On 23 August 2018, one day after U.S. Securities and Exchange Commission (SEC) staffers rejected (via three disapproval orders) a total of nine Bitcoin ETFs proposals from ProShares, Direxion and GraniteShares, SEC Commissioner Hester Peirce (the only Commissioner who dissented from the decision last month to reject for the second time the Winklevoss Bitcoin ETF) announced that the SEC has "stayed" (or put on hold) these orders, and that it is going to review these disapproval orders.
She announced the news (around 20:26 UTC) via the following tweet:
Yesterday's staff orders disapproving SRO rules related to a number of bitcoin ETFs are stayed pending Commission review. See, for example: https://t.co/Ky9Z8t1E4q— Hester Peirce (@HesterPeirce) August 23, 2018
The link in this tweet is to a letter sent by Brent Fields, the SEC's Secretary, to Eugene Schlanger, Counsel for NYSE Group. This letter, which has to do with the rejection of the five Bitcoin ETFs from Direxion, contains the following important paragraph:
"This letter is to notify you that, pursuant to Rule 43 1 of the Commission's Rules of Practice, 17 CFR 201.431 , the Commission will review the delegated action. In accordance with Rule 43 1 (e), the August 22 order is stayed until the Commission orders otherwise."
Two other similar letters, with regards to the Bitcoin ETFs from ProShares and GraniteShares, were also sent out: the ProShares letter was sent to NYSE Group just like the Direxion letter (but this time to David De Gregorio, Senior Counsel); and the GraniteShares letter was sent to Kyle Murray, Assisant General Counsel for Cbloe Global Markets.
The Direxion and the ProShares letters were sent to the NYSE Group because in these two cases, the proposed rule changes came from NYSE Arca ("the top U.S. exchange for the listing and trading of exchange-traded funds"), which was going to be the exchange to list and trade the shares of the Direxion and ProShares ETFs. The GraniteShares letter was sent to Clobe Global Markets because for those two ETFs, the proposed rule change to list and trade their shares came from Cboe BZX (an exchange that is part of Cboe Global Markets).
Less than an hour after her first tweet, Commissioner Peirce sent this follow-up tweet:
In English: the Commission (Chairman and Commissioners) delegates some tasks to its staff. When the staff acts in such cases, it acts on behalf of the Commission. The Commission may review the staff's action, as will now happen here.— Hester Peirce (@HesterPeirce) August 23, 2018
It is not clear how long the Commission's review of the delegated actions will take, with all three letters ending with the following sentence:
"The Office of the Secretaty will notify you of any pertinent action taken by the Commission."
The reply to this tweet by former SEC Commissioner Michael Piwowar (who resigned last month) was quite interesting:
It only takes one Commissioner to ask for a review of a staff decision and stay the ruling. After their review is complete, it would take a majority of the Commission to overturn the staff decision.— Michael Piwowar (@MichaelPiwowar) August 23, 2018
"Don't get too excited, folks. Under Rule 431 of the SEC's Rules of Practice, it only takes a single Commissioner to order a review like this. @HesterPeirce deserves credit & respect for putting up a fight, but there's no reason to think yesterday's rejections will be reversed."
What Chervinsky is referring to is Rule 431 ("Commission consideration of actions made pursuant to delegated authority"), which you can learn more about in the SEC's "Rules of Practice" document.
As for how a futures-based Bitcoin ETF could cause the BTC price to go up, Twitter user "Nik Bhatia" offered one potential scenario:
How could a futures-based ETF *possibly* help bitcoin price:— Nik Bhatia (@timevalueofbtc) August 23, 2018
1. Investors buy shares in ETF
2. ETF buys bitcoin futures
3. Broker/dealer sells these bitcoin futures to ETF
4. Broker/dealer is naked short
5. Broker/dealer buys real bitcoin to hedge naked short position
The return of hope of a Bitcoin ETF getting approved this year has caused crypto markets to rejoice, with Bitcoin, according to data from CryptoCompare, breaking the $6,500 resistance level, surging to an intraday high of $6,558 around 22:00 UTC, and currently (as of 22:20 UTC) trading at $6,542, up 2.7% in the past 24-hour period.
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