SEC Seeks Comments on Bitcoin ETF Options

The United States Securities and Exchange Commission (SEC) has put out a request for public comments on a proposed rule change that would allow the listing and trading of options for Bitcoin exchange-traded funds (ETFs). The New York Stock Exchange (NYSE) submitted a request to make a rule change that would permit the listing and trading of options on the Bitwise Bitcoin ETF (BITC), the Grayscale Bitcoin Trust (GBTC), and any other trust that holds Bitcoin. If this change is approved, the options would be traded in the same way as options on other ETFs and would be subject to various regulations and criteria.

BlackRock, a major asset manager, is also seeking approval for a similar policy change. The company has filed for rule revisions in order to list options on its Bitcoin ETF in partnership with the Chicago Board Options Exchange (CBOE). Bloomberg ETF analyst James Seyffart estimates that the SEC’s decision on this matter could come by September 2024 at the latest.

Options are financial derivatives products that investors can use for a variety of purposes, such as portfolio hedging, generating income, or speculating on price movements. They give the buyer the right, but not the obligation, to buy or sell a specific asset at a predetermined price on a specific date. In the context of Bitcoin ETFs, options would allow investors to hedge or speculate on the price movements of the ETF itself rather than the underlying Bitcoin.

The SEC has previously approved the trading of commodity ETFs held by trusts, such as the SPDR Gold Trust, iShares COMEX Gold Trust, iShares Silver Trust, and ETFS Gold Trust. The NYSE has stated that its current surveillance procedures are sufficient to monitor the trading of options on Bitcoin ETPs and detect any rule violations. They have also promised to implement any necessary new surveillance procedures.

Grayscale CEO Michael Sonnenshein has publicly supported the approval of crypto derivatives products like options. He believes that options are beneficial for investors as they help with price discovery and allow for better navigation of market conditions or the achievement of desired outcomes, such as income generation. It is important to note that options trading, like any other investment, carries certain risks and may not be suitable for all investors.

The SEC recently approved the trading of spot Bitcoin ETFs on Wall Street on January 10, after previously denying such requests for several years.