SEC Deems Spot Bitcoin ETF Filings Inadequate
The U.S. Securities and Exchange Commission (SEC) has reported that the recent filings for launching spot bitcoin exchange-traded funds (ETFs) are insufficient, according to sources. This news has caused the price of Bitcoin to drop by over 3%, equivalent to a $1,000 decrease in just a few minutes. Currently, bitcoin is trading slightly above $30,000.
Insufficient Detail on Surveillance-Sharing Agreements
Nasdaq and CBOE, the exchanges responsible for submitting the spot ETF applications on behalf of various asset managers, including BlackRock and Fidelity, have been informed by the SEC that the applications lack clarity and comprehensiveness. The filings did not provide enough information regarding the surveillance-sharing agreements, particularly the identification of the spot bitcoin exchange to be used. However, the asset managers can revise and resubmit their applications.
Surveillance-Sharing Agreements and Market Manipulation Prevention
The SEC has previously stated that a sponsor of a Bitcoin trust must establish a surveillance-sharing agreement with a regulated market of significant size. This requirement ensures that market manipulators attempting to influence the price of an exchange-traded product (ETP) must trade on the same market as the ETP. By doing so, both the sponsor and the trading platform can identify any potential manipulative activities. Currently, spot bitcoin markets lack oversight from federal regulators, a situation the Commodity Futures Trading Commission has sought to change for years.
Implications for BlackRock, Fidelity, and Other Asset Managers
The spot ETF filing by BlackRock in mid-June initiated a significant price surge in bitcoin, propelling the cryptocurrency from under $26,000 to over $31,000, reaching one-year highs. BlackRock’s filing also prompted other asset managers, including Invesco and Fidelity, to submit their previously rejected spot bitcoin ETF applications. However, representatives from BlackRock, Fidelity, and Galaxy (who filed jointly with Invesco) declined to comment on this matter.
In conclusion, the SEC’s determination that the spot bitcoin ETF filings are inadequate has led to a sharp decline in the price of bitcoin. This decision affects major asset managers like BlackRock and Fidelity, who now have the opportunity to revise and resubmit their applications to address the SEC’s concerns.
