The New York Stock Exchange's stocks and options exchange, NYSE Arca has reapplied with the SEC to list a pair of Bitcoin exchange-traded funds(ETF), tied to the recently introduced Bitcoin futures contracts.
The ETFs, ProShares Bitcoin ETF and ProShares Short Bitcoin ETF, are essentially the same products filed for approval by Proshares back in September, when the futures hadn't yet emerged.
The new petition by NYSE Arca dated December 19, 2017 is headlined, “Notice of Filing of Proposed Rule Change to List and Trade the Shares of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF under NYSE Arca Rule 8.200-E.”
The proposal added that New York private bank, Brown Brothers Harriman & Co. would act as custodian for the funds, “In its capacity as the Custodian for the Funds, Brown Brothers Harriman & Co. (“BBH&Co.” or the “Custodian”) may hold the Funds’ investment assets and cash and cash equivalents pursuant to a custodian agreement.”
It is unclear as yet if the funds would be tied to the Cboe or CME futures contract,
“According to the Registration Statement, the investment objective of the Fund is to seek results (before fees and expenses) that, both for a single day and over time, correspond to the performance of lead month bitcoin futures contracts listed and traded on either Cboe or CME”
To allay SEC’s fears over the cryptocurrency market’s wild-west reputation, NYSE Arca also notes that the fund “will not be benchmarked to the current price of bitcoin and will not invest directly in bitcoin.”
No Future Regrets
Two weeks ago, the Chairman of Intercontinental Exchange, owner of NYSE, Jeffrey Sprecher said he may end up regretting not creating a futures contract based on bitcoin as competitors CME Group Inc., Cboe Global Markets Inc. and Nasdaq Inc.
“We may be stupid for not being first on that. I don’t have the answers, I wish I knew but I don’t know what to make of cryptocurrencies.”
Sprecher added that he was unsure if there was a natural selling side for bitcoin futures or investors to short the contract, highlighting that the bitcoin world is largely in thrall to miners and algorithmic traders on the other side of the world, “To short that, that means they’re deciding to exit the market through a futures market which may not be a good scenario for our exchanges.”
The SEC has previously rebuffed filings for Bitcoin ETFs. Earlier in March, it twice denied requests for Bitcoin exchange-traded funds (ETF), citing unregulated nature of bitcoin markets without even basic oversight as posing major risks for investors.
Another reason previously cited by the SEC has been that the commodity market underlying any ETF “must be regulated.”
Will the existence of Bitcoin futures contracts sway their stance? We'll have to wait and see.