Notice2025-03510
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Permit In-Kind Creations and Redemptions by the WisdomTree Bitcoin Fund
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
March 5, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 42 (Wednesday, March 5, 2025)</title>
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[Federal Register Volume 90, Number 42 (Wednesday, March 5, 2025)]
[Notices]
[Pages 11340-11342]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-03510]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102499; File No. SR-CboeBZX-2025-033]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Permit In-Kind Creations and
Redemptions by the WisdomTree Bitcoin Fund
February 27, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 20, 2025, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III 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
Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
a proposed rule change to amend the WisdomTree Bitcoin Fund (the
``Trust''), shares of which have been approved by the Commission to
list and trade on the Exchange pursuant to BZX Rule 14.11(e)(4), to
permit in-kind creations and redemptions.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/">http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/</a>), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
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
[[Page 11341]]
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 Commission approved the listing and trading of shares (the
``Bitcoin ETP Shares'') of the Bitcoin Trust on the Exchange pursuant
to Exchange Rule 14.11(e)(4), Commodity-Based Trust Shares, on January
10, 2024.\3\ Exchange Rule 14.11(e)(4) governs the listing and trading
of Commodity-Based Trust Shares, which means a security (a) that is
issued by a trust that holds (1) a specified commodity deposited with
the trust, or (2) a specified commodity and, in addition to such
specified commodity, cash; (b) that is issued by such trust in a
specified aggregate minimum number in return for a deposit of a
quantity of the underlying commodity and/or cash; and (c) that, when
aggregated in the same specified minimum number, may be redeemed at a
holder's request by such trust which will deliver to the redeeming
holder the quantity of the underlying commodity and/or cash. The
Bitcoin ETP Shares are issued by the Bitcoin Trust, which was formed as
a Delaware statutory trust on December 17, 2020.
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\3\ See Securities Exchange Act Release Nos. 99292 (January 8,
2024) 89 FR 2429 (January 12, 2024) (SR-CboeBZX-2023-042) (Notice of
Filing of Amendment No. to a Proposed Rule Change To List and Trade
Shares of the WisdomTree Bitcoin Fund Under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares) (``Bitcoin ETP Amendment No. 2'');
99306 (January 10, 2024) 89 FR 3008 (January 17, 2024) (SR-CboeBZX-
2023-042) (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) (the
``Bitcoin ETP Approval Order'').
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The Exchange proposes to amend several portions of the Bitcoin ETP
Amendment No. 2 in order to permit in-kind creation and redemptions.
Representations
The Bitcoin ETP Amendment No. 2 included specific representations
making clear that the Bitcoin Trust would only process creations and
redemptions in cash. Specifically, the ``WisdomTree Bitcoin Fund''
section of the Bitcoin ETP Amendment No. 2 states:
When the Trust sells or redeems its Shares, it will do so in
cash transactions in blocks of 5,000 Shares (a ``Creation Basket'')
at the Trust's net asset value (``NAV''). A third party will use
cash to buy and deliver bitcoin to create Shares or withdraw and
sell bitcoin for cash to redeem Shares, on behalf of the Trust.
Authorized participants will deliver, or facilitate the delivery of,
cash to the Trust's account with the Cash Custodian in exchange for
Shares when they purchase Shares, and the Trust, through the Cash
Custodian, will deliver cash to such authorized participants when
they redeem Shares with the Trust. Authorized participants may then
offer Shares to the public at prices that depend on various factors,
including the supply and demand for Shares, the value of the Trust's
assets, and market conditions at the time of a transaction.
Shareholders who buy or sell Shares during the day from their broker
may do so at a premium or discount relative to the NAV of the Shares
of the Trust.\4\
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\4\ See Bitcoin ETP Amendment No. 2 at 2437.
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The Exchange proposes to replace the above with the following:
When the Trust creates or redeems its Shares, it will do so in
cash transactions or in-kind transactions in blocks of 5,000 Shares
(a ``Creation Basket'') at the Trust's net asset value (``NAV'').
For cash creations and redemptions, authorized participants will
deliver, or facilitate the delivery of, cash to the Trust's account
with the Cash Custodian, in exchange for Shares when they create
Shares, and the Trust, through the Cash Custodian, will deliver cash
to such authorized participants when they redeem Shares with the
Trust. For in-kind creation and redemptions, authorized participants
will deliver, or facilitate delivery of, bitcoin to the Trust's
account with the Custodian, in exchange for Shares when they create
Shares, and the Trust, through the Custodian, will deliver bitcoin
to such authorized participants when they redeem Shares with the
Trust. Authorized participants may then offer Shares to the public
at prices that depend on various factors, including the supply and
demand for Shares, the value of the Trust's assets, and market
conditions at the time of a transaction.
The ``Investment Objective'' section of the Bitcoin ETP Amendment
No. 2 stated: ``The Trust will process all creations and redemptions in
cash transactions with authorized participants.'' \5\ The Exchange
proposes to replace this sentence with the following: ``The Trust will
process all creations and redemptions in cash or in-kind transactions
with authorized participants.''
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\5\ See Bitcoin ETP Amendment No. 2 at 2437.
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Creation and Redemption of Shares
Additionally, the ``Creation and Redemption of Shares'' section of
the filing includes a detailed description of how the cash-only
creation and redemption process works.\6\ The Exchange proposes to
replace this section as follows:
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\6\ See Bitcoin ETP Amendment No. 2 at 2438-2439.
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Creation and Redemption of Shares
When the Trust creates or redeems its Shares, it will do so in
cash or in-kind. In connection with cash creations and cash
redemptions, the authorized participants will submit orders to
create or redeem Baskets of Shares in exchange for cash. When the
Trust creates or redeems its Shares in cash, it will do so in
transactions in blocks of 5,000 Shares that are based on the
quantity of bitcoin attributable to each Share of the Trust (e.g., a
Creation Basket) at the Trust's NAV. When the Trust creates or
redeems its Shares in kind, it will do so in transfers of bitcoin in
blocks of 5,000 Shares that are based on the quantity of bitcoin
attributable to the Creation Basket being created or redeemed.
The authorized participants will deliver or cause to be
delivered cash or bitcoin to create Shares and the authorized
participant or its designee will receive cash or bitcoin when
redeeming Shares. The Trust will create Shares by receiving bitcoin
or cash from an authorized participant or its designee and will
redeem shares by delivering bitcoin or cash to an authorized
participant or its designee.
On any business day, an authorized participant may place an
order to create one or more Creation Baskets. Purchase orders for
cash creations must be placed by 12:00 p.m. Eastern Time and
purchase orders for in-kind creations must be placed by 4:00 p.m.
Eastern Time (or such earlier order cut-off time as disclosed in the
Prospectus), or the close of Regular Trading Hours on the Exchange,
whichever is earlier. The day on which an order is received is
considered the purchase order date.
For a cash creation order, the total deposit of cash required is
an amount of cash sufficient to purchase such amount of bitcoin, the
amount of which is equal to the combined NAV of the number of Shares
included in the Creation Baskets being created determined as of 4:00
p.m. ET on the date the order to purchase is properly received.
For a creation order in kind, the total in-kind transfer of
bitcoin is based on the quantity of bitcoin attributable to the
Creation Baskets being created determined as of 4:00 p.m. ET on the
date the order to purchase is properly received.
The Administrator determines the quantity of bitcoin used to
calculate the Creation Basket for a given day by dividing the number
of bitcoin held by the Trust as of the opening of business on that
business day, adjusted for the amount of bitcoin constituting
estimated accrued but unpaid fees and expenses of the Trust as of
the opening of business on that business day, by the quotient of the
number of Shares outstanding at the opening of business divided by
the number of Shares in a Creation Basket.
The procedures by which an authorized participant can redeem one
or more Creation
[[Page 11342]]
Baskets mirror the procedures for the creation of Creation Baskets.
For a cash creation order, an authorized participant will deliver
cash to create Shares. For an in-kind creation order, an authorized
participant or its designee will deliver bitcoin to create Shares.
For a cash redemption order, an authorized participant will deliver
Shares to the Trust and will receive cash for the Shares delivered.
For an in-kind redemption order, an authorized participant will
deliver Shares to the Trust and the authorized participant or its
designee will receive bitcoin for the Shares delivered.
Except for the above changes, all other representations in the
Bitcoin ETP Amendment No. 2 remain unchanged and will continue to
constitute continuing listing requirements. In addition, the Bitcoin
Trust will continue to comply with the terms of Bitcoin ETP Amendment
No. 2 and the Trust will continue to comply with the requirements of
Rule 14.11(e)(4).
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.\7\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \8\ requirements that the rules of
an exchange be designed to prevent fraudulent and manipulative acts and
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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed rule change is designed to
remove impediments to and perfect the mechanism of a free and open
market and, in general, to protect investors and the public interest
because it would update representations in the Bitcoin ETP Amendment
No. 2 such that the Trust would be able to engage in in-kind creation
and redemptions with authorized participants or their designees, as
described above. This ability would make the Trust (and the market more
generally) operate more efficiently because authorized participants
would be able to source bitcoin, as applicable, rather than to provide
cash to the applicable Trust and to receive bitcoin from the Trust.
This means that the authorized participant would be responsible for
buying and selling bitcoin rather than the Trust itself, which would
potentially lessen the impact on the market of the Trust on both sides
of the transaction by allowing the authorized participant to decide how
and where to source the bitcoin for creations and deciding how, where,
and whether to sell the bitcoin received for redemptions. This would
improve the creation and redemption process for both authorized
participants and the Trust, increase efficiency, and ultimately benefit
the end investors in the Trust.
Except for the addition of in-kind creation and redemption for the
Bitcoin Trust as specifically set forth herein, all other
representations made in the Bitcoin ETP Amendment No. 2 remain
unchanged and will continue to constitute continuing listing
requirements for the Bitcoin Trust.
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. As noted above, the proposed
amendment is intended to allow the Trust to operate more efficiently by
allowing for in-kind creation and redemption. The Exchange believes
these changes will not impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change 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#3745425b521a54585a5a525943447744525419505841"><span class="__cf_email__" data-cfemail="bbc9ced7de96d8d4d6d6ded5cfc8fbc8ded895dcd4cd">[email protected]</span></a>. Please include
file number SR-CboeBZX-2025-033 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-CboeBZX-2025-033.
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-CboeBZX-2025-033 and
should be submitted on or before March 26, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-03510 Filed 3-4-25; 8:45 am]
BILLING CODE 8011-01-P
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