Nasdaq is seeking regulatory approval to launch and trade bitcoin index options, the exchange operator said recently.
In addition, Nasdaq said it will provide investors with the ability to manage positions and hedge their Bitcoin investments through options. According to the U.S. stock exchange, the offering could boost the adoption of crypto assets.
"This collaboration further combines the innovative crypto space with the resilience and reliability of traditional securities markets and will be an important milestone in expanding the maturity of the digital asset market," said Greg Ferrari, Nasdaq vice president and head of exchange business management, in a statement.
The SEC has yet to approve options on any of the exchange-traded funds tied to bitcoin’s spot price that debuted in January, including Nasdaq’s application to trade options on BlackRock’s $21.3 billion iShares Bitcoin Trust ETF.
The proposed Bitcoin Index Options — a type of listed derivative that offers a quick and cheap way to expand exposure to Bitcoin — would give institutional investors and traders an alternative way to hedge their investments in BTC, the world’s largest cryptocurrency.
“The launch of bitcoin options is critical to the full normalization of this asset class,” said Matt Hougan, chief investment officer at Bitwise, one of the asset managers that brought a bitcoin ETF to market this year. “We were missing some of the liquidity that ETF options provide.”
An option is a listed derivative that gives the holder the right to buy or sell an asset (such as a stock or exchange-traded product) at a predetermined price before a specified date. Options provide traders with a low-cost way to expand their buying power, while institutional investors use options to hedge risk.
Nasdaq said 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 offered by exchanges operated by the Chicago Mercantile Exchange Group.
While waiting for regulators to approve or reject options on new spot Bitcoin ETFs, traders have turned to other products, such as options on recently launched leveraged ETFs tied to Bitcoin and their funds.
The exchanges began applying for spot Bitcoin ETF options in January, when the SEC clearly approved a BTC ETF. But in recent weeks, they withdrew those applications and then resubmitted them based on the SEC’s comments, people familiar with the matter said.
Some U.S. lawmakers are pressuring federal regulators to approve investment products. In May, Axios reported that U.S. Congressmen Mike Flood and Wiley Nickel sent a letter to the Securities and Exchange Commission (SEC) asking the agency to approve options trading for a Bitcoin-based fund.
significance
The move into bitcoin index options highlights Nasdaq’s stewardship of the dynamic digital asset market.
Over the past few years, the cryptocurrency space has attracted a large number of institutional investors, asset managers and other financial professionals seeking to integrate digital assets into more traditional investment portfolios.
“Bitcoin has always been the standard,” Black explained. “Our goal is to create a financial architecture around Bitcoin — including ETFs, indices, and options — that propels Bitcoin across the line to broad legitimacy.”
By leveraging its mature and reliable technology architecture, Nasdaq serves as a stable bridge between the cryptocurrency world and the traditional securities market.
“Speed and volatility are fundamental to the world we live in,” said Black. “Nasdaq helps investors navigate the storm by providing a reliable platform for them to manage risk and volatility.”
