Notice2025-18258
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Cboe BZX Exchange, Inc.; NYSE Arca, Inc.; Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, To Adopt Generic Listing Standards for Commodity-Based Trust Shares
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
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<title>Federal Register, Volume 90 Issue 181 (Monday, September 22, 2025)</title>
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[Federal Register Volume 90, Number 181 (Monday, September 22, 2025)]
[Notices]
[Pages 45414-45422]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-18258]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103995; File Nos. SR-NASDAQ-2025-056; SR-CboeBZX-2025-
104; SR-NYSEARCA-2025-54]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Cboe
BZX Exchange, Inc.; NYSE Arca, Inc.; Order Granting Accelerated
Approval of Proposed Rule Changes, as Modified by Amendments Thereto,
To Adopt Generic Listing Standards for Commodity-Based Trust Shares
September 17, 2025.
I. Introduction
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'') \1\ and Rule 19b-4 thereunder (``Rule 19b-4''),\2\
The Nasdaq Stock Market LLC (``Nasdaq''), Cboe BZX Exchange, Inc.
(``BZX''), and NYSE Arca, Inc. (``NYSE Arca'') (Nasdaq, BZX, and NYSE
Arca, each an ``Exchange,'' and collectively, the ``Exchanges''), filed
with the Securities and Exchange Commission (``Commission'') proposed
rule changes to adopt generic listing standards for Commodity-Based
Trust Shares.\3\ Each of the foregoing proposed rule changes, as
modified by its respective amendment is referred to herein as a
``Proposal'' and collectively as the ``Proposals.'' \4\ The Proposals
were subject to notice and comment.\5\ This order approves the
Proposals on an accelerated basis.\6\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Notice of Filing of Amendment No. 2 to a Proposed Rule
Change to Adopt Generic Listing Standards for Commodity-Based Trust
Shares under Proposed Rule 5711(d) (SR-NASDAQ-2025-056), Securities
Exchange Act Release No. 103973 (Sept. 15, 2025) (``Nasdaq
Proposal''), available at <a href="https://www.sec.gov/files/rules/sro/nasdaq/2025/34-103973.pdf">https://www.sec.gov/files/rules/sro/nasdaq/2025/34-103973.pdf</a>; Notice of Filing of Amendment No. 3 to a
Proposed Rule Change to Permit the Generic Listing and Trading of
Commodity-Based Trust Shares that Meet the Requirements Set Forth in
Proposed Rule 14.11(e)(4) (SR-CboeBZX-2025-104), Securities Exchange
Act Release No. 103972 (Sept. 15, 2025) (``BZX Proposal''),
available at <a href="https://www.sec.gov/files/rules/sro/cboebzx/2025/34-103972.pdf">https://www.sec.gov/files/rules/sro/cboebzx/2025/34-103972.pdf</a>; and Notice of Filing of Amendment No. 1 to a Proposed
Rule Change for New Rule 8.201-E (Generic) (SR-NYSEARCA-2025-54),
Securities Exchange Act Release No. 103974 (Sept. 15, 2025) (``NYSE
Arca Proposal''), available at <a href="https://www.sec.gov/files/rules/sro/nysearca/2025/34-103974.pdf">https://www.sec.gov/files/rules/sro/nysearca/2025/34-103974.pdf</a>.
\4\ For the complete procedural history of each Proposal, see
each respective Amendment, supra note 3.
\5\ Comments received on the Nasdaq Proposal are available at:
<a href="https://www-draft.sec.gov/comments/sr-nasdaq-2025-056/srnasdaq2025056.htm">https://www-draft.sec.gov/comments/sr-nasdaq-2025-056/srnasdaq2025056.htm</a>. Comments received on the BZX Proposal are
available at: <a href="https://www.sec.gov/comments/sr-cboebzx-2025-104/srcboebzx2025104.htm">https://www.sec.gov/comments/sr-cboebzx-2025-104/srcboebzx2025104.htm</a>. Comments received on the NYSE Arca Proposal
are available at <a href="https://www.sec.gov/comments/sr-nysearca-2025-54/srnysearca202554.htm">https://www.sec.gov/comments/sr-nysearca-2025-54/srnysearca202554.htm</a>.
\6\ See infra Section IV.
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II. Description of the Proposals
As described in more detail in the Proposals' respective amended
filings,\7\ each Exchange proposes to adopt substantially identical
``generic'' listing standards for Commodity-Based Trust Shares,\8\ such
that it would be permitted, pursuant to Rule 19b-4(e) under the
Exchange Act (``Rule 19b-4(e)''), to list and trade Commodity-Based
Trust Shares without first submitting a proposed rule change with the
Commission pursuant to Section 19(b) of the Exchange Act (``Section
19(b)'').\9\ An Exchange would continue to be required to submit a rule
filing with the Commission when seeking to list and trade Commodity-
Based Trust Shares that do not meet the proposed generic listing
standards.\10\
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\7\ See supra note 3.
\8\ The proposed rules for each Exchange differ in some
instances based on differences in the Exchanges' existing rules. Any
material differences in the Proposals are discussed herein. See,
e.g., infra note 10. As each Exchange's proposed generic listing
standards are substantially identical, references herein to the
``proposed generic listing standards'' apply to all three Exchanges'
Proposals.
\9\ See 17 CFR 240.19b-4(e). Rule 19b-4(e) permits self-
regulatory organizations (``SROs'') to list and trade new derivative
securities products that comply with existing SRO trading rules,
procedures, surveillance programs, and listing standards, without
submitting a proposed rule change under Section 19(b). See also
Securities Exchange Act Release No. 40761 (Dec. 8, 1998), 63 FR
70952 (Dec. 22, 1998) (S7-13-98) (amending the rule filing
requirements for SROs for new derivative securities products)
(``NDSP Adopting Release''). Under Rule 19b-(e), the term ``new
derivative securities product'' means any type of option, warrant,
hybrid securities product, or any other security, other than a
single equity option or a security futures product, whose value is
based, in whole or in part, upon the performance of, or interest in,
an underlying instrument. Rule 19b-4(e)(1) under the Exchange Act
provides that the listing and trading of a new derivative securities
product by an SRO is not deemed a proposed rule change pursuant to
Rule 19b-4(c)(1) if the Commission has approved, pursuant to Section
19(b), the SRO's trading rules, procedures, and listing standards
for the product class that would include the new derivative
securities product, and the SRO has a surveillance program for the
product class. See 17 CFR 240.19b-4(c)(1). Rule 19b-4(e) requires an
SRO seeking to rely on Rule 19b-4(e) to post on its publicly
available internet website within five business days after
commencement of trading a new derivative securities product the
following information relating to the new derivative securities
product: (A) type of issuer; (B) class; (C) name of underlying
instrument; (D) if the underlying instrument is an index, whether it
is broad-based or narrow-based; (E) ticker symbol(s); (F) market(s)
upon which securities composing the underlying instrument trade; (G)
settlement methodology; and (H) position limits (if applicable). See
17 CFR 240.19b-4(e)(2)(ii).
\10\ Nasdaq and BZX propose to adopt amendments to their current
listing standards for Commodity-Based Trust Shares (Nasdaq Rule
5711(d) and BZX Rule 14.11(e)(4), respectively) to: (i) permit the
listing and trading of Commodity-Based Trust Shares that meet the
proposed generic listing standards pursuant to Rule 19b-4(e) or (ii)
submit a rule filing pursuant to Section 19(b) to permit the listing
and trading of Commodity-Based Trust Shares that do not meet the
proposed generic listing standards set forth in the Proposals. In
contrast, NYSE Arca proposes to adopt a new rule (proposed NYSE Arca
Rule 8.201-E (Generic). Commodity-Based Trust Shares) to permit the
listing and trading of Commodity-Based Trust Shares that meet the
proposed generic listing standards pursuant to Rule 19b-4(e) and to
maintain its existing rule setting forth the non-generic listing
standards for Commodity-Based Trust Shares (renamed NYSE Arca Rule
8.201 (Non-Generic). Commodity Based Trust Shares). NYSE Arca's non-
generic rule would continue to provide for the listing and trading
of Commodity-Based Trust Shares for which NYSE Arca would file
separate proposals under Section 19(b). NYSE Arca also proposes
conforming changes to NYSE Arca Rules 5.3-O(j), 5.2-E(j)(6), 5.3-E
and 5.3-E(e) to clarify that references in each of these rules to
``Commodity-Based Trust Shares'' would include Commodity-Based Trust
Shares listed pursuant to both existing NYSE Arca Rule 8.201-E (Non-
Generic). Commodity-Based Trust Shares and the proposed NYSE Arca
Rule 8.201-E (Generic). Commodity-Based Trust Shares.
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A. Definition of Commodity-Based Trust Share
The Exchanges' proposed generic listing standards define the term
``Commodity-Based Trust Share'' as a security \11\ that:
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\11\ Shares of Commodity-Based Trust Shares trade as equity
securities. See Securities Exchange Act Release No. 50603 (Oct. 28,
2004), 69 FR 64614, 64619 (Nov. 5, 2004) (SR-NYSE-2004-22)
(approving the listing and trading of streetTRACKS Gold Shares)
(``Spot Gold Approval Order'') and ETP Request for Comments, infra
note 20, at 34731. See also proposed Nasdaq Rule 5711(d)(ii);
proposed BZX Rule 14.11(e)(4)(B); proposed NYSE Arca Rule 8.201-E(b)
(Generic) (stating that Commodity-Based Trust Shares are included
within the definition of a ``security'' as such term is used in the
Exchanges' rules and are subject to the Exchanges' existing rules
governing the trading of equity securities).
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<bullet> Is issued by a trust, limited liability company, or other
similar entity \12\ (``Trust'') that, if applicable, is operated by a
registered commodity pool operator pursuant to the Commodity Exchange
Act (``CEA''), and is not registered as an investment company pursuant
to the Investment Company Act of 1940 (``1940 Act''), or series or
class thereof; \13\
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\12\ The Nasdaq Proposal and NYSE Arca Proposal also specify
that a Commodity-Based Trust Share may be issued by a partnership.
See proposed Nasdaq Rule 5711(d)(iii)(A)(1); proposed NYSE Arca Rule
8.201-E(c)(1) (Generic).
\13\ See proposed Nasdaq Rule 5711(d)(iii)(A)(1); proposed BZX
Rule 14.11(e)(4)(C)(i)(a); proposed NYSE Arca Rule 8.201-E(c)(1)(i)
(Generic).
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<bullet> Is designed to reflect the performance of one or more
reference assets or an index of reference assets; \14\
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\14\ See proposed Nasdaq Rule 5711(d)(iii)(A)(2); proposed BZX
Rule 14.11(e)(4)(C)(i)(b); proposed NYSE Arca Rule 8.201-E(c)(1)(ii)
(Generic).
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<bullet> In order to reflect such performance, is issued by a Trust
that holds (i) one or more commodities \15\ or
[[Page 45415]]
commodity-based assets,\16\ and (ii) in addition to such commodities or
commodity-based assets, may hold securities, cash, and cash
equivalents; \17\
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\15\ The term ``commodity'' is any ``commodity'' as defined in
Section 1a(9) of the CEA that is not an ``excluded commodity'' as
defined in Section 1a(19) of the CEA. See proposed Nasdaq Rule
5711(d)(iii)(B); proposed BZX Rule 14.11(e)(4)(C)(ii); proposed NYSE
Arca Rule 8.201-E(c)(2) (Generic).
\16\ The term ``commodity-based asset'' means any future,
option, or swap on a commodity, as that term is defined in the
proposed generic listing standards. See proposed Nasdaq Rule
5711(d)(iii)(C); proposed BZX Rule 14.11(e)(4)(C)(iii); proposed
NYSE Arca Rule 8.201-E(c)(3) (Generic).
\17\ See proposed Nasdaq Rule 5711(d)(iii)(A)(3); proposed BZX
Rule 14.11(e)(4)(C)(i)(c); proposed NYSE Arca Rule 8.201-
E(c)(1)(iii) (Generic). The term ``cash equivalent'' means short-
term instruments with maturities of less than three months as
follows: (i) U.S. Government securities, including bills, notes, and
bonds differing as to maturity and rate of interest, which are
either issued or guaranteed by the U.S. Treasury or by U.S.
Government agencies or instrumentalities; (ii) certificates of
deposit issued against funds deposited in a bank or savings and loan
association; (iii) bankers' acceptances, which are short-term credit
instruments used to finance commercial transactions; (iv) repurchase
agreements and reverse repurchase agreements; (v) bank time
deposits, which are monies kept on deposit with banks or savings and
loan associations for a stated period of time at a fixed rate of
interest; (vi) commercial paper, which are short-term unsecured
promissory notes; and (vii) money market funds. See proposed Nasdaq
Rule 5711(d)(iii)(D); proposed BZX Rule 14.11(e)(4)(C)(iv); proposed
NYSE Arca Rule 8.201-E(c)(4) (Generic).
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<bullet> Is issued by a Trust in a specified aggregate minimum
number in return for a deposit of (i) a specified quantity of the
underlying commodities, commodity-based assets, securities, cash, and
cash equivalents or (ii) a cash amount with a value based on the next
determined net asset value \18\ per Trust share; \19\ and
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\18\ The term ``net asset value'' means an amount reflecting the
current market value of the assets held by the Trust, less expenses
and liabilities, used to periodically compute the current price for
the purpose of creation and redemption of Trust shares. See proposed
Nasdaq Rule 5711(d)(iii)(E); proposed BZX Rule 14.11(e)(4)(C)(v);
proposed NYSE Arca Rule 8.201-E(c)(5) (Generic).
\19\ See proposed Nasdaq Rule 5711(d)(iii)(A)(4); proposed BZX
Rule 14.11(e)(4)(C)(i)(d); proposed NYSE Arca Rule 8.201-E(c)(1)(iv)
(Generic).
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<bullet> When aggregated in the same specified minimum number, may
be redeemed at a holder's request \20\ by a Trust which will deliver to
the redeeming holder (i) the specified quantity of the underlying
commodities, commodity-based assets, securities, cash, and cash
equivalents or (ii) a cash amount with a value based on the next
determined net asset value per Trust share.\21\
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\20\ Although most investors can buy or sell shares of exchange-
traded products (``ETPs'') only in the secondary market through a
broker-dealer, certain large market participants, typically broker-
dealers, can become authorized participants (``Authorized
Participants'') with respect to ETPs. An Authorized Participant can
then enter into a contractual relationship with an ETP that allows
the Authorized Participant to engage directly in purchases and
redemptions of shares directly with the ETP. See Request for Comment
on Exchange-Traded Products, Securities Exchange Act Release No.
75165 (June 12, 2015), 80 FR 34729 (June 17, 2015) (File No. S7-11-
15) (``ETP Request for Comments'').
\21\ See proposed Nasdaq Rule 5711(d)(iii)(A)(5); proposed BZX
Rule 14.11(e)(4)(C)(i)(e); proposed NYSE Arca Rule 8.201-E(c)(1)(v)
(Generic).
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B. Eligibility Criteria for Generic Listing
Each Proposal sets forth eligibility criteria that the holdings of
Commodity-Based Trust Shares must meet for the Commodity-Based Trust
Shares to be listed and traded pursuant to the proposed generic listing
standards. Specifically, each commodity held by a Trust, or commodity
that underlies a commodity-based asset held by a Trust, must meet at
least one of the following criteria:
<bullet> On an initial and continuing basis, the commodity trades
on a market that is an Intermarket Surveillance Group (``ISG'') member,
provided that the Exchange may obtain information about trading in such
commodity from the ISG member; \22\
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\22\ See proposed Nasdaq Rule 5711(d)(iv)(A)(1); proposed BZX
Rule 14.11(e)(4)(D)(i)(a); proposed NYSE Arca Rule 8.201-E(d)(1)(i)
(Generic).
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<bullet> On an initial and continuing basis, the commodity
underlies a futures contract that has been made available to trade on a
designated contract market (``DCM'') \23\ for at least six months;
provided that the Exchange has a comprehensive surveillance sharing
agreement (``CSSA''), whether directly or through common membership in
ISG, with such DCM; \24\ or
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\23\ The term ``designated contract market'' means a board of
trade or exchange that has been designated as a contract market
under Section 5 of the CEA and operates under the regulatory
oversight of the Commodity Futures Trading Commission, pursuant to
Section 5 of the CEA. See proposed Nasdaq Rule 5711(d)(iii)(F);
proposed BZX Rule 14.11(e)(4)(C)(vi); proposed NYSE Arca Rule 8.201-
E(c)(6) (Generic).
\24\ See proposed Nasdaq Rule 5711(d)(iv)(A)(2); proposed BZX
Rule 14.11(e)(4)(D)(i)(b); proposed NYSE Arca Rule 8.201-E(d)(1)(ii)
(Generic). According to the Proposals, to be ``made available to
trade on a [DCM],'' the relevant futures contract must be listed and
traded on the DCM. See Nasdaq Proposal at 12 n.17; BZX Proposal at
9; NYSE Arca Proposal at 8, n.6.
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<bullet> On an initial basis only, an exchange-traded fund \25\
(``ETF'') designed to provide economic exposure of no less than 40% of
its net asset value to the commodity lists and trades on a national
securities exchange.\26\
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\25\ The term ``exchange-traded fund'' means an open-end
management investment company or a unit investment trust as defined
in Section 4(2) of the 1940 Act or series or class thereof, the
shares of which are listed and traded on a national securities
exchange, and that has formed and operates under an exemptive order
under the 1940 Act or in reliance on an exemptive rule adopted by
the Commission. See proposed Nasdaq Rule 5711(d)(iii)(G); proposed
BZX Rule 14.11(e)(4)(C)(vii); proposed NYSE Arca Rule 8.201-E(c)(7)
(Generic).
\26\ See proposed Nasdaq Rule 5711(d)(iv)(A)(3); proposed BZX
Rule 14.11(e)(4)(D)(i)(c); proposed NYSE Arca Rule 8.201-
E(d)(1)(iii) (Generic).
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In addition, to the extent a Trust holds securities, (i) each
equity security held by a Trust must meet the requirements set forth in
the Exchange's rules for equity component securities underlying Managed
Fund Shares generically listed on the Exchange; \27\ (ii) each fixed
income security held by a Trust must meet the requirements set forth in
the Exchange's rules for fixed income component securities underlying
Managed Fund Shares generically listed on the Exchange,\28\ and (iii)
if the security is a listed option, it must trade on an ISG market.\29\
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\27\ See Nasdaq Rule 5735(b)(1)(A) (Managed Fund Shares); BZX
Rule 14.11(i) (4)(C)(i) (Managed Fund Shares); NYSE Arca Rule 8.600-
E (Managed Fund Shares), Commentary .01(a). These provisions set
forth various requirements for U.S. and non-U.S. component stocks
included in the portfolio holdings of Managed Fund Shares
generically listed and traded on the Exchanges, including minimum
market value and trading volume requirements, diversification
requirements, and trading and reporting requirements, that such
underlying equity securities must meet in order for the shares to
list and trade pursuant to the Managed Fund Shares generic listing
standards.
\28\ See Nasdaq Rule 5735(b)(1)(B) (Managed Fund Shares); BZX
Rule 14.11(i)(4)(C)(ii) (Managed Fund Shares); NYSE Arca Rule 8.600-
E (Managed Fund Shares), Commentary .01(b). These provisions set
forth various requirements for fixed income securities included in
the portfolio holdings of Managed Fund Shares generically listed and
traded on the Exchanges, including requirements relating to issuer
status, minimum original principal amount outstanding, and
diversification, that such underlying fixed income securities must
meet in order for the shares to list and trade pursuant to the
Managed Fund Shares generic listing standards.
\29\ See proposed Nasdaq Rule 5711(d)(iv)(B); proposed BZX Rule
14.11(e)(4)(D)(ii); proposed NYSE Arca Rule 8.201-E(d)(2) (Generic).
See infra notes 70-72 and accompanying text.
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Each Proposal also provides that, for generic listing and trading,
a Trust may not seek, directly or indirectly, to provide investment
returns that correspond to the performance of an index, benchmark, or
reference value by a specified multiple, or to provide investment
returns that have an inverse or multiple inverse relationship to the
performance of an index, benchmark, or reference value, over a
predetermined period of time.\30\
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\30\ See proposed Nasdaq Rule 5711(d)(vi); proposed BZX Rule
14.11(e)(4)(F); proposed NYSE Arca Rule 8.201-E(f) (Generic).
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C. Disclosure of Information
To generically list and trade, each Proposal requires that a Trust
must disclose prominently on its website, which is publicly available
and free of charge, the following information:
[[Page 45416]]
<bullet> Before the opening of regular trading on the Exchange, for
the Trust's commodities, commodity-based assets, securities, cash and
cash equivalents, to the extent applicable: (i) ticker symbol; (ii)
identifier; (iii) description of the holding; (iv) the quantity of each
commodity, commodity-based asset, security, cash, and cash equivalents
held; and (v) percentage weighting of the Trust's assets; \31\
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\31\ See proposed Nasdaq Rule 5711(d)(v)(A); proposed BZX Rule
14.11(e)(4)(E)(i); proposed NYSE Arca Rule 8.201-E(e)(1) (Generic).
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<bullet> The Trust's current net asset value per share, market
price,\32\ and premium or discount,\33\ each as of the end of the prior
business day; \34\
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\32\ The term ``market price'' means: (i) the official closing
price of a Trust share; or (ii) if it more accurately reflects the
market value of a Trust share at the time as of which the Trust
calculates current net asset value per share, the price that is the
midpoint between the national best bid and national best offer as of
that time. See proposed Nasdaq Rule 5711(d)(iii)(I); proposed BZX
Rule 14.11(e)(4)(C)(ix); proposed NYSE Arca Rule 8.201-E(c)(9)
(Generic).
\33\ The term ``premium or discount'' means the positive or
negative difference between the market price of a Trust share at the
time as of which the current net asset value is calculated and the
Trust's current net asset value per share, expressed as a percentage
of the Trust share's current net asset value per share. See proposed
Nasdaq Rule 5711(d)(iii)(J); proposed BZX Rule 14.11(e)(4)(C)(x);
proposed NYSE Arca Rule 8.201-E(c)(10) (Generic).
\34\ See proposed Nasdaq Rule 5711(d)(v)(B); proposed BZX Rule
14.11(e)(4)(E)(ii); proposed NYSE Arca Rule 8.201-E(e)(2) (Generic).
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<bullet> A table showing the number of days the Trust's shares
traded at a premium or discount during the most recently completed
calendar year and the most recently completed calendar quarters since
that year (or the life of the Trust, if shorter); \35\
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\35\ See proposed Nasdaq Rule 5711(d)(v)(C); proposed BZX Rule
14.11(e)(4)(E)(iii); proposed NYSE Arca Rule 8.201-E(e)(3)
(Generic).
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<bullet> A line graph showing the Trust share's premiums or
discounts for the most recently completed calendar year and the most
recently completed calendar quarters since that year (or the life of
the Trust, if shorter); \36\
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\36\ See proposed Nasdaq Rule 5711(d)(v)(D); proposed BZX Rule
14.11(e)(4)(E)(iv); proposed NYSE Arca Rule 8.201-E(e)(4) (Generic).
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<bullet> The Trust share's median bid-ask spread, expressed as a
percentage rounded to the nearest hundredth, computed by: (i)
identifying the Trust share's national best bid and national best offer
as of the end of each 10 second interval during each trading day of the
last 30 calendar days; (ii) dividing the difference between each such
bid and offer by the midpoint of the national best bid and national
best offer; and (iii) identifying the median of those values; \37\
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\37\ See proposed Nasdaq Rule 5711(d)(v)(E); proposed BZX Rule
14.11(e)(4)(E)(v); proposed NYSE Arca Rule 8.201-E(e)(5) (Generic).
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<bullet> Liquidity risk policies and procedures (described further
below); \38\
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\38\ See proposed Nasdaq Rule 5711(d)(v)(F); proposed BZX Rule
14.11(e)(4)(E)(vi); proposed NYSE Arca Rule 8.201-E(e)(6) (Generic).
See also infra Section II.D.
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<bullet> The Trust's methodology for the calculation of its net
asset value; \39\
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\39\ See proposed Nasdaq Rule 5711(d)(v)(G); proposed BZX Rule
14.11(e)(4)(E)(vii); proposed NYSE Arca Rule 8.201-E(e)(7)
(Generic).
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<bullet> The Trust's trading volume for the previous day; \40\ and
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\40\ See proposed Nasdaq Rule 5711(d)(v)(H); proposed BZX Rule
14.11(e)(4)(E)(viii); proposed NYSE Arca Rule 8.201-E(e)(8)
(Generic).
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<bullet> The Trust's effective prospectus, in a form available for
download.\41\
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\41\ See proposed Nasdaq Rule 5711(d)(v)(I); proposed BZX Rule
14.11(e)(4)(E)(ix); proposed NYSE Arca Rule 8.201-E(e)(9) (Generic).
The proposed generic listing standards would also continue to
require members to provide all purchasers of newly issued Commodity-
Based Trust Shares a prospectus for the series of Commodity-Based
Trust Shares, as is the case today. See proposed Nasdaq Rule
5711(d), Commentary .01; proposed BZX Rule 14.11(e)(4),
Interpretations and Policies .02; proposed NYSE Arca Rule 8.201-E
(Generic), Commentary .01.
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D. Liquidity Risk Policies and Procedures
The proposed generic listing standards for Commodity-Based Trust
Shares generally provide that, if a Trust has on a daily basis less
than 85% of its assets readily available to meet redemption requests,
the Trust must have written liquidity risk policies and procedures
reasonably designed to address the risk that it could not meet requests
to redeem shares issued by the Trust without significant dilution of
remaining shareholders' interest in the Trust.\42\ Such policies and
procedures must be periodically reviewed (with such review occurring no
less frequently than annually) by the Trust and must address the
following, as applicable:
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\42\ See proposed Nasdaq Rule 5711(d)(vii); proposed BZX Rule
14.11(e)(4)(G); proposed NYSE Arca Rule 8.201-E(g) (Generic).
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<bullet> The Trust's investment strategy and liquidity of the
Trust's assets during normal and stressed conditions, including
holdings in derivatives and whether the investment strategy is
appropriate for effective and efficient arbitrage; \43\
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\43\ See proposed Nasdaq Rule 5711(d)(vii)(A); proposed BZX Rule
14.11(e)(4)(G)(i); proposed NYSE Arca Rule 8.201-E(g)(1) (Generic).
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<bullet> Holdings of cash and cash equivalents, as well as
borrowing arrangements and other funding sources; \44\ and
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\44\ See proposed Nasdaq Rule 5711(d)(vii)(B); proposed BZX Rule
14.11(e)(4)(G)(ii); proposed NYSE Arca Rule 8.201-E(g)(2) (Generic).
---------------------------------------------------------------------------
<bullet> Percentage and description of the Trust's assets that are
segregated, pledged, hypothecated, encumbered, or otherwise restricted
or prevented from being liquidated, sold, transferred, or assigned.\45\
---------------------------------------------------------------------------
\45\ See proposed Nasdaq Rule 5711(d)(vii)(C); proposed BZX Rule
14.11(e)(4)(G)(iii); proposed NYSE Arca Rule 8.201-E(g)(3)
(Generic).
---------------------------------------------------------------------------
For purposes of this proposed requirement, an asset is deemed not
readily available to meet redemption requests if it is segregated,
pledged, hypothecated, encumbered, or otherwise restricted or prevented
from being liquidated, sold, transferred, or assigned within one
business day.\46\
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\46\ See proposed Nasdaq Rule 5711(d)(vii); proposed BZX Rule
14.11(e)(4)(G); proposed NYSE Arca Rule 8.201-E(g) (Generic). This
provision would, for example, apply to Commodity-Based Trust Shares
that hold digital assets and engage in protocol staking of such
assets if the Trust has, on a daily basis, less than 85% of its
assets readily available to meet redemption requests within one
business day. See Nasdaq Proposal at 15-16; BZX Proposal at 11; NYSE
Arca Proposal at 10.
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E. Initial and Continued Listing Criteria
Each Proposal sets forth initial listing requirements for the
generic listing and trading of Commodity-Based Trust Shares.
Specifically, on an initial basis, an Exchange must establish, as is
required today, a minimum number of Commodity-Based Trust Shares
required to be outstanding at the time of commencement of trading on
the Exchange.\47\ In addition, all Commodity-Based Trust Shares must
have a stated investment objective, which must be adhered to under
normal market conditions.\48\
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\47\ See proposed Nasdaq Rule 5711(d)(viii)(A)(1); proposed BZX
Rule 14.11(e)(4)(H)(i); proposed NYSE Arca Rule 8.201-E(h)(1)
(Generic).
\48\ See proposed Nasdaq Rule 5711(d)(viii)(A)(2); proposed BZX
Rule 14.11(e)(4)(H)(ii); proposed NYSE Arca Rule 8.201-E(h)(2)
(Generic).
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Each Proposal also sets forth continued listing requirements for
the generic listing and trading of Commodity-Based Trust Shares, and
requires an issuer of Commodity-Based Trust Shares to promptly notify
the Exchange of any non-compliance with any of the applicable continued
listing standards set forth in the proposed rule.\49\ Moreover, each
Proposal requires the Exchange to maintain surveillance procedures for
Commodity-Based Trust Shares and consider the suspension of
[[Page 45417]]
trading in and the delisting of Trust shares under certain
circumstances.\50\
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\49\ See proposed Nasdaq Rule 5711(d), Commentary .03; proposed
BZX Rule 14.11(e)(4), Interpretations and Policies .01; proposed
NYSE Arca Rule 8.201-E(k) (Generic).
\50\ The proposed generic listing standards would specify that
an Exchange will consider suspension and will initiate delisting if:
(i) following the initial 12 month period following commencement of
trading, (A) the Trust has more than 60 days remaining until
termination and there are fewer than 50 record and/or beneficial
holders, (B) the Trust has fewer than 50,000 Trust shares issued and
outstanding, or (C) the market value of all Trust shares issued and
outstanding is less than $1,000,000; (ii) the Trust fails to
disseminate updated information relating to the underlying reference
asset or index or the intraday indicative value (as defined below);
(iii) the net asset value is not calculated and disseminated daily;
(iv) other information required to be disclosed by the proposed
generic listing standards is not disseminated; (v) any of the
continued listing requirements set forth in the rule are not
continuously maintained; or (vi) any other event occurs or condition
exists which, in the opinion of an Exchange, makes further dealings
on the Exchange inadvisable. See proposed Nasdaq Rule
5711(d)(viii)(B); proposed BZX Rule 14.11(e)(4)(I); proposed NYSE
Arca Rule 8.201-E(i) (Generic). The circumstances under which the
Exchanges will consider the suspension of trading in, and initiate
the delisting of, Trust shares are substantially similar to each
Exchange's current rules for Commodity-Based Trust Shares.
---------------------------------------------------------------------------
F. Trading Halts
The proposed generic listing standards set forth circumstances
pursuant to which an Exchange will halt trading in Commodity-Based
Trust Shares. In general, an Exchange may halt trading during the day
in which there is an interruption to the dissemination of the
underlying reference asset(s) or index value, the intraday indicative
value,\51\ the information required to be disclosed by the proposed
generic listing standards,\52\ or the net asset value.\53\
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\51\ The term ``intraday indicative value'' means the estimated
indicative value of a Trust share based on current information
regarding the value of the Trust's underlying assets. See proposed
Nasdaq Rule 5711(d)(iii)(H); proposed BZX Rule 14.11(e)(4)(C)(viii);
proposed NYSE Arca Rule 8.201-E(c)(8) (Generic) (the NYSE Arca
Proposal uses the term ``intraday trust value'' instead, which has
the same meaning).
\52\ See supra Section II.C.
\53\ See proposed Nasdaq Rule 5711(d)(ix); proposed BZX Rule
14.11(e)(4)(J); proposed NYSE Arca Rule 8.201-E(1) (Generic). The
NYSE Arca Proposal provides that NYSE Arca may also halt trading
because of market conditions or for reasons that, in the view of the
Exchange, make trading in the Trust shares inadvisable. See proposed
NYSE Arca Rule 8.201-E(l)(3) (Generic). The BZX Proposal provides
that BZX may also exercise discretion to halt trading in a series of
Commodity-Based Trust Shares based on a consideration of the
following factors: (i) the extent to which trading has ceased in
underlying commodity(s) or commodity-based assets comprising the
index or portfolio, (ii) in the event of national, regional, or
localized disruption that necessitates a trading halt to maintain a
fair and orderly market, or (iii) the presence of other unusual
conditions or circumstances detrimental to the maintenance of a fair
and orderly market. See proposed BZX Rule 14.11(e)(4)(J)(iii).
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G. Market Maker Requirements
The proposed generic listing standards would retain the Exchanges'
current rules that provide that registered market makers in Commodity-
Based Trust Shares on an Exchange must file with the Exchange and keep
current a list identifying all accounts for trading in each underlying
commodity and commodity-based asset which the registered market maker
may have or over which it may exercise investment discretion.\54\ In
addition, the Proposals continue to limit registered market makers in
Commodity-Based Trust Shares from trading in an underlying commodity,
commodity-based asset, or any other related commodity derivative
thereon under certain circumstances.\55\ Furthermore, the Proposals
continue to require registered market makers in Commodity-Based Trust
Shares to make available to the Exchange books, records or other
information pertaining to trading the underlying commodity or
commodity-based asset.\56\
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\54\ See proposed Nasdaq Rule 5711(d)(xiii); proposed BZX Rule
14.11(e)(4)(L); proposed NYSE Arca Rule 8.201-E(m) (Generic).
\55\ See id.
\56\ See id.
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H. Firewall Requirements
The proposed generic listing standards require the implementation
and maintenance of firewalls and policies and procedures designed to
prevent the use and dissemination of material, non-public information
and fraudulent or manipulative acts or practices in the following
circumstances:
<bullet> If the value of a Commodity-Based Trust Share is based in
whole or in part on an index that is maintained by a broker-dealer, the
broker-dealer shall erect and maintain a ``firewall'' around the
personnel responsible for the maintenance of such index or who have
access to information concerning changes and adjustments to the index;
\57\
---------------------------------------------------------------------------
\57\ See proposed Nasdaq Rule 5711(d)(x)(1); proposed BZX Rule
14.11(e)(4)(M)(i); proposed NYSE Arca Rule 8.201-E(n)(1) (Generic).
---------------------------------------------------------------------------
<bullet> Any advisory committee, supervisory board, or similar
entity that advises an index licensor or administrator or that makes
decisions regarding the index composition, methodology, and related
matters must implement and maintain, or be subject to, procedures
designed to prevent the use and dissemination of material, non-public
information regarding the applicable index; \58\ and
---------------------------------------------------------------------------
\58\ See proposed Nasdaq Rule 5711(d)(x)(2); proposed BZX Rule
14.11(e)(4)(M)(ii); proposed NYSE Arca Rule 8.201-E(n)(2) (Generic).
---------------------------------------------------------------------------
<bullet> If the Trust is affiliated with any entity that has the
ability to influence the price or supply of a commodity, or a commodity
underlying a commodity-based asset, held by the Trust, the Trust shall
(i) implement and maintain a ``firewall'' between any such entity and
the Trust, (ii) have written policies and procedures designed to
prevent the use and dissemination of material, non-public information
regarding the Trust; and (iii) have written policies and procedures
designed to prevent fraudulent, deceptive or manipulative acts,
practices, or courses of business with respect to the Trust and such
commodity.\59\
---------------------------------------------------------------------------
\59\ See proposed Nasdaq Rule 5711(d)(x)(3); proposed BZX Rule
14.11(e)(4)(M)(iii); proposed NYSE Arca Rule 8.201-E(n)(3)
(Generic).
---------------------------------------------------------------------------
The Exchanges will consider the suspension of trading in, and the
delisting of, Commodity-Based Trust Shares that do not continuously
maintain these requirements.\60\
---------------------------------------------------------------------------
\60\ See supra note 50.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the Proposals are
consistent with the Exchange Act and rules and regulations thereunder
applicable to a national securities exchange.\61\ In particular, the
Commission finds that the Proposals are consistent with Section 6(b)(5)
of the Exchange Act,\62\ which requires, among other things, that the
Exchanges' rules be designed 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 and are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\61\ In approving the Proposals, the Commission has considered
the Proposals' impacts on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\62\ 15 U.S.C. 78f(b)(5).
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Rule 19b-4(e) provides that the listing and trading of a new
derivative securities product by an SRO shall not be deemed a proposed
rule change pursuant to Section (c)(1) of Rule 19b-4 \63\ if the
Commission has approved, pursuant to Section 19(b),\64\ the SRO's
trading rules, procedures, and listing standards for the product class
that would include the new derivatives securities product, and the SRO
has a surveillance program for the product
[[Page 45418]]
class.\65\ The Exchanges are proposing to adopt generic listing
standards for Commodity-Based Trust Shares, pursuant to which the
Exchanges will be able to list and trade such shares under Rule 19b-
4(e) without Commission approval of each individual proposal.\66\
---------------------------------------------------------------------------
\63\ 17 CFR 240.19b-4(c)(1).
\64\ 15 U.S.C. 78s(b).
\65\ See supra note 9.
\66\ 17 CFR 240.19b-4(e).
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The Proposals fulfill the intended objective of Rule 19b-4(e) by
permitting shares that satisfy the proposed generic listing standards
to commence trading without public comment and Commission approval.\67\
The Exchanges' ability to rely on Rule 19b-4(e) to list and trade
Commodity-Based Trust Shares that meet the applicable requirements and
minimum standards will reduce the time frame for bringing the shares to
market and thereby reduce the burdens on issuers and other market
participants, while also promoting competition. The Proposals also
require the Exchanges to maintain surveillance procedures for
Commodity-Based Trust Shares, consistent with the requirements of Rule
19b-4(e).\68\
---------------------------------------------------------------------------
\67\ The failure of any particular Commodity-Based Trust Shares
to satisfy the proposed generic listing standards pursuant to Rule
19b-4(e) would not preclude an Exchange from submitting a separate
filing pursuant to Section 19(b) to list and trade those Commodity-
Based Trust Shares. See supra note 10.
\68\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------
Moreover, the proposed eligibility requirements for commodities and
commodity-based assets that may underlie Commodity-Based Trust Shares
are reasonably designed to help prevent fraudulent and manipulative
acts and practices, to remove impediments to and perfect the mechanism
of a free and open market and a national market system, and to protect
investors and the public interest, and are therefore consistent with
the requirements of Section 6(b)(5) of the Exchange Act.\69\ As
described above, to be an eligible holding under the generic listing
standards, the Proposals provide that, for each commodity, or commodity
that underlies a commodity-based asset, the commodity may (1) trade on
an ISG market; or (2) have futures traded for at least six months on a
DCM that is an ISG market or with which an Exchange has a CSSA. Whether
the Trust holds the commodity directly, or holds commodity-based
assets, these eligibility requirements help to ensure the availability
of information with respect to the commodity, or the commodity that
underlies the commodity-based asset, necessary to detect and deter
potential fraud and manipulation. The availability of this information
can be reasonably expected to assist the Exchanges in surveilling for
fraud and manipulation that may impact the Commodity-Based Trust
Shares. The Commission has previously recognized that surveillance-
sharing agreements assist in the detection and deterrence of fraudulent
and manipulative activity.\70\ The Commission also has stated that it
considers two markets that are members of the ISG to have a CSSA with
one another, even if they do not have a separate bilateral
surveillance-sharing agreement.\71\ Finally, the Commission has stated
that these agreements, whether through an ISG membership or through a
CSSA, should help to ensure the availability of information necessary
to detect and deter potential manipulations and other trading abuses,
thereby making the Commodity-Based Trust Shares less readily
susceptible to manipulation.\72\
---------------------------------------------------------------------------
\69\ 15 U.S.C. 78f(b)(5).
\70\ See, e.g., Securities Exchange Act Release No. 35518 (Mar.
21, 1995), 60 FR 15804, 15807 (Mar. 27, 1995) (SR-Amex-94-30)
(approving the listing and trading of Commodity Linked Notes)
(finding that the listing exchange had surveillance-sharing
agreements with the exchanges on which the futures contracts that
make up the reference indexes traded and was able to obtain market
surveillance information); Securities Exchange Act Release No. 36166
(Aug. 29, 1995), 60 FR 46637, 46641 (Sept. 7, 1995) (SR-PSE-94-28)
(approving a proposal to adopt uniform listing and trading
guidelines for stock-index, currency, and currency-index warrants)
(stating that ``a surveillance sharing agreement should provide the
parties with the ability to obtain information necessary to detect
and deter market manipulation and other trading abuses'' and, in the
context of foreign stock-index warrants, the Commission ``generally
requires that there be a surveillance sharing agreement in place
between an exchange listing or trading a derivative product and the
exchange(s) trading the stocks underlying the derivative contract
that specifically enables the relevant markets to surveil trading in
the derivative product and its underlying stocks''); Securities
Exchange Act Release No. 99306 (Jan. 10, 2024), 89 FR 3008, 3012
(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)
(approving the listing and trading of bitcoin-based Commodity-Based
Trust Shares and Trust Units) (concluding that a ``surveillance-
sharing agreement with the CME can be reasonably expected to assist
in surveilling for fraud and manipulation that may impact the
proposed spot bitcoin ETPs'') (``Spot BTC Approval Order'');
Securities Exchange Act Release No. 100224 (May 23, 2024), 89 FR
46937, 46940 (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)
(approving the listing and trading of ether-based exchange-traded
products) (concluding that a ``surveillance-sharing agreement with
the CME can be reasonably expected to assist in surveilling for
fraud and manipulation that may impact the proposed spot ether
ETPs'') (``Spot ETH Approval Order''); Spot Gold Approval Order,
supra note 11 at 64619 (finding that the exchange's Memorandum of
Understanding with NYMEX for the sharing of information related to
any financial instrument based, in whole or in part, upon an
interest in or performance of gold assists in creating the basis for
the exchange to monitor for fraudulent and manipulative practices in
the trading of the shares); Securities Exchange Act Release No.
53521 (Mar. 20, 2006), 71 FR 14967, 14974 (Mar. 24, 2006) (SR-Amex-
2005-072) (approving the listing and trading of the iShares[supreg]
Silver Trust) (stating that, although an information sharing
agreement with the OTC silver market was not possible, the
exchange's information sharing agreement with NYMEX for the purpose
of providing information in connection with trading in or related to
COMEX silver futures contracts helps create the basis for Amex to
monitor for fraudulent and manipulative practices in the trading of
the shares); Securities Exchange Act Release No. 86636 (Aug. 12,
2019), 84 FR 42030, 42034 (Aug. 16, 2019) (SR-NYSEARCA-2018-98)
(approving the listing and trading of iShares Commodity Multi-
Strategy ETF) (in a matter where an ETF holds up to 60% of its
assets in OTC forwards, options, and swaps on a commodities index or
commodities from the same sectors as those included in the index,
finding that the exchange's representation that each of the
commodities in the index has futures traded on an ISG market or
futures exchange with which the exchange has a CSSA helps to
mitigate concerns that the ETF's investments in OTC derivatives will
make the shares more susceptible to manipulation); and Securities
Exchange Act Release No. 86698 (Aug. 16, 2019), 84 FR 43823, 43829
(Aug. 22, 2019) (SR-NYSEARCA-2018-83) (approving the listing and
trading the iShares Bloomberg Roll Select Commodity Strategy ETF)
(in a matter where an ETF holds up to 60% of its assets in listed
futures, options, and swaps, and up to 60% of its assets in OTC
forwards, options, and swaps, each on a commodities index or on
commodities from the same sectors as those included in the index,
finding that the exchange's representations that (i) the futures
contracts included in the index are traded on ISG markets or futures
exchanges with which the exchange has a CSSA, and (ii) all
commodities underlying the index have futures that are traded on ISG
markets or futures exchanges with which the exchange has a CSSA,
help to mitigate concerns that the ETF's investments in OTC and
listed derivatives will make the shares susceptible to
manipulation).
\71\ See NDSP Adopting Release, supra note 9 at 70959 (stating
that the ISG ``was formed to coordinate, among other things,
effective surveillance and investigative information sharing
arrangements in the stock and options markets,'' and that, if an
exchange trades component securities underlying a new derivative
securities product and is not a member of the ISG, the exchange
seeking to list and trade such new derivative securities product
should enter into a comprehensive information sharing agreement with
the non-ISG market, and conversely, if an exchange seeks to list and
trade a new derivative securities product and is not a member of the
ISG, such exchange should enter into a comprehensive information
sharing agreement with each market that trades securities underlying
the new derivative securities product).
\72\ See Securities Exchange Act Release No. 102921 (Apr. 23,
2025), 90 FR 17856, 17859 (Apr. 29, 2025) (SR-NYSEARCA-2024-70)
(approving the listing and trading of COtwo Advisors Physical
European Carbon Allowance Trust) (stating that the spot market's ISG
membership and the exchange's CSSA with the derivatives market can
be reasonably expected to assist in surveilling for fraudulent and
manipulative acts and practices with respect to the spot carbon
allowances proposed to be held by the trust and further elaborating
that these agreements, whether through ISG membership or CSSAs,
should help to ensure the availability of information necessary to
detect and deter potential manipulations and other trading abuses,
thereby making the shares of the trust less readily susceptible to
manipulation).
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[[Page 45419]]
The Proposals also provide that, if an ETF designed to provide
economic exposure of no less than 40% of its net asset value to a
commodity lists and trades on a national securities exchange,
Commodity-Based Trust Shares issued by a Trust that holds the same
commodity, or commodity-based assets with the same underlying
commodity, can list and trade on an Exchange pursuant to the proposed
generic listing standards. Allowing the generic listing and trading of
Commodity-Based Trust Shares that provide exposure to commodities that
already substantially underlie listed and traded ETFs (i.e., at least
40% of the portfolio of such ETFs provide economic exposure to the same
commodity) will promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and open market, and
help ensure that the Exchanges' rules are not designed to permit unfair
discrimination between issuers.\73\ Currently, ETFs that comply with
Rule 6c-11 under the 1940 Act (``Rule 6c-11'') may list and trade their
shares pursuant to Rule 19b-4(e) under the Exchanges' existing generic
listing standards.\74\ By consistently applying generic listing and
trading across products with economic exposures to the same underlying
commodities, the Proposals would level the playing field between the
issuers of Commodity-Based Trust Shares and the issuers of Rule 6c-11
eligible ETFs, which would promote competition and would more readily
afford investors greater investment options. Moreover, all national
securities exchanges that list and trade ETFs are members of ISG.
Accordingly, the Exchanges would be able to obtain information with
respect to listed and traded ETFs that have exposure to the same
underlying commodity, which should facilitate information sharing and
help to ensure the availability of information necessary to aid in the
detection and deterrence of potential manipulations and other trading
abuses, thereby making the Commodity-Based Trust Shares less readily
susceptible to fraud and manipulation.\75\ Furthermore, it is
appropriate for the Exchanges to apply this eligibility criteria only
on an initial basis. Delisting Commodity-Based Trust Shares because the
economic exposure to a commodity by the preceding ETF diminished to
less than 40% could cause unnecessary market disruption.\76\
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\73\ Although Commodity-Based Trust Shares are not investment
companies under the 1940 Act, and therefore not subject to the rules
and regulations of the 1940 Act, the Proposals would require the
Trusts, pursuant to the proposed generic listing standards, to
comply with certain requirements similar to those applicable to
Exchange-Traded Fund Shares. For example, Commodity-Based Trust
Shares will have disclosure requirements with respect to the Trusts'
holdings and valuation metrics similar to those required under Rule
6c-11. See definition of ``net asset value,'' supra note 18, and
proposed disclosure requirements, supra Section II.C. See also infra
note 89 and accompanying text.
\74\ See NYSE Arca Rule 5.2-E(j)(8) (Exchange-Traded Fund
Shares); Nasdaq Rule 5704 (Exchange-Traded Fund Shares); BZX Rule
14.11(l) (Exchange-Traded Fund Shares). When approving the generic
listing standards for ETFs that comply with Rule 6c-11, defined by
each Exchange as ``Exchange-Traded Fund Shares,'' the Commission
found that the portfolio disclosure requirements in Rule 6c-11
should help prevent manipulation of these shares, and that such
disclosure, along with requirements relating to firewalls and
procedures to prevent the use and dissemination of material, non-
public information and existing statutory requirements, should help
to protect against fraudulent and manipulative acts and practices.
See Securities Exchange Act Release No. 88625 (Apr. 13, 2020), 85 FR
21479, 21487 (Apr. 17, 2020) (SR-NYSEARCA-2019-81) (order approving
NYSE Arca Rule 5.2-E(j)(8)); Securities Exchange Act Release No.
88561 (Apr. 3, 2020), 85 FR 19984, 19992 (Apr. 9, 2020) (SR-NASDAQ-
2019-090) (order approving Nasdaq Rule 5704); and Securities
Exchange Act Release No. 88566 (Apr. 6, 2020), 85 FR 20312, 20320
(Apr. 10, 2020) (SR-CboeBZX-2019-097) (order approving BZX Rule
14.11(l)).
\75\ In addition, a Trust would be subject to ongoing disclosure
obligations and additional requirements relating to, among other
things, liquidity risk policies and procedures, market maker
accounts, firewalls and procedures designed to prevent the use and
dissemination of material, non-public information and fraud and
manipulation, and restrictions on the use of leverage. As discussed
further below, these requirements are designed to prevent fraudulent
and manipulative acts and practices and protect investors and the
public interest, consistent with Section 6(b)(5) of the Exchange
Act, and, taken together, should help to protect against fraud and
manipulation in the Commodity-Based Trust Shares. See supra note 74.
\76\ An ETF's exposure to a commodity may change over time for
any number of reasons unrelated to any regulatory concerns. If,
however, an ETF's decreased exposure to a commodity is due to
regulatory concerns, the Exchanges would have the necessary rules to
address the continued listing and trading of Commodity-Based Trust
Shares that relied on such ETF for initial listing and trading. See
supra note 50 relating to each Exchange's ability to delist
Commodity-Based Trust Shares if an event occurs or a condition
exists which, in the opinion of the Exchange, makes further dealings
on the Exchange inadvisable.
---------------------------------------------------------------------------
The Proposals require that each security held by a Trust meet the
requirements set forth in the respective Exchange's rules for equity
and fixed income securities underlying generically listed Managed Fund
Shares or, if the security held by the Trust is a listed option, it
must trade on an ISG market.\77\ These requirements are reasonably
designed to help prevent fraudulent and manipulative acts and practices
and to protect investors and the public interest, and are therefore
consistent with the requirement in Section 6(b)(5) of the Exchange
Act.\78\ The Commission previously found the Exchanges' generic listing
standards for Managed Fund Shares consistent with the Exchange Act,
including the requirements relating to component equity and fixed
income securities underlying Managed Fund Shares.\79\ Moreover, as
discussed above, with respect to listed options, ISG membership and
CSSAs help to ensure the availability of information necessary to
detect and deter potential manipulations and other trading abuses,
thereby making the Commodity-Based Trust Shares less readily
susceptible to manipulation.\80\
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\77\ See supra notes 27-29 and accompanying text. The Proposals
would limit a Trust from holding securities if doing so would
require the Trust to register as an investment company under the
1940 Act. See supra note 13 and accompanying text and infra note 81
and accompanying text.
\78\ 15 U.S.C. 78f(b)(5).
\79\ See Securities Exchange Act Release No. 78397 (July 22,
2016), 81 FR 49320 (July 27, 2016) (NYSEARCA-2015-110) (approving
NYSE Arca's generic listing standards for Managed Fund Shares);
Securities Exchange Act Release No. 78396 (July 22, 2016), 81 FR
49698 (July 28, 2016) (SR-BATS-2015-100) (approving BZX's generic
listing standards for Managed Fund Shares); Securities Exchange Act
Release No. 78918 (Sep. 23, 2016), 81 FR 67033 (Sep. 29, 2016) (SR-
NASDAQ-2016-104) (approving Nasdaq's generic listing standards for
Managed Fund Shares).
\80\ See supra notes 70-72 and accompanying text. The Proposals
also permit Commodity-Based Trust Shares to hold cash and cash
equivalents. The Proposals' definition of cash equivalent is
identical to the definition in the Exchanges' existing Managed Fund
Shares listing standards. See Nasdaq Rule 5735(b)(1)(C); BZX Rule
14.11(i)(4)(C)(iii); NYSE Arca Rule 8.600-E, Commentary .01(c). As
noted above, the Commission previously found the Exchanges' generic
listing standards for Managed Fund Shares consistent with the
Exchange Act, including the requirements relating to cash and cash
equivalents. See supra note 79.
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In addition to the eligibility requirements, the Proposals specify
that, in order to qualify under the proposed generic listing standards,
the Commodity-Based Trust Shares must (1) be issued by a Trust that is
not registered as an investment company pursuant to the 1940 Act; (2)
be designed to reflect the performance of one or more reference assets
or an index of reference assets; and (3) not seek to provide investment
returns that correspond to the performance of a specified multiple,
inverse, or multiple inverse of an index, benchmark, or reference value
over a predetermined period of time.\81\ Products that would be
registered investment companies or seek leverage or inverse strategies
may qualify to list and trade under the Exchanges' other existing
generic listing standards, including Exchange-Traded
[[Page 45420]]
Fund Shares.\82\ In addition, the proposed requirement that Commodity-
Based Trust Shares reflect the performance of one or more reference
assets or an index of reference assets is consistent with the current
rule that requires Commodity-Based Trust Shares to hold and track one
or more commodities.\83\ Moreover, an Exchange seeking to list and
trade Commodity-Based Trust Shares that do not meet these
specifications can seek to do so by qualifying to list and trade under
the Exchanges' other existing generic listing standards \84\ or by
submitting a proposed rule change to the Commission under Section
19(b).\85\ Accordingly, the Exchanges' scope of qualifications for
generically listed and traded Commodity-Based Trust Shares are
reasonable and consistent with Section 6(b)(5) of the Exchange Act.\86\
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\81\ See supra notes 13-14 and 30 and accompanying text.
\82\ NYSE Arca Rule 5.2-E(j)(8) (Exchange-Traded Fund Shares);
Nasdaq Rule 5704 (Exchange-Traded Fund Shares); BZX Rule 14.11(l)
(Exchange-Traded Fund Shares).
\83\ See Nasdaq Proposal at 6 n.13 (stating that proposed rule
changes for previously listed series of Commodity-Based Trust Shares
have also been passively managed).
\84\ See, e.g., Registration Statement on Form N-1A for
Volatility Shares Trust, dated Mar. 29, 2023 (File Nos. 333-263619
and 811-23785) relating to the 2x Bitcoin Strategy ETF, available at
<a href="http://sec.gov/Archives/edgar/data/1884021/000138713123004119/btix-485apos_032323.htm">sec.gov/Archives/edgar/data/1884021/000138713123004119/btix-485apos_032323.htm</a>; Registration statement on Form N-1A for
ProShares Trust, dated July 23, 2025 (File Nos. 333-89822 and 811-
21114) relating to the Short Bitcoin ETF, Short Ether ETF, Ultra
Bitcoin ETF, Ultra Ether ETF, UltraShort Bitcoin ETF, and UltraShort
Ether ETF, available at <a href="https://www.sec.gov/Archives/edgar/data/1174610/000168386325006082/f42514d1.htm">https://www.sec.gov/Archives/edgar/data/1174610/000168386325006082/f42514d1.htm</a>.
\85\ See supra note 10.
\86\ 15 U.S.C. 78f(b)(5).
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The Proposals stipulate other requirements for Commodity-Based
Trust Shares. First, the Proposals would require a Trust issuing
Commodity-Based Trust Shares to disclose prominently on its public
website certain information relating to the Commodity-Based Trust
Shares.\87\ Previously approved listing rules for specific Commodity-
Based Trust Shares have included similar disclosure requirements,\88\
and Rule 6c-11 requires ETFs to disclose substantially similar
information.\89\ The website disclosure requirements are designed to
provide investors with key metrics to evaluate their investment and
trading decisions in a format that is easily accessible and frequently
updated. The information required to be disclosed by the Proposals
includes information that market participants can use to monitor the
underlying commodity market and value the Commodity-Based Trust Shares
and is consistent with the maintenance of fair and orderly markets and
investor protection, as required by Section 6(b)(5) of the Exchange
Act.\90\ The dissemination of this information will facilitate
transparency with respect to the Commodity-Based Trust Shares and
diminish the risk of manipulation or unfair informational advantage.
---------------------------------------------------------------------------
\87\ See supra Section II.C.
\88\ See, e.g., Spot BTC Approval Order, supra note 70 at 3011;
Spot ETH Approval Order, supra note 70 at 46940; Securities Exchange
Act Release No. 101998 (Dec. 19, 2024), 89 FR 106707 (Dec. 30, 2024)
(SR-NASDAQ-2024-028; CboeBZX-2024-091) (approving the listing and
trading of the Hashdex Nasdaq Crypto Index US ETF and Franklin
Crypto Index ETF) (``Spot BTC/ETH Approval Order'').
\89\ 17 CFR 270.6c-11(c).
\90\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Second, the Proposals would require a Trust that has less than 85%
of its assets readily available to meet redemption requests daily to
maintain and review written liquidity risk policies and procedures to
address the risk that it could not meet redemption requests without
signification dilution of remaining shareholders.\91\ This provision is
consistent with the requirement of Section 6(b)(5) of the Exchange Act
that an Exchange's rules be designed 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 to protect
investors and the public interest.\92\ The requirement promotes
effective liquidity risk management for issuers of Commodity-Based
Trust Shares, thereby reducing the risk that a Trust that encumbers a
significant portion of its assets will be unable to meet its redemption
obligations, and is consistent with the maintenance of fair and orderly
markets. In addition, because a Trust is required to publicly disclose
its liquidity risk policies and procedures on its website free of
charge,\93\ this provision should help to ensure that investors have
relevant information that will allow them to adequately assess the
characteristics and risks of trading Commodity-Based Trust Shares
issued by a Trust that encumbers more than 15% of its assets.
---------------------------------------------------------------------------
\91\ See supra Section II.D.
\92\ 15 U.S.C. 78f(b)(5).
\93\ See supra note 38 and accompanying text.
---------------------------------------------------------------------------
Third, the proposed generic listing standards will have certain
initial and continued listing requirements \94\ and include provisions
allowing an Exchange to halt trading in Commodity-Based Trust Shares in
certain circumstances, including in circumstances where information
relating to the Commodity-Based Trust Shares and/or the underlying
reference asset or index is not being disseminated as required.\95\ The
initial and continued listing standards are adequate to ensure
transparency of key values and information \96\ regarding the
Commodity-Based Trust Shares and will help ensure that a minimum level
of liquidity \97\ exists for the initial and continued trading of
Commodity-Based Trust Shares. Transparency of key values and
information and a minimum level of liquidity will help facilitate a
fair and orderly market for the Shares, as well as help to ensure that
the Shares are not susceptible to manipulation.\98\ In addition, the
Exchanges will have the ability to delist Commodity-Based Trust Shares
or to halt trading if circumstances warrant such action. Moreover, an
issuer of Commodity-Based Trust Shares must notify the Exchange of any
non-compliance with any of the continued listing standards,\99\ and if
the Commodity-Based Trust Shares do not satisfy the requirements set
forth in the rule, the Exchange may suspend trading and initiate
delisting proceedings.\100\ Accordingly, consistent with the
requirement of Section 6(b)(5) of the Exchange Act \101\ that an
Exchange's rules be designed to remove impediments to and perfect the
mechanism of a free and open market, the initial and continued listing
standards and trading halt provisions are reasonably designed to
promote fair disclosure of information that may be necessary to price
the Trust shares appropriately, to prevent trading when a reasonable
degree of transparency
[[Page 45421]]
cannot be assured, and to ensure fair and orderly markets for the
Commodity-Based Trust Shares.
---------------------------------------------------------------------------
\94\ See supra Section II.E.
\95\ See supra Section II.F. Commodity-Based Trust Shares
previously approved for listing and trading have included similar
trading halt provisions. See, e.g., Spot BTC Approval Order, supra
note 70 at 3011; Spot ETH Approval Order, supra note 70 at 46940.
\96\ See supra note 50 relating to the dissemination of updated
information relating to the underlying reference asset, index or the
intraday indicative value, the net asset value, and other
information required to be disclosed by the proposed generic listing
standards, including the liquidity risk policies and procedures.
\97\ See supra note 47 and accompanying text relating to, for
initial listing purposes, the minimum number of Shares outstanding
at the commencement of trading. See also supra note 50 relating to,
for continued listing purposes, the minimum number of record and/or
beneficial holders, as well as Shares issued and outstanding, and
the minimum market value of the Shares issued and outstanding.
\98\ See, e.g., Securities Exchange Act Release No. 57785 (May
6, 2008), 73 FR 27597 (May 13, 2008) (SR-NYSE-2008-17) (stating that
the distribution standards, which includes exchange holder
requirements ``. . . should help to ensure that the [Special Purpose
Acquisition Company's] securities have sufficient public float,
investor base, and liquidity to promote fair and orderly markets'').
\99\ See supra note 49 and accompanying text.
\100\ See proposed Nasdaq Rule 5711(d)(i); proposed BZX Rule
14.11(e)(4)(A); proposed NYSE Arca Rule 8.201-E(a) (Generic).
\101\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Fourth, the Proposals would impose obligations on registered market
makers in the Commodity-Based Trust Shares, including limitations on
certain trading activities in the underlying commodities and commodity-
based assets and requirements to file with, and make available to, the
Exchanges certain records of transactions by such market makers in the
underlying commodities and commodity-based assets.\102\ These proposed
requirements should deter potential manipulation and other misconduct
by registered market makers in the Commodity-Based Trust Shares and
should assist the Exchanges in identifying situations potentially
susceptible to manipulation. These requirements are therefore
consistent with the requirement in Section 6(b)(5) of the Exchange Act
that the Exchanges' rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and to protect investors and the public
interest.\103\
---------------------------------------------------------------------------
\102\ See supra Section II.G.
\103\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Fifth, the Proposals include requirements to erect firewalls; to
have procedures to prevent the use and dissemination of material, non-
public information relating to the Commodity-Based Trust Shares and the
underlying commodities and/or related indexes; and to have procedures
designed to prevent fraudulent, deceptive or manipulative acts,
practices, or courses of business with respect to Commodity-Based Trust
Shares and the underlying commodities.\104\ These requirements provide
additional protections against the potential misuse of material, non-
public information relating to Commodity-Based Trust Shares and are
designed to prevent fraudulent and manipulative acts and practices with
respect to the Commodity-Based Trust Shares, and their underlying
commodities and related indexes, consistent with Section 6(b)(5) of the
Exchange Act.\105\
---------------------------------------------------------------------------
\104\ See supra Section II.H.
\105\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The comment letters received on the Proposals were generally
supportive.\106\ While expressing general support for the proposed
generic listing standards, some commenters believe that the Proposals
should be expanded to, among other things: (i) add an alternative route
to eligibility for underlying commodities based on quantitative
liquidity measures; (ii) contemplate actively-managed Commodity-Based
Trust Shares; (iii) contemplate generic listing and trading of multi-
asset Commodity-Based Trust Shares that hold at least 85% of their
portfolio in assets that meet the proposed eligibility requirements;
(iv) treat liquid staking tokens as economically equivalent to the
underlying staked asset for purposes of eligibility and liquidity
provisions of the proposed rules; (v) allow Commodity-Based Trust
Shares to utilize custom baskets; (vi) for purposes of the liquidity
risk policies and procedures, allow a Trust to (a) assess ``readily
available'' assets based on the Trust's stated settlement cycle rather
than based on one business day, and (b) consider liquid staking tokens
as ``readily available'' to meet redemption requests; and (vii) include
stablecoins in the definition of ``cash equivalent.'' \107\ In
addition, one commenter states that, while the proposed eligibility for
the underlying commodity based on whether it trades on an ISG market is
appropriate today, if the ISG were to change its membership
requirements in the future, the prong could admit illiquid or
marginally liquid assets.\108\ The commenter suggests that, in the
future, the Exchanges should replace the ISG-traded eligibility
standard with an asset qualification standard or limit it to highly
liquid commodities.\109\ However, these additional recommendations are
not before the Commission in the Proposals being considered and
therefore are outside the scope of this order.
---------------------------------------------------------------------------
\106\ See Letters from Morrison C. Warren, Chapman and Cutler
LLP, on behalf of The Digital Chamber, dated Aug. 25, 2025
(``Digital Chamber Letter''), at 2 (stating that they are generally
supportive of the proposed generic listing standards and believe
``they will further regulatory certainty, expedite the timeline for
the formulation of capital, and be an efficient allocation of
regulatory resources''); 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 Aug. 25, 2025 (``Multicoin Letter''),
at 2 (stating that the Proposals are ``well conceived, narrow in
focus, and faithful to the mandates of Section 6(b)(5) of the
[Exchange Act],'' ``prioritize surveillance, continued-listing, and
disclosure safeguards,'' and will ``enhance efficiency, foster
competition, and reduce administrative burden''); Lucas Tcheyan,
Research Associate, Galaxy Digital Inc., dated Aug. 28, 2025 at 6
(stating that approval of the proposed generic listing standards
would ``manage the growing backlog of applications, provide clarity
to issuers, and expand regulated access to digital assets'' and
would help migrate digital asset investments ``into safer, more
efficient, and regulated structures'').
\107\ See Digital Chamber Letter, supra note 106 at 2-10;
Multicoin Letter, supra note 106 at 5-7.
\108\ See Multicoin Letter, supra note 106 at 4.
\109\ See id.
---------------------------------------------------------------------------
One comment letter opposes the Proposals and states that ETPs
holding digital assets are ``relatively new,'' novel products that pose
unique risks and that the Exchanges should be required to seek
Commission approval to list and trade each such new product to minimize
investor harm.\110\ The Commission disagrees. First, contrary to the
commenter's assertion that ETPs holding digital assets are ``novel,''
the Commission has been engaged with digital asset products since
2013.\111\ And although the Commission did not approve under Rule 19b-4
an ETP with exposure to digital assets until 2022,\112\ the Commission
has since reviewed and approved 27 additional proposals to list and
trade ETPs either holding or having economic exposure to digital
assets.\113\ Moreover, the proposed generic listing requirements apply
not just to Commodity-Based Trust Shares with exposure to digital
assets but to those holding other commodities, as well as commodity-
based assets. With respect to the latter, the first ETP to hold
commodities was approved by the Commission in 2004,\114\ and in 2006,
the Commission approved ETPs providing exposure to futures on
commodities.\115\
---------------------------------------------------------------------------
\110\ See Letter from Benjamin L. Schiffrin, Director of
Securities Policy, Better Markets, Inc., dated Aug. 25, 2025
(``Better Markets Letter'').
\111\ See Form S-1 Registration Statement filed with the
Commission on July 1, 2013, available at <a href="https://www.sec.gov/Archives/edgar/data/1579346/000119312513279830/d562329ds1.htm">https://www.sec.gov/Archives/edgar/data/1579346/000119312513279830/d562329ds1.htm</a>.
\112\ See Securities Exchange Act Release No. 94620 (Apr. 6,
2022), 87 FR 21676 (Apr. 12, 2022) (SR-NYSEARCA-2021-53) (approving
the listing and trading of the Teucrium Bitcoin Futures Fund, which
invests in bitcoin futures) (``Teucrium BTC Futures Approval
Order''). The first ETPs holding digital assets were approved in
January 2024. See Spot BTC Approval Order, supra note 70. In
addition, the Commission has reviewed a number of registration
statements for ETFs with exposure to digital assets, with the first
such products launching in October 2021. See Teucrium BTC Futures
Approval Order at 21681.
\113\ See Spot BTC Approval Order, supra note 70; Spot ETH
Approval Order, supra note 70; Spot BTC/ETH Approval Order, supra
note 88; Securities Exchange Act Release No. 94853 (May 5, 2022), 87
FR 28848 (May 11, 2022) (SR-NASDAQ-2021-066) (approving the listing
and trading of the Valkyrie XBTO Bitcoin Futures Fund); Securities
Exchange Act Release No. 100541 (July 17, 2024), 89 FR 59786 (July
23, 2024) (SR-NYSEARCA-2024-44; SR-NYSEARCA-2024-53) (approving the
listing and trading of the Grayscale Ethereum Mini Trust and
ProShares Ethereum ETF); Securities Exchange Act Release No. 100610
(July 26, 2024), 89 FR 62821 (Aug. 1, 2024); (SR-NYSEARCA-2024-45;
SR-CboeBZX-2023-101) (approving the listing and trading of the
Grayscale Bitcoin Mini Trust and the Pando Asset Spot Bitcoin
Trust); Securities Exchange Act Release No. 103570 (July 29, 2025),
90 FR 36217 (Aug. 1, 2025) (SR-NYSEARCA-2025-15) (approving the
listing and trading of the Bitwise Bitcoin and Ethereum ETF).
\114\ See Spot Gold Approval Order, supra note 11.
\115\ See Securities Exchange Act Release No. 53105 (Jan. 11,
2006), 71 FR 3129 (Jan. 19, 2006) (SR-Amex-2005-059) (approving the
listing and trading of the DB Commodity Index Tracking Fund, which
invests in a master fund that holds commodity futures); Securities
Exchange Act Release No. 53324 (Feb. 16, 2016), 71 FR 9614 (Feb. 24,
2006) (SR-Amex-2005-127) (approving the listing and trading of the
United States Oil Fund, LP, which invests in crude oil futures
contracts and other related commodity derivatives).
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[[Page 45422]]
Second, the Commission disagrees with the commenter's statement
that, rather than ``circumvent'' the Rule 19b-4 process, each new
product should be considered separately to minimize investor harm.\116\
The Proposals establish rules-based criteria for qualifying Commodity-
Based Trust Shares, designed to protect investors and the public
interest and to be consistent with the Exchange Act. As discussed
above, many of these criteria are consistent with previously approved
listing requirements for specific Commodity-Based Trust Shares approved
by the Commission and/or the Exchanges' existing listing standards for
Commodity-Based Trust Shares.\117\ Moreover, for each applicable
commodity, or commodity that underlies a commodity-based asset, the
Proposals establish objective eligibility requirements that are, for
reasons discussed above, consistent with the Exchange Act.\118\
Finally, the Proposals include additional requirements tailored for
generically-listed Commodity-Based Trust Shares and are intended to
address concerns related to fraudulent and manipulative acts and
practices and to protect investors and the public interest including,
for example, the proposed firewall requirements and requirements
relating to liquidity risk policies and procedures.\119\ Accordingly,
having considered the commenter's concerns relating to investor
protection in the broader context of whether the Proposals meet the
applicable requirements of the Exchange Act, including the requirements
in Section 6(b)(5),\120\ for reasons described above, the Commission
determines that the Proposals meet such requirements.\121\
---------------------------------------------------------------------------
\116\ See Better Markets Letter, supra note 110 at 1. The
commenter also states that the Commission ``should not make the same
mistakes with crypto ETPs as . . . with single stock ETFs.'' See
Better Markets Letter at 4. The commenter's observations about
single stock ETFs are outside the scope of this order because the
Proposals involve Commodity-Based Trust Shares designed to reflect
the performance of commodities, not single stock ETFs designed to
reflect the performance of a stock. However, the Commission notes
that, unlike single stock ETFs, the Proposals do not contemplate for
generic listing and trading Commodity-Based Trust Shares with
leverage or inverse strategies. See supra note 30 and accompanying
text.
\117\ See, e.g., supra notes 50, 54-56, 83, 88, 95 and
accompanying text.
\118\ See, e.g., supra notes 69-80 and accompanying text.
\119\ See supra notes 91-93, 104-105 and accompanying text.
\120\ 15 U.S.C. 78f(b)(5). The commenter also seems to suggest,
without further elaboration, that ETPs with exposure to digital
assets may have certain fundamental characteristics that render them
``products that necessitate careful Commission review.'' See Better
Markets Letter, supra note 110 at 3-4. The Commission disagrees for
reasons discussed above. Moreover, consistent with prior statements,
the Commission's findings herein do not rest on the evaluation of
the investment quality of a product or an assessment of the
underlying technology's utility or value as an innovation or an
investment. See, e.g., Securities Exchange Act Release No. 34-95179
(June 29, 2022), 87 FR 40282 (July 6, 2022) (SR-NYSEArca-2021-89)
(disapproving the listing and trading of shares of the Bitwise
Bitcoin ETP Trust).
\121\ In addition, existing rules and standards of conduct would
apply to recommending and advising investments in Commodity-Based
Trust Shares listed pursuant to the proposed generic listing
standards. For example, when broker-dealers recommend ETPs to retail
customers, Regulation Best Interest (``Reg BI'') would apply. See
Rule 15l-1(a) of the Exchange Act. Reg BI requires broker-dealers
to, among other things, exercise reasonable diligence, care, and
skill when making a recommendation to a retail customer to: (1)
understand potential risks, rewards, and costs associated with the
recommendation and have a reasonable basis to believe that the
recommendation could be in the best interest of at least some retail
customers; and (2) have a reasonable basis to believe the
recommendation is in the best interest of a particular retail
customer based on that retail customer's investment profile. See
Rules 15l-1(a)(2)(ii)(A) and (B) of the Exchange Act. To the extent
that broker-dealers recommend ETPs to customers who are not retail
customers covered by Reg BI, FINRA Rule 2111 (Suitability) requires,
in part, that a member broker-dealer or associated person ``have a
reasonable basis to believe that a recommended transaction or
investment strategy involving a security or securities is suitable
for the customer, based on the information obtained through the
reasonable diligence of the [broker-dealer] or associated person to
ascertain the customer's investment profile.'' See FINRA Rule
2111(a). In addition, investment advisers have a fiduciary duty
under the Investment Advisers Act of 1940 comprised of a duty of
care and a duty of loyalty. These obligations require the adviser to
act in the best interest of its client and not subordinate its
client's interest to its own. See Commission Interpretation
Regarding Standard of Conduct for Investment Advisers, Investment
Advisers Act Release No. 5248 (June 5, 2019), 84 FR 33669 (July 12,
2019), at 33671; Investment Company Act Release No. 34084 (Nov. 2,
2020), 85 FR 83162 (Dec. 21, 2020), at 83217 (discussing the best
interest standard of conduct for broker-dealers and the fiduciary
obligations of investment advisers in the context of all ETPs).
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In conclusion, the Proposals contain adequate rules and procedures
to govern the listing and trading of Commodity-Based Trust Shares on
the Exchanges pursuant to Rule 19b-4(e). All Commodity-Based Trust
Shares listed under the proposed generic listing standards will be
subject to the rules and procedures of each Exchange that currently
govern the trading of equity securities on the Exchange.\122\ For the
reasons discussed above, the Commission finds that the Proposals are
consistent with Section 6(b)(5) of the Exchange Act.\123\
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\122\ See proposed Nasdaq Rule 5711(d)(ii); proposed BZX Rule
14.11(e)(4)(B); proposed NYSE Arca Rule 8.201-E (Generic)(b).
\123\ 15 U.S.C. 78f(b)(5).
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IV. Accelerated Approval of the Proposals
The Commission finds good cause to approve the Proposals prior to
the 30th day after the date of publication of notice of the Exchanges'
amended filings \124\ in the Federal Register. The amended filings
clarify the definitions set forth in, and the requirements of, the
proposed generic listing standards. These changes are technical in
nature and do not materially alter the substance of the proposed rule
changes or raise any novel regulatory issues. Further, the changes
assist the Commission in evaluating the Proposals and in determining
that they are consistent with the Exchange Act and the rules and
regulations thereunder applicable to a national securities exchange, as
discussed above. Accordingly, the Commission finds good cause, pursuant
to Section 19(b)(2) of the Exchange Act,\125\ to approve the Proposals
on an accelerated basis.
---------------------------------------------------------------------------
\124\ See supra note 3.
\125\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
This approval order is based on all of the Exchanges'
representations and descriptions in their respective amended filings,
which the Commission has evaluated as discussed above. For the reasons
set forth above, the Commission finds, pursuant to Section 19(b)(2) of
the Exchange Act,\126\ that the Proposals are consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to a national securities exchange, and in
particular, with Section 6(b)(5) of the Exchange Act.\127\
---------------------------------------------------------------------------
\126\ 15 U.S.C. 78s(b)(2).
\127\ 15 U.S.C. 78f(b)(5).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\128\ that the Proposals (SR-NASDAQ-2025-056; SR-CboeBZX-
2025-104; SR-NYSEARCA-2025-54), as modified by amendments thereto, be,
and hereby are, approved on an accelerated basis.
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\128\ 15 U.S.C. 78s(b)(2).
By the Commission.
Stephanie J. Fouse,
Assistant Secretary.
[FR Doc. 2025-18258 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.