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.
In the last month. many financial firms are seen lining up at the SEC’s doors to receive permission to open exchange-traded-funds (ETFs) tied to Bitcoin. Almost all of the ETFs that have been filed till now are said to be following the price movements of the Bitcoin futures contracts rather than following the price fluctuations in Bitcoin prices.
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The five major firms that have withdrawn their ETF proposals include Direxion Shares ETF Trust, Exchange Listed Funds Trust, ProShares Trust, VanEck and First Trust Advisors LP.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.”
A similar letter has been submitted by ProShares 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 proposals for Bitcoin ETFs filed by the Chicago Board Options Exchange (Cboe) would be exempted from several market manipulation rules that govern traditional assets. The SEC has been seeking public inputs 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, NYSE has also filed for five Bitcoin ETFs which are short-term trading instruments to be traded on the secondary Arca exchange. However, the SEC’s continuous denial to consider Bitcoin ETFs based on futures contracts is a matter of concern and we can’t tell that when will the ETF products see the light-of-the-day, for which investors have been waiting for so long.