Grayscale CEO Michael Sonnenshein has made a case for regulators to approve exchange-listed options for spot Bitcoin exchange-traded funds (ETFs). He contends that options are beneficial for investors as they facilitate price discovery and enable investors to navigate market conditions or achieve specific goals, such as income generation.
Exchange-traded options are standardized contracts that provide investors with the ability to buy (using a call option) or sell (using a put option) a specified quantity of a particular financial asset at a predetermined price (known as the strike price) on or before a specified date. Options trading allows investors to make predictions about the future movement of specific stocks, bonds, or the overall stock market. Importantly, options contracts grant traders the choice, but not the obligation, to buy or sell an underlying asset at a predefined price by a specific date.
Exchange-traded options are traded on platforms like the Chicago Board Options Exchange (Cboe) and are subject to regulatory oversight by agencies such as the United States Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). Clearinghouses like the Options Clearing Corporation (OCC) provide guarantees for these exchanges.
Sonnenshein highlighted that when the SEC approved the first Bitcoin futures ETF in October 2021, listed options for the ETF became available for trading immediately due to automatic effectiveness, relying on existing rules. However, a similar rule does not apply to commodity-based ETFs, such as recently approved spot Bitcoin ETFs. These spot Bitcoin ETFs have to undergo a potentially lengthy review process similar to the 19b-4 process applicable to spot Bitcoin ETFs themselves.
The Grayscale CEO called for equitable treatment of similar products, emphasizing the distinction between spot and futures-based BTC ETFs. Sonnenshein noted that national exchanges like the New York Stock Exchange have recently filed Forms 19b-4 to amend listing standards, allowing listed options on commodity-based ETFs, including spot Bitcoin ETFs.
Currently, the SEC is in the process of reviewing applications for listed options on spot Bitcoin ETFs and has opened comments on BlackRock’s proposed options with Cboe. Bloomberg ETF analyst Eric Balchunas speculated that the SEC could make a decision as early as February 15 or, at the latest, by September 2024.
Sonnenshein concluded his statement by advocating for fair treatment of spot Bitcoin ETFs and the entire crypto asset class, emphasizing the need for consistency and equal opportunities for different financial products within the cryptocurrency market.
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