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Notice2025-18797

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing of Proposed Rule Change to List and Trade Nasdaq Bitcoin Index Options

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Published

September 29, 2025

Issuing agencies

Securities and Exchange Commission

Full Text

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[Federal Register Volume 90, Number 186 (Monday, September 29, 2025)]
[Notices]
[Pages 46706-46728]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-18797]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-104038; File No. SR-Phlx-2025-50]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
of Proposed Rule Change to List and Trade Nasdaq Bitcoin Index Options

September 24, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 23, 2025, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III, below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.

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[[Page 46707]]

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to list and trade Nasdaq Bitcoin Index
Options, a new index that reflects the price of Bitcoin.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings">https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings</a>,
and at the principal office of the Exchange.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
The Exchange proposes to introduce a new index options product,
Nasdaq Bitcoin Index Options. This index would enable retail and
institutional investors to obtain a precise price for Bitcoin.
Nasdaq Bitcoin Index Options, as proposed, shall have a ticker
symbol ``XBTX'' and will be based on the underlying index, CME CF
Bitcoin Real Time Index (``BRTI'') \3\ divided by a factor of one
hundred (100). The Exchange shall utilize a separate methodology to
calculate the final settlement price. The final settlement price shall
be the ``BRRNY--NOS ``Nasdaq Options Settlement'' which is calculated
on the expiration date by observing transactions during a one-hour
window from 15.00 to 16.00 New York Time, separated into twelve
partitions of five minutes, each with a resulting a volume-weighted
median (``VWM''), which index value is expressed as the arithmetic mean
of the twelve (12) VWMs, resulting in the CME CF Cryptocurrency
Reference Rate--New York Variant (``BRRNY'') \4\ which is then divided
by a factor of one hundred (100). The purpose of utilizing the BRRNY
divided by a factor of one hundred (100), known as the BRRNY--NOS, as
the final settlement price is to provide a replicable, manipulation-
resistant and representative Bitcoin benchmark that synchronizes with
the traditional U.S. options market close timeframe.
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\3\ The BRTI is a real time price benchmark and is regulated by
the UK Financial Conduct Authority, a regulator of financial
services firms, under EU BMR. The European Regulation on indices
used as benchmarks in financial instruments and financial contracts
or to measure the performance of investment funds is the EU BMR.
Today, the BRRNY--U.S. Dollar trading pair is the benchmark index
for the following exchange-listed ETF products comprising $58
billion of assets as of July 18, 2024: iShares Bitcoin Trust (IBIT),
Grayscale Bitcoin Trust (GBTC), Fidelity Wise Origin Bitcoin Fund
(FBTC), ARK 21Shares Bitcoin ETF (ARKB), Bitwise Bitcoin ETF Trust
(BUTB), VanEck Bitcoin Trust (HODL), Coinshares Valkyrie Bitcoin
Fund (BRRR), Invesco Galaxy Bitcoin ETF (BTCO), Franklin Bitcoin ETF
(EZBC). (See <a href="https://etfdb.com/index/cme-cf-benchmarks-Bitcoin-reference-rate-new-york-variant">https://etfdb.com/index/cme-cf-benchmarks-Bitcoin-reference-rate-new-york-variant</a>).
\4\ Today, CME CF Bitcoin Futures contracts are settled using
the BRRNY.
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Options on this new index will be cash-settled, with a European-
style exercise.

Background

The BRTI \5\ is a once a second benchmark index price for Bitcoin
that aggregates order data from Bitcoin-USD markets operated by major
cryptocurrency exchanges that conform to the CME CF Constituent
Exchange Criteria.\6\ The BRTI is calculated every second of every day,
using the Relevant Order Books \7\ of all Constituent Exchanges,\8\
thereby aggregating the notional value of Bitcoin across major Bitcoin
spot platforms.
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\5\ In 2016, CME Group and Crypto Facilities Ltd. launched the
BRTI index. See <a href="https://www.cmegroup.com/education/courses/introduction-to-Bitcoin/introduction-to-Bitcoin-reference-rate.html">https://www.cmegroup.com/education/courses/introduction-to-Bitcoin/introduction-to-Bitcoin-reference-rate.html</a>.
\6\ ``Constituent Exchange'' is defined at proposed Options 4D,
Section 2(a)(5) to mean the cryptocurrency trading venues approved
by the CME CF Cryptocurrency Pricing Products Oversight Committee to
serve as pricing source for the calculation of the BRTI and BRRNY.
\7\ CF Benchmark's Methodology Guide defines ``Relevant Order
Books'' as the universe of the currently unmatched limit orders to
buy or sell a unit of the cryptocurrency base asset versus the quote
asset on a Constituent Exchange in the Relevant Pair, aggregated by
price, that is reported through its Automatic Programming Interface
(``API'') to the CF Benchmarks. The Relevant Pair for the Nasdaq
Bitcoin Index Options shall mean Bitcoin versus the U.S. Dollar. To
assure that the BRTI and the BRRNY reflects global cryptocurrency
trading activity in a representative and unbiased manner, a
geographically diverse set of spot trading venues is included within
the current framework.
\8\ Constituent Exchanges are cryptocurrency trading venues
approved by the CME CF Cryptocurrency Pricing Products Oversight
Committee to serve as pricing source for the calculation of a BRTI
and the BRRNY, collectively known as the CME CF Cryptocurrency
Pricing Products. The Exchange defines ``CME CF Cryptocurrency
Pricing Products Oversight Committee'' or ``Oversight Committee'' at
proposed Options 4D, Section 2(a)(4) to mean the committee
established jointly by Crypto Facilities Ltd. or ``CF'' and Chicago
Mercantile Exchange Inc. or ``CME'' to protect the integrity of the
methodology and calculation process of the BRTI and the BRRNY and to
address potential conflicts of interest. The role of the Oversight
Committee is to provide an oversight function to review and provide
challenge on all aspects of the methodology and calculation process
and provide effective oversight of CF as the administrator of the
BRTI and BRRNY.
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The BRTI is designed based on the IOSCO Principles for Financial
Benchmarks.\9\ The administrator of the CF Benchmarks Index is CF
Benchmarks Ltd.
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\9\ See <a href="https://www.iosco.org/library/pubdocs/pdf/IOSCOPD589.pdf">https://www.iosco.org/library/pubdocs/pdf/IOSCOPD589.pdf</a>.
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A trading venue is eligible as a Constituent Exchange in any of the
CME CF Cryptocurrency Pricing Products \10\ if it offers a market that
facilitates the spot trading of the relevant cryptocurrency base asset
(Bitcoin) against the corresponding quote asset (U.S. Dollars), and
makes trade data and order data available through an API with
sufficient reliability, detail and timeliness. Furthermore, it must
meet certain criteria established by the CME CF Cryptocurrency Pricing
Products Oversight Committee.\11\ Should the average daily contribution
of a Constituent Exchange fall below 3% for any CME CF Cryptocurrency
Pricing Product, then the continued inclusion of the venue as a
Constituent Exchange to the Relevant Pair shall be assessed by the CME
CF Oversight Committee.
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\10\ CME CF Cryptocurrency Pricing Products includes the BRTI
and the BRRNY.
\11\ CF Benchmark's guidelines require that the venue's Relevant
Pair spot trading volume for an index must meet the minimum
thresholds for it to be admitted as a Constituent Exchange. The
average daily volume the venue would have contributed during the
observation window for the Reference Rate of the Relevant Pair must
exceed 3% for two consecutive calendar quarters. The venue must have
policies to ensure fair and transparent market conditions at all
times and has processes in place to identify and impede illegal,
unfair or manipulative trading practices. The venue must not impose
undue barriers to entry or restrictions on market participants, and
utilizing the venue does not expose market participants to undue
credit risk, operational risk, legal risk or other risks. The venue
must comply with applicable law and regulation, including, but not
limited to capital markets regulations, money transmission
regulations, client money custody regulations, know-your-client
(``KYC'') regulations and anti-money laundering regulations.
Finally, the venue must cooperate with inquiries and investigations
of regulators and CF Benchmarks upon request and must execute data
sharing agreements with CME Group Once admitted a constituent
exchange must demonstrate that it continues to meet the
aforementioned criteria.
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When calculated, the Relevant Order Book of each Constituent
Exchange is added to a joint list of order books,\12\

[[Page 46708]]

which are aggregated into one consolidated order book. If the size at
the bid or ask order price level exceeds the order size cap that is set
by CF Benchmarks, it enters the consolidated order book with a size
equal to the order size cap.\13\ The cumulative bid price-volume curve,
ask price-volume curve, mid-price volume curve \14\ and mid spread-
volume curve are calculated from the consolidated order book at a
granularity equal to the spacing parameter.
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\12\ An order book is a list of buy and sell orders with
associated limit prices and sizes that have not yet been matched due
to lack of supply or demand to trade at that price. The BRTI is
calculated from order book data, as opposed to, for instance, trade
data. Order book data is composed of unmatched limit orders to buy
or sell Bitcoin. It informs about the price at which a trader can
buy or sell Bitcoins now or in the future and is therefore forward-
looking by nature. Further, absent retrieval constraints, order book
data is always up to date. This is in contrast to trade data, which
is produced in stochastic intervals only and informs about the price
at which Bitcoin has traded in the past. See <a href="https://www.cmegroup.com/trading/files/Bitcoin-real-time-index-methodology-version-2.pdf">https://www.cmegroup.com/trading/files/Bitcoin-real-time-index-methodology-version-2.pdf</a>.
\13\ The order cap size is intended to prevent any excess size
of a bid or ask order to be discarded.
\14\ See <a href="https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf">https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf</a>.
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Using the above notation, the ask price-volume curve is defined as
askPV, the bid price-volume curve as bidPV, the mid-price volume curve
as midPV, and the mid spread-volume curve as midSV, in each case as of
the effective time T, as:
[GRAPHIC] [TIFF OMITTED] TN29SE25.000

At a high level, the mid-price volume curve represents the average
of the marginal price at which a certain amount of Bitcoins can be sold
and at which that same amount can be bought. By averaging across the
mid-price volume curve, the BRTI represents a blend of such
(hypothetical) transactions at various transaction sizes.\15\
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\15\ See <a href="https://www.cmegroup.com/trading/files/Bitcoin-real-time-index-methodology-version-2.pdf">https://www.cmegroup.com/trading/files/Bitcoin-real-time-index-methodology-version-2.pdf</a>.
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The utilized depth is calculated as the maximum cumulative volume
for which the mid spread-volume curve does not exceed a certain
percentage deviation from the mid-price.\16\ If this volume is less
than the spacing parameter, the utilized depth is set to the spacing
parameter. The utilized depth, v, is calculated as:
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\16\ See <a href="https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf">https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf</a>.
[GRAPHIC] [TIFF OMITTED] TN29SE25.001

At a high level, the BRTI is calculated from the section of the
mid-price volume curve for which ask limit orders at a certain depth
diverge by no more than 0.5% from the mid-price at that depth. It
therefore reflects a significant portion of the top of the consolidated
order book (as opposed to, for instance, the best bid and ask prices
only) but discards limit orders that are less likely to be matched.
This makes it a meaningful representation of true Bitcoin liquidity and
robust to local changes in order books. Note that utilized depth will
always include crossed orders for any of the consolidated order books
of the Constituent Exchanges, along with limit orders on the order
books of Constituent Exchanges up to 0.5% away of the mid-price volume
curve. If zero size resides in both these sections, utilized depth is
set to one. The BRTI is then effectively equal to the mid-price of the
consolidated order book.\17\
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\17\ See <a href="https://www.cmegroup.com/trading/files/Bitcoin-real-time-index-methodology-version-2.pdf">https://www.cmegroup.com/trading/files/Bitcoin-real-time-index-methodology-version-2.pdf</a>.
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The mid-price volume curve is weighted by the normalized
probability density of the exponential distribution up to the utilized
depth. The BRTI is then given by the sum of the weighted mid-price
volume curve obtained in the previous step.\18\ The BRTI as of the
effective time T, CCRT, is then given by:
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\18\ See the qualitative description of the calculation
methodology at <a href="https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf">https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf</a>.
[GRAPHIC] [TIFF OMITTED] TN29SE25.002

[[Page 46709]]

The order size cap is calculated from the uncapped consolidated
order book. Using the above notation, the dynamic order size cap is
derived as follows:
[GRAPHIC] [TIFF OMITTED] TN29SE25.003

The order size cap as of the effective time T, C, is then given by:
[GRAPHIC] [TIFF OMITTED] TN29SE25.004

If the Retrieval Time of the Relevant Order Book of a Constituent
Exchange is at least 30 seconds older than the Calculation Time, the
Constituent Exchange is disregarded in the calculation of the BRTI for
that Calculation Time. If the Retrieval Times of the Relevant Order
Books of all Constituent Exchanges are at least 30 seconds older each
than the Calculation Time, the BRTI calculation failure occurs for that
Calculation Time. All Relevant Order Books are subject to an automated
screening for erroneous data.\19\
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\19\ If the format of a Relevant Order Book: deviates from the
expected format such that it cannot be parsed; contains no bid
orders or no ask orders; crosses; or contains any entries with a
non-numeric or non-positive limit price or size, it is flagged as
erroneous. Relevant Order Books flagged as erroneous for a given
calculation time are disregarded in the calculation of the BRTI for
that calculation time. See <a href="https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf">https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf</a>.
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At a high level, the mid-price volume curve is weighted such that
prices near the current market prices (at the mid-point) are weighted
higher than prices that are far away from where trading is occurring
(at the bid or offer).
Overview of the Bitcoin Industry
Bitcoin is a digital asset that is created and transmitted through
the operations of the peer-to-peer Bitcoin network, a decentralized
network of computers that operates on cryptographic protocols (the
``Bitcoin network''). No single entity owns or operates the Bitcoin
network, the infrastructure of which is collectively maintained by its
user base. The Bitcoin network allows people to exchange tokens of
value, called Bitcoin, which are recorded on a public transaction
ledger known as the Bitcoin blockchain (the ``Bitcoin blockchain'').
Bitcoin can be used to pay for goods and services, or it can be
converted to fiat currencies, such as the U.S. dollar, at rates
determined on Bitcoin platforms that enable trading in Bitcoin or in
individual end-user-to-end-user transactions under a barter system.
The Bitcoin network is commonly understood to be decentralized and
does not require governmental authorities or financial institution
intermediaries to create, transmit or determine the value of Bitcoin.
Rather, Bitcoin is created and allocated by the Bitcoin network
protocol through a ``mining'' process. The value of Bitcoin is
determined by the supply of and demand for Bitcoin-on-Bitcoin platforms
or in private end-user-to-end-user transactions.
New Bitcoins are created and rewarded to the miners of a block in
the Bitcoin blockchain for verifying transactions. The Bitcoin
blockchain is a shared database that includes all blocks that have been
solved by miners and it is updated to include new blocks as they are
solved. Each Bitcoin transaction is broadcast to the Bitcoin network
and, when included in a block, recorded in the Bitcoin blockchain. As
each new block records outstanding Bitcoin transactions, and
outstanding transactions are settled and validated through such
recording, the Bitcoin blockchain represents a complete,

[[Page 46710]]

transparent and unbroken history of all transactions of the Bitcoin
network.
History of Bitcoin
The Bitcoin network was initially contemplated in a whitepaper that
also described Bitcoin and the operating software to govern the Bitcoin
network. The whitepaper was purportedly authored by Satoshi Nakamoto.
However, no individual with that name has been reliably identified as
Bitcoin's creator, and the general consensus is that the name is likely
a pseudonym for the actual inventor or inventors. The first Bitcoins
were created in 2009 after Nakamoto released the Bitcoin network source
code (the software and protocol that created and launched the Bitcoin
network). The Bitcoin network has been under active development since
that time by a loose group of software developers who have come to be
known as core developers.
Overview of Bitcoin Network Operations
In order to own, transfer or use Bitcoin directly on the Bitcoin
network (as opposed to through an intermediary, such as an exchange), a
person generally must have internet access to connect to the Bitcoin
network. Bitcoin transactions may be made directly between end-users
without the need for a third-party intermediary. To prevent the
possibility of double-spending Bitcoin, a user must notify the Bitcoin
network of the transaction by broadcasting the transaction data to its
network peers. The Bitcoin network provides confirmation against
double-spending by memorializing every transaction in the Bitcoin
blockchain, which is publicly accessible and transparent. This
memorialization and verification against double-spending is
accomplished through the Bitcoin network mining process, which adds
``blocks'' of data, including recent transaction information, to the
Bitcoin blockchain.
Overview of Bitcoin Transfers
Prior to engaging in Bitcoin transactions directly on the Bitcoin
network, a user generally must first install on its computer or mobile
device a Bitcoin network software program that will allow the user to
generate a private and public key pair associated with a Bitcoin
address commonly referred to as a ``wallet.'' The Bitcoin network
software program and the Bitcoin address also enable the user to
connect to the Bitcoin network and transfer Bitcoin to, and receive
Bitcoin from, other users.
Each Bitcoin network address, or wallet, is associated with a
unique ``public key'' and ``private key'' pair. To receive Bitcoin, the
Bitcoin recipient must provide its public key to the party initiating
the transfer. This activity is analogous to a recipient for a
transaction in U.S. dollars providing a routing address in wire
instructions to the payor so that cash may be wired to the recipient's
account. The payor approves the transfer to the address provided by the
recipient by ``signing'' a transaction that consists of the recipient's
public key with the private key of the address from where the payor is
transferring the Bitcoin. The recipient, however, does not make public
or provide to the sender its related private key.
Neither the recipient nor the sender reveals their private keys in
a transaction because the private key authorizes transfer of the funds
in that address to other users. Therefore, if a user loses his or her
private key, the user may permanently lose access to the Bitcoin
contained in the associated address. Likewise, Bitcoin is irretrievably
lost if the private key associated with them is deleted and no backup
has been made. When sending Bitcoin, a user's Bitcoin network software
program must validate the transaction with the associated private key.
The resulting digitally validated transaction is sent by the user's
Bitcoin network software program to the Bitcoin network to allow
transaction confirmation.
Some Bitcoin transactions are conducted ``off-blockchain'' and are
therefore not recorded in the Bitcoin blockchain. Some ``off-blockchain
transactions'' involve the transfer of control over, or ownership of, a
specific digital wallet holding Bitcoin or the reallocation of
ownership of certain Bitcoin in a digital wallet containing assets
owned by multiple persons, such as a digital wallet maintained by a
digital assets platform. In contrast to on-blockchain transactions,
which are publicly recorded on the Bitcoin blockchain, information and
data regarding off-blockchain transactions are generally not publicly
available. Therefore, off-blockchain transactions are not truly Bitcoin
transactions in that they do not involve the transfer of transaction
data on the Bitcoin network and do not reflect a movement of Bitcoin
between addresses recorded in the Bitcoin blockchain. For these
reasons, off-blockchain transactions are subject to risks as any such
transfer of Bitcoin ownership is not protected by the protocol behind
the Bitcoin network or recorded in, and validated through, the
blockchain mechanism.
Summary of a Bitcoin Transaction
In a Bitcoin transaction directly on the Bitcoin network between
two parties (as opposed to through an intermediary, such as a
custodian), the following circumstances must initially be in place: (i)
the party seeking to send Bitcoin must have a Bitcoin network public
key, and the Bitcoin network must recognize that public key as having
sufficient Bitcoin for the transaction; (ii) the receiving party must
have a Bitcoin network public key; and (iii) the spending party must
have internet access with which to send its spending transaction.
The receiving party must provide the spending party with its public
key and allow the Bitcoin blockchain to record the sending of Bitcoin
to that public key. After the provision of a recipient's Bitcoin
network public key, the spending party must enter the address into its
Bitcoin network software program along with the number of Bitcoin to be
sent. The number of Bitcoin to be sent will typically be agreed upon
between the two parties based on a set number of Bitcoin or an agreed
upon conversion of the value of fiat currency to Bitcoin. Since every
computation on the Bitcoin network requires the payment of Bitcoin,
including verification and memorialization of Bitcoin transfers, there
is a transaction fee involved with the transfer, which is based on
computation complexity and not on the value of the transfer and is paid
by the payor with a fractional number of Bitcoin.
After the entry of the Bitcoin network address, the number of
Bitcoin to be sent and the transaction fees, if any, to be paid, will
be transmitted by the spending party. The transmission of the spending
transaction results in the creation of a data packet by the spending
party's Bitcoin network software program, which is transmitted onto the
decentralized Bitcoin network, resulting in the distribution of the
information among the software programs of users across the Bitcoin
network for eventual inclusion in the Bitcoin blockchain.
As discussed in greater detail below, Bitcoin network miners record
transactions when they solve for and add blocks of information to the
Bitcoin blockchain. When a miner solves for a block, it creates that
block, which includes data relating to (i) the solution to the block,
(ii) a reference to the prior block in the Bitcoin blockchain to which
the new block is being added and (iii) transactions that have occurred
but have not yet been added to the Bitcoin

[[Page 46711]]

blockchain. The miner becomes aware of outstanding, unrecorded
transactions through the data packet transmission and distribution
discussed above.
Upon the addition of a block included in the Bitcoin blockchain,
the Bitcoin network software program of both the spending party and the
receiving party will show confirmation of the transaction on the
Bitcoin blockchain and reflect an adjustment to the Bitcoin balance in
each party's Bitcoin network public key, completing the Bitcoin
transaction. Once a transaction is confirmed on the Bitcoin blockchain,
it is irreversible.
Creation of a New Bitcoin
New Bitcoins are created through the mining process. The process by
which Bitcoin is ``mined'' results in new blocks being added to the
Bitcoin blockchain and new Bitcoin tokens being issued to the miners.
Computers on the Bitcoin network engage in a set of prescribed complex
mathematical calculations in order to add a block to the Bitcoin
blockchain and thereby confirm Bitcoin transactions included in that
block's data. The Bitcoin network is designed in such a way that the
reward for adding new blocks to the Bitcoin blockchain decreases over
time. In the future, once new Bitcoin tokens are no longer awarded for
adding a new block, miners will only have transaction fees to
incentivize them, and as a result, it is expected that miners will need
to be better compensated with higher transaction fees to ensure that
there is adequate incentive for them to continue mining.
Limits on Bitcoin Supply
Under the source code that governs the Bitcoin network, the supply
of new Bitcoin is mathematically controlled so that the number of
Bitcoin grows at a limited rate pursuant to a pre-set schedule. The
number of Bitcoin awarded for solving a new block is automatically
halved after every 210,000 blocks are added to the Bitcoin blockchain,
approximately every 4 years. The fixed reward for solving a new Bitcoin
block is currently 3.125 BTC per block. This amount is the result of
the most recent Bitcoin halving event, which occurred in April 2024.
The next Bitcoin halving is anticipated in 2028 when Bitcoin will halve
to 1.5625. This deliberately controlled rate of Bitcoin creation means
that the number of Bitcoin in existence will increase at a controlled
rate until the number of Bitcoin in existence reaches the pre-
determined 21 million Bitcoin. However, the 21 million supply cap could
be changed in a hard fork. A hard fork could change the source code to
the Bitcoin network, including the 21 million Bitcoin supply cap.
Final Settlement
The term ``final settlement value'' as defined at proposed Options
4D, Section 2(a)(9) shall be calculated as described at Options 4D,
Section 8. The Nasdaq Bitcoin Index Options final settlement value is
the BRRNY on the expiration date (usually a Friday). BRRNY will be
divided by a factor of one hundred (100) and published as BRRNY--NOS
(Nasdaq Options Settlement). The BRRNY is calculated daily based on the
Relevant Transactions \20\ and is calculated on the expiration date for
purposes of final settlement. Relevant Transactions include those that
trade Bitcoin versus U.S. Dollars on a Constituent Exchange from 15:00
to 16:00 New York Time. The final settlement value is calculated and
reported by the reporting authority. The final settlement value is
determined by the aggregated last reported sale price of each
Constituent Exchange. Specifically, the final settlement value is
calculated by combining all Relevant Transactions from each Constituent
Exchange on a joint list and recording the trade price and size for
each transaction. That list is partitioned into a number of equally-
sized time intervals, of 5 minutes. For each partition separately, the
volume-weighted median trade price is calculated from the trade prices
and sizes of all Relevant Transactions across all Constituent
Exchanges. The BRRNY is the equally weighted average of the volume-
weighted medians of all partitions. In the event that the Nasdaq
Bitcoin Index is not open for trading on the expiration date, the value
of the Nasdaq Bitcoin Index shall be the last reported sale price prior
to the expiration date.
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\20\ Specifically, the BRRNY is calculated based on the Relevant
Transactions of all of its constituent Bitcoin platforms, which are
currently Bitstamp, Coinbase, itBit, Kraken, Gemini, and LMAX and
which may change from time to time.
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The BRRNY is methodologically identical to the regulated CME CF
Bitcoin Reference Rate (BRR), the most widely used benchmark price for
Bitcoin, that settles the Bitcoin-USD derivatives complex listed by CME
Group, and which serves as the NAV for exchange listed investment
products from WisdomTree Europe, Evolve ETFs (CAN) and QR Asset
Management (BRZ). The only difference between the BRRNY and the BRR is
that the BRRNY references the price of Bitcoin at the closing time of
U.S. markets, 16:00 New York Time, rather than the price at 16:00
London Time, referenced by the BRR.
The purpose of the BRRNY is to provide a replicable, manipulation-
resistant and representative Bitcoin benchmark that synchronizes with
the traditional U.S. market close. The BRRNY is a regulated Benchmark
under the UK Benchmarks Regulation (BMR) regime. The BRRNY calculation
methodology aggregates transactions of Bitcoins in U.S. dollars that
are only conducted on the most liquid markets for which data is
publicly available and operated by exchanges that meet the CME CF
Constituent Exchange Criteria.\21\
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\21\ See infra note 25.
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The BRRNY is a valid and robust benchmark that is calculated from
input data of sufficient volume so that it is representative of the
market it seeks to measure. Additionally, the BRRNY has volume
sufficiency which permits it to be replicated by institutional market
participants and product providers that need to warehouse price risk.
The table below summarizes the total number of transactions and average
number of transactions per day observed each month for the BRRNY.\22\
Between February 28, 2022, and January 31, 2024 (weekdays only), on
average 2,116.73 Bitcoins, or $59M were traded during each daily
observation window between 15:00 and 16:00 New York Time.\23\
---------------------------------------------------------------------------

\22\ The data represents both trade count and Bitcoin volume
during the observation window.
\23\ BRRNY was launched on February 28, 2022. LMAX Digital was
added as a Constituent Exchange from May 2022.

---------------------------------------------------------------------------

[[Page 46712]]

[GRAPHIC] [TIFF OMITTED] TN29SE25.005

This trading activity exhibits volatility that is not substantially
different from that shown in traditional asset markets. The volume
observed and the reliability of that volume are clearly evident to be
sufficient for the calculation of a robust and reliable benchmark.
Phlx believes that Nasdaq Bitcoin Index Options will be utilized
for a wide range of activities such as asset valuation, settlement of
financial risk, risk management, NAV calculation, unit creation and
unit redemption. To that end, the index design is fair and transparent.
CF Benchmarks exclusively sources input data from Constituent Exchanges
that meet published criteria as set out in its CME CF Constituent
Exchange Criteria and CF Benchmarks conducts a thorough review of any
exchange under consideration for inclusion as a Constituent
Exchange.\24\ The BRRNY methodology takes an observation period and
divides it into equal partitions of time. The volume-weighted median of
all transactions within each partition is then calculated. The
benchmark index value is determined from the arithmetic mean of the
volume-weighted medians, equally weighted. As a result, individual
trades of large size have limited effect on the index level as they
only influence the level of the volume-weighted median for that
specific partition. Further, a cluster of trades in a short period of
time will also only influence the volume-weighted median of the
partition or partitions they were conducted in, thereby limiting
impact. Use of volume-weighted medians as opposed to volume-weighted
means ensures that transactions conducted at outlying prices do not
have an undue effect on the value of a specific partition because
trades of large size or clusters of trades over a short period of time
will not have an undue influence on the index level. CF Benchmarks
applies equal weight to transactions observed from Constituent
Exchanges. With no pre-set weights, the BRRNY is not readily subject to
manipulation. Using the arithmetic mean of partitions of equal weight
further denudes the effect of trades of large size at prices that
deviate from the prevailing price having undue influence on the
benchmark level.\25\
---------------------------------------------------------------------------

\24\ The CME CF Constituent Exchange Criteria is available at:
<a href="https://docs.cfbenchmarks.com/CME%20CF%20Constituent%20Exchanges%20Criteria.pdf">https://docs.cfbenchmarks.com/CME%20CF%20Constituent%20Exchanges%20Criteria.pdf</a>. The arrangements
of all Constituent Exchanges are reviewed annually to ensure that
they continue to meet all criteria specified within the
``Constituent Exchange Criteria.'' This due diligence is documented,
and the information is distributed to CF Benchmarks' regulators to
consider. The deliberations of regulators are conducted during
regular meetings, minutes of such meetings are publicly available,
being published by CF Benchmarks.
\25\ See also <a href="https://www.cfbenchmarks.com/blog/suitability-analysis-of-the-cme-cf-Bitcoin-reference-rate-new-york-variant-as-a-basis-for-regulated-financial-products-february-2024-update">https://www.cfbenchmarks.com/blog/suitability-analysis-of-the-cme-cf-Bitcoin-reference-rate-new-york-variant-as-a-basis-for-regulated-financial-products-february-2024-update</a>.
---------------------------------------------------------------------------

The BRRNY methodology incorporates a procedure for potentially
erroneous data. In the event of an instance of index calculation in
which a Constituent Exchange's volume-weighted median transaction price
exhibits an absolute percentage deviation from the volume-weighted
median price of other Constituent Exchange transactions greater than
the Potentially Erroneous Data Parameter \26\ (10%), then transactions
from that Constituent Exchange are deemed potentially erroneous and
excluded from the index calculation. All instances of data excluded
from a calculation trigger an alert that is investigated. By way of
example, between February 28, 2022, and January 31, 2024, the
Potentially Erroneous Data Parameter of the methodology for the CME CF
Bitcoin Reference Rate--New York Variant has never been triggered.
Analysis of the highest volume-weighted median per exchange during the
observation period produced the results in the table below. The results
illustrate that during the observation period, no Constituent
Exchange's input data needed to be excluded due to exhibiting potential
manipulation and indeed no individual cryptocurrency exchange exhibits
a deviation percentage above 2.41% during this period.
---------------------------------------------------------------------------

\26\ The Potentially Erroneous Data Parameter is an automated
screening established by CF Benchmarks to remove potentially
erroneous data.

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[[Page 46713]]

[GRAPHIC] [TIFF OMITTED] TN29SE25.006

CF Benchmarks has implemented a benchmark surveillance program for
the investigation of alerts. Instances of suspected benchmark
manipulation are escalated through appropriate regulatory channels in
accordance with CF Benchmarks' obligations under the UK Benchmarks
Regulation (UK BMR). As a regulated Benchmark Administrator, CF
Benchmarks is subject to supervision by the UK FCA.\27\
---------------------------------------------------------------------------

\27\ Furthermore, CF Benchmarks' control procedures with respect
to compliance with the UK BMR have been audited by `Big Four'
accountancy firm Deloitte. The Independent Assurance Report on
Control Procedures Noted by CF Benchmarks Regarding Compliance with
the UK Benchmarks Regulation as of September 12, 2022 is available
at: <a href="https://docs.cfbenchmarks.com/Deloitte_CFBenchmarksSOC1AuditReport.pdf">https://docs.cfbenchmarks.com/Deloitte_CFBenchmarksSOC1AuditReport.pdf</a>.
---------------------------------------------------------------------------

In terms of this correlation of prices among Constituent Exchanges
as shown in the table above, an analysis was undertaken of the pair-
wise correlation of prices from Constituent Exchanges on a per-minute
basis (the price difference between transactions for each minute at
each exchange) during the observation period. The results are shown in
the table below.
[GRAPHIC] [TIFF OMITTED] TN29SE25.007

[[Page 46714]]

With respect to replicability, a simple replication simulation was
thereby conducted of BRRNY to demonstrate the extent of slippage \28\
that implementation of the BRR would probably encounter. The
methodology was as follows for weekdays only.
---------------------------------------------------------------------------

\28\ Slippage refers to the difference between the expected
price of a trade and the actual price at which the trade is
executed. In the context of errant (incorrect or unintended) trading
prices, slippage represents the deviation from your intended
execution price, which can result in unexpected costs or,
occasionally, unexpected gains.

[ssquf] Trades are executed on n (6) Constituent Exchanges,
during a 3,600-second window.
[ssquf] One trade is executed every second and the price
achieved is assumed to be the last execution price observed in that
second. Its associated volume is assumed to be the volume executed
during that second.
[ssquf] If no trade is completed in any single-second period,
then the price achieved is assumed to be the price achieved in the
previous second, but the associated volume from the previous second
is not added to the volume executed in the latest second.

The results of this simulation are displayed below.
[GRAPHIC] [TIFF OMITTED] TN29SE25.008

Summary data for the above simulation is provided below.
[GRAPHIC] [TIFF OMITTED] TN29SE25.009

As evidenced above, the BRRNY can be replicated with a high degree
of confidence and usually with slippage of no more than 1 basis point
(0.01%). On only 6.76% of days would slippage have been greater than 5
basis points (0.05%). Indeed, even on the most volatile day, slippage
was approximately one half of one percent, 51.6 basis points (0.516%).
Furthermore, in the 24-month period under observation slippage would
have been in double-digit basis points only 10 times.
As evidenced by the foregoing data, the BRTI is representative of
the underlying market, resistant to manipulation, and replicable by
market participants.
Regulatory Framework
The proposed product is a cash-settled index option that permits
holders to receive U.S. dollars representing the difference between the
current Bitcoin spot markets as represented by the BRRNY and the
exercise price of the option. Like the Spot Bitcoin ETPs,\29\ the
Nasdaq Bitcoin Index Options do not hold physical Bitcoin.
---------------------------------------------------------------------------

\29\ See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008 (January 17, 2024) (File Nos. SR-NYSEArca-2021-90;
SR-NYSEArca-2023-44; SR-NYSEArca-2023-58; SR-NASDAQ-2023-016; SR-
NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-CboeBZX-2023-038; SR-
CboeBZX-2023-040; SR-CboeBZX-2023-042; SRCboeBZX-2023-044; and SR-
CboeBZX-2023-072) (Order Granting Accelerated Approval of Proposed
Rule Changes, as Modified by Amendments Thereto, to List and Trade
Bitcoin-Based Commodity-Based Trust Shares and Trust Units) (``Spot
Bitcoin ETPs Approval Order'').
---------------------------------------------------------------------------

Since January 2024, shares of Spot Bitcoin ETPs based on Bitcoin
have been listed and traded on national securities exchanges.\30\
Phlx's proposal to list and trade Nasdaq Bitcoin Index Options would
allow market participants that hold shares of Spot Bitcoin ETPs to
hedge or modify their exposure on a national securities exchange,
within a single regulatory regime,\31\ thereby fostering innovation and
competition in the rapidly evolving market for digital asset
derivatives.
---------------------------------------------------------------------------

\30\ See Spot Bitcoin ETPs Approval Order.
\31\ Specifically, the proposed index options would allow
investors in Spot Bitcoin ETPs to carry the proposed index options
in the same account subject to the same margin regime that applies
to the asset through which they take long exposure to Bitcoin. See
letter from Phlx dated March 17, 2025, page 3, footnote 13,
available at <a href="https://www.sec.gov/comments/sr-phlx-2025-08/srphlx202508-581995-1674542.pdf">https://www.sec.gov/comments/sr-phlx-2025-08/srphlx202508-581995-1674542.pdf</a>.

---------------------------------------------------------------------------

[[Page 46715]]

Section 2(a)(1)(A) of the Commodity Exchange Act (the ``CEA'') \32\
provides the Commodity Futures Trading Commission (the ``CFTC'') with
exclusive jurisdiction over, among other things, options on commodities
traded on a designated contract market, swap execution facility, or
other board of trade, exchange, or market. Section 4(c)(1) of the CEA
\33\ authorizes the CFTC, after notice and opportunity for hearing, to
exempt any agreement, contract, or transaction from the requirements of
any provision of the CEA, subject to certain determinations by the
CFTC.\34\ Section 717 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the ``Dodd-Frank Act'') \35\ amended the Exchange Act
and the CEA to establish a framework designed to address the trading of
novel derivative products. Among other things, the Dodd-Frank Act added
Section 3B to the Exchange Act.\36\ Section 3B(a) \37\ provides that
any agreement, contract, or transaction, or class thereof, that is
exempted by the CFTC pursuant to Section 4(c)(1) of the CEA \38\ with
the condition that the SEC exercise concurrent jurisdiction over such
agreement, contract, or transaction (or class thereof) shall be deemed
a security for purposes of the securities laws. Further, Section 3B(b)
\39\ states:
---------------------------------------------------------------------------

\32\ See 7 U.S.C. 4.
\33\ See 7 U.S.C. 6(c)(1)).
\34\ Under Section 4(c)(2) of the CEA, the CFTC may not grant an
exemption under Section 4(c)(1) unless the CFTC determines that: (i)
the requirement should not be applied to the agreement, contract, or
transaction for which the exemption is sought; (ii) the exemption
would be consistent with the public interest and the purposes of the
CEA; (iii) the agreement, contract, or transaction at issue will be
entered into solely between appropriate persons (as set forth in
Section 4(c)(3) of the CEA); and (iv) the agreement, contract, or
transaction at issue will not have a material adverse effect on the
ability of the CFTC or exchange to discharge its regulatory or self-
regulatory duties under the CEA. The Exchange notes that, in
enacting section 4(c) of the CEA, Congress stated that its goal ``is
to give the Commission a means of providing certainty and stability
to existing and emerging markets so that financial innovation and
market development can proceed in an effective and competitive
manner.'' See House Conf. Report No. 102-978, 1992 U.S.C.C.A.N.
3179, 3213.
\35\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Sec. 717, 12 U.S.C. 5481.
\36\ See 15 U.S.C. 78c-2.
\37\ See id.
\38\ See 7 U.S.C. 6(c)(1)).
\39\ See 15 U.S.C. 78c-2.

With respect to any agreement, contract, or transaction (or
class thereof) that is exempted by the Commodity Futures Trading
Commission pursuant to section 4(c)(1) of the Commodity Exchange Act
(7 U.S.C. 6(c)(1)) with the condition that the Commission exercise
concurrent jurisdiction over such agreement, contract, or
transaction (or class thereof), references in the securities laws to
the `purchase' or `sale' of a security shall be deemed to include
the execution, termination (prior to its scheduled maturity date),
assignment, exchange, or similar transfer or conveyance of, or
extinguishing of rights or obligations under such agreement,
---------------------------------------------------------------------------
contract, or transaction, as the context may require.

The Exchange believes that the index options are a novel derivative
product that should be permitted to trade on a national securities
exchange pursuant to the Section 717 of the Dodd-Frank Act. The
Exchange believes that the provisions of the Dodd-Franck Act covering
novel derivative products provides the SEC and the CFTC with extensive
freedom to craft solutions to allow products such as Phlx's index
options to come to market.\40\ To list and trade the proposed Nasdaq
Bitcoin Index Options, the Exchange will seek exemptive relief from the
CFTC pursuant to Section 4(c)(1) of the CEA \41\ from any applicable
requirements of the CEA and the CFTC's rules and regulations, including
the requirements applicable to a Designated Contract Market under
Section 5 of the CEA \42\ and Part 38 \43\ of the CFTC's regulations.
Further, the Exchange will seek exemptive relief to allow the proposed
Nasdaq Bitcoin Index Options to clear through The Options Clearing
Corporation (``OCC'') in its capacity as a clearing agency registered
with the SEC pursuant to Section 17A of the Act.\44\ The Exchange
acknowledges that it will not be permitted to list and trade the
proposed Nasdaq Bitcoin Index Options unless and until the CFTC grants
all necessary exemptive relief pursuant to Section 4(c)(1) of the CEA
\45\ from the requirements of the CEA and the rules and regulations
thereunder, with the condition that the SEC exercise concurrent
jurisdiction with the CFTC over the proposed Nasdaq Bitcoin Index
Options, as provided under Section 3B of the Exchange Act.\46\ In
addition, the Exchange acknowledges that it will not be permitted to
list and trade the proposed Nasdaq Bitcoin Index options until the CFTC
issues exemptive relief to allow OCC to clear the proposed options in
its capacity as a clearing agency registered with the SEC pursuant to
Section 17A of the Exchange Act.\47\ Finally, the Exchange acknowledges
that it will not be permitted to list and trade the proposed Nasdaq
Bitcoin Index Options until the OCC receives approval to update The
Characteristics and Risks of Standardized Options (the ``Options
Disclosure Document'' or ``ODD'') to reflect the risks attendant to
trading Nasdaq Bitcoin Index Options.
---------------------------------------------------------------------------

\40\ Of note, the CFTC and SEC entered into an MOU in March 2008
to address novel derivatives products that ``may reflect elements of
both securities and commodity futures or options, and may impact the
regulatory mission of each agency.'' See CFTC & SEC, Memorandum of
Understanding between the U.S. Securities and Exchange Commission
and the U.S. Commodity Futures Trading Commission Regarding
Coordination in Areas of Common Regulatory Interest (2008). In that
timeframe, the CFTC granted an exemption pursuant to CEA section
4(c) to permit options on the ETF shares to be traded on national
securities exchanges as options on securities and futures on such
ETF shares to be traded on exchanges as security futures. See, e.g.,
SPDR Exemption Order, 73 FR 31,981; CFTC Order Exempting the Trading
and Clearing of Certain Products Related to SPDR Gold Trust Shares,
73 FR 21,917 (proposed Apr. 28, 2008) (permitting options on SPDR
Gold Trust Shares to be listed by securities exchanges and cleared
by Options Clearing Corporation as options on securities).
\41\ See 7 U.S.C. 6(c)(1).
\42\ See 7 U.S.C. 7.
\43\ See 17 CFR part 38.
\44\ See 15 U.S.C. 78q-1.
\45\ See 7 U.S.C. 6(c)(1).
\46\ See 15 U.S.C. 78c-2.
\47\ See 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

Pursuant to Section 717(b) of Dodd-Frank, the proposed Nasdaq
Bitcoin Index Options would be deemed a security permitted to trade on
Phlx, a self-regulatory organization regulated by the SEC.
As proposed, Phlx's index option would transact on an SEC-regulated
exchange, therefore, the SEC's jurisdiction would not be superseded or
limited with respect to prosecuting fraud and manipulation relating to
the proposed index options which would be transacted on Phlx. If the
proposed Nasdaq Bitcoin Index Options were exempted pursuant to Section
4(c)(1) of the CEA, the CFTC would retain enforcement jurisdiction
relating to the sale of the commodity, which jurisdiction would be
concurrent with the SEC's enforcement jurisdiction.
Phlx will not list the Nasdaq Bitcoin Index Options until such time
as it obtains an exemption from the CFTC pursuant to Section 4(c)(1) of
the CEA \48\ with the condition that the Commission exercise concurrent
jurisdiction over such agreement, contract, or transaction (or class
thereof) and that it shall be deemed a security for purposes of the
securities laws. Further, Phlx shall not list the Nasdaq Bitcoin Index
Options until all conditions noted in the approval of the application
pursuant to

[[Page 46716]]

Section 4(c)(1) of the CEA have been satisfied. Finally, the Exchange
would not list the Nasdaq Bitcoin Index Options until such time as OCC
has received approval to update the ODD to reflect the risks attendant
to trading Nasdaq Bitcoin Index Options.
---------------------------------------------------------------------------

\48\ Phlx will make an application for an exemption with the
CFTC pursuant to Section 4(c)(1) of the CEA requesting an exemption
from the regulatory requirements under the CEA applicable to a
Designated Contract Market pursuant to Section 5 of the CEA (7
U.S.C. 7) and Part 38 (17 CFR part 38) of the CFTC's regulations to
list and trade Nasdaq Bitcoin Index Options. Further, the Exchange
would seek exemptive relief so that the Nasdaq Bitcoin Index Options
would clear through OCC in its capacity as a clearing agency
registered with the SEC pursuant to Section 17A of the Act.
---------------------------------------------------------------------------

Amendments to Exchange Rules
The proposal is designed to ensure that Nasdaq Bitcoin Index
Options are listed and traded under the same terms that apply to other
index options that are currently traded on the Exchange. The Exchange
proposes to create a new Options 4D, titled ``Nasdaq Bitcoin Index
Options,'' with rules that would apply specifically to the listing and
trading of Nasdaq Bitcoin Index Options.
Applicability
The proposed Options 4D Rules would be applicable to Nasdaq Bitcoin
Index Options. All Options Rules shall apply to Nasdaq Bitcoin Index
Options, in addition to the Options 4D Rules, however where the Options
4D Rules disagree with another Options Rule not within Options 4D, a
conflict shall be resolved in favor of the Options 4D Rule as it
applies to Nasdaq Bitcoin Index Options.\49\
---------------------------------------------------------------------------

\49\ See proposed Options 4D, Section 1.
---------------------------------------------------------------------------

Definitions
The Exchange proposes to define certain terms for the trading of
Nasdaq Bitcoin Index Options in proposed Options 4D, Section 2, titled
``Definitions.'' The Exchange proposes to define ``aggregate exercise
price,'' ``CME CF Bitcoin Real Time Index (``BRTI''),'' ``CME CF
Cryptocurrency Reference Rate--New York Variant (``BRRNY''),'' ``CME CF
Cryptocurrency Pricing Products Oversight Committee,'' ``Constituent
Exchange,'' ``current index value,'' ``exercise price,'' ``European-
style index option,'' ``final settlement value,'' ``index multiplier,''
``Nasdaq Bitcoin Index,'' ``P.M-settled Index Options,'' ``reporting
authority,'' and ``underlying.'' The proposed definitions are as
follows:

[ssquf] The term ``aggregate exercise price'' shall mean the
exercise price of the option contract times the index multiplier.
[ssquf] The term ``CME CF Bitcoin Real Time Index (``BRTI'')''
shall mean a once a second benchmark index price for Bitcoin that
aggregates order data from Bitcoin-USD markets operated by
Constituent Exchanges.
[ssquf] The term ``CME CF Cryptocurrency Reference Rate--New
York Variant (``BRRNY'')'' shall mean the once a day benchmark index
price for Bitcoin that aggregates trade data from Constituent
Exchanges.
[ssquf] The term ``CME CF Cryptocurrency Pricing Products
Oversight Committee'' or ``Oversight Committee'' shall mean the
committee established jointly by Crypto Facilities Ltd. or ``CF''
and Chicago Mercantile Exchange Inc. or ``CME'' to protect the
integrity of the methodology and calculation process of the BRTI and
the BRRNY and to address potential conflicts of interest. The role
of the Oversight Committee is to provide an oversight function to
review and provide challenge on all aspects of the methodology and
calculation process and provide effective oversight of CF as the
administrator of the BRTI and BRRNY.
[ssquf] The term ``Constituent Exchange'' shall mean the
cryptocurrency trading venues approved by the CME CF Cryptocurrency
Pricing Products Oversight Committee to serve as pricing source for
the calculation of the BRTI and BRRNY.
[ssquf] The term ``current index value'' shall mean the
aggregated last reported sale price of each Constituent Exchange
comprising the BRTI divided by a factor of one hundred (100).
[ssquf] The term ``exercise price'' shall mean the specific
price at which the current index value may be purchased in the case
of a call or sold in the case of a put upon the exercise of the
option.
[ssquf] The term ``European-style index option'' shall mean an
option on an industry or market index that can be exercised only on
the business day of expiration, or, in the case of an option
contract expiring on a day that is not a business day, on the last
business day prior to the day it expires.
[ssquf] The term ``final settlement value'' shall be calculated
as described at Options 4D, Section 8.
[ssquf] The term ``index multiplier'' shall mean the amount by
which the current index value is to be multiplied to arrive at the
value required to be delivered to the holder of a call or by the
holder of a put upon valid exercise of the contract. The index
multiplier shall be $100.
[ssquf] The term ``Nasdaq Bitcoin Index'' for purposes of the
Options 4D rules shall mean the BRTI divided by a factor of one
hundred. The settlement value will be based on the BRRNY divided by
a factor of one hundred.
[ssquf] The term ``P.M-settled Index Options'' shall mean an
index options where the last day of trading shall be the business
day of expiration, or, in the case of an option contract expiring on
a day that is not a business day, on the last business day before
its expiration date.
[ssquf] The term ``reporting authority'' shall mean the
institution or reporting service designated by the Exchange as the
official source for (1) calculating the level of the index and (2)
reporting such level. The ``reporting authority'' for the BRTI,
BRRNY, and the BRRNY--NOS ``Nasdaq Options Settlement'' is CF
Benchmarks.
[ssquf] The term ``underlying'' shall mean the Nasdaq Bitcoin
Index.
Trading Sessions
Proposed Options 4D, Section 3, titled ``Trading Sessions,'' notes
that Nasdaq Bitcoin Index Options may be effected on the Exchange
between the hours of 9:30 a.m. (Eastern time) and 4:15 p.m. (Eastern
time), except that on the last trading day, transactions in expiring in
Nasdaq Bitcoin Index Options may be effected on the Exchange between
the hours of 9:30 a.m. (Eastern time) and 4:00 p.m. (Eastern time). As
is the case for all index options, General 3, Rule 1030 governs the
days the Exchange will be open for business.\50\ These hours are
consistent with trading hours for index options listed on Phlx.
---------------------------------------------------------------------------

\50\ See proposed Options 4D, Section 3(a).
---------------------------------------------------------------------------

Designation of an Index
Unlike other index options, Nasdaq Bitcoin Index Options need not
meet the requirements of Options 4, Section 3 or Options 4A, Section
3.\51\ The Exchange designates Nasdaq Bitcoin Index as a narrow based
index.
---------------------------------------------------------------------------

\51\ See proposed Options 4D, Section 4.
---------------------------------------------------------------------------

Minimum Increments
As proposed, Nasdaq Bitcoin Index Options would have a minimum
increment of $0.01 for all series.\52\ Nasdaq Bitcoin Index Options
would be quoted and traded in U.S. dollars.\53\
---------------------------------------------------------------------------

\52\ See proposed Supplementary Material .06 to Options 3,
Section 3 and proposed Options 4D, Section 5.
\53\ Phlx proposed Options 4D, Section 7(a)(1) titled ``Meaning
of Premium Bids and Offers,'' provides that bids and offers shall be
expressed in terms of dollars and cents per unit of the underlying
index, which is the BRTI divided by a factor of one hundred (100).
---------------------------------------------------------------------------

Position and Exercise Limits
The Exchange proposes to state at proposed Options 4D, Section 6(a)
that the Nasdaq Bitcoin Index Options shall be subject to a position
limit of 24,000 contracts. Today, options on the Cboe Exchange, Inc.
(``Cboe'') Bitcoin U.S. ETF Index (``CBTX'') and the Mini-Cboe Bitcoin
U.S. ETF Index (``MBTX'') have position limits of 24,000 contracts.
Today, CBTX is trading 2,660.00 as of September 23, 2025. CBTX notional
is $266,000 (index price * $100) as of September 23, 2025. The Nasdaq
Bitcoin Index has a notional value of $112,444.28 as of September 23,
2025. Therefore, the proposed 24,000 position and exercise limits for
Nasdaq Bitcoin Index Options are appropriate because the limits
represent less than half of the notional value of CBTX.
With respect to aggregation, the Exchange proposes at Options 4D,
Section 6(c) that Nasdaq Bitcoin Index Options contracts shall not be
aggregated with any other options contracts. Positions in Short Term
Option Series, Monthly Options Series, and Quarterly Options Series
shall be aggregated with positions in options contracts in Nasdaq
Bitcoin Index and

[[Page 46717]]

shall be subject to the overall position limit.
The Exchange proposes reporting requirements at proposed Options
4D, Section 6(d) which provide that each member or member organization
that maintains a position on the same side of the market in excess of
100,000 contracts for its own account or for the account of a customer
in excess of 100,000 contracts for its own account or for the account
of a customer in Nasdaq Bitcoin Index Options, would be required to
file a report with the Exchange that includes, but is not limited to,
data related to the option positions, whether such positions are hedged
and if applicable, a description of the hedge and information
concerning collateral used to carry the positions. Market Makers would
be exempt from this reporting requirement. These reporting requirements
are applicable to all other index options.\54\
---------------------------------------------------------------------------

\54\ See Phlx Options 4A, Section 6(c).
---------------------------------------------------------------------------

Finally, as noted in proposed Options 4D, Section 6(e), exercise
limits for Nasdaq Bitcoin Index Options shall be equivalent to the
position limits described in Options 4D, Section 6.
Terms of Index Options Contracts
Pursuant to proposed Options 4D, Section 7(a)(1), bids and offers
shall be expressed in terms of dollars and cents per unit of the
underlying index which is the Nasdaq Bitcoin Index.
Pursuant to proposed Options 4D, Section 7(a)(2), the Exchange
shall determine fixed-point intervals of exercise prices for call and
put options.
As proposed in Options 4D, Section 7(a)(3), strike price intervals
of no less than $2.50 are generally permitted for Nasdaq Bitcoin Index
Options if the strike price is less than $200. This is consistent with
how other index options trade on Phlx. Further, the Exchange may also
determine to list strike prices at $1 or greater, subject to certain
conditions. The Exchange may list series at $1 or greater strike price
intervals for Nasdaq Bitcoin Index Options and will list at least two
strike prices above and two strike prices below the current value of
the Nasdaq Bitcoin Index Options at about the time a series is opened
for trading on the Exchange. The Exchange shall list strike prices for
Nasdaq Bitcoin Index Options that are within 5 points from the closing
value of the Nasdaq Bitcoin Index on the preceding day.\55\ This is
consistent with how other index options trade on Phlx.
---------------------------------------------------------------------------

\55\ See proposed Options 4D, Section 7(a)(3)(A).
---------------------------------------------------------------------------

Additional series of the same class of Nasdaq Bitcoin Index Options
may be opened for trading on the Exchange when deemed necessary to
maintain an orderly market, to meet customer demand or when the Nasdaq
Bitcoin Index moves substantially from the initial exercise price or
prices. To the extent that any additional strike prices are listed by
the Exchange, such additional strike prices shall be within thirty
percent (30%) above or below the closing value of Nasdaq Bitcoin Index
Options. The Exchange may also open additional strike prices that are
more than 30% above or below the current Nasdaq Bitcoin Index value
divided by a factor of one hundred (100) provided that demonstrated
customer interest exists for such series, as expressed by
institutional, corporate or individual customers or their brokers.
Market-Makers trading for their own account shall not be considered
when determining customer interest under this provision. In addition to
the initial listed series, the Exchange may list up to sixty (60)
additional series per expiration month for each series in Nasdaq
Bitcoin Index Options.\56\ This is consistent with how other index
options trade on Phlx.
---------------------------------------------------------------------------

\56\ See proposed Options 4D, Section 7(a)(3)(B).
---------------------------------------------------------------------------

The Exchange shall not list LEAPS on Nasdaq Bitcoin Index Options
at intervals less than $5.\57\ This is consistent with how other index
options trade on Phlx.
---------------------------------------------------------------------------

\57\ See proposed Options 4D, Section 7(a)(3)(C).
---------------------------------------------------------------------------

With respect to delisting, Nasdaq Bitcoin Index Options added
pursuant Options 4D, Section 7(a)(3)(A) and (B) will be reviewed by the
Exchange on a monthly basis. The Exchange will review series that are
outside a range of five (5) strikes above and five (5) strikes below
the current value of the Nasdaq Bitcoin Index divided by a factor of
one hundred (100) and delist series with no open interest in both the
put and the call series having a: (i) strike higher than the highest
strike price with open interest in the put and/or call series for a
given expiration month; and (ii) strike lower than the lowest strike
price with open interest in the put and/or call series for a given
expiration month.\58\ This is consistent with how other index options
trade on Phlx.
---------------------------------------------------------------------------

\58\ See proposed Options 4D, Section 7(a)(3)(D).
---------------------------------------------------------------------------

Notwithstanding this delisting policy, customer requests to add
strikes and/or maintain strikes in Nasdaq Bitcoin Index Options series
eligible for delisting shall be granted.\59\ If the Exchange identifies
series for delisting, the Exchange shall notify other options exchanges
with similar delisting policies regarding eligible series for
delisting, and shall work with such other exchanges to develop a
uniform list of series to be delisted, so as to ensure uniform series
delisting of multiply listed Nasdaq Bitcoin Index Options.\60\ This is
consistent with how other index options trade on Phlx.
---------------------------------------------------------------------------

\59\ See proposed Options 4D, Section 7(a)(3)(D)(i).
\60\ See proposed Options 4D, Section 7(a)(3)(D)(ii).
---------------------------------------------------------------------------

Notwithstanding any other provision regarding strike prices in
Options 4D, Section 6, non-Short Term Options that are on Nasdaq
Bitcoin Index Options that have been selected to participate in the
Short Term Option Series Program (referred to as a ``Related non-Short
Term Option series'') shall be opened during the month prior to
expiration of such Related non-Short Term Option series in the same
manner as permitted in Supplementary .01 of Options 4D, Section 7 and
in the same strike price intervals that are permitted in Supplementary
.01 of Options 4D, Section 7.\61\ This is consistent with how other
index options trade on Phlx.
---------------------------------------------------------------------------

\61\ See proposed Options 4D, Section 7(a)(3)(E).
---------------------------------------------------------------------------

The Exchange proposes to state that Nasdaq Bitcoin Index Options
contracts may expire at three (3) month intervals, in consecutive weeks
or in consecutive months. The Exchange may list: (i) up to six (6)
standard monthly expirations at any one time in a class of Nasdaq
Bitcoin Index Options, but will not list Nasdaq Bitcoin Index Options
that expire more than twelve (12) months out.\62\ This is consistent
with how other index options trade on Phlx.
---------------------------------------------------------------------------

\62\ See proposed Options 4D, Section 7(a)(4).
---------------------------------------------------------------------------

Nasdaq Bitcoin Index Options would be European-style index options
\63\ and P.M.-settled.\64\
---------------------------------------------------------------------------

\63\ See proposed Options 4D, Section 7(a)(5).
\64\ See proposed Options 4D, Section 7(a)(6).
---------------------------------------------------------------------------

The Exchange believes that market participants, and in particular,
retail investors, prefer P.M.-settled index options. P.M.-settlement is
preferred by retail investors as it allows market participants to hedge
their exposure for the full week. A.M.-settled options by contrast are
based on opening prices on the day of expiration and therefore stop
trading on the day prior, leaving residual risk on the day of
expiration. P.M.-settlement is needed to garner retail investor support
for this product.
After a particular class of Nasdaq Bitcoin Index Options has been
approved for listing and trading on the Exchange, the Exchange shall
from time to time open for trading series of options therein. Within
each approved class of Nasdaq Bitcoin Index Options, the Exchange shall
open for trading a minimum of one expiration month and series and may
also open for trading series of options having not less than twelve and
up to 60 months to

[[Page 46718]]

expiration (``Long-Term Index Options Series'').\65\
---------------------------------------------------------------------------

\65\ See proposed Options 4D, Section 7(b).
---------------------------------------------------------------------------

Prior to the opening of trading in any series of Nasdaq Bitcoin
Index Options, the Exchange shall fix the expiration month and exercise
price of option contracts included in each such series.\66\
---------------------------------------------------------------------------

\66\ See proposed Options 4D, Section 7(b).
---------------------------------------------------------------------------

Additional series of Nasdaq Bitcoin Index Options of the same class
may be opened for trading on the Exchange when the Exchange deems it
necessary to maintain an orderly market, to meet customer demand or
when the market price of the Nasdaq Bitcoin Index moves more than five
strike prices from the initial exercise price or prices. The opening of
a new series of options shall not affect the series of options of the
same class previously opened. New series of Nasdaq Bitcoin Index
Options may be added until the beginning of the month, in which the
options contract will expire. Due to unusual market conditions, the
Exchange, in its discretion, may add a new series of Nasdaq Bitcoin
Index Options until the fourth business day prior to the business day
of expiration, or, in the case of Nasdaq Bitcoin Index Options contract
expiring on a day that is not a business day, up to the fifth business
day prior to expiration.\67\ This is consistent with how other index
options trade on Phlx.
---------------------------------------------------------------------------

\67\ See proposed Options 4D, Section 7(b)(1).
---------------------------------------------------------------------------

The Exchange would also list Long-Term Option Series or ``LEAPs.''
Similar to index options at Options 4A, Section 12(b)(2), the Exchange
proposes that it may list LEAPs on Nasdaq Bitcoin Index Options that
expire from twelve (12) to sixty (60) months from the date of issuance.
There may be up to ten (10) expiration months, none further out than
sixty (60) months. Strike price intervals and continuity Rules shall
not apply to such options series until the time to expiration is less
than twelve (12) months. Bid/ask differentials for LEAPs are specified
within Options 2, Section 4(b)(4)(i)(A).\68\ Also similar to index
options at Options 4A, Section 12(b)(1), when new Nasdaq Bitcoin Index
Options LEAPs are listed, such series would be opened for trading
either when there is buying or selling interest, or forty (40) minutes
prior to the close, whichever occurs first. No quotations would be
posted for such options series until they are opened for trading.\69\
This is consistent with how other index options trade on Phlx.
---------------------------------------------------------------------------

\68\ See proposed Options 4D, Section 7(b)(2)(a).
\69\ See proposed Options 4D, Section 7(b)(2)(a)(i).
---------------------------------------------------------------------------

Similar to index options at Options 4A, Section 12(d), the reported
level of the Nasdaq Bitcoin Index that is calculated by the reporting
authority, CF Benchmarks, for purposes of determining the current index
value at the expiration will be disseminated as the Nasdaq Bitcoin
Index Options.\70\
---------------------------------------------------------------------------

\70\ See proposed Options 4D, Section 7(c).
---------------------------------------------------------------------------

The Exchange proposes to note in Supplementary .01 to Options 4D,
Section 7 that the Short Term Options Series Program listing rules at
Options 4A, Section 12(b)(4) shall be applicable to Nasdaq Bitcoin
Index Options. The Monthly Options Series Program at Options 4A,
Section 12(b)(5) shall be applicable to Nasdaq Bitcoin Index Options.
Finally, the Quarterly Options Series Program at Options 4A, Section
12(b)(3) shall be applicable to Nasdaq Bitcoin Index Options.
The Exchange proposes to describe the final settlement value of
Nasdaq Bitcoin Index Options in proposed Options 4D, Section 8. Nasdaq
Bitcoin Index Options would be settled in U.S. dollars on the business
day following expiration. Cash settlement would be equal to the
difference between the final settlement value and the strike price of
the contract multiplied by an index multiplier of $100.\71\
---------------------------------------------------------------------------

\71\ See proposed Options 4D, Section 8(a).
---------------------------------------------------------------------------

The Nasdaq Bitcoin Index Options final settlement value would be
the BRRNY on the expiration date (usually a Friday). BRRNY is
calculated based on the Relevant Transactions. BRRNY will be divided by
a factor of one hundred (100) and published as BRRNY--NOS (Nasdaq
Options Settlement). BRRNY is calculated daily based on the Relevant
Transactions and is calculated on the expiration date for purposes of
final settlement. Relevant Transactions include those that trade
Bitcoin versus U.S. Dollars on a Constituent Exchange that occur from
15:00 to 16:00 New York Time that is calculated and reported by the
reporting authority. The final settlement value is determined by the
aggregated last reported sale price of each Constituent Exchange.
Specifically, the final settlement is calculated by combining all
Relevant Transactions from each Constituent Exchange on a joint list
and recording the trade price and size for each transaction. That list
is partitioned into a number of equally-sized time intervals, of 5
minutes. For each partition separately, the volume-weighted median
trade price is calculated from the trade prices and sizes of all
Relevant Transactions across all Constituent Exchanges. The BRRNY is
the equally weighted average of the volume-weighted medians of all
partitions. In the event that the underlying BRTI is not open for
trading on the expiration date, the value of the Nasdaq Bitcoin Index
shall be the last reported sale price prior to the expiration date.\72\
---------------------------------------------------------------------------

\72\ See proposed Options 4D, Section 8(b).
---------------------------------------------------------------------------

Settlement is calculated by combining all Relevant Transactions on
a joint list and recording the trade price and size for each
transaction. That list is partitioned into a number of equally-sized
time intervals, of 5 minutes. For each partition \73\ separately, the
volume-weighted median \74\ trade price is calculated from the trade
prices and sizes of all Relevant Transactions, i.e. across all
Constituent Exchanges.\75\ A volume-weighted median differs from a
standard median in that a weighting factor, in this case trade size, is
factored into the calculation.\76\ For each partition k the volume-
weighted median trade prices WM across all Relevant Transactions is
calculated as:
---------------------------------------------------------------------------

\73\ CME CF Cryptocurrency Reference Rates are calculated as the
equally-weighted average of the intermediate calculation steps for
the k partitions. A single large trade or cluster of trades
occurring in any one partition will therefore only have a limited
effect on CME CF Cryptocurrency Reference Rates. See <a href="https://www.cfbenchmarks.com/data/indices/BRRNY">https://www.cfbenchmarks.com/data/indices/BRRNY</a>.
\74\ Spot prices have historically varied considerably across
trading venues, in particular during times of high volatility. The
use of medians to calculate the weighted median trade price for each
partition (as opposed to averages) greatly reduces CME CF
Cryptocurrency Reference Rates' susceptibility to price extremes on
one or more Constituent Exchanges. See <a href="https://www.cfbenchmarks.com/data/indices/BRRNY">https://www.cfbenchmarks.com/data/indices/BRRNY</a>. Trading is driven to some extent by automated
algorithms that may execute a high number of small trades. The use
of volume-weighted medians to calculate the weighted median trade
price for each partition (as opposed to simple medians) assures that
CME CF Cryptocurrency Reference Rates appropriately reflect large
trades and that whether an order is executed in parts or in full has
no effect on calculation results.
\75\ Partitions are equally-weighted (as opposed to volume-
weighted) to facilitate replication of CME CF Cryptocurrency
Reference Rates through trading on Constituent Exchanges. Assuming k
partitions, a trader aiming to transact Y units of the relevant
cryptocurrency at the CME CF Cryptocurrency Reference Rates can do
so with little tracking error by transacting Y/K units of the
cryptocurrency during each partition. See <a href="https://www.cfbenchmarks.com/data/indices/BRRNY">https://www.cfbenchmarks.com/data/indices/BRRNY</a>.
\76\ See proposed Options 4D, Section 8(b).

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[[Page 46719]]

[GRAPHIC] [TIFF OMITTED] TN29SE25.010

The BRRNY is then given by the equally weighted average of the
volume-weighted medians of all partitions.\77\ The CME CF
Cryptocurrency Reference Rate as of the effective time T,CCRR, is then
given by:
---------------------------------------------------------------------------

\77\ See id.
[GRAPHIC] [TIFF OMITTED] TN29SE25.011

Delayed data and missing data are subject to certain rules. Any
Relevant Transaction for a given Calculation Day that is not available
from a Constituent Exchange's API by the Retrieval Time is disregarded
in the calculation of the CME CF Cryptocurrency Reference Rate for that
Calculation Day. If no Relevant Transaction occurs on a Constituent
Exchange on a given Calculation Day or one or more Relevant
Transactions occur but for any reason cannot be retrieved by the
Calculation Agent, the Constituent Exchange is disregarded in the
calculation of the CME CF Cryptocurrency Reference Rate for that
Calculation Day. If, for any of the K partitions of the TWAP Period in
the above Eq. 2, no Relevant Transaction occurs on any Constituent
Exchange or one or more Relevant Transactions occur but for any reason
cannot be retrieved by the Calculation Agent, the partition remains
empty and will be disregarded in the calculation of the CME CF
Cryptocurrency Reference Rate for that Calculation Day. The denominator
in Eq. 2 above will then be decremented by the number of empty
partitions. If one or more Relevant Transactions occur but for any
reason no Relevant Transaction can be retrieved from any Constituent
Exchange API by the Calculation Agent, a CME CF Cryptocurrency
Reference Rate calculation failure occurs for that Calculation Day. All
Relevant Transactions retrieved by CF Benchmarks for a given
calculation day are subject to an automated screening for erroneous
data.\78\
---------------------------------------------------------------------------

\78\ See <a href="https://docs.cfbenchmarks.com/CME%20CF%20Reference%20Rates%20Methodology.pdf">https://docs.cfbenchmarks.com/CME%20CF%20Reference%20Rates%20Methodology.pdf</a>.
---------------------------------------------------------------------------

Similar to other index options,\79\ neither the Exchange, nor any
agent of the Exchange would have any liability for damages, claims,
losses or expenses caused by any errors, omissions, or delays in
calculating or disseminating the current settlement value or the final
settlement value resulting from an act, condition, or cause beyond the
reasonable control of the Exchange including but not limited to, an act
of God; fire; flood; extraordinary weather conditions; war;
insurrection; riot; strike; accident; action of government;
communications or power failure; equipment or software malfunction; any
error, omission, or delay in the reports of transactions in one or more
underlying transactions in the BRRNY or any error, omission or delay in
the reports of the current settlement value or the closing settlement
value by the Exchange.\80\ The Exchange shall post the final settlement
value BRRNY--NOS (Nasdaq Options Settlement) on its website or
disseminate it through one or more major market data vendors.\81\
---------------------------------------------------------------------------

\79\ See Options 4A, Sections 20 and 21.
\80\ See proposed Options 4D, Section 8(c).
\81\ See proposed Options 4D, Section 8(d).
---------------------------------------------------------------------------

Today, Phlx limits its liability at Options 4A, Section 19. The
Exchange proposes to expand this limitation of the Exchange's liability
in connection with its administration of Phlx proprietary indices that
currently exists for other indexes \82\ to the Nasdaq Bitcoin Index
Options. The Exchange currently lists and trades options on a number of
proprietary indices, and new indices continue to be developed from time
to time. There is a great deal of work involved in the daily
calculation and dissemination of these indices. While much of such work
is automated, manual input is still required. Thus, the potential for
human error exists which exposes the Exchange to a risk of liability.
Potential human errors include inputting a symbol or index value
incorrectly. The Exchange's proposal promotes equitable principles of
trade, and protects investors and the public interest, by defining the
scope of the Exchange's liability, thereby putting investors on notice
that the Exchange is not liable for negligent conduct in connection
with its administration of the Nasdaq Bitcoin Index Options.
---------------------------------------------------------------------------

\82\ Phlx Options 4A, Section 19 has similar language concerning
liability that applies to multiple proprietary products that are
listed today by Phlx, See list of Phlx Sector Indexes at <a href="https://www.nasdaq.com/solutions/phlx-sector-based-index-options">https://www.nasdaq.com/solutions/phlx-sector-based-index-options</a>.
---------------------------------------------------------------------------

The Exchange proposes to adopt ``Disclaimers'' at proposed Options
4D, Section 9. As noted herein, CF Benchmarks shall be the reporting
authority for Nasdaq Bitcoin Index Options.\83\ Other options markets
provide similar disclaimers for the reporting authority.\84\ Each index
has a designated Reporting Authority, which is the institution or
reporting service designated by the Exchange as the official source for
routinely calculating the level of each respective index. The Exchange
believes that a disclaimer for a Reporting Authority promotes just and
equitable principles of trade by encouraging the Reporting Authority
for each index to develop and maintain indexes that may qualify for
options trading on the Exchange, thereby providing investors with new
investment opportunities.
---------------------------------------------------------------------------

\83\ See proposed Options 4D, Section 2(a)(13).
\84\ See Nasdaq ISE, LLC Options 4A, Section 14.
---------------------------------------------------------------------------

The Exchange proposes to provide at proposed Options 4D, Section
9(a) that the disclaimers in paragraph (b) of Options 4D, Section 9
shall apply to the reporting authority, CF Benchmarks, as

[[Page 46720]]

identified in Options 4D, Section 2(a)(13).
Further, proposed Options 4D, Section (b) provides that neither CF
Benchmarks nor any of its affiliates make any warranty, express or
implied, as to the results to be obtained by any person or entity from
the use of an index it publishes, any opening, intra-day or closing
value therefor, or any data included therein or relating thereto, in
connection with the trading of any options contract based thereon or
for any other purpose. CF Benchmarks shall obtain information for
inclusion in, or for use in the calculation of, such index from sources
it believes to be reliable, but CF Benchmarks does not guarantee the
accuracy or completeness of such index, any opening, intra-day or
closing value therefor, or any date included therein or related
thereto. CF Benchmarks hereby disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect
to such index, any opening, intra-day, or closing value therefor, any
data included therein or relating thereto, or any options contract
based thereon. CF Benchmarks shall have no liability for any damages,
claims, losses (including any indirect or consequential losses),
expenses, or delays, whether direct or indirect, foreseen or
unforeseen, suffered by any person arising out of any circumstance or
occurrence relating to the person's use of such index, any opening,
intra-day or closing value therefor, any data included therein or
relating thereto, or any options contract based thereon, or arising out
of any errors or delays in calculating or disseminating such index.
Margin
The Exchange proposes to apply margin requirements for the purchase
and sale of Nasdaq Bitcoin Index Options that are identical to those
applied for its narrow-based index options. Therefore, purchases of
puts or calls with 9 months or less until expiration must be paid for
in full. Writers of uncovered puts or calls must deposit/maintain 100%
of the option proceeds plus 20% of the underlying index value less out-
of-the-money amount, if any, to a minimum of option proceeds plus 10%
of underlying index value for calls; 10% of the put exercise price for
puts.
Regulatory Rules
The trading of Nasdaq Bitcoin Index Options would be subject to the
same rules that presently govern the trading of index options on Phlx,
including sales practice rules and trading rules. Options 10, Section
6, ``Opening of Accounts,'' is designed to protect public customer
trading and shall apply to trading in Nasdaq Bitcoin Index Options.
Specifically, Options 10, Section 6(a) prohibits members and member
organizations from accepting a customer order to purchase or write an
option, including Nasdaq Bitcoin Index Options, unless such customer's
account has been approved in writing by an Options Principal.
Additionally, Phlx Options 10, Section 8, ``Suitability of
Recommendations,'' is designed to ensure that options, including Nasdaq
Bitcoin Index Options, are only sold to customers capable of evaluating
and bearing the risks associated with trading in this instrument.
Further, Phlx Options 10, Section 9, ``Discretionary Accounts,''
permits members and member organizations to exercise discretionary
power with respect to trading options, including Nasdaq Bitcoin Index
Options, in a customer's account only if the customer has given prior
written authorization and the account has been accepted in writing by a
Registered Options Principal. Phlx Options 10, Section 9 also requires
a record to be made of every option transaction for an account in
respect to which a member or member organization or a partner, officer
or employee of a member organization is vested with any discretionary
authority, such record to include the name of the customer, the
designation, number of contracts and premium of the option contracts,
the date and time when such transaction took place and clearly
reflecting the fact that discretionary authority was exercised.
Finally, Phlx Options 10, Section 7, ``Supervision of Accounts,'' Phlx
Options 10, Section 10, ``Confirmations to Customers,'' and Phlx
Options 10, Section 13, ``Delivery of Options Disclosure Documents and
Prospectus,'' will also apply to trading in Nasdaq Bitcoin Index
Options.
The trading of Nasdaq Bitcoin Index Options will be subject to the
trading halt procedures applicable to other index options traded on the
Exchange.\85\
---------------------------------------------------------------------------

\85\ Phlx Options 4A, Section 18(c), Trading Rotations, Halts or
Reopenings.
---------------------------------------------------------------------------

The Exchange believes that all Phlx and OCC members will be able to
accommodate trading, clearance and settlement of Nasdaq Bitcoin Index
Options because these index options will trade similar to all other
index options.
Surveillance
In 2024, the Commission approved various rule changes to list and
trade Spot Bitcoin ETPs.\86\ The Commission noted in the Spot Bitcoin
ETPs Approval Order that, ``. . . one way an exchange that lists
Bitcoin-based ETF can meet the obligation under Exchange Act Section
6(b)(5) that its rules be designed to prevent fraudulent and
manipulative acts and practices is by demonstrating that the exchange
has a comprehensive surveillance-sharing agreement with a regulated
market of significant size related to the underlying or reference
Bitcoin assets. Such an agreement would assist in detecting and
deterring fraud and manipulation related to that underlying asset.''
The Commission has recognized that the ``regulated market of
significant size'' standard is not the only means for satisfying
Section 6(b)(5) of the Act, specifically providing that a listing
exchange could demonstrate that ``other means to prevent fraudulent and
manipulative acts and practices'' are sufficient to justify dispensing
with the requisite surveillance-sharing agreement.\87\ For example, in
approving the Spot Bitcoin ETPs, the Commission found that there were
``sufficient `other means' of preventing fraud and manipulation,''
including that:
---------------------------------------------------------------------------

\86\ See supra note 29.
\87\ See Securities Exchange Act Release No. 83723 (July 26,
2018), 83 FR 37579 at 37580 (August 1, 2018) (the ``Winklevoss
Order''). The Commission has also specifically noted that it ``is
not applying a `cannot be manipulated' standard; instead, the
Commission is examining whether the proposal meets the requirements
of the Exchange Act and, pursuant to its Rules of Practice, places
the burden on the listing exchange to demonstrate the validity of
its contentions and to establish that the requirements of the
Exchange Act have been met.'' See Winklevoss Order, 83 FR at 37582.

[B]ased on the record before the Commission and the improved
quality of the correlation analysis in the record, including the
Commission's own analysis, the Commission is able to conclude that
fraud or manipulation that impacts prices in spot Bitcoin markets
would likely similarly impact CME Bitcoin futures prices. And
because the CME's surveillance can assist in detecting those impacts
on CME Bitcoin futures prices, the Exchanges' comprehensive
surveillance-sharing agreement with the CME--a U.S. regulated market
whose Bitcoin futures market is consistently highly correlated to
spot Bitcoin, albeit not of ``significant size'' related to spot
Bitcoin--can be reasonably expected to assist in surveilling for
fraudulent and manipulative acts and practices in the specific
context of the [Spot Bitcoin ETPs].\88\
---------------------------------------------------------------------------

\88\ See Spot Bitcoin ETPs Approval Order 89 FR 3010 and 3011.

As described in the Spot Bitcoin ETPs Approval Order, there is
currently a regulated U.S. market with respect to spot Bitcoin, the CME
Bitcoin futures (``Bitcoin Futures'') market.\89\ In its Spot

[[Page 46721]]

Bitcoin ETPs Approval Order, the Commission found there was a high
price correlation between the underlying and the futures market.\90\
The proposed Nasdaq Bitcoin Index Options and the various Spot Bitcoin
ETPs reference the same underlying market for spot Bitcoin that trade
on spot Bitcoin trading platforms.
---------------------------------------------------------------------------

\89\ CME began offering trading in Bitcoin Futures in 2017. Each
contract represents five Bitcoin and is based on the CME CF Bitcoin
Reference Rate. The contracts trade and settle like other cash
settled commodity futures contracts.
\90\ A correlation analysis was conducted by the Commission in
analyzing the Spot Bitcoin ETP proposals. The results of the
Commission's analysis confirmed that the CME Bitcoin futures market
has been consistently highly correlated with the subset of the spot
Bitcoin market utilized in the analysis for the timeframe reviewed.
See Spot Bitcoin ETPs Approval Order at 89 FR 3010.
---------------------------------------------------------------------------

Specifically, the Exchange has a comprehensive surveillance-sharing
agreement with the CME via its common membership in ISG, which
facilitates the sharing of information that is available to the CME
through its surveillance of its markets, including its surveillance of
the Bitcoin Futures market. Similar to the Spot Bitcoin ETPs previously
approved by the SEC, Phlx's ability to obtain information regarding
trading in the Bitcoin Futures market from other markets that are
members of the ISG (specifically the CME) would assist Phlx in
detecting and deterring misconduct.
Further, the exchanges that list Spot Bitcoin ETPs comprehensively
surveil market conditions and price movements on a real time and
ongoing basis in order to detect and prevent price distortions,
including price distortions caused by manipulative efforts. Thus, the
CME's surveillance as well as Phlx's surveillance and other equity
markets that list Spot Bitcoin ETPs can reasonably be relied upon to
capture the effects on the Bitcoin Futures market and Spot Bitcoin
ETPs, as applicable, that are caused by a person attempting to
manipulate the futures ETP or Spot Bitcoin ETPs by manipulating the
price of Bitcoin futures contracts or Spot Bitcoin ETPs, whether that
attempt is made by directly trading on the Bitcoin Futures market or
Spot Bitcoin ETPs, or indirectly by trading outside of the Bitcoin
Futures market or Spot Bitcoin ETPs.
The Exchange would have an adequate surveillance program in place
for Nasdaq Bitcoin Index Options as it intends to apply the same
program procedures that apply to the Exchange's other index options
products.\91\ Index products and their respective symbols are
integrated into the Exchange's existing surveillance system
architecture and are thus subject to the relevant surveillance
processes. This is true for both surveillance system processing and
manual processes that support the Phlx's surveillance program.
Additionally, the Exchange is also a member of the ISG under the
Intermarket Surveillance Group Agreement. ISG members work together to
coordinate surveillance and investigative information sharing in the
stock and options markets. Both the Exchange and CME are members of
ISG.\92\
---------------------------------------------------------------------------

\91\ The surveillance program includes real-time patterns for
price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, pinging, phishing).
\92\ For a list of the current members and affiliate members of
ISG, see <a href="https://www.isgportal.com/">https://www.isgportal.com/</a>.
---------------------------------------------------------------------------

The Exchange, in its normal course of surveillance, will monitor
for any potential manipulation of the Nasdaq Bitcoin Index Options
settlement value according to the Exchange's current procedures. The
Exchange believes that its surveillance procedures currently in place
will allow it to adequately surveil for any potential manipulation in
the trading of Nasdaq Bitcoin Index Options.
Capacity
The Exchange represents that it has the necessary system capacity
to support additional quotations and messages that will result from the
listing and trading Nasdaq Bitcoin Index Options. Finally, the Options
Price Reporting Authority (``OPRA'') has the necessary systems capacity
to handle the additional traffic associated with the listing of Nasdaq
Bitcoin Index Options. The proposal is limited to one new class and the
additional traffic that would be generated from the introduction of
Nasdaq Bitcoin Index Options would be manageable and well within any
systems capacity capabilities.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\93\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\94\ in particular, in that it will permit trading
in Nasdaq Bitcoin Index Options pursuant to rules designed to prevent
fraudulent and manipulative acts and practices and promote just and
equitable principles of trade. In particular, the Exchange believes the
proposed rule change will further the Exchange's goal of introducing
new and innovative products to the marketplace. The Exchange believes
that listing Nasdaq Bitcoin Index Options will provide an opportunity
for investors to hedge, or speculate on, the market risk associated
with trading Bitcoin. This proposal offers market participants with
choice of product structures for Bitcoin exposure and offers a flexible
way to gain exposure to Bitcoin through transparent, regulated index
options.
---------------------------------------------------------------------------

\93\ 15 U.S.C. 78f(b).
\94\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Since January 2024, Spot Commodity ETF shares based on Bitcoin have
been listed and traded on national securities exchanges.\95\ Phlx's
proposal to list and trade Nasdaq Bitcoin Index Options would allow
market participants that hold spot Bitcoin-based ETFs to hedge or
modify their exposure on a national securities exchange, within a
single regulatory regime,\96\ thereby fostering innovation and
competition in the rapidly evolving market for digital asset
derivatives.
---------------------------------------------------------------------------

\95\ See SEC 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 (January 10, 2024), 89 FR
3008 (January 17, 2024).
\96\ Specifically, the proposed index options would allow
investors in spot Bitcoin-based ETFs to carry the proposed index
options in the same account subject to the same margin regime that
applies to the asset through which they take long exposure to
Bitcoin. See letter from Phlx, dated March 17, 2025, page 3,
footnote 13, available at <a href="https://www.sec.gov/comments/sr-phlx-2025-08/srphlx202508-581995-1674542.pdf">https://www.sec.gov/comments/sr-phlx-2025-08/srphlx202508-581995-1674542.pdf</a>.
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Section 2(a)(1)(A) of the CEA \97\ provides the CFTC with exclusive
jurisdiction over, among other things, options on commodities traded on
a designated contract market, swap execution facility, or other board
of trade, exchange, or market. Section 4(c)(1) of the CEA \98\
authorizes the CFTC, after notice and opportunity for hearing, to
exempt any agreement, contract, or transaction from the requirements of
any provision of the CEA, subject to certain determinations by the
CFTC.\99\ Section 717 of the Dodd-

[[Page 46722]]

Frank Act \100\ amended the Exchange Act and the CEA to establish a
framework designed to address the trading of novel derivative products.
Among other things, the Dodd-Frank Act added Section 3B to the Exchange
Act.\101\ Section 3B(a) \102\ provides that any agreement, contract, or
transaction, or class thereof, that is exempted by the CFTC pursuant to
Section 4(c)(1) of the CEA \103\ with the condition that the SEC
exercise concurrent jurisdiction over such agreement, contract, or
transaction (or class thereof) shall be deemed a security for purposes
of the securities laws. Further, Section 3B(b) \104\ states:
---------------------------------------------------------------------------

\97\ See 7 U.S.C. 4.
\98\ See 7 U.S.C. 6(c)(1)).
\99\ Under Section 4(c)(2) of the CEA, the CFTC may not grant an
exemption under Section 4(c)(1) unless the CFTC determines that: (i)
the requirement should not be applied to the agreement, contract, or
transaction for which the exemption is sought; (ii) the exemption
would be consistent with the public interest and the purposes of the
CEA; (iii) the agreement, contract, or transaction at issue will be
entered into solely between appropriate persons (as set forth in
Section 4(c)(3) of the CEA); and (iv) the agreement, contract, or
transaction at issue will not have a material adverse effect on the
ability of the CFTC or exchange to discharge its regulatory or self-
regulatory duties under the CEA. The Exchange notes that, in
enacting section 4(c) of the CEA, Congress stated that its goal ``is
to give the Commission a means of providing certainty and stability
to existing and emerging markets so that financial innovation and
market development can proceed in an effective and competitive
manner.'' See House Conf. Report No. 102-978, 1992 U.S.C.C.A.N.
3179, 3213.
\100\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Sec. 717, 12 U.S.C. 5481.
\101\ See 15 U.S.C. 78c-2.
\102\ See id.
\103\ See 7 U.S.C. 6(c)(1)).
\104\ See 15 U.S.C. 78c-2.

Phlx's proposal is a novel derivative product that should be
permitted to trade on a national securities exchange pursuant to the
Section 717 of the Dodd-Frank Act. The Exchange believes that the
provisions of the Dodd-Franck Act covering novel derivative products
provides the SEC and the CFTC with extensive freedom to craft solutions
to allow products such as Phlx's index options to come to market.\105\
To list and trade the proposed Nasdaq Bitcoin Index Options, the
Exchange will seek exemptive relief from the CFTC pursuant to Section
4(c)(1) of the CEA \106\ from any applicable requirements of the CEA
and the CFTC's rules and regulations, including the requirements
applicable to a Designated Contract Market under Section 5 of the CEA
\107\ and part 38 \108\ of the CFTC's regulations. Further, the
Exchange will seek exemptive relief to allow the proposed Nasdaq
Bitcoin Index Options to clear through OCC in its capacity as a
clearing agency registered with the SEC pursuant to Section 17A of the
Act.\109\
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\105\ Of note, the CFTC and SEC entered into an MOU in March
2008 to address novel derivatives products that ``may reflect
elements of both securities and commodity futures or options, and
may impact the regulatory mission of each agency.'' See CFTC & SEC,
Memorandum of Understanding between the U.S. Securities and Exchange
Commission and the U.S. Commodity Futures Trading Commission
Regarding Coordination in Areas of Common Regulatory Interest
(2008). In that timeframe, the CFTC granted an exemption pursuant to
CEA section 4(c) to permit options on the ETF shares to be traded on
national securities exchanges as options on securities and futures
on such ETF shares to be traded on exchanges as security futures.
See, e.g., SPDR Exemption Order, 73 FR 31,981; CFTC Order Exempting
the Trading and Clearing of Certain Products Related to SPDR Gold
Trust Shares, 73 FR 21,917 (proposed Apr. 28, 2008) (permitting
options on SPDR Gold Trust Shares to be listed by securities
exchanges and cleared by Options Clearing Corporation as options on
securities).
\106\ See 7 U.S.C. 6(c)(1).
\107\ See 7 U.S.C. 7.
\108\ See 17 CFR part 38.
\109\ See 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

The Exchange acknowledges that it will not be permitted to list and
trade the proposed Nasdaq Bitcoin Index Options unless and until the
CFTC grants all necessary exemptive relief pursuant to Section 4(c)(1)
of the CEA \110\ from the requirements of the CEA and the rules and
regulations thereunder, with the condition that the SEC exercise
concurrent jurisdiction with the CFTC over the proposed Nasdaq Bitcoin
Index Options, as provided under Section 3B of the Exchange Act.\111\
In addition, the Exchange acknowledges that it will not be permitted to
list and trade the proposed Nasdaq Bitcoin Index options until the CFTC
issues exemptive relief to allow OCC to clear the proposed options in
its capacity as a clearing agency registered with the SEC pursuant to
Section 17A of the Exchange Act.\112\ Finally, the Exchange
acknowledges that it will not be permitted to list and trade the
proposed Nasdaq Bitcoin Index Options until the OCC receives approval
to update The Characteristics and Risks of Standardized Options (the
``Options Disclosure Document'' or ``ODD'') to reflect the risks
attendant to trading Nasdaq Bitcoin Index Options.
---------------------------------------------------------------------------

\110\ See 7 U.S.C. 6(c)(1).
\111\ See 15 U.S.C. 78c-2.
\112\ See 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

Pursuant to Section 717(b) of Dodd-Frank, the proposed Nasdaq
Bitcoin Index Options would be deemed a security permitted to trade on
Phlx, a self-regulatory organization regulated by the SEC.
In light of evolving market structures in digital asset developing
markets, Phlx's proposal will foster responsible innovation and
competition, while ensuring that appropriate regulatory protections are
in place. The proposed Nasdaq Bitcoin Index Options are in the public
interest and promote responsible innovation and fair competition.
Phlx will not list the Nasdaq Bitcoin Index Options until such time
as it obtains an exemption from the CFTC pursuant to Section 4(c)(1) of
the CEA \113\ with the condition that the Commission exercise
concurrent jurisdiction over such agreement, contract, or transaction
(or class thereof) and that it shall be deemed a security for purposes
of the securities laws. Further, Phlx shall not list the Nasdaq Bitcoin
Index Options until all conditions noted in the approval of the
application pursuant to Section 4(c)(1) of the CEA have been satisfied.
Finally, the Exchange would not list the Nasdaq Bitcoin Index Options
until such time as OCC has received approval to update the ODD to
reflect the risks attendant to trading Nasdaq Bitcoin Index Options.
---------------------------------------------------------------------------

\113\ Phlx will make an application for an exemption with the
CFTC pursuant to Section 4(c)(1) of the CEA requesting an exemption
from the regulatory requirements under the CEA applicable to a
Designated Contract Market pursuant to Section 5 of the CEA (7
U.S.C. 7) and Part 38 (17 CFR part 38) of the CFTC's regulations to
list and trade Nasdaq Bitcoin Index Options. Further, the Exchange
would seek exemptive relief so that the Nasdaq Bitcoin Index Options
would clear through OCC in its capacity as a clearing agency
registered with the SEC pursuant to Section 17A of the Act.
---------------------------------------------------------------------------

The Exchange believes that with the commencement of trading of
Bitcoin as an ETF on a national securities exchange, Phlx's proposal
would serve important economic functions by providing investors,
speculators and multinational corporations with an important risk-
shifting mechanism by allowing them to hedge the price of Bitcoin.
Phlx's proposal is an innovative response to the demands of various
market participants who require greater flexibility to tailor their
Bitcoin positions and portfolios to satisfy their investment objections
by creating a ``precise'' hedge for approved Spot Bitcoin ETPs.
The introduction of Nasdaq Bitcoin Index Options will provide
investors with an additional tool to manage their portfolio, whether by
hedging or through diversification and will remove impediments to and
perfect the mechanism of a free and open market and a national market
system and, in general, protect investors because offering this new
product will provide investors with a greater opportunity to realize
the benefits of utilizing index options based on spot Bitcoin,
including cost efficiencies and increased hedging strategies. In
particular, the Exchange believes that offering Nasdaq Bitcoin Index
Options will benefit investors by providing them with an additional,
relatively lower cost risk management tool allowing them to manage,
more easily, their positions and associated

[[Page 46723]]

risks, in their portfolios in connection with exposure to spot Bitcoin.
Additionally, this cash-settled index that permits holders to receive
U.S. dollars representing the difference between the current Bitcoin
spot market and the exercise price of the option eliminates risks
associated with physical settlement such as volatility and movement in
the underlying at expiration. Today, the CME CF Bitcoin Reference
Rate--New York Variant for the Bitcoin--U.S. Dollar trading pair (the
``CF Benchmarks Index'') constitutes the index for the following
products: iShares Bitcoin Trust ETF, Franklin Bitcoin ETF, Bitwise
Bitcoin ETF, Valkyrie Bitcoin Fund and ARK 21Shares Bitcoin ETF.
For the reasons which follow, the Exchange believes that Nasdaq
Bitcoin Index Options is designed to prevent fraudulent and
manipulative acts and practices and promote just and equitable
principles of trade. Nasdaq Bitcoin Index Options are representative of
the underlying market, resistant to manipulation, and replicable by
market participants, to be able to foster further institutional
participation in the underlying market that is being measured. The
final settlement value for Nasdaq Bitcoin Index Options would be the
BRRNY on the expiration date (usually a Friday). BRRNY will be divided
by a factor of one hundred (100) to create a new settlement value to
arrive at the settlement value for Nasdaq Bitcoin Index Options and
will be published as BRRNY--NOS (Nasdaq Options Settlement). BRRNY is a
once-a-day benchmark index price for Bitcoin that aggregates trade data
from multiple Bitcoin-USD markets operated by major cryptocurrency
exchanges that conform to the CME CF Constituent Exchange Criteria. It
is synchronized to the traditional U.S. financial market close of 1600
New York Time and is calculated every single day of the year. The index
is a Registered Benchmark under UK BMR and as such is a Third Country
benchmark under the EU BMR Regime.
The BRRNY index is methodologically identical to the regulated CME
CF Bitcoin Reference Rate (BRR), the most widely used benchmark price
for Bitcoin, that settles the Bitcoin-USD derivatives complex listed by
CME Group, and which serves as the NAV for exchange listed investment
products from WisdomTree Europe, Evolve ETFs (CAN) and QR Asset
Management (BRZ). The only difference between the CME CF BRRNY and the
CME CF BRR, is that BRRNY references the price of Bitcoin at the
closing time of U.S. markets, 16:00 New York Time, rather than the
price at 16:00 London Time, referenced by the BRR.
The purpose of BRRNY is to provide a replicable, manipulation-
resistant and representative Bitcoin benchmark that synchronizes with
the traditional U.S. market close. The CME CF Bitcoin Reference Rate--
New York Variant is a regulated Benchmark under the UK Benchmarks
Regulation (BMR) regime. The BRRNY calculation methodology aggregates
transactions of Bitcoins in U.S. dollars that are only conducted on the
most liquid markets for which data is publicly available and operated
by exchanges that meet the CME CF Constituent Exchange Criteria.\114\
---------------------------------------------------------------------------

\114\ See supra note 24.
---------------------------------------------------------------------------

BRRNY is a valid and robust benchmark that is calculated from input
data of sufficient volume so that it is representative of the market it
seeks to measure. Additionally, BRRNY has volume sufficiency which
permits it to be replicated by institutional market participants and
product providers that need to warehouse price risk. The table below
summarizes the total number of transactions and average number of
transactions per day observed each month for BRRNY.\115\ Between
February 28, 2022, and January 31, 2024 (weekdays only), on average
2,116.73 Bitcoins, or $59M were traded during each daily observation
window between 15:00 and 16:00 New York Time.\116\
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\115\ The data represents both trade count and Bitcoin volume
during the observation window.
\116\ BRRNY was launched on February 28, 2022. LMAX Digital was
added as a Constituent Exchange from May 2022.
[GRAPHIC] [TIFF OMITTED] TN29SE25.012

[[Page 46724]]

transactions conducted at outlying prices do not have an undue effect
on the value of a specific partition. By not volume weighting
partitions, trades of large size or clusters of trades over a short
period of time will not have an undue influence on the index level. CF
Benchmarks applies equal weight to transactions observed from CME CF
Constituent Exchanges. With no pre-set weights, the BRRNY index is not
readily subject to manipulation. Using the arithmetic mean of
partitions of equal weight further denudes the effect of trades of
large size at prices that deviate from the prevailing price having
undue influence on the benchmark level.\118\
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\117\ See supra note 24.
\118\ See also <a href="https://www.cfbenchmarks.com/blog/suitability-analysis-of-the-cme-cf-Bitcoin-reference-rate-new-york-variant-as-a-basis-for-regulated-financial-products-february-2024-update">https://www.cfbenchmarks.com/blog/suitability-analysis-of-the-cme-cf-Bitcoin-reference-rate-new-york-variant-as-a-basis-for-regulated-financial-products-february-2024-update</a>.
---------------------------------------------------------------------------

BRRNY's methodology incorporates a procedure for potentially
erroneous data. Although volume-weighted medians of transaction prices
from individual data sources are not part of the benchmark
determination process, they are calculated as a means of quality
control and manipulation resistance. In the event of an instance of
index calculation in which a Constituent Exchange's volume-weighted
median transaction price exhibits an absolute percentage deviation from
the volume-weighted median price of other Constituent Exchange
transactions greater than the Potentially Erroneous Data Parameter
(10%), then transactions from that Constituent Exchange are deemed
potentially erroneous and excluded from the index calculation. All
instances of data excluded from a calculation trigger a Benchmark
Surveillance Alert that is investigated. By way of example, between
February 28, 2022, and January 31, 2024, the Potentially Erroneous Data
Parameter of the methodology for the CME CF Bitcoin Reference Rate--New
York Variant has never been triggered. Analysis of the max volume-
weighted median per exchange during the observation period produced the
results in the table below. The results illustrate that during the
observation period, no Constituent Exchange's input data needed to be
excluded due to exhibiting potential manipulation and indeed no
individual cryptocurrency exchange exhibits a deviation percentage
above 2.41% during this period.
[GRAPHIC] [TIFF OMITTED] TN29SE25.013

CF Benchmarks has implemented a benchmark surveillance program for
the investigation of alerts. Instances of suspected benchmark
manipulation are escalated through appropriate regulatory channels in
accordance with CF Benchmarks' obligations under the UK Benchmarks
Regulation (UK BMR). As a regulated Benchmark Administrator, CF
Benchmarks is subject to supervision by the UK FCA.\119\
---------------------------------------------------------------------------

\119\ Furthermore, CF Benchmarks' Control Procedures with
respect to compliance with the UK BMR have been audited by `Big
Four' accountancy firm Deloitte. The Independent Assurance Report on
Control Procedures Noted by CF Benchmarks Regarding Compliance with
the UK Benchmarks Regulation as of September 12, 2022 is available
at: <a href="https://docs.cfbenchmarks.com/Deloitte_CFBenchmarksSOC1AuditReport.pdf">https://docs.cfbenchmarks.com/Deloitte_CFBenchmarksSOC1AuditReport.pdf</a>.
---------------------------------------------------------------------------

In terms of correlation, an analysis was undertaken of the pair-
wise correlation of prices from Constituent Exchanges on a per-minute
basis (the price difference between transactions for each minute at
each exchange) during the observation period. The results are shown in
the table below.

[[Page 46725]]

[GRAPHIC] [TIFF OMITTED] TN29SE25.014

With respect to replicability, a simple replication simulation was
thereby conducted of BRRNY to demonstrate the extent of slippage that
implementation of the BRR would probably encounter. The methodology was
as follows for weekdays only.

The results of this simulation are displayed below.
[GRAPHIC] [TIFF OMITTED] TN29SE25.015

Summary data for the above simulation is provided below.
[GRAPHIC] [TIFF OMITTED] TN29SE25.016

As evidenced above, the BRRNY can be replicated with a high degree
of confidence and usually with slippage of no more than 1 basis point
(0.01%). On only 6.76% of days would slippage have been greater than 5
basis points (0.05%). Indeed, even on the most volatile day, slippage
was approximately one half of one percent, 51.6 basis points (0.516%).
Furthermore, in the 24-month period under observation slippage would
have been in double-digit basis points only 10 times.
In 2024, the Commission approved various rule changes to list and
trade Spot Bitcoin ETPs.\120\ The Commission noted in the Spot Bitcoin
ETPs Approval Order that, ``. . . one way an exchange that lists
Bitcoin-based exchange-traded products (``ETPs'') can meet the
obligation under Exchange Act Section 6(b)(5) that its rules be
designed to prevent fraudulent and manipulative acts and practices is
by demonstrating that the exchange has a comprehensive surveillance-
sharing agreement with a regulated market of significant size related
to the underlying or reference Bitcoin assets. Such an agreement

[[Page 46726]]

would assist in detecting and deterring fraud and manipulation related
to that underlying asset.'' The Commission has recognized that the
``regulated market of significant size'' standard is not the only means
for satisfying Section 6(b)(5) of the Act, specifically providing that
a listing exchange could demonstrate that ``other means to prevent
fraudulent and manipulative acts and practices'' are sufficient to
justify dispensing with the requisite surveillance-sharing
agreement.\121\ For example, in approving the Spot Bitcoin ETPs, the
Commission found that there were ``sufficient `other means' of
preventing fraud and manipulation,'' including that:
---------------------------------------------------------------------------

\120\ See supra note 29.
\121\ See Securities Exchange Act Release No. 83723 (July 26,
2018), 83 FR 37579 at 37580 (August 1, 2018) (the ``Winklevoss
Order''). The Commission has also specifically noted that it ``is
not applying a `cannot be manipulated' standard; instead, the
Commission is examining whether the proposal meets the requirements
of the Exchange Act and, pursuant to its Rules of Practice, places
the burden on the listing exchange to demonstrate the validity of
its contentions and to establish that the requirements of the
Exchange Act have been met.'' See Winklevoss Order, 83 FR at 37582.

[B]ased on the record before the Commission and the improved
quality of the correlation analysis in the record, including the
Commission's own analysis, the Commission is able to conclude that
fraud or manipulation that impacts prices in spot Bitcoin markets
would likely similarly impact CME Bitcoin futures prices. And
because the CME's surveillance can assist in detecting those impacts
on CME Bitcoin futures prices, the Exchanges' comprehensive
surveillance-sharing agreement with the CME--a U.S. regulated market
whose Bitcoin futures market is consistently highly correlated to
spot Bitcoin, albeit not of ``significant size'' related to spot
Bitcoin--can be reasonably expected to assist in surveilling for
fraudulent and manipulative acts and practices in the specific
context of the [Spot Bitcoin ETPs].\122\
---------------------------------------------------------------------------

\122\ See Spot Bitcoin ETPs Approval Order 89 FR 3010 and 3011.

As described in the Spot Bitcoin ETPs Approval Order, there is
currently a regulated U.S. market with respect to spot Bitcoin, the CME
Bitcoin futures (``Bitcoin Futures'') market.\123\ In its Spot Bitcoin
ETPs Approval Order, the Commission found there was a high price
correlation between the underlying and the futures market.\124\ The
proposed Nasdaq Bitcoin Index Options and the various Spot Bitcoin ETPs
reference the same underlying market for spot Bitcoin that trade on
spot Bitcoin trading platforms.
---------------------------------------------------------------------------

\123\ CME began offering trading in Bitcoin Futures in 2017.
Each contract represents five Bitcoin and is based on the CME CF
Bitcoin Reference Rate. The contracts trade and settle like other
cash settled commodity futures contracts.
\124\ A correlation analysis was conducted by the Commission in
analyzing the Spot Bitcoin ETP proposals. The results of the
Commission's analysis confirmed that the CME Bitcoin futures market
has been consistently highly correlated with the subset of the spot
Bitcoin market utilized in the analysis for the timeframe reviewed.
See Spot Bitcoin ETPs Approval Order at 89 FR 3010.
---------------------------------------------------------------------------

Specifically, the Exchange has a comprehensive surveillance-sharing
agreement with the CME via its common membership in ISG, which
facilitates the sharing of information that is available to the CME
through its surveillance of its markets, including its surveillance of
the Bitcoin Futures market. Similar to the Spot Bitcoin ETPs previously
approved by the SEC, Phlx's ability to obtain information regarding
trading in the Bitcoin Futures market from other markets that are
members of the ISG (specifically the CME) would assist Phlx in
detecting and deterring misconduct.
Further, the exchanges that list Spot Bitcoin ETPs comprehensively
surveil market conditions and price movements on a real time and
ongoing basis in order to detect and prevent price distortions,
including price distortions caused by manipulative efforts. Thus, the
CME's surveillance as well as Nasdaq's surveillance and other equity
markets that list Spot Bitcoin ETPs can reasonably be relied upon to
capture the effects on the Bitcoin Futures market and Spot Bitcoin
ETPs, as applicable, that are caused by a person attempting to
manipulate the futures ETP or Spot Bitcoin ETPs by manipulating the
price of Bitcoin futures contracts or Spot Bitcoin ETPs, whether that
attempt is made by directly trading on the Bitcoin Futures market or
Spot Bitcoin ETPs, or indirectly by trading outside of the Bitcoin
Futures market or Spot Bitcoin ETPs.
The Exchange would have an adequate surveillance program in place
for Nasdaq Bitcoin Index Options as it intends to apply the same
program procedures that apply to the Exchange's other index options
products.\125\ Index products and their respective symbols are
integrated into the Exchange's existing surveillance system
architecture and are thus subject to the relevant surveillance
processes. This is true for both surveillance system processing and
manual processes that support the Phlx's surveillance program.
Additionally, the Exchange is also a member of the ISG under the
Intermarket Surveillance Group Agreement. ISG members work together to
coordinate surveillance and investigative information sharing in the
stock and options markets. Both the Exchange and CME are members of
ISG.\126\
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\125\ The surveillance program includes real-time patterns for
price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, pinging, phishing).
\126\ For a list of the current members and affiliate members of
ISG, see <a href="https://www.isgportal.com/">https://www.isgportal.com/</a>.
---------------------------------------------------------------------------

The Exchange, in its normal course of surveillance, will monitor
for any potential manipulation of the Nasdaq Bitcoin Index Options
settlement value according to the Exchange's current procedures. The
Exchange believes that its surveillance procedures currently in place
will allow it to adequately surveil for any potential manipulation in
the trading of Nasdaq Bitcoin Index Options.
The Exchange believes that the proposed contract specifications
will be attractive to market participants, and will remove impediments
to and perfect the mechanism of a free and open market and a national
market system. The proposal is designed to ensure that Nasdaq Bitcoin
Index Options are listed and traded under the same terms that apply to
other index options that are currently traded on the Exchange. Nasdaq
Bitcoin Index Options will be subject to the same rules that presently
govern the trading of index options, including sales practice rules,
margin requirements, trading rules, and position and exercise limits.
The proposed product is a cash-settled index option that permit holders
to receive U.S. dollars representing the difference between the current
Bitcoin spot market and the exercise price of the option and would not
involve holding physical Bitcoin similar to the Spot Bitcoin ETPs,
which entailed the custody of Bitcoin assets. The Exchange's proposal
to have a minimum increment of $0.01 for all series will enable traders
to make the most effective use of the product for trading and hedging
purposes. The Exchange believes that the rules applicable to trading in
Nasdaq Bitcoin Index Options are consistent with the protection of
investors and the public interest.
Permitting Nasdaq Bitcoin Index Options to be P.M.-settled whereby
the exercise settlement value would be derived from closing prices on
the day of expiration is consistent with the Act. The proposed rule
change will provide investors with greater trading and hedging
opportunities and flexibility. The size of the spot bitcoin
market,\127\ and the high correlation of these components to the Spot
Bitcoin ETPs make it unlikely the proposal would result in material
impact on the underlying, the index value, or the

[[Page 46727]]

broader market. Further, the Nasdaq Bitcoin Index Options would trade
within a complex where there are multiple other highly correlated
instruments that all hold bitcoin available for hedging--such as Spot
Bitcoin ETPs for which the CME CF Bitcoin Reference Rate constitutes
the index, and options and futures on bitcoin, in addition to the
underlying--and that this reduces the risk that listing these options
would strain liquidity providers or materially impact, the index value,
or the broader market. The Exchange is unaware of any reason why
trading Nasdaq Bitcoin Index Options as P.M.-settled options would
create such concerns or impact. Particularly, the Exchange does not
believe allowing Nasdaq Bitcoin Index Options to transact as P.M.-
settled options will have any significant adverse economic impact on
the index, or underlying. Today, options on the Cboe Exchange, Inc.
(``Cboe'') Bitcoin U.S. ETF Index (``CBTX'') and the Mini-Cboe Bitcoin
U.S. ETF Index (``MBTX'') are P.M.-settled.\128\ In a recent proposal,
Cboe noted that it had not experienced any adverse impact on fair and
orderly markets in connection with the listing of CBTX and MBTX options
that are P.M.-settled and expire on the last calendar day of the month
and quarter.\129\ Further, the Exchange believes that providing P.M.-
settlement will make this product more attractive to market
participants and help garner additional support for this new index
options product. In particular, retail investors, prefer P.M.-settled
index options. P.M.-settlement is preferred by retail investors as it
allows market participants to hedge their exposure for the full week.
A.M.-settled options by contrast are based on opening prices on the day
of expiration and therefore stop trading on the day prior, leaving
residual risk on the day of expiration. P.M.-settled Weekly and
Expiration Friday expirations for the Nasdaq Bitcoin Index Options will
provide investors with expanded hedging tools and greater trading
opportunities and flexibility providing investors with additional means
to manage their risk exposures and carry out their investment
objectives. The Exchange does not believe that permitting Nasdaq
Bitcoin Index Options to trade as P.M.-settled Index Options will raise
any prohibitive regulatory concerns, nor adversely impact fair and
orderly markets on expiration days. The Exchange has not experienced
any meaningful regulatory concerns, nor adverse impact on fair and
orderly markets, in connection with these programs on its Nonstandard
Expirations.\130\
---------------------------------------------------------------------------

\127\ As of September 23, 2025, the market capitalization of the
spot bitcoin market is 2,249,669,484,352. This figure utilizes a
price of $112,950.
\128\ CBTX and MBTX options have P.M.-settlement and expirations
on the last calendar day of the month or quarter pursuant to Cboe
Rule 4.13(a)(2)(C) and (B), respectively; and P.M.-settled Weeklys
and Expiration Friday expirations pursuant to Cboe Rule 4.13(e) and
Rule 4.13, Interpretation and Policy .13.
\129\ See Securities and Exchange Act Release No. 103997
(September 17, 2025, 90 FR 45431 at 45434 (September 22, 2025) (SR-
Cboe-2025-004) (Notice of Filing of Amendment No. 2 and Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified
by Amendment No. 2, To Add P.M.-Settled Options on the Cboe Bitcoin
U.S. ETF Index and the Mini-Cboe Bitcoin U.S. ETF Index With Third
Friday Expirations, Nonstandard Expirations, and Quarterly Index
Expirations).
\130\ Options trading in the Exchange's Non-Standard Program are
p.m.-settled. See Options 4A, Section 12(b)(6).
---------------------------------------------------------------------------

The Exchange believes the permitting Weekly expirations and EOMs
should create greater trading and hedging opportunities and
flexibility, and provide customers with the ability to tailor their
investment objectives more closely. This is comparable to the manner in
which all index options trade on Phlx.
Additionally, a position and exercise limit for Nasdaq Bitcoin
Index Options of 24,000 contracts is consistent with the Act because
the limits are in line with options on the Cboe CBTX and MBTX that have
position limits of 24,000 contracts. Today, CBTX is trading 2,660.00 as
of September 23, 2025. CBTX notional is $266,000 (index price * $100)
as of September 23, 2025. The Nasdaq Bitcoin Index has a notional value
of $112,444.28 as of September 23, 2025. The proposed 24,000 position
and exercise limits for Nasdaq Bitcoin Index Options represent less
than half of the notional value of CBTX. The Exchange believes that the
proposed position and exercise limits will prevent fraudulent and
manipulative acts and practices.
Finally, the Exchange represents that it and OPRA have the
necessary system capacity to support additional quotations and messages
that will result from the listing and trading Nasdaq Bitcoin Index
Options.

B. Self-Regulatory Organization's Statement on Burden on Competition

This proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. The Exchange notes that the proposed rule change will
facilitate the listing and trading of an index option product with a
novel structure that will enhance competition among market
participants, to the benefit of investors and the marketplace.
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act as Nasdaq Bitcoin
Index Options would be subject to Exchange rules that currently govern
the listing and trading of index options, including permissible
expirations, strike prices, minimum increments, position and exercise
limits, and margin requirements. Nasdaq Bitcoin Index Options will be
equally available to all market participants who wish to trade such
options.
The Exchange does not believe the proposal will impose any burden
on intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act. To the extent that permitting
Nasdaq Bitcoin Index Options to trade on the Exchange may make Phlx a
more attractive marketplace to market participants, such market
participants are free to elect to become market participants on the
Exchange. Additionally, other options exchanges are free to amend their
rules, as applicable, to permit them to list and trade index options
that track the value of Bitcoin. The Exchange believes that the
proposed rule change may relieve any burden on, or otherwise promote,
competition, as it is designed to increase competition for order flow
on the Exchange in a manner that is beneficial to investors by
providing them with a relatively low-cost means to hedge their
portfolios and meet their investment needs in connection with spot
Bitcoin prices and Bitcoin-related products and positions, in a cash-
settled product. The Exchange notes that it operates in a highly
competitive market in which market participants can readily direct
order flow to competing venues that offer similar products.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings

[[Page 46728]]

to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#cfbdbaa3aae2aca0a2a2aaa1bbbc8fbcaaace1a8a0b9"><span class="__cf_email__" data-cfemail="89fbfce5eca4eae6e4e4ece7fdfac9faeceaa7eee6ff">[email&#160;protected]</span></a>. Please include
file number SR-Phlx-2025-50 on the subject line.

Paper Comments

<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-Phlx-2025-50. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-Phlx-2025-50 and should be submitted on
or before October 20, 2025.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\131\
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\131\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-18797 Filed 9-26-25; 8:45 am]
BILLING CODE 8011-01-P

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