SEC Approves Spot Bitcoin ETF Options Trading On NYSE, Cboe – Details

The US Securities and Exchange Commission (SEC) has granted a go-ahead to the New York Stock Exchange (NYSE) and Chicago Board Options Exchange (Cboe) to list options trading for several spot Bitcoin ETFs. This development comes amidst the massive inflows recorded by these Bitcoin ETFs in the past week.

According to filings by the SEC, NYSE and Cboe have obtained permission to list and trade options on multiple spot Bitcoin ETFs. 

Based on NYSE’s proposed rule change, the US securities regulator has allowed the exchange to provide options trading for Grayscale Bitcoin Trust (GBTC), Grayscale Bitcoin Mini Trust BTC (BTC), and Bitwise Bitcoin ETF (BITB). Meanwhile, Cboe has been greenlighted to list and trade options on the Fidelity Wise Origin Bitcoin Fund (FBTC) and the ARK 21Shares Bitcoin ETF (ARKB). 

Interestingly, both exchanges gained “accelerated approval” from the Commission which means authorization was granted before the usual 30-day public comment period on the proposed amendments had elapsed according to Section 19(b)(2) of the Securities Exchange Act of 1934.

However, an accelerated approval usually happens when the Commission decides that waiting for a full 30 days is not necessary for the public protection of market stability or there is a good cause to fast-track the process as in the case of NYSE and Cboe.

Commenting on this development, Bloomberg Analyst Eric Balchumas has expressed no surprise although applauding the SEC’s decision. Balchunas said: 

They approved same thing for Nasdaq recently so not a big surprise but still good news as SEC was big hurdle. We hearing good things about the rest of process altho exact timeline for listing date still unclear.

Before NYSE and Cboe, the SEC had approved Nasdaq to list and trade options on the BlackRock iShares Bitcoin Trust (IBIT). This represents the first approval for spot Bitcoin ETF options trading and came nine months after application with the SEC.

Options trading refers to buying and selling contracts that grant traders the right but not the obligation to buy or sell an asset e.g.ETF at a predetermined price, albeit within a specific time frame. With six of the active spots of Bitcoin ETFs eligible for options trading, investors in these institutional funds are exposed to new trading strategies in terms of hedging against volatility or evening leveraging on Bitcoin’s price movement.

Bitwise executive Jeff Park sheds more light on these 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 uncharted capital efficiency-the closest thing to free leverage.

Ultimately, this will result in increased institutional interest in an already booming spot Bitcoin ETF market which boasts over $65 billion in total net assets in ten months of trading.