On 26th July, the U.S Securities and Exchange Commission disapproved a rule change proposed by the Bats BZX Exchange to trade the Winklevoss twins Bitcoin ETF for the second time.
On 30th June 2016, the exchange company had filed for a proposed rule change with the States and Exchanges Commission. The proposal for the rule change was rejected by the Division of Trading and Markets of the SEC on 10th March 2017. This led to the exchange platform applying for a timely petition requesting the commission to review the disapproval by the delegated authority [Division of Trading and Markets].
The SEC granted the petition for review seeking public comments in support of or opposition to the disapproval of the proposal. The commission conducted a new investigation of the proposal and reviewed the proposal made by the exchange company and the petition for review of the disapproval of the rule change. The petition for review included the comments and statements submitted by the exchange platform and other parties.
The commission enquired if the proposal was in accordance to the Exchange Act and rules and regulations which are applicable to the National Securities Exchanges. They checked whether the exchange proposal was inconsistent with the rules of the National Securities Exchange which focused on preventing fraudulent and manipulative acts and practices; protect investors and public interest.
After reviewing the claims made by the BZX exchange, the commission stated that the records did not support the statement made by the exchange on Bitcoin and the Bitcoin market was resistant to manipulation. The record also did not support whether the traditional means described by the exchange for identifying and avoiding fraud and manipulation are sufficient to meet the requirement of the Exchange Act.
The commission stressed on the importance of surveillance sharing agreement in order to detect and prevent fraud and manipulation. BZX exchange has not entered or is planning to enter into a surveillance sharing with a regulated market of significant significant size related to Bitcoin, unlike the approved ETP commodity-trusts.
According to the commission, the regulated Bitcoin-related market is still in its early stages. It also states that the majority of the trading that takes places overseas are unregulated and the Bitcoin-markets are new. Furthermore, there are no records supporting that the Bitcoin derivatives market has gained significant size.
Commissioner Hester M. Peirce stands against the commission’s disapproval of the proposed rule change. The commissioner stated that the proposed rule change satisfies the requirements of the Exchange Act.
Commissioner Peirce said:
“The Commission focuses its decision not on the ETP shares to be listed on the exchange but on the underlying bitcoin spot market. It rejects BZX’s argument that the underlying bitcoin market is resistant to manipulation and, contending that BZX does not have surveillance-sharing agreements with one or more regulated markets of significant size in the bitcoin spot market, finds that the proposed rule does not comply with Section 6(b)(5)”
The commissioner concludes:
” Bitcoin is a new phenomenon, and its long-term viability is uncertain. It may succeed; it may fail. The Commission, however, is not well positioned to assess the likelihood of either outcome, for bitcoin or any other asset.”
Since the SEC released a statement which stated that the Winklevoss twins ETF is rejected, the Bitcoin [BTC] price also started to plummet in the market. After gaining its momentum and crossing the $8000 mark, Bitcoin has fallen below $8000 again.
According to CoinMarketCap, at press time, Bitcoin [BTC] was trading at $7947 with a market cap of more than $136 billion and has witnessed a significant dip of more than 3% in the past 24 hours.
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