Cboe, a global markets company, is seeking approval from the U.S. Securities and Exchange Commission (SEC) to launch a groundbreaking product that combines exchange-traded funds (ETFs) and mutual funds. If the SEC grants approval, experts predict a significant increase in the number of ETFs and ETF assets.
The request filed by Cboe is a major development in the crypto market, as ETFs and mutual funds currently operate under different rules and regulatory frameworks. Mutual funds are traded at the end of the trading day at a predetermined price based on the fund’s net asset value (NAV), while ETFs trade throughout the day like stocks, resulting in price fluctuations.
Cboe’s request, known as a 19b-4 filing, proposes the widespread use of multi-share class fund structures, allowing mutual funds to incorporate ETF share classes. This filing is significant because it introduces a 240-day timeline for approval. Other companies such as MS, Fidelity, and DFA have also filed similar requests, but their filings have no specific timetable.
Cboe’s goal is to introduce ETF shares into mutual funds, creating a hybrid product that would expand the investor base for Bitcoin. Eric Balchunas, a Bloomberg ETF analyst, revealed that the SEC now has 240 days to approve or reject the proposal. Considering that the SEC has already approved Bitcoin ETFs earlier this year, with billions of dollars in investments pouring in, there are few obstacles in the way.
This is not the first time such a product has been introduced. Vanguard previously held a patent for a unique way to structure ETFs, allowing them to create ETF share classes that mirrored existing mutual funds. This approach, which emerged in 2001, enabled both the ETF and mutual fund to have the same underlying investments. Vanguard’s patent, however, expired in May 2023, opening the door for other companies to adopt a similar approach.
Following the expiration of Vanguard’s patent, eight asset managers, including industry giants like Dimensional Fund Advisors, Morgan Stanley, and Fidelity, have filed for approval to use a similar share class structure for their ETFs. T. Rowe Price and JPMorgan have also shown interest in this approach, indicating a potential wave of new ETFs based on this model.
In an interview, Todd Sohn, an ETF analyst at Strategas LLC, highlighted that if the SEC approves Cboe’s recent filing, it could lead to an increase in the number of ETFs and ETF assets. Morgan Stanley and UBS have recently entered the race by filing for Bitcoin ETFs, indicating the continued popularity of ETFs.
The launch of Bitcoin ETFs has had a significant impact on the price of BTC. As trading volume increases, BTC prices fluctuate accordingly. The introduction of more ETFs is expected to expose traditional investors to digital assets and fuel price changes.
As of the time of writing, BTC is trading at $69,443, with a 1.5% change in the last 24 hours. Investors are eager to surpass the psychological position of $70,000, with the all-time high of $75,000 achieved a few weeks ago in their sights.