Notice2025-02284
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Adopt New NYSE Arca Rule 8.800-E To Provide for the Listing and Trading of Commodity- and/or Digital Asset-Based Investment Interests and To List and Trade Shares of the Grayscale Digital Large Cap Fund LLC
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
February 6, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 24 (Thursday, February 6, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 24 (Thursday, February 6, 2025)]
[Notices]
[Pages 9092-9094]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-02284]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102313; File No. SR-NYSEARCA-2024-87]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove a Proposed
Rule Change To Adopt New NYSE Arca Rule 8.800-E To Provide for the
Listing and Trading of Commodity- and/or Digital Asset-Based Investment
Interests and To List and Trade Shares of the Grayscale Digital Large
Cap Fund LLC
January 31, 2025.
I. Introduction
On October 15, 2024, NYSE Arca, Inc. (``NYSE Arca'' 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 adopt new NYSE Arca Rule
8.800-E to provide for the listing and trading of Commodity- and/or
Digital Asset-Based Investment Interests and to list and trade shares
of the Grayscale Digital Large Cap Fund LLC under proposed NYSE Arca
Rule 8.800-E. The proposed rule change was published for comment in the
Federal Register on November 4, 2024.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 101470 (Oct. 29,
2024), 89 FR 87681 (``Notice''). The Commission has received no
comment letters on the proposed rule change.
---------------------------------------------------------------------------
On December 17, 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
Section 19(b)(2)(B) of the Act \6\ to determine whether to approve or
disapprove the proposed rule change.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 101939, 89 FR 104581
(Dec. 23, 2024) (designating February 2, 2025, 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).
---------------------------------------------------------------------------
[[Page 9093]]
II. Summary of the Proposal
A. Proposed Listing Standards for Commodity- and/or Digital Asset-Based
Investment Interests
As described in more detail in the Notice,\7\ the Exchange proposes
to adopt new NYSE Arca Rule 8.800-E to provide for the listing and
trading of Commodity- and/or Digital Asset-Based Investment Interests.
Proposed NYSE Arca Rule 8.800-E(c)(1) defines ``Commodity- and/or
Digital Asset-Based Investment Interests'' to mean ``a security (a)
that is issued by a trust, limited liability company, or other similar
entity (the `Fund') that holds (1) specified commodities and/or digital
assets deposited with the Fund, or (2) specified commodities and/or
digital assets and, in addition to such specified commodities and/or
digital assets, Derivative Securities Products (as defined in NYSE Arca
Rule 1.1) and/or cash; (b) that is issued by such Fund in a specified
aggregate minimum number in return for a deposit of a quantity of the
underlying commodity(ies), digital asset(s), Derivative Securities
Products, and/or cash; and (c) that, when aggregated in the same
specified minimum number, may be redeemed at a holder's request by such
Fund which will deliver to the redeeming holder the quantity of the
underlying commodity(ies), digital asset(s), Derivative Securities
Products, and/or cash.'' \8\
---------------------------------------------------------------------------
\7\ See supra note 3.
\8\ See Notice at 87682.
---------------------------------------------------------------------------
Proposed NYSE Arca Rule 8.800-E(c)(2) states that ``commodity,''
for purposes of this rule, ``includes commodities as defined in Section
1a(9) of the Commodity Exchange Act.'' \9\ Proposed NYSE Arca Rule
8.800-E(c)(3) defines the term ``digital asset,'' for purposes of this
rule, to mean ``any digital representation of value recorded on a
cryptographically secured, distributed ledger (i.e., blockchain) or
similar technology.'' \10\
---------------------------------------------------------------------------
\9\ See id.
\10\ See id.
---------------------------------------------------------------------------
Proposed NYSE Arca Rule 8.800-E sets forth certain listing
requirements specific to Commodity- and/or Digital Asset-Based
Investment Interests, as described in more detail in the Notice and
Exhibit 5 thereto.\11\ Among other things, proposed NYSE Arca Rule
8.800-E(e)(1)(ii) would provide that there shall be no limitation on
the percentage of a Fund's portfolio that may be invested in commodity
and/or digital asset holdings, ``except that, in the aggregate, at
least 90% of the weight of such holdings shall, on both an initial and
continuing basis, consist of commodities and/or digital assets
concerning which the Exchange is able to obtain information via the
Intermarket Surveillance Group (`ISG') from other members of the ISG or
via a comprehensive surveillance sharing agreement.'' \12\
---------------------------------------------------------------------------
\11\ See Notice, supra note 3. See also Exhibit 5 to the
proposed rule change, which is available at <a href="https://www.sec.gov/files/rules/sro/nysearca/2024/34-101470-ex5.pdf">https://www.sec.gov/files/rules/sro/nysearca/2024/34-101470-ex5.pdf</a>.
\12\ See Notice at 87682.
---------------------------------------------------------------------------
The Exchange also proposes to amend NYSE Arca Rules 5.3-E
(Corporate Governance and Disclosure Policies) and 5.3-E(e)
(Shareholder Annual Meetings) to include Commodity- and/or Digital
Asset-Based Investment Interests listed pursuant to proposed NYSE Arca
Rule 8.800-E among the derivative or special purpose securities to
which a limited set of corporate governance and disclosure policies
would apply and to which the requirements concerning shareholder/annual
meetings would not apply.
The Exchange states that Commodity- and/or Digital Asset-Based
Investment Interests listed and traded pursuant to proposed Rule 8.800-
E would be ``substantially similar to Commodity-Based Trust Shares
listed and traded pursuant to NYSE Arca Rule 8.201-E, with two main
differences.'' \13\ The Exchange states that ``whereas Commodity-Based
Trust Shares are issued by a trust, Commodity- and/or Digital Asset-
Based Investment Interests could be issued, as [ ] proposed, by a
trust, limited liability company, or other similar entity;'' and that
``whereas Commodity-Based Trust Shares are based on an underlying
commodity only, the Exchange proposes that Commodity- and/or Digital
Asset-Based Investment Interests could be based on an underlying
commodity or commodities, as well as digital assets and Derivative
Securities Products.'' \14\
---------------------------------------------------------------------------
\13\ See id. at 87683.
\14\ See id. at 87683-4.
---------------------------------------------------------------------------
B. Grayscale Digital Large Cap Fund LLC
As described in more detail in the Notice, the Exchange also
proposes to list and trade shares (``Shares'') of the Grayscale Digital
Large Cap Fund LLC (``Grayscale Fund'') under proposed NYSE Arca Rule
8.800-E.
According to the Exchange, the investment objective of the
Grayscale Fund is for the value of the Shares (based on net asset value
(``NAV'') per Share) to reflect the value of the Fund Components (as
described below) held by the Grayscale Fund, as determined by reference
to their Digital Asset Reference Rates \15\ and weightings within the
Grayscale Fund, less the Grayscale Fund's expenses and other
liabilities.\16\ The Grayscale Fund's assets consist solely of the Fund
Components.\17\ The Fund Components consist of the components of the
CoinDesk Large Cap Select Index (``Index''), except that the Manager
may determine to exclude a particular Index component in its discretion
under certain rules-based circumstances (including to comply with the
requirements of proposed NYSE Arca Rule 8.800-E).\18\ The weightings of
the Fund Components are generally expected to be the same as for the
weightings of the Index components within the Index, except when the
Manager determines to exclude one or more of the Index components from
the Fund Components, in which case the weightings are generally
expected to be calculated proportionally to the respective Index
weightings for the remaining components of the Index.\19\ As of the
date of the filing, the Fund Components and their weightings were
bitcoin (75.46%), ether (17.90%), Solana (4.13%), XRP (1.86%), and
Avalanche (0.65%).\20\ The Manager will calculate and publish the NAV
of the Grayscale Fund at 4:00 p.m., New York time, on each business day
or as soon thereafter as practicable.\21\ The Grayscale Fund uses the
Digital Asset Reference Rate for each Fund Component to calculate its
NAV.\22\ The Grayscale Fund will issue Shares to and redeem Shares from
authorized participants on an ongoing basis, but only in one or more
``Baskets'' of 10,000 Shares.\23\
---------------------------------------------------------------------------
\15\ See infra note 22 and accompanying text.
\16\ See Notice at 87685. The Grayscale Fund is a Cayman Islands
limited liability company. The manager of the Grayscale Fund is
Grayscale Investments, LLC (``Manager''). The custodian is Coinbase
Custody Trust Company, LLC. The administrator and transfer agent
will be BNY Mellon Asset Servicing, a division of The Bank of New
York Mellon. The distribution and marketing agent will be Foreside
Fund Services, LLC. See id. at 87684.
\17\ See id. at 87684.
\18\ See id. at 87691.
\19\ See id.
\20\ See id. at 87684. The Exchange states that, as of the date
of the filing, the Fund Components that meet the proposed initial
and continued listing standard in proposed NYSE Arca Rule 8.800-
E(e)(1)(ii) are bitcoin and ether. See id. at 87691 n.27. See also
supra note 12 and accompanying text.
\21\ See Notice at 87685.
\22\ See id. The rules that the Manager will employ to calculate
the Digital Asset Reference Rate for each Fund Component are
described in the Notice. See id. at 87694-95.
\23\ See id. at 87699. Authorized participants will deliver only
cash to create Shares and will receive only cash when redeeming
Shares. See id.
---------------------------------------------------------------------------
[[Page 9094]]
III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEARCA-2024-87 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \24\ 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, the Commission seeks and
encourages interested persons to provide comments on the proposed rule
change.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\25\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act, which requires, among other things, that the rules of a
national securities exchange be ``designed to prevent fraudulent and
manipulative acts and practices'' and ``to protect investors and the
public interest.'' \26\
---------------------------------------------------------------------------
\25\ Id.
\26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposal, which are set forth
in the Notice, in addition to any other comments they may wish to
submit about the proposed rule change. In particular, with respect to
the proposal to allow the listing and trading of Commodity- and/or
Digital Asset-Based Investment Interests on the Exchange, the
Commission seeks comment on whether the requirements and associated
definitions set forth in proposed NYSE Arca Rule 8.800-E are
sufficiently clear and are designed to prevent fraudulent and
manipulative acts and practices. The Commission also seeks comment on
whether the proposal to list and trade Shares of the Grayscale Fund,
which would hold bitcoin, ether, Solana, XRP, Avalanche, and
potentially other commodities, digital assets, and/or Derivative
Securities Products, is designed to prevent fraudulent and manipulative
acts and practices. In particular, as the proposal would allow the
listing and trading of securities issued by entities, including the
Grayscale Fund, that hold ``digital assets,'' \27\ the Commission seeks
comment on any new or novel concerns not previously contemplated by the
Commission.
---------------------------------------------------------------------------
\27\ See supra note 10 and accompanying text.
---------------------------------------------------------------------------
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.\28\
---------------------------------------------------------------------------
\28\ 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).
---------------------------------------------------------------------------
Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by February 27, 2025. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
March 13, 2025.
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#780a0d141d551b1715151d160c0b380b1d1b561f170e"><span class="__cf_email__" data-cfemail="e597908980c8868a8888808b9196a5968086cb828a93">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-87 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-NYSEARCA-2024-87. 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-NYSEARCA-2024-87 and should
be submitted on or before February 27, 2025. Rebuttal comments should
be submitted by March 13, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------
\29\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-02284 Filed 2-5-25; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on February 6, 2025.
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.