Grayscale, a prominent digital currency investment firm, has submitted an application to the U.S. Securities and Exchange Commission (SEC) for the creation of a new Ethereum (ETH) futures exchange-traded fund (ETF). The proposed ETF, known as the Grayscale Ethereum Futures Trust ETF, is intended to provide investors with exposure to Ethereum through futures contracts.
The application, filed on September 19, seeks approval for the listing and trading of shares of the Grayscale Ethereum Futures Trust ETF on the New York Stock Exchange (NYSE) Arca. The proposal follows the provisions of the Securities Exchange Act of 1934 and is part of a rule change submission by NYSE to the SEC.
Grayscale Advisors, referred to as the "sponsor" in the filing, will manage the ETF. Notably, Grayscale Advisors is in the process of registering as a commodity pool operator with the Commodity Futures Trading Commission (CFTC) and is working towards becoming a member of the National Futures Association (NFA). Additionally, Grayscale Advisors has enlisted Videnct Advisory as a subadviser to serve as the trust's commodity trading adviser.
The investment strategy of the Grayscale Ethereum Futures Trust ETF is centered around maintaining a "roughly constant expiration profile" for its holdings in Ether futures contracts. The ETF is designed to actively manage its futures positions and avoid carrying them all the way to cash settlement.
Unlike some cryptocurrency investment vehicles, this ETF will not require the use of an Ether custodian, as the nature of the Ether futures contracts it holds does not necessitate traditional custodial services.
The filing specifies that the Ether futures contracts held within the ETF do not necessitate the involvement of an Ether custodian.
"The trust will provide an initial margin deposit as part of the process to initiate an open position in futures contracts. This margin deposit serves a similar function to a cash performance bond, serving as a guarantee of the trader's commitment to fulfilling the futures contracts they buy or sell."
This development follows the recent submission by digital asset management firm Valkyrie, which also applied for an Ether futures ETF with the SEC in mid-August. Several other companies have made similar filings for ETH futures ETFs. On August 17, Bloomberg reported that the SEC was poised to approve the first ETFs based on Ether futures, generating significant optimism within the Ethereum market.
Grayscale files for new Ether futures ETF — Official (2023) Cointelegraph. Available at: https://cointelegraph.com/news/grayscale-files-for-new-ethereum-futures-etf
(Accessed: 21 September 2023).