SEC seeks feedback on Bitwise, Grayscale BTC ETF options

SEC is considering a rule change that allows options trading for BTC ETF with NYSE and BlackRock seeking similar approvals.

Regarding a proposed rule change that permits the listing and trading of options for Bitcoin exchange-traded funds (ETFs), the Securities and Exchange Commission (SEC) of the United States is soliciting opinions.  

The NYSE sought a rule change on February 23 that would allow the Bitwise Bitcoin ETF (BITC), the Grayscale Bitcoin Trust (GBTC) and “any trust that holds Bitcoin” to list and trade options. If accepted, the options will trade on the exchange in the same manner as options on other ETFs (including commodities ETFs). These rules include listing requirements, expiration dates, strike prices, minimum price adjustments, position and exercise limitations, margin requirements, client account processes and trading suspensions. 

BlackRock is also requesting and approving a similar policy change. Together with the Chicago Board Options Exchange (CBOE), the asset manager submitted a request for rule changes pertaining to listed options on its Bitcoin ETF. Bloomberg ETF analyst James Seyffart suggests that the SEC may issue its ruling as early as September 2024.

Investors can use options for speculation, income or portfolio hedging. Financial derivatives, also known as options provide purchasers with the choice—not the duty—to purchase or sell a certain asset at a given price on a given date. In the context of Bitcoin ETFs, options would enable investors to hedge or speculate on the price swings of a BTC ETF rather than the actual price of Bitcoin.

The SPDR Gold Trust, iShares COMEX Gold Trust, iShares Silver Trust and ETFS Gold Trust are among the commodities ETFs held by trusts that the SEC has previously approved. Michael Sonnenshein, the CEO of Grayscale has been vocally urging regulators to approve the cryptocurrency derivatives products.

“In addition, the Exchange represents that its existing surveillance procedures are adequate to properly monitor the trading of options on Bitcoin ETPs in all trading sessions and to deter and detect violations of Exchange rules. The Exchange further represents that it will implement new surveillance procedures, as necessary, to effectively monitor the trading of options on Bitcoin ETPs.”

Options aid “price discovery and can help investors better navigate market conditions or achieve desired outcomes, such as generating income,” the CEO stated, making them beneficial for investors. Like other financial instruments and investments trading in options entails risks that make it unsuitable for certain individuals. After years of rejections, the SEC finally allowed spot Bitcoin ETF trading on Wall Street on January 10.