Bitcoin ETF Options: SEC Seeks Public Input, Possible Early Approval

The US Securities and Exchange Commission (SEC) has opened the floor for public comments on the potential introduction of Bitcoin spot ETF options trading. This move has sparked reactions from the financial market, with experts anticipating a possible approval as early as March.

NYSE’s Application

In a letter to the SEC, the New York Stock Exchange (NYSE) has requested a rule change that would allow options trading on Bitwise Bitcoin ETF (BITC), Grayscale Bitcoin Trust (GBTC), and any trust that holds Bitcoin. The NYSE argues that Bitcoin spot ETFs qualify for options trading under US trading laws since they are commodity-backed exchanged-traded products (ETP).

Options Explained

Options are financial derivatives that grant the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (strike price) before or at the expiration date of the option. In this case, the Bitcoin spot ETF serves as the underlying asset, and the introduction of options trading would provide a “relatively lower cost investing tool” for traders to gain exposure to these investment funds without direct engagement.

NYSE’s Regulations

The NYSE has stated that all exchange standard rules and regulations will guide the listing and trading of spot ETF options, covering aspects such as listing criteria, expirations, exercise prices, minimum increments, position and exercise limits, margin requirements, customer accounts, and trading halt procedures. Additionally, the Bitcoin spot ETF options will be subject to NYSE’s continued listing standards and can be delisted if the underlying ETF fails to meet certain standards according to US securities law, Rule 916, among other conditions.

SEC’s Response and Analyst Forecast

The SEC has formally acknowledged the NYSE’s filing, incorporating the proposal into its official register and inviting public feedback for the next 21 days. Bloomberg analyst James Seyffart suggests that this development may lead to an expedited consideration of the matter. If that happens, Seyffart predicts that the SEC could approve Bitcoin spot ETF options trading within the next 27 days. In the worst-case scenario, the approval decision could come around September 21.