Winklevoss Bitcoin Trust dumped NASDAQ for the largest market operator for exchange-traded funds, BATS

On Wednesday the Winklevoss twins filed a sixth amendment to their Securities and Exchange Commission (SEC) registration for the Winklevoss Bitcoin Trust. The amendment includes two major changes, the price and their chosen exchange.

Cameron Winklevoss, CEO of the Trust, originally filed the Winklevoss Bitcoin Trust Registration Statement with the SEC on July 1, 2013. An amendment on May 8, 2014, named NASDAQ as the chosen exchange for trading. On July 1, 2014, a further amendment was revealed that the shares will be traded under the symbol “COIN.”

The most recent amendment swaps out NASDAQ for Bats BZX Exchange Inc. (BATS), a relatively new global equity market exchange located in Kansas.

The Bats BZX Exchange was founded in 2005 as an alternative to the NYSE and NASDAQ, and is one of four equities exchanges that Bats Global Market operates from their Lenexa, Kansas offices. The other three are the BYX Exchange, the EDGA Exchange, and the EDGX Exchange.

Bats also operates two U.S. equity options markets, Bats BZX Options and Bats EDGX Options, and the largest pan-European equities exchange, the BXTR, which offers exchange trading services across 15 major European markets.

“We are the second largest exchange operator in U.S. listed cash equity securities trading by market share, the largest exchange operator of ETFs and other ETPs by market share, and the largest European exchange operator as measured by notional value traded.[…] during 2015 we operated the fastest growing market in the United States for exchange traded options as measured by market share.”
— – Bats Global Markets

Bats shows that it has rapidly become the largest U.S. equities market, and the largest operator of ETF trading in the U.S., executing 24.5% of all May trades. Collectively Bats handles “nearly half of all ETF trading taking place on exchanges,” according to industry journal ETF.com. Bats and Investopedia report that the company has the world’s largest exchange-traded fund (ETF) market and continues to run the largest stock exchange in Europe with a 23.4 percent market share.

Moving from NASDAQ to BATS may also offer other advantages, namely High-Frequency Trading (HFT). “We improve markets by maximizing efficiency and mitigating trade execution risk,” Bats wrote in its’ S-1 filing with the SEC, “in part by offering low-cost, innovative pricing and low-latency trade execution enabled by resilient and robust proprietary technology.” HFT has since become a rapidly-growing segment of the business.

The company also has an incentive program for issuers. Initiated in December of last year, the program promises to refund fees between $3,000 and $400,000 each year per fund listed on BATS. "That’s unheard of in an industry known for having issuers be the ones paying to list," according to the company. So far the program has been very successful, and is credited with helping them grow to become the largest U.S. ETF market.

The source of the bitcoins backing up the COIN shares is from the Winklevoss twins’ own personal reserves, which are among the largest known anywhere besides those held by Satoshi himself. The twins were reported to own at least 108,000 bitcoins in April 2013, as they announced their intentions to create their ETF with the SEC.

Within a few months their first filing was completed, wherein they planned for 1 million shares worth 0.2 bitcoin each to be created, which would at some point require them to set aside 200,000 bitcoins to back the trust, more than they had at the time. This latest filing has the same number of shares, but each is worth half as much.

If the Winklevoss Bitcoin Trust launches successfully it will be the first such investment to be based on a cryptocurrency, and is expected to open up the new asset class to institutional investors.

The closest investment vehicle to the Winklevoss Bitcoin Trust out there today is Grayscale Investments’ Bitcoin Investment Trust, (OTC: GBTC) which is a widely available investment vehicle from Barry Silbert’s Digital Currency Group, formerly traded on Secondmarket.

Launched on OTC Markets Group in March 2015, GBTC is for over-the-counter trade only, and therefore not available inside managed retirement plans or even self-directed institutional plans. The Winklevoss Bitcoin Trust will be, once the SEC approves their application.