The Chicago Board Options Exchange (CBOE) has filed an application for a bitcoin-based exchange-traded fund (ETF) with the United States Securities and Exchange Commission (SEC). The SEC has requested public feedback regarding CBOE’s prospective ETF.
CBOE Files for Bitcoin ETF With SEC
CBOE has filed an application for a bitcoin-based ETF that will list and trade BTC shares backed by the Vaneck Solidx Bitcoin Trust (“the Trust”). According to a release published by the SEC, the application was filed on the 20th of June.
The SEC is seeking public feedback regarding the application, with the release stating that “Interested persons are invited to submit written data, views, and arguments” concerning the proposed ETF.
Fund to “Invest in Bitcoin Only”
CBOE Files Application for Bitcoin-Based ETF with SECThe SEC release states that “The Exchange proposes to list and trade the Shares under BZX Rule 14.11(e)(4), which governs the listing and trading of Commodity-Based Trust Shares on the Exchange. Solidx Management LLC is the sponsor of the Trust (Sponsor). The Trust will be responsible for custody of the Trust’s bitcoin. Delaware Trust Company is the trustee (Trustee). The Bank of New York Mellon will be the administrator (Administrator), transfer agent (Transfer Agent) and the custodian, with respect to cash, (Cash Custodian) of the Trust. Foreside Fund Services, LLC will be the marketing agent (Marketing Agent) in connection with the creation and redemption of ‘Baskets’ of Shares.”
Each of the fund’s shares “will represent a fractional undivided beneficial interest in the Trust’s net assets. The Trust’s assets will consist of bitcoin held […] utilizing a secure process […] The Trust will not normally hold cash or any other assets, but may hold a very limited amount of cash in connection with the creation and redemption of Baskets and to pay Trust expenses.” According to the registration statement, “the Trust will issue and redeem ‘Baskets’, each equal to a block of 5 Shares” to “Authorized Participants” exclusively. Each share “currently represents approximately 25 bitcoin.”
ETF to Track MVBTCO Index
CBOE Files Application for Bitcoin-Based ETF with SECThe investment objective of the Trust is for “the Shares to reflect the performance of the price of bitcoin, less the expenses of the Trust’s operations. The Trust intends to achieve this objective by investing substantially all of its assets in bitcoin traded primarily in the over-the-counter (OTC) markets, though the Trust may also invest in bitcoin traded on domestic and international bitcoin exchanges, depending on liquidity and otherwise at the Trust’s discretion.”
The fund will track the prices as determined by the MVBTCO index – which “calculates the intra-day price of bitcoin every 15 seconds, including the closing price as of 4:00 p.m. E.T.” The SEC release states that “The bitcoin OTC platforms included in the MVBTCO are U.S.-based entities. These platforms are well-established institutions that comply with AML and KYC regulatory requirements with respect to trading counterparties and include entities that are regulated by the SEC and FINRA as registered broker-dealers and affiliates of broker-dealers.”
When trading using exchanges, the Trust expects to do so using Bitstamp, Gdax, Gemini, Itbit, Bitflyer, and Kraken.
Storage and Security
CBOE Files Application for Bitcoin-Based ETF with SECAll bitcoins held by the Trust will be stored using “multi-signature cold storage wallets.” Additionally, “For backup and disaster recovery purposes, the Trust will maintain cold storage wallet backups in locations geographically distributed throughout the United States, including in the Northeast and Midwest.”
The Trust asserts that it will also “maintain comprehensive insurance coverage underwritten by various insurance carriers.” The insurance policy “will carry initial limits of $25 million in primary coverage and $100 million in excess coverage, with the ability to increase coverage depending on the value of the bitcoin held by the Trust. To the extent the value of the Trust’s bitcoin holdings exceeds the total $125,000,000 of insurance coverage, the Sponsor has made arrangements for additional insurance coverage with the goal of maintaining insurance coverage at a one-to-one ratio with the Trust’s bitcoin holdings valued in U.S. dollars such that for every dollar of bitcoin held by the Trust there is an equal amount of insurance coverage.”
