Notice2024-27741
Self-Regulatory Organizations; MIAX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 402, Criteria for Underlying Securities, Exchange Rule 307, Position Limits, and Exchange Rule 309, Exercise Limits To Allow the Exchange To List and Trade Options on the iShares Bitcoin Trust (the “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
November 27, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 229 (Wednesday, November 27, 2024)</title>
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[Federal Register Volume 89, Number 229 (Wednesday, November 27, 2024)]
[Notices]
[Pages 93802-93810]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-27741]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101698; File No. SR-MIAX-2024-40]
Self-Regulatory Organizations; MIAX Exchange LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Exchange Rule 402, Criteria for Underlying Securities, Exchange Rule
307, Position Limits, and Exchange Rule 309, Exercise Limits To Allow
the Exchange To List and Trade Options on the iShares Bitcoin Trust
(the ``Trust'')
November 21, 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 November 18, 2024, Miami International Securities Exchange, LLC
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change 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 Exchange Rule 402, Criteria for
Underlying Securities, Exchange Rule 307, Position Limits, and Exchange
Rule 309, Exercise Limits.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://www.miaxglobal.com/markets/us-options/miax-options/rule-filings">https://www.miaxglobal.com/markets/us-options/miax-options/rule-filings</a>, at MIAX's principal office, and at the Commission's
Public Reference Room.
[[Page 93803]]
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 Exchange Rule 402, Criteria for
Underlying Securities, Exchange Rule 307, Position Limits, and Exchange
Rule 309, Exercise Limits,\3\ to allow the Exchange to list and trade
options on the iShares Bitcoin Trust (the ``Trust''), designating the
Trust as appropriate for options trading on the Exchange.\4\ This is a
competitive filing based on a similar proposal submitted by Nasdaq ISE,
LLC (``ISE'') and approved by the Securities and Exchange Commission
(``Commission'').\5\
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\3\ The Exchange notes that its affiliate exchanges, MIAX Pearl
and MIAX Sapphire, submitted substantively identical proposals. The
Exchange notes that all the rules of Chapter III of the MIAX Options
Exchange, including Rules 307 and 309, are incorporated by reference
to MIAX Pearl and MIAX Sapphire. The Exchange also notes that all of
the rules of Chapter III of the MIAX Options Exchange, including
Rules 307 and 309, and the rules of Chapter IV of the MIAX Options
Exchange, including Rule 402, are incorporated by reference to MIAX
Emerald.
\4\ On January 10, 2024, the Commission approved proposals by
NYSE Arca, Inc., The Nasdaq Stock Market LLC, and Cboe BZX Exchange,
Inc. to list and trade the shares of 11 bitcoin-based commodity-
based trust shares and trust units, including the iShares Bitcoin
Trust. See Securities Exchange Act Release No. 99306 (Jan. 10,
2024), 89 FR 3008 (Jan. 17, 2024) (order approving File Nos. SR-
NYSEARCA-2021-90; SR-NYSEARCA-2023-44; SR-NYSEARCA-2023-58; SR-
NASDAQ-2023-016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-
CboeBZX-2023-038; SR-CboeBZX-2023-040; SR-CboeBZX-2023-042; SR-
CboeBZX-2023-044; SR-CboeBZX-2023-072) (``Bitcoin ETP Order'').
\5\ See Securities Exchange Act Release No. 101128 (September
20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (Self-
Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing of
Amendment Nos. 4 and 5 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment Nos. 1, 4, and 5, to
Permit the Listing and Trading of Options on the iShares Bitcoin
Trust).
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Current Exchange Rule 402(i)(4) provides that securities deemed
appropriate for options trading include shares or other securities
(``Exchange Traded Fund Shares'') that are traded on a national
securities exchange and are defined as ``NMS stock'' under Rule 600 of
Regulation NMS, and that meet specified criteria enumerated in the
rule. Sub Section 4 of Exchange Rule 402(i) provides that such shares
or other securities:
(4) are issued by the SPDR[supreg] Gold Trust or the iShares
COMEX Gold Trust or the iShares Silver Trust or the ETFS Silver
Trust or the ETFS Gold Trust or the ETFS Palladium Trust or the ETFS
Platinum Trust or the Sprott Physical Gold Trust; or
In addition, the underlying securities and Exchange Rule 402i,
including the commodity based trusts in Exchange Rule 402(i)(4), must
meet the requirements of Exchange Rule 402(i), Sections (5)(i)(A) or
(B).
Proposal
The Exchange proposes to amend Exchange Rule 402(i)(4) to expand
the list of securities that are appropriate for options trading on the
Exchange.
Description of the Trust <SUP>6</SUP>
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\6\ See Securities Exchange Act Release No. 99306 (Jan. 10,
2024), 89 FR 3008 (Jan. 17, 2024) (order approving File Nos. SR-
NYSEARCA-2021-90; SR-NYSEARCA-2023-44; SR-NYSEARCA-2023-58; SR-
NASDAQ-2023-016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-
CboeBZX-2023-038; SR-CboeBZX-2023-040; SR-CboeBZX-2023-042; SR-
CboeBZX-2023-044; SR-CboeBZX-2023-072) (Order Granting Accelerated
Approval of Proposed Rule Changes, as Modified by Amendments
Thereto, To List and Trade Bitcoin-Based Commodity-Based Trust
Shares and Trust Units) 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 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 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 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,
[[Page 93804]]
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-based trusts
on which options may be listed on the Exchange (e.g. SPDR[supreg] Gold
Trust, the iShares COMEX Gold Trust, the iShares Silver Trust, or the
ETFS Gold Trust),\9\ the Trust essentially offers the same objectives
and benefits to investors as do other commodity-based trusts on which
options may be listed on the Exchange.
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\9\ See Exchange Rule 402(i)(4).
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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 (including as
proposed herein), 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-based trusts deemed appropriate for options trading
on the Exchange pursuant to Exchange Rule 402(i)(4).
The Exchange's initial listing standards for ETFs on which options
may be listed and traded on the Exchange will apply to the Trust.
Pursuant to Exchange Rule 402(a), a security (which includes ETFs) 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. Exchange Rule 402(i) requires that, in relevant part,
ETFs must either (1) meet the criteria and standards set forth in
Exchange Rule 402(a) or Exchange Rule 402(b), or (2) be available for
creation or redemption each business day from or through the issuer in
cash or in kind at a price related to net asset value, and the issuer
must be obligated to issue ETFs in a specified aggregate number even if
some or all of the investment assets required to be deposited have not
been received by the issuer, subject to the condition that the person
obligated to deposit the investments has undertaken to deliver the
investment assets 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, as provided in the
respective prospectus.
Options on the Trust will also be subject to the Exchange's
continued listing standards set forth in Exchange Rule 403(g), for ETFs
deemed appropriate for options trading pursuant to Exchange Rule
402(i). Specifically, Exchange Rule 403(g) provides that ETFs that were
initially approved for options trading pursuant to Exchange Rule 402(i)
shall be deemed not 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 that such ETFs, if the ETFs are
delisted from trading pursuant to Exchange Rule 403(b)(4), are halted
or suspended from trading in their primary market. Additionally,
options on ETFs may be subject to the suspension of opening
transactions in any of the following circumstances: (1) in the case of
options covering ETFs approved for trading under Exchange Rule
402(i)(5)(i)(A), in accordance with the terms of paragraphs (b)(1),
(2), and (3) of Exchange Rule 403; (2) in the case of options covering
ETFs approved for trading under Exchange Rule 402(i)(5)(i)(B),
following the initial twelve-month period beginning upon the
commencement of trading in the ETFs on a national securities exchange
and are defined as an NMS stock, there are fewer than 50 record and/or
beneficial holders of such ETFs for 30 or more consecutive trading
days; (3) the value of the index or portfolio of securities, non-U.S.
currency, or portfolio of commodities including commodity futures
contracts, options on commodity futures contracts, swaps, forward
contracts and/or options on physical commodities and/or financial
instruments and money market instruments on which the ETFs are based is
no longer calculated or available; or (4) such other event shall occur
or condition exist 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.\10\ Consistent with current Exchange Rule 404,
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 \11\ and may also list series
of options on the Trust for trading on a weekly,\12\ monthly,\13\ or
quarterly \14\ basis. The Exchange may also list long-term equity
option series (``LEAPS'') that expire from 12 to 39 months from the
time they are listed.\15\
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\10\ See Exchange Rule 401, which provides that the rights and
obligations of holders and writers are set forth in the Rules of the
Options Clearing Corporation (``OCC''); see also OCC Rules, Chapters
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).
\11\ See Exchange Rule 404(b). The monthly expirations are
subject to certain listing criteria for underlying securities
described within Exchange Rule 404 and its Interpretations and
Policies. Monthly listings expire the third Friday of the month. The
term ``expiration date'' (unless separately defined elsewhere in the
OCC By-Laws), when used in respect of an option contract (subject to
certain exceptions), means the third Friday of the expiration month
of such option contract, or if such Friday is a day on which the
exchange on which such option is listed is not open for business,
the preceding day on which such exchange is open for business. See
OCC By-Laws Article I, Section 1. Pursuant to Exchange Rule 404(c),
additional series of options of the same class may be opened for
trading on the Exchange when the Exchange deems it necessary to
maintain an orderly market, to meet customer demand or when the
market price of the underlying stock moves more than five strike
prices from the initial exercise price or prices. Pursuant to
Exchange Rule 404(e), new series of options on an individual stock
may be added until the beginning of the month in which the options
contract will expire. Due to unusual market conditions, the
Exchange, in its discretion, may add a new series of options on an
individual stock until the close of trading on the business day
prior to expiration.
\12\ See Exchange Rule 404, Interpretations and Policies .02.
\13\ See Exchange Rule 404, Interpretations and Policies .13.
\14\ See Exchange Rule 404, Interpretations and Policies .03.
\15\ See Exchange Rule 404(d).
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Pursuant to Exchange Rule 404, Interpretation and Policy .06, 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 Exchange Rule 402(i) shall be fixed at a price per
share which is reasonably close to the price per share at which the
[[Page 93805]]
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.\16\ 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.\17\ Additionally, the Exchange may list series of options
pursuant to the $1 Strike Price Interval Program,\18\ the $0.50 Strike
Program,\19\ and the $2.50 Strike Price Program.\20\ Pursuant to
Exchange Rule 510, 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 \21\
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 Rules 404 and 510,
as applicable.
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\16\ See Exchange Rule 404, Interpretations and Policies .02(e).
\17\ Id.
\18\ See Exchange Rule 404, Interpretation and Policy .01.
\19\ See Exchange Rule 404, Interpretation and Policy .04.
\20\ See Exchange Rule 404(f).
\21\ See Exchange Rule 510.
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Position and exercise limits for options on ETFs, including options
on the Trust, are determined pursuant to Exchange Rules 307 and 309,
respectively. 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, 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. The
Exchange proposes to cap the position and exercise limits for the Trust
at 25,000 contracts. Capping the position and exercise limits at 25,000
contracts, the lowest limits available in options, would address
concerns related to manipulation and protection of investors as this
number is extremely conservative for the Trust and is more than
appropriate given its liquidity.
For purposes of addressing position and exercise limits, the
Exchange applies position and exercise limits for options for each
underlying security and does not aggregate position and exercise
limits. In considering the appropriate position and exercise limits for
the Trust, the Exchange reviewed the data presented by ISE in its
filing, specifically in Exhibit 3 of the filing,\22\ where ISE measured
the Trust's market capitalization and ADV against other industry data
as explained further below. The Commission should consider the position
and exercise limits for options on the Trust exclusive of other options
on bitcoin.
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\22\ See Securities Exchange Act Release No. 101128 (September
20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified
by Amendment Nos. 1, 4, and 5, to Permit the Listing and Trading of
Options on the iShares Bitcoin Trust) (Exhibit 3) (``IBIT Approval
Order'') (letter from Angela Dunn, Nasdaq ISE, LLC, to Vanessa
Countryman, Secretary, Commission, dated August 21, 2024)(``ISE
Letter'').
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In its filing, ISE considered the Trust's market capitalization and
ADV, and prospective position limit in relation to other securities. In
measuring the Trust against other securities, ISE aggregated market
capitalization and volume data for securities that have defined
position limits utilizing data from The Options Clearing Corporations
(``OCC'').\23\ This pool of data took into consideration 3,984 options
on single stock securities, excluding broad based ETFs.\24\ Next, ISE
aggregated the data based on market capitalization and ADV and grouped
option symbols by position limit utilizing statistical thresholds for
ADV and market capitalization that were one standard deviation above
the mean for each position limit category (i.e. 25,000, 50,000 to
65,000, 75,000, 100,000 to less than 250,000, 250,000 to 400,000,
450,000 to 1,000,000, and greater than or equal to 1,000,000)(sic).\25\
Exchange Rule 307(d) sets out position limits for various contracts.
For example, on the Exchange like on ISE, a 25,000 contract limit
applies to those options having an underlying security that does not
meet the requirements for a higher options contract limit. ISE
performed an exercise to demonstrate the Trust's position limit
relative to other options symbols in terms of market capitalization and
ADV. For reference the market capitalization for the Trust was
19,789,068 billion \26\ with an ADV, for the preceding three months
prior to August 7, 2024, of greater than 26 million shares.\27\ Today,
by comparison, other options symbols with similar market capitalization
and ADV have a position limit in excess of 400,000.\28\ Therefore, the
proposed 25,000 same side position limit for options on the Trust is
extremely conservative relative to these options symbols which are a
full standard deviation above the mean in comparison.
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\23\ The computations are based on OCC data from August 6, 2024.
Data displaying zero values in market capitalization or ADV were
removed.
\24\ The Trust has one asset and therefore is not comparable to
a broad based ETF where there are typically multiple components.
\25\ See ISE Letter at 10.
\26\ ISE acquired this figure as of August 13, 2024. See <a href="https://www.ishares.com/us/products/333011/ishares-bitcoin-trust">https://www.ishares.com/us/products/333011/ishares-bitcoin-trust</a>. The
global supply of bitcoin grows each day bitcoin are minted.
\27\ See ISE Letter at 10.
\28\ See, eg,. iShares[supreg] iBoxx[supreg] $ High Yield
Corporate Bond ETF (``HYG'') with a market capitalization of
13,859,235,000 billion as of November 4, 2024. See <a href="https://www.ishares.com/us/products/239565/ishares-iboxx-high-yield-corporate-bond-etf">https://www.ishares.com/us/products/239565/ishares-iboxx-high-yield-corporate-bond-etf</a>. The Exchange notes that HYG has a position limit
of 500,000 contracts.
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Second, ISE reviewed the Trust's data relative to the market
capitalization of the entire bitcoin market in terms of exercise risk
and availability of deliverables. Utilizing data as of August 3, 2024,
there were 19,737,193 bitcoins in circulation.\29\ ISE took a price of
$57,000 that equates to a market capitalization of greater than 1.125
trillion US dollars, and applied that to a position limit of 400,000
for options on the Trust.\30\ If a position limit of 400,000 options
were considered (the position limit that would be typically assigned
based upon data) the exercisable risk would represent only 6.6% of the
outstanding shares of the Trust. The 25,000 position limit being sought
only represents 0.4% of the outstanding shares of the Trust. Since the
Trust has a creation and redemption process managed through the issuer,
additionally it can be compared the position limit sought to the total
market capitalization of the entire bitcoin market. In this case, the
exercisable risk for options on the Trust would be less
[[Page 93806]]
than 0.01% of the market capitalization of all outstanding bitcoin.
Assuming a scenario where all options on the Trust's shares were
exercised given the proposed 25,000 per same side position limit, this
would have a virtually unnoticed impact on the entire bitcoin market.
This analysis demonstrates that the proposed 25,000 per same side
position limit is also extremely conservative and more than appropriate
for options on the Trust.
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\29\ See ISE Letter at 10.
\30\ Id.
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Third, ISE reviewed the proposed position limit by comparing it to
position limits for derivative products regulated by the Commodity
Futures Trading Commission (``CFTC''). While the CFTC, through the
relevant Designated Contract Markets, only regulates options positions
based upon delta equivalents (creating a less stringent standard), ISE
examined equivalent bitcoin futures position limits. In particular, ISE
looked at the CME bitcoin futures contract \31\ that has a position
limit of 2,000 futures.\32\ On August 7, 2024, CME bitcoin futures
settled at $55,000.\33\ Taking the position limit of 2,000 futures at a
$5 multiplier \34\ equates to $550 million of notional value for
bitcoin futures. By way of comparison, on August 7, 2024, the Trust
settled at $31.19 per share, which would equate to 17,633,857 shares of
the Trust \35\ if the CME notional position limit were utilized. Since
substantial portions of any distributed options portfolio are likely to
be out of the money on expiration, an options position limit equivalent
to the CME position limit for bitcoin futures (considering that all
options deltas are <=1.00) should be a bit higher than the CME implied
176,338 limit.
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\31\ CME Bitcoin Futures are described in Chapter 350 of CME's
Rulebook.
\32\ See the Position Accountability and Reportable Level Table
in the Interpretations & Special Notices Section of Chapter 5 of
CME's Rulebook.
\33\ See https://finance.yahoo.com/quote/BTC%3DF/history/
?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_refe
rrer_sig=AQAAAM7ngaS6ZQS9c2Wzx7JW2IUe-_-_1FnLyr8T-
Qw4jjkleHyCENfSMIEpPPt2hCzPDEryTVyB78NIwxkwFB5Fuw-jA-
YiuSmYJHBriWbV6dYn91VQfzQNt3p0I2RkYLD3HhzXPwu4AP5as-
_WzHNpEBon4sk5sUZXgkapMrZR--CS.
\34\ Each bitcoin futures contract is valued at 5 bitcoins as
defined by the CME CF Bitcoin Reference Rate (``BRR''). See CME Rule
35001.
\35\ See ISE Letter at 11.
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Of note, unlike options contracts, CME position limits are
calculated on a net futures equivalent basis by contract and include
contracts that aggregate into one or more base contract according to an
aggregation ratio(s).\36\ Therefore, if a portfolio includes positions
in options on futures, CME would aggregate those positions into the
underlying futures contracts in accordance with a table published by
CME on a delta equivalent value for the relevant spot month, subsequent
spot month, single month and all month position limits.\37\ If a
position exceeds position limits because of an option assignment, CME
permits market participants to liquidate the excess position within one
business day without being considered in violation of its rules.
Additionally, if at the close of trading, a position that includes
options exceeds position limits for futures contracts, when evaluated
using the delta factors as of that day's close of trading, but does not
exceed the limits when evaluated using the previous day's delta
factors, then the position shall not constitute a position limit
violation. Considering CME's position limits on futures for bitcoin,
the Exchange believes that the proposed 25,000 per same side position
limit is conservative and more than appropriate for options on the
Trust.
---------------------------------------------------------------------------
\36\ See <a href="https://www.cmegroup.com/education/courses/market-regulation/position-limits/positionlimits-aggregation-of-contracts-and-table.htm">https://www.cmegroup.com/education/courses/market-regulation/position-limits/positionlimits-aggregation-of-contracts-and-table.htm</a>.
\37\ Id.
---------------------------------------------------------------------------
In analyzing the proposed position limit for options on the Trust,
ISE also considered the supply of bitcoin. Specifically, ISE examined
the number of market participants with position limits that would need
to exercise in unison to put the underlying asset under stress. In the
case of options on the Trust, the proposed 25,000 same side position
limit effectively restricts a market participant from holding positions
that could be exercised in excess of 2,500,000 shares of the Trust.
Utilizing data from August 12, 2024, the Trust had 611,040,000 shares
outstanding, therefore 244 market participants would have to
simultaneously exercise position limits in order to create a scenario
that may put the underlying asset (the Trust) under stress.\38\ The
Exchange notes that historically, from observation only, it appears
that no more than five market participants holding position limits in
any security have exercised in unison in any option. As unlikely an
occurrence as all market participants exercising their position limits
in unison would be, if it were to occur, it should be noted that even
such an occurrence would not likely put the Trust under stress as
economic incentives, would induce the creation of more shares through
the ETF creation and redemption process.
---------------------------------------------------------------------------
\38\ See <a href="https://www.ishares.com/us/products/333011/ishares-bitcoin-trust">https://www.ishares.com/us/products/333011/ishares-bitcoin-trust</a>.
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By way of example, given that the current global supply of bitcoin,
the underlying asset of the Trust, is 19,789,068 \39\ and that each
bitcoin can currently be redeemed for 1,755 shares of the Trust,
another 34,729,814,340 shares of the Trust could be created. To exhaust
this supply of the Trust, 13,891 market participants would have to
simultaneously exercise their position limit. Comparing the Trust to
the SPDR Gold Shares (``GLD'') ETF or the iShares Silver Trust
(``SLV'') ETF, which have position limits of 250,000 or ten times the
proposed position limit for the Trust as well as lower shares
outstanding in both products,\40\ it is unjustified to mandate a
different level of stringency with respect to a position limit for
options on the Trust.
---------------------------------------------------------------------------
\39\ This figure was acquired as of August 13, 2024. See <a href="https://www.ishares.com/us/products/333011/ishares-bitcoin-trust">https://www.ishares.com/us/products/333011/ishares-bitcoin-trust</a>. The
global supply of bitcoin grows each day bitcoin are minted.
\40\ As of August 13, 2024, GLD had 294,000,000 shares
outstanding and SLV had 510,200,000 shares outstanding. See <a href="https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-gold-shares-gld">https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-gold-shares-gld</a> and
<a href="https://www.ishares.com/us/products/239855/ishares-silver-trust-fund">https://www.ishares.com/us/products/239855/ishares-silver-trust-fund</a>.
---------------------------------------------------------------------------
The supply of bitcoin does have a limit, which will take years to
fully mint.\41\ The Exchange notes that bitcoin is a viable economic
alternative to traditional assets. The price of goods denominated by
bitcoin has actually declined. This dynamic not only makes a fixed
supply desirable, but a necessary condition of the value added by this
asset in the broader economy. Further, the Exchange notes that
corporations have a limited number of outstanding shares. Corporations
may authorize additional shares, repurchase shares or split their
shares. Similarly, ETFs, like the Trust, may also create, redeem, or
split shares to suit the demand of the marketplace.
---------------------------------------------------------------------------
\41\ A recent article suggested that the remaining supply will
take over 100 years to fully mint. See Sen, Vivek. ``94% of
Bitcoin's Supply Has Now Been Issued.'' Bitcoin Magazine, <a href="https://bitcoinmagazine.com/business/94-of-bitcoins-supply-has-now-been-issued">https://bitcoinmagazine.com/business/94-of-bitcoins-supply-has-now-been-issued</a>. August 19, 2024.
---------------------------------------------------------------------------
Importantly, because the supply of bitcoin is much larger than the
available supply of most securities and the proposed 25,000 contract
position limit is so conservative, the Exchange believes that
evaluating the available supply of bitcoin in establishing a position
limit for options on the Trust would demonstrate that the proposed
limit is safe for investors and the market.\42\ The Trust constitutes
less than 2% of the entire bitcoin supply. When comparing the market
capitalization of bitcoin against the largest securities, bitcoin would
rank 7th among those
[[Page 93807]]
securities.\43\ Further, the Exchange believes that its proposal to
list options on the Trust with a position limit of 25,000 on the same
side is a conservative position limit that does not lend itself to
manipulation in the market given the ample market capitalization and
liquidity in the Trust. If we look to the liquidity statistics of
similar instruments and their concomitant position limits, we are able
to extrapolate a reasonable standard for arriving at a position limit
for a new product. In this case we can look to GLD, SLV, and the
ProShares Bitcoin Strategy ETF (``BITO''). These products have volume
statistics and ``float'' statistics, which gauge liquidity, which are
in line, yet slightly lower than the Trust. All three of these
reference products have position limits of 250,000 contracts. These
reference products are remarkably similar in nature to the Trust; they
are exchange-traded products (``ETPs'') holding one asset in a trust.
---------------------------------------------------------------------------
\42\ A supply consideration would likely be valuable for an
option symbol that had far less liquidity than the Trust.
\43\ See <a href="https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/">https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/</a>.
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The Exchange further notes that Exchange Rule 1502, which governs
margin requirements applicable to trading on the Exchange, including
options on ETFs, will also apply to the trading of the Trust options.
Notwithstanding the position limits in Exchange Rule 307(d) and
exercise limits in Exchange Rule 309, the Exchange proposes the
position and exercise limits for the options on the Trust to be 25,000
contracts on the same side pursuant to proposed Supplementary Material
.01 to Exchange Rule 307 and proposed Supplementary Material .01 to
Exchange Rule 309.
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.
Today, the Exchange has an adequate surveillance program in place
for options. The Exchange intends to apply those same program
procedures to options on the Trust that it applies to the Exchange's
other options products.\44\ The Exchange's staff will have access to
the surveillance programs conducted by its affiliate exchanges, MIAX
Pearl and MIAX Sapphire with respect to trading in the shares of the
underlying Trust when conducting surveillances for market abuse or
manipulation in the options on the Trust. Additionally, the Exchange is
a member of the Intermarket Surveillance Group (``ISG'') under the
Intermarket Surveillance Group Agreement. ISG members work together to
coordinate surveillance and investigative information sharing in the
stock, options, and futures markets. In addition to obtaining
surveillance data from MIAX Pearl and MIAX Sapphire, the Exchange will
be able to obtain information regarding trading in the shares of the
underlying Trust from Nasdaq, LLC and other markets through ISG. In
addition, the Exchange has a Regulatory Services Agreement with the
Financial Industry Regulatory Authority (``FINRA''). Pursuant to a
multi-party 17d-2 joint plan, all options exchanges allocate regulatory
responsibilities to FINRA to conduct certain options-related market
surveillance that are common to rules of all options exchanges.\45\
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\44\ The surveillance program includes real-time patterns for
price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, pinging, phishing).
\45\ Section 19(g)(1) of the Act, among other things, requires
every SRO registered as a national securities exchange or national
securities association to comply with the Act, the rules and
regulations thereunder, and the SRO's own rules, and, absent
reasonable justification or excuse, enforce compliance by its
members and persons associated with its members. See 15 U.S.C.
78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows
the Commission to relieve an SRO of certain responsibilities with
respect to members of the SRO who are also members of another SRO
(``common members''). Specifically, Section 17(d)(1) allows the
Commission to relieve an SRO of its responsibilities to: (i) receive
regulatory reports from such members; (ii) examine such members for
compliance with the Act and the rules and regulations thereunder,
and the rules of the SRO; or (iii) carry out other specified
regulatory responsibilities with respect to such members.
---------------------------------------------------------------------------
The underlying shares of spot bitcoin ETPs, including the Trust,
are also subject to safeguards related to addressing market abuse and
manipulation. As the Commission stated in Bitcoin ETP Order:
Each Exchange has a comprehensive surveillance-sharing agreement
with the CME via their common membership in the Intermarket
Surveillance Group. This facilitates the sharing of information that
is available to the CME through its surveillance of its markets,
including its surveillance of the CME bitcoin futures market.\46\
---------------------------------------------------------------------------
\46\ See Bitcoin ETP Order, 89 FR at 3010-11.
---------------------------------------------------------------------------
The Exchange states that, given the consistently high
correlation between the CME bitcoin futures market and the spot
bitcoin market, as confirmed by the Commission through robust
correlation analysis, the Commission was able to conclude that such
surveillance sharing agreements could reasonably be ``expected to
assist in surveilling for fraudulent and manipulative acts and
practices in the specific context of the [Bitcoin ETPs].'' \47\
---------------------------------------------------------------------------
\47\ See Bitcoin ETP Order, 89 FR at 3010-11.
In light of surveillance measures related to both options and
futures as well as the underlying Trust,\48\ the Exchange believes that
existing surveillance procedures are designed to deter and detect
possible manipulative behavior which might potentially arise from
listing and trading the proposed options on the Trust. Further, the
Exchange represents that it will implement any new surveillance
procedures it deems necessary to effectively monitor the trading of
options on the Trust.
---------------------------------------------------------------------------
\48\ See Securities Exchange Act Release No. 99295 (January 8,
2024), 89 FR 2321, 2334-35 (January 12, 2024) (SR-NASDAQ-2023-016)
(Notice of Filing of Amendment No. 1 to a Proposed Rule Change To
List and Trade Shares of the iShares Bitcoin Trust Under Nasdaq Rule
5711(d)).
---------------------------------------------------------------------------
The Exchange has also analyzed its capacity and represents that it
believes the Exchange and 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 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
Exchange Rule 402(i)(4) to amend the name ``ETFS Gold Trust'' to
``Aberdeen Standard Physical Gold Trust.'' In 2018 ETFS Gold Trust was
renamed.\49\ At this time, the Exchange proposes to amend the name of
the ETF to reflect its current name.
---------------------------------------------------------------------------
\49\ 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 the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\50\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \51\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and
[[Page 93808]]
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with 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) \52\ requirement that the rules
of an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\50\ 15 U.S.C. 78f(b).
\51\ 15 U.S.C. 78f(b)(5).
\52\ Id.
---------------------------------------------------------------------------
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 Exchange
Rule 402(i)(4). Additionally, as demonstrated above, the Trust is
characterized by a substantial number of shares that are widely held
and actively traded. 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 (as proposed herein), and margin requirements, will govern the
listing and trading of options on the Trust. The proposed position and
exercise limits for options on the Trust is 25,000 contracts. These
position and exercise limits are the lowest position and exercise
limits available in the options industry, are extremely conservative
and more than appropriate given the Trust's market capitalization,
average daily volume, and high number of outstanding shares. The
proposed position limit, and exercise limit, is consistent with the Act
as it addresses concerns related to manipulation and protection of
investors because, as demonstrated above, the position limit (and
exercise limit) is extremely conservative and more than appropriate
given the Trust is actively traded. In support of the proposed position
and exercise limits for options on the Trust is 25,000 contracts, the
Exchange is citing the in depth analysis ISE did in its filing. As
noted above, in the IBIT Approval Order, ISE considered the: (i)
Trust's market capitalization and ADV, and prospective position limit
in relation to other securities; (ii) market capitalization of the
entire bitcoin market in terms of exercise risk and availability of
deliverables; (iii) proposed position limit by comparing it to position
limits for derivative products regulated by the CFTC; and (iv) supply
of bitcoin. Based on the Exchange's review of IBIT Approval Order, the
Exchange believes that the setting position and exercise limits for
options on the Trust is 25,000 contracts is more than appropriate for
the Trust. The proposed position and exercise limits reasonably and
appropriately balance the liquidity provisioning in the market against
the prevention of manipulation. The Exchange believes these proposed
limits are effectively designed to prevent an individual customer or
entity from establishing options positions that could be used to
manipulate the market of the underlying as well as the Bitcoin
market.\53\
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\53\ See Securities Exchange Act Release No. 39489 (December 24,
1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
---------------------------------------------------------------------------
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.
Today, the Exchange has an adequate surveillance program in place for
options. The Exchange intends to apply those same program procedures to
options on the Trust that it applies to the Exchange's other options
products.\54\ The Exchange's staff will have access to the surveillance
programs conducted by its affiliate exchanges, MIAX Pearl and MIAX
Sapphire with respect to the underlying Trust when conducting
surveillances for market abuse or manipulation in the options on the
Trust. The Exchange will review activity in the underlying Trust when
conducting surveillances for market abuse or manipulation in the
options on the Trust. Additionally, the Exchange is a member of the ISG
under the Intermarket Surveillance Group Agreement. ISG members work
together to coordinate surveillance and investigative information
sharing in the stock, options, and futures markets. In addition to
obtaining surveillance data from MIAX Pearl and MIAX Sapphire, the
Exchange will be able to obtain information from Nasdaq, LLC and other
markets through ISG. In addition, the Exchange has a Regulatory
Services Agreement with FINRA. Pursuant to a multi-party 17d-2 joint
plan, all options exchanges allocate regulatory responsibilities to
FINRA to conduct certain options-related market surveillance that are
common to rules of all options exchanges.\55\
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\54\ The surveillance program includes real-time patterns for
price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, pinging, phishing).
\55\ Section 19(g)(1) of the Act, among other things, requires
every SRO registered as a national securities exchange or national
securities association to comply with the Act, the rules and
regulations thereunder, and the SRO's own rules, and, absent
reasonable justification or excuse, enforce compliance by its
members and persons associated with its members. See 15 U.S.C.
78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows
the Commission to relieve an SRO of certain responsibilities with
respect to members of the SRO who are also members of another SRO
(``common members''). Specifically, Section 17(d)(1) allows the
Commission to relieve an SRO of its responsibilities to: (i) receive
regulatory reports from such members; (ii) examine such members for
compliance with the Act and the rules and regulations thereunder,
and the rules of the SRO; or (iii) carry out other specified
regulatory responsibilities with respect to such members.
---------------------------------------------------------------------------
The underlying shares of spot bitcoin ETPs, including the Trust,
are also subject to safeguards related to addressing market abuse and
manipulation. As the Commission stated in Bitcoin ETP Order:
Each Exchange has a comprehensive surveillance-sharing agreement
with the CME via their common membership in the Intermarket
Surveillance Group.
[[Page 93809]]
This facilitates the sharing of information that is available to the
CME through its surveillance of its markets, including its surveillance
of the CME bitcoin futures market.\56\
---------------------------------------------------------------------------
\56\ See supra note 5.
---------------------------------------------------------------------------
The Exchange states that, given the consistently high correlation
between the CME bitcoin futures market and the spot bitcoin market, as
confirmed by the Commission through robust correlation analysis, the
Commission was able to conclude that such surveillance sharing
agreements could reasonably be ``expected to assist in surveilling for
fraudulent and manipulative acts and practices in the specific context
of the [Bitcoin ETPs].'' \57\
---------------------------------------------------------------------------
\57\ See Bitcoin ETP Order, 89 FR at 3010-11.
---------------------------------------------------------------------------
In light of surveillance measures related to both options and
futures as well as the underlying Trust,\58\ the Exchange believes that
existing surveillance procedures are designed to deter and detect
possible manipulative behavior which might potentially arise from
listing and trading the proposed options on the Trust. Further, the
Exchange represents that it will implement any new surveillance
procedures it deems necessary to effectively monitor the trading of
options on the Trust.
---------------------------------------------------------------------------
\58\ See Securities Exchange Act Release No. 99295 (January 8,
2024), 89 FR 2321, 2334-35 (January 12, 2024) (SR-NASDAQ-2023-016)
(Notice of Filing of Amendment No. 1 to a Proposed Rule Change To
List and Trade Shares of the iShares Bitcoin Trust Under Nasdaq Rule
5711(d)).
---------------------------------------------------------------------------
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,\59\ the iShares COMEX Gold Trust \60\ the
iShares Silver Trust,\61\ the ETFS Gold Trust,\62\ and the ETFS Silver
Trust.\63\
---------------------------------------------------------------------------
\59\ 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 SRPhlx-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).
\60\ 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; SRNYSEArca-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).
\61\ Id.
\62\ 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).
\63\ Id.
---------------------------------------------------------------------------
Further, the Exchange's proposal to amend the name ``ETFS Gold
Trust'' to ``Aberdeen Standard Physical Gold Trust'' in Exchange Rule
402(i)(4) is consistent with the Act and the protection of investors as
this amendment reflects the current name of this product.
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. In this regard and as
indicated above, the Exchange notes that the rule change is being
proposed as a competitive response to filings submitted by ISE.\64\
---------------------------------------------------------------------------
\64\ See supra note 6.
---------------------------------------------------------------------------
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 (including as proposed to modify herein),
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 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 Exchange Rule
402(i)(4) does not impose an undue burden on competition as this
amendment reflects the current name of this product.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \65\ and Rule 19b-4(f)(6) thereunder.\66\
Because the foregoing proposed rule change does not: (i) significantly
affect the protection of investors or the public interest; (ii) impose
any significant burden on competition; and (iii) become operative for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A)(iii) of the Act \67\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\68\
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\65\ 15 U.S.C. 78s(b)(3)(A)(iii).
\66\ 17 CFR 240.19b-4(f)(6).
\67\ 15 U.S.C. 78s(b)(3)(A)(iii).
\68\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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[[Page 93810]]
A proposed rule change filed under Rule 19b-4(f)(6) \69\ under the
Act does not normally become operative prior to 30 days after the date
of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\70\ the
Commission may designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposal may become operative immediately upon filing. The
Commission previously approved the listing of options on iShares
Bitcoin Trust.\71\ The Exchange has provided information regarding the
underlying iShares Bitcoin Trust, including, among other things,
information regarding trading volume, the number of beneficial holders,
and the market capitalization of the iShares Bitcoin Trust. The
proposal also establishes position and exercise limits for options on
the iShares Bitcoin Trust and provides information regarding the
surveillance procedures that will apply to iShares Bitcoin Trust
options. The Commission believes that waiver of the operative delay
could benefit investors by providing an additional venue for trading
iShares Bitcoin Trust options. Therefore, the Commission believes that
waiver of the 30-day operative delay is consistent with the protection
of investors and the public interest. Accordingly, the Commission
hereby waives the 30-day operative delay and designates the proposed
rule change as operative upon filing.\72\
---------------------------------------------------------------------------
\69\ 17 CFR 240.19b-4(f)(6).
\70\ 17 CFR 240.19b-4(f)(6)(iii).
\71\ See Securities Exchange Act Release No. 101128 (September
20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (Self-
Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing of
Amendment Nos. 4 and 5 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment Nos. 1, 4, and 5, to
Permit the Listing and Trading of Options on the iShares Bitcoin
Trust).
\72\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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 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#f98b8c959cd49a9694949c978d8ab98a9c9ad79e968f"><span class="__cf_email__" data-cfemail="3b494e575e16585456565e554f487b485e58155c544d">[email protected]</span></a>. Please include
file number SR-MIAX-2024-40 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-MIAX-2024-40. 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-MIAX-2024-40 and should be
submitted on or before December 18, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\73\
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\73\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-27741 Filed 11-26-24; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on November 27, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.