Je veux savoir à propos de…

50582

Federal Register / Vol. 86, No. 172 / Thursday, September 9, 2021 / Notices
lotter on DSK11XQN23PROD with NOTICES1

publicly available on the Trusts website.
2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6b of the Act 69 in general and Section 6b5 of the Act 70 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest.
The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. Additionally, the Bitcoin Futures will be subject to the rules and surveillance programs of CME and the CFTC. Trading of the Shares through the Exchange will be subject to the Exchanges surveillance procedures for derivative products, including Commodity Futures Trust Shares. The Exchange or FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares and the underlying Bitcoin Futures via ISG, from other exchanges who are members or affiliates of the ISG, or with which the Exchange has entered into a comprehensive surveillance sharing agreement. The Exchange may also obtain information regarding trading in the spot bitcoin market via the ISG, from other exchanges who are members or affiliates of the ISG, or from other exchanges with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, the Exchange is able to access, as needed, trade information for certain fixed income instruments reported to TRACE. The Exchange prohibits the distribution of material non-public information by its employees.
The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. The 69 15
70 15

U.S.C. 78f.
U.S.C. 78fb5.

VerDate Sep<11>2014

19:38 Sep 08, 2021

Jkt 253001

Exchange further believes that the proposal is designed to prevent fraudulent and manipulative acts and practices in that the Exchange expects that the market for Bitcoin Futures will be sufficiently liquid to support numerous ETPs shortly after launch.
This belief is based on numerous conversations with market participants, issuers, and discussions with personnel of CFE. As such, the Exchange believes that the expected liquidity in the market for Bitcoin Futures, combined with the Exchange surveillance procedures related to the Shares, and the broader regulatory structure will prevent trading in the Shares from being susceptible to manipulation.
Because of its innovative features as a cryptoasset, bitcoin has gained wide acceptance as a secure means of exchange in the commercial marketplace and has generated significant interest among investors. In less than a decade since its creation in 2008, bitcoin has achieved significant market penetration, with payments giant PayPal and thousands of merchants and businesses accepting it as a form of commercial payment, as well as receiving official recognition from several governments, including Japan and Australia. Accordingly, investor interest in gaining exposure to bitcoin is increasing exponentially as well. As expected, the total volume of bitcoin transactions in the market continues to grow exponentially.
Despite the growing investor interest in bitcoin, the primary means for investors to gain access to bitcoin exposure remains either through the Bitcoin Futures or direct investment through bitcoin exchanges or over-thecounter trading. For regular investors simply wishing to express an investment viewpoint in bitcoin, investment through the Bitcoin Futures is complex and requires active management, and direct investment in bitcoin brings with it significant inconvenience, complexity, expense and risk. The Shares would therefore represent a significant innovation in the bitcoin market by providing an inexpensive and simple vehicle for investors to gain exposure to bitcoin in a secure and easily accessible product that is familiar and transparent to investors. Such an innovation would help to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest by improving investor access to bitcoin exposure through efficient and transparent exchange-traded derivative products.
In addition to improved convenience, efficiency and transparency, the Trust
PO 00000

Frm 00059

Fmt 4703

Sfmt 4703

will also help to prevent fraudulent and manipulative acts and practices by enhancing the security afforded to investors as compared to a direct investment in bitcoin. Despite the extensive security mechanisms built into the Bitcoin network, a remaining risk to owning bitcoin directly is the need for the holder to retain and protect the private key required to spend or sell bitcoin after purchase. If a holders private key is compromised or simply lost, their bitcoin can be rendered unavailablei.e., effectively lost to the investor. Investment vehicles that invest directly in bitcoin or investors that hold their bitcoin through digital wallets or other storage mechanisms must take extraordinary steps in order to protect their bitcoin, such as placing their bitcoin in cold storage. This risk will be eliminated for the Trust because the exposure to bitcoin is gained through cash-settled Bitcoin Futures that do not present any of the security issues that exist with direct investment in bitcoin.
The Trust expects that it will generally seek to remain fully exposed to Bitcoin Futures even during times of adverse market conditions. Under Normal Market Conditions, the Trust will generally hold only Bitcoin Futures and Money Market Instruments which are used to collateralize the Bitcoin Futures.
The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer of the Shares that the NAV will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. In addition, a large amount of information is publicly available regarding the Trust and the Shares, thereby promoting market transparency. Moreover, the Intraday Indicative Value will be disseminated by one or more major market data vendors at least every 15 seconds during Regular Trading Hours. On each business day, before commencement of trading in Shares during Regular Trading Hours, the Trust will disclose on its website the Disclosed Portfolio that will form the basis for the Trusts calculation of NAV at the end of the business day. Pricing information will be available on the Trusts website including: 1 The prior business days reported NAV, the Bid/Ask Price of the Trust, and a calculation of the premium and discount of the Bid/Ask Price against the NAV; and 2 data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the
E:FRFM09SEN1.SGM

09SEN1