Nasdaq Wants To Launch Options On Spot Bitcoin ETFs, Bringing Another TradeFi Titan To Crypto

American stock exchange market Nasdaq is asking for regulators’ permission to list and facilitate trading of spot Bitcoin ETF-based index options, bringing another traditional finance giant into the crypto space. The new derivatives aim to give institutions and traders a different way to hedge their exposure to the flagship cryptocurrency.

If the U.S. Securities and Exchange Commission (SEC) grants its regulatory blessing, this would give investors a secure and regulated platform for trading Bitcoin options, as Nasdaq’s Head of Index Options John Black posited:

“We’re creating a place for investors to confidently put their money into this innovative asset class.”

Nasdaq Seeking SEC Nod To Trade Bitcoin Index Options

For the uninitiated, options are investment vehicles that let traders buy or sell assets like stocks, indexes, and exchange-traded funds (ETFs) at a specified price on an agreed date. This allows investors to hedge risks and expand their purchasing power.

The proposed Nasdaq Bitcoin Index Options (XBTX), submitted on Aug. 27 to the Securities and Exchange Commission, would give institutions the ability to manage their positions and hedge Bitcoin investments via options, Nasdaq stated. The offering could boost crypto adoption, as per the U.S.-based stock exchange. 

XBTX would be based on the CME CF Bitcoin Real-Time Index developed by CF Benchmarks. The index tracks Bitcoin futures and options contracts on the Chicago Mercantile Exchange, providing real-time pricing data for the cryptocurrency.

“This collaboration further 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,” Nasdaq Vice President and Head of Exchange Business Management Greg Ferrari said in a Tuesday statement. 

Notably, XBTX will feature European-style exercise and cash settlement provisions. The final settlement value will be contingent on the CME CF Bitcoin Reference Rate New York Variant (BRRNY), calculated every second by averaging Bitcoin-to-U.S. dollar order data from major crypto exchanges.

Nasdaq’s application follows a similar announcement by the world’s largest stock exchange, the New York Stock Exchange (NYSE), indicating that it plans to list Bitcoin index options. The SEC has yet to approve any options investment instruments tied to the spot Bitcoin ETFs greenlighted in January.

Sui Chung, CEO of CF Benchmarks, noted that these options would complement already existent trading of spot Bitcoin ETFs. 

“Together these regulated crypto derivatives will give investors the confidence to deploy more nuanced ways to gain exposure to the largest digital asset,” Chung added.