The US Securities Exchange Commission (SEC) has postponed its decision on whether to allow the Vaneck Solidx Bitcoin ETF to 31st September, 2018. The extension came in as result of a proposed rule change submitted by Cboe BZX Exchange. The key part of the proposal was a detailed description of the changes that have been made so far relating to the concerns which were referenced by the SEC as key reasons for snubbing Solidx’s Bitcoin ETF in 2017.
The proposed rule change was filed by Cboe BZX earlier on 20 June which was followed by a formal publication on the 2nd of July. Following the proposed rule change, the SEC acknowledged a remarkable interest from those with a keen interest in the cryptocurrency community by revealing that, “As of August 6, 2018, the Commission has received more than 1,300 comments on the proposed rule change.”
The SEC elaborated that according to the Securities Exchange Act, the commission has the liberty to designate a longer period within a period of 45 days after the issue has been published in the Federal Register.
“The Commission is extending this 45-day time period. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change.”
The commission continued to verify the actual date by saying it “designates September 30, 2018, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change.”
From the look of things, the decision may only represent one of the instances where the authoritative body extends the time frame on any decision relating to ETF as the Exchange act further stipulates that the commission has the description to extend the period to 240 days after publication in the Federal Register.
Major issues from last rejection solved
A bit of hindsight to March last year takes us to a situation where the commission turned down a proposed rule change from the NYSE Arca which was seeking to list and trade shares for Solidx Bitcoin Trust.
After this, we also witnessed SEC featuring a document on its website, dated 1st August, which describes a meeting conducted on 31st August involving officials and representatives from SEC, Van Eck Securities, Solidx Management and Cboe BZX Exchange. The meeting saw representatives from Van Eck Securities and Solidx Management deliver a detailed presentation showing that the identified issues were looked at in detail and resolved.
“Issues identified in [the SEC’s previous] disapproval order have been resolved.”
The first notable change noted by the presentation was that there are now multiple derivatives markets for Bitcoin which have the appropriate trading volume and credentials. Key examples included Cboe Bitcoin Futures and CME Bitcoin futures whose daily trading volumes combine to $150-200 million and are both CFTC regulated.
Product pricing also went through some changes so as to shield the ETF from various forms of manipulative activity. The proposition listed OTC index and NAV to be used for pricing and cited the “CFTC’s jurisdiction over OTC Bitcoin Trading” as a major factor behind the choice.
“Potential manipulative activity would be identified immediately, providing the ‘necessary deterrent to manipulation’ described in the March 2017 disapproval notice.”
Additionally, the presentation addressed SEC’s “concerns regarding bitcoin ETFs and retail investors,” by saying that “the initial share price will be set at a level designed to ensure that only institutional and ‘non-retail’ investors will be able to purchase shares,”
In addition, we saw an additional effort from Van Eck earlier on in July where the company submitted a 13 page report to the SEC which addressed key issues including liquidity, valuation, arbitrage, custody and potential manipulation.
Following the declaration for extension, the bitcoin’s price has plunged with experts plausibly linking the plunge to the decision. It remains for time to tell what will become of the efforts to turn the Bitcoin ETF idea into a reality. The whole cryptocurrency world awaits anxiously to witness and join the accomplishment of one of the major milestones in blockchain and cryptocurrency.