Grayscale recently submitted a comment letter to the U.S. Securities and Exchange Commission (SEC), expressing support for the proposal to allow Bitcoin spot ETF options trading on the U.S. stock exchanges.
The proposal aims to open up exchange-traded products (ETPs) based on commodities, such as Bitcoin spot ETFs like GBTC, to options trading.
Grayscale’s main argument is that since Bitcoin futures options are already available for trading, which allows investors to invest in options based on “asset derivative products (such as Bitcoin futures),” options based on “asset itself products (such as GBTC)” should also be accepted.
SEC’s approval process for commodity-based products options trading differs
Grayscale stated in its statement that since October 2021, the SEC has allowed Bitcoin futures options to start trading 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 require separate review and approval by the SEC, leading to inconsistencies in the approval process for commodity-based fund options trading.
Grayscale proposed that the SEC should update this outdated approval method to allow the approval of options for spot commodity-based ETPs that have the same structure as approved ETPs, and allow national stock 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 supported its argument by referencing the court ruling, stating that the Washington court considered Bitcoin futures and Bitcoin spot to be “substantially similar in terms of relevant regulatory factors,” and the court found the SEC’s actions in rejecting its application to be arbitrary and capricious, overturning the rejection order in June 2022.
Grayscale stated 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 greater liquidity compared to the Bitcoin futures ETF market.
As for the benefits of allowing options trading for Bitcoin spot ETFs, Grayscale pointed out the following:
1. Facilitating price changes for Bitcoin spot ETFs.
2. Providing investors with more options and helping them respond to market changes or achieve investment objectives (such as income generation, hedging, or volatility reduction).
3. Increasing investor interest in Bitcoin spot ETFs.
4. Improving market efficiency.
5. Ending the SEC’s time-consuming and expensive product-by-product approval method that has been in place for 15 years.
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