Nasdaq Inc. is awaiting a decision from the U.S. Securities and Exchange Commission (SEC) on its application to offer options trading on a bitcoin index. The exchange operator announced its intention on Tuesday, signaling a potential expansion of cryptocurrency-related products in financial markets. The SEC has yet to approve options for any exchange-traded funds (ETFs) tied to bitcoin spot prices, which includes Nasdaq’s previous application to list options on BlackRock’s iShares Bitcoin Trust ETF, a fund with $21.3 billion in assets. The proposed bitcoin index options would provide institutional investors and traders with a new tool to hedge their exposure to bitcoin. Such options are designed to be a cost-effective method of managing risk or increasing market exposure without directly owning the asset.
Bitwise Asset Management’s chief investment officer emphasized the importance of options in the cryptocurrency market, stating, “It is important that bitcoin options are available for this asset class to fully normalize. We are missing out on some of the liquidity framework that ETF options would provide.” Options are financial derivatives that grant the right, but not the obligation, to buy or sell an asset at a specified price within a certain time frame.
They are commonly used to speculate on price movements or to hedge against potential losses in other investments. Nasdaq Bitcoin Index Options would be tied to the CME CF Bitcoin Real-Time Index, which is based on bitcoin futures and options contracts traded on the CME Group platform. As the SEC deliberates on approving spot bitcoin ETF options, traders have been looking at alternative investment vehicles, such as leveraged bitcoin-related ETFs and options on those funds. In response to the SEC’s feedback, exchanges have withdrawn and resubmitted their applications for spot bitcoin ETF options in recent weeks, according to people familiar with the matter. Reuters contributed to this article.
