Nasdaq Proposes Significant Increase in IBIT Options Trading Limits
Nasdaq ISE, LLC, a subsidiary of the Nasdaq-owned options exchange, has submitted a proposal to the US Securities and Exchange Commission (SEC) to substantially raise the position and exercise limits for options on BlackRock’s iShares Bitcoin Trust ETF (IBIT). The proposed increase aims to boost the current cap from 25,000 contracts to 250,000, citing growing trading volumes and liquidity in IBIT options as justification.
Growing Demand and Institutional Appeal
In its filing, Nasdaq ISE highlighted IBIT’s rapid growth and institutional appeal, citing a market capitalization of $46.8 billion and an average daily trading volume of 39.4 million shares. These metrics reflect the need for higher trading limits to better accommodate demand from large-scale investors. The proposal is in line with the New York Stock Exchange’s (NYSE) October proposal to extend Bitcoin ETF trading hours, which also cited growing demand.
Comparative Analysis of ETF Position Limits
The proposed increase would bring IBIT options limits in line with, or even below, comparable ETFs. For example, SPDR Gold Shares (GLD) and iShares Silver Trust (SLV) have higher position limits relative to their respective floats. In contrast, the proposed IBIT limit of 250,000 contracts would represent only 2.89% of the ETF’s total shares, compared to 23.22% for the ProShares Bitcoin Strategy ETF (BITO).
Potential Impact on Market Liquidity
If approved, the new limits could significantly enhance market liquidity and provide institutional players with greater flexibility to hedge their Bitcoin-related positions. According to Nasdaq ISE, “The Exchange believes that increasing the position (and exercise) limits for IBIT options would lead to a more liquid and competitive market environment.”
Regulatory Evaluation and Industry Momentum
The SEC has 45 days to evaluate the proposal, after which it may approve, disapprove, or initiate further proceedings. Since its approval four months ago, IBIT has steadily gained traction among institutional investors, with sales exceeding $425 million on its first day of trading. Nasdaq ISE’s proposal builds on the momentum generated by the SEC’s green light for IBIT options trading last September, which provided investors with a regulated avenue to hedge against Bitcoin price fluctuations.
Conclusion
Nasdaq’s proposal to expand IBIT options trading is part of a broader strategy to increase its digital asset offerings. The move aligns with industry efforts to integrate digital assets into traditional finance, as seen in similar initiatives by the NYSE. If approved, the increased position and exercise limits could significantly enhance market liquidity and provide institutional players with greater flexibility to hedge their Bitcoin-related positions.
Source: Beincrypto.com
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