Lawmakers in the United States are reportedly pushing the Securities and Exchange Commission (SEC) to approve options trading on Bitcoin exchange-traded products (ETPs). Representatives Mike Flood and Wiley Nickel recently penned a letter to the commission’s chair, Gary Gensler, urging the SEC to end its discrimination against crypto funds. In the bipartisan letter, they called on the SEC to approve options on spot Bitcoin ETPs or provide an explanation for the differing treatment between options for Bitcoin futures ETFs and options for spot Bitcoin ETPs.
Options are financial instruments that grant the buyer the right, but not the obligation, to buy or sell an asset, such as Bitcoin (BTC), at a predetermined price within a specified timeframe. These instruments are commonly used for hedging against price fluctuations, limiting potential losses, and allowing investors to generate additional income through strategic maneuvers.
Flood and Nickel believe that the approval of options trading is crucial for the protection of investors that the SEC aims to safeguard. However, the agency has been delaying decisions on applications from major players like the New York Stock Exchange, Nasdaq, and Cboe Global Markets, all of which submitted their applications in January. Nasdaq has sought permission to list and trade options on BlackRock’s iShares Bitcoin Trust, while Cboe plans to offer options trading on various Bitcoin funds. Similarly, the NYSE intends to trade options on Bitwise Bitcoin ETF, Grayscale Bitcoin Trusts, and any other trusts holding Bitcoin.
In a recent development, the SEC has opened a new consultation round regarding a proposed rule change that would allow options trading on Bitcoin funds. The SEC is seeking to assess how Bitcoin options could impact market stability, particularly during periods of volatility. Additionally, the agency is evaluating whether existing market surveillance and enforcement practices are adequate for managing the complexities associated with Bitcoin options. Participants have been invited to provide initial comments by May 15 and rebuttal comments by May 29.