Cboe seeks SEC approval for the first U.S. 3x bitcoin and ether ETFs
The proposed commodity-pool funds would seek three times the daily performance of bitcoin, ether, gold, silver, crude oil and natural gas by holding futures contracts.
Cboe BZX Exchange is seeking approval from the U.S. Securities and Exchange Commission to list a suite of leveraged commodity exchange-traded funds, including products offering three times the daily performance of bitcoin and ether.
According to the proposed rule change filed Friday, the exchange wants to introduce a 3x Gold ETF, 3x Silver ETF, 3x Bitcoin ETF, 3x Ether ETF, 3x Crude Oil ETF and 3x Natural Gas ETF. Each would aim to deliver three times the daily performance of its underlying asset, primarily by holding futures contracts on CME or COMEX, with cash and cash equivalents as collateral.
Generally, highly leveraged funds are designed for short-term, tactical trading by sophisticated investors—not long-term holding.
"The Sponsor (defined below) will increase and decrease the number of Benchmark Futures Contracts that each Fund holds in order to accommodate purchases and redemptions of Shares and to account for changes in the value of the Benchmark so that each Fund can meet its daily investment objective," Choe wrote.
The funds are designed to operate as "commodity pools" under Commodity Futures Trading Commission oversight, rather than as traditional 1940 Act investment companies overseen by the SEC, as many ETFs are. A commodity pool combines money from multiple investors to trade derivatives or other commodity-related instruments.
Because the funds seek leveraged returns, they fall outside the exchange's generic listing standards and require specific SEC approval, hence the proposed rule change. Cboe will also file a related Form S-1 registration statement under the Securities Act of 1933, according to the filing.
Cboe described this structure as an "additional layer of federal regulatory oversight—beyond what a physical commodity-based exchange-traded product would be subject to." The filing says Volatility Shares LLC will sponsor the funds, which will enter the VS Trust.
Volatility Shares already offers 2x bitcoin and ether strategy ETFs in the U.S. market. LeverageShares debuted the world's first 3x and –3x bitcoin and ether ETFs in Europe last year.