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SEC Asks Public for Comments on CBOE Bitcoin ETF Filings



The SEC is requesting the public to comment on two proposed amendments to rules, that if ratified, would result in the listing of the first-ever bitcoin-based exchange-traded funds.

Released by the SEC on December 28 and January 2 as a way to ask public input on the proposals, the new documents publicize the proposed rule changes put forward by the Chicago Board Options Exchange (Cboe).

The rule amendments would exempt its proposed bitcoin ETFs from certain market manipulation rules.

Submitted in two filings, on Dec. 15 and Dec. 19, the rule changes are for advisors and brokers that would look to back the products when launched.

The two documents would allow Cboe’s exchange to list a total of four ETFs.

Under existing rules, advisors to a company managing funds must have a “firewall” between any brokers or dealers they might be linked with.

This wall would keep the advisor and the broker from sharing information about the firm’s portfolio.

Other regulations do not allow anyone who manages a fund from utilizing insider information to boost their funds’ worth.

CBOE Asks for Exemptions to Rules

In the documents, Cboe asks for exclusions to the rules because it does not believe bitcoin can be considered as a commodity at risk of being manipulated under the same rules as some existing ones are.

The Cboe noted that price manipulation would need a bad actor to influence the entire blockchain worldwide.

The filing also claims that because of the nature of the bitcoin network, and its broad, global infrastructure, it would be hard for any person to have insider trading knowledge on it.

It reads:

“There is [no] inside information about revenue, earnings, corporate activities or sources of supply; manipulation of the price on any single venue would require manipulation of the global bitcoin price in order to be effective; a substantial over-the-counter market provides liquidity and shock-absorbing capacity; bitcoin’s 24/7/365 nature provides constant arbitrage opportunities across all trading venues; and it is unlikely that any one actor could obtain a dominant market share.”

With that being said, it still remains unclear whether the existing procedure will pave the way for Cboe to list any bitcoin related ETF products.

Previous attempts at launching a bitcoin-based ETF have failed, with the SEC rejecting some filings or forcing other companies to withdraw their filings.

To date, the regulatory body has not approved any bitcoin-based ETFs, though whether the SEC will continue doing so is unclear given that now two different futures products are on the market.

As part of the public comment, the SEC will accept both email and written messages for three weeks after the filings are published in the Federal Register.

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