The Cboe BZX Exchange has submitted a proposed regulation amendment to the US Securities and Exchange Commission (SEC) to revise the ARK 21Shares Bitcoin ETF (ARKB) and the 21Shares Core Ethereum ETF (CETH) to allow for in-kind creations and redemptions.
The 19b-4 application was filed on January 27. It will permit in-kind creations and redemptions solely for Authorized Participants (AP).
Cboe’s Proposed Regulation Revision for Bitcoin, Ethereum ETFs
“In-kind” denotes the method of creating or redeeming ETF shares utilizing assets such as Bitcoin or Ethereum instead of cash. For instance, if an AP seeks to create additional shares of a Bitcoin ETF, they would provide Bitcoin to the ETF issuer in exchange for ETF shares.
In a similar manner, when redeeming shares, they would receive Bitcoin rather than cash. This mechanism helps align the ETF’s price with the valuation of its assets. Additionally, it lowers transaction expenses and reduces taxable occurrences for investors.
“Cboe BZX Exchange, Inc. (“BZX” or the “Exchange”) is submitting to the Securities and Exchange Commission (“Commission” or “SEC”) a proposed regulation amendment to modify the ARK 21Shares Bitcoin ETF (the “Bitcoin Trust”) and the 21Shares Core Ethereum ETF (the “ETH Trust” and, collectively with the Bitcoin Trust, the “Trusts”), shares of which have received Commission approval to list and trade on the Exchange under BZX Rule 14.11(e)(4), to enable in-kind creations and redemptions,” the filing indicated.
Significantly, this filing comes after Nasdaq’s comparable request just days prior on behalf of BlackRock for its iShares Bitcoin Trust (IBIT).
According to Bloomberg analyst James Seyffart, in-kind creations and redemptions are likely to enhance the trading efficiency of ETFs. This is due to the potential for streamlined processes. Seyffart is of the opinion that ETFs should have been allowed to utilize this method from the outset.
“The key takeaway is that the In-kind model is significantly more streamlined with fewer steps and fewer parties involved (and it’s how the vast majority of ETFs function),” the analyst shared on X.
The Bitcoin and Ethereum ETFs received SEC approval in January and May 2024, respectively. IBIT and Grayscale Ethereum Trust (ETHE) continue to be the leading performers.
Meanwhile, data from SoSo Value indicates that ARKB retains its status as the fourth-largest Bitcoin ETF. As of January 27, it boasts a cumulative net inflow of $2.91 billion. The product also manages $5.10 billion in total net assets. Additionally, it captures 0.25% of the entire Bitcoin market share.
Conversely, CETH stands as the 8th largest Ethereum ETF. It has gathered a cumulative net inflow of $11.40 million and $16.77 million in net assets as of January 27.
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