SEC Delays Verdict on Spot Bitcoin ETFs for Options Trading

Last Updated on March 8, 2024

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Key Takeaways:

  • The SEC has postponed its decision on approving options trading on spot Bitcoin ETFs, extending the decision deadline to April 24.
  • This delay affects the proposals from the Cboe Exchange, the Miami International Securities Exchange, and Nasdaq for BlackRock’s iShares Bitcoin Trust (IBIT).
  • Options trading allows traders to leverage their positions and speculate on Bitcoin’s price direction with less capital upfront.
  • Approval of Bitcoin ETF options could attract institutional and hedge fund investors, diversifying the market and potentially contributing to its stability.
  • The SEC previously approved ten spot Bitcoin ETFs, which have collectively attracted $25.87 billion in assets under management as of March 6.
  • Seven spot Ether ETFs are currently under SEC review, with a decision expected by May 23, potentially expanding the range of cryptocurrency investment products available to investors.

The United States Securities and Exchange Commission (SEC) has once again delayed its decision regarding the authorization of derivatives trading, specifically options, on spot Bitcoin Exchange-Traded Funds (ETFs). This postponement could significantly influence the influx of institutional capital into the Bitcoin market.

On March 6, the SEC announced an extension to review submissions by the Cboe Exchange and the Miami International Securities Exchange, which have proposed offering options on Bitcoin ETFs.

Additionally, the SEC has deferred its decision on a similar request by Nasdaq to provide options on BlackRock’s iShares Bitcoin Trust (IBIT), citing the need for ample time to consider these applications comprehensively.

The initial filings for listing Bitcoin ETF options were submitted on January 25, with the SEC facing a regulatory deadline of March 10 to make a preliminary decision.

According to U.S. securities laws, the SEC has a 45-day window to either make a decision or choose to delay it.

By utilizing its right to defer, the SEC has extended its decision-making period to its maximum of 90 days, setting a new deadline for a final verdict on April 24.

A highlighted excerpt of the SEC’s filing which cites needing “sufficient time” to decide on allowing Bitcoin ETF options trading. Source SEC
A highlighted excerpt from the SEC’s filing, citing the need for “sufficient time” to make a decision on authorizing Bitcoin ETF options trading. Source: SEC

Options trading involves derivative products that enable traders to leverage their positions and make bets on the market’s direction.

For instance, if a trader anticipates a price increase for Bitcoin, they could purchase a call option, allowing them to buy 1 BTC at today’s price at a future date, with a lower upfront investment compared to buying 1 BTC outright.

This method could lead to profits if Bitcoin’s price increases, or the trader might lose the premium paid if the price declines.

The push for the approval of Bitcoin ETF options has been supported by figures like Grayscale CEO Michael Sonnenshein, who argues that such financial instruments contribute to a more robust and healthy market.

Analysts like VettaFi’s Dave Nadig suggest that the introduction of Bitcoin ETF options could attract hedge fund activity, offering new investment avenues for those not directly engaged in the cryptocurrency ecosystem.

The SEC’s decision comes in the wake of approving ten spot Bitcoin ETFs for trading as of January 11, following prolonged periods of consideration.

These newly approved ETFs, excluding Grayscale’s which transitioned into an ETF, have collectively amassed $25.87 billion in assets under management by March 6, according to BitMEX Research.

Moreover, the SEC is currently evaluating proposals for seven spot Ether ETFs, with speculation that a collective approval might occur by May 23, coinciding with the deadline for VanEck’s application.

Additionally, the consideration of multiple leveraged Bitcoin ETFs is underway, with filings from Direxion for five inverse and long spot Bitcoin ETFs, ProShares’ five leveraged Bitcoin funds, and REX Shares’ six leveraged ETFs, showcasing a growing interest in diversified cryptocurrency investment products.

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