SEC Approves Nasdaq Options for BlackRock’s Bitcoin ETF, Paving the Way for Institutional Investment

• On September 20th, the  U.S. SEC approved Blackrock’s proposal to list and trade options for its Bitcoin ETFs.
• Additionally, Nasdaq’s International Securities Exchange (ISE) can now list and trade options on the iShares Bitcoin Trust.

On September 20th, the U.S. SEC approved Blackrock’s proposal to list and trade options for its Bitcoin ETFs, and in this, Nasdaq’s ISE can now list and trade options on the iShares Bitcoin Trust, Blackrock’s Bitcoin ETF. 

The SEC said it was approving the world’s largest asset manager on an “accelerated basis” to list those options for the iShares Bitcoin Trust (ticker IBIT), in a filing posted on Friday. Nasdaq ISE, LLC would be listing and trading those options.

As the crypto market gets more cutthroat, the approval of options trading for BlackRock’s Bitcoin ETF marks a significant milestone in the growing acceptance of Bitcoin-based financial products.  Also, this move gives traditional finance institutions exposure to Bitcoin, which can now use options to hedge their positions and manage the ups and downs that come with the crypto minefield.

“8+ months after spot bitcoin ETFs launched…Options trading has now been approved,” said ETF Store President Nate Geraci in a post on the X platform. “Better late than never.“

The beginning of the year witnessed the debut of several exchange-traded funds (ETFs), with Blackrock being one of them. Since then, iShares Bitcoin has quickly gained traction as one of the most liquid Bitcoin-related products in the U.S.  Now, with options available on IBIT, investors will have an added layer of flexibility, allowing them to use options to speculate, hedge, or diversify their portfolios without directly holding Bitcoin.

BlackRock’s push for this approval began as early as March, following a series of approvals for Bitcoin-linked ETFs in the U.S. However, the SEC’s decision was not without its challenges . The proposal faced significant scrutiny over concerns related to market manipulation and excessive risk-taking, which have been ongoing concerns for crypto derivatives.

As earlier reported , Nasdaq ISE submitted several amendments in an attempt to address these issues, which included implementing enhanced surveillance measures.

In particular, position and exercise limits for options on IBIT have been set at 25,000 contracts, a number Nasdaq ISE described as “extremely conservative,” given the liquidity of the trust. Additionally, the options will be physically settled and feature American-style exercise, meaning investors can exercise their options at any time before expiration, providing more flexibility for risk management.

Institutional investors have long dreaded for Bitcoin derivatives and the SEC’s approval for these options cements cryptocurrency’s foothold in traditional markets. Options on iBIT allow a regulated and precise exposure to Bitcoin. 

Despite the glad tidings, concerns have risen, highlighting the risks of increased volatility while urging the regulatory board to proceed with caution.  However, the SEC found that Nasdaq’s surveillance mechanisms, including real-time monitoring and agreements with the CME, would be sufficient to address concerns about manipulation and instability.