Grayscale’s CEO is advocating for listed options on spot Bitcoin exchange-traded funds (ETFs). According to Grayscale’s CEO, options help investors with market pricing and strategy.
In a post on Feb. 5, Sonnenshein, CEO of Grayscale, urged regulators to approve options trading for spot Bitcoin exchange-traded funds (ETFs).
He argued that options are good for investors as they support “price discovery and can help investors better navigate market conditions or achieve desired outcomes, such as generating income.”
Exchange-traded options are standardized financial contracts that allow individuals to purchase (via a call option) or sell (through a put option) a specific amount of a financial asset at a predetermined price (the strike price) by a specified date.
Investors can speculate on the price direction of specific stocks, bonds, and the overall market using options trading.
Furthermore, traders who enter into options contracts are not obligated to follow through on the purchase or sale of the underlying asset, but they have the right to do so if they choose.
Options contracts trade on exchanges like the Chicago Board Options Exchange and are regulated by both the United States Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
In essence, exchanges like the Cboe work with clearinghouses like the Options Clearing Corporation to ensure that options contracts are guaranteed to be fulfilled.
Sonnenshein pointed out that when the SEC approved the first Bitcoin futures ETF in October 2021, listed options for the ETF were immediately available for trading, thanks to existing rules that make the approval process automatic.
Commodity-based ETFs, like the newly sanctioned spot Bitcoin ETFs, do not fall under the same rule, requiring a review process similar to the 19b-4 process for spot Bitcoin ETFs, which can be time-consuming.
The CEO believes that similar products should be treated equally, using the example of Bitcoin spot ETFs and Bitcoin futures ETFs.
Sonnenshein mentioned that exchanges like the New York Stock Exchange have filed amendments to allow listed options for commodity-based ETFs, including spot Bitcoin ETFs.
The SEC is reviewing applications for listed options on spot Bitcoin ETFs and is also collecting public comments on BlackRock’s proposed options on the Cboe exchange.
According to Bloomberg’s Eric Balchunas, the SEC could decide on the applications as early as February 15, and the latest deadline for a decision is September 2024.
Grayscale’s CEO, Sonnenshein believes that spot Bitcoin ETFs and the cryptocurrency market should be treated fairly.
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