Rule Change Could Allow Listing Bitcoin Futures as Exchange Traded Funds

A potentially giant step toward approval for listing bitcoin futures as exchange traded funds (ETFs) was taken this week when the New York Stock Exchange (NYSE) Arca, owned by Intercontinental Exchange (ICE), filed a petition for a rule change regarding two potential ETFs. The document presumes much of the groundwork to be already completed, and could signal readiness to embrace even more mainstream acceptance for the world’s most popular cryptocurrency.  

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Bitcoin Futures Exchange Traded Funds

“Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934,” the SEC public notice began, “and Rule 19b-4 thereunder, notice is hereby given that, on December 4, 2017, NYSE Arca, Inc. filed with the Securities and Exchange Commission the proposed rule change,” also noting the SEC “is publishing this notice to solicit comments on the proposed rule change from interested persons.”

The proposed change is actually for two funds, the Proshares Bitcoin ETF and Proshares Short ETF. Both were previously denied in the fall. Presumably, the last two weeks of history-making futures markets on Cboe and CME helped boost confidence in both ICE and the SEC going forward. 

The notice continues, each fund “is a series of the Proshares Trust II, a Delaware statutory trust. The Trust and the Funds are managed and controlled by Proshare Capital Management LLC. The Sponsor is registered as a commodity pool operator with the Commodity Futures Trading Commission and is a member of the National Futures Association,” it details. The mainstream pedigree appears sufficient.

Cryptocurrencies in general are inching toward a trillion dollar market capitalization, and prices for brand favorites like bitcoin have been resilient through crackdowns from world governments, IRS challenges to popular exchanges, and assorted tabloid media linking the digital asset to any number of nefarious dealings. Bitcoin trudges along, and professional financial managers are noticing.

Bitcoin ETF v Short Bitcoin ETF

According to the filing, Proshares Bitcoin ETF’s “investment objective of the Fund is to seek, results (before fees and expenses) that, both for a single day and over time, correspond to the performance of lead month bitcoin futures contracts listed and traded on either the Cboe Futures Exchange or the Chicago Mercantile Exchange. Specifically, the Fund will seek results that correspond to the last traded price of the Benchmark Futures Contract on its primary listing exchange prior to the Fund’s NAV calculation time.”

The Proshares Short Bitcoin ETF’s “investment objective of the Fund is to seek results, for a single day, that correspond (before fees and expenses) to the inverse (-1x) of the daily performance of the Benchmark Futures Contract. The Fund does not seek to achieve its investment objective over a period greater than a single day. The Fund generally intends to invest substantially all of its assets through investment in short positions in Benchmark Futures Contracts. However, the Fund may invest through short positions in Bitcoin Futures Contracts other than Benchmark Futures Contracts,” the notice explains.  

The “investment objective of the Fund is to seek results (before fees and expenses) that, both for a single day and over time, correspond to the performance of lead month bitcoin futures contracts listed and traded on either [Cboe] or [CME],” the company wrote.

This is Arca’s second attempt this year at ETF approval. Rule changes could happen as soon as a month and half from now, or they could take into the spring of 2018, according to the filing.

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