SEC rejects nine applications to list exchange-traded funds
The US Securities and Exchange Commission (SEC) has rejected nine applications from three different companies to list bitcoin exchange-traded funds.
The financial markets regulator published three separate orders late on Wednesday, one of them – for two ETF listings on the NYSE Arca exchange by ProShares – a day ahead of the scheduled decision due on Thursday, 23 August.
All applications were for the SEC to consider changing rulings on earlier disapprovals, however, the regulator upheld its decision on all three applications.
It said for all three: “The Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”
An ETF is traded like an equity on a stock exchange and tracks an underlying index or asset – in this case, the price of bitcoin futures on various exchanges. Like the price of the underlying asset, ETF prices change throughout the day, depending on the buying and selling activity of the ETF.
The SEC has maintained that its decisions have been made to protect the rights and best interests of investors whose exposure to a popular and widely-available investment product such as an ETF could leave them vulnerable to heavy losses in the event of fraud or manipulative practices in the underlying asset.
The regulator added: “The Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.’ That failure is critical because, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary.”
At the time of writing, none of the three applicants had made a statement on the SEC’s decisions.