The SEC declined to approve a rule change submitted by Bats BZX Exchange designed to permit the listing and trading the Winklevoss Bitcoin Trust. The SEC said it did not approve the proposed rule change because it did not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest. The Commission believes that, in order to meet this standard, an exchange that lists and trades shares of commodity-trust exchange-traded products, or ETPs, must, in addition to other applicable requirements, satisfy two requirements that are dispositive in this matter. First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated

The SEC said it believes that the significant markets for bitcoin are unregulated. Therefore, Bats BZX Exchange has not entered into, and would currently be unable to enter into, the type of surveillance-sharing agreement that has been in place with respect to all previously approved commodity-trust ETPs. The SEC noted that such agreements help address concerns about the potential for fraudulent or manipulative acts and practices.