US SEC Receives Application for CLO ETF

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  • Janus Henderson has applied to the SEC to launch a CLO ETF, being the first of its kind to exist
  • In the wrong hands with margin trading available, regular retail investors could lose huge sums of money, making it a potentially risky product
  • If the SEC gives the CLO ETF the green light, a Bitcoin ETF could soon pass through the SEC’s tests

The cryptocurrency trading world is a strange and complex place, with regulatory bodies desperate to stick their fingers into the pie. The crypto world is eager to get a Bitcoin ETF approved by the US Securities and Exchange Commission (SEC), but time after time, the SEC shoots these plans down.

On the other hand, the SEC is quite happy for more risky investments to become available to your average Joe. The SEC has received an application to approve a CLO ETF. If the SEC gives the application the green light, it will be the first ETF to offer Collateralized Loan Obligations (CLOs).

A History Stooped in Recession

If you cast your mind back to the financial crisis that hit in 2002 because of subprime mortgages, bankers were creating mortgage-backed securities. They then became packaged up as CLOs, allowing institutional investors to gain exposure to these investment vehicles. However, if the SEC gives Janus Henderson the green light for its CLO ETF, then your average trader could get hold of them and begin trading them on popular stock trading apps such as Robhinhood.

Way More Dangerous Than Bitcoin

The SEC has shot down a number of attempts for a Bitcoin ETF, citing that markets are too manipulated and that the ETF application put forward doesn’t account for this. While this is true, regulation of the Bitcoin trading world has increased, and now virtually every major exchange in the world has some form of KYC. Exchanges should be able to use this information to penalize and punish traders that manipulate the market through massive orders that are not OTC, just as it is in the stock trading world.

If a regular trader has access to this potentially risky and dangerous CLO instrument, and god forbid has access to trade them on margin, we could see a lot of inexperienced traders buying into markets they have no knowledge of. This could result in massive losses for the average trader, and without a Bitcoin ETF, regular Joe investors will be eager to buy into these highly lucrative instruments.

Will the SEC Do Anything?

Janus Henderson is hoping to have an answer about their ETF by October, and this could be catastrophic for your average investor. However, it’s likely that the SEC will impose some form of restrictions on who can buy into the ETF, such as accredited investors only. If this is not the case and anyone can trade this new ETF, which will have the ticker JAAA, then the SEC should consider changing its stance towards a Bitcoin ETF.

But, as we’ve seen time and time again, the traditional financial services world is terrified of Bitcoin and other cryptocurrencies. So, this could be the real reason the SEC doesn’t want to approve a Bitcoin ETF, but potentially approve an ETF that in the wrong hands could be rather dangerous.