September 21, 2017

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SEC Rejects Rule Change for Bitcoin ETF



The U.S. Securities and Exchange Commission (SEC) today issued an order disapproving the proposed rule change to list and trade Coin ETF on the Bats BZX Exchange. This is the first Bitcoin ETF which the SEC has ruled on. Two other Bitcoin ETFs are also being considered by the Commission.

Also read: Bitcoin Price Consolidates on ETF News

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The Decision

SEC Rejects Rule Change for Bitcoin ETFThe SEC has just published an “Order Disapproving a Proposed Rule Change, as Modified by Amendments No. 1 and 2, to BZX Rule 14.11(e)(4), Commodity-Based
Trust Shares” to list and trade the Coin ETF.

Bats BZX Exchange filed the proposed rule change with the Commission on June 30, 2016, which was subsequently published in the Federal Register on July 14. Almost 240 days later and 53 comments received, the SEC finally made a decision. In its order, after recapping the filing history, the Commission wrote:

IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the Exchange Act, that the proposed rule change (SR-BatsBZX-2016-30), as modified by Amendments No. 1 and 2, be, and it hereby is, disapproved.

 Bitcoin Will Be Ok

Bitcoin’s price has been on a wild ride today as the market anticipates the ETF decision. While many in the Bitcoin community were hopeful of a positive outcome, analysts had already expected the approval of a Bitcoin ETF to be unlikely. Needham & Company, for SEC Disapproves Proposed Rule Change for Bitcoin ETFexample, predicted a less than 25 percent chance of it happening.

Last month, the firm published an in-depth analysis on Bitcoin ETFs which also discussed the effects on bitcoin’s price should the SEC reject the proposed rule change. Author Spencer Bogart, who previously expected a “highly limited” downside back in January, revised his view and wrote that: “we think downside risks is greater than it was only a few weeks ago”. His stated reasons were that “there’s been a significant run-up in price, the premium on GBTC has fallen substantially, the ETF has seen a significant increase in media attention, and some segments of the market appear to be speculating in favor of approval”.

Despite downside risks, Bogart concludes that:

We think the vast majority of owners will continue holding bitcoin regardless of the SEC’s decision and would likely welcome the opportunity to buy at a lower price – thus providing price support.

This is the first time the SEC has made a decision on a proposed rule change to list and trade a Bitcoin ETF. There are two other proposed rule changes, both filed by NYSE Arca, for two different bitcoin ETFs being considered by the Commission this year; Solidx Bitcoin Trust and Barry Silbert’s Bitcoin Investment Trust.

What do you think of the SEC’s decision? Let us know in the comments section below.


Images courtesy of Shutterstock and SEC


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