The United States Securities and Exchange Commission (SEC) has launched another round of consultations on a proposed rule change for trading options on Bitcoin exchange-traded products (ETPs).

According to an April 24 filing, the securities regulator wants to better understand how listing Bitcoin (BTC) options could affect the overall market, especially during times of stress. Part of the review will assess whether the exchanges’ current surveillance and enforcement mechanisms are adequate to handle the unique aspects of Bitcoin options.

Initial comments must be submitted within 21 days after the document is officially registered, which would make the final deadline May 15, 2024. Likewise, rebuttal comments may be submitted up to May 29, 2024.

Bitcoin options are financial instruments that give the buyer the right, but not the obligation, to buy or sell Bitcoin at a specified price by a certain date. Options are typically used by traders familiar with option pricing and market movements. Similar to other investments, options trading carries risks that may not be suitable for all investors.

The Commission previously sought comments on the rule change and included the feedback received in its filing. Most of the comments highlighted how options on Bitcoin ETPs would increase liquidity and improve market efficiency:

“In addition, the commenter stated that approving the listing and trading of options on spot Bitcoin ETPs “would further bring Bitcoin into the regulatory perimeter by allowing additional regulated market participants such as CFTC-regulated designated contract merchants and SEC-regulated broker-dealers to trade the products.” “

Several financial firms, including Nasdaq and Cboe, have submitted proposals to the SEC seeking permission to trade Bitcoin options. Nasdaq’s application seeks to list and trade options on BlackRock’s iShares Bitcoin Trust, while Cboe intends to offer options trading on various ETPs that hold Bitcoin.

Additionally, asset managers like Bitwise and Grayscale are also seeking regulatory approval to list options on their Bitcoin ETFs through New York Stock Exchange applications.

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