NYSE Arca Petitions SEC For Bitcoin ETF Listing

December 20, 2017, 8:10 PM UTC

NYSE Arca, an exchange owned by New York Stock Exchange’s parent company, has resubmitted an application with the SEC to list a pair of Bitcoin-backed exchange-traded funds, or ETFs, that would track newly-introduced Bitcoin futures contracts.

The two products would be known as the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF. Proshares filed for essentially the same products in September, but the futures they proposed to track hadn’t yet been introduced.

NYSE Arca withdrew two other bitcoin ETF applications in late September.

Other bitcoin ETFs, including one proposed by Tyler and Cameron Winklevoss, were rejected by the SEC in March. In explaining its snub of the Winklevoss fund, the SEC cited potential for “fraud and manipulation” surrounding bitcoin. In a parallel decision later the same month, the SEC wrote that the commodity market underlying any ETF “must be regulated.”

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Regulation of bitcoin and cryptocurrency markets is still piecemeal at best, but the new application suggests that NYSE Arca and its parent, the Intercontinental Exchange, believe that linking their fund to bitcoin futures contracts introduced this month will allay SEC concerns. In its filing, NYSE Arca writes that “the investment objective of the [ProShares Bitcoin ETF] 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.” According to the new filing, “the Fund will not be benchmarked to the current price of bitcoin and will not invest directly in bitcoin,” at least nominally separating it from the Wild West of the cryptocurrency markets.

An ETF would provide a new route for investing in bitcoin, which has been on a wild bull run all year. Investors are apparently hungry for exposure to the market, leading to massive boosts for the stocks of companies purporting to focus on cryptocurrency.

At the same time, the proposed ProShares Short Bitcoin ETF would make it easier to bet that bitcoin’s price will drop. It’s currently quite difficult to take a short position against bitcoin, even as warnings of a bitcoin bubble are widespread, so there may be significant pent-up demand for short positions.

In fact, this new ETF application comes just as Bitcoin seems to be losing a bit of steam in the market. The cryptocurrency has declined roughly 15% since nearly breaking $20,000 over the weekend.