A Newly Proposed ETF Will Mix Bitcoin Futures With Sovereign Debt
Reality Shares ETF Trust, a branch of Blockforce Capital that has already launched an ETF with blockchain products, files a Form N1-A with the U.S. Securities and Exchange Commission (SEC) on Monday. The application is in partnership with NYSE Arca and seeks approval to launch the Reality Shares Blockforce Global Currency Strategy ETF.
According to the filing, the fund would invest in a portfolio that will deal in “high-quality, short-term sovereign debt instruments listed for trading on U.S. exchanges and denominated in U.S. dollar, euro, British pounds sterling, Japanese yen and Swiss francs,” along with bitcoin futures, money market mutual funds and/or other cash equivalents.
Notably, the investment would be made in cash-settled bitcoin futures contracts, rather than physically settled; i.e when the contract expires, the investor will not receive any actual bitcoins, just the cash equivalent of its value. The filing adds that “the fund will not invest directly in bitcoin.” The proposal explains:
“The Adviser initially constructs the Fund’s portfolio by investing approximately (i) an equal-weight of 15 [percent] of the Fund’s net assets in Fixed Income Securities denominated in each Fiat Significant Global Currency; (ii) 15 [percent] of the Fund’s net assets representing notional exposure in Bitcoin Futures and (iii) 10 [percent] of the Fund’s net assets in Money Market Instruments for margin and/or cash management purposes, each as measured at the time of purchase (the ‘Target Portfolio’).”
The Reality Shares’ filing further elaborates
“The Adviser seeks to reallocate the Fund’s assets approximately to the Target Portfolio on the business day following the date that one or more of the Significant Global Currencies moves by more than 20 [percent] up or down from its original 15 [percent] portfolio equal-weight, calculated as a percentage of the Fund’s net assets.”
Initially, the firm plans to invest in the bitcoin futures that are offered by the major Chicago futures exchanges, Cboe and CME. Though eventually, they might look for other bitcoin futures products.
It’s raining Bitcoin ETFs
Though just the application part, the approval of Bitcoin ETFs is a tiny bit twisted tale. Just last month, Bitwise Asset Management ETF was filed by NYSE Arca and Cboe refiled its ETF application.
Both the aforementioned bitcoin ETFs differ from Monday’s filing, as they do not include sovereign debt instruments.
The SEC has not yet published Reality Shares’ rule change proposal on its website, indicating that it has not yet begun examining the product. Once the proposal is published in the Federal Register, the SEC will have at most 240 days to determine whether to approve or reject the rule change proposal.
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