Cboe and NYSE Arca Seek SEC Approval for Streamlined Crypto ETF Listings

Cboe and NYSE Arca have submitted a rule change request to the U.S. Securities and Exchange Commission (SEC) aimed at streamlining the listing process for crypto-based exchange-traded funds (ETFs). The proposed rule would allow crypto fund issuers to list products under a unified framework, eliminating the need for individual SEC approvals for each new fund [1]. This development follows recent regulatory shifts, including the SEC’s approval of in-kind creation and redemption mechanisms for crypto ETFs, which bring the asset class closer to traditional fund structures [1].

Currently, exchanges must file a 19b-4 form for every new crypto ETF, initiating a lengthy and complex approval process. The proposed change would streamline this by allowing qualifying products to be listed automatically if they meet specific criteria. This could significantly reduce the regulatory burden on market participants and accelerate the introduction of new crypto ETFs [1]. Nate Geraci, an ETF analyst, emphasized that the rule change could represent a major efficiency boost for the industry, particularly as demand for digital assets continues to grow [1].

The rule change request from Cboe and NYSE Arca aligns with broader efforts to modernize the ETP landscape and accommodate the unique characteristics of digital assets. For example, in-kind redemptions allow investors to receive the actual underlying assets rather than cash, which is particularly relevant for crypto ETFs due to the volatility and high transaction costs of digital assets. This mechanism can help reduce arbitrage opportunities and improve price discovery [1].

The move also reflects the White House’s recent call for clearer trading guidelines and relaxed restrictions on blockchain innovation. The Working Group on Digital Assets released a 168-page policy document advocating for regulatory clarity in crypto custody, trading, and registration. It also urged regulators to eliminate bureaucratic delays that hinder the development of innovative financial products [1].

Cboe, known for launching the first U.S. Bitcoin futures in 2017, and NYSE Arca, a major player in the ETF market, are positioning themselves at the forefront of this regulatory evolution. If the SEC approves the rule change, it could set a precedent for other exchanges and encourage further innovation in the ETP space. Analysts suggest that the adoption of in-kind mechanisms could lower the price spread between ETFs and their underlying assets, boosting investor confidence and attracting greater institutional participation [1].

The outcome of the SEC’s review will be closely watched by the industry. A positive decision could signal a shift in the regulatory tone and accelerate the availability of new crypto ETFs in the U.S. market. The broader implications include the potential for more complex ETP structures and increased efficiency in the trading of digital assets [1].

Source:

[1] US SEC approves in-kind redemptions for crypto ETPs

https://crypto.news/us-sec-approves-in-kind-redemptions-for-crypto-etps/