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 The July 26 Order itself effectively reaffirmed and superseded the action taken by the SEC on March 10, 2017, acting through authority delegated to the Division of Trading and Markets, that denied a similar application.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.