CBOE Futures Launch : Two Firms File Bitcoin ETF Applications

For the creation of the Bitcoin ETF products that trade in the cryptocurrency derivatives, Two exchange-traded funds (ETF) dealers have signed up with the U.S. Securities and Exchange Commission (SEC).

U.S. Securities and Exchange Commission (SEC)

The SEC holds primary responsibility for enforcing the federal securities, laws, proposing securities rules, and regulating the securities industry, the nation’s stock and options exchanges, and other activities and organizations, including the electronic securities markets in the United States.

The SEC’s divisions are:

  • Corporation Finance
  • Trading and Markets
  • Investment Management
  • Enforcement
  • Economic and Risk Analysis

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Exchange-traded funds (ETF)

An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occasionally occur

DEFINITION of ‘Exchange-Traded Fund (ETF)’

An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.

Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does.

Two Firms File Bitcoin ETF Applications

According to the public submitting system, U.S. Securities and Exchange Commission (SEC) has received the new applications for the REX Bitcoin Strategy ETF, REX Short Bitcoin Strategy ETF and in addition, for the VanEck Bitcoin Strategy ETF.

The Connecticut-based REX signed up its application just before two days of the first bitcoin futures contracts launched on CBOE that is, on 8th December. The New York-based VanEck was signed up on December 11.

None of these firms can hold the bitcoins directly instead the actively managed funds will trade CBOE and other derivative products which will provide profit for the investors from the price movements of the flagship cryptocurrency.

A large number of fund providers have signed up to create Bitcoin ETFs. But until now the SEC has not rejected or refused to review the applications. In the former case, the SEC has denied the applications citing the irregular nature of bitcoin exchangeswhich traded bitcoin directly. In the latter case, the SEC stated that the commission cannot review an application for the fund which will invest in non-existent products, namely, bitcoin derivatives.

Anyway, the CBOE has officially listed the bitcoin futures. The LedgerX has launched many other derivatives products which made a hope in many analysts that the SEC will approve the ETFs which trade these products. As a result, it is expecting that the futures launch will stir up an outbreak of new Bitcoin ETF filings.

All Eyes staring to SEC

The creation of the first Bitcoin ETF will be a historic moment for mainstream cryptocurrency adoption. Many retail investors desire to invest in bitcoin through their brokerage and retirement accounts which will make them bitcoin-linked investment products more easily attainable for such retail investors. It is going to be added more fuel to the price record rampage of the bitcoin as it heads into 2018.

It is not clear to what extent the market has already priced an ETF into the general growth surrounding the futures launch if there is any.  As a result, the rejection of SEC would possibly switch on the markets into bearish territory.

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