SEC Halts Ethereum Options ETF, What’s Behind the Delay?

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The United States Securities and Exchange Commission (SEC) has held back from taking a major decision. The U.S. SEC shifted its ruling on allowing exchanges to list options linked to spot Ethereum exchange-traded fund (ETF).

According to a filing entered on October 11, the regulatory body remains undecided. The ruling would permit Cboe Exchange to list options for several popular spot ETH funds.

SEC Explains Reason for Delay

Sherry Haywood, Assistant Secretary of the SEC, maintained that the commission considers it appropriate to extend the period to act. According to Haywood, this will allow the SEC sufficient time to consider the proposed rule change.

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As a result of this extension, the commission has shifted the new date for approval or rejection to December 3, 2024. The SEC’s Assistant Secretary says the commission can act this way. The power is drawn from Section 19(b)(2) of the Act,6 of the SEC.

Why Options Are Important for ETFs

For context, “options” refer to contracts permitting the right to trade – or, in industry terms, “call” – an underlying asset at a certain price. This allows the Options Clearing Corporation (OCC) to intervene and settle trades in cases of disagreement or breach. The OCC serves as a regulator for listed options traded in the United States under the SEC.

Options have become a measure by financial advisers to safeguard the ETF market against sharp movements. As per data from a survey by the Journal of Financial Planning, over 10% of advisers relied on options in 2023. These advisers used options to manage client portfolios. Hence, stakeholders eagerly anticipate the SEC’s ruling on Cboe’s application with the commission.

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What’s Next on the Path to SEC Approval?

The approval journey commenced in August when Cboe filed an application with the U.S. SEC, seeking permission to list nine ETFs. The ETFs included Fidelity Ethereum Fund, Grayscale Ethereum Trust, Grayscale Mini Ethereum Trust, and BlackRock’s iShares Ethereum Trust ETF. The application also involved the 21Shares Core Ethereum ETF and the Invesco Galaxy Ethereum ETF, among others.

Some stakeholders anticipated the SEC’s decision before October 19, 2024. However, with the new extension, which is still within the 90 days, investors will have to wait till December for a decision. The crypto community has become accustomed to expecting delays from the SEC in making critical decisions. 

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