Highlights
- SEC approves options trading for BlackRock’s Bitcoin ETF, marking the first spot BTC ETF with options in the U.S.
- Nasdaq can now list BlackRock’s Bitcoin ETF options (IBIT), offering new risk management tools for institutional investors.
- Analysts predict broader adoption of Bitcoin ETF options as U.S. exchanges await similar approvals.
BlackRock’s Bitcoin ETF has been approved by the United States Securities and Exchange Commission (SEC) for options trading making it a significant step towards the development of cryptocurrency investment products. The approval allows Nasdaq to list and trade options of iShares Bitcoin Trust under the symbol IBIT which will expand the Bitcoin ETF market that has already grown significantly since its inception in January 2024.
SEC Greenlights Options for BlackRock’s Spot Bitcoin ETF
On September 20, the SEC permitted the trading of options on BlackRock’s iShares Bitcoin Trust on the Nasdaq, which allows the exchange to trade options on the ETF in the same manner as it trades on other ETFs. The SEC notice outlined that options on IBIT would be physically settled with American-style exercise and would be subject to the exchange’s initial and continued listing requirements.
These standards state that underlying security must have a large number of float shares and these shares must be distributed among the public.
INTEL: SEC APPROVES OPTIONS ON BLACKROCK SPOT BITCOIN ETF
NOTICE OF FILING OF AMENDMENT NOS. 4 AND 5 AND ORDER GRANTING ACCELERATED APPROVAL OF A PROPOSED RULE CHANGE, AS MODIFIED BY AMENDMENT NOS. 1, 4, AND 5, TO PERMIT THE LISTING AND TRADING OF OPTIONS ON THE ISHARES BITCOIN…
— Solid Intel 📡 (@solidintel_x) September 20, 2024
The approval is significant because it is the first time the SEC has approved options trading for a spot Bitcoin ETF, which opens up possibilities for more sophisticated trading strategies and risk management in the Bitcoin investment market. This comes amidst a growing trend of institutions investing in cryptocurrency as options allow investors to hedge and control their exposure to the Bitcoin price fluctuations.
Potential for Broader Adoption of Bitcoin ETF Options
The green light for BlackRock’s Bitcoin ETF options may be an indication of future acceptance of similar products. Although this approval is only for Nasdaq, other U.S exchanges may follow suit in the near future according to analysts.
Bloomberg ETF analyst Eric Balchunas said other products could be greenlit shortly, but final permissions may also come from other agencies . Some of the agencies include the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC).
The SEC’s approval could also increase the trading volume of the IBIT Bitcoin ETF that has already been quite active, with trading volumes hitting over $875 million in early August. If more spot BTC ETFs get approval for options trading, it is likely to enhance the participation of institutional investors who are in search of advanced tools of trading.
Expansion to Ethereum and Developments
After approving Bitcoin ETF options, the stock exchange, Nasdaq, has requested the SEC to allow spot Ethereum ETF options trading. However, any decision on Ethereum ETF options is expected to take longer, with potential approval timelines extending into April 2025. The approval of options for Ethereum ETFs would create more choice for investors and increase the appeal of cryptocurrency ETFs.
The decision to add options trading is in line with the growth of the cryptocurrency ETF market and its increased popularity among institutional investors since the start of the year. Banks and asset managers have now started considering cryptocurrency ETFs as a significant element of a diversified investment portfolio as well as an opportunity to invest in the digital asset market and hedge risks using options.
This is because the introduction of options in BlackRock’s spot Bitcoin ETF is estimated to enhance the institutional acceptance of crypto products. The presence of options is especially beneficial for institutional investors as it provides more opportunities for hedging and managing risks, particularly in the highly risky cryptocurrency market.
In its filing, BlackRock pointed out that options on the IBIT ETF will help investors to manage their risks related to the Bitcoin prices, which further supports the growing importance of ETFs in the financial space.
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