Grayscale CEO Michael Sonnenshein has called on regulators to approve exchange-listed options for spot Bitcoin exchange-traded funds (ETFs). He emphasized that options play a crucial role for investors by supporting price discovery and helping them navigate market conditions effectively, including income generation.
Understanding Exchange-Traded Options
Exchange-traded options are standardized contracts that allow individuals to buy (using a call option) or sell (using a put option) a specific quantity of a financial asset at a predetermined price (the strike price) on or before a specified date. Options trading enables investors to make predictions about the future movements of assets and the overall market. Importantly, traders have the choice, but not the obligation, to purchase or sell the underlying asset by the specified date at the agreed-upon price.
Equal Treatment for Similar Products
Sonnenshein pointed out that when the SEC approved the first Bitcoin futures ETF in October 2021, options for the ETF were immediately available for trading due to automatic effectiveness, relying on existing rules. However, the same rule does not apply to commodity-based ETFs, like recently approved spot Bitcoin ETFs, which have to undergo a potentially lengthy review process similar to the 19b-4 process for spot Bitcoin ETFs.
He called for equitable treatment of similar products, citing the example of spot and futures Bitcoin-based ETFs. Notably, national exchanges, including the New York Stock Exchange, have filed Forms 19b-4 to amend listing standards and allow options on commodity-based ETFs, including spot Bitcoin ETFs.
SEC's Ongoing Review
The SEC is currently reviewing applications for listed options on spot Bitcoin ETFs and has opened comments on BlackRock's proposed options with Cboe. It is anticipated that the SEC might make a decision as early as February 15, or at the latest, by September 2024.
Sonnenshein concluded by advocating for fair treatment of spot Bitcoin ETFs and the broader crypto asset class.