SEC Scrutinizes Bitcoin Options Rules

The SEC in the United States has initiated another phase of discussions regarding a proposed rule alteration concerning the trading of options on Bitcoin exchange-traded products (ETPs).

In an April 24 submission, the securities regulator aims to gain deeper insights into the potential impact of introducing Bitcoin (BTC) tickered options, particularly in volatile market conditions. The evaluation will include an examination of whether existing surveillance and enforcement measures employed by exchanges are sufficient to address the distinctive features of Bitcoin options.

Bitcoin options are financial products. They give the customer the choice, but not the duty, to buy or sell Bitcoin by a set date at a set price. Traders who know about option pricing and market changes often use options. Like other investments, options have risks, so not every investor should use them.

The Commission had previously requested feedback on the proposed rule amendment and integrated the received responses into its submission. The majority of the feedback underscored the potential for options on Bitcoin ETPs to enhance liquidity and bolster market efficiency.

Moreover, the commenter emphasized that endorsing the listing and trading of options on spot Bitcoin ETPs “would expand Bitcoin’s regulatory oversight by enabling more regulated market participants, including CFTC-regulated designated contract merchants and SEC-regulated broker-dealers, to engage with these products.

Bitcoin Options Drive SEC Applications

However, Numerous financial institutions, such as Nasdaq and Cboe, have presented requests to the SEC, asking for approval to engage in trading Bitcoin options. Nasdaq aims to list and trade options tied to BlackRock’s iShares Bitcoin Trust, while Cboe plans to facilitate options trading for a range of Exchange-Traded Products (ETPs) holding Bitcoin.

In the realm of Bitcoin ETFs, options would enable investors to mitigate risks or engage in speculative maneuvers concerning the price fluctuations of a BTC ETF, as opposed to the underlying Bitcoin asset. The SEC has previously greenlit various commodity ETFs managed by trusts, such as the SPDR Gold Trust, iShares COMEX Gold Trust, iShares Silver Trust, and ETFS Gold Trust.

Moreover, Bitwise and Grayscale, among other asset managers, are actively pursuing regulatory clearance to offer options for their Bitcoin ETFs via applications submitted to the New York Stock Exchange.

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The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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