem Baskets must be to an Authorized Participant in a form; (ii) the Administrator or the placed no later than 1:00 p.m., E.T., but redemption Basket will be borne by Sponsor believes the purchase order the total amount of redemption Authorized Participants via the would have adverse tax consequences to proceeds typically will not be redemption transaction fee. With the Trust or the shareholders; or (iii) determined until after 4:00 p.m., E.T., respect to redemptions in cash, circumstances outside the control of the on the date the redemption order is Authorized Participants will be charged Sponsor make it, for all practical received. Authorized Participants a variable transaction fee to cover purposes, not feasible to process therefore will not know the total amount expenses as set forth above. creations of Baskets. The Administrator of the redemption proceeds at the time Suspension or Rejection of Redemption may reject a purchase order if the they submit an irrevocable redemption Orders Sponsor thinks it is necessary or order. advisable for any reason, which the The Administrator may, in its Delivery of Redemption Proceeds Sponsor determines is in the best discretion, suspend the right of interests of the Trust or shareholders. The redemption proceeds due from redemption or postpone the redemption the Trust are delivered to the settlement date (1) for any period during Redemption Procedures Authorized Participant at 4:00 p.m., which an emergency exists as a result of The procedures by which an E.T., on the business day immediately which the redemption distribution is Authorized Participant can redeem one following the redemption order date if, not reasonably practicable or (2) for or more Baskets mirror the procedures by such time on such business day such other period as the Sponsor for the creation of Baskets. On any immediately following the redemption determines to be necessary for the business day, an Authorized Participant order date, the Trust’s DTC account has protection of the shareholders. None of may place an order with the been credited with the Baskets to be the Sponsor, the Administrator or the Administrator to redeem one or more redeemed. If the Trust’s DTC account Custodian will be liable to any person Baskets. Redemption orders must be has not been credited with all of the or in any way for any loss or damages placed no later than 1:00 p.m., E.T. The Baskets to be redeemed by such time, that may result from any such day on which the Administrator the redemption distribution is delivered suspension or postponement.

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The Administrator will reject a available at https://tradeblock.com/ number of Shares outstanding at the redemption order if the order is not in markets/index/. start of trading is sufficient to provide proper form as described in the The NAV for the Trust will be adequate market liquidity. Authorized Participant Agreement or if calculated by the Administrator once a The Exchange deems the Shares to be the fulfillment of the order, in the day and will be disseminated daily to equity securities, thus rendering trading opinion of its counsel, might be all market participants at the same time. in the Shares subject to the Exchange’s unlawful. The Exchange will also make available existing rules governing the trading of on its Web site daily trading volume of equity securities. Trading in the Shares Availability of Information the Shares, closing prices of the Shares on the Exchange will occur in The Trust’s Web site will provide an and the corresponding NAV for the accordance with NYSE Arca Equities intra-day indicative value (‘‘IIV’’) per Trust. In addition, bitcoin prices are Rule 7.34(a). The Exchange has Share updated every 15 seconds, as available from automated quotation appropriate rules to facilitate calculated by the Exchange or a third systems, published or other public transactions in the Shares during all party financial data provider during the sources or on-line information services trading sessions. As provided in NYSE Exchange’s Core Trading Session. The such as Bloomberg or Reuters. Arca Equities Rule 7.6, the minimum IIV will be calculated by using the prior Quotation and last-sale information price variation (‘‘MPV’’) for quoting and day’s closing NAV per Share as a base regarding the Shares will be entry of orders in equity securities and updating that value during the disseminated through the facilities of traded on the NYSE Arca Marketplace is NYSE Arca Core Trading Session to the Consolidated Tape Association $0.01, with the exception of securities reflect changes in the value of the (‘‘CTA’’). that are priced less than $1.00 for which Trust’s bitcoin holdings during the Quotation and last sale information the MPV for order entry is $0.0001. trading day. for bitcoin will be widely disseminated Further, NYSE Arca Equities Rule The IIV disseminated during the through a variety of major market data 8.201 sets forth certain restrictions on NYSE Arca Core Trading Session should vendors, including Bloomberg and Equity Trading Permit Holders (‘‘ETP not be viewed as an actual real-time Reuters. In addition, the complete real- Holders’’) acting as registered Market update of the NAV, which will be time price (and volume) data for bitcoin Makers in the Shares to facilitate calculated only once at the end of each is available by subscription from surveillance. Pursuant to NYSE Arca trading day. The IIV will be widely Reuters and Bloomberg. The spot price Equities Rule 8.201(g), an ETP Holder disseminated on a per Share basis every of bitcoin is available on a 24-hour basis acting as a registered Market Maker in 15 seconds during the NYSE Arca Core from major market data vendors, the Shares is required to provide the Trading Session by one or more major including Bloomberg and Reuters. Exchange with information relating to market data vendors. In addition, the IIV Information relating to trading, its trading in the underlying bitcoin, will be published on the NYSE Global including price and volume related futures or options on futures or Index Feed and will be available information, in bitcoin will be available any other related derivatives. through on-line information services from major market data vendors and Commentary .04 of NYSE Arca Equities such as Bloomberg and Reuters. from the exchanges on which bitcoin are Rule 6.3 requires an ETP Holder acting The Web site for the Trust, which will traded. The normal trading hours for as a registered Market Maker, and its be publicly accessible at no charge, will bitcoin exchanges are 24-hours per day, affiliates, in the Shares to establish, contain the following information: (a) 365-days per year. maintain and enforce written policies The Trust will provide Web site The current NAV per Share daily and and procedures reasonably designed to disclosure of its bitcoin holdings daily. the prior business day’s NAV and the prevent the misuse of any material The Web site disclosure of the Trust’s nonpublic information with respect to reported closing price; (b) the mid-point portfolio composition will occur at the such products, any components of the of the bid-ask price 28 in relation to the same time as the disclosure by the related products, any physical asset or NAV as of the time the NAV is Sponsor of the portfolio composition to commodity underlying the product, calculated (‘‘Bid-Ask Price’’) and a Authorized Participants so that all applicable currencies, underlying calculation of the premium or discount market participants are provided indexes, related futures or options on of such price against such NAV; (c) data portfolio composition information at the futures and any related derivative in chart form displaying the frequency same time. Therefore, the same portfolio instruments (including the Shares). distribution of discounts and premiums information will be provided on the As a general matter, the Exchange has of the Bid-Ask Price against the NAV, public Web site as well as in electronic regulatory jurisdiction over its ETP within appropriate ranges for each of files provided to Authorized Holders and their associated persons, the four previous calendar quarters (or Participants. Accordingly, each investor which include any person or entity for the life of the Trust, if shorter); (d) will have access to the current portfolio controlling an ETP Holder. A subsidiary the prospectus; and (e) other applicable composition of the Trust through the or affiliate of an ETP Holder that does quantitative information. The Trust will Trust’s Web site. business only in commodities or futures also disseminate the Trust’s holdings on contracts would not be subject to a daily basis on the Trust’s Web site. Trading Rules Exchange jurisdiction, but the Exchange The price of bitcoin will be made The Trust will be subject to the could obtain information regarding the available by one or more major market criteria in NYSE Arca Equities Rule activities of such subsidiary or affiliate data vendors, updated at least every 15 8.201, including 8.201(e), for initial and through surveillance sharing agreements seconds during the Exchange’s Core continued listing of the Shares. A with regulatory organizations of which Trading Session. Information about the minimum of 100,000 Shares will be such subsidiary or affiliate is a member. XBX, including key elements of how the required to be outstanding at the start of With respect to trading halts, the XBX algorithm is calculated, is publicly trading. With respect to application of Exchange may consider all relevant Rule 10A–3 under the Act, the Trust factors in exercising its discretion to 28 The bid-ask price of the Trust is determined using the highest bid and lowest offer on the will rely on the exception contained in halt or suspend trading in the Shares. Consolidated Tape as of the time of calculation of Rule 10A–3(c)(7). The Exchange Trading on the Exchange in the Shares the closing day NAV. believes that the anticipated minimum may be halted because of market

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conditions or for reasons that, in the which could be indicative of ETP Holders in an ‘‘Information view of the Exchange, make trading in manipulative or other violative activity. Bulletin’’ of the special characteristics the Shares inadvisable. These may When such situations are detected, and risks associated with trading the include: (1) The extent to which surveillance analysis follows and Shares. Specifically, the Information conditions in the underlying bitcoin investigations are opened, where Bulletin will discuss the following: (1) markets have caused disruptions and/or appropriate, to review the behavior of The procedures for purchases and lack of trading or (2) whether other all relevant parties for all relevant redemptions of Shares in Baskets unusual conditions or circumstances trading violations. (including noting that the Shares are not detrimental to the maintenance of a fair The Exchange or FINRA, on behalf of individually redeemable); (2) NYSE and orderly market are present. In the Exchange, or both, will Arca Equities Rule 9.2(a), which addition, trading in Shares will be communicate as needed regarding imposes a duty of due diligence on its subject to trading halts caused by trading in the Shares with other markets ETP Holders to learn the essential facts extraordinary market volatility pursuant and other entities that are members of relating to every customer prior to to the Exchange’s ‘‘circuit breaker’’ the Intermarket Surveillance Group trading the Shares; (3) how information rule.29 (‘‘ISG’’), and the Exchange or FINRA, on regarding how the Index and the IIV are The Exchange will halt trading in the behalf of the Exchange, or both, may disseminated; (4) the requirement that Shares if the NAV of the Trust is not obtain trading information regarding ETP Holders deliver a prospectus to calculated or disseminated daily. The trading in the Shares from such markets investors purchasing newly issued Exchange may halt trading during the and other entities. In addition, the Shares prior to or concurrently with the day in which an interruption occurs to Exchange may obtain information confirmation of a transaction; (5) the the dissemination of the IIV or to the regarding trading in the Shares from possibility that trading spreads and the dissemination of bitcoin pricing data by markets and other entities that are resulting premium or discount on the one or more bitcoin Market Price members of ISG or with which the Shares may widen during the Opening sources. If the interruption to the Exchange has in place a comprehensive and Late Trading Sessions, when an dissemination of the IIV or the value of surveillance sharing agreement updated IIV will not be calculated or bitcoin persists past the trading day in (‘‘CSSA’’).32 publicly disseminated; and (6) trading which it occurs, the Exchange will halt Also, pursuant to NYSE Arca Equities information. For example, the trading no later than the beginning of Rule 8.201(g), the Exchange is able to Information Bulletin will advise ETP the trading day following the obtain information regarding trading in Holders, prior to the commencement of interruption.30 In addition, if the the Shares and the underlying bitcoin or trading, of the prospectus delivery Exchange becomes aware that the NAV any bitcoin derivative through ETP requirements applicable to the Trust. with respect to the Shares is not Holders acting as registered Market The Exchange notes that investors disseminated to all market participants Makers, in connection with such ETP purchasing Shares directly from the at the same time, it will halt trading in Holders’ proprietary or customer trades Trust will receive a prospectus. ETP the Shares until such time as the NAV through ETP Holders which they effect Holders purchasing Shares from the is available to all market participants. on any relevant market. Trust for resale to investors will deliver The Exchange also has a general a prospectus to such investors. Surveillance policy prohibiting the distribution of In addition, the Information Bulletin The Exchange represents that trading material, non-public information by its will reference that the Trust is subject in the Shares will be subject to the employees. to various fees and expenses as existing trading surveillances All statements and representations described in the Registration Statement. administered by the Exchange, as well made in this filing regarding (i) the The Information Bulletin will disclose as cross-market surveillances description of the portfolio, (ii) that information about the Shares of the administered by the Financial Industry limitations on portfolio holdings or Trust is publicly available on the Trust’s Regulatory Authority (‘‘FINRA’’) on reference assets or (iii) the applicability Web site. behalf of the Exchange, which are of Exchange rules and surveillance The Information Bulletin will also designed to detect violations of procedures shall constitute continued discuss any relief, if granted, by the Exchange rules and applicable federal listing requirements for listing the Commission or the staff from any rules securities laws.31 The Exchange Shares on the Exchange. under the Act. represents that these procedures are The issuer has represented to the 2. Statutory Basis adequate to properly monitor Exchange Exchange that it will advise the Exchange of any failure by the Fund to The basis under the Act for this trading of the Shares in all trading proposed rule change is the requirement sessions and to deter and detect comply with the continued listing requirements, and, pursuant to its under Section 6(b)(5) 33 that an violations of Exchange rules and federal exchange have rules that are designed to securities laws applicable to trading on obligations under Section 19(g)(1) of the Act, the Exchange will monitor for prevent fraudulent and manipulative the Exchange. acts and practices, to promote just and The surveillances referred to above compliance with the continued listing requirements. If the Fund is not in equitable principles of trade, to remove generally focus on detecting securities impediments to, and perfect the trading outside their normal patterns, compliance with the applicable listing requirements, the Exchange will mechanism of a free and open market and, in general, to protect investors and 29 See NYSE Arca Equities Rule 7.12. commence delisting procedures under 30 The Exchange notes that the Exchange may halt NYSE Arca Equities Rule 5.5(m). the public interest. trading during the day in which an interruption to The Exchange believes that the the dissemination of the IIV or the value of bitcoin Information Bulletin proposed rule change is designed to occurs. Prior to the commencement of prevent fraudulent and manipulative 31 FINRA conducts cross market surveillances on acts and practices in that the Shares will behalf of the Exchange pursuant to a regulatory trading, the Exchange will inform its services agreement. The Exchange is responsible for be listed and traded on the Exchange FINRA’s performance under this regulatory services 32 For the list of current members of ISG, see agreement. https://www.isgportal.org/home.html. 33 15 U.S.C. 78f(b)(5).

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pursuant to the initial and continued bitcoin occurs. If the interruption to the III. Date of Effectiveness of the listing criteria in NYSE Arca Equities dissemination of the IIV or the value of Proposed Rule Change and Timing for Rule 8.201. The Exchange has in place bitcoin persists past the trading day in Commission Action surveillance procedures that are which it occurred, the Exchange will Within 45 days of the date of adequate to properly monitor trading in halt trading no later than the beginning publication of this notice in the Federal the Shares in all trading sessions and to of the trading day following the Register or within such longer period deter and detect violations of Exchange interruption. In addition, if the up to 90 days (i) as the Commission may rules and applicable federal securities Exchange becomes aware that the NAV designate if it finds such longer period laws. The Exchange or FINRA, on behalf with respect to the Shares is not to be appropriate and publishes its of the Exchange, or both, will disseminated to all market participants reasons for so finding or (ii) as to which communicate as needed regarding at the same time, it will halt trading in the self-regulatory organization trading in the Shares with other markets the Shares until such time as the NAV consents, the Commission will: (a) By that are members of the ISG, and the is available to all market participants. order approve or disapprove such Exchange or FINRA, on behalf of the The NAV per Share will be calculated proposed rule change; or (b) institute Exchange, or both, may obtain trading proceedings to determine whether the information regarding trading in the daily and made available to all market participants at the same time. One or proposed rule change should be Shares from such markets. In addition, disapproved. the Exchange may obtain information more major market data vendors will regarding trading in the Shares from disseminate for the Trust on a daily IV. Solicitation of Comments basis information with respect to the markets that are members of ISG or with Interested persons are invited to recent NAV per Share and Shares which the Exchange has in place a submit written data, views, and outstanding. CSSA. Also, pursuant to NYSE Arca arguments concerning the foregoing, Equities Rule 8.201(g), the Exchange is The proposed rule change is designed including whether the proposed rule able to obtain information regarding to perfect the mechanism of a free and change is consistent with the Act. trading in the Shares and the underlying open market and, in general, to protect Comments may be submitted by any of bitcoin or any bitcoin derivative through investors and the public interest in that the following methods: ETP Holders acting as registered Market it will facilitate the listing and trading Electronic Comments Makers, in connection with such ETP of an additional type of exchange-traded Holders’ proprietary or customer trades product that will enhance competition • Use the Commission’s Internet through ETP Holders which they effect among market participants, to the comment form (http://www.sec.gov/ on any relevant market. benefit of investors and the marketplace. rules/sro.shtml); or • The proposed rule change is designed As noted above, the Exchange has in Send an email to rule- to promote just and equitable principles place surveillance procedures relating to [email protected]. Please include File of trade and to protect investors and the trading in the Shares and may obtain Number SR–NYSEArca–2016–101 on the subject line. public interest in that there is a information via ISG from other considerable amount of bitcoin price exchanges that are members of ISG or Paper Comments and bitcoin market information with which the Exchange has entered available on public Web sites and • Send paper comments in triplicate into a CSSA. In addition, as noted through professional and subscription to Secretary, Securities and Exchange services. Investors may obtain on a 24- above, investors will have ready access Commission, 100 F Street NE., hour basis bitcoin pricing information to information regarding the Trust’s Washington, DC 20549–1090. based on the spot price for bitcoin from bitcoin holdings, IIV and quotation and All submissions should refer to File various financial information service last sale information for the Shares. Number SR–NYSEArca–2016–101. This providers. The closing price and B. Self-Regulatory Organization’s file number should be included on the settlement prices of bitcoin are readily Statement on Burden on Competition subject line if email is used. To help the available from the bitcoin exchanges Commission process and review your and other publicly available Web sites. The Exchange does not believe that comments more efficiently, please use In addition, such prices are published in the proposed rule change will impose only one method. The Commission will public sources or on-line information any burden on competition that is not post all comments on the Commission’s services such as Bloomberg and Reuters. necessary or appropriate in furtherance Internet Web site (http://www.sec.gov/ The Trust will provide Web site of the purposes of the Act. The rules/sro.shtml). Copies of the disclosure of its bitcoin holdings daily. Exchange notes that the proposed rule submission, all subsequent Quotation and last-sale information change will facilitate the listing and amendments, all written statements regarding the Shares will be trading of an additional type of with respect to the proposed rule disseminated through the facilities of exchange-traded product, and the first change that are filed with the the CTA. The IIV will be widely such product based on bitcoin, which Commission, and all written disseminated on a per Share basis every will enhance competition among market communications relating to the 15 seconds during the NYSE Arca Core proposed rule change between the participants, to the benefit of investors Trading Session by one or more major Commission and any person, other than and the marketplace. market data vendors. In addition, the IIV those that may be withheld from the will be published on the NYSE Global C. Self-Regulatory Organization’s public in accordance with the Index Feed and will be available Statement on Comments on the provisions of 5 U.S.C. 552, will be through on-line information services Proposed Rule Change Received From available for Web site viewing and such as Bloomberg and Reuters. The Members, Participants, or Others printing in the Commission’s Public Exchange represents that the Exchange Reference Room, 100 F Street NE., may halt trading during the day in No written comments were solicited Washington, DC 20549, on official which an interruption to the or received with respect to the proposed business days between the hours of dissemination of the IIV or the value of rule change. 10:00 a.m. and 3:00 p.m. Copies of the

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filing will also be available for ‘‘Exchange’’) filed with the Securities concerning the purpose of and basis for inspection and copying at the principal and Exchange Commission the proposed rule change and discussed office of the Exchange. All comments (‘‘Commission’’) the proposed rule any comments it received on the received will be posted without change; change as described in Items I, II, and proposed rule change. The text of these the Commission does not edit personal III below, which Items have been statements may be examined at the identifying information from prepared by the Exchange. The places specified in Item IV below. The submissions. You should submit only Exchange filed the proposed rule change Exchange has prepared summaries, set information that you wish to make pursuant to Section 19(b)(3)(A)(ii) of the forth in Sections A, B, and C below, of 3 4 available publicly. All submissions Act, and Rule 19b–4(f)(2) thereunder, the most significant aspects of such which renders the proposal effective should refer to File Number SR– statements. NYSEArca–2016–101 and should be upon filing with the Commission. The submitted on or before August 23, 2016. Commission is publishing this notice to A. Self-Regulatory Organization’s For the Commission, by the Division of solicit comments on the proposed rule Statement of the Purpose of, and Trading and Markets, pursuant to delegated change from interested persons. Statutory Basis for, the Proposed Rule authority.34 I. Self-Regulatory Organization’s Change Robert W. Errett, Statement of the Terms of the Substance 1. Purpose Deputy Secretary. of the Proposed Rule Change [FR Doc. 2016–18204 Filed 8–1–16; 8:45 am] The Exchange is filing with the The Exchange proposes to make a BILLING CODE 8011–01–P Securities and Exchange Commission number of changes to the BOX Fee (‘‘Commission’’) a proposed rule change Schedule. to amend the Fee Schedule to on the Exchange Fees SECURITIES AND EXCHANGE BOX Market LLC (‘‘BOX’’) options COMMISSION facility. While changes to the fee PIP and COPIP Transactions schedule pursuant to this proposal will [Release No. 34–78427; File No. SR–BOX– The Exchange proposes to remodel 2016–34] be effective upon filing, the changes will become operative on August 1, 2016. the current fee structure for PIP and Self-Regulatory Organizations; BOX The text of the proposed rule change is COPIP Transactions. Currently, PIP and Options Exchange LLC; Notice of available from the principal office of the COPIP transactions are assessed fees Filing and Immediate Effectiveness of Exchange, at the Commission’s Public based upon the account type of the a Proposed Rule Change To Amend Reference Room and also on the Participant and whether the order is a: the Fee Schedule on the BOX Market Exchange’s Internet Web site at http:// (i) PIP or COPIP Order; (ii) Improvement LLC (‘‘BOX’’) Options Facility boxexchange.com. Order in PIP or COPIP; or (iii) Primary Improvement Order. The current PIP July 27, 2016. II. Self-Regulatory Organization’s Statement of the Purpose of, and and COPIP Transactions fee structure is Pursuant to Section 19(b)(1) of the as follows: Securities Exchange Act of 1934 (the Statutory Basis for, the Proposed Rule ‘‘Act’’),1 and Rule 19b–4 thereunder,2 Change notice is hereby given that on July 18, In its filing with the Commission, the 2016, BOX Options Exchange LLC (the Exchange included statements

Account type Professional Public customer customer Broker dealer Market maker

PIP Order or COPIP Order 5 ...... $0.00 ...... $0.15 ...... $0.15 ...... $0.15. Improvement Order in PIP or COPIP 6 ..... $0.15 ...... $0.37 ...... $0.37 ...... $0.30. Primary Improvement Order 7 ...... See Section I. B.1 ...... See Section I. B.1 ...... See Section I. B.1 ...... See Section I. B.1.

First, the Exchange proposes to and Market Makers. Specifically, the Market Makers, Broker Dealers and restructure the PIP and COPIP Exchange proposes to establish a fee of Professional Customers. Public Transactions fee schedule to $0.12 for Broker Dealers, Professional Customer Improvement Order fees will differentiate between fees assessed in Customer and Market Maker remain the same, as well as the PIP and Penny and Non-Penny Pilot Classes. Improvement Orders in Penny Pilot COPIP Order fees for all Participants. Next, the Exchange proposes to adjust Classes. For Improvement Orders in The proposed PIP and COPIP fee the Improvement Order fees assessed for Non-Penny Pilot Classes, the Exchange structure will be as follows: Broker Dealers, Professional Customers proposes to establish a fee of $0.38 for

34 17 CFR 200.30–3(a)(12). 4 17 CFR 240.19b–4(f)(2). 6 An Improvement Order is a response to a PIP 1 15 U.S.C. 78s(b)(1). 5 A PIP Order or COPIP Order is a Customer or COPIP auction. 7 2 17 CFR 240.19b–4. Order (an agency order for the account of either a A Primary Improvement Order is the matching customer or a broker-dealer) designated for the PIP contra order submitted to the PIP or COPIP on the 3 15 U.S.C. 78s(b)(3)(A)(ii). or COPIP, respectively. opposite side of the PIP or COPIP order.

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