Investment Firms Call for SEC to Reinstate Filing-Order Rule to Safeguard Crypto ETF Innovation
Urgent Appeal to SEC to Restore Fairness in ETP Approvals Amidst Big Firms’ Exploitation
A coalition of top asset management companies, including Vaneck, Canary Capital, and 21Shares, penned a joint communication to SEC Chairman Paul Atkins on June 5, imploring the regulatory body to re-implement the “first-to-file” approval framework for exchange-traded products (ETPs). The firms raised concerns about the current practice of simultaneous approvals, regardless of filing order, which they argued is detrimental to smaller issuers, particularly in the rapidly expanding cryptocurrency sector.
The letter lambasted the SEC’s departure from its traditional approach, stating:
“The principle of approving in order of filing has been compromised. The shift towards simultaneous approvals undermines the competitive edge of first movers and enables larger firms to capitalize on innovations introduced by smaller players.”
The executives highlighted instances where the latest filers secured significant market share, such as the launch of multiple spot bitcoin ETFs on January 10, 2024. Notably, the SEC’s approval of 11 spot bitcoin ETFs simultaneously earlier this year, including offerings from industry giants like Blackrock and Fidelity, has intensified criticism of favoritism towards larger players.
While the SEC maintains that approvals are based on regulatory criteria, the perceived bias towards established firms has sparked concerns about market manipulation and stifling of competition, especially in an industry where being the first to market can make or break a product’s success.
The signatories of the letter underscored the far-reaching repercussions of the current approval process on market dynamics and investor interests, cautioning:
“The regulatory shift is not without consequences. It discourages innovation, promotes imitation, and consolidates market power in the hands of a few. Smaller innovators are put at a disadvantage while larger entities reap the benefits.”
They concluded by urging the SEC to revert to honoring filing sequence to uphold fairness and uphold the United States’ leadership in financial innovation.