Nasdaq Plans Bitcoin Index Options, Awaits SEC Approval

Nasdaq, the American leading stock exchange, is planning to launch index options that allows investors to hedge their exposure to the largest cryptocurrency, in partnership with CF Benchmarks, according to an announcement on August 27.

The investment product, called Nasdaq Bitcoin Index Options, is subject to approval from the U.S. Securities and Exchange Commission (SEC). If accepted, it will trade under the XBTX ticker and track the price of Bitcoin as represented by the CME CF Bitcoin Real-Time Index (BRTI).

More Market Options

The Nasdaq Bitcoin Index Options would be cash-settled based on the CME CF Bitcoin Reference Rate – New York Variant (BRRNY), meaning that when the options contract expires, the option holder will receive or pay a cash amount, not Bitcoin, based on the difference between the strike price and the final price of the crypto asset as determined by the BRRNY index.

According to Greg Ferrari, Vice President and Head of Exchange Business Management at Nasdaq, these options will provide market participants with reliable and trustworthy ways to invest in Bitcoin. He believes the launch of these options contracts will be a major step forward in the development and maturation of the digital assets market.

The product targets both institutional and retail market participants seeking a risk management tool. Once approved, it is expected to allow investors to manage positions and hedge investments in Bitcoin, without directly owning the cryptocurrency.

Commenting on the planned offering, Sui Chung, CEO of CF Benchmarks, said the options contracts will complement the growing popularity of spot Bitcoin exchange-traded funds (ETFs). They will provide investors only more investment choices but also confidence thanks to the regulated nature of these derivatives, Chung added.

“Together these regulated crypto derivatives will give investors the confidence to deploy more nuanced ways to gain exposure to the largest digital asset and will complement the spot ETFs that have already proved so popular with investors,” said Chung.

US Crypto Markets Under Fire

Unlike previous proposals, Nasdaq’s proposed options will track a benchmark index rather than an exchange-traded fund. Like Nasdaq, the Chicago Mercantile Exchange also plans to launch smaller Bitcoin futures in September, also tied to the CF benchmark.

The move comes shortly after a wave of withdrawals regarding crypto options filings. Earlier this month, NYSE Arca, NYSE American and Nasdaq ISE reportedly pulled back their request for rule changes related to listing options on spot Bitcoin and Ether ETFs.

As of now, the SEC has not approved any Bitcoin or Ethereum ETF options for trading on major U.S. exchanges. The regulator has been cautious and requested more time to consider these proposals.

While the explicit reasons for recent withdrawals remain unclear, analysts suggest that the SEC may have feedback or conditions that led to the withdrawals. Nasdaq had previously expressed the need to demonstrate that the underlying Bitcoin ETPs are widely held and actively traded.

Despite ongoing challenges and delays in the process, there is a possibility that Bitcoin and Ethereum options could be approved in the future. Bloomberg anticipates that spot Bitcoin options could be available by the fourth quarter.

Analysts view the recent withdrawals as temporary setbacks. On the bright side, these indicate that exchanges might be making progress towards reaching an agreement with the SEC for listing crypto ETF options.

Grayscale has urged the SEC to approve options on spot Bitcoin ETFs. The firm argues that there is no difference between investing in options for derivatives and the underlying asset.

While there are currently no options for spot Bitcoin and Ethereum ETFs in the U.S, investors can trade options on ETFs that track Bitcoin performance using derivatives.