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Nasdaq filed a proposal with the SEC seeking approval to list BlackRock’s spot ethereum exchange-traded fund (ETF) based on the regulator’s recent approval of eth-based futures ETFs in October.
The exchange proposed that the regulator allow it to create the iShares ethereum Trust under its Nasdaq Rule 5711(d), which governs the listing and trading of commodity-based Trust shares on the exchange.
Advocating for greater uniformity in the regulation of digital and traditional assets, Nasdaq posits that both bitcoin (btc) and ethereum (eth) should be governed as commodities and that the rules for spot ETFs for these digital assets should be aligned with those of gold ETFs.
The arguments proposed in the filing are similar to those used in bitcoin ETF spot applications. Nasdaq believes the SEC has no reason to block a spot ETF based on bitcoin or ethereum because it allows the CME to host futures-based ETFs for both digital assets.
Nasdaq urged the SEC to approve spot ETF applications as it will allow US investors to safely gain exposure to bitcoin and ethereum.
Surveillance problem
Nasdaq further argued that it meets all requirements set by the regulator to ensure investors are protected and has a monitoring arrangement to monitor fraud and market manipulation.
The exchange used the same arguments presented in the bitcoin ETF spot applications. Basically, Nasdaq stated that, like the CME, it is a member of the Intermarket Surveillance Group (ISG), which monitors and reports illicit activities to all its members.
According to the exchange, this and its partnership with Coinbase, which monitors spot markets, are enough to ensure that investors are adequately protected against fraud and manipulation.
Addressing potential concerns about market surveillance, Nasdaq emphasized that the surveillance mechanisms for a bitcoin or ethereum spot market are as robust as those for a futures market. He added that the CME futures market meets the SEC’s criteria of being a market of significant size that is properly monitored.
ETF Details
The proposed iShares ethereum Trust will be a collaborative effort, operating under a trust agreement between iShares Delaware Trust Sponsor, an indirect subsidiary of leading investment management corporation BlackRock Inc., and BlackRock Fund Advisors. The ETF will reflect the price performance of eth, the cryptocurrency underlying the Trust.
Coinbase Custody Trust Company will act as the “Ether custodian” and hold most of the eth in cold storage. The filing emphasized that investors may not be able to easily access the Ether custodian’s hardware, software, systems and procedures.
The net asset value (NAV) of the ETF will be determined based on total assets, including eth and cash, less total liabilities. The filing states that the NAV calculation may not be consistent with U.S. generally accepted accounting principles (GAAP) and that the sponsor of iShared Delaware Trust will have exclusive authority to determine the NAV of the ETF.
The ETF will be based on the CME CF Ether-Dollar Reference Rate – New York Variant (“CF Reference Index”) for valuation purposes, calculated daily based on Ether-USD trading activity on major trading platforms. cash.
