SEC Postpones Decision on Bitcoin ETF Options Trading

The U.S. Securities and Exchange Commission (SEC) has postponed its decision on whether to allow the Cboe Global Markets to list and trade options on Bitcoin Exchange Traded Funds (ETFs). The Cboe had initially filed for the ability to offer these options in January, concerning the recently introduced Bitcoin ETFs. However, the SEC announced on Wednesday that it would delay its ruling on this proposed rule change until the end of April.

Options trading serves as a risk management tool, enabling investors to enter contracts to buy or sell a financial asset at a predetermined price within a certain period. The response from Cboe regarding the SEC’s delay was not immediately available.

Typically, the Cboe could begin offering options three days after an Exchange-Traded Product (ETP) starts trading on major securities exchanges such as the Nasdaq or the New York Stock Exchange. Nonetheless, these standard rules do not cover ETPs dealing with commodities like Bitcoin. For the Cboe’s rule filing to gain SEC approval, and for the Options Clearing Corporation (OCC) to be permitted to issue and clear these options, both need to secure necessary approvals from their regulators, including the SEC and the Commodity Futures Trading Commission (CFTC), as stated by Cboe earlier.

The New York Stock Exchange (NYSE) is also looking to list “commodity-based trust shares,” while the Nasdaq aims to offer options on the iShares Bitcoin Trust ETF by BlackRock, pointing out in its January submission the potential of options to provide investors with a cost-effective investment tool and a means for hedging.

BlackRock’s iShares Bitcoin Trust ETF (IBIT) has set new records, amassing $10 billion in assets under management shortly after launch, while Grayscale’s Bitcoin ETF, transformed from its Bitcoin trust, has $26 billion in assets under management.

Furthermore, the SEC’s postponement on the Cboe’s proposal coincided with delays in decisions on other related rule change proposals, all set for a late April verdict. Grayscale voiced its support for the NYSE’s proposal, specifically advocating for the SEC to approve options trading on its fund, GBTC, in a blog post. The firm argues that if options trading on derivatives of an asset is deemed suitable for investors, then options trading on the asset itself should also be permissible.

Grayscale also urged the SEC via a post on X (formerly Twitter) to adopt a uniform approach in approving options products on all similarly structured commodity ETFs that have received approval to list and trade on national exchanges, irrespective of the asset held.