In a recent social media post on February 5th, Grayscale’s CEO Michael Sonnenshein called on regulators to green-light exchange-listed options for spot Bitcoin ETFs. He believes that options can enhance price discovery and aid investors in navigating market fluctuations or in achieving specific financial goals, such as income generation.
Exchange-traded options are contracts that allow buying (via call options) or selling (via put options) a set amount of a financial asset at a pre-agreed price on or before a given date. This form of trading lets investors speculate on future movements of stocks, bonds, or entire markets. Unlike direct asset trading, options offer the flexibility to buy or sell without obligation, based on a future date and price.
These options are available on platforms like the Chicago Board Options Exchange (Cboe) and come under the regulatory purview of the U.S. Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The Options Clearing Corporation (OCC) ensures the fulfillment of these contracts.
Sonnenshein highlighted that when the SEC approved the first Bitcoin futures ETF in October 2021, options for the ETF were tradable the very next day, thanks to existing regulatory frameworks. However, this expedited process doesn’t apply to commodity-based ETFs like the recently approved spot Bitcoin ETFs, which must undergo a more detailed review process.
The Grayscale CEO is advocating for a level playing field for all ETF products, citing the inconsistency between the treatment of spot and futures BTC-based ETFs. He mentioned that the New York Stock Exchange, among other exchanges, has proposed amendments to allow listed options on commodity-based ETFs, including those based on spot Bitcoin.
The SEC is currently evaluating these proposals for spot BTC ETF options, with the possibility of a decision as early as February 15th or as late as September 2024, as suggested by Bloomberg ETF analyst Eric Balchunas.
Sonnenshein’s post underscores his call for fair and equal treatment of spot Bitcoin ETFs and the broader cryptocurrency asset class in regulatory practices.
