The SEC has frozen Nasdaq PHLX's approval to list cash-settled bitcoin index options after CME Group challenged the agency's authority to approve them. The commission will now reconsider its May approval of the contracts, known as QBTC, and has opened a public comment period running to Aug. 24.
The U.S. Securities and Exchange Commission has paused Nasdaq's approval of cash-settled bitcoin index options and will reconsider the decision after a legal challenge from CME Group, according to an order the agency released for public inspection on July 31. The freeze halts Nasdaq PHLX's plan to list the contracts under the ticker QBTC while the commission works through CME's objection.
CME says bitcoin's status puts options under the CFTC
In May, the SEC granted Nasdaq PHLX conditional approval to list QBTC, though the product still needed exemptions from the Commodity Futures Trading Commission before it could launch. CME challenged that approval in June, arguing that because bitcoin is a commodity, options tied directly to its value fall under the CFTC's jurisdiction rather than the SEC's.
If CME's reading holds, the SEC would have no authority to approve QBTC. Nasdaq would then need to register as a CFTC-regulated futures or swaps venue, or redesign the contracts to track a security such as a spot bitcoin exchange-traded fund.
A challenge to a rival's trading business
CME already operates regulated bitcoin futures and options markets, and Nasdaq's QBTC would compete for the same trading activity without Nasdaq registering under the CFTC framework that governs CME. Its petition also warned that the approval could set a precedent letting securities exchanges list derivatives tied to other commodities. Nasdaq's proposed contracts would use CME CF benchmarks for both their underlying index and final settlement price.
Comment window runs to Aug. 24
The order keeps Nasdaq's approval frozen and gives interested parties until Aug. 24 to submit statements supporting or opposing it. The stay has been in place since CME filed notice of its challenge on June 11.
Nasdaq's approval had envisioned the CFTC granting exemptions that would let Nasdaq and the Options Clearing Corporation offer the product through the securities market, but CME argued the agencies cannot use exemptions to shift a product from one regulator to another. QBTC remains suspended while the full commission reviews the earlier approval.
Source: CoinDesk
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