SEC To Render New Decision On 9 Recently Rejected Bitcoin ETFs By End Of Month

The U.S. Securities and Exchange Commission (SEC) has reopened the door for nine previously dismissed Bitcoin exchange-traded funds via a series of notices published October 4.


The U.S. Securities and Exchange Commission (SEC) has reopened the door for nine previously dismissed Bitcoin exchange-traded funds via a series of notices published October 4.

SEC sets comment deadline for previously rejected ETFs

The regulator has set an October deadline for “comments” as part of a timeline to review initially rejected proposed rule changes.

The review timeline targets nine different ETFs proposed for listing by three applicants, the SEC revealed in its documents filings. The applications for listing exchange-traded funds under review will be those by ProShares, GraniteShares, and Direxion.

The three firms had sought to list the Bitcoin (BTC) ETFs on the NYSE Arca or CBOE BZX. However, the commission, through a decision taken by its Division of Trading and Markets, had rejected the proposed rule changes.

The decision to reject the ETFs drew the ire of one of the commissioners, Hester Peirce, who criticized the Commission, saying that it had exceeded its mandate.

She felt that the agency’s staff had erred in taking a decision based on qualitative judgments concerning the appropriateness of the funds for retail investors and not on whether these crypto products satisfied the set requirements and guidelines.

A quick decision for a review

At the time, the SEC commissioners had highlighted a number of issues as grounds for denying the applications, with concerns that the Bitcoin spot market held a significant risk of manipulation.

In a sudden turn of events, the regulatory watchdog issued a statement a day later saying that it would review the decisions made concerning the nine rejections.

For that reason, the agency has designated October 26 as the deadline for “any person or party” to file statements that either support or oppose the proposed amendments. At the end of this period, the commission will begin a formal review.

At the same time, the SEC will not rescind its previous decision to deny the proposed exchange-traded funds until the end of the current review period.

Part of the initial review process has seen the SEC amend the NYSE Arca and CBOE applications to comply with the law.

The amendments relate to a pair of Proshares Bitcoin ETFs submitted in conjunction with NYSE Arca, and another five ETFs that Direxion had also proposed to list on the NYSE Arca. The last two proposals relate to applications made by GraniteShares that were to be listed on the CBOE.

The regulator had disapproved all the ETFs on the grounds that the products did not meet compliance requirements as stipulated in the Exchange Act Section 6(b)(5).

Specifically, the SEC cited a rule that states that “a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”

The SEC’s August decision to reject the nine applications hit the market hard and dashed the hopes of most within the cryptocurrency community, especially retail investors anxiously waiting for permission to begin trading.

Any remaining hope quickly faded into fear when the Commision swiftly followed the rejections with yet another disappointing decision not to allow the VanEck/SolidX Bitcoin ETF.

The commission pointed out that if the spot market is unregulated, then a regulated derivative market related to the underlying asset with which the Exchange can enter into a surveillance-sharing agreement must exist.

Weiss Ratings believes that Bitcoin ETF acceptance by the SEC is coming close. The company stated that:

One of the biggest issues holding back the price of cryptocurrencies is the SEC, which has rejected 15 different Bitcoin ETF proposals. However, every rejected ETF brings us one step closer to finally getting approval. The SEC isn’t rejecting Bitcoin ETFs because they hate Bitcoin; the SEC is rejecting a Bitcoin ETF because all the previous ETFs failed to meet certain rules and requirements.

The agency is expected to make a ruling on the fund by at least December, though that could easily be pushed to a later date in 2019.

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