During a meeting with the US Securities and Exchange Commission (SEC) commissioner, Elad L. Roismanm representatives from SolidX, VanEck, and CBOE presented five main reasons why the commission should accept the Bitcoin exchange-traded fund (ETF) filing of VanEck and SolidX.
VanEck, an investment management firm based in New York with years of track record in the traditional finance sector and hundreds of ETFs filed under its name, pointed out the following reasons the SEC should consider in approving its Bitcoin ETF:
- There now exists a significant regulated derivatives market for bitcoin
- Relevant markets – CBOE, bitcoin futures, OTC desks – are regulated
- Concerns around price manipulation have been mitigated, consistent with approval of prior commodity-based ETPs
- CBOE’s rules are designed to surveil for potential manipulation of Trust shares
- Promotes investor protection
Earlier on, the SEC overruled the Winklevoss Bitcoin ETF mainly because of its dependence in a public cryptocurrency exchange in Gemini to find the base price of Bitcoin. The SEC considered cryptocurrency exchanges to lack enough regulation and liquid to handle an ETF.
In response to the dismissal of the Winklevoss Bitcoin ETF, ProShares and two other companies filed 9 ETFs, basing the BTC price of the ETFs on the futures market managed by CBOE and CME Group. During the time, the filing of ETFs by the three companies was seen as a smart move as it regarded the SEC’s concerns towards cryptocurrency exchanges.
But, the SEC overruled the 9 ETFs saying that the futures market is of no relevance to supporting an ETF.
In their presentation, VanEck, SolidX, and CBOE representatives told the SEC that the futures market is capable of handling the running of an ETF through the Depository Trust & Clearing Corporation (DTCC), which was particularly significant due to the involvement of CBOE in the filing.
VanEck also stressed that the approval of an ETF would lower rival risk for investors and it will offer a simple solution for investors seeking price exposure, by increasing the stability of the market.
“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 redemptions, the Trust always requires APs and trading counterparties to settle their leg of the trade before the Trust will do so.”
VanEck’s claim directly supports the statement of SEC commissioner Hester Peirce, who earlier on noted that the present structure of the cryptocurrency exchange market only permits a number of investors with certain know-how and knowledge in the market to trade and gain off 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 futures, for example, began to trade recently,” she noted.