Grayscale recently submitted a comment letter to the U.S. Securities and Exchange Commission (SEC), supporting the proposal to open options trading for Bitcoin spot ETFs on the U.S. stock exchanges.
Background:
Is the next step for Bitcoin spot ETFs options trading, moving further away from the “blockchain ideal”?
Supplemental background:
Bitcoin spot not exciting enough? Over 15 “leveraged ETF” applications, analysts shocked: unprecedented.
Grayscale, with the largest assets under management in the Bitcoin ETF space, announced on the 6th that it has submitted a comment letter to the U.S. Securities and Exchange Commission (SEC), supporting the proposal by NYSE American and NYSE to open trading options for commodity-based exchange-traded products (ETPs) such as GBTC, a Bitcoin spot ETF.
Further reading:
Is the next step for Bitcoin spot ETFs options trading, moving further away from the “blockchain ideal”?
Grayscale’s main argument is that now that Bitcoin futures options are already open for trading, which means that investors can invest in options of “asset derivative products (such as Bitcoin futures),” options of products that directly hold “the asset itself (such as GBTC)” should also be accepted.
There is a difference in SEC’s approval of options trading for commodity-based products.
In its statement, Grayscale stated that since October 2021, the SEC has allowed Bitcoin futures options to be traded on the second day after the approval and listing of the first batch of Bitcoin futures ETFs. This is mainly because options trading for products registered under the 1940 Securities Act, such as Bitcoin futures ETFs, has been widely accepted.
However, spot commodity products like GBTC are registered under the 1933 Securities Act, and therefore must undergo individual review and approval by the SEC, resulting in inconsistency in the approval of options trading for commodity-based funds.
Grayscale proposes that the SEC should update this outdated approval process, allowing the approval of options for spot commodity-based ETPs with the same structure as approved ETPs, and allowing national securities exchanges to update their rules to approve the listing and trading of such options. This would include options for GBTC.
Importance and Impact:
Grayscale further supports its argument by citing the court’s ruling, stating that the Washington court found in its lawsuit with the SEC that Bitcoin futures and Bitcoin spot are “substantially similar in terms of relevant regulatory factors,” and that the SEC’s behavior in rejecting its application was arbitrary and capricious, thereby overturning the SEC’s rejection order in June 2022.
Further reading:
After winning SEC lawsuit, will Grayscale transform GBTC into a spot ETF? Experts say it might not be that simple.
Grayscale states that although the Bitcoin spot ETF market is still in its early stages, it has already attracted more investors, providing smaller bid-ask spreads and much greater liquidity compared to the Bitcoin futures ETF market.
As for the benefits of opening options trading for Bitcoin spot ETFs, Grayscale points out the following:
Facilitate price changes for Bitcoin spot ETFs.
Provide investors with more options and help them respond to market changes or achieve investment goals such as income generation, hedging, or reducing volatility.
Increase investor interest in Bitcoin spot ETFs.
Improve market efficiency.
Put an end to the SEC’s time-consuming and expensive individual product approval method that has been relied upon for the past 15 years.
Related reports:
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