SEC Delays Bitcoin ETF Options Trading Decision

SEC delays Bitcoin ETF options trading decision

SEC delays Bitcoin ETF options trading decision

SEC has postponed its decision on allowing spot Bitcoin options trading and Bitcoin ETFs.

The US Securities and Exchange Commission has deferred making a decision about whether to permit spot Bitcoin options trading and exchange-traded funds (ETFs) which have the potential to attract additional institutional investment in Bitcoin.

On March 6, they extended its deadline to respond to Cboe Exchange and Miami International Securities Exchange regarding their proposals to offer options on Bitcoin ETFs. Additionally, it postponed making a decision on Nasdaq’s proposal to issue options on BlackRock’s iShares Bitcoin Trust (IBIT) claiming that by doing so, it would give itself “sufficient time to consider” the request.

According to U.S. securities rules, the SEC has 45 days to make a decision or postpone one. The exchanges are all registered to market Bitcoin ETF options on January 25. The SEC faced its first deadline for a decision on March 10. They stated that the agency’s deferral gave it an additional 45 days—the maximum 90 days allowed by law—to reach a final determination by April 24.

SEC Delays Bitcoin ETF Options Trading Decision
A highlighted excerpt of the SEC’s filing which cites needing “sufficient time” to decide on allowing Bitcoin ETF options trading. Source: SEC

Derivative securities called options allow traders to make directional bets on the market and provide them with leverage. A trader who anticipated a rise in Bitcoin’s price could pay a premium purchase a “call option,” and commit to purchasing 1 BTC at the current price in one month, all while making a smaller down payment than what would be required to purchase 1 BTC.

The trader has the ability to take advantage of the rising price of Bitcoin over the month, purchase it at a discount and maybe sell it for a profit. They’d probably just let the contract expire and lose the premium money if it sank. According to Grayscale CEO Michael Sonnenshein, options for Bitcoin ETFs “contribute to a robust and healthy market,” hence he asked for their approval last month.

When the Bitcoin ETF options markets go live, “you’re going to see all sorts of hedge fund players in the space,” VettaFi analyst Dave Nadig predicted to CNBC in January. They will now have some to play with for individuals who weren’t “speculating on crypto directly in the crypto ecosystem,” according to Nagid.

On January 11, the SEC finally decided on the approval of ten spot Bitcoin ETFs that had been delayed for months. According to BitMEX Research statistics from March 6, traders had flooded the ETFs with cash resulting in $25.87 billion in assets under management across nine of the new ETFs—excluding Grayscale’s, which was converted to an ETF.

Currently, the SEC must select seven slots. ETFs Analysts estimate that the FDA will wait until May 23 to approve each one of them before extending the deadline for VanEck’s application. Asset management Direxion filed for five inverse and long-spot Bitcoin ETFs in January, joining ProShares’ five leveraged Bitcoin funds and REX Shares’ six leveraged ETFs that are currently before the SEC.

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