Nasdaq ISE filed a proposal with the Securities and Exchange Commission this week to increase the position and exercise limits for options on the iShares Bitcoin Trust (IBIT) to 250,000 contracts from 25,000.
The proposal aims to expand trading capacity for the largest spot bitcoin ETF’s options market at a crucial time, as institutional investors seek more ways to trade bitcoin through regulated markets following the recent approval of spot bitcoin ETFs and their options.
According to the filing, the current 25,000 contract limit represents just 0.4% of the exercisable risk for IBIT options. With IBIT’s market capitalization reaching $46.7 billion and average daily trading volume of over 39 million shares, Nasdaq argues that the ETF’s liquidity supports higher limits.
“The Exchange also has no reason to believe that the growth in trading volume in IBIT will not continue,” Nasdaq stated in the filing, adding that increased limits would enhance market efficiency.
The proposal places IBIT in line with position limits for other commodity-based ETFs like SPDR Gold Trust (GLD) , iShares Silver Trust (SLV) , and ProShares Bitcoin Strategy ETF (BITO) , which have 250,000 contract limits, according to the filing.
Market Impact and Surveillance
Nasdaq outlined surveillance procedures to prevent market manipulation, including using existing options monitoring systems and collaborating with other exchanges, according to the filing.
The exchange argues the current limit is “extremely conservative” given IBIT’s liquidity. Even with the proposed increase to 250,000 contracts, the exercisable risk would represent just 2.9% of IBIT’s outstanding shares, the filing showed.
If approved, the higher limits could help prevent trading from moving to less-transparent over-the-counter markets, where transactions occur through bilateral agreements without public price discovery, Nasdaq noted.
The SEC has 45 days from the filing’s publication in the Federal Register to decide on the proposal, with the possibility of extending the review period up to 90 days if needed, according to the filing. The agency will accept public comments on the proposed rule change until Jan. 27.
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