A survey of seven Ethereum Futures ETF filing companies.
Source: Decrypt
Compiled by: BitpushNews Mary Liu
Recently, the enthusiasm for spot Bitcoin exchange-traded funds (ETFs) has cooled down, and issuers and investors are still waiting for approval from US regulatory agencies. Ethereum futures ETF applications are emerging like mushrooms after rain.
According to public documents, seven companies have submitted applications for Ethereum ETFs. Tracking Ethereum futures ETFs essentially means investing in futures contracts of the industry's second-largest cryptocurrency. These contracts are traded on the Chicago Mercantile Exchange (CME) regulated by the CFTC, rather than directly holding the underlying assets.
Whether these applications will be rejected and whether the SEC will approve them is still pending, especially considering the recent crackdown on the cryptocurrency industry by regulatory agencies, and the fact that the SEC classifies almost all cryptocurrencies (except Bitcoin) as securities.
Volatility Shares: Ethereum Strategy ETF
Filing Date: 07/27/2023
SEC Response: 10/11/2023
Listed Exchange: CBOE BZX Exchange
Volatility Shares manages four exchange-traded funds worth $173.5 million. After outlining its plans in the filing submitted to the SEC on July 28th, the company could become the first issuer focused on Ethereum ETFs.
The proposed Ethereum Strategy ETF (ETHU) complies with the regulations of the 1940 Investment Company Act and allocates up to 25% of its assets to cash-settled Ethereum futures contracts traded on the CFTC-regulated Chicago Mercantile Exchange (CME).
In addition, according to the documents, the fund may invest in inverse repurchase agreements and stocks of other investment companies but cannot directly invest in Ethereum.
The fund plans to list and primarily trade its shares on the CBOE BZX Exchange.
The proposed ETHU application comes after the launch of Volatility Shares 2x Bitcoin Strategy ETF (BITX), the first leveraged Bitcoin futures ETF, introduced in June by the Mt. Kisco-based company.
Bitwise: Ethereum Strategy ETF
Filing Date: August 1, 2023
SEC Response: October 16, 2023
Listed Exchange: NYSE Arca
After withdrawing the initial application in May, Bitwise refiled the Ethereum Strategy ETF (ETHG) on August 1st. According to the application documents, ETHG intends to invest in cash-settled, nearest-to-expiration monthly ETH futures contracts without directly touching the current spot price of Ethereum.
According to the Investment Company Act of 1940, this fund is classified as a "non-diversified" fund, which means it can invest a higher proportion of its assets in the financial instruments of a single or a few counterparties.
The document specifies that the fund will not directly invest in ETH futures contracts; instead, investments will be made through a wholly-owned subsidiary operated under the laws of the Cayman Islands.
In addition, since the Bitwise Ethereum Strategy ETF intends to qualify as a regulated investment company, the fund's investment in the subsidiary will not exceed 25% of its total assets at the end of each quarter of the current fiscal year.
Despite such a low allocation, the fund will primarily achieve its investment objective through investing in ETH futures contracts, while the remaining 75% of assets are expected to be invested in US Treasury bonds and other US government securities, as well as money market funds, cash, and cash equivalents, such as high-quality commercial paper.
Roundhill: Roundhill Ethereum Strategy ETF
Filing Date: August 1, 2023
SEC Response: October 16, 2023
Listing Exchange: Not specified
Roundhill Investments, headquartered in New York, is an SEC-registered investment advisor focused on offering innovative financial products that target the investments themes attracting the next generation of investors.
The firm currently manages a total of $662 million in assets across eight ETFs and seeks to expand its product offerings with the launch of the Roundhill Ethereum Strategy ETF.
According to the filing submitted on August 1st, the Roundhill Ethereum Strategy ETF is an actively managed fund that seeks capital appreciation through investments in near-month Ether futures contracts listed on the CME.
Similar to Bitwise, the fund plans to invest up to 25% of its assets in a wholly-owned subsidiary organized under the laws of the Cayman Islands.
VanEck: VanEck Ethereum Strategy ETF
Filing Date: August 1, 2023
SEC Response: October 16, 2023
Listing Exchange: Not specified
VanEck, also a hopeful for a spot BTC ETF, seems to be heavily investing in Ethereum as well: according to the filing on August 1st, the VanEck Ethereum Strategy ETF plans to invest approximately 100% of its total assets in ETH.
If the fund is unable to achieve its desired exposure due to position or liquidity limits, it may invest in the equity securities of ETH-related companies that the fund's advisor believes have historically tended to exhibit correlations or have performance generally consistent with or responsive to ETH or ETH futures.
The filing states, "For example, the fund may invest in US-listed companies that offer digital asset trading platforms."
In addition to ETH futures, VanEck Ethereum Strategy ETF is expected to "hold a large amount" of cash and fixed income investments, which aim to provide liquidity and serve as collateral for the fund's ETH futures, and participate in "active and proactive investing". Frequent trading of the investment portfolio.
Proshares: Short Ethereum Strategy ETF and ProShares Ethereum Strategy ETF
Filing Date: August 1, 2023
SEC Response: October 16, 2023
Exchange: Not specified
On August 1, ProShares, the issuer of the ETF, applied for two different Ethereum-focused ETFs: the Short Ethereum Strategy ETF and the ProShares Ethereum Strategy ETF.
The former seeks daily investment results that correspond to the inverse (-1 x) of the daily performance of the S&P CME Ethereum Futures Index, while the latter primarily aims to provide capital appreciation by managing exposure to Ethereum futures contracts listed on the CME. The investment objective is "non-fundamental," meaning that the board of directors can make changes to it without the approval of the fund shareholders.
Similar to the Bitwise Ethereum Strategy ETF, Proshares Ethereum futures ETFs also seek to qualify as regulated investment companies, which means that the fund's investments in its respective subsidiaries (also located in the Cayman Islands) will not exceed 25% of the total assets at the end of each quarter of the fiscal year.
Grayscale: Grayscale Ethereum Futures ETF
Filing Date: August 1, 2023
SEC Response: October 16, 2023
Exchange: Not specified
On May 9, Grayscale Investments announced the establishment of Grayscale Funds Trust, which is a statutory trust structure in Delaware and includes three new funds: Grayscale Ethereum Futures ETF, Grayscale Bitcoin Composite ETF, and Grayscale Privacy ETF.
Just a week later, the company submitted amendments to the filing with the SEC, removing the mention of Ethereum futures ETF, but re-applied for issuance on August 1.
The updated filing states that the Ethereum futures ETF is an actively managed fund that primarily achieves its investment objective through holding Ethereum futures contracts purchased by its subsidiary in the Cayman Islands.
The fund also plans to hold approximately 100% of its net assets in Ethereum futures contracts, but it may also hold a significant amount of cash and cash equivalents investments, such as U.S. Treasury bonds or repurchase agreements.
Direxion: Bitcoin Ethereum Strategy ETF
Filing Date: August 2, 2023
SEC Response: October 17, 2023
Exchange: Not specified
According to the Securities and Exchange Commission (SEC) documents, the proposed Direxion Bitcoin Ethereum Strategy ETF will invest in Bitcoin and Ethereum futures contracts, subject to regulatory approval. The ETF may also invest in other ETFs with exposure to futures products.
Direxion, established in 1997, is renowned in the traditional financial ETF field, specializing in creating investment products for investors seeking beyond traditional offerings. Their products are index-based, providing investors with directional choices, expanded risk exposure, and rule-based long-term strategies. As of March 31, 2023, Direxion manages approximately $27.5 billion in assets.
