85% Asset Threshold: SEC Seeks Public Comments on NYSE Arca Cryptocurrency Trust Proposal

On Monday, the U.S. Securities and Exchange Commission (SEC) issued a notice seeking public comments on a rule change proposal from the New York Stock Exchange Arca. The proposal introduces an 85% asset threshold aimed at tightening listing requirements for cryptocurrency and commodity trust products.

Under the proposed rule amendments, trusts must ensure that at least 85% of their net assets hold assets that meet existing eligibility standards, including qualifying commodities, securities, cash, and cash equivalents. The remaining 15% can be allocated to non-qualifying assets.

Additionally, derivatives will be calculated based on their total notional value, meaning large options or futures positions could directly impact whether a product qualifies for listing. Sponsors are required to monitor the 85% threshold daily and notify the exchange promptly if the requirement is not met.

For example, if a trust’s 95% of assets are composed of qualifying assets such as Bitcoin, Ethereum, Solana, and XRP, the trust would meet the new requirements;

But if the trust holds Bitcoin and over-the-counter call options on Bitcoin ETFs, resulting in a qualifying exposure below 85%, the trust would not qualify. This indicates that non-qualifying derivatives can offset otherwise compliant holdings.

Furthermore, the new rules explicitly exclude non-fungible assets and collectibles from the definition of commodities, so trusts involving such assets can only apply for listing through separate approval channels.

The SEC stated that this framework aims to enhance exchange oversight, curb manipulation, and protect investors. The SEC can approve, reject, or initiate further review procedures, and stakeholders can submit comments on the rule change to argue whether it meets statutory requirements.

In the future, cryptocurrency and commodity trusts may gain greater flexibility in listing, but they will need to adhere to stricter exposure limits. This means that while the product access threshold may be lowered, asset allocation and risk management requirements will become more rigorous to ensure market stability and investor protection.

#Asset Allocation Rules