Nasdaq seeks US SEC approval for Bitcoin index options

Nasdaq Inc. (NASDAQ: NDAQ) has filed with the US Securities and Exchange Commission (SEC) seeking permission to launch Bitcoin index options, a development that could enhance market liquidity and offer new risk management tools for investors.

This initiative, announced on August 27, aims to provide a new mechanism for institutional and retail investors to manage their Bitcoin exposure more effectively.

Nasdaq’s Bitcoin index options to be settled in cash

The proposed Bitcoin index options will be based on the CME CF Bitcoin Real-Time Index, developed by CF Benchmarks.

This index tracks Bitcoin futures and options contracts traded on the CME Group’s platform, offering a reliable and transparent benchmark for pricing these new financial instruments.

The options will feature European-style exercise and cash settlement, with final settlement values determined by the CME CF Bitcoin Reference Rate — New York Variant.

This means that the options will be settled in cash rather than Bitcoin, providing a clearer reference rate crucial for continuous global trading in the volatile crypto market.

Matt Hougan, Chief Investment Officer at Bitwise, emphasized the importance of having options available for Bitcoin to fully normalize the asset class.

According to Hougan, the introduction of Bitcoin index options fills a significant gap in the liquidity picture, complementing existing financial products like exchange-traded funds (ETFs).

By allowing traders to buy or sell Bitcoin at a set price on a specified date, these options will enable investors to hedge risks and extend their buying power.

The US SEC is yet to approve any Bitcoin-related options

The SEC is yet to approve any options investment instruments tied to spot Bitcoin ETFs, including Nasdaq’s pending application for options on the iShares Bitcoin Trust (IBIT) ETF managed by BlackRock.

This adds a layer of uncertainty to the approval of Nasdaq’s newly filed Bitcoin index options, as the SEC’s stance on cryptocurrency-related financial products continues to evolve.

The introduction of Bitcoin index options represents a strategic move by Nasdaq to offer alternative risk management tools and expand its suite of Bitcoin-related financial products.

The filing comes amid notable developments in the broader crypto investment space.

BlackRock’s spot Bitcoin ETF, IBIT, recently saw its largest daily net inflow in 35 days, with a $224.1 million increase on August 26.

This substantial inflow indicates a growing interest in Bitcoin investment products, despite recent market fluctuations.

Overall, digital asset investment products experienced their largest weekly inflow in five weeks, highlighting a resurgence in investor confidence.

If approved, Nasdaq’s Bitcoin index options are expected to provide a cost-effective way to magnify exposure to Bitcoin, complementing existing futures and options contracts and offering institutional investors and traders a valuable tool for managing Bitcoin exposure.

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