Mutual Funds Meet ETFs: Cboe Seeks SEC Nod, Hinting at Bitcoin Integration

• Cboe is seeking to issue a multi-share class fund that would combine exchange-traded funds (ETFs) and mutual funds.
• Experts have shared an optimistic outlook predicting that the number of ETFs and ETF assets could dramatically increase if the SEC approves the request.

Cboe Global Markets has filed a request with the U.S. SEC that will see the firm launch one of the most revolutionary products in the crypto market. As it is, the two financial products operate under unique rules and are under different regulatory frameworks.

Mutual funds are bought and sold at the end of the trading day at a pre-determined price, based on the fund’s net asset value (NAV) calculated after the market closes. In contrast, ETFs trade throughout the day like stocks on exchanges. This means their prices can fluctuate at any time just like a stock price.

CBOE filed a 19b-4 requesting widespread use of multi-share class fund structures (which allow Mut Funds to add ETF share class = big deal) CBOE filing imp bc it adds a clock to this: 240 days. MS, Fidelity and DFA have filed as well but their's has no timetable. Scoop from…

— Eric Balchunas (@EricBalchunas) April 5, 2024

Cboe aims to introduce ETF shares into mutual funds, creating a hybrid product that could expose Bitocin to an even larger investor pool. As revealed by Bloomberg ETF analyst Eric Balchunas, the SEC now has 240 days to approve or reject the proposal. After approving Bitcoin ETFs earlier this year, and with the product attracting tens of billions in investment, there would be little in the way.

Furthermore, this is not a first-of-a-kind product. Vanguard previously held a patent for a unique way to structure ETFs. This approach, introduced in 2001, allowed them to create ETF share classes that mirrored existing mutual funds. This meant both the ETF and mutual fund could share the same underlying investments. However, Vanguard’s patent expired in May 2023, opening the door for others to follow suit.

Following the patent expiration, Reuters reports that eight asset managers, including industry giants like Dimensional Fund Advisors, Morgan Stanley, and Fidelity, have filed for approval to use a similar share class structure for their ETFs. Additionally, T. Rowe Price and JPMorgan have expressed interest in this approach, suggesting a potential wave of new ETFs built on this model.

In an interview, Todd Sohn, an ETF analyst at Strategas LLC pointed out that if the SEC approves the Cboe in the recent filing, this could drive up both the number of ETFs and ETF assets. ETFs remain popular with Morgan Stanley and UBS recently entering the race with Bitcoin ETF filings as reported by CNF.

Bitcoin ETFs to Dictate BTC Movement

Activity around the launched Bitcoin ETFs has had a significant impact on BTC price since its launch. As volume increases, the BTC prices bounce and vice versa. The entry of more should expose more traditional investors to digital asset and fuel price changes.

At the time of writing, BTC is trading at $69,443 after a 1.5% change in the last 24 hours. Investors will be looking to get over the $70,000 psychological position as bulls eye the $75,000 all-time high achieved a few weeks ago.