SEC Delays Decision on Allowing Spot Bitcoin ETF Options Trading

The regulatory agency said that it would decide on a rules change permitting exchanges to list and trade options on the spot bitcoin ETFs in April.

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Finance Reporter
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Reviewed by: etf.com Staff
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Edited by: etf.com Staff

The U.S. Securities and Exchange Commission delayed its decision on a rule change that would allow exchanges to list and trade options on spot bitcoin ETFs, the agency said in a filing earlier this week.

The SEC said that it would hold off weighing in about the listing of these options on the CBOE Exchange and the Miami International Securities Exchange until late April. The delay relates to multiple spot bitcoin ETFs, which are based primarily on the price of the largest cryptocurrency by market value. 

"The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change," the SEC filing said.

The exchanges first applied to list options on bitcoin funds in January around the time that the SEC gave its seal of approval to 10 new spot bitcoin products. Since then, investor interest in cryptocurrency has skyrocketed with the spot bitcoin ETFs netting more than $9.3 billion in inflows as of the closing of equity markets on March 7, despite more than $10 billion in outflows from the Grayscale Bitcoin Trust (GBTC). That fund is a conversion from a trust so differs from the other spot bitcoin products. 

BlackRock's iShares Bitcoin ETF (IBIT) last week became the fastest ETF in history to surpass $10 billion in assets under management. Bitcoin hit a record high above $69,000 earlier this week, according to crypto data platform CoinMarketCap, breaking its previous high mark set in November 2021. 

Analysts and financial advisors see using call and put options on bitcoin ETFs as a key strategy to address crypto's inherent volatility. Using put and call options hedge risk. 

Options on ETFs work the same way that options on stocks do, since ETFs can be traded throughout the day. Investors use options by entering an agreement in which they buy or sell the asset at a specified price over a certain period. Options on bitcoin funds would apply an increasingly popular strategy to the successful spot bitcoin ETFs. 

CBOE said in a statement in January that while it usually is able to list options on a new exchange traded product three days after it hits the market, it has to seek special permission from the SEC for commodity products, such as bitcoin.

In a blog post Wednesday, Grayscale Investments called "access to exchange-listed options on GBTC and other spot Bitcoin ETPs...vital to the interests of investors."

“Options would facilitate price discovery in the ETP’s shares, provide investors with greater choice and help investors navigate varying market conditions or achieve desired investment outcomes, such as generating income, hedging, or reducing volatility," the firm said.

Cryptocurrency Mania

While the SEC has allowed ETFs that give exposure to bitcoin futures since 2021, it only approved the spot bitcoin ETFs in January after a decade-long regulatory saga. But even before the approvals, Wall Street had increasingly been exploring the potential for other cryptocurrency-based investment products. 

On March 4, the SEC delayed a decision on a BlackRock proposal for an exchange traded fund based on ether, the second largest digital asset in market capitalization. Ether has surged this year even more strongly than bitcoin, cracking $4,000 on Friday, the first time in two years that it has risen above this level, according to crypto publication CoinDesk.   

Contact Lucy Brewster at [email protected].

Lucy Brewster is a finance reporter at etf.com covering asset managers, emerging technologies, and regulation. She hosts etf.com webinars and appears on Exchange Traded Fridays, etf.com’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.