Michael Sonnenshein, Grayscale’s CEO has commenced advocacy for the introduction of listed options for spot Bitcoin ETF just less than one month after the offering was greenlighted by the SEC in the United States.
Bottlenecks With Spot Bitcoin ETF-Listed Options
According to a Monday post from the crypto boss, it’s high time the broad crypto ecosystem, particularly the ETF community, began to consider the development of listed options for spot Bitcoin ETF.
He recalled that his company’s Bitcoin ETF GBTC has been in the public market for quite some time now but it never made it to the listed options level. However, he tied this drawback to the fact that listed options are not a feature of the Over-the-counter (OTC) market.
As we look ahead, I think it’s never been more important for the #crypto and ETF communities alike to advocate for the development of a robust listed options market for spot #bitcoin ETFs. Although $GBTC has been in the public market since 2015, it was never accompanied by listed…
— Sonnenshein (@Sonnenshein) February 5, 2024
Options can be described as listed derivatives that provide the holder with the right to buy and sell an asset. It could either be in the form of stocks or exchange traded products like in this case of spot Bitcoin ETFs.
Listed options are useful to both retail traders and institutional investors. Firstly, it is a cheaper way for traders to increase their purchasing power while it is an efficient hedge risk tool for institutional investors. Overall, they are useful to the robust and healthy status of the market. It is also good for price discovery and even the generation of income.
The Challenge of Listed Options Per Regulatory Strain
Listed options are currently unavailable for spot Bitcoin ETFs for a number of reasons but many market observers believe that the lack of established regulatory process is the main challenge of the offering. Ordinarily, the U.S. SEC is left with the responsibility of supervising the technical rule change that is required of exchanges before they can list options.
This offering should be approved a few days after the ETF begins trading like in the case of the first bitcoin futures ETFs that began trading in the U.S. on October 19, 2021 and listed options were made available the next day.
However, Bitcoin is regarded as a commodity by several market watchdogs hence, it would have to also go through the Commodity Futures Trading Commission (CFTC) to receive approval. Plus the subject of Bitcoin (crypto) and jurisdiction is still a tough battle that the CFTC is still trying to walk through.
Even with these unsettled subjects, NYSE and other national exchanges have submitted their Forms 19b-4 which seeks to amend the listing standards to permit listed options on commodity-based ETFs like spot bitcoin ETFs, per Sonnenshein’s X post.
Meanwhile, GBTC is leading the spot Bitcoin ETF market by a wide margin. On trading day 16, the Sonnenshein-led spot Bitcoin ETF registered a trading volume of $338 million. BlackRock is following closely behind and the competition is getting tougher by the day.