Reps. Nickel and Flood Push for SEC Approval of Options on Spot Bitcoin ETFs
By Hassan Shittu
US Representatives Mike Flood and Wiley Nickel are urging the U.S. Securities and Exchange Commission (SEC) to grant approval for options trading on spot bitcoin exchange-traded products (ETPs). They have specifically called on SEC Chair Gary Gensler to address the delay in approving these options.
Flood and Nickel are emphasizing the need for clarification regarding the perceived discrepancy in treatment between options for Bitcoin futures ETFs, which are already being traded, and options for spot Bitcoin ETPs.
Reasons for Approval Request
The lawmakers have referred to the SEC’s approval of spot bitcoin ETFs in January, highlighting the significant amount of capital that these products have attracted since their introduction.
“We urge you, without any delay, to approve options on spot Bitcoin ETPs or to provide an explanation for the Commission’s differing treatment of options for Bitcoin futures ETFs, which are currently being traded, and options for spot Bitcoin ETPs,” wrote Flood and Nickel, who belong to the Republican and Democrat parties, respectively.
The delay in approving options on spot bitcoin ETFs has raised concerns among lawmakers, especially in light of previous court rulings that questioned the SEC’s reasoning behind treating similar products differently.
Flood and Nickel stress the importance of options trading for the investors whom the SEC aims to protect.
The approval of spot bitcoin ETFs earlier this year was prompted, in part, by a ruling made by three judges in a D.C. court over the summer. The judges decided that the SEC had to re-review Grayscale’s proposal for a spot bitcoin ETF after the asset management firm filed a lawsuit against the agency last year following the rejection of its plan to convert its flagship GBTC fund.
Flood and Nickel’s letter highlights the crucial role that options trading plays in providing investors with risk management tools and additional investment strategies.
While the SEC’s approval process typically involves multiple agencies, including the Commodity Futures Trading Commission (CFTC), Flood and Nickel’s letter focuses on the SEC’s responsibility in addressing the current regulatory challenges surrounding options trading on spot bitcoin ETFs.
SEC’s Indecisiveness on ETFs
According to the SEC’s filing on April 8, the SEC extended its decision-making timeline regarding options trading for Bitcoin ETFs proposed by Grayscale and Bitwise.
On April 25, the SEC initiated consultations regarding a proposed rule change, indicating a potential shift in its regulatory stance. Several exchanges have sought to enable options trading on recently approved spot bitcoin ETFs, but the process has been delayed.
The SEC’s review aims to evaluate the impact of introducing Bitcoin options trading on market stability and efficiency, especially during volatile periods. It also considers whether the current surveillance and enforcement measures are sufficient for managing the complexities of Bitcoin options.
The Commission has chosen to extend the review period to thoroughly assess the applications, with a new deadline set for May 29, 2024. This delay follows a previous postponement in March 2024, which affected proposals from Cboe Exchange Inc. and Nasdaq ISE, indicating the SEC’s cautious approach to regulating crypto-related financial products.
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