83_FR_13598 83 FR 13537 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade the Shares of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF Under NYSE Arca Rule 8.200-E, Commentary .02

83 FR 13537 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade the Shares of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF Under NYSE Arca Rule 8.200-E, Commentary .02

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 61 (March 29, 2018)

Page Range13537-13539
FR Document2018-06297

Federal Register, Volume 83 Issue 61 (Thursday, March 29, 2018)
[Federal Register Volume 83, Number 61 (Thursday, March 29, 2018)]
[Notices]
[Pages 13537-13539]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-06297]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82939; File No. SR-NYSEArca-2017-139]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove a Proposed 
Rule Change To List and Trade the Shares of the ProShares Bitcoin ETF 
and the ProShares Short Bitcoin ETF Under NYSE Arca Rule 8.200-E, 
Commentary .02

March 23, 2018.
    On December 4, 2017, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade the shares (``Shares'') of the 
ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF (each a 
``Fund'' and, collectively, ``Funds'') issued by the ProShares Trust II 
(``Trust'') under NYSE Arca Rule 8.200-E, Commentary .02. The proposed 
rule change was published for comment in the Federal Register on 
December 26, 2017.\3\
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 82350 (Dec. 19, 
2017), 82 FR 61100 (Dec. 26, 2017) (``Notice'').
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    The Commission has received one comment letter on the proposed rule 
change.\4\ On January 30, 2018, pursuant to Section 19(b)(2) of the 
Act,\5\ the Commission designated a longer period within which to 
approve the proposed rule change, disapprove the proposed rule change, 
or institute proceedings to determine whether to disapprove the 
proposed rule change.\6\ This order institutes proceedings under 
Section 19(b)(2)(B) of the Act \7\ to determine whether to approve or 
disapprove the proposed rule change.
---------------------------------------------------------------------------

    \4\ See Letter from Abe Kohen, AK Financial Engineering 
Consultants, LLC (Dec. 27, 2017) (``Kohen Letter''). All comments on 
the proposed rule change are available on the Commission's website 
at: https://www.sec.gov/comments/sr-nysearca-2017-139/nysearca2017139.htm.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 82602 (Jan. 30, 
2018), 83 FR 4941 (Feb. 2, 2018). The Commission designated March 
26, 2018, as the date by which it should approve, disapprove, or 
institute proceedings to determine whether to disapprove the 
proposed rule change.
    \7\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

I. Summary of the Proposal \8\ and Comments Received
---------------------------------------------------------------------------

    \8\ The Commission notes that additional information regarding 
the Trust, the Shares, and the Funds, including investment 
strategies, calculation of net asset value (``NAV'') and indicative 
fund value, creation and redemption procedures, and additional 
background information about bitcoins, the bitcoin network, and 
bitcoin futures contracts, among other things, can be found in the 
Notice (see supra note 3) and the registration statement filed with 
the Commission on Form S-1 (File No. 333-220680) under the 
Securities Act of 1933 (``Registration Statement''), as applicable.
---------------------------------------------------------------------------

    The Exchange proposes to list and trade the Shares under NYSE Arca 
Rule 8.200-E, Commentary .02, which governs the listing and trading of 
Trust Issued Receipts on the Exchange.\9\ Each Fund will be a series of 
the Trust, and the Trust and the Funds will be managed and controlled 
by ProShare Capital Management LLC (``Sponsor''). Brown Brothers 
Harriman & Co. will be the custodian and administrator for the Trust. 
SEI Investments Distribution Co. will serve as the distributor of the 
Shares (``Distributor''). The Trust will offer Shares of the Funds for 
sale through the Distributor in ``Creation Units.'' \10\
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    \9\ See NYSE Arca Rule 8.200-E, Commentary .02. NYSE Arca Rule 
8.200-E permits the listing and trading of ``Trust Issued 
Receipts,'' defined as a security (1) that is used by the trust 
which holds specific securities deposited with the trust; (2) that, 
when aggregated in some specified minimum number, may be surrendered 
to the trust by the beneficial owner to receive the securities; and 
(3) that pay beneficial owners dividends and other distributions on 
the deposited securities, if any are declared and paid to the 
trustee by an issuer of the deposited securities. Commentary .02 
applies to Trust Issued Receipts that invest in any combination of 
investments, including cash; securities; options on securities and 
indices; futures contracts; options on futures contracts; forward 
contracts; equity caps, collars, and floors; and swap agreements.
    \10\ See Notice, supra note 3, at 61101.
---------------------------------------------------------------------------

    According to the Exchange, the ProShares Bitcoin ETF's investment 
objective will be to seek results (before fees and expenses) that, both 
for a single day and over time, correspond to the performance of lead 
month bitcoin futures contracts \11\ listed and traded on either the 
Cboe Futures Exchange (``CFE'') or the Chicago Mercantile Exchange 
(``CME'') (``Benchmark Futures Contract''). This Fund generally intends 
to invest substantially all of its assets in the Benchmark Futures 
Contracts, but may invest in other U.S. exchange listed bitcoin futures 
contracts, if available (together with Benchmark Futures Contracts, 
collectively, ``Bitcoin Futures Contracts'').\12\
---------------------------------------------------------------------------

    \11\ According to the Exchange, lead month futures contracts are 
the monthly contracts with the earliest expiration date. See Notice, 
supra note 3, at 61101, n.6. See also Notice and Registration 
Statement, supra notes 3 and 8.
    \12\ See Notice, supra note 3, at 61101.
---------------------------------------------------------------------------

    In addition, the Exchange states that the ProShares Short Bitcoin 
ETF's investment objective will be to seek results, for a single day, 
that correspond (before fees and expenses) to the inverse of the daily 
performance of the Benchmark Futures Contract. This Fund generally 
intends to invest substantially all of its assets through short 
positions in Benchmark Futures Contracts, but may invest through short 
positions in Bitcoin Futures Contracts, if available.\13\
---------------------------------------------------------------------------

    \13\ See id.
---------------------------------------------------------------------------

    Further, the Exchange states that, in the event position, price, or 
accountability limits are reached with respect to Bitcoin Futures 
Contracts, each Fund may invest in listed options on Bitcoin Futures 
Contracts (should such listed options become available) and OTC swap 
agreements referencing Bitcoin Futures Contracts (collectively, 
``Financial Instruments'').\14\
---------------------------------------------------------------------------

    \14\ See id. at 61102.
---------------------------------------------------------------------------

    The Commission has received one comment letter, which expresses 
concerns about the proposed rule change.\15\ The commenter refers to 
the proposal as a ``house of cards'' and expresses concern that the 
Funds' attempt to replicate the bitcoin futures markets, which are 
related to underlying cryptocurrencies that trade on unregulated 
exchanges, will lead to losses for retail investors, and that the 
inclusion of an inverse Fund will add to the risk.\16\
---------------------------------------------------------------------------

    \15\ See supra note 4 and accompanying text.
    \16\ See Kohen Letter, supra note 4.
---------------------------------------------------------------------------

II. Proceedings To Determine Whether to Approve or Disapprove SR-
NYSEArca-2017-139 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \17\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change. 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

[[Page 13538]]

provide comments on the proposed rule change.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\18\ 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 change's consistency with Section 6(b)(5) 
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, to promote just and equitable 
principles of trade,'' and ``to protect investors and the public 
interest.'' \19\
---------------------------------------------------------------------------

    \18\ Id.
    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

III. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) or any other provision of the Act, or 
the rules and regulations thereunder. Although there do not appear to 
be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\20\
---------------------------------------------------------------------------

    \20\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Pub. L. 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by April 19, 2018. Any person who wishes to file a rebuttal 
to any other person's submission must file that rebuttal by May 3, 
2018. The Commission asks that commenters address the sufficiency of 
the Exchange's statements in support of the proposal, which are set 
forth in the Notice,\21\ 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:
---------------------------------------------------------------------------

    \21\ See supra note 3.
---------------------------------------------------------------------------

    1. What are commenters' views on whether the Exchange has 
sufficiently described how the Sponsor will select the applicable 
Benchmark Futures Contracts, given that the contracts trading on these 
two bitcoin futures exchanges have different terms (including different 
reference prices) and trade at different prices?
    2. In its proposal, the Exchange states that each Fund may, in the 
event that position, price, or accountability limits are reached with 
respect to Bitcoin Futures Contracts--or if the market for a specific 
Bitcoin Futures Contract experiences an emergency or disruption--also 
invest in Financial Instruments, which include listed options on 
Bitcoin Futures Contracts (should such listed options become available) 
and OTC swap agreements referencing Bitcoin Futures Contracts. What are 
commenters' views on the current availability of Financial Instruments 
for trading? What are commenters' views on the ability of the Funds to 
invest in Financial Instruments in the event that position, price, or 
accountability limits are reached with respect to Bitcoin Futures 
Contracts? What are commenters' views on the ability of the Funds to 
invest in Financial Instruments if the market for a specific Bitcoin 
Futures Contract experiences emergencies or disruptions?
    3. What are commenters' views on whether the Funds would have the 
information necessary to adequately value, including fair value, the 
Bitcoin Futures Contracts and related Financial Instruments when 
determining an appropriate end-of-day NAV for the Funds, taking into 
account any volatility, fragmentation, or general lack of regulation of 
the underlying bitcoin markets?
    4. What are commenters' views on the potential impact of 
manipulation in the underlying bitcoin markets on the Funds' NAV? What 
are commenters views on the potential effect of such manipulation on 
the valuation of a Fund's Bitcoin Futures Contracts, which is 
determined using the last traded price on the primary listing futures 
exchange (as opposed to the settlement price, closing price, midpoint, 
or volume weighted average price)? What are commenters' views on the 
potential effect of such manipulation on the pricing of a Fund's 
Financial Instruments?
    5. What are commenters' views on how the Funds' valuation policies 
would address the potential for the bitcoin blockchain to diverge into 
different paths (i.e., a ``fork'')?
    6. What are commenters' views on the price differentials and 
trading volumes across bitcoin trading platforms (including during 
periods of market stress) and on the extent to which these differing 
prices may affect the trading of the Bitcoin Futures Contracts and, 
accordingly, trading in the Shares of the Funds?
    7. What are commenters' views on how the substantial margin 
requirements for Bitcoin Futures Contracts, and the nature of liquidity 
and volatility in the market for Bitcoin Futures Contracts, might 
affect the Trust's ability to meet redemption orders? What are 
commenters' views on whether and how the margin requirements for 
Bitcoin Futures Contracts, and the nature of liquidity and volatility 
in the market for Bitcoin Futures Contracts, might affect a Fund's use 
of available cash to achieve its investment strategy?
    8. What are commenters' views on the possibility that the Funds--
along with other exchange-traded products with similar investment 
objectives--could acquire a substantial portion of the market for 
Bitcoin Futures Contracts or the Financial Instruments? What are 
commenters' views on whether such a concentration of holdings could 
affect the Funds' portfolio management, the liquidity of the Funds' 
respective portfolios, or the pricing of the Bitcoin Futures Contracts 
or the Financial Instruments?
    9. What are commenters' views on possible factors that might impair 
the ability of the arbitrage mechanism to keep the trading price of the 
Shares tied to the NAV of each Fund? With respect to the market for 
Bitcoin Futures Contracts, what are commenters' views on the potential 
impact on the arbitrage mechanism of the price volatility and the 
potential for trading halts? What are commenters' views on whether or 
how these potential impairments of the arbitrage mechanism may affect 
the Funds' ability to ensure adequate participation by Authorized 
Participants? What are commenters' views on the potential effects on 
investors if the arbitrage mechanism is impaired?
    10. What are commenters' views on the risks of price manipulation 
and fraud in the underlying bitcoin trading platforms and how these 
risks might affect the Bitcoin Futures Contracts market or the 
Financial Instruments? What are commenters' views on how these risks 
might affect trading in the Shares of the Funds?
    11. What are commenters' views on how an investor may evaluate the 
price of the Shares in light of the risk of

[[Page 13539]]

potential price manipulation and fraud in the underlying bitcoin 
trading platforms and in light of the potentially significant spread 
between the price of the Bitcoin Futures Contracts and the spot price 
of bitcoin?
    12. What are commenters' views on whether the two bitcoin futures 
exchanges represent a significant market, i.e., a market of significant 
size?
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2017-139 on the subject line.

Paper Comments

     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-NYSEArca-2017-139. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2017-139 and should be 
submitted on or before April 19, 2018. Rebuttal comments should be 
submitted by May 3, 2018.
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(57).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Brent J. Fields,
Secretary.
[FR Doc. 2018-06297 Filed 3-28-18; 8:45 am]
 BILLING CODE 8011-01-P



                                                                             Federal Register / Vol. 83, No. 61 / Thursday, March 29, 2018 / Notices                                                      13537

                                                  For the Commission, by the Division of                institutes proceedings under Section                      exchange listed bitcoin futures
                                                Trading and Markets, pursuant to delegated              19(b)(2)(B) of the Act 7 to determine                     contracts, if available (together with
                                                authority.24                                            whether to approve or disapprove the                      Benchmark Futures Contracts,
                                                Brent J. Fields,                                        proposed rule change.                                     collectively, ‘‘Bitcoin Futures
                                                Secretary.                                                                                                        Contracts’’).12
                                                                                                        I. Summary of the Proposal 8 and
                                                [FR Doc. 2018–06299 Filed 3–28–18; 8:45 am]
                                                                                                        Comments Received                                            In addition, the Exchange states that
                                                BILLING CODE 8011–01–P
                                                                                                           The Exchange proposes to list and                      the ProShares Short Bitcoin ETF’s
                                                                                                        trade the Shares under NYSE Arca Rule                     investment objective will be to seek
                                                SECURITIES AND EXCHANGE                                 8.200–E, Commentary .02, which                            results, for a single day, that correspond
                                                COMMISSION                                              governs the listing and trading of Trust                  (before fees and expenses) to the inverse
                                                                                                        Issued Receipts on the Exchange.9 Each                    of the daily performance of the
                                                [Release No. 34–82939; File No. SR–                                                                               Benchmark Futures Contract. This Fund
                                                NYSEArca–2017–139]
                                                                                                        Fund will be a series of the Trust, and
                                                                                                        the Trust and the Funds will be                           generally intends to invest substantially
                                                                                                        managed and controlled by ProShare                        all of its assets through short positions
                                                Self-Regulatory Organizations; NYSE
                                                Arca, Inc.; Order Instituting                           Capital Management LLC (‘‘Sponsor’’).                     in Benchmark Futures Contracts, but
                                                Proceedings To Determine Whether To                     Brown Brothers Harriman & Co. will be                     may invest through short positions in
                                                Approve or Disapprove a Proposed                        the custodian and administrator for the                   Bitcoin Futures Contracts, if available.13
                                                Rule Change To List and Trade the                       Trust. SEI Investments Distribution Co.                      Further, the Exchange states that, in
                                                Shares of the ProShares Bitcoin ETF                     will serve as the distributor of the                      the event position, price, or
                                                and the ProShares Short Bitcoin ETF                     Shares (‘‘Distributor’’). The Trust will                  accountability limits are reached with
                                                Under NYSE Arca Rule 8.200–E,                           offer Shares of the Funds for sale                        respect to Bitcoin Futures Contracts,
                                                Commentary .02                                          through the Distributor in ‘‘Creation                     each Fund may invest in listed options
                                                                                                        Units.’’ 10                                               on Bitcoin Futures Contracts (should
                                                March 23, 2018.                                            According to the Exchange, the                         such listed options become available)
                                                   On December 4, 2017, NYSE Arca,                      ProShares Bitcoin ETF’s investment                        and OTC swap agreements referencing
                                                Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed              objective will be to seek results (before                 Bitcoin Futures Contracts (collectively,
                                                with the Securities and Exchange                        fees and expenses) that, both for a single                ‘‘Financial Instruments’’).14
                                                Commission (‘‘Commission’’), pursuant                   day and over time, correspond to the
                                                to Section 19(b)(1) of the Securities                   performance of lead month bitcoin                            The Commission has received one
                                                Exchange Act of 1934 (‘‘Act’’) 1 and Rule               futures contracts 11 listed and traded on                 comment letter, which expresses
                                                19b–4 thereunder,2 a proposed rule                      either the Cboe Futures Exchange                          concerns about the proposed rule
                                                change to list and trade the shares                     (‘‘CFE’’) or the Chicago Mercantile                       change.15 The commenter refers to the
                                                (‘‘Shares’’) of the ProShares Bitcoin ETF               Exchange (‘‘CME’’) (‘‘Benchmark                           proposal as a ‘‘house of cards’’ and
                                                and the ProShares Short Bitcoin ETF                     Futures Contract’’). This Fund generally                  expresses concern that the Funds’
                                                (each a ‘‘Fund’’ and, collectively,                     intends to invest substantially all of its                attempt to replicate the bitcoin futures
                                                ‘‘Funds’’) issued by the ProShares Trust                assets in the Benchmark Futures                           markets, which are related to underlying
                                                II (‘‘Trust’’) under NYSE Arca Rule                     Contracts, but may invest in other U.S.                   cryptocurrencies that trade on
                                                8.200–E, Commentary .02. The proposed                                                                             unregulated exchanges, will lead to
                                                rule change was published for comment                     7 15  U.S.C. 78s(b)(2)(B).                              losses for retail investors, and that the
                                                in the Federal Register on December 26,                   8 The  Commission notes that additional                 inclusion of an inverse Fund will add to
                                                2017.3                                                  information regarding the Trust, the Shares, and the      the risk.16
                                                                                                        Funds, including investment strategies, calculation
                                                   The Commission has received one                      of net asset value (‘‘NAV’’) and indicative fund
                                                comment letter on the proposed rule                                                                               II. Proceedings To Determine Whether
                                                                                                        value, creation and redemption procedures, and
                                                change.4 On January 30, 2018, pursuant                  additional background information about bitcoins,         to Approve or Disapprove SR–
                                                to Section 19(b)(2) of the Act,5 the                    the bitcoin network, and bitcoin futures contracts,       NYSEArca–2017–139 and Grounds for
                                                Commission designated a longer period
                                                                                                        among other things, can be found in the Notice (see       Disapproval Under Consideration
                                                                                                        supra note 3) and the registration statement filed
                                                within which to approve the proposed                    with the Commission on Form S–1 (File No. 333–               The Commission is instituting
                                                rule change, disapprove the proposed                    220680) under the Securities Act of 1933
                                                                                                                                                                  proceedings pursuant to Section
                                                rule change, or institute proceedings to                (‘‘Registration Statement’’), as applicable.
                                                                                                           9 See NYSE Arca Rule 8.200–E, Commentary .02.          19(b)(2)(B) of the Act 17 to determine
                                                determine whether to disapprove the                     NYSE Arca Rule 8.200–E permits the listing and            whether the proposed rule change
                                                proposed rule change.6 This order                       trading of ‘‘Trust Issued Receipts,’’ defined as a        should be approved or disapproved.
                                                                                                        security (1) that is used by the trust which holds
                                                  24 17                                                 specific securities deposited with the trust; (2) that,
                                                                                                                                                                  Institution of such proceedings is
                                                         CFR 200.30–3(a)(12).
                                                  1 15                                                  when aggregated in some specified minimum                 appropriate at this time in view of the
                                                        U.S.C.78s(b)(1).
                                                   2 17 CFR 240.19b–4.
                                                                                                        number, may be surrendered to the trust by the            legal and policy issues raised by the
                                                                                                        beneficial owner to receive the securities; and (3)       proposed rule change. Institution of
                                                   3 See Securities Exchange Act Release No. 82350
                                                                                                        that pay beneficial owners dividends and other
                                                (Dec. 19, 2017), 82 FR 61100 (Dec. 26, 2017)            distributions on the deposited securities, if any are     proceedings does not indicate that the
                                                (‘‘Notice’’).                                           declared and paid to the trustee by an issuer of the      Commission has reached any
                                                   4 See Letter from Abe Kohen, AK Financial
                                                                                                        deposited securities. Commentary .02 applies to           conclusions with respect to any of the
                                                Engineering Consultants, LLC (Dec. 27, 2017)            Trust Issued Receipts that invest in any
                                                (‘‘Kohen Letter’’). All comments on the proposed
                                                                                                                                                                  issues involved. Rather, as described
                                                                                                        combination of investments, including cash;
                                                rule change are available on the Commission’s           securities; options on securities and indices; futures    below, the Commission seeks and
sradovich on DSK3GMQ082PROD with NOTICES




                                                website at: https://www.sec.gov/comments/sr-            contracts; options on futures contracts; forward          encourages interested persons to
                                                nysearca-2017-139/nysearca2017139.htm.                  contracts; equity caps, collars, and floors; and swap
                                                   5 15 U.S.C. 78s(b)(2).                               agreements.                                                12 See
                                                   6 See Securities Exchange Act Release No. 82602         10 See Notice, supra note 3, at 61101.
                                                                                                                                                                          Notice, supra note 3, at 61101.
                                                                                                                                                                   13 See id.
                                                (Jan. 30, 2018), 83 FR 4941 (Feb. 2, 2018). The            11 According to the Exchange, lead month futures
                                                                                                                                                                   14 See id. at 61102.
                                                Commission designated March 26, 2018, as the date       contracts are the monthly contracts with the earliest
                                                                                                                                                                   15 See supra note 4 and accompanying text.
                                                by which it should approve, disapprove, or institute    expiration date. See Notice, supra note 3, at 61101,
                                                                                                                                                                   16 See Kohen Letter, supra note 4.
                                                proceedings to determine whether to disapprove the      n.6. See also Notice and Registration Statement,
                                                proposed rule change.                                   supra notes 3 and 8.                                       17 15 U.S.C. 78s(b)(2)(B).




                                           VerDate Sep<11>2014   19:09 Mar 28, 2018   Jkt 244001   PO 00000   Frm 00069   Fmt 4703   Sfmt 4703   E:\FR\FM\29MRN1.SGM        29MRN1


                                                13538                         Federal Register / Vol. 83, No. 61 / Thursday, March 29, 2018 / Notices

                                                provide comments on the proposed rule                   particular, the Commission seeks                         6. What are commenters’ views on the
                                                change.                                                 comment on the following:                             price differentials and trading volumes
                                                   Pursuant to Section 19(b)(2)(B) of the                  1. What are commenters’ views on                   across bitcoin trading platforms
                                                Act,18 the Commission is providing                      whether the Exchange has sufficiently                 (including during periods of market
                                                                                                        described how the Sponsor will select                 stress) and on the extent to which these
                                                notice of the grounds for disapproval
                                                                                                        the applicable Benchmark Futures                      differing prices may affect the trading of
                                                under consideration. The Commission is
                                                                                                        Contracts, given that the contracts                   the Bitcoin Futures Contracts and,
                                                instituting proceedings to allow for
                                                                                                        trading on these two bitcoin futures                  accordingly, trading in the Shares of the
                                                additional analysis of the proposed rule
                                                                                                        exchanges have different terms                        Funds?
                                                change’s consistency with Section                                                                                7. What are commenters’ views on
                                                                                                        (including different reference prices)
                                                6(b)(5) of the Act, which requires,                     and trade at different prices?                        how the substantial margin
                                                among other things, that the rules of a                    2. In its proposal, the Exchange states            requirements for Bitcoin Futures
                                                national securities exchange be                         that each Fund may, in the event that                 Contracts, and the nature of liquidity
                                                ‘‘designed to prevent fraudulent and                    position, price, or accountability limits             and volatility in the market for Bitcoin
                                                manipulative acts and practices, to                     are reached with respect to Bitcoin                   Futures Contracts, might affect the
                                                promote just and equitable principles of                Futures Contracts—or if the market for                Trust’s ability to meet redemption
                                                trade,’’ and ‘‘to protect investors and the             a specific Bitcoin Futures Contract                   orders? What are commenters’ views on
                                                public interest.’’ 19                                   experiences an emergency or                           whether and how the margin
                                                III. Procedure: Request for Written                     disruption—also invest in Financial                   requirements for Bitcoin Futures
                                                Comments                                                Instruments, which include listed                     Contracts, and the nature of liquidity
                                                                                                        options on Bitcoin Futures Contracts                  and volatility in the market for Bitcoin
                                                   The Commission requests that                         (should such listed options become                    Futures Contracts, might affect a Fund’s
                                                interested persons provide written                      available) and OTC swap agreements                    use of available cash to achieve its
                                                submissions of their views, data, and                   referencing Bitcoin Futures Contracts.                investment strategy?
                                                arguments with respect to the issues                    What are commenters’ views on the                        8. What are commenters’ views on the
                                                identified above, as well as any other                  current availability of Financial                     possibility that the Funds—along with
                                                concerns they may have with the                         Instruments for trading? What are                     other exchange-traded products with
                                                proposal. In particular, the Commission                 commenters’ views on the ability of the               similar investment objectives—could
                                                invites the written views of interested                 Funds to invest in Financial                          acquire a substantial portion of the
                                                persons concerning whether the                          Instruments in the event that position,               market for Bitcoin Futures Contracts or
                                                proposal is consistent with Section                     price, or accountability limits are                   the Financial Instruments? What are
                                                6(b)(5) or any other provision of the Act,              reached with respect to Bitcoin Futures               commenters’ views on whether such a
                                                or the rules and regulations thereunder.                Contracts? What are commenters’ views                 concentration of holdings could affect
                                                Although there do not appear to be any                  on the ability of the Funds to invest in              the Funds’ portfolio management, the
                                                issues relevant to approval or                          Financial Instruments if the market for               liquidity of the Funds’ respective
                                                disapproval that would be facilitated by                a specific Bitcoin Futures Contract                   portfolios, or the pricing of the Bitcoin
                                                an oral presentation of views, data, and                experiences emergencies or disruptions?               Futures Contracts or the Financial
                                                                                                           3. What are commenters’ views on                   Instruments?
                                                arguments, the Commission will
                                                                                                        whether the Funds would have the                         9. What are commenters’ views on
                                                consider, pursuant to Rule 19b–4, any
                                                                                                        information necessary to adequately                   possible factors that might impair the
                                                request for an opportunity to make an
                                                                                                        value, including fair value, the Bitcoin              ability of the arbitrage mechanism to
                                                oral presentation.20
                                                                                                        Futures Contracts and related Financial               keep the trading price of the Shares tied
                                                   Interested persons are invited to                    Instruments when determining an                       to the NAV of each Fund? With respect
                                                submit written data, views, and                         appropriate end-of-day NAV for the                    to the market for Bitcoin Futures
                                                arguments regarding whether the                         Funds, taking into account any                        Contracts, what are commenters’ views
                                                proposal should be approved or                          volatility, fragmentation, or general lack            on the potential impact on the arbitrage
                                                disapproved by April 19, 2018. Any                      of regulation of the underlying bitcoin               mechanism of the price volatility and
                                                person who wishes to file a rebuttal to                 markets?                                              the potential for trading halts? What are
                                                any other person’s submission must file                    4. What are commenters’ views on the               commenters’ views on whether or how
                                                that rebuttal by May 3, 2018. The                       potential impact of manipulation in the               these potential impairments of the
                                                Commission asks that commenters                         underlying bitcoin markets on the                     arbitrage mechanism may affect the
                                                address the sufficiency of the                          Funds’ NAV? What are commenters                       Funds’ ability to ensure adequate
                                                Exchange’s statements in support of the                 views on the potential effect of such                 participation by Authorized
                                                proposal, which are set forth in the                    manipulation on the valuation of a                    Participants? What are commenters’
                                                Notice,21 in addition to any other                      Fund’s Bitcoin Futures Contracts, which               views on the potential effects on
                                                comments they may wish to submit                        is determined using the last traded price             investors if the arbitrage mechanism is
                                                about the proposed rule change. In                      on the primary listing futures exchange               impaired?
                                                                                                        (as opposed to the settlement price,                     10. What are commenters’ views on
                                                  18 Id.                                                closing price, midpoint, or volume                    the risks of price manipulation and
                                                  19 15  U.S.C. 78f(b)(5).                              weighted average price)? What are                     fraud in the underlying bitcoin trading
                                                  20 Section  19(b)(2) of the Act, as amended by the    commenters’ views on the potential                    platforms and how these risks might
                                                Securities Act Amendments of 1975, Pub. L. 94–29
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                                                (June 4, 1975), grants the Commission flexibility to
                                                                                                        effect of such manipulation on the                    affect the Bitcoin Futures Contracts
                                                determine what type of proceeding—either oral or        pricing of a Fund’s Financial                         market or the Financial Instruments?
                                                notice and opportunity for written comments—is          Instruments?                                          What are commenters’ views on how
                                                appropriate for consideration of a particular              5. What are commenters’ views on                   these risks might affect trading in the
                                                proposal by a self-regulatory organization. See         how the Funds’ valuation policies
                                                Securities Act Amendments of 1975, Senate Comm.
                                                                                                                                                              Shares of the Funds?
                                                on Banking, Housing & Urban Affairs, S. Rep. No.        would address the potential for the                      11. What are commenters’ views on
                                                75, 94th Cong., 1st Sess. 30 (1975).                    bitcoin blockchain to diverge into                    how an investor may evaluate the price
                                                   21 See supra note 3.                                 different paths (i.e., a ‘‘fork’’)?                   of the Shares in light of the risk of


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                                                                             Federal Register / Vol. 83, No. 61 / Thursday, March 29, 2018 / Notices                                                      13539

                                                potential price manipulation and fraud                  19, 2018. Rebuttal comments should be                  to the CQ Plan (‘‘Amendments’’). The
                                                in the underlying bitcoin trading                       submitted by May 3, 2018.                              Amendments seek to amend the text of
                                                platforms and in light of the potentially                 For the Commission, by the Division of               the Plans’ fee schedule to adopt changes
                                                significant spread between the price of                 Trading and Markets, pursuant to delegated             to the Broker-Dealer Enterprise
                                                the Bitcoin Futures Contracts and the                   authority.22                                           Maximum Monthly Charge (‘‘Enterprise
                                                spot price of bitcoin?                                  Brent J. Fields,                                       Cap’’) and Per-Quote-Packet Charges.
                                                  12. What are commenters’ views on                     Secretary.                                                The Participants are proposing to
                                                whether the two bitcoin futures                         [FR Doc. 2018–06297 Filed 3–28–18; 8:45 am]            increase the Enterprise Cap from
                                                exchanges represent a significant                       BILLING CODE 8011–01–P                                 $686,400 to $1,260,000 for Network A
                                                market, i.e., a market of significant size?                                                                    and from $520,000 to $680,000 for
                                                  Comments may be submitted by any                                                                             Network B. The Participants state that
                                                of the following methods:                               SECURITIES AND EXCHANGE                                the Enterprise Cap was established to
                                                                                                        COMMISSION                                             provide incentives to entities to make
                                                Electronic Comments                                                                                            market data available to large
                                                                                                        [Release No. 34–82937; File No. SR–CTA/
                                                   • Use the Commission’s internet                      CQ–2018–01]
                                                                                                                                                               Nonprofessional Subscriber bases. Due
                                                comment form (http://www.sec.gov/                                                                              to what they describe as ongoing
                                                rules/sro.shtml); or                                    Consolidated Tape Association; Notice                  industry consolidation, however, the
                                                   • Send an email to rule-comments@                    of Filing and Immediate Effectiveness                  Participants are proposing to increase
                                                sec.gov. Please include File Number SR–                 of the Twenty-Third Charges                            the Enterprise Cap in order to account
                                                NYSEArca–2017–139 on the subject                        Amendment to the Second                                for the sudden and substantial increase
                                                line.                                                   Restatement of the CTA Plan and the                    of Nonprofessional Subscribers at
                                                                                                        Fourteenth Charges Amendment to the                    entities using the Enterprise Cap.
                                                Paper Comments                                          Restated CQ Plan                                          To make the increase of the Enterprise
                                                  • Send paper comments in triplicate                   March 23, 2018.
                                                                                                                                                               Cap revenue neutral (from an overall
                                                to Secretary, Securities and Exchange                                                                          Plan perspective) and fee neutral (from
                                                                                                           Pursuant to Section 11A of the                      an individual entity 6 perspective), the
                                                Commission, 100 F Street NE,
                                                                                                        Securities Exchange Act of 1934                        Participants are proposing to decrease
                                                Washington, DC 20549–1090.
                                                                                                        (‘‘Act’’),1 and Rule 608 thereunder,2                  the Per-Quote-Packet Charges for those
                                                All submissions should refer to File                    notice is hereby given that on March 5,                broker-dealers with 500,000 or more
                                                Number SR–NYSEArca-2017–139. This                       2018,3 the Consolidated Tape                           Nonprofessional Subscribers. According
                                                file number should be included on the                   Association (‘‘CTA’’) Plan participants                to the Participants, the increase in fees
                                                subject line if email is used. To help the              (‘‘Participants’’) 4 filed with the                    as a result of the increase of the
                                                Commission process and review your                      Securities and Exchange Commission                     Enterprise Cap will be offset by a
                                                comments more efficiently, please use                   (‘‘Commission’’) a proposal to amend                   decrease in Per-Quote-Packet Charges
                                                only one method. The Commission will                    the Second Restatement of the CTA Plan                 for those entities that would be most
                                                post all comments on the Commission’s                   and the Restated Consolidated                          likely affected by the raising of the cap,
                                                internet website (http://www.sec.gov/                   Quotation (‘‘CQ’’) Plan (‘‘Plans’’).5 The              i.e., those with a large Nonprofessional
                                                rules/sro.shtml). Copies of the                         amendment represents the twenty-third                  Subscriber base.
                                                submission, all subsequent                              Charges Amendment to the CTA Plan
                                                amendments, all written statements                      and the fourteenth Charges Amendment                      Pursuant to Rule 608(b)(3) under
                                                with respect to the proposed rule                                                                              Regulation NMS,7 the Participants
                                                change that are filed with the                            22 17 CFR 200.30–3(a)(57).                           designate the amendment as
                                                Commission, and all written                               1 15 U.S.C. 78k–1.                                   establishing or changing a fee or other
                                                communications relating to the                            2 17 CFR 242.608.                                    charge collected on their behalf in
                                                proposed rule change between the                          3 See Letter from Emily Kasparov to Brent J.         connection with access to, or use of, the
                                                                                                        Fields, Secretary, Securities and Exchange             facilities contemplated by the Plans. As
                                                Commission and any person, other than                   Commission, dated March 1, 2018.
                                                those that may be withheld from the                       4 The Participants are: Cboe BYX Exchange, Inc.;
                                                                                                                                                               a result, the amendment is effective
                                                public in accordance with the                           Cboe BZX Exchange, Inc.; Cboe EDGA Exchange,           upon filing with the Commission.
                                                provisions of 5 U.S.C. 552, will be                     Inc.; Cboe EDGX Exchange, Inc.; Cboe Exchange,            The Commission is publishing this
                                                available for website viewing and                       Inc.; Chicago Stock Exchange, Inc.; Financial          notice to solicit comments from
                                                                                                        Industry Regulatory Authority, Inc.; Investors
                                                printing in the Commission’s Public                     Exchange LLC; Nasdaq BX, Inc.; Nasdaq ISE, LLC;        interested persons on the proposed
                                                Reference Room, 100 F Street NE,                        Nasdaq PHLX LLC; The Nasdaq Stock Market LLC;          Amendments. Set forth in Sections I and
                                                Washington, DC 20549 on official                        New York Stock Exchange LLC; NYSE Arca, Inc.;          II is the statement of the purpose and
                                                business days between the hours of                      NYSE American LLC; and NYSE National, Inc.             summary of the Amendments, along
                                                                                                        (collectively, the ‘‘Participants’’).
                                                10:00 a.m. and 3:00 p.m. Copies of the                    5 See Securities Exchange Act Release Nos. 10787     with the information required by Rules
                                                filing also will be available for                       (May 10, 1974), 39 FR 17799 (May 20, 1974)             608(a) and 601(a) under the Act,
                                                inspection and copying at the principal                 (declaring the CTA Plan effective); 15009 (July 28,    prepared and submitted by the
                                                office of the Exchange. All comments                    1978), 43 FR 34851 (August 7, 1978) (temporarily       Participants to the Commission.
                                                                                                        authorizing the CQ Plan); and 16518 (January 22,
                                                received will be posted without change.                 1980), 45 FR 6521 (January 28, 1980) (permanently
                                                Persons submitting comments are                         authorizing the CQ Plan). The most recent                6 As described below, the Plan does not require

                                                cautioned that we do not redact or edit                 restatement of both Plans was in 1995. The CTA         an entity that is registered as a broker-dealer under
sradovich on DSK3GMQ082PROD with NOTICES




                                                personal identifying information from                   Plan, pursuant to which markets collect and            the Act to pay more than the Enterprise Cap for any
                                                                                                        disseminate last sale price information for non-       month for the aggregate amount of (a) a network’s
                                                comment submissions. You should                         NASDAQ listed securities, is a ‘‘transaction           Device charges for devices used for its Internal
                                                submit only information that you wish                   reporting plan’’ under Rule 601 under the Act, 17      Distribution plus (b) that network’s Device and Per-
                                                to make available publicly. All                         CFR 242.601, and a ‘‘national market system plan’’     Quote-Packet charges payable in respect of services
                                                submissions should refer to File                        under Rule 608 under the Act, 17 CFR 242.608. The      that it provides to Nonprofessional Subscribers that
                                                                                                        CQ Plan, pursuant to which markets collect and         are brokerage account customers of the broker-
                                                Number SR–NYSEArca-2017–139 and                         disseminate bid/ask quotation information for listed   dealer.
                                                should be submitted on or before April                  securities, is a national market system plan.            7 17 CFR 242.608(b)(3)(i).




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Document Created: 2018-03-29 00:25:37
Document Modified: 2018-03-29 00:25:37
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation83 FR 13537 

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