The US Securities and Exchange Commission (SEC) has given the green light to Nasdaq’s International Securities Exchange (ISE) to list and trade options on BlackRock’s iShares Bitcoin Trust (IBIT), following a rule change.
The SEC’s decision is a significant step forward for crypto derivatives and broadens the field of financial products linked to Bitcoin in the US.
Among professional traders and crypto specialists, the news was greeted with excitement. Jeff Park, Head of Alpha Strategies at crypto fintech Bitwise, described the move as “game-changing”
The approval follows months of deliberation after BlackRock’s request back in March.
If there were one thing to read today re the game-changing nature of Bitcoin ETF options, read (and bookmark) this one for 2025 – it's going to be wild. pic.twitter.com/On2DmUsbHX
— Jeff Park (@dgt10011) September 20, 2024
Index options on Bitcoin offer institutional investors and traders a more traditional avenue to manage their exposure to the world’s largest cryptocurrency. The derivatives provide a relatively efficient and cost-effective means to gain exposure to Bitcoin without buying some directly.
To gain approval from the SEC, Nasdaq ISE had to submit several amendments to assuage concerns about market manipulation and excessive risk-taking. A critical amendment in the filing limits IBIT options at 25,000 contracts, which the exchange describes as “extremely conservative” given the market size and the trust’s liquidity.
SEC move will help Bitcoin ETFs gain traction with mainstream
Since the launch of the Bitcoin exchange-traded funds (ETFs), crypto, particularly Bitcoin, has gained greater mainstream acceptance after approval was first given by the SEC in January this year.
The SEC approves technical rule changes required for exchanges to list new options. The regulator confirmed on Friday (Sep, 20) that its existing surveillance procedures will apply to the newly approved IBIT options.
Despite the march towards widespread adoption, there have been objections to these ETFs along the way. There are ongoing debates around the risks associated with these financial products and during the SEC’s review process, several comment letters expressed concerns about market volatility and the wider implications of merging digital assets into the traditional financial markets.
Despite these concerns, the SEC determined that the exchange’s surveillance mechanisms, including real-time monitoring and inter-market surveillance-sharing agreements with the Chicago Mercantile Exchange – one of the world’s largest financial derivatives exchanges – would be sufficient to deter manipulation.
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