U.S. Financial Industry Developments
SEC Disapproves the Listing and Trading of Nine Bitcoin Related Exchange Traded Products
On August 22, 2018, the SEC released three Orders, acting through authority delegated to the Division of Trading and Markets, that disapproved: (i) a proposed rule change application by NYSE Acra, Inc. that would have permitted it to list and trade the shares of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF; (ii) a proposed rule change application by NYSE Acra, Inc. that would have permitted it to list and trade shares of five exchange-traded products of the Direxion Shares ETF Trust II; and (iii) a proposed rule change application by the Cboe BZX Exchange, Inc. that would have permitted it to list and trade two classes of shares of funds of the GraniteShares ETP Trust.
Each of the Orders relied upon the same rationale that was the basis for the July 26, 2018 SEC Order that disapproved a proposed rule change application by the Bats BZX Exchange, Inc. ("Bats BZX") that would have permitted it to list and trade shares of the Winklevoss Bitcoin Trust. The July 26 Order itself effectively reaffirmed and superseded the action taken by the SEC on March 10, 2017, acting through authority delegated to the Division of Trading and Markets, that denied a similar application.
In issuing the July 26 Order, the SEC determined that Bats BZX had "not met its burden under the [Exchange Act] and the Commission's Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Section 6(b)(5), in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices."
The SEC also found that Bats BZX had not "demonstrated that bitcoin and bitcoin markets are inherently resistant to manipulation." Accordingly, the SEC focused particularly on whether there are "comprehensive surveillance-sharing agreements with significant, regulated markets." Finding that this is not the case and "any current surveillance-sharing agreements are with bitcoin-related markets that are either not significant, not regulated or both – the Commission conclude[d] that the proposal is inconsistent with Exchange Act Section 6(b)(5)."
On August 23, 2018, the SEC notified NYSE Group, Inc. and Cboe Global Markets that it will review the Orders and they are stayed until the SEC orders otherwise. The vote of one Commissioner is sufficient to bring an action made pursuant to delegated authority before the SEC for review. This action follows the same protocol as was followed in the case of the Bates BZX July 26 Order.
CFTC Adopts Rule Amendments Simplifying CCO Duties and Annual Report Rules
On August 21, 2018, the Commodity Futures Trading Commission ("CFTC") unanimously approved final amendments clarifying and simplifying its regulations governing chief compliance officer ("CCO") duties and annual compliance reporting requirements for futures commission merchants ("FCM"), swap dealers and major swap participants. The amendments aim to clarify a CCO's duties by providing reasonable standards and guidance on effective compliance. The amendments also modify the CCO annual report content and submission requirements to reduce report preparation burdens while also making the reports more effective. Press Release. Final Rule.
SEC Adopts Rule Amendments to Improve Municipal Securities Disclosure
On August 20, 2018, the Securities and Exchange Commission adopted amendments to Rule 15c2-12 of the Securities Exchange Act in order to enhance transparency in the municipal securities market. The adopted changes focus on material financial obligations that could impact an issuer's liquidity, overall creditworthiness or an existing security holder's rights. The amendments add two new events to Rule 15c2-12 of the Securities Exchange Act, which requires brokers, dealers and municipal securities dealers that are acting as underwriters in primary offerings of municipal securities to reasonably determine that the issuer or obligated person has agreed to provide to the Municipal Securities Rulemaking Board timely notice of certain events. Press Release. Final Rule.
SEC Adopts Amendments to Simplify and Update Disclosure Requirements
On August 17, 2018, the Securities and Exchange Commission announced it voted to adopt amendments to certain disclosure requirements that it found have become duplicative, overlapping or outdated in light of other Commission disclosure requirements, U.S. Generally Accepted Accounting Principles ("GAAP") or changes in the information environment. The Commission also announced it is referring certain disclosure requirements that overlap with, but require information incremental to, GAAP to the Financial Accounting Standards Board for consideration for potential incorporation into GAAP. Press Release. Final Rule.
Rating Agency Developments
On August 22, 2018, DBRS published an update to its ratings methodology for: Modelling Assumptions for Portfolios of Public Sector Exposures. Release.
On August 20, 2018, Fitch published a report entitled: U.S. Public Finance Solid Waste Revenue Bond Rating Criteria. Report.
