Notice2021-13101
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade Shares of the VanEck Bitcoin Trust Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 23, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 118 (Wednesday, June 23, 2021)</title>
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[Federal Register Volume 86, Number 118 (Wednesday, June 23, 2021)]
[Notices]
[Pages 32985-32987]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-13101]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92196; File No. SR-CboeBZX-2021-019]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To List and Trade Shares of the VanEck Bitcoin
Trust Under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares
June 16, 2021.
On March 1, 2021, Cboe BZX Exchange, Inc. (``BZX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
list and trade shares (``Shares'') of the VanEck Bitcoin Trust
(``Trust'') under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares.
The proposed rule change was published for comment in the Federal
Register on March 19, 2021.\3\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 91326 (March 15,
2021), 86 FR 14987 (``Notice''). Comments on the proposed rule
change can be found at: <a href="https://www.sec.gov/comments/sr-cboebzx-2021-019/srcboebzx2021019.htm">https://www.sec.gov/comments/sr-cboebzx-2021-019/srcboebzx2021019.htm</a>.
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On April 28, 2021, pursuant to Section 19(b)(2) of the Act,\4\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ This order institutes proceedings under Section 19(b)(2)(B)
of the Act \6\ to determine whether to approve or disapprove the
proposed rule change.
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\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 91695, 86 FR 24066
(May 5, 2021). The Commission designated June 17, 2021, as the date
by which it should approve, disapprove, or institute proceedings to
determine whether to disapprove the proposed rule change.
\6\ 15 U.S.C. 78s(b)(2)(B).
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I. Summary of the Proposal
As described in more detail in the Notice,\7\ the Exchange proposes
to list and trade the Shares of the Trust under BZX Rule 14.11(e)(4),
which governs the listing and trading of Commodity-Based Trust Shares
on the Exchange.
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\7\ See Notice, supra note 3.
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The investment objective of the Trust would be for the Shares to
reflect the performance of the MVIS[supreg] CryptoCompare Bitcoin
Benchmark Rate (``Benchmark''), less the expenses of the Trust's
operations.\8\ The Benchmark will be used to calculate the Trust's net
asset value (``NAV''). The Benchmark is designed to be a price for
bitcoin in USD and there is no component other than bitcoin in the
Benchmark. The current platform composition of the Benchmark is
Bitstamp, Coinbase, Gemini, itBit and Kraken. In calculating the
Benchmark, the methodology captures trade prices and sizes from
platforms and examines twenty three-minute periods leading up to 4:00
p.m. E.T. It then calculates an equal-weighted average of the volume-
weighted median price of these twenty three-minute periods, removing
the highest and lowest contributed prices.\9\
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\8\ VanEck Digital Assets, LLC is the sponsor of the Trust, and
Delaware Trust Company is the trustee. The State Street Bank and
Trust Company will be the administrator (``Administrator'') and
transfer agent. Van Eck Securities Corporation will be the marketing
agent in connection with the creation and redemption of Shares. Van
Eck Securities Corporation provides assistance in the marketing of
the Shares. A third-party regulated custodian (``Custodian'') will
be responsible for custody of the Trust's bitcoin. See Notice, supra
note 3, 86 FR at 14995.
\9\ See id. at 14995-996.
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Each Share will represent a fractional undivided beneficial
interest in the Trust's net assets. The Trust's assets will consist of
bitcoin held by the Custodian on behalf of the Trust. The Trust
generally does not intend to hold cash or cash equivalents. However,
there may be situations where the Trust will unexpectedly hold cash on
a temporary basis.\10\
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\10\ See id. at 14995.
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The Administrator will determine the NAV and NAV per Share of the
Trust on each day that the Exchange is open for regular trading, as
promptly as practical after 4:00 p.m. E.T. The NAV of the Trust is the
aggregate value of the Trust's assets less its estimated accrued but
unpaid liabilities (which include accrued expenses). In determining the
Trust's NAV, the Administrator values the bitcoin held by the Trust
based on the price set by the Benchmark as of 4:00 p.m. E.T.\11\
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\11\ See id. at 14996.
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The Trust will provide information regarding the Trust's bitcoin
holdings, as well as an Intraday Indicative Value (``IIV'') per Share
updated every 15 seconds, as calculated by the Exchange or a third-
party financial data provider during the Exchange's Regular Trading
Hours (9:30 a.m. to 4:00 p.m. E.T.). The IIV will be calculated by
using the prior day's closing NAV per Share as a base and updating that
value during Regular Trading Hours to reflect changes in the value of
the Trust's bitcoin holdings during the trading day.\12\
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\12\ See id.
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When the Trust sells or redeems its Shares, it will do so in ``in-
kind'' transactions in blocks of 50,000 Shares at the Trust's NAV.
Authorized participants will deliver, or facilitate the delivery of,
bitcoin to the Trust's account with the Custodian in exchange for
Shares when they purchase Shares, and the Trust, through the Custodian,
will deliver bitcoin to such authorized participants when they redeem
Shares with the Trust.\13\
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\13\ See id. at 14995.
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II. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2021-019 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \14\ to determine whether the proposed rule
change should be approved or disapproved. Institution of proceedings is
appropriate at this time in view of the legal and policy issues raised
by the proposed rule change, as discussed below. Institution of
proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, as
described below, the Commission seeks and encourages interested persons
to provide comments on the proposed rule change.
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\14\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\15\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act, which requires, among other things, that the rules of a
national securities exchange be ``designed to prevent fraudulent and
manipulative acts and practices'' and ``to protect investors and the
public interest.'' \16\
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\15\ Id.
\16\ 15 U.S.C. 78f(b)(5).
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The Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposal, which are set forth
in the Notice,\17\ in addition to any other comments they may wish to
submit about the proposed rule change. In particular, the Commission
seeks comment on the following questions and asks commenters to submit
data where appropriate to support their views:
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\17\ See Notice, supra note 3.
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1. What are commenters' views on whether the proposed Trust and
Shares would be susceptible to manipulation?
[[Page 32986]]
What are commenters' views generally on whether the Exchange's proposal
is designed to prevent fraudulent and manipulative acts and practices?
What are commenters' views generally with respect to the liquidity and
transparency of the bitcoin markets, the bitcoin markets'
susceptibility to manipulation, and thus the suitability of bitcoin as
an underlying asset for an exchange-traded product?
2. What are commenters' views of the Exchange's assertion that
regulatory and financial landscapes relating to bitcoin and other
digital assets have changed significantly since 2016? \18\ Are the
changes that the Exchange identifies sufficient to support the
determination that the proposed listing and trading of the Shares are
consistent with the Act?
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\18\ See id. at 14989.
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3. The Exchange states that ``approving this proposal . . . [would]
allow U.S. investors with access to bitcoin in a regulated and
transparent exchange-traded vehicle that would act to limit risk''
associated with retail exposure through other means.\19\ Further, the
Exchange asserts that ``the manipulation concerns previously
articulated by the Commission are sufficiently mitigated to the point
that they are outweighed by quantifiable investor protection issues.''
\20\ What are commenters' view regarding such an assertion?
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\19\ See id. at 14990.
\20\ See id. at 14994.
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4. According to the Exchange, ``[n]early every measurable metric
related to [Chicago Mercantile Exchange's] Bitcoin Futures has trended
consistently up since launch and/or accelerated upward in the past
year.'' \21\ Based on data provided and the academic research cited by
the Exchange, do commenters agree that the Chicago Mercantile Exchange
(``CME'') now represents a regulated market of significant size? \22\
What are commenters' views on whether there is a reasonable likelihood
that a person attempting to manipulate the Shares would also have to
trade on CME to manipulate the Shares? What of the Exchange's assertion
that the combination of (a) CME bitcoin futures leading price
discovery; (b) the overall size of the bitcoin market; and (c) the
ability for market participants to buy or sell large amounts of bitcoin
without significant market impact helps to prevent the Shares from
becoming the predominant force on pricing in either the bitcoin spot or
CME bitcoin futures markets? \23\
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\21\ See id. at 14991.
\22\ See id. at 14989.
\23\ See id. at 14995.
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5. What are commenters' views on the Exchange's statement,
generally, that bitcoin is resistant to price manipulation and that
other means to prevent fraudulent and manipulative acts and practices
exist to justify dispensing with the requisite surveillance sharing
agreement with a regulated market of significant size related to
bitcoin? \24\ What of the Exchange's assertion in support of such
statement that significant liquidity in the spot market and the
decreasing impact of market orders on the overall price of bitcoin mean
that attempting to move the price of bitcoin is costly? \25\ What of
the assertion that offering only in-kind creations and redemptions
provides unique protections against potential attempts to manipulate
the Shares and that the price the Sponsor uses to value the Trust's
bitcoin ``is not particularly important''? \26\
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\24\ See id. at 14994 n.54.
\25\ See id. at 14995.
\26\ See id. at 14999.
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III. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Section 6(b)(5) or any other provision of the Act, and
the rules and regulations thereunder. Although there do not appear to
be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\27\
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\27\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Pub. L. 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by July 14, 2021. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by July 28,
2021. Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#aedcdbc2cb83cdc1c3c3cbc0daddeeddcbcd80c9c1d8"><span class="__cf_email__" data-cfemail="95e7e0f9f0b8f6faf8f8f0fbe1e6d5e6f0f6bbf2fae3">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2021-019 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeBZX-2021-019. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeBZX-2021-019 and should be submitted
by July 14, 2021. Rebuttal comments should be submitted by July 28,
2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
J. Matthew DeLesDernier,
Assistant Secretary.
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\28\ 17 CFR 200.30-3(a)(57).
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[FR Doc. 2021-13101 Filed 6-22-21; 8:45 am]
BILLING CODE 8011-01-P
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