BlackRock and VanEck Present In-Kind Models for Bitcoin ETFs
BlackRock and VanEck, two asset management firms, have presented “In-Kind” models for their proposed spot bitcoin exchange-traded funds (ETFs) in meetings with the U.S. Securities and Exchange Commission (SEC). These models aim to enhance trading efficiency and secondary market pricing for all participants.
Efficiency of Physical Creations
The presentations emphasized that arbitrage and hedge are more efficient with physical creations. Self-clearing ETF market maker firms can facilitate efficient arbitrage by acting as Agency AP for non-self-clearing ETF market maker firms with Crypto Affiliates. Allowing for physical creation and redemption is critical in achieving this goal.
Technical Aspects of Proposed Funds
Regulators and asset managers have been focusing on the technical aspects of how the proposed bitcoin ETFs would work. Amendments to filings and discussions about meeting details have taken place as the market anticipates a decision from the SEC.
Varying Approaches to Creation/Redemption
An amended filing for VanEck’s proposed spot bitcoin ETF suggests that create/redeem language could include both in-kind and cash options. However, approval under 19b-4 may initially only allow cash creates. This indicates that different approaches to creation/redemption may be considered by different proposals.
BlackRock’s Revised In-Kind Model Design
In a meeting with the SEC, BlackRock submitted a presentation about its proposed spot bitcoin ETF, highlighting a “Revised In-Kind Model Design.” The presentation addressed unresolved questions regarding the in-kind model’s impact on balance sheets and risks to Market Maker’s U.S. Registered Broker/Dealer entity during the redemption flow.
Hot Take: BlackRock and VanEck Focus on In-Kind Models for Bitcoin ETFs
Asset management firms BlackRock and VanEck have presented in-kind models for their proposed spot bitcoin ETFs. These models aim to enhance trading efficiency and secondary market pricing by allowing for physical creation and redemption. The presentations highlight the importance of physical creations in facilitating efficient arbitrage and hedge. As the SEC reviews these proposals, it has become apparent that create/redeem language may include both in-kind and cash options, although initial approvals may only allow cash creates. The varying approaches to creation/redemption reflect the ongoing discussions about the technical aspects of these proposed funds. In a meeting with the SEC, BlackRock submitted a revised in-kind model design, addressing unresolved questions about balance sheet impacts and risks during redemption flows.
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