Nasdaq and Cboe BZX Exchange are changing rules to list ETPs linked to spot bitcoin and ether. The SEC is reviewing these products to ensure whether they follow regulations and protect investors. This move helps bring digital assets into traditional finance ecosystem by preventing from frauds.

Nasdaq and Cboe BZX Exchange crypto index ETF

• Nasdaq and the Cboe BZX Exchange changed their rules for listing and trading with exchange-traded products (ETPs) linked to spot bitcoin and ether ETF.
• Nasdaq intends to list the Hashdex Nasdaq Crypto Index US ETF,
• while the Cboe BZX Exchange aims to introduce the Franklin Crypto Index ETF.

These ETPs will directly hold spot bitcoin and ether and cash equivalents. The goal of listing these assets on the exchanges is to increase their accessibility.

SEC’s Role in Regulating

The Securities and Exchange Commission (SEC) is reviewing these listings according to the Securities Exchange Act of 1934 which sets rules for trading securities on exchanges like Nasdaq and Cboe BZX, for ensuring fairness and transparency.

The Securities Act of 1933 regulates how securities are issued and required proper disclosures to protect investors on Nasdaq and the Cboe BZX Exchange.

The Investment Company Act of 1940 governs investment products like ETFs to ensure they follow rules that protect investors.

In addition to this, The Commodity Exchange Act (CEA) regulates financial products linked to bitcoin and ether as commodities. The proposed Digital Asset Market Structure and Investor Protection Act could shape future cryptocurrency regulations to ensure safe investment practices.

The SEC believes that the proposed rule changes meet these requirements, especially those to prevent fraud and market manipulation. Additionally, the Commission emphasizes the necessity of surveillance-sharing agreements between exchanges to detect fraudulent activities and maintain market integrity.

To minimize the risk of market manipulation, the SEC investigates how the spot markets for assets like bitcoin and ether that are correlated with their futures markets.

In previous approvals for Bitcoin and Ether-based ETPs, the SEC confirmed that price movements in spot markets which closely reflected in futures markets.

This correlation indicates that if manipulation or fraud occurs in the spot market, it is more like an evident in the futures market, which is easier to monitor.

The CME’s bitcoin and ether futures markets have exhibited strong correlations with their spot markets, giving the SEC confidence that these new ETFs can be effectively supervised.

The SEC has decided that the Hashdex Nasdaq Crypto Index US ETF and the Franklin Crypto Index ETF follow all necessary rules. These products are in line with past approvals of similar bitcoin and ether-based investment products.

By introducing these new ETPs, investors will have access to spot bitcoin and ether in a regulated environment, which enhances security and transparency in their cryptocurrency investments.

This approval is an important step in bringing digital assets into traditional finance ecosystem, with the help of SEC.

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