US SEC asks exchanges to fine-tune ether ETF filings in positive sign for approval, say sources

Representation of Ethereum, with its native cryptocurrency ether, is seen in this illustration taken November 29, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) -The U.S. securities regulator on Monday asked Nasdaq, CBOE and NYSE to fine-tune their applications to list spot ether exchange-traded-funds (ETFs), signaling the agency may be poised to approve the filings, four people familiar with the process told Reuters.

While the exchange applications are the first step in a two-step approval process, a Securities and Exchange Commission green light would mark a major, and surprising, win for the cryptocurrency industry that had been expecting the thumbs-down.

The price of ether jumped as much as 18% Monday, and was up another 8.6% at $3,802 late Tuesday morning.

The SEC must decide whether to approve applications filed by CBOE to list ether ETFs provided by VanEck and ARK Investments/21Shares by the end of this week. The SEC had not engaged with exchanges and issuers on the filing details, leading industry executives to expect a thumbs-down.

But in a surprise move, SEC officials on Monday asked Nasdaq, CBOE and NYSE to quickly make updates and changes to the filings, requests which usually precede approval, said the people who declined to be identified discussing private regulatory matters.

Spokespeople for the SEC and CBOE declined to comment. Spokespeople for Nasdaq, ARK and NYSE did not return a request for comment.

The exchange applications seek SEC approval for a rule change required to list new products, but the issuers still need the agency to approve the ETF registration statements before they can start trading.

Unlike the exchange filings, there is no set time frame in which the SEC has to decide, meaning it could still take several months for ether ETFs to begin trading.

The first issuers filed for the spot ether products after the SEC approved ETFs tied to ether futures in October. But market participants had expected the SEC to reject the spate of spot ether ETF applications, citing discouraging and one-sided meetings with the regulator.

The SEC, which is led by crypto skeptic Gary Gensler, rejected spot bitcoin ETFs for more than a decade over market manipulation worries but was forced to approve them after Grayscale Investments won a court challenge last year. Those products have attracted buying interest from a wide array of hedge funds, wealth advisors and retail investors. Within the first week, two of the new bitcoin funds had attracted more than $1 billion in assets.

(Reporting by Suzanne McGee and Hannah Lang in New York; Editing by Michelle Price and Chizu Nomiyama)

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