The approval of the Bitcoin Spot ETF applications for two firms is heading towards the next step. The United States Securities and Exchange Commission (SEC) has outlined the next steps in evaluating the proposed Bitcoin spot ETFs from Hashdex and Franklin Templeton.
The SEC has asked these two firms to submit applications in which they are to present written comments that will be evaluated by the SEC. The evaluation will result in whether or not the SEC approves the Forms 19b-4 submitted by the applicants.
SEC Form 19b-4 is a publicly disclosed document approved by the SEC Trading and Markets Division, distinct from Form S-1, the offering prospectus requiring Corporate Finance Division approval. The SEC has allowed a 35-day open period for comments and responses to comments from the date of publication in the Federal Register for both proposals.
The applications for rule changes, filed in late September, are essentially requests to permit the trading of ETFs. The Hashdex ETF is proposed to be listed on the New York Stock Exchange Arca, while Franklin Templeton’s ETF would be on Cboe BZX. The SEC extended its deadline for a decision on these applications to November 15.
The reason for the SEC’s inquiries is primarily focused on the issues related to potential ETF approval. The process outlined by the SEC requires commentators to assess whether or not there are any vulnerabilities present that would make the ETFs susceptible to any form of manipulation and whether the exchanges that will host these ETFs are of significant size to take on the task of this magnitude.
Franklin Templeton commentators are specifically asked to consider aspects such as potential price manipulation in the Bitcoin market, the company’s surveillance sharing agreement with Coinbase, and the correlation between Bitcoin spot and futures prices.
The proposed structure of Hashdex’s fund is a bit more complex, as its Hashdex Bitcoin ETF would be structured as a futures ETF holding spot BTC. Unlike Franklin Templeton, Hashdex would acquire BTC from other exchanges on the Chicago Mercantile Exchange (CME) and rely solely on that mechanism for pricing without a Coinbase surveillance sharing agreement.
The SEC is interested in understanding the significance of the Chicago Mercantile Exchange (CME) in the proposed fund’s structure. The fund in question here is the Hashdex Bitcoin ETF, which has a unique structure as a futures ETF that holds spot BTC. The SEC is seeking clarification on how the CME, as a futures exchange, fits into the overall architecture of the ETF and how its size might impact the fund.
