Monday, May 01, 2017

Commission to review disapproval of Bats bitcoin rule change

By Mark S. Nelson, J.D. 

The Commission granted Bats BZX Exchange, Inc.’s petition for review of the Division of Trading and Markets’s disapproval of a proposed Bats rule change to list and trade shares of the Winklevoss Bitcoin Trust. The Bats proposal was the first of two similar proposals to modify exchange rules to allow the listing and trading of bitcoin trust shares disapproved by the Division within the same month earlier this year. Persons who wish to submit statements about the Bats matter must do so before May 15, 2017 (In the Matter of Bats BZX Exchange, Inc., Release No. 34-80511, April 24, 2017). 

According to Bats’s petition for review, the Division applied too stringent a standard and failed to consider the many ways in which bitcoin markets can resist manipulation. Bats also argued that the novelty of its proposal made it a good candidate for Commission review. The Division’s primary basis for disapproving the Bats proposal was that bitcoin markets are unregulated and Bats could not obtain needed surveillance sharing agreements from significant markets. 

The Division also disapproved a similar proposal submitted by NYSE Arca, Inc. to list and trade shares of the SolidX Bitcoin Trust. While the underlying Winklevoss and SolidX registration statements have many similarities, they also have some differences. Separately, another trading venue has asked the Commission to clarify the treatment of digital assets like bitcoin through rulemaking or other guidance. 

The release is No. 34-80511.