Marking a monumental step forward for the launch of crypto asset exchange-traded products (ETPs), the Securities and Exchange Commission (SEC) approved rule changes by three exchanges to adopt generic listing standards for ETPs that hold spot commodities, including crypto assets. Provided that the ETPs satisfy certain conditions, they will be able to be listed and commence trading more quickly, as their exchanges will not need to submit proposed rule changes for each issuer.
Generally, to rely on the SEC's order, each commodity held by the ETP, or each commodity underlying the commodities-based assets held by the ETP, must trade on an established futures market. In addition, among other things, the ETPs may not be registered investment companies and must be designed to reflect the performance of at least one reference asset or index thereof. Eligible ETPs may hold one or more commodities or commodity-based assets, including crypto assets, and may also hold securities, cash, and cash equivalents. They may also issue and redeem their shares on an in-kind or cash basis.
As with guidance from the SEC staff over the last several months, the SEC's approval of the generic listing standards aligns commodity-based ETPs more closely with traditional exchange-traded funds (ETFs) that are registered under the Investment Company Act of 1940. In most cases exchanges and ETF issuers do not need to endure the Securities Exchange Act of 1934 Rule 19b-4 review process. The SEC's approval of generic listing standards for qualifying commodity-based ETPs will put them on the same playing field as ETFs with respect to listing process, thereby making it easier for them to come to market.
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