SEC postponed the Bitcoin ETF Decision

The SEC has postponed decision on Bitcoin ETF proposed by Cboe BZX Exchange, Inc. on a proposed rule change to list and trade shares of SolidX Bitcoin Shares as Commodity-Based Trust Shares. In a press release, The SECURITIES AND EXCHANGE COMMISSION (SEC) states, the ETF decision is furthr delayed as they are seeking more comments on the proposed rule change.

Important dates on this ETF:

  • June 20, 2018 - Cboe BZX Exchange, Inc. filed a request with the Securities and Exchange Commission (SEC) (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)1 and Rule 19b-4 thereunder,2 a proposed rule change to list and trade shares of SolidX Bitcoin Shares (“Shares”) issued by the VanEck SolidX Bitcoin Trust (“Trust”) under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares.
  • July 2, 2018 - The proposed rule change was published for comment in the Federal Register.
  • August 7, 2018 - The Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.
  • September 19, 2018 - The Commission has received more than 1,400 comment letters on the proposed rule change.

The Cboe BZX Exchange proposes to list and trade the Shares, which governs the listing and trading of Commodity-Based Trust Shares on the Exchange. Each Share will represent a fractional undivided beneficial interest in the Trust’s net assets. SolidX Management LLC will be the sponsor of the Trust (“Sponsor”). The Trust will be responsible for custody of the Trust’s bitcoin. The Bank of New York Mellon will be the Administrator, transfer agent, and the custodian, with respect to cash, of the Trust. Foreside Fund Services, LLC will be the marketing agent in connection with the creation and redemption of baskets of Shares. Van Eck Securities Corporation will provide assistance in the marketing of the Shares.

The SEC raised concern over the mamnegement of "Trust"; whereas, MVBTCO with which the Trust intends to effect transactions are well established institutions that comply with AML and KYC regulatory requirements with respect to trading counterparties and include entities that are regulated by the Commission and FINRA as registered broker- dealers and affiliates of broker-dealers.

The Cboe BZX Exchange asserts that bitcoin is arguably less susceptible to manipulation than other commodities that underlie exchange-traded products (“ETPs”) because there may be inside information relating to the supply of the physical commodity (such as the discovery of new sources of supply or significant disruptions at mining facilities that supply the commodity) whereas the geographically diverse and continuous nature of bitcoin trading makes it difficult and prohibitively costly to manipulate the price of bitcoin.

The Exchange notes that it has entered into a comprehensive surveillance sharing agreement with the Gemini Exchange of Winklevoss brothers.

How can you participate?

The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of the proposal, in addition to any other comments they may wish to submit about the proposed rule change. They have listed 18 points where in particular, the Commission is seeking commenters view. It includes views

  • on the Exchange’s assertions that bitcoin is arguably less susceptible to manipulation than other commodities that underlie ETPs?
  • on the Sponsor’s assertion?
  • regarding the statements that will tend to cause the public trading price to track NAV per Share closely over time?
  • generally, on whether the proposed ETP would be susceptible to manipulation? and more that can be read here.

Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved. Comments may be submitted by any of the following methods:

Electronic comments:
 Use the Commission’s Internet comment form (http://www.sec.gov/rules/sro.shtml); or
 Send an e-mail to rule-comments@sec.gov.

Paper comments:
 Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeBZX-2018-040. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method.

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