Notice2024-26533
Self-Regulatory Organizations; NYSE American LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend Exchange Rule 915 To Permit the Listing and Trading of Options on the Bitwise Ethereum ETF, the Grayscale Ethereum Trust, the Grayscale Ethereum Mini Trust, and Any Trust That Holds Ether
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
November 14, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 220 (Thursday, November 14, 2024)</title>
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[Federal Register Volume 89, Number 220 (Thursday, November 14, 2024)]
[Notices]
[Pages 90133-90136]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-26533]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101573; File No. SR-NYSEAMER-2024-45]
Self-Regulatory Organizations; NYSE American LLC; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To Amend Exchange Rule 915 To Permit the Listing
and Trading of Options on the Bitwise Ethereum ETF, the Grayscale
Ethereum Trust, the Grayscale Ethereum Mini Trust, and Any Trust That
Holds Ether
November 8, 2024.
I. Introduction
On July 23, 2024, NYSE American LLC (``NYSE American'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend Exchange Rule 915 to
permit the listing and trading of options on the Bitwise Ethereum ETF,
the Grayscale Ethereum Trust (ETH), the Grayscale Ethereum Mini Trust,
and any trust that holds ether. The proposed rule change was published
for comment in the Federal Register on August 13, 2024.\3\ The
Commission has received no comments regarding the proposal.
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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. 100666 (Aug. 7,
2024), 89 FR 65957 (``Notice'').
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On September 24, 2024, pursuant to Section 19(b)(2) of the Exchange
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
[[Page 90134]]
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. 101157 (Sept. 24,
2024), 89 FR 79678 (Sept. 30, 2024) (designating November 11, 2024,
as the date by which the Commission shall either 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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II. Description of the Proposal
As described more fully in the Notice,\7\ the Exchange proposes to
amend Exchange Rule 915, Commentary .10, to allow the Exchange to list
and trade options on the Bitwise Ethereum ETF, the Grayscale Ethereum
Trust, the Grayscale Ethereum Mini Trust, and any trust that holds
ether (collectively, the ``Ether ETPs'').\8\ The Exchange states that
Ether ETPs are ether-backed commodity ETPs structured as trusts, and
that, similar to exchange-traded funds (``ETFs'') currently deemed
appropriate for options trading under Exchange Rule 915, the investment
objective of an Ether ETP trust is for its shares to reflect the
performance of ether (less the expenses of the trust's operations),
thereby offering investors an opportunity to gain exposure to ether
without the complexities of ether delivery.\9\ The Exchange states that
an Ether ETP's shares represent units of fractional undivided
beneficial interest in the trust, and that Ether ETPs provide investors
with cost efficient alternatives that allow a level of participation in
the ether market through the securities market.\10\
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\7\ See supra note 3.
\8\ The Exchange states that the Commission approved rule
changes to list and trade shares of Ether-based exchange-traded
products (``ETPs''), including, among others, the Bitwise Ethereum
ETF, the Grayscale Ethereum Trust, and the Grayscale Ethereum Mini
Trust. See Notice, 89 FR at 65958, note 4, and Securities Exchange
Act Release Nos. 100224 (May 23, 2024), 89 FR 3008 (May 30, 2024);
and 100541 (July 17, 2024) 89 FR 59786 (July 23, 2024).
\9\ See Notice, 89 FR at 65958.
\10\ See id.
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The Exchange states that Ether ETPs will trade in the same manner
as options on other ETFs and will be subject to the same rules as
options on other ETFs, 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.\11\ In addition, the Exchange states that
its initial listing standards for ETFs on which options may be listed
and traded on the Exchange will apply to Ether ETPs, and that the
Exchange expects the Ether ETPs to satisfy the initial listing
standards in Exchange Rule 915(a) and in Commentary .06 to Exchange
Rule 915.\12\ The Exchange states that, pursuant to Exchange Rule
915(a), a security on which options may be listed and traded on the
Exchange must be registered with the Commission and be an NMS stock (as
defined in Rule 600 of Regulation NMS under the Act) and be
characterized by a substantial number of outstanding shares that are
widely held and actively traded.\13\ In addition, the Exchange states
that Commentary .06 requires that ETFs must either (1) meet the
criteria and standards set forth in Commentary .01 to Rule 915; or (2)
be available for creation and redemption each business day as set forth
in Commentary .06(a)(ii).\14\ The Exchange states that options on Ether
ETPs will also be subject to the Exchange's continued listing standards
set forth in Exchange Rule 916, Commentary .07, which provides that
options on ETFs may be subject to the suspension of opening
transactions if: (1) the ETF no longer meets the terms of Commentary
.01 to Rule 916; (2) following the initial twelve-month period
beginning upon the commencement of trading of the ETF, there are fewer
than 50 record and/or beneficial holders of the ETF for 30 or more
consecutive trading days; (3) the value of the underlying commodity 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 on the Exchange inadvisable.\15\ In addition, the Exchange
states that ETFs will be deemed to not meet the requirements for
continued approval, and the Exchange states that it will not open for
trading any additional series of option contracts covering the ETF if
such security ceases to be an ``NMS stock,'' as provided in Exchange
Rule 915, Commentary .01(5), or the ETF is halted from trading on its
primary market.\16\
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\11\ See id.
\12\ See Notice, 89 FR at 65958-9.
\13\ See Notice, 89 FR at 65959.
\14\ See id.
\15\ See id.
\16\ See id. For avoidance of doubt, the Exchange proposes to
amend Exchange Rule 916 to include the Ether ETPs in the list of
ETFs subject to the continued listing standards. See id. at note 11.
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The Exchange states that options on Ether ETPs listed pursuant to
proposed Exchange Rule 915, Commentary .10 would be physically settled
contracts with American-style exercise and would be subject to Exchange
rules and procedures that currently govern the trading of securities on
the Exchange, including Exchange rules governing the trading of equity
options.\17\ The Exchange further states that its rules pertaining to
position and exercise limits or margin will apply to options on Ether
ETPs.\18\ As described more fully in the Notice, the Exchange's rules
governing the opening of options series and the strike prices for ETP
options also would apply to the proposed Ether ETP options.\19\
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\17\ See Notice, 89 FR at 65959.
\18\ See id.
\19\ See id.
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The Exchange states that position and exercise limits for options
on the proposed Ether ETP options will be determined pursuant to
Exchange Rules 904 and 905, respectively.\20\ The Exchange further
states that position and exercise limits for ETF 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, recapitalizations, 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, recapitalizations, etc.) on the same side of the market.\21\
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\20\ See id.
\21\ See id.
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The Exchange states that options on Ether ETPs would not be
available for trading until The Options Clearing Corporation (``OCC'')
represents to the Exchange that it is fully able to clear and settle
such options.\22\ In addition, the Exchange states that it has analyzed
its capacity and represents that it and The Options Price Reporting
Authority (``OPRA'') have the necessary systems capacity to handle the
additional traffic associated with the listing of options on Ether
ETPs.\23\ In addition, 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
Ether ETPs.\24\ Further, as described in the Notice, the Exchange
states that it will implement any new surveillance procedures it deems
necessary to effectively monitor the trading of options on Ether
ETPs.\25\ Finally, the Exchange states that the quotation and last sale
information for ETFs is available via the Consolidated Tape Association
high speed line, and that quotation and last sale information for such
securities is also available from the exchange on which such securities
are listed.\26\ The Exchange states that quotation and last sale
information for options on Ether ETPs will be available
[[Page 90135]]
via OPRA and major market data vendors.\27\
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\22\ See id. at 65960.
\23\ See id.
\24\ See id.
\25\ See id.
\26\ See id.
\27\ See id.
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The Exchange states that the proposal is consistent with Section
6(b) of the Act, in general, and furthers the objectives of Section
6(b)(5) of the Act, in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanisms of a free and open market and a national market
system. The Exchange believes that the proposal to list and trade
options on Ether ETPs 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 Ether ETPs
will provide investors with a greater opportunity to realize the
benefits of utilizing options on an ETF based on spot ether, including
cost efficiencies and increased hedging strategies.\28\ The Exchange
states that offering options on a competitively priced ETF based on
spot ether will benefit investors by providing them with an additional,
relatively lower cost risk management tool that will allow them to more
easily manage their positions, and the associated risks, in their
portfolios in connection with exposure to spot ether.\29\ The Exchange
states that it currently lists options on other commodity ETFs
structured as a trust and that it has not identified any issues with
the continued listing and trading of options on those ETFs.\30\ In
addition, the Exchange states that the proposal to permit options on
Ether ETPs will remove impediments to and perfect the mechanism of a
free and open market and a national market system because options on
Ether ETPs will comply with current Exchange rules, as discussed
above.\31\ The Exchange states that the Commission has previously
approved the listing and trading of options on other commodity-based
ETFs structured as a trust, including options on the SPDR Gold Trust,
the iShares COMEX Gold Trust, the iShares Silver Trust, the ETFS Gold
Trust, and the ETFS Silver Trust.\32\
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\28\ See id.
\29\ See id.
\30\ See id.
\31\ See id.
\32\ See id.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEAMER-2024-45 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \33\ 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. 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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\33\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\34\ 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,\35\ which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to and protect the mechanism
of a free and open market and a national market system, and, in
general, to protect investors and the public interest.
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\34\ Id.
\35\ 15 U.S.C. 78f(b)(5).
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the Exchange
Act and the rules and regulations issued thereunder . . . is on the
self-regulatory organization that proposed the rule change.'' \36\ The
description of a proposed rule change, its purpose and operation, its
effect, and a legal analysis of its consistency with applicable
requirements must all be sufficiently detailed and specific to support
an affirmative Commission finding,\37\ and any failure of a self-
regulatory organization to provide this information may result in the
Commission not having a sufficient basis to make an affirmative finding
that a proposed rule change is consistent with the Act and the
applicable rules and regulations.\38\ The Commission is instituting
proceedings to allow for additional consideration and comment on the
issues raised herein, including as to whether the proposal is
consistent with the Act. In particular, the Commission asks commenters
to address whether the proposal includes sufficient data and analysis
to support a conclusion that the proposal is consistent with the
requirements of Section 6(b)(5) of the Act.
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\36\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
\37\ See id.
\38\ See id.
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IV. 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.\39\
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\39\ Section 19(b)(2) of the Act, as amended by the Securities
Acts 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 Acts 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 proposed rule change should be approved
or disapproved by December 5, 2024. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
December 19, 2024.
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#a6d4d3cac38bc5c9cbcbc3c8d2d5e6d5c3c588c1c9d0"><span class="__cf_email__" data-cfemail="0270776e672f616d6f6f676c7671427167612c656d74">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2024-45 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-NYSEAMER-2024-45. This
file number should be included on the subject line if email is used. To
help the Commission process and review your
[[Page 90136]]
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-NYSEAMER-2024-45 and should be submitted on or before December 5,
2024. Rebuttal comments should be submitted by December 19, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26533 Filed 11-13-24; 8:45 am]
BILLING CODE 8011-01-P
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