NYSE Arсa Seeks Regulatory Approval for 5 Bitcoin Exchange-Traded Funds (ETFs)

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by Darya Rudz · 3 min read
NYSE Arсa Seeks Regulatory Approval for 5 Bitcoin Exchange-Traded Funds (ETFs)
Photo: Dominik "Dome" / Flickr

The New York Stock Exchange wants to launch new Bitcoin-related exchange-traded funds (ETF) on Arca. If the SEC approves it, NYSE will become the third American exchange to offer Bitcoin futures contracts.

According to the Securities and Exchange Commission (SEC) filing, the New York Stock Exchange has asked SEC for permission to launch five Bitcoin-related ‘bull and bear’ exchange-traded funds (ETF) on one of its markets, reports Business Insider. These EFTs will be linked to the price of Bitcoin futures that are listed on the CME and CBOE, exchanges which launched Bitcoin futures contracts in December 2017.

An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs offer both tax efficiency as well as lower transaction and management costs. The ETFs were created by Direxion Asset Management to track bitcoin futures trading. They are not tied to the price of bitcoin itself, but the funds’ aim is increasing income of investors in comparison with the underlying market.

The ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF were applied for in December. The three additional ETFs are ‘Bull Funds’: the Direxion Asset Management 1.25X Bull Fund, the 1.5X Bull Fund and the 2X Bull Fund. According to the filing, these instruments seek “daily leveraged investment results (before fees and expenses) that correlate positively to either 125%, 150%, or 200% the daily return of the target benchmark”.

However, high risks are involved, as investors may face losses multiplied by 1.25, if the price of Bitcoin falls. “Conversely, its value on a given day (before fees and expenses) should lose approximately 1.25 times, 1.5 times or 2 times, as applicable, as much on a percentage basis as the level of the target benchmark when the benchmark declines.”

On the other hand, ‘Bear funds’, the opposite ETFs, give investors an opportunity to profit on bitcoin futures going down by offering returns that “correlate to two times the inverse (-200%) of the daily return of the target benchmark.”

So, leveraged and inverse ETFs are not designed for long-term investing. But they could make access to bitcoin easier and, in the case of the Direxion product, mean bigger stakes for investors.

Dave Weisberger, the CEO of CoinRoutes, commented: “Investors will likely see these leveraged products as a way to profit on price moves without taking either the security risks of buying actual bitcoin or having approved accounts to trade futures.”

Noise around Bitcoin and its competitors raised in 2017 and brought a 1,700 percent annual gain in the Bitcoin price. At the press time, the price of Bitcoin is $15,800, it incurred 5-percent fall after reaching $17,500 yesterday, according to the data from CoinMarketCap.

If the SEC approves the request of NYSE, the five ETFs will be traded on Arca, a secondary marketplace on the NYSE.  According to the exchange, the products would “enhance competition among market participants, to the benefit of investors and the marketplace.”

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