SEC Seeks Public Feedback on Franklin Templeton and Hashdex Bitcoin ETF Proposals
Spot Bitcoin ETF applications by Franklin Templeton and Hashdex have moved into the next phase of consideration by the SEC, with the public invited to provide input on potential approval.
The Securities and Exchange Commission (SEC) in the United States is actively considering spot Bitcoin exchange-traded fund (ETF) proposals from Hashdex and Franklin Templeton. The agency has solicited written comments from the public on Forms 19b-4 submitted by the applicants. Form 19b-4 is a public disclosure approved separately by the SEC Trading and Markets Division, distinct from Form S-1, the offering prospectus subject to approval from the Corporate Finance Division. The public comment period will last for 35 days following the publication of the requests in the Federal Register.
The proposed rule changes, acting as applications, were submitted in late September, with the Hashdex ETF intended for trading on the New York Stock Exchange Arca and Franklin Templeton’s on Cboe BZX. The SEC extended its deadline for deciding on the applications on Nov. 15.
Addressing concerns related to potential ETF approval, the SEC’s questions center on evaluating the susceptibility to manipulation of the funds and assessing the significant size of the exchanges that will host them. Franklin Templeton commenters are also tasked with considering potential price manipulation on the BTC market, the company’s surveillance sharing agreement with Coinbase, and the correlation between BTC spot and futures prices. This information is crucial for price discovery and enhancing efforts to detect manipulation and fraud.
Hashdex’s proposed fund structure is more intricate than Franklin Templeton’s. The proposed Bitcoin ETF by Hashdex would be structured as a futures ETF that holds spot BTC. Hashdex plans to acquire BTC from other exchanges on the CME, relying solely on that mechanism for pricing. The SEC is seeking input on whether the CME has significant size considering the fund structure and whether sufficient liquidity will be available. The public is also invited to comment on sponsor Toroso Investments’ calculations determining the relationship between the BTC price on the CME and on unregulated exchanges. Toroso Investments manages and controls the fund.
Several other asset managers, such as BlackRock and Fidelity, have submitted applications for spot Bitcoin ETFs. To date, the SEC has not approved any spot Bitcoin fund and has postponed all applications it has received for the product.
Analysts observe that the SEC appears to be moving swiftly with the latest action on the Franklin Bitcoin ETF. Speculations suggest that the move could be an effort to align all spot Bitcoin ETFs on the same timeline, potentially setting the stage for a wave of approvals in early January.
Following the SEC action, Franklin Templeton filed an amended S-1 form, incorporating language on the creation/redemption process, which opens the possibility for both in-kind and/or cash. Public feedback on the proposals by Hashdex and Franklin Templeton is due in 21 days, with a two-week rebuttal period following that.
Analysts have noted that the SEC appears to be moving quickly with the latest action on the Franklin Bitcoin ETF. They speculate that the move could be an effort to get all the spot bitcoin ETFs on the same timeline, possibly setting the stage for a wave of approvals in early January.
