Quiero saber acerca de...

Federal Register / Vol. 86, No. 172 / Thursday, September 9, 2021 / Notices last traded price before the NAV
calculation time on the date with respect to which the NAV is being determined. Money Market Instruments will generally be valued at their market price using market quotations or information provided by a pricing service.
For more information regarding the valuation of Trust investments in calculating the Trusts NAV, see the Draft Registration Statement.
Preventing Fraudulent and Manipulative Practices
lotter on DSK11XQN23PROD with NOTICES1

Applicable Standard of Review In disapproving prior proposals to list and trade shares of various bitcoin trusts and bitcoin-based trust issued receipts, the Commission noted that such proposals did not adequately demonstrate that they were designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest, consistent with Section 6b5 of the Act.15 The Commission does not apply 15 See, e.g., Order Disapproving a Proposed Rule Change, as Modified by Amendments No. 1 and 2, to BZX Rule 14.11e4, To List and Trade Shares Issued by the Winklevoss Bitcoin Trust, Securities Exchange Act Release No. 80206 Mar. 10, 2017, 82
FR 14076 Mar. 16, 2017 SRBatsBZX201630
Winklevoss I Order; Order Setting Aside Action by Delegated Authority and Disapproving a Proposed Rule Change, as Modified by Amendments No. 1 and 2, to List and Trade Shares of the Winklevoss Bitcoin Trust, Securities Exchange Act Release No. 83723 July 26, 2018, 83
FR 37579 Aug. 1, 2018 SRBatsBZX201630
the Winklevoss II Order; Order Disapproving a Proposed Rule Change, as Modified by Amendment No. 1, Relating to the Listing and Trading of Shares of the Bitwise Bitcoin ETF Trust Under NYSE Arca Rule 8.201E, Securities Exchange Act Release No.
87267 October 9, 2019, 84 FR 55382 October 16, 2019 SRNYSEArca201901 the Bitwise Order; Order Disapproving a Proposed Rule Change, as Modified by Amendment No. 1, to Amend NYSE Arca Rule 8.201E CommodityBased Trust Shares and to List and Trade Shares of the United States Bitcoin and Treasury Investment Trust Under NYSE Arca Rule 8.201E, Securities Exchange Act Release No. 88284
February 26, 2020, 85 FR 12595 Mar. 3, 2020
SRNYSEArca201939 the Wilshire Phoenix Order; Order Disapproving a Proposed Rule Change to List and Trade the Shares of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF, Securities Exchange Act Release No.
83904 August 22, 2018, 83 FR 43934 August 28, 2018 SRNYSEArca2017139; Order Disapproving a Proposed Rule Change Relating to Listing and Trading of the Direxion Daily Bitcoin Bear 1X Shares, Direxion Daily Bitcoin 1.25X Bull Shares, Direxion Daily Bitcoin 1.5X Bull Shares, Direxion Daily Bitcoin 2X Bull Shares, and Direxion Daily Bitcoin 2X Bear Shares Under NYSE Arca Rule 8.200E, Securities Exchange Act Release No.
83912 August 22, 2018, 83 FR 43912 August 28, 2018 SRNYSEArca201802; Order Disapproving a Proposed Rule Change to List and Trade the Shares of the GraniteShares Bitcoin ETF
and the GraniteShares Short Bitcoin ETF, Securities Exchange Act Release No. 83913 August 22, 2018, 83 FR 43923 August 28, 2018 SRCboeBZX
201801 the GraniteShares Order.

VerDate Sep<11>2014

19:38 Sep 08, 2021

Jkt 253001

a cannot be manipulated standard, but instead seeks to examine whether a proposal meets the requirements of the Act.16 The Commission has explained that a proposal could satisfy the requirements of the Act in the first instance by demonstrating that the listing exchange has entered into a comprehensive surveillance sharing agreement CSSA with a regulated market of significant size relating to the underlying assets.17 The Commission has also recognized that a listing exchange would not necessarily need to enter into a CSSA with a regulated significant market if the underlying commodity market inherently possessed a unique resistance to manipulation beyond the protections that are utilized by traditional commodity or securities markets or if the listing exchange could demonstrate that there were sufficient other means to prevent fraudulent and manipulative acts and practices. 18
While the earliest of the prior disapproval orders applied these standards to a commodity-trust based on bitcoin, the Commission has stated its belief that these standards are also appropriate for an ETP based on Bitcoin Futures.19
The Commission has noted that information sharing agreements with primary markets trading index components underlying a derivative product are an important part of a selfregulatory organizations ability to monitor for trading abuses in derivative products.20 In addition, the Commissions approval orders for commodity-futures ETPs note the ability of an ETP listing exchange to share surveillance information either through surveillance sharing agreements or through membership by the listing exchange and the relevant futures exchanges in the Intermarket Surveillance Group ISG.21 While the Commission in those orders did not explicitly undertake an analysis of whether the related futures markets were of significant size, the exchanges proposing commodity-futures ETPs on a single reference asset or benchmark generally made representations regarding the trading volume of the futures markets, and the Commission was in each of those cases dealing with a large futures market that had been trading for a number of years before an 16 See 17 See
Winklevoss II Order, 84 FR at 37582.
Wilshire Phoenix Order, 85 FR at 12596

50575

exchange proposed an ETP based on those futures.22 And where the Commission has considered a proposed ETP based on futures that had only recently begun trading, the Commission specifically addressed whether the futures on which the ETP was based which were futures on an index of wellestablished commodity futureswere illiquid or susceptible to manipulation.23
As described below, the Exchange believes the structure and operation of the Trust are designed to prevent fraudulent and manipulative acts and practices, to protect investors and the public interest, and to respond to the specific concerns that the Commission has identified with respect to potential fraud and manipulation in the context of a bitcoin ETP. In particular, the Exchange believes that it has addressed the Commissions previously stated concern that the Exchange must have entered into a surveillance-sharing agreement with a regulated market of significant size as evidence of the Trusts resistance to manipulation. In addition, the Exchange believes that Bitcoin Futures market has sufficiently developed since the prior disapproval orders such that the market for Bitcoin Futures now resembles the markets for other commodities at the time the related commodity futures-based ETP
was approved for listing. Finally, the Exchange believes it has demonstrated that the Trust possesses other means to prevent fraud or manipulation through the CMEs use of the CME CF BRR as the reference rate for Bitcoin Futures contracts. The Exchange also believes that listing of the Trusts Shares on the Exchange will provide investors with such an opportunity to obtain exposure to bitcoin within a regulated environment.
Surveillance Sharing Agreements With a Market of Significant Size In previous orders rejecting the listing of Bitcoin ETFs, the Commission noted its concerns that the bitcoin market could be subject to manipulation.24 In these orders, the Commission cited numerous precedents 25 in which 19b4
listing applications were approved based on findings that the particular market was either inherently resistant to manipulation or that the listing exchange had entered into a surveillance sharing agreement with a
97.
18 See Winklevoss II Order, 84 FR at 37580, 3758291; Bitwise Order, 84 FR at 55383, 55385
406; Wilshire Phoenix Order, 85 FR at 12597.
19 See GraniteShares Order, 83 FR 43925.
20 Id at 43926.
21 Id at 43926, n. 35.

PO 00000

Frm 00052

Fmt 4703

Sfmt 4703

22 Id
at 43927.

23 Id.
24 See Winklevoss I Order and Winklevoss II
Order.
25 For an extensive listing of such precedents, see Winklevoss I Order, at 14083 n. 96.

E:FRFM09SEN1.SGM

09SEN1