Nasdaq options exchange has submitted a significant proposal to the U.S. Securities and Exchange Commission (SEC), seeking approval to increase the position and exercise limits for options on the iShares Bitcoin Trust ETF (IBIT).
The Nasdaq options exchange has filed a proposal with the U.S. Securities and Exchange Commission (SEC) to increase the position and exercise limits for options on the iShares Bitcoin Trust ETF (IBIT).
Currently, the position and exercise limits for IBIT options are relatively low compared to other exchange-traded funds (ETFs), making it difficult for institutional investors to fully participate in the growing Bitcoin market. The Nasdaq proposal to increase these limits would enable investors, particularly large-scale institutional players, to better manage risk and enhance liquidity within the market.
The move comes as IBIT, with a market capitalization of $46.8 billion and an average daily trading volume of 39.4 million shares, has seen significant growth in both trading volume and liquidity.
The proposed limit of 250,000 contracts is viewed as a conservative measure relative to other well-established ETFs like the SPDR Gold Shares (GLD) and iShares Silver Trust (SLV). If approved, the new limit would represent only 2.89% of IBIT’s total float, which is considerably lower than the position limits for GLD (8.17% of float) and SLV (4.8% of float).
According to the Nasdaq ISE filing, the IBIT ETF’s new limits would be more cautious than other similar ETFs while still addressing the growing demand for Bitcoin exposure. In comparison, a position limit in other popular ETFs, such as BITO, would represent a higher percentage of the float (23.22%). This makes Nasdaq’s proposed 250,000 contracts for IBIT options a more prudent choice, especially given the volatile nature of Bitcoin and the need for a well-regulated and liquid market.
If the proposal is approved by the SEC, the higher limits would enhance the overall market liquidity for IBIT options, allowing investors to trade these options more efficiently. The exchange believes that this change will create a more competitive environment for IBIT options, ultimately benefiting market participants, especially those using these options for hedging purposes in response to fluctuations in Bitcoin prices.
The increase in position limits is also expected to foster greater market participation from institutional investors, who typically seek larger positions in their trades. As the IBIT ETF continues to grow in popularity, allowing for greater flexibility in trade execution could prove essential in making the Bitcoin asset class more accessible to a broader range of investors.
The SEC has 45 days to review the proposed amendment and decide whether to approve or disapprove the changes. In the meantime, the Nasdaq ISE’s filing emphasizes that increasing the position and exercise limits will not only help create a more liquid and competitive market for IBIT options, but also align the fund with regulatory standards similar to those of other major ETFs.
Last September, the SEC approved rule changes allowing Nasdaq ISE to list and trade options on BlackRock’s IBIT, providing investors with a regulated environment to hedge against the fluctuations in Bitcoin prices. Nasdaq also plans to further expand its offerings by seeking approval for Bitcoin options trading under the CME CF Bitcoin Real-Time Index, a move that mirrors similar efforts from the New York Stock Exchange (NYSE) to enter the growing digital asset market.
