Notice2025-14035
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend the Rule Governing the Listing and Trading of the Franklin Bitcoin ETF, the Franklin Ethereum ETF, and the Franklin Crypto Index ETF To Permit In-Kind Creations and Redemptions
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
July 25, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 141 (Friday, July 25, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 141 (Friday, July 25, 2025)]
[Notices]
[Pages 35343-35348]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14035]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103530; File No. SR-CboeBZX-2025-050]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To
Amend the Rule Governing the Listing and Trading of the Franklin
Bitcoin ETF, the Franklin Ethereum ETF, and the Franklin Crypto Index
ETF To Permit In-Kind Creations and Redemptions
July 22, 2025.
On April 2, 2025, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchang Commission (``SEC'' or
``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend the rules governing the listing and
trading of shares of the Franklin Bitcoin ETF, the Franklin Ethereum
ETF, and the Franklin Crypto Index ETF under BZX Rule 14.11(e)(4). The
proposed rule change was published for comment in the Federal Register
on April 11, 2025.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 102776 (Apr. 7,
2025), 90 FR 15499.
---------------------------------------------------------------------------
On May 22, 2025, pursuant to Section 19(b)(2) of the 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\ On June 25, 2025, the Commission instituted proceedings
under Section 19(b)(2)(B) of the Act,\6\ to determine whether to
approve or disapprove the proposed rule change.\7\ On July 21, 2025,
pursuant to Section 19(b)(2) of the Act,\8\ the Exchange filed
Amendment No. 1 to the proposed rule change, which replaced and
superseded the original filing in its entirety. The proposed rule
change, as modified by Amendment No. 1, is described in Items I and II
below, which Items have been substantially prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendment No. 1, from interested
persons.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 103107, 90 FR 22803
(May 29, 2025) (designating July 10, 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).
\7\ See Securities Exchange Act Release No. 103326, 90 FR 27893
(June 30, 2025).
\8\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
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 rule governing the Franklin Bitcoin
ETF (the ``Bitcoin Fund''), the Franklin Ethereum ETF (the ``Eth
Fund''), and the Franklin Crypto Index ETF (the ``Crypto Index Fund''
and, collectively with the Bitcoin Fund and the Eth Fund, the
``Funds''),\9\ 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.
---------------------------------------------------------------------------
\9\ The Bitcoin Fund is a series of the Franklin Templeton
Digital Holdings Trust (the ``Bitcoin Trust''), the Eth Fund is a
series of the Franklin Ethereum Trust (the ``Eth Trust''), and the
Crypto Index Fund is a series of the Franklin Crypto Trust (the
``Crypto Trust'').
---------------------------------------------------------------------------
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>) and at the Exchange's Office of the Secretary.
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 III below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
[[Page 35344]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
This Amendment No. 1 to SR-CboeBZX-2025-050 amends and replaces in
its entirety the proposal as originally submitted on April 2, 2025. The
Exchange submits this Amendment No. 1 in order to clarify certain
points and add additional details to the proposal.
The Commission approved the listing and trading of shares (the
``Bitcoin ETP Shares'') of the Bitcoin Fund on the Exchange pursuant to
Exchange Rule 14.11(e)(4), Commodity-Based Trust Shares, on January 10,
2024.\10\ The Commission approved the listing and trading of shares
(the ``ETH ETP Shares'') of the Eth Fund on the Exchange pursuant to
Exchange Rule 14.11(e)(4), Commodity-Based Trust Shares, on May 23,
2024.\11\ The Commission also approved the listing and trading of
shares (the ``Crypto Index ETP Shares'') of the Crypto Index Fund on
the Exchange pursuant to Exchange Rule 14.11(e)(4), Commodity-Based
Trust Shares, on December 19, 2024.\12\ 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
Fund, the ETH ETP Shares are issued by the Eth Fund, and the Crypto
Index ETP Shares are issued by the Crypto Index Fund. The Bitcoin Trust
was formed as a Delaware statutory trust on September 6, 2023, the Eth
Trust was formed as a Delaware statutory trust on February 8, 2024, and
the Crypto Trust was formed as a Delaware statutory trust on August 13,
2024.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release Nos. 99286 (January 8,
2024) 89 FR 2372 (January 12, 2024) (SR-CboeBZX-2023-072) (Notice of
Filing of Amendment No. 1 to a Proposed Rule Change To List and
Trade Shares of the Franklin Bitcoin ETF Under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares) (``Bitcoin ETP Amendment No. 1'');
99306 (January 10, 2024) 89 FR 3008 (January 17, 2024) (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) (the
``Bitcoin ETP Approval Order''). The Bitcoin ETP Amendment No. 1 was
later amended to amend the time at which purchase orders for cash
transaction creation baskets must be placed. See Securities Exchange
Act Release No. 100245 (May 29, 2024) 89 FR 48016 (June 4, 2024)
(SR-CboeBZX-2024-040) (Notice of Filing and Immediate Effectiveness
of a Proposed Rule Change To Amend the Franklin Bitcoin ETF).
\11\ See Securities Exchange Act Release Nos. 100218 (May 22,
2024) 89 FR 46499 (May 29, 2024) (SR-CboeBZX-2024-018) (Notice of
Filing of Amendment No. 1 to a Proposed Rule Change Relating To List
and Trade Shares of the Franklin Ethereum ETF, a Series of the
Franklin Ethereum Trust, Under BZX Rule 14.11(e)(4), Commodity-Based
Trust Shares) (``ETH ETP Amendment No. 1''); 100224 (May 23, 2024)
89 FR 46937 (May 30, 2024) (SR-CboeBZX-2024-018) (Order Granting
Accelerated Approval of Proposed Rule Changes, as Modified by
Amendments Thereto, to List and Trade Shares of Ether-Based
Exchange-Traded Products) (the ``ETH ETP Approval Order'').
\12\ See Securities Exchange Act Release Nos. 101963 (December
18, 2024) 89 FR 105109 (December 26, 2024) (SR-CboeBZX-2024-091)
(Notice of Filing of Amendment No. 1 to a Proposed Rule Change To
List and Trade Shares of the Franklin Crypto Index ETF, a Series of
the Franklin Crypto Trust, Under BZX Rule 14.11(e)(4), Commodity-
Based Trust Shares) (``Crypto Index ETP Amendment No. 1''); 101998
(December 19, 2024) 89 FR 106707 (December 30, 2024) (SR-CboeBZX-
2024-028) (Order Granting Approval of a Proposed Rule Change, as
Modified by Amendment No. 1, To List and Trade Shares of the Hashdex
Nasdaq Crypto Index US ETF and Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To List and
Trade Shares of the Franklin Crypto Index ETF, a Series of the
Franklin Crypto Trust) (the ``Crypto Index ETF Approval Order'').
---------------------------------------------------------------------------
Bitcoin Fund
The Exchange proposes to amend several portions of the Bitcoin ETP
Amendment No. 1, as amended, in order to permit in-kind creation and
redemptions.
Representations
The Bitcoin ETP Amendment No. 1 included specific representations
making clear that the Bitcoin Fund would only process creations and
redemptions in cash. Specifically, the ``Franklin Templeton Digital
Holdings Trust'' section of Bitcoin ETP Amendment No. 1 stated:
When the Fund sells or redeems its Shares, it will do so in cash
transactions in large blocks of 50,000 Shares (a ``Creation
Basket'') at the Fund's NAV. In such cases, a third party that is
unaffiliated with the Fund and the Sponsor 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 Fund. Authorized
participants will deliver, or facilitate the delivery of, cash to
the Fund's account with the Cash Custodian in exchange for Shares
when they purchase Shares, and the Fund, through the Cash Custodian,
will deliver cash to such authorized participants when they redeem
Shares. 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 Fund'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 Fund.\13\
---------------------------------------------------------------------------
\13\ See Bitcoin ETP Amendment No. 1 at 2381.
---------------------------------------------------------------------------
The Exchange proposes to replace the above paragraph as follows:
When the Fund sells or redeems its Shares, it will do so in
large blocks of 50,000 Shares (a ``Creation Basket'') based on the
quantity of bitcoin attributable to each Share (net of the accrued
but unpaid Sponsor's fee and any accrued but unpaid expenses or
liabilities). Creation Baskets are issued and redeemed in exchange
for bitcoin or cash. For cash creations, authorized participants
will deliver, or facilitate the delivery of, cash to the Fund's
account with the Cash Custodian in exchange for Shares. Upon receipt
of an approved cash creation order, the Sponsor, on behalf of the
Fund, will submit to one or more previously onboarded trading
partners an order to buy the amount of bitcoin represented by a
Creation Basket.\14\ For in-kind creations, authorized participants
or their designee will deliver, or facilitate the delivery of,
bitcoin to the Fund's account with the bitcoin Custodian in exchange
for Shares.\15\ 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 Fund'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 net asset value (``NAV'') per
Share of the Fund.
---------------------------------------------------------------------------
\14\ For cash redemptions, the process will occur in the reverse
order. Upon receipt of an approved cash redemption order, the
Sponsor, on behalf of the Fund, will submit an order to sell the
amount of bitcoin represented by a Creation Basket and the cash
proceeds will be remitted to the authorized participant when the
large block of Shares is received by the Transfer Agent.
\15\ For in-kind redemptions, the process will occur in the
reverse order. Upon receipt of an approved in-kind redemption order,
the Sponsor, on behalf of the Fund, will transfer the amount of
bitcoin represented by a Creation Basket to the authorized
participant or its designee when the large block of Shares is
received by the Transfer Agent.
---------------------------------------------------------------------------
Creation and Redemption of Shares
Additionally, the ``Creation and Redemption of Shares'' section of
the filing, as amended, includes a detailed description of how the
cash-only creation and redemption process works.\16\ The Exchange
proposes to replace this section as provided below. The Exchange
proposes no change to the subheading ``Rule 14.11(e)(4)--Commodity-
Based Trust Shares'' \17\ and
[[Page 35345]]
proposes to retain everything thereunder.
---------------------------------------------------------------------------
\16\ See Bitcoin ETP Amendment No. 1 at 2382-2383.
\17\ See Bitcoin ETP Amendment No. 1 at 2383-2384.
---------------------------------------------------------------------------
Creation and Redemption of Shares
When the Fund sells or redeems its Shares, it will do so in
Creation Baskets that are based on the quantity of bitcoin
attributable to each Share (net of the accrued but unpaid Sponsor's
fee and any accrued but unpaid expenses or liabilities). Creation
Baskets are issued and redeemed in exchange for bitcoin or cash.
According to the Registration Statement, on any business day, an
authorized participant may place an order to create one or more
Creation Baskets. Purchase orders for cash transaction Creation
Baskets must be placed by 2:00 p.m. ET (or such other time as
disclosed in the Prospectus), or the close of regular trading on the
Exchange, whichever is earlier. Purchase orders for in-kind
transaction Creation Baskets must be placed by 4:00 p.m. ET (or such
other time as disclosed in the Prospectus), or the close of regular
trading on the Exchange, whichever is earlier. The day on which an
order is properly received is considered the purchase order date.
For cash creations, authorized participants will deliver, or
facilitate the delivery of, cash to the Fund's account with the Cash
Custodian in exchange for Shares. Upon receipt of an approved cash
creation order, the Sponsor, on behalf of the Fund, will submit to
one or more previously onboarded trading partners an order to buy
the amount of bitcoin represented by a Creation Basket. For in-kind
creations, authorized participants or their designee will deliver,
or facilitate the delivery of, bitcoin to the Fund's account with
the bitcoin Custodian in exchange for Shares.
For a cash creation order, the total deposit of cash required is
based on 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 purchase order is properly received, in an amount
sufficient to purchase the requisite amount of bitcoin (as described
below). With respect to a cash purchase order, as between the Fund
and the Authorized Participant, the Authorized Participant is
responsible for the dollar cost of the difference between the
bitcoin price utilized in calculating NAV on trade date and the
price at which the Fund acquires the bitcoin to the extent the price
realized in buying the bitcoin is higher than the bitcoin price
utilized in the NAV. To the extent the price realized in buying the
bitcoin is lower than the price utilized in the NAV, the Authorized
Participant shall keep the dollar impact of any such difference.
For a creation order in-kind, the total in-kind transfer of
bitcoin is based on the quantity of bitcoin attributable to the
Creation Basket applicable to the date the purchase order is
properly received.
After the close of business each day, the Administrator
determines the quantity of bitcoin associated with a Creation Basket
for the next business day by dividing the number of bitcoin held by
the Fund, adjusted for the amount of bitcoin constituting estimated
accrued but unpaid fees and expenses of the Fund, by the quotient of
the number of Shares outstanding divided by the number of Shares in
a Creation Basket.
The procedures by which an authorized participant can redeem one
or more Creation Baskets mirror the procedures for the creation of
Creation Baskets. For a cash redemption order, an authorized
participant will deliver Shares to the Fund and will receive cash
for the Shares delivered. With respect to a cash redemption order,
between the Fund and the Authorized Participant, the Authorized
Participant will be responsible for the dollar cost of the
difference between the bitcoin price utilized in calculating the NAV
on trade date and the price realized in selling the bitcoin to raise
the cash needed for the cash redemption order to the extent the
price realized in selling the bitcoin is lower than the bitcoin
price utilized in the NAV. To the extent the price realized from
selling the bitcoin is higher than the price utilized in the NAV,
the Authorized Participant shall get to keep the dollar impact of
any such difference.
For an in-kind redemption order, an authorized participant will
deliver Shares to the Fund and the authorized participant or its
designee will receive bitcoin for the Shares delivered.
The Sponsor (including its delegates) will maintain ownership
and control of the Fund's bitcoin in a manner consistent with good
delivery requirements for spot commodity transactions.
Eth Fund
Similarly, the Exchange proposes to amend several portions of the
ETH ETP Amendment No. 1 in order to permit in-kind creations and
redemptions.
Representations
The ETH ETP Amendment No. 1 included specific representations
making clear that the Eth Fund would only process creations and
redemptions in cash. Specifically, the ``Franklin Ethereum ETF''
section of the ETH ETP Amendment No. 1 stated:
When the Fund sells or redeems its Shares, it will do so in cash
transactions in large blocks of 50,000 Shares (a ``Creation
Basket'') at the Fund's net asset value (``NAV''). For creations,
authorized participants will deliver, or facilitate the delivery of,
cash to the Fund's account with the Cash Custodian in exchange for
Shares. Upon receipt of an approved creation order, the Sponsor, on
behalf of the Fund, will submit an order to buy the amount of ether
represented by a Creation Basket. Based off ether executions, the
Cash Custodian will request the required cash from the authorized
participant. Following receipt by the Cash Custodian of the cash
from an authorized participant, the Sponsor, on behalf of the Fund,
will approve an order with one or more previously onboarded trading
partners to purchase the amount of ether represented by the Creation
Basket.\18\ 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 Fund'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
Fund.\19\
---------------------------------------------------------------------------
\18\ For redemptions, the process will occur in the reverse
order. Upon receipt of an approved redemption order, the Sponsor, on
behalf of the Fund, will submit an order to sell the amount of ether
represented by a Creation Basket and the cash proceeds will be
remitted to the authorized participant when the large block of
Shares is received by the Transfer Agent.
\19\ See ETH ETP Amendment No. 1 at 46505.
---------------------------------------------------------------------------
The Exchange proposes to replace the above with the following:
When the Fund sells or redeems its Shares, it will do so in
large blocks of 50,000 Shares (a ``Creation Basket'') based on the
quantity of ETH attributable to each Share (net of the accrued but
unpaid Sponsor's fee and any accrued but unpaid expenses or
liabilities). Creation Baskets are issued and redeemed in exchange
for ETH or cash. For cash creations, authorized participants will
deliver, or facilitate the delivery of, cash to the Fund's account
with the Cash Custodian in exchange for Shares. Upon receipt of an
approved cash creation order, the Sponsor, on behalf of the Fund,
will submit to one or more previously onboarded trading partners an
order to buy the amount of ETH represented by a Creation Basket.\20\
For in-kind creations, authorized participants or their designee
will deliver, or facilitate the delivery of, ETH to the Fund's
account with the Custodian in exchange for Shares.\21\ 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 Fund'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 net asset value (``NAV'') per Share of the Fund.
---------------------------------------------------------------------------
\20\ For cash redemptions, the process will occur in the reverse
order. Upon receipt of an approved cash redemption order, the
Sponsor, on behalf of the Fund, will submit an order to sell the
amount of ETH represented by a Creation Basket and the cash proceeds
will be remitted to the authorized participant when the large block
of Shares is received by the Transfer Agent.
\21\ For in-kind redemptions, the process will occur in the
reverse order. Upon receipt of an approved in-kind redemption order,
the Sponsor, on behalf of the Fund, will transfer the amount of ETH
represented by a Creation Basket to the authorized participant or
its designee when the large block of Shares is received by the
Transfer Agent.
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.\22\ The Exchange proposes to
replace this section as provided below. The Exchange proposes no change
to the subheading ``Rule 14.11(e)(4)--Commodity-Based Trust Shares''
\23\ and
[[Page 35346]]
proposes to retain everything thereunder.
---------------------------------------------------------------------------
\22\ See ETH ETP Amendment No. 1 at 46507.
\23\ See ETH ETP Amendment No. 1 at 46507-46508.
---------------------------------------------------------------------------
Creation and Redemption of Shares
When the Fund sells or redeems its Shares, it will do so in
Creation Baskets that are based on the quantity of ETH attributable
to each Share (net of the accrued but unpaid Sponsor's fee and any
accrued but unpaid expenses or liabilities). Creation Baskets are
issued and redeemed in exchange for ETH or cash. According to the
Registration Statement, on any business day, an authorized
participant may place an order to create one or more Creation
Baskets. Purchase orders for cash transaction Creation Baskets must
be placed by 2:00 p.m. ET (or such other time as disclosed in the
Prospectus), or the close of regular trading on the Exchange,
whichever is earlier. Purchase orders for in-kind transaction
Creation Baskets must be placed by 4:00 p.m. ET (or such other time
as disclosed in the Prospectus), or the close of regular trading on
the Exchange, whichever is earlier. The day on which an order is
properly received is considered the purchase order date.
For cash creations, authorized participants will deliver, or
facilitate the delivery of, cash to the Fund's account with the Cash
Custodian in exchange for Shares. Upon receipt of an approved cash
creation order, the Sponsor, on behalf of the Fund, will submit to
one or more previously onboarded trading partners an order to buy
the amount of ETH represented by a Creation Basket. For in-kind
creations, authorized participants or their designee will deliver,
or facilitate the delivery of, ETH to the Fund's account with the
Custodian in exchange for Shares.
For a cash creation order, the total deposit of cash required is
based on 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 purchase order is properly received, in an amount
sufficient to purchase the requisite amount of ETH (as described
below). With respect to a cash purchase order, as between the Fund
and the Authorized Participant, the Authorized Participant is
responsible for the dollar cost of the difference between the ETH
price utilized in calculating NAV on trade date and the price at
which the Fund acquires the ETH to the extent the price realized in
buying the ETH is higher than the ETH price utilized in the NAV. To
the extent the price realized in buying the ETH is lower than the
price utilized in the NAV, the Authorized Participant shall keep the
dollar impact of any such difference.
For a creation order in-kind, the total in-kind transfer of ETH
is based on the quantity of bitcoin attributable to the Creation
Basket applicable to the date the purchase order is properly
received.
After the close of business each day, the Administrator
determines the quantity of ETH associated with a Creation Basket for
the next business day by dividing the number of ETH held by the
Fund, adjusted for the amount of ETH constituting estimated accrued
but unpaid fees and expenses of the Fund, by the quotient of the
number of Shares outstanding divided by the number of Shares in a
Creation Basket.
The procedures by which an authorized participant can redeem one
or more Creation Baskets mirror the procedures for the creation of
Creation Baskets. For a cash redemption order, an authorized
participant will deliver Shares to the Fund and will receive cash
for the Shares delivered. With respect to a cash redemption order,
between the Fund and the Authorized Participant, the Authorized
Participant will be responsible for the dollar cost of the
difference between the ETH price utilized in calculating the NAV on
trade date and the price realized in selling the ETH to raise the
cash needed for the cash redemption order to the extent the price
realized in selling the ETH is lower than the ETH price utilized in
the NAV. To the extent the price realized from selling the ETH is
higher than the price utilized in the NAV, the Authorized
Participant shall get to keep the dollar impact of any such
difference.
For an in-kind redemption order, an authorized participant will
deliver Shares to the Fund and the authorized participant or its
designee will receive ETH for the Shares delivered.
The Sponsor (including its delegates) will maintain ownership
and control of the Fund's ETH in a manner consistent with good
delivery requirements for spot commodity transactions.
Crypto Index Fund
The Exchange proposes to amend several portions of the Crypto Index
ETP Amendment No. 1 in order to permit in-kind creations and
redemptions.
Representations
The Crypto Index ETP Amendment No. 1 included specific
representations making clear that the Crypto Index Fund would only
process creations and redemptions in cash. Specifically, the ``Franklin
Crypto Index ETF'' section of the Crypto Index ETP Amendment No. 1
stated:
When the Fund sells or redeems its Shares, it will do so in cash
transactions in large blocks of 50,000 Shares (a ``Creation
Basket'') at the Fund's NAV. For creations, authorized participants
will deliver, or facilitate the delivery of, cash to the Fund's
account with the Cash Custodian in exchange for Shares. Upon receipt
of an approved creation order, the Sponsor, on behalf of the Fund,
will submit to one or more previously onboarded trading partners an
order to buy the amount of bitcoin and ether represented by a
Creation Basket.\24\ 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 Fund'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 per Share of the Fund.\25\
---------------------------------------------------------------------------
\24\ For redemptions, the process will occur in the reverse
order. Upon receipt of an approved redemption order, the Sponsor, on
behalf of the Fund, will submit an order to sell the amount of
bitcoin and ether represented by a Creation Basket and the cash
proceeds will be remitted to the authorized participant when the
large block of Shares is received by the Transfer Agent.
\25\ See Crypto Index ETP Amendment No. 1 at 105111.
---------------------------------------------------------------------------
The Exchange proposes to replace the above with the following:
When the Fund sells or redeems its Shares, it will do so in
large blocks of 50,000 Shares (a ``Creation Basket'') based on the
quantity of bitcoin and ether attributable to each Share (net of the
accrued but unpaid Sponsor's fee and any accrued but unpaid expenses
or liabilities). Creation Baskets are issued and redeemed in
exchange for (i) bitcoin and ether or (ii) cash. For cash creations,
authorized participants will deliver, or facilitate the delivery of,
cash to the Fund's account with the Cash Custodian in exchange for
Shares. Upon receipt of an approved cash creation order, the
Sponsor, on behalf of the Fund, will submit to one or more
previously onboarded trading partners an order to buy the amount of
bitcoin and ether represented by a Creation Basket.\26\ For in-kind
creations, authorized participants or their designee will deliver,
or facilitate the delivery of, bitcoin and ether to the Fund's
account with the Custodian in exchange for Shares.\27\ 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 Fund'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 net asset value (``NAV'') per Share of the Fund.
---------------------------------------------------------------------------
\26\ For cash redemptions, the process will occur in the reverse
order. Upon receipt of an approved cash redemption order, the
Sponsor, on behalf of the Fund, will submit an order to sell the
amount of bitcoin and ether represented by a Creation Basket and the
cash proceeds will be remitted to the authorized participant when
the large block of Shares is received by the Transfer Agent.
\27\ For in-kind redemptions, the process will occur in the
reverse order. Upon receipt of an approved in-kind redemption order,
the Sponsor, on behalf of the Fund, will transfer the amount of
bitcoin and ether represented by a Creation Basket to the authorized
participant or its designee when the large block of Shares is
received by the Transfer Agent.
---------------------------------------------------------------------------
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.\28\ The Exchange proposes to
replace this section as provided below. The Exchange proposes no change
to the subheading ``Rule 14.11(e)(4)--Commodity-Based Trust Shares''
\29\ and proposes to retain everything thereunder.
---------------------------------------------------------------------------
\28\ See Crypto Index ETP Amendment No. 1 at 105113.
\29\ See Crypto Index ETP Amendment No. 1 at 105114.
---------------------------------------------------------------------------
[[Page 35347]]
Creation and Redemption of Shares
When the Fund sells or redeems its Shares, it will do so in
Creation Baskets that are based on the quantity of bitcoin and ether
attributable to each Share (net of the accrued but unpaid Sponsor's
fee and any accrued but unpaid expenses or liabilities). Creation
Baskets are issued and redeemed in exchange for (i) bitcoin and
ether or (ii) cash. According to the Registration Statement, on any
business day, an authorized participant may place an order to create
one or more Creation Baskets. Purchase orders for cash transaction
Creation Baskets must be placed by 2:00 p.m. ET (or such other time
as disclosed in the Prospectus), or the close of regular trading on
the Exchange, whichever is earlier. Purchase orders for in-kind
transaction Creation Baskets must be placed by 4:00 p.m. ET (or such
other time as disclosed in the Prospectus), or the close of regular
trading on the Exchange, whichever is earlier. The day on which an
order is properly received is considered the purchase order date.
For cash creations, authorized participants will deliver, or
facilitate the delivery of, cash to the Fund's account with the Cash
Custodian in exchange for Shares. Upon receipt of an approved cash
creation order, the Sponsor, on behalf of the Fund, will submit to
one or more previously onboarded trading partners an order to buy
the amount of bitcoin and ether represented by a Creation Basket.
For in-kind creations, authorized participants or their designee
will deliver, or facilitate the delivery of, bitcoin and ether to
the Fund's account with the Custodian in exchange for Shares.
For a cash creation order, the total deposit of cash required is
based on 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 purchase order is properly received, in an amount
sufficient to purchase the requisite amount of bitcoin and ether (as
described below). With respect to a cash purchase order, as between
the Fund and the Authorized Participant, the Authorized Participant
is responsible for the dollar cost of the difference between the
bitcoin and ether price utilized in calculating NAV on trade date
and the price at which the Fund acquires the bitcoin and ether to
the extent the price realized in buying the bitcoin and ether is
higher than the bitcoin and ether price utilized in the NAV. To the
extent the price realized in buying the bitcoin and ether is lower
than the price utilized in the NAV, the Authorized Participant shall
keep the dollar impact of any such difference.
For a creation order in-kind, the total in-kind transfer of
bitcoin and ether is based on the quantity of bitcoin and ether
attributable to the Creation Basket applicable to the date the
purchase order is properly received.
After the close of business each day, the Administrator
determines the quantity of bitcoin and ether associated with a
Creation Basket for the next business day by dividing the number of
bitcoin and ether held by the Fund, adjusted for the amount of
bitcoin and ether constituting estimated accrued but unpaid fees and
expenses of the Fund, by the quotient of the number of Shares
outstanding divided by the number of Shares in a Creation Basket.
The procedures by which an authorized participant can redeem one
or more Creation Baskets mirror the procedures for the creation of
Creation Baskets. For a cash redemption order, an authorized
participant will deliver Shares to the Fund and will receive cash
for the Shares delivered. With respect to a cash redemption order,
between the Fund and the Authorized Participant, the Authorized
Participant will be responsible for the dollar cost of the
difference between the bitcoin and ether price utilized in
calculating the NAV on trade date and the price realized in selling
the bitcoin and ether to raise the cash needed for the cash
redemption order to the extent the price realized in selling the
bitcoin and ether is lower than the bitcoin and ether price utilized
in the NAV. To the extent the price realized from selling the
bitcoin and ether is higher than the price utilized in the NAV, the
Authorized Participant shall get to keep the dollar impact of any
such difference.
For an in-kind redemption order, an authorized participant will
deliver Shares to the Fund and the authorized participant or its
designee will receive bitcoin and ether for the Shares delivered.
The Sponsor (including its delegates) will maintain ownership
and control of the Fund's bitcoin and ether in a manner consistent
with good delivery requirements for spot commodity transactions.
Conclusion
Except for the above changes, all other representations in the
Bitcoin ETP Amendment No. 1, as amended, the ETH ETP Amendment No. 1,
and the Crypto Index ETP Amendment No. 1 remain unchanged and will
continue to constitute continuing listing requirements. In addition,
the Bitcoin Fund will continue to comply with the terms of Bitcoin ETP
Amendment No. 1, as amended, the Eth Fund will continue to comply with
the terms of ETH ETP Amendment No. 1, and the Crypto Index Fund will
continue to comply with the terms of the Crypto Index ETP Amendment
No.1 and the Funds 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.\30\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \31\ 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.
---------------------------------------------------------------------------
\30\ 15 U.S.C. 78f(b).
\31\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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. 1, as amended, the ETH ETP Amendment No. 1, and the Crypto Index
ETP Amendment No. 1 such that the Funds 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 Funds (and
the market more generally) operate more efficiently because authorized
participants would be able to source bitcoin and/or ether, as
applicable, rather than to provide cash to the applicable Fund and to
receive bitcoin and/or ether from the Funds. This means that the
authorized participant would be responsible for buying and selling the
applicable crypto asset(s) rather than the Fund itself, which would
potentially lessen the impact on the market of the Funds on both sides
of the transaction by allowing the authorized participant to decide how
and where to source the underlying crypto asset for creations and
deciding how, where, and whether to sell the underlying crypto asset
received for redemptions. This would improve the creation and
redemption process for both authorized participants and the Funds,
increase efficiency, and ultimately benefit the end investors in the
Funds.
Except for the addition of in-kind creation and redemption for the
Bitcoin Fund as specifically set forth herein, all other
representations made in the Bitcoin ETP Amendment No. 1, as amended,
remain unchanged, and will continue to constitute continuing listing
requirements for the Bitcoin Fund. Except for the addition of in-kind
creation and redemption for the Eth Fund as specifically set forth
herein, all other representations made in the ETH ETP Amendment No. 1
remain unchanged and will continue to constitute continuing listing
requirements for the Eth Fund. Similarly, except for the addition of
in-kind creation and redemption for the Crypto Index Fund as
specifically set forth herein, all other representations
[[Page 35348]]
made in the Crypto Index ETP Amendment No. 1 remain unchanged and will
continue to constitute continuing listing requirements for the Crypto
Index Fund.
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 Funds 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. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as modified by Amendment No. 1, is consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#c9bbbca5ace4aaa6a4a4aca7bdba89baacaae7aea6bf"><span class="__cf_email__" data-cfemail="80f2f5ece5ade3efedede5eef4f3c0f3e5e3aee7eff6">[email protected]</span></a>. Please include
file number SR-CboeBZX-2025-050 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-2025-050. 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 filing 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-2025-050 and should be submitted
on or before August 15, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
---------------------------------------------------------------------------
\32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14035 Filed 7-24-25; 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 July 25, 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.