SEC approves Cboe rule to list Volatility Shares' 3x Bitcoin, Ether funds
In brief
- SEC approved Cboe BZX's rule change on Oct. 2 to list VS Trust's 3x Bitcoin and 3x Ether funds.
- The SEC order covered six funds, including gold, silver, crude oil and natural gas products.
- Tickers BITH and ETHK are proposed in an Aug. 17 preliminary prospectus subject to completion.
- Each fund seeks 3x its futures benchmark's daily performance before fees and expenses.
- Registration effectiveness and a first trading date remained unconfirmed as of Oct. 4.
What the SEC order actually approved
The order, as reported by CryptoSlate, approved the exchange's listing rule change. It covered six funds in total, including products tied to gold, silver, crude oil and natural gas. CryptoSlate had reported on the proposal in August, when Cboe was still seeking permission.
Why did these need a separate sign-off? Cboe's generic commodity-trust standards exclude products that seek specified multiples of a benchmark, so the funds required individual approval. Their other initial and continuing listing requirements still apply.
That's not the same as a green light to trade.
The October order didn't establish that registration was effective or that trading had begun, and VS Trust's preliminary prospectus states the securities can't be sold until registration becomes effective. The same Aug. 17 filing listed BITH for the Bitcoin product and ETHK for the Ether product (proposed symbols in a document marked subject to completion).
ETF in name, ETP in structure
Despite "ETF" in their names, the order classified the funds as exchange-traded products structured as Commodity-Based Trust Shares. They don't carry the investor protections associated with funds registered under the Investment Company Act of 1940.
Each crypto product seeks 3x its benchmark's daily performance before fees and expenses. The exposure comes from futures, not spot: the benchmarks measure portfolios of first- and second-month futures contracts, and the funds use futures alongside cash collateral. The preliminary prospectus defines a day as the interval between successive net asset value calculations, and under normal circumstances the funds seek to rebalance daily.
The compounding warning
The daily reset is the part regulators flag. The SEC's investor bulletin warned that daily leveraged products can depart substantially from their stated multiple over weeks or months (especially in volatile markets). The prospectus likewise warns that longer-period returns may differ in magnitude and even direction.
SEC staff have also warned that ETFs using leveraged Bitcoin-futures strategies increase volatility and can expose investors to significant, sudden losses.
As of Oct. 4, there's still no confirmed first trading date.
Frequently asked questions
Did the SEC approve the 3x Bitcoin and Ether funds to start trading?
No. The Oct. 2 order approved Cboe BZX's listing rule change, but it did not establish that registration was effective or that trading had begun. As of Oct. 4, registration effectiveness and a first trading date remained unconfirmed.
Why did these funds need individual SEC approval?
Cboe's generic commodity-trust standards exclude products that seek specified multiples of a benchmark, so the leveraged funds required individual approval. Their other initial and continuing listing requirements still apply.
Do the 3x funds track three times the Bitcoin or Ether spot price?
No. Each crypto product seeks three times its benchmark's daily performance before fees and expenses, and those benchmarks measure portfolios of first- and second-month futures contracts. The prospectus warns that longer-period returns may differ in magnitude and even direction.
