Cboe Exchange Moves to List Ethereum ETFs Options Amid Growing Demand
On April 11, 2025, the Cboe Exchange, Inc. filed a significant proposal with the Securities and Exchange Commission (SEC) aimed at amending certain exchange rules. This proposed rule change, identified as Release No. 34-102838 and designated as File No. SR-CBOE-2025-026, seeks to enable the listing and trading of options associated with three specific Exchange-Traded Funds (ETFs): the Grayscale Ethereum Trust ETF, the Grayscale Ethereum Mini Trust ETF, and the Bitwise Ethereum ETF.
Under Section 19 of the Securities Exchange Act of 1934 and in adherence to Rule 19b-4, the exchange characterizes this rule change as non-controversial. This means it can be enacted quickly while still allowing for public feedback. Comments from interested parties are solicited as part of this process.
Background and Purpose of the Proposed Change
Cboe aims to amend Rules 4.3, 4.20, and 8.30 to facilitate trading options on these ETFs by designating them as “Units” appropriate for trading under the Exchange’s existing framework. This move not only aligns with prior approval granted to other Ethereum-based products by the SEC but also responds to competitive pressures from other exchanges that have successfully incorporated similar offerings, including NYSE American’s options on these ETFs.
The objective of each Ethereum fund is to mirror the performance of Ethereum (minus operational costs), thus allowing investors simplified access to the Ethereum market without the complications of directly managing the cryptocurrency. Each fund is built upon a structure similar to existing ETFs on the market that also offer precious metals or Bitcoin, which have garnered options trading eligibility.
Trading and Market Standards
To ensure compliance, all units destined for options trading must meet well-established listing criteria—be they related to registration requirements with the SEC or pertaining to the vast number of outstanding shares. For context, data as of November 29, 2024, reflects the following for the Ethereum Funds:
- Grayscale Fund: 177,838,500 shares worth approximately $5.43 billion.
- Grayscale Mini Fund: 45,220,787 shares at about $1.55 billion.
- Bitwise Fund: 16,600,000 shares, totaling around $431 million.
These figures surpass the minimum thresholds often used to determine whether a security can be traded under similar options frameworks, ensuring that the launch of options on these funds is grounded in substantial market activity.
Proposed Position Limits and Market Oversight
Cboe proposes a limit of 25,000 same-side contracts per option position on each ETF, which, as per the rules, will impose a slight barrier on a single market participant’s ability to exert undue influence over trading narratives. Comparatively, this limit is considerably lower than what other equity options trades might allow, highlighting the cautious approach Cboe plans to adopt. Furthermore, ongoing surveillance to safeguard against fraud and market manipulation will be necessary as trading progresses.
Investor Benefits and Community Engagement
The provision of options increases not only market transparency but also provides investors more tools for risk management. Currently, ETF options on products similar to Bitcoin have been accepted, leading to expectations that Ethereum options will follow in drawing in more liquidity and improving price discovery on exchanges.
Cboe is prepared to enhance its existing market oversight protocols and collaborate with appropriate regulatory authorities to uphold the highest standards of transparency in the trading of options on these Ethereum Funds. The proposal is now open for comments until [INSERT DATE 21 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. This initiative by Cboe reflects broader trends in financial markets towards embracing cryptocurrency-related financial products and could signal a kinetic shift towards ensuring regulated avenues for investors seeking exposure to Ethereum.
