Notice2022-21982
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
October 11, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 195 (Tuesday, October 11, 2022)</title>
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[Federal Register Volume 87, Number 195 (Tuesday, October 11, 2022)]
[Notices]
[Pages 61418-61420]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-21982]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95978; File No. SR-CboeBZX-2022-035]
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
October 4, 2022.
On June 24, 2022, 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 July 13, 2022.\3\ The Commission has received no comments
on the proposed rule change.
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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. 95218 (July 7,
2022), 87 FR 41755 (``Notice'').
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On August 24, 2022, 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
[[Page 61419]]
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. 95596, 87 FR 53038
(Aug. 30, 2022). The Commission designated October 11, 2022, 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\ See Notice, supra note 3, 87 FR at 41765. 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. See
id. at 41764. A third-party regulated custodian (``Custodian'') will
be responsible for custody of the Trust's bitcoin. See id. at 41755.
\9\ See id. at 41765.
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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 41764.
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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 41766.
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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. at 41765.
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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 41764-65.
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II. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2022-035 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? 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. Based on data and analysis provided and the academic research
cited by the Exchange,\18\ do commenters agree with the Exchange that
the Chicago Mercantile Exchange (``CME'') on which bitcoin futures
contracts trade (``CME Bitcoin Futures'') represents a regulated market
of significant size related to spot bitcoin? \19\ 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 the CME
to manipulate the Shares? Do commenters agree with the Exchange's
assertion that the combination of (a) the in-kind creation and
redemption process; (b) CME Bitcoin Futures leading price discovery;
(c) the overall size of the bitcoin market; and (d) 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 spot bitcoin or CME
Bitcoin Futures markets? \20\
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\18\ See id. at 41761-62, 41763 n.51.
\19\ See id. at 41763.
\20\ See id. at 41764.
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[[Page 61420]]
3. The Exchange states 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
requirement to enter into a comprehensive surveillance-sharing
agreement with a regulated market of significant size related to spot
bitcoin.\21\ Do commenters believe the Exchange has shown that the
bitcoin market is resistant to price manipulation or that other means
to prevent fraudulent and manipulative acts and practices exist to
justify dispensing with the relevant surveillance-sharing agreement?
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\21\ See id. at 41763 n.54.
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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.\22\
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\22\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 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 November 1, 2022. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
November 15, 2022.
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#344641585119575b5959515a4047744751571a535b42"><span class="__cf_email__" data-cfemail="3f4d4a535a125c5052525a514b4c7f4c5a5c11585049">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2022-035 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-2022-035. 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-2022-035 and should be submitted
by November 1, 2022. Rebuttal comments should be submitted by November
15, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-21982 Filed 10-7-22; 8:45 am]
BILLING CODE 8011-01-P
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