To further your conclusion, while there are absolutely drawbacks to the types of "me-too" arms races you outline here, the aggregate net benefit to the end users of those services has been enormous, and almost always to the aggregate net detriment of the providers of those services. The institutions that spent a mint to acquire Spread Networks' most premium route achieved profitability on that purchase to the tune of hundreds of billions. Spread, on the other hand, ended up being acquired to the tune of a ~-70% return to its first tranche of investors. I am therefore less inclined to believe that the SEC has a specific issue with BTC/crypto and more inclined to believe that the nature of BTC/crypto makes it more difficult for institutional offerors of crypto ETx products to be protected from failure the same way an offeror of an ETx product centered around more regulated underlying products would be.
This is a good point, and definitely the argument WRT Spread and the waxing/waning of people who enter the latency arb game while volume/volatility is high and leave when it compresses (man, 2014-2019 flushed out a lot of that stuff especially after KCG's... incident) does have a net value add even if "pointless" at first glance. Additionally, I wanted to mention the fact that ETF competition is so freaking high that some of the most used products don't even generate any profit (such as QQQ), but just ran out of space.
I think it's a bit of both WRT the SEC and crypto — I do understand what they're arguing and it's clear that they don't want a mass proliferation in the ETP space only for it all to get rugged, as is clearly possible in crypto relative to traditional equities. But the arguments, legally, are just *bad* to some extent — it's totally unclear (and in a larger survey of securities regulation that I'm working on separately) why BTC is a commodity, ETH is somewhere in the middle, and a bunch of other stuff is unregistered securities, and why BITO got approved as a result. In the lawsuit, Grayscale plainly argues (pretty logically) that if the CME is monitoring the underlying and facilitating the trading of futures, it stands to reason that same method could work for an ETP just fine. On top of that, it's pretty clear that the SEC got burned hard wrt the whole FTX situation and how much SBF had penetrated regulators. By and large all accounts had it that pro-crypto regulation was on the cusp of pushing through, but much like when Theranos collapsed and funding for medical devices/biotech dried up, crypto became irreversibly politically toxic.
Frankly, I don't like the idea of bitcoin ETFs. I largely think ETFs, with enough inflow, make products trade less as an individual market and more as a market "made" with other products. But given the skirting of loopholes that MSTR, ARKK, and GBTC got to "allow" BTC to be traded, I don't see how the SEC can coherently reject this class of products without severely changing how they think about ETPs in general
To further your conclusion, while there are absolutely drawbacks to the types of "me-too" arms races you outline here, the aggregate net benefit to the end users of those services has been enormous, and almost always to the aggregate net detriment of the providers of those services. The institutions that spent a mint to acquire Spread Networks' most premium route achieved profitability on that purchase to the tune of hundreds of billions. Spread, on the other hand, ended up being acquired to the tune of a ~-70% return to its first tranche of investors. I am therefore less inclined to believe that the SEC has a specific issue with BTC/crypto and more inclined to believe that the nature of BTC/crypto makes it more difficult for institutional offerors of crypto ETx products to be protected from failure the same way an offeror of an ETx product centered around more regulated underlying products would be.
This is a good point, and definitely the argument WRT Spread and the waxing/waning of people who enter the latency arb game while volume/volatility is high and leave when it compresses (man, 2014-2019 flushed out a lot of that stuff especially after KCG's... incident) does have a net value add even if "pointless" at first glance. Additionally, I wanted to mention the fact that ETF competition is so freaking high that some of the most used products don't even generate any profit (such as QQQ), but just ran out of space.
I think it's a bit of both WRT the SEC and crypto — I do understand what they're arguing and it's clear that they don't want a mass proliferation in the ETP space only for it all to get rugged, as is clearly possible in crypto relative to traditional equities. But the arguments, legally, are just *bad* to some extent — it's totally unclear (and in a larger survey of securities regulation that I'm working on separately) why BTC is a commodity, ETH is somewhere in the middle, and a bunch of other stuff is unregistered securities, and why BITO got approved as a result. In the lawsuit, Grayscale plainly argues (pretty logically) that if the CME is monitoring the underlying and facilitating the trading of futures, it stands to reason that same method could work for an ETP just fine. On top of that, it's pretty clear that the SEC got burned hard wrt the whole FTX situation and how much SBF had penetrated regulators. By and large all accounts had it that pro-crypto regulation was on the cusp of pushing through, but much like when Theranos collapsed and funding for medical devices/biotech dried up, crypto became irreversibly politically toxic.
Frankly, I don't like the idea of bitcoin ETFs. I largely think ETFs, with enough inflow, make products trade less as an individual market and more as a market "made" with other products. But given the skirting of loopholes that MSTR, ARKK, and GBTC got to "allow" BTC to be traded, I don't see how the SEC can coherently reject this class of products without severely changing how they think about ETPs in general