SEC Delays Decision on Allowing Spot Bitcoin ETF Options Trading

 

The U.S. Securities and Exchange Commission (SEC) has postponed its ruling on a proposed rule change allowing exchanges to list and trade options on spot bitcoin exchange-traded Funds (ETFs). The regulatory decision, initially expected earlier, is now slated for late April, according to an SEC filing. The delay specifically pertains to various spot bitcoin ETFs tied to the price of the leading cryptocurrency.

The SEC justified the extension, stating it needs additional time to thoroughly evaluate the proposed rule change. The applications for options on bitcoin funds were submitted by the CBOE Exchange and the Miami International Securities Exchange in January, coinciding with the SEC's approval of 10 new spot bitcoin products. Despite the delay, spot bitcoin ETFs have attracted significant investor interest, amassing over $9.3 billion in inflows as of March 7, even as the Grayscale Bitcoin Trust experienced outflows exceeding $10 billion.

BlackRock's iShares Bitcoin ETF achieved a historic milestone by surpassing $10 billion in assets under management in record time. Bitcoin itself reached a new peak above $69,000, breaking its previous high in November 2021.

Market analysts and financial advisors consider utilizing call-and-put options on bitcoin ETFs as a crucial strategy to manage the inherent volatility of cryptocurrencies. The use of put and call options serves as a risk mitigation approach.

Options on ETFs operate similarly to options on individual stocks, allowing investors to enter agreements to buy or sell assets at specified prices over defined periods. The potential approval of options on bitcoin funds aligns with the growing popularity of strategies applied to successful spot bitcoin ETFs.

In January, CBOE highlighted the need for special SEC permission to list options on commodity products like bitcoin, deviating from the standard three-day listing timeframe for other exchange-traded products.

Grayscale Investments emphasized the importance of offering options on GBTC and other spot Bitcoin ETPs, asserting that they are essential for investors. Options, according to the firm, would enhance price discovery, provide more choices for investors, and assist in navigating diverse market conditions for desired investment outcomes, including income generation, hedging, and volatility reduction.

Although the SEC has permitted ETFs to provide exposure to bitcoin futures since 2021, the approval of spot bitcoin ETFs in January marked the end of a decade-long regulatory process. Even before these approvals, Wall Street had been exploring various cryptocurrency-based investment products.

On March 4, the SEC also delayed a decision on a BlackRock proposal for an ETF based on ether, the second-largest digital asset by market capitalization. Ether's robust performance in 2024, surpassing $4,000, has heightened interest in cryptocurrency-based investment products.