BlackRock Receives SEC Greenlight For Spot Bitcoin ETF Options

The United States Securities and Exchange Commission (SEC) has approved BlackRock’s proposal to offer options trading for its spot Bitcoin ETF (exchange-traded fund).

On Friday, September 20, the SEC released a notice of approval for options trading for the iShares Bitcoin Trust (IBIT) on Nasdaq. This would come about eight months after the SEC greenlighted the world’s largest asset manager and a dozen other firms’ applications to launch spot Bitcoin ETFs.

Following the spot Bitcoin ETF launch in January, BlackRock quickly followed with a proposal to list and trade options on its product. For context, options are derivatives that give the holders the right to purchase or sell an underlying asset at a predetermined price and time

The regulator’s notice read: 

The Commission is publishing this notice to solicit comments on Amendment Nos. 4 and 5 from interested persons, and is approving the proposed rule change, as modified by Amendment Nos. 1, 4, and 5, on an accelerated basis.

It is worth mentioning that other asset management firms, including Grayscale and Bitwise, are also looking to list spot Bitcoin ETFs. Bloomberg analyst Eric Balchunas asserted in a post on X that he expects these firms’ proposals to receive approval in “short order.”

Balchunas added:

Huge win for the bitcoin ETFs (as it will attract more liquidity which will in turn attract more big fish). This is a nice surprise re timing but not a shocker as James Seyffart and I gave 70% odds of approval by end of May.

The Bloomberg analyst also noted that this latest permission to Nasdaq exchange is only one stage of the approval, as the Office of the Comptroller of the Currency (OCC) and Commodity Futures Trading Commission (CFTC) need to validate before trading can officially begin.

ETF expert Nate Geraci also took to the X platform to weigh in on the latest approval of options trading by the SEC, explaining the next steps for the spot Bitcoin ETFs. The ETFStore president highlighted the positive performance of the crypto products despite certain limitations.

Remember, spot btc ETFs have taken in a net $18bil in 8 months…

With no options trading, no in-kind creation & redemption, & limited approval on major wirehouse platforms (plus no access on Vanguard).

Monumental success w/ one hand tied behind back.

— Nate Geraci (@NateGeraci) September 20, 2024

According to Geraci, the introduction of in-kind creation and redemption should be the next milestone for the Bitcoin exchange-traded funds. For context, in-kind creation and redemption refers to the process by which large investors can either create or redeem ETF shares by exchanging them for the underlying asset (Bitcoin, in this scenario).

Related Reading: SEC Vs. Coinbase On Pause: US Regulator Requests 4-Month Fact Discovery Delay

The introduction of in-kind creation and redemption will increase the efficiency of Bitcoin ETF trading, as investors will be able to deposit BTC directly into the fund. This would reduce the cost of investing in the spot Bitcoin ETFs and make them a more attractive investment product.