U.S. SEC Sets 30 September 2018 As New Deadline for Decision on VanEck-SolidX Bitcoin ETF

On Tuesday (7 August 2018), the U.S. Securities and Exchange Commission (SEC) announced that it needed more time to make a decision regarding the VanEck-SolidX Bitcoin ETF, and it set 30 September 2018 as the new deadline.

Via a notice published on its website ("Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change to List and Trade Shares of SolidX Bitcoin Shares Issued by the VanEck SolidX Bitcoin Trust"), the SEC said that on 20 June 2018, Cboe BZX Exchange (BZX) had filed with the SEC "a proposed rule change to list and trade shares of SolidX Bitcoin Shares issued by the VanEck SolidX Bitcoin Trust", which got published in the Federal Register on 2 July 2018.

Since the SEC had 45 days from the date of publication in the Federal Register to make a decision, this means that many people in the crypto space expected a decision to be made by 16 August 2018. However, the SEC has now decided to exercize its right to extend this deadline by another 45 days to 30 September 2018, saying that it needs more time:

"The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change."

Therefore, pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934, the SEC decided to designate "September 30, 2018, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change."

Jake Chervinsky, who is an American lawyer (an asociate at the law firm of Kobre & Kim) specializing in securities litigation, had this to say on Twitter about the SEC's announcement:

Previously, on 24 July 2018, Chervinsky had published a series of tweets to explain the process the SEC uses to decide proposed rule changes for new ETFs:

Then, on 25 July 2018, Chervinsky sent out another tweet to summarize the SEC deadlines, as he saw them, for the VanEck-SolidX Bitcoin ETF:

Chervinky now says that we should expect the next three SEC deadlines regarding this ETF to fall on:

  • 30 September 2018
  • 29 December 2018 (i.e. 180 days from publication in the Federal Register)
  • 27 February 2019 (this is the final deadline, since 27 February 2019 is 240 days from 2 July 2018)

According to data from CryptoCompare, as of press time, Bitcoin (BTC) is trading around $6,902. Prior to the announcement, at 20:30 (UTC + 01:00), BTC was trading around $7,104. About 40 minutes later, it had fallen to around $6,870, i.e. a fall of roughly 3.4%.

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Featured Image Credit: Image Courtesy of VanEck

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

Featured Image Credit: Photo via Pixabay.com