Cboe Seeks SEC Approval for Mutual Funds’ ETF Share Class, Will Bitcoin Find Its Way?

On Thursday, April 4, Cboe Global Markets requested a rule change from the U.S. Securities and Exchange Commission (SEC) allowing mutual funds to get exposure to exchange-traded funds (ETFs) share class. With the spot Bitcoin ETFs seeing huge demand in just two months of its launch, it opens up the possibility of Bitcoin making its way into the mutual fund industry.

Cboe Adding ETF Products With Mutual Funds

If the SEC sanctions this rule change, asset managers would be able to provide access to existing mutual fund portfolios via an ETF, akin to the manner in which they presently offer mutual fund share classes with varied fees and additional features.

Analysts noted that SEC approval would streamline the process for issuers to incorporate ETF products mirroring the performance of existing mutual funds. thus, they won’t need to introduce entirely new funds every time. This could potentially lead to a significant increase in both the quantity of ETFs available and the total assets held within ETFs.

Cboe is, however, not the sole player seeking such an arrangement. Last year in May 2023, Vanguard’s patent on the share class concept expired, and since then Morgan Stanley, Fidelity, and Dimensional Fund Advisors have been looking to replicate this model.

Bryan Armour, an ETF strategist at Morningstar, stated that the Cboe filing “provides issuers with a channel to prompt the SEC to address and interact with” their applications. The SEC is required to either approve or reject Cboe’s application within a period of 240 days.

Will Bitcoin ETFs Find A Way?

Firstly, Morningstar’s Armour believes that there’s no guarantee that the SEC will approve this application from Cboe. He added that the SEC has already made a high-profile decision this year of approving the spot Bitcoin ETF. As per Armour, this puts the odds of Cboe winning the approval at less than 50%.

However, according to Armour, the exchange’s readiness to participate in the struggle alongside asset managers might enhance the likelihood of securing the SEC’s approval in the long term. “Ultimately, this is the trajectory that the industry is moving towards, and it’s evident that Cboe is striving to take the lead,” he remarked.