The U.S. Securities and Exchange Commission has approved a Cboe BZX rule change that would allow the exchange to list a leveraged bitcoin fund from Volatility Shares LLC. The decision, approved on Oct. 2, covers the Volatility Shares 3x Bitcoin ETF and five related commodity-focused products.
The bitcoin fund is designed to seek three times the daily return of its bitcoin futures benchmark before fees and expenses. The approval does not by itself start trading: the products still need an effective registration statement, and each fund must have at least 100,000 shares outstanding when exchange trading begins.
A 3x strategy tied to bitcoin futures
The approved product offers magnified exposure to bitcoin through futures contracts rather than direct ownership of the asset. Alongside the bitcoin fund, the SEC action also covers a 3x Ether ETF and similar 3x products linked to gold, silver, crude oil, and natural gas. All six funds operate as series of VS Trust and are sponsored by Volatility Shares LLC.
The source article notes that the funds are not regulated under the Investment Company Act of 1940. Their benchmark exposure comes from futures positions tied to the price of the underlying asset at a future date, not from holding spot bitcoin itself.
Daily target, not a long-term promise
The structure aims for three times the benchmark’s move over a single trading day before fees and expenses. In practical terms, a 1% gain in the bitcoin futures benchmark would imply a targeted 3% daily gain, while a 1% decline would imply a targeted 3% daily loss.
That objective applies to daily performance only. The article says compounding can cause returns over longer periods to differ sharply from three times the benchmark’s cumulative move, and that FINRA has warned the gap may widen when leverage and volatility are high.
The benchmark itself also may not move in lockstep with bitcoin’s spot price. The reference portfolio rolls expiring futures into later contracts over five days, shifting roughly 20% of its exposure per day. If benchmark contracts are unavailable, the strategies may turn to later-dated futures, related exchange-traded holdings, and options.
Why the SEC review was separate
These listings required individual SEC review because leveraged commodity-based trust shares do not qualify for the exchange’s standard generic listing route. Commodity-based trust shares that meet generic standards can usually list without a separate exchange rule filing, but the funds’ 3x objectives meant Cboe BZX had to seek specific authorization.
The approval preserves the exchange’s market oversight framework. According to the source article, exchange surveillance procedures and trading-halt rules will apply, including a halt if the daily asset valuation is not made available to all market participants at the same time.
What must happen before trading starts
The SEC approval is only one step in the process. Before any of the funds can begin trading, each must have an effective registration statement in place. At launch, each product also must have at least 100,000 shares outstanding.
The sponsor is also required to calculate net asset value per share every day, based on assets minus liabilities divided by outstanding shares. In addition, broker recommendations remain subject to suitability-style obligations described in the source article, including consideration of an investor’s circumstances, risks, potential rewards, and costs.
Source: news.bitcoin.com