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Cboe Seeks SEC for Mutual Funds’ ETF Share: Bitcoin Inclusion?

Cboe Seeks SEC for Mutual Funds’ ETF Share: Bitcoin Inclusion?

Cboe plans to offer investors access to established mutual fund portfolios through an ETF if the SEC approves.
The US SEC has 240 days to respond to Cboe’s application.
Experts suggest that the chances of Cboe securing approval are below 50%.
On Thursday, April 4, Cboe Global Markets submitted a request to the U.S. Securities and Exchange Commission (SEC) for a rule change. This change would enable mutual funds to gain exposure to the share class of exchange-traded funds (ETFs). Given the significant demand for spot Bitcoin ETFs within a short period, it raises the potential for Bitcoin to enter the mutual fund industry.

Cboe is expanding its product offerings to include ETF products alongside mutual funds.

If the SEC approves this rule change, asset managers could offer access to current mutual fund portfolios through an ETF, similar to how they currently provide different fee structures and additional features for mutual fund share classes.

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Experts observed that SEC approval would simplify the process for issuers to include ETF products that mirror the performance of current mutual funds. Therefore, there is no requirement to introduce entirely new funds every occasion. This can result in a substantial rise in the number of ETFs on the market and the overall value of assets held in ETFs.

Other players, apart from Cboe, are also seeking such an arrangement. In May 2023, the patent for Vanguard’s share class concept expired. Since then, Morgan Stanley, Fidelity, and Dimensional Fund Advisors have been seeking to emulate this model.

Bryan Armour, an ETF strategist at Morningstar, mentioned that the Cboe filing offers issuers a way to engage with the SEC and address their applications. The SEC must decide on Cboe’s application within 240 days.

Can Bitcoin ETFs Overcome the Obstacles?

According to Morningstar’s Armour, there is no certainty regarding the SEC’s approval of this application from Cboe. He mentioned that the SEC has already made a notable decision this year by approving the spot Bitcoin ETF. According to Armour, the chances of Cboe winning the approval are less than 50%.

Nevertheless, according to Armour, the exchange’s support for asset managers might enhance SEC approval prospects. “Ultimately, Cboe is striving to establish itself as an industry leader,” he remarked, emphasizing their dedication.

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