SEC opens comments on First Trust-SkyBridge bitcoin ETF proposal

The Federal Register published a Securities and Exchange Commission notice on May 27, 2021, seeking public comment on NYSE Arca’s proposal to list shares of the First Trust SkyBridge Bitcoin ETF Trust. The publication moved another proposed bitcoin investment vehicle into the SEC’s formal exchange-rule process, but it did not authorize the fund to begin trading.

The chronology matters. First Trust SkyBridge filed its initial registration statement on March 19, 2021. NYSE Arca submitted the proposed listing-rule change on May 6, and the SEC issued its notice on May 21. Publication on May 27 made the proposal broadly available for comment, with submissions due on or before June 17, 2021.

What the proposed trust would hold

The proposed trust was designed to hold bitcoin rather than futures or shares of cryptocurrency-related companies. According to the regulatory notice, authorized participants would create units by depositing bitcoin with the custodian and receive bitcoin when redeeming units. The trust would not be actively managed or attempt to protect investors from declines in bitcoin’s price.

Its stated objective was for the shares to reflect the value of the trust’s bitcoin, less liabilities and expenses. The proposal said the trust would seek to keep bitcoin holdings as close as reasonably practicable to 100% of net assets. First Trust Advisors was identified as sponsor, SkyBridge Capital II as sub-adviser and NYDIG Trust Company as bitcoin custodian. Bank of New York Mellon was named as administrator and transfer agent.

Those details illustrated the institutional structure applicants were building around direct bitcoin exposure: an exchange listing, a registered securities wrapper, conventional fund administration and specialized digital-asset custody. Investors would trade shares through brokerage accounts rather than manage private keys themselves. That structure could reduce certain operational burdens, although it would introduce fund, custody, tracking and market-price risks described in the filings.

The exchange’s market argument

NYSE Arca argued that the regulated bitcoin market had changed substantially since earlier U.S. exchange-traded-product applications. Its submission cited CME data showing approximately $28 billion in notional bitcoin-futures trading during December 2020, more than $1.2 billion per trading day and approximately $1.6 billion in open interest. The filing compared that open interest with $115 million in December 2019.

These were figures presented by the exchange in support of its application, not independent SEC findings. They covered CME’s cash-settled bitcoin-futures contracts during the stated monthly windows; they did not measure the complete global spot-bitcoin market or establish that manipulation concerns had been resolved. The exchange contended that its surveillance relationship with the CME market could address those concerns, leaving the SEC to evaluate that contention under exchange-listing standards.

What May 27 did—and did not—decide

The May 27 publication established a public regulatory record and opened the proposal to outside scrutiny. It did not make the registration statement effective, approve the proposed rule change, validate the trust’s valuation arrangements or guarantee that shares would trade.

That distinction was especially important during a period when several sponsors were competing to place bitcoin exposure inside familiar U.S. investment products. The consequential development on May 27 was procedural but concrete: First Trust and SkyBridge had progressed beyond announcing or registering a proposed fund, and NYSE Arca’s case for listing it was now before the SEC and the public. The product’s fate remained undecided within the event-date record.