90 FR 73 pgs. 16316-16324 - Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules 3120 (Position Limits), 5020 (Criteria for Underlying Securities), and 5055 (FLEX Equity Options) To Permit the Listing and Trading of Options on the Grayscale Ethereum Trust ETF, the Grayscale Ethereum Mini Trust ETF, and the Bitwise Ethereum ETF
Type: NOTICEVolume: 90Number: 73Pages: 16316 - 16324
Pages: 16316, 1631716318, 16319, 16320, 16321, 16322, 16324, Docket number: [Release No. 34-102840; File No. SR-BOX-2025-09]
FR document: [FR Doc. 2025-06525 Filed 4-16-25; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102840; File No. SR-BOX-2025-09]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules 3120 (Position Limits), 5020 (Criteria for Underlying Securities), and 5055 (FLEX Equity Options) To Permit the Listing and Trading of Options on the Grayscale Ethereum Trust ETF, the Grayscale Ethereum Mini Trust ETF, and the Bitwise Ethereum ETF
April 11, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ("Act"), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on April 10, 2025, BOX Exchange LLC ("Exchange") filed with the Securities and Exchange Commission ("Commission") the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule from interested persons.
Footnotes:
1 ?15 U.S.C. 78s(b)(1).
2 ?17 CFR 240.19b-4.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend Rules 3120 (Position Limits), 5020 (Criteria for Underlying Securities), and 5055 (FLEX Equity Options) to permit the listing and trading of options on the Grayscale Ethereum Trust ETF, the Grayscale Ethereum Mini Trust ETF, and the Bitwise Ethereum ETF. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission's Public Reference Room and also on the Exchange's internet website at https://rules.boxexchange.com/rulefilings.
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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rules 3120 (Position Limits) and 5020 (Criteria for Underlying Securities) to allow the Exchange to list and trade options on the Grayscale Ethereum Trust ETF (the "Grayscale Fund" or "ETHE"), the Grayscale Ethereum Mini Trust ETF (the "Grayscale Mini Fund" or "ETH"), and the Bitwise Ethereum ETF (the "Bitwise Fund" or "ETHW" and, collectively, the "Ether Funds" or "Funds"). 3 Additionally, the Exchange proposes to amend Rule 5055 (FLEX Equity Options). This is a competitive filing that is based on a proposal recently submitted by NYSE American LLC ("NYSE American") and approved by the Commission. 4
Footnotes:
3 ? See proposed Rule 5020(h). On July 23, 2024, the Ether Funds began trading on NYSE Arca, Inc. ("NYSE Arca"), after the Commission approved rule changes to list and trade shares of "Ether-Based Commodity-Based Trust Shares" pursuant to Rule 8.201-E(c)(1) (Commodity-Based Trust Shares). See Securities Exchange Act Release Nos. 100224 (May 23, 2024), 89 FR 46937 (May 30, 2024) (SR-NYSEARCA-2023-70; SR-NYSEARCA-2024-31) (order approving the listing and trading of, among other Ether-Based Exchange-Traded Products, the Bitwise Ethereum ETF and the Grayscale Ethereum Trust (ETH)); and 100541 (July 17, 2024), 89 FR 59786 (July 23, 2024) (SR-NYSEARCA-2024-44) (order approving the listing and trading of, among others, the Grayscale Ethereum Trust Mini).
4 ? See Securities Exchange Act Release No. 102799 (April 9, 2025) (Order Approving SR-NYSEAMER-2024-45, as modified by Amendment No. 2) ("NYSE American Approval Order").
Current Rule 5020(h) provides that subject to certain other criteria set forth in the Rule, securities deemed appropriate for options trading include Exchange-Traded Fund Shares ("ETFs"), that represent certain types of interests? 5 and exchange-traded products ("ETPs") structured as trusts that hold precious metals (which are deemed commodities). 6 Like ETPs backed by precious metals and bitcoin ( i.e., commodities), the Exchange proposes to allow options trading on the Ether Funds that hold ether-which is also deemed a commodity. 7
Footnotes:
5 ? See Rule 5020(h) which provides that securities deemed appropriate for options trading shall include shares or other securities ("Exchange-Traded Fund Shares") that are traded on a national securities exchange and are defined as an "NMS stock" under Rule 600 of Regulation NMS and that (i) represent interests in registered investment companies (or series thereof) organized as open-end management investment companies, unit investment trusts or similar entities that hold portfolios of securities and/or financial instruments, including, but not limited to, stock index futures contracts, options on futures, options on securities and indices, equity caps, collars and floors, swap agreements, forward contracts, repurchase agreements and reverse repurchase agreements (the "Financial Instruments") and money market instruments, including, but not limited to, U.S. government securities and repurchase agreements (the "Money Market Instruments") comprising or otherwise based on or representing investments in broad-based indexes or portfolios of securities and/or Financial Instruments and Money Market Instruments (or that hold securities in one or more other registered investment companies that themselves hold such portfolios of securities and/or Financial Instruments and Money Market Instruments); or (ii) represent interests in a trust that holds a specified non-U.S. currency deposited with the trust or similar entity when aggregated in some specified minimum number may be surrendered to the trust by the beneficial owner to receive the specified non-U.S. currency or currencies and pays the beneficial owner interest and other distributions on the deposited non-U.S. currency or currencies, if any, declared and paid by the trust ("Currency Trust Shares"); or (iii) represent commodity pool interests principally engaged, directly or indirectly, in holding and/or managing portfolios or baskets of securities, commodity futures contracts, options on commodity futures contracts, swaps, forward contracts and/or options on physical commodities and/or non-U.S. currency ("Commodity Pool ETFs") or (iv) represent interests in the SPDR® Gold Trust, the iShares COMEX Gold Trust, the iShares Silver Trust, the abrdn Gold ETF Trust, the abrdn Silver ETF Trust, the abrdn Palladium ETF Trust, the abrdn Platinum ETF Trust, the Sprott Physical Gold Trust, the iShares Bitcoin Trust, the Grayscale Bitcoin Trust, the Grayscale Bitcoin Mini Trust, the Bitwise Bitcoin ETF, the Fidelity Wise Origin Bitcoin Fund, or the ARK 21Shares Bitcoin ETF; provided that all conditions in Rules 5020(h)(1) and (2) are met.
6 ? See Rule 5020(h) (permitting the listing and trading of options on certain ETPs backed by precious metals and bitcoin). The Exchange notes on October 19, 2024, the Commission approved the NYSE American's proposal to list and trade options on the Grayscale Bitcoin Trust (BTC), the Grayscale Bitcoin Mini Trust BTC, and the Bitwise Bitcoin ETF. See Securities Exchange Act Release No. 101386 (October 18, 2024), 89 FR 84960 (October 24, 2024) (SR-NYSEARCA-2024-49) (the "BTC Approval Order"). The Commission has also approved for options trading several other bitcoin-related funds: See, e.g., Securities Exchange Act Release Nos. 101128 (September 20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (order approving the listing and trading of options on the iShares Bitcoin Trust (IBIT)); and 101387 (October 18, 2024), 89 FR 84948 (October 24, 2024) (SR-CBOE-2024-035) (order approving the listing and trading of options on the Fidelity Wise Origin Bitcoin Fund and the ARK 21Shares Bitcoin ETF).
7 ? See proposed Rule 5020(h) (expanded to include the listing and trading of options on shares of ETHE, ETH, AND ETHW, pursuant to Rule 5020).
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The Ether Funds are structured as trusts that hold ether. Like ETFs and ETPs currently deemed appropriate for options trading, the investment objective of each Ether Fund trust is for its shares to reflect the performance of ether (less the expenses of the trust's operations), offering investors an opportunity to gain exposure to ether without the complexities of ether delivery. Each Ether Fund's shares represent units of fractional undivided beneficial interest in the trust, the assets of which consist principally of ether and are designed to track ether or the performance of the price of ether and offer access to the ether market. 8 The Ether Funds provide investors with cost-efficient alternatives that allow a level of participation in the ether market through the securities market. The Exchange believes each Ether Fund satisfies the Exchange's initial listing standards set forth in Rule 5020(a). 9 The Exchange notes that the Ether Funds also satisfy the listing standard applied to ETFs traded on the Exchange that they be available for creation and redemption each business day as set forth in Rule 5020(h)(1). 10
Footnotes:
8 ?The trust may include minimal cash.
9 ?Rule 5020(a) provides for guidelines to be followed by the Exchange when evaluating potential underlying securities for Exchange option transactions.
10 ?Rule 5020(h)(1) requires that the Exchange-Traded Fund Shares are available for creation or redemption each business day from or through the issuing trust, investment company, commodity pool or other entity in cash or in kind at a price related to net asset value, and the issuer is obligated to issue Exchange-Traded Fund Shares in a specified aggregate number even if some or all of the investment assets and/or cash required to be deposited have not been received by the issuer, subject to the condition that the person obligated to deposit the investment assets has undertaken to deliver them as soon as possible and such undertaking is secured by the delivery and maintenance of collateral consisting of cash or cash equivalents satisfactory to the issuer of the Exchange-Traded Fund Shares, all as described in the Exchange-Traded Fund Shares' prospectus.
First, each of the Ether Funds satisfy the criteria and guidelines set forth in Rule 5020(a). Pursuant to Rule 5020(a), a security on which options may be listed and traded on the Exchange must be duly registered (with the Commission) and be an NMS stock (as defined in Rule 600 of Regulation NMS under the Act) and be characterized by a substantial number of outstanding shares that are widely held and actively traded. 11 Each of the Ether Funds is an NMS Stock as defined in Rule 600 of Regulation NMS under the Act. 12 The Exchange believes each Ether Fund is characterized by a substantial number of outstanding shares that are widely held and actively traded.
Footnotes:
11 ?The criteria and guidelines for a security to be considered widely held and actively traded are set forth in Rule 5020(b), subject to exceptions.
12 ?An "NMS stock" means any NMS security other than an option, and an "NMS security" means any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan (or an effective national market system plan for reporting transaction in listed options). See 17 CFR 242.600(b)(64) (definition of "NMS security") and (65) (definition of "NMS stock").
As provided in the NYSE American Approval Order, as of November 29, 2025, ETHE had 177,838,500 shares outstanding, ETH had 45,220,787, and ETHW had 16,600,000. As such, each of the Ether Funds had significantly more than 7,000,000 shares outstanding, which is the minimum number of shares of a corporate stock that the Exchange generally requires to list options on that stock pursuant to Rule 5020(b)(1). 13 The Exchange believes this demonstrates that each Ether Fund is characterized by a substantial number of outstanding shares.
Footnotes:
13 ?The Exchange notes that on November 19, 2024, ETH underwent a reverse stock split, reducing the number of shares outstanding-and increasing the share price-tenfold.
Further, as provided in the NYSE American Approval Order, as of December 31, 2024, ETHE had 112,320 beneficial holders, ETH had 17,396, and ETHW had 5,992. As such, each Ether Fund has significantly more than 2,000 beneficial holders (approximately 56, 9, and 3 times more, respectively), which is the minimum number of holders the Exchange generally requires for corporate stock in order to list options on that stock pursuant to pursuant to Rule 5020(b)(2). 14 Therefore, the Exchange believes the shares of each Ether Fund are widely held.
Footnotes:
14 ?The number of beneficial holders of ETH may have been impacted by the 10:1 reverse stock split, as investors with fewer than 10 shares would have received a cash payout. See id.
According to the NYSE American Approval Order, based on trading volume since the Funds began trading on July 23, 2024, shares of the Ether Funds are actively traded. In particular, the total trading volume from the inception of trading through November 29, 2024 for ETHE was 427,312,540 shares and ETH was 172,400,020 shares and through December 31, 2024 was 44,477,060 for ETHW. 15 As such, even though the Ether Funds have been trading for less than one year, the trading volume for each Ether Fund is substantially higher than 2,400,000 shares (roughly 178, 72, and 16 times that amount, respectively), which is the minimum 12-month volume the Exchange generally requires for a security in order to list options on that security as set forth in Rule 5020(b)(4). The Exchange believes this data demonstrates that each Ether Fund is characterized by a substantial number of outstanding shares that are actively traded.
Footnotes:
15 ? See FactSet, 11/29/2024 and 12/31/24, https://www.factset.com/data-attribution.
Options on the Ether Funds will be subject to the Exchange's continued listing standards set forth in Rule 5030(h) for ETFs and ETPs deemed appropriate for options trading pursuant to Rule 5020(h). Specifically, Rule 5030(h) provides that funds that were initially approved for options trading pursuant to Rule 5020(h) shall be deemed not to meet the requirements for continued approval, and the Exchange shall not open for trading any additional series of option contracts of the class covering that fund, if the fund ceases to be an NMS stock or if the fund is halted from trading in their primary market. In addition, options on funds may be subject to the suspension of opening transactions in any of the following circumstances: (1) in the case of options covering funds approved for trading under Rule 5020(h)(1)(i), in accordance with the terms of subparagraphs (b)(1),(2),(3) and (6) of Rule 5030; (2) in the case of options covering funds approved for trading under Rule 5020(h)(1)(ii) (as is the case for the Ether Funds), following the initial twelve-month period beginning upon the commencement of trading in the fund on a national securities exchange and are defined as an NMS stock, there are fewer than 50 record and/or beneficial holders of such fund for 30 or more consecutive trading days; (3) the value of the index or portfolio of securities and/or financial instruments and money market instruments, or non-U.S. currency, portfolio of commodities including commodity futures contracts, options on commodity futures contracts, swaps, forward contracts and/or options on physical commodities, on which the ETFs are based is no longer calculated or available; or (4) such other event shall occur or condition exist that in the opinion of the Exchange makes further dealing in such options on the Exchange inadvisable.
[top] Options on the Ether Funds will be physically settled contracts with American-style exercise. 16 Consistent
Footnotes:
16 ? See Rule 5010 (Rights and Obligations of Holders and Writers), which provides that the rights and obligations of holders and writers of option contracts of any class of options dealt in on the Exchange shall be as set forth in the Rules of the Clearing Corporation. See also OCC Rules, Chapter VIII, which governs exercise and assignment, and Chapter IX, which governs the discharge of delivery and payment obligations arising out of the exercise of physically settled stock option contracts. OCC Rules can be located at: https://www.theocc.com/ getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occrules.pdf.
17 ? See Rule 5050(b). The standard expirations are subject to certain listing criteria for underlying securities described within Rule 5020. Standard listings expire the third Friday of the month. The term "expiration date" (unless separately defined elsewhere in the OCC By-Laws), when used in respect of an option contract (subject to certain exceptions), means the third Friday of the expiration month of such option contract, or if such Friday is a day on which the exchange on which such option is listed is not open for business, the preceding day on which such exchange is open for business. See OCC By-Laws Article I, Section 1. Pursuant to Rule 5050(c), additional series of options of the same class may be opened for trading on the Exchange when the Exchange deems it necessary to maintain an orderly market, to meet customer demand or when the market price of the underlying stock moves more than five strike prices from the initial exercise price or prices. New series of options on an individual stock may be added until the beginning of the month in which the options contract will expire. Due to unusual market conditions, the Exchange, in its discretion, may add a new series of options on an individual stock until the close of trading on the business day prior to expiration.
18 ? See IM-5050-6.
19 ? See IM-5050-13.
20 ? See IM-5050-4.
21 ? See Rule 5070.
Pursuant to IM-5050-1(b), which governs strike prices of series of options on ETFs, the interval between strike prices of series of options on the Ether Funds will be $1 or greater when the strike price is $200 or less and $5 or greater where the strike price is over $200. 22 Additionally, the Exchange may list series of options pursuant to the $1 Strike Price Interval Program, 23 the $0.50 Strike Program, 24 the $2.50 Strike Price Program, 25 and the $5 Strike Program. 26 Pursuant to Rule 7050, where the price of a series of an Ether Fund option is less than $3.00, the minimum increment will be $0.05, and where the price is $3.00 or higher, the minimum increment will be $0.10. 27 Any and all new series of Ether Fund options that the Exchange lists will be consistent and comply with the expirations, strike prices, and minimum increments set forth in Rules 5050 and 7050, as applicable.
Footnotes:
22 ?The Exchange notes that for options listed pursuant to the Short Term Option Series Program, the Monthly Options Series Program, and the Quarterly Options Series Program, IM-5050-6, IM-5050-13, and IM-5050-4, specifically set forth intervals between strike prices on Quarterly Options Series, Short Term Option Series, and Monthly Options Series, respectively.
23 ? See IM-5050-2.
24 ? See IM-5050-5.
25 ? See IM-5050-3.
26 ? See Rule 5050(d)(5).
27 ?If options on the Ether Funds are eligible to participate in the Penny Interval Program, the minimum increment of $0.01 below $3.00 and $0.05 above $3.00 would apply. See Rule 7050(a)(3). See also Rule 7260 (which describes the requirements for the Penny Interval Program).
The Exchange also proposes to amend IM-3120-2 to provide a position limit of 25,000 same side option contracts for the Ether Fund options. Further, Rule 3140 provides that the exercise limits shall be determined in the manner described in Rule 3120, therefore the exercise limits would also be 25,000 contracts. 28
Footnotes:
28 ? See Rule 3140(c),
Position and exercise limits for options, including options on Ether Funds, are determined pursuant to Rules 3120 and 3140, respectively. Position and exercise limits for options vary according to the number of outstanding shares and the trading volumes of the underlying security over the past six months, where the largest in capitalization and the most frequently traded funds have an option position and exercise limit of 250,000 contracts (with adjustments for splits, re-capitalizations, etc.) on the same side of the market; and smaller capitalization funds have position and exercise limits of 200,000, 75,000, 50,000 or 25,000 contracts (with adjustments for splits, re-capitalizations, etc.) on the same side of the market. 29 Position limits are designed to limit the number of options contracts traded on BOX in an underlying security that an investor, acting alone or in concert with others directly or indirectly, may control. The purpose of position limits, which are set forth in Rule 3120, is to address potential manipulative schemes and adverse market impacts surrounding the use of options, such as disrupting the market in the security underlying the options. As such, position limits must balance concerns regarding mitigating potential manipulation and the cost of inhibiting potential hedging activity that investors may use for legitimate economic purposes. To achieve this balance, the Exchange proposes to set the position and exercise limits for the options on the Ether Funds at 25,000 contracts. 30 Capping the position limit at 25,000 contracts, the lowest limit available in options, would address concerns related to manipulation and protection of investors as this number is conservative for the Ether Funds and therefore appropriate given their liquidity. While the Exchange believes that the proposed 25,000-contract position limit is conservative for options on the Ether Funds, it nonetheless believes that, as provided in the NYSE American Approval Order, evidence exists to support a much higher position limit. 31
Footnotes:
29 ? See Rule 3120(d). For an option to be eligible for the 50,000-contract limit, the security underlying the option must have most recent six-month trading volume of at least 20,000,000 shares, or most recent six-month trading volume of at least 15,000,000 shares and at least 40,000,000 shares currently outstanding. For an option to be eligible for the 75,000-contract limit, the underlying security must have most recent six-month trading volume of at least 40,000,000 shares, or most recent six-month trading volume of at least 30,000,000 shares and at least 120,000,000 shares currently outstanding. For an option to be eligible for the 200,000-contract limit, the underlying security must have most recent six-month trading volume of at least 80,000,000 shares, or most recent six-month trading volume of at least 60,000,000 shares and at least 240,000,000 shares currently outstanding. For an option to be eligible for the 250,000-contract limit, the security underlying the option must have most recent six-month trading volume of at least 100,000,000 shares, or most recent six-month trading volume of at least 75,000,000 shares and at least 300,000,000 shares currently outstanding. The 25,000-contract limit applies to options on underlying securities that do not qualify for a higher contract limit. In addition, IM-3120-2 establishes higher position limits for options on certain ETFs.
30 ? See proposed IM-3120-2.
31 ?The Exchange may file a subsequent rule change to amend the position and exercise limit for options on any or all the Ether Funds based on additional data regarding trading activity, to continue to balance any concerns regarding manipulation. A higher position limit would allow institutional investors to utilize options on the Ether Funds for prudent risk management purposes.
[top] Specifically, as provided in the NYSE American Approval Order, the most-recent trading volume in ETHE and ETH well exceeds the requisite minimum of 100,000,000 shares necessary to qualify for the 250,000-contract position and exercise limits. 32 By comparison, other options symbols with less trading volume for the most-recent six months than ETHE and ETH are eligible for position and exercise limits of at least 250,000. 33 Further, the most-recent trading volume for ETHW well exceeded the requisite minimum of 40,000,000 shares necessary to qualify for the 75,000-contract position (and exercise) limit, which is three times the proposed 25,000- contract limit. 34 Finally, the proposed 25,000-contract position limit is the default for options that do not otherwise qualify for a
Footnotes:
32 ? See supra note 4.
33 ? See https://www.theocc.com/Market-Data/Market-Data-Reports/Series-and-Trading-Data/Series-Search (including the following symbols that have a position limit of 250,000: GLD, IAU, SLV, SIVR, SGOL).
34 ? See supra note 4.
35 ? Id.
As provided in the NYSE American Approval Order, if a market participant held the maximum permissible options positions in one of the Ether Fund options and exercised all of them at the same time, that market participant would control a small percentage of the outstanding shares of the underlying Ether Fund. For example, as noted above, a position limit of 25,000 same side contracts effectively restricts a market participant from holding positions that could result in the receipt of no more than 2,500,000 shares of the applicable Ether Fund (if that market participant exercised all its options).
Further, as provided in the NYSE American Approval Order, if 71 market participants had 25,000 same side positions in options on ETHE, each of them would have to simultaneously exercise all those options to create a scenario that may put the underlying security under stress. Similarly, if 18 market participants had 25,000 same side positions in options on ETH, each of them would have to simultaneously exercise all those options to create a scenario that may put the underlying security under stress. Finally, if 7 market participants had 25,000 same side positions in options on ETHW, each of them would have to simultaneously exercise all those options to create a scenario that may put the underlying security under stress. The Exchange believes it is highly unlikely for any of these scenarios to occur; however, even if such an event did occur, the Exchange would not expect any of the Ether Funds to be under stress because such an event would merely induce the creation of more shares through the trust's creation and redemption process. Further, given that the issuer of each Ether Fund may create and redeem shares that represent an interest in ether, the Exchange believes it is relevant to compare the size of a position limit to the market capitalization of the ether market. As of November 29, 2024, the global supply of ether was approximately 120.44 million, and the price of one ether was approximately $3,593.49, 36 which equates to a market capitalization of approximately $439.78 billion. Consider the proposed position and exercise limit of 25,000 option contracts for each Ether Fund option. A position and exercise limit of 25,000 same side contracts effectively restricts a market participant from holding positions that could result in the receipt of no more than 2,500,000 shares of ETHE, ETH, and ETHW, as applicable (if that market participant exercised all of its options). Therefore, if a market participant with the maximum 25,000 same side contracts in options on any of ETHE, ETH, or ETHW exercised all positions at one time, such an event would have no practical impact on ether.
Footnotes:
36 ? See https://finance.yahoo.com/quote/ETH-USD/history/.
[top] The NYSE American Approval Order provides the Ether Funds collectively represent approximately 1.71% of the global supply of ether (120,440,000). 37 Based on the $30.15 price of a ETHE share on November 29, 2024, a market participant could have redeemed one ether for approximately 119 ETHE shares. Another 14,354,890,070 ETHE shares could be created before the supply of ether was exhausted. As a result, 5,742 market participants would have to simultaneously exercise 25,000 same side positions in ETHE options to receive shares of the ETHE holding the entire global supply of ether. Similarly, based on the $33.84 price of an ETH share on November 29, 2024, a market participant could have redeemed one ether for approximately 106 ETH shares. Another 12,789,596,206 ETH shares could be created before the supply of ether was exhausted. As a result, 5,116 market participants would have to simultaneously exercise 25,000 same side positions in ETH options to receive shares of ETH holding the entire global supply of ether. Similarly, based on the $25.80 price of a ETHW share on November 29, 2024, a market participant could have redeemed one ether for approximately 139 ETHW shares. Another 16,775,191,302 ETHW shares could be created before the supply of ether was exhausted. As a result, 6,710 market participants would have to simultaneously exercise 25,000 same side positions in ETHW options to receive shares of ETHW holding the entire global supply of ether. Unlike the Ether Funds, the number of shares that corporations may issue is limited. However, like corporations, which authorize additional shares, repurchase shares, or split their shares, the Ether Funds may create, redeem, or split shares in response to demand. The supply of ether is larger than the available supply of most securities. 38 Given the significant unlikelihood of any of these events ever occurring, the Exchange does not believe options on the Ether Funds should be subject to position and exercise limits even lower than those proposed (which are already equal to the lowest available limit for equity options in the industry) to protect the supply of ether. The Exchange also believes the proposed limits are appropriate given position limits for ether futures. For example, the Chicago Mercantile Exchange ("CME") imposes a position limit of 8,000 futures (for the initial spot month) on its ether futures contract. 39 On November 29, 2024, CME Jan 25 ether futures settled at $3,629.69. A position of 8,000 CME ether futures, therefore, would have a notional value of $1,451,876,000. As provided in the NYSE American Approval Order, the approximate number of option contracts for each Ether Fund that would equate to the notional value of CME ether futures is significantly higher than the proposed limit of 25,000 options contract for each Ether Fund option. The fact that many options ultimately expire out-of-the-money and thus are not exercised for shares of the underlying, while the delta of an ether future is 1, further demonstrates how conservative the proposed limits of 25,000 options contracts are for the Ether Fund options. The Exchange notes, unlike options contracts, CME position limits are calculated on a net futures-equivalent basis by contract and include contracts that aggregate into one or more base contracts according to an aggregation ratio(s). 40 Therefore, if a portfolio includes positions in options on futures, CME would aggregate those positions into the underlying futures contracts in accordance with a table published by CME on a delta equivalent value for the relevant spot month, subsequent spot month, single month and all month position limits. 41 If a position exceeds position limits because of an option assignment, CME permits market participants to liquidate the excess position within one business day without being considered in violation of its rules. Additionally, if at the close of trading, a position that includes options exceeds position limits for futures contracts, when evaluated using the delta factors as of that day's close of trading but does not exceed the limits when evaluated using the previous
Footnotes:
37 ? See id.
38 ?The market capitalization of ether would rank in the top 20 among securities. See https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/.
39 ? See CME Rulebook Chapter 349 (description of CME ether futures) and Chapter 5, Position Limit, Position Accountability and Reportable Level Table in the Interpretations & Special Notices. Each CME ether futures contract is valued at fifty ethers as defined by the CME CF Ether Reference Rate ("ERR"). See CME Rulebook Chapter 349.
40 ? See CME Rulebook Chapter 5, Position Limit, Position Accountability and Reportable Level Table in the Interpretations & Special Notices.
41 ? Id.
Consistent with its position regarding the irrelevance of bitcoin supply to position limits for options on bitcoin ETPs, the Exchange likewise believes the available supply of ether is not relevant to the determination of position and exercise limits for Ether Fund options. 42 Position and exercise limits are not a tool that should be used to address a potential limited supply of an underlying. Position and exercise limits do not limit the total number of options that may be held, but rather they limit the number of positions a single customer may hold or exercise at one time. 43 "Since the inception of standardized options trading, the options exchanges have had rules imposing limits on the aggregate number of options contracts that a member or customer could hold or exercise."? 44 Position and exercise limit rules are intended "to prevent the establishment of options positions that can be used or might create incentives to manipulate or disrupt the underlying market so as to benefit the options position. In particular, position and exercise limits are designed to minimize the potential for mini-manipulations and for corners or squeezes of the underlying market. In addition, such limits serve to reduce the possibility for disruption of the options market itself, especially in illiquid options classes."? 45 The Exchange notes that a Registration Statement on Form S-1 was filed with the Commission for each Ether Fund, each of which described the supply of ether as being unlimited. 46 Each Registration Statement permits an unlimited number of shares of the applicable Ether Fund to be created. Further, the Commission approved proposed rule changes that permitted the listing and trading of shares of each Ether Fund, which approval did not comment on the sufficient supply of ether or address whether there was a risk that permitting an unlimited number of shares for an Ether Fund would impact the supply of ether. 47 Therefore, the Exchange believes the Commission had ample time and opportunity to consider whether the supply of ether was sufficient to permit the creation of unlimited Ether Fund shares, and does not believe considering this supply with respect to the establishment of position and exercise limits is appropriate given its lack of relevance to the purpose of position and exercise limits. However, given the significant size of the ether supply, the proposed positions limits are more than sufficient to protect investors and the market.
Footnotes:
42 ? See BTC Approval Order, 89 FR at 84965, n. 48 (asserting that, outside of the bitcoin context, NYSE American is unaware of any proposed rule change related to position and exercise limits for any equity option (including commodity ETF options) for which the Commission required consideration of whether the available supply of an underlying (whether it be a corporate stock or an ETF) or the contents of an ETF (commodity or otherwise) should be considered when an exchange proposed to establish those limits). See, e.g., Securities Exchange Act Release No. 57894 May 30, 2008), 73 FR 32061 (June 5, 2008) (SR-CBOE-2005-11) (approval order in which the Commission stated that the "listing and trading of Gold Trust Options will be subject to the exchanges' rules pertaining to position and exercise limits and margin"). The Exchange notes the current position and exercise limits for options on SPDR Gold Shares ETF ("GLD") and options on iShares Silver Trust ("SLV") are 250,000 contracts, or 10 times the position and exercise limit for options on the Ether Funds.
43 ?For example, suppose an option has a position limit of 25,000 option contracts and there are a total of 10 investors trading that option. If all 10 investors max out their positions, that would result in 250,000 option contracts outstanding at that time. However, suppose 10 more investors decide to begin trading that option and also max out their positions. This would result in 500,000 option contracts outstanding at that time. An increase in the number of investors could cause an increase in outstanding options even if position limits remain unchanged.
44 ? See Securities Exchange Act Release No. 39489 (December 24, 1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11).
45 ? Id.
46 ? See, e.g., ETHE Form S-1 Registration Statement, at p. 77, https://www.sec.gov/Archives/edgar/data/2020455/000119312524106957/d756153ds1.htm; ETH Amendment No. 5 to Form S-1 Registration Statement, at p. 79, https://www.sec.gov/Archives/edgar/data/2020455/000119312524181081/d756153ds1a.htm; and ETHW Form S-1 Registration Statement 1, at p. 17, https://www.sec.gov/Archives/edgar/data/2013744/000199937124007581/bitwise-s1a_061824.htm ("Ether Funds Reg. Stmts.").
47 ? See infra note 50.
Based on the foregoing, the Exchange believes the proposal to list options on the Ether Funds with positions and exercise limits of 25,000 on the same side, the lowest position limit available in the options industry, is conservative and appropriate given the market capitalization, average daily volume, and high number of outstanding shares for each of the Ether Funds. The proposed position and exercise limits reasonably and appropriately balance the liquidity provisioning in the market against the prevention of manipulation. The Exchange believes these proposed limits are effectively designed to prevent an individual customer or entity from establishing options positions that could be used to manipulate the market of the underlying Ether Funds as well as the ether market. 48 As described herein, options on the Ether Funds will trade in the same manner as any other ETF or ETP options on the Exchange, except that the Ether Funds will not be eligible for FLEX Equity Option trading. The Exchange Rules that currently apply to the listing and trading of options on BOX, including, for example, Rules that govern listing criteria, expiration and exercise prices, minimum increments, margin requirements, customer accounts and trading halt procedures will apply to the listing and trading of Ether Funds on BOX in the same manner as they apply to all other ETFs and ETPs that are listed and traded on BOX, including the precious metal-backed commodity ETPs already deemed appropriate for options trading on BOX pursuant to Rule 5020(h). Further, as described above, Exchange Rules regarding position and exercise limits will likewise apply to options on the Ether Funds except that, as proposed, the position and exercise limits will be set at 25,000 on the same side.
Footnotes:
48 ? See Securities Exchange Act Release No. 39489 (December 24, 1997), 63 FR 276 (January 5, 1998) (SR-CBOE-1997-11). See also BTC Approval Order.
[top] The Exchange has analyzed BOX's capacity and represents that it and The Options Price Reporting Authority ("OPRA") have the necessary systems capacity to handle the additional traffic associated with the listing of options on Ether Funds. The Exchange believes any additional traffic that would be generated from the trading of options on Ether Funds would be manageable. The Exchange represents that Exchange Participants will not have a capacity issue as a result of this proposed rule change. The Exchange represents that the same surveillance procedures applicable to all other options currently listed and traded on BOX will apply to options on Ether Funds, and that it has the necessary systems capacity to support the new option series. The Exchange's existing surveillance and reporting safeguards are designed to deter and detect possible manipulative behavior which might arise from listing and trading options on ETFs and ETPs, such as (existing) precious metal-commodity backed ETP options as well as the proposed options on Ether Funds. The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of options on Ether Funds and to deter and detect violations of Exchange rules. Specifically, the Exchange's market surveillance staff will have access to surveillances that it conducts, and that Financial Industry Regulatory Authority
Footnotes:
49 ?Section 19(g)(1) of the Act, among other things, requires every SRO registered as a national securities exchange or national securities association to comply with the Act, the rules and regulations thereunder, and the SRO's own rules, and, absent reasonable justification or excuse, enforce compliance by its members and persons associated with its members. See 15 U.S.C. 78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows the Commission to relieve an SRO of certain responsibilities with respect to members of the SRO who are also members of another SRO. Specifically, Section 17(d)(1) allows the Commission to relieve an SRO of its responsibilities to: (i) receive regulatory reports from such members; (ii) examine such members for compliance with the Act and the rules and regulations thereunder, and the rules of the SRO; or (iii) carry out other specified regulatory responsibilities with respect to such members.
50 ? See Securities Exchange Act Release No. 100224 (May 23, 2024), 89 FR 46937, 46938 (May 30, 2024) (File Nos. SR-NYSEARCA-2023-70; SR-NYSEARCA-2024-31; SR-NASDAQ-2023-045; SR-CboeBZX-2023-069; SR-CboeBZX-2023-070; SR-CboeBZX-2023-087; SR-CboeBZX-2023-095; SR-CboeBZX-2024-018) (Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, to List and Trade Ether-Based Commodity-Based Trust Shares and Trust Units) ("Ether ETP Approval Order").
51 ? See Ether ETP Approval Order, 89 FR at 46941.
52 ? See Amendment No. 2 to Proposed Rule Change to List and Trade Shares of the Grayscale Ethereum ETF under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares) (SR-NYSEARCA-2023-70), filed May 21, 2024, available at https://www.sec.gov/comments/sr-nysearca-2023-70/srnysearca202370-475871-1363474.pdf; Amendment No. 1 to Proposed Rule Change to List and Trade Shares of the Bitwise Ethereum ETF under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares) (SR-NYSEARCA-2024- 31), filed May 21, 2024, available at https://www.sec.gov/comments/sr-nysearca-2024-31/srnysearca202431-475891-1363514.pdf; and Amendment No. 2 to Proposed Rule Change to List and Trade Shares of the Grayscale Ethereum Mini ETF under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares) (SR-NYSEARCA-2024-44), filed May 22, 2024, available at https://www.sec.gov/comments/sr-nysearca-2024-44/srnysearca202444-476231-1364174.pdf.
53 ?The Exchange understands from customers that investors have historically transacted in options on ETFs in the OTC options market if such options were not available for trading in a listed environment.
54 ? See Rules 4020(b), (e) and 4100.
55 ? See Rule 4040.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Securities Exchange Act of 1934 (the "Act"), 56 in general, and Section 6(b)(5) of the Act, 57 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest.
Footnotes:
56 ?15 U.S.C. 78f(b).
57 ?15 U.S.C. 78f(b)(5).
[top] In particular, the Exchange believes that the proposal to list and trade options on Ether Funds will remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, protect investors because
Footnotes:
58 ? See Rule 5020(h).
59 ?The Exchange may submit a subsequent rule filing that would permit the Exchange to authorize for trading FLEX Equity Options on the Ether Funds (which filing may propose changes to existing FLEX Equity Option position limits for such options if appropriate).
60 ? See BTC Approval Order. See also IM-3120-2.
61 ?As noted herein, the Ether Funds collectively represent approximately 1.71% of the ether market.
62 ? See Ether ETP Approval Order, 89 FR, at 46938.
63 ? See Ether ETP Approval Order, 89 FR at 46941.
64 ? See Amendment No. 2 to Proposed Rule Change to List and Trade Shares of the Grayscale Ethereum ETF under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares) (SR-NYSEARCA-2023-70), filed May 21, 2024, available at https://www.sec.gov/comments/sr-nysearca-2023-70/srnysearca202370-475871-1363474.pdf; Amendment No. 1 to Proposed Rule Change to List and Trade Shares of the Bitwise Ethereum ETF under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares) (SR-NYSEARCA-2024-31), filed May 21, 2024, available at https://www.sec.gov/comments/sr-nysearca-2024-31/srnysearca202431-475891-1363514.pdf; and Amendment No. 2 to Proposed Rule Change to List and Trade Shares of the Grayscale Ethereum Mini ETF under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares) (SR-NYSEARCA-2024-44), filed May 22, 2024, available at https://www.sec.gov/comments/sr-nysearca-2024-44/srnysearca202444-476231-1364174.pdf.
Finally, the Exchange notes that this proposal will remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, protect investors because applicable Exchange rules will require that customers receive appropriate disclosure before trading options on Ether Funds? 65 and will require that brokers opening accounts and recommending options transactions comply with relevant customer suitability standards. 66
Footnotes:
65 ? See Rules 4020(b), (e) and 4100.
66 ? See Rule 4040.
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 not necessary or appropriate in furtherance of the purposes of the Act. In this regard and as indicated above, the Exchange notes that the rule change is being proposed as a competitive response to a filing submitted by NYSE American that was recently approved by the Commission. 67
Footnotes:
67 ? See supra note 4.
Intramarket Competition: The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act as Ether Funds would need to satisfy the initial listing standards set forth in the Exchange Rules in the same manner as any other ETF before BOX could list options on them. Additionally, Ether Fund options will be equally available to all market participants who wish to trade such options. The Exchange Rules currently applicable to the listing and trading of options on ETFs on BOX will apply in the same manner to the listing and trading of all options on Ether Funds. Also, and as stated above, BOX already lists options on other commodity-based ETPs. 68
Footnotes:
68 ? See Rule 5020(h).
Intermarket Competition: The Exchange does not believe that the proposal to list and trade options on Ether Funds will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the extent that the advent of Ether Fund options trading on BOX may make BOX a more attractive marketplace to market participants at other exchanges, such market participants are free to elect to become market participants on BOX. Additionally, other options exchanges are free to amend their listing rules, as applicable, to permit them to list and trade options on Ether Funds. The Exchange notes that listing and trading Ether Fund options on BOX will subject such options to transparent exchange-based rules as well as price discovery and liquidity, as opposed to alternatively trading such options in the OTC market. The Exchange believes that the proposed rule change may relieve any burden on, or otherwise promote, competition as it is designed to increase competition for order flow on BOX in a manner that is beneficial to investors by providing them with a lower-cost option to hedge their investment portfolios. The Exchange notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues that offer similar products. Ultimately, the Exchange believes that offering Ether Fund options for trading on BOX will promote competition by providing investors with an additional, relatively low-cost means to hedge their portfolios and meet their investment needs in connection with ether prices and ether-related products and positions on a listed options exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received comments on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act? 69 and Rule 19b-4(f)(6) thereunder. 70 Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act? 71 and subparagraph (f)(6) of Rule 19b-4 thereunder. 72
Footnotes:
69 ?15 U.S.C. 78s(b)(3)(A)(iii).
70 ?17 CFR 240.19b-4(f)(6).
71 ?15 U.S.C. 78s(b)(3)(A)(iii).
72 ?17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission has waived the pre-filing requirement.
[top] A proposed rule change filed under Rule 19b-4(f)(6)? 73 under the Act does not normally become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii), 74 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission previously approved the listing and trading of options on the Ether Funds. 75 The Exchange has provided information regarding the underlying Ether Funds, including, among other things, information regarding trading volume, the number of beneficial holders, and the market capitalization of the Ether Funds. The proposal also establishes position and exercise limits for options on the Ether Funds and provides information regarding the surveillance procedures that will apply to Ether Funds options. The Commission believes that waiver of the operative delay could benefit investors by providing an additional venue for trading Ether Funds options. Therefore, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby
Footnotes:
73 ?17 CFR 240.19b-4(f)(6).
74 ?17 CFR 240.19b-4(f)(6)(iii).
75 ? See NYSE American Approval Order, supra note 4.
76 ?For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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 ( https://www.sec.gov/rules/sro.shtml ); or
• Send an email to rule-comments@sec.gov. Please include file number SR-BOX-2025-09 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-BOX-2025-09. 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 ( https://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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR-BOX-2025-09 and should be submitted on or before May 8, 2025.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 77
Footnotes:
77 ?17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-06525 Filed 4-16-25; 8:45 am]
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