SEC Considers Proposal for Trading Options on Bitcoin ETFs
Summary:
The U.S. SEC is seeking public feedback on a NYSE request to change regulations to permit the listing and trading of Bitcoin ETF options. The proposal also covers BITC, GBTC, and any Bitcoin-holding trust. Options are financial tools that allow investors to buy or sell assets at a specified price on a specific date, offering a way to hedge or speculate on a BTC ETF's price movements. The SEC has previously approved similar regulations for other commodity ETFs. Grayscale CEO Michael Sonnenshein supports the approval of cryptocurrency derivatives, stating they facilitate price discovery and help investors navigate market conditions. However, like all investments, options trading carries certain risks.
The U.S. Securities and Exchange Commission (SEC) has initiated a public comment process on a proposal to allow the listing and trading of Bitcoin ETF options. The NYSE has requested this rule change in a notice dated Feb. 23, hoping to allow options trading on BITC from Bitwise Bitcoin ETF, GBTC from Grayscale Bitcoin Trust, and all Bitcoin holding trusts. The options, if accepted, will trade similarly to other ETF options on the exchange, including commodity ETFs. Protocols such as listing guidelines, expiration dates, strike rates, minimal price alterations, position and exercise limitations, margin requirements, and regulations for customer accounts and trading suspensions also apply. Asset management firm BlackRock has submitted a similar proposal for approval. It plans to revise the rules for listing options on its Bitcoin ETF in partnership with the CBOE. Bloomberg's ETF analyst, James Seyffart suggests the SEC's approval decision can be expected by September 2024.
Options act as financial hedging tools, income sources, or speculative instruments. These financial derivatives bestow upon purchasers the right (and not the commitment) to buy or sell an asset at a pre-agreed price on a specific date. Concerning Bitcoin ETFs, options would offer investors the opportunity to hedge or speculate on the BTC ETF's price behavior instead of the Bitcoin itself. The SEC has previously sanctioned other trust-held commodity ETFs, such as the SPDR Gold Trust, iShares COMEX Gold Trust, iShares Silver Trust, and ETFS Gold Trust.
The exchange has guaranteed that its existing supervision methodologies are sufficiently robust to aptly regulate Bitcoin ETPs options trading during all trading sessions, and to deter and detect any exchange rule violations. If necessary, new monitoring procedures will be implemented to effectively oversee Bitcoin ETPs options trading.
Grayscale CEO Michael Sonnenshein has been openly requesting regulators to sanction the cryptocurrency derivatives products. According to Sonnenshein, options benefit investors as they facilitate price discovery and help investors efficiently navigate market conditions or achieve specific objectives, such as income generation.
Options trading, like other investments and financial products, involves risk factors that may not suit all investor profiles. After years of refusals, on Jan. 10, the SEC authorized the trading of spot Bitcoin ETFs on Wall Street. Bitcoin ETF expert Eric Balchunas had a triumphant moment over the skeptics: X Hall of Flame.
Published At
2/24/2024 12:04:30 AM
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