The U.S. Securities and Exchange Commission (SEC) has approved BlackRock’s proposal to allow trading in options on its Bitcoin-based ETF (exchange-traded fund).

On Friday, September 20, the SEC released notice approving options trading for the iShares Bitcoin Trust (IBIT) on Nasdaq. It would come about eight months after the SEC gave the green featherlight to the world’s largest asset manager and a dozen other firms that filed to launch a spot Bitcoin ETF.

After launching a spot Bitcoin ETF in January, BlackRock quickly followed suit with an offer to list and trade options on its product. For context, options are derivatives that give holders the right to buy or sell an underlying asset at a predetermined price and time.

The regulatory notice said:

The Commission is publishing this notice to solicit comments from interested persons on Amendments 4 and 5 and is approving the proposed rule change, as modified by Amendments 1, 4 and 5, on an expedited basis.

Source: SEC

It is worth mentioning that other asset managers, including Grayscale and Bitwise, are also looking to list spot Bitcoin ETFs. Bloomberg analyst Eric Balchunas stated in write to X that he expects the companies’ proposals to be accepted “shortly thereafter.”

Balchunas added:

Huge win for Bitcoin ETFs (since it will attract more liquidity, which in turn will attract more huge fish). It’s a nice surprise about the timing, but not a shock since James Seyffart and I gave it a 70% chance of approval by the end of May.

The Bloomberg analyst also noted that the latest Nasdaq listing is just one step in the approval process, as it needs to be approved by the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC) before trading can officially begin.

What’s Next for Bitcoin ETFs?

ETF expert Nate Geraci also took to the X platform to assess the SEC’s latest approval of options trading and explain the next steps for the company.about Bitcoin ETFs. ETFStore CEO highlighted positive performance of crypto products despite some limitations.

Remember, BTC spot ETFs have netted $18 billion in 8 months…

No options trading, no creation or redemption in kind, and narrow acceptance on major brokerage platforms (and no access to Vanguard).

Monumental success with one hand tied behind his back.

— Nate Geraci (@NateGeraci) September 20, 2024

According to Geracithe introduction of in-kind creation and redemption should be the next milestone for Bitcoin-based ETFs. For context, in-kind creation and redemption refers to the process by which enormous investors can create or redeem ETF shares by exchanging them for the underlying asset (in this scenario, Bitcoin).

Related reading: SEC vs. Coinbase in limbo: US regulator demands 4-month delay in disclosure

The introduction of in-kind creation and redemption will augment the efficiency of Bitcoin ETF trading, as investors will be able to deposit BTC directly into the fund. This would reduce the costs of investing in a spot Bitcoin ETF and make it a more attractive investment product.

The price of Bitcoin on the daily timeframe | Source: BTCUSDT chart on TradingView

Featured image created with Dall.E, chart from TradingView