Grayscale’s CEO, Michael Sonnenshein, has called for regulatory bodies to approve exchange-listed options for spot Bitcoin exchange-traded funds (ETFs). In a recent X post dated February 5, Sonnenshein emphasized the benefits such financial instruments could offer investors, highlighting how options facilitate price discovery and assist investors in navigating market conditions more effectively or achieving specific financial objectives, such as income generation.
Exchange-listed options, as defined, are standardized contracts that allow the holder to buy (via call options) or sell (via put options) a specified quantity of a financial asset at a predetermined price on or before a set date. These instruments are traded on recognized platforms like the Chicago Board Options Exchange (Cboe). They are subject to regulation by the United States Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), with clearinghouses such as the Options Clearing Corporation (OCC) ensuring the integrity of these transactions.
Regulatory disparities and proposed changes
Sonnenshein pointed out a regulatory inconsistency where, following the SEC’s approval of the first Bitcoin futures ETF in October 2021, options were made available the next day due to automatic effectiveness, leveraging existing rules. However, this streamlined process does not currently apply to commodity-based ETFs, including those based on spot Bitcoin, which are subject to a more cumbersome review process similar to the initial approval for spot Bitcoin ETFs.
The Grayscale CEO has called for a level playing field, urging the same regulatory treatment for similar products. He referenced recent efforts by the New York Stock Exchange and other national exchanges, which have submitted Forms 19b-4 aiming to amend listing standards to allow for listed options on commodity-based ETFs, such as those based on spot Bitcoin.
Grayscale seeks fair rules for Bitcoin ETFs
The Securities and Exchange Commission is reviewing applications for listed options on spot Bitcoin ETFs, with the comment period open for a proposal by BlackRock in partnership with Cboe. Bloomberg ETF analyst Eric Balchunas has suggested that a decision by the SEC could come as soon as February 15 or, at the latest, by September 2024. This timeline indicates the regulatory body’s careful but ongoing consideration of expanding the range of financial products available within the cryptocurrency space.
Sonnenshein concluded his advocacy by underscoring the importance of fair treatment for spot Bitcoin ETFs and the broader crypto asset class. By aligning the regulatory framework for both futures and spot-based Bitcoin ETFs, including the approval of listed options, Grayscale’s CEO believes that investors will benefit from enhanced tools for risk management and investment strategy.
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