March 27, 2024
Grayscale CEO Pushes for Options on Spot Bitcoin ETFs
Bitcoin ETF

Grayscale CEO Pushes for Options on Spot Bitcoin ETFs

In a post on X, Grayscale CEO Michael Sonnenshein urged regulators to approve exchange-listed options for spot Bitcoin exchange-traded funds (ETFs). He argued that options benefit investors, supporting “price discovery and helping investors navigate market conditions or achieve desired outcomes, such as generating income.”

Exchange-traded options are standardized contracts allowing the purchase (using a call option) or sale (using a put option) of a specific quantity of a financial asset at a predefined price (the strike price) on or before a specified date. Options trading enables investors to make predictions of the movement of stocks, bonds, or the overall stock market. Traders have the choice, but not the obligation, to buy or sell an underlying asset by a specified date at a predetermined price.

Exchanges such as the Chicago Board Options Exchange (CBOE) oversee these options, regulated by the CFTC and SEC. Clearinghouses like the Options Clearing Corporation (OCC) ensure exchange security. Sonnenshein highlighted that when the SEC approved the first Bitcoin futures ETF in October 2021, the listed options were available for trading the next day due to automatic effectiveness, relying on existing rules.

However, a similar rule does not apply to commodity-based ETFs, such as the recently approved spot Bitcoin ETFs, as they must undergo a potentially lengthy review similar to the 19b-4 process for spot Bitcoin ETFs. Grayscale’s CEO urged fair treatment for comparable products, using spot and futures BTC-based ETFs as an example.

Sonnenshein mentioned that the New York Stock Exchange and other national exchanges have filed Forms 19b-4 to amend listing standards, allowing listed options on commodity-based ETFs, including spot Bitcoin ETFs.

The SEC is in the process of evaluating applications for listed options on spot BTC ETFs and has initiated discussions on BlackRock’s proposed options with Cboe. Bloomberg ETF analyst Eric Balchunas indicated that the SEC might reach a decision as early as Feb. 15 or, at the latest, by September 2024.

The Grayscale CEO concluded his post by advocating for fair treatment of spot Bitcoin ETFs and the entire crypto asset class.

Image by fabrikasimf on Freepik

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