Ben Strack

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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A new crypto-related financial tool is finally here.&nbsp;



Spot bitcoin ETFs hit US exchanges in January, and more than 10 months later, investors are able to trade options on the biggest of those products (and others very soon).



As you probably know, an option is a contract representing the right to buy or sell a financial product at a certain price for a specific period of time.



Industry watchers have told Blockworks that options would lead to a more <a href="https://blockworks.co/news/on-the-margin-newsletter-btc-etf-options">robust ecosystem</a> around the spot ETFs, enhancing liquidity and price discovery.



CK Zheng, CIO of crypto hedge fund ZX Squared Capital, told me today that bitcoin ETF options are “extremely powerful” for institutional investors to better manage their bitcoin exposures under various market conditions.&nbsp;



Indeed, Anchorage Digital CEO Nathan McCauley said in a statement that the new product shows bitcoin is further “cementing its place alongside stocks, bonds and commodities as a mainstream institutional investment.”



The options can also be used by speculators, Zheng explained, to leverage their bets when they are extremely bullish or bearish on the asset.



Bitwise’s Jeff Park previously <a href="https://x.com/dgt10011/status/1837278352823972147">noted</a> these options would mark “the first time the financial world will see regulated leverage on a perpetual commodity that is truly supply-constrained.”



Put another way by Joe Consorti in a <a href="https://x.com/JoeConsorti/status/1858666860960727249">video</a> on X, listing options on bitcoin ETFs “opens the door to the largest and deepest liquidity pools on the planet.”&nbsp;



Let’s quickly run through some of the events leading up to these listings:&nbsp;



<ul class="wp-block-list">
<li>Nasdaq, NYSE and Cboe submitted proposals to the SEC in January to list options on spot bitcoin ETPs.</li>



<li>Grayscale Investments pointed out the SEC’s quick approval of options on bitcoin futures ETFs in a March blog <a href="https://www.grayscale.com/blog/legal-topics/investors-deserve-options-on-gbtc">post</a>, calling on the regulator to do the same for the spot products. But that month, the SEC said it <a href="https://blockworks.co/news/sec-delays-bitcoin-etf-options-proposals">needed more time</a> to consider the proposals.</li>



<li>The SEC, on Sept. 20, gave “accelerated” approval of options on BlackRock’s iShares Bitcoin Trust (IBIT). About a month later, the SEC <a href="https://blockworks.co/news/sec-approves-cboe-nyse-options-btc-etfs">greenlit the bids</a> by NYSE and CBOE to list options on other bitcoin ETFs.</li>



<li>The CFTC last week essentially yielded to the SEC and the Options Clearing Corporation (OCC), <a href="https://www.cftc.gov/PressRoom/PressReleases/9008-24">saying</a> that the listing of these bitcoin ETF options “does not implicate the CFTC’s jurisdiction.”</li>



<li>The OCC said in a Monday <a href="https://infomemo.theocc.com/infomemo/search?utm_source=forward-guidance.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=last-week-today&amp;_bhlid=cc18d512040548fa9bc7f854de1b4deae9cd23de">memo</a> that it was “preparing for the clearance, settlement and risk management” of bitcoin ETF options. A Nasdaq spokesperson <a href="https://x.com/Blockworks_/status/1858598159720870083">confirmed to me</a> later in the day that they intended to list IBIT options on Tuesday.</li>
</ul>



So here we are. Options on IBIT are available today; that fund has grown to have roughly $43 billion in assets under management — making it by far the largest bitcoin ETF and even bigger than the iShares Gold Trust (IAU).



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">A few hundred million so far in options volume on <a href="https://twitter.com/search?q=%24IBIT&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$IBIT</a> (a ton for Day One).. here&#39;s a rank of the contracts by volume, it&#39;s almost all calls. Seems very bullish, esp the Dec20th C100, which is basically betting price of btc will double in the next month. <a href="https://t.co/R6HB7OMUla">pic.twitter.com/R6HB7OMUla</a>&mdash; Eric Balchunas (@EricBalchunas) <a href="https://twitter.com/EricBalchunas/status/1858916477384225005?ref_src=twsrc%5Etfw">November 19, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Grayscale said bitcoin ETF options are set to begin trading on NYSE — the exchange on which its GBTC and BTC products are listed — tomorrow. Bitwise <a href="https://x.com/HHorsley/status/1858697188282691924">expects the same</a> for options on its bitcoin ETF.



“Many new investors will, no doubt, leverage their experiences in investing in the meme stock options market to bitcoin options,” Zheng said. “The bitcoin ETF options market will compete greatly with Deribit to bring more investors to the US and help build the US as the bitcoin derivative trading center.”



Bitwise’s Park <a href="https://x.com/dgt10011/status/1857603360486216032">pointed out</a> on X that BTC ETF options will have “cross-margining capabilities in multi-asset portfolios” than an exchange like Deribit “can never provide.”&nbsp;



He added: “Only spot ETF options can leverage your GLD, SPY, HYG ETFs, bonds, loans, and cross-margin to achieve unmatched capital efficiency — closest thing that looks like free leverage.”



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Bitcoin ETF options marks new chapter for the asset class

Katherine Ross

The Securities and Exchange Commission delayed a decision on letting Cboe list and trade options on bitcoin ETFs.



Cboe first applied to list and trade options on the newly launched bitcoin ETFs back in January. The SEC said on Wednesday it’s delaying a decision on the proposed rule change until late April.



Options can be used to hedge risk, allowing a party to enter into a contract where they can buy or sell a financial product at a certain price in a specified window of time.



Read more: <a href="https://blockworks.co/news/sec-options-spot-bitcoin-etfs">Options on bitcoin ETFs could come soon, offering hedging tool for institutions</a>



<a href="https://blockworks.co/tag/cboe">Cboe</a> didn’t immediately return a request for comment on the delay.



Generally, CBOE can offer <a href="https://blockworks.co/tag/options">options</a> three days after an ETP begins trading on a national securities exchange like Nasdaq or the New York Stock Exchange.&nbsp;



“However, those rules do not apply to ETPs holding commodities such as Bitcoin. In addition to Cboe’s rule filing receiving <a href="https://blockworks.co/tag/sec">SEC</a> approval, Cboe understands that OCC may need certain approvals from its regulators (SEC and <a href="https://blockworks.co/tag/cftc">CFTC</a>) to permit it to issue and clear these options,” Cboe <a href="https://cdn.cboe.com/resources/release_notes/2024/Cboe-Options-to-List-Options-on-ETPs-Holding-Bitcoin.pdf">said</a> earlier this year.



Cboe isn’t the only exchange seeking to offer options. NYSE also filed to list “commodity-based trust shares.”&nbsp;



Read more: <a href="https://blockworks.co/news/blackrock-bitcoin-etf-battle">Is it too soon to name BlackRock the bitcoin ETF segment winner?</a>



Nasdaq seeks to list and trade options specifically on BlackRock’s iShares Bitcoin Trust ETF. In its January filing, the exchange said that options would give investors a “lower cost investing tool” while also offering a hedging vehicle.&nbsp;



<a href="https://blockworks.co/tag/blackrock">BlackRock</a>’s IBIT <a href="https://blockworks.co/news/bitcoin-all-time-high-blackrock-etf">has crushed records in its first few months</a>. The ETF already has $10 billion in assets under management. Grayscale’s bitcoin ETF — which was converted from its bitcoin trust — has $26 billion in assets under management.



The SEC, alongside the Cboe delay, also <a href="https://www.sec.gov/files/rules/sro/nysearca/2024/34-99683.pdf">announced</a> that it was delaying a decision on the proposed rule changes on Wednesday. All three rule change proposals have the same late April decision date.



<a href="https://blockworks.co/tag/grayscale">Grayscale</a>, on Thursday, reaffirmed its support for the NYSE proposed rule change, though it specifically wants the SEC to greenlight options on its fund, GBTC.



“Our argument is straightforward: If investing in options for shares of products holding derivatives of an asset is acceptable for investors, investing in options for shares of products holding the asset itself should be as well,” Grayscale <a href="https://www.grayscale.com/blog/legal-topics/investors-deserve-options-on-gbtc">wrote</a> in a blog post.&nbsp;



In a <a href="https://twitter.com/Grayscale/status/1765457633451114822">post</a> on X Wednesday, the firm also pushed for the SEC to “standardize a more consistent approach to approving options products on all identically-structured commodity ETFs that have been approved to list &amp; trade on national exchanges” regardless of whether they hold bitcoin.



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SEC postpones decisions on bitcoin ETF options proposals

CBOE Digital President John Palmer says that the potential approval for a spot bitcoin ETF could broaden the ecosystem for institutions and retail.



“I think seeing that approval really is gonna pave the way for pension funds and RIA-based funds to be able to invest assets in a spot Bitcoin ETF where they may not be able to gain that access today and just a native spot, Bitcoin token,” Palmer said.



Any potential approvals for an ETF could also change how institutions approach derivatives, Palmer added. Derivatives include options and futures contracts.



“So you have more players, institutional players that are used to hedging their risk. And so they lean on derivatives quite heavily to be able to hedge that risk…And so, as that ecosystem evolves, they&#8217;re going to lean on those derivatives more and more,” Palmer said.



Read more: <a href="https://blockworks.co/news/bitcoin-etf-environmental-impact">This proposed bitcoin ETF has a twist. Would investors bite?</a>



“So I think we’ll see that ecosystem on the derivative side, grow with the growth in the spot <a href="https://blockworks.co/tag/etfs">ETF</a> as well.”



However, Palmer doesn’t think that the total breakdown will just be institutions. While he added that “it’s gonna be hard to judge what the breakdown is gonna be yet,” he also added that “institutions will lead the way” with the spot bitcoin ETF-involved participants using the hedging tools, but “retail will also look for that as well.”



Overall, ETFs give both institutions and retail a “broader ecosystem,” according to Palmer.



The US Securities and Exchange Commission is expected to hand down a decision on potential spot bitcoin ETFs by January 10. Ahead of the new year, a <a href="https://blockworks.co/news/planned-bitcoin-etf-updates">handful of potential issuers submitted fresh amendments</a> to their S-1s, with firms including BlackRock disclosing authorized participants.&nbsp;



As <a href="https://blockworks.co/news/analysts-weigh-potential-bitcoin-etf-approval">Blockworks previously reported</a>, the inclusion of APs is one of the details that the SEC is looking for ahead of potential approval. 



“The <a href="https://blockworks.co/tag/sec">SEC</a> is ready to approve spot bitcoin ETFs, but only if they have clear language around cash-only creations and have a signed agreement with an authorized participant,” Bloomberg Intelligence analyst Eric Balchunas wrote in a note at the end of December.



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CBOE Digital president says a spot bitcoin ETF approval will promote derivatives growth

Chicago Board Options Exchange (Cboe), an exchange seeking approval from the SEC to list several spot bitcoin ETFs, has resubmitted its applications with slight amendments regarding its surveillance-sharing agreement with cryptocurrency exchange Coinbase.



The amendments appear to signal Cboe’s attempt to mirror language already included in filings by rival exchange Nasdaq, which would list the spot bitcoin ETFs for BlackRock and Valkyrie, if approved.&nbsp;



Cboe is the planned listing exchange for proposed bitcoin products by 21Shares (in tandem with Ark Invest), as well as for similar offerings by Fidelity, WisdomTree, VanEck and Invesco.



In earlier filings, the exchange had indicated its intention to establish a surveillance-sharing agreement (SSA) with a US-based spot trading platform for bitcoin, and subsequently specified that Coinbase would be the platform involved.



Read more: <a href="https://blockworks.co/news/surveillance-sharing-bitcoin-etf">How ‘surveillance-sharing’ is designed to deter bitcoin ETF manipulation</a>



Now, Cboe filings appear to have been amended to note that the exchange “reached an agreement on terms” with Coinbase to enter into an SSA.



Coinbase’s stock price was up about 10% on the day late Tuesday morning.



Spokespeople for Cboe and Coinbase did not immediately return a request for comment.&nbsp;



Bloomberg Intelligence analyst James Seyffart noted Cboe’s amendments in a Tuesday <a href="https://twitter.com/JSeyff/status/1678770546874658818">tweet</a>, adding that the filings also now note Cboe and Coinbase “will finalize and execute a definitive agreement that the parties expect to be executed prior to allowing trading of the commodity-based trust shares.”



Though the language in the Cboe <a href="https://www.cboe.com/us/equities/regulation/rule_filings/bzx/">filings</a> are now in line with that within Nasdaq’s filing for the BlackRock spot bitcoin ETF, Seyffart said in a separate tweet that Nasdaq “seems to be farther along than Cboe/others even with these updates.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Key here is that <a href="https://twitter.com/Nasdaq?ref_src=twsrc%5Etfw">@Nasdaq</a> (which has <a href="https://twitter.com/BlackRock?ref_src=twsrc%5Etfw">@BlackRock</a> &amp; <a href="https://twitter.com/ValkyrieFunds?ref_src=twsrc%5Etfw">@ValkyrieFunds</a>) seems to be farther along in this process than CBOE/others even with these updates. I wrote about this in a note today: <a href="https://t.co/xXOaXoI7ke">pic.twitter.com/xXOaXoI7ke</a>&mdash; James Seyffart (@JSeyff) <a href="https://twitter.com/JSeyff/status/1678773289093844998?ref_src=twsrc%5Etfw">July 11, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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According to a filing made by Nasdaq on June 29 regarding the BlackRock filing, the exchange stated that it had &#8220;reached an agreement on terms&#8221; with Coinbase on June 8, and the corresponding term sheet became effective on June 16. In the Cboe filings, it is mentioned that similar agreements with Coinbase were reached on June 21.



The Cboe amendments come nearly a month after BlackRock — a multi-national investment company with roughly $9 trillion in assets under management — shocked many by entering the race to launch a spot bitcoin ETF. This development prompted several issuers who had previously attempted, but failed, to introduce such ETFs to renew their efforts.



Morgan Creek Capital founder Mark Yusko said during an On the Margin podcast that <a href="https://blockworks.co/news/sec-plays-king-maker-blackrock">the SEC could allow BlackRock to launch first</a>.



Matthew Sigel, VanEck’s head of digital assets research, said last month <a href="https://blockworks.co/news/sec-stop-picking-winners">the SEC should approve all the spot bitcoin ETF proposals at once</a>.



“Given the nearly identical ETF applications submitted, we believe all issuers should have the same timeline to a bitcoin spot ETF,” Sigel tweeted at the time. “Stop picking winners!”



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Cboe ‘reached an agreement on terms’ with Coinbase for bitcoin ETFs

Cboe refiled five spot bitcoin ETF proposals Friday, following reports that the SEC had requested more information. 



The Wall Street Journal had reported this morning that previous filings were &#8220;inadequate,&#8221; a characterization that appeared to cause a loss of faith in the cryptocurrency earlier in the day. However, on closer reading, the WSJ report merely noted that the SEC wanted updated language and detail and had made no decisions on the merits of the ETF applications.



The filings, in their second iteration, have named <a href="https://blockworks.co/tag/coinbase">Coinbase</a> as part of the surveillance-sharing agreement for Wise Origin, WisdomTree, VanEck and Invesco Galaxy’s ETF applications.



Ark tapped “Coinbase Custody Trust Company, LLC, a third-party regulated custodian (the “Custodian”), will be responsible for custody of the Trust’s bitcoin” according to its filing.&nbsp;



The updated document said that the product, The Spot BTC SSA, would “have the hallmarks of a surveillance-sharing agreement” split between two parties. That setup would permit “supplemental access to data regarding spot Bitcoin trades occurring on Coinbase if the Exchange determines it is necessary as part of its surveillance program,” the filing said.



Additional refiled applications contained similar language and related updates.&nbsp;



The <a href="https://blockworks.co/tag/SEC">SEC</a> told both Cboe and Nasdaq representatives that the filings lacked sufficient details to appease regulators, The Wall Street Journal <a href="https://www.wsj.com/articles/sec-says-spot-bitcoin-etf-filings-are-inadequate-390336e8">reported</a>. Key among those details, reportedly, was a lack of information around surveillance sharing agreements with bitcoin exchanges designed to safeguard the ETF products.&nbsp;&nbsp;



The updated filings come after Wall Street firms rushed to file – or refile in some cases — <a href="https://blockworks.co/tag/bitcoin-etf">spot bitcoin ETF proposals</a> in the wake of BlackRock’s filing on June 15.&nbsp;



BlackRock also <a href="https://blockworks.co/news/blackrock-clout-bitcoin-etf-approval">plans to tap Coinbase as its crypto custodian</a>.



The refilings come a day after Fidelity filed for its spot bitcoin ETF.



The <a href="https://blockworks.co/news/ark-21shares-strengthen-bitcoin-etf-filing">wave of filings contains the same language</a>: around surveillance-sharing agreements in the hopes that the SEC will greenlight a spot bitcoin ETF.



Updated June 30, 2023 at 5:37 pm ET: Added context throughout.



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Hours after ‘bombshell’ WSJ report, Cboe refiles bitcoin ETFs

Shalini Nagarajan

The Commodity Futures Trading Commission (CFTC) has given the green light for Cboe Global Markets to offer crypto more products as a derivatives clearing organization under the Commodity Exchange Act.



Cboe Digital, a platform that handles crypto spot and crypto derivatives markets, received the go-ahead to provide leveraged derivatives once the contracts are introduced in the latter half of the year.



The updated order allows Cboe Clear to offer clearing services for digital asset futures on a margin basis to futures commission merchants. This is in addition to the previously authorized fully collateralized futures and swaps, according to a Monday <a href="https://www.cftc.gov/PressRoom/PressReleases/8712-23" target="_blank" rel="noreferrer noopener">statement</a>.



Cboe Digital also supports spot trade for cryptocurrencies including bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>), bitcoin cash (<a href="https://blockworks.co/price/bch" target="_blank" rel="noreferrer noopener">BCH</a>), ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>), litecoin (<a href="https://blockworks.co/price/ltc" target="_blank" rel="noreferrer noopener">LTC</a>) and <a href="https://blockworks.co/price/usdc" target="_blank" rel="noreferrer noopener">USDC</a>.



CFTC Commissioner Christy Goldsmith Romero <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/romerostatement060523b" target="_blank" rel="noreferrer noopener">said</a> the updated registration order lets Cboe clear more crypto futures contracts, while implementing careful risk-reducing measures.



Cboe’s application is quite unlike FTX’s application for a direct-to-customer market structure without any middlemen, according to Romero. FTX’s application was withdrawn after the company filed for bankruptcy in November.



“The proposed FTX model was never adopted by the Commission, but it put at risk customers’ bankruptcy priority, other customer protections, and financial stability,” she said.



Cboe&#8217;s clearinghouse has been registered with the Commission since 2019. Its parent company Cboe, headquartered in Chicago, has over 50 years of experience running exchanges in regulated futures, options, foreign exchange, and equities markets, she added.



Shortly after acquiring crypto exchange and clearinghouse ErisX last year, Cboe Digital <a href="https://blockworks.co/news/cboe-to-add-slate-of-partners-to-grow-digital-asset-business" target="_blank" rel="noreferrer noopener">partnered</a> with companies like Jump Crypto, Interactive Brokers, and Robinhood to expand its digital asset business.



“We’ll integrate only where it makes sense, but we realize that in this asset class we need to move quickly,” Cboe COO Chris Isaacson <a href="https://blockworks.co/news/cboe-sees-need-to-move-quickly-in-crypto-following-exchange-acquisition" target="_blank" rel="noreferrer noopener">told</a> Blockworks after the closing of the ErisX deal. “Keeping that agility with this wholly-owned subsidiary is a great move.”  



Cboe said it intended to create a digital advisory committee composed of the partner firms.



There’s currently $11.95 billion in bitcoin open interest and $6.17 billion in ether open interest across 12 platforms, excluding Cboe Digital’s ErisX, per <a href="https://www.coinglass.com/BitcoinOpenInterest" target="_blank" rel="noreferrer noopener">CoinGlass</a>.



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Amid Crypto Chaos, CFTC Approves Cboe For Futures Margin Trade

Sebastian Sinclair

Cboe Global Markets has made its third attempt to secure regulatory approval for a <a href="https://blockworks.co/tag/bitcoin-etf" target="_blank" rel="noreferrer noopener">spot Bitcoin ETF</a> from the US Securities and Exchange Commission (SEC).&nbsp;



The ARK 21Shares Bitcoin ETF, if approved, would allow investors to gain exposure to Bitcoin without owning the digital currency directly.



The proposed ETF, a collaboration between Cathie Wood&#8217;s Ark Invest and crypto investment product firm 21Shares, aims to list and trade on the Cboe BZX exchange, Reuters <a href="https://www.reuters.com/markets/us/cboe-files-with-us-sec-third-time-list-ark-21shares-bitcoin-etf-2023-05-09/?rpc=401&amp;" target="_blank" rel="noreferrer noopener">reported</a> on Tuesday. It marks the latest effort by Cboe, following two previous unsuccessful attempts to list and trade the same ETF.&nbsp;



Cboe BZX Exchange is one of the largest US equities market operators on any given day, clocking <a href="https://www.cboe.com/us/equities/market_share/" target="_blank" rel="noreferrer noopener">$1.4 billion</a> in 24-hour trade volume. It is owned and operated by Cboe Global Markets, which also owns the Chicago Board Options Exchange and other exchanges around the world.



The operator has made attempts to list and trade the ARK 21Shares Bitcoin ETF in the past, including in May 2022 and August 2021. They were both rejected on the grounds the product did little to prevent fraud, according to the SEC.



The regulator has historically been cautious about such proposals, citing concerns over potential market manipulation and the lack of transparency in the crypto market.



To date, the SEC has rejected more than a dozen other proposals for spot bitcoin ETFs over a number of years, including from prominent firms such as Grayscale, Fidelity, and NYDIG.&nbsp;



Despite the regulator&#8217;s reservations, the increasing demand for bitcoin and other digital assets has fueled a renewed push for regulatory approval of crypto-based financial products.



That’s led to the creation of US-based <a href="https://blockworks.co/tag/bitcoin-futures-etf" target="_blank" rel="noreferrer noopener">bitcoin futures ETF</a>s, most notably from issuers Proshares, Valkyrie and VanEck, which have been available for nearly two years.



But a spot bitcoin ETF remains elusive. Comparable products are available in developed markets outside the US, and the SEC has <a href="https://blockworks.co/news/coinbase-grewal-congress-testimony">faced criticism for its intransigence</a>, to the point where <a href="https://blockworks.co/news/grayscale-win-over-sec-might-not-change-much-industry-watchers-say">Grayscale is suing the agency</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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Cboe Makes Third Attempt to List ARK 21Shares Bitcoin ETF

<div id="highlights-block_6307c073fdf3c" class="highlights">
 <ul>
 <li>Company’s near-term focuses include adding margin-based futures contracts, market data tools, executives said</li>
 <li>“We very intentionally established a diverse group of partners,” Cboe Chief Strategy Officer John Deters said</li>
 </ul>
 
</div>



Cboe Global Markets is bringing aboard a slate of equity partners to help grow its digital assets business, just months after closing its acquisition of <a href="https://www.erisx.com" target="_blank" rel="noreferrer noopener">ErisX</a>.



The company is seeking to build out its crypto spot and futures capabilities to fill what executives called “a massive gap” in the space of offering market intermediaries a trusted venue for its retail and institutional clients.



ErisX operates a US-based digital asset spot market, as well as a futures exchange and clearinghouse regulated by the Commodity Futures Trading Commission (CFTC). <a href="https://www.cboe.com" target="_blank" rel="noreferrer noopener">Cboe</a>, which owns the world’s largest options exchange, <a href="https://cms.blockworks.co/cboe-sees-need-to-move-quickly-in-crypto-following-exchange-acquisition/" target="_blank" rel="noreferrer noopener">closed its acquisition</a> of the company in May as a way to enter the digital asset spot and derivatives marketplaces and is set to rebrand ErisX to Cboe Digital.



The new planned partners, each of which intend to take minority stakes in Cboe, are B2C2, DRW, GSR, Hidden Road, IMC, Interactive Brokers, Jane Street, Jump Crypto, Optiver, Robinhood, tastytrade and Virtu Financial. Executives did not reveal the specific size of the stakes.



The investors join other previously announced partner firms, such as Fidelity Digital Assets, Galaxy Digital, NYDIG and Webull. Cboe plans to form a digital advisory committee comprising the partner firms.



The incoming group of partners includes retail order flow providers, some of the largest market makers in the spot crypto world and other market makers focused more on derivatives pricing and trading, Cboe Chief Strategy Officer John Deters told Blockworks.&nbsp;



“We very intentionally established a diverse group of partners,” he said. “It’s that kind of mix which creates, we think, an ideal and healthy blend of participants, each with a little bit different focus and coming together simultaneously to make a vibrant and liquid market.”&nbsp;



<h3 class="wp-block-heading">ErisX and Cboe product roadmap</h3>



ErisX offers cash-settled futures contracts on bitcoin and ether. It offers spot trading on bitcoin, ether, bitcoin cash, litecoin and USD Coin.



In terms of the company’s product roadmap, ErisX President John Palmer told Blockworks that its “next push” is getting CFTC approval to trade margin-based futures contracts. Cboe hopes to roll those products out by the end of the year, he said.



Into 2023 and 2024, the firm will seek to offer additional futures contracts and spot trading for tokens beyond the five digital assets currently offered. Though Palmer did not name specific assets it would seek to offer, it noted that it would be considering other “top-traded tokens.”



“We certainly want to offer that very quickly and have a platform where participants can trade spot and derivatives and really get the benefit of capital efficiencies by having these things all clear at our clearinghouse,” Palmer said.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



Using market data based on actionable bid and offer prices from the spot crypto market, Cboe Digital also plans on developing a benchmark data stream to help market participants evaluate crypto execution prices, Deters said.



“Our industry is going digital over the long-term, and so making sure that our platform is built for that future, that we’re helping market participants and our clients engage in the market and helping them figure out opportunities to digitizing and interacting with their products is a “mission-critical” initiative for us and will keep us busy for quite a bit of time to come,” Deters said.



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Cboe To Add Slate of Partners to Grow Digital Asset Business

<div id="highlights-block_62954c51ede8b" class="highlights">
 <ul>
 <li>The ether ETF listing by Cosmos tracks the physically-settled Purpose Ether ETF in Canada</li>
 <li>The success of Purpose Investment&#8217;s ether ETF performance has prompted Cosmos to provide investors exposure, the company said</li>
 </ul>
 
</div>



Cboe Australia said Monday it has listed Cosmos Asset Management&#8217;s ether exchange-traded fund (ETF), despite volatile conditions that continue to plague the crypto market.



Cosmos Purpose Ethereum Access ETF (CPET) invests in Canada&#8217;s Purpose Ether ETF, which holds physically settled tokens instead of derivatives like futures or options.



Purpose Investment&#8217;s Ether ETF, a world first, came to market via the Toronto Stock Exchange in April last year following clearance from Canadian securities regulators. 



Since then, the fund has accumulated more than $409.9 million in assets under management. The Australian subsidiary of Cboe Global Markets is hoping to tap into the fervor surrounding Purpose&#8217;s ETF, with expectations of domestic investors responding in a similar fashion to Cosmos&#8217;.



“As investors continue to seek cryptocurrency exposure, it’s important the market provides them with choice and access,&#8221; said Cboe Australia CEO Vic Jokovic in a statement. &#8220;CPET offers Australians unique access to the world’s first physically settled Ether ETF and we’re excited to watch its progress.&#8221;



That view may be somewhat optimistic as declining interest has coincided with a drop in crypto prices. Earlier this month, the debut of <a href="https://cms.blockworks.co/first-spot-crypto-etfs-in-australia-underwhelm-traders-amid-market-downturn/" target="_blank" rel="noreferrer noopener">21Shares&#8217;</a> Australian spot bitcoin and ether ETFs fell short of market expectations, posting trading volumes of around $656,000 and $415,000 respectively.



On the same day, Bloomberg Intelligence Senior ETF Analyst Eric Balchunas called 21Share&#8217;s debut “shockingly timid” in a <a href="https://twitter.com/EricBalchunas/status/1524722087084105728" target="_blank" rel="noreferrer noopener">tweet</a>. Lack of interest has also not been the only roadblock facing Australian-based crypto ETFs.



In April, Cboe Australia decided to halt the launch of the Cosmos Purpose Bitcoin Access ETF, 21Shares along with ETF Securities citing “standard checks” as the primary reason for the <a href="https://cms.blockworks.co/australian-bitcoin-and-ether-etfs-delayed-due-to-standard-checks/" target="_blank" rel="noreferrer noopener">delay</a>. 



Not to mention, Australian-based Cosmos&#8217; newest ether ETF listing comes at a time when the markets have been checkered by periods of extreme volatility following a significant decline from peak prices witnessed late last year. 



The market is beginning to flash signs of a reversal amid a broader uptick in global commodities and equities. Bitcoin is once again <a href="https://cms.blockworks.co/crypto-markets-rally-as-bitcoin-reclaims-30000-once-again/" target="_blank" rel="noreferrer noopener">on the rise</a> above the $30,000 level. 



Still, more rallies are required to shore up investor confidence amid the current downward trend that has persisted since the bellwether crypto&#8217;s peak of around $69,000 in November.



CPET is available through Cboe Australia market participants and supporting Australian stockbrokers.



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Cboe Australia Lists Cosmos’ Physically-Settled Ether ETF Amid Market Woes

<div id="highlights-block_6272e422d24e2" class="highlights">
 <ul>
 <li>ErisX, operator of crypto spot market, futures exchange and clearinghouse, to be rebranded as Cboe Digital </li>
 <li>Cboe is uniquely positioned to offer basis trading and exchange for physical transactions down the line after the acquisition, the company said</li>
 </ul>
 
</div>



Cboe Global Markets has closed its acquisition of institutional cryptocurrency exchange ErisX, with the newly combined company’s executives saying they intend to integrate quickly while digital asset markets remain hot.&nbsp;



Chicago-based Cboe first <a href="https://cms.blockworks.co/cboe-sees-enormous-future-for-crypto-as-it-acquires-crypto-market-provider-erisx/">announced the deal</a> six months ago.



ErisX operates a US-based digital asset spot market, as well as a regulated futures exchange and clearinghouse. Set to be rebranded as Cboe Digital, the business will function as a subsidiary run by ErisX CEO Thomas Chippas.



A company of 55 people at the time of acquisition, ErisX will now leverage Cboe’s more ample resources, Chippas told Blockworks.&nbsp;



“We get to find crossover opportunities and product development opportunities to grow the existing Cboe customer base, but [we have] complete freedom to continue new digital asset products over here at ErisX,” Chippas said.&nbsp;&nbsp;



Cboe Chief Operating Officer Chris Isaacson called the acquisition “super complementary,” adding it gives the company its first presence in the digital assets sector.



“We’ll integrate only where it makes sense, but we realize that in this asset class we need to move quickly,” he told Blockworks. “Keeping that agility with this wholly-owned subsidiary is a great move.”&nbsp;&nbsp;



Cboe operates the largest options exchange in the US. An average of $86.5 billion is traded on Cboe’s equities exchanges daily. The average number of US options contracts and US futures contracts traded each day total roughly 9.8 million and 213,000, respectively.&nbsp;



<h3 class="wp-block-heading">Product plans</h3>



ErisX Chief Operating Officer Matt Trudeau said the highest priority for the company in the near term is adding margin capability to its clearinghouse. It has an application pending with the Commodity Futures Trading Commission (CFTC) to offer margin crypto futures that are both physically settled and cash settled.



The soon-to-be Cboe Digital will also now look to expand its spot offerings beyond bitcoin, bitcoin cash, litecoin and ether.



Down the line, Cboe is uniquely positioned to offer products, such as basis trading and exchange for physical transactions, that involve both the spot and futures markets, Trudeau told Blockworks.



“One of the things we expect to be able to do is offer those products more efficiently from an operational and cost standpoint than anybody who’s got a standalone cash-settled futures market or a standalone spot market,” he said.



Cboe also intends to develop a benchmark data stream — based on actionable bid and offer prices from the spot crypto market — to help market participants evaluate the appropriateness of crypto execution prices, the company said in a statement.



<h3 class="wp-block-heading">Bridging TradFi and crypto</h3>



Isaacson said part of the attractiveness of buying ErisX was the company’s “intermediary-friendly platform.” The deal was estimated at $400 million, according to data by M&amp;A advisory firm Architect Partners. The companies did not disclose the sale price.&nbsp;



“It will allow for traditional finance players that are more and more capable and ready to adopt digital assets to now come on and adopt the asset class,” he said.



Ryan McCulloch, an investment banking associate at <a href="https://www.architectpartners.com/" target="_blank" rel="noreferrer noopener">Architect Partners</a>, said in a research note that the need for traditional financial players to have crypto exposure has become “table stakes.” He likened the Cboe-ErisX deal to other so-called “bridge transactions” between companies, such as Deutsche Borse Group and Crypto Finance; Mastercard and Cipher Trace; and PayPal and Curv.



“As the crypto sector develops, consolidation via acquisition will continue as traditional players continue to choose the buy over build option,” McCulloch wrote. “ErisX isn’t the largest crypto derivatives exchange, but their focus throughout development on robust regulatory compliance is a major driver of value to traditional financial players such as Cboe.”



Many traditional institutions are already getting involved in crypto, Chippas said, adding that there is a massive opportunity to grow the pie.&nbsp;&nbsp;



“There are lots of people today that want to access these products that are unwilling to open an account for one asset class at one particular provider,” he said. “They’re looking to access these products via the traditional intermediaries.”



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Cboe Sees ‘Need to Move Quickly’ in Crypto Following Exchange Acquisition

<div id="highlights-block_6269671d58261" class="highlights">
 <ul>
 <li>Cboe Australia said Tuesday the funds would not go ahead as expected due to pending &#8220;standard checks&#8221;</li>
 <li>Asset managers ETF Securities and 21Shares had hoped to push through their crypto ETFs following the go-ahead from ASX Clear last week</li>
 </ul>
 
</div>



Three of Australia&#8217;s crypto ETFs set to launch Tuesday have been postponed, with pending &#8220;standard checks&#8221; as the primary reason given for the delay. According to a statement from <a href="https://www.cboe.com.au/wp-content/uploads/2022/04/Cboe-Funds-Market-Circular-22005ETF.pdf" target="_blank" rel="noreferrer noopener">Cboe Australia</a> on Tuesday, ETF Securities&#8217; bitcoin and ether ETFs, which track the underlying price of their respective digital asset in Australian dollars, will not commence as expected. 



&#8220;A further update will be provided in the coming days,&#8221; Cboe said.



ETF Securities, along with 21Shares, had hoped to push through their funds on <a href="https://cms.blockworks.co/first-australian-spot-bitcoin-ether-etfs-to-go-live-next-week/" target="_blank" rel="noreferrer noopener">April 27</a>, following a green light from the country’s primary clearing house for capital markets, ASX Clear.



Cosmos Asset Management’s <a href="https://cms.blockworks.co/australia-gets-go-ahead-to-list-countrys-first-bitcoin-etf-next-week/" target="_blank" rel="noreferrer noopener">bitcoin ETF</a>, which is expected to invest in shares of Canada&#8217;s Purpose Bitcoin ETF, has also been delayed.



While the official line being given by Cboe states the funds would not go ahead as a result of the checks, the <a href="https://www.afr.com/companies/financial-services/failure-to-launch-crypto-etfs-hit-listing-snag-20220426-p5ag4s" target="_blank" rel="noreferrer noopener">Australian Financial Review</a> reported a &#8220;powerful but undisclosed third-party broker&#8221; had blocked the listings.



A “service provider downstream” has been fingered as the responsible party, though details of which provider ETF Securities and Cosmos are referring to were not given, per the report.



The report cites trading of the funds has been delayed due to a &#8220;prime&#8221; or &#8220;executing&#8221; broker whose blessing is required for the go-ahead.



Kanish Chugh, head of distribution of ETF Securities, reportedly told the Australian news outlet the delay was not the fault of ETF Securities, its ETFs or the exchange, and the news had caught the asset manager off guard.



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Australian Bitcoin and Ether ETFs Delayed Due to ‘Standard Checks’

<div id="highlights-block_625ebf0f96c1e" class="highlights">
 <ul>
 <li>Australia is to receive its first publicly listed bitcoin ETF via Cosmos Asset Management</li>
 <li>The approval follows proposed legislation from Australia&#8217;s ruling party seeking to regulate crypto</li>
 </ul>
 
</div>



Australia is set to receive its first bitcoin ETF as early as next week, the <a href="https://www.afr.com/chanticleer/bitcoin-etfs-get-the-green-light-20220419-p5aela" target="_blank" rel="noreferrer noopener">Australian Financial Review</a> reported Monday.



Cosmos Asset Management&#8217;s bitcoin ETF — the first of its kind for Australia — stands poised to take the crown following a green light from the country&#8217;s primary clearinghouse for capital markets, ASX Clear.



Trading could begin on <a href="https://www.cboe.com.au/about-cboeaustralia" target="_blank" rel="noreferrer noopener">Cboe Australia</a> as early as April 27 following a seven-day notice period to investors, clearing participants, brokers and market makers, beginning Wednesday.



Like many ETFs centered on the oldest cryptocurrency, Cosmos&#8217; product will invest in shares of the world&#8217;s first bitcoin ETF — the Purpose Bitcoin ETF — which listed via the Toronto Stock Exchange in Canada more than a year ago.



Should demand for Cosmos&#8217; ETF follow a <a href="https://www.purposeinvest.com/thoughtful/purpose-investments-bitcoin-etf-crosses-1-billion-in-assets-under-management-on-one-month-fund-anniversary" target="_blank" rel="noreferrer noopener">similar trajectory</a> to that of Canada, between $550 million to $750 million could flow into the fund within a week as investors scramble to grab hold of one of the world&#8217;s most volatile asset classes while avoiding direct market exposure.



According to the report, ASX Clear has four market participants ready to front the 42% margin requirement for settlement risks, including one retail and three institutional clearing participants.



<a href="https://www.asx.com.au/services/clearing/asx-clear.htm" target="_blank" rel="noreferrer noopener">ASX Clear</a> is the clearing house for all Australian shares, structured products, warrants and Australian Securities Exchange equity derivatives.



Approval of the country&#8217;s first bitcoin ETF follows proposed legislation from Australia&#8217;s ruling party seeking to regulate custody, DAOs, crypto taxation and digital asset service provider licensing, <a href="https://cms.blockworks.co/australia-seeks-licensing-of-crypto-exchanges-via-digital-services-act/" target="_blank" rel="noreferrer noopener">among other measures</a>.



While the incumbent Liberal Party faces an uphill battle at the polling booth in five weeks time, the approval of a bitcoin ETF potentially clears a new path for Australia&#8217;s march toward the nascent asset class.



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Australia Gets Go-Ahead to List Country’s First Bitcoin ETF Next Week

Jacquelyn Melinek

<div id="highlights-block_6171c7defd0f4" class="highlights">
 <ul>
 <li>Cboe’s acquisition of ErisX provides it with the opportunity to grow tremendously by “blending the best of both” traditional and crypto markets, Deters said</li>
 <li>While the company is acquiring ErisX, it will be a separate subsidiary from Cboe and will operate under its digital asset business as Cboe Digital, Deters said</li>
 </ul>
 
</div>



Cboe Global Markets has agreed to acquire crypto spot and futures market provider Eris Digital Holdings (ErisX), at a time when the digital asset space continues to boom.&nbsp;



The deal is expected to close in the first half of 2022, subject to regulatory approvals and other closing elements, the company said in a statement.



“This deal gets us into digital assets,” John Deters, executive vice president and chief strategy officer at Cboe Global Markets, told Blockworks in an interview. Cboe’s acquisition of ErisX provides it with the opportunity to grow tremendously by “blending the best of both” worlds between traditional finance and crypto markets, Deters said. 



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="400" height="327" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Image-from-iOS-14.jpg" alt="JOHN DETERS, EXECUTIVE VICE PRESIDENT AND CHIEF STRATEGY OFFICER, CBOE GLOBAL MARKETS" class="wp-image-9770" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Image-from-iOS-14.jpg?w=400 400w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Image-from-iOS-14.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Image-from-iOS-14.jpg?w=314 314w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Image-from-iOS-14.jpg?w=319 319w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Image-from-iOS-14.jpg?w=268 268w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/Image-from-iOS-14.jpg?w=80 80w" sizes="(max-width: 400px) 100vw, 400px" /><figcaption>John Deters, executive vice president and chief strategy officer at Cboe Global Markets; Source: Cboe</figcaption></figure></div>



<a href="https://cms.blockworks.co/erisxs-trudeau-ira-investors-want-crypto-exposure/" target="_blank" rel="noreferrer noopener">ErisX</a> operates a US-based digital asset spot market, a futures exchange and clearing house regulated by the Commodity Futures Trading Commission (CFTC). Its clearing house is also registered with FinCEN as well as licensed in many US states, the company said. Cboe is a global provider of market infrastructure and tradable products with an average amount of $78.14 billion traded on its US Equities exchanges daily.&nbsp;



While the company is acquiring ErisX, it will be a separate subsidiary from Cboe and will operate under its digital asset business Cboe Digital, Deters said. “We want the businesses to have degrees of freedom to operate with the speed and flexibility that it needs,” he said.&nbsp;



<h3 class="wp-block-heading">Competitors edge&nbsp;</h3>



Competitors in the space include global markets company CME Group and newcomers of regulated derivatives like the cryptocurrency-based exchange FTX. But, Deters said it’s fairly easy to differentiate <a href="https://www.cboe.com/tradable_products/equity_indices/flex_options?gclid=CjwKCAjwn8SLBhAyEiwAHNTJbWys1AJlsoIR2PmA_33hIM49oDNZw7EJLypJvvvU1C2TnfPGcuGjyRoCERkQAvD_BwE&amp;gclsrc=aw.ds" target="_blank" rel="noreferrer noopener">Cboe</a> and ErisX from their competitors.&nbsp;



“CME’s product does what it’s supposed to do, but it’s constrained by the technology stack, the regulatory framework and platform it’s traded on. So, I think there’s probably some limit to how far penetrated that product ultimately gets,” Deters said. “The overlap is there but it’s not significant and we think the size of the circles and the size of the areas we’re playing in, with a complete stack in a single venue, represents the growth opportunity for the future,” he added.&nbsp;



Meanwhile, Matthew Trudeau, chief operating officer at ErisX, said that ErisX’s focuses solely on crypto and hones in on this asset class through a regulated lense, which has given them the edge and flexibility to delve into that market. As the company operates in a heavily regulated way, it requires them to vet products thoroughly and acknowledge risks and implications beforehand, Trudeau said.&nbsp;



“It’s not just a niche product to us,” Trudeau said. “All we do, all day, every day, is think about crypto, crypto derivatives and the crypto industry,” he added.&nbsp;



As it relates to FTX and some of the other crypto exchanges, Trudeau said, “I think the recent (regulatory) moves are validation for us and show the importance of the US market, globally, for this asset,” he said. “There’s a lot of discussion about moving crypto offshore, but ironically it seems like there’s a lot of stuff moving onshore at this point…. Everybody seems to want to get into the US and I think some of the M&amp;A activity you’re seeing is evidence of that,” he added.&nbsp;



As a regulated digital asset market provider, ErisX is no stranger to working with officials. So, as it continues to grow its US market offerings, Trudeau said those elements will benefit Cboe and its digital asset expansion. Their framework provides “potentially faster, more nimble and effective products compared to those who operate in an offshore environment,” like Bahama-based FTX, Trudeau said.



<h3 class="wp-block-heading">“There’s a massive release of potential here”</h3>



After the acquisition, the company can add in adjacent assets, options and other relative products, Trudeau noted. “But it’s not like we have to build a brand new platform to do that,” because it already has the infrastructure available, he said. “There are near-term products we can offer related to crypto native products and new products related to commodities and securities,” Trudeau added.&nbsp;



From a general point of view, the company plans to work with regulators on the digital asset space and solve existing problems related to the current marketplace, Deters said.&nbsp;



“We think the future (of crypto) is enormous, I think we’re only seeing a small fraction of what it could be,” Deters said. “Once you solve (some) problems and provide clarity to the space, there’s a massive release of potential here,” he added.



In the future, Trudeau and Deters said they see the digital asset market expanding exponentially. “There’s unbounded potential in this market,” Trudeau said. “Traditional financial markets and crypto will converge and we’re seeing this happen already &#8212; both will take something from one another,” he added.



Trudeau estimates that in 10 to 15 years, all traditional assets will live in a crypto native market. “That’s a pretty exciting place to be&#8230; and a phenomenal thing to think about,” he said.&nbsp;