Nasdaq, one of the world’s leading stock exchanges, has taken a significant step towards bringing Bitcoin into the mainstream of traditional finance.
The company recently filed an application with the U.S. Securities and Exchange Commission (SEC) to launch its own Bitcoin Index Options, known as XBTX.
If approved, this new product could open the door to a broader adoption of Bitcoin, providing a regulated and familiar environment for trading bitcoin options.
Bitcoin index options are a type of financial product that allows investors to buy or sell the value of a bitcoin index at a predetermined price on a specific expiration date.
By offering bitcoin index options, Nasdaq aims to provide a new tool for both institutional and retail investors to manage their exposure to bitcoin.
In simple terms, these options give traders the flexibility to bet on the future price of bitcoin without actually owning the digital asset. This tool can help investors manage risk, hedge their investments, or amplify their buying power in the market.
The proposed Nasdaq Bitcoin Index Options would be based on the CME CF Bitcoin Real-Time Index (BRTI), developed by CF Benchmarks.
This index provides real-time pricing data for bitcoin by aggregating bitcoin-to-USD order data from leading exchanges. The final settlement value for these options will be based on the CME CF Bitcoin Reference Rate – New York Variant (BRRNY), which is updated every second.
Nasdaq’s filing with the SEC marks a collaboration with CF Benchmarks, the creator of the CME CF Bitcoin Real-Time Index.
CF Benchmarks has a reputation for developing regulated benchmarks for bitcoin, and its partnership with Nasdaq is aimed at bringing more trust and stability to the market.
Sui Chung, CEO of CF Benchmarks, highlighted the importance of this partnership, stating:
“CF Benchmarks is delighted to partner with Nasdaq on the launch of options settling to the CME CF Bitcoin Reference Rate – New York Variant (BRRNY), the most liquid and widely recognized BTC price benchmark for the US market.”
Chung highlighted that the new spot options settling to BRRNY will enhance the success of CME’s BTC futures and options. These regulated bitcoin derivatives will offer investors more sophisticated strategies for gaining exposure to bitcoin, complementing the popular spot ETFs.
Chung expressed pride in attracting more institutions to the market, stating: “As the cornerstone provider of regulated benchmarks for the asset class we are proud to bring more institutions to the market that will keep improving market liquidity.”
Nasdaq’s move into the bitcoin options market comes at a time when the interest in the digital asset is growing, particularly among institutional investors.
Related: BlackRock Sees Growing Interest from Institutional Investors in Bitcoin ETFs
Greg Ferrari, Vice President and Head of Exchange Business Management at Nasdaq, explained:
“We are proud to partner with CF Benchmarks for the Nasdaq Bitcoin Index Options, providing market participants with trusted investment avenues for accessing the digital asset ecosystem.”
He emphasized that this collaboration bridges the innovative Bitcoin landscape with the stability of traditional securities markets, representing a significant step toward the maturation of the digital assets market.
The decision also follows similar steps by other major financial institutions.
Earlier this year, the New York Stock Exchange (NYSE) announced plans to list bitcoin index options. While neither Nasdaq nor NYSE has received approval from the SEC yet, these moves indicate a growing interest in integrating bitcoin into traditional financial markets.
The introduction of Nasdaq Bitcoin Index Options is expected to offer several benefits to different types of investors.
For institutional investors, the product would provide a regulated environment to hedge their exposure to bitcoin and manage risk more effectively.
For retail investors, it could offer a new way to participate in the bitcoin market with potentially lower risk compared to directly buying and holding the asset itself.
John Black, Head of Index Options at Nasdaq, emphasized that the new options are designed to offer a secure, regulated, and familiar method of trading bitcoin options. “We’re creating a place for investors to confidently put their money into this innovative asset class,” Black said.
Matt Hougan, Chief Investment Officer at Bitwise, highlighted the importance of these options for normalizing Bitcoin as an asset class.
“It’s important that options on Bitcoin are available for this asset class to be fully normalized. We’re missing part of the liquidity picture that ETF options would provide,” he said.
Nasdaq’s proposed options would feature a European-style exercise, meaning they can only be exercised at expiration, and they would be cash-settled. This structure allows investors to hedge against bitcoin’s price movements while minimizing the potential for sudden, volatile changes in value.
Despite the excitement surrounding the potential launch of bitcoin index options, Nasdaq is still awaiting approval from the SEC. According to Bloomberg analyst James Seyffart, the first approval could happen as early as the fourth quarter of this year.
The approval process is not without challenges.
In recent months, several other proposals for options linked to Bitcoin ETFs have been withdrawn, including those from Cboe, NYSE, and BOX. However, analysts like Seyffart remain optimistic that we could see re-filings and eventual approvals in the coming months.
If approved, Nasdaq’s Bitcoin Index Options could be a game-changer for the bitcoin market. By offering a regulated way to trade bitcoin options, Nasdaq aims to fill crucial liquidity gaps and provide a more secure environment for investors.
The timing of Nasdaq’s filing also coincides with a period of increased interest in bitcoin investment products, as BlackRock’s spot Bitcoin ETF recently recorded its largest daily net inflow in 35 days, with $224.1 million on August 26.
Overall, digital asset investment products saw their largest inflows in five weeks, with more than $700 million flowing into these investment vehicles from August 19 to 24, according to data from Farside Investors.
