Approval was granted by the United States Securities and Exchange Commission for listing and trading options on a spot Bitcoin exchange-traded fund offered by BlackRock’s iShares Bitcoin Trust, IBIT. With this approval, the investors will be physically settling the options based on the fund, wherein Bitcoin will be delivered upon exercising an option.
The options will be exercisable at any time before their expiration, therefore offering higher flexibility to the traders. According to the SEC, new options will be similar to other exchange-traded funds and subject to the same rules, such as position limits and margin requirements.
Eric Balchunas, Bloomberg’s senior ETF analyst, observed: “This is a big win for Bitcoin ETFs in terms of liquidity and potentially institutional money in more sizeable accounts.”
The SEC observed that the permission would provide investors with a fresh way of hedging Bitcoin’s natural volatility using options trading to hedge their positions more efficiently. The iShares Bitcoin Trust, which had established itself as the most liquid spot Bitcoin ETF in the U.S., met the requirements for options trading.
“IBIT is currently the 11th most liquid ETF in the U.S., with an average daily volume of over 34 million shares and around 194,000 shareholders,” the SEC said. The commission underscored rigorous surveillance mechanisms to guarantee against market manipulation and orderly trading.
This is an important step but the OCC and the CFTC would still need to get final approval regarding official listings. According to Balchunas, “This is only one step of the process but is a huge step forward.”
The development represents the increasing welcome of Bitcoin within regulated financial markets. This approval marks one side of a broader trend that is unfolding in the development of expanding regulated financial products tied to cryptocurrencies, now with new opportunities for institutional investors to get engaged with Bitcoin and manage their risks.
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Haider Shah