Key Takeaways
- Nasdaq ISE proposes to increase IBIT options position and exercise limits tenfold.
- The proposed change is motivated by increased trading volumes and liquidity in IBIT.
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Nasdaq ISE, LLC (ISE), the Nasdaq-owned options exchange, recently submitted a proposed amendment to the SEC to increase the position and exercise limits for options on the iShares Bitcoin Trust ETF (IBIT) from 25,000 to 250,000 contracts.
The current position and exercise limits for IBIT options are considered low limits available in options trading. The proposal, pending SEC approval, is aimed at accommodating the growing trading volume and liquidity of IBIT, the world’s leading fund that holds Bitcoin.
The exchange said that increasing the limits to 250,000 contracts is justified given IBIT’s market cap of $46.8 billion and average daily trading volume of 39.4 million shares.
The proposed limit would represent only 2.89% of the shares of IBIT, which is considerably lower than similar ETFs like SPDR Gold Shares (GLD) and iShares Silver Trust (SLV), both of which have higher percentage limits relative to their floats, according to ISE.
“A position limit exercise in GLD would represent 8.17% of the float of GLD; a position limit exercise in SLV would represent 4.8% of the float of SLV, and a position limit exercise of BITO would represent 23.22% of the float of BITO,” ISE wrote. “Consequently, the 250,000 proposed IBIT options position and exercise limit is more conservative than the standard applied to GLD, SLV and BITO, and appropriate.”
If approved, the proposed change would promote market liquidity and allow institutional investors to better manage risk. The SEC has 45 days to approve or disapprove the changes, or initiate proceedings to determine if the proposal should be rejected.
“The Exchange believes that increasing the position (and exercise) limits for IBIT options would lead to a more liquid and competitive market environment for IBIT options, which will benefit customers that trade these options,” ISE stated in the filing.
Last September, the SEC endorsed rule changes allowing Nasdaq ISE to list and trade options on BlackRock’s IBIT. The move enables investors to hedge against Bitcoin price fluctuations under strict regulatory supervision.
Nasdaq also announced plans to seek approval for Bitcoin options trading, aiming to expand its digital asset offerings by tracking the CME CF Bitcoin Real-Time Index, following a similar move by NYSE.
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