The U.S. Securities and Exchange Commission (SEC) has initiated a public comment period regarding a proposed rule change by NYSE Arca. This proposal seeks to establish an 85% eligible-asset threshold for commodity trusts listed on the exchange, impacting the structure of cryptocurrency-based exchange-traded products (ETPs).
Key Takeaways
- The SEC is seeking public input on a NYSE Arca proposal for commodity ETPs.
- The proposed rule mandates that at least 85% of a trust’s assets must meet existing generic listing standards.
- This initiative appears to align with a broader regulatory trend toward standardized frameworks for crypto assets under SEC Chair Paul Atkins.
- The proposal aims to facilitate broader product design while ensuring substantial exposure to assets compliant with surveillance and eligibility criteria.
- Explicit exclusions for non-fungible assets and collectibles are included, though future separate approvals for such products remain a possibility.
According to a notice published by the SEC, NYSE Arca aims to amend its generic listing standards for Commodity-Based Trust Shares. The core of the proposal requires that a significant majority, at least 85%, of a trust’s net asset value must be composed of assets that already comply with current listing rules. The remaining 15% could consist of assets that do not independently meet these standards, provided the trust fulfills all other regulatory requirements.
NYSE Arca stated that this threshold is designed to permit more flexibility in product design while ensuring that the majority of the exposure remains linked to assets that satisfy existing surveillance-linked eligibility criteria. The proposal also clarifies that listed and over-the-counter derivatives would be evaluated based on their aggregate gross notional value, rather than solely their market value.
Illustrative examples provided in the filing show how this rule could apply. A trust holding a mix of Bitcoin (BTC), Ether (ETH), Solana (SOL), and XRP, along with a small allocation of non-qualifying digital assets, would be compliant if 95% of its net asset value met the specified standards. Conversely, a trust holding Bitcoin and over-the-counter call options on a Bitcoin ETF would not meet the requirement if only approximately 71% of its exposure qualified.
Furthermore, the proposal refines the definition of what constitutes a “commodity” for the purpose of these generic listings. Non-fungible assets and collectibles are explicitly excluded from this definition. However, the exchange noted its openness to seeking separate approval for products that might include such assets in the future.
Potential Regulatory Precedent
This development signifies a discernible shift in the SEC’s methodology for approving crypto-related listings. The agency appears to be moving towards establishing more standardized regulatory frameworks rather than relying on case-by-case approvals. This approach is consistent with recent actions under SEC Chair Paul Atkins, who, since assuming the role, has emphasized the importance of regulatory clarity, inter-agency coordination, and structured product development within the digital asset space.
In recent times, the SEC has advanced proposals for a crypto safe harbor, engaged in coordinated guidance with the Commodity Futures Trading Commission (CFTC) on broader digital asset matters, acknowledged limitations in past enforcement actions, and outlined pathways for certain crypto-related entities to potentially avoid broker registration requirements. This move towards defining clear asset eligibility standards for ETPs further underscores this evolving regulatory posture, potentially setting a precedent for how future digital asset investment products are structured and evaluated by the commission.
Original article : www.theblock.co