Lack of Bitcoin ETN Holding Back Wall Street Money, says CBOE Head
US markets regulators should decide how to protect consumer rights and allow exchange-traded products, Ed Tilly, CEO of the Chicago-based market has explained.
Wall Street investors will enter the crypto space actively after the US market watchdogs allow exchange-traded notes (ETN) tied to Bitcoin (BTC), Ed Tilly, president, and CEO of CBOE Global Markets said on Friday. The Chicago-headquartered trading company is the operator of the largest American options markets, and was the first traditional exchange to launch BTC-linked derivatives more than a year ago.
A licensed ETN would allow retail investors to easily back exchange-traded products (ETPs) tied to Bitcoin as the notes need lower capital than futures, Tilly said while speaking during a media luncheon. Moreover, it would create trust and Wall Street players would start trading BTC derivatives actively.
However, the existing situation, with lack of a similar product-linked to the largest virtual asset, keeps Wall Street investors away from the crypto industry, Tilly noted. For example, CBOE BTC futures have 3,475 contracts while the exchange’s main traditional tracker, the Volatility Index Fund has 368,598, CBOE’s latest data shows.
“The power of having that future there is also having an ETN that is more attractive to retail, and then institutions can lay that risk off on the listed futures market,” Tilly said as quoted by a Business Insider. “Absent that leg and introducing trackers or notes, I think we will be in this, 'It trades every day, but it is not the story.”
Currently, US markets regulators, the Securities and Exchange Commission (SEC) and the Commodity Trading Futures Commission (CFTC) are against crypto-tied ETPs as they cannot regulate the underlying assets and ensure investor protection, Tilly told attendees. Interestingly, the majority of crypto volume and liquidity come from foreign markets, outside of SEC and CFTC’s scope.
CBOE wants to promote ETPs and encourage regulators to consider them, but, currently, the two federal agencies are paralyzed by the US government shutdown.
“How do I protect the US customer from manipulation in a market that I don't regulate? You answer that question, you get your first ETN,” Tilly explained.
“I have two regulators that are not taking calls right now. That doesn't mean there is nothing we are interested in. It means nothing is going to happen in this government shutdown.”
Both ETN and ETF are ETPs. The former is backed by its investors, while the latter relies on an asset pool. ETNs are considered a soft version of the far more popular ETFs.