Reviving the Queue-Based Review System: A Call to Action for the SEC
In a significant move to influence the regulatory landscape, VanEck, 21Shares, and Canary Capital submitted a letter to the U.S. Securities and Exchange Commission (SEC) on June 5, advocating for the reinstatement of a queue-based review system for exchange-traded products (ETPs). This approach not only historically favored early filers but also balanced the financial implications of legal and compliance costs associated with submitting ETF applications. The joint call from industry leaders, including VanEck CEO Jan van Eck and 21Shares President Duncan Moir, highlights the growing concern over the implications of concurrent approvals that could disrupt market fairness and competition.
The letter articulates a pressing issue: the advantages of first-mover status have been eroded. The firms argue that since changes began in October 2021, especially with the early success of the ProShares Bitcoin Futures Fund, the playing field has become less equitable. By receiving their approvals ahead of others, larger asset managers have seized significant market share, leaving early filers struggling to compete. The impact on smaller firms has raised questions about the integrity of the market and the value of original research in a sector increasingly dominated by bigger brands.
A major point in the letter is the request for the SEC to adhere to a filing-date principle, which would prioritize the processing of pending products and any future Solana ETP applications. The call aims to restore predictability to timelines, thereby fostering a competitive financial marketplace. By following a chronological review process, the SEC could not only reinforce fairness but also mitigate the risks for smaller, innovative firms that could be discouraged from taking early risks due to the inequities in the approval process.
Historically, the focus on first-to-file was standard regulatory practice, creating a level playing field. Concerns raised by industry insiders, like VanEck’s Matt Sigel, suggest that the SEC’s departure from this protocol undermines essential transparency and leads to higher costs for the early filers. Sigel’s ongoing advocacy emphasizes that fostering competition within the financial ecosystem benefits investors and promotes robust market dynamics.
Furthermore, the joint letter signals a collective urgency to address a trend that threatens the foundational principles of market integrity. The coordination of efforts among multiple issuers showcases a unified front in appealing to the SEC for a return to the previous norms. Amidst ongoing discussions, experts like Bloomberg ETF analyst James Seyffart have noted that the first-to-file method was beneficial until the approvals shifted dramatically in 2024, leaving smaller issuers at a disadvantage.
In summary, the appeal by VanEck, 21Shares, and Canary Capital for the SEC to restore the queue-based review system stands as a call for fairness and competition within a rapidly evolving financial landscape. The potential revival of the first-to-file advantage could reinvigorate the market, encouraging innovation and promoting a healthy diversity of financial products. As this dialogue continues to unfold, the response from the SEC could significantly shape the future of the ETF market and the broader investment landscape.
