Regulatory approval for US ETF options may take months

by Jonathan Adams
bitcoin ETFs

The SEC last month approved spot bitcoin exchange traded funds, in a landmark for the crypto industry

Options on new U.S. spot bitcoin exchange traded funds (ETFs) could take months to gain regulatory approval, potentially dampening the appeal of the underlying products, according to multiple industry sources.

The Securities and Exchange Commission (SEC) last month approved spot bitcoin exchange traded funds, in a landmark for the crypto industry. Ten products have been trading since January 11.

Options on the bitcoin ETFs are delayed because there is no established regulatory process for approving them.

The Securities and Exchange Commission oversees technical rule changes that exchanges must make to list options, and typically approves them days after an exchange traded fund starts trading. But because regulators view bitcoin as a commodity, spot bitcoin ETF options may also require approval from the CFTC, which oversees commodity derivatives, the sources added.

Products related to the spot bitcoin exchange traded funds could raise questions about jurisdiction and oversight, which the Commodity Futures Trading Commission is still sorting through, said a person familiar with the matter who declined to be identified discussing regulatory matters.

Without the options, big investors, which analysts have said could help drive as much as $100 billion into the exchange traded funds, face risk management issues. That may lead some “to stay away altogether,” said Yesha Yadav, law professor at Vanderbilt University.

The delay is also a barrier to the crypto industry’s aim to bring more innovative crypto products to market.

While it is not uncommon for options to require dual approval, it is rare. In the case of the first exchange traded fund tied to a physical commodity, the SPDR Gold Shares ETF, it took more than three years for the Commodity Futures Trading Commission to approve the options. Regulators never signed off on a 2010 application to launch options on platinum and palladium ETFs.

Nasdaq, CBOE and NYSE Arca, which list the ETFs, in January sought SEC approval to launch the options, as per notices on their websites. CBOE said that it expects to list options “later in 2024.”

Related Posts

    Sign up for our newsletter

    Get our latest downloads and information first. Complete the form below to subscribe to our weekly newsletter.

    © Copyright 2022-23
    Trading and Investment News.
    Part of CAS Media Group Publishing Ltd whose registered office is – Unit 7, Lombard Business Park, 12 Deer Park Road, Wimbledon, SW19 3FB

    Latest articles