BREAKING: U.S. SEC Orders Temporary Suspension of Trading of Bitcoin and Ether ETNs

On Sunday (9 September 2018), the U.S. Securities and Exchange Commission (SEC) announced the temporary suspension of trading in the securities Bitcoin Tracker One (“CXBTF”) and Ether Tracker One (“CETHF”) starting at 21:30 (UTC) on 9 September 2018 and ending at 03:59 (EDT) on 21 September 2018.

The “Bitcoin Tracker One” and “Ether Tracker One” are Exchange-Traded Notes (ETNs) that track Bitcoin (BTC) and Ether (ETH) respectively, and are issued by Swedish company “XBT Provider”, a wholly-owned subsidiary of UK company Global Advisors (Holdings) Limited. 

This is how the SEC announced the news on Twitter (around 21:43 UTC on 9 September 2018):

SEC Issues Order of Suspension of Trading in Bitcoin Tracker One (“CXBTF”) and Ether Tracker One (“CETHF”) https://t.co/5z1vEYFBFB

— SEC_News (@SEC_News) September 9, 2018

The link in the tweet was to a PDF file representing a notice (Release No. 84063) from the SEC.

Here were the terms of the order:

The Securities and Exchange Commission (“Commission”) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities Bitcoin Tracker One (“CXBTF”) and Ether Tracker One (“CETHF”) commencing at 5:30 p.m. EDT on September 9, 2018, and terminating at 11:59 p.m. EDT on September 20, 2018.

And the reason given was:

The Commission temporarily suspended trading in the securities CXBTF and CETHF because of confusion amongst market participants regarding these instruments.

The “confusion amongst market participants” that the SEC is talking about probably refers to the fact that some unsophisticated retail investors may mistakenly think that these two products are equivalent to ETFs, which they are not. Since these two Swedish products do not seem to be violating any U.S. securities laws, one possible reason for a temporary suspension is that the SEC wants to have some time to have a dialog with U.S. broker-dealers to make advise them to take some steps to protect such investors.

As for section12 (k) of the Securities Exchange Act of 1934 cited by the SEC, here is the relevant part of this section:

If in its opinion the public interest and the protection of investors so require, the Commission is authorized by order (A) summarily to suspend trading in any security (other than an exempted security) for a period not exceeding 10 business days, and (B) summarily to suspend all trading on any national securities exchange or otherwise, in securities other than exempted securities, for a period not exceeding 90 calendar days.

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