Chicago Board Options Exchange’s (Cboe) BZX Exchange has identified crypto exchange Coinbase as the designated market for its surveillance-sharing agreement. The exchange recently refilled its ETF applications on behalf of several aspiring bitcoin ETF issuers, including Fidelity, WisdomTree, VanEck, ARK Invest, Galaxy/Invesco, and BlackRock, media reports said.
These companies hope to bring a spot bitcoin ETF that the U.S. Securities and Exchange Commission (SEC) has previously rejected for years. While BlackRock has filed its spot bitcoin ETF with Nasdaq, the other firms are collaborating with Cboe.
On Friday, the SEC informed both Nasdaq and Cboe that their applications were deemed “inadequate” because they failed to specify the market that the fund sponsors would be working with on their surveillance-sharing agreements.
In their refilled applications, Cboe cited Coinbase’s platform as representing a substantial portion of U.S.-based and USD-denominated bitcoin trading, making it an ideal partner for their surveillance-sharing agreements. The proposed “Spot BTC SSA” (surveillance-sharing agreement) is expected to follow the principles of a similar agreement between two members of the ISG (Intermarket Surveillance Group).
This would grant the Exchange supplementary access to data concerning spot bitcoin trades occurring on Coinbase, which the Exchange deems necessary as part of its surveillance program for Commodity-Based Trust Shares.
The SEC has previously stressed the importance of surveillance-sharing agreements with markets of “significant size” to prevent market manipulation and safeguard consumers. The absence of such agreements has been a primary reason for the SEC’s rejection of numerous bitcoin ETF applications in the past.
While the regulator has yet to formally acknowledge the review of these applications, once published in the Federal Register, they will initiate an initial 45-day review period, extendable up to a total of 240 days.
The SEC’s assessment is further complicated by its recent lawsuit against Coinbase, alleging the operation of an unregistered securities exchange, broker, and clearinghouse. Notably, the SEC has clarified that it is not claiming Bitcoin itself to be a security, with Chair Gary Gensler often citing it as an example of a digital asset not classified as such. It remains to be seen whether the SEC will recognize Coinbase as a significant and regulated market for bitcoin.
