Cboe Proposes In-Kind Redemptions for Invesco Galaxy Crypto ETFs
2min read Cboe bzx Exchange has submitted a proposed rule change to the U.S. Securities and Exchange Commission (SEC) on behalf of invesco Galaxy. This proposal aims to facilitate in-kind creations and redemptions of shares for its spot Bitcoin and Ethereum ETFs. This method allows for the direct exchange of the underlying assets—Bitcoin or Ethereum—for ETF shares, eliminating the need for cash transactions.
In-kind redemptions and creations offer several advantages. They bypass the necessity for participants to sell the underlying crypto to create shares, which can reduce the bid/ask spread and avoid additional broker commissions. This streamlined process can enhance trading efficiency and potentially lower costs for investors. The proposal, published recently, represents a significant step forward in the evolution of crypto ETFs in the U.S., providing new avenues for investors to access Bitcoin and Ethereum without physically holding the assets.
As the SEC reviews Cboe’s proposed rule change, a public comment period has been opened, allowing stakeholders to share their thoughts before a final decision is made. Authorized participants, which are institutions involved in the creation and redemption process, will be eligible to use the in-kind transaction model. However, individual investors will still be required to use the cash-based model when purchasing or redeeming ETF shares.
The Invesco Galaxy filing mirrors similar moves by major ETF providers, including blackrock, which has recently sought approval for in-kind redemption mechanisms. This trend indicates a growing interest in streamlining the ETF market and reducing operational inefficiencies. The proposed rule change by CboeBZX underscores the increasing acceptance and integration of cryptocurrencies into traditional financial markets, providing investors with more flexibility and potentially lower costs when trading these digital assets.
Last January, the SEC approved the Invesco Galaxy Bitcoin ETF, marking a historic moment as one of the first spot Bitcoin ETFs to be listed on a U.S. exchange. Following this, the SEC granted approval for the Invesco Galaxy Ethereum ETF in May of last year. Both ETFs hold their respective cryptocurrencies as underlying assets and allow shares to be traded on a regulated exchange. Despite these approvals, both Bitcoin and Ethereum ETFs have faced challenges in recent days, highlighting the need for more efficient trading mechanisms.
The proposed rule change is currently under review by the SEC. If approved, it could set a precedent for other exchanges and ETF providers looking to streamline their operations and reduce costs. The approval of this rule change would not only benefit investors but also contribute to the overall growth and development of the cryptocurrency market. As more institutional investors enter the space, the demand for efficient and cost-effective trading solutions will continue to rise, and in-kind redemptions could play a crucial role in meeting this demand.
