Notice2025-18257
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Setting Aside Action by Delegated Authority and Approving a Proposed Rule Change, as Modified by Amendment No. 1, To Amend NYSE Arca Rule 8.500-E (Trust Units) and To List and Trade Shares of the Grayscale Digital Large Cap Fund LLC Under Amended NYSE Arca Rule 8.500-E (Trust Units)
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
September 22, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 181 (Monday, September 22, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 181 (Monday, September 22, 2025)]
[Notices]
[Pages 45440-45445]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-18257]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103996; File No. SR-NYSEARCA-2024-87]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Setting
Aside Action by Delegated Authority and Approving a Proposed Rule
Change, as Modified by Amendment No. 1, To Amend NYSE Arca Rule 8.500-E
(Trust Units) and To List and Trade Shares of the Grayscale Digital
Large Cap Fund LLC Under Amended NYSE Arca Rule 8.500-E (Trust Units)
September 17, 2025.
I. Introduction
On October 15, 2024, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt certain listing rules
and to list and trade shares of the Grayscale Digital Large Cap Fund
LLC.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The proposed rule change was published for comment in the
Federal Register on November 4, 2024. See Securities Exchange Act
Release No. 101470 (Oct. 29, 2024), 89 FR 87681 (Nov. 4, 2024). On
December 17, 2024, the Commission extended the time period for
Commission action on the proposed rule change. See Securities
Exchange Act Release No. 101939 (Dec. 17, 2024), 89 FR 104581 (Dec.
23, 2024). On January 31, 2025, the Commission instituted
proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act to
determine whether to approve or disapprove the proposed rule change.
See Securities Exchange Act Release No. 102313 (Jan. 31, 2025), 90
FR 9092 (Feb. 6, 2025). On April 29, 2025, the Commission extended
the time period for Commission action on proceedings to determine
whether to approve or disapprove the proposed rule change. See
Securities Exchange Act Release No. 102941 (Apr. 29, 2025), 90 FR
19037 (May 5, 2025). On June 26, 2025, the Exchange filed Amendment
No. 1 to the proposed rule change, which replaced and superseded the
proposed rule change in its entirety. The proposed rule change, as
modified by Amendment No. 1, was published for comment in the
Federal Register on July 2, 2025. See Securities Exchange Act
Release No. 103345 (June 27, 2025), 90 FR 29057 (July 2, 2025)
(``Amendment No. 1'').
---------------------------------------------------------------------------
[[Page 45441]]
On July 1, 2025, the Commission, acting through authority delegated
to the Division of Trading and Markets (``Division''),\4\ approved the
proposed rule change, as modified by Amendment No. 1, on an accelerated
basis.\5\ On July 1, 2025, the Deputy Secretary of the Commission
notified NYSE Arca that, pursuant to Commission Rule of Practice
431,\6\ the Commission would review the Division's action pursuant to
delegated authority and that the Division's action pursuant to
delegated authority was stayed until the Commission ordered
otherwise.\7\ On July 29, 2025, the Commission issued a scheduling
order, pursuant to Commission Rule of Practice 431, providing until
August 22, 2025, for any party or other person to file a written
statement in support of, or in opposition to, the Approval Order.\8\
---------------------------------------------------------------------------
\4\ 17 CFR 200.30-3(a)(12).
\5\ See Securities Exchange Act Release No. 103364 (July 1,
2025), 90 FR 29923 (July 7, 2025) (``Approval Order'').
\6\ 17 CFR 201.431.
\7\ See Letter from J. Matthew DeLesDernier, Deputy Secretary,
Commission, to Le-Anh Bui, Senior Counsel, NYSE Group, Inc., dated
July 1, 2025, available at <a href="https://www.sec.gov/files/rules/sro/nysearca/2025/sr-nysearca-2024-87-rule-431-letter-2025-07-01.pdf">https://www.sec.gov/files/rules/sro/nysearca/2025/sr-nysearca-2024-87-rule-431-letter-2025-07-01.pdf</a>.
\8\ See Securities Exchange Act Release No. 103562 (July 29,
2025), 90 FR 36231 (Aug. 1, 2025). Comments on the proposed rule
change, including statements concerning the Approval Order, are
available at: <a href="https://www.sec.gov/comments/sr-nysearca-2024-87/srnysearca202487.htm">https://www.sec.gov/comments/sr-nysearca-2024-87/srnysearca202487.htm</a>.
---------------------------------------------------------------------------
The Commission has conducted a de novo review of NYSE Arca's
proposal, giving careful consideration to the entire record, including
all comments and statements submitted, to determine whether the
proposal is consistent with the requirements of the Exchange Act and
the rules and regulations thereunder that are applicable to a national
securities exchange. Under Section 19(b)(2)(C) of the Exchange Act, the
Commission must approve the proposed rule change of a self-regulatory
organization if the Commission finds that the proposed rule change is
consistent with the requirements of the Exchange Act and the applicable
rules and regulations thereunder; if it does not make such a finding,
the Commission must disapprove the proposed rule change.\9\
Additionally, under Rule 700(b)(3) of the Commission's Rules of
Practice, the ``burden to demonstrate that a proposed rule change is
consistent with the Exchange Act and the rules and regulations issued
thereunder . . . is on the self-regulatory organization that proposed
the rule change.'' \10\ The description of a proposed rule change, its
purpose and operation, its effect, and a legal analysis of its
consistency with applicable requirements must all be sufficiently
detailed and specific to support an affirmative Commission finding.\11\
Any failure of a self-regulatory organization to provide the
information required by Rule 19b-4 and elicited on Form 19b-4 may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Exchange Act and the rules and regulations thereunder that are
applicable to the self-regulatory organization.\12\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(2)(C).
\10\ 17 CFR 201.700(b)(3).
\11\ See id.
\12\ See id. See also 17 CFR 240.19b-4.
---------------------------------------------------------------------------
For the reasons discussed further herein, NYSE Arca has met its
burden to show that the proposed rule change is consistent with the
Exchange Act, and this order sets aside the Approval Order and approves
NYSE Arca's proposed rule change, as modified by Amendment No. 1. In
particular, the Commission concludes that the record before the
Commission demonstrates that NYSE Arca's proposal is consistent with
Section 6(b)(5) of the Exchange Act,\13\ which requires that the rules
of a national securities exchange be designed, among other things, to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, 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.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
II. Summary of the Proposal
A. Amendments to NYSE Arca Rules 8.500-E and 5.3-E
As described in more detail in the Amendment No. 1,\14\ the
Exchange proposes to amend NYSE Arca Rule 8.500-E (Trust Units). First,
the Exchange proposes to revise the definition of ``Trust Units.''
Currently, the rule provides that Trust Units are securities ``issued
by a trust or similar entity that is constituted as a commodity pool
that holds investments comprising or otherwise based on any combination
of futures contracts, options on futures contracts, forward contracts,
swap contracts, commodities and/or securities.'' \15\ The Exchange
proposes to amend this definition to specify that (i) Trust Units may
also be issued by a limited liability company; and (ii) Trust Units may
be commodity pools, ``if applicable.'' \16\
---------------------------------------------------------------------------
\14\ See supra note 3.
\15\ See NYSE Arca Rule 8.500-E(b)(2).
\16\ See Amendment No. 1 at 29058.
---------------------------------------------------------------------------
Second, the Exchange proposes to amend NYSE Arca Rule 8.500-E to
specify that the Exchange may list and trade Trust Units with
investments that are represented by an index or portfolio.\17\
Currently, the rule only provides that the Exchange may list and trade
Trust Units based on an underlying asset, commodity, security, or
portfolio.\18\ As revised, Trust Units may be based on an underlying
asset, commodity, security, and/or portfolio, ``which may be
represented by an index or portfolio of any of the foregoing.'' \19\
---------------------------------------------------------------------------
\17\ See id.
\18\ See NYSE Arca Rule 8.500-E(c).
\19\ See Amendment No. 1 at 29058.
---------------------------------------------------------------------------
Third, the Exchange proposes certain conforming changes to the
rule, consistent with the proposed changes described above.\20\
---------------------------------------------------------------------------
\20\ See id. for additional details. The Exchange also proposes
to amend NYSE Arca Rule 8.500-E(b)(1), which defines the term
``commodity,'' to update the reference to Section 1(a)(4) of the
Commodity Exchange Act (``CEA'') with a reference to Section 1a(9)
of the CEA. See id.
---------------------------------------------------------------------------
Fourth, the Exchange proposes to amend NYSE Arca Rules 5.3-E
(Corporate Governance and Disclosure Policies) and 5.3-E(e)
(Shareholder Annual Meetings) to include Trust Units listed pursuant to
NYSE Arca Rule 8.500-E among the derivative and special purpose
securities to which a limited set of corporate governance and
disclosure policies would apply and to which the requirements
concerning shareholder/annual meetings would not be required.\21\
---------------------------------------------------------------------------
\21\ See id.
---------------------------------------------------------------------------
[[Page 45442]]
B. The Fund
The Exchange proposes to list and trade shares (``Shares'') of the
Grayscale Digital Large Cap Fund LLC (``Fund'') under amended NYSE Arca
Rule 8.500-E, as described above. The investment objective of the Fund
is for the value of the Shares to reflect the value of the digital
assets held by the Fund (``Fund Components''), as determined by
reference to their respective Index Prices \22\ and weightings within
the Fund, less the Fund's expenses and other liabilities.\23\ The
Fund's assets consist solely of the Fund Components.\24\ The Fund
Components, as well as their weightings, will consist of the digital
assets that make up the CoinDesk 5 Index (``CD5''), as rebalanced from
time to time, subject to the Manager's discretion to exclude and/or
rebalance the weighting of individual digital assets in certain rules-
based circumstances.\25\ The Manager will ensure that, on an initial
and continuing basis, as of 4:00 p.m. E.T. on every trading day, at
least 85% of the Fund Components will consist of commodities that are
the primary investment underlying exchange-traded products (``ETPs'')
that have been approved by the Commission to list and trade on a
national securities exchange (``Approved Components'') \26\ and that no
more than 15% of the Fund Components will be non-Approved
Components.\27\ As of the date of the Amendment No. 1, the Fund
Components and their weightings were bitcoin (80.20%), ether (11.39%),
Solana (2.78%), XRP (4.82%), and Cardano (0.81%).\28\
---------------------------------------------------------------------------
\22\ The ``Index Price'' of each Fund Component is the U.S.
dollar value derived from the Digital Asset Trading Platforms that
are reflected in each Fund Component's CoinDesk CCIXber Reference
Rate, calculated at 4:00 p.m., New York time, on each business day.
See id. at 29059, n.20. A ``Digital Asset Trading Platform'' is an
electronic marketplace where participants may trade, buy, and sell
digital assets based on bid-ask trading. See id. at 29061, n.29.
\23\ See id. at 29059. The Fund is a Cayman Islands limited
liability company. The manager of the Fund is Grayscale Investments
Sponsors, LLC (``Manager''). The custodian is Coinbase Custody Trust
Company, LLC. See id.
\24\ See id.
\25\ See id. CD5 represents the five largest and the most liquid
digital assets in the digital asset market. The respective
weightings of CD5 components are determined by market capitalization
and rebalanced quarterly. See id. at 29059, n.18; 29066-67.
\26\ As of the filing of Amendment No. 1, more than 85% of the
Fund Components were bitcoin (80.20%) and ether (11.39%). See id. at
29059. The Commission approved both spot bitcoin and spot ether to
underlie ETPs as primary investments. See 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, Securities Exchange Act Release No. 99306
(Jan. 10, 2024), 89 FR 3008 (Jan. 17, 2024) (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) (``Spot Bitcoin ETP Approval Order''); Order
Granting Accelerated Approval of Proposed Rule Changes, as Modified
by Amendments Thereto, To List and Trade Shares of Ether-Based
Exchange-Traded Products, Securities Exchange Act Release No. 100224
(May 23, 2024), 89 FR 46937 (May 30, 2024) (SR-NYSEARCA-2023-70; SR-
NYSEARCA-2024-31; SR-NASDAQ-2023-045; SR-CboeBZX-2023-069; SR-
CboeBZX-2023-070; SR-CboeBZX-2023-087; SR-CboeBZX-2023-095; SR-
CboeBZX-2024-018) (``Spot Ether ETP Approval Order''); 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, Securities Exchange Act Release No. 101998 (Dec. 19,
2024), 89 FR 106707 (Dec. 30, 2024) (SR-NASDAQ-2024-028; SR-CBOEBZX-
2024-091) (``Spot Bitcoin & Ether ETP Approval Order''). The Spot
Bitcoin ETP Approval Order, Spot Ether ETP Approval Order; and Spot
Bitcoin & Ether ETP Approval Order each approved the listing and
trading of Commodity-Based Trust Shares holding 100% of their assets
in spot bitcoin and/or spot ether. Today, the Commission is also
approving proposals to adopt generic listing standards for
Commodity-Based Trust Shares that hold spot commodities (or certain
derivatives thereon). See Order Granting Accelerated Approval of
Proposed Rule Changes, as Modified by Amendments Thereto, to Adopt
Generic Listing Standards for Commodity-Based Trust Shares,
Securities Exchange Act Release No. 103995 (Sept. 17, 2025) (SR-
NASDAQ-2025-056; SR-CboeBZX-2025-104; SR-NYSEARCA-2025-54)
(``Commodity-Based Trust Shares Generics Approval Order''). Approved
Components would include commodities that would qualify to underlie
Commodity-Based Trust Shares that list and trade pursuant to such
generic listing standards.
\27\ See Amendment No. 1 at 29059. The Exchange states that, to
the extent the Fund's composition is, or is anticipated to be, less
than 85% Approved Components as of 4:00 p.m. E.T. on a given trading
day, the Manager will promptly notify the Exchange. As soon as
practicable and in any event by no later than the beginning of the
NYSE Arca Core Trading Session on the following trading day, the
Manager will rebalance the Fund's portfolio according to the
methodology described in the Fund's prospectus such that at least
85% of the weightings of the Fund Components will consist of
Approved Components. If it is anticipated that, as of 4:00 p.m. E.T.
on a given trading day, the Fund's portfolio will not consist of at
least 85% Approved Components by the start of the next NYSE Arca
Core Trading Session, the Manager will notify the Exchange as soon
as practicable (and, in any event, no later than 9:15 a.m. E.T.),
and the Exchange will halt trading in the Shares until at least 85%
of the weightings of the Fund Components consist of Approved
Components. See id. at 29067.
\28\ See id. at 29059.
---------------------------------------------------------------------------
The Fund will use the Index Price for each Fund Component to
calculate its net asset value (``NAV''), which will occur at 4:00 p.m.,
New York time, on each business day or as soon thereafter as
practicable.\29\ The Fund will issue Shares to, and redeem Shares from,
authorized participants on an ongoing basis for cash, but only in one
or more ``Baskets'' of 10,000 Shares.\30\
---------------------------------------------------------------------------
\29\ See id. at 29060-61. The rules that the Manager will employ
to calculate the Index Prices for each Fund Component are described
in Amendment No. 1. See id. at 29070-71.
\30\ See id. at 29075-76.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
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.\31\ In particular, the Commission finds that the
proposal is consistent with Section 6(b)(5) of the Exchange Act,\32\
which requires, among other things, that the Exchange's rules be
designed to ``prevent fraudulent and manipulative acts and practices''
and, ``in general, to protect investors and the public interest;'' and
with Section 11A(a)(1)(C)(iii) of the Exchange Act,\33\ which sets
forth Congress' finding that it is in the public interest and
appropriate for the protection of investors and the maintenance of fair
and orderly markets to assure the availability to brokers, dealers, and
investors of information with respect to quotations for and
transactions in securities. The Commission therefore approves the
proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\31\ In approving this proposed rule change, the Commission has
considered the proposed rule change's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\32\ 15 U.S.C. 78f(b)(5).
\33\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------
A. Amendments to NYSE Arca Rule 8.500-E and 5.3-E
The Commission finds that the proposed changes to NYSE Arca Rule
8.500-E are consistent with the Exchange Act. The proposed change to
the definition of Trust Units as described above simply specifies that
an entity structured as a limited liability company can issue Trust
Units. Moreover, by amending the rule so that Trust Units may be
commodity pools ``if applicable,'' the proposal no longer requires
Trust Units to be commodity pools.\34\ Although the proposal no longer
requires the entity issuing Trust Units to be a commodity pool, it does
not change Trust Units' permissible investments, which remain ``any
combination of futures contracts, options on futures contracts, forward
contracts, swap contracts, commodities and/or securities.'' \35\
Accordingly, the proposal provides flexibility on Trust Units structure
without changes to
[[Page 45443]]
permissible investments. Similarly, the proposal's provision that Trust
Units' underlying investments may be represented by an index or
portfolio of permissible investments merely adds specificity that is
consistent with the current rule text. All Trust Units listed and
traded on the Exchange will continue to be subject to the initial and
continued listing standards set forth in NYSE Arca Rule 8.500-E and
will continue to be subject to the full panoply of the Exchange's rules
and procedures that currently govern the trading of equity securities
on the Exchange including, among others, rules and procedures governing
trading halts, surveillance procedures, disclosures to members,
customer suitability requirements, and market maker obligations.
---------------------------------------------------------------------------
\34\ See Section 1a(10) of the CEA for the definition of
``commodity pool.''
\35\ NYSE Arca Rule 8.500-E(b)(2).
---------------------------------------------------------------------------
The Commission finds that it is consistent with Section 6(b)(5) of
the Exchange Act \36\ for the Exchange to include Trust Units among the
types of securities to which a limited set of corporate governance and
disclosure policies would apply and to which the requirements
concerning shareholder/annual meetings would not be required. Like
other types of securities listed in NYSE Arca Rules 5.3-E and 5.3-E(e),
Trust Units are investment vehicles where unit holders, unlike other
equity holders, do not directly participate or vote in the annual
election of directors or generally on the operations or policies of the
listed company.\37\ Thus, the Exchange's rules, as amended, would
continue to ensure that the appropriate listed companies are required
to comply with corporate governance and disclosure policies and hold
annual shareholder meetings, for the benefit of investors and the
public interest.
---------------------------------------------------------------------------
\36\ 15 U.S.C. 78f(b)(5).
\37\ See Order Granting Approval of a Proposed Rule Change
Amending Section 302 of the Listed Company Manual To Provide
Exemptions for the Issuers of Certain Categories of Securities From
the Obligation To Hold Annual Shareholders' Meetings, Securities
Exchange Act Release No. 86406 (July 18, 2019), 84 FR 35431 (July
23, 2019) (SR-NYSE-2019-20) (``The Commission believes the right of
shareholders to vote at an annual meeting is an essential and
important one. The Commission, however, believes that the
requirement to hold an annual shareholder meeting may not be
necessary for certain issuers of specific types of securities
because the holders of such securities do not directly participate
as equity holders and vote in the annual election of directors or
generally on the operations or policies of the listed company.'');
Order Granting Approval of a Proposed Rule Change and Amendment Nos.
1 and 2 Thereto and Notice of Filing and Order Granting Accelerated
Approval of Amendment No. 3 Thereto Relating to Rule 4350(e) To
Amend the Annual Shareholder Meeting Requirement, Securities
Exchange Act Release No. 53578 (Mar. 30, 2006); 71 FR 17532 (Apr. 4,
2006) (SR-NASD-2005-073). The Exchange is reverting the previous
deletion of Trust Units from NYSE Arca Rules 5.3-E and 5.3-E(e). See
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
To Amend NYSE Arca Rule 5.3-E To Exclude Certain Categories of
Issuers From the Exchange's Annual Meeting Requirement, Securities
Exchange Act Release No. 83324 (May 24, 2018), 83 FR 25076 (May 31,
2018) (SR-NYSEARCA-2018-31) (stating that the Exchange is removing
Trust Units from those derivative and special purpose securities
that are excluded from certain corporate governance requirements
because ``the Exchange does not presently list any security under
the . . . Trust Units standards'' and that ``[s]hould the Exchange
list securities under the . . . Trust Units standards in the future,
it may consider whether to amend its rules at that time to allow for
certain corporate governance exclusions applicable to such classes
of securities.''). See id. at 25077-78 and n.10.
---------------------------------------------------------------------------
B. The Fund
1. Exchange Act Section 6(b)(5)
The Commission finds that the listing and trading of the Fund is
consistent with the Exchange Act. The structure of the Fund, the terms
of its operation and the trading of its Shares, and the representations
in the proposal are substantially similar to those of other proposals
approved in prior Commission orders. On an initial basis, and on a
continuing basis reflecting subsequent ETP approvals, at least 85% of
the Fund's holdings will consist of commodities that the Commission has
approved to underlie an ETP as primary investments, with no more than
15% of the Fund's investments in other assets, which could include
other types of commodities as well as securities.\38\ The Commission
has previously found that the risks associated with fraud and
manipulation are sufficiently mitigated if an ETP holds at least 80% of
the investments in assets that do not raise concerns relating to fraud
and manipulation.\39\ In approving an ETP with a commodity as a primary
investment, the Commission must find under Section 6(b)(5) that there
are sufficient means to prevent fraud and manipulation.\40\
Accordingly, the Commission finds that the requirement that the Fund
will hold at least 85% of its investments in assets approved by the
Commission to underlie an ETP as primary investments will enable
adequate surveillance of the Shares on the Exchange.
---------------------------------------------------------------------------
\38\ See Amendment No. 1 at 29067. See also supra notes 26-27
and accompanying text.
\39\ See, e.g., Notice of Filing of Amendment No. 2, and Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified
by Amendment No. 2, To List and Trade Shares of the SPDR DoubleLine
Short Duration Total Return Tactical ETF of the SSgA Active Trust,
Securities Exchange Act Release No. 77499 (Apr. 1, 2016), 81 FR
20428 (Apr. 7, 2016) (SR-BATS-2016-04) (approving the listing and
trading of a series of Managed Fund Shares that would hold up to at
least 80% of its net assets in a diversified portfolio of fixed
income securities, with 20% limitations on certain holdings such as
junior bank loans); Notice of Filing of Amendment No. 1 and Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified
by Amendment No. 1, To Allow the JPMorgan Core Plus Bond ETF of the
J.P. Morgan Exchange-Traded Fund Trust To Hold Certain Instruments
in a Manner That May Not Comply With Rule 14.11(i), Managed Fund
Shares, Securities Exchange Act Release No. 85701 (Apr. 22, 2019),
84 FR 17902 (Apr. 26, 2019) (SR-CboeBZX-2019-016) (approving the
listing and trading of a series of Managed Fund Shares that could
hold up to 20% of the weight of the fixed income portion of its
portfolio in asset backed securities and mortgage backed securities
issued by private issuers); Order Granting Approval of Proposed Rule
Change, as Modified by Amendment No. 2 Thereto Relating to the Use
of Derivative Instruments by PIMCO Total Return Exchange Traded
Fund, Securities Exchange Act Release No. 72666 (July 3, 2014), 79
FR 44224 (July 30, 2014) (SR-NYSEARCA-2013-122) (approving the
listing and trading of a series of Managed Fund Shares that would
invest under normal market circumstances at least 65% of its total
assets in a diversified portfolio of fixed income derivatives,
including over-the-counter derivatives); Order Granting Approval of
Proposed Rule Change, as Modified by Amendment No. 7 Thereto,
Amending NYSE Arca Equities Rule 8.600 To Adopt Generic Listing
Standards for Managed Fund Shares, Securities Exchange Act Release
No. 78397 (July 22, 2016), 81 FR 49320 (July 27, 2016) (SR-NYSEARCA-
2015-110) (approving generic listing standards for managed fund
shares allowing for up to 10% of the equity weight of the portfolio
to consist of non-exchange-traded ADRs; up to 20% of the weight of
the fixed income portion of the portfolio to consist of non-agency,
non-government-sponsored entity, and privately-issued mortgage-
related and other asset-backed securities components; up to 10% of
the weight of holdings invested in futures, exchange-traded options,
and listed swaps to consist of futures, options, and swaps which
trade on markets that are not members of ISG or with which the
Exchange does not have in place a comprehensive surveillance sharing
agreement; and up to 20% of the assets in the portfolio to be
invested in OTC derivatives) (``Managed Fund Shares Order''). In the
Managed Fund Shares Order, the Commission found that the 20%
limitation on OTC derivatives ``is sufficient to mitigate the risks
associated with price manipulation because at least 80% of a Managed
Fund Shares portfolio would consist of: Cash and cash equivalents;
listed derivatives, of which 90% by portfolio weight would be traded
on a principal market that is a member of ISG; and equity securities
or fixed income instruments subject to numerous restrictions
designed to prevent manipulation and ensure pricing transparency.''
See Managed Fund Shares Order at 49326.
\40\ For example, as of the filing of the Amendment No. 1, 85%
of the Fund's holdings would be in bitcoin and ether. In approving
the ETPs with primary investments in bitcoin and ether, the
Commission found that there were sufficient means to prevent fraud
and manipulation of bitcoin and ether ETPs under Section 6(b)(5) of
the Exchange Act. Similarly, in the Commodity-Based Trust Shares
Generics Approval Order, the Commission found that the proposed
eligibility requirements for commodities that may underlie
Commodity-Based Trust Shares are reasonably designed to help prevent
fraudulent and manipulative acts and practices. See supra note 26.
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2) of the Exchange Act, the Commission
must approve a proposed rule change filed by a national securities
exchange if it finds that the proposed rule change is consistent with
the applicable requirements of the Exchange Act.\41\ As
[[Page 45444]]
such, based on the record before the Commission, the Commission finds
that the proposal is consistent with the requirements of the Exchange
Act, including the requirement in Section 6(b)(5) \42\ that the
Exchange's rules be designed to ``prevent fraudulent and manipulative
acts and practices.''
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78s(b)(2)(C).
\42\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
2. Exchange Act Section 11A(a)(1)(C)(iii)
The proposal sets forth aspects of the Fund, including the
availability of pricing information, transparency of portfolio
holdings, and types of surveillance procedures, that are consistent
with other ETPs that the Commission has approved.\43\ This includes
commitments regarding: the availability of quotation and last-sale
information for the Shares; the availability on the Fund's website of
certain information related to the Fund, including NAV; the
dissemination of an intra-day indicative value by one or more major
market data vendors, updated every 15 seconds throughout the Exchange's
core trading session; the Exchange's surveillance procedures and
ability to obtain information regarding trading in the Shares; the
conditions under which the Exchange would implement trading halts and
suspensions; and the requirements of registered market makers in the
Shares.\44\ In addition, the Exchange deems the Shares to be equity
securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity
securities.\45\ Further, the listing rules of the Exchange require that
all statements and representations made in its filing regarding, among
others, the description of the Fund's holdings, limitations on such
holdings, and the applicability of the Exchange's listing rules
specified in the filing, will constitute continued listing
requirements.\46\ Moreover, the proposal states that: the Fund's
Manager has represented to the Exchange that it will advise the
Exchange of any failure by the Fund to comply with the continued
listing requirements; pursuant to obligations under Section 19(g)(1) of
the Exchange Act, the Exchange will monitor for compliance with the
continued listing requirements; and if the Fund is not in compliance
with the applicable listing requirements, the Exchange will commence
delisting procedures.\47\
---------------------------------------------------------------------------
\43\ See, e.g., Spot Bitcoin & Ether ETP Approval Order at
106709.
\44\ See Amendment No. 1 at 29078-80.
\45\ See id. at 29079.
\46\ See NYSE Arca Rule 8.500-E, Commentary .03.
\47\ See Amendment No. 1 at 29079.
---------------------------------------------------------------------------
The Commission therefore finds that the proposal, as with other
ETPs that the Commission has approved,\48\ is reasonably designed to
promote fair disclosure of information that may be necessary to price
the Shares appropriately, to prevent trading when a reasonable degree
of transparency cannot be assured, to safeguard material non-public
information relating to the Fund's portfolio, and to ensure fair and
orderly markets for the Shares.
---------------------------------------------------------------------------
\48\ See Spot Bitcoin ETP Approval Order, Spot Ether ETP
Approval Order, and Spot Bitcoin & Ether ETP Approval Order.
---------------------------------------------------------------------------
C. Comments
The Commission received three comment letters supporting the
proposal.\49\ Two of these commenters state that approving the proposal
would provide benefits to investors.\50\ The other commenter agrees
with the Division's conclusion that the proposal is consistent with the
Exchange Act and does not raise novel regulatory issues.\51\
---------------------------------------------------------------------------
\49\ See Letter from Gregory E. Xethalis, General Counsel,
Daniel A. Leonardo, Chief Compliance Officer & Deputy General
Counsel, and Jay B. Stolkin, Deputy General Counsel, Multicoin
Capital Management, LLC, dated Apr. 29, 2025 (``Multicoin Letter'');
Letter from Samir Kerbage, Chief Investment Officer, Hashdex Asset
Management Ltd., dated Aug. 12, 2025 (``Hashdex Letter''); and
Letter from Robert Citrone, Founder, Discovery Capital Management,
LLC, dated Aug. 20, 2025 (``Discovery Letter'').
\50\ See Multicoin Letter; Discovery Letter.
\51\ See Hashdex Letter.
---------------------------------------------------------------------------
One commenter opposing the proposal contends that the proposal
should be disapproved because the Fund would hold XRP and Solana and
details a number of arguments in favor of disapproval, including, among
other things: neither XRP nor Solana has an established futures market;
each of XRP and Solana has been allegedly classified as an unregistered
security by the Commission; neither XRP nor Solana is truly
decentralized; and reliable on-chain analytics are not widely available
for either XRP or Solana.\52\ As discussed above, the Fund will limit
the amount of assets that are not the primary investment underlying
ETPs approved by the Commission to 15% of the weight of the Fund's
portfolio, and this limitation is consistent with similar limitations
approved by the Commission with respect to ETP investments.\53\ In
addition, although this commenter states that neither XRP nor Solana
has an established futures market, the Chicago Mercantile Exchange
currently lists and trades both XRP and Solana futures contracts.\54\
---------------------------------------------------------------------------
\52\ See Letter from Anonymous, dated Feb. 10, 2025.
\53\ See supra notes 38 and 39.
\54\ See <a href="https://www.cmegroup.com/markets/cryptocurrencies/xrp/xrp.html">https://www.cmegroup.com/markets/cryptocurrencies/xrp/xrp.html</a>. See also <a href="https://www.cmegroup.com/markets/cryptocurrencies/solana.html">https://www.cmegroup.com/markets/cryptocurrencies/solana.html</a>. See also Commodity-Based Trust Shares
Generics Approval Order, supra note 26.
---------------------------------------------------------------------------
Another commenter opposing the proposal states that recent events,
such as the hack of crypto exchange Bybit, have exposed the risk that
investors will suffer losses due to crypto hacks as well as to crypto
assets' extreme volatility, and believes that approving the proposal
would endanger investors.\55\ While the Commission acknowledges
concerns relating to hacking and volatility, pursuant to Section
19(b)(2) of the Exchange Act, the Commission must approve a proposed
rule change filed by a national securities exchange if it finds that
the proposed rule change is consistent with the applicable requirements
of the Exchange Act.\56\ The Commission does not apply a ``cannot be
manipulated'' standard; rather, the Commission examines whether a
proposal meets the requirements of the Exchange Act.\57\ The Commission
does not understand the Exchange Act to require that a particular
product or market be immune from manipulation. Rather, the inquiry into
whether the rules of an exchange are designed to prevent fraudulent and
manipulative acts and practices and, in general, to protect investors
and the public interest, has long focused on the mechanisms in place
for the detection and deterrence of fraud and manipulation. For the
reasons described above, the Commission finds that the proposal
satisfies the requirements of the Exchange Act, including the
requirement in Section 6(b)(5) that the Exchange's rules be designed to
``prevent fraudulent and manipulative acts and practices.''
---------------------------------------------------------------------------
\55\ See Letter from Benjamin L. Schiffrin, Director of
Securities Policy, Better Markets, Inc., dated Feb. 27, 2025.
\56\ See Exchange Act Section 19(b)(2)(C), 15 U.S.C.
78s(b)(2)(C).
\57\ See, e.g., Spot Bitcoin ETP Approval Order at 3013 n.61.
---------------------------------------------------------------------------
D. Procedural Considerations
The Sponsor \58\ asserts that the proposed rule change has been
deemed
[[Page 45445]]
approved pursuant to Section 19(b)(2)(D)(ii) of the Exchange Act.\59\
The Sponsor asserts that the Commission has no power to impose a stay
pursuant to Commission Rule of Practice 431(e) after the 240th day.\60\
---------------------------------------------------------------------------
\58\ See Letter from Joseph A. Hall and Zachary J. Zweihorn,
Davis Polk & Wardwell LLP, on behalf of Grayscale Investments, dated
July 8, 2025 (``Grayscale Letter''). Two additional commenters
request that the Commission lift the stay and approve the delegated
action in short order. See Letter from Jaime Klima, General Counsel,
New York Stock Exchange, dated July 21, 2025, and Hashdex Letter.
This order by the Commission addresses those comments. In addition,
one commenter also requests that the Commission approve the
proposals to list and trade similar funds, simultaneously and with
immediate effect. See Hashdex Letter at 2 (citing to File Nos. SR-
NASDAQ-2025-016 and SR-NYSEARCA-2024-98). The proposal under
consideration by the Commission in this order relates only to the
Fund, along with changes to NYSE Arca Rules 8.500-E and 5.3-E.
Accordingly, proposals to list and trade similar but different funds
are beyond the scope of this order.
\59\ Section 19(b) of the Exchange Act requires the Commission
to ``issue an order'' approving or disapproving a proposed rule
change within, at most, 240 days of the proposed rule change's
filing. See 15 U.S.C. 78s(b)(2)(B)(ii). If the Commission fails to
issue an order within that period, the proposed rule change is
deemed to have been approved. See 15 U.S.C. 78s(b)(2)(D).
\60\ See 17 CFR 201.431(e). Rule 431(e) provides that upon
filing with the Commission of a notice of intention to petition for
review, or upon notice to the Secretary of the vote of a
Commissioner that a matter be reviewed, an action made pursuant to
delegated authority shall be stayed until the Commission orders
otherwise. Rule 431(a) also provides that the Commission may decide
to ``affirm, reverse, modify, set aside or remand [the delegated
action] for further proceedings.'' See 17 CFR 201.431(a).
---------------------------------------------------------------------------
The Commission disagrees with the Sponsor's assertions that: (1)
because the Approval Order is stayed, the proposal has been deemed
approved; \61\ and (2) the Commission has no power to stay the Approval
Order after the 240th day.\62\ The Commission complied with the
requirements of the statute. Section 19(b)(2)(D) of the Exchange Act
requires that the Commission ``issue an order'' approving or
disapproving the proposed rule change within 240 days. The Approval
Order was issued within that period. Although orders issued by
delegated authority are issued by Commission staff, they are issued
with the full authority of the Commission and are signed by the
Secretary's office on behalf of the Commission. Section 4A of the
Exchange Act authorizes the Commission to delegate certain functions--
including approval or disapproval of proposed rule changes under
Section 19--to a ``division of the Commission.'' \63\ And the
Commission's Rules of Practice make clear that ``an action made
pursuant to delegated authority shall have immediate effect and be
deemed the action of the Commission.'' \64\ Moreover, as the Commission
has previously explained, Congress was aware of the Commission's
ability to delegate authority to approve self-regulatory organization
rule filings when the time restrictions in Section 19(b)(2)(D) of the
Exchange Act were enacted.\65\ In asserting that the Commission has no
power to stay the Approval Order after 240 days, the Sponsor
effectively construes Section 19(b)(2) of the Exchange Act to require
the Commission's review of an order by delegated authority to be
completed within those 240 days. Such construction, however, ``would
undermine both the specific deadlines set forth in the statute and the
Commission's ability to delegate functions.'' \66\ Nor is such a
construction necessary to fulfill Congress's purpose in enacting the
deadlines to ``streamline'' the rule filing process.\67\
---------------------------------------------------------------------------
\61\ See Grayscale Letter at 3. The Sponsor asserts that the
proposal is deemed approved if the Commission fails to meet the
statutory approval deadline under Section 19b(b)(2)(D), regardless
of reason.
\62\ See id. at 2-3.
\63\ 15 U.S.C. 78d-1(a).
\64\ Commission Rule of Practice 431(e), 17 CFR 201.431(e). See
also, e.g., Rule of Practice 430(c), 17 CFR 201.430(c) (referring to
``a final order entered pursuant to [delegated authority]''); Rule
of Practice 431(f), 17 CFR 201.431(f) (giving an order by delegated
authority operative effect, even when review has been sought, until
a person receives actual notice that it was been stayed, modified,
or reversed on review).
\65\ See Order Affirming Action by Delegated Authority and
Disapproving Proposed Rule Changes Related to Connectivity and Port
Fee In the Matter of the BOX Exchange LLC, Securities Exchange Act
Release No. 88493 (Mar. 27, 2020), 85 FR 18617 (Apr. 2, 2020) (SR-
BOX-2018-24, SR-BOX-2018-37, and SR-BOX-2019-04), at 18626.
\66\ See Order Setting Aside Action by Delegated Authority and
Disapproving a Proposed Rule Change, as Modified by Amendments No. 1
and No. 2, Regarding the Acquisition of CHX Holdings, Inc. by North
America Casin Holdings, Inc., Securities Exchange Act Release No.
82727 (Feb. 15, 2018), 83 FR 7793 (Feb. 22, 2018) (SR-CHX-2016-20),
at 7799.
\67\ See id. With rare exception, rule filings are decided, by
delegated authority or otherwise, within 240 days. See id.
---------------------------------------------------------------------------
IV. Conclusion
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the Exchange Act and the rules and
regulations thereunder applicable to a national securities exchange.
It is therefore ordered, pursuant to Rule 431 of the Commission's
Rules of Practice, that the earlier action taken by delegated
authority, Securities Exchange Act Release No. 103364 (July 1, 2025),
90 FR 29923 (July 7, 2025), is set aside and, pursuant to Section
19(b)(2) of the Exchange Act, the proposed rule change (SR-NYSEARCA-
2024-87), as modified by Amendment No. 1, hereby is approved.
By the Commission.
Stephanie J. Fouse,
Assistant Secretary.
[FR Doc. 2025-18257 Filed 9-19-25; 8:45 am]
BILLING CODE 8011-01-P
</pre></body>
</html>Indexed from Federal Register on September 22, 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.