The US Securities and Exchange Commission (SEC) has approved the New York Stock Exchange (NYSE) and Chicago Board Options Exchange (Cboe) to initiate options trading for various spot Bitcoin ETFs. This news comes in response to significant inflows observed in these Bitcoin ETFs over the past week.
NYSE And Cboe Obtain Expedited Approval For Spot Bitcoin ETF Options Trading
As per SEC filings, both NYSE and Cboe have received authorization to list and trade options on several spot Bitcoin ETFs.
Under a proposed rule change by NYSE, the US securities regulator has permitted the exchange to offer options trading for Grayscale Bitcoin Trust (GBTC), Grayscale Bitcoin Mini Trust BTC (BTC), and Bitwise Bitcoin ETF (BITB). Meanwhile, Cboe has been authorized to list and trade options on the Fidelity Wise Origin Bitcoin Fund (FBTC) and the ARK 21Shares Bitcoin ETF (ARKB).
Notably, both exchanges were granted “expedited approval” from the Commission, meaning that the permission was given prior to the standard 30-day public comment period on the proposed changes, in accordance with Section 19(b)(2) of the Securities Exchange Act of 1934.
Typically, expedited approval occurs when the Commission determines that the safety of market stability does not necessitate waiting for the full 30 days, or there is a compelling reason to streamline the process, as was the case for NYSE and Cboe.
In response to this news, Bloomberg Analyst Eric Balchunas noted his lack of surprise while commending the SEC’s decision. Balchunas remarked:
They recently granted similar approval to Nasdaq, so it wasn’t unexpected, but it’s still a positive development as the SEC was a major hurdle. We’re hearing encouraging updates about the rest of the process, although the exact timeline for the listing date remains uncertain.
Prior to NYSE and Cboe, the SEC had approved Nasdaq to list and trade options on the BlackRock iShares Bitcoin Trust (IBIT). This marked the first approval for options trading related to spot Bitcoin ETFs and came nine months after the initial application with the SEC.
What Advantages Does Options Trading Offer For Spot Bitcoin ETFs?
Options trading involves the purchase and sale of contracts that provide traders the right, but not the obligation, to buy or sell an asset, such as an ETF, at a predetermined price within a specified timeframe. With six of the existing spot Bitcoin ETFs eligible for options trading, investors in these funds can explore new strategies for hedging against volatility or enhancing leverage based on Bitcoin’s price movements.
Bitwise executive Jeff Park elaborates on these benefits, referring to it as “free leverage.” Park stated:
ETF options will offer cross-margining capabilities across multi-asset portfolios, something single-asset exchanges like Derbit cannot provide. Only spot ETF options can leverage your GLD, SPY, HYG ETFs, bonds, and enable cross-margining to achieve unparalleled capital efficiency—akin to free leverage.
Ultimately, this will drive increased institutional interest in the flourishing spot Bitcoin ETF market, which has accumulated over $65 billion in total net assets over ten months of trading.
Image provided by Forbes, chart sourced from Tradingview
