The SEC alleged that CBOE failed to demonstrate that it could prevent fraud and protect investors. CBOE BZX Exchange and VanEck issued the ETF application with the SEC on March 19, 2021.
The United States Securities and Exchange Commission dismissed the request of the exchange house CBOE BZX Exchange to authorize a publicly-traded bitcoin fund managed by VanEck. The financial instrument experienced direct monitoring of the price movements of bitcoin.
The SEC released its decision in a 51-page document, dated Friday, November 12. The main argument discussed by the regulator is that BZX did not manage to prove to be able to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.
CBOE BZX Exchange and VanEck arranged the ETF application with the SEC on March 19. Its approval included a rule change that would allow a bitcoin spot fund to get legally listed. However, the regulator considered that the proposed product does not facilitate the availability of information necessary to start an investigation.
The main feature of an ETF based directly on an underlying asset, such as bitcoin, is that the issuer would hold physical reserves of BTC. Meanwhile, futures ETFs get based on contracts where a buy-sale agreement gets established with a stipulated price and date.
The approval of a financial product such as the one proposed by CBOE and VanEck has been the subject of various investigations by many companies in recent years. The SEC has dismissed each of the requests, alleging concerns about the lack of regulation. In countries like Canada, spot bitcoin ETFs have already experienced healthy trades since early 2021.
SEC Prefers Bitcoin Futures
Two US congressmen wrote a letter to the SEC requesting approval of a bitcoin exchange-traded fund for spot or “spot”, as it is also known. The representatives pointed out that ETFs backed directly in Bitcoin offer better protection to investors, as the price gets based directly on the market value.
In mid-October, the SEC approved the first bitcoin futures ETF, which got presented by ProShares. The instrument began trading on the New York Stock Exchange (NYSE) with a collection close to USD 3.5 billion in the first four days. The regulator authorized at least three exchange-traded funds based on BTC futures, one of them belonged to the VanEck fund manager.
Eric Balchunas, a Bloomberg ETF Senior Analyst, revealed at the time that the ProShares bitcoin ETF had been very close to a record-breaking first day of trading in the history of these instruments. ProShares’ Bitcoin exchange managed to reach a spot right behind BlackRock’s LCTU ETF, which invests in companies best positioned to benefit from the transition to a low-carbon economy.
However, examining in more detail the performance of the LCTU ETF, Balchunas clarified that the investment of USD 1,100 million on its first day got covered by a single investor.
By: Jenson Nuñez
