(Kitco News) – Nasdaq, the U.S.-based stock exchange, in partnership with CF Benchmarks, is reportedly seeking approval from the Securities and Exchange Commission (SEC) to launch and trade Bitcoin (BTC) Index options.
An option is a listed derivative that gives the holder the right – but not the obligation – to buy or sell an asset, such as a stock or exchange-traded product, at a predetermined price by a set date. Traders use them as an inexpensive way to increase their purchasing power, while institutions use them to hedge risk.
"This collaboration combines the innovative crypto landscape with the resiliency and reliability of traditional securities markets and would mark a significant milestone for expanding the maturation of the digital assets market,” said Greg Ferrari, Vice President and Head of Exchange Business Management at Nasdaq.
According to a report for Reuters, the SEC has yet to approve options based on any of the individual exchange-traded funds (ETFs) tied to spot Bitcoin prices that launched at the beginning of 2024, including a Nasdaq application to trade options on BlackRock's iShares Bitcoin Trust (IBIT).
This newest filing by Nasdaq proposes index options that would give institutional investors and traders an alternative way to hedge their exposure to Bitcoin, further expanding the available options. If approved, these Bitcoin options would become the first cryptocurrency derivatives cleared by the U.S. Options Clearing Corporation (OCC).
“It's important for options on Bitcoin to be available for this asset class to be fully normalized,” Matt Hougan, chief investment officer of Bitwise, told Reuters. “We're missing a part of the liquidity picture that ETF options would provide.”
Nasdaq said their proposed Bitcoin index options would track the CME CF Bitcoin Real-Time Index (BRTI), which tracks Bitcoin futures and options contracts available on the exchange operated by CME Group. The final settlement value would be based on the CME CF Bitcoin Reference Rate New York Variant (BRRNY).
Sui Chung, CEO of CF Benchmarks, said spot Bitcoin options settling to BRRNY would enhance the existing futures and options contracts offered by CME and complement already-existent trading in spot BTC ETFs.
“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,” Chung said.
According to people familiar with the matter, multiple exchanges have withdrawn and refiled their applications for spot Bitcoin ETF options in recent weeks in response to SEC comments. Many of those applications were originally filed before the SEC approved the spot BTC ETFs to launch in January.
CME Group to launch Bitcoin Friday futures
Nasdaq is not alone in looking to expand the number of available crypto products as CME Group, the world's leading derivatives marketplace, announced plans to launch Bitcoin Friday futures (BFF) on September 30, pending regulatory review.
The new weekly futures contracts are sized at one-fiftieth of one Bitcoin and will be cash-settled to the BRRNY at 4:00 p.m. New York time every Friday. New BFF contracts will be listed every Thursday at 6:00 pm New York time for a Friday trade date, with market participants able to trade the nearest two Fridays at any given point.
Utilizing a Friday expiry “allows these contracts to closely track the spot price of Bitcoin, as well as help investors mitigate weekend price moves,” CME Group said.
“With these weekly expiring smaller-sized contracts, investors of all sizes - from institutions to sophisticated, active retail traders - will be able to more accurately fine-tune their Bitcoin exposure on a regulated exchange,” said Giovanni Vicioso, CME Group Global Head of Cryptocurrency Products. “By settling to the BRRNY, the benchmark used by leading spot Bitcoin ETFs, traders will also benefit from growing liquidity and the ability to more efficiently capture market moves during U.S. hours.”
“With a shorter duration and smaller-sized contract, Bitcoin Friday futures will offer our active trader and institutional investor clients a flexible and cost-effective new way to manage their Bitcoin exposure in a transparent market,” said Steve Sanders, EVP of Marketing and Product Development at Interactive Brokers.
Elad Even-Chen, Group CFO of Plus500, added that these shorter-duration contracts “will suit the needs of a broad category of investors looking to manage their cryptocurrency portfolios with more flexibility and capital efficiency.”
