Bitcoin’s popularity in the last year has swayed many institutional investors to formulate Bitcoin-related investment and trading products. The launch of Bitcoin Futures Contracts by the CBOE and the CME has provided more fodder to this.
Over the past month, many financial firms have lined up at the SEC’s doors to seek approval for launching exchange-traded funds (ETFs) tied to Bitcoin. Almost all of the filed ETFs track the price movements of Bitcoin futures contracts instead of directly following Bitcoin’s price fluctuations.
However, a major disappointment has arrived on the way for these firms and its investors as the U.S. Securities and Exchange Commission has asked to withdraw these proposals sighting issues relating to its valuations and liquidity.
The five major firms that have withdrawn their ETF proposals include Direxion Shares ETF Trust, Exchange Listed Funds Trust, ProShares Trust, VanEck and First Trust Advisors LP.
Angela Brickl, Direxion’s secretary, wrote to SEC seeking feedback on this matter. Angela writes: “On a call with the Staff on January 5, 2018, the Staff expressed concerns regarding the liquidity and valuation of the underlying instruments in which the Fund intends to primarily invest and requested that the Trust withdraw the Amendment until such time as these concerns are resolved. In response to the Staff’s request, the Trust respectfully requests withdrawal of the Amendment.”
ProShares submitted a similar letter to the SEC. Richard Morris, general counsel and secretary for ProShares, wrote:”This request for withdrawal is being made in response to a request from the Staff.”
The timing of this withdrawal is quite critical considering the fact that SEC has just released two rule change proposals which for Bitcoin ETF. Both of these proposed rule changes note that Bitcoin does not have similar behaviour to traditional assets.
The Chicago Board Options Exchange (Cboe) has filed proposals for Bitcoin ETFs, requesting exemptions from several market manipulation rules that apply to traditional assets. The SEC is actively seeking public input on these proposals.
In a word with Business Insider last month, Chris Concannon, CEO of Cboe said: “A healthy market is a healthy underlying market, derivatives markets, and an ETF. That will take time.”
Recently, the NYSE filed for five Bitcoin ETFs, designing them as short-term trading instruments for trading on the secondary Arca exchange. However, the SEC continues to deny approval for Bitcoin ETFs based on futures contracts, raising concerns. As a result, it remains uncertain when these ETF products—eagerly awaited by investors—will finally launch.