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Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices
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and trade the Shares of the Trust under BZX Rule 14.11e4, which governs the listing and trading of Commodity-Based Trust Shares on the Exchange.
The investment objective of the Trust would be to provide exposure to bitcoin at a price that is reflective of the actual bitcoin market where investors purchase and sell bitcoin, less the expense of the Trusts operation.8 The Trust would hold bitcoin and it would calculate the Trusts net asset value NAV daily based on the value of bitcoin as reflected by the CF Bitcoin US
Settlement Price Reference Rate.
The administrator of the Reference Rate is CF Benchmarks Ltd. The Reference Rate aggregates the trade flow of several bitcoin platforms. The current platform composition of the Reference Rate is Bitstamp, Coinbase, Gemini, itBit and Kraken. In calculating the Reference Rate, the methodology creates a joint list of certain trade prices and sizes from the constituent platforms between 3:00 p.m.
E.T. and 4:00 p.m. E.T. The methodology then divides this list into 12 equally-sized time intervals of 5
minutes and it calculates the volumeweighted median trade price for each of those time intervals. The Reference Rate is the arithmetic mean of these 12
volume-weighted median trade prices.9
Each Share will represent a fractional undivided beneficial interest in the bitcoin held by the Trust. The Trusts assets will consist of bitcoin held by the Custodian on behalf of the Trust. The Trust generally does not intend to hold cash or cash equivalents. However, there may be situations where the Trust will unexpectedly hold cash on a temporary basis.10
The Administrator will determine the NAV and NAV per Share of the Trust, on each day that the Exchange is open for regular trading, after 4:00 p.m. E.T.
The NAV of the Trust is the aggregate value of the Trusts assets less its liabilities which include estimated accrued but unpaid fees and expenses.
In determining the Trusts NAV, the Administrator values the bitcoin held by the Trust on the basis of the price of 8 Kryptoin Investment Advisors, LLC Sponsor is the sponsor of the Trust, Delaware Trust Company is the trustee, and The Bank of New York Mellon will be the administrator Administrator and transfer agent. Foreside Fund Services, LLC
will be the marketing agent in connection with the creation and redemption of baskets of Shares, and the Sponsor will provide assistance in the marketing of the Shares. Gemini Trust Company, LLC, a third-party regulated custodian Custodian, will be responsible for custody of the Trusts bitcoin. See id. at 22485 and 2249293.
9 See id. at 22493.
10 See id. at 22492.

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bitcoin as determined by the Reference Rate.11
The Trust will provide information regarding the Trusts bitcoin holdings, as well as an Intraday Indicative Value IIV per Share updated every 15
seconds, as calculated by the Exchange or a third-party financial data provider during the Exchanges Regular Trading Hours 9:30 a.m. to 4:00 p.m. E.T.. The IIV will be calculated by using the prior days closing NAV per Share as a base and updating that value during Regular Trading Hours to reflect changes in the value of the Trusts bitcoin holdings during the trading day.12
When the Trust sells or redeems its Shares, it will do so in in-kind transactions in blocks of 50,000 Shares.
Authorized participants will deliver, or facilitate the delivery of, bitcoin to the Trusts account with the Custodian in exchange for Shares when they purchase Shares, and the Trust, through the Custodian, will deliver bitcoin to such authorized participants when they redeem Shares with the Trust.13
II. Proceedings To Determine Whether To Approve or Disapprove SR
CboeBZX2021029 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19b2B of the Act 14 to determine whether the proposed rule change should be approved or disapproved.
Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change, as discussed below.
Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to provide comments on the proposed rule change.
Pursuant to Section 19b2B of the Act,15 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposed rule changes consistency with Section 6b5 of the Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and
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to protect investors and the public interest. 16
The Commission asks that commenters address the sufficiency of the Exchanges statements in support of the proposal, which are set forth in the Notice,17 in addition to any other comments they may wish to submit about the proposed rule change. In particular, the Commission seeks comment on the following questions and asks commenters to submit data where appropriate to support their views:
1. What are commenters views on whether the proposed Trust and Shares would be susceptible to manipulation?
What are commenters views generally on whether the Exchanges proposal is designed to prevent fraudulent and manipulative acts and practices? What are commenters views generally with respect to the liquidity and transparency of the bitcoin markets, the bitcoin markets susceptibility to manipulation, and thus the suitability of bitcoin as an underlying asset for an exchange-traded product?
2. What are commenters views of the Exchanges assertion that regulatory and financial landscapes relating to bitcoin and other digital assets have changed significantly since 2016? 18 Are the changes that the Exchange identifies sufficient to support the determination that the proposed listing and trading of the Shares are consistent with the Act?
3. The Exchange states that approving this proposal . . . would allow U.S. investors with access to bitcoin in a regulated and transparent exchange-traded vehicle that would act to limit risk associated with exposure through other means.19 Further, the Exchange asserts that the manipulation concerns previously articulated by the Commission are sufficiently mitigated to the point that they are outweighed by quantifiable investor protection issues. 20 What are commenters views regarding such assertions?
4. According to the Exchange, nearly every measurable metric related to Chicago Mercantile Exchanges Bitcoin Futures has trended consistently up since launch and/or accelerated upward in the past year. 21
Based on data provided and the academic research cited by the Exchange, do commenters agree that the Chicago Mercantile Exchange CME
now represents a regulated market of 16 15

U.S.C. 78fb5.
Notice, supra note 3.
18 See id. at 2248687.
19 See id. at 22487.
20 See id. at 22491.
21 See id. at 22489.

11 See
id. at 22494.
12 See id. at 22493.
13 See id.
14 15 U.S.C. 78sb2B.
15 Id.

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17 See
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