By Donald Haymatter
The U.S. Securities and Exchange Commission (SEC) is inviting public input on the proposed Franklin Templeton and Hashdex spot Bitcoin ETFs, as revealed in a November 28 filing. This move could pave the way for potential approvals of these ETFs in early January 2024.
SEC Opens 35-Day Comment Window for Franklin Templeton and Hashdex ETF Proposals
The Securities and Exchange Commission (SEC) of the United States, in a recent filing dated November 28, has called for public input on the Bitcoin ETF proposals submitted by Franklin Templeton and Hashdex.
This request specifically pertains to their Forms 19b-4, which differ from Form S-1, as they are governed by the SEC’s Trading and Markets Division for public disclosure, in contrast to the offering prospectus scrutinized by the Corporate Finance Division.
The SEC has set a 35-day period for the public to submit their comments and responses, beginning after the notice’s publication in the Federal Register. In reviewing Franklin Templeton’s application, the SEC urges commenters to focus on several critical aspects.
These include the potential for price manipulation in the Bitcoin market, the effectiveness of the company’s surveillance-sharing agreement with Coinbase for price discovery and fraud detection, and the correlation between Bitcoin (BTC) spot prices and futures prices.
Also read:Evaluating Hashdex’s Complex Fund Structure
In contrast to the straightforward proposal of Franklin Templeton, Hashdex’s proposed fund structure is notably more complex. It is designed as a futures ETF that includes holding spot BTC.
This approach is distinct from Franklin Templeton’s, as Hashdex intends to acquire BTC through other exchanges on the CME (Chicago Mercantile Exchange), using this exclusive mechanism for determining pricing.
The SEC has specifically requested public feedback on several key aspects of Hashdex’s proposal. One of the primary areas of inquiry concerns the CME’s size and its impact on the fund structure, particularly in terms of ensuring sufficient market liquidity. This aspect is crucial given the reliance of the fund on the CME for BTC pricing.
Another significant point for commenters involves the calculations made by Toroso Investments, the sponsor managing and controlling the fund. The SEC is interested in understanding the rationale and methodology used by Toroso Investments to determine the relationship between BTC prices on the CME and those on unregulated exchanges.
Exploring Potential Early Approvals for Bitcoin ETFs
The SEC’s proactive steps in the evaluation of the Franklin Templeton and Hashdex Bitcoin ETFs have sparked considerable market speculation.
These ETFs, proposed for trading on major exchanges like the New York Stock Exchange Arca and Cboe BZX, saw their rule change submissions in late September. In a notable move, the SEC advanced its decision-making deadline to November 15, ahead of the initially planned date of January 1, 2024.
James Seyffart, an ETF expert, interprets this early update as a possible indication of the SEC’s strategy to synchronize the review processes for all 12 issuer applications, including prominent names like BlackRock and Grayscale. This synchronized approach could potentially lead to comprehensive approvals across the board.
While speculations point towards a likely approval in the early weeks of January, these predictions remain based on typical SEC procedures and past patterns. It’s important to note that these estimations, while informed, do not set a definitive timeline for the SEC’s decision-making on these Bitcoin ETFs.
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