Blackrock’s bitcoin ETF enters a pivotal moment as Nasdaq seeks SEC approval for a 1M-contract IBIT options cap, signaling stronger liquidity, deeper institutional activity, and enhanced transparency across the regulated crypto-linked derivatives market.
Wall Street Braces as SEC Weighs IBIT’s 1M Options Limit
The U.S. Securities and Exchange Commission (SEC) issued a notice on Nov. 21 that Nasdaq International Securities Exchange (ISE) LLC proposed lifting the position and exercise limits for options on Blackrock’s Ishares Trust ETF (IBIT) to 1,000,000 contracts. The exchange said the existing 250,000-contract ceiling restricts liquidity, hedging, and institutional trading strategies.
The SEC explained: “These limits … are intended to address potential manipulative schemes and adverse market impacts surrounding the use of options, such as disrupting the market in the security underlying the options. Position and exercise limits must balance concerns regarding mitigating potential manipulation and the cost of inhibiting potential hedging activity that could be used for legitimate economic purposes.”
Nasdaq said stronger liquidity and substantial trading volumes show that expanding the ceiling would not threaten market stability. It emphasized that IBIT’s size places it near the top of ETF peers in market capitalization and average daily volume, with page 10 data showing that even a full 1,000,000-contract exercise would represent only 7.40% of IBIT’s float and 0.284% of all outstanding. The notice states:
To achieve this balance, ISE proposes to increase the position limits and exercise limits for options on IBIT to 1,000,000 contracts.
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The exchange also states that higher thresholds could allow market makers to improve liquidity and reduce reliance on the less transparent OTC market. Surveillance procedures, including FINRA-supported monitoring, would remain unchanged, while the creation-redemption mechanism would continue to limit dislocations between IBIT and .
The notice explains that the SEC is specifically seeking feedback on whether this approach aligns with the Exchange Act. The Commission underscores that comments will help determine whether to approve, disapprove, or open further proceedings within the statutory timeline. Supporters argue that expanding limits within a regulated environment strengthens crypto-linked risk management and supports market transparency, countering concerns that larger positions could distort trading by noting that exchange oversight is stricter than bilateral OTC arrangements.
FAQ ⏰
- What limit is Nasdaq proposing for IBIT options? The proposal seeks to raise IBIT options limits to 1,000,000 contracts.
- Why does the SEC want public comments? The agency is evaluating whether the proposal aligns with Exchange Act requirements.
- How large would a 1,000,000-contract exercise be relative to IBIT? It would represent 7.40% of IBIT’s float and 0.284% of all outstanding.
- How could higher limits affect trading dynamics? They could boost liquidity, reduce OTC reliance, and enhance transparency under regulated oversight.
Author: Kevin Helms
Source: Bitcoin
Reviewed By: Editorial Team
