The U.S. Securities and Exchange Commissioner Elad L. Roisman met with representatives from SolidX, VanEck and CBOE, in which the representatives presented five major reasons why the commission should approve VackEck and SolidX’s ETF.
Investment management firm VanEck has hundreds of ETS filed under its name. It discussed five points as to why the SEC should consider approving its ETF and the points are as follows:
- There is a significant regulated derivatives market for bitcoin.
- Relevant markets such as CBOE, bitcoin futures, and OTC desks are regulated.
- There are concerns about price manipulation, but they have been mitigated, which is consistent with approved of prior commodity-based ETPs.
- CBOE’s rules are designed to surveil for potential manipulation of Trust shares
- Promotes investor protection.
As of now, no CCPs support the clearing of bitcoin investors are left facing absolute counterparty risk. Such risks are often unacceptable to many investors. An ETF provides a straightforward solution for investors seeking price exposure without facing counterparty risk, as the ETF would be cleared through DTCC. Furthermore, in creations and redemption, the Trust always requires APs and trading counterparties to settle their leg of the trade before the Trust will do so.
The SEC previously rejected the Winklevoss Bitcoin ETF due to its reliance on a public cryptocurrency exchange in Gemini to find the base price of BTC. The SEC also determined that the exchange was insufficiently regulated and too liquid to handle the ETF. In response to the rejection, ProShares and two other platforms filed 9 ETFs, basing the BTC price of the ETFs on the futures market operated by the CBOE and CME Group. The SEC then rejected the ETFs, finding that the securities market was insufficient in size to support the ETFs.
At the recent presentation, VanEck, Solid X, and CBOE told the SEC that the futures market is able to now handle ETF operations through the Depository Trust and Clearing Corporation. VanEck also discussed that approving an ETF may reduce counterparty risk for investors and that it could provide a simple solution for investors seeking price exposure by increasing market stability. In its words:
VanEck’s claim directly supports the SEC commissioner Hester Peirce’s statement concerning the current structure of the cryptocurrency exchange only allows select investors with specific knowledge in the market to trade and benefit from the liquidity in the market.
“This complexity means that only a very particular type of investor can pursue the diversification opportunities such assets can provide. Entrepreneurs are developing new products through which people can access cryptocurrencies indirectly or hedge their cryptocurrency holdings. Bitcoin futrues, for example, began to trade recently.”