Options trading on spot bitcoin exchange-traded funds is one step closer to becoming a reality.
Late Friday, the Commodity Futures Trading Commission’s Division of Clearing and Risk (DCR) issued a staff advisory that said ETF options on spot commodity funds are "cleared and settled by the Options Clearing Corporation as the sole issuer of all equity options."
"[I]n light of relevant precedents in the courts, it is substantially likely these spot commodity ETF shares would be held to be securities," the CFTC advisory states. "Therefore, DCR’s position is the listing of these shares on SEC-registered national securities exchanges does not implicate the CFTC’s jurisdiction, and therefore, the clearing of these options by OCC would be undertaken in its capacity as a registered clearing agency subject to SEC oversight."
This is the second hurdle the Bitcoin ETFs needed to clear after the U.S. Securities and Exchange Commission, according to Bloomberg senior ETF analyst Eric Balchunas.
"Ball now in OCC's court and they are into it, so they'll prob list very soon," he said in a post on X. OCC refers to the Options Clearing Corporation, the world's largest equity derivatives clearing organization.
The process began on Sept. 20, when the SEC approved BlackRock's proposal to list and trade options for its IBIT fund. Firms have been looking to list and trade options for their spot bitcoin ETFs following the SEC's approval of 11 spot BTC ETFs in January.
"Nice to see progress, but this delay has been entirely unnecessary," ETF Store President Nate Geraci said on X. "Btw, no reason there shouldn’t be options trading on spot eth ETFs asap as well…"
Retail traders typically use options for speculation, while larger institutions use options as a hedge. Bitcoin has a big retail following, which means it's likely there will be more speculation in bitcoin ETF options when compared to ETF options on equities, market structure analyst Dennis Dick told The Block in September.
“Counter to common opinion, options actually reduce volatility,” Dick told The Block at the time. “As open interest rises, it creates natural buyers and sellers on both sides of the market… This thickens up the market and increases liquidity, which therefore reduces volatility.”
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