- The U.S. SEC has approved Nasdaq’s request to list and trade options on BlackRock’s spot Bitcoin ETF.
- The approval process took over eight months, with multiple amendments and extensions.
- The new Bitcoin options will be American-style, physically settled, and subject to strict standards, including margin requirements and position limits.
- An initial contract limit of 25,000 has been set to mitigate liquidity and volatility concerns.
The U.S. Securities and Exchange Commission has given Nasdaq the green light to list and trade options on BlackRock’s spot Bitcoin exchange-traded fund. This development means a major stride toward larger options for institutional and individual investors in cryptocurrency trading on Bitcoin options.
Commenting on the timing of the delay, Nate Geraci, president of the ETF Store, said that it took over eight months to get this approval, but better late than never. This decision has been made after a very long regulatory process.
The Notice was submitted to the SEC as a proposed rule change by Nasdaq ISE on January 9, 2024. That kicked off several months of amendments and analysis. The Commission published several amendments and extensions before approving the proposal, as modified by Amendments No. 8 and 9, on an accelerated basis.
According to the filing, the new options on iShares Bitcoin Trust have been designed to relate physically settled American-style exercise options for investors. They would provide members of the marketplace with an avenue to hedge their positions and receive strategic Bitcoin exposure under a robustly regulated framework. The approved options will be listed subject to strict standards, margin requirements, and position limits.
It is set initially to the most conservative limit of 25,000 contracts on the basis of concerns about liquidity and volatility in markets. This is a precautionary measure arising out of the risk of protection for all investors against market manipulation.
Regarding surveillance, the SEC explained that such an arrangement would require rigorous surveillance mechanisms to keep off fraudulent trading. The market surveillance personnel at Nasdaq would coordinate closely the activities of other members of the Intermarket Surveillance Group in pursuing suspicious trading.
These are already the set of rules and regulations for any other ETF options, which now applies to the newly approved Bitcoin options to make sure that trading is secured and transparent.
Market Impact of Bitcoin ETF Options
Eric Balchunas, a senior ETF analyst at Bloomberg, called the move a “huge win for the Bitcoin ETFs.” He noted that increased liquidity could draw in some larger institutional players. He said that as big as this development is, there are still OCC and CFTC approvals pending before these options are listed.
Still, this approval shows that the institutional inclusion of Bitcoin-based financial products is rising, perhaps setting the stage for more robust participation in cryptocurrency markets.
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