The SEC (Securities & Exchange Commission) has refused the bid for listing the SolidX Bitcoin exchange traded fund (ETF) in the NYSE (New York Stock Exchange).
The decision was published on the March 28th, and is the second time that SEC has rejected an ETF tied to Bitcoin in March.
Dreams of Trust Dashed
SolidX Partners Incorporation was founded in the 2014 and develops the blockchain products/services that focus on the capital markets.
It has raised a sum of $3 million from its investors, and has the objective of offering a total return swap for large institutional investors of Bitcoin.
SolidX Partners Inc. had initially filed the registration statement with Securities and Exchange Commission on the July 11 2016 proposing the launch of the SolidX Bitcoin Trust.
It claimed that the permission for developing the Trust would be in public interest and would allow new and compelling options for investment to investors.
The NYSE Arca trades over 8000 securities that are exchange listed and it had filed a proposal for listing and trading the SolidX Bitcoin Trust shares in July 2016.
However, the dreams for creation of the Trust now stand dashed.
On March 10th, the SEC denied another proposal from Cameron and Tyler Winklevoss for listing the Bitcoin ETF in Bats, BZX Exchange.
Bats had moved later to fight this denial and sought a hearing regarding the SEC’s decision.
The decision was a disappointment for Bats Global Markets when SEC rejected its proposal on the grounds that Bats was not able to satisfy the shared security surveillance.
SEC has justified the refusal of SolidX’s Bitcoin ETF proposal in their notice and the reasons given are similar to the ones given for the refusal of the earlier Winklevoss ETF proposal.
Justification for Denial
According to the SEC’s statement, the Commission believed that for meeting the standards, exchanges listing and trading shares of the commodity trust ETPs must satisfy all requirements that are applicable and must also satisfy two dipositive requirements.
The first one is that the exchange should have agreements for sharing surveillance, sharing these with other important markets in order to trade its underlying product or the derivatives of that product.
Secondly, the markets must be regulated.
According to the Commission, Bitcoin ETF’s significant markets are not regulated.
The SEC would presently not be able to enter into this kind of surveillance sharing type of agreement, which has been in place regarding all other commodity trust ETPs that have been approved previously.
Such an agreement is useful for addressing problems related to fraud or manipulative practices of the market.
The Commission finds the proposed change in rules inconsistent with the present Exchange Act.
It feels that Bitcoin is yet in the early stages of development.
With time, it is possible that more regulated and significant sized markets of Bitcoin could develop.
Bitcoin Fall in Price
Bitcoin lost more than 1% following the proposal rejection.
The proposal’s denial had the effect of dashing the hopes of Bitcoin to turn its digital currency to proper investment vehicles.
The SEC has refused to offer exemption, which would have enabled SolidX to become the first Bitcoin ETF launching on the NYSE.
This denial comes at the end of several months of rallying, which had earlier pushed the value of Bitcoin to higher than that of Gold.
After the refusal of the Winklevoss proposal, the value of Bitcoin fell by about 18% to $978.76 from the prior $1300 level.
Delay in Decision
The SEC has been continually delaying its decision on the proposal.
First, it extended the time for action on this proposal to September 2016.
Later, it instituted formal proceedings for determining the approval in October and then extended the deadline to the 28th of March in January.
In spite of investors’ interest, the SEC may not find it acceptable to use Bitcoin as the underlying assets in the investment vehicle in the near future.