NYSE’s Bitcoin Opportunity: Options on Bitcoin ETFs May Fuel Future Growth

Published January 17, 2024 9:53 AM

By Teuta Franjkovic

NYSE files 19b-4 application to list and trade options on Commodity-Based Trust Shares | Credit: Spencer Platt/Getty Images)

Key Takeaways

The introduction of spot Bitcoin ETFs led to a surge in trading, with skyrocketing volumes in just three days.
The NYSE has filed an application to allow options trading on spot Bitcoin ETFs.
ProShares has filed applications for leveraged Bitcoin ETFs.
Grayscale has been withdrawing funds from its Bitcoin Trust, leading to outflows from Bitcoin ETFs overall.

The introduction of spot Bitcoin ETFs has seen a remarkable increase in trading activity, with volumes soaring to $10 billion within a mere three days of their launch.

At the same time, there’s significant market speculation about the potential for allowing options trading on the shares of commodity-based trusts, specifically for some of the newly released Bitcoin ETFs.

Options Trading for Spot Bitcoin ETFs: A Potential Game-Changer

On January 13, Bloomberg analyst Henry Jim reported a significant development from the New York Stock Exchange (NYSE). The NYSE submitted a 19b-4 filing , a formal request for regulatory approval to list and trade options on Commodity-Based Trust Shares. This move is, notably, tailored to the structure of some of the newly launched Bitcoin ETFs.

NYSE filed 19b-4 to allow for listing and trading of options on Commodity-Based Trust Shares – as some of the new #Bitcoin ETFs are structured.

This may increase trading volume (and income) for NYSE and also increase liquidity for the new #BTC ETFs.

Filing is here:… pic.twitter.com/luCMcZxcG4

— ETF Hearsay by Henry Jim (@ETFhearsay) January 13, 2024

Eric Balchunas, a senior ETF strategist at Bloomberg, elaborated on the importance of the 19b-4 filing. This filing is a step towards enabling the trading of options on spot Bitcoin ETFs. The process involves submissions from all three exchanges under the 19b-4 framework, with the possibility of receiving approval in about two months.

This is a filing to be able to list options on spot bitcoin ETFs. All three exchanges had to file a 19b-4 (here we go again lol). Earliest approval in 2mo-ish. Commodity trusts like $GLD et al had to do the same thing. Options will likely be a big hit on these given the… https://t.co/gsMQO8DClq

— Eric Balchunas (@EricBalchunas) January 16, 2024

Balchunas also highlighted the historical precedence of similar filings in the commodity trusts sector. He referenced the $GLD ETF as a notable example. He underscored the potential impact of such approvals, particularly given Bitcoin’s inherent volatility. According to Balchunas, the introduction of options trading could amplify the appeal and functionality of these Bitcoin ETFs.

If sanctioned, this initiative would not only increase trading volumes and generate additional revenue for the exchange but also enhance the liquidity of the new Bitcoin ETFs.

SEC Approval of NYSE Bitcoin ETF Options Looms

Bloomberg strategist James Seyffart offers insight into the potential outcomes of the 19b-4 application.

Okay. only the Nasdaq filers are submitted so far. Still nothing from anyone listing with NYSE or CBOE.

3 with NYSE and 6 with CBOE. https://t.co/xcyI65s1rA pic.twitter.com/2geXf0zGxL

— James Seyffart (@JSeyff) January 5, 2024

Although the United States Securities and Exchange Commission (SEC) could speed the process up, Seyffart remains cautious. He speculates that there might be delays, drawing on the SEC’s historical pattern of handling such applications.

Here's the 19b-4 application to allow options on spot #Bitcoin ETFs. Theoretically the SEC could handle this and approve rather quickly (first deadline in <~60 days) But could also delay repeatedly and wait until like late Sept or early Oct?

(or i guess they could even deny?) https://t.co/lqsiQcM8ZP

— James Seyffart (@JSeyff) January 16, 2024

Seyffart suggests that the timeline for approval could vary significantly. The scenarios range from an unexpectedly swift approval process to a more extended timeline, possibly stretching into late September or early October. This development is unfolding amid a rising interest in bridging traditional financial markets with the cryptocurrency sector.

? Bloomberg's James Seyffart reports: Bitwise and BlackRock revise ETF application and resubmit to SEC, likely prompting other firms to also submit amended filings. #FinanceUpdate #ETFRevise #SECNews #InvestmentTrends #Bitwise #BlackRock ??? pic.twitter.com/zmwL33m9SR

— Fintech For The People (@fintech_people) December 5, 2023

In a parallel move, ProShares has recently submitted applications for leveraged Bitcoin ETFs. These ETFs are designed to provide investors with the option to speculate on Bitcoin’s price movements. This allows them to position themselves either in support of or against Bitcoin’s market fluctuations.

Grayscale’s Influence on Bitcoin ETF Market Dynamics

Grayscale, a leading asset management firm, has recently been at the forefront of driving trading volumes in the Bitcoin ETF market. In a latest update from James Seyffart, he noted that there were net outflows from Bitcoin ETFs on the previous day. He specifically pointed out that an estimated $594 million is expected to be withdrawn from Grayscale’s Bitcoin Trust ($GBTC), culminating in a total outflow of $1.173 billion.

Update on the #Bitcoin ETF Cointucky Derby. The ETFs have traded almost $10 billion total over 3 days. Will have updated flows and assets later tonight or tomorrow morning. pic.twitter.com/OnpCshjYJP

— James Seyffart (@JSeyff) January 16, 2024

Despite some Bitcoin ETFs registering inflows, Seyffart remains doubtful about their capacity to fully counterbalance the significant outflow from $GBTC, which nears $600 million.

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About the Author

Teuta Franjkovic

Teuta is a seasoned writer and editor with more than 15 years of experience. She has expertise in covering macroeconomics and technology as well as the cryptocurrency and blockchain industries. She has worked for several publications as a journalist and editor, including Forbes, Bloomberg, CoinTelegraph, Coin Rivet, CoinSpeaker, VRWorld and Arcane Bear. Teuta began her professional career in 2005, working as a lifestyle writer at Cosmopolitan in Croatia. From there, she branched out to several other publications, covering mainly business and the economy. She then turned her attention to the world of cryptocurrency and blockchain, believing that crypto is among the most important inventions in the history of humanity. Her involvement in fintech began in 2014 and she has since lent her expertise in writing, editing and gathering information about the world of crypto, blockchain, NFTs and Web3. An all-round news hound, mentor, editor, and writer, Teuta enjoys teamwork and good communication. She holds a WSET2 diploma and has a thing for chablis, punkrock music and shoes. She also holds a double MA in Political science and Entrepreneurship.

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