The US Securities and Exchange Commission (SEC) has given the green light to New York Stock Exchange (NYSE) and Chicago Board Options Exchange (Cboe) will begin trading options for several spot Bitcoin ETFs. This development comes amid the massive inflows that these Bitcoin ETFs have recorded over the past week.
NYSE and Cboe Secure Accelerated Approval for Spot Trading of Bitcoin ETF Options
According to SEC filings, NYSE and Cboe have been authorized to list and trade options on multiple spot Bitcoin ETFs.
Based on the rule change proposed by NYSE, the US securities regulator has allowed the exchange to offer options trading for Grayscale Bitcoin Trust (GBTC), Grayscale Bitcoin Mini Trust BTC (BTC) and Bitwise Bitcoin ETF (BITB). Meanwhile Cboe has been given the green light to list and trade options on the Fidelity Wise Origin Bitcoin Fund (FBTC) and the ARK 21Shares Bitcoin ETF (ARKB).
Interestingly, both exchanges received “expedited approval” from the Commission, meaning that the approval was granted before the usual 30-day public comment period on the proposed changes had expired, pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934.
However, accelerated approval usually occurs when the Commission decides that waiting a full 30 days is not necessary for the public protection of market stability, or when there is a good reason to accelerate the process, as in the case of NYSE and Cboe.
Commenting on this development, Bloomberg analyst Eric Balchumas said has expressed no surprise, although they applaud the SEC’s decision. Balchunas said:
They recently approved the same for Nasdaq, so not a huge surprise, but still good news as SEC was a major hurdle. We’re hearing good things about the rest of the process, although the exact timeline for the listing date is still unclear.
Before NYSE and Cboe was the SEC Nasdaq had approved to list and trade options on the BlackRock iShares Bitcoin Trust (IBIT). This represents the first approval for spot trading of Bitcoin ETF options came nine months after filing with the SEC.
What potential does options trading offer to spot Bitcoin ETFs?
Options trading refers to purchase and sale contracts that give traders the right, but not the obligation, to buy or sell an asset, for example an ETF, at a predetermined price, albeit within a specific time frame. Because six of Bitcoin ETFs’ active spots are eligible for options trading, investors in these institutional funds are exposed to new trading strategies in terms of hedging against volatility or taking advantage of Bitcoin’s price movement in the evening.
Bitwise CEO Jeff Park sheds more light about this in what he calls ‘free leverage’. park said:
ETF options will have cross-margining capabilities in multi-asset portfolios, which single-asset exchanges like Derbit can never provide. Only spot ETF options can leverage your GLD, SPY, HYG ETFs, bonds and cross-margin to achieve unprecedented capital efficiency – the closest thing you can get to free leverage.
Ultimately, this will result in increased institutional interest in an already booming Bitcoin ETF market, which boasts total net assets of more than $65 billion in ten months of trading.
Featured image from Forbes, chart from Tradingview