While the world is still waiting for a Bitcoin ETF approval, another deadline appears that would make the wait just a little longer. According to the latest filing released by SEC, a second amendment has been filed by Cboe BZX Exchange, Inc for a proposed rule change to list GraniteShares Bitcoin ETF application for which SEC has asked people to file a statement in support of, or in opposition to the proposed amendment. The due date for filing comments is set for October 26, 2018.
GraniteShares ETF to invest in Bitcoin Futures and not Bitcoin
GraniteShares Bitcoin ETF is one of that ETF that would not be investing in direct bitcoins but into futures of Bitcoins that are currently being traded at CBOE Futures Exchange (“CFE”) and the Chicago Mercantile Exchange (“CME”). The reason that GraniteShares chose this route instead of bitcoin as it had four major benefits in regards to risk and operation of the funds, namely protection against market manipulation, Good Trading and Liquidity, ready and hassle-free valuation and available custody. This was clearly stated in the letter filed by CEO of GraniteShares, William Rhind, to the SEC.
Granite shares had also proposed to list and trade shares two ETF ’s: GraniteShares(long) Bitcoin ETF and the GraniteShares Short Bitcoin ETF to take make the best use of the market volatility and also to mitigate the risk that arises due to trends in the market. Graniteshares and Cboe BZX Exchange, Inc had filed certain changes and clarifications regarding this model of operation of the Bitcoin ETF in Amendment 1 that it filed with the SEC on August 21, 2018. Now with Amendment 2, The Cboe BZX Exchange, Inc amends and replaces in its entirety Amendment No. 1 to the proposal as submitted on August 21, 2018, which had future amended and replaced in its entirety the proposal as originally submitted on January 5, 2018. The Exchange submits this Amendment No. 2 in order to clarify certain points and add additional details about the Fund. Important excerpts from amendment 2
“The Exchange proposes to list and trade shares of the GraniteShares Bitcoin ETF (the “Long Fund”) and the GraniteShares Short Bitcoin ETF (the “Short Fund”) under Rule 14.11(f)(4), which governs the listing and trading of Trust Issued Receipts on the Exchange. The Shares will be offered by the Trust, which was established as a Delaware statutory trust on November 7, 2016. The Trust will not be registered as an investment company under the Investment Company Act of 1940 and is not required to register under such act”
The amendment also states
“The Funds are not actively managed by traditional methods (e.g., by effecting changes in the composition of a portfolio on the basis of judgments relating to economic, financial and market considerations with a view toward obtaining positive results under all market conditions) other than for cash management purposes and the rolling methodology employed by the Sponsor”
The details of the same could be found here:
With the deadline now been set at October 26, 2018, the SEC has opened doors to comments in favor or in against of not just the Granite Shares ETF but also for Direxion Daily Bitcoin Shares and ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF
The wait of approval of GraniteShares ETF continues even after 10 months
On January 5, 2018, Cboe BZX Exchange, Inc. (“Exchange” or “BZX”) filed with the Securities and Exchange Commission (“Commission”) the application for list and trade shares of the GraniteShares Bitcoin ETF and the GraniteShares Short Bitcoin ETF issued by the GraniteShares ETP Trust. The proposed rule change was published for comment in the Federal Register on January 18, 2018.3
On February 22, 2018, the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to approve or disapprove the proposed rule change.4 On April 5, 2018, the Commission instituted proceedings to determine whether to approve or disapprove the application
On June 28, 2018, the Commission extended the period for consideration of the proposed rule change to September 15, 2018. As of August 21, 2018, the Commission had received 15 comments on the proposed rule change. The following could be seen here
On August 21, 2018, BZX filed Amendment No. 1 to the proposal, which amended and replaced in its entirety the proposal as originally filed on January 5, 2018.
On August 22, 2018, BZX filed Amendment No. 2 to the proposal, which amended and replaced in its entirety the proposal as amended on August 21, 2018. On August 22, 2018, the Division of Trading and Markets (“Division”), acting by delegated authority, issued an order disapproving the proposed rule change. On August 23, 2018, the Secretary of the Commission notified BZX that, the Commission would review the Division’s action pursuant to the delegated authority and that the Division’s action pursuant to delegated authority had automatically stayed.
Finally, on October 4, 2018, the Commission issued an Order Scheduling Filing of Statements on Review, setting October 26, 2018, as the date by which any party or another person may file a comment.
Now all eyes will be on October 26 when the exchange will announce the verdict for these ETF applications. As the street still expects Q1 2019 to give us the first BTC ETF, any positive surprise from SEC will just cheer the market. Fingers crossed
Will SEC approve, disapprove or further delay the GraniteShares ETF application? Do let us know your views on the same.
Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.