Denial of Bats BZX Exchange, Inc. Bitcoin ETP Proposal

Release No. 34-83723, File No. SR-BatsBZX-2016-30 (2018)

From our private database of 46,500+ case briefs, written and edited by humans—never with AI.

Denial of Bats BZX Exchange, Inc. Bitcoin ETP Proposal

Securities and Exchange Commission
Release No. 34-83723, File No. SR-BatsBZX-2016-30 (2018)

Facts

The Bats BZX Exchange, Inc. (BZX) (petitioner) was a national stock exchange registered with the Securities and Exchange Commission (SEC). BZX asked the SEC for permission to change BZX’s rules to allow BZX to list and trade shares of the Winklevoss Bitcoin Trust (trust) as commodity-based trust shares. If the SEC approved the rule change, the trust would have been an exchange-traded product (ETP). Under BZX’s proposal, the trust’s sole asset would be Bitcoin, which would be held and secured by Gemini Trust Company LLC (Gemini), a New York-chartered entity that was supervised by the New York State Department of Financial Services. Gemini was also affiliated with Digital Asset Services LLC, the trust’s sponsor. BZX did not intend to share surveillance information or join a surveillance group regarding Bitcoin trading. Nevertheless, BZX contended that its proposed rule change satisfied § 6(b)(5) of the Securities Exchange Act of 1934, which required that national stock exchange rules be designed to prevent fraud and manipulation and protect investors and the public interest. Per BZX, this was because Bitcoin was uniquely resistant to manipulation due to the absence of material inside information regarding Bitcoin revenue or earnings. The SEC considered, however, whether the market for Bitcoin or Bitcoin derivatives could be manipulated through the misuse of material, nonpublic information regarding (1) order flow (e.g., potential significant buy-or-sell orders); (2) new demand sources (e.g., new Bitcoin-holding ETPs); or (3) responses by Bitcoin-based ETPs, Bitcoin-trading venues, or Bitcoin wallet-service providers to a potential fork in the Bitcoin blockchain that would create noninterchangeable Bitcoin forms. The SEC also considered an academic paper citing empirical evidence of Bitcoin trading based on material, nonpublic information and the possibility that the Bitcoin market could be manipulated by hacking or by someone gaining malicious control of the Bitcoin network.

Rule of Law

Issue

Holding and Reasoning ()

Dissent (Peirce, C.)

What to do next…

  1. Unlock this case brief with a free (no-commitment) trial membership of Quimbee.

    You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 832,000 law students since 2011. Some law schools even subscribe directly to Quimbee for all their law students.

  2. Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.

    Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.

Here's why 832,000 law students have relied on our case briefs:

  • Written by law professors and practitioners, not other law students. 46,500 briefs, keyed to 994 casebooks. Top-notch customer support.
  • The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
  • Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.

Access this case brief for FREE

With a 7-day free trial membership
Here's why 832,000 law students have relied on our case briefs:
  • Reliable - written by law professors and practitioners, not other law students
  • The right length and amount of information - includes the facts, issue, rule of law, holding and reasoning, and any concurrences and dissents
  • Access in your class - works on your mobile and tablet
  • 46,500 briefs - keyed to 994 casebooks
  • Uniform format for every case brief
  • Written in plain English - not in legalese and not just repeating the court's language
  • Massive library of related video lessons - and practice questions
  • Top-notch customer support

Access this case brief for FREE

With a 7-day free trial membership