The ASX strongly denied the allegation. A spokesman for the market operator told the Financial Review: “The product awaits sufficient clearing participants prepared to provide the product to their clients to enable it to be viable. Whilst completing this assessment, ASX has engaged extensively with Chi-X and our clearing participants.”
Chi-X declined to comment.
Basic requirement ‘not satisfied’
Under the rules for admitting investment products to the ASX, at least five or six so-called clearing houses (mostly stockbroking firms) must be willing to offer the product to their clients. It is understood that just two or three brokers have as yet indicated demand for crypto ETFs.
“This is a basic requirement for central clearing and has not yet been satisfied,” the ASX spokesman said. “ASX and Chi-X are working with the clearing industry so that this requirement can be met and crypto ETFs accepted for clearing.”
Besides ETF Securities, a number of fund managers have applied to either the ASX or Chi-X to list cryptocurrency-backed funds on their exchanges, including ETF providers VanEck and BetaShares and crypto-specialist firms Cosmos Asset Management and Monochrome Asset Management.
The Australian Securities and Investments Commission in October gave its blessing for crypto ETFs to be listed on regulated exchanges, but said only products that track the price of bitcoin and ether (the digital token linked to the ethereum blockchain) would be accepted, not smaller alt-coins.
A fund manager with knowledge of the crypto ETF race backed the ASX’s response to Mr Tuckwell’s claims. “It’s the brokers that aren’t ready, not the ASX,” the fund manager said.
But stockbroking industry sources said that while it was true that just a couple of clearing houses had so far signed up to crypto ETFs, the ASX could have done more to ease that decision for them.
Chicken or egg?
“ASX Clear issued a guidance note to clearing houses around their liquidity and margin obligations back in 2016, but it hasn’t updated that guidance to account for these new [crypto-linked] products,” said a broking industry executive. “It’s convenient for the ASX to just blame [the clearing houses], but it’s a chicken or egg type thing.”
Mr Tuckwell said it was fair that a consultation and due diligence process should take place, but it shouldn’t take seven weeks from application, particularly given crypto ETFs have been on the agenda for more than six months.
“We have received the regulatory approvals, so there shouldn’t be any more delays or hurdles,” the ETF Securities chairman said.
The frustration is a sign of the increasingly heated race to list Australia’s first ETF invested directly in crypto assets, for which the industry believes there is strong pent-up demand from retail and institutional investors.
An ETF invested in cryptocurrency-linked stocks such as bitcoin miners and exchanges was listed by BetaShares on the ASX in November. It broke the record for debut-day ASX ETF trading volumes within 15 minutes of listing.
Crypto-shares funds managed by Cosmos Asset Management and ETF Securities have also been listed on Chi-X.
The ASX has previously said it would assess cryptocurrency ETF applications in the order in which they were received. It declined to release the pecking order.