Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Nasdaq Bitcoin Index Options

SECURITIES AND EXCHANGE COMMISSION [Release No. 34-105549; File No. SR-Phlx-2025-50] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Nasdaq Bitcoin Index Options May 22, 2026. I. Introduction On September 23, 2025, Nasdaq PHLX LLC (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)  1 and Rule 19b-4 thereunder, 2 a proposed rule change to list and trade options on the Nasdaq Bitcoin Index. The proposed rule change was published for comment in the Federal Register on September 29, 2025. 3 On November 3, 2025, pursuant to Section 19(b)(2) of the Act, 4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change. 5 On December 23, 2025, the Commission instituted proceedings under Section 19(b)(2)(B) of the Act  6 to determine whether to approve or disapprove the proposed rule change. 7 On March 20, 2026, the Commission designated a longer time for Commission action on the proposed rule change. 8 The Commission received comments regarding the proposed rule change. 9 On May 15, 2026, the Exchange filed Amendment No. 1 to the proposed rule change, which replaces and supersedes the original filing in its entirety. 10 The Commission is publishing this notice and order to solicit comment on Amendment No. 1 in Sections II and III below, which Items have been prepared by the Exchange, and to approve the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. 1  15 U.S.C. 78s(b)(1). 2  17 CFR 240.19b-4. 3   See Securities Exchange Act Release No. 104038 (Sept. 24, 2025), 90 FR 46706 (Sept. 29, 2025). 4  15 U.S.C. 78s(b)(2). 5   See Securities Exchange Act Release No. 104173 (Nov. 3, 2025), 90 FR 51424 (Nov. 17, 2025). The Commission designated December 28, 2025, as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6  15 U.S.C. 78s(b)(2)(B). 7   See Securities Exchange Act Release No. 104506 (Dec. 23, 2025), 90 FR 61452 (Dec. 31, 2025). 8   See Securities Exchange Act Release No. 105057 (Mar. 20, 2026), 91 FR 14613 (Mar. 25, 2026). 9  Comments regarding the proposed rule change are available at https://www.sec.gov/comments/sr-phlx-2025-50/srphlx202550.htm. 10  Amendment No. 1 revises the proposal to: update several defined terms; correct an error in the delisting provision in proposed Options 4D, Section 7(a)(3)(D); revise Exchange Options 4D, Section 7(c) to describe the intra-day and settlement value information that CF Benchmarks will disseminate; indicate that CF Benchmarks will calculate and publish the CME CF Bitcoin Real Time Index every 200 milliseconds; provide that the trading increment for Nasdaq Bitcoin Index options will be $0.01 as long as iShares Bitcoin Trust ETF (“IBIT”) options participate in the Penny Interval Program, and provide additional data and analysis to support the proposed minimum increment; provide additional analysis supporting the proposed position and exercise limits for Nasdaq Bitcoin Index options; identify the funds comprising the Spot Bitcoin ETPs; provide information regarding potential uses for Nasdaq Bitcoin Index options; and revise the description of the potential exemptive relief that the Commodity Futures Trading Commission could provide. Amendment No. 1 is available at https://www.sec.gov/comments/SR-Phlx-2025-50/srphlx202550-779187-2374615.pdf. II. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade Nasdaq Bitcoin Index Options, a new index that reflects the price of Bitcoin. This Amendment No. 1 replaces and supersedes the original filing in its entirety and proposes to: (1) amend the definitions for “CME CF Cryptocurrency Pricing Products Oversight Committee,” “current index value,” and “reporting authority”; (2) amend the description of the utilization of Nasdaq Bitcoin Index Options; (3) amend the minimum increment rule text and justification for the proposed minimum increment; (4) update the position limit rule with respect to reporting and justification for the proposed position and exercise limits; (5) amend the index level rule text; (6) amend the name of final settlement index; (7) amend the interval of dissemination of the BRTI; (8) amend the conditions to list and trade Nasdaq Bitcoin Index Options including the type of exemptive relief required from the CFTC; (9) add a new Section 10 related to margin; and (10) amend rule citations and data. The text of the proposed rule change is available on the Exchange's website at https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings, and at the principal office of the Exchange. III. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange 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 V below. The Exchange 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 introduce a new index options product, Nasdaq Bitcoin Index Options. This index would enable retail and institutional investors to obtain a precise price for Bitcoin. Nasdaq Bitcoin Index Options, as proposed, shall have a ticker symbol “QBTC” and will be based on the underlying index, CME CF Bitcoin Real Time Index (“BRTI”)  11 divided by a factor of one hundred (100) and disseminated as the “CF NQBTC Options Indicative Settlement Value.” The Exchange shall utilize a separate methodology to calculate the final settlement price. The final settlement price shall be the “CF NQBTC Options Settlement Value” which is calculated on the expiration date by observing transactions during a one-hour window from 15.00 to 16.00 New York Time, separated into twelve partitions of five minutes, each with a resulting volume-weighted median (“VWM”), which index value is expressed as the arithmetic mean of the twelve (12) VWMs, resulting in the CME CF Cryptocurrency Reference Rate—New York Variant (“BRRNY”)  12 which is then divided by a factor of one hundred (100). The purpose of utilizing the BRRNY divided by a factor of one hundred (100), known as the CF NQBTC, as the final settlement price is to provide a replicable, manipulation-resistant and representative Bitcoin benchmark that synchronizes with the traditional U.S. options market close timeframe. 11  The BRTI is a real time price benchmark and is regulated by the UK Financial Conduct Authority, a regulator of financial services firms, under EU BMR. The European Regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds is the EU BMR. Today, the BRRNY—U.S. Dollar trading pair is the benchmark index for the following exchange-listed ETF products comprising $58 billion of assets as of July 18, 2024: iShares Bitcoin Trust (IBIT), Grayscale Bitcoin Trust (GBTC), Fidelity Wise Origin Bitcoin Fund (FBTC), ARK 21Shares Bitcoin ETF (ARKB), Bitwise Bitcoin ETF Trust (BUTB), VanEck Bitcoin Trust (HODL), Coinshares Valkyrie Bitcoin Fund (BRRR), Invesco Galaxy Bitcoin ETF (BTCO), Franklin Bitcoin ETF (EZBC). (See https://etfdb.com/index/cme-cf-benchmarks-Bitcoin-reference-rate-new-york-variant ). 12  Today, CME CF Bitcoin Futures contracts are settled using the BRRNY. Options on this new index will be cash-settled, with a European-style exercise. Background The BRTI  13 is a benchmark index price calculated and published once per 200 milliseconds for Bitcoin that aggregates order data from Bitcoin-USD markets operated by major cryptocurrency exchanges that conform to the CME CF Constituent Exchange Criteria. 14 The BRTI is calculated every 200 milliseconds of every day, using the Relevant Order Books  15 of all Constituent Exchanges, 16 thereby aggregating the notional value of Bitcoin across major Bitcoin spot platforms. 13  In 2016, CME Group and Crypto Facilities launched the BRTI index. See https://www.cmegroup.com/education/courses/introduction-to-Bitcoin/introduction-to-Bitcoin-reference-rate.html. 14  “Constituent Exchange” is defined at proposed Options 4D, Section 2(a)(5) to mean the cryptocurrency trading venues approved by the CME CF Cryptocurrency Pricing Products Oversight Committee to serve as pricing source for the calculation of the BRTI and BRRNY. 15  CF Benchmark's Methodology Guide defines “Relevant Order Books” as the universe of the currently unmatched limit orders to buy or sell a unit of the cryptocurrency base asset versus the quote asset on a Constituent Exchange in the Relevant Pair, aggregated by price, that is reported through its Automatic Programming Interface (“API”) to the CF Benchmarks. The Relevant Pair for the Nasdaq Bitcoin Index Options shall mean Bitcoin versus the U.S. Dollar. To assure that the BRTI and the BRRNY reflects global cryptocurrency trading activity in a representative and unbiased manner, a geographically diverse set of spot trading venues is included within the current framework. 16  Constituent Exchanges are cryptocurrency trading venues approved by the CME CF Cryptocurrency Pricing Products Oversight Committee to serve as [sic] pricing source for the calculation of a [sic] BRTI and the BRRNY, collectively known as the CME CF Cryptocurrency Pricing Products. The Exchange defines “CME CF Cryptocurrency Pricing Products Oversight Committee” or “Oversight Committee” at proposed Options 4D, Section 2(a)(4) to mean the committee established jointly by Crypto Facilities or “CF” and Chicago Mercantile Exchange Inc. or “CME” to protect the integrity of the methodology and calculation process of the BRTI and the BRRNY and to address potential conflicts of interest. The role of the Oversight Committee is to provide an oversight function to review and provide challenge on all aspects of the methodology and calculation process and provide effective oversight of CF Benchmarks as the administrator of the BRTI and BRRNY. The BRTI is designed based on the IOSCO Principles for Financial Benchmarks. 17 The administrator of the BRTI and BRRNY is CF Benchmarks Ltd. 17   See https://www.iosco.org/library/pubdocs/pdf/IOSCOPD589.pdf. A trading venue is eligible as a Constituent Exchange in any of the CME CF Cryptocurrency Pricing Products  18 if it offers a market that facilitates the spot trading of the relevant cryptocurrency base asset (Bitcoin) against the corresponding quote asset (U.S. Dollars), and makes trade data and order data available through an API with sufficient reliability, detail and timeliness. Furthermore, it must meet certain criteria established by the CME CF Cryptocurrency Pricing Products Oversight Committee. 19 Should the average daily contribution of a Constituent Exchange fall below 3% for any CME CF Cryptocurrency Pricing Product, then the continued inclusion of the venue as a Constituent Exchange to the Relevant Pair shall be assessed by the CME CF Oversight Committee. 18  CME CF Cryptocurrency Pricing Products includes the BRTI and the BRRNY. 19  CF Benchmark's guidelines require that the venue's Relevant Pair spot trading volume for an index must meet the minimum thresholds for it to be admitted as a Constituent Exchange. The average daily volume the venue would have contributed during the observation window for the Reference Rate of the Relevant Pair must exceed 3% for two consecutive calendar quarters. The venue must have policies to ensure fair and transparent market conditions at all times and has [sic] processes in place to identify and impede illegal, unfair or manipulative trading practices. The venue must not impose undue barriers to entry or restrictions on market participants, and utilizing the venue does not expose market participants to undue credit risk, operational risk, legal risk or other risks. The venue must comply with applicable law and regulation, including, but not limited to capital markets regulations, money transmission regulations, client money custody regulations, know-your-client (“KYC”) regulations and anti-money laundering regulations. Finally, the venue must cooperate with inquiries and investigations of regulators and CF Benchmarks upon request and must execute data sharing agreements with CME Group. Once admitted a constituent exchange must demonstrate that it continues to meet the aforementioned criteria. When calculated, the Relevant Order Book of each Constituent Exchange is added to a joint list of order books, 20 which are aggregated into one consolidated order book. If the size at the bid or ask order price level exceeds the order size cap that is set by CF Benchmarks, it enters the consolidated order book with a size equal to the order size cap. The cumulative bid price-volume curve, ask price-volume curve, mid-price volume curve  21 and mid spread-volume curve are calculated from the consolidated order book at a granularity equal to the spacing parameter. 20  An order book is a list of buy and sell orders with associated limit prices and sizes that have not yet been matched due to lack of supply or demand to trade at that price. The BRTI is calculated from order book data, as opposed to, for instance, trade data. Order book data is composed of unmatched limit orders to buy or sell Bitcoin. It informs about the price at which a trader can buy or sell Bitcoins now or in the future and is therefore forward-looking by nature. Further, absent retrieval constraints, order book data is always up to date. This is in contrast to trade data, which is produced in stochastic intervals only and informs about the price at which Bitcoin has traded in the past. See https://www.cmegroup.com/trading/files/Bitcoin-real-time-index-methodology-version-2.pdf. 21   See https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf. Using the above notation, the ask price-volume curve is defined as askPV , the bid price-volume curve as bidPV , the mid-price volume curve as midPV , and the mid spread-volume curve as midSV , in each case as of the effective time T , as: EN28MY26.000 At a high level, the mid-price volume curve represents the average of the marginal price at which a certain amount of Bitcoins can be sold and at which that same amount can be bought. By averaging across the mid-price volume curve, the BRTI represents a blend of such (hypothetical) transactions at various transaction sizes. 22 22   See https://www.cmegroup.com/trading/files/Bitcoin-real-time-index-methodology-version-2.pdf. The utilized depth is calculated as the maximum cumulative volume for which the mid spread-volume curve does not exceed a certain percentage deviation from the mid-price. 23 If this volume is less than the spacing parameter, the utilized depth is set to the spacing parameter. The utilized depth, v , is calculated as: 23   See https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf. EN28MY26.001 At a high level, the BRTI is calculated from the section of the mid-price volume curve for which ask limit orders at a certain depth diverge by no more than 0.5% from the mid-price at that depth. It therefore reflects a significant portion of the top of the consolidated order book (as opposed to, for instance, the best bid and ask prices only) but discards limit orders that are less likely to be matched. This makes it a meaningful representation of true Bitcoin liquidity and robust to local changes in order books. Note that utilized depth will always include crossed orders for any of the consolidated order books of the Constituent Exchanges, along with limit orders on the order books of Constituent Exchanges up to 0.5% away of the mid-price volume curve. If zero size resides in both these sections, utilized depth is set to one. The BRTI is then effectively equal to the mid-price of the consolidated order book. 24 24   See https://www.cmegroup.com/trading/files/Bitcoin-real-time-index-methodology-version-2.pdf. The mid-price volume curve is weighted by the normalized probability density of the exponential distribution up to the utilized depth. The BRTI is then given by the sum of the weighted mid-price volume curve obtained in the previous step. 25 The BRTI as of the effective time T, CCRTI , is then given by: 25   See the qualitative description of the calculation methodology at https://docs.cfbenchmarks.com/ME%20CF%20Real%20Time%20Indices%20Methodology.pdf. EN28MY26.002 The order size cap is calculated from the uncapped consolidated order book. Using the above notation, the dynamic order size cap is derived as follows: EN28MY26.003 The order size cap as of the effective time T, C, is then given by: EN28MY26.004 If the Retrieval Time of the Relevant Order Book of a Constituent Exchange is at least 30 seconds older than the Calculation Time, the Constituent Exchange is disregarded in the calculation of the BRTI for that Calculation Time. If the Retrieval Times of the Relevant Order Books of all Constituent Exchanges are at least 30 seconds older each than the Calculation Time, the BRTI calculation failure occurs for that Calculation Time. All Relevant Order Books are subject to an automated screening for erroneous data. 26 26  If the format of a Relevant Order Book: deviates from the expected format such that it cannot be parsed; contains no bid orders or no ask orders; crosses; or contains any entries with a non-numeric or non-positive limit price or size, it is flagged as erroneous. Relevant Order Books flagged as erroneous for a given calculation time are disregarded in the calculation of the BRTI for that calculation time. See https://docs.cfbenchmarks.com/CME%20CF%20Real%20Time%20Indices%20Methodology.pdf. At a high level, the mid-price volume curve is weighted such that prices near the current market prices (at the mid-point) are weighted higher than prices that are far away from where trading is occurring (at the bid or offer). Overview of the Bitcoin Industry Bitcoin is a digital asset that is created and transmitted through the operations of the peer-to-peer Bitcoin network, a decentralized network of computers that operates on cryptographic protocols (the “Bitcoin network”). No single entity owns or operates the Bitcoin network, the infrastructure of which is collectively maintained by its 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 Bitcoin blockchain (the “Bitcoin 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 platforms that enable trading in Bitcoin or in individual end-user-to-end-user transactions under a barter system. The Bitcoin network is commonly understood to be decentralized and does not require governmental authorities or financial institution intermediaries to create, transmit or determine the value of Bitcoin. Rather, Bitcoin is created and allocated by the Bitcoin network protocol through a “mining” process. The value of Bitcoin is determined by the supply of and demand for Bitcoin-on-Bitcoin platforms or in private end-user-to-end-user transactions. New Bitcoins are created and rewarded to the miners of a block in the Bitcoin blockchain for verifying transactions. The Bitcoin blockchain is a shared 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 Bitcoin blockchain. As each new block records outstanding Bitcoin transactions, and outstanding transactions are settled and validated through such recording, the Bitcoin blockchain represents a complete, transparent and unbroken history of all transactions of the Bitcoin network. History of Bitcoin The Bitcoin network was initially contemplated in a whitepaper that also described Bitcoin and the operating software to govern the Bitcoin network. The whitepaper was purportedly authored by Satoshi Nakamoto. However, no individual with that name has been reliably identified as Bitcoin's creator, and the general consensus is that the name is likely a pseudonym for the actual inventor or inventors. The first Bitcoins were created in 2009 after Nakamoto released the Bitcoin network source code (the software and protocol that created and launched the Bitcoin network). The Bitcoin network has been under active development since that time by a loose group of software developers who have come to be known as core developers. Overview of Bitcoin Network Operations In order to own, transfer or use Bitcoin directly on the Bitcoin network (as opposed to through an intermediary, such as an exchange), a person generally must have internet access to connect to the Bitcoin network. Bitcoin transactions may be made directly between end-users without the need for a third-party intermediary. To prevent the possibility of double-spending Bitcoin, a user must notify the Bitcoin network of the transaction by broadcasting the transaction data to its network peers. The Bitcoin network provides confirmation against double-spending by memorializing every transaction in the Bitcoin blockchain, which is publicly accessible and transparent. This memorialization and verification against double-spending is accomplished through the Bitcoin network mining process, which adds “blocks” of data, including recent transaction information, to the Bitcoin blockchain. Overview of Bitcoin Transfers Prior to engaging in Bitcoin transactions directly on the Bitcoin network, a user generally must first install on its computer or mobile device a Bitcoin network software program that will allow the user to generate a private and public key pair associated with a Bitcoin address commonly referred to as a “wallet.” The Bitcoin network software program and the Bitcoin address also enable the user to connect to the Bitcoin network and transfer Bitcoin to, and receive Bitcoin from, other users. Each Bitcoin network address, or wallet, is associated with a unique “public key” and “private key” pair. To receive Bitcoin, the Bitcoin recipient must provide its public key to the party initiating the transfer. This activity is analogous to a recipient for a transaction in U.S. dollars providing a routing address in wire instructions to the payor so that cash may be wired to the recipient's account. The payor approves the transfer to the address provided by the recipient by “signing” a transaction that consists of the recipient's public key with the private key of the address from where the payor is transferring the Bitcoin. The recipient, however, does not make public or provide to the sender its related private key. Neither the recipient nor the sender reveals their private keys in a transaction because the private key authorizes transfer of the funds in that address to other users. Therefore, if a user loses his or her private key, the user may permanently lose access to the Bitcoin contained in the associated address. Likewise, Bitcoin is irretrievably lost if the private key associated with them is deleted and no backup has been made. When sending Bitcoin, a user's Bitcoin network software program must validate the transaction with the associated private key. The resulting digitally validated transaction is sent by the user's Bitcoin network software program to the Bitcoin network to allow transaction confirmation. Some Bitcoin transactions are conducted “off-blockchain” and are therefore not recorded in the Bitcoin blockchain. Some “off-blockchain transactions” involve the transfer of control over, or ownership of, a specific digital wallet holding Bitcoin or the reallocation of ownership of certain Bitcoin in a digital wallet containing assets owned by multiple persons, such as a digital wallet maintained by a digital assets platform. In contrast to on-blockchain transactions, which are publicly recorded on the Bitcoin blockchain, information and data regarding off-blockchain transactions are generally not publicly available. Therefore, off-blockchain transactions are not truly Bitcoin transactions in that they do not involve the transfer of transaction data on the Bitcoin network and do not reflect a movement of Bitcoin between addresses recorded in the Bitcoin blockchain. For these reasons, off-blockchain transactions are subject to risks as any such transfer of Bitcoin ownership is not protected by the protocol behind the Bitcoin network or recorded in, and validated through, the blockchain mechanism. Summary of a Bitcoin Transaction In a Bitcoin transaction directly on the Bitcoin network between two parties (as opposed to through an intermediary, such as a custodian), the following circumstances must initially be in place: (i) the party seeking to send Bitcoin must have a Bitcoin network public key, and the Bitcoin network must recognize that public key as having sufficient Bitcoin for the transaction; (ii) the receiving party must have a Bitcoin network public key; and (iii) the spending party must have internet access with which to send its spending transaction. The receiving party must provide the spending party with its public key and allow the Bitcoin blockchain to record the sending of Bitcoin to that public key. After the provision of a recipient's Bitcoin network public key, the spending party must enter the address into its Bitcoin network software program along with the number of Bitcoin to be sent. The number of Bitcoin to be sent will typically be agreed upon between the two parties based on a set number of Bitcoin or an agreed upon conversion of the value of fiat currency to Bitcoin. Since every computation on the Bitcoin network requires the payment of Bitcoin, including verification and memorialization of Bitcoin transfers, there is a transaction fee involved with the transfer, which is based on computation complexity and not on the value of the transfer and is paid by the payor with a fractional number of Bitcoin. After the entry of the Bitcoin network address, the number of Bitcoin to be sent and the transaction fees, if any, to be paid, will be transmitted by the spending party. The transmission of the spending transaction results in the creation of a data packet by the spending party's Bitcoin network software program, which is transmitted onto the decentralized Bitcoin network, resulting in the distribution of the information among the software programs of users across the Bitcoin network for eventual inclusion in the Bitcoin blockchain. As discussed in greater detail below, Bitcoin network miners record transactions when they solve for and add blocks of information to the Bitcoin blockchain. When a miner solves for a block, it creates that block, which includes data relating to (i) the solution to the block, (ii) a reference to the prior block in the Bitcoin blockchain to which the new block is being added and (iii) transactions that have occurred but have not yet been added to the Bitcoin blockchain. The miner becomes aware of outstanding, unrecorded transactions through the data packet transmission and distribution discussed above. Upon the addition of a block included in the Bitcoin blockchain, the Bitcoin network software program of both the spending party and the receiving party will show confirmation of the transaction on the Bitcoin blockchain and reflect an adjustment to the Bitcoin balance in each party's Bitcoin network public key, completing the Bitcoin transaction. Once a transaction is confirmed on the Bitcoin blockchain, it is irreversible. Creation of a New Bitcoin New Bitcoins are created through the mining process. The process by which Bitcoin is “mined” results in new blocks being added to the Bitcoin blockchain and new Bitcoin tokens being issued to the miners. Computers on the Bitcoin network engage in a set of prescribed complex mathematical calculations in order to add a block to the Bitcoin blockchain and thereby confirm Bitcoin transactions included in that block's data. The Bitcoin network is designed in such a way that the reward for adding new blocks to the Bitcoin blockchain decreases over time. In the future, once new Bitcoin tokens are no longer awarded for adding a new block, miners will only have transaction fees to incentivize them, and as a result, it is expected that miners will need to be better compensated with higher transaction fees to ensure that there is adequate incentive for them to continue mining. Limits on Bitcoin Supply Under the source code that governs the Bitcoin network, the supply of new Bitcoin is mathematically controlled so that the number 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 after every 210,000 blocks are added to the Bitcoin blockchain, approximately every 4 years. The fixed reward for solving a new Bitcoin block is currently 3.125 BTC per block. This amount is the result of the most recent Bitcoin halving event, which occurred in April 2024. The next Bitcoin halving is anticipated in 2028 when Bitcoin will halve to 1.5625. This deliberately controlled rate of Bitcoin creation means that the number of Bitcoin in existence will increase at a controlled rate until the number of Bitcoin in existence reaches the pre-determined 21 million Bitcoin. However, the 21 million supply cap could be changed in a hard fork. A hard fork could change the source code to the Bitcoin network, including the 21 million Bitcoin supply cap. Final Settlement The term “final settlement value” as defined at proposed Options 4D, Section 2(a)(9) shall be calculated as described at Options 4D, Section 8. The Nasdaq Bitcoin Index Options final settlement value is the BRRNY on the expiration date (usually a Friday), divided by a factor of one hundred (100) and published as the CF NQBTC Options Settlement Value. The BRRNY is calculated daily based on the Relevant Transactions  27 and is calculated on the expiration date for purposes of final settlement. Relevant Transactions include those that trade Bitcoin versus U.S. Dollars on a Constituent Exchange from 15:00 to 16:00 New York Time. The final settlement value is calculated and reported by the reporting authority, CF Benchmarks. The final settlement value is determined by the aggregated last reported sale price of each Constituent Exchange. Specifically, the final settlement value is calculated by combining all Relevant Transactions from each Constituent Exchange on a joint list and recording the trade price and size for each transaction. That list is partitioned into a number of equally-sized time intervals, of 5 minutes. For each partition separately, the volume-weighted median trade price is calculated from the trade prices and sizes of all Relevant Transactions across all Constituent Exchanges. The BRRNY is the equally weighted average of the volume-weighted medians of all partitions. In the event that the Nasdaq Bitcoin Index is not open for trading on the expiration date, the value of the Nasdaq Bitcoin Index shall be the last reported sale price prior to the expiration date. 27  Specifically, the BRRNY is calculated based on the Relevant Transactions of all of its constituent Bitcoin platforms, which are currently Bitstamp, Coinbase, itBit, Kraken, Gemini, and LMAX and which may change from time to time. The BRRNY is methodologically identical to the regulated CME CF Bitcoin Reference Rate (BRR), the most widely used benchmark price for Bitcoin, that settles the Bitcoin-USD derivatives complex listed by CME Group, and which serves as the NAV for exchange listed investment products from WisdomTree Europe, Evolve ETFs (CAN) and QR Asset Management (BRZ). The only difference between the BRRNY and the BRR is that the BRRNY references the price of Bitcoin at the closing time of U.S. markets, 16:00 New York Time, rather than the price at 16:00 London Time, referenced by the BRR. The purpose of the BRRNY is to provide a replicable, manipulation-resistant and representative Bitcoin benchmark that synchronizes with the traditional U.S. market close. The BRRNY is a regulated Benchmark under the UK Benchmarks Regulation (BMR) regime. The BRRNY calculation methodology aggregates transactions of Bitcoins in U.S. dollars that are only conducted on the most liquid markets for which data is publicly available and operated by exchanges that meet the CME CF Constituent Exchange Criteria. 28 28   See infra note 23. The BRRNY is a valid and robust benchmark that is calculated from input data of sufficient volume so that it is representative of the market it seeks to measure. Additionally, the BRRNY has volume sufficiency which permits it to be replicated by institutional market participants and product providers that need to warehouse price risk. The table below summarizes the total number of transactions and average number of transactions per day observed each month for the BRRNY. 29 Between February 28, 2022, and January 31, 2024 (weekdays only), on average 2,116.73 Bitcoins, or $59M were traded during each daily observation window between 15:00 and 16:00 New York Time. 30 29  The data represents both trade count and Bitcoin volume during the observation window. 30  BRRNY was launched on February 28, 2022. LMAX Digital was added as a Constituent Exchange from May 2022. EN28MY26.005 This trading activity exhibits volatility that is not substantially different from that shown in traditional asset markets. The volume observed and the reliability of that volume are clearly evident to be sufficient for the calculation of a robust and reliable benchmark. Phlx believes that Nasdaq Bitcoin Index Options will be utilized for a wide range of activities such as hedging cash portfolio risk, creating tailored or structured products that allow investor risk-mitigated participation in Bitcoin, and onshoring of risk associated with holding capital and options in non-U.S. regulated venues. To that end, the index design is fair and transparent. CF Benchmarks, the administrator of the Nasdaq Bitcoin Index, exclusively sources input data from Constituent Exchanges that meet published criteria as set out in its CME CF Constituent Exchange Criteria and CF Benchmarks conducts a thorough review of any exchange under consideration for inclusion as a Constituent Exchange. 31 The BRRNY methodology takes an observation period and divides it into equal partitions of time. The volume-weighted median of all transactions within each partition is then calculated. The benchmark index value is determined from the arithmetic mean of the volume-weighted medians, equally weighted. As a result, individual trades of large size have limited effect on the index level as they only influence the level of the volume-weighted median for that specific partition. Further, a cluster of trades in a short period of time will also only influence the volume-weighted median of the partition or partitions they were conducted in, thereby limiting impact. Use of volume-weighted medians as opposed to volume-weighted means ensures that transactions conducted at outlying prices do not have an undue effect on the value of a specific partition because trades of large size or clusters of trades over a short period of time will not have an undue influence on the index level. CF Benchmarks applies equal weight to transactions observed from Constituent Exchanges. With no pre-set weights, the BRRNY is not readily subject to manipulation. Using the arithmetic mean of partitions of equal weight further denudes the effect of trades of large size at prices that deviate from the prevailing price having undue influence on the benchmark level. 32 31  The CME CF Constituent Exchange Criteria is available at: https://docs.cfbenchmarks.com/CME%20CF%20Constituent%20Exchanges%20Criteria.pdf. The arrangements of all Constituent Exchanges are reviewed annually to ensure that they continue to meet all criteria specified within the “Constituent Exchange Criteria.” This due diligence is documented, and the information is distributed to CF Benchmarks' regulators to consider. The deliberations of regulators are conducted during regular meetings, minutes of such meetings are publicly available, being published by CF Benchmarks. 32   See also https://www.cfbenchmarks.com/blog/suitability-analysis-of-the-cme-cf-Bitcoin-reference-rate-new-york-variant-as-a-basis-for-regulated-financial-products-february-2024-update. The BRRNY methodology incorporates a procedure for potentially erroneous data. In the event of an instance of index calculation in which a Constituent Exchange's volume-weighted median transaction price exhibits an absolute percentage deviation from the volume-weighted median price of other Constituent Exchange transactions greater than the Potentially Erroneous Data Parameter  33 (10%), then transactions from that Constituent Exchange are deemed potentially erroneous and excluded from the index calculation. All instances of data excluded from a calculation trigger an alert that is investigated by CF Benchmarks. By way of example, between February 28, 2022, and January 31, 2024, the Potentially Erroneous Data Parameter of the methodology for the BRRNY has never been triggered. Analysis of the highest volume-weighted median per exchange during the observation period produced the results in the table below. The results illustrate that during the observation period, no Constituent Exchange's input data needed to be excluded due to exhibiting potential manipulation and indeed no individual cryptocurrency exchange exhibits a deviation percentage above 2.41% during this period. 33  The Potentially Erroneous Data Parameter is an automated screening established by CF Benchmarks to remove potentially erroneous data. EN28MY26.006 CF Benchmarks has implemented a benchmark surveillance program for the investigation of alerts. Instances of suspected benchmark manipulation are escalated through appropriate regulatory channels in accordance with CF Benchmarks' obligations under the UK Benchmarks Regulation (UK BMR). As a regulated Benchmark Administrator, CF Benchmarks is subject to supervision by the UK FCA. 34 34  Furthermore, CF Benchmarks' control procedures with respect to compliance with the UK BMR have been audited by `Big Four' accountancy firm Deloitte. The Independent Assurance Report on Control Procedures Noted by CF Benchmarks Regarding Compliance with the UK Benchmarks Regulation as of September 12, 2022 is available at: https://docs.cfbenchmarks.com/Deloitte_CF%20Benchmarks%20SOC1%20Audit%20Report.pdf. In terms of this correlation of prices among Constituent Exchanges as shown in the table above, an analysis was undertaken of the pair-wise correlation of prices from Constituent Exchanges on a per-minute basis (the price difference between transactions for each minute at each exchange) during the observation period. The results are shown in the table below. EN28MY26.007 With respect to replicability, a simple replication simulation was thereby conducted of BRRNY to demonstrate the extent of slippage  35 that implementation of the BRR would probably encounter. The methodology was as follows for weekdays only. 35  Slippage refers to the difference between the expected price of a trade and the actual price at which the trade is executed. In the context of errant (incorrect or unintended) trading prices, slippage represents the deviation from your intended execution price, which can result in unexpected costs or, occasionally, unexpected gains. Trades are executed on n (6) Constituent Exchanges, during a 3,600-second window. One trade is executed every second and the price achieved is assumed to be the last execution price observed in that second. Its associated volume is assumed to be the volume executed during that second. If no trade is completed in any single-second period, then the price achieved is assumed to be the price achieved in the previous second, but the associated volume from the previous second is not added to the volume executed in the latest second. The results of this simulation are displayed below. EN28MY26.008 Summary data for the above simulation is provided below. EN28MY26.009 As evidenced above, the BRRNY can be replicated with a high degree of confidence and usually with slippage of no more than 1 basis point (0.01%). On only 6.76% of days would slippage have been greater than 5 basis points (0.05%). Indeed, even on the most volatile day, slippage was approximately one half of one percent, 51.6 basis points (0.516%). Furthermore, in the 24-month period under observation slippage would have been in double-digit basis points only 10 times. As evidenced by the foregoing data, the BRTI is representative of the underlying market, resistant to manipulation, and replicable by market participants. Regulatory Framework The proposed product is a cash-settled index option that permits holders to receive U.S. dollars representing the difference between the current Bitcoin spot markets as represented by the BRRNY and the exercise price of the option. Like the Spot Bitcoin ETPs, 36 the Nasdaq Bitcoin Index Options do not hold physical Bitcoin. 36   See Securities Exchange Act Release No. 99306 (January 10, 2024), 89 FR 3008 (January 17, 2024) (File Nos. SR-NYSEArca-2021-90; SR-NYSEArca-2023-44; SR-NYSEArca-2023-58; SR-NASDAQ-2023-016; SR-NASDAQ-2023-019; SR-CboeBZX-2023-028; SR-CboeBZX-2023-038; SR-CboeBZX-2023-040; SR-CboeBZX-2023-042; SR-CboeBZX-2023-044; and SR-CboeBZX-2023-072) (Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, to List and Trade Bitcoin-Based Commodity-Based Trust Shares and Trust Units) (“Spot Bitcoin ETPs Approval Order”). The ETPs approved in these filings were: the Grayscale Bitcoin Trust (BTC); the Bitwise Bitcoin ETF; the Hashdex Bitcoin ETF; the iShares Bitcoin Trust; the Valkyrie Bitcoin Fund; the ARK 21Shares Bitcoin ETF; the Invesco Galaxy Bitcoin ETF; the VanEck Bitcoin Trust; the WisdomTree Bitcoin Fund; the Fidelity Wise Origin Bitcoin Fund; and the Franklin Bitcoin ETF (collectively “Spot Bitcoin ETPs”). Since January 2024, shares of Spot Bitcoin ETPs based on Bitcoin have been listed and traded on national securities exchanges. 37 Phlx's proposal to list and trade Nasdaq Bitcoin Index Options would allow market participants that hold shares of Spot Bitcoin ETPs to hedge or modify their exposure on a national securities exchange, within a single regulatory regime, 38 thereby fostering innovation and competition in the rapidly evolving market for digital asset derivatives. 37   See Spot Bitcoin ETPs Approval Order. 38  Specifically, the proposed index options would allow investors in Spot Bitcoin ETPs to carry the proposed index options in the same account subject to the same margin regime that applies to the asset through which they take long exposure to Bitcoin. See letter from Phlx dated March 17, 2025, page 3, footnote 13, available at https://www.sec.gov/comments/sr-phlx-2025-08/srphlx202508-581995-1674542.pdf. Section 2(a)(1)(A) of the Commodity Exchange Act (the “CEA”)  39 provides the Commodity Futures Trading Commission (the “CFTC”) with exclusive jurisdiction over, among other things, options on commodities traded on a designated contract market, swap execution facility, or other board of trade, exchange, or market. The Exchange believes that the proposed Nasdaq Bitcoin Index Options should be permitted to trade on a national securities exchange provided the Exchange requests and obtains exemptive relief from the CFTC that would: (1) provide the Exchange with exemption from any applicable requirements of the CEA and the CFTC and regulations, including the requirements applicable to a Designated Contract Market under Section 5 of the CEA  40 and Part 38  41 of the CFTC's regulations; and (2) provide the Commission, with the CFTC, with jurisdiction over the proposed Nasdaq Bitcoin Index Options; and (3) provide exemptive relief to allow the proposed Nasdaq Bitcoin Index Options to clear through The Options Clearing Corporation (“OCC”) in its capacity as a clearing agency registered with the SEC pursuant to Section 17A of the Act. 42 39   See 7 U.S.C. 4. 40   See 7 U.S.C. 7. 41   See 17 CFR part 38. 42   See 15 U.S.C. 78q-1. The Exchange acknowledges that it will not be permitted to list and trade the proposed Nasdaq Bitcoin Index Options unless and until the CFTC grants all necessary exemptive relief  43 from the requirements of the CEA and the rules and regulations thereunder, with the condition that the SEC exercise jurisdiction with the CFTC over the proposed Nasdaq Bitcoin Index Options. In addition, the Exchange acknowledges that it will not be permitted to list and trade the proposed Nasdaq Bitcoin Index Options until the CFTC issues exemptive relief to allow OCC to clear the proposed options in its capacity as a clearing agency registered with the SEC pursuant to Section 17A of the Exchange Act. 44 Finally, the Exchange acknowledges that it will not be permitted to list and trade the proposed Nasdaq Bitcoin Index Options until the OCC receives approval to update The Characteristics and Risks of Standardized Options (the “Options Disclosure Document” or “ODD”) to reflect the risks attendant to trading Nasdaq Bitcoin Index Options. 43   See 7 U.S.C. 6(c)(1). 44   See 15 U.S.C. 78q-1. As proposed, the Nasdaq Bitcoin Index Options would transact on an SEC-regulated exchange, therefore, the SEC's jurisdiction should not be superseded or limited with respect to prosecuting fraud and manipulation relating to the proposed index options which would be transacted on Phlx. If the CFTC grants the Exchange's request for exemptive relief, the CFTC would retain enforcement jurisdiction relating to the sale of the commodity. Phlx will not list the Nasdaq Bitcoin Index Options until such time as it obtains an exemption from the CFTC such that the Commission has jurisdiction with the CFTC over the Nasdaq Bitcoin Index Options. Further, Phlx shall not list the Nasdaq Bitcoin Index Options until all conditions set forth in any exemptive relief granted by the CFTC have been satisfied. Finally, the Exchange would not list the Nasdaq Bitcoin Index Options until such time as OCC has received approval to update the ODD to reflect the risks attendant to trading Nasdaq Bitcoin Index Options. Amendments to Exchange Rules The proposal is designed to ensure that Nasdaq Bitcoin Index Options are listed and traded under the same terms that apply to other index options that are currently traded on the Exchange. The Exchange proposes to create a new Options 4D, titled “Nasdaq Bitcoin Index Options,” with rules that would apply specifically to the listing and trading of Nasdaq Bitcoin Index Options. Applicability The proposed Options 4D Rules would be applicable to Nasdaq Bitcoin Index Options. All Options Rules shall apply to Nasdaq Bitcoin Index Options, in addition to the Options 4D Rules, however where the Options 4D Rules disagree with another Options Rule not within Options 4D, a conflict shall be resolved in favor of the Options 4D Rule as it applies to Nasdaq Bitcoin Index Options. 45 45   See proposed Options 4D, Section 1. Definitions The Exchange proposes to define certain terms for the trading of Nasdaq Bitcoin Index Options in proposed Options 4D, Section 2, titled “Definitions.” The Exchange proposes to define “aggregate exercise price,” “CME CF Bitcoin Real Time Index (“BRTI”),” “CME CF Cryptocurrency Reference Rate—New York Variant (“BRRNY”),” “CME CF Cryptocurrency Pricing Products Oversight Committee,” “Constituent Exchange,” “current index value,” “exercise price,” “European-style index option,” “final settlement value,” “index multiplier,” “Nasdaq Bitcoin Index,” “P.M.-settled Index Options,” “reporting authority,” and “underlying.” The proposed definitions are as follows: The term “aggregate exercise price” shall mean the exercise price of the option contract times the index multiplier. The term “CME CF Bitcoin Real Time Index (“BRTI”)” shall mean a benchmark index price calculated and published once per 200 milliseconds for Bitcoin that aggregates order data from Bitcoin-USD markets operated by Constituent Exchanges. The term “CME CF Cryptocurrency Reference Rate—New York Variant (“BRRNY”)” shall mean the once a day benchmark index price for Bitcoin that aggregates trade data from Constituent Exchanges. The term “CME CF Cryptocurrency Pricing Products Oversight Committee” or “Oversight Committee” shall mean the committee established jointly by Crypto Facilities or “CF” and Chicago Mercantile Exchange Inc. or “CME” to protect the integrity of the methodo