SEC invites public feedback on Bitwise and Grayscale Bitcoin ETF proposals

The Securities and Exchange Commission (SEC) of the United States is currently inviting feedback on a proposed rule change that would enable the trading and listing of options for Bitcoin exchange-traded funds (ETFs), according to a notice released on February 23. The New York Stock Exchange (NYSE) has requested the rule change, which would allow options to be traded on the Bitwise Bitcoin ETF (BITC), the Grayscale Bitcoin Trust (GBTC), and any other trust that holds Bitcoin. If approved, these options would be traded in the same manner as options on other ETFs, including commodities ETFs, on the Exchange. The notice outlines various regulations that would apply to these options, such as listing criteria, expiration dates, strike prices, minimum price changes, position and exercise limits, margin requirements, and procedures for customer accounts and trading suspensions. BlackRock, an asset manager, is also seeking approval for a similar policy change, having filed for rule revisions to list options on its Bitcoin ETF in collaboration with the Chicago Board Options Exchange (CBOE). Bloomberg ETF analyst James Seyffart predicts that the SEC’s decision could be made by September 2024 at the latest. Options are financial derivatives products that are used for portfolio hedging, generating income, or speculative purposes. They grant buyers the right, but not the obligation, to buy or sell a specified asset at a predetermined price on a specific date. In the context of Bitcoin ETFs, options would allow investors to hedge or speculate on the price movements of a BTC ETF instead of Bitcoin itself. The SEC has previously approved other commodity ETFs held by trusts, such as the SPDR Gold Trust, iShares COMEX Gold Trust, iShares Silver Trust, and ETFS Gold Trust. Michael Sonnenshein, the CEO of Grayscale, has publicly advocated for regulators to approve crypto derivatives products, including options. Sonnenshein believes that options are beneficial for investors as they facilitate price discovery and help investors navigate market conditions or achieve desired outcomes, such as generating income. However, it is important to note that options trading, like any other investment or financial product, carries risks that may not be suitable for all investors. The SEC approved the trading of spot Bitcoin ETFs on Wall Street on January 10, after years of rejections.