New Bitcoin index options trading will not begin immediately. SEC approval does not automatically open the door. Because Bitcoin is classified as a commodity and falls under the jurisdiction of the CFTC, the Commodity Futures Trading Commission still must approve its own exemption relief before contracts can be changed on exchanges.
The SEC approved Nasdaq’s proposal to quickly list options on the Philadelphia Stock Exchange, known as Phlx, with the decision posted Friday on the agency’s website.
Different types of Bitcoin contracts
Contracts are European and settled in cash. This means that buyers will receive the difference between the Bitcoin spot price and the strike price at expiration. No actual Bitcoin changes.
These structures also eliminate the risk of early allocation, setting them apart from bundled options for investors to discover available Bitcoin ETFs.
Source: Samsung Electronics
The contract is traded under the QBTC ticker, has a minimum price increment of 1 cent and a position limit of 24,000 contracts per side, equivalent to approximately 0.12% of Bitcoin’s total outstanding supply.
It is tied to the Nasdaq Bitcoin Index, a benchmark that tracks one hundredth of the CME CF BTC Real-Time Index, which pulls price data from major cryptocurrency exchanges every 200 milliseconds.
CME Group filed a comment in October arguing that the new contract falls within the CFTC’s exclusive authority. The SEC pushed back, ordering that shared jurisdiction between the two regulators is not new, citing hybrid swaps and securities futures as existing examples and Section 717 of the Dodd-Frank Act as the legal basis for concurrent supervision.
SEC’s change in tone
The approval fits with broader changes underway at the SEC under Chairman Paul Atkins. The agency moved to drop several enforcement cases against cryptocurrency companies launched under the previous administration, and Atkins publicly called for clearer rules to support innovation.
Image: Economic Times
According to reports, the SEC is preparing an innovation exemption that would allow tokenized trading of public company stocks on decentralized cryptocurrency platforms without the consent of the companies involved.
The Philadelphia Stock Exchange will host a new QBTC contract after both regulators approved it, marking another step in Wall Street’s growing acceptance of bitcoin-related financial products.
Featured image from Unsplash, chart from TradingView
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