CBOE Files SEC Application for Innovative Canary PENGU ETF Launch
Cboe BZX Exchange Files for Approval of Innovative Canary PENGU ETF
Introduction to the Canary PENGU ETF
Cboe BZX Exchange, Inc. has submitted a Form 19-b4 to the U.S. Securities and Exchange Commission (SEC) to obtain approval for the listing and trading of shares in the Canary PENGU ETF. This unique fund is set to be backed by a mix of the PENGU memecoin and non-fungible tokens (NFTs), indicating that Canary is likely to file a Form S-1 for its ETF in the near future.
Structure and Regulation of the ETF
The ETF will be governed by BZX Rule 14.11(e)(4), which pertains to Commodity-Based Trust Shares. Sponsored by Canary Capital Group LLC, the fund will be organized as a Delaware statutory trust. Notably, this trust will not be registered under the Investment Company Act of 1940 and will not be categorized as a commodity pool.
Asset Composition of the ETF
According to the filing, the ETF is expected to allocate approximately 80-95% of its total assets to PENGU, a utility token on the Solana blockchain, while dedicating 5-15% to Pudgy Penguin NFTs, a popular collection based on Ethereum. Additionally, the trust will maintain small holdings of SOL and ETH to cover transaction fees and NFT acquisitions.
Investment Strategy and Asset Allocation
The trust aims to invest at least 95% of its assets in PENGU and Pudgy Penguin NFTs under typical market conditions. The PENGU token, launched in December 2024 by Pudgy Penguins, is characterized as both a digital collectible and a utility token, providing holders with access to various ecosystem services. Unlike traditional cryptocurrencies such as Bitcoin, ETH, and SOL, PENGU does not operate on its own blockchain.
Market Manipulation Safeguards
In addressing potential market manipulation risks, the exchange noted that the widespread and continuous trading of PENGU makes it challenging and costly to influence its price. Effective manipulation would require altering the global price of PENGU across multiple trading venues.
Share Structure and Trading Mechanism
Each ETF share will represent a fractional interest in the trust’s assets. The fund will issue and redeem shares exclusively in creation units of 10,000, with transactions settled in cash. Authorized participants will only provide cash to create shares and will receive cash upon redeeming them.
Net Asset Value and Trading Information
The net asset value (NAV) of the ETF will be calculated daily at 4:00 p.m. ET, with real-time indicative values published every 15 seconds during trading hours. The trust’s website will offer public access to daily NAVs, historical performance data, and information on premiums and discounts.
Additional Operational Details
The trust will not participate in proof-of-stake validation and will forgo any incidental rights, such as forks or airdrops. Furthermore, the ETF will not distribute any digital assets from its portfolio to shareholders.
This article provides a comprehensive overview of the Canary PENGU ETF, highlighting its unique structure, asset composition, and regulatory considerations.
