Several asset managers have resubmitted applications for their spot Bitcoin ETFs following this morning’s reports that those applications did not meet the U.S. Securities and Exchange Commission’s (SEC) standards over language surrounding surveillance-sharing agreements.
The Wall Street Journal reported on June 30, 2023, that spot Bitcoin EFT applications submitted by Fidelity, WisdomTree, VanEck, Invesco, and BlackRock’s were likely to be rejected due to insufficient clarity in the SSA between those asset managers and the exchanges that would list the products—in these cases, either Cboe Global Markets or Nasdaq.
The SEC’s concerns revolved around the applications’ inability to identify a specific spot Bitcoin exchange that would engage in a “surveillance-sharing agreement” (SSA) with Nasdaq and Cboe. An SSA, designed to prevent fraud and market manipulation, is a requirement the SEC imposes to ensure integrity in the underlying market of an asset by being alert to manipulative trading activities.
Fidelity, WisdomTree, VanEck, and Invesco — all of which filed spot Bitcoin ETF applications in recent weeks — submitted revised filings on June 30. Those filings can be seen on the Cboe Global Markets’ page for pending rule changes for BZX options.
BlackRock submitted a filing for a spot Bitcoin ETF with Nasdaq rather than Cboe. While BlackRock’s earlier June 15 filing is still listed as pending on Nasdaq’s website, there is no indication that it has resubmitted or updated its filing.
In response to the SEC’s concerns, the exchanges proposed a solution by pledging to establish SSAs with the Chicago Mercantile Exchange (CME), one of the largest Bitcoin futures markets. Through their membership in the Intermarket Surveillance Group (ISG), they would have access to an established self-regulatory body focused on preventing fraud and market manipulation.
ISG members, which include most major traditional financial stock exchanges, would share information as part of their fraud prevention efforts. The CME already has measures in place to detect market manipulation, which the exchanges argue should assuage the SEC’s concerns, given the precedent set by ISG membership constituting a suitable SSA.
The SEC has not definitively rejected the various pending ETF applications, nor has it made any public statement on the matter. The Wall Street Journal reported the SEC’s statements and cited anonymous contacts as its source of information.
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