Index provider CF Benchmarks has partnered with exchange giant Nasdaq for spot options. These options complement spot bitcoin ETFs. It is also easy to access for retail investors.
Nasdaq's recent application to list and trade bitcoin options is further proof that investors want exposure to cryptocurrency.
Retail customers are getting more choice after the successful rollout of crypto spot exchange-traded funds in the US.
CF Benchmarks CEO Sui Chung says a wide variety of investors want exposure to bitcoin, from institutions to “your aunt with a Charles Schwab account.” News.
“ETFs have shown that everyone on the investing spectrum is interested.”
CF Benchmarks is a digital asset index provider owned by crypto exchange operator Kraken. It has partnered with Nasdaq in offering listed options.
Nasdaq asked the Securities and Exchange Commission last week to approve its XBTX-listed options.
If approved by the regulator, options will track a real-time index of CF benchmarks.
Also, the final settlement value of the options is determined by the CF Benchmarks CME CF Bitcoin Reference Rate, which provides the US dollar price calculated at the end of the New York trading day.
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A listed option allows the investor to buy or sell an asset at a specified price over a specified period of time. Chung said that once approved, Nasdaq's spot bitcoin options could be used by institutional investors as a cost-effective way to predict the price of bitcoin.
But they are also used for institutions' long-term exposure to spot ETFs.
Six of the 11 approved spot bitcoin ETFs calculate their value using Chung's BRRNY, and hedging with options benchmarked at the same price creates an effective risk offset, Chung said.
Nasdaq's spot options also open up opportunities for retail investors, Chung said.
“ETFs and spot options give individual investors the ability to do the same things that more sophisticated investors and institutions do today with ETFs futures and options on the CME,” he said.
Derivatives are cash-settled — that is, exchanged for dollars — and investors don't need a futures position to open an options contract, Chung said.
“Therefore, they are more individual investor friendly,” he said.
If approved, Nasdaq options will be the first crypto derivatives cleared by the Options Clearing Corporation, Chung said.
The OCC is the clearing house that processes all spot options transactions in the US.
This is significant as a sign of bitcoin's popularity and acceptance in traditional markets, Chung said.
He said that the application is in pieces with the news Earlier this month investment bank Morgan Stanley allowed its financial advisors to offer Bitcoin ETFs to certain clients.
“You're seeing this critical financial infrastructure in the US accept bitcoin as one of the many things they deal with,” Chung said.
Investors want exposure to bitcoin for a wide range of reasons, so Wall Street is watching the asset class more closely.
“When you look at it seriously, you evaluate the liquidity, you evaluate the infrastructure around the markets, and you conclude, 'Hey, it's no different than other assets,'” he said.
The SEC has 240 days to approve Nasdaq's application.
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Related TopicsKRAKENBITCOIN ETF
