SEC Approves Options Trading on BlackRock’s Bitcoin Spot ETF

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The US Securities and Exchange Commission (SEC) has approved options trading on BlackRock’s iShares Bitcoin Trust (IBIT), according to a SUBMISSION published today.

With IBIT options approved, investors now have a new tool for hedging and managing Bitcoin price risk. These physically settled options will work similarly to other ETF options already traded on US exchanges.

The SEC said IBIT options will face strict supervision and oversight, following ETF trading rules with additional Bitcoin-specific measures.

Key changes in the approval process included setting conservative position and exercise limits, limiting options to 25,000 contracts. The SEC found this limit to be appropriate given IBIT’s market capitalization and liquidity, considering it a conservative measure to deter market manipulation.

Supervisory and anti-manipulation measures, including real-time pattern tracking and post-trade surveillance, will ensure that market abuse is deterred and detected. This improved regulatory framework is crucial given Bitcoin’s volatility, which remains a point of concern for some investors and regulators alike.

The approval process began on January 9, 2024, when Nasdaq ISE submitted a proposal to list and trade options on BlackRock’s Spot Bitcoin ETF. Following the amendments and public comments, the SEC initiated proceedings to evaluate the proposal, addressing concerns about market manipulation, investor protection and liquidity.

The approval of options trading on the BlackRock Spot Bitcoin ETF marks a key step in the crypto’s maturation, giving institutions more tools to hedge and manage their Bitcoin exposure. Also today, BNY Mellon’s announcement the advancement in crypto custody services highlights how traditional financial institutions are increasingly embracing the crypto market, driven by growing institutional demand.

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