In an X post on Feb. 5, Grayscale CEO Michael Sonnenshein advocated for regulators to approve exchange-listed options for spot Bitcoin exchange-traded funds (ETFs). He argued that options are good for investors as they support “price discovery and can help investors better navigate market conditions or achieve desired outcomes, such as generating income.”
An exchange-traded option is a standardized contract that can be used to buy (using a call option) or sell (using a put option) a certain quantity of a particular financial asset at a predefined price (the strike price) on or before a specified date. With options trading, investors can make predictions about the future movement of particular stocks or bonds and the stock market as a whole. Under options contracts, traders have the choice — but not the obligation — to purchase or sell an underlying asset by a specified date at a predetermined price.
These options are traded on exchanges like the Chicago Board Options Exchange (Cboe) and are regulated by 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 the exchanges.
Sonnenshein noted that when the SEC approved the first Bitcoin BTC $42,634 futures ETF in October 2021, the listed options for the ETF were available for trading from the very next day due to automatic effectiveness, which allowed them to rely on existing rules.
However, a similar rule is not applicable for commodity-based ETFs, such as the recently approved spot Bitcoin ETFs, as these have to go through a potentially lengthy review akin to the 19b-4 process for spot Bitcoin ETFs themselves.
The Grayscale CEO called for equal treatment of similar products, citing the example of spot and futures BTC-based ETFs.
Options are good for investors, whether retail or institutional, and contribute to a robust and healthy market. Options support price discovery, and can help investors better navigate market conditions or achieve desired outcomes, such as generating income.— Sonnenshein (@Sonnenshein) February 5, 2024
Sonnenshein added that the New York Stock Exchange and other national exchanges have recently filed Forms 19b-4 to amend the listing standards to permit listed options on commodity-based ETFs, including spot Bitcoin ETFs.
The SEC is currently reviewing the applications for listed options on spot BTC ETFs and has opened comments for BlackRock’s proposed options with Cboe. Bloomberg ETF analyst Eric Balchunas suggested the SEC could make the decision as early as Feb. 15 or, at the latest, by September 2024.
Absolute latest we get a decision is somewhere around ~Sept 21, 2024.— James Seyffart (@JSeyff) January 19, 2024
The Grayscale CEO concluded his post by advocating for spot Bitcoin ETFs and the crypto asset class to be treated fairly.