NASDAQ, CBOE, NYSE Reverse Course on Bitcoin and Ethereum ETF Options By Pulling Proposals
Exchanges have pulled their proposals to list options on crypto ETFs. Photo by Scott Olson/Getty Images.
Key Takeaways
- In the last week, the Nasdaq, the Chicago Board Options Exchange, and the New York Stock Exchange have all pulled their application to list crypto ETF options.
- CBOE has since refiled its proposal with the SEC, and Nasdaq and NYSE are expected to follow suit.
- The accelerated pace of developments suggests the SEC may be warming to the concept.
It has been seven months since the Securities and Exchange Commission (SEC) greenlit the first spot Bitcoin Exchange-Traded Funds (ETFs). Yet, the regulator remains hesitant to allow options trading on these new crypto funds.
Moreover, their Ethereum-based counterparts, which debuted more recently, also remain options-free.
As a sign that the regulator is putting up roadblocks, the NASDAQ, the Chicago Board Options Exchange, and the New York Stock Exchange have all recently withdrawn proposals to enable crypto ETF options.
Securities Exchanges Play Regulatory Tennis
For over a year, US securities exchanges have been locked in a constant back and forth with the SEC, which previously demanded repeated modifications to their various ETF proposals before finally approving them.
Mirroring the ETF applications themselves, there is no established model for options on crypto funds. As such, exchanges have had to wing it and wait for the SEC’s response.
Last week, CBOE withdrew its application to list and trade options on crypto ETFs. However, it followed up shortly after with adjusted proposals.
On Thursday, Aug. 15, Nasdaq and NYSE also withdrew their proposals. At the time of writing, they have yet to be resubmitted.
Commenting on the latest development, Bloomberg ETF analyst James Seyffart said he expects Nasdaq and NYSE to follow CBOE and refile in the coming days or weeks.
What’s the Holdup?
While the SEC clearly hasn’t been satisfied with exchanges’ proposals so far, it hasn’t publicly signaled its position on crypto ETF options.
In a letter to the SEC in May, the investor advocacy campaigner Better Markets Inc. warned the regulator against rushing to approve options on the new exchange-traded products. It argued they “will expose retail investors to a tremendous amount of risk” while also posing “systemic risks to the financial system that the SEC must be careful to guard against.”
Initial proposals filed by exchanges in January were met by silence from the Commission. However, the accelerated pace of developments in recent weeks suggests it may be warming to the concept after exchanges filed more detailed proposals.
Advantages of ETF Options
Although there are concerns that new crypto ETF derivatives could expose retail investors to additional risk, options also offer several advantages to the burgeoning crypto ETF market.
In any market, options can be used to provide traders with leverage, increasing the potential return on their investments. At the same time, hedging strategies leverage options to mitigate risk during periods of market volatility.
Overall, options trading signals a mature investment market. While the SEC clearly isn’t in a rush to open the gates to them, as institutional demand rises, it is perhaps inevitable that it will eventually approve crypto ETF options.
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