Cboe Filed to List Fidelity’s Spot Ether Fund

Cboe BZX Exchange filed a proposed rule change with the Securities and Exchange Commission on November 17, 2023 to list and trade shares of the Fidelity Ethereum Fund. The proposed commodity-based trust would hold ether directly and seek to track its U.S.-dollar performance, less expenses and liabilities.

The filing placed Fidelity’s name behind another attempt to bring spot cryptocurrency exposure into conventional U.S. brokerage accounts. It was a regulatory application, not an SEC approval, an effective registration statement or the beginning of trading. Those distinctions defined what was—and was not—knowable on November 17.

How the proposed fund was designed

Cboe’s filing identified FD Funds Management as sponsor and Fidelity Digital Assets Services as the proposed ether custodian. Each share would represent a fractional beneficial interest in the trust’s net assets. The original structure contemplated authorized participants delivering ether for creation baskets and receiving ether for redemptions, while investors would buy and sell shares on Cboe BZX through ordinary securities accounts.

The proposed investment objective was to track ether using the Fidelity Ethereum Index. As described in the filing, the index drew from eligible spot markets and applied a volume-weighted median methodology. The trust would calculate net asset value once on each exchange trading day, while an intraday indicative value would be disseminated during regular trading hours. Neither measure would eliminate the possibility that shares traded above or below net asset value.

Why the filing mattered

The November 17 filing extended the institutional contest over spot digital-asset products beyond bitcoin. Several issuers were already seeking U.S. exchange listings for trusts holding ether, but Fidelity brought a large traditional financial-services organization, an affiliated index framework and an affiliated digital-asset custodian to the process.

A listed trust could give brokerage customers price exposure without requiring them to manage Ethereum private keys or open an account at a cryptocurrency exchange. That convenience would not remove ether’s price volatility, custody risk, tracking differences, fees or the structural risks associated with an exchange-traded commodity trust. The filing also did not establish investor demand or predict how much ether the product might eventually hold.

The regulatory argument

Cboe argued that the CME ether-futures market should qualify as a regulated market of significant size for surveillance purposes. The exchange and sponsor also invoked the D.C. Circuit’s August 29, 2023 decision in Grayscale Investments v. SEC. That decision vacated the SEC’s rejection of a proposed spot bitcoin trust conversion because the agency had not adequately explained its different treatment of materially similar spot and futures products.

That bitcoin ruling did not compel approval of Fidelity’s ether proposal. Cboe was applying the court’s reasoning to a different underlying asset and regulatory record. Whether the spot and futures ether markets were sufficiently connected, and whether the exchange’s surveillance arrangements met the Exchange Act standard, remained questions for SEC review.

What November 17 did not accomplish

The original filing said the trust’s registration statement was not yet effective and that shares could not trade until it became effective. It also contained no operating history, assets under management, trading volume, expense ratio or investor-flow data. No event-day market-performance claim can therefore be derived from the filing.

Contemporaneous reporting confirmed the submission but could not convert the proposal into an authorization. The verifiable November 17 development was narrower: Cboe formally asked the SEC to permit the Fidelity Ethereum Fund to enter the U.S. securities market as a spot ether product.

Later context

On May 23, 2024, the SEC approved exchange rule changes covering eight spot ether products, including the Fidelity Ethereum Fund. That later order confirms the proposal’s eventual regulatory path, but it was not available on November 17, 2023 and should not be projected backward as evidence that approval was assured.