Notice2025-14550
Self-Regulatory Organizations; Cboe Exchange, Inc.; Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 4, To Amend Rules 4.3, 4.20, and 8.30, To Allow the Exchange To List and Trade Options on the VanEck 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 36210-36214]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14550]
[[Page 36210]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103569; File No. SR-CBOE-2025-017]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified by
Amendment No. 4, To Amend Rules 4.3, 4.20, and 8.30, To Allow the
Exchange To List and Trade Options on the VanEck Bitcoin ETF
July 29, 2025.
I. Introduction
On March 14, 2025, Cboe Exchange, Inc. (``Cboe'' or ``Exchange'')
filed with the Securities and Exchange Commission (``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
list and trade options on the VanEck Bitcoin Trust.\3\ On March 26,
2025, the Exchange filed Amendment No. 1 to the proposed rule change.
On March 27, 2025, the Exchange withdrew Amendment No. 1, filed and
withdrew Amendment No. 2, and filed Amendment No. 3 to the proposal,
which superseded and replaced the original proposal in its entirety.\4\
The proposed rule change, as modified by Amendment No. 3, was published
for comment in the Federal Register on April 3, 2025.\5\ On May 1,
2025, the Exchange filed Amendment No. 4 to the proposed rule change,
which superseded the initial proposed rule change and Amendment Nos. 1
through 3 and replaced them in their entirety.\6\ On May 14, 2025, the
Commission designated a longer period within which to take action on
the proposed rule change, as modified by Amendment No. 4.\7\ On June
27, 2025, the Commission published for comment the proposed rule
change, as modified by Amendment No. 4, and instituted proceedings
under Section 19(b)(2)(B) of the Act \8\ to determine whether to
approve or disapprove the proposed rule change, as modified by
Amendment No. 4.\9\ The Commission did not receive any comments on the
proposal. The Commission is approving the proposed rule change, as
modified by Amendment No. 4, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ On January 10, 2024, the Commission approved proposals by
NYSE Arca, Inc., The Nasdaq Stock Market LLC, and Cboe BZX Exchange,
Inc. to list and trade the shares of 11 spot bitcoin-based trust
shares and trust units, including the trust underlying the proposed
options herein. See Securities Exchange Act Release No. 99306 (Jan.
10, 2024), 89 FR 3008 (Jan. 17, 2024) (order approving File Nos. SR-
NYSEARCA-2021-90; SR-NYSEARCA-2023-44; SR-NYSEARCA-2023-58; SR-
NASDAQ-2023-016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-
CboeBZX-2023-038; SR-CboeBZX-2023-040; SR-CboeBZX-2023-042; SR-
CboeBZX-2023-044; SR-CboeBZX-2023-072).
\4\ Amendment No. 3 modified the original filing by adding
information regarding the proposed changes to Rule 4.20 and
correcting minor technical errors.
\5\ See Securities Exchange Act Release No. 102742 (Mar. 28,
2025), 90 FR 14670 (April 3, 2025).
\6\ Amendment No. 4 modified the original filing, as modified by
Amendment No. 3, by changing references to the VanEck Bitcoin Trust
to the VanEck Bitcoin ETF and correcting a description of the 30-day
period over which average daily volume was measured for shares of
the VanEck Bitcoin ETF. Amendment No. 4 is available at <a href="https://www.sec.gov/comments/sr-cboe-2025-017/srcboe2025017-600895-1751482.pdf">https://www.sec.gov/comments/sr-cboe-2025-017/srcboe2025017-600895-1751482.pdf</a>.
\7\ See Securities Exchange Act Release No. 103046 (May 14,
2025), 90 FR 21524 (May 20, 2025). The Commission designated July 2,
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 as modified by Amendment No. 4.
\8\ 15 U.S.C. 78s(b)(2)(B).
\9\ See Securities Exchange Act Release No. 103340 (Jun. 27,
2025), 90 FR 29088 (July 2, 2025) (``OIP'').
---------------------------------------------------------------------------
II. Description of the Proposal, as Modified by Amendment No. 4
<SUP>10</SUP>
---------------------------------------------------------------------------
\10\ For a full description of the proposed rule change, refer
to OIP, supra note 9.
---------------------------------------------------------------------------
As described more fully in the OIP, the Exchange has proposed to
amend Rules 4.3 (Criteria for Underlying Securities), 4.20 (FLEX Option
Classes), and 8.30 (Position Limits), to allow the Exchange to list and
trade options on the VanEck Bitcoin ETF.\11\ First, the Exchange
proposes to amend Rule 4.3, Interpretation and Policy .06(a)(4), to
allow the Exchange to list and trade options on Units that represent
interests in the VanEck Bitcoin ETF, designating them as ``Units''
deemed appropriate for options trading on the Exchange.\12\
---------------------------------------------------------------------------
\11\ The Exchange's rules use the terms ``Units'' and ``ETF'' to
refer to several types of investment products. See Exchange Rule
1.1. In its proposal to list and trade shares of the VanEck Bitcoin
Trust (the ``Trust''), CboeBZX Exchange, Inc. states that shares of
the Trust will be registered with the Commission on Form S-1. See
Securities Exchange Act Release No. 99289 (Jan. 8, 2024), 89 FR
2413, 2414 (Jan. 12, 2024) (File No. SR-CboeBZX-2023-040) (Notice of
Filing of Amendment No. 2 to a Proposed Rule Change to List and
Trade Shares of the VanEck Bitcoin Trust Under BZX Rule 14.11(e)(4),
Commodity-Based Trust Shares). Amendment No. 8 to the Form S-1,
dated January 9, 2024, states, ``The Trust is not registered under
the Investment Company Act of 1940, as amended (the `1940 Act') and
is not subject to regulation under the 1940 Act.'' Amendment No. 8
to the Form S-1 is available at <a href="https://www.sec.gov/Archives/edgar/data/1838028/000093041324000056/c106800_s1a.htm">https://www.sec.gov/Archives/edgar/data/1838028/000093041324000056/c106800_s1a.htm</a>.
\12\ See OIP, 90 FR at 29089.
---------------------------------------------------------------------------
The Exchange states that the VanEck Bitcoin ETF satisfies the
criteria and guidelines in Rule 4.3, Interpretation and Policy .01.\13\
Rule 4.3(a) sets forth criteria for underlying securities on which
option contracts are approved for listing and trading. One of the
criteria is that a security must be characterized by a substantial
number of outstanding shares that are widely held and actively
traded.\14\ The Exchange states that, as of March 5, 2025, the VanEck
Bitcoin ETF had 49,900,000 shares outstanding,\15\ which is more than
the minimum of 7,000,000 shares outstanding that the Exchange generally
requires to list options on a corporate stock pursuant to Rule 4.3,
Interpretation and Policy .01(a)(1).\16\ Additionally, the Exchange
states that the shares of the VanEck Bitcoin ETF are widely held
because, as of January 31, 2025, the VanEck Bitcoin ETF had 32,469
beneficial holders, which is more than the minimum of 2,000 beneficial
holders the Exchange generally requires for corporate stock in order to
list options on that stock pursuant to Rule 4.3, Interpretation and
Policy .01(a)(2).\17\
---------------------------------------------------------------------------
\13\ See id. at 29089.
\14\ See id. at 29089-90.
\15\ See id. at 29090.
\16\ See id.
\17\ See id.
---------------------------------------------------------------------------
The Exchange also provides that, as of March 5, 2025, the VanEck
Bitcoin ETF had six-month total trading volume of 133,275,448 shares
and, for the period from January 21, 2025, through March 5, 2025, 30-
day average daily volume (``ADV'') of 794,677 shares and 30-day average
notional daily volume of $39,163,513.72.\18\ The Exchange states that
the VanEck Bitcoin ETF is characterized as having shares that are
actively traded because its six-month trading volume of 133,275,448
shares, as of March 5, 2025, is higher than 2,400,000 shares, which is
the volume over the preceding 12 months the Exchange generally requires
for a corporate stock to list options on that security, as set forth in
Rule 4.3, Interpretation and Policy .01(b).\19\
---------------------------------------------------------------------------
\18\ See id.
\19\ See id.
---------------------------------------------------------------------------
The Exchange states that the VanEck Bitcoin ETF satisfies the
Exchange's initial listing standards set forth in Rule 4.3 (Criteria
for Underlying Securities), Interpretation and Policy .06(b)(2), which
requires that Units be available for creation or redemption each
business day from or through the issuer in cash or in kind at a price
related to net asset value, and the issuer must be obligated to issue
Units in a specified aggregate number even if some or all of the
investment assets required to be deposited have not been received by
the issuer, subject to conditions.\20\ Options on the VanEck Bitcoin
ETF will be subject to the Exchange's continued
[[Page 36211]]
listing standards set forth in Rule 4.4, Interpretation and Policy .06,
for Units deemed appropriate for options trading pursuant to Rule 4.3,
Interpretation and Policy .06.\21\
---------------------------------------------------------------------------
\20\ See id.
\21\ See id. at 29090.
---------------------------------------------------------------------------
Options on the VanEck Bitcoin ETF will be physically settled
contracts with American-style exercise \22\ and will trade in the same
manner as any other Unit options: the Exchange represents that the same
Exchange rules that currently govern the listing and trading of all
Unit options, including rules governing listing criteria, expirations,
exercise prices, minimum increments, margin requirements, customer
accounts, and trading halt procedures will apply to the listing and
trading of VanEck Bitcoin ETF options on the Exchange in the same
manner as they apply to other options on all other Units that are
listed and traded on the Exchange.\23\
---------------------------------------------------------------------------
\22\ See id.
\23\ See id. at 29091.
---------------------------------------------------------------------------
Second, the Exchange proposes to amend Rule 4.20 (FLEX Option
Classes), which currently permits the Exchange to authorize for trading
a FLEX option class on any equity security if it may authorize for
trading a non-FLEX option class on that equity security pursuant to
Rule 4.3.\24\ The proposed rule change would amend Rule 4.20 to exclude
the VanEck Bitcoin ETF from being eligible for trading as FLEX
options.\25\
---------------------------------------------------------------------------
\24\ See id.
\25\ See id.
---------------------------------------------------------------------------
Finally, the Exchange proposes to amend Rule 8.30 (Position
Limits), Interpretation and Policy .10, to provide a position limit of
25,000 same-side option contracts for options on the VanEck Bitcoin
ETF.\26\ Pursuant to Rule 8.42 (Exercise Limits), Interpretation and
Policy .02, the exercise limits for options on the VanEck Bitcoin ETF
will be equivalent to this proposed position limit.\27\ The Exchange
states that the proposed position and exercise limits are well below
those of other ETFs with similar market characteristics and are the
lowest position and exercise limits available for equity options in the
industry, and are more than appropriate given the VanEck Bitcoin ETF's
market capitalization, ADV, and number of outstanding shares.\28\
---------------------------------------------------------------------------
\26\ See id.
\27\ See id. The Exchange is not proposing to amend Rule 8.42,
Interpretation and Policy .02, which provides that exercise limits
for options on shares or other securities that represent interests
in registered investment companies (or series thereof) organized as
open-end management investment companies, unit investment trusts or
similar entities that satisfy the criteria set forth in Rule 4.3,
Interpretation and Policy .06 shall be equivalent to the position
limits for such options provided in Rule 8.30, Interpretation and
Policy .10.
\28\ See OIP, 90 FR at 29092.
---------------------------------------------------------------------------
In determining the proposed position and exercise limits, the
Exchange considered the six-month ADV, shares outstanding and market
capitalization of the VanEck Bitcoin ETF. As of March 5, 2025, the
VanEck Bitcoin ETF had a six-month ADV of 1,074,802 shares, 49,900,000
shares outstanding, and a market capitalization of $1,271,859,416.\29\
The Exchange also compared the number of outstanding shares of the
VanEck Bitcoin ETF to those of other ETFs with similar outstanding
shares (as of March 5, 2025).\30\ The Exchange calculated the
approximate average position (and exercise limit) of options on those
ETFs to be 225,000 contracts.\31\ The Exchange states that the proposed
position and exercise limits are significantly lower than the average
limit of the options on the other ETFs.\32\
---------------------------------------------------------------------------
\29\ See id. at 29091.
\30\ See id.
\31\ See id.
\32\ See id.
---------------------------------------------------------------------------
The Exchange states that if a market participant held the maximum
number of positions possible in VanEck Bitcoin ETF options pursuant to
the proposed position and exercise limits, the equivalent shares
represented by the proposed position/exercise limit (2,500,000 shares)
would represent approximately 5.01% of the current outstanding shares
of the VanEck Bitcoin ETF (49,900,000 shares).\33\ Therefore, according
to the Exchange, if a market participant exercised all of these
positions at the same time, that market participant would control a
small percentage of the outstanding shares of the VanEck Bitcoin
ETF.\34\
---------------------------------------------------------------------------
\33\ See id. at 29092
\34\ See id.
---------------------------------------------------------------------------
The Exchange also compared the size of the proposed position limit
to the market capitalization of the bitcoin market.\35\ The Exchange
states that, as of March 5, 2025, the bitcoin market had a market
capitalization of approximately $1.797 trillion.\36\ The Exchange
explains that the proposed position and exercise limit of 25,000 same-
side contracts would prevent a market participant from holding
positions that could result in the receipt of more than 2,500,000
shares of the VanEck Bitcoin ETF.\37\ The Exchange calculated that the
value of 2,500,000 shares of the VanEck Bitcoin ETF, as of March 5,
2025, represented 0.0035% of the value of the bitcoin market. The
Exchange concluded that if a market participant with the maximum 25,000
same-side contracts in options in the VanEck Bitcoin ETF decided to
simultaneously exercise its positions, its actions would have no
practical impact on the bitcoin market.\38\
---------------------------------------------------------------------------
\35\ See id. at 29094.
\36\ See id.
\37\ See id.
\38\ See id.
---------------------------------------------------------------------------
The Exchange believes that the proposed position limit is
appropriate when compared to the bitcoin futures contract position
limit imposed by the Chicago Mercantile Exchange (``CME''), which is
2,000 futures for the initial spot month.\39\ According to the
Exchange, on March 5, 2025, CME Mar 25 bitcoin futures settled at
$90,935, so a position of 2,000 CME bitcoin futures had a notional
value of $909,350,000.\40\ Based on the share price of the VanEck
Bitcoin ETF on March 5, 2025, the Exchange calculated that 335,214
VanEck Bitcoin ETF option contracts would equal the notional value of
the 2,000 CME bitcoin futures, a ``significantly higher'' number of
contracts than the proposed position limit of 25,000 contracts.\41\
---------------------------------------------------------------------------
\39\ See id.
\40\ See id.
\41\ See id. at 29095.
---------------------------------------------------------------------------
Additionally, based on the number of outstanding shares of the
VanEck Bitcoin ETF (49,900,000 shares as of March 5, 2025), the
Exchange calculated that approximately 20 market participants holding
the maximum of 25,000 same-side positions in options on the VanEck
Bitcoin ETF would have to simultaneously exercise all of those options
to put the underlying security under stress.\42\ The Exchange states
that this would be unlikely to happen, but if it did, the Exchange does
not expect the VanEck Bitcoin ETF to be under stress because more
shares could be created through the trust's creation and redemption
process.\43\
---------------------------------------------------------------------------
\42\ See id.
\43\ See id.
---------------------------------------------------------------------------
The Exchange represents that it has an adequate surveillance
program in place for options and intends to apply the same program
procedures to options on the VanEck Bitcoin ETF that it applies to the
Exchange's other options products.\44\ The Exchange states that its
existing surveillance procedures are designed to deter and detect
possible manipulative behavior which might arise from listing and
trading the proposed options on the VanEck Bitcoin ETF.\45\ The
Exchange states that its market surveillance staff would have access to
the surveillances conducted by Cboe BZX Exchange, Inc., an affiliated
market of the Exchange, with respect to
[[Page 36212]]
the VanEck Bitcoin ETF, and would review activity in the VanEck Bitcoin
ETF when conducting surveillances for market abuse or manipulation in
the VanEck Bitcoin ETF options.\46\ The Exchange also represents that
it will implement any new surveillance procedures it deems necessary to
effectively monitor the trading of options on the VanEck Bitcoin
ETF.\47\
---------------------------------------------------------------------------
\44\ See id. at 29092.
\45\ See id. at 29093.
\46\ See id. at 29092-93.
\47\ See id. at 29093.
---------------------------------------------------------------------------
Additionally, the Exchange states that it is a member of the
Intermarket Surveillance Group (``ISG''), and that ISG members
coordinate surveillance and investigative information sharing in the
stock, options, and futures markets.\48\ The Exchange would be able to
obtain information regarding trading of shares of the VanEck Bitcoin
ETF through ISG.\49\
---------------------------------------------------------------------------
\48\ See id.
\49\ See id.
---------------------------------------------------------------------------
The Exchange states that it has a Regulatory Services Agreement
with the Financial Industry Regulatory Authority (``FINRA'') for
certain market surveillance, investigation and examinations
functions,\50\ and that all options exchanges allocate amongst
themselves and FINRA responsibilities to conduct certain options-
related market surveillance that are common to rules of all options
exchanges, pursuant to a multi-party 17d-2 joint plan.\51\ The Exchange
also represents that it and the Options Price Reporting Authority have
the necessary systems capacity to handle the additional traffic
associated with the listing of new series that may result from the
introduction of options on the VanEck Bitcoin ETF.\52\
---------------------------------------------------------------------------
\50\ See id.
\51\ See id.
\52\ See id.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change, as modified by Amendment No. 4, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange,\53\ and, in particular,
the requirements of Section 6 of the Act.\54\ Specifically, the
Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\55\ which requires that an exchange have
rules designed to prevent fraudulent and manipulative acts and
practices and to protect investors and the public interest.
---------------------------------------------------------------------------
\53\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\54\ 15 U.S.C. 78f.
\55\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
A. Widely Held and Actively Traded
The Exchange's initial listing standards require, among other
things, that the security underlying a listed option be ``characterized
by a substantial number of outstanding shares that are widely held and
actively traded.'' \56\ As described above, the Exchange states that,
as of March 5, 2025, the VanEck Bitcoin ETF had 49,900,000 shares
outstanding and that, as of January 31, 2025, VanEck Bitcoin ETF had
32,469 beneficial holders.\57\ In addition, the Exchange states that,
as of March 5, 2025, the VanEck Bitcoin ETF had six-month total trading
volume of 133,275,448 shares and, for the period from January 21, 2025,
through March 5, 2025, 30-day ADV of 794,677 shares and 30-day average
notional daily volume of $39,163,513.72.\58\ The Exchange also states
that, as of March 5, 2025, the VanEck Bitcoin ETF had a market
capitalization of $1,271,859,416.\59\
---------------------------------------------------------------------------
\56\ See Cboe Rule 4.3(a)(2).
\57\ See OIP, 90 FR at 29090.
\58\ Id.
\59\ Id. at 29091.
---------------------------------------------------------------------------
The Commission has reviewed the Exchange's analysis and publicly
available data regarding the VanEck Bitcoin ETF. Based on this review
of information provided by the Exchange and publicly available
information--including information regarding the number of shares
outstanding and the number of beneficial holders for the VanEck Bitcoin
ETF, the ADV of the VanEck Bitcoin ETF, and the market capitalization
of the VanEck Bitcoin ETF--the Commission concludes that it is
reasonable for the Exchange to determine that the VanEck Bitcoin ETF
satisfies the requirement of Cboe Rule 4.3(a)(2) that the security
underlying a listed option be widely held and actively traded.
B. Position and Exercise Limits
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.\60\ In addition, such limits serve to reduce the
possibility of disruption in the options market itself, especially in
illiquid classes.\61\ As the Commission has previously recognized,
markets with active and deep trading interest, as well as with broad
public ownership, are more difficult to manipulate or disrupt than less
active and deep markets with smaller public floats.\62\ The Commission
also has recognized 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.\63\ 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.\64\
---------------------------------------------------------------------------
\60\ 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) (``Position Limit Order'').
\61\ Id.
\62\ Id.
\63\ See, e.g., Securities Exchange Act Release Nos. 21907 (Mar.
29, 1985), 50 FR 13440, 13441 (Apr. 4, 1985) (order approving File
Nos. SR-CBOE-84-21, SR-Amex-84-30, SR-Phlx-84-25, and SR-PSE-85-1);
and 40875 (Dec. 31, 1998), 64 FR 1842, 1843 (Jan. 12, 1999) (order
approving File Nos. SR-CBOE-98-25; Amex-98-22; PCX-98-33; and Phlx-
98-36).
\64\ See id.
---------------------------------------------------------------------------
The Exchange proposes a position limit of 25,000 contracts on the
same side of the market for options on the VanEck Bitcoin ETF and an
equivalent exercise limit.\65\ In proposing these position and exercise
limits, the Exchange considered, among other things, the approximate
six-month ADV, outstanding shares, and market capitalization of the
VanEck Bitcoin ETF.\66\ The Exchange states that the proposed position
and exercise limits of 25,000 contracts are significantly lower than
the position and exercise limits of options on other ETFs with a
similar
[[Page 36213]]
number of outstanding shares.\67\ In addition, the Exchange states that
the number of shares represented by the proposed position and exercise
limits were equal to approximately 5.01% of the outstanding shares of
the VanEck Bitcoin ETF.\68\ The Exchange further states that ``[t]he
proposed position and exercise limits are the lowest position and
exercise limits available for equity options in the industry, are
extremely conservative, and are more than appropriate given the VanEck
Bitcoin ETF's market capitalization, ADV, and high number of
outstanding shares.'' \69\
---------------------------------------------------------------------------
\65\ See OIP, 90 FR at 29091; proposed Cboe Rule 8.30,
Interpretation and Policy .10 (establishing a 25,000-contract
position limit for options on the VanEck Bitcoin ETF); Cboe Rule
8.42, Interpretation and Policy .02 (stating that exercise limits
for options on shares or other securities that represent interests
in registered investment companies (or series thereof) organized as
open-end management investment companies, unit investment trusts or
similar entities that satisfy the criteria set forth in Rule 4.3,
Interpretation and Policy .06 shall be equivalent to the position
limits prescribed for such options in Rule 8.30, Interpretation and
Policy .10).
\66\ See OIP, 90 FR at 29091.
\67\ The Exchange states that options on ETFs with outstanding
shares similar to the VanEck Bitcoin ETF had average position and
exercise limits of 225,000 contracts. See id.
\68\ See id. at 29092.
\69\ See id.
---------------------------------------------------------------------------
The Exchange also compared the size of the position and exercise
limits to the market capitalization of the bitcoin market, which,
according to the Exchange, had a market capitalization of $1.797
trillion as of March 5, 2025.\70\ The Exchange calculated that, with a
position limit of 25,000 contracts (2,500,000 shares of the VanEck
Bitcoin ETF), as of March 5, 2025, a market participant could hold a
position in shares of the VanEck Bitcoin ETF that represented 0.0035%
of the bitcoin market, a position that the Exchange states ``would have
no practical impact on the Bitcoin market.'' \71\
---------------------------------------------------------------------------
\70\ See id. at 29094.
\71\ See id.
---------------------------------------------------------------------------
The Exchange states that the proposed position and exercise limits
also are appropriate given position limits for bitcoin futures.\72\ The
Exchange states that the CME establishes a position limit of 2,000
bitcoin futures for the spot month and that, as of March 5, 2025, such
a position would have had a notional value of $909,350,000.\73\ The
Exchange states that, as of that date, 355,214 option contracts on the
VanEck Bitcoin ETF would be the equivalent of the $909,350,000 CME
bitcoin futures notional value.\74\ The Exchange states that the option
contract equivalent numbers are significantly higher than the proposed
position and exercise limit of 25,000 contracts.\75\
---------------------------------------------------------------------------
\72\ See id.
\73\ See id.
\74\ See id. at 29094-95.
\75\ See id. at 29095.
---------------------------------------------------------------------------
In addition, the Exchange states that with a position limit of
25,000 contracts, 20 market participants, each with a position of
25,000 contracts, would have to exercise all of their VanEck Bitcoin
ETF options to place the VanEck Bitcoin ETF shares under stress.\76\
Based on the information provided, demonstrating, among other things,
that the VanEck Bitcoin ETF is characterized by a substantial number of
outstanding shares that are actively traded and widely held, the
Exchange believes the proposed position and exercise limits are
extremely conservative compared to those of ETF options with similar
market characteristics.\77\ The Exchange states that the proposed
position and exercise limits reasonably and appropriately balance the
liquidity provisioning in the market against the prevention of
manipulation. The Exchange further states that the proposed limits are
effectively designed to prevent an individual customer or entity from
establishing options positions that could be used to manipulate the
market of the underlying as well as the bitcoin market.\78\
---------------------------------------------------------------------------
\76\ The Exchange bases this calculation on the number of VanEck
Bitcoin ETF shares outstanding as of March 5, 2025. See id.
\77\ See id. at 29096.
\78\ See id. (citing the Position Limit Order, supra note 60).
---------------------------------------------------------------------------
The Commission finds that the proposed position and exercise limits
are consistent with the Act, and in particular, with the requirements
in Section 6(b)(5) that the rules of a national securities exchange are
designed to prevent fraudulent and manipulative acts and practices and
to protect investors and the public interest. As discussed above, the
Commission has recognized 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.\79\ In addition, the
Commission has stated previously 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
position.\80\ Based on its review of the data and analysis provided by
the Exchange, the Commission concludes that the proposed position and
exercise limits satisfy these objectives. Specifically, the Commission
has considered and reviewed the Exchange's analysis that, as of March
5, 2025, the proposed position and exercise limits of 25,000 contracts
represented 5.01% of the outstanding shares of the VanEck Bitcoin
ETF.\81\ The Commission also has considered and reviewed the Exchange's
statement that with a position limit of 25,000 contracts, 20 market
participants, each with a same side position of 25,000 contracts, would
have to exercise all of their VanEck Bitcoin ETF options to place the
VanEck Bitcoin ETF shares under stress.\82\ Based on the Commission's
review of this information and analysis, the Commission concludes that
the proposed position and exercise limits are designed to prevent
investors from disrupting the market for the underlying securities 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
can be used or might create incentives to manipulate or disrupt the
underlying market so as to benefit the options position.\83\
---------------------------------------------------------------------------
\79\ See supra note 63 and accompanying text.
\80\ See Securities Exchange Act Release No. 57352 (Feb. 19,
2008), 73 FR 10076, 10080 (Feb. 25, 2008) (order approving File No.
SR-CBOE-2008-07).
\81\ See supra note 68.
\82\ See supra note 76.
\83\ The proposal also excludes the VanEck Bitcoin ETF options
from FLEX trading. The Exchange states that the Exchange may submit
a separate rule filing that would permit the Exchange to authorize
for trading FLEX options on the VanEck Bitcoin Trust (which filing
may propose changes to existing FLEX option position limits for such
options if appropriate). See OIP, 90 FR at 29094, n. 42. Excluding
VanEck Bitcoin ETF options from FLEX trading will allow the
Commission to consider the listing of FLEX options on the VanEck
Bitcoin ETF in the context of any separate proposal the Exchange
files to list such options.
---------------------------------------------------------------------------
C. Surveillance
As described more fully above, the Exchange states that it will
apply its existing options surveillance program procedures to options
on the VanEck Bitcoin ETF \84\ and it will implement any new
surveillance procedures it deems necessary to effectively monitor the
trading of options on the VanEck Bitcoin ETF.\85\ The Exchange states
that its market surveillance staff would have access to the
surveillances conducted by Cboe BZX Exchange, Inc.\86\ with respect to
the VanEck Bitcoin ETF and would review activity in the underlying
VanEck Bitcoin ETF when conducting surveillances for market abuse or
manipulation in the options on the VanEck Bitcoin ETF.\87\ In addition,
the Exchange states that it is a member of the ISG and that, in
addition to the
[[Page 36214]]
surveillances conducted by Cboe BZX Exchange, Inc., the Exchange would
be able to obtain information regarding trading of shares of the VanEck
Bitcoin ETF through ISG.\88\ The Exchange further states that ISG
members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets.\89\
Together, these surveillance procedures should allow the Exchange to
investigate suspected manipulations or other trading abuses in options
on the VanEck Bitcoin ETF.
---------------------------------------------------------------------------
\84\ The surveillance program includes surveillance patterns for
price and volume movements as well as patterns for potential
manipulation (e.g., spoofing and marking the close). See id. at
29092, n.29.
\85\ See id. at 29093
\86\ Cboe BZX Exchange, Inc. is an affiliated market of the
Exchange. See id. at 29092, n.30.
\87\ See id. at 29092-93.
\88\ See id. at 29093.
\89\ See id.
---------------------------------------------------------------------------
Accordingly, the Commission finds that the Exchange's surveillance
procedures for the proposed options are designed to prevent fraudulent
and manipulative acts and practices and to protect investors and the
public interest.
D. Retail Customers
Existing rules governing broker-dealer conduct when dealing with
retail customers will apply to the proposed options on the VanEck
Bitcoin ETF. For example, the Exchange's rules require its members to
``exercise due diligence to learn the essential facts as to the
customer and his investment objectives and financial situation'' when
approving a customer's account for options transactions.\90\ In
fulfilling this obligation, the member must consider, among other
things, a customer's investment objectives; employment status;
estimated annual income; estimated net worth; and investment experience
and knowledge.\91\ Further, FINRA's heightened suitability requirements
for options trading accounts require that a person recommending an
opening position in any option contract have ``a reasonable basis for
believing, at the time of making the recommendation, that the customer
has such knowledge and experience in financial matters that he may
reasonably be expected to be capable of evaluating the risks of the
recommended transaction, and is financially able to bear the risks of
the recommended position in the option contract.'' \92\
---------------------------------------------------------------------------
\90\ See Cboe Rule 9.1(b).
\91\ See id.
\92\ See FINRA Rule 2360(b)(19).
---------------------------------------------------------------------------
IV. Accelerated Approval of Amendment No. 4
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act, for approving Amendment No. 4 prior to the 30th day after the
date of publication of notice of Amendment No. 4 in the Federal
Register. Amendment No. 4 changes references to the VanEck Bitcoin
Trust in the proposed rule change to the VanEck Bitcoin ETF and
corrects a description in the proposed rule change of the 30-day period
over which ADV was measured for shares of the VanEck Bitcoin ETF. The
correction of the 30-day period over which ADV was measured improves
the accuracy of the Exchange's proposal. Accordingly, the Commission
finds good cause, pursuant to Section 19(b)(2) of the Act,\93\ to
approve the proposed rule change, as modified by Amendment No. 4, on an
accelerated basis.
---------------------------------------------------------------------------
\93\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
V. Conclusion
For the reasons set forth above, the Commission finds that the
proposed rule change, as modified by Amendment No. 4, is consistent
with the requirements of the 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.\94\
---------------------------------------------------------------------------
\94\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\95\ that the proposed rule change (SR-CBOE-2025-017), as modified
by Amendment No. 4, is approved.
---------------------------------------------------------------------------
\95\ 15 U.S.C. 78s(b)(2)
By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14550 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.