Bitwise Asset Management has filed an amended application for a spot bitcoin exchange-traded fund (ETF), beefing it up with 40 pages of new text in response to the U.S. Securities and Exchange Commission’s (SEC) objections to the product. . However, it may still not be enough to satisfy regulatory requirements, a company executive warned.
Bitwise is among six financial firms whose btc spot ETF applications are on hold after the SEC delayed their consideration. That move came after a court overturned the agency’s rejection of a request by Grayscale Investments to convert its over-the-counter Grayscale bitcoin Trust into a listed btc ETF.
Bitwise Chief Investment Officer Matt Hougan explained in a thread on In that case, the wrote:
“We return to the need to demonstrate that the CME bitcoin futures market leads in price discovery over the spot market so that it can serve as a ‘regulated market of significant size’ for surveillance purposes.”
Chicago-based CME Group operates derivatives exchanges, including a btc futures and options market.
In its amended application, Bitwise addressed what the SEC called “the ‘mixed’ or ‘inconclusive’ academic record” on the lead-lag relationship between btc futures and spot markets. After analyzing academic works cited in 11 previous SEC disapproval orders for spot btc exchange-traded products, Bitwise saying“The data convincingly shows that the CME is the primary source of price discovery.”
1/ NEW: Bitwise Spot bitcoin ETF Update
NYSE today filed an amended application to list the Bitwise bitcoin ETF Trust, complete with more than 40 pages of new research from Bitwise.
The investigation addresses key concerns the SEC has raised around spot bitcoin ETFs.
Here’s why it’s important: pic.twitter.com/RPb7OXRGat
– Matt Hougan (@Matt_Hougan) September 25, 2023
Furthermore, Hougan summarized that the amended application demonstrated that “every well-designed academic study supports the conclusion that the CME is ‘significant,’” countering several arguments made by the SEC in previous disapproval decisions.
The conclusions reached in the modified Bitwise application are important to comply with SEC requirements. The agency has determined that a listed exchange must have a co-surveillance agreement with a regulated exchange, such as the CME btc futures exchange, that is “of significant size.” That requirement goes into effect if an exchange “fails to establish that other means of preventing fraudulent and manipulative acts and practices are sufficient.” The SEC has determined that to be the case for previous applicants.
Hougan warned: “Shared surveillance arrangements with spot exchanges are positive, but may not satisfy technical regulatory requirements.”
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