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19(b)(3)(A)(iii) of the Act 22 and Commission takes such action, the submitted on or before November 25, subparagraph (f)(6) of Rule 19b–4 Commission shall institute proceedings 2016. 23 28 thereunder. A proposed rule change under Section 19(b)(2)(B) of the Act to For the Commission, by the Division of filed under Rule 19b–4(f)(6) normally determine whether the proposed rule Trading and Markets, pursuant to delegated does not become operative prior to 30 change should be approved or authority.29 24 days after the date of filing. Rule 19b– disapproved. Brent J. Fields, 4(f)(6)(iii), however, permits the IV. Solicitation of Comments Secretary. Commission to designate a shorter time [FR Doc. 2016–26512 Filed 11–2–16; 8:45 am] if such action is consistent with the Interested persons are invited to protection of investors and the public submit written data, views, and BILLING CODE 8011–01–P interest.25 arguments concerning the foregoing, The Exchange has requested that the including whether the proposed rule change is consistent with the Act. SECURITIES AND EXCHANGE Commission waive the 30-day operative COMMISSION delay. The Commission believes that the Comments may be submitted by any of proposed rule change is designed to the following methods: [Release No. 34–79183; File No. SR– BatsBZX–2016–30] ensure that there will always be a Electronic Comments Clearing Member that will be financially • responsible for a trade, which should Use the Commission’s Internet Self-Regulatory Organizations; Bats promote greater operational certainty comment form (http://www.sec.gov/ BZX Exchange, Inc.; Notice of Filing of rules/sro.shtml); or Amendment No. 1 to a Proposed Rule and facilitate cooperation and • coordination with persons engaged in Send an email to rule-comments@ Change to BZX Rule 14.11(e)(4), clearing transactions. In addition, the sec.gov. Please include File Number SR– Commodity-Based Trust Shares, To BatsEDGX–2016–58 on the subject line. Commission believes that the proposal List and Trade Winklevoss addresses the role of different parties Paper Comments Shares Issued by the Winklevoss Bitcoin Trust involved in the give up process in a • Send paper comments in triplicate balanced manner and is designed to to Secretary, Securities and Exchange October 28, 2016. provide a fair and reasonable Commission, 100 F Street NE., On June 30, 2016, Bats BZX Exchange, methodology for the give up process. Washington, DC 20549–1090. Inc. (‘‘BZX’’ or ‘‘Exchange’’) filed with The Commission notes that it has All submissions should refer to File the Securities and Exchange considered a substantially similar Number SR–BatsEDGX–2016–58. This Commission (‘‘Commission’’), pursuant proposed rule change filed by the file number should be included on the to Section 19(b)(1) of the Securities Chicago Board Options Exchange, subject line if email is used. To help the Exchange Act of 1934 (‘‘Act’’) 1 and Rule Incorporated (‘‘CBOE’’) and NYSE MKT Commission process and review your 19b–4 thereunder,2 a proposed rule LLC (‘‘NYSE MKT’’), which it approved change to list and trade Winklevoss 26 comments more efficiently, please use after a notice and comment period. only one method. The Commission will Bitcoin Shares issued by the Winklevoss This proposed rule change does not post all comments on the Commission’s Bitcoin Trust under BZX Rule raise any new or novel issues from those Internet Web site (http://www.sec.gov/ 14.11(e)(4). The proposed rule change considered in the CBOE and NYSE MKT rules/sro.shtml). Copies of the was published for comment in the proposals. Based on the foregoing, the submission, all subsequent Federal Register on July 14, 2016.3 Commission believes that it is amendments, all written statements On August 23, 2016, pursuant to consistent with the protection of with respect to the proposed rule Section 19(b)(2) of the Act,4 the investors and the public interest to change that are filed with the Commission designated a longer period waive the 30-day operative date so that Commission, and all written within which to approve the proposed the proposal may take effect upon rule change, disapprove the proposed 27 communications relating to the filing. proposed rule change between the rule change, or institute proceedings to At any time within 60 days of the Commission and any person, other than determine whether to disapprove the filing of such proposed rule change, the 5 those that may be withheld from the proposed rule change. On October 12, Commission summarily may public in accordance with the 2016, the Commission instituted temporarily suspend such rule change if provisions of 5 U.S.C. 552, will be proceedings under Section 19(b)(2)(B) of it appears to the Commission that such 6 available for Web site viewing and the Act to determine whether to action is necessary or appropriate in the printing in the Commission’s Public approve or disapprove the proposed public interest, for the protection of 7 Reference Room, 100 F Street NE., rule change. The Commission has investors, or otherwise in furtherance of Washington, DC 20549 on official the purposes of the Act. If the 29 business days between the hours of 17 CFR 200.30–3(a)(12). 1 10:00 a.m. and 3:00 p.m. Copies of such 15 U.S.C. 78s(b)(1). 22 15 U.S.C. 78s(b)(3)(a)(iii). 2 17 CFR 240.19b–4. 23 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– filing also will be available for 3 See Securities Exchange Act Release No. 78262 4(f)(6) requires a self-regulatory organization to give inspection and copying at the principal (Jul. 8, 2016), 81 FR 45554. the Commission written notice of its intent to file office of the Exchange. All comments 4 15 U.S.C. 78s(b)(2). the proposed rule change at least five business days received will be posted without change; 5 See Securities Exchange Act Release No. 78653, prior to the date of filing of the proposed rule the Commission does not edit personal 81 FR 59256 (Aug. 29, 2016). The Commission change, or such shorter time as designated by the designated October 12, 2016, as the date by which Commission. The Exchange has satisfied this identifying information from it should approve, disapprove, or institute requirement. submissions. You should submit only proceedings to determine whether to disapprove the 24 17 CFR 240.19b–4(f)(6)(iii). information that you wish to make proposed rule change. 25 Id. available publicly. All submissions 6 15 U.S.C. 78s(b)(2)(B). 26 See supra note 5. should refer to File Number SR– 7 See Securities Exchange Act Release No. 79084, 27 For purposes only of waiving the 30-day 81 FR 71778 (Oct. 18, 2016) (‘‘Order Instituting operative delay, the Commission has considered the BatsEDGX–2016–58, and should be Proceedings’’). Specifically, the Commission proposed rule’s impact on efficiency, competition, instituted proceedings to allow for additional and capital formation. See 15 U.S.C. 78c(f). 28 15 U.S.C. 78s(b)(2)(B). analysis of the proposed rule change’s consistency

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received 17 comment letters on the The text of the proposed rule change the Registration Statement was filed on proposed rule change.8 is available at the Exchange’s Web site October 18, 2016 and the Registration On October 20, 2016, the Exchange at www.batstrading.com, at the Statement will be effective as of the date filed Amendment No. 1 to the proposed principal office of the Exchange, and at of any offer and sale pursuant to the rule change, as described in Items I and the Commission’s Public Reference Registration Statement.15 II below, which Items have been Room. prepared by the Exchange.9 The Service Providers of the Trust Commission is publishing this notice to II. Self-Regulatory Organization’s Digital Asset Services, LLC, formerly solicit comments on Amendment No. 1 Statement of the Purpose of, and Math-Based Asset Services, LLC, will be to the proposed rule change from Statutory Basis for, the Proposed Rule the sponsor of the Trust (the interested persons.10 Change ‘‘Sponsor’’).16 The Trust’s administrator In its filing with the Commission, the (the ‘‘Administrator’’) 17 and transfer I. Self-Regulatory Organization’s Exchange included statements agent (the ‘‘Transfer Agent’’) will be Statement of the Terms of Substance of concerning the purpose of and basis for State Street Bank and Trust Company the Proposed Rule Change the proposed rule change and discussed (‘‘State Street’’).18 State Street is a trust The Exchange filed a proposal to list any comments it received on the company organized under the laws of and trade Winklevoss Bitcoin Shares proposed rule change. The text of these the Commonwealth of Massachusetts. (the ‘‘Shares’’) issued by the Winklevoss statements may be examined at the Trust Company, LLC will be the Bitcoin Trust (the ‘‘Trust’’) under BZX places specified in Item IV [sic] below. custodian of the Trust (the Rule 14.11(e)(4), Commodity-Based The Exchange has prepared summaries, ‘‘Custodian’’).19 The Custodian is a New Trust Shares. set forth in Sections A, B, and C below, of the most significant parts of such 15 See Registration Statement on Form S–1, dated with Section 6(b)(5) of the Act, which requires, statements. October 18, 2016 (File No. 333–189752). The among other things, that the rules of a national descriptions of the Trust and the Shares contained securities exchange be ‘‘designed to prevent A. Self-Regulatory Organization’s herein are based, in part, on information in the fraudulent and manipulative acts and practices, to Statement of the Purpose of, and the Registration Statement. promote just and equitable principles of trade,’’ and 16 The Sponsor is a Delaware limited liability ‘‘to protect investors and the public interest.’’ See Statutory Basis for, the Proposed Rule company formed on May 9, 2013, and is wholly id., 81 FR at 71781. Change owned by Winklevoss Capital Fund LLC. Under the 8 See Letters from Robert D. Miller, VP Technical Delaware Limited Liability Company Act and the Services, RKL eSolutions (July 11, 2016); Jorge 1. Purpose governing documents of the Sponsor, Winklevoss Stolfi, Full Professor, Institute of Computing This Amendment No. 1 to SR– Capital Fund LLC, the sole member of the Sponsor, UNICAMP (July 13, 2016); Guillaume Lethuillier is not responsible for the debts, obligations and (July 26, 2016); Michael B. Casey (July 31, 2016); BatsBZX–2016–30 amends and replaces liabilities of the Sponsor solely by reason of being Erik A. Aronesty, Sr. Software Engineer, Bloomberg in its entirety the proposal as originally the sole member of the Sponsor. The Sponsor will LP (Aug. 2, 2016); Dan Anderson (Aug. 27, 2016); submitted on June 30, 2016. The be the exclusive licensee, within the field of use of Robert Miller (Oct. 12, 2016); Lysle Shaw-McMinn, Exchange submits this Amendment No. operation of an exchange-traded product (‘‘ETP’’), O.D. (Oct. 13, 2016); Nils Neidhardt (Oct. 13, 2016); of certain patent-pending intellectual property Dana K. Barish (2 letters; Oct. 13, 2016); Xin Lu 1 in order to clarify certain points and regarding the operation of the Trust. Winklevoss IP (Oct. 13, 2016); Rodger Delehanty CFA (Oct. 14, add additional details about the Trust. LLC, an affiliate of the Sponsor, is the owner of and 2016); Dylan (Oct. 14, 2016); Dana K. Barish (Oct. The Exchange proposes to list and is licensing to the Sponsor such intellectual 14, 2016); and Dana K. Barish (2 letters; Oct. 15, trade the Shares under BZX Rule property for use by the Trust and the Custodian and 2016). All comments on the proposed rule change 11 other service providers in the operation of the are available on the Commission’s Web site at: 14.11(e)(4), which governs the listing Trust. The Sponsor arranged for the creation of the https://www.sec.gov/comments/sr-batsbzx-2016-30/ and trading of Commodity-Based Trust Trust and will arrange for the registration of the batsbzx201630.shtml. Shares on the Exchange.12 The Shares Shares for their public offering in the United States 9 Among other things, Amendment No. 1 (1) will be offered by the Trust, which was and their listing on the Exchange. identifies State Street Bank and Trust Company as established as a Delaware statutory trust 17 Pursuant to the Administration Agreement the Trust’s Administrator and Transfer Agent (see between the Administrator and the Trust, the Section II.A.1, infra (discussion in subheading on December 30, 2014. The Trust will Administrator provides fund administration and ‘‘Service Providers of the Trust’’)); (2) clarifies that not be registered as an investment fund accounting services with regard to the Trust, the price of bitcoin is measured by the clearing company under the Investment including calculating the Trust’s net asset value and price of a two-sided auction which occurs every day Company Act of 1940 13 and is not NAV, maintaining the Trust’s records, and at 4:00 p.m. Eastern Time on the Gemini exchange providing such other administrative services as are (see Section II.A.1, infra (discussion in subheading required to register under such act. The specified in the Administration Agreement. ‘‘Service Providers of the Trust’’)) and notes various Trust will not be a commodity pool for 18 The Transfer Agent serves as the transfer agent conflicts of interest that may arise among the purposes of the Commodity Exchange Sponsor and its affiliates, including the Custodian in accordance with the provisions of the Transfer 14 and the Gemini Exchange, on one hand, and the Act (‘‘CEA’’). The Shares of the Trust Agency and Services Agreement. The Transfer Trust and its Shareholders, on the other hand (see will be registered with the Commission Agent, among other things, provides transfer agent Section II.A.1, infra (discussion in subheading by means of the Trust’s registration services with respect to the creation and ‘‘Overview of the Bitcoin Industry and Market’’ redemption of Baskets by Authorized Participants. under ‘‘The Gemini Exchange’’)); (3) provides statement on Form S–1 (the 19 The Custodian is an affiliate of the Sponsor and additional information on the Bitcoin exchange ‘‘Registration Statement’’) under the a New York State-chartered limited liability trust ‘‘lit’’ market (see Section II.A.1, infra (discussion in Securities Act of 1933 (the ‘‘Securities company that operates under the direct supervision subheading ‘‘Bitcoin Market’’ under ‘‘Bitcoin Act’’). The most recent amendment to and regulatory authority of the New York State Exchange Lit Market’’)); (4) provides additional Department of Financial Services (‘‘NYSDFS’’). information on security, the Custodian’s Cold Although the Trust’s bitcoin is not stored in a Storage System, the Custodian’s insurance 11 The Commission approved BZX Rule physical sense, all transactions involving the arrangements and proof of control auditing (see 14.11(e)(4) in Securities Exchange Act Release No. Trust’s bitcoin are recorded on the Bitcoin Section II.A.1, infra (discussion in subheading 65225 (August 30, 2011), 76 FR 55148 (September Network’s and associated with a public ‘‘Description of the Trust and Shares’’ under 6, 2011) (SR–BATS–2011–018). Bitcoin address. The Trust’s public Bitcoin ‘‘Proprietary Cold Storage System’’)); and (5) 12 All statements and representations made in this addresses are established by the Custodian using its changes the value of creation/redemption Baskets filing regarding (a) the description of the portfolio, proprietary hardware and software security from 50,000 Shares to 10,000 Shares (see Section (b) limitations on portfolio holdings or reference technology (‘‘Cold Storage System’’), which holds II.A.1, infra (discussion in subheading ‘‘Creation assets, or (c) the applicability of Exchange rules and the Trust’s bitcoin and permits the Trust to move and Redemption of Shares’’)). surveillance procedures shall constitute continued its bitcoin. Access and control of those Bitcoin 10 In formulating comments, commenters should listing requirements for listing the Shares on the addresses, and the bitcoin associated with them, is consider whether this Amendment No. 1 addresses Exchange. restricted through the public-private key pair any of the questions posed in the Order to Institute 13 15 U.S.C. 80a–1. relating to each Bitcoin address. The Custodian is Proceeding mentioned in footnote 5, supra. 14 17 U.S.C. 1. Continued

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York State-chartered limited liability decentralized public transaction , (each a ‘‘Bitcoin Exchange’’) 23 or in trust company that operates under the known as the ‘‘Blockchain,’’ on which individual end-user-to-end-user direct supervision and regulatory all bitcoin is recorded. The Bitcoin transactions under a barter system. See authority of the NYSDFS. The Network software source code includes ‘‘Uses of Bitcoin—Bitcoin Exchange Custodian is a fiduciary and must meet the protocols that govern the creation of Market,’’ below. the capitalization, compliance, anti- bitcoin and the cryptographic system Bitcoin is ‘‘stored’’ or reflected on the money laundering, consumer protection that secures and verifies Bitcoin Blockchain, which is a digital file stored and cyber security requirements as set transactions. in a decentralized manner on the forth by the NYSDFS. The Custodian The Trust is expected to issue and computers of each will hold the bitcoin deposited with the redeem Shares from time to time only in user. The Bitcoin Network software Custodian on behalf of the Trust in a one or more whole Baskets. Certain source code includes the protocols that segregated custody account (the ‘‘Trust Authorized Participants are the only govern the creation of bitcoin and the Custody Account’’) in accordance with persons that may place orders to create cryptographic system that secures and the Trust Custody Agreement. The or redeem Baskets. Authorized verifies Bitcoin transactions. The Custodian will use its proprietary and Participants or their affiliated market Blockchain is a canonical record of patent-pending offline (i.e., air-gapped) makers are expected to have the facility every bitcoin, every Bitcoin transaction Cold Storage System to store the Trust’s to participate directly on one or more (including the creation or ‘‘mining’’ of bitcoin, as further described herein. Bitcoin Exchanges (as defined below). new bitcoin) and every Bitcoin address associated with a quantity of bitcoin. Delaware Trust Company acts as the The investment objective of the Trust 20 The Bitcoin Network and Bitcoin trustee of the Trust (the ‘‘Trustee’’). is for the Shares to track the price of Network software programs can The Trust will only hold bitcoin, bitcoin, as measured by the clearing interpret the Blockchain to determine which is a digital commodity 21 that is price of a two-sided auction which the exact bitcoin balance, if any, of any not issued by any government, bank or occurs every day at 4:00 p.m. Eastern public Bitcoin address listed in the central organization. Bitcoin is a digital Time on the Gemini exchange (‘‘Gemini Blockchain as having taken part in a asset (‘‘Digital Asset’’) based on the Exchange’’) (the ‘‘Gemini Exchange transaction on the Bitcoin Network. The decentralized, open source protocol of Auction Price’’), each day the Exchange Bitcoin Network utilizes the Blockchain the peer-to-peer Bitcoin computer is open for trading (each a ‘‘Business to evidence the existence of bitcoin in network (the ‘‘Bitcoin Network’’ or Day’’), less the Trust’s liabilities (which 22 any public Bitcoin address. A Bitcoin ‘‘Bitcoin’’) that hosts the include accrued but unpaid fees and private key controls the transfer or expenses). The Gemini Exchange is a ‘‘spending’’ of bitcoin from its responsible for the safekeeping of the private keys Digital Asset exchange owned and associated public Bitcoin address. A used to access and transfer the Trust’s bitcoin. The operated by the Custodian and is an Custodian also facilitates the transfer of bitcoin in Bitcoin ‘‘wallet’’ is a collection of accordance with the Administrator’s instructions affiliate of the Sponsor. The Gemini private keys and their associated public pursuant to the terms of the Administration Exchange does not receive any Bitcoin addresses. Agreement. Pursuant to the terms of the Trust compensation from the Trust or the The Blockchain is comprised of a Agreement and the trust custody agreement (‘‘Trust Sponsor for providing the Gemini Custody Agreement’’), the Custodian will store all digital file, downloaded and stored, in of the Trust’s bitcoin on a segregated basis in its Exchange Auction Price. The Sponsor whole or in part, on all Bitcoin Network unique Bitcoin addresses with balances that can be believes that, for many investors, the users’ software programs. The file directly verified on the Blockchain. It will provide Shares will represent a cost-effective includes all blocks that have been the Trust’s public Bitcoin addresses to the and convenient means of gaining Administrator. Pursuant to the provisions of the solved by miners and is updated to Trust Custody Agreement, the Custodian will use investment exposure to bitcoin similar include new blocks as they are solved. the Cold Storage System to manage and safeguard to a direct investment in bitcoin. The See ‘‘Bitcoin Mining & Creation of New a system utilizing numerous Bitcoin addresses that Shares represent units of fractional Bitcoin.’’ As each newly solved block are kept offline either (i) in computers that are not undivided beneficial interest in and directly connected to or accessible from the internet refers back to and ‘‘connects’’ with the or (ii) through the storage of the public and private ownership of the Trust and are expected immediately prior solved block, the keys relating to such Bitcoin addresses only in to be traded under the ticker symbol addition of a new block adds to the ‘‘cold storage.’’ ‘‘COIN.’’ Blockchain in a manner similar to a new 20 The Trustee, a Delaware trust company, acts as link being added to a chain. Each new the trustee of the Trust for the purpose of creating Overview of the Bitcoin Industry and a Delaware statutory trust in accordance with the Market block records outstanding Bitcoin Delaware Statutory Trust Act (‘‘DSTA’’). The duties transactions, and outstanding of the Trustee will be limited to (i) accepting legal Bitcoin is a Digital Asset that is issued transactions are settled and validated process served on the Trust in the State of Delaware by, and transmitted through, the through such recording. The Blockchain and (ii) the execution of any certificates required to be filed with the Delaware Secretary of State which decentralized, open source protocol of represents a complete, transparent and the Delaware Trustee is required to execute under the peer-to-peer Bitcoin Network. The unbroken history of all transactions of the DSTA. To the extent that, at law or in equity, Bitcoin Network hosts the decentralized the Bitcoin Network. Each Bitcoin the Trustee has duties (including fiduciary duties) public transaction ledger, known as the transaction is broadcast to the Bitcoin and liabilities relating thereto to the Trust or the Sponsor, such duties and liabilities will be replaced Blockchain, on which all bitcoin is Network and recorded in the by the duties and liabilities of the Trustee expressly recorded. No single entity owns or Blockchain. set forth in the Trust Agreement. operates the Bitcoin Network, the The Bitcoin Network is decentralized 21 Bitcoin is a commodity as defined in Section infrastructure of which is collectively and does not rely on either 1a(9) of the Commodity Exchange Act. 7 U.S.C. governmental authorities or financial 1a(9). See In re Coinflip, Inc., No. 15–29 (CFTC maintained by a decentralized user base. Sept. 17, 2015), available at: http://www.cftc.gov/ Bitcoin can be used to pay for goods and institutions to create, transmit or ucm/groups/public/@lrenforcementactions/ services or can be converted to fiat documents/legalpleading/enfcoinfliprorder currencies, such as the U.S. Dollar, at 23 The Gemini Exchange is a United States-based 09172015.pdf (‘‘Coinflip’’). rates determined on bitcoin exchanges Bitcoin Exchange that began trading on October 8, 22 By common convention, Bitcoin with a capital 2015. It is currently operational in 35 states, ‘‘B’’ typically refers to the Bitcoin Network as a Washington, DC, Canada, Hong Kong, Singapore, whole, whereas bitcoin with a lowercase ‘‘b’’ refers including the Trust’s bitcoin. This naming and the U.K., and allows trading between bitcoin, to the Digital Asset of the Bitcoin Network, convention is used throughout this document. U.S. Dollars, and other Digital Assets.

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determine the value of bitcoin. Rather, notify the Bitcoin Network of the Neither the recipient nor the sender bitcoin is created and allocated by the transaction by broadcasting the reveal their public Bitcoin addresses’ Bitcoin Network protocol through a transaction data to its network peers. private key in a transaction, because the ‘‘mining’’ process subject to a strict, The Bitcoin Network provides private key authorizes access to, and well-known issuance schedule. The confirmation against double-spending transfer of, the funds in that Bitcoin value of bitcoin is determined by the by memorializing every transaction in address to other users. Therefore, if a supply of and demand for bitcoin in the the Blockchain, which is publicly user loses his private key, the user ‘‘Bitcoin Exchange Market’’ 24 (and in accessible and transparent. This permanently loses access to the bitcoin private end-user-to-end-user memorialization and verification against contained in the associated Bitcoin transactions), as well as the number of double-spending is accomplished address. Likewise, bitcoin is merchants that accept them. As Bitcoin through the Bitcoin Network mining irretrievably lost if the private key transactions can be broadcast to the process, which adds ‘‘blocks’’ of data, associated with them is deleted and no Bitcoin Network by any user’s Bitcoin including recent transaction backup has been made. When sending Network software and bitcoin can be information, to the Blockchain. See bitcoin, a user’s Bitcoin Network transferred without the involvement of ‘‘Cryptographic Security Used in the software program must ‘‘sign’’ the intermediaries or third parties, there are Bitcoin Network—Double-Spending and transaction with the associated private currently little or no transaction fees in the Bitcoin Network Confirmation key. The resulting digitally signed direct peer-to-peer transactions on the System,’’ below. transaction is sent by the user’s Bitcoin Bitcoin Network. Third party service Network software program to the Brief Description of Bitcoin Transfers providers such as Bitcoin Exchanges Bitcoin Network to allow transaction and third-party Bitcoin payment Prior to engaging in Bitcoin confirmation. The digital signature processing services may charge fees for transactions, a user generally must first serves as validation that the transaction processing transactions and for install on its computer or mobile device has been authorized by the holder of the converting, or facilitating the conversion a Bitcoin Network software program that Bitcoin addresses’ private key. This of, bitcoin to or from fiat currency. will allow the user to generate a private signature process is typically automated The Bitcoin Network was initially and public key pair associated with a by software that has access to the public contemplated in a white paper that also Bitcoin address (analogous to a Bitcoin and private keys. described bitcoin and the operating account). The Bitcoin Network software software to govern the Bitcoin Network. program and the Bitcoin address also Summary of a Bitcoin Transaction The white paper was purportedly enable the user to connect to the Bitcoin In a Bitcoin transaction between two authored by ; Network and engage in the transfer of parties, the following circumstances however, no individual with that name bitcoin with other users. The computer must be in place: (i) The party seeking has been reliably identified as Bitcoin’s of a user that downloads a version of the to send bitcoin must have a public creator, and the general consensus is Bitcoin Network software program will Bitcoin address and the Bitcoin Network that the name is a pseudonym for the become a ‘‘node’’ on the Bitcoin must recognize that public Bitcoin actual inventor or inventors. The first Network that assists in validating and address as having sufficient bitcoin for bitcoin was created in 2009 after relaying transactions from other users. the spending transaction; (ii) the Nakamoto released the Bitcoin Network See ‘‘Cryptographic Security Used in the receiving party must have a public source code (the software and protocol Bitcoin Network—Double-Spending and Bitcoin address; and (iii) the spending that created and launched the Bitcoin the Bitcoin Network Confirmation party must have internet access with Network). Since its introduction, the System,’’ below. Alternatively, a user which to send its spending transaction. Bitcoin Network has been under active may retain a third party to create a Next, the receiving party must development by a group of contributors Bitcoin address, or collection of Bitcoin provide the spending party with its currently headed by Wladimir J. van der addresses known as a digital wallet to public Bitcoin address, an identifying Laan who was appointed project be used for the same purpose. There is series of twenty-seven (27) to thirty-four maintainer in April 2014 by Gavin no limit on the number of Bitcoin (34) alphanumeric characters that Andresen (who was previously addresses a user can have, and each represents the routing number on the appointed maintainer by Satoshi such Bitcoin address consists of a Bitcoin Network and allow the Nakamoto in 2010). As an open source ‘‘public key’’ and a ‘‘private key,’’ which Blockchain to record the sending of project, Bitcoin is not represented by an are mathematically related. See bitcoin to that public Bitcoin address. official organization or authority. ‘‘Cryptographic Security Used in the The receiving party can provide this Bitcoin Network—Public and Private address to the spending party in Overview of the Bitcoin Network’s Keys,’’ below. alphanumeric format or an encoded Operations In a Bitcoin transaction, the bitcoin format such as a Quick Response Code In order to own, transfer or use recipient must provide its public (commonly known as a ‘‘QR Code’’), bitcoin, a person generally must have Bitcoin address, which serves as a which may be scanned by a smartphone internet access to connect to the Bitcoin routing number for the recipient on the or other device to quickly transmit the Network. Bitcoin transactions may be Blockchain, to the party initiating the information. made directly between end-users transfer. This activity is analogous to a After the provision of a recipient’s without the need for a third-party recipient providing a routing address in public Bitcoin address, the spending intermediary, although there are entities wire instructions to the payor so that party must enter the address into its that provide third-party intermediary cash may be wired to the recipient’s Bitcoin Network software program along services. To prevent the possibility of account. The recipient, however, does with the number of bitcoin to be sent. double-spending bitcoin, a user must not make public or provide to the The number of bitcoin to be sent will sender its related private key. The typically be agreed upon between the 24 For purposes of this filing, the term Bitcoin payor, or ‘‘spending’’ party, does reveal two parties based on a set number of Exchange Market means the global Bitcoin its public key in signing and verifying bitcoin or an agreed upon conversion of Exchange Market for the trading of bitcoin, which consists of transactions on various electronic its spending transaction to the the value of fiat currency to bitcoin. Bitcoin Exchanges. Blockchain. Most Bitcoin Network software

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programs also allow, and often suggest, through the data packet transmission ownership of bitcoin transferred. See the payment of a transaction fee (also and propagation discussed above. ‘‘Bitcoin Mining & Creation of New known as a miner’s fee). Transaction Typically, Bitcoin transactions will be Bitcoin,’’ below. Adding a block to the fees are not required to be included by recorded in the next chronological block Blockchain requires Bitcoin Network many Bitcoin Network software if the spending party has an internet miners to exert significant programs, but, when they are included, connection and at least one (1) minute computational effort. Requiring this they are paid by the spending party on has passed between the transaction’s ‘‘’’ prevents a malicious top of the specified quantity of bitcoin data packet transmission and the actor from either adding fraudulent being sent in the transaction. solution of the next block. If a blocks to generate bitcoin (i.e., Transaction fees, if any, are typically a transaction is not recorded in the next counterfeit bitcoin) or overwriting fractional number of bitcoin (e.g., 0.005 chronological block, it is usually existing valid blocks to reverse prior or 0.0005 bitcoin) and are automatically recorded in the next block thereafter. transactions. transferred by the Bitcoin Network to Upon the addition of a block included A Bitcoin transaction between two the Bitcoin Network miner that solves in the Blockchain, the Bitcoin Network parties is recorded in the Blockchain in and adds the block recording the software program of both the spending a block only if that block is accepted as spending transaction on the Blockchain. party and the receiving party will show valid by a majority of the nodes on the After the entry of the Bitcoin address, confirmation of the transaction on the Bitcoin Network. Validation of a block the number of bitcoin to be sent and the Blockchain and reflect an adjustment to is achieved by confirming the transaction fees, if any, to be paid, the the bitcoin balance in each party’s cryptographic hash value included in spending party will transmit the public Bitcoin address, completing the the block’s solution and by the block’s spending transaction. The transmission bitcoin transaction. Typically, Bitcoin addition to the longest confirmed of the spending transaction results in Network software programs will Blockchain on the Bitcoin Network. For the creation of a data packet by the automatically check for and display a transaction, inclusion in a block on spending party’s Bitcoin Network additional confirmations of six or more the Blockchain constitutes a software program, which data packet blocks in the Blockchain. See ‘‘confirmation’’ of a Bitcoin transaction. includes data showing (i) the ‘‘Cryptographic Security Used in the As each block contains a reference to destination public Bitcoin address, (ii) Bitcoin Network—Double-Spending and the immediately preceding block, the number of bitcoin being sent, (iii) the Bitcoin Network Confirmation additional blocks appended to and the transaction fees, if any, and (iv) the System.’’ incorporated into the Blockchain spending party’s digital signature, constitute additional confirmations of verifying the authenticity of the Cryptographic Security Used in the the transactions in such prior blocks, transaction. The data packet also Bitcoin Network and a transaction included in a block for includes references called ‘‘inputs’’ and Public and Private Keys the first time is confirmed once against ‘‘outputs,’’ which are used by the double-spending. The layered Blockchain to identify the source of the The Bitcoin Network uses confirmation process makes changing bitcoin being spent and record the flow sophisticated cryptography to maintain historical blocks (and reversing of bitcoin from one transaction to the the integrity of the Blockchain ledger. transactions) exponentially more next transaction in which the bitcoin is Transactions are digitally signed by difficult the further back one goes in the spent. The digital signature exposes the their senders. Before adding a spending party’s public Bitcoin address transaction to a block, miners will verify Blockchain. Bitcoin Exchanges and and public key to the Bitcoin Network, both that the sender has not already users can set their own threshold as to though, for the receiving party, only its spent the bitcoin being sent and that the how many confirmations they require public Bitcoin address is revealed. The digital signature information in the until funds from the transferor are spending party’s Bitcoin Network transaction is valid. Besides the considered valid. software will transmit the data packet requirement of containing only valid To undo past transactions in a block onto the decentralized Bitcoin Network, transactions (as described in the recorded on the Blockchain, a malicious resulting in the propagation of the preceding sentence), blocks are actor would have to exert tremendous information among the software validated by means of properties of their hashrate in resolving each block in the programs of Bitcoin users across the cryptographic hashes. By extension, Blockchain starting with and after the Bitcoin Network for eventual inclusion blocks in the Blockchain can be target block and broadcasting all such in the Blockchain. Typically, the data validated by verifying that each block blocks to the Bitcoin Network. The will spread to a vast majority of Bitcoin contains the cryptographic hash of the Bitcoin Network is generally Network miners within the course of prior block. The cryptographic programmed to consider the longest less than a minute. algorithms and cryptographic Blockchain containing solved blocks to As discussed in greater detail below parameters, including key sizes, used by be the most accurate Blockchain. In in ‘‘Bitcoin Mining & Creation of New the Bitcoin Network provide adequate order to undo multiple layers of Bitcoin,’’ Bitcoin Network miners record security for the foreseeable future. confirmation and alter the Blockchain, a transactions when they solve for and malicious actor must resolve all of the Double-Spending and the Bitcoin add blocks of information to the old blocks sought to be regenerated and Network Confirmation System Blockchain. When a miner solves for a be able to continuously add new blocks block, it creates that block, which To ensure the integrity of Bitcoin to the Blockchain at a speed that would includes data relating to (i) the solution transactions from the recipient’s side have to outpace that of all of the other to the block, (ii) a reference to the prior (i.e., to prevent double-spending by a miners on the Bitcoin Network, who block in the Blockchain to which the spending party), every Bitcoin would be continuously solving for and new block is being added, and (iii) transaction is broadcast to the Bitcoin adding new blocks to the Blockchain. transactions that have occurred but have Network and recorded in the Blockchain Given the size and speed of the Bitcoin not yet been added to the Blockchain. through the ‘‘mining’’ process, which Network, it is generally agreed that the The miner becomes aware of timestamps the transaction and cost of amassing such computational outstanding, unrecorded transactions memorializes the change in the power exceeds the profit to be obtained

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by double-spending or attempting to bitcoin enter into circulation to the transactions that are recorded in the fabricate prior blocks. public and is accomplished in the block). Therefore, ‘‘hashing’’ is akin to If a malicious actor is able to amass added block through the notation of the a mathematical lottery, and miners that ten (10) percent of the Bitcoin Network’s new bitcoin creation and their have devices with greater processing aggregate hashrate, there is estimated to allocation to the successful miner’s power (i.e., the ability to make more be a 0.1 percent chance that it would be public Bitcoin address. To begin hash calculations per second) are more able to overcome six (6) confirmations. mining, a user can download and run likely to be successful miners because Therefore, given the difficulty in Bitcoin Network mining software, they can generate more hashes or amassing such hashrate, six (6) which, like regular Bitcoin Network ‘‘entries’’ into that lottery. confirmations is an often-cited standard software programs, turns the user’s As more miners join the Bitcoin for the validity of transactions. The computer into a ‘‘node’’ on the Bitcoin Network and its aggregate hashrate Trust has adopted a policy whereby a Network that validates blocks. See increases, the Bitcoin Network transaction will be deemed confirmed ‘‘Overview of the Bitcoin Network’s automatically adjusts the complexity of upon this industry standard of six (6) Operations,’’ above. the block-solving equation in an effort to confirmations (the ‘‘Confirmation All Bitcoin transactions are recorded set distribution such that newly-created Protocol’’). As one (1) block is added to in blocks added to the Blockchain. Each blocks will be added to the Blockchain, the Blockchain approximately every six block contains (i) the details of some or on average, approximately every ten (10) (6) to twelve (12) minutes, a Bitcoin all of the most recent transactions that minutes. Hashrate is added to the transaction will be, on average, are not memorialized in prior blocks, (ii) Bitcoin Network at irregular rates that confirmed using the Confirmation a reference to the most recent prior have grown with increasing speed since Protocol beyond a reasonable doubt in block, and (iii) a record of the award of early 2013, though the rate of additional approximately one (1) hour. Merchants bitcoin to the miner who added the new mining power slowed steadily through selling high-value goods and services, as block. In order to add blocks to the 2014, until the computational speed of well as Bitcoin Exchanges and many Blockchain, a miner must map an input the network temporarily and marginally experienced users, are believed to data set (i.e., a reference to the declined during December 2014. generally use the six (6) confirmations immediately preceding block in the The rapid growth of the standard. This confirmation system, Blockchain, plus a block of the most computational power of the Bitcoin however, does not mean that merchants recent Bitcoin Network transactions and Network means that blocks are typically must always wait for multiple an arbitrary number called a ‘‘nonce’’) to solved faster than the Bitcoin protocol’s confirmations for transactions involving a desired output data set of target of, on average, approximately low-value goods and services. As predetermined length (‘‘hash value’’) every ten (10) minutes. Although the discussed below, the value of a using a cryptographic hash algorithm. difficulty of the mining process is successful double-spending attack To ‘‘solve’’ or ‘‘calculate’’ a block, a adjusted on a periodic basis, after 2,016 involving a low-value transaction may, miner must repeat this computation blocks have been added to the and perhaps likely will, be significantly with a different nonce until the miner Blockchain since the last adjustment, less than the cost involved in arranging generates a hash of a block’s header that the average solution time for a block has been approximately 8 minutes for the and executing such double-spending has a value less than or equal to the one hundred and eighty (180) days prior attacks. Furthermore, merchants current target set by the Bitcoin to and including October 1, 2016. engaging in low-value transactions may Network. Each unique block can only be then view the reward of quicker solved and added to the Blockchain by Incentives for Mining transaction settlements with limited or one (1) miner; therefore, all individual miners and mining pools on the Bitcoin Miners dedicate substantial resources no Blockchain confirmation as greater to mining. Given the increasing than the related risk of not waiting for Network are engaged in a competitive process and are incentivized to increase difficulty of the target established by the six (6) confirmations with respect to their computing power to improve their Bitcoin Network, current miners must low-value transactions at points of sale. likelihood of solving for new blocks. invest in expensive mining devices with Conversely, for high-value transactions The cryptographic hash function that adequate processing power to hash at a that are not time sensitive, additional a miner uses is one-way only and is, in competitive rate. The first mining settlement security can be provided by effect, irreversible: hash values are easy devices were standard home computers; waiting for more than six (6) to generate from input data (i.e., valid however, mining computers are confirmations. recent network transactions, Blockchain currently designed solely for mining Bitcoin Mining & Creation of New and nonce), but neither a miner nor purposes. Such devices include Bitcoin participant is able to determine the application specific integrated circuit original input data solely from the hash (‘‘ASIC’’) machines built by specialized Mining Process value. As a result, generating a new companies such as BitFury. Miners also The process by which bitcoin is valid block with a header value less incur substantial electricity costs in ‘‘mined’’ results in new blocks being than or equal to the target prescribed by order to continuously power and cool added to the Blockchain and new the Bitcoin Network is initially difficult their devices while solving for a new bitcoin being issued to the miners. for a miner, yet other nodes can easily block. Although variables such as the Bitcoin Network miners engage in a set confirm a proposed block by running rate and cost of electricity are estimated, of prescribed complex mathematical the hash function just once with the as of September 1, 2013, Blockchain calculations in order to add a block to proposed nonce and other input data. A Luxembourg S.A. estimated that the the Blockchain and thereby confirm miner’s proposed block is added to the average 24-hour electricity cost of all Bitcoin transactions included in that Blockchain once a majority of the nodes mining on the Bitcoin Network to be block’s data. Miners that are successful on the Bitcoin Network confirms the more than $1.5 million. In late 2013, in adding a block to the Blockchain are miner’s work, and the miner that solved Blockchain Luxembourg S.A. ceased automatically awarded a fixed number such block receives the reward of a publishing estimated electric of bitcoin for their effort. This reward fixed number of bitcoin (plus any consumption on the Bitcoin Network, in system is the method by which new transaction fees paid by spenders of part due to uncertainty in estimating

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electrical usage as newer, more energy because of the open-source nature of the Also according to Blockchain efficient mining hardware became Bitcoin Network, there may be no way Luxembourg S.A., on such date, the prevalent. As of October 2016, over the to require that all software instances nine (9) largest pools (AntPool, F2Pool, past year, two (2) years, and three (3) include minimum transaction fees for ViaBTC, BitFury, BW.COM, SlushPool, years, the aggregate hashrate of the spending transactions. Alternatively, a BitFury, BTC.com, and HaoBTC) Bitcoin Network has increased future Bitcoin Network software update accounted for approximately eighty- approximately 4-fold, 8-fold and 1,500- could simply build a small transaction eight (88) percent of the aggregate fold, respectively, due in part to the fee payment into all spending hashrate of the Bitcoin Network. In late development of more energy efficient transactions (e.g., by deducting a May and early June 2014, reports ASIC mining chips and, during the fractional number of bitcoin from all indicated that a single second half of 2013, the substantial transactions on the Bitcoin Network as approached and, during a twenty-four increase in the price of bitcoin. transaction fees). (24)- to forty-eight (48)-hour period in Additionally, it can be estimated that The Bitcoin Network protocol already early June, may have exceeded one-half the scale of total computing resources includes transaction fee rules and the of the aggregate hashrate of the Bitcoin devoted to mining on the Bitcoin mechanics for awarding transaction fees Network, as measured by the self- Network is commensurate with the total to the miners that solve for blocks in reported hashrate of the pool and by rewards, which was approximately $1.2 which the fees are recorded; however, measuring the percentage of blocks million U.S. dollars per day as of users currently may opt not to pay mined by the pool. As of October 1, October 1, 2016. transaction fees (depending on the 2016, that single mining pool has ceased The Bitcoin Network is designed in Bitcoin Network software they use) and to exist. As of October 1, 2016, Antpool such a way that the reward for adding miners may choose not to enforce the was determined to be the largest mining new blocks to the Blockchain decreases transaction fee rules since, at present, pool, having solved for sixteen (16) over time and the production (and the bitcoin rewards are far more percent of the blocks discovered during reward) of bitcoin will eventually cease. substantial than transaction fees. As of the prior four (4) days. Once such reward ceases, it is expected October 2016, transaction fees Mathematically Controlled Supply that miners will demand compensation accounted for an average of 3.55 percent in the form of transaction fees to ensure of miners’ total revenue based upon The method for creating new bitcoin that there is adequate incentive for them publicly available information, though is mathematically controlled in a to continue mining. The amount of the percentage of revenue represented manner so that the supply of bitcoin transaction fees will be based upon the by transaction fees is not static and grows at a limited rate pursuant to a pre- need to provide sufficient revenue to fluctuates based on the number of set schedule. The number of bitcoin incentivize miners, counterbalanced by transactions for which sending users awarded for solving a new block is the need to retain sufficient Bitcoin include transaction fees, the levels of automatically halved every two hundred Network users (and transactions) to those transaction fees and the number of and ten thousand (210,000) blocks. make mining profitable. transactions a miner includes in its Thus, the current fixed reward for Though not free from doubt, Bitcoin solved blocks. Typically, transactions solving a new block is twelve and a half industry participants have expressed a do not have difficulty being recorded if (12.5) bitcoin per block; the reward belief that transaction fees would be transaction fees are not included. decreased from twenty-five (25) bitcoin enforced through (i) mining operators per block in July 2016. It is estimated to collectively refusing to record Mining Pools halve again in about four years. This transactions that do not include a A miner’s daily expected reward is deliberately controlled rate of bitcoin payment of a transaction fee or (ii) the proportional to their contribution to the creation means that the number of updating of Bitcoin Network software to Bitcoin Network’s aggregate hashrate. bitcoin in existence will never exceed require a minimum transaction fee Given the limited number of blocks twenty-one (21) million and that bitcoin payment. Indeed, most miners already produced per day and the statistically cannot be devalued through excessive have a policy regarding transactions uncertain nature of finding blocks, a production unless the Bitcoin Network’s fees, albeit the minimum fees are small miner acting alone would source code (and the underlying currently low under such policies. experience very high variance in block protocol for bitcoin issuance) is altered. Under a regime whereby large miners rewards. Because of this fact most See ‘‘Modifications to the Bitcoin require fees to record transactions, a miners join mining pools wherein Protocol,’’ below. As of October 1, 2016, transaction where the spending party multiple miners act cohesively and approximately fifteen million, nine did not include a payment of share any rewards. hundred and seven thousand transaction fees would not be recorded According to Blockchain Luxembourg (15,907,000) bitcoin have been mined. It on the Blockchain until a miner who S.A., as of October 1, 2016, the largest is estimated that more than ninety (90) does not require transaction fees solves three (3) known mining pools were percent of the twenty-one (21) million for a new block (thereby recording all AntPool, F2Pool and BTCC Pool, which, bitcoin will have been produced by outstanding transaction records for when aggregated, represented 2022. which it has received data). If popular approximately forty-five (45) percent of The following chart from Blockchain Bitcoin Network software were to the aggregate hashrate of the Bitcoin Luxembourg S.A. indicates the number require a minimum transaction fee, Network (as calculated by determining of bitcoin that have been mined since users of such programs would be the percentage of blocks mined by each the Bitcoin Network began operation in required to include such fees; however, such pool over the prior four (4) days). January 2009 through October 2016.

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Modifications to the Bitcoin Protocol Network. Additionally, an issue may Chinese Yuan. Bitcoin Exchanges Bitcoin is an open source project (i.e., arise in which a modification is typically publish trade data including a product whose source code is freely overwhelmingly supported by users but last price, bid and ask information, and available to the public and that utilizes miners do not support it, or vice versa. trade volume, among other data. crowdsourcing to identify possible If a modification is accepted only by a Although each Bitcoin Exchange has its issues, problems and defects) and there percentage of users and miners, a own market price, it is expected that is no official developer or group of division in the Bitcoin Network will most Bitcoin Exchanges’ market prices developers that controls the Bitcoin occur such that one (1) network will run should be relatively consistent with the Network. The Bitcoin Network’s the pre-modification source code and Bitcoin Exchange Market average since development is furthered by a collection the other network will run the modified market participants can choose the of active contributors who can access source code; such a division is known Bitcoin Exchange on which to buy or and propose alterations to the Bitcoin as a ‘‘fork’’ in the Bitcoin Network. It sell bitcoin (i.e., exchange shopping). Network source code hosted on GitHub, should be noted that, although their Arbitrage between the prices on various an online service and forum used to power to amend the source code is Bitcoin Exchanges is possible, but share and develop open source code. effectively subject to the approval of varying fees and fiat currency deposit/ Other programmers have access to and users and miners, some contributors withdrawal policies and other concerns can propose changes to the Bitcoin have substantial influence over the appear to have, at times, prevented an Network source code on GitHub, but development of the Bitcoin Network active arbitrage mechanism among users some contributors have an elevated and the direction of the Bitcoin on some Bitcoin Exchanges. For level of influence over the process. As community. example, delayed fiat currency a result, these contributors are Bitcoin Value withdrawals imposed by Bitcoin responsible for quasi-official releases of Exchanges and the perceived risks Bitcoin Exchange Valuation updates and other changes to the associated with such delayed Bitcoin Network’s source code. Users The value of bitcoin is determined by withdrawals have, at times, resulted in and miners can accept any changes the value that various market trading on such Bitcoin Exchange to be made to the Bitcoin Network (including participants place on bitcoin through at a premium for certain periods. those proposed by contributors) by their transactions. The most common Bitcoin Exchange Price Convergence downloading the proposed modification means of determining the value of a of the source code. bitcoin is by surveying one or more Price differentials across Bitcoin A modification of the source code is Bitcoin Exchanges where bitcoin is Exchanges remain; however, such only effective with respect to the Bitcoin traded publicly and transparently (i.e., differentials have been decreasing. For users and miners that download it. the Bitcoin Exchange Market) or an example, the daily opening price data Consequently, as a practical matter, a index tracking prices on the Bitcoin for the one hundred and eighty (180) modification to the source code (e.g., a Exchange Market (e.g., the CoinDesk days prior to October 1, 2016 shows that proposal to increase the twenty-one (21) Bitcoin Price Index). the top three U.S.-based Bitcoin million total limit on bitcoin or to Exchanges (viz. GDAX, Gemini, and Bitcoin Exchange Public Market Data reduce the average confirmation time itBit) had an absolute price difference target from ten (10) minutes per block) On each online Bitcoin Exchange, less than 1% percent according to only becomes part of the Bitcoin bitcoin is traded with publicly disclosed publicly available data. Since 2015, Network if accepted by participants valuations for each executed trade, prices on U.S.-based Bitcoin Exchanges collectively having an effective majority measured by one or more fiat currencies have generally been converging. In of the aggregate hashrate of the Bitcoin such as the U.S. Dollar, the Euro or the January of 2015, the average range in

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prices across all Bitcoin Exchanges was particular Bitcoin Exchange would trust, corporate trust, transfer agency, approximately 3.8%; as of October 2016, require overcoming the liquidity supply securities clearance, investment that figure has dropped to less than of such arbitrageurs who are actively management, and custodial services. A 1.0%. This convergence serves to eliminating any cross-market pricing trust company, including a limited illustrate the fungibility of bitcoin differences. purpose trust company like Gemini across Bitcoin Exchanges and the ease Trust Company, LLC, can serve as the The Gemini Exchange with which market participants transfer custodian of customer funds itself. their assets amongst them. The Gemini Exchange, an affiliate of Under New York Banking Law, the the Sponsor, is a Digital Asset exchange same general procedures, requirements Bitcoin Exchange Market Manipulation that has a U.S. dollar-denominated and criteria for the formation of a full- As the Bitcoin Exchange Market has bitcoin order book. As a facility of a service bank apply also to the formation evolved and matured, licensed entrants New York State-chartered limited of a limited purpose trust company with have emerged, including two (2) New liability trust company, the Gemini two (2) exceptions: (i) No requirement to York limited purpose trust companies, Exchange is one of only two (2) Bitcoin carry FDIC insurance and (ii) a level of markedly changing the once Exchanges in the world that have such capitalization deemed satisfactory to the concentrated and non-regulated a high level of regulatory oversight. The Superintendent of Financial Services. landscape of the Bitcoin Exchange Bitcoin Exchange Market has Once submitted in acceptable form, a Market. For example, in the first half of experienced several significant limited purpose trust company 2013, Mt.Gox accounted for nearly incidents at unregulated Bitcoin application receives the same level of three-quarters of all Bitcoin Exchange Exchanges and it is widely-believed that scrutiny as other bank and trust Market trading.25 Any disruption to much of the self-reported trade volume company proposals and ultimately Mt.Gox trading, such as a distributed numbers of unregulated Bitcoin requires the approval of the denial of service (‘‘DDOS’’) attack had a Exchanges are inaccurate (either Superintendent of Financial Services. In dramatic impact on the bitcoin price intentionally or unintentionally). The addition, trust companies are subject to and subsequently the Bitcoin Exchange Gemini Exchange was established in an many of the same requirements that Market as a whole.26 Since then, the effort to improve the Bitcoin ecosystem apply to a bank operating under a New number of constituents in the Bitcoin by having a regulated entity where York State banking charter, including: Exchange Market has considerably participants could engage in trading (i) Capital requirements, (ii) increased and no single Bitcoin bitcoin. implementation of an anti-money Exchange represents a systemically In establishing the Gemini Exchange, laundering program,28 (iii) critical part or single point of failure of Gemini Trust Company, LLC worked implementation of a cyber security the Bitcoin ecosystem. In addition, the closely with the NYSDFS to obtain a program, and (iv) consumer protection advent of market participants who are limited purpose trust company license. disclosures.29 Furthermore, as a limited chiefly arbitrageurs results in Bitcoin The term ‘‘limited purpose trust purpose trust company with fiduciary Exchange prices generally converging company’’ refers to entities that are powers under the Banking Law, all after dislodgement. Arbitrageurs must chartered under the bank and trust activities of a trust company, including have funds distributed across multiple company provisions of the New York all exchange functions, are subject to Bitcoin Exchanges in order to take Banking Law. Under New York Banking examination and supervision by the advantage of temporary price Law, a ‘‘trust company’’ has general NYSDFS. Gemini Trust Company, LLC dislocations, thereby discouraging the powers available to banks and trust complies with the capital requirements strong concentration of funds on any companies, as well as powers generally under New York State banking law, has particular Bitcoin Exchange. As a result, associated with trustees and other implemented the required anti-money the potential for manipulation on a fiduciaries. laundering program and cybersecurity Apart from general fiduciary powers, program and makes the required 25 For most of 2013, Mt. Gox (a Japanese exchange the following activities are among those consumer protection disclosures. As a operated by Tibanne Co. Ltd.) was the largest online specifically identified in the statute as Bitcoin Exchange in the world. Supporting trading facility of a regulated entity, the Gemini of bitcoin using sixteen (16) different fiat activities that New York Trust Exchange is obliged to put the interests currencies, Mt. Gox accounted for nearly three- Companies may conduct with respect to of its customers before its own, to quarters of all Bitcoin Exchange Market trading their fiduciary accounts, including (i) provide accurate public market data and during the first half of 2013. On February 25, 2014, the power to accept deposits exclusively Mt. Gox suspended trading on its platform and, three (3) days later, filed for bankruptcy protection in a fiduciary capacity, to receive and 28 In particular, a prospective trust company must in Japanese courts, stating that it had lost disburse money, to transfer, register and establish policies and procedures designed to approximately eight hundred and fifty thousand countersign evidences of indebtedness ensure and monitor compliance with the Bank (850,000) bitcoin, including approximately seven Secrecy Act (‘‘BSA’’) as amended by the USA or other securities, and to act as attorney PATRIOT Act and the anti-money laundering hundred fifty thousand (750,000) bitcoin belonging 27 to its customers. Mt. Gox subsequently recovered in fact or agent; and (ii) the power to programs of Part 115 of the General Regulations of access to approximately two hundred thousand accept appointment as receiver, trustee, the Banking Board. A compliance program must (200,000) of the lost bitcoin. As no full, reliable or committee of the property of an estate include, at a minimum, a system of internal accounting has been publicly provided, it is of any person in insolvency or controls to assure ongoing compliance, independent difficult to assess whether Mt. Gox’s collapse was testing for compliance to be conducted by bank due to cyber-attacks (including denial of service bankruptcy proceedings. personnel or by an outside party, the designation and hacking incidents reported in 2011 and 2013), A ‘‘limited purpose’’ trust company of an individual or individuals responsible for mismanagement or fraud, although many market must conduct its business and coordinating and monitoring day-to-day participants believe Mt. Gox’s collapse was due to operations subject to the limitations or compliance, and training for appropriate personnel. the latter. Following the cessation of trading activity 29 Limited purpose trust companies operating on its platform, Mt. Gox has been in bankruptcy restrictions as the NYSDFS may virtual currency exchanges are required to provide proceedings in Japan and the United States and is prescribe in its sole discretion. In disclosures to current and prospective customers in the process of liquidation. practice, most limited purpose trust (in a form approved by NYSDFS) regarding the risks 26 Bitcoin Exchanges may also be vulnerable to companies typically engage in activities of its services and products and are also required security breaches. For example, in August 2016, a to disclose to current and prospective customers the security breach at , a large, Hong Kong- such as employee benefit trust, personal terms and conditions for using the trust company’s based Bitcoin Exchange, resulted in the loss of one products and services prior to any customer using hundred twenty thousand (120,000) bitcoin. 27 N.Y. Banking Law § 100 (McKinney). the product or service.

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pricing information and to monitor for benefits the Sponsor’s affiliates through • The Gemini Exchange had the and prevent market manipulation. increased volume on the Gemini second tightest bid/ask spread as a As part of its supervision under the Exchange and which may negatively percentage of price. NYSDFS and New York Banking Law, impact the value of the Trust’s • The Gemini Exchange had the Gemini Trust Company, LLC must (i) remaining bitcoin; tightest spread ten (10) bitcoin deep and undergo semiannual bank exams, (ii) • The Sponsor, its affiliates and their the second tightest spread one hundred submit quarterly financial updates to (100) bitcoin deep. officers and employees may own and • NYSDFS, (iii) submit independent trade bitcoin and are not prohibited The Gemini Exchange had the third-party year-end audited financial from engaging in other businesses or lowest volatility (i.e., smallest standard 30 deviation of daily prices). statements to NYSDFS, (iv) submit activities, including those that might be In addition, since opening in October semiannual Federal Financial in direct competition with the Trust; 2015 and as of October 1, 2016, pricing Institutions Examination Council and 31 on the Gemini Exchange differed from (‘‘FFIEC’’) Call Reports to the • The Sponsor decides whether to NYSDFS, and (v) undergo an annual the median price of all U.S.-based retain separate counsel, accountants or Bitcoin Exchanges on Business Days by third-party review of its overall security others to perform services for the Trust. program as implemented by its Chief 0.23% on average and 0.48% at most; Security Officer (‘‘CSO’’) that may take Although the Trust has taken steps to that difference dropped to 0.15% on 32 the form of a Service Organization mitigate these conflicts of interest, average in the third quarter of 2016. Since launching on September 21, Controls (‘‘SOC’’) Level 2 audit. including having the Administrator 2016 and through October 14, 2016, on The Gemini Exchange is not the only calculate the Trust’s NAV and Business Days, the Gemini Exchange venue on which Authorized Participants determine the amount of the Sponsor’s Auction Price has deviated from the can purchase bitcoin for delivery to the Fee (based on the publicly-available Gemini Exchange midpoint price (the Trust, but it may provide a convenient Gemini Exchange Auction Price, which midrange of the highest bid and lowest and stable venue given its regulatory will be provided to the Administrator by offer prices) by 0.17% on average and oversight and superior liquidity the Sponsor each business day), it may 0.71% at most, and it has deviated from characteristics. While Authorized not be possible to entirely eliminate the median price of all U.S.-based Participants are not obliged to use the these conflicts of interest. Bitcoin Exchanges by 0.12% on average Gemini Exchange to trade their bitcoin, Gemini Exchange Auction Price and 0.52% at most. On business days it may prove to be an efficient way to The Trust values its bitcoin using the between September 21 and October 14, do so. 2016, the volume has averaged more Conflicts of interest may arise among Gemini Exchange Auction Price on each Business Day. At 4:00 p.m. Eastern Time than 1,900 bitcoin (worth $1.2 million the Sponsor and its affiliates, including notional) representing more than 16% of the Custodian and the Gemini every day, the Gemini Exchange conducts a two-sided auction which is all U.S.-based Bitcoin Exchange volume Exchange, on the one hand, and the during that period. Additionally, the Trust and its Shareholders, on the other open to all exchange customers. Similar to the closing auction on the Exchange Gemini Exchange’s auction market hand. As a result of these conflicts, the bolstered its share of the U.S.-based Sponsor may favor its own interests and and other U.S. equities exchanges, the auction process incorporates both Bitcoin Exchange market to almost $1.7 the interests of its affiliates over the million of notional daily volume for the Trust and its Shareholders. These auction-only and continuous trading book orders to find a single price at six-month period ending October 1, potential conflicts include, among 2016, representing almost 32% of such others, the following: which the most interest is eligible to • trade (sometimes called ‘‘Walrasian market, since it was first instituted on The Sponsor has no fiduciary duties September 21, 2016. In addition, to, and is allowed to take into account equilibrium’’). Because indicative auction pricing is published publicly transactions on the Gemini Exchange the interests of parties other than, the appear to be substantially larger than Trust and its Shareholders in resolving throughout the ten (10) minutes prior to the auction, this mechanism allows typical daily transaction sizes on other conflicts of interest; Bitcoin Exchanges. These facts, taken • The Trust’s bitcoin is valued, and participants to engage in thorough price discovery while concentrating liquidity together, suggest that the Gemini the Trust’s NAV is calculated, using the Exchange Auction Price is Gemini Exchange Auction Price, and the and trading volume at a single moment each day. The Gemini Exchange representative and indicative of the Gemini Exchange Auction Price as larger Bitcoin marketplace, and that it provided by the Sponsor will be used by Auction Price is the clearing price of this auction. The Gemini Exchange has can support the liquidity and volume the Administrator to calculate the necessary to maintain an efficient amount of the Sponsor’s Fee due to the been conducting these auctions since September 21, 2016. arbitrage mechanism. Sponsor; As discussed above, the Gemini • The Sponsor’s relationship with the The Sponsor believes that the Gemini Exchange is uniquely positioned Gemini Exchange creates an incentive Exchange Auction Price is because of its regulatory status and for the Sponsor to sell the bitcoin it representative of the accurate price of licensing as a venue on which collects as its Sponsor’s fee for U.S. bitcoin because of the positive price traditional financial institutions may be dollars on the Gemini Exchange, which discovery attributes of the Gemini comfortable transacting in bitcoin. Exchange marketplace, and because the These institutions provide a vital bridge 30 Gemini Trust Company, LLC, successfully two-sided auction process was to the equities markets and other capital completed an independent third-party opening day specifically designed to maximize price Balance Sheet audit for October 2, 2015 as well as markets, serving to enrich price an independent third-party year-end Financial discovery and liquidity. According to discovery, liquidity, and transparency. Statements audit for December 31, 2015. No publicly available market data for U.S- The Trust has entered into preliminary material issues, weaknesses or concerns were based Bitcoin Exchanges as of October conversations with a number of raised. 1, 2016 for the prior six months: potential Authorized Participants as 31 Gemini Trust Company, LLC, successfully • completed and filed its first FFIEC Call Report with The Gemini Exchange was the third the NYSDFS on February 1, 2016. biggest by volume. 32 Id.

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well as market makers, each of which is parties on a principal-to-principal basis. subsequently recorded on the an experienced participant in the ETP 33 All risks and issues of credit are Blockchain, or of a money transfer going marketplace and is actively engaged in between the parties directly involved in from one bank account to another. For trading ETPs. A number of these the transaction. Liquidity can change a pooled-account Bitcoin Exchange, potential Authorized Participants, from time to time during the course of Bitcoin transactions and money currently trade bitcoin and are already a 24-hour trading day. The Bitcoin transfers typically only occur during the registered participants that trade on the Network rules that require transaction withdrawal or deposit of bitcoin or fiat Gemini Exchange. Authorized fees are generally not enforced; therefore currency by an exchange customer, or if Participants will not be required to use transaction costs, if any, are negotiable the Bitcoin Exchange needs to shift the Gemini Exchange to trade their between the parties and may vary bitcoin or fiat currency between its bitcoin, and the Gemini Exchange is not widely, although, where transaction fees pooled accounts for internal purposes. the only venue on which Authorized are included, they are paid by the Nevertheless, Bitcoin Exchanges Participants can purchase bitcoin for spending party in a Bitcoin transaction. typically publish trade data including delivery to the Trust. However, the These transactions occur remotely last price, bid and ask information, and Gemini Exchange may provide a through the Internet or in-person trade volume, among other data, on convenient and stable venue in which to through forums such as Satoshi Square their respective Web sites and through purchase bitcoin, as well as an efficient (an open-air bitcoin trading market held application programming interfaces way to trade bitcoin, given its regulatory in New York City) and bulletin boards (‘‘APIs’’). oversight and superior liquidity such as LocalBitcoins. Marketplaces like As noted above, Gemini Exchange, an characteristics. See ‘‘Bitcoin Value—The LocalBitcoins and ICBIT are intended to affiliate of the Sponsor and the source Gemini Exchange’’ above. bring together counterparties trading in of the Gemini Exchange Auction Price bitcoin but do not provide any clearing used by the Trust to calculate its NAV, Bitcoin Market or intermediary function and may or operates the Web site www.gemini.com. Global Bitcoin Market may not report transaction data such as Gemini Exchange is owned and Global trade in bitcoin consists of price and volume. operated by Gemini Trust Company, LLC, the Trust’s Custodian. As a facility individual end-user-to-end-user Bitcoin Exchange ‘‘Lit’’ Market transactions, together with facilitated of a New York State-chartered limited exchange-based bitcoin trading on ‘‘lit’’ U.S.-based Bitcoin Exchanges traded liability trust company, Gemini markets as well as ‘‘dark pools’’. A approximately $20 million of notional Exchange operates under the direct limited market currently exists for value daily throughout the six months supervision and regulatory authority of bitcoin-based derivatives. The Trust ending October 1, 2016. Although it has the NYSDFS. The Gemini Trust represents the first Digital Asset ETP. been operating for only one year, the Company is a fiduciary and must meet Securitized instruments have been Gemini Exchange has traded the capitalization, compliance, anti- created for other marketplaces, but have approximately $1.2 million of notional money laundering, consumer protection encountered limited success due to their daily volume over the same period, and cyber security requirements as set lack of transparency and thorough representing nearly 6 percent of the forth by the NYSDFS. Gemini regulatory oversight. Three notable market. Moreover, on business days Exchange’s principal business is to examples are the Grayscale Investment between September 21 and October 14, provide an electronic trading platform Trust, which trades under the ticker 2016, the volume has averaged more and associated online presence to allow GBTC on OTC Markets (formerly the than 1,900 bitcoin (worth $1.2 million customers to exchange fiat currency ‘‘Pink Sheets’’) and does not qualify as notional), representing more than 16% (e.g., U.S. Dollars) for Digital Assets an exchange-listed product, Bitcoin of all U.S.-based daily Bitcoin Exchange (e.g., bitcoin or ether) and vice versa. Tracker One, which trades under the volume during that period. Additionally, the Gemini Exchange’s Bitcoin Exchange Market ‘‘Dark Pools’’ ticker COINXBT on the Stockholm auction bolstered its share of the U.S.- and OTC Trading Stock Exchange, and the euro- based Bitcoin Exchange market to In addition to transparent or ‘‘lit’’ denominated BitcoinETI Exchange almost $1.7 million of notional daily online Bitcoin Exchanges with a Traded Instrument, which has been volume for the six-month period ending traditional central limit order book approved for admission to the Gibraltar October 1, 2016, representing almost structure, some trading in bitcoin takes Stock Exchange and will be co-listed on 32% of such market, since it was first place on an on-demand or over-the- Deutsche Boerse. None of these instituted on September 21, 2016. These counter (‘‘OTC’’) basis. Similar to instruments are held to the same marketplaces provide significant data mature securities, there are also private regulatory scrutiny and oversight as a with respect to prevailing valuations of request for quote (RFQ) venues and security listed under the Securities Act. bitcoin. Most Bitcoin Exchanges operate ‘‘dark pools,’’ which are bitcoin trading Because of the high standards pursued through pooled account systems, platforms that do not publicly report in the creation and listing of the Trust, whereby the users of the Bitcoin limit order book data. Market it will finally provide investors with a Exchange send bitcoin and/or fiat participants have the ability to execute reliable and transparent vehicle for currency to an account of the Bitcoin large block trades in a dark pool without access to bitcoin as an asset class. Exchange, which records user sub- revealing those trades and the related End-User-to-End-User account balances in a ledger entry price data to the public Bitcoin Exchange Market; however, any The Bitcoin end-user-to-end-user system. Trades on pooled account withdrawal from or deposit to a dark ecosystem operates on a continuous, 24- exchanges are typically conducted ‘‘off- pool platform must ultimately be hour per day basis. This is Blockchain,’’ meaning that they are recorded on the Blockchain, as must accomplished through decentralized settled by reallocating bitcoin and OTC transactions. Genesis Trading also peer-to-peer transactions between money to and from users on the balanced ledger of the Bitcoin Exchange. operates a form of dark pool through a 33 For purposes of this filing, the term ETP means Therefore, a trade on a pooled account trading desk that buys and sells blocks any product that may be listed on the Exchange exchange will not result in a Bitcoin of bitcoin without publicly reporting pursuant to Rule 14.11. transaction being transmitted and trade data. In June 2015, , a

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Bitcoin Exchange, launched a dark pool In Coinflip,34 the CFTC determined that January 2014, U.S. national online for bitcoin trades separate from its bitcoin and other ‘‘virtual currencies’’ retailers Overstock.com and TigerDirect public central limit order book. Informal (aka Digital Assets) are properly defined began accepting Bitcoin payments. Over dark pools are currently believed to as commodities under the CEA and the course of 2014, computer hardware exist, particularly among wholesale CFTC regulations, and applied CEA and software company Microsoft began buyers of bitcoin and Bitcoin Network provisions and CFTC regulations that accepting bitcoin as online payment for mining groups that obtain bitcoin apply to transactions in commodity certain digital content, online retailer through mining. Such informal dark options and swaps to the conduct of the NewEgg began accepting bitcoin, and pools function as a result of the peer-to- bitcoin derivatives trading platform. The computer hardware company Dell began peer nature of the Bitcoin Network, CFTC affirmed its approach to the accepting bitcoin. Additionally, Apple, which allows direct transactions regulation of bitcoin and bitcoin-related Inc. approved the inclusion of certain between any seller and buyer. As the enterprises on June 2, 2016, when the approved bitcoin wallet applications on Bitcoin Exchange Market and bitcoin CFTC settled charges against Bitfinex, a the Apple App Store. There are dark pools have a limited history and no Bitcoin Exchange based in Hong Kong. thousands of additional online publicly available limit order book data, In its Order, the CFTC found that merchants that accept bitcoin, and the it is difficult to estimate the impact of Bitfinex engaged in ‘‘illegal, off- variety of goods and services for which dark pools on the Bitcoin Exchange exchange commodity transactions and bitcoin can be exchanged is increasing. Market. failed to register as a futures Currently, local, regional and national commission merchant’’ when it businesses, including Time Inc., Global Bitcoin Derivatives Markets facilitated borrowing transactions Wikimedia, WordPress, Expedia and Nascent derivatives markets for among its users to permit the trading of Foodler, accept bitcoin. Bitcoin service bitcoin now exist. For example, certain bitcoin on a ‘‘leveraged, margined or providers such as BitPay and types of options, futures contracts for financed basis’’ without first registering provide means to spend bitcoin for differences and other derivative with the CFTC.35 While the Commission goods and services at additional instruments are available in certain has not opined on the legal retailers. There are also many real-world jurisdictions; however, many of these characterization of bitcoin as a security, locations that accept bitcoin throughout are not available in the United States it has taken various actions against the world. and generally are not regulated to the persons or entities misusing bitcoin in As of October 2016, it was estimated degree that U.S. investors expect connection with fraudulent schemes that as many as one hundred thousand derivative instruments to be regulated. (i.e., Ponzi schemes), inaccurate and (100,000) merchants or businesses The U.S. Commodity Futures Trading inadequate publicly disseminated accept, or have the technological Commission (‘‘CFTC’’) has approved information, and the offering of infrastructure to choose to accept (e.g., 36 TeraExchange, LLC as a swap execution unregistered securities. Shopify merchants), bitcoin as payment. facility (‘‘SEF’’), on which bitcoin swap Goods and Services In September 2014, payments giant contracts may be entered into. On PayPal announced a partnership with Bitcoin can also be used to purchase October 9, 2014, TeraExchange merchant processors including BitPay goods and services, either online or at announced that it had hosted the first and Coinbase and to expand their physical locations, although reliable executed bitcoin swap traded on a Bitcoin-related services to PayPal’s data is not readily available about the CFTC-regulated platform. Additionally, merchant customers, thereby retail and commercial market in September 2015, the CFTC issued an significantly expanding the reach of penetration of the Bitcoin Network. In order temporarily registering LedgerX bitcoin-accepting merchants. To date, LLC as a SEF. LedgerX also previously 34 See supra note 13 [sic]. the rate of consumer adoption and use applied for registration as a derivatives 35 See In re BFXNA Inc., No. 16–19 (CFTC June of bitcoin in paying merchants has clearing organization (‘‘DCO’’) although 2, 2016), available at: http://www.cftc.gov/idc/ trailed the broad expansion of retail and its application is still in the process of groups/public/@lrenforcementactions/documents/ commercial acceptance of bitcoin. CFTC approval. Other parties have legalpleading/enfbfxnaorder060216.pdf. Nevertheless, there will likely be a 36 See, e.g., SEC v. Homero Joshua Garza, GAW acknowledged submitting applications Miners, LLC and ZenMiner, LLC, Complaint and strong correlation between continued for registration to the CFTC, though no Demand for Jury Trial, Case 3:15–cv–01760 (D. expansion of the Bitcoin Network and other bitcoin-focused derivatives Conn. Dec. 1, 2015) (The Commission brought its retail and commercial market platform has been approved for charges in connection with a bitcoin-related Ponzi penetration. registration by the CFTC. Various scheme); In re Erik T. Voorhees, Securities Act Release No. 9592 (June 3, 2014), available at: Market Participants platforms and Bitcoin Exchanges also https://www.sec.gov/litigation/admin/2014/33- offer trading on margin. Currently, the 9592.pdf (The Commission brought an Miners open interest in these bitcoin derivative administrative action in connection with the offering of unregistered securities of two bitcoin- Miners range from Bitcoin enthusiasts instruments is quite limited in related entities.); In re BTC Trading, Corp. and to professional mining operations that comparison to the volume of actual Ethan Burnside, Securities Act Release No. 9685 design and build dedicated machines bitcoin trades. CFTC commissioners (Dec. 8, 2014), available at: http://www.sec.gov/ and data centers, but the vast majority have previously expressed publicly that litigation/admin/2014/33-9685.pdf (The Commission brought an administrative action in of mining is now undertaken by derivatives based on Digital Assets such connection with the operation and offering of participants in mining pools. See as bitcoin are subject to regulation by securities of two online exchanges, neither of which ‘‘Bitcoin Mining & Creation of New the CFTC, including oversight to were registered with the Commission, that accepted Bitcoin’’ above. prevent market manipulation of the payment in bitcoin and primarily listed virtual currency-related companies.); In re Sand Hill Investment and Speculative Sector price of bitcoin. As previously noted, in Exchange, et al., Securities Act Release No. 9809 the September 2015 Coinflip case, the (June 17, 2015), available at: https://www.sec.gov/ This sector includes the investment CFTC instituted and settled litigation/admin/2015/33-9809.pdf (The and trading activities of both private administrative proceedings that Commission took legal action against an online exchange that accepted payment in bitcoin in and professional investors and involved a bitcoin derivatives trading connection with disseminating fraudulent speculators. These participants range platform and its chief executive officer. information, among other matters.). from exchange-traded products, such as

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ARK Web x.0 ETF, or hedge funds such typically reduces the transaction cost for designed for investors seeking a cost- as the Pantera Bitcoin Fund Ltd. to day- merchants, relative to the costs paid for effective and convenient means of traders who invest in bitcoin by trading credit card transaction processing. gaining investment exposure to bitcoin on Bitcoin Exchanges. See ‘‘Uses of Consumers can now purchase goods or similar to a direct investment in bitcoin. Bitcoin—Bitcoin Exchange Market’’ services through retail companies such A substantial direct investment in below. as Overstock.com, DISH, Dell, Expedia, bitcoin may require expensive and Historically, larger financial services Microsoft, and Time, Inc. sometimes complicated arrangements in institutions are publicly reported to Service Sector connection with the acquisition, have limited involvement in investment security, and safekeeping of the bitcoin and trading in bitcoin. In December This sector includes companies that and may involve the payment of 2013, Wedbush Securities and Bank of provide a variety of services including substantial fees to acquire such bitcoin America Merrill Lynch released the buying, selling, payment processing from third-party facilitators through preliminary research reports on Bitcoin and storing of bitcoin. Coinbase and cash payments of U.S. Dollars. Although as both a payment tool and investment are each multi-service financial the Shares will not be the exact vehicle. Additionally in December, the institutions that provide digital wallets equivalent of a direct investment in Federal Reserve Bank of Chicago that store bitcoin for users and also bitcoin, they provide investors with an released a primer on Bitcoin prepared serve as a retail gateway whereby users alternative that allows them to gain by a senior economist. In early 2014, can purchase bitcoin for fiat currency. investment exposure to bitcoin. In Fitch Ratings, Goldman Sachs, Coinbase, BitPay, BitPagos, and GoCoin addition, the Trust will provide its JPMorgan Chase, are examples of Bitcoin payment investors with other advantages PricewaterhouseCoopers, UBS processors that allow merchants to including easy accessibility, relative Securities and Wedbush Securities, accept bitcoin as payment. As the cost efficiencies and minimal credit risk among others, released additional Bitcoin Network continues to grow in as the Trust will wholly-own all of its research reports analyzing the Bitcoin acceptance, it is anticipated that service bitcoin assets, as discussed below. The Network on the basis of bitcoin value, providers will expand the currently Shares offer an investment that is: technological innovation or payment available range of services and that • Easily Accessible and Relatively system mechanics. In December 2014, additional parties will enter the service Cost Efficient. Investors in the Shares the Federal Reserve Board’s Divisions of sector for the Bitcoin Network. can also directly access bitcoin through Research & Statistics and Monetary Competition the Bitcoin Exchange Market. The Affairs released an analysis of the Sponsor believes that investors will be Bitcoin Network’s transaction system Bitcoin is not the only Digital Asset able to more effectively implement and the Bitcoin Exchange Market’s founded on math-based algorithms and strategic and tactical asset allocation economics. Additionally, institutions cryptographic security, although it is strategies that use bitcoin by using the including Fortress Investment Group considered the most prominent. Shares instead of directly purchasing and Pantera Capital made, or proposed Approximately seven hundred (700) and holding bitcoin, and for many to make, direct or indirect investments other Digital Assets or ‘‘altcoins’’ have investors, transaction costs related to in bitcoin or the Bitcoin ecosystem. In been developed since the Bitcoin the Shares will be lower than those addition, in October 2015, the Network’s inception, including , associated with the direct purchase, Congressional Research Service, at the Ether and Ripple. The Bitcoin Network, storage and safekeeping of bitcoin. request of one (1) or more Members, however, possesses the ‘‘first-to-market’’ • Exchange-Traded and Transparent. released a report detailing the advantage and thus far has the largest The Shares will be listed on BZX, background and regulatory landscape of market capitalization and is secured by providing investors with an efficient Bitcoin. a mining network with significantly means to implement various investment more aggregate hashrate than the Retail Sector strategies. Upon effectiveness of the networks of any other Digital Assets. registration statement of which this The retail sector includes users prospectus is a part, the Shares will be transacting in direct peer-to-peer Bitcoin Description of the Trust and the Shares eligible for margin accounts and will be transactions through the direct sending According to the Registration backed by the assets of the Trust. The of bitcoin over the Bitcoin Network. The Statement, the investment objective of Trust will not hold or employ any retail sector also includes transactions the Trust is for the Shares to track the derivative securities. The value of the between consumers paying for goods or price of bitcoin using the Gemini Trust’s holdings will be reported each services from commercial or service Exchange Auction Price on each day on the Trust’s Web site, located at businesses through direct transactions Business Day, less the Trust’s liabilities www.coin-etf.com. Furthermore, the fact or third-party service providers such as (which include accrued but unpaid fees that the Trust will be regulated by the BitPay, Coinbase and GoCoin. BitPay, and expenses).37 The Shares are Coinbase and GoCoin each provide a Exchange and by the Commission under merchant platform for instantaneous 37 According to the Registration Statement, the the Act provides a level of oversight not transactions whereby the consumer activities of the Trust will be limited to (1) issuing Baskets in exchange for the actual bitcoin deposited and Services Agreement, the Custody Agreement, sends bitcoin to BitPay, Coinbase, or by the Authorized Participants with the Custodian the License Agreement, and Authorized Participant GoCoin, which then provides either the as consideration, (2) transferring actual bitcoin as Agreements. The Trust will not be actively bitcoin or the cash value thereof to the necessary to cover the Sponsor’s Fee and as managed. It will not engage in any activities commercial or service business utilizing necessary to pay Trust expenses not assumed by the designed to obtain a profit from, or to ameliorate Sponsor and other liabilities, (3) transferring actual losses caused by, changes in the market prices of the platform. PayPal, Square and bitcoin in exchange for Baskets surrendered for bitcoin. The Trust seeks to achieve its investment Shopify are examples of traditional redemption by the Authorized Participants, (4) objective by directly owning bitcoin and will not merchant payment processors or causing the Trustee to sell bitcoin on the speculate with regard to short-term changes in merchant platforms that have also termination of the Trust, and (5) engaging in all bitcoin prices. The Trust will not invest in bitcoin administrative and custodial procedures necessary derivatives, futures, swaps, or other financial added Bitcoin payment options for their to accomplish such activities in accordance with instruments that represent bitcoin or that may be merchant customers. Payment the provisions of the Trust Agreement, the exchanged for bitcoin. The Trust does not expect to processing through the Bitcoin Network Administration Agreement, the Transfer Agency make any cash distributions to shareholders.

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provided by any other current Bitcoin using a state-of-the-art, proprietary Cold utilizes multiple-signature (‘‘Multisig’’) Exchanges or service providers. The Storage System.39 Similar hardware, technology with a ‘‘2 of 3’’ signing Sponsor represents that the Trust will software, administration and continued design that requires a signature from at enter into an information sharing technological development may not be least two (2) of three (3) potential agreement with the Gemini Exchange available or cost-efficient for many Signers in order to move the Trust’s enabling it to obtain and publish the investors. As such, the logistics of bitcoin. This provides both security Gemini Exchange Auction Price on the accepting, transferring and safekeeping against attacks and tolerance to losing Trust’s Web site. In addition, the of actual bitcoin are dealt with by the access to a minority of facilities or Sponsor will arrange for the Gemini Custodian using the Cold Storage private keys, thereby eliminating single Exchange to share data regarding the System, and the related expenses are points of failure. In addition, the Gemini Exchange Spot Price and other built into the price of the Shares. operation of a Signer requires the trading data with the Exchange. See Therefore, the investor does not have coordinated actions of multiple ‘‘Overview of the Bitcoin Industry and any additional tasks or costs over and employees (each a ‘‘Signatory’’) to Market—Bitcoin Value—Gemini above those associated with dealing in protect against insider malfeasance. All Exchange Spot Price’’ above. Lastly, the any other publicly traded security. The Signatories have undergone background Exchange has the ability to halt trading Shares are intended to provide investors checks by a third-party vendor and are and delist the Shares of the Trust under with a cost-efficient and convenient subject to, with or without the certain circumstances and, more means of gaining exposure to bitcoin Signatory’s knowledge, ongoing generally, retains broad discretionary similar to a direct investment in bitcoin. background checks at the discretion of authority over the continued listing of All bitcoin is recorded on the the Custodian. All Signatories have been securities on the Exchange, as further Blockchain, the decentralized fingerprinted, and all fingerprint cards described below. transaction ledger of the Bitcoin and accompanying information are • Proprietary Cold Storage System. Network. The Blockchain is a canonical retained by the Custodian for the The Custodian has been appointed to record of every bitcoin, every Bitcoin duration of the Signatory’s tenure and store and safekeep the Trust’s bitcoin transaction (including the mining of for a minimum of three (3) years using a state-of-the-art, proprietary Cold new bitcoin) and every Bitcoin address thereafter. Lastly, the Cold Storage Storage System. Similar hardware, associated with a quantity of bitcoin. In System is comprised of hardware that is software, administration and continued order to transfer or ‘‘spend’’ bitcoin, one sourced from multiple, diverse technological development may not be must control the private key that is manufacturers to guard against supply- available or cost-efficient for many mathematically associated with a given chain risks. investors. Winklevoss IP, LLC (‘‘WIP’’) Bitcoin address. The private keys that The Custodian’s Cold Storage System is the owner of certain intellectual control the Trust’s bitcoin are secured was purpose-built to demonstrate ‘‘proof property and it has licensed such by the Custodian and stored completely of control’’ of the private keys intellectual property to the Sponsor for offline (i.e., air-gapped) using the associated with its public Bitcoin use by the Custodian and its service Custodian’s state-of-the-art, proprietary addresses. More specifically, the providers in the safekeeping of the Cold Storage System. The Custodian’s Custodian can use Signers to sign a Trust’s bitcoin. Cold Storage System is founded on the specific message that references a Using the precious metals exchange- principles of (i) building defense-in- current event (i.e., to prove recency), traded trusts currently trading on U.S. depth against external threats; (ii) thereby proving control of the private exchanges38 as design paradigms, the protecting against human error; and (iii) keys associated with the public Bitcoin Sponsor has structured the Trust to be guarding against misuse of insider addresses in which the Trust’s bitcoin a similar passive investment vehicle access. are held. This allows the Custodian to holding a single asset. Like the precious In order to accomplish these periodically evidence control of the metals exchange traded trusts cited principles, the Custodian’s Cold Storage Trust’s assets without necessitating the above, the Trust will only own and store System generates, stores and manages transfer of any of the Trust’s bitcoin. In bitcoin and will not be permitted to the private keys that control the Trust’s fact, such ‘‘proof of control’’ exercises hold cash or any other Digital Asset. bitcoin onboard hardware security will be conducted monthly and audited The Custodian has been appointed to modules (‘‘HSMs’’) for the lifetime of by the Trust’s Auditor; the results will store and safekeep the Trust’s bitcoin each private key. HSMs (each, a be made publicly available on the ‘‘Signer’’) are tamper-resistant Trust’s Web site along with an 38 See, e.g., SPDR Gold Trust: See Securities computers used by the Custodian to attestation from the Trust’s Auditor. Exchange Act Release No. 50603 (October 28, 2004), digitally sign (i.e., authenticate) any The Trust does not currently intend to 69 FR 64614 (November 5, 2004) (SR–NYSE–2004– transfer of the Trust’s bitcoin. All insure its bitcoin, but may elect to do so 22) (approving listing of the SPDR Gold Trust); in the future if a viable insurance iShares Gold Trust: See Securities Exchange Act Signers are stored, as well as backed up, Release No. 51058 (January 19, 2005), 70 FR 3749 in various geographically distributed, market for bitcoin is established. The (January 26, 2005) (SR–Amex–2004–38) (approving access-controlled facilities throughout Custodian does, however, maintain listing of the iShares Gold Trust); ETFS Gold Trust: the United States. In addition, the insurance in the form of a fidelity bond See Securities Exchange Act Release No. 59895 with regard to its custodial business on (May 8, 2009), 74 FR 22993 (May 15, 2009) (SR– Custodian’s Cold Storage System NYSEArca–2009–40) (approving listing of the ETFS such terms and conditions as it Gold Trust); ETFS Silver Trust: See Securities 39 WIP is the owner of certain intellectual considers appropriate in connection Exchange Act Release No. 59781 (April 17, 2009), property and it has licensed such intellectual with its custodial obligations and is 74 FR 18771 (April 24, 2009) (SR–NYSEArca–2009– property to the Sponsor for use by the Custodian responsible for all costs, fees and 95) (approving listing of the ETFS Silver Trust); and its service providers in the safekeeping of the ETFS Platinum Trust: See Securities Exchange Act Trust’s bitcoin. The Sponsor believes that the use expenses arising from the insurance Release No. 61219 (December 22, 2009), 74 FR of this Cold Storage System and other security policy or policies. The Custodian’s 68886 (December 29, 2009) (SR–NYSEArca–2009– features described below, the technological statutorily required fidelity bond 94) (approving listing of the ETFS Platinum Trust); experience of the Custodian’s employees and the coverage includes, among other things, and ETFS Palladium Trust: See Securities Exchange Sponsor’s management team, as well as the use of Act Release No. 61220 (December 22, 2009), 74 FR independent auditors for periodic reviews, will insurance against employee theft, 68895 (December 29, 2009) (SR–NYSEArca–2009– provide a level of security not available through computer fraud, and funds transfer 94) (approving listing of the ETFS Palladium Trust). other Digital Asset custodians. fraud; this coverage is subject to certain

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terms, conditions, and exclusions. This private keys that control the Trust’s bitcoin involves the consideration of a fidelity bond has been in effect since bitcoin on a monthly basis. Other Digital number of subjective factors and thus October 1, 2015. The Trust will not be Asset ETPs may not be able to or willing the prices for bitcoin may differ from a beneficiary of any such insurance and to provide ‘‘proof of control’’ of the the Gemini Exchange Auction Price or does not have the ability to dictate the private keys that control their bitcoin. the spot price on the Gemini Exchange existence, nature or amount of coverage. or the itBit Exchange. Factors the Net Asset Value Therefore, Shareholders cannot be Sponsor may consider include the assured that the Custodian will According to the Registration market price for bitcoin on other Bitcoin maintain adequate insurance or any Statement, on each Business Day, the Exchanges, or in other forums for which insurance with respect to the bitcoin Administrator will use the Gemini bitcoin prices are published publicly, held by the Custodian on behalf of the Exchange Auction Price to calculate the recent significant transactions on the Trust. Furthermore, Shareholders’ Trust’s NAV at 4:00 p.m. Eastern Time Blockchain where the USD-bitcoin recourse against the Trust, Custodian (the ‘‘Evaluation Time’’). exchange rate can be readily ascertained and Sponsor under New York law At the Evaluation Time, the (e.g., sales of items with widely governing their custody operations is Administrator will value the bitcoin available USD prices where the cost in limited. Similarly, Shareholders’ held by the Trust using the Gemini bitcoin can be readily determined), recourse against the Administrator and Exchange Auction Price which is movements in the price of other Digital Transfer Agent for the services they publicly available and will be provided Assets or fiat currencies, movements in provide to the Trust is limited. to the Administrator by the Sponsor the price of other Digital Asset ETPs, Consequently, a loss may be suffered each Business Day. In the event that the global or regional political, economic or with respect to the Trust’s bitcoin which Sponsor determines that the Gemini financial events, and other factors is not covered by insurance and for Exchange Auction Price is not an determined by the Sponsor in good which no person is contractually liable appropriate basis for evaluation of the faith. The Sponsor shall not be liable to in damages. Trust’s bitcoin on a given Business Day, any person for the determination that The Custodian is the custodian of the the Sponsor will instruct the the Gemini Exchange Auction Price or Trust’s bitcoin in accordance with the Administrator to use the 4:00 p.m. an alternative basis for a fair market terms and provisions of the Trust Eastern Time spot price on the Gemini value of bitcoin is not appropriate as a Custody Agreement and utilizes its Cold Exchange or the itBit bitcoin exchange basis for calculation of the Trust’s NAV Storage System in the administration (the ‘‘itBit Exchange’’) 40 as an provided that such determination is and operation of the Trust and the alternative basis for calculating the made in good faith. safekeeping of its bitcoin. The Trust’s NAV on that Business Day. The In order to calculate the Trust’s NAV, Custodian segregates the Trust’s bitcoin itBit Exchange is operated by the itBit the Administrator will first determine which are held in unique Bitcoin Trust Company, LLC, a New York State- the value of the Trust’s bitcoin and then addresses with balances that can be chartered limited liability trust subtract all of the Trust’s liabilities directly verified on the Bitcoin company that, like the Gemini (including accrued but unpaid fees and Blockchain. Under the Trust Custody Exchange, operates under the direct expenses) to determine the Trust’s net Agreement, the Custodian is also supervision and regulatory oversight of assets. The Administrator will calculate responsible for the maintenance of, and the NYSDFS. Any determination that the Trust’s NAV by dividing the net periodic updates to, the Cold Storage the Gemini Exchange Auction Price is assets of the Trust by the number of the System. unavailable or otherwise not an Shares outstanding as of the close of Acting on standing instructions appropriate basis for calculating the trading on the Exchange (which specified in the Trust Custody Trust’s NAV on a given Business Day includes the net number of any of the Agreement, the Custodian will accept, would be based upon extraordinary Shares created or redeemed on such on behalf of the Trust, delivery of criteria in which the operation of the Business Day). bitcoin from Authorized Participants Gemini Exchange is disrupted or The Sponsor will publish the Trust’s into the Trust Custody Account in the otherwise experiencing material NAV on the Trust’s Web site as soon as creation of a Basket. In order for an calculation or reporting irregularities. If practicable after determination by the Authorized Participant to redeem a the Sponsor determines in good faith Administrator. To the extent that the Basket and receive a distribution of that none of the Gemini Exchange NAV has been calculated using a price bitcoin from the Trust, the Custodian, Auction Price, the spot price on the per bitcoin other than the Gemini upon receiving instructions from the Gemini Exchange, or the spot price on Exchange Auction Price for such Transfer Agent, will sign transactions the itBit Exchange are reliable for Business Day, the publication on the necessary to transfer bitcoin out of the calculating the Trust’s NAV on a Trust’s Web site will note the valuation Trust Custody Account and distribute to particular Business Day, including but methodology and the price per bitcoin the Bitcoin address specified by the not limited to situations where it does resulting from such calculation. Authorized Participant. See ‘‘Net Asset not reflect material information or Value—Creation and Redemption of events occurring between the time of Creation and Redemption of Shares Shares.’’ calculation of such prices and the time The Trust is expected to issue and The Custodian will engage an the Trust’s Shares are valued, bitcoin redeem Shares from time to time only in independent audit firm to periodically will be valued by the Sponsor using fair one or more whole Baskets. The Trust audit the Custodian’s Cold Storage market value pricing as determined in will issue and redeem the Shares in System protocols and internal controls good faith by the Sponsor and Baskets only to certain Authorized (‘‘Internal Controls Audit’’), and report calculated by the Administrator . Participants on an ongoing basis. On a to the Custodian at least annually on Determining the fair market value of creation, Baskets will be distributed to such matters. Additionally, as noted the Authorized Participants by the Trust above, the Sponsor and the Custodian 40 The itBit Exchange is operated by the itBit in exchange for the delivery to the Trust have engaged an independent audit firm Trust Company, LLC, a New York State-chartered of the appropriate number of bitcoin limited liability trust company that, like the Gemini to verify that the Custodian can Exchange, operates under the direct supervision (i.e., bitcoin equal in value to the value demonstrate ‘‘proof of control’’ of the and regulatory oversight of the NYSDFS. of the Shares being purchased). On a

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redemption, the Trust will distribute each of which is attached as an exhibit the Trust in the Trust Custody Account bitcoin equal in value to the value of the to the Registration Statement of which shall be borne by the Custodian. Shares being redeemed to the redeeming the prospectus is a part. The Custodian may accept delivery of Authorized Participant in exchange for Creation Procedures bitcoin by such other means as the the delivery to the Trust of one or more Sponsor, from time to time, may Baskets. On each Business Day, the On any Business Day, an Authorized determine to be acceptable for the Trust, value of each Basket accepted by the Participant may place an order with the provided that the same is disclosed in Transfer Agent in a creation or Transfer Agent to create one or more a prospectus relating to the Trust filed redemption transaction will be the same Baskets (each a ‘‘Creation Basket’’). The with the Commission pursuant to Rule (i.e., each Basket will consist of 10,000 settlement of Creation Basket orders, 424 under the Securities Act. If bitcoin Shares and the value of the Basket will including the delivery of bitcoin by the is to be delivered other than as be equal to the value of 10,000 Shares Authorized Participant and distribution described above, the Sponsor is at their net asset value per Share on that of Shares to the Authorized Participant, authorized to establish such procedures day). The Trust will not issue or redeem will occur only on days BZX is open for and to appoint such custodians and fractions of a Basket. regular trading. Only Authorized Participants will be establish such custody accounts in able to place orders to create or redeem Creation Basket Order Requirements addition to those described in this Baskets. Authorized Participants must prospectus, as the Sponsor determines The quantity of bitcoin required to be to be desirable. be (i) registered broker-dealers or other delivered to the Trust in exchange for a securities market participants, such as Creation Basket is determined by the Suspension or Rejection of Creation banks and other financial institutions, Administrator, and all questions as to Basket Orders which are not required to register as the quantity of bitcoin necessary to broker-dealers to engage in securities deliver to purchase a Creation Basket The Administrator or the Sponsor transactions, and (ii) DTC Participants. will be conclusively determined by the may suspend the right to place Creation A Transaction Fee may be imposed to Administrator. The Administrator’s Basket orders, or postpone the Creation offset the transfer and other transaction determination of the cost of a Creation Basket settlement date, (i) for any period costs associated with creation or Basket shall be final and binding on all during which BZX is closed other than redemption. Authorized Participants or persons interested in the Trust. customary weekend or holiday closings, their affiliated market makers are or trading on BZX is suspended or expected to have the facility to Creation Basket Distribution restricted; or (ii) for any period during participate directly on one or more An Authorized Participant who places which an emergency exists as a result of Bitcoin Exchanges. a Creation Basket order with the which receipt or evaluation of bitcoin The Trust currently expects that prior Transfer Agent is responsible for delivery is not reasonably practicable or to the commencement of trading on the delivering the bitcoin to the Trust presents, in the judgment of the Exchange, at least two Authorized Custodian or the Sponsor or their Participants will have signed an required to purchase the Creation Basket on the order date. Bitcoin delivered by agents, a security risk to the Cold Authorized Participant Agreement with Storage System. The inability of the the Trust and may create and redeem an Authorized Participant will be considered settled upon the completion Custodian to operate the Cold Storage Baskets as described above. Persons System because of a failure of hardware, interested in placing orders to create or of the Confirmation Protocol. Under the Confirmation Protocol, the Custodian software or personnel or an inability to redeem Baskets should contact the access the Cold Storage System (e.g., Sponsor or the Transfer Agent to obtain must wait until the bitcoin delivery transaction has been confirmed by six because of power failure or acts of God) the contact information for the are examples of such emergencies. None Authorized Participants. Shareholders (6) consecutive blocks on the Blockchain before it is considered of the Custodian, the Sponsor, or their who are not Authorized Participants agents will be liable to any person or in will only be able to redeem their Shares settled. The confirmation process should take approximately one (1) hour any way for any loss or damages that through an Authorized Participant. may result from any such suspension or Bitcoin will be (i) delivered to the depending upon the speed with which postponement. Trust Custody Account from an Bitcoin Network miners add new blocks Authorized Participant in connection to the Blockchain. See ‘‘Overview of the The Sponsor may also reject a with the creation of one or more Baskets Bitcoin Industry and Market— Creation Basket order if (i) such order is and (ii) distributed by the Custodian Cryptographic Security Used in the not presented in proper form as from the Trust Custody Account to the Bitcoin Network—Double-Spending and described in the Authorized Participant Authorized Participant in connection the Bitcoin Network Confirmation Agreements, (ii) such order is incorrect, with the redemption of one or more System,’’ above. An Authorized (iii) if the Creation Basket Order Baskets. Participant shall not be deemed to have presents, in the opinion of the Under the Authorized Participant fulfilled its bitcoin delivery requirement Custodian, the Sponsor, or their agents, Agreement, the Sponsor has agreed to until the completion of the a security risk to the Cold Storage indemnify the Authorized Participants Confirmation Protocol. System, (iv) the fulfillment of the against certain liabilities, including Following confirmation of the receipt Creation Basket order, in the opinion of liabilities under the Securities Act. of bitcoin into the Trust Custody counsel, might be unlawful, or (v) The following description of the Account by the Custodian, the Transfer circumstances outside the control of the procedures for the creation and Agent will direct DTC to credit the Sponsor, the Transfer Agent or the redemption of Baskets is only a Authorized Participant’s DTC account Custodian, as applicable, make it, for all summary and an investor should refer to with the Shares representing the practical purposes, not feasible to the relevant provisions of the Trust number of Creation Baskets purchased. process the Creation Basket Order. None Agreement, the Trust Servicing The expense and risk of delivery, of the Custodian, Sponsor, or their Agreement and the form of Authorized ownership and safekeeping of a bitcoin agents will be liable for the rejection of Participant Agreement for more detail, delivery until it has been received by any Creation Basket order.

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Redemption Procedures instruct the Custodian to transfer bitcoin reported NAV, the Trust’s Intraday The procedures by which an from the Trust Custody Account and Indicative Value or IIV (as defined Authorized Participant can redeem one distribute it to the redeeming below), the national best bid for the or more Baskets (each a ‘‘Redemption Authorized Participant. If the Transfer Trust’s Shares (‘‘NBB’’), the national Basket’’) will mirror the procedures for Agent’s DTC account has not been best offer for the Trust’s Shares credited with all of the Shares the creation of Baskets. On any Business (‘‘NBO’’), the midpoint of the NBB and representative of the Redemption Day, an Authorized Participant may the NBO, and the discount or premium Baskets to be redeemed by such time, place a Redemption Basket order with of this midpoint from the IIV. Daily the delivery will be considered the Transfer Agent. The settlement of trading volume information for the unfulfilled. Shares will also be available in the Redemption Baskets orders, including In order to facilitate the distribution the delivery of Shares to the Trust and financial section of newspapers, through of the bitcoin representing a subscription services such as distribution of bitcoin to the Authorized Redemption Basket order, the Participant, will only occur when BZX Bloomberg, Thomson Reuters and Administrator will calculate the number International Data Corporation, which is open for regular trading. Settlement of of bitcoin representing the value of the Redemption Baskets may be delayed can be accessed by Authorized Redemption Basket order and instruct Participants and other investors, as well only in the instance of administrative or the Custodian to distribute that quantity custodial delays in the processing of a as through other electronic services, of bitcoin to the redeeming Authorized including major public Web sites. distribution of bitcoin from the Trust Participant. Custody Account, whether by reason of In addition, the Sponsor will calculate Bitcoin Network delays, mechanical or Suspension or Rejection of Redemption an estimated fair value of the Shares clerical error or by act of God. Basket Orders based on the most recent Gemini Settlement of a Redemption Basket will The Administrator, the Transfer Exchange Auction Price (the ‘‘Intraday occur only on Business Days. Agent, or the Sponsor may suspend the Indicative Value’’ or ‘‘IIV’’), which will Redemption Basket orders must be right to place Redemption Basket orders, be updated and widely disseminated by placed no later than 3:00 p.m. Eastern or postpone the Redemption Basket one or more major market data vendors Time on a Business Day. A Redemption order settlement date, (i) for any period at least every fifteen (15) seconds during Basket order so received will be during which BZX is closed other than the Exchange’s regular trading hours.41 effective on the date it is received if the customary weekend or holiday closings, The dissemination of the Intraday Sponsor finds it to be in satisfactory or trading on BZX is suspended or Indicative Value will provide investors form. The redemption procedures allow restricted; or (ii) for any period during with an estimate of the fair value of the only Authorized Participants to place which an emergency exists as a result of Shares throughout the trading day. Redemption Basket orders and do not which the distribution or evaluation of Investors may obtain bitcoin pricing entitle an Authorized Participant to bitcoin is not reasonably practicable or information twenty-four (24) hours a receive a distribution of bitcoin in a presents, in the judgment of the day or from various financial quantity that is different than the value Custodian, the Sponsor, or their agents information service providers or Bitcoin of a Redemption Basket. a security risk to the Cold Storage Network information sites such as By placing a Redemption Basket System. The inability of the Custodian BitcoinCharts or bitcoinity. Bloomberg order, an Authorized Participant agrees to operate the Cold Storage System financial terminals include pricing data to deliver the number of Shares in the because of a failure of hardware, in USD and in Euro from several Bitcoin Redemption Basket through DTC’s book- software or personnel or an inability to Exchanges. Recently, the CME and the entry system to the Transfer Agent’s access the Cold Storage System (e.g., ICE announced bitcoin pricing indices. DTC account not later than the next because of power failure or acts of God) Current Bitcoin market prices are also Business Day following the effective are examples of such emergencies. None generally available with bid/ask spreads date of the Redemption Basket order. of the Custodian, the Sponsor, or their directly from Bitcoin Exchanges. In Redemption Basket Order Requirements agents will be liable to any person or in addition, on each Business Day, the any way for any loss or damages that Trust’s Web site will provide pricing The Redemption Basket distribution may result from any such suspension or information for the Gemini Exchange from the Trust will consist of a transfer postponement. Auction Price, the 4:00 p.m. Eastern to the redeeming Authorized Participant The Sponsor will also reject a Time spot price on the Gemini of the quantity of the bitcoin held by the Redemption Basket order if, among Exchange and the Shares. The Gemini Trust in the Trust Custody Account other things, the order is not in proper Exchange itself provides comprehensive evidenced by the Shares being form as described in the Authorized last trade information as well as the delivered. Redemption distributions Participant Agreement or if the aggregate quantity available at each will be subject to the deduction of any fulfillment of the Redemption Basket price level within its limit order book, applicable taxes or other governmental order, in the opinion of its counsel, all through its public Web site charges that may be due. might be unlawful. (www.gemini.com) and public market Redemption Basket Distribution Availability of Information data feeds. The distribution of bitcoin The Trust’s Web site, which will be Additional information regarding the representing a Redemption Basket will publicly available prior to the public Trust and its Shares, including risks, be transferred to the Authorized offering of the Shares, will include a creation and redemption procedures, Participant on the third Business Day form of the prospectus for the Trust that fees, distributions and taxes, is included following the Redemption Basket order may be downloaded. The Web site will in the Registration Statement. date if, by 3:00 p.m. Eastern Time on the feature additional quantitative next Business Day, the Transfer Agent’s information for the Shares updated 41 Currently, it is the Exchange’s understanding that several major market data vendors display and/ DTC account has been credited with the every 15 seconds throughout the or make widely available Intraday Indicative Values Redemption Baskets to be redeemed. Exchange’s Regular Trading Session, published via the Consolidated Tape Association Subsequently, the Transfer Agent will including the prior Business Day’s (‘‘CTA’’) or other data feeds.

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Arbitrage Mechanism arbitrageurs will take advantage of price the Trust in connection with issuance of Similar to other ETPs listed and variations between the Shares’ market Commodity-Based Trust Shares; traded on the Exchange, the Trust will price and the NAV and that the resulting from any negligent act or rely on the Basket creation and Arbitrage Mechanism will be facilitated omission by the Exchange, or any agent redemption process to reduce any by the transparency and simplicity of of the Exchange, or any act, condition or premium or discount that may occur in the Trust’s holdings, the availability of cause beyond the reasonable control of the Share trading prices on the the Intraday Indicative Value, the the Exchange, its agent, including, but Exchange relative to the NAV. Baskets liquidity of the bitcoin market, each not limited to, an act of God; fire; flood; may be created or redeemed only by Authorized Participant’s ability to extraordinary weather conditions; war; access the bitcoin market, and each insurrection; riot; strike; accident; Authorized Participants who have Authorized Participant’s ability to create action of government; communications entered into an Authorized Participant workable hedges. or power failure; equipment or software Agreement with the Trust and the malfunction; or any error, omission or Sponsor, subject to acceptance by the Rule 14.11(e)(4)—Commodity-Based delay in the reports of transactions in an Transfer Agent. The Basket creation and Trust Shares underlying commodity. Finally, as redemption process is important for the The Shares will be subject to BZX required in Rule 14.11(e)(4)(G), the Trust in providing Authorized Rule 14.11(e)(4), which sets forth the Exchange notes that any registered Participants with an arbitrage initial and continued listing criteria market maker (‘‘Market Maker’’) in the mechanism through which they may applicable to Commodity-Based Trust Shares must file with the Exchange in keep Share trading prices in line with Shares. The Exchange will obtain a a manner prescribed by the Exchange the NAV. See ‘‘Overview of the Bitcoin representation that the Trust’s NAV will and keep current a list identifying all Industry and Market—Bitcoin Value— be calculated daily and that these values accounts for trading in an underlying Gemini Exchange Spot Price’’ above. and information about the assets of the commodity, related commodity futures As the Shares trade intraday on the Trust will be made available to all or options on commodity futures, or any Exchange, their market prices will market participants at the same time. other related commodity derivatives, fluctuate due to supply and demand, The Exchange notes that, as defined in which the registered Market Maker may which will be driven in large part by the Rule 14.11(e)(4)(C)(i), the Shares will be: have or over which it may exercise price of bitcoin. The following examples (a) Issued by a trust that holds a investment discretion. No registered generally describe the conditions specified commodity 42 deposited with Market Maker shall trade in an surrounding Basket creation and the trust; (b) issued by such trust in a underlying commodity, related redemption: specified aggregate minimum number in • commodity futures or options on If the market price of the Shares is return for a deposit of a quantity of the commodity futures, or any other related greater than the NAV, an Authorized underlying commodity; and (c) when commodity derivatives, in an account in Participant can purchase sufficient aggregated in the same specified which a registered Market Maker, bitcoin to create a Basket, and then sell minimum number, may be redeemed at directly or indirectly, controls trading the new Shares on the secondary market a holder’s request by such trust which activities, or has a direct interest in the at a profit. This process increases the will deliver to the redeeming holder the profits or losses thereof, which has not selling interest of the Shares and is quantity of the underlying commodity. been reported to the Exchange as expected to decrease the market price of The Trust currently expects that there required by this Rule. In addition to the the Shares such that their market price will be at least 100,000 Shares existing obligations under Exchange will be closer to the NAV. outstanding at the time of • rules regarding the production of books If the NAV is greater than the commencement of trading on the and records (see, e.g., Rule 4.2), the market price of the Shares, an Exchange. Upon termination of the registered Market Maker in Commodity- Authorized Participant can purchase Trust, the Shares will be removed from Based Trust Shares shall make available Shares on the secondary market in an listing. The Trustee, Delaware Trust to the Exchange such books, records or amount equal to a Basket and redeem Company, is a trust company having other information pertaining to them for bitcoin, and then sell the substantial capital and surplus and the transactions by such entity or registered bitcoin at a profit. This process experience and facilities for handling or non-registered employee affiliated increases the buying interest for the corporate trust business, as required with such entity for its or their own Shares and is expected to increase the under Rule 14.11(e)(4)(E)(iv)(a) and that accounts for trading the underlying market price of the Shares such that no change will be made to the trustee physical commodity, related commodity their market price will be closer to the without prior notice to and approval of futures or options on commodity NAV. the Exchange. The Exchange also notes futures, or any other related commodity This process is referred to as the that, pursuant to Rule 14.11(e)(4)(F), derivatives, as may be requested by the arbitrage mechanism (‘‘Arbitrage neither the Exchange nor any agent of Exchange. Mechanism’’). The Arbitrage the Exchange shall have any liability for Trading Halts Mechanism helps to minimize the damages, claims, losses or expenses difference between the trading price of caused by any errors, omissions or With respect to trading halts, the a Share and the NAV. Over time, these delays in calculating or disseminating Exchange may consider all relevant buying and selling pressures should any underlying commodity value, the factors in exercising its discretion to balance, and a Share’s market trading current value of the underlying halt or suspend trading in the Shares. price is expected to remain at a level commodity required to be deposited to The Exchange will halt trading in the that is at or close to the NAV. The Shares under the conditions specified in Arbitrage Mechanism provided by the 42 For purposes of Rule 14.11(e)(4), the term BZX Rule 11.18. Trading may be halted Basket creation and redemption process commodity takes on the definition of the term as because of market conditions or for is designed, and required, in order to provided in the Commodity Exchange Act. As noted reasons that, in the view of the above, the CFTC has opined that Bitcoin is a maintain the relationship between the commodity as defined in Section 1a(9) of the Exchange, make trading in the Shares market trading price of the Shares and Commodity Exchange Act. See Coinflip, supra note inadvisable. These may include: (1) The the NAV. The Exchange expects that 13 [sic]. extent to which trading is not occurring

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in the bitcoin underlying the Shares; or comprehensive surveillance sharing and other Digital Assets for purposes of (2) whether other unusual conditions or agreement as well as certain additional commodities, tax and securities laws. circumstances detrimental to the information that is publicly available The Information Circular will also maintenance of a fair and orderly through the Blockchain. The Exchange contain information regarding the market are present. Trading in the notes that it has entered into a CFTC’s determination that bitcoin and Shares also will be subject to Rule comprehensive surveillance sharing other ‘‘virtual currencies’’ (aka Digital 14.11(e)(4)(E)(ii), which sets forth agreement with Gemini Exchange. Assets) are properly defined as circumstances under which trading in commodities under the CEA,46 and will Information Circular the Shares may be halted. reference the fact that the CFTC has Prior to the commencement of Trading Rules applied CEA provisions and CFTC trading, the Exchange will inform its regulations that apply to transactions in The Exchange deems the Shares to be members in an Information Circular of commodity options and swaps to the equity securities, thus rendering trading the special characteristics and risks conduct of the bitcoin derivatives in the Shares subject to the Exchange’s associated with trading the Shares. trading platform. existing rules governing the trading of Specifically, the Information Circular equity securities. BZX will allow trading will discuss the following: (i) The 2. Statutory Basis in the Shares from 8:00 a.m. until 5:00 procedures for the creation and The Exchange believes that the p.m. Eastern Time. The Exchange has redemption of Baskets (and that the proposal is consistent with Section 6(b) appropriate rules to facilitate Shares are not individually redeemable); of the Act 47 in general and Section transactions in the Shares during all (ii) BZX Rule 3.7, which imposes 6(b)(5) of the Act 48 in particular in that trading sessions. As provided in BZX suitability obligations on Exchange it is designed to prevent fraudulent and Rule 11.11(a) the minimum price members with respect to recommending manipulative acts and practices, to variation for quoting and entry of orders transactions in the Shares to customers; promote just and equitable principles of in securities traded on the Exchange is (iii) how information regarding the trade, to foster cooperation and $0.01 where the price is greater than Intraday Indicative Value and the coordination with persons engaged in $1.00 per share or $0.0001 where the Trust’s NAV are disseminated; (iv) the facilitating transactions in securities, to price is less than $1.00 per share. risks involved in trading the Shares remove impediments to and perfect the Surveillance during the Pre-Opening 44 and After mechanism of a free and open market Hours Trading Sessions 45 when an and a national market system and, in The Exchange believes that its updated Intraday Indicative Value will general, to protect investors and the surveillance procedures are adequate to not be calculated or publicly public interest. properly monitor the trading of the disseminated; (v) the requirement that The Exchange believes that the Shares on the Exchange during all members deliver a prospectus to proposed rule change is designed to trading sessions and to deter and detect investors purchasing newly issued prevent fraudulent and manipulative violations of Exchange rules and the Shares prior to or concurrently with the acts and practices in that the Shares will applicable federal securities laws. confirmation of a transaction; and (vi) be listed on the Exchange pursuant to Trading of the Shares through the trading information. the initial and continued listing criteria Exchange will be subject to the In addition, the Information Circular in Exchange Rule 14.11(e)(4), which as Exchange’s surveillance procedures for will advise members, prior to the noted above includes all statements and derivative products, including commencement of trading, of the representations made in this filing Commodity-Based Trust Shares. The prospectus delivery requirements regarding the description of the issuer has represented to the Exchange applicable to the Shares. Members portfolio and limitations on portfolio that it will advise the Exchange of any purchasing the Shares for resale to holdings or reference assets. The failure by the Trust or the Shares to investors will deliver a prospectus to Exchange believes that its surveillance comply with the continued listing such investors. The Information Circular procedures are adequate to properly requirements, and, pursuant to its will also discuss any exemptive, no- monitor the trading of the Shares on the obligations under Section 19(g)(1) of the action and interpretive relief granted by Exchange during all trading sessions Exchange Act, the Exchange will surveil the Commission from any rules under and to deter and detect violations of for compliance with the continued the Act. Exchange rules and the applicable listing requirements. If the Trust or the In addition, the Information Circular federal securities laws. The Exchange Shares are not in compliance with the will reference that the Trust is subject may obtain information regarding applicable listing requirements, the to various fees and expenses described trading in the Shares via the ISG from Exchange will commence delisting in the Registration Statement. The other exchanges who are members or procedures under Exchange Rule 14.12. Information Circular will also reference affiliates of the ISG, or with which the The Exchange may obtain information the fact that, apart from the CFTC, the Exchange has entered into a regarding trading in the Shares via the Financial Crimes Enforcement Network comprehensive surveillance sharing Intermarket Surveillance Group (‘‘ISG’’), of the U.S. Department of the Treasury agreement.49 In addition, the Exchange from other exchanges who are members (‘‘FinCEN’’) and the U.S. Internal may obtain information about Bitcoin or affiliates of the ISG, or with which Revenue Service (‘‘IRS’’), most major transactions, trades, and market data the Exchange has entered into a U.S. regulators, including the from Bitcoin Exchanges with which the comprehensive surveillance sharing Commission, have yet to make official Exchange has entered into a 43 agreement. In addition, the Exchange pronouncements or adopt rules comprehensive surveillance sharing may obtain information about bitcoin providing guidance with respect to the agreement, which includes the Gemini transactions, trades and market data classification and treatment of bitcoin from Bitcoin Exchanges with which the 46 See Coinflip, supra note 13 [sic]. Exchange has entered into a 44 The Pre-Opening Session is from 8:00 a.m. to 47 15 U.S.C. 78f. 9:30 a.m. Eastern Time. 48 15 U.S.C. 78f(b)(5). 43 For a list of the current members and affiliate 45 The After Hours Trading Session is from 4:00 49 For a list of the current members and affiliate members of ISG, see www.isgportal.com. p.m. to 5:00 p.m. Eastern Time. members of ISG, see www.isgportal.com.

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Exchange, as well as certain additional obtain bitcoin pricing information sell bitcoin, (ii) an efficient way to trade information that is publicly available twenty-four (24) hours a day or from bitcoin, and (iii) a safe place to store through the Blockchain. various financial information service purchased bitcoin for future use in the According to the Registration providers or Bitcoin Network creation of Baskets given the regulatory Statement, the Trust will only own and information sites such as oversight to which the Gemini Exchange store bitcoin and will not be permitted www.BitcoinCharts.com or is subject. to hold cash or any other Digital Asset. www.bitcoinity.org. Bloomberg financial The Exchange may consider all The proposal also promotes market terminals include pricing data in USD relevant factors in exercising its transparency in that large amount of and in Euro from several Bitcoin discretion to halt or suspend trading in information is publicly available Exchanges. Recently, the CME and the the Shares. The Exchange will halt regarding the Trust and the Shares, ICE announced bitcoin pricing indices. trading in the Shares under the thereby promoting market transparency. Current Bitcoin market prices are also conditions specified in BZX Rule 11.18. The Exchange will obtain a generally available with bid/ask spreads Trading may be halted because of representation from the Sponsor that the directly from various Bitcoin Exchanges. market conditions or for reasons that, in Trust’s NAV will be determined by the The Exchange also believes that the the view of the Exchange, make trading Administrator and published by the widespread availability of information in the Shares inadvisable. These may Sponsor at 4:00 p.m. Eastern Time each regarding bitcoin, the Trust, and the include: (i) The extent to which trading Business Day (using the Gemini Shares, combined with the ability of is not occurring in the financial Exchange Auction Price) on the Trust’s Authorized Participants to create and instruments underlying the Shares; or Web site and that such information will redeem Baskets each Business Day, (ii) whether other unusual conditions or be made available to all market thereby utilizing the Arbitrage circumstances detrimental to the participants at the same time. Mechanism, will be sufficient for market maintenance of a fair and orderly Furthermore, the Trust’s Web site will participants to value and trade the market are present. Trading in the provide an Intraday Indicative Value Shares in a manner that will not lead to Shares also will be subject to Rule during regular trading hours on each significant deviations between the NBB/ 14.11(e)(4)(E)(ii), which sets forth Business Day. The Trust’s Web site will NBO midpoint and the Intraday circumstances under which trading in also provide its current prospectus, as Indicative Value as well as between the the Shares may be halted. well as the two (2) most recent reports NBB/NBO midpoint and the NAV. In The proposed rule change is designed to shareholders. The Web site will addition, the numerous options for to perfect the mechanism of a free and feature additional quantitative buying and selling bitcoin will both open market and, in general, to protect information for the Shares updated provide Authorized Participants with investors and the public interest in that every 15 seconds throughout the many options for hedging their it will facilitate the listing and trading Exchange’s Regular Trading Session, positions and provide market including the prior Business Day’s participants generally with potential of Commodity-Based Trust Shares that reported NAV, the Trust’s IIV, the NBB, arbitrage opportunities, further will enhance competition among market the NBO, the midpoint of the NBB and strengthening the Arbitrage Mechanism participants, to the benefit of investors the NBO, and the discount or premium as it relates to the Shares. Furthermore, and the marketplace. As noted above, of this midpoint from the IIV. This the Trust has discussed with several the Exchange has in place surveillance information will be retained by the prominent market participants the procedures relating to trading in the Trust. In addition, the Exchange will possibility of acting as an Authorized Shares and may obtain information from publish (via the CTA) quotation Participant and/or a Market Maker, each other Bitcoin Exchanges with which the information, trading volume, closing of which is an experienced participant Exchange has entered into a prices, and the prior Business Day’s in the ETP marketplace and is actively comprehensive surveillance sharing NAV. The IIV, which is the pricing on engaged in trading ETPs. A number of agreement. In addition, as noted above, the Gemini Exchange prior to the these potential Authorized Participants investors will have ready access to Gemini Exchange Auction Price, will be and Market Makers currently trade information regarding bitcoin pricing widely disseminated by one (1) or more bitcoin and are already registered and bitcoin information, as well as major market data vendors, such as participants that trade on the Gemini equitable access to the Trust’s Intraday Reuters or Bloomberg, and broadly Exchange. Based on their experience in Indicative Value, NAV, and quotation displayed on at least a 15-second basis ETPs and in the Bitcoin marketplace, and last sale information for the Shares. during regular trading hours. In these market participants have indicated For the above reasons, the Exchange addition, information regarding market that they believe that they will be able believes that the proposed rule change price and trading volume of the Shares to make efficient and liquid markets in is consistent with the requirements of will be continually available on a real- the Shares at prices generally in line Section 6(b)(5) of the Act. time basis throughout the Business Day with the NAV. B. Self-Regulatory Organization’s on brokers’ computer screens and other Authorized Participants will be able Statement on Burden on Competition electronic services, and quotation and to acquire bitcoin for delivery to the last sale information will also be Trust by a variety of means. Authorized The Exchange does not believe that available via the Exchange’s data feeds. Participants will not be required to use the proposed rule change will impose The proposed rule change is further the Gemini Exchange to trade their any burden on competition that is not designed to promote just and equitable bitcoin and the Gemini Exchange is not necessary or appropriate in furtherance principles of trade and to protect the only venue on which Authorized of the purpose of the Act. The Exchange investors and the public interest and to Participants can purchase bitcoin for notes that the proposed rule change will promote market transparency in that delivery to the Trust. However, as facilitate the listing and trading of an there is a considerable amount of discussed above, the ability to transact additional Commodity-Based Trust bitcoin price and market information in bitcoin on the Gemini Exchange may Share product that will enhance available for free on public Web sites provide (i) a convenient and stable competition among market participants, and through financial, professional and venue with superior liquidity to the benefit of investors and the subscription services. Investors may characteristics in which to purchase or marketplace.

VerDate Sep<11>2014 17:54 Nov 02, 2016 Jkt 241001 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 E:\FR\FM\03NON1.SGM 03NON1 mstockstill on DSK3G9T082PROD with NOTICES 76670 Federal Register / Vol. 81, No. 213 / Thursday, November 3, 2016 / Notices

C. Self-Regulatory Organization’s Commission and any person, other than hearing requests should state the nature Statement on Comments on the those that may be withheld from the of the writer’s interest, any facts bearing Proposed Rule Change Received From public in accordance with the upon the desirability of a hearing on the Members, Participants, or Others provisions of 5 U.S.C. 552, will be matter, the reason for the request, and The Exchange has neither solicited available for Web site viewing and the issues contested. Persons who wish nor received written comments on the printing in the Commission’s Public to be notified of a hearing may request proposed rule change. Reference Room, 100 F Street NE., notification by writing to the Washington, DC 20549, on official Commission’s Secretary. III. Solicitation of Comments business days between the hours of ADDRESSES: The Commission: Secretary, Interested persons are invited to 10:00 a.m. and 3:00 p.m. Copies of such U.S. Securities and Exchange submit written data, views, and filing will also be available for Commission, 100 F Street NE., arguments concerning the foregoing, inspection and copying at the principal Washington, DC 20549–1090. including whether the proposed rule office of the Exchange. All comments FOR FURTHER INFORMATION CONTACT: change, as amended, is consistent with received will be posted without change; Jessica Shin, Attorney-Adviser, at (202) the Section 6(b)(5) of the Act, the other the Commission does not edit personal 551–5921 or Chief Counsel’s Office at provisions of the Act, and the rules and identifying information from (202) 551–6821; SEC, Division of regulations thereunder. In particular, submissions. You should submit only Investment Management, Chief the Commission invites the written information that you wish to make Counsel’s Office, 100 F Street NE., views of interested persons concerning available publicly. All submissions Washington, DC 20549–8010. the sufficiency of the Exchange’s should refer to File Number SR– statements in support of Amendment BatsBZX–2016–30 and should be Arden Investment Series Trust [File No. No. 1 to the proposed rule change, submitted on or before November 25, 811–22701] which are set forth above; the 2016. Summary: Applicant seeks an order statements made in comment letters For the Commission, by the Division of declaring that it has ceased to be an submitted to the Commission; 50 and the Trading and Markets, pursuant to delegated investment company. On March 31, specific requests for comment set forth authority.52 2016 and September 20, 2016, applicant in the Order Instituting Proceedings.51 Brent J. Fields, made liquidating distributions to its Comments may be submitted by any Secretary. shareholders, based on net asset value. of the following methods: [FR Doc. 2016–26513 Filed 11–2–16; 8:45 am] Applicant’s custodian is holding Electronic Comments BILLING CODE 8011–01–P remaining assets of approximately • $816,214 in cash and $105,662 in tax Use the Commission’s Internet reclaims receivables to cover current comment form (http://www.sec.gov/ SECURITIES AND EXCHANGE and anticipated liabilities and expenses rules/sro.shtml); or COMMISSION in connection with applicant’s • Send an email to rule-comments@ liquidation and dissolution as well as to sec.gov. Please include File Number SR– [Release No. IC–32342] cover any unexpected liabilities. BatsBZX–2016–30 on the subject line. Notice of Applications for Expenses of approximately $611,038 Paper Comments Deregistration Under Section 8(f) of the incurred in connection with the • Send paper comments in triplicate Investment Company Act of 1940 liquidation were paid by the applicant to Secretary, Securities and Exchange and the applicant’s investment advisers. Commission, 100 F Street NE., October 28, 2016. Filing Dates: The application was Washington, DC 20549–1090. The following is a notice of filed on April 20, 2016, and amended on applications for deregistration under September 21, 2016 and October 26, All submissions should refer to File section 8(f) of the Investment Company 2016. Number SR–BatsBZX–2016–30. This file Act of 1940 for the month of October Applicant’s Address: 375 Park number should be included on the 2016. A copy of each application may be Avenue, 32nd Floor, New York, New subject line if email is used. To help the obtained via the Commission’s Web site York 10152. Commission process and review your by searching for the file number, or for comments more efficiently, please use Roge Partners Fund [File No. 811– an applicant using the Company name only one method. The Commission will 21571] box, at http://www.sec.gov/search/ post all comments on the Commission’s search.htm or by calling (202) 551– Summary: Applicant seeks an order Internet Web site (http://www.sec.gov/ 8090. An order granting each declaring that it has ceased to be an rules/sro.shtml). Copies of the application will be issued unless the investment company. The series of submission, all subsequent SEC orders a hearing. Interested persons applicant has transferred its assets to a amendments, all written statements may request a hearing on any corresponding series of Northern Lights with respect to the proposed rule application by writing to the SEC’s Fund Trust III, and, on April 24, 2014, change that are filed with the Secretary at the address below and made a final distribution to its Commission, and all written serving the relevant applicant with a shareholders based on net asset value. communications relating to the copy of the request, personally or by Expenses of approximately $9,084 proposed rule change between the mail. Hearing requests should be incurred in connection with the received by the SEC by 5:30 p.m. on reorganization were paid by the 50 See supra note 8. 51 See Order Instituting Proceedings, supra note 7. November 22, 2016, and should be applicant’s investment adviser. The Commission notes that, consistent with certain accompanied by proof of service on Filing Dates: The application was changes made in Amendment No. 1 to the proposed applicants, in the form of an affidavit or, filed on September 23, 2016 and rule change, with respect to Question No. 2 in the for lawyers, a certificate of service. amended on October 20, 2016. Order Instituting Proceedings, commenters are asked to address the sufficiency of the Exchange’s Pursuant to Rule 0–5 under the Act, Applicant’s Address: 630 Johnson statements as they pertain to the Gemini Exchange Avenue, Suite 103, Bohemia, New York Auction Price. See id., 81 FR at 71781. 52 17 CFR 200.30–3(a)(12). 11716.

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