The Securities and Exchange Commission (SEC) of the United States is currently inviting comments on a proposed rule change that would allow the trading and listing of options for Bitcoin exchange-traded funds (ETFs). According to a notice released on February 23, the New York Stock Exchange (NYSE) has requested a rule alteration that would permit the trading and listing of options on the Bitwise Bitcoin ETF (BITC), the Grayscale Bitcoin Trust (GBTC), and any other trust that holds Bitcoin.
If this proposal is approved, the options would be traded in the same way as options on other ETFs, including commodities ETFs, on the Exchange. The notice explains that this would involve adhering to regulations such as listing criteria, expiration dates, strike prices, minimum price changes, position and exercise limits, margin requirements, and procedures for customer accounts and trading suspensions.
BlackRock, an asset management company, is also pursuing approval for a similar policy change. The firm has filed for rule revisions that would allow the listing of options on its Bitcoin ETF in collaboration with the Chicago Board Options Exchange (CBOE). Bloomberg ETF analyst James Seyffart predicts that the SEC’s decision on this matter could be reached no later than September 2024.
Options are financial derivatives products that are utilized for portfolio hedging, generating income, or speculative purposes. They give buyers the right, but not the obligation, to buy or sell a specific asset at a predetermined price on a specified date.
In the context of Bitcoin ETFs, options would enable investors to hedge or speculate on the price movements of a BTC ETF, rather than the Bitcoin itself. The SEC has previously approved other commodity ETFs held by trusts, including the SPDR Gold Trust, iShares COMEX Gold Trust, iShares Silver Trust, and ETFS Gold Trust.
Michael Sonnenshein, the CEO of Grayscale, has been publicly advocating for regulators to approve crypto derivatives products. Sonnenshein believes that options are beneficial for investors as they support price discovery and can assist investors in navigating market conditions and achieving desired outcomes, such as generating income.
Just like any other investment or financial product, options trading carries risks that may not be suitable for all investors. On January 10, the SEC approved the trading of spot Bitcoin ETFs on Wall Street, after years of denials.