Representatives from BlackRock (BLK), NASDAQ, and the Securities and Exchange Commission (SEC) gathered for their second meeting in a month to deliberate on crucial rule changes essential for the potential listing of a Bitcoin (BTC) exchange-traded fund (ETF). 

The SEC released a memo outlining the meeting details, highlighting discussions around NASDAQ Rule 5711(d) and its implications on listing and trading shares of the iShares Bitcoin Trust.

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Rule 5711(d): Setting the Stage for Bitcoin ETF Listing

NASDAQ Rule 5711(d) plays a pivotal role in establishing specific criteria and regulatory guidelines for the listing and trading Commodity-Based Trust Shares on the Nasdaq Exchange.

The rule outlines stringent requirements for both initial and continued listing, encompassing surveillance and compliance measures aimed at ensuring market integrity and protecting against fraudulent activities. Major exchanges will likely adopt this regulatory framework as a cornerstone of future Bitcoin ETF offerings.

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BlackRock's Strategic Adjustments: A Positive Signal

Prior to the meeting with the SEC, BlackRock made noteworthy adjustments to its application, introducing a new mechanism for redeeming shares into fiat currency.  Additionally, the inclusion of the ticker symbol IBIT in its application to register a spot Bitcoin ETF was viewed positively by industry experts. 

Bloomberg Intelligence analyst Eric Balchunas remarked that these changes signal a positive shift in BlackRock's approach to the ETF approval process.

Responding to recent comments by Michael Novogratz, CEO of Galaxy, who predicted approval within the next 8-10 weeks, analyst James Seyffart expressed his belief that the decision might come sooner but remains uncertain, emphasizing the unpredictable nature of SEC decisions.

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Historical Context and Previous Discussions

This recent meeting is not the first instance where rules about the listing of a spot Bitcoin ETF were discussed. On November 20, BlackRock and NASDAQ engaged with the SEC to discuss a proposed rule for the listing of a spot Bitcoin ETF. 

BlackRock presented a comprehensive overview of how the company could implement an in-kind or in-cash redemption model for the iShares Bitcoin Trust. Subsequently, on December 14, the SEC held another round of discussions with asset managers proposing spot Bitcoin ETFs, with officials from SEC Chair Gary Gensler’s office present.

The journey towards a spot in Bitcoin ETF began on June 15 when BlackRock submitted an application to the Commission for an investment product based on the first cryptocurrency. Following BlackRock, similar requests were filed by Valkyrie, Fidelity Investments, WisdomTree, and Invesco. 

Regulatory decisions on several Bitcoin ETFs were initially postponed until mid-October, and later in September, the SEC deferred the consideration of applications to January 2024.