Notice2024-01389
Self-Regulatory Organizations; Nasdaq ISE LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Options on iShares Bitcoin Trust
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
January 25, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 17 (Thursday, January 25, 2024)</title>
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[Federal Register Volume 89, Number 17 (Thursday, January 25, 2024)]
[Notices]
[Pages 5047-5052]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-01389]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99396; File No. SR-ISE-2024-03]
Self-Regulatory Organizations; Nasdaq ISE LLC; Notice of Filing
of Proposed Rule Change, as Modified by Amendment No. 1, To List and
Trade Options on iShares Bitcoin Trust
January 19, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on January 9, 2024, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I and II, below, which
Items have been prepared by the Exchange. On January 11, 2024, the
Exchange filed Amendment No. 1 to the proposal, which supersedes the
original filing in its entirety. The Commission is publishing this
notice to solicit comments on the proposed rule change, as modified by
Amendment No. 1, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Options 4, Section 3, Criteria for
Underlying Securities. This Amendment No. 1 supersedes the original
filing in its entirety.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/ise/rules">https://listingcenter.nasdaq.com/rulebook/ise/rules</a>, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
[[Page 5048]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Options 4, Section 3, Criteria for
Underlying Securities, to allow the Exchange to list and trade options
on iShares Bitcoin Trust (the ``Trust'') \3\ as a Unit deemed
appropriate for options trading on the Exchange.
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\3\ The Commission recently approved a rule change to list and
trade shares of the Trust pursuant to Rule 5711(d) of The Nasdaq
Stock Exchange LLC (``Commodity-Based Trust Shares''). See
Securities Exchange Act Release No. 99306 (January 10, 2024) (SR-
NASDAQ-2023-016) (not yet published) (hereinafter ``SR-NASDAQ-2023-
016''). The Exchange represents it would not list options on the
Trust unless it satisfied all applicable criteria in Options 4,
Section 3.
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Currently, Options 4, Section 3(h) provides that securities deemed
appropriate for options trading shall include shares or other
securities (``Exchange-Traded Fund Shares'' or ``ETFs'') that are
traded on a national securities exchange and are defined as an ``NMS''
stock under Rule 600 of Regulation NMS, and that meet certain criteria
specified in Options 4, Section 3(h), including that they:
(i) represent interests in registered investment companies (or
series thereof) organized as open-end management investment
companies, unit investment trusts or similar entities that hold
portfolios of securities and/or financial instruments, including,
but not limited to, stock index futures contracts, options on
futures, options on securities and indices, equity caps, collars and
floors, swap agreements, forward contracts, repurchase agreements
and reverse repurchase agreements (the ``Financial Instruments''),
and money market instruments, including, but not limited to, U.S.
government securities and repurchase agreements (the ``Money Market
Instruments'') comprising or otherwise based on or representing
investments in broad-based indexes or portfolios of securities and/
or Financial Instruments and Money Market Instruments (or that hold
securities in one or more other registered investment companies that
themselves hold such portfolios of securities and/or Financial
Instruments and Money Market Instruments) or
(ii) represent interests in a trust or similar entity that holds
a specified non-U.S. currency or currencies deposited with the trust
when aggregated in some specified minimum number may be surrendered
to the trust or similar entity by the beneficial owner to receive
the specified non-U.S. currency or currencies and pays the
beneficial owner interest and other distributions on the deposited
non-U.S. currency or currencies, if any, declared and paid by the
trust (``Currency Trust Shares'') or
(iii) represent commodity pool interests principally engaged,
directly or indirectly, in holding and/or managing portfolios or
baskets of securities, commodity futures contracts, options on
commodity futures contracts, swaps, forward contracts and/or options
on physical commodities and/or non-U.S. currency (``Commodity Pool
ETFs'') or
(iv) represent interests in the SPDR[supreg] Gold Trust, the
iShares COMEX Gold Trust, the iShares Silver Trust, or the ETFS Gold
Trust or
(v) represents an interest in a registered investment company
(``Investment Company'') organized as an open-end management company
or similar entity, that invests in a portfolio of securities
selected by the Investment Company's investment adviser consistent
with the Investment Company's investment objectives and policies,
which is issued in a specified aggregate minimum number in return
for a deposit of a specified portfolio of securities and/or a cash
amount with a value equal to the next determined net asset value
(``NAV''), and when aggregated in the same specified minimum number,
may be redeemed at a holder's request, which holder will be paid a
specified portfolio of securities and/or cash with a value equal to
the next determined NAV (``Managed Fund Share'').
In addition to the aforementioned requirements, Options 4, Section
3(h)(1) and (2) must be met to list options on ETFs.\4\
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\4\ Options 4, Section 3(h)(1) and (2) state that the Exchange-
Traded Fund Shares either (i) meet the criteria and guidelines set
forth in paragraphs (a) and (b) described herein; or (ii) the
Exchange-Traded Fund Shares are available for creation or redemption
each business day from or through the issuing trust, investment
company, commodity pool or other entity in cash or in kind at a
price related to net asset value, and the issuer is obligated to
issue Exchange-Traded Fund Shares in a specified aggregate number
even if some or all of the investment assets and/or cash required to
be deposited have not been received by the issuer, subject to the
condition that the person obligated to deposit the investment assets
has undertaken to deliver them as soon as possible and such
undertaking is secured by the delivery and maintenance of collateral
consisting of cash or cash equivalents satisfactory to the issuer of
the Exchange-Traded Fund Shares, all as described in the Exchange-
Traded Fund Shares' prospectus. Also, the Exchange-Traded Fund
Shares based on international or global indexes, or portfolios that
include non-U.S. securities, shall meet the criteria in Options 4,
Section 3(h)(2)(A)-(F).
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Proposal
The Exchange proposes to expand the list of ETFs that are
appropriate for options trading on the Exchange in Options 3, Section
4(h)(iv) to include the Trust.\5\
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\5\ Specifically, the Exchange proposes to amend Options 3,
Section 4(h)(iv) to include the name of the Trust to enable options
to be listed on the Trust on the Exchange.
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Description of the Trust \6\
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\6\ See SR-NASDAQ-2023-016 for a complete description of the
Trust.
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The Shares are issued by the Trust, a Delaware statutory trust. The
Trust operates pursuant to a trust agreement (the ``Trust Agreement'')
between the Sponsor, BlackRock Fund Advisors (the ``Trustee'') as the
trustee of the Trust and Wilmington Trust, National Association, as
Delaware trustee (the ``Delaware Trustee''). The Trust issues Shares
representing fractional undivided beneficial interests in its net
assets. The assets of the Trust consist only of bitcoin, held by a
custodian on behalf of the Trust except under limited circumstances
when transferred through the Trust's prime broker temporarily
(described below), and cash. Coinbase Custody Trust Company, LLC (the
``Bitcoin Custodian'') is the custodian for the Trust's bitcoin
holdings, and maintains a custody account for the Trust (``Custody
Account''); Coinbase, Inc. (the ``Prime Execution Agent''), an
affiliate of the Bitcoin Custodian, is the prime broker for the Trust
and maintains a trading account for the Trust (``Trading Account'');
and Bank of New York Mellon is the custodian for the Trust's cash
holdings (the ``Cash Custodian'' and together with the Bitcoin
Custodian, the ``Custodians'') and the administrator of the Trust (the
``Trust Administrator''). Under the Trust Agreement, the Trustee may
delegate all or a portion of its duties to any agent, and has delegated
the bulk of the day-to-day responsibilities to the Trust Administrator
and certain other administrative and record-keeping functions to its
affiliates and other agents. The Trust is not an investment company
registered under the Investment Company Act of 1940, as amended (the
``1940 Act'').
The investment objective of the Trust is to reflect generally the
performance of the price of bitcoin. The Trust seeks to reflect such
performance before payment of the Trust's expenses and liabilities. The
Shares are intended to constitute a simple means of making an
investment similar to an investment in bitcoin through the public
securities market rather than by acquiring, holding
[[Page 5049]]
and trading bitcoin directly on a peer-to-peer or other basis or via a
digital asset exchange. The Shares have been designed to remove the
obstacles represented by the complexities and operational burdens
involved in a direct investment in bitcoin, while at the same time
having an intrinsic value that reflects, at any given time, the
investment exposure to the bitcoin owned by the Trust at such time,
less the Trust's expenses and liabilities. Although the Shares are not
the exact equivalent of a direct investment in bitcoin, they provide
investors with an alternative method of achieving investment exposure
to bitcoin through the public securities market, which may be more
familiar to them.
Custody of the Trust's Bitcoin
An investment in the Shares is backed by bitcoin held by the
Bitcoin Custodian on behalf of the Trust. All of the Trust's bitcoin
will be held in the Custody Account, other than the Trust's bitcoin
which is temporarily maintained in the Trading Account under limited
circumstances, i.e., in connection with creation and redemption Basket
\7\ activity or sales of bitcoin deducted from the Trust's holdings in
payment of Trust expenses or the Sponsor's fee (or, in extraordinary
circumstances, upon liquidation of the Trust). The Custody Account
includes all of the Trust's bitcoin held at the Bitcoin Custodian, but
does not include the Trust's bitcoin temporarily maintained at the
Prime Execution Agent in the Trading Account from time to time. The
Bitcoin Custodian will keep all of the private keys associated with the
Trust's bitcoin held in the Custody Account in ``cold storage''.\8\ The
hardware, software, systems, and procedures of the Bitcoin Custodian
may not be available or cost-effective for many investors to access
directly.
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\7\ The Trust issues and redeems Shares only in blocks of 40,000
or integral multiples thereof. A block of 40,000 Shares is called a
``Basket.'' These transactions take place in exchange for bitcoin.
\8\ The term ``cold storage'' refers to a safeguarding method by
which the private keys corresponding to the Trust's bitcoins are
generated and stored in an offline manner, subject to layers of
procedures designed to enhance security. Private keys are generated
by the Bitcoin Custodian in offline computers that are not connected
to the internet so that they are more resistant to being hacked.
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The Exchange believes that offering options on the Trust will
benefit investors by providing them with an additional, relatively
lower cost investing tool to gain exposure to spot Bitcoin as well as a
hedging vehicle to meet their investment needs in connection with
Bitcoin products and positions. Similar to other commodity ETFs in
which options may be listed on ISE (e.g., SPDR[supreg] Gold Trust, the
iShares COMEX Gold Trust, the iShares Silver Trust, or the ETFS Gold
Trust),\9\ the proposed ETF is a trust that essentially offers the same
objectives and benefits to investors.
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\9\ See ISE Options 4, Section 3(h)(iv).
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Options on the Trust will trade in the same manner as options on
other ETFs on the Exchange. Exchange Rules that currently apply to the
listing and trading of all options on ETFs on the Exchange, including,
for example, Rules that govern listing criteria, expirations, exercise
prices, minimum increments, position and exercise limits, margin
requirements, customer accounts and trading halt procedures, will apply
to the listing and trading of options on the Trust on the Exchange.
Today, these rules apply to options on the various commodities ETFs
deemed appropriate for options trading on the Exchange pursuant to
Options 4, Section 3(h)(iv).
The Exchange's initial listing standards for ETFs on which options
may be listed and traded on the Exchange will apply to the Trust. The
initial listing standard as set forth in Options 4, Section 3(a)
provides that:
Underlying securities with respect to which put or call options
contracts are approved for listing and trading on the Exchange must
meet the following criteria: (1) the security must be registered and
be an ``NMS stock'' as defined in Rule 600 of Regulation NMS under
the Exchange Act; and (2) the security shall be characterized by a
substantial number of outstanding shares that are widely held and
actively traded.
Pursuant to ISE Options 4, Section 3, ETFs on which options may be
listed and traded must satisfy the listing standards set forth in
Options 4, Section 3(h). Specifically, the Trust must meet either:
(1) the criteria and guidelines for underlying securities set
forth in Options 4, Section 3(h), or
(2) it must be available for creation or redemption each
business day from or through the issuing trust, investment company,
commodity pool or other entity in cash or in kind at a price related
to net asset value, and the issuer is obligated to issue Exchange-
Traded Fund Shares in a specified aggregate number even if some or
all of the investment assets and/or cash required to be deposited
have not been received by the issuer, subject to the condition that
the person obligated to deposit the investment assets has undertaken
to deliver them as soon as possible and such undertaking is secured
by the delivery and maintenance of collateral consisting of cash or
cash equivalents satisfactory to the issuer of the Exchange-Traded
Fund Shares, all as described in the Exchange-Traded Fund Shares'
prospectus, or the Exchange-Traded Fund Shares must be based on
international or global indexes, or portfolios that include non-U.S.
securities, and meet other criteria.
Options on the Trust will also be subject to the Exchange's
continued listing standards for options on ETFs set forth in Options 4,
Section 4(g). Specifically, options approved for trading pursuant to
Options 4, Section 3(h) will not be deemed to meet the requirements for
continued approval, and the Exchange shall not open for trading any
additional series of option contracts of the class covering such ETFs
if the ETFs are delisted from trading as provided in subparagraph
(b)(5) of Options 4, Section 4 \10\ or the ETFs are halted or suspended
from trading on their primary market.\11\ In addition, the Exchange
shall consider the suspension of opening transactions in any series of
options of the class covering ETFs in any of the following
circumstances:
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\10\ Options 4, Section 4(b)(5) provides, if an underlying
security is approved for options listing and trading under the
provisions of Options 4, Section 3(c), the trading volume of the
Original Security (as therein defined) prior to but not after the
commencement of trading in the Restructure Security (as therein
defined), including `when-issued' trading, may be taken into account
in determining whether the trading volume requirement of (3) of this
paragraph (b) is satisfied.
\11\ See Options 4, Section 4(g).
(1) in the case of options covering Exchange-Traded Fund Shares
approved pursuant to Options 4, Section 3(h)(A)(i), in accordance
with the terms of subparagraphs (b)(1), (2), (3) and (4) of Options
4, Section 4; \12\
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\12\ Options 4, Section 4(b)(5)(1) through (4) provides, if: (1)
there are fewer than 6,300,000 shares of the underlying security
held by persons other than those who are required to report their
security holdings under Section 16(a) of the Act, (2) there are
fewer than 1,600 holders of the underlying security, (3) the trading
volume (in all markets in which the underlying security is traded)
has been less than 1,800,000 shares in the preceding twelve (12)
months, or (4) the underlying security ceases to be an `NMS stock'
as defined in Rule 600 of Regulation NMS under the Exchange Act.
Options 4, Section 3(h)(i) refers to Financial Instruments and Money
Market Instruments. In addition, the Exchange proposes to amend the
citation to ``Options 4, Section 3(h)(A)(i)'' herein to ``Options 4,
Section 3(h)(i).''
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(2) in the case of options covering Fund Shares approved
pursuant to Options 4, Section 3(h)(A)(ii),\13\ following the
initial twelve-month period beginning upon the commencement of
trading in the Exchange-Traded Fund Shares on a national securities
exchange and are defined as an ``NMS stock'' under Rule 600 of
Regulation NMS [sic], there were fewer than 50 record and/or
beneficial holders of such Exchange-Traded Fund Shares for 30 or
more consecutive trading days;
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\13\ Options 4, Section 3(h)(ii) refers to Currency Trust
Shares. In addition, the Exchange proposes to amend the citation to
``Options 4, Section 3(h)(A)(ii)'' herein to ``Options 4, Section
3(h)(ii).''
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(3) the value of the index or portfolio of securities or non-
U.S. currency, portfolio of
[[Page 5050]]
commodities including commodity futures contracts, options on
commodity futures contracts, swaps, forward contracts, options on
physical commodities and/or Financial Instruments and Money Market
Instruments, on which the Exchange-Traded Fund Shares are based is
no longer calculated or available; or
(4) such other event occurs or condition exists that in the
opinion of the Exchange makes further dealing in such options on the
Exchange inadvisable.
Options on the Trust would be physically settled contracts with
American-style exercise.\14\ Consistent with current Options 4, Section
5, which governs the opening of options series on a specific underlying
security (including ETFs), the Exchange will open at least one
expiration month for options on the Trust and may also list series of
options on the Trust for trading on a weekly \15\ or quarterly \16\
basis. The Exchange may also list long-term equity option series
(``LEAPS'') \17\ that expire from twelve to thirty-nine [sic] from the
time they are listed.
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\14\ See Options 4, Section 2, Rights and Obligations of Holders
and Writers, which provides that the rights and obligations of
holders and writers shall be as set forth in the Rules of the
Clearing Corporation. See also OCC Rules, Chapter VIII, which
governs exercise and assignment, and Chapter IX, which governs the
discharge of delivery and payment obligations arising out of the
exercise of physically settled stock option contracts. OCC Rules can
be located at: <a href="https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occ_rules.pdf">https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occ_rules.pdf</a>.
\15\ See Supplementary .03 to Options 4, Section 5.
\16\ See Supplementary .04 to Options 4, Section 5.
\17\ See Options 4, Section 8.
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Pursuant to Options 4, Section 5(d), which governs strike prices of
series of options on ETFs, the interval between strike prices of series
of options on ETFs approved for options trading pursuant to Section
3(h) of Options 4 shall be fixed at a price per share which is
reasonably close to the price per share at which the underlying
security is traded in the primary market at or about the same time such
series of options is first open for trading on the Exchange, or at such
intervals as may have been established on another options exchange
prior to the initiation of trading on the Exchange. With respect to the
Short Term Options Series or Weekly Program, during the month prior to
expiration of an option class that is selected for the Short Term
Option Series Program, the strike price intervals for the related non-
Short Term Option (``Related non-Short Term Option'') shall be the same
as the strike price intervals for the Short Term Option.\18\
Specifically, the Exchange may open for trading Short Term Option
Series at strike price intervals of (i) $0.50 or greater where the
strike price is less than $100, and $1 or greater where the strike
price is between $100 and $150 for all option classes that participate
in the Short Term Options Series Program; (ii) $0.50 for option classes
that trade in one dollar increments and are in the Short Term Option
Series Program; or (iii) $2.50 or greater where the strike price is
above $150.\19\ Additionally, the Exchange may list series of options
pursuant to the $1 Strike Price Interval Program,\20\ the $0.50 Strike
Program,\21\ the $2.50 Strike Price Program,\22\ and the $5 Strike
Program.\23\ Options 3, Section 3 governs the minimum increment for
bids and offers for both equity and index options. Pursuant to Options
3, Section 3, where the price of a series of options for the Trust is
less than $3.00 the minimum increment will be $0.05, and where the
price is $3.00 or higher, the minimum increment will be $0.10 \24\
consistent with the minimum increments for options on other ETFs listed
on the Exchange. Any and all new series of Trust options that the
Exchange lists will be consistent and comply with the expirations,
strike prices, and minimum increments set forth in Options 4, Section 5
and Options 3, Section 3, as applicable.
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\18\ See Supplementary Material .03(e) to Options 4, Section 5.
\19\ Id.
\20\ See Supplementary Material .01 to Options 4, Section 5.
\21\ See Supplementary Material .05 to Options 4, Section 5.
\22\ See Supplementary Material .02 to Options 4, Section 5.
\23\ See Supplementary Material .06 to Options 4, Section 5.
\24\ Options that are eligible to participate in the Penny
Interval Program have a minimum increment of $0.01 below $3.00 and
$0.50 above $3.00. See Supplementary Material .01 to Options 3,
Section 3.
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Position and exercise limits for options on ETFs, including options
on the Trust, are determined pursuant to Options 9, Sections 13 and 15,
respectively. Position and exercise limits for ETFs options vary
according to the number of outstanding shares and the trading volumes
of the underlying ETF over the past six months, where the largest in
capitalization and the most frequently traded ETFs have an option
position and exercise limit of 250,000 contracts (with adjustments for
splits, re-capitalizations, etc.) on the same side of the market; and
smaller capitalization ETFs have position and exercise limits of
200,000, 75,000, 50,000 or 25,000 contracts (with adjustments for
splits, re-capitalizations, etc.) on the same side of the market.
Further, Options 6C, Section 3, which governs margin requirements
applicable to the trading of all options on the Exchange including
options on ETFs, will also apply to the trading of the Trust options.
The Exchange represents that the same surveillance procedures
applicable to all other options on other ETFs currently listed and
traded on the Exchange will apply to options on the Trust. Also, the
Exchange represents that it has the necessary systems capacity to
support the new option series. The Exchange believes that its existing
surveillance and reporting safeguards are designed to deter and detect
possible manipulative behavior which might potentially arise from
listing and trading options on ETFs, including the proposed Trust
options.
The Exchange has also analyzed its capacity and represents that it
believes the Exchange and the Options Price Reporting Authority or
``OPRA'' have the necessary systems capacity to handle the additional
traffic associated with the listing of new series that may result from
the introduction of options on the Trust up to the number of
expirations currently permissible under the Exchange Rules. Because the
proposal is limited to one class, the Exchange believes any additional
traffic that may be generated from the introduction of the Trust
options will be manageable.
Finally, the Exchange proposes a technical amendment to Options 4,
Section 3(h)(iv) to amend the name ``ETFS Gold Trust'' to ``Aberdeen
Standard Physical Gold Trust.'' In 2018 this ETF was renamed.\25\ At
this time, the Exchange proposes to amend the name of the ETF to
reflect its current name. The Exchange also proposes to correct two
citations in Options 4, Section 4(g). The Exchange proposes to update a
citation in Options 4, Section 4(g)(1) from ``Options 4, Section
3(h)(A)(i)'' to ``Options 4, Section 3(h)(i)'' The Exchange also
proposes to update a citation in Options 4, Section 4(g)(2) from
``Options 4, Section 3(h)(A)(ii)'' to ``Options 4, Section 3(h)(ii).''
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\25\ Effective October 1, 2018 ETFS Gold Trust was renamed
Aberdeen Standard Gold ETF Trust. <a href="https://www.sec.gov/Archives/edgar/data/1450923/000138713118005292/ex10-2.htm">https://www.sec.gov/Archives/edgar/data/1450923/000138713118005292/ex10-2.htm</a>.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\26\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\27\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with
[[Page 5051]]
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. Additionally, the Exchange
believes the proposed rule change is consistent with the Section
(6)(b)(5) \28\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
\28\ 15 U.S.C. 78(f)(b)(5).
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In particular, the Exchange believes that the proposal to list and
trade options on the Trust will remove impediments to and perfect the
mechanism of a free and open market and a national market system and,
in general, protect investors because offering options on the Trust
will provide investors with a greater opportunity to realize the
benefits of utilizing options on an ETF based on spot bitcoin,
including cost efficiencies and increased hedging strategies. The
Exchange believes that offering options on a competitively priced ETF
based on spot bitcoin will benefit investors by providing them with an
additional, relatively lower cost risk management tool allowing them to
manage, more easily, their positions, and associated risks, in their
portfolios in connection with exposure to spot bitcoin. Today, the
Exchange lists options on other commodity ETFs structured as a trust,
which essentially offer the same objectives and benefits to investors,
and for which the Exchange has not identified any issues with the
continued listing and trading of options on those ETFs.
The Exchange also believes the proposal to permit options on the
Trust will remove impediments to and perfect the mechanism of a free
and open market and a national market system, because options on the
Trust will comply with current Exchange Rules. Options on the Trust
must satisfy the initial listing standards and continued listing
standards currently in the Exchange Rules, applicable to options on all
ETFs, including options on other commodity ETFs already deemed
appropriate for options trading on the Exchange pursuant to Options 4,
Section 3(h)(iv). Further, Exchange Rules that currently govern the
listing and trading of options on ETFs, including permissible
expirations, strike prices, minimum increments, position and exercise
limits, and margin requirements, will govern the listing and trading of
options on the Trust. The Exchange represents that it has the necessary
systems capacity to support options on the Trust. The Exchange believes
that its existing surveillance and reporting safeguards are designed to
deter and detect possible manipulative behavior which might arise from
listing and trading options on ETFs, including the Trust options.
Finally, the Commission has previously approved the listing and
trading of options on other commodity ETFs structured as a trust, such
as SPDR[supreg] Gold Trust,\29\ the iShares COMEX Gold Trust \30\ the
iShares Silver Trust,\31\ the ETFS Gold Trust,\32\ and the ETFS Silver
Trust.\33\
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\29\ See Securities Exchange Act Release No. 57897 (May 30,
2008), 73 FR 32061 (June 5, 2008) (SR-Amex-2008-15; SR-CBOE-2005-11;
SR-ISE-2008-12; SR-NYSEArca-2008-52; and SR-Phlx-2008-17) (Order
Granting Approval of a Proposed Rule Change, as Modified, and Notice
of Filing and Order Granting Accelerated Approval of Proposed Rule
Changes, as Modified, Relating to Listing and Trading Options on the
SPDR Gold Trust).
\30\ See Securities Exchange Act Release No. 59055 (December 4,
2008), 73 FR 75148 (December 10, 2008) (SR-Amex-2008-68; SR-BSE-
2008-51; SR-CBOE-2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and
SR-Phlx-2008-58) (Notice of Filing and Order Granting Accelerated
Approval of Proposed Rule Changes Relating to the Listing and
Trading Options on Shares of the iShares COMEX Gold Trust and the
iShares Silver Trust).
\31\ Id.
\32\ See Securities Exchange Act Release No. 61483 (February 3,
2010), 75 FR 6753 (February 10, 2010) (SR-CBOE-2010-007; SR-ISE-
2009-106; SR-NYSEAmex-2009-86; and SR-NYSEArca-2009-110) (Order
Granting Approval of Proposed Rule Changes and Notice of Filing and
Order Granting Accelerated Approval of a Proposed Rule Change
Relating to Listing and Trading Options on the ETFS Gold Trust and
the ETFS Silver Trust).
\33\ Id.
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Further, the Exchange's proposal to amend the name ``ETFS Gold
Trust'' to ``Aberdeen Standard Physical Gold Trust'' in Options 4,
Section 3(h)(iv) is consistent with the Act and the protection of
investors as this amendment reflects the current name of this product.
Also, the Exchange's proposal to correct two citations in Options 4,
Section 4(g) \34\ are consistent with the Act as these amendments are
intended to update incorrect citations.
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\34\ The Exchange proposes to update a citation in Options 4,
Section 4(g)(1) from ``Options 4, Section 3(h)(A)(i)'' to ``Options
4, Section 3(h)(i)'' The Exchange also proposes to update a citation
in Options 4, Section 4(g)(2) from ``Options 4, Section
3(h)(A)(ii)'' to ``Options 4, Section 3(h)(ii).''
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act as options on the
Trust will be subject to initial listing standards and continued
listing standards the same as other options on ETFs listed on the
Exchange. Further, options on the Trust will be subject to Exchange
Rules that currently govern the listing and trading of options on ETFs,
including permissible expirations, strike prices, minimum increments,
position and exercise limits, and margin requirements. Options on the
Trust will be equally available to all market participants who wish to
trade such options. Also, and as stated above, the Exchange already
lists options on other commodity ETFs structured as a trust.
The Exchange does not believe that the proposal to list and trade
options on the Trust will impose any burden on intermarket competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. To the extent that permitting options on the Trust to trade on
the Exchange may make the Exchange a more attractive marketplace to
market participants, such market participants are free to elect to
become market participants on the Exchange. Additionally, other options
exchanges are free to amend their listing rules, as applicable, to
permit them to list and trade options on the Trust. The Exchange
believes that the proposed rule change may relieve any burden on, or
otherwise promote, competition as it is designed to increase
competition for order flow on the Exchange in a manner that is
beneficial to investors by providing them with a lower-cost option to
hedge their investment portfolios. The Exchange notes that it operates
in a highly competitive market in which market participants can readily
direct order flow to competing venues that offer similar products.
Ultimately, the Exchange believes that offering options on the Trust
for trading on the Exchange will promote competition by providing
investors with an additional, relatively low-cost means to hedge their
portfolios and meet their investment needs in connection with spot
bitcoin prices and bitcoin related products and positions.
Finally, the Exchange's proposal to amend the name ``ETFS Gold
Trust'' to ``Aberdeen Standard Physical Gold Trust'' in Options 4,
Section 3(h)(iv) does not impose an undue burden on competition as this
amendment reflects the current name of this product. Also, the
Exchange's proposal to correct two
[[Page 5052]]
citations in Options 4, Section 4(g) \35\ does not impose an undue
burden on competition as these amendments are intended to update
incorrect citations.
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\35\ The Exchange proposes to update a citation in Options 4,
Section 4(g)(1) from ``Options 4, Section 3(h)(A)(i)'' to ``Options
4, Section 3(h)(i)'' The Exchange also proposes to update a citation
in Options 4, Section 4(g)(2) from ``Options 4, Section
3(h)(A)(ii)'' to ``Options 4, Section 3(h)(ii).''
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as modified by Amendment No. 1, is consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d8aaadb4bdf5bbb7b5b5bdb6acab98abbdbbf6bfb7ae"><span class="__cf_email__" data-cfemail="6b191e070e46080406060e051f182b180e08450c041d">[email protected]</span></a>. Please include
file number SR-ISE-2024-03 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-ISE-2024-03. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-ISE-2024-03 and should be
submitted on or before February 15, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01389 Filed 1-24-24; 8:45 am]
BILLING CODE 8011-01-P
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