CBOE Global Markets is unhappy with SEC interference in the launch of bitcoin ETF. It has urged the regulator to allow the launch of the ETF, as a regular marketable security. In a recent letter to the Securities and Exchange Commission, CBOE President Chris Concannon addressed the regulator’s concerns, recommending them not to interfere in the development of the new fund.
Per the exchange operator, a bitcoin ETF will be similar to other ETFs in the market. An exchange-traded fund is designed as marketable security that tracks, bonds, a basket of assets, an index or a commodity. They have lower fees than mutual funds, and their liquidity remains higher than common stock.
In response to an SEC letter expressing concerns about liquidity and manipulation risks of the cryptocurrency market, Concannon wrote this letter asking the regular to avoid interfering in the process.
Dalia Blass, Director of the Division of Investment Management, wrote in the letter, “Until the questions identified above can be addressed satisfactorily, we do not believe that it is appropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products.”
Concannon responded by saying, “As the volumes continue to grow, especially on regulated US markets, the overall spot Bitcoin market looks more and more like a traditional commodity market and CBOE continues to believe that the spot market is sufficiently liquid to support a Bitcoin ETP.”
He also talked about arbitrage opportunities in ETF, writing “CBOE believes that the arbitrage mechanism would function identically to other commodity-related ETPs… thereby keeping the price of the ETP in line with the price of Bitcoin and limiting the risk of manipulation shares of the ETP.”
While the SEC still isn’t convinced about the role of cryptocurrencies in traditional markets and their regulation, Concannon supported the statements made by regulatory experts in a recent congressional hearing. They stated that the current set of regulations are enough to manage some aspects of digital currencies.
He added, “While CBOE shares many of the concerns raised in the Staff Letter, we believe that the vast majority of these concerns can be addressed within the existing framework for commodity-related funds related to valuation, liquidity, custody, arbitrage, and manipulation.”
The SEC has launched dozens of probes into digital currency companies and issued subpoenas to several firms offering ICOs to investors. This week, the SEC has launched a fresh investigation into 100 hedge funds that have holdings in cryptocurrencies. The regulator wants to know whether the investors are aware that their money is being used in crypto markets or not. Financial advisors to private individuals and businesses could also come under the purview of this probe.
CBOE and its rival CME Group Inc. have already launched bitcoin futures contracts, overlooked by the CFTC. The SEC, however, has already denied dozens of proposals to start funds with bitcoin holdings or futures contracts. Four of these proposals were submitted by CBOE, including one for the Winklevoss Bitcoin Trust.