NYSE Arca Proposes Rule 8.800-E to Open Digital Asset Doors

Key Points:

• NYSE Arca proposes Rule 8.800-E for listing commodities and digital asset-based investment products.
• New rule aims to expand investment options and meet demand for diversified asset products.

NYSE Arca proposes Rule 8.800-E to allow listing of commodity and digital asset-based securities. The rule aims to expand investment options, meet investor demand, and provide a regulated environment for trading these innovative products.

On October 29, 2024, NYSE Arca submitted a proposal to the U.S. Securities and Exchange Commission (SEC) to adopt a new rule, referred to as Rule 8.800-E, which would allow for the listing and trading of innovative investment products based on commodities and digital assets.

Alongside this rule, NYSE Arca has also specifically proposed listing and trading shares of the Grayscale Digital Large Cap Fund under these new provisions.

Purpose of NYSE Arca’s Proposed Rule 8.800-E

The primary purpose of Rule 8.800-E is to expand the investment options available on NYSE Arca by providing a framework for listing securities based on both physical commodities and digital assets.

According to the proposal, this would enable the exchange to “consider for trading, whether by listing or pursuant to unlisted trading privileges, Commodity- and/or Digital Asset-Based Investment Interests that meet the criteria of this rule”​. These investment interests refer to securities issued by a trust, limited liability company, or similar entity holding specific commodities, digital assets, derivative securities, or cash.

The rule aims to meet investor demand for a diversified product that combines the growth potential of digital assets, like cryptocurrencies, with traditional commodity investments. By broadening the types of securities listed, NYSE Arca would facilitate new forms of exchange-traded products (ETPs) that offer access to these innovative asset classes in a secure and regulated environment.

Read more: NYSE Arca Bitcoin ETF Delayed Again By SEC To November 21

What This Means for Investors

Rule 8.800-E opens doors to a regulated space where investors can trade securities backed by commodities and digital assets. The proposed rule specifies the structure and requirements that such investment interests must meet.

NYSE Arca intends to monitor compliance actively, enforcing rules to prevent delisting risks, such as ensuring these securities remain accessible to a sufficient number of investors. Specifically, if a fund fails to meet the minimum requirements, such as holding fewer than 50,000 securities, the exchange “may halt trading in the securities and will initiate delisting proceedings”.

How Rule 8.800-E Differs from Existing Regulations

While existing rules, such as NYSE Arca Rule 8.201-E, cover commodity-based securities, Rule 8.800-E represents an extension by allowing securities to be backed by both commodities and digital assets, expanding the range of assets covered.

The flexibility could “benefit both issuers and the investing public and would facilitate the availability of a new type of exchange-traded product (ETP)”​. The combination of assets also means that an investor could have a more diversified risk profile in one security.