SEC Evaluates Bitcoin Options Trading Rules Amidst Regulatory Scrutiny

The Securities and Exchange Commission (SEC) is currently conducting a review of proposed rule changes related to the trading of options on Bitcoin exchange-traded products (ETPs) in the United States. The SEC aims to assess how the introduction of Bitcoin options could impact the overall market, particularly during periods of market stress, and whether current surveillance and enforcement mechanisms employed by exchanges are sufficient to handle the unique characteristics of Bitcoin options. Interested parties are invited to provide initial comments within 21 days of the filing, with a final deadline set for May 15, 2024, and rebuttal comments accepted until May 29, 2024. Bitcoin options, which grant the holder the right to buy or sell Bitcoin at a predetermined price by a certain date, are considered complex financial instruments suitable for experienced traders. The SEC previously sought feedback on the proposed rule changes, with many commenters emphasising the potential benefits of increased liquidity and market efficiency associated with options on Bitcoin ETPs. Various financial institutions, including Nasdaq and Cboe, have submitted proposals to the SEC seeking approval to trade Bitcoin options, with Nasdaq looking to list options on BlackRock's iShares Bitcoin Trust and Cboe planning to offer options trading on multiple Bitcoin ETPs. Additionally, asset managers such as Bitwise and Grayscale are pursuing regulatory clearance to list options on their Bitcoin ETFs through applications with the New York Stock Exchange.