Exploring the SEC’s Examination of Bitcoin Options Trading
The United States Securities and Exchange Commission (SEC) has launched a review of potential impacts related to the trading of options on Bitcoin exchange-traded funds (ETFs). They are seeking public feedback on this matter, especially during periods of market turbulence.
Several exchanges are eager to introduce options trading on recently approved spot bitcoin ETFs, although they have encountered delays in this process.
The SEC’s Inquisitive Stance on Bitcoin Options Trading
The SEC aims to evaluate the broader market impact of introducing Bitcoin options trading. This scrutiny will focus on determining whether existing surveillance and enforcement mechanisms on exchanges are adequate to address the distinct characteristics of Bitcoin options.
- Exchanges like Inc., BOX Exchange LLC, MIAX International Securities Exchange LLC, Nasdaq ISE, LLC, and NYSE American LLC have all submitted requests to enable options trading on recently approved spot bitcoin ETFs.
- Nasdaq’s proposal involves listing and trading options connected to BlackRock’s iShares Bitcoin Trust, while Cboe plans to facilitate options trading on various ETPs holding Bitcoin.
Public Input and Decision Delays by SEC
Interested stakeholders have been invited to provide their initial comments within a specified timeframe, with the final deadline set for May 15. Subsequent rebuttal comments can be submitted until May 29.
The agency is contemplating whether regulations governing options trading on spot bitcoin ETFs should align with those governing stocks.
- Bitcoin options are instruments that grant buyers the right (but not the obligation) to buy or sell Bitcoin at a predetermined price by a specified date. These are primarily used by traders who understand option pricing and market dynamics.
Postponement of SEC’s Decision on Bitcoin ETP Options
The SEC has extended its evaluation period for options trading on Grayscale and Bitwise Bitcoin ETFs, with a new decision date set for May 29.
Feedback received by the SEC has illustrated potential benefits, with suggestions that options trading on spot bitcoin ETFs could offer investors hedging strategies and risk management tools.
- A subsequent delay in the decision-making process follows earlier postponements regarding options trading.
- Asset management firms like Bitwise and Grayscale are actively seeking regulatory approval for listing options on their Bitcoin ETFs via applications to the New York Stock Exchange.
Insight from Grayscale CEO on Options Approval
Grayscale CEO Michael Sonnenshein has stressed the logical progression of approving options on Bitcoin ETFs in a February comment letter. He believes that following the approval of spot Bitcoin ETPs, the next natural step is to approve options trading.
Sonnenshein has drawn parallels to the approval process for options on spot gold ETPs after their initial approval.
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