Notice2025-14546
Self-Regulatory Organizations; NYSE American LLC; Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, To Permit the Trading of FLEX Options on Shares of the Grayscale Bitcoin Trust, the Grayscale Bitcoin Mini Trust ETF, and the Bitwise Bitcoin ETF
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
August 1, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 146 (Friday, August 1, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 146 (Friday, August 1, 2025)]
[Notices]
[Pages 36250-36252]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14546]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103566; File No. SR-NYSEAMER-2024-78]
Self-Regulatory Organizations; NYSE American LLC; Order Approving
a Proposed Rule Change, as Modified by Amendment No. 1, To Permit the
Trading of FLEX Options on Shares of the Grayscale Bitcoin Trust, the
Grayscale Bitcoin Mini Trust ETF, and the Bitwise Bitcoin ETF
July 29, 2025.
I. Introduction
On December 13, 2024, NYSE American LLC (``Exchange'') filed with
the Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'' or
``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule
change to amend Exchange Rule 903G(a)(1) to permit Flexible Exchange
(``FLEX'') options on shares of the Grayscale Bitcoin Trust (BTC)
(``GBTC''). The proposed rule change was published for comment in the
Federal Register on December 27, 2024.\3\ On February 7, 2025, pursuant
to Section 19(b)(2) of the Act,\4\ the Commission designated a longer
period within which to approve the proposal, disapprove the proposal,
or institute proceedings to determine whether to disapprove the
proposal.\5\ On March 14, 2025, the Commission instituted proceedings
under Section 19(b)(2)(B) of the Act \6\ to determine whether to
approve or disapprove the proposal.\7\ On April 25, 2025, the Exchange
filed Amendment No. 1 to the proposal, which replaces and supersedes
the original filing in its entirety.\8\ The proposed rule change, as
modified by Amendment No. 1, was published for comment in the Federal
Register on May 9, 2025.\9\ The Commission received no comments
regarding the proposed rule change, as modified by Amendment No. 1.
This order approves the proposed rule change, as modified by Amendment
No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 102014 (Dec. 20,
2024), 89 FR 105669.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 102376 (Feb. 7,
2025), 90 FR 9570 (Feb. 13, 2025). The Commission designated March
27, 2025, as the date by which the Commission shall either approve
or 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. 102675 (Mar. 14,
2025), 90 FR 13229.
\8\ Among other things, Amendment No. 1 expands the scope of the
proposal to permit FLEX options on the Grayscale Bitcoin Mini Trust
ETF (``BTC''), and the Bitwise Bitcoin ETF (``BITB''), as well as
GBTC (each a ``Fund'' and, collectively, the ``Funds''). Amendment
No. 1 also makes technical corrections to Exchange Rule 904,
Commentary .07(f), to update the name of the Grayscale Bitcoin Mini
Trust (BTC) to the Grayscale Bitcoin Mini Trust ETF and correct the
symbol associated with the Fidelity Ethereum Fund from ``ETH'' to
``FETH.''
\9\ See Securities Exchange Act Release No. 102996 (May 5,
2025), 90 FR 19756 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
As described more fully in the Notice, the Exchange states that
FLEX options are customized equity or index contracts that allow
investors to tailor contract terms for exchange-listed equity and index
options.\10\ Except for enumerated exceptions, FLEX options are not
subject to position limits.\11\ The Exchange states that the Commission
recently approved the trading of options on GBTC, BTC, and BITB, all
exchange-traded products (``ETPs'') that hold spot bitcoin and are
listed on NYSE Arca, Inc., the Exchange's affiliated equities
exchange.\12\ The Exchange further states that GBTC, BTC, and BITB
options currently are not approved for FLEX trading, and that the
current position and exercise limit for options applicable to each Fund
is 25,000 contracts.\13\ The Exchange proposes to amend its rules to
permit FLEX equity options on GBTC (``FLEX GBTC''), BTC (``FLEX BTC''),
and BITB (``FLEX BITB'') (collectively, ``FLEX Fund Options'') and to
apply the 25,000-contract position and exercise limits for GBTC
options, BTC options, and BITB options to FLEX GBTC, FLEX BTC, and FLEX
BITB, respectively.\14\ The Exchange will aggregate position (and
exercise) limits for all GBTC, BTC, and BITB FLEX and non-FLEX options
in the same underlying Fund, thus limiting positions for GBTC, BTC, and
BITB options--FLEX and non-FLEX--to 25,000 contracts for each Fund.\15\
---------------------------------------------------------------------------
\10\ See id. at 19756, n.6.
\11\ See id. at 19756-57.
\12\ See id. 90 FR at 19757. See also Securities Exchange Act
Release No. 101386 (Oct. 18, 2024), 89 FR 84960 (Oct. 24, 2024)
(File No. SR-NYSEAMER-2024-49) (order approving the listing and
trading of options on GBTC, BTC, and BITB) (``Bitcoin ETP Options
Order'').
\13\ See Notice, 90 FR at 19757.
\14\ See id.
\15\ See id. and proposed Exchange Rule 906G(b)(iv).
---------------------------------------------------------------------------
The Exchange states that the Commission has stated that ``rules
regarding position and exercise limits are intended to prevent the
establishment of options positions that can be used or might create
incentives to manipulate or disrupt the underlying market so as to
benefit the options positions.'' \16\ The Exchange states that, for
this reason, the Commission requires that ``position and exercise
limits must be sufficient to prevent investors from disrupting the
market for the underlying security by acquiring and exercising a number
of options contracts disproportionate to the deliverable supply and
average trading volume of the underlying security.'' \17\ The Exchange
further states that based on its review of the data and analysis
provided by the Exchange, the Commission concluded that the 25,000-
contract position limit for non-FLEX options on each Fund satisfied
these objectives.\18\
---------------------------------------------------------------------------
\16\ See Notice, 90 FR at 19757 (citing the Bitcoin ETP Options
Order, 89 FR at 84971).
\17\ See Notice, 90 FR at 19757.
\18\ See id.
---------------------------------------------------------------------------
The Exchange states that the proposed aggregated limit effectively
restricts a market participant from holding positions that could result
in the receipt of more than 2,500,000 shares, aggregated for FLEX and
non-FLEX options in the same underlying Fund (if that market
participant exercised all its options).\19\ The Exchange states that
capping the aggregated position limit at 25,000 contracts would be
sufficient to address concerns related to manipulation and the
protection of investors, and, further, that the proposed position and
exercise limits are conservative given the liquidity of the Funds.\20\
As described more fully in the Notice, the Exchange states that
although it proposes an aggregated position limit of 25,000 contracts
for all
[[Page 36251]]
options for each Fund, there is evidence to support a higher position
limit.\21\
---------------------------------------------------------------------------
\19\ See Notice, 90 FR at 19757.
\20\ See id.
\21\ See id.
---------------------------------------------------------------------------
The Exchange states that FLEX options on ETFs are currently traded
in the over-the-counter (``OTC'') market by a variety of market
participants, including hedge funds, proprietary trading firms, and
pension funds.\22\ The Exchange states that an exchange-traded
alternative may provide a useful risk management and trading vehicle
for market participants and their customers.\23\ The Exchange states
that Exchange-traded FLEX Fund Options would have advantages over
contracts traded in the OTC market, including the mitigation of
counter-party credit risk because Exchange-traded options are issued
and guaranteed by The Options Clearing Corporation (``OCC'') and the
price discovery and dissemination provided by the Exchange and its
members, which would lead to more transparent markets.\24\
---------------------------------------------------------------------------
\22\ See id.
\23\ See id.
\24\ See id.
---------------------------------------------------------------------------
The Exchange states that it and The Options Price Reporting
Authority have the necessary systems capacity to handle the additional
traffic associated with the listing of FLEX Fund Options.\25\ The
Exchange states that the same surveillance procedures applicable to the
other options products listed and traded on the Exchange, including
non-FLEX options in each Fund, will apply to FLEX Fund Options, and
that it has the necessary systems capacity to support the options.\26\
The Exchange states that FLEX options products (and their respective
symbols) are integrated into the Exchange's existing surveillance
system architecture and are thus subject to the relevant surveillance
processes.\27\ The Exchange further states that its market surveillance
staff (including staff of the Financial Industry Regulatory Authority
(``FINRA'') who perform surveillance and investigative work on behalf
of the Exchange pursuant to a regulatory services agreement) conducts
surveillances with respect to GBTC, BTC, and BITB (i.e., the underlying
ETFs) and, as appropriate, would review activity in the applicable ETF
when conducting surveillances for market abuse or manipulation in the
FLEX Fund Options.\28\ The Exchange states that it does not believe
that allowing FLEX Fund Options would render the marketplace for non-
FLEX options in any of the Funds, or equity options in general, more
susceptible to manipulative practices.\29\ The Exchange states that its
existing trading surveillances are adequate to monitor the trading in
GBTC, BTC, and BITB, and subsequent trading of FLEX Fund Options on the
Exchange.\30\ Additionally, the Exchange states that it is a member of
the Intermarket Surveillance Group (``ISG'') under the Intermarket
Surveillance Group Agreement, that ISG members work together to
coordinate surveillance and investigative information sharing in the
stock, options, and futures markets, and that it would therefore have
access to information regarding trading activity in GBTC, BTC, and BITB
and in other pertinent underlying securities on other exchanges through
ISG.\31\ In addition, the Exchange states that it has a regulatory
services agreement with FINRA, pursuant to which FINRA conducts certain
surveillances on behalf of the Exchange.\32\ The Exchange further
states that, pursuant to a multi-party 17d-2 joint plan, all options
exchanges allocate regulatory responsibilities to FINRA to conduct
certain options-related market surveillances.\33\ The Exchange states
that it will implement any additional surveillance procedures it deems
necessary to effectively monitor the trading of FLEX Fund Options.\34\
---------------------------------------------------------------------------
\25\ See Notice, 90 FR at 19758.
\26\ See id.
\27\ See id.
\28\ See id. at 19758-59. The Exchange's rules use the term
``exchange-traded fund'' to refer to several types of investment
products. See Exchange Rule 915, Commentary .06. GBTC, BTC and BITB
are not registered nor subject to regulation under the Investment
Company Act of 1940. See Form 10-Q for GBTC, dated May 2, 2025,
available at <a href="https://www.sec.gov/Archives/edgar/data/1588489/000095017025062731/gbtc-20250331.htm">https://www.sec.gov/Archives/edgar/data/1588489/000095017025062731/gbtc-20250331.htm</a>; Amendment No. 4 to Form S-1
for BTC, dated July 26, 2024, available at <a href="https://www.sec.gov/Archives/edgar/data/2015034/000119312524186494/d785023ds1a.htm">https://www.sec.gov/Archives/edgar/data/2015034/000119312524186494/d785023ds1a.htm</a>; Pre-
Effective Amendment No. 1 to Form S-3 for BITB, dated June 23, 2025,
available at <a href="https://www.sec.gov/Archives/edgar/data/1763415/000121390025056635/ea0246384-s3a1_bitwise.htm">https://www.sec.gov/Archives/edgar/data/1763415/000121390025056635/ea0246384-s3a1_bitwise.htm</a>.
\29\ See Notice, 90 FR at at 19759.
\30\ See id.
\31\ See id.
\32\ See id.
\33\ See id. The Exchange states that Section 19(g)(1) of the
Act, among other things, requires every self-regulatory organization
(``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.
Specifically, Section 17(d)(1) allows the Commission to relieve an
SRO of its responsibilities to: receive regulatory reports from such
members; examine such members for compliance with the Act and the
rules and regulations thereunder, and the rules of the SRO; or carry
out other specified regulatory responsibilities with respect to such
members. See Notice, 90 FR at 19759 at n.30.
\34\ See Notice, 90 FR at 19759.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange,\35\ and, in particular,
the requirements of Section 6 of the Act.\36\ Specifically, the
Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with Section 6(b)(5) of the Act,\37\
which requires, among other things, that an exchange have rules
designed to prevent fraudulent and manipulative acts and practices and
to protect investors and the public interest.
---------------------------------------------------------------------------
\35\ In approving this proposed rule change, as modified by
Amendment No. 1, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. See 15
U.S.C. 78c(f).
\36\ 15 U.S.C. 78f.
\37\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The proposed FLEX Fund Options would permit the creation of
customized options on GBTC, BTC, and BITB, which could help market
participants implement their hedging, risk management, and investment
strategies. In addition, the proposal will extend to FLEX Fund Options
the benefits of trading on the Exchange's options market, including a
centralized market center, an auction market with posted transparent
market quotations and transaction reporting, parameters and procedures
for clearance and settlement, and the guarantee of OCC for all
contracts traded on the Exchange.\38\
---------------------------------------------------------------------------
\38\ See Securities Exchange Act Release No. 36841 (Feb. 14,
1996), 61 FR 6666, 6668 (Feb. 21, 1996) (File Nos. SR-Cboe-95-43 and
PSE-95-24) (order approving listing of FLEX options on specified
equity securities).
---------------------------------------------------------------------------
The Exchange's rules currently provide position and exercise limits
of 25,000 contracts on the same side of the market for GBTC, BTC, and
BITB options.\39\ Although the proposal provides for the trading of
FLEX Fund Options, the proposal maintains the existing position and
exercise limits for GBTC, BTC, and BITB options of 25,000 contracts on
the same side of the market and thus does not raise new regulatory
issues with respect to position and exercise limits.\40\ The Commission
finds
[[Page 36252]]
that the proposed aggregation of positions in FLEX and non-FLEX options
when calculating position and exercise limits for each of the FLEX Fund
Options is consistent with the Act, and in particular, with the
requirements in Section 6(b)(5) 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. Position
and exercise limits serve as a regulatory tool designed to deter
manipulative schemes and adverse market impact surrounding the use of
options. Since the inception of standardized options trading, the
options exchanges have had rules limiting the aggregate number of
options contracts that a member or customer may hold or exercise.
Options position and exercise limits are intended to prevent the
establishment of options positions that can be used or might create
incentives to manipulate or disrupt the underlying market to benefit
the options position.\41\ In addition, such limits serve to reduce the
possibility of disruption in the options market itself, especially in
illiquid classes.\42\
---------------------------------------------------------------------------
\39\ See Exchange Rule 904, Commentary .07(f).
\40\ See Bitcoin ETP Options Order, 89 FR at 84971 (discussing
the Commission's approval of the 25,000-contract position and
exercise limits for GBTC, BTC, and BITB options).
\41\ See Securities Exchange Act Release No. 39489 (Dec. 24,
1997), 63 FR 276, 279 (Jan 5. 1998) (order approving File No. SR-
Cboe-97-11).
\42\ See id.
---------------------------------------------------------------------------
When the Commission approved the Exchange's proposal to list
options on GBTC, BTC, and BITB, the Commission concluded that the
proposed position and exercise limits were designed to prevent
investors from disrupting the market for the underlying security by
acquiring and exercising a number of options contracts disproportionate
to the deliverable supply and average trading volume of the underlying
security, and to prevent the establishment of options positions that
could be used or might create incentives to manipulate or disrupt the
underlying market so as to benefit the options position.\43\ At the
same time, the Commission has recognized that limits must not be
established at levels that are so low as to discourage participation in
the options market by institutions and other investors with substantial
hedging needs or to prevent specialists and market-makers from
adequately meeting their obligations to maintain a fair and orderly
market.\44\ This analysis applies to the proposed position and exercise
limits for the FLEX Fund Options as well. By applying the existing
GBTC, BTC, and BITB option position and exercise limits to the FLEX
Fund Options, and by requiring the aggregation of positions in FLEX and
non-FLEX options on each of the funds for position and exercise limit
purposes, the proposed position and exercise limits for the FLEX Fund
Options are designed to prevent investors from disrupting the market
for the underlying security by acquiring and exercising a number of
options contracts disproportionate to the deliverable supply and
average trading volume of the underlying security, and to prevent the
establishment of options positions that could be used or might create
incentives to manipulate or disrupt the underlying market so as to
benefit the options position.
---------------------------------------------------------------------------
\43\ See Bitcoin ETP Options Order, 89 FR at 84971. See also
Securities Exchange Act Release Nos. 21907 (Mar. 29, 1985), 50 FR
13440, 13441 (Apr. 4, 1985).
\44\ See id.
---------------------------------------------------------------------------
The Commission previously considered the surveillance procedures
that would apply to options on GBTC, BTC, and BITB when it approved the
Exchange's proposal to list and trade options on GBTC, BTC, and
BITB.\45\ As described above, the same surveillance procedures
applicable to other options products listed and traded on the Exchange,
including non-FLEX options on the Funds, will apply to FLEX Fund
Options.\46\ The Exchange states that FLEX options products (and their
respective symbols) are integrated into the Exchange's existing
surveillance system architecture and thus are subject to the relevant
surveillance processes.\47\ The Exchange further states that it will
implement any additional surveillance procedures it deems necessary to
effectively monitor the trading of FLEX Fund Options.\48\ In addition,
the Exchange states that its market surveillance staff (including staff
of FINRA who perform surveillance and investigative work on behalf of
the Exchange pursuant a regulatory services agreement) conducts
surveillances with respect to GBTC, BTC, and BITB and, as appropriate,
would review activity in GBTC, BTC, and BITB when conducting
surveillances for market abuse or manipulation in the FLEX Fund
Options.\49\ The Exchange also states that it is a member of ISG, that
ISG members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets, and
that it would therefore have access to information regarding trading
activity in GBTC, BTC, and BITB and in other pertinent underlying
securities on other exchanges through ISG.\50\ Accordingly, the
Exchange states that for surveillance purposes, it would therefore have
access to information regarding trading activity in the pertinent
underlying securities.\51\ Further, in approving proposals to list
bitcoin-based ETPs, including GBTC, BTC, and BITB, the Commission found
that there were sufficient means to prevent fraud and manipulation of
bitcoin-based ETPs.\52\
---------------------------------------------------------------------------
\45\ See Bitcoin ETP Options Order, 89 FR at 84971 (discussing
the surveillance procedures that will apply to options on GBTC, BTC,
and BITB).
\46\ See Notice, 90 FR at 19759.
\47\ See id.
\48\ See id.
\49\ See id.
\50\ See id.
\51\ See id.
\52\ See Securities Exchange Act Release Nos. 99306 (Jan. 10,
2024), 89 FR 3008 (Jan. 17, 2024) and 100610 (Jul. 26, 2024), 89 FR
62821 (Aug. 1, 2024).
---------------------------------------------------------------------------
Together, these surveillance procedures should allow the Exchange
to investigate suspected manipulations or other trading abuses in FLEX
Fund Options. Accordingly, the Commission finds that the Exchange's
surveillance procedures for the FLEX Fund Options are designed to
prevent fraudulent and manipulative acts and practices and to protect
investors and the public interest.
The proposed changes to Exchange Rule 904, Commentary .07(f) to
update the name of the Grayscale Bitcoin Mini Trust (BTC) to the
Grayscale Bitcoin Mini Trust ETF and to correct the symbol associated
with the Fidelity Ethereum Fund should help to ensure the accuracy of
the Exchange's rules.
IV. Conclusion
For the reasons set forth above, the Commission finds that the
proposed rule change, as modified by Amendment No. 1, is consistent
with the requirements of the Exchange Act and the rules and regulations
thereunder applicable to a national securities exchange and, in
particular, the requirements of Section 6(b)(5) of the Act.\53\
---------------------------------------------------------------------------
\53\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\54\ that the proposed rule change, (SR-NYSEAMER-2024-78), as
modified by Amendment No. 1, is approved.
---------------------------------------------------------------------------
\54\ 15 U.S.C. 78s(b)(2)
By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14546 Filed 7-31-25; 8:45 am]
BILLING CODE 8011-01-P
</pre></body>
</html>Indexed from Federal Register on August 1, 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.