- The SEC’s approval allows Bitcoin ETF options trading on NYSE and CBOE, enhancing market liquidity.
- Strict position and exercise limits are set for Bitcoin ETF options to maintain market stability and security.
- NYSE and CME will collaborate on surveillance to detect potential manipulation in Bitcoin spot and futures markets.
The U.S. Securities and Exchange Commission has given the green light for options trading on Bitcoin exchange-traded funds. The approval applies to the New York Stock Exchange and the Chicago Board Options Exchange.
This decision allows traders to utilize Bitcoin ETFs like the Grayscale Bitcoin Trust, the Grayscale Bitcoin Mini Trust, and the Bitwise Bitcoin ETF as underlying securities in options contracts.
Accelerated Approval for Spot Bitcoin ETFs
The SEC also approved accelerated listing of more spot ETFs of Bitcoin. Among them are the Fidelity Wise Origin Bitcoin Fund, the ARK 21 Shares Bitcoin ETF and the Invesco Galaxy Bitcoin ETF. As more bitcoin based financial products get rolled out, they will be available on exchanges.
Criteria and Trading Rules
The requirements for these underlying securities are detailed in the SEC filing. It is mentioned that options trading can hedge risks, boost market liquidity, and possibly decrease volatility for Bitcoin ETFs.
The rule is also revised to allow for listing and trading of these options under Rule 915. Under this regulation, Bitcoin ETFs will be treated the same as commodity backed ETPs like gold and silver.
Position and Exercise Limits
However, the SEC emphasizes that Bitcoin options must comply with strict position and exercise limits. The Exchange proposes a limit of 25,000 contracts for Bitcoin Fund options.
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This limit equates to approximately 0.9% of outstanding shares for GBTC, 0.7% for BTC, and 3.6% for BITB. These conservative measures aim to ensure stability and protect investors in the market.
Monitoring and Surveillance Measures
To enhance security, NYSE and its affiliate, NYSE Arca, will share surveillance data with the Chicago Mercantile Exchange (CME). This collaboration will help monitor trading activities and identify any potential manipulation within both the spot and futures markets.
Market Impact Minimization
The filing also underscores the safeguards in place to prevent market manipulation. It mentions how the creation and redemption processes for Bitcoin fund shares, such as GBTC, ensure no single entity dominates the market.
Even if multiple participants held the maximum allowed positions, the overall market impact would remain minimal.
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