By
Chimamanda U. Martha
April 26th, 2024
Cboe has amended its spot Bitcoin ETF proposal to include an SSA agreement for market surveillance, to prevent fraudulent activity.
The Cboe BZX Exchange updated a 19b-4 filing to amend its ARK 21Shares Bitcoin ETF proposal. The exchange amended the filing to add a feature that helps prevent market manipulation and other forms of fraud.
The amended filing states the ETF will include a surveillance-sharing agreement with a Bitcoin spot trading operator. Furthermore, the amendment is similar to a feature in asset manager BlackRock’s proposal for a spot Bitcoin ETF.
“The Exchange is proposing to take additional steps to those described above to supplement its ability to obtain information that would be helpful in detecting, investigating, and deterring fraud and market manipulation in the Commodity-Based Trust Shares,” reads the filing.
The amended filing includes a Spot BTC SSA, a “bilateral surveillance-sharing agreement between the Exchange and the US BTC Spot Market Platform”. This feature will provide Cboe access to data on spot Bitcoin trades as required.
The agreement will involve two Intermarket Surveillance Group (ISG) members. The ISG operates a network for information sharing and regulatory coordination among exchanges to prevent trading abuse and market manipulation. In the Cboe’s initial April filing, there was no mention of an SSA.
Cboe Bitcoin ETF Amendment Mirrors BlackRock’s
Earlier in June, BlackRock (NYSE: BLK) submitted an application for a spot Bitcoin ETF. According to CF Benchmarks CEO Sui Chung, in a conversation with The Block, a Nasdaq 19-b4 amendment proposes an SSA with the Bitcoin spot market. Chung says this is unprecedented as no US national stock exchange has ever attempted a rule change for this purpose.
Including an SSA addresses concerns noted by the United States Securities and Exchange Commission (SEC). The Commission has rejected all applications for spot Bitcoin ETFs because it believes no proposal provides adequate protection against fraud and market manipulation. Over the years, the SEC has rejected proposals from the Winklevoss Bitcoin Trust, Bitwise, Wilshire Phoenix, VanEck, Fidelity Investments, Grayscale Investments, and the New York Digital Investment Group (NYDIG).
Last June, Grayscale filed a Petition for Review hours after the SEC rejected its previous application. The firm’s chief legal officer Craig Salm said the SEC’s rejection was unfairly discriminatory.
SEC May Greenlight a Spot ETF This Year
Despite the SEC’s continued rejection of spot Bitcoin ETF applications, the Commission might have a change of heart this year. According to Bloomberg analysts, there is a 50% chance the SEC would approve a proposal before the end of the year. Bloomberg’s senior ETF analyst Eric Balchunas tweeted that Grayscale’s lawsuit against SEC could influence the Commission to support a spot Bitcoin ETF.
According to Bloomberg’s senior legal analyst Elliott Stein, Grayscale has a 70% chance of winning its case against the SEC. Stein believes that the firm’s odds of a win jumped 30% following oral arguments that seemed to swat panel judges in Grayscale’s favor. With the possibility of a loss, the SEC may be forced to approve a spot Bitcoin ETF to make the loss less biting. Balchunas believes the Commission could approve BlackRock’s ETF to save face, and tackle Grayscale via a TradFi firm.
