Original source: BlockWorks
Original compilation: Mary Liu, BitpushNews
In the latest wave of spot Bitcoin ETF application documents, a term appears frequently: surveillance-sharing agreement.
Following asset management giant BlackRock, firms including ARK Invest, Valkyrie, Bitwise, WisdomTree and Invesco have all added this to their proposals.
Ophelia Snyder, co-founder and president of 21 Shares, said: “These agreements will provide greater transparency to the market and bring the cryptocurrency market more in line with how the U.S. market is regulated.”
In considering a proposed Bitcoin ETF, the U.S. Securities and Exchange Commission (SEC) weighed whether the proposed exchange (NASDAQ, NYSE or other entity) could meet certain obligations under the Exchange Act to prevent Fraud and manipulation.
According to the SEC’s June 2022 filing rejecting the Bitwise spot Bitcoin ETF, the SEC argued that the exchange could do so by demonstrating “a comprehensive oversight-sharing agreement with a sizable regulated market related to the underlying or reference Bitcoin asset.” make it happen.
The SEC defined a surveillance sharing agreement very clearly in its denial order:
The characteristics of a sharing agreement are that it provides for the sharing of information about market trading activities, clearing activities and customer identities; that the parties to the agreement have a reasonable ability to obtain and provide the requested information; and that it is not prevented by any existing rules, laws or practices One party obtains this information from or provides this information to the other party.
The size of this market cannot be quantified in numbers. The document states that the metric refers to a market in which a potential manipulator has a reasonable probability that he or she would have to trade in that market to do so - so that monitoring sharing protocols will help detect and prevent inappropriate behavior. Behavior.
In its Bitwise order, the SEC noted that oversight sharing agreements are not the only way for exchanges seeking to list Bitcoin ETFs to satisfy Section 6(b)(5) of the Exchange Act.
But the securities regulator said, “Such agreements have previously provided a basis for exchanges listing commodity trust ETPs to meet these obligations, and the Commission has historically recognized their importance by allowing the sharing of information regarding market trading activities, clearing activities and customer identities.” information.
David Hirsch, head of the U.S. Securities and Exchange Commissions Enforcement Divisions Crypto-Assets and Cyber Division, said last week that potential Bitcoin ETF spot issuers have not established appropriate monitoring systems equivalent to registered exchange transactions.
BlackRock, a fund giant with about $9 trillion in assets under management, applied for a spot Bitcoin ETF for the first time last week. Its filing states that the U.S. Securities and Exchange Commission approves ETFs that hold Bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME): “If CME’s regulation is sufficient to mitigate concerns related to trading in Bitcoin futures due to the pricing of Bitcoin futures, Based directly on spot Bitcoin market pricing, it is unclear how such a conclusion would apply only to Bitcoin futures-based ETPs and not to spot Bitcoin ETPs.”
Nasdaq is expected to enter into an oversight-sharing agreement with an operator of a U.S. Bitcoin spot trading platform, which was not named in the filing.
Sumit Roy, senior analyst at ETF.com, told Blockworks earlier this week that the additional agreement may not be enough to win approval, especially if the platform operator is Coinbase (which the U.S. Securities and Exchange Commission sued earlier this month).
But he said: Because BlackRock was involved, they were expected to have inside information and make it happen.
Different proposals correspond to different exchanges
Investment firm Valkyrie is the latest company to rejoin the spot Bitcoin ETF race. The company’s last attempt at a spot Bitcoin ETF ended in December 2021 when the SEC failed to approve it.
According to the new filing, the Valkyrie Bitcoin Fund will trade under the ticker BRRR (BRRR is also used to describe the sound of the money printing press).
The company, like BlackRock, designates Nasdaq as the exchange on which it is listed, which could give it an advantage over other companies, Bloomberg Intelligence analyst James Seyffart said in a tweet.
Valkyrie follows applications from Bitwise, whose proposed spot Bitcoin ETF will be listed on NYSE Arca, and more traditional financial firms WisdomTree and Invesco, whose planned products will be traded on the Cboe BZX exchange.
A spot Bitcoin ETF filed in April by Ark Invest and 21 Shares also plans to trade on Cboe.
Seyffart told Blockworks in an email: “21 Shares, ARK, and Cboe [Chicago Board Options Exchange] are at the top of the list because the SEC’s next decision date is August 13, 2023, and we have not yet determined the others. 19 b-4 Date of filing, such as BlackRock’s filing.”
