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Federal Register / Vol. 86, No. 172 / Thursday, September 9, 2021 / Notices
Prior to listing a new commodity futures contract, a designated contract market must either submit a selfcertification to the CFTC that the contract complies with the CEA and CFTC regulations or voluntarily submit the contract for CFTC approval. This process applies to all futures contracts and all commodities underlying the futures contracts, whether the new futures contracts are related to oil, gold, or any other commodity.10 On December 1, 2017, it was announced 11
that the CME had self-certified with the CFTC new contracts for bitcoin futures products.12 The CME Bitcoin Futures 13
trade and settle like any other cashsettled commodity futures contracts.14
Like other futures products on the CME, Bitcoin Futures are subject to oversight by the CFTC, and the CME itself is empowered to enforce its own rulebook as it relates to the Bitcoin Futures.
Furthermore, the CME has a surveillance team that monitors the trading of Bitcoin futures at all times along with the underlying bitcoin spot exchanges with which the CME has a surveillance agreement.
As such, the Exchange is proposing to list and trade Shares of the Trust under Nasdaq Rule 5711g, which governs the listing and trading of Commodity Futures Trust Shares on the Exchange.
Investment Objective
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According to the Draft Registration Statement, the investment objective of the Trust is for the Shares to reflect the performance of bitcoin as represented by the CME CF BRR, less the Trusts liabilities and expenses.
10 Section 1a9 of the CEA defines commodity to include, among other things, all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in. The definition of commodity is broad. 7 U.S.C. 1a9.
11 See CFTC Statement on Self-Certification of Bitcoin Products by CME, CFE and Cantor Exchange, dated December 1, 2017, available at http www.cftc.gov/PressRoom/PressReleases/
pr7654-17.
12 Bitcoin is a commodity as defined in Section 1a9 of the CEA. 7 U.S.C. 1a9. See In re Coinflip, Inc., No. 1529 CFTC Sept. 17, 2015, available at http www.cftc.gov/ucm/groups/public/@
lrenforcementactions/documents/legalpleading/
enfcoinfliprorder09172015.pdf.
13 The CME Bitcoin Futures are also cash-settled futures contracts based on the CME CF BRR, which is based on an aggregation of trade flow from several bitcoin spot exchanges, that will expire on a monthly and quarterly basis. CME Futures began trading on December 17, 2017.
14 The CME is registered with the CFTC and seek to provide a neutral, regulated marketplace for the trading of derivatives contracts for commodities, such as futures, options and certain swaps. The CME is a member of the Intermarket Surveillance Group.

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Investment Strategy The Trust pursues its investment objective primarily by investing in Bitcoin Futures. Futures are financial contracts, the value of which depends on, or is derived from, the underlying reference asset. In the case of Bitcoin Futures, the underlying reference asset is Bitcoin. Futures contracts may be cash-settled or physically-settled. When a cash-settled future expires, if the value of the underlying asset exceeds the futures price, the seller pays to the purchaser cash in the amount of that excess, and if the futures price exceeds the value of the underlying asset, the purchaser pays to the seller cash in the amount of that excess. When a physically-settled future expires, the seller is obligated to deliver the underlying asset to the purchaser in exchange for the futures price agreed to at the outset of the contract. The only Bitcoin Futures in which the Trust invests are cash-settled Bitcoin Futures traded on commodity exchanges registered with the CFTC.
At expiration, the cash settlement amount for the Bitcoin Futures held by the Trust will be determined by comparing the price at which the Trust purchased the futures contract on the relevant futures exchange with the reference rate specified by that exchange on the expiration date. For example, the CME has specified that the reference rate for its Bitcoin Futures will be a volume-weighted composite of Bitcoin prices on multiple Bitcoin exchanges.
The Trust does not invest in Bitcoin or other digital assets directly.
The Trust seeks to purchase a number of Bitcoin Futures so that the total value of the Bitcoin underlying the Bitcoin Futures held by the Trust is as close to 100% of the net assets of the Trust the Target Exposure as it is reasonably practicable to achieve, although as described further in the Draft Registration Statement, there can be no assurance that the Trust will be able to achieve or maintain the Target Exposure. The Trust intends to execute these purchases on commodity exchanges registered with the CFTC
through futures commission merchants FCMs. An FCM is a brokerage firm that solicits or accepts orders to buy or sell futures contracts and accepts money or other assets from customers to support such orders. The Trust does not intend to hold short positions in any futures, and accordingly, the most an investor could lose is the amount of his or her investment in the Trust. Although the Trusts Bitcoin Futures will provide leverage to the extent that they give the Trust exposure to an amount of
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underlying Bitcoin with a greater value than the amount of collateral the Trust is required to post, the Trust does not intend to provide investors with exposure to an amount of Bitcoin in excess of the Trusts net assets. The Trust will engage in active and frequent trading of Bitcoin Futures in seeking to maintain the Target Exposure.
In addition to the Trusts investments in Bitcoin Futures, the Trust expects to have significant holdings of cash and high-quality, short-term debt instruments that have terms-to-maturity of less than 397 days, such as U.S.
government securities and repurchase agreements the Money Market Instruments. The Money Market Instruments are intended to provide liquidity, to serve as collateral for the Trusts Bitcoin Futures and to support the Trusts use of leverage through the Trusts Bitcoin Futures. The amount of Money Market Instruments held by the Trust may change over time and will be determined primarily by the amount needed to seek to achieve or maintain the Target Exposure.
The Trust will generally hold its investments in Bitcoin Futures during periods in which the price of Bitcoin is flat or declining as well as during periods in which the price of Bitcoin is rising, and the Advisor will generally not seek to change the Trusts Target Exposure based on daily price changes.
For example, if the Trusts positions in Bitcoin Futures are declining in value, the Trust generally will not close out its positions except in order to meet redemption requests. As a result, any decrease in value of the Bitcoin Futures in which the Trust invests will result in a decrease in the Trusts net asset value NAV.
Calculation of the Trusts NAV
According to the Draft Registration Statement, the NAV of the Trust will be determined in accordance with Generally Accepted Accounting Principles GAAP as the total value of bitcoin held by the Trust, plus any cash or other assets, less any liabilities including accrued but unpaid expenses.
The NAV per Share will be determined by dividing the NAV of the Trust by the number of Shares outstanding.
The NAV of the Trust is typically determined as of 4:00 p.m. Eastern time on each day the Shares trade on the Exchange a Business Day. The Trusts daily activities are generally not reflected in the NAV determined for the Business Day on which the transactions are effected the trade date, but rather on the following Business Day.
Bitcoin Futures traded on a U.S.
exchange are generally valued using the
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