[Federal Register Volume 86, Number 90 (Wednesday, May 12, 2021)]
[Notices]
[Pages 26073-26081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09969]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91771; File No. SR-NYSEArca-2021-31]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of a Proposed Rule Change To List and Trade Shares of the Valkyrie 
Bitcoin Fund Under NYSE Arca Rule 8.201-E

May 6, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on April 23, 2021, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the Valkyrie 
Bitcoin Fund under NYSE Arca Rule 8.201-E. The proposed change is 
available on the Exchange's website at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
Valkyrie Bitcoin Fund (the ``Trust'') under NYSE Arca Rule 8.201-E, 
which governs the listing and trading of Commodity-Based Trust Shares.
Description of the Trust
    The Shares will be issued by the Trust, a Delaware statutory trust. 
The Trust will operate pursuant to a trust agreement (the ``Trust 
Agreement'') between Valkyrie Digital Assets LLC (the ``Sponsor'') and 
Delaware Trust Company, as the Trust's trustee (the ``Trustee''). The 
Shares will be registered with the Commission by means of the Trust's 
registrations statement on Form S-1 (the ``Registration 
Statement'').\4\ Pursuant to the Trust Agreement, the Sponsor has 
entered into a custodian agreement (the ``Custodian Agreement'') with 
Coinbase Custody Trust Company, LLC (the ``Custodian'') to act as 
custodian for the Trust's bitcoins. Pursuant to the Custodian 
Agreement, the Custodian will establish accounts that hold the bitcoins 
deposited with the Custodian on behalf of the Trust. U.S. Bancorp Fund 
Services, LLC will act as the transfer agent for the Trust (the 
``Transfer Agent'') and as the administrator of the Trust (the 
``Administrator'') to perform various administrative, accounting and 
recordkeeping functions on behalf of the Trust.
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    \4\ See Registration Statement on Form S-1, dated January 22, 
2021 filed with the Commission by the Sponsor on behalf of the Trust 
(File No. 333-252344). The descriptions of the Trust contained 
herein are based, in part, on information in the Registration 
Statement. The Registration Statement in not yet effective and the 
Shares will not trade on the Exchange until such time that the 
Registration Statement is effective.
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Description of the Trust
    According to the Registration Statement, the investment objective 
of the Trust is for the Shares to reflect the performance of the value 
of a bitcoin as represented by the CF Bitcoin US Settlement Price (the 
``Index''), less the Trust's liabilities and expenses. The purpose of 
the Trust is to provide investors with a cost-effective and convenient 
way to invest in bitcoin in a manner that is more efficient and 
convenient than the purchase of a stand-alone bitcoin, while also 
mitigating some of the risk by reducing the volatility typically 
associated with the purchase of stand-alone bitcoin and without the 
uncertain and often complex requirements relating to acquiring and/or 
holding bitcoin.
    According to the Registration Statement, the Trust will only hold 
bitcoin, and will, from time to time, issue Baskets \5\ in exchange for 
deposits of bitcoins and to distribute bitcoins in connection with 
redemptions of Baskets. The Shares of the Trust represent units of 
fractional undivided beneficial interest in, and ownership of, the 
Trust. The bitcoins held by the Custodian on behalf of the Trust will 
be transferred out of the Bitcoin Account only in the following 
circumstances: Transferred to pay the Sponsor's Fee, distributed to 
Authorized Participants or Liquidity Providers, as applicable, in 
connection with the redemption of Baskets, transferred to be sold on an 
as-needed basis to pay Additional Trust Expenses, sold on behalf of the 
Trust in the event the Trust terminates and liquidates its assets or as 
otherwise required by law or regulation.
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    \5\ According to the Registration Statement, a Basket equals a 
block of 50,000 Shares.
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Custody of the Trust's Bitcoins
    According to the Registration Statement, the Custodian is a New 
York-state chartered trust company operating under the direct 
supervision of the New York State Department of Financial Services and 
is subject to the anti-money laundering requirements of the Financial 
Crimes Enforcement Network (``FinCEN''). In addition, the Custodian is 
a qualified custodian under the Investment Advisers Act of 1940. Under 
the Custodian Agreement, the Custodian will be responsible for the 
safety and security of the Trust's Bitcoins as well as overseeing the 
process of deposit, withdrawal, sale and purchase of the Trust's 
bitcoins. The Custodian will custody the bitcoin in accordance with the 
terms of the Custodian Agreement.
    According to the Registration Statement, all bitcoins exist and are 
stored on the Blockchain, the decentralized transaction ledger of the 
Bitcoin Network. The Blockchain records most transactions (including 
mining of new bitcoins) for all bitcoins in existence, and in doing so 
verifies the

[[Page 26074]]

location of each bitcoin (or fraction thereof) in a particular digital 
wallet. The Bitcoin Account will be maintained by the Custodian and 
cold storage \6\ mechanisms will be used for the Vault Account by the 
Custodian. Each digital wallet of the Trust may be accessed using its 
corresponding private key. The Custodian's custodial operations will 
maintain custody of the private keys that have been deposited in cold 
storage at its various vaulting premises which are located in 
geographically dispersed locations across the world, including but not 
limited to the United States, Europe, including Switzerland, and South 
America. The locations of the vaulting premises may change regularly 
and are kept confidential by the Custodian for security purposes.
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    \6\ According to the Registration Statement, the term ``cold 
storage'' refers to a safeguarding method by which the private keys 
corresponding to bitcoins stored on a digital wallet are removed 
from any computers actively connected to the internet. Cold storage 
of private keys may involve keeping such wallet on a non-networked 
computer or electronic device or storing the public key and private 
keys relating to the digital wallet on a storage device (for 
example, a USB thumb drive) or printed medium (for example, papyrus 
or paper) and deleting the digital wallet from all computers.
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    According to the Registration Statement, the Custodian is the 
custodian of the Trust's private keys in accordance with the terms and 
provisions of the Custodian Agreement and will utilize the certain 
security procedures such as algorithms, codes, passwords, encryption or 
telephone call-backs (together, the ``Security Procedures'') in the 
administration and operation of the Trust and the safekeeping of its 
bitcoins and private keys. The Custodian will create a Vault Account 
for the Trust assets in which private keys are placed in cold storage. 
The Custodian will segregate the private keys stored with it from any 
other assets it holds or holds for others. Further, multiple distinct 
private keys must sign any transaction in order to transfer the Trust's 
bitcoins from a multi-signature address to any other address on the 
Bitcoin blockchain. Distinct private keys required for multi-signature 
address transfers reside in geographically dispersed vault locations, 
known as ``signing vaults.'' In addition to multiple signing vaults, 
the Custodian maintains multiple ``back-up vaults'' in which backup 
private keys are stored. In the event that one or more of the ``signing 
vaults'' is compromised, the back-up vaults would be activated and used 
as signing vaults to complete a transaction within 72 hours. As such, 
if any one signing vault is compromised, it would have no impact on the 
ability of the Trust to access its bitcoins, other than a possible 
delay in operations of 72 hours, while one or more of the ``backup 
vaults'' is transitioned to a signing vault. These Security Procedures 
ensure that there is no single point of failure in the protection of 
the Trust's assets.
Overview of the Bitcoin Industry and Market \7\
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    \7\ For the purpose of this section, Bitcoin with an upper case 
``B'' is used to describe the system as a whole that is involved in 
maintaining the ledger of bitcoin ownership and facilitating the 
transfer of bitcoin among parties. When referring to the digital 
asset within the bitcoin network, bitcoin is written with a lower 
case ``b'' (except, at the beginning of sentences or paragraph 
sections).
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Bitcoin
    According to the Registration Statement, bitcoin is the digital 
asset that is native to, and created and transmitted through the 
operations of, the peer-to-peer Bitcoin network, a decentralized 
network of computers that operates on cryptographic protocols. No 
single entity owns or operates the Bitcoin network, the infrastructure 
of which is collectively maintained by a decentralized user base. The 
Bitcoin network allows people to exchange tokens of value, called 
bitcoin, which are recorded on a public transaction ledger known as the 
Blockchain. Bitcoin can be used to pay for goods and services, or it 
can be converted to fiat currencies, such as the U.S. dollar, at rates 
determined on bitcoin trading platforms or in individual end-user-to-
end-user transactions under a barter system.
    The value of bitcoin is determined by the supply of and demand for 
bitcoin. New bitcoins are created and rewarded to the parties providing 
the Bitcoin network's infrastructure (``miners'') in exchange for their 
expending computational power to verifying transactions and add them to 
the Blockchain. The Blockchain is effectively a decentralized database 
that includes all blocks that have been solved by miners and it is 
updated to include new blocks as they are solved. Each bitcoin 
transaction is broadcast to the Bitcoin network and, when included in a 
block, recorded in the Blockchain. As each new block records 
outstanding bitcoin transactions, and outstanding transactions are 
settled and validated through such recording, the Blockchain represents 
a complete, transparent and unbroken history of all transactions of the 
Bitcoin network.
Bitcoin Network
    According to the Registration Statement, bitcoin was first 
described in a white paper released in 2008 and published under the 
pseudonym ``Satoshi Nakamoto.'' The protocol underlying Bitcoin was 
subsequently released in 2009 as open source software and currently 
operates on a worldwide network of computers.
    The first step in directly using the Bitcoin network for 
transactions is to download specialized software referred to as a 
``bitcoin wallet.'' A user's bitcoin wallet can run on a computer or 
smartphone, and can be used both to send and to receive bitcoin. Within 
a bitcoin wallet, a user can generate one or more unique ``bitcoin 
addresses,'' which are conceptually similar to bank account numbers. 
After establishing a bitcoin address, a user can send or receive 
bitcoin from his or her bitcoin address to another user's address. 
Sending bitcoin from one bitcoin address to another is similar in 
concept to sending a bank wire from one person's bank account to 
another person's bank account; provided, however, that such 
transactions are not managed by an intermediary and erroneous 
transactions generally may not be reversed or remedied once sent.
    The amount of bitcoin associated with each bitcoin address, as well 
as each bitcoin transaction to or from such address, is transparently 
reflected in the Blockchain and can be viewed by websites that operate 
as ``blockchain explorers.'' Copies of the Blockchain exist on 
thousands of computers on the Bitcoin network. A user's bitcoin wallet 
will either contain a copy of the blockchain or be able to connect with 
another computer that holds a copy of the blockchain. The innovative 
design of the Bitcoin network protocol allows each Bitcoin user to 
trust that their copy of the Blockchain will generally be updated 
consistent with each other user's copy.
Bitcoin Protocol
    According to the Registration Statement, the Bitcoin protocol is 
open source software, meaning any developer can review the underlying 
code and suggest changes. There is no official company or group that is 
responsible for making modifications to Bitcoin. There are, however, a 
number of individual developers that regularly contribute to a specific 
distribution of Bitcoin software known as the ``Bitcoin Core,'' which 
is maintained in an open-source repository on the website Github. There 
are many other compatible versions of Bitcoin software, but Bitcoin 
Core provides the de-facto standard for the Bitcoin protocol, also 
known as the ``reference software.'' The core developers for Bitcoin 
Core operate under a volunteer basis and without strict hierarchical 
administration.

[[Page 26075]]

    Significant changes to the Bitcoin protocol are typically 
accomplished through a so-called ``Bitcoin Improvement Proposal'' or 
BIP. Such proposals are generally posted on websites, and the proposals 
explain technical requirements for the protocol change as well as 
reasons why the change should be accepted. Upon its inclusion in the 
most recent version of Bitcoin Core, a new BIP becomes part of the 
reference software's Bitcoin protocol. Several BIPs have been 
implemented since 2011 and have provided various new features and 
scaling improvements.
    Because Bitcoin has no central authority, updating the reference 
software's Bitcoin protocol will not immediately change the Bitcoin 
network's operations. Instead, the implementation of a change is 
achieved by users and miners downloading and running updated versions 
of Bitcoin Core or other Bitcoin software that abides by the new 
Bitcoin protocol. Users and miners must accept any changes made to the 
Bitcoin source code by downloading a version of their Bitcoin software 
that incorporates the proposed modification of the Bitcoin network's 
source code. A modification of the Bitcoin network's source code is 
only effective with respect to the Bitcoin users and miners that 
download it. If an incompatible modification is accepted only by a 
percentage of users and miners, a division in the Bitcoin network will 
occur such that one network will run the pre-modification source code 
and the other network will run the modified source code. Such a 
division is known as a ``fork'' in the Bitcoin network.
    Such a fork in the Bitcoin network occurred on August 1, 2017, when 
a group of developers and miners accepted certain changes to the 
Bitcoin network software intended to increase transaction capacity. 
Blocks mined on this network now diverge from blocks mined on the 
Bitcoin network, which has resulted in the creation of a new blockchain 
whose digital asset is referred to as ``bitcoin cash.'' Bitcoin and 
bitcoin cash now operate as separate, independent networks, and have 
distinct related assets (bitcoin and bitcoin cash). Additional forks 
have followed the Bitcoin Cash fork, including those for Bitcoin Gold 
and Bitcoin SegWit2X, in the months after the creation of Bitcoin Cash.
Bitcoin Transactions
    According to the Registration Statement, a bitcoin transaction 
contains the sender's bitcoin address, the recipient's bitcoin address, 
the amount of bitcoin to be sent, a transaction fee and the sender's 
digital signature. Bitcoin transactions are secured by cryptography 
known as public-private key cryptography, represented by the bitcoin 
addresses and digital signature in a transaction's data file. Each 
Bitcoin network address, or wallet, is associated with a unique 
``public key'' and ``private key'' pair, both of which are lengthy 
alphanumeric codes, derived together and possessing a unique 
relationship. The public key is visible to the public and analogous to 
the Bitcoin network address. The private key is a secret and may be 
used to digitally sign a transaction in a way that proves the 
transaction has been signed by the holder of the public-private key 
pair, without having to reveal the private key.
    The Bitcoin network incorporates a system to prevent double-
spending of a single bitcoin. To prevent the possibility of double-
spending a single bitcoin, each validated transaction is recorded, time 
stamped and publicly displayed in a ``block'' in the Blockchain, which 
is publicly available. Any user may validate, through their Bitcoin 
wallet or a blockchain explorer, that each transaction in the Bitcoin 
network was authorized by the holder of the applicable private key, and 
Bitcoin network mining software consistent with reference software 
requirements typically validates each such transaction before including 
it in the Blockchain.
Bitcoin Mining--Creation of New Bitcoins
    According to the Registration Statement, the process by which 
bitcoins are created and bitcoin transactions are verified is called 
mining. To begin mining, a user, or ``miner,'' can download and run a 
mining client, which, like regular Bitcoin network software, turns the 
user's computer into a ``node'' on the Bitcoin network that validates 
blocks. Each time transactions are validated and bundled into new 
blocks added to the Blockchain, the Bitcoin network awards the miner 
solving such blocks with newly issued bitcoin and any transaction fees 
paid by bitcoin transaction senders. This reward system is the method 
by which new bitcoins enter into circulation to the public.
Mathematically Controlled Supply
    According to the Registration Statement, the method for creating 
new bitcoin is mathematically controlled in a manner so that the supply 
of bitcoin grows at a limited rate pursuant to a pre-set schedule. The 
number of bitcoin awarded for solving a new block is automatically 
halved every 210,000 blocks. Thus, the current fixed reward for solving 
a new block is 6.25 bitcoin per block; the reward decreased from 
twenty-five (25) bitcoin in July 2016 and 12.5 in May 2020. It is 
estimated to halve again at the start of 2024. This deliberately 
controlled rate of bitcoin creation means that the number of bitcoin in 
existence will never exceed twenty-one (21) million and that bitcoin 
cannot be devalued through excessive production unless the Bitcoin 
network's source code (and the underlying protocol for bitcoin 
issuance) is altered. As of January 1, 2021, approximately 18,587,000 
bitcoin have been mined. It is estimated that more than ninety (90) 
percent of the twenty-one (21) million bitcoin will have been produced 
by 2022.
Bitcoin Value
    According to the Registration Statement, the value of Bitcoin is 
determined by the value that various market participants place on 
Bitcoin through their transactions. The most common means of 
determining the value of a Bitcoin is by surveying one or more Bitcoin 
Exchanges where Bitcoin is traded publicly and transparently (e.g., 
Bitstamp, Coinbase, Kraken, itBit, and Gemini). Additionally, in 
parallel to the open bitcoin exchanges, informal ``over-the-counter'' 
or ``OTC markets'' for bitcoin trading also exist as a result of the 
peer-to-peer nature of the Bitcoin Network, which allows direct 
transactions between any seller and buyer.
    On each exchange, bitcoin is traded with publicly disclosed 
valuations for each executed trade, measured by one or more fiat 
currencies such as the U.S. dollar or Euro. OTC markets do not 
typically disclose their trade data.
    Currently, there are many exchanges operating worldwide, and each 
such exchange represents a substantial percentage of bitcoin buying and 
selling activity. These exchanges provide the most data with respect to 
prevailing valuations of bitcoins. The below table reflects the trading 
volume (in thousands of USD) of each of the bitcoin exchanges included 
in the Index as of January 1, 2021 using data reported by the Index 
Provider from January 1, 2020 to January 1, 2021:

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                                                           Total volume
  Bitcoin exchanges in the index as of January 1, 2021     (in thousands
                                                              of USD)
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Bitstamp................................................     $33,291,537
Coinbase................................................      63,462,664
Gemini..................................................       8,317,528
itBit...................................................       2,775,916

[[Page 26076]]

 
Kraken..................................................      25,445,906
                                                         ---------------
                                                             133,293,551
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    Bitcoin futures contracts are traded on the Chicago Mercantile 
Exchange (the ``CME'') and other exchanges. However, the Trust will not 
hold or trade in commodity futures contracts or other derivative 
contracts regulated by the Commodities Exchange Act,\8\ as administered 
by the Commodity Futures Trading Commission (the ``CFTC'').
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    \8\ 7 U.S.C. 1.
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The Index
    As described in the Registration Statement, the Fund will use the 
Index to calculate the Trust's NAV. The Index is not affiliated with 
the Sponsor and was created and is administered by CF Benchmarks Ltd. 
(the ``Benchmark Administrator''), an independent entity, to facilitate 
financial products based on bitcoin. The Index is designed based on the 
IOSCO Principals for Financial Benchmarks and serves as a once-a-day 
benchmark rate of the U.S. dollar price of bitcoin (USD/BTC), 
calculated as of 4 p.m. Eastern time. The Index is based on materially 
the same methodology (except calculation time) \9\ as the Benchmark 
Administrator's CME CF Bitcoin Reference Rate (the ``BRR''), which was 
first introduced on November 14, 2016 and is the rate on which bitcoin 
futures contracts are cash-settled in U.S. dollars at the CME. The 
Index aggregates the trade flow of several bitcoin exchanges, during an 
observation window between 3:00 p.m. and 4:00 p.m. Eastern time into 
the U.S. dollar price of one bitcoin at 4:00 p.m. Eastern time. The 
current constituent bitcoin exchanges of the Index are Bitstamp, 
Coinbase, Gemini, itBit and Kraken (the ``Constituent Bitcoin 
Exchanges'').
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    \9\ The Index is calculated as of 4 p.m. Eastern Time, whereas 
the BRR is calculated as of 4 p.m. London Time.
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    The Index is calculated based on the ``Relevant Transactions'' \10\ 
of all of its Constituent Bitcoin Exchanges, as follows:
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    \10\ A ``Relevant Transaction'' is any cryptocurrency versus 
U.S. dollar spot trade that occurs during the observation window 
between 3:00 p.m. and 4:00 p.m. Eastern time on a Constituent 
Bitcoin Exchange in the BTC/USD pair that is reported and 
disseminated by a Constituent Bitcoin Exchange through its publicly 
available API and observed by the Benchmark Administrator, CF 
Benchmarks Ltd.

     All Relevant Transactions are added to a joint list, 
recording the time of execution, trade price and size for each 
transaction.
     The list is partitioned by timestamp into 12 equally-
sized time intervals of 5 (five) minute length.
     For each partition separately, the volume-weighted 
median trade price is calculated from the trade prices and sizes of 
all Relevant Transactions, i.e., across all Constituent Bitcoin 
Exchanges. A volume-weighted median differs from a standard median 
in that a weighting factor, in this case trade size, is factored 
into the calculation.
     The Index is then determined by the arithmetic mean of 
the volume-weighted medians of all partitions.

    By employing the foregoing steps, the Index thereby seeks to ensure 
that transactions in bitcoin conducted at outlying prices do not have 
an undue effect on the value of a specific partition, large trades or 
clusters of trades transacted over a short period of time will not have 
an undue influence on the index level, and the effect of large trades 
at prices that deviate from the prevailing price are mitigated from 
having an undue influence on the benchmark level. In addition, the 
Sponsor notes that an oversight function is implemented by the 
Benchmark Administrator in seeking to ensure that the Index is 
administered through codified policies for Index integrity.
    According to the Registration Statement, the Index provides an 
accurate reference to the average spot price of Bitcoin and the 
methodology employed in constructing the Index, specifically its use of 
medians in filtering out small trades, makes the Index more resistant 
to manipulation than other measurements that employ different 
methodologies. In addition, the Index included over $133,293,551,000 
billion in bitcoin trades (approximately 16,304,168 bitcoins) during 
the one-year period ended December 31, 2020. Finally, an oversight 
committee is responsible for regularly reviewing and overseeing the 
methodology, practice, standards and scope of the Index to ensure that 
it continues to accurately track the spot prices of Bitcoin.
Calculation of Net Asset Value
    The Trust's net asset value (``NAV'') is calculated by taking the 
current market value of its total assets, less any liabilities of the 
Trust, and dividing that total by the total number of outstanding 
Shares. The bitcoin held by the Trust will be valued based on the price 
set by the Index. The Administrator will calculate the NAV of the Trust 
once each Exchange trading day. The Exchange's Core Trading Session 
closes at 4:00 p.m. EST. The NAV for a normal trading day will be 
released after the end of the Core Trading Session. However, NAVs are 
not officially struck until later in the day (often by 5:30 p.m. EST 
and almost always by 8:00 p.m. EST). The pause between 4:00 p.m. EST 
and 5:30 p.m. EST provides an opportunity to algorithmically detect, 
flag, investigate, and correct unusual pricing should it occur. The NAV 
for the Trust's Shares will be disseminated daily to all market 
participants at the same time. The Sponsor anticipates that the Index 
will be reflective of a reasonable valuation of the average spot price 
of bitcoin. However, in the event the Index is not available or 
determined by the Sponsor to not be reliable, the Sponsor would ``fair 
value'' the Trust's bitcoin holdings. The Sponsor does not anticipate 
that the need to ``fair value'' bitcoin will be a common occurrence. 
The Sponsor will publish the NAV and NAV per Share at 
www.valkyriefunds.io as soon as practicable after their determination 
and availability.
Intraday Indicative Value
    In order to provide updated information relating to the Trust for 
use by Shareholders and market professionals, the Trust will 
disseminate an updated intraday indicative value (``IIV'') per Share 
updated every 15 seconds by one of more major market data vendors 
during the Exchange's Core Trading Session.\11\ The IIV will be 
calculated by a third-party financial data provider during the 
Exchange's Core Trading Session. The IIV will be calculated by using 
the prior day's closing NAV per Share of the Trust as a base and 
updating that value throughout the trading day to reflect changes in 
the most recently reported price level of the CME CF Bitcoin Real-Time 
Index (``BRTI''), as reported by CME Group, Inc., Bloomberg, L.P. or 
another reporting service. The BRTI is calculated in real time based on 
the Relevant Order Books of all Constituent Bitcoin Exchanges. A 
``Relevant Order Book'' is the universe of the currently unmatched 
limit orders to buy or sell in the BTC/USD pair that is reported and 
disseminated by CF Benchmarks Ltd., as the BRTI calculation agent.
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    \11\ Several major market data vendors display and/or make 
widely available IIVs taken from the Consolidated Tape Association 
(``CTA'') or other data feeds. In addition, the indicative fund 
value will be available through on-line information services such as 
Bloomberg and Reuters.
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Creation and Redemption of Shares
    According to the Registration Statement, the Trust will issue 
Shares on an ongoing basis, but only in one or more Baskets. The 
creation and redemption of a Basket requires the delivery to the Trust, 
or the distribution by the Trust, of the number of whole and fractional 
bitcoins represented by

[[Page 26077]]

each Basket being created or redeemed, the number of which is 
determined by dividing the number of bitcoins owned by the Trust at 
4:00 p.m., New York time, on the trade date of a creation or redemption 
order, as adjusted for the number of whole and fractional bitcoins 
constituting accrued but unpaid fees and expenses of the Trust, by the 
number of Shares outstanding at such time (the quotient so obtained 
calculated to one-hundred-millionth of one bitcoin), and multiplying 
such quotient by 50,000 (the ``Basket Bitcoin Amount''). The Basket 
Bitcoin Amount multiplied by the number of Baskets being created or 
redeemed is the ``Total Basket Bitcoin Amount.''
    According to the Registration Statement, Authorized Participants 
are the only persons that may place orders to crate or redeem Baskets. 
Each Authorized Participant must (i) be a registered broker-dealer, 
(ii) enter into a Participant Agreement with the Sponsor, the 
Administrator, the Marketing Agent and the Liquidity Providers and 
(iii) in the case of the creation or redemption of Baskets that do not 
use the Conversion Procedures, own a bitcoin wallet address that is 
recognized by the Custodian as belonging to the Authorized Participant 
(an ``Authorized Participant Self-Administered Account''). Authorized 
Participants may act for their own accounts or as agents for broker-
dealers, custodians and other securities market participants that wish 
to create or redeem Baskets. Shareholders who are not Authorized 
Participants will only be able to redeem their Shares through an 
Authorized Participant.
    Although the Trust will create Baskets only upon the receipt of 
bitcoins, and will redeem Baskets only by distributing bitcoins, an 
Authorized Participant may deposit cash with the Administrator, which 
will facilitate the purchase or sale of bitcoins through a Liquidity 
Provider on behalf of an Authorized Participant (the ``Conversion 
Procedures''). Liquidity Providers must (i) enter into a Participant 
Agreement with the Sponsor, the Administrator, the Marketing Agent and 
each Authorized Participant and (ii) own a Liquidity Provider Account.
    The Conversion Procedures will be facilitated by a single Liquidity 
Provider. On an order-by-order basis, the Sponsor will select the 
Liquidity Provider that it believes will provide the best execution of 
the Conversion Procedures, and will base its decision on factors such 
as the Liquidity Provider's creditworthiness, financial stability, the 
timing and speed of execution, liquidity and the likelihood of, and 
capabilities in, execution, clearance and settlement. In the event that 
an order cannot be filled in its entirety by a single Liquidity 
Provider, additional Liquidity Provider(s) will be selected by the 
Sponsor to fill the remaining amount based on the criteria above.
Creation Procedures
    According to the Registration Statement, on any Business Day, an 
Authorized Participant may order one or more Creation Baskets from the 
Trust by placing a creation order with the Administrator. Creation 
orders may be placed either ``in-kind'' or ``in-cash.'' Creation orders 
must be placed no later than 3:59:59 p.m., New York time, for in-kind 
creations, and 4:59:59 p.m., New York time, for in-cash creations, on 
each Business Day. Authorized Participants may only create Baskets and 
cannot create any Shares in an amount less than a Basket.
In-Kind Creations
    In-kind creations will take place as follows, where ``T'' is the 
trade date and each day in the sequence is a Business Day:
T
     The Authorized Participant places a creation order with 
the Administrator.
     The Marketing Agent accepts (or rejects) the creation 
order, which is communicated to the Authorized Participant by the 
Administrator.
     The Total Basket Bitcoin Amount is determined as soon as 
practicable after 4:00 p.m., New York time.
T+1
     The Authorized Participant transfers the Total Basket 
Bitcoin Amount from its Authorized Participant Self-Administered 
Account to the Custodian.
     Once the Total Basket Bitcoin Amount is received by the 
Custodian, the Administrator directs the Transfer Agent to credit the 
Creation Baskets to the Authorized Participant's DTC account.
In-Cash Creations
    Upon receiving instruction from the Administrator that a creation 
order has been accepted by the Marketing Agent, the Authorized 
Participant will send 110% of the U.S. Dollar value of the Total Basket 
Bitcoin Amount, as calculated using the most recently published Bitcoin 
Index Price (the ``Cash Collateral Amount''). Once the Cash Collateral 
Amount is received by the Administrator, the Sponsor will notify the 
Liquidity Provider of the creation order. The Liquidity Provider will 
then (i) determine the Cash Exchange Rate, which, in the case of a 
creation order, is the Index spot price at the time at which the Cash 
Collateral Amount is received by the Administrator, plus the 1% 
Liquidity Provider Fee, and (ii) provide a firm quote to the Authorized 
Participant for the Total Basket Bitcoin Amount, determined by using 
the Cash Exchange Rate. If the Liquidity Provider's quote is greater 
than the Cash Collateral Amount received, the Authorized Participant 
will be required to pay the difference on the same day. Under the 
Conversion Procedures, the Authorized Participant does not pay more 
than the firm quote provided by the Liquidity Provider. The Liquidity 
Provider bears the risk of any change in the Total Basket Bitcoin 
Amount and of any change in the price of bitcoin once the Cash Exchange 
Rate has been determined. Provided that payment for the Total Basket 
Bitcoin Amount is received by the Administrator, the Liquidity Provider 
will deliver the bitcoins to the Custodian on the settlement date on 
behalf of the Authorized Participant. After the Custodian receives the 
Total Basket Bitcoin Amount, the Administrator will instruct the 
Transfer Agent to deliver the Creation Baskets to the Authorized 
Participant. The Administrator will then send the Liquidity Provider 
the cash equal to the Cash Exchange Rate times the Total Basket Bitcoin 
Amount, plus the 1% Liquidity Provider Fee. The Administrator will 
return any remaining amount of the Cash Collateral Amount to the 
Authorized Participant.
Redemption Procedures
    According to the Registration Statement, the procedures by which an 
Authorized Participant can redeem one or more Baskets mirror the 
procedures for the creation of Baskets. On any Business Day, an 
Authorized Participant may place a redemption order specifying the 
number of Redemption Baskets to be redeemed. Redemption orders may be 
placed either ``in-kind'' or ``in-cash.'' Redemption orders must be 
placed no later than 3:59:59 p.m., New York time, for in-kind 
redemptions, and 4:59:59 p.m., New York time, for in-cash redemption, 
on each Business Day. Authorized Participants may only redeem Baskets 
and cannot redeem any Shares in an amount less than a Basket.
In-Kind Redemptions
    In-kind redemptions will take place as follows, where ``T'' is the 
trade date and

[[Page 26078]]

each day in the sequence is a Business Day:
T
     The Authorized Participant places a redemption order with 
the Administrator.
     The Marketing Agent accepts (or rejects) the redemption 
order.
     The Total Basket Bitcoin Amount is determined as soon as 
practicable after 4:00 p.m., New York time.
T+1
     The Authorized Participant delivers to the Transfer Agent 
Redemption Baskets from its DTC account.
     Once the Redemption Baskets are received by the Transfer 
Agent, the Custodian transfers the Total Basket Bitcoin Amount to the 
Authorized Participant and the Transfer Agent cancels the Shares.
In-Cash Redemptions
    To redeem Baskets using the Conversion Procedures, Authorized 
Participants will send the Administrator a redemption order. The 
Marketing Agent will accept or reject the redemption order on that same 
date. A Liquidity Provider will then (i) determine the Cash Exchange 
Rate, which, in the case of a redemption order, is the Index spot price 
minus the 1% Liquidity Provider Fee at the time at which the 
Administrator notifies the Authorized Participant that an order has 
been accepted and (ii) provide a firm quote to an Authorized 
Participant for the Total Basket Bitcoin Amount, determined by using 
the Cash Exchange Rate. Under the Conversion Procedures, the Authorized 
Participant does not receive less than the firm quote provided by the 
Liquidity Provider. The Liquidity Provider bears the risk of any change 
in the Total Basket Bitcoin Amount and of any change in the price of 
bitcoin once the Cash Exchange Rate has been determined. The Liquidity 
Provider will send the Administrator the cash proceeds equal to the 
Cash Exchange Rate times the Total Basket Bitcoin Amount, minus the 1% 
Liquidity Provider Fee. Once the Authorized Participant delivers the 
Redemption Baskets to the Transfer Agent, the Administrator will send 
the cash proceeds to the Authorized Participant and the Transfer Agent 
will cancel the Shares. At the instruction of the Administrator, the 
Custodian will then send the Liquidity Provider the Total Basket 
Bitcoin Amount.
Potential Manipulation in the Bitcoin Market
    In prior orders relating to the listing of products on U.S. 
exchanges, the Commission Staff expressed its concern that the global 
market for bitcoin may be subject to potential manipulation.\12\ In 
order for any proposed rule change from an exchange to be approved, the 
Commission must determine that, among other things, the proposal is 
consistent with the requirements of Section 6(b)(5) of the Act. The 
Exchange believes that this proposal is consistent with the 
requirements of Section 6(b)(5) of the Act and that the Sponsor's 
representations below sufficiently demonstrate that the manipulation 
concerns previously articulated by the Commission are mitigated by 
investor protection issues.
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    \12\ See Securities Exchange Act Release Nos. 80206 (Mar. 10, 
2017), 82 FR 14076 (Mar. 16, 2017) (SR-BatsBZX-2016-30) (Order 
Disapproving a Proposed Rule Change, as Modified by Amendments No. 1 
and 2, to BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, To 
List and Trade Shares Issued by the Winklevoss Bitcoin Trust) 
(``Winklevoss I''); and 83723 (July 26, 2018), 83 FR 37579 (August 
1, 2018) (SR-BatsBZX-2016-30) (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) (``Winklevoss II''); see also Securities 
Exchange Act Release No. 88284 (February 26, 2020), 85 FR 12595 
(March 3, 2020) (SR-NYSEArca-2019-39) (Order Disapproving a Proposed 
Rule Change, as Modified by Amendment No. 1, To Amend NYSE Arca Rule 
8.201-E (Commodity-Based Trust Shares) and To List and Trade Shares 
of the United States Bitcoin and Treasury Investment Trust Under 
NYSE Arca Rule 8.201-E).
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    According to the Sponsor, the bitcoin marketplace has matured 
rapidly in recent years regarding user growth, market capitalization, 
volume, market participants, and liquidity shifts. The Sponsor notes 
that Coinbase alone enables access to cryptocurrency exchange or 
professional custodial solutions to over 43 million retail users as 
well as 7,000 institutions. The Sponsor further notes that the bitcoin 
market has seen a dramatic shift from retail-driven growth to 
institutional involvement. Large, publicly-traded companies such as 
Tesla and MicroStrategy have purchased bitcoin to hold on corporate 
balance sheets. The Sponsor additionally notes that, typically, in a 
thinly traded asset, it would not be feasible to trade in as large of 
quantities without causing corresponding spikes in price action. 
According to the Sponsor, asset managers alongside numerous 
corporations around the world have been able to obtain bitcoin, at 
times surpassing billion-dollar notional values, without significantly 
distorting the marketplace. As provided below, the bitcoin ecosystem 
has matured considerably since the last time the Commission reviewed a 
proposal for a bitcoin ETF. The Sponsor notes below the advancement of 
the application of the Index (as described below) over that same period 
of time, including how the Index articulates the potential remedy that 
it can be to sufficiently mitigate the pricing issues and various risks 
surrounding market manipulation.
Price Manipulation and Market Integrity
    According to the Sponsor, the bitcoin market has experienced 
significant maturity as adoption pressure has broadened from both 
retail and institutional clients on a global perspective. There has 
been concern over whether cryptocurrency exchanges have mechanisms in 
place to report and remediate price and overall, ensure market 
integrity. As the industry has grown exponentially and the number of 
marketplaces expands, it follows that the quality of several factors of 
these marketplaces will vary. This notion is amplified for exchanges in 
some jurisdictions that are unregulated or decentralized. Therefore, 
the Sponsor believes that there must be sufficiency of data inputs for 
the calculation of the spot price of bitcoin. In turn the data must be 
provided under licensing arrangements with each exchange, who in turn 
meet strict entry criteria. The design choices within the methodology 
and framework of the Index are sufficiently resistant to market 
manipulation while providing oversight managed by an independent 
committee.
    According to the Sponsor, the Index is the aggregation of executed 
trade data for major bitcoin spot exchanges. To be eligible for 
inclusion in the Index, a Constituent Bitcoin Exchange must facilitate 
spot trading of bitcoin against the U.S. Dollar and make trade data and 
order data available through an API with sufficient reliability, 
relevant data, and appropriate speed. The volume for spot trading must 
meet a minimum threshold when compared to the total volume of all 
Constituent Bitcoin Exchanges included in the Index. To be considered, 
an exchange must also enforce policies to ensure fair and transparent 
market conditions and have processes in place to impede illegal, or 
manipulative trading practices. Additionally, to be included as a 
constituent in the Index, each Constituent Bitcoin Exchange must comply 
with applicable law and regulation, including proper AML/KYC 
procedures. According to the Sponsor, the BRR, which uses an identical 
methodology as the Index except with respect to is calculation times, 
is the

[[Page 26079]]

settlement index for the regulated futures contracts listed by CME 
Group, Kraken Futures, as well as being the pricing source for various 
NAV determinations for investment products offered by major financial 
institutions. According to the Sponsor, the Calculation Agent of the 
Index further ascertains the presence of fair and transparent market 
conditions and processes to identify and impede illegal, unfair, or 
manipulative practices by conducting a thorough review of any spot 
bitcoin exchange under consideration for inclusion as a Constituent 
Bitcoin Exchange. According to the Sponsor, the arrangements of all 
Constituent Bitcoin Exchanges are reviewed regularly to ensure that 
they continue to meet all criteria.
    The Sponsor notes that, currently, the Constituent Bitcoin 
Exchanges currently included in the Index are Bitstamp, Coinbase, 
Gemini, itBit and Kraken. The Sponsor further notes that after 
ascertaining API data from these exchanges, the information is 
aggregated from actual trade data in a manner designed to resist 
manipulation. Partitions are utilized to ensure large individual trades 
have a limited effect on the price of the Index by only influencing the 
volume-weighted median for a particular partition. Use of volume-
weighted medians, as opposed to volume-weighted means, verifies that 
transactions conducted at outlying prices do not have an excessive 
effect on the value of a partition. The Index weights each partition 
equally as well as equal weighting of each exchange that is a part of 
the Index. In the event of an instance of index calculation in which a 
Constituent Bitcoin Exchange's volume-weighted median transaction price 
exhibits an absolute percentage deviation from the volume-weighted 
median price of other Constituent Bitcoin Exchange transactions greater 
than the potentially erroneous data parameter (10%), then transactions 
from that Constituent Bitcoin Exchange are deemed potentially erroneous 
and excluded from the index calculation.
Index Price Manipulation
    According to the Sponsor, to date, there has been no evidence that 
the Index has been subject to manipulation. The Sponsor notes that, in 
order for the Index to be manipulated, one or both of the following 
must be true: (a) The Index provider is manipulating the Index, or (b) 
the prices being fed to the Index provider are being manipulated by 
their sources. The Sponsor notes that the CME participates in the 
oversight committee of the Index, and no evidence has been presented of 
the provider failing to maintain processes and controls to prevent 
manipulation by its organization.\13\ If such a manipulation were to 
occur, it would be quickly detected by the CME, and hundreds of 
sophisticated market participants, as the Index formula and the data 
sources are both publicly available.\14\ Finally, according to the 
Sponsor, the CFTC has been successfully exercising its enforcement 
authority related to fraud and manipulation on the Constituent Bitcoin 
Exchanges.\15\ In addition, any platform that is accepted by the CME to 
become part of the constituent trading platforms that are used to 
calculate the Index or the CME CF BRR, including the Constituent 
Platforms, (1) must enter into a data sharing agreement with the CME, 
(2) must cooperate with inquiries and investigations of regulators and 
the Benchmark Administrator and (3) must submit each of its clients to 
its Know-Your-Customer (``KYC'') procedures; therefore, the CME would 
be able, in the case of any suspicious trades, to discover all material 
trade information including the identities of the customers placing the 
trades.
---------------------------------------------------------------------------

    \13\ See CME CF Cryptocurrency Pricing Products Oversight 
Committee (July 31, 2020), available at: https://docs-cfbenchmarks.s3.amazonaws.com/CME+CF+Oversight+Committee+Charter.pdf.
    \14\ See CME CF Cryptocurrency Reference Rates Methodology Guide 
(July 31, 2020), available at: https://docs-cfbenchmarks.s3.amazonaws.com/CME+CF+Reference+Rates+Methodology.pdf.
    \15\ See e.g., CFTC Rel. No. 8369-21, ``CFTC Orders Coinbase 
Inc. to Pay $6.5 Million for False, Misleading, or Inaccurate 
Reporting and Wash Trading'' (March 19, 2021); and ``Remarks of 
Commissioner Dawn D. Stump Before Texas A&M's Bitcoin Conference'' 
(April 16, 2021), available at: https://cftc.gov/PressRoom/SpeechesTestimony/opastump7.
---------------------------------------------------------------------------

Availability of Information
    The website for the Trust (www.valkyriefunds.io) will contain the 
following information, on a per Share basis, for the Trust: (a) The 
current NAV per Share daily and the prior business day's NAV and the 
reported closing price; (b) the Official Closing Price; \16\ (c) 
midpoint of the national best bid and the national best offer 
(``NBBO'') as of the time the NAV is calculated (``Bid-Ask Price''); 
(d) calculation of the premium or discount of the Official Closing 
Price against such NAV expressed as a percentage of such NAV; (e) a 
table showing the number of days the Shares of the Trust traded at a 
premium or discount during the most recently complete calendar year and 
the most recently completed calendar quarters since that year; (f) a 
line graph showing the Shares' premiums or discounts for the most 
recently completed calendar year and the most recently completed 
calendar quarters since that year (or the life of the exchange-traded 
fund, if shorter); (g) the prospectus; and (h) other applicable 
quantitative information.
---------------------------------------------------------------------------

    \16\ The term ``Official Closing Price'' is defined in NYSE Arca 
Rule 1.1(ll) as the reference price to determine the closing price 
in a security for purposes of Rule 7-E Equities Trading, and the 
procedures for determining the Official Closing Price are set forth 
in that rule.
---------------------------------------------------------------------------

    The Trust's website will be publicly available prior to the public 
offering of Shares and accessible at no charge.
    The Index value is available on the CF Benchmarks website and from 
major market data vendors. The spot price of bitcoin also is available 
on a 24-hour basis from major market data vendors.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Trust.\17\ Trading in Shares of the Trust 
will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable.
---------------------------------------------------------------------------

    \17\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    The Exchange may halt trading during the day in which an 
interruption to the dissemination of the IIV or the value of the Index 
occurs. If the interruption to the dissemination of the IIV or the 
value of the Index persists past the trading day in which it occurred, 
the Exchange will halt trading no later than the beginning of the 
trading day following the interruption. In addition, if the Exchange 
becomes aware that the NAV with respect to the Shares is not 
disseminated to all market participants at the same time, it will halt 
trading in the Shares until such time as the NAV is available to all 
market participants.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in 
accordance with NYSE Arca Rule 7.34-E (Early, Core, and Late Trading 
Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Rule 7.6-E, the minimum price variation (``MPV'') for quoting 
and entry of orders in equity securities traded on the NYSE Arca 
Marketplace is

[[Page 26080]]

$0.01, with the exception of securities that are priced less than $1.00 
for which the MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.201-E. The trading of the Shares will 
be subject to NYSE Arca Rule 8.201-E(g), which sets forth certain 
restrictions on Equity Trading Permit (``ETP'') Holders acting as 
registered Market Makers in Commodity-Based Trust Shares to facilitate 
surveillance. The Exchange represents that, for initial and continued 
listing, the Trust will be in compliance with Rule 10A-3 \18\ under the 
Act, as provided by NYSE Arca Rule 5.3-E. A minimum of 100,000 Shares 
of the Trust will be outstanding at the commencement of trading on the 
Exchange.
---------------------------------------------------------------------------

    \18\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares of the Trust 
will be subject to the existing trading surveillances administered by 
the Exchange, as well as cross-market surveillances administered by 
FINRA on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities 
laws.\19\ The Exchange represents that these procedures are adequate to 
properly monitor Exchange trading of the Shares in all trading sessions 
and to deter and detect violations of Exchange rules and federal 
securities laws applicable to trading on the Exchange.
---------------------------------------------------------------------------

    \19\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and bitcoin 
futures with other markets and other entities that are members of the 
ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, may 
obtain trading information regarding trading in the Shares and bitcoin 
futures from such markets and other entities. In addition, the Exchange 
may obtain information regarding trading in the Shares and bitcoin 
futures from markets and other entities that are members of ISG or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement (``CSSA'').\20\ The Exchange is also able to obtain 
information regarding trading in the Shares in connection with ETP 
Holders' proprietary or customer trades which they effect through ETP 
Holders on any relevant market.
---------------------------------------------------------------------------

    \20\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Trust may trade on markets that are members of ISG or with which the 
Exchange has in place a CSSA.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolio of the Trust, (b) limitations on 
portfolio holdings or reference assets, or (c) the applicability of 
Exchange listing rules specified in this rule filing shall constitute 
continued listing requirements for listing the Shares on the Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Trust to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Trust is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E(m).
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \21\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.201-E. 
Investing in the Trust will provide investors with exposure to bitcoin 
in a manner that is more efficient and convenient than the purchase of 
stand-alone bitcoin, while also mitigating some of the risk by reducing 
the volatility typically associated with the purchase of stand-alone 
bitcoin. The proposed rule change is designed to prevent fraudulent and 
manipulative acts and practices because, although the global Bitcoin 
market is not inherently resistant to fraud and manipulation, the Index 
used by the Trust to determine the value of its bitcoin assets and its 
NAV, serves as a benchmark mechanism sufficient to mitigate the impact 
of instances of fraud and manipulation on a reference price for 
Bitcoin. As discussed above, while bitcoin is listed and traded on a 
number of markets and platforms, the Index exclusively utilizes its 
Constituent Bitcoin Exchanges to determine the value of the Index. 
Therefore, use of the Index would mitigate the effects of potential 
manipulation of the bitcoin market. Bitcoin trades in a well-arbitraged 
and distributed market. The linkage between the bitcoin markets and the 
presence of arbitrageurs in those markets means that the manipulation 
of the price of bitcoin on any Constituent Platform would likely 
require overcoming the liquidity supply of such arbitrageurs who are 
potentially eliminating any cross-market pricing differences.
    In addition, the Exchange has in place surveillance procedures that 
are adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws. The Exchange or FINRA, on behalf of 
the Exchange, or both, will communicate as needed regarding trading in 
the Shares with other markets that are members of the ISG, and the 
Exchange or FINRA, on behalf of the Exchange, or both, may obtain 
trading information regarding trading in the Shares and bitcoin futures 
with other markets and other entities that are members of the ISG, and 
the Exchange or FINRA, on behalf of the Exchange, or both, may obtain 
trading information regarding trading in the Shares and bitcoin futures 
from such markets and other entities. In addition, the Exchange may 
obtain information regarding trading in the Shares from markets that 
are members of ISG or with which the Exchange has in place a CSSA. 
Also, pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able to 
obtain information regarding trading in the Shares and the underlying 
bitcoin or any bitcoin derivative through ETP Holders acting as 
registered Market Makers, in connection with such ETP Holders' 
proprietary or customer trades through ETP Holders which they effect on 
any relevant market.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the

[[Page 26081]]

public interest in that there is a considerable amount of bitcoin price 
and market information available on public websites and through 
professional and subscription services. Investors may obtain, on a 24-
hour basis, bitcoin pricing information based on the spot price for 
bitcoin from various financial information service providers. The 
closing price and settlement prices of bitcoin are readily available 
from the Bitcoin exchanges and other publicly available websites. In 
addition, such prices are published in public sources, or on-line 
information services such as Bloomberg. The Trust will provide website 
disclosure of its bitcoin holdings daily. Quotation and last-sale 
information regarding the Shares will be disseminated through the 
facilities of the CTA. The IIV will be widely disseminated on a per 
Share basis every 15 seconds during the NYSE Arca Core Trading Session 
(normally 9:30 a.m., E.T., to 4:00 p.m., E.T.) by one or more major 
market data vendors. In addition, the IIV will be available through on-
line information services. The Exchange represents that the Exchange 
may halt trading during the day in which an interruption to the 
dissemination of the IIV or the Index value occurs. If the interruption 
to the dissemination of the IIV or the Index value persists past the 
trading day in which it occurred, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption. 
In addition, if the Exchange becomes aware that the NAV with respect to 
the Shares is not disseminated to all market participants at the same 
time, it will halt trading in the Shares until such time as the NAV is 
available to all market participants.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of exchange-traded product that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a CSSA. In addition, as noted above, 
investors will have ready access to information regarding the Trust's 
bitcoin holdings, the IIV, and quotation and last sale information for 
the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
exchange-traded product based on the price of bitcoin, which will 
enhance competition among market participants, to the benefit of 
investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2021-31 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-2021-31. 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-2021-31 and should be submitted 
on or before June 2, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09969 Filed 5-11-21; 8:45 am]
BILLING CODE 8011-01-P


