Nasdaq is hoping for the green light from regulators to launch and trade options on a Bitcoin index, the exchange operator said Tuesday.
The U.S. Securities and Exchange Commission (SEC) has yet to approve options trading based on the individual exchange-traded funds (ETFs) tied to Bitcoin spot prices that debuted in January. This includes an application on Nasdaq to trade options on BlackRock’s $21.3 billion (approximately Rs 193,940 crore) iShares Bitcoin Trust ETF.
The proposed index options – exchange-traded derivatives that offer a quick and low-cost way to increase exposure to Bitcoin – on a Bitcoin index would give institutional investors and traders an alternative way to hedge their exposure to the world’s largest cryptocurrency.
“Having options on Bitcoin is important to fully normalize this asset class,” said Matt Hougan, chief investment officer of Bitwise, one of a group of asset managers that launched Bitcoin ETFs this year. “We’re missing some of the liquidity picture that ETF options would provide.”
Options are exchange-traded derivatives that give the holder the right to buy or sell an asset, such as a stock or a listed product, at a predetermined price on a set date. They offer traders a low-cost way to increase their purchasing power, while institutional investors use them to hedge risk.
The proposed Nasdaq Bitcoin Index Options would track the CME CF Bitcoin Real-Time Index, which was developed by CF Benchmarks to track Bitcoin futures and options contracts available on the exchange operated by CME Group, Nasdaq said.
While they wait for regulators to approve or reject options on the new Bitcoin ETFs, traders have turned to other products, such as the recently launched leveraged ETFs tied to Bitcoin and options on those funds.
Exchanges began filing for spot Bitcoin ETF options once it became clear the SEC would approve the underlying ETFs in January. But in recent weeks, they have withdrawn and then resubmitted those applications in response to comments from the SEC, people familiar with the matter said.
© Thomson Reuters 2024
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