Grayscale CEO Michael Sonnenshein urged regulators to accept exchange-listed options for spot Bitcoin (BTC) exchange-traded funds (ETFs) in an X post on February 5. Options, he claimed, promote “price discovery and can help investors better navigate market conditions or achieve desired outcomes, such as generating income,” making them advantageous for investors.
An exchange-traded option is a standardized contract that allows you to buy (with a call option) or sell (with a put option) a specific quantity of a financial asset at a predetermined price (the strike price) on or before a specified date. Investors can use options trading to predict the future movement of individual stocks or bonds, as well as the stock market as a whole. Options contracts give traders the option — but not the obligation — to buy or sell an underlying asset by a specific date at a predetermined price.
These options are traded on exchanges such as the Cboe and are overseen by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission. Clearinghouses such as the Options Clearing Corporation (OCC) guarantee the exchanges.
Sonnenshein noted that when the SEC approved the first Bitcoin futures in an ETF in October 2021, the listed options for the ETF became available for trading the very next day due to automatic effectiveness, allowing them to rely on existing rules.
However, a similar rule does not apply to commodity-based ETFs, such as the recently approved spot Bitcoin ETFs, because they must undergo a potentially lengthy review, similar to the 19b-4 process for spot Bitcoin ETFs.
The CEO of Grayscale advocated for treating similar products equally, using spot and futures BTC-based exchange-traded funds as an example.
According to Sonnenshein, Forms 19b-4 have been filed recently by the New York Stock Exchange and other national exchanges to change the listing requirements and allow listed options on commodity-based ETFs, such as spot Bitcoin ETFs.
The SEC is currently reviewing applications for listed options on spot BTC ETFs and has requested comments on BlackRock’s proposed options with Cboe. According to Bloomberg ETF analyst Eric Balchunas, the SEC could make the decision as early as February 15 or no later than September 2024.
The SEC has already acknowledged the 19b-4's requesting the ability to trade options on spot #Bitcoin ETFs. This is faster than SEC typically moves. Options could be approved before end of February if SEC wants to move fast?…
— James Seyffart (@JSeyff) January 19, 2024
AT ABSOLUTE EARLIEST options still ~27+ days away pic.twitter.com/ohbvHgP2uO
The Grayscale CEO concluded his post by arguing that spot Bitcoin ETFs and the crypto asset class should be treated fairly.
